UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
[X]
Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act Of 1934
For
the fiscal year ended December 31, 2019
[ ]
Transition Report Under Section 13 or 15(d) of the Securities
Exchange Act Of 1934
For
the transition period from _____________ to
_____________
Commission
File Number: 333-218854
The
GREATER CANNABIS COMPANY, INC.
(Exact
name of registrant as specified in its charter)
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Florida |
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30-0842570 |
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(State
or other jurisdiction
of
incorporation or organization)
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(I.R.S.
Employer
Identification
No.)
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15
Walker Ave, Suite 101
Baltimore,
MD 21208
(Address
of principal executive offices, including Zip Code)
(443)
738-4051
(Issuer’s
telephone number, including area code)
NOT
APPLICABLE
(Former
name or former address if changed since last report)
Indicate
by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes [ ]
No [X]
Indicate
by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act.
Yes [ ] No [X]
Check
whether the issuer (1) has filed all reports required to be filed
by section 13 or 15(d) of the Exchange Act during the past 12
months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X]
No [ ]
Indicate
by check mark whether the registrant has submitted electronically
and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405
of Regulation S-T (§232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant was
required to submit and post such files). Yes [X]
No [ ]
Indicate
by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, or a small reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer,” “non-accelerated filer,” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
|
Large
accelerated filer [ ] |
Accelerated
filer [ ] |
| Non-accelerated
filer [ ] |
Smaller
reporting company [X] |
| Emerging
growth company [X] |
|
If an
emerging growth company, indicate by checkmark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange
Act. [ ]
Indicate
by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). Yes [ ]
No [X]
State
the number of shares outstanding of each of the issuer’s classes of
common equity, as of the latest practicable date: 60,786,011 shares
of common stock as of April 14, 2020.
TABLE
OF CONTENTS
Cautionary Note Regarding Forward Looking
Statements
This
annual report contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. The words “believe,”
“expect,” “anticipate,” “intend,” “estimate,” “may,” “should,”
“could,” “will,” “plan,” “future,” “continue, “and other
expressions that are predictions of or indicate future events and
trends and that do not relate to historical matters identify
forward-looking statements. These forward-looking statements are
based largely on our expectations or forecasts of future events,
can be affected by inaccurate assumptions, and are subject to
various business risks and known and unknown uncertainties, a
number of which are beyond our control. Therefore, actual results
could differ materially from the forward-looking statements
contained in this document, and readers are cautioned not to place
undue reliance on such forward-looking statements. We undertake no
obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise. A wide variety of factors could cause or contribute
to such differences and could adversely impact revenues,
profitability, cash flows and capital needs. There can be no
assurance that the forward-looking statements contained in this
document will, in fact, transpire or prove to be accurate. These
statements are only predictions and involve known and unknown
risks, uncertainties and other factors, including the risks in the
section entitled “Risk Factors” that may cause our or our
industry’s actual results, levels of activity, performance or
achievements to be materially different from any future results,
levels of activity, performance or achievements expressed or
implied by any forward-looking statements.
Important
factors that may cause the actual results to differ from the
forward-looking statements, projections or other expectations
include, but are not limited to, the following:
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risk
that we will not be able to remediate identified material
weaknesses in our internal control over financial reporting and
disclosure controls and procedures; |
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risk
that we fail to meet the requirements of the agreements under which
we acquired our business interests, including any cash payments to
the business operations, which could result in the loss of our
right to continue to operate or develop the specific businesses
described in the agreements; |
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risk
that we will be unable to secure additional financing in the near
future in order to commence and sustain our planned development and
growth plans; |
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risk
that we cannot attract, retain and motivate qualified personnel,
particularly employees, consultants and contractors for our
operations; |
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risks
and uncertainties relating to the various industries and operations
we are currently engaged in; |
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results
of initial feasibility, pre-feasibility and feasibility studies,
and the possibility that future growth, development or expansion
will not be consistent with our expectations; |
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risks
related to the inherent uncertainty of business operations
including profit, cost of goods, production costs and cost
estimates and the potential for unexpected costs and
expenses; |
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risks
related to commodity price fluctuations; |
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the
uncertainty of profitability based upon our history of
losses; |
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risks
related to failure to obtain adequate financing on a timely basis
and on acceptable terms for our planned development
projects; |
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risks
related to environmental regulation and liability; |
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risks
related to tax assessments; |
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other
risks and uncertainties related to our prospects, properties and
business strategy. |
Although
we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements. You should not
place undue reliance on these forward-looking statements, which
speak only as of the date of this report. Except as required by
law, we do not undertake to update or revise any of the
forward-looking statements to conform these statements to actual
results, whether as a result of new information, future events or
otherwise.
As
used in this annual report, “Greater Cannabis,” the “Company,”
“we,” “us,” or “our” refer to The Greater Cannabis Company, Inc.,
unless otherwise indicated.
THE
GREATER CANNABIS COMPANY, INC.
Annual
Report on Form 10-K for the
Fiscal
Year Ended December 31, 2019
The
following analysis of our financial condition and results of
operations should be read in conjunction with our financial
statements and the related notes thereto contained elsewhere in
this Form 10-K, as well as the risk factors included in this Form
10-K.
PART I
Item 1. BUSINESS
HISTORY
OF OUR COMPANY
The
Greater Cannabis Company, Inc. (the “Company”) was formed in March
2014 as a limited liability company under the name, The Greater
Cannabis Company, LLC. The Company remained a wholly owned
subsidiary of Sylios Corp until March 2017. The Company’s initial
business plan was to concentrate on cannabis related investment and
development opportunities through its online retail store, direct
equity investments, joint ventures, licensing agreements or
acquisitions. Our current operations are focused on our online
store, GCC Superstore.
On
July 31, 2018, the Company entered into and consummated a voluntary
share exchange transaction with Green C Corporation, a company
incorporated under the laws of the Province of Ontario (“Green C”)
and the shareholders of Green C (the “Selling Shareholders”)
pursuant to a Share Exchange Agreement by and among the Company,
Green C and the Selling Shareholders (the “Exchange
Agreement”).
Green
C is the owner of an exclusive, worldwide license for an eluting
transmucosal patch platform (“ETP”) for non-invasive drug delivery
in the cannabis field for medical treatment as further described in
the exclusive license agreement dated June 21, 2018 with
Pharmedica. A copy of the License Agreement is incorporated by
reference to this report as Exhibit 10.1 of the Company’s current
report on Form 8-K dated August 3, 2018 (the “License
Agreement”).
In
accordance with the terms of the Exchange Agreement, the Company
issued 9,411,998 shares of its preferred stock, par value $0.001
(the “Shares”) to the Selling Shareholders and certain individuals
named below (collectively, the “Shareholder Group”) in exchange for
100% of the issued and outstanding capital stock of Green C (the
“Exchange Transaction”). As a result of the Exchange Transaction,
the Selling Shareholders acquired 29.67% of the Company’s issued
and outstanding shares of preferred stock, Green C became the
Company’s wholly-owned subsidiary and the Company acquired 100% of
the business and operations of Green C.
After
the consummation of the transactions contemplated by the Exchange
Agreement, we switched our business model in fiscal 2018 and no
longer intend to pursue E-commerce, advertising, licensing (except
as specified below) or direct investment operations. We are now
engaged in the commercialization of our exclusively licensed
technology for medical medicinal or recreational cannabis (where
permitted) for the transmucosal delivery of medicinal or
recreational cannabis (where permitted) (other than in the field of
oral care) or any other product exploiting such technology or
similar technologies for the transmucosal delivery of medicinal or
recreational cannabis (where permitted) (collectively, the
“Technology”).
The
commercialization of the Technology is expected to require an
investment of up to $1,500,000 and up to one year to
finalize.
The
Company’s business plan is to (i) commercialize its ETP technology
and (ii) concentrate on cannabis related investment and development
opportunities through direct equity investments, joint ventures,
licensing agreements or acquisitions.
The
Company is actively seeking licensing opportunities in the cannabis
sector for intellectual property and products. At present, the
Company’s sole active, exclusive, worldwide licensing agreement is
with Pharmedica for its ETP technology.
The
Company received its first purchase order for 125,000 oral patches
on December 5, 2019 and expects to deliver such patches to the
purchaser before the end of the first calendar quarter of
2020.
Our
principal executive office is located at The Greater Cannabis
Company, Inc., 15 Walker Avenue, Suite 101, Baltimore, MD 21208,
and our telephone number is (443) 738-4051.
Strategy
The
Company owns the worldwide license for a novel drug delivery
technology from Pharmedica, a biopharmaceutical research and
development company. The technology is centered around the eluting
patch platform, which is a bioadhesive, transmucosal orally
dissolving thin film system. The platform allows for actives loaded
onto the eluting patch to be absorbed by the buccal mucosa into the
body.
The
Company has an exclusive license for the technology in cannabinoid
use. The Company intends to commercialize the technology by
sublicensing or partnering with companies in the cannabis industry
to bring the product to market. Potential partners include licensed
producers, distributors, processors, consumer product and
pharmaceutical companies. The Company intends to focus on the North
American market both in medical and recreational cannabis
segments.
Competition
There
are a number of other companies operating in the cannabis space.
Such companies range from producers of cannabis plants to makers of
cannabis-based edible products to developers of different methods
of cannabis delivery. Known competitors in our space include
IntelGenix Technologies (IGXT), CTT Pharmaceuticals (CTTH) and Cure
Pharmaceuticals (CURR). These are all biopharmaceutical companies
focused on developing orally dissolving thin film technologies with
cannabinoid applications.
Raw Materials
We
require water soluble polymers including hydroxylpropyl, methyl
cellulose, hydroxyethyl cellulose, polyinyl alcohol, polyethyle
oxide, polyvinyl pyrollidones, starch-based polymers and
crosslinkable polymers such as polyacrylic acid, sodium alginate
and polyethyline oxide, cannabinoid actives such as cannabidiol,
tetrahydrocannabinol or other derivatives of cannabis. Most of
these are easily attainable pharmaceutical grade
cannabinoids.
Intellectual Property
As at
the date hereof, the Company’s intellectual property consists of a
Pharmedica patent providing broad coverage for the Company’s
licensed technology.
The
Issued patent is: WO 2010/135053 A2 Dual and single layer dosage
forms.
The
Issued USA patent was filed on April 28, 2015.
Costs and Effects of Complying with Environmental
Regulations
Not
applicable.
Research and Development
The
Company is involved in additional research and development of
innovative delivery systems. The Company expects to develop new
formulations around cannabinoid delivery and intends to file more
patents to protect the intellectual property resulting from that
R&D. To support these efforts, the Company will allocate
additional funds of approximately $250,000 from financing proceeds
to research and development, sample productions and laboratory
studies.
Government Regulation
Cannabis
is currently a Schedule I controlled substance under the Controlled
Substances Act (“CSA”) and is, therefore, illegal under federal
law. Even in those states in which the use of cannabis has been
legalized pursuant to state law, its use, possession or cultivation
remains a violation of federal law. A Schedule I controlled
substance is defined as one that has no currently accepted medical
use in the United States, a lack of safety for use under medical
supervision and a high potential for abuse. The U.S. Department of
Justice (the “DOJ”) defines Schedule I controlled substances as
“the most dangerous drugs of all the drug schedules with
potentially severe psychological or physical dependence.” If the
federal government decides to enforce the CSA in Colorado with
respect to cannabis, persons that are charged with distributing,
possessing with intent to distribute or growing cannabis could be
subject to fines and/or terms of imprisonment, the maximum being
life imprisonment and a $50 million fine.
Notwithstanding
the CSA, as of the date of this filing, 33 U.S. states, the
District of Columbia and the U.S. territories of Guam and Puerto
Rico allow their residents to use medical cannabis and 11 states
have legalized recreational marijuana. Such state and territorial
laws are in conflict with the federal CSA, which makes cannabis use
and possession illegal at the federal level.
In
light of such conflict between federal laws and state laws
regarding cannabis, the previous administration under President
Obama had effectively stated that it was not an efficient use of
resources to direct federal law enforcement agencies to prosecute
those lawfully abiding by state-designated laws allowing the use
and distribution of medical cannabis. For example, the prior DOJ
Deputy Attorney General of the Obama administration, James M. Cole,
issued a memorandum (the “Cole Memo”) to all United States
Attorneys providing updated guidance to federal prosecutors
concerning cannabis enforcement under the CSA (see “-The Cole
Memo”). In addition, the Financial Crimes Enforcement Network
(“FinCEN”) provided guidelines (the “FinCEN Guidelines”) on
February 14, 2014, regarding how financial institutions can provide
services to cannabis-related businesses consistent with their Bank
Secrecy Act (“BSA”) obligations (see “-FinCEN”).
Additional
existing and pending legislation provides, or seeks to provide,
protection to persons acting in violation of federal law but in
compliance with state laws regarding cannabis. The Rohrabacher-Farr
Amendment to the Commerce, Justice, Science and Related Agencies
Appropriations Bill, which funds the DOJ, prohibits the DOJ from
using funds to prevent states with medical cannabis laws from
implementing such laws. The Rohrabacher-Farr Amendment is effective
through April 28, 2017, but as an amendment to an appropriations
bill, it must be renewed annually. The Compassionate Access
Compassionate Access, Research Expansion, and Respect States Act
(the “CARERS Act”) has been introduced in the U.S. Senate, which
proposes to reclassify cannabis under the CSA to Schedule II,
thereby changing the plant from a federally criminalized substance
to one that has recognized medical uses. More recently, the Respect
State Marijuana Laws Act of 2017 has been introduced in the U.S.
House of Representatives, which proposes to exclude persons who
produce, possess, distribute, dispense, administer or deliver
marijuana in compliance with state laws from the regulatory
controls and administrative, civil and criminal penalties of the
CSA.
However,
as of the date of this filing, neither the CARERS Act nor the
Respect State Marijuana Laws Act of 2017 has been enacted, the
Rohrabacher-Blumenauer (formerly known as the Rohrabacher-Farr
Amendment) has been renewed through September, 2018, and the new
administration under President Trump has not yet indicated whether
it will change the previously stated policy of low-priority
enforcement of federal laws related to cannabis set forth in the
Cole Memo or the FinCEN Guidelines. The Trump administration could
change this policy and decide to strongly enforce the federal laws
applicable to cannabis. Any such change in the federal government’s
enforcement of current federal laws could cause significant
financial damage to us. While we do not currently harvest,
distribute or sell cannabis, we may be irreparably harmed by a
change in enforcement policies of the federal government. However,
as of the date of this filing, we have provided products and
services to state-approved cannabis cultivators and dispensary
facilities. As a result of our providing ancillary products and
services to state-approved cannabis cultivators and dispensary
facilities, we could be deemed to be aiding and abetting illegal
activities, a violation of federal law.
Absent
any future changes in cannabis-related policies under the Trump
administration, we intend to remain within the guidelines outlined
in the Cole Memo (see “-The Cole Memo”) and the FinCEN Guidelines
(see “-FinCEN”), where applicable; however, we cannot provide
assurance that we are in full compliance with the Cole Memo, the
FinCEN Guidelines or any applicable federal laws or
regulations.
Cole
Memo
Because
of the discrepancy between the laws in some states, which permit
the distribution and sale of medical and recreational cannabis,
from federal law that prohibits any such activities, DOJ Deputy
Attorney General James M. Cole issued the Cole Memo concerning
cannabis enforcement under the CSA. The Cole Memo guidance applies
to all of the DOJ’s federal enforcement activity, including civil
enforcement and criminal investigations and prosecutions,
concerning cannabis in all states.
The
Cole Memo reiterates Congress’s determination that cannabis is a
dangerous drug and that the illegal distribution and sale of
cannabis is a serious crime that provides a significant source of
revenue to large-scale criminal enterprises, gangs, and cartels.
The Cole Memo notes that the DOJ is committed to enforcement of the
CSA consistent with those determinations. It also notes that the
DOJ is committed to using its investigative and prosecutorial
resources to address the most significant threats in the most
effective, consistent, and rational way. In furtherance of those
objectives, the Cole Memo provides guidance to DOJ attorneys and
law enforcement to focus their enforcement resources on persons or
organizations whose conduct interferes with any one or more of the
following important priorities (the “Enforcement Priorities”) in
preventing:
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the
distribution of cannabis to minors; |
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revenue
from the sale of cannabis from going to criminal enterprises,
gangs, and cartels; |
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the
diversion of cannabis from states where it is legal under state law
in some form to other states; |
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state-authorized
cannabis activity from being used as a cover or pretext for the
trafficking of other illegal drugs or other illegal
activity; |
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violence
and the use of firearms in the cultivation and distribution of
cannabis; |
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drugged
driving and the exacerbation of other adverse public health
consequences associated with cannabis use; |
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the
growing of cannabis on public lands and the attendant public safety
and environmental dangers posed by cannabis production on public
lands; and |
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cannabis
possession or use on federal property. |
We
intend to conduct rigorous due diligence to verify the legality of
all activities that we engage in and ensure that our activities do
not interfere with any of the Enforcement Priorities set forth in
the Cole Memo.
The
Cole Memo is meant only as a guide for United States Attorneys and
does not alter in any way the Department of Justice’s authority to
enforce Federal law, including Federal laws relating to cannabis,
regardless of state law.
Rohrabacher
Farr Amendment
On
December 16, 2014, H.R. 83 - Consolidated and Further Continuing
Appropriations Act, 2015 was enacted and included a provision known
as the “Rohrabacher Farr Amendment” which states:
None
of the funds made available in this Act to the Department of
Justice may be used, with respect to the States of Alabama, Alaska,
Arizona, California, Colorado, Connecticut, Delaware, District of
Columbia, Florida, Hawaii, Illinois, Iowa, Kentucky, Maine,
Maryland, Massachusetts, Michigan, Minnesota, Mississippi,
Missouri, Montana, Nevada, New Hampshire, New Jersey, New Mexico,
Oregon, Rhode Island, South Carolina, Tennessee, Utah, Vermont,
Washington, and Wisconsin, to prevent such States from implementing
their own State laws that authorize the use, distribution,
possession, or cultivation of medical marijuana.
The
Rohrabacher Farr Amendment represents one of the first times in
recent history that Congress has taken action indicating support of
medical cannabis. The Rohrabacher Farr Amendment was renewed by
Congress in 2015, but expired in September 2018. It is again up for
renewal, although there is no assurance that it will be
renewed.
The
Rohrabacher Farr Amendment would appear to protect the right of the
states to determine their own laws on medical cannabis use;
however, the actual effects of the amendment are still unclear. The
Rohrabacher Farr Amendment did not remove the federal ban on
medical cannabis and cannabis remains regulated as a Schedule I
controlled substance. Further, the United States Department of
Justice has interpreted the Rohrabacher Farr Amendment as only
preventing federal action that prevents states from creating and
implementing cannabis laws - not against the individuals or
businesses that actually carry out cannabis laws - and has
continued to sporadically commence enforcement actions against
individuals or businesses participating in the cannabis industry
despite such participation being legal under state law. Whether
this interpretation is appropriate is still being litigated, and,
while an initial district court decision has not supported the
Department of Justice’s interpretation, such decision is currently
under appellate review. In addition, no matter what interpretation
is adopted by the courts, there is no question that the Rohrabacher
Farr Amendment does not protect any party not in full compliance
with state medicinal cannabis laws.
Potential
Changes to Federal Laws and Enforcement Priorities
Although
the Department of Justice has stated in the Cole Memo that it is
not an efficient use of limited resources to direct federal law
enforcement agencies to prosecute those lawfully abiding by state
laws allowing the use and distribution of medical cannabis, there
is no guarantee that the Department of Justice’s position will not
change regarding the low-priority enforcement of federal laws.
Further, the United States has a new administration in 2017, which
could introduce a less favorable cannabis enforcement policy. There
can be no assurances that any future administration would not
change the current enforcement policy and decide to strongly
enforce the federal laws.
In
light of the 2005 U.S. Supreme Court ruling in Gonzales v. Raich,
under the commerce clause of the constitution, Congress may pass
laws to criminalize the production and use of home-grown cannabis
even where states have approved its use for medicinal purposes,
which leads to the conclusion that the Controlled Substances Act
may preempt state laws relating to any cannabis-related activity.
Any such change in the federal enforcement program of current
federal laws could cause significant financial damage to our
business. While we do not directly harvest, distribute, or
distribute cannabis today, we still may be deemed to be violating
federal law and may be irreparably harmed by a change in
enforcement by the federal or state governments.
Agriculture
Improvement Act of 2018
On
December 20, 2018, the United States federal government passed The
Agriculture Improvement Act of 2018, which amends the Controlled
Substances Act of 1970 concerning cannabis for the first time.
Specifically, it refers to a new definition of “hemp” as being any
C. Sativa plant that has Tetrahydrocannabinol (“THC”) below 0.3% on
a dry weight basis. The effect of this act is to legalize hemp or,
in other words, strains of cannabis with low THC.
Legalizing
strains that are low in THC is important for the nascent cannabis
industry. Hemp is a great source of cannabidiol (“CBD”). As at the
date hereof, CBD has been legalized in some form or another in all
but 3 states – Idaho, Nebraska and South Dakota. Legalizing its
production, even with significant oversight, opens the door for
legal cannabis growing in the United States in a way that has not
been available to farms, companies, and consumers since the at the
Controlled Substances Act of 1970.
Employees
We
have two persons providing us services on a full-time basis – our
chief executive officer and our general counsel.
Item 1A. RISK FACTORS
Risks Associated to Our Business and
Industry
Coronavirus has slowed down our business growth
There
continues to be a significant and growing volatility and
uncertainty in the global economy due to the Coronavirus pandemic
affecting all business sectors and industries. To-date, the
fulfillment of our first order of eluting patches has been delayed
due to the Coronavirus shutdown in the United States. It is not
clear if and when business activity will resume to the point where
we will be able to re-start work on our first order. If business
activity does not resume in a timely manner, then our first order
may be cancelled and subsequent orders may not be forthcoming.
Further or future downturns may adversely affect business
development and commercial activity and could materially and
adversely affect our results of operations, financial position and
growth strategy.
Our proposed business is dependent on laws pertaining to the
marijuana industry.
Continued
development of the marijuana industry is dependent upon continued
legislative authorization and/or voter approved referenda of
marijuana at the state level. Any number of factors could slow or
halt progress in this area. Further, progress for the industry,
while encouraging, is not assured. While there may be ample public
support for legislative action, numerous factors impact the
legislative process. Any one of these factors could slow or halt
use of marijuana, which would negatively impact our proposed
business.
As of
the date hereof, 33 states and the District of Columbia allow its
citizens to use medical marijuana and 11 states have legalized
recreational marijuana. The state laws are in conflict with the
federal Controlled Substances Act, which makes marijuana use,
cultivation and/or possession illegal on a national level. As
discussed in the “Cole Memo” the former Obama administration
has effectively stated that it is not an efficient use of resources
to direct law federal law enforcement agencies to prosecute those
lawfully abiding by state-designated laws allowing the use and
distribution of medical marijuana. Any change in the federal
government’s enforcement of current federal laws could cause
significant financial damage to us and our shareholders.
All strains of cannabis other than hemp remain illegal under
Federal law.
Despite
the development of a legal cannabis industry under the laws of
certain states and the legalization of hemp under the Agriculture
Improvement Act of 2018, the state laws legalizing medical and
adult cannabis use are in conflict with the Federal Controlled
Substances Act, which classifies cannabis as a “Schedule-I”
controlled substance and makes cannabis use and possession illegal
on a national level. The United States Supreme Court has ruled that
the Federal government has the right to regulate and criminalize
cannabis, even for medical purposes, and thus Federal law
criminalizing the use of cannabis preempts state laws that legalize
its use. However, the Obama Administration determined that it is
not an efficient use of resources to direct Federal law enforcement
agencies to prosecute those lawfully abiding by state laws allowing
the use and distribution of medical and recreational cannabis.
There is no guarantee that the Trump Administration will not change
the Federal government’s stated policy regarding the low-priority
enforcement of Federal laws in states where cannabis has been
legalized. Any such change in the Federal government’s enforcement
of Federal laws could cause significant financial damage to us and
our shareholders.
Laws and regulations affecting the medical marijuana industry are
constantly changing, which could detrimentally affect our proposed
operations.
Local,
state and federal medical marijuana laws and regulations are broad
in scope and subject to evolving interpretations, which could
require us to incur substantial costs associated with compliance or
alter our business plan. In addition, violations of these laws, or
allegations of such violations, could disrupt our business and
result in a material adverse effect on our operations. In addition,
it is possible that regulations may be enacted in the future that
will be directly applicable to our proposed business. We cannot
predict the nature of any future laws, regulations, interpretations
or applications, nor can we determine what effect additional
governmental regulations or administrative policies and procedures,
when and if promulgated, could have on our business.
As the possession and use of strains of cannabis that are not hemp
is illegal under the Federal Controlled Substances Act, we may be
deemed to be aiding and abetting illegal activities through the
services that we provide to users and advertisers. As a result, we
may be subject to enforcement actions by law enforcement
authorities, which would materially and adversely affect our
business.
Under
Federal law, and more specifically the Federal Controlled
Substances Act, the possession, use, cultivation, and transfer of
non-hemp cannabis is illegal. Our business provides services to
customers that are engaged in the business of possession, use,
cultivation, and/or transfer of cannabis. As a result, law
enforcement authorities, in their attempt to regulate the illegal
use of cannabis, may seek to bring an action or actions against us,
including, but not limited, to a claim of aiding and abetting
another’s criminal activities. The Federal aiding and abetting
statute provides that anyone who “commits an offense against the
United States or aids, abets, counsels, commands, induces or
procures its commission, is punishable as a principal.” 18 U.S.C.
§2(a). As a result of such an action, we may be forced to cease
operations and our investors could lose their entire investment.
Such an action would have a material negative effect on our
business and operations.
Our potential customers, clients and companies which we may elect
to invest directly with may have difficulty accessing the service
of banks, which may make it difficult for them to
operate.
On
February 14, 2014, the U.S. government issued rules allowing banks
to legally provide financial services to state-licensed cannabis
businesses. A memorandum issued by the Justice Department to
federal prosecutors reiterated guidance previously given, this time
to the financial industry that banks can do business with legal
marijuana businesses and “may not” be prosecuted. FinCEN issued
guidelines to banks noting that it is possible to provide financial
services to state-licensed cannabis businesses and still be in
compliance with federal anti-money laundering laws. The guidance,
however, falls short of the explicit legal authorization that
banking industry officials had requested the government provide,
and, to date, it is not clear if any banks have relied on the
guidance to take on legal cannabis companies as clients. The
aforementioned policy can be changed, including in connection with
a change in presidential administration, and any policy reversal
and or retraction could result in legal cannabis businesses losing
access to the banking industry.
Because
the use, sale and distribution of cannabis remains illegal under
federal law, many banks will not accept deposits from or provide
other bank services to businesses involved with cannabis. The
inability to open bank accounts may make it difficult for our
existing and potential customers, clients and tenants to operate
and may make it difficult for them to contract with us.
We are highly dependent on the services of key executives, the loss
of whom could materially harm our business and our strategic
direction. If we lose key management or significant personnel,
cannot recruit qualified employees, directors, officers, or other
personnel or experience increases in our compensation costs, our
business may materially suffer.
We
are highly dependent on our management team, specifically Aitan
Zacharin. If we lose key employees, our business may suffer.
Furthermore, our future success will also depend in part on the
continued service of our management personnel and our ability to
identify, hire, and retain additional key personnel. We do not
carry “key-man” life insurance on the lives of any of our
executives, employees or advisors. We experience intense
competition for qualified personnel and may be unable to attract
and retain the personnel necessary for the development of our
business. Because of this competition, our compensation costs may
increase significantly.
We will need to raise additional capital to continue operations
over the coming year.
We
anticipate the need to raise approximately $1,500,000 in capital to
fund our operations through December 31, 2020. We expect to use
these cash proceeds primarily for business development, testing,
licensing and operations. We cannot guarantee that we will be able
to raise these required funds or generate sufficient revenue to
remain operational.
Government actions or digital distribution platform restrictions
could result in our products and services being unavailable in
certain geographic regions, harming future
growth.
Due
to our connections to the cannabis industry, governments and
government agencies could ban or cause our ETP technology to become
unavailable in certain regions and jurisdictions. This could
greatly impair or prevent us from entering the market and
commercializing our technology.
Failure to generate interest in our ETP technology could greatly
harm our business model.
Our
business model is reliant on its ability to attract and retain
players in the cannabis market to use our ETP technology. If we are
unable to convince such players to utilize our ETP technology, our
business will not grow and we will not generate any
revenues.
We may not be able to compete successfully with other established
companies offering the same or similar services and, as a result,
we may not achieve our projected revenue and user
targets.
If we
are unable to compete successfully with other businesses in our
existing market, we may not achieve our projected revenue and/or
customer targets. We compete with both start-up and established
retail and technology companies. Compared to our business, some of
our competitors may have greater financial and other resources,
have been in business longer, have greater name recognition and be
better established in the technological or cannabis
markets.
Our lack of adequate D&O insurance may also make it difficult
for us to retain and attract talented and skilled directors and
officers.
We
may in the future be subject to additional litigation, including
potential class action and stockholder derivative actions. Risks
associated with legal liability are difficult to assess and
quantify, and their existence and magnitude can remain unknown for
significant periods of time. To date, we have not obtained
directors and officers liability (“D&O”) insurance. While
neither Florida law nor our Articles of Incorporation or bylaws
require us to indemnify or advance expenses to our officers and
directors involved in such a legal action, we have entered into an
indemnification agreement with our President and intend to enter
into similar agreements with other officers and directors in the
future. Without adequate D&O insurance, the amounts we would
pay to indemnify our officers and directors should they be subject
to legal action based on their service to the Company could have a
material adverse effect on our financial condition, results of
operations and liquidity. Furthermore, our lack of adequate D&O
insurance may make it difficult for us to retain and attract
talented and skilled directors and officers, which could adversely
affect our business.
We expect to incur substantial expenses to meet our reporting
obligations as a public company. In addition, failure to maintain
adequate financial and management processes and controls could lead
to errors in our financial reporting and could harm our ability to
manage our expenses.
We
estimate that it will cost approximately $50,000 annually to
maintain the proper management and financial controls for our
filings required as a public reporting company. In addition, if we
do not maintain adequate financial and management personnel,
processes and controls, we may not be able to accurately report our
financial performance on a timely basis, which could cause a
decline in our stock price and adversely affect our ability to
raise capital.
Our ETP Technology may require FDA approval.
The
use of our ETP technology may be subject to FDA, or equivalent
regulatory body approval. If so, obtaining such approval will
require a substantial investment of funds and may take years. There
is no assurance that we will be able to obtain regulatory approval
as may be required prior to entering certain markets.
Due to our involvement in the cannabis industry, we may have a
difficult time obtaining the various insurances that are desired to
operate our business, which may expose us to additional risk and
financial liabilities.
Insurance
that is otherwise readily available, such as workers’ compensation,
general liability, and directors and officer’s insurance, is more
difficult for us to find and more expensive, because we are a
service provider to companies in the cannabis industry. There are
no guarantees that we will be able to find such insurances in the
future, or that the cost will be affordable to us. If we are forced
to go without such insurances, it may prevent us from entering into
certain business sectors, may inhibit our growth, and may expose us
to additional risk and financial liabilities. In 2019, The Greater
Cannabis Company, Inc. expects to begin offering health, dental and
vision insurance to its employees at an estimated monthly cost of
$5,000-$10,000. The Greater Cannabis Company, Inc. carries general
liability insurance. We do not currently hold any other forms of
insurance, including directors’ and officers’ insurance. Because we
do not have any other types of insurance, if we are made a party of
a legal action, we may not have sufficient funds to defend the
litigation. If that occurs a judgment could be rendered against us
that could cause us to cease operations.
Participants in the cannabis industry may have difficulty accessing
the service of banks, which may make it difficult for us to
operate.
Despite
recent rules issued by the United States Department of the Treasury
mitigating the risk to banks who do business with cannabis
companies operating in compliance with applicable state laws, as
well as recent guidance from the United States Department of
Justice, banks remain wary of accepting funds from businesses in
the cannabis industry. Since the use of cannabis remains illegal
under Federal law, there remains a compelling argument that banks
may be in violation of Federal law when accepting for deposit funds
derived from the sale or distribution of cannabis and/or related
products. Consequently, businesses involved in the cannabis
industry continue to have trouble establishing banking
relationships. Our inability to open a bank account may make it
difficult (and potentially impossible) for us, or some of our
advertisers, to do business with us.
Risks Relating to our Common Stock
There is currently limited liquidity of shares of our common
stock.
Our
common stock was first quoted for trading in the quarter that ended
September 30, 2018.
Failure
to develop or maintain a trading market could negatively affect its
value and make it difficult or impossible for you to sell your
shares. Even if a market for common stock does develop, the market
price of common stock may be highly volatile. In addition to the
uncertainties relating to future operating performance and the
profitability of operations, factors such as variations in interim
financial results or various, as yet unpredictable, factors, many
of which are beyond our control, may have a negative effect on the
market price of our common stock.
If we fail to remain current on our reporting requirements, we
could be removed from the OTC Bulletin Board which would limit the
ability of broker-dealers to sell our securities in the secondary
market.
Companies
trading on the Over the Counter Bulletin Board must be reporting
issuers under Section 12 of the Securities Exchange Act of 1934, as
amended, and must be current in their reports under Section 13, in
order to maintain price quotation privileges on the OTC Bulletin
Board. As a result, the market liquidity for our securities could
be severely adversely affected by limiting the ability of
broker-dealers to sell our securities and the ability of
stockholders to sell their securities in the secondary market. In
addition, we may be unable to get relisted on the OTC Bulletin
Board, which may have an adverse material effect on the
Company.
We do not expect to pay dividends in the future; any return on
investment may be limited to the value of our common
stock.
We do
not currently anticipate paying cash dividends in the foreseeable
future. The payment of dividends on our common stock will depend on
earnings, financial condition and other business and economic
factors affecting it at such time as the board of directors may
consider relevant. Our current intention is to apply net earnings,
if any, in the foreseeable future to increasing our capital base
and development and marketing efforts. There can be no assurance
that the Company will ever have sufficient earnings to declare and
pay dividends to the holders of our common stock, and in any event,
a decision to declare and pay dividends is at the sole discretion
of our board of directors. If we do not pay dividends, our common
stock may be less valuable because a return on your investment will
only occur if its stock price appreciates.
Authorization of preferred stock.
Our
Certificate of Incorporation authorizes the issuance of up to
10,000,000 shares of preferred stock with designations, rights and
preferences determined from time to time by its Board of Directors.
Accordingly, our Board of Directors is empowered, without
stockholder approval, to issue preferred stock with dividend,
liquidation, conversion, voting, or other rights which could
adversely affect the voting power or other rights of the holders of
the common stock.
Our
Certificate of Incorporation also authorizes the issuance from time
to time of shares of its stock of any class, whether now or
hererafter authorized, or securities convertible into shares of its
stock of any class, whether now or hereafter authorized, for such
consideration as the Board of Director(s) may deem advisable,
subject to such restrictions or limitation, if any, as may be set
forth in the bylaws of the Corporation. This authority would allow
us to issue shares of preferred stock in excess of the 10,000,000
initially authorized. In fact, as at the date of this report, we
have issued 10 shares of Series A Convertible Preferred
Stock.
The market price for our common stock may be particularly volatile
given our status as a relatively unknown company, with a limited
operating history and lack of profits which could lead to wide
fluctuations in our share price. You may be unable to sell your
common stock at or above your purchase price, which may result in
substantial losses to you.
Our
stock price may be particularly volatile when compared to the
shares of larger, more established companies that trade on a
national securities exchange and have large public floats. The
volatility in our share price will be attributable to a number of
factors. First, our common stock will be compared to the shares of
such larger, more established companies, sporadically and thinly
traded. As a consequence of this limited liquidity, the trading of
relatively small quantities of shares by our shareholders may
disproportionately influence the price of those shares in either
direction. The price for our shares could decline precipitously in
the event that a large number of shares of our common stock are
sold on the market without commensurate demand. Second, we are a
speculative or “risky” investment due to our limited operating
history and lack of profits to date, and uncertainty of future
market acceptance for our potential products. As a consequence of
this enhanced risk, more risk-averse investors may, under the fear
of losing all or most of their investment in the event of negative
news or lack of progress, be more inclined to sell their shares on
the market more quickly and at greater discounts than would be the
case with the stock of a larger, more established company that
trades on a national securities exchange and has a large public
float. Many of these factors are beyond our control and may
decrease the market price of our common stock, regardless of our
operating performance. We cannot make any predictions or
projections as to what the prevailing market price for our common
stock will be at any time. Moreover, the OTC Bulletin Board is not
a liquid market in contrast to the major stock exchanges. We cannot
assure you as to the liquidity or the future market prices of our
common stock if a market does develop. If an active market for our
common stock does not develop, the fair market value of our common
stock could be materially adversely affected.
Our shares are subject to the U.S. “Penny Stock” Rules and
investors who purchase our shares may have difficulty re-selling
their shares as the liquidity of the market for our shares may be
adversely affected by the impact of the “Penny Stock”
Rules.
Our
stock is subject to U.S. “Penny Stock” rules, which may make the
stock more difficult to trade on the open market. A “penny stock”
is generally defined by regulations of the U.S. Securities and
Exchange Commission (“SEC”) as an equity security with a market
price of less than US$5.00 per share. However, an equity security
with a market price under US $5.00 will not be considered a penny
stock if it fits within any of the following exceptions:
|
|
(i) |
the
equity security is listed on NASDAQ or a national securities
exchange; |
| |
|
|
| |
(ii) |
the
issuer of the equity security has been in continuous operation for
less than three years, and either has (a) net tangible assets of at
least US $5,000,000, or (b) average annual revenue of at least US
$6,000,000; or |
| |
|
|
| |
(iii) |
the
issuer of the equity security has been in continuous operation for
more than three years and has net tangible assets of at least US
$2,000,000. |
Our
common stock does not currently fit into any of the above
exceptions.
If an
investor buys or sells a penny stock, SEC regulations require that
the investor receive, prior to the transaction, a disclosure
explaining the penny stock market and associated risks.
Furthermore, trading in our common stock will be subject to Rule
15g-9 of the Exchange Act, which relates to non-NASDAQ and
non-exchange listed securities. Under this rule, broker/dealers who
recommend our securities to persons other than established
customers and accredited investors must make a special written
suitability determination for the purchaser and receive the
purchaser’s written agreement to a transaction prior to sale.
Securities are exempt from this rule if their market price is at
least $5.00 per share. Since our common stock is currently deemed
penny stock regulations, it may tend to reduce market liquidity of
our common stock, because they limit the broker/dealers’ ability to
trade, and a purchaser’s ability to sell, the stock in the
secondary market.
The
low price of our common stock has a negative effect on the amount
and percentage of transaction costs paid by individual
shareholders. The low price of our common stock also limits our
ability to raise additional capital by issuing additional shares.
There are several reasons for these effects. First, the internal
policies of certain institutional investors prohibit the purchase
of low-priced stocks. Second, many brokerage houses do not permit
low-priced stocks to be used as collateral for margin accounts or
to be purchased on margin. Third, some brokerage house policies and
practices tend to discourage individual brokers from dealing in
low-priced stocks. Finally, broker’s commissions on low-priced
stocks usually represent a higher percentage of the stock price
than commissions on higher priced stocks. As a result, the
Company’s shareholders may pay transaction costs that are a higher
percentage of their total share value than if our share price were
substantially higher.
Because we can issue additional shares of common stock, purchasers
of our common stock may incur immediate dilution and experience
further dilution.
We
are authorized to issue up to 500,000,000 shares of common stock,
of which 60,786,011 shares of common stock are issued and
outstanding as of the date hereof. Our Board of Directors has the
authority to cause us to issue additional shares of common stock
and to determine the rights, preferences and privileges of such
shares, without consent of any of our stockholders. Consequently,
the stockholders may experience more dilution in their ownership of
our stock in the future.
Dilution from Convertible Note Financing
On
February 12, 2019, we issued a convertible note to Eagle Equities,
LLC and on January 27, 2020 we issued a convertible note to GW
Holdings Group, LLC the terms and conditions of which are
incorporated by reference in this report as Exhibit 10.1 to our
current report on Form 8-K dated February 15, 2019 and Exhibit 10.1
to our current report on form 8-K dated February 3, 2020. The notes
are convertible into shares of our common stock at (depending on
certain factors) a 35-45% discount to the market price at the time
of conversion. We filed a registration statement on Form S-1 to
cover the resale of the shares into which the notes are
convertible. As a result of these transactions, shareholders of the
Company may experience substantial dilution.
A reverse stock split may decrease the liquidity of the shares of
our common stock.
The
liquidity of the shares of our common stock may be affected
adversely by a reverse stock split given the reduced number of
shares that will be outstanding following a reverse stock split,
especially if the market price of our common stock does not
increase as a result of the reverse stock split.
Our management has identified material weaknesses in the Company’s
internal control over financial reporting which could, if not
remediated, result in additional material misstatements in our
consolidated financial statements. We may be unable to develop,
implement and maintain appropriate controls in future
periods.
Our
management is responsible for establishing and maintaining adequate
internal control over financial reporting, and the Sarbanes-Oxley
Act of 2002 and SEC rules require that our management report
annually on the effectiveness of the Company’s internal control
over financial reporting. Among other things, our management must
conduct an assessment of the Company’s internal control over
financial reporting to allow management to report on, and our
independent registered public accounting firm to audit, the
effectiveness of the Company’s internal control over financial
reporting, as required by Section 404 of the Sarbanes-Oxley Act. As
disclosed in Part II, Item 9A, “Controls and Procedures” of this
Form 10-K, our management, with the participation of our chief
executive officer and our chief financial officer, has determined
that we had material weaknesses in the Company’s internal control
over financial reporting as of December 31, 2019.
A
“material weakness” is a deficiency, or a combination of
deficiencies, in internal control over financial reporting, such
that there is a reasonable possibility that a material misstatement
of our annual or interim consolidated financial statements will not
be prevented or detected on a timely basis. Due to lack of funds
and internal resources, we are not actively engaged in developing
and implementing a remediation plan designed to address such
material weaknesses. Additionally, further material weaknesses in
the Company’s internal control over financial reporting may be
identified in the future. Any failure to implement or maintain
required new or improved controls, or any difficulties we encounter
in their implementation, could result in additional material
weaknesses, or could result in material misstatements in our
consolidated financial statements. These misstatements could result
in a restatement of our consolidated financial statements, cause us
to fail to meet our reporting obligations, reduce our ability to
obtain financing or cause investors to lose confidence in our
reported financial information, leading to a decline in our stock
price.
We do
not expect to develop or implement a remediation plan in fiscal
2020. As such, we expect that there will continue to be an
increased risk that we will be unable to timely file future
periodic reports with the SEC and that our future consolidated
financial statements could contain errors that will be undetected.
Further and continued determinations that there are material
weaknesses in the effectiveness of the Company’s internal control
over financial reporting could also reduce our ability to obtain
financing or could increase the cost of any financing we obtain and
require additional expenditures of both money and our management’s
time to comply with applicable requirements. For more information
relating to the Company’s internal control over financial
reporting, see Part II, Item 9A, “Controls and Procedures” of this
Form 10-K.
ITEM 1B. UNRESOLVED STAFF
COMMENTS.
None
ITEM 2. PROPERTIES
We
currently lease office space at 15 Walker Street, Suite 101,
Baltimore, Maryland 21208 from our chief executive officer, Aitan
Zacharin, for no consideration. Our lease with Mr. Zacharin is
terminable at will.
We do
not own any real property.
We
believe that our facilities are adequate for our current needs and
that, if required, we will be able to expand our current space or
locate suitable new office space and obtain a suitable replacement
for our executive and administrative headquarters.
ITEM 3. LEGAL
PROCEEDINGS
We
know of no pending proceedings to which any director, member of
senior management, or affiliate is either a party adverse to us or
has a material interest adverse to us.
None
of our executive officers or directors have (i) been involved in
any bankruptcy proceedings within the last five years, (ii) been
convicted in or has pending any criminal proceedings (other than
traffic violations and other minor offenses), (iii) been subject to
any order, judgment or decree enjoining, barring, suspending or
otherwise limiting involvement in any type of business, securities
or banking activity or (iv) been found to have violated any
Federal, state or provincial securities or commodities law and such
finding has not been reversed, suspended or vacated.
ITEM 4. MINE SAFETY
DISCLOSURES
Not
applicable.
PART II
ITEM 5. MARKET FOR COMPANY’S COMMON
EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES.
Market
Information
Our
shares of common stock have been quoted on the OTCQB by the OTC
Markets Group Inc. of the Financial Industry Regulatory Authority,
Inc. (“FINRA”) under the symbol “GCAN” since August 2018. Set forth
below are the high and low closing bid prices for our common stock
for each quarter of 2018 and 2019. All prices listed herein reflect
inter-dealer prices, without retail mark-up, mark-down or
commissions and may not represent actual transactions.
|
Period |
|
High |
|
Low |
| |
|
|
|
|
|
July 1,
2018 through September 30, 2018 |
|
$ |
0.7350 |
|
|
$ |
0.01175 |
|
| |
|
|
|
|
|
|
|
|
| October 1, 2018
through December 31, 2018 |
|
$ |
0.28 |
|
|
$ |
0.1010 |
|
| |
|
|
|
|
|
|
|
|
|
January 1,
2019 through March 31, 2019 |
|
$ |
0.18 |
|
|
$ |
0.10 |
|
|
|
|
|
|
|
|
|
|
|
|
April 1,
2019 through June 30, 2019 |
|
$ |
0.20 |
|
|
$ |
0.08 |
|
|
|
|
|
|
|
|
|
|
|
|
July 1,
2019 through September 30, 2019 |
|
$ |
0.14 |
|
|
$ |
0.10 |
|
|
|
|
|
|
|
|
|
|
|
|
October 1,
2019 through December 31, 2019 |
|
$ |
0.05 |
|
|
$ |
0.03 |
|
|
|
|
|
|
|
|
|
|
|
|
January 1,
2020 through March 31, 2020 |
|
$ |
0.04 |
|
|
$ |
0.004 |
|
On
April 14, 2020, the stock closed at $0.[ ].
Holders
of Record
On
the date hereof, there were 331 holders of record of our common
stock, as reported by the Company’s transfer agent. In computing
the number of holders of record, each broker-dealer and clearing
corporation holding shares on behalf of its customers is counted as
a single stockholder.
Dividends
We
have never declared or paid any cash dividends on our common stock
nor do we anticipate paying any in the foreseeable future.
Furthermore, we expect to retain any future earnings to finance our
operations and expansion. The payment of cash dividends in the
future will be at the discretion of our Board of
Directors.
Equity
Compensation Plans
Not
applicable
Recent
Sales of Unregistered Securities; Use of Proceeds from Registered
Securities
During
the first calendar quarter of 2020, we issued 21,484,688 shares of
our common stock pursuant to conversions of principal and interest
under our outstanding convertible notes.
Please
see NOTE H - ISSUANCES OF COMMON STOCK AND WARRANTS
for further information.
ITEM 6. SELECTED FINANCIAL
DATA
As a
smaller reporting company, we are not required to provide this
information.
ITEM 7. MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Results of Operations
For
the year ended December 31, 2019, the Company generated $7,120 in
annual revenue compared to $95,375 in 2018. During the year ended
December 31, 2019, the Company’s revenue was negatively impacted
due to the fact that it took all of fiscal 2019 to finalize, market
and sell our products with our first sale completed on October 10,
2019.
Cost
of sales was $0 for the year ended December 31, 2019 and $0 for the
year ended December 31, 2018. Our operating expenses in the year
ended December 31, 2019 amounted to $532,443 as compared to
$286,294 for the year ended December 31, 2018.
Our
net loss in the year ended December 31, 2019 was $1,648,490 as
compared to the net loss of $839,070 during the year ended December
31, 2018.
The
amounts presented in the financial statements do not provide for
the effect of inflation on our operations or our financial
position. Amounts shown for costs and expenses reflect historical
cost and do not necessarily represent replacement cost. The net
operating losses shown would be greater than reported if the
effects of inflation were reflected either by charging operations
with amounts that represent replacement costs or by using other
inflation adjustments.
Liquidity and Capital Resources
We
had $24,662 cash on hand at December 31, 2019, compared to $59,891
at December 31, 2018.
At
December 31, 2019, we had $399,318 in principal amount of
outstanding convertible notes.
Please
see NOTE E - NOTES PAYABLE TO THIRD PARTIES for
further information.
The
proceeds from loans, convertible debentures as well as cash on hand
is being used to fund the operations of our current
operations.
The
following table provides detailed information about our net cash
flows for the twelve months ended December 31, 2019 and
2018.
|
|
|
31-Dec-19 |
|
31-Dec-18 |
|
Net cash
used in operating activities |
|
$ |
285,229 |
|
|
$ |
100,109 |
|
|
Net cash
provided by (used in) investing activities |
|
|
- |
|
|
|
- |
|
|
Net cash
provided by financing activities |
|
|
250,000 |
|
|
|
160,000 |
|
|
Net
increase (decrease) in cash |
|
$ |
(35,229 |
) |
|
$ |
59,891 |
|
Trends
The
factors that will most significantly affect our future operating
results, liquidity and capital resources will be:
|
|
● |
Government
regulation of the marijuana industry; |
| |
● |
Revision
of Federal banking regulations for the marijuana industry;
and |
| |
● |
Legalization
of the use of marijuana for medical or recreational use in other
states. |
Other
than the foregoing, we do not know of any trends, events or
uncertainties that have had, or are reasonably expected to have, a
material impact on:
|
|
● |
revenues
or expenses; |
| |
● |
any
material increase or decrease in liquidity; or |
| |
● |
expected
sources and uses of cash. |
Critical Accounting Policies and Estimates
The
SEC issued Financial Reporting Release No. 60, “Cautionary Advice
Regarding Disclosure About Critical Accounting Policies” suggesting
that companies provide additional disclosure and commentary on
their most critical accounting policies. In Financial Reporting
Release No. 60, the SEC has defined the most critical accounting
policies as the ones that are most important to the portrayal of a
company’s financial condition and operating results and require
management to make its most difficult and subjective judgments,
often as a result of the need to make estimates of matters that are
inherently uncertain. Based on this definition, we have identified
the following significant policies as critical to the understanding
of our financial statements. The preparation of financial
statements in conformity with generally accepted accounting
principles requires management to make a variety of estimates and
assumptions that affect (i) the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities as
of the date of the financial statements and (ii) the reported
amounts of revenues and expenses during the reporting periods
covered by the financial statements. Our management expects to make
judgments and estimates about the effect of matters that are
inherently uncertain. As the number of variables and assumptions
affecting the future resolution of the uncertainties increase,
these judgments become even more subjective and complex. Although
we believe that our estimates and assumptions are reasonable,
actual results may differ significantly from these estimates.
Changes in estimates and assumptions based upon actual results may
have a material impact on our results.
Off-Balance Sheet Arrangements
We do
not have any off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on our
financial condition, changes in financial condition, revenues or
expenses, results of operations, liquidity, capital expenditures or
capital resources that are material to investors.
ITEM 7A. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
As a
smaller reporting company, we are not required to provide this
information.
ITEM 8. FINANCIAL
STATEMENTS
The
financial statements and supplementary financial information
required by this Item are set forth immediately below and are
incorporated herein by reference.
THE
GREATER CANNABIS COMPANY, INC.
December
31, 2019
FORM 10-K
INDEX
TO FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
To
the Board of Directors and Stockholders of The Greater Cannabis
Company, Inc.
Opinion
on the Financial Statements
We
have audited the accompanying consolidated balance sheets of The
Greater Cannabis Company, Inc. (the “Company”) as of December 31,
2019 and 2018 and the related consolidated statements of
operations, stockholders’ deficiency, and cash flows for the years
then ended, and the related notes (collectively referred to as the
“financial statements”). In our opinion, the financial statements
present fairly, in all material respects, the financial position of
The Greater Cannabis Company, Inc. as of December 31, 2019 and 2018
and the results of its operations and cash flows for the years then
ended in conformity with accounting principles generally accepted
in the United States.
Basis
for Opinion
These
financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on the
Company’s financial statements based on our audit. We are a public
accounting firm registered with the Public Company Accounting
Oversight Board (United States) (“PCAOB”) and are required to be
independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We
conducted our audit in accordance with the standards of the PCAOB.
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements
are free of material misstatement, whether due to error or fraud.
The Company is not required to have, nor were we engaged to
perform, an audit of its internal control over financial reporting.
As part of our audit we are required to obtain an understanding of
internal control over financial reporting but not for the purpose
of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express
no such opinion.
Our
audit included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial
statements. Our audit also included evaluating the accounting
principles used and significant estimates made by management, as
well as evaluating the overall presentation of the financial
statements. We believe that our audit provides a reasonable basis
for our opinion.
Going
Concern Uncertainty
The
accompanying financial statements referred to above have been
prepared assuming that the Company will continue as a going
concern. As discussed in Note B to the financial statements, the
Company’s present financial situation raises substantial doubt
about its ability to continue as a going concern. Management’s
plans in regard to this matter are also described in Note B. The
financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
|
/s/
Michael T. Studer CPA P.C. |
|
|
Michael
T. Studer CPA P.C. |
|
|
|
|
|
Freeport,
New York |
|
|
April
14, 2020 |
|
We
have served as the Company’s auditor since 2017.
THE GREATER CANNABIS COMPANY,
INC.
CONSOLIDATED
BALANCE SHEETS
| |
|
December 31, 2019 |
|
|
December 31, 2018 |
|
| |
|
|
|
|
|
|
| ASSETS |
|
|
|
|
|
|
|
|
|
CURRENT ASSETS |
|
|
|
|
|
|
|
|
|
Cash |
|
$ |
24,662 |
|
|
$ |
59,891 |
|
|
Advance to supplier |
|
|
28,000 |
|
|
|
- |
|
| Total current
assets |
|
|
52,662 |
|
|
|
59,891 |
|
| |
|
|
|
|
|
|
|
|
| OTHER ASSETS |
|
|
|
|
|
|
|
|
|
Pharmedica Exclusive License Agreement (less accumulated
amortization and impairment of $100,000 and $10,251,
respectively) |
|
|
- |
|
|
|
89,749 |
|
| |
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
52,662 |
|
|
$ |
149,640 |
|
| |
|
|
|
|
|
|
|
|
| LIABILITIES AND
STOCKHOLDERS’ DEFICIENCY |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES |
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
17,517 |
|
|
$ |
17,890 |
|
|
Accrued interest |
|
|
20,619 |
|
|
|
5,312 |
|
|
Accrued salaries |
|
|
98,000 |
|
|
|
85,000 |
|
|
Accrued royalties |
|
|
50,000 |
|
|
|
- |
|
|
Advance from customer |
|
|
27,977 |
|
|
|
- |
|
|
Loans payable to related parties |
|
|
260,000 |
|
|
|
260,000 |
|
|
Notes payable to third parties (less debt discounts of $505,937 and
$550, respectively) |
|
|
399,318 |
|
|
|
64,914 |
|
|
Derivative liability |
|
|
725,865 |
|
|
|
280,310 |
|
|
Total current liabilities and total liabilities |
|
|
1,599,296 |
|
|
|
713,426 |
|
| |
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ (DEFICIENCY) |
|
|
|
|
|
|
|
|
| Preferred stock;
19,000,000 shares authorized, $.001 par value: |
|
|
|
|
|
|
|
|
|
Series A Convertible Preferred-issued and outstanding 9,411,998 and
9,411,998 shares, respectively |
|
|
9,412 |
|
|
|
9,412 |
|
|
Series B Convertible Preferred-issued and outstanding 0 and 0
shares, respectively |
|
|
- |
|
|
|
- |
|
|
Common stock; 500,000,000 shares authorized, $.001 par value, as of
December 31, 2019 and 2018, there are 39,301,323 and 31,880,969
shares outstanding, respectively |
|
|
39,301 |
|
|
|
31,881 |
|
|
Additional paid-in capital |
|
|
783,891 |
|
|
|
233,991 |
|
|
Accumulated deficit |
|
|
(2,379,238 |
) |
|
|
(839,070 |
) |
| |
|
|
|
|
|
|
|
|
| Total
stockholders’ (deficiency) |
|
|
(1,546,634 |
) |
|
|
(563,786 |
) |
|
Total liabilities and stockholders’ (deficiency) |
|
$ |
52,662 |
|
|
$ |
149,640 |
|
The accompanying notes are an integral part of these consolidated
financial statements.
THE GREATER CANNABIS COMPANY,
INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS
For
The Years Ended December 31, 2019 and 2018
| |
|
December 31, 2019 |
|
|
December 31, 2018 |
|
| |
|
|
|
|
|
|
| Revenue: |
|
|
|
|
|
|
|
|
|
Product sales |
|
$ |
4,500 |
|
|
$ |
- |
|
|
Gross profit on product transactions (Note I) |
|
|
- |
|
|
|
86,898 |
|
|
Consulting fees (related party $0 and $8,477, respectively) |
|
|
2,620 |
|
|
|
8,477 |
|
| |
|
|
|
|
|
|
|
|
|
Total revenue |
|
|
7,120 |
|
|
|
95,375 |
|
| |
|
|
|
|
|
|
|
|
|
Operating Expenses: |
|
|
|
|
|
|
|
|
|
Cost of product sales |
|
|
3,125 |
|
|
|
- |
|
|
Minimum royalties expense |
|
|
50,000 |
|
|
|
- |
|
|
Officers compensation |
|
|
204,000 |
|
|
|
185,593 |
|
|
Consulting fees paid to former Chief Executive Officer |
|
|
- |
|
|
|
50,000 |
|
|
Amortization of Pharmedica Exclusive License Agreement cost |
|
|
20,000 |
|
|
|
10,251 |
|
|
Impairment charge-Pharmedica Exclusive License Agreement cost |
|
|
69,749 |
|
|
|
- |
|
|
Other operating expenses (including stock-based professional fees
of $88,130 and $0, respectively) |
|
|
185,569 |
|
|
|
40,450 |
|
|
Total operating expenses |
|
|
532,443 |
|
|
|
286,294 |
|
| |
|
|
|
|
|
|
|
|
| Income
(loss) from operations |
|
|
(525,323 |
) |
|
|
(190,919 |
) |
| |
|
|
|
|
|
|
|
|
|
Other income (expenses): |
|
|
|
|
|
|
|
|
|
Income (expense) from derivative liability |
|
|
(303,981 |
) |
|
|
(9,808 |
) |
|
Loss on conversion of notes payable |
|
|
(320,025 |
) |
|
|
(592,907 |
) |
|
Interest income |
|
|
- |
|
|
|
5,903 |
|
|
Interest expense |
|
|
(35,776 |
) |
|
|
(28,487 |
) |
|
Amortization of debt discounts |
|
|
(463,490 |
) |
|
|
(22,852 |
) |
|
Total other income (expenses) |
|
|
(1,123,272 |
) |
|
|
(648,151 |
) |
| |
|
|
|
|
|
|
|
|
|
Income (loss) before provision for income taxes |
|
|
(1,648,595 |
) |
|
|
(839,070 |
) |
|
Provision for income taxes |
|
|
- |
|
|
|
- |
|
| |
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(1,648,595 |
) |
|
$ |
(839,070 |
) |
| |
|
|
|
|
|
|
|
|
|
Basic and diluted income (loss) per common share |
|
$ |
(.05 |
) |
|
$ |
(.03 |
) |
| Weighted average
common shares outstanding-basic and diluted |
|
|
34,980,133 |
|
|
|
29,964,950 |
|
The accompanying notes are an integral part of these consolidated
financial statements.
THE GREATER CANNABIS COMPANY,
INC.
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ DEFICIENCY
For
The Years Ended December 31, 2019 and 2018
| |
|
Series A Preferred |
|
|
Series B Preferred |
|
|
|
|
|
Additional |
|
|
|
|
|
|
|
| |
|
stock |
|
|
stock |
|
|
Common Stock |
|
|
Paid
in |
|
|
Accumulated |
|
|
|
|
| |
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Total |
|
| Year
Ended December 31, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balances at December
31, 2018 |
|
|
9,411,998 |
|
|
$ |
9,412 |
|
|
|
- |
|
|
$ |
- |
|
|
|
31,880,969 |
|
|
$ |
31,881 |
|
|
$ |
233,991 |
|
|
$ |
(839,070 |
) |
|
$ |
(563,786 |
) |
| Cumulative effect adjustment to reduce
derivative liability of warrants with “down round” features
effective January 1, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
108,427 |
|
|
|
108,427 |
|
| Conversion of note payable ($670) and
accrued interest ($100) into 769,785 shares of common stock (Fair
Value of $100,072) on January 4, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
769,785 |
|
|
|
770 |
|
|
|
99,302 |
|
|
|
- |
|
|
|
100,072 |
|
| Exercise of 1400 warrants into 645,129
shares of common stock in a cashless exercise transaction on
January 4, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
695,129 |
|
|
|
695 |
|
|
|
(695 |
) |
|
|
|
|
|
|
- |
|
| Exchange of 438,600 warrants into
9,000,000 shares of Class B Convertible Preferred Stock on February
14, 2019 |
|
|
- |
|
|
|
- |
|
|
|
9,000,000 |
|
|
|
9,000 |
|
|
|
|
|
|
|
|
|
|
|
(9,000 |
) |
|
|
|
|
|
|
- |
|
| Net loss for the three months
ended March 31, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(138,349 |
) |
|
|
(138,349 |
) |
| Balances at March 31, 2019 |
|
|
9411,998 |
|
|
$ |
9,412 |
|
|
|
9,000,000 |
|
|
$ |
9,000 |
|
|
|
33,345,883 |
|
|
$ |
33,346 |
|
|
$ |
323,598 |
|
|
$ |
(868,992 |
) |
|
$ |
(493,636 |
) |
| Conversion of note payables ($40,500)
and accrued interest ($7,961) into 1,384,600 shares of common stock
(Fair Value of $100,072) on April 16, 2019 |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,384,600 |
|
|
|
1,384 |
|
|
|
178,614 |
|
|
|
- |
|
|
|
179,998 |
|
| Issuance of 542,000 common shares for
professional services rendered |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
542,000 |
|
|
|
542 |
|
|
|
75,338 |
|
|
|
- |
|
|
|
75,880 |
|
| Net loss for the three months
ended June 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(287,779 |
) |
|
|
(287,779 |
) |
| Balances at June 30, 2019 |
|
|
9411,998 |
|
|
$ |
9,412 |
|
|
|
9,000,000 |
|
|
$ |
9,000 |
|
|
|
35,272,483 |
|
|
$ |
35,272 |
|
|
$ |
577,550 |
|
|
$ |
(1,156,771 |
) |
|
$ |
(525,537 |
) |
| Issuance of 175,000 common shares for
professional services rendered |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
175,000 |
|
|
|
175 |
|
|
|
12,075 |
|
|
|
|
|
|
|
12,250 |
|
| Net loss for the three months
ended September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(126,430 |
) |
|
|
(126,430 |
) |
| Balances at September 30, 2019 |
|
|
9,411,998 |
|
|
$ |
9,412 |
|
|
|
9,000,000 |
|
|
$ |
9,000 |
|
|
|
35,447,483 |
|
|
$ |
35,447 |
|
|
$ |
589,625 |
|
|
$ |
(1,283,201 |
) |
|
$ |
(639,717 |
) |
| Exchange Agreement dated October 18,
2019, provided for the reversal of the February 14, 2019 agreement
to which certain warrants then held by Emet were exchanged for
9,000,000 shares of Series B Convertible Preferred Stock |
|
|
|
|
|
|
|
|
|
|
(9,000,000 |
) |
|
|
(9,000 |
) |
|
|
|
|
|
|
|
|
|
|
9,000 |
|
|
|
|
|
|
|
- |
|
| Conversion of note payables ($53,705)
and accrued interest ($2,680) into 1,748,363 shares of common stock
(Fair Value of $104,901) on November 11, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,748,363 |
|
|
|
1,749 |
|
|
|
103,152 |
|
|
|
|
|
|
|
104,901 |
|
| Conversion of note payable ($29,000)
and accrued interest ($4,035) into 1,468,204 shares of common stock
(Fair Value of $58,728) on December 20, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,468,204 |
|
|
|
1,468 |
|
|
|
57,260 |
|
|
|
|
|
|
|
58,728 |
|
| Conversion of note payables ($10,000)
and accrued interest ($515) into 637,273 shares of common stock
(Fair Value of $58,728) on December 24, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
637,273 |
|
|
|
637 |
|
|
|
24,854 |
|
|
|
|
|
|
|
25,491 |
|
| Net loss for the three months
ended December 31, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,096,037 |
) |
|
|
(1,096,037 |
) |
| Balances at December 31,
2019 |
|
|
9,411,998 |
|
|
$ |
9,412 |
|
|
|
- |
|
|
$ |
- |
|
|
|
39,301,323 |
|
|
$ |
39,301 |
|
|
$ |
783,891 |
|
|
$ |
(2,379,238 |
) |
|
$ |
(1,546,634 |
) |
Year Ended December 31, 2018
| |
|
Series A Preferred |
|
|
Series B Preferred |
|
|
|
|
|
Additional |
|
|
|
|
|
|
|
| |
|
stock |
|
|
stock |
|
|
Common Stock |
|
|
Paid
in |
|
|
Accumulated |
|
|
|
|
| |
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Total |
|
| Balances at December
31, 2017 |
|
|
- |
|
|
$ |
- |
|
|
|
- |
|
|
$ |
- |
|
|
|
100 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
| Net income for the three months
ended March 31, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
78,465 |
|
|
|
78,465 |
|
| Balances at March 31, 2018 |
|
|
- |
|
|
$ |
- |
|
|
|
- |
|
|
$ |
- |
|
|
|
100 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
78,465 |
|
|
$ |
78,465 |
|
| Net income for the three months
ended June 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,314 |
|
|
|
22,314 |
|
| Balances at June 30, 2018 |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
100 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
100,779 |
|
|
$ |
100,779 |
|
| Issuance of 9,411,988 shares of Series
A convertible preferred stock in exchange for 100 shares of Green C
Corporation common stock on July 31, 2018 |
|
|
9,411,998 |
|
|
|
9,412 |
|
|
|
- |
|
|
|
- |
|
|
|
(100 |
) |
|
|
- |
|
|
|
(9,412 |
) |
|
|
- |
|
|
|
- |
|
| Shares of The Greater Cannabis
Company, Inc. (“GCAN”) common stock retained by GCAN stockholders
in connection with reverse acquisition of GCAN on July 31,
2018 |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
29,380,969 |
|
|
|
29,381 |
|
|
|
(414,676 |
) |
|
|
- |
|
|
|
(385,295 |
) |
| Issuance of 1,465,523 shares of common
stock from conversion of notes payable and accrued interest on
September 19, 2018 |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,465,523 |
|
|
|
1,465 |
|
|
|
545,322 |
|
|
|
- |
|
|
|
546,787 |
|
| Net loss for the three months
ended September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(964,322 |
) |
|
|
(964,322 |
) |
| Balances at September 30, 2018 |
|
|
9,411,998 |
|
|
$ |
9,412 |
|
|
|
- |
|
|
$ |
- |
|
|
|
30,846,492 |
|
|
$ |
30,846 |
|
|
$ |
121,234 |
|
|
$ |
(863,543 |
) |
|
$ |
(702,051 |
) |
| Issuance of 1,034,477 shares of common
stock from conversion of notes payable and accrued interest on
October 26, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,034,477 |
|
|
|
1,035 |
|
|
|
112,757 |
|
|
|
|
|
|
|
113,792 |
|
| Net income for the three months
ended December 31, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,473 |
|
|
|
24,473 |
|
| Balances at December 31,
2018 |
|
|
9,411,998 |
|
|
$ |
9,412 |
|
|
|
- |
|
|
$ |
- |
|
|
|
31,880,969 |
|
|
$ |
31,881 |
|
|
$ |
233,991 |
|
|
$ |
(839,070 |
) |
|
$ |
(563,786 |
) |
The accompanying notes are an integral part of these financial
statements.
THE GREATER CANNABIS COMPANY,
INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
For
The Years Ended December 31, 2019 and 2018
| |
|
December 31,
2019 |
|
|
December 31,
2018 |
|
| |
|
|
|
|
(Unaudited) |
|
| OPERATING
ACTIVITIES |
|
|
|
|
|
|
|
|
| Net
income (loss) |
|
$ |
(1,648,595 |
) |
|
$ |
(839,070 |
) |
| Adjustments to
reconcile net income (loss) to net cash provided (used) in
operating activities: |
|
|
|
|
|
|
|
|
| Loss on conversion
of note payable and accrued interest to common stock |
|
|
320,025 |
|
|
|
592,907 |
|
| Issuance of
stock-based professional fees |
|
|
88,130 |
|
|
|
- |
|
| (Income) expense
from derivative liability |
|
|
303,981 |
|
|
|
9,808 |
|
| Amortization of
Pharmedica Exclusive License Agreement cost |
|
|
20,000 |
|
|
|
10,251 |
|
| Impairment charge-
Pharmedica Exclusive License Agreement cost |
|
|
69,749 |
|
|
|
- |
|
| Interest expense
for default added to note payable balance |
|
|
|
|
|
|
21,270 |
|
| Amortization of
debt discounts |
|
|
463,490 |
|
|
|
22,852 |
|
| Changes in
operating assets and liabilities: |
|
|
|
|
|
|
|
|
| Advance to
supplier |
|
|
(28,000 |
) |
|
|
- |
|
| Accounts
payable |
|
|
(383 |
) |
|
|
74,676 |
|
| Accrued
interest |
|
|
35,397 |
|
|
|
7,197 |
|
| Accrued
salaries |
|
|
13,000 |
|
|
|
- |
|
| Accrued
royalties |
|
|
50,000 |
|
|
|
- |
|
|
Advance from customer |
|
|
27,977 |
|
|
|
- |
|
| Net cash used
in operating activities |
|
|
(285,229 |
) |
|
|
(100,109 |
) |
| |
|
|
|
|
|
|
|
|
| INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
| Loan to third
party |
|
|
- |
|
|
|
(296,043 |
) |
|
Repayment of loan to third party |
|
|
- |
|
|
|
296,043 |
|
| Net
cash used in investing activities |
|
|
- |
|
|
|
- |
|
| |
|
|
|
|
|
|
|
|
| FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
| Proceeds from loan
payable to related party |
|
|
- |
|
|
|
783 |
|
| Repayment of loan
payable to related party |
|
|
- |
|
|
|
(783 |
) |
| Proceeds from
loans payable to related parties |
|
|
- |
|
|
|
160,000 |
|
|
Proceeds from notes payable to third parties |
|
|
250,000 |
|
|
|
- |
|
| |
|
|
|
|
|
|
|
|
| Net cash
provided by financing activities |
|
|
250,000 |
|
|
|
160,000 |
|
| |
|
|
|
|
|
|
|
|
| NET INCREASE
(DECREASE) IN CASH |
|
|
(35,229 |
) |
|
|
59,891 |
|
| |
|
|
|
|
|
|
|
|
| CASH BALANCE, BEGINNING OF
PERIOD |
|
|
59,891 |
|
|
|
- |
|
| |
|
|
|
|
|
|
|
|
| CASH BALANCE, END OF PERIOD |
|
$ |
24,662 |
|
|
$ |
59,891 |
|
| |
|
|
|
|
|
|
|
|
| Supplemental
Disclosures of Cash Flow Information: |
|
|
|
|
|
|
|
|
| Interest paid |
|
$ |
- |
|
|
$ |
- |
|
| Income tax
paid |
|
$ |
- |
|
|
$ |
- |
|
| |
|
|
|
|
|
|
|
|
| Non-cash Investing
and Financing Activities: |
|
|
|
|
|
|
|
|
| Conversion of note
payable ($670) and accrued interest ($100) into 769,785 shares of
common stock (Fair Value of $100,072) on January 4, 2019 |
|
$ |
100,072 |
|
|
$ |
- |
|
| Exercise of 1400
warrants into 695,129 shares of common stock in a cashless exercise
transaction on January 4, 2019 |
|
$ |
695 |
|
|
$ |
- |
|
| Exchange of
438,600 warrants into 9,000,000 shares of Class B Convertible
Preferred Stock on February 14, 2019. Exchange Agreement reversed
on October 18, 2019 |
|
$ |
- |
|
|
$ |
- |
|
| Initial derivative
liability charged to debt discount |
|
$ |
250,000 |
|
|
$ |
- |
|
| Conversion of note
payable ($40,500) and accrued interest ($7,961) into 1,384,600
shares of common stock (fair value of $179,998) on April 16,
2019 |
|
$ |
179,998 |
|
|
$ |
|
|
|
Payment from related party to licensor of Pharmedica Exclusive
License Agreement on June 26, 2018 |
|
$ |
- |
|
|
$ |
100,000 |
|
| Liabilities of The
Greater Cannabis Company, Inc. at July 31, 2018 added pursuant to
reverse acquisition: |
|
|
|
|
|
|
|
|
| Accounts payable
and accrued expenses |
|
$ |
- |
|
|
$ |
28,214 |
|
| Accrued
interest |
|
|
- |
|
|
|
2,123 |
|
| Notes payable to
third parties |
|
|
- |
|
|
|
83,323 |
|
|
Derivative liability |
|
|
- |
|
|
|
270,502 |
|
| Total |
|
$ |
- |
|
|
$ |
385,295 |
|
| Conversion of
notes payable and accrued interest to 2,500,000 shares of common
stock |
|
|
|
|
|
|
|
|
| Accrued
interest |
|
$ |
- |
|
|
$ |
5,141 |
|
| Notes
payable to third parties |
|
|
- |
|
|
|
62,531 |
|
| Total |
|
$ |
- |
|
|
$ |
67,672 |
|
|
Conversion of note payables ($53,705) and accrued interest ($2,680)
into 1,748,363 shares of common stock (Fair Value of $104,901) on
November 11, 2019 |
|
$ |
104,901 |
|
|
$ |
- |
|
|
Conversion of note payables ($29,000) and accrued interest ($4,035)
into 1,468,204 shares of common stock (Fair Value of $58,728) on
December 20, 2019 |
|
$ |
58,728 |
|
|
$ |
- |
|
|
Conversion of note payables ($10,000) and accrued interest ($515)
into 637,273 shares of common stock (Fair Value of $25,491) on
December 24, 2019 |
|
$ |
25,491 |
|
|
$ |
- |
|
The accompanying notes are an integral part of these consolidated
financial statements
THE GREATER CANNABIS COMPANY,
INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
For
The Years Ended December 31, 2019 and 2018
NOTE
A – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Nature
of Operations
The
Greater Cannabis Company, Inc. (the “Company”) was formed in March
2014 as a limited liability company under the name, The Greater
Cannabis Company, LLC. The Company was a wholly owned subsidiary of
Sylios Corp (“Sylios”) until March 10, 2017.
On
July 31, 2018, the Company acquired 100% of the issued and
outstanding shares of Class A common stock of Green C Corporation
(“Green C”) in exchange for 9,411,998 newly issued shares of the
Company’s Series A Convertible Preferred Stock (the “Exchange”).
Each share of Series A Convertible Preferred Stock is convertible
into 50 shares of common stock and is entitled to vote 50 votes per
share on all matters as a class with holders of common stock. Since
after the Exchange was consummated, the former shareholders of
Green C and their designees owned approximately 94% of the issued
and outstanding voting shares of the Company, Green C is the
acquirer for accounting purposes. Prior to the Exchange, the
Company had no assets and nominal business operations. Accordingly,
the Exchange has been treated for accounting purposes as a
recapitalization by the accounting acquirer, Green C, and the
accompanying consolidated financial statements of the Company
reflect the assets, liabilities and operations of Green C from its
inception on December 21, 2017 to July 31, 2018 and combined with
the Company thereafter. See Note C (Acquisition of Green C
Corporation).
Green
C was incorporated on December 21, 2017 under the laws of the
Province of Ontario Canada with the principle place of business in
North York, Ontario.
Green
C is the owner of an exclusive, worldwide license for an eluting
transmucosal patch platform (“ETP”) for non-invasive drug delivery
in the cannabis field as further described in the exclusive license
agreement dated June 21, 2018 with Pharmedica Ltd. (see Note
J).
The
Company’s business plan is to (i) commercialize its ETP technology
and (ii) concentrate on cannabis related investment and development
opportunities through direct equity investments, joint ventures,
licensing agreements or acquisitions.
The
Company is actively seeking licensing opportunities in the cannabis
sector for intellectual property and products. At present, the
Company’s sole active, exclusive, worldwide licensing agreement is
with Pharmedica Limited for its ETP technology.
Principles
of Consolidation
The
consolidated financial statements include the accounts of The
Greater Cannabis Company, Inc., and its wholly owned subsidiary
Green C Corporation.
THE
GREATER CANNABIS COMPANY, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
For
The Years Ended December 31, 2019 and 2018
NOTE
A – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)
Cash
and Cash Equivalents
Investments
having an original maturity of 90 days or less that are readily
convertible into cash are considered to be cash equivalents. For
the periods presented, the Company had no in cash
equivalents.
Income
Taxes
In
accordance with Accounting Standards Codification (ASC) 740 -
Income Taxes, the provision for income taxes is computed using the
asset and liability method. The asset and liability method measures
deferred income taxes by applying enacted statutory rates in effect
at the balance sheet date to the differences between the tax basis
of assets and liabilities and their reported amounts on the
financial statements. The resulting deferred tax assets or
liabilities are adjusted to reflect changes in tax laws as they
occur. A valuation allowance is provided when it is more likely
than not that a deferred tax asset will not be realized.
We
expect to recognize the financial statement benefit of an uncertain
tax position only after considering the probability that a tax
authority would sustain the position in an examination. For tax
positions meeting a “more-likely-than-not” threshold, the amount to
be recognized in the financial statements will be the benefit
expected to be realized upon settlement with the tax authority. For
tax positions not meeting the threshold, no financial statement
benefit is recognized. As of December 31, 2019, we had no uncertain
tax positions. We recognize interest and penalties, if any, related
to uncertain tax positions as general and administrative expenses.
We currently have no foreign federal or state tax examinations nor
have we had any foreign federal or state examinations since our
inception. To date, we have not incurred any interest or tax
penalties.
Use
of Estimates
The
preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and reported amounts of revenue and expenses during the
reporting periods. Actual results could differ from those
estimates.
Financial
Instruments and Fair Value of Financial Instruments
We
follow ASC Topic 820, Fair Value Measurements and
Disclosures, for assets and liabilities measured at fair value
on a recurring basis. ASC Topic 820 establishes a common definition
for fair value to be applied to existing US GAAP that requires the
use of fair value measurements that establishes a framework for
measuring fair value and expands disclosure about such fair value
measurements.
ASC
820 defines fair value as the price that would be received to sell
an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. Additionally,
ASC Topic 820 requires the use of valuation techniques that
maximize the use of observable inputs and minimize the use of
unobservable inputs. These inputs are prioritized below:
THE
GREATER CANNABIS COMPANY, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
For
The Years Ended December 31, 2019 and 2018
NOTE
A – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)
|
Level
1: |
|
Observable
inputs such as quoted market prices in active markets for identical
assets or liabilities |
|
Level
2: |
|
Observable
market-based inputs or unobservable inputs that are corroborated by
market data |
|
Level
3: |
|
Unobservable
inputs for which there is little or no market data, which require
the use of the reporting entity’s own assumptions. |
The
carrying value of financial assets and liabilities recorded at fair
value is measured on a recurring or nonrecurring basis. Financial
assets and liabilities measured on a recurring basis are those that
are adjusted to fair value each time a financial statement is
prepared. Financial assets and liabilities measured on a
non-recurring basis are those that are adjusted to fair value when
a significant event occurs. Except for derivative liabilities, we
had no financial assets or liabilities carried and measured on a
recurring or nonrecurring basis during the reporting
periods.
Derivative
Liabilities
We
evaluate convertible notes payable, stock options, stock warrants
or other contracts to determine if those contracts or embedded
components of those contracts qualify as derivatives to be
separately accounted for under the relevant sections of ASC Topic
815-40, Derivative Instruments and Hedging: Contracts in
Entity’s Own Equity.
The
result of this accounting treatment could be that the fair value of
a financial instrument is classified as a derivative instrument and
is marked-to-market at each balance sheet date and recorded as a
liability. In the event that the fair value is recorded as a
liability, the change in fair value is recorded in the statement of
operations as other income or other expense. Upon conversion or
exercise of a derivative instrument, the instrument is marked to
fair value at the conversion date and then that fair value is
reclassified to equity. Financial instruments that are initially
classified as equity that become subject to reclassification under
ASC Topic 815-40 are reclassified to a liability account at the
fair value of the instrument on the reclassification
date.
Long-lived
Assets
Long-lived
assets such as property and equipment and intangible assets are
periodically reviewed for impairment. We test for impairment losses
on long-lived assets used in operations whenever events or changes
in circumstances indicate that the carrying amount of the asset may
not be recoverable. Recoverability of an asset to be held and used
is measured by a comparison of the carrying amount of an asset to
the future undiscounted cash flows expected to be generated by the
asset. If such asset is considered to be impaired, the impairment
to be recognized is measured by the amount by which the carrying
amount of the asset exceeds its fair value. Impairment evaluations
involve management’s estimates on asset useful lives and future
cash flows. Actual useful lives and cash flows could be different
from those estimated by management which could have a material
effect on our reporting results and financial positions. Fair value
is determined through various valuation techniques including
discounted cash flow models, quoted market values and third-party
independent appraisals, as considered necessary.
Pharmedica
Exclusive License Agreement cost
The
Pharmedica Exclusive License Agreement is carried at cost less
accumulated amortization. Amortization is calculated using the
straight line method over the license’s estimated economic life of
five years. (see Note J)
THE
GREATER CANNABIS COMPANY, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
For
The Years Ended December 31, 2019 and 2018
NOTE
A – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)
Equity
Instruments Issued to Non-Employees for Acquiring Goods or
Services
Issuances
of our common stock or warrants for acquiring goods or services are
measured at the fair value of the consideration received or the
fair value of the equity instruments issued, whichever is more
reliably measurable. The measurement date for the fair value of the
equity instruments issued to consultants or vendors is determined
at the earlier of (i) the date at which a commitment for
performance to earn the equity instruments is reached (a
“performance commitment” which would include a penalty considered
to be of a magnitude that is a sufficiently large disincentive for
nonperformance) or (ii) the date at which performance is
complete.
Although
situations may arise in which counter performance may be required
over a period of time, the equity award granted to the party
performing the service may be fully vested and non-forfeitable on
the date of the agreement. As a result, in this situation in which
vesting periods do not exist if the instruments are fully vested on
the date of agreement, we determine such date to be the measurement
date and will record the estimated fair market value of the
instruments granted as a prepaid expense and amortize such amount
to expense over the contract period. When it is appropriate for us
to recognize the cost of a transaction during financial reporting
periods prior to the measurement date, for purposes of recognition
of costs during those periods, the equity instrument is measured at
the then-current fair values.
Related
Parties
A
party is considered to be related to us if the party directly or
indirectly or through one or more intermediaries, controls, is
controlled by, or is under common control with us. Related parties
also include our principal owners, our management, members of the
immediate families of our principal owners and our management and
other parties with which we may deal if one party controls or can
significantly influence the management or operating policies of the
other to an extent that one of the transacting parties might be
prevented from fully pursuing its own separate interests. A party
which can significantly influence the management or operating
policies of the transacting parties, or if it has an ownership
interest in one of the transacting parties and can significantly
influence the other to an extent that one or more of the
transacting parties might be prevented from fully pursuing its own
separate interests, is also a related party.
THE
GREATER CANNABIS COMPANY, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
For
The Years Ended December 31, 2019 and 2018
NOTE
A – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)
Revenue
Recognition
Revenue
from product sales will be recognized when all of the following
criteria are met: (1) persuasive evidence of an arrangement exists,
(2) the price is fixed or determinable, (3) collectability is
reasonably assured, and (4) delivery has occurred.
Advertising
Costs
Advertising
costs are expensed as incurred. For the periods presented, we had
no advertising costs.
Loss
per Share
We
compute net loss per share in accordance with FASB ASC 260. The ASC
specifies the computation, presentation and disclosure requirements
for loss per share for entities with publicly held common
stock.
Basic
loss per share amounts is computed by dividing the net loss by the
weighted average number of common shares outstanding. Diluted net
loss per common share is computed on the basis of the weighted
average number of common shares and dilutive securities (such as
stock options, warrants and convertible securities) outstanding.
Dilutive securities having an anti-dilutive effect on diluted net
loss per share are excluded from the calculation. For the periods
presented, the Company excluded 470,599,900 shares relating to the
Series A Convertible Preferred Stock (see Note G), shares relating
to convertible notes payable to third parties (Please see
NOTE E - NOTES PAYABLE TO THIRD PARTIES for further
information) and shares relating to outstanding warrants (Please
see NOTE G - CAPITAL STOCK AND WARRANTS for further
information) from the calculation of diluted shares outstanding as
the effect of their inclusion would be anti-dilutive.
Recently
Enacted Accounting Standards
In
May 2014, the Financial Accounting Standards Board (FASB) issued
Accounting Standards Update (ASU) No. 2014-09, Revenue from
Contracts with Customers, which supersedes nearly all prior revenue
recognition guidance under U.S. GAAP. The core principle of ASU
2014-09 is to recognize revenues when promised goods or services
are transferred to customers in an amount that reflects the
consideration to which an entity expects to be entitled for those
goods or services. ASU 2014-09 defines a five-step process to
achieve this core principle and, in doing so, more judgment and
estimates may be required within the revenue recognition process
than are required under prior U.S. GAAP. As amended by the FASB in
July 2015, the standard became effective for annual periods
beginning after December 15, 2017, and interim periods therein. ASU
2014-09 has had no impact on our Financial statements for the
periods presented.
THE
GREATER CANNABIS COMPANY, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
For
The Years Ended December 31, 2019 and 2018
NOTE
A – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)
Recently
Enacted Accounting Standards
In
March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts
with Customers (Topic 606): Principal versus Agent Considerations,
to clarify the implementation guidance on principal versus agent
considerations and address how an entity should assess whether it
is the principal or the agent in contracts that include three or
more parties. The effective date and transition requirements for
these amendments are the same as the effective date and transition
requirements of ASU 2014-09 (discussed above). ASU 2016-08 has had
no impact on our Financial statements for the periods
presentd.
In
April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts
with Customers (Topic 606): Identifying Performance Obligations and
Licensing, to clarify the following two aspects of Topic 606: 1)
identifying performance obligations, and 2) the licensing
implementation guidance. The effective date and transition
requirements for these amendments are the same as the effective
date and transition requirements of ASU 2014-09 (discussed above).
ASU 2016-10 has had no impact on our financial statements for the
periods presented.
On
July 13, 2017, the Financial Accounting Standards Board (FASB)
issued Accounting Standards Update (“ASU”) 2017-11. Among other
things, ASU 2017-11 provides guidance that eliminates the
requirement to consider “down round” features when determining
whether certain financial instruments or embedded features are
indexed to an entity’s stock and need to be classified as
liabilities. ASU 2017-11 provides for entities to recognize the
effect of a down round feature only when it is triggered and then
as a dividend and a reduction to income available to common
stockholders in basic earnings per share. The guidance is effective
for annual periods beginning after December 15, 2018.
Accordingly,
effective January 1, 2019, the Company reduced the derivative
liability of warrants with “down round” features (and do not
contain variable conversion features) of $108,427 at December 31,
2018 to $0 and recognized a $108,427 cumulative affect adjustment
reduction of accumulated deficit. See Note F.
THE
GREATER CANNABIS COMPANY, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
For
The Years Ended December 31, 2019 and 2018
NOTE
B - GOING CONCERN
Under
ASC 205-40, we have the responsibility to evaluate whether
conditions and/or events raise substantial doubt about our ability
to meet our future obligations as they become due within one year
after the date the financial statements are issued. As required by
this standard, our evaluation shall initially not take into
consideration the potential mitigating effects of our plans that
have not been fully implemented as of the date the financial
statements are issued.
In
performing the first step of this assessment, we concluded that the
following conditions raise substantial doubt about our ability to
meet our financial obligations as they become due. As of December
31, 2019, the Company had cash of $24,662, total current
liabilities of $1,599,296, and negative working capital of
$1,546,634. For the year ended December 31, 2019, we incurred a net
loss of $1,648,490 and used $285,229 cash from operating
activities. We expect to continue to incur negative cash flows
until such time as our business generates sufficient cash inflows
to finance our operations and debt service requirements.
In
performing the second step of this assessment, we are required to
evaluate whether our plans to mitigate the conditions above
alleviate the substantial doubt about our ability to meet our
obligations as they become due within one year after the date that
the financial statements are issued. Our future plans include
securing additional funding sources.
There
is no assurance that sufficient funds required during the next year
or thereafter will be generated from operations or that funds will
be available through external sources. The lack of additional
capital resulting from the inability to generate cash flow from
operations or to raise capital from external sources would force
the Company to substantially curtail or cease operations and would,
therefore, have a material effect on the business. Furthermore,
there can be no assurance that any such required funds, if
available, will be available on attractive terms or that they will
not have a significant dilutive effect on the Company’s existing
shareholders. We have therefore concluded there is substantial
doubt about our ability to continue as a going concern through
March 2021.
The
accompanying consolidated financial statements have been prepared
on a going-concern basis, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of
business. The accompanying consolidated financial statements do not
include any adjustments to reflect the possible future effects on
the recoverability and classification of assets or the amounts and
classification of liabilities that may result from the outcome of
the uncertainty related to our ability to continue as a going
concern.
NOTE
C - ACQUISITION OF GREEN C CORPORATION
As
discussed in Note A above, the Company acquired 100% ownership of
Green C Corporation on July 31, 2018. The acquisition has been
accounted for in the accompanying consolidated financial statements
as a “reverse acquisition” transaction. Accordingly, the financial
position and results of operations of the Company prior to July 31,
2018 has been excluded from the accompanying consolidated financial
statements.
THE
GREATER CANNABIS COMPANY, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
For
The Years Ended December 31, 2019 and 2018
NOTE
C - ACQUISITION OF GREEN C CORPORATION (continued)
The
carrying values of the net assets (liabilities) of the Company (The
Greater Cannabis Company, Inc., and subsidiaries) at July 31, 2018
prior to the acquisition consisted of:
| Total
Assets |
|
$ |
- |
|
| |
|
|
|
|
| Accounts payable and
accrued expenses |
|
$ |
90,724 |
|
| Accrued interest |
|
|
15,813 |
|
| Loans payable to related parties |
|
|
89,774 |
|
| Notes payable to third parties |
|
|
83,323 |
|
| Derivative
liability |
|
|
270,502 |
|
| |
|
|
|
|
| Total current
liabilities and total liabilities |
|
$ |
550,136 |
|
Pursuant
to terms of the acquisition agreements, $164,841 (accounts payable
and accrued expenses - $62,500, accrued interest - $12,567, and
loans payable to related parties - $89,774) of the $550,136 total
liabilities was forgiven.
NOTE
D - LOANS PAYABLE TO RELATED PARTIES
Loans
payable to related parties consist of:
| |
|
December 31,
2019 |
|
|
December 31,
2018 |
|
| |
|
|
|
|
|
|
| Loans from Elisha Kalfa
and Yonah Kalfa, holders of a total of 2,966,666 shares of Series A
Convertible Preferred stock |
|
$ |
180,000 |
|
|
$ |
180,000 |
|
| |
|
|
|
|
|
|
|
|
| Loan from
Fernando Bisker and Sigalush, LLC, holders of a total of 2,966,666
shares of Series A Convertible Preferred stock |
|
|
80,000 |
|
|
|
80,000 |
|
| |
|
|
|
|
|
|
|
|
| Total |
|
$ |
260,000 |
|
|
$ |
260,000 |
|
Pursuant
to loan and contribution agreements dated July 31, 2018, the above
loans are non-interest bearing and are to be repaid after the
Company raises from investors no less than $1,500,000 or generates
sufficient revenue to make repayments (each, a “Replacement
Event”). If the First Replacement Event does not occur within 18
months from July 31, 2018, the loans are to be repaid immediately.
In the event there is insufficient capital to repay the loan, the
lenders have the option to convert all or part of the loans into
shares at the Company common stock at the average trading price of
the 10 days prior to the date of the conversion request.
THE
GREATER CANNABIS COMPANY, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
For
The Years Ended December 31, 2019 and 2018
NOTE
E - NOTES PAYABLE TO THIRD PARTIES
Notes
payable to third parties consist of:
| |
|
December 31, 2019 |
|
|
December 31, 2018 |
|
| |
|
|
|
|
|
|
|
Convertible Promissory Note dated May 25, 2017 payable to Emet
Capital Partners, LLC (“EMET”), interest at 5%, due May 25, 2018
(i) |
|
$ |
- |
|
|
$ |
3,469 |
|
| Convertible
Promissory Note dated September 14, 2017 payable to Emet Capital
Partners, LLC (“EMET”), interest at 5%, due September 14, 2018
(ii) |
|
|
- |
|
|
|
16,500 |
|
| Convertible
Promissory Note dated January 9, 2018 payable to Emet Capital
Partners, LLC (“EMET”), interest at 5%, due January 9, 2019-less
unamortized debt discount of $0 and $550, respectively (iii) |
|
|
- |
|
|
|
23,450 |
|
| Allonge to the
Convertible Promissory Note dated September 14, 2017 payable to
Emet Capital Partners, LLC (“EMET”), interest at 5%, due September
14, 2018 (iv) |
|
|
2,420 |
|
|
|
14,520 |
|
| Allonge 2 to the
Convertible Promissory Note dated September 14, 2017 payable to
Emet Capital Partners, LLC (“EMET”), interest at 5%, due September
14, 2018 (v) |
|
|
1,100 |
|
|
|
6,600 |
|
| Promissory Note dated
March 28, 2017 payable to John T. Root, Jr., interest at 4%, due
September 28, 2017, convertible into shares of common stock at a
conversion price of $.001 per share. |
|
|
375 |
|
|
|
375 |
|
| Convertible
Convertible Note dated February 12, 2019 payable to Eagle Equities,
LLC (“Eagle”), interest at 6%, due February 12, 2020-less
unamortized debt discount of $33,396 and $0, respectively (vi) |
|
|
250,082 |
|
|
|
- |
|
| Convertible Warrant
Note dated October 18, 2019 payable to Emet Capital Partners, LLC
(“EMET”), interest at 2%, due October 18, 2020-less unamortized
debt discount of $294,234 and $0, respectively (vi) |
|
|
74,566 |
|
|
|
- |
|
| Convertible Warrant
Note dated October 18, 2019 payable to Emet Capital Partners, LLC
(“EMET”), interest at 2%, due October 18, 2020-less unamortized
debt discount of $90,054 and $0, respectively (vii) |
|
|
22,823 |
|
|
|
- |
|
| Convertible Warrant
Note dated October 18, 2019 payable to Emet Capital Partners, LLC
(“EMET”), interest at 2%, due October 18, 2020-less unamortized
debt discount of $79,248 and $0, respectively (vii) |
|
|
20,084 |
|
|
|
- |
|
|
Convertible Warrant Note dated October 18, 2019 payable to Emet
Capital Partners, LLC (“EMET”), interest at 2%, due October 18,
2020-less unamortized debt discount of $9,005 and $0, respectively
(vii) |
|
|
2,281 |
|
|
|
- |
|
|
Convertible Promissory Note dated October 18, 2019 payable to Emet
Capital Partners, LLC (“EMET”), interest at 6%, due February 12,
2020-less unamortized debt discount of $0 and $0, respectively
(vii) |
|
|
25,587 |
|
|
|
|
|
| Total |
|
$ |
399,318 |
|
|
$ |
64,914 |
|
(i)
On May 25, 2017, the Company executed a Convertible Note (the
“Convertible Note”) payable to Emet Capital Partners, LLC, (“EMET”)
in the principal amount of $55,000 in exchange for $50,000 cash.
The Convertible Note is convertible, in whole or in part, at any
time and from time to time before maturity (May 25, 2018) at the
option of the holder at the Variable Conversion Price, which shall
mean the lesser of (i) $0.25 (the “Fixed Conversion Price”); or
(ii) 50% multiplied by the Market Price (as defined). “Market
Price” means the lowest Trading Prices (as defined below) for the
Common Stock during the twenty (20) Trading Day period ending on
the last complete Trading Day prior to the Conversion Date. The
Convertible Note has a term of one (1) year and bears interest at
5% annually. As part of the transaction, EMET was also issued a
warrant granting the holder the right to purchase up to 440,000
shares of the Company’s common stock at an exercise price of $.50
for a term of 5-years. As part of the Convertible Note, the Company
executed a Registration Rights Agreement (the “RRA”) dated May 25,
2017. Among other things, the RRA provided for the Company to file
a Registration Statement with the SEC covering the resale of shares
underlying the Convertible Note and the warrant and to have
declared effective such Registration Statement. The Registration
Statement was declared effective by the Securities and Exchange
Commission on August 31, 2017. On September 19, 2018, $32,000
principal of the Convertible Note (and $4,638 accrued interest) was
converted into 1,465,523 shares of Company common stock. On October
26, 2018, $30,531 principal of the Convertible Note (and $503
accrued interest) was converted into 1,034,477 shares of Company
common stock. On January 4, 2019, $670 principal of the Convertible
Note (and $100 accrued interest) was converted into 769,785 shares
of Company common stock. Please see NOTE F - DERIVATIVE
LIABILITY for further information.
THE
GREATER CANNABIS COMPANY, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
For
The Years Ended December 31, 2019 and 2018
(ii)
On September 14, 2017, the Company executed a Convertible Note (the
“Convertible Note”) payable to Emet Capital Partners, LLC, (“EMET”)
in the principal amount of $13,750 in exchange for $12,500 cash.
The Convertible Note is convertible, in whole or in part, at any
time and from time to time before maturity (September 14, 2018) at
the option of the holder at the Variable Conversion Price, which
shall mean the lesser of (i) $0.25 (the “Fixed Conversion Price”);
or (ii) 50% multiplied by the Market Price (as defined). “Market
Price” means the lowest Trading Prices (as defined below) for the
Common Stock during the twenty (20) Trading Day period ending on
the last complete Trading Day prior to the Conversion Date. The
Convertible Note has a term of one (1) year and bears interest at
5% annually (default interest rate 15%). As part of the
transaction, EMET was also issued a warrant granting the holder the
right to purchase up to 110,000 shares of the Company’s common
stock at an exercise price of $.50 for a term of 5-years. Please
see NOTE F - DERIVATIVE LIABILITY for further
information.
(iii)
On January 9, 2018, the Company executed a Convertible Note (the
“Convertible Note”) payable to Emet Capital Partners, LLC, (“EMET”)
in the principal amount of $20,000 in exchange for entry into a
Waiver Agreement pertaining to the Securities Purchase Agreements
entered into between the Parties dated May 25, 2017 and September
14, 2017 along with a Convertible Note issued by the Company on
each of the same dates. The Company received $0 cash from issuance
of the Convertible Note. The Convertible Note is convertible, in
whole or in part, at any time and from time to time before maturity
(January 9, 2019) at the option of the holder at the Variable
Conversion Price, which shall mean the lesser of (i) $0.25 (the
“Fixed Conversion Price”); or (ii) 50% multiplied by the Market
Price (as defined). “Market Price” means the lowest Trading Prices
(as defined below) for the Common Stock during the twenty (20)
Trading Day period ending on the last complete Trading Day prior to
the Conversion Date. The Convertible Note has a term of one (1)
year and bears interest at 5% annually (default interest rate 15%).
Please see NOTE F - DERIVATIVE LIABILITY for further
information.
(iv)
On March 28, 2018, the Company made an Allonge to the Convertible
Debenture due September 14, 2018 (hereinafter the “Allonge”) to
Emet Capital Partners, LLC. The Principal Amount as stated on the
face of the Debenture shall be increased to $25,850 ($13,750 –
original Principal Amount of the Debenture + $12,100 Allonge). The
amendment to the Principal Amount due and owing on the Debenture
described herein notwithstanding, the Holder does not waive
interest that may have accrued at a default rate of interest and
liquidated damages, if any, that may have accrued on the Debenture
through the date of this Allonge, which default interest and
liquidated damages, if any, remain outstanding and payable. As part
of the transaction, EMET was also issued a warrant granting the
holder the right to purchase up to 98,600 shares of the Company’s
common stock at an exercise price of $.50 for a term of 5-years.
Please see NOTE F - DERIVATIVE LIABILITY for further
information.
(v)
On September 13, 2018, the Company made a second Allonge to the
Convertible Debenture due September 14, 2018 (hereinafter the
“Allonge”) to Emet Capital Partners, LLC. The Principal Amount as
stated on the face of the Debenture shall be increased to $31,350
($13,750 – original Principal Amount of the Debenture + $12,100
1st Allonge + $5,500 2nd Allonge). The
amendment to the Principal Amount due and owing on the Debenture
described herein notwithstanding, the Holder does not waive
interest that may have accrued at a default rate of interest and
liquidated damages, if any, that may have accrued on the Debenture
through the date of this Allonge, which default interest and
liquidated damages, if any, remain outstanding and payable. As part
of the transaction, EMET was also issued a warrant granting the
holder the right to purchase up to 11,000 shares of the Company’s
common stock at an exercise price of $.50 for a term of 5-years.
Please see NOTE F - DERIVATIVE LIABILITY for further
information.
(vi)
On February 12, 2019, (the “Issue Date”) the Company issued a 6%
Convertible Redeemable Note to Eagle Equities, LLC (“Eagle”),
having a principal amount of $1,200,000 of which $96,000
constituted an original issue discount (the “Eagle Note”). In
connection with the Eagle Note, the Company and Eagle entered into
a Securities Purchase Agreement. The Eagle Note will mature on one
year from the Issue Date. Eagle is to fund the $1,104,000 purchase
price of he Eagle Note in tranches. The first tranche of $250,000
was received by the Company on February 13, 2019.
THE
GREATER CANNABIS COMPANY, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
For
The Years Ended December 31, 2019 and 2018
(vii)
On October 18, 2019, the Company entered into two Exchange
Agreements with Emet Capital Partners, LLC (“Emet”). The first
Exchange Agreement provided for the exchange of three outstanding
convertible notes payable to Emet with a total remaining principal
balance of $20,399 and a total accrued interest balance of $5,189
for three new convertible notes payable to Emet in the total amount
of $25,587. The new notes bear interest at 6%, are due on February
12, 2020 and are convertible into common stock at a conversion
price equal to 75% of the lowest Trading Price during the 15
Trading Day Period prior to the Conversion Date. The second
Exchange Agreement provided for the reversal of the February 14,
2019 exchange agreement pursuant to which certain warrants then
held by Emet were exchanged for 9,000,000 shares of Series B
Convertible Preferred Stock (see Note G) and the exchange of such
warrants for four new convertible notes payable to Emet in the
total amount of $675,000. These new note bear interest at 2%, are
due on October 18, 2020 and are convertible into common stock at a
conversion price equal to 75% of the lowest Trading Price during
the 15 Trading Day Period prior to the Conversion Date. Please
see NOTE F - DERIVATIVE LIABILITY for further
information.
The
Eagle Note may be pre-paid in whole or in part by paying Eagle the
following premiums:
|
PREPAY
DATE |
|
PREPAY
AMOUNT |
| ≤ 30
days |
|
105%
* (Principal + Interest (“P+I”) |
| 31-
60 days |
|
110%
* (P+I) |
| 61-90
days |
|
115%
* (P+I) |
| 91-120
days |
|
120%
* (P+I) |
| 121-150
days |
|
125%
* (P+I) |
| 151-180
days |
|
130%
* (P+I) |
Any
amount of principal or interest on the Eagle Note, which is not
paid when due shall bear interest at the rate of twenty four (24%)
per annum from the due date thereof until the same is paid
(“Default Interest”).
Eagle
has the right beginning on the date which is one hundred eighty
(180) days following the Issue Date to convert all or any part of
the outstanding and unpaid principal amount of the Eagle Note into
fully paid and non-assessable shares of common stock of the Company
at the conversion price (the “Conversion Price”). The Conversion
Price shall be, equal to 65% of the lowest closing price of the
Company’s common stock as reported on the National Quotations
Bureau OTC Market exchange which the Company’s shares are traded or
any exchange upon which the Common Stock may be traded in the
future (“Exchange”), for the fifteen prior trading days including
the day upon which a Notice of Conversion is received by the
Company. The Eagle Note contains other customary terms found in
like instruments for conversion price adjustments.
In
the case of an Event of Default (as defined in the Eagle Note), the
Eagle Note shall become immediately due and payable and interest
shall accrue at the rate of Default Interest. Certain events of
default will result in further penalties.
THE
GREATER CANNABIS COMPANY, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
For
The Years Ended December 31, 2019 and 2018
NOTE
F - DERIVATIVE LIABILITY
The
derivative liability consists of:
| |
|
December 31, 2019 |
|
|
December 31, 2018 |
|
| Convertible
Promissory Note dated May 25, 2017 payable to EMET Capital
Partners, LLC Please see NOTE E – NOTES PAYABLE TO THIRD
PARTIES for further information |
|
$ |
- |
|
|
$ |
8,385 |
|
| Warrants
issued to EMET in connection with the above Convertible Promissory
Note dated May 25, 2017. Please see NOTE E – NOTES
PAYABLE TO THIRD PARTIES for further information
(i) |
|
|
- |
|
|
|
72,468 |
|
| Convertible
Promissory Note dated September 14, 2017 payable to EMET Capital
Partners, LLC Please see NOTE E – NOTES PAYABLE TO THIRD
PARTIES for further information |
|
|
- |
|
|
|
43,780 |
|
| Warrants
issued to EMET in connection with the above Convertible Promissory
Note dated September 14, 2017. Please see NOTE E – NOTES
PAYABLE TO THIRD PARTIES for further information
(i) |
|
|
- |
|
|
|
18,150 |
|
| Convertible
Promissory Note dated January 9, 2018 payable to EMET Capital
Partners, LLC Please see NOTE E – NOTES PAYABLE TO THIRD
PARTIES for further information |
|
|
- |
|
|
|
63,680 |
|
| Allonge
dated March 28, 2018 to the Convertible Promissory Note dated
September 14, 2017 Please see NOTE E – NOTES PAYABLE TO
THIRD PARTIES for further information |
|
|
- |
|
|
|
38,526 |
|
| Warrants
issued to EMET in connection with the above Allonge dated March 28,
2018 to the Convertible Promissory Note dated September 14, 2017.
Please see NOTE E – NOTES PAYABLE TO THIRD PARTIES for
further information (i) |
|
|
- |
|
|
|
15,991 |
|
| Allonge
2 dated September 13, 2018 to the Convertible Promissory Note dated
September 14, 2017 Please see NOTE E – NOTES PAYABLE TO
THIRD PARTIES for further information |
|
|
- |
|
|
|
17,512 |
|
| Warrants
issued to EMET in connection with the above Allonge 2 dated
September 13, 2018 to the Convertible Promissory Note dated
September 14, 2017. Please see NOTE E – NOTES PAYABLE TO
THIRD PARTIES for further information (i) |
|
|
- |
|
|
|
1,818 |
|
| Convertible
Promissory Note dated February 12, 2019 payable to Eagle Equities,
LLC Please see NOTE E – NOTES PAYABLE TO THIRD PARTIES
for further information |
|
|
182,625 |
|
|
|
- |
|
| Convertible
Promissory Notes dated October 18, 2019, payable to EMET. Please
see NOTE E – NOTES PAYABLE TO THIRD PARTIES for further
information |
|
|
543,240 |
|
|
|
- |
|
| Total
derivative liability |
|
$ |
725,865 |
|
|
$ |
280,310 |
|
(i)As
discussed in Note A above, warrants with “down round” features (and
do not contain variable conversion features) are not subject to
derivative liability treatment effective January 1,
2019.
The
Convertible Promissory Notes (the “Notes”) and the warrants contain
obligations to reduce the conversion price of the Notes and the
exercise price of the Warrants in the event that the Company sells,
grants or issues any non-excluded shares, options, warrants or any
convertible instrument at a price below the conversion price of the
Notes and the exercise price of the Warrants (“ratchet-down”
provisions). The Notes also contain a variable conversion feature
based on the future trading price of the Company’s common stock.
Therefore, the number of shares of common stock issuable upon
conversion of the Notes and exercise of the Warrants is
indeterminate.
The
fair value of the derivative liability was measured at the
respective issuance dates and quarterly thereafter using the Black
Scholes option pricing model. Assumptions used for the calculation
of the derivative liability of the Notes at September 30, 2019 were
(1) stock price of $0.1007 per share, (2) conversion prices ranging
from $0.045 to $.0655 per share, (3) terms ranging from 135 days to
6 months, (4) expected volatility of 130.68%, and (5) risk free
interest rates ranging from 1.83% to 1.85%. Assumptions used for
the calculation of the derivative liability of the notes at
December 31, 2018 were (1) stock price of $0.1655 per share, (2)
conversion price of $0.0525 per share, (3) terms ranging from 3
months to 6 months, (4) expected volatility of 286.71%, and (5)
risk free interest rates ranging from 2.47% to 2.50%.
THE
GREATER CANNABIS COMPANY, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
For
The Years Ended December 31, 2019 and 2018
NOTE
G - CAPITAL STOCK AND WARRANTS
Preferred
Stock
On
July 31, 2018, The Greater Cannabis Company, Inc. (the “Company”)
acquired 100% of the issued and outstanding shares of Class A
common stock of Green C Corporation (“Green C”) in exchange for
9,411,998 newly issued shares of the Company’s Series A Convertible
Preferred Stock (the Exchange”). Each share of Series A Convertible
Preferred Stock is convertible into 50 shares of common stock and
is entitled to 50 votes on all matters as a class with the holders
of common stock.
On
February 14, 2019, the Company issued 9,000,000 shares of Series B
Convertible Preferred Stock to Emet Capital Partners, LLC (“Emet”)
in exchange for the surrender of all outstanding warrants held by
Emet. Each share of Series B Convertible Preferred Stock is
convertible into one share of Company common stock subject to
adjustment in case, at the time of conversion, the market price per
share of the Company common stock is less than $0.075 per share. On
October 18, 2019, this exchange agreement was reversed.
Common
Stock
Effective
March 10, 2017, in connection with a partial spin-off of the
Company from Sylios Corp, the Company issued a total of 26,905,969
shares of its common stock. 5,378,476 shares were issued to Sylios
Corp (representing 19.99% of the issued and outstanding shares of
Company common stock after the spin-off) and 21,527,493 shares were
issued to the stockholders of record of Sylios Corp on February 3,
2017 on the basis of one share of Company common stock for each 500
shares of Sylios Corp common stock held (representing 80.01% of the
issued and outstanding shares of Company common stock after the
spin-off).
Effective
March 22, 2017, the Company issued 100,000 shares of its common
stock to a consulting firm entity for service rendered. The $25,000
estimated fair value of the 100,000 shares was expensed as
consulting fees in the three months ended March 31,
2017.
Effective
March 31, 2017, the Company issued 2,000,000 shares of its common
stock to our Chief Executive Officer, Wayne Anderson, for services
rendered. The $500,000 estimated fair value of the 2,000,000 shares
was expensed as officer compensation in the three months ended
March 31, 2017.
Effective
September 15, 2017, the Company issued 375,000 shares of its common
stock to retire a Note Payable to a Third Party.
On
September 19, 2018, the Company issued 1,465,523 shares of its
common stock pursuant to a conversion of $32,000 principal and
$4,638 accrued interest of its convertible note dated May 25, 2017
by Emet Capital Partners, LLC. The $510,149 excess of the $546,787
fair value of the 1,465,523 shares over the $36,638 liability
reduction was charged to Loss on Conversion of Debt.
On
October 26, 2018, the Company issued 1,034,477 shares of its common
stock pursuant to a conversion of $30,531 principal and $503
accrued interest of its convertible note dated May 25, 2017 by Emet
Capital Partners, LLC. The $82,758 excess of the $113,792 fair
value of the 1,034,479 shares over the $31,034 liability reduction
was charged to Loss on Conversion of Debt.
On
January 4, 2019, the Company issued 769,785 shares of its common
stock pursuant to a conversion of $670 principal and $100 accrued
interest of its convertible note dated May 25, 2018 by Emet Capital
Partners, LLC (“Emet”). This conversion was based on a conversion
price of $0.001 per share (rather than the Variable Conversion
Price provided in the related note) submitted by Emet in its
Conversion Notice. Emet asserted that the Company had committed a
dilutive issuance, which triggered the “ratchet-down” provision of
the related note which provides for a reduction of the conversion
price. The Company has notified Emet that it disagrees with Emet’s
assertion that a ratch-down dilutive issuance occurred. The $99,302
excess of the $100,072 fair value of the 769,785 shares over the
$770 liability reduction was charged to Loss on Conversion of Debt
in the three months ended March 31, 2019.
THE
GREATER CANNABIS COMPANY, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
For
The Years Ended December 31, 2019 and 2018
On
January 4, 2019, the Company issued 695,129 shares of its common
stock pursuant to an exercise of the equivalent of 1,400 warrants
(of the 440,000 warrants issued to Emet Capital Partners, LLC on
May 25, 2017) in a cashless exercise transaction based on a
ratchet-down exercise price of $0.001 per share.
On
April 16, 2019, the Company issued 1,384,600 shares of its common
stock pursuant to conversions of $40,500 principal and $7,961
accrued interest of two convertible notes issued to by Emet Capital
Partners, LLC (“Emet”). The $131,537 excess of the $179,998 fair
value of the 1,384,600 shares over the $47,961 liability reduction
was charged to Loss on Conversion of Debt in the three months ended
June 30, 2019.
On
May 29, 2019, the Company issued a total of 542,000 shares of its
common stock to two consulting firm entities for certain specified
investor relations and advisory services. The $75,880 fair value of
the 542,000 shares was charged to Other Operating Expenses in the
three months ended June 30, 2019.
On
August 15, 2019, the Company issued 175,000 shares of its common
stock to an entity consultant for accounting services rendered. The
$12,250 fair value of the 175,000 shares was charged to Other
Operating Expenses.
On
October 18, 2019, the Company entered into two Exchange Agreements
with Emet Capital Partners, LLC (“Emet”). The first Exchange
Agreement provided for the exchange of three outstanding
convertible notes payable to Emet with a total remaining principal
balance of $20,399 and a total accrued interest balance of $5,189
for three new convertible notes payable to Emet in the total amount
of $25,587. The new notes bear interest at 6%, are due on February
12, 2020 and are convertible into common stock at a conversion
price equal to 75% of the lowest Trading Price during the 15
Trading Day Period prior to the Conversion Date. The second
Exchange Agreement provided for the reversal of the February 14,
2019 exchange agreement pursuant to which certain warrants then
held by Emet were exchanged for 9,000,000 shares of Series B
Convertible Preferred Stock (see Note G) and the exchange of such
warrants for four new convertible notes payable to Emet in the
total amount of $675,000. These new note bear interest at 2%, are
due on October 18, 2020 and are convertible into common stock at a
conversion price equal to 75% of the lowest Trading Price during
the 15 Trading Day Period prior to the Conversion Date.
On
November 11, 2019, the Company issued 1,748,363 shares of its
common stock pursuant to a conversion of $53,705 principal and
$2,680 accrued interest and fees of its convertible note dated
October 18, 2019 by Emet.
On
December 20, 2019, the Company issued 1,468,204 shares of its
common stock pursuant to a conversion of $29,000 principal and
$4,015 accrued interest and fees of its convertible note dated
October 18, 2019 by Emet.
On
December 24, 2019, the Company issued 637,273 shares of its common
stock pursuant to a conversion of $10,000 principal and $515
accrued interest and fees of its convertible note dated October 18,
2019 by Emet.
Warrants
On
May 25, 2017, the Company issued Emet Capital Partners, LLC a
warrant granting the holder the right to purchase 440,000 shares of
the Company’s common stock at an exercise price of $.50 for a term
of 5-years. If at any time after the Initial Exercise Date, there
is no effective registration statement registering the Warrant
Shares, or no current prospectus available for the resale of the
Warrant Shares by the Holder, then this Warrant may also be
exercised at the Holder’s election, in whole or in part, at such
time by means of a “cashless exercise”. The Holder of the warrant
did not require that the Company register the common shares to be
issued under the warrant in the Registration Statement declared
effective August 31, 2017. (Please see NOTE E - NOTES
PAYABLE TO THIRD PARTIES for further information).
On
September 14, 2017, the Company issued Emet Capital Partners, LLC a
warrant granting the holder the right to purchase 110,000 shares of
the Company’s common stock at an exercise price of $.50 for a term
of 5-years. If at any time after the Initial Exercise Date, there
is no effective registration statement registering the Warrant
Shares, or no current prospectus available for the resale of the
Warrant Shares by the Holder, then this Warrant may also be
exercised at the Holder’s election, in whole or in part, at such
time by means of a “cashless exercise”. The Holder of the warrant
did not require that the Company register the common shares to be
issued under the warrant in the Registration Statement declared
effective August 31, 2017. (Please see NOTE E - NOTES
PAYABLE TO THIRD PARTIES for further information).
THE
GREATER CANNABIS COMPANY, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
For
The Years Ended December 31, 2019 and 2018
On
March 28, 2018, the Company issued Emet Capital Partners, LLC a
warrant granting the holder the right to purchase 96,800 shares of
the Company’s common stock at an exercise price of $.50 for a term
of 5-years. If at any time after the Initial Exercise Date, there
is no effective registration statement registering the Warrant
Shares, or no current prospectus available for the resale of the
Warrant Shares by the Holder, then this Warrant may also be
exercised at the Holder’s election, in whole or in part, at such
time by means of a “cashless exercise”. The Holder of the warrant
has not requested that the Company register the common shares to be
issued under the warrant. (Please see NOTE E - NOTES
PAYABLE TO THIRD PARTIES for further information).
On
June 13, 2018, the Company issued Emet Capital Partners, LLC a
warrant granting the holder the right to purchase 11,000 shares of
the Company’s common stock at an exercise price of $.50 for a term
of 5-years. If at any time after the Initial Exercise Date, there
is no effective registration statement registering the Warrant
Shares, or no current prospectus available for the resale of the
Warrant Shares by the Holder, then this Warrant may also be
exercised at the Holder’s election, in whole or in part, at such
time by means of a “cashless exercise”. The Holder of the warrant
has not requested that the Company register the common shares to be
issued under the warrant. (Please see NOTE E - NOTES
PAYABLE TO THIRD PARTIES for further information).
Emet
Warrant Restructuring
On
February 14, 2019, the Company entered into an exchange agreement
with Emet Capital Partners, LLC (“Emet”) pursuant to which the
Company issued Emet 9,000,000 shares of its Series B Convertible
Preferred Stock (the “Series B Preferred Shares”) in exchange for
the surrender of all outstanding warrants held by Emet. Each Series
B Preferred Share was convertible into one share of the Company’s
common stock subject to adjustment in case, at the time of
conversion, the market price per share of the Company’s common
stock was less than $0.075. In such case, Emet was to receive an
additional number of shares of common stock equal to the number of
shares being converted divided by the applicable market price. On
October 18, 2019, this exchange agreement was reversed.
At
December 31, 2019, the Company has no outstanding
warrants.
NOTE
H - INCOME TAXES
The
Company and its United States subsidiaries expect to file
consolidated Federal income tax returns. Green C Corporation, its
Ontario Canada subsidiary, will file Canada and Ontario income tax
returns.
At
December 31, 2019 the Company has available for federal income tax
purposes a net operating loss carry forward that may be used to
offset future taxable income. The Company has provided a valuation
reserve against the full amount of the net operating loss benefit,
since in the opinion of management based upon the earnings history
of the Company; it is not more likely than not that the benefits
will be realized. Due to significant changes in the Company’s
ownership, the future use of its existing net operating losses will
be limited.
All
tax years of the Company and its United States subsidiaries remain
subject to examination by the Internal Revenue Service.
NOTE
I- GROSS PROFIT ON PRODUCT TRANSACTIONS
In
February 2018, Green C sold certain bitcoin mining rig machines to
a North Carolina based third party entity for $2,929,000. Also in
February 2018, Green C sold additional bitcoin mining rig machines
to another North Carolina based third party entity for $1,720,000.
The Company’s supplier of the products in these two transactions
was Focus Global Supply (“FGS”), a business entity controlled by
Elisha Kalfa, Green C’s Chief Executive Officer.
Green
C paid FGS total of $4,517,000 for these machines. Net of a total
of $59,000 commission paid to a third party finder, Green C
recognized a gross profit of $72,912 from these two
sales.
In
June 2018, Green C sold certain telecommunications parts to a China
based third party entity for a total of $111,147. Green C’s
supplier of the products in these transactions was an Italy based
third part entity which was paid $111,127 for these products.
Including $13,965 commissions received from NFW Marketing, Inc., an
entity affiliated with Elisha Kalfa, Green C’s Chief Executive
Officer. Green C recognized a gross profit of $13,986 from this
transaction.
THE
GREATER CANNABIS COMPANY, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
For
The Years Ended December 31, 2019 and 2018
NOTE
J - COMMITMENTS AND CONTINGENCIES
Pharmedica
Exclusive License Agreement
On
June 21, 2018, Green C executed an Exclusive License Agreement with
Pharmedica, Ltd. (“Pharmedica”), an Israeli company, to exploit
certain Pharmedica intellectual property for the development and
distribution of a certain Licensed Product involved in the
transmucosal delivery of medicinal or recreational cannabis. The
agreement provides for Green C payments to Pharmedica of a $100,000
license fee (which was paid by 2591028 Ontario Limited, an entity
affiliated with Green C’s Chief Executive Officer, on June 26,
2018) and annual royalties at a rate of 5% of the Net Sales of the
Licensed Product subject to a Minimum Annual Royalty of $50,000.
The agreement also provides for certain milestones to be
accomplished by Green C in order for Green C to retain the license.
Green C and Pharmedica each may terminate the agreement upon the
occurrence of a material breach by the other party of its
obligations under the agreement and such other party’s failure to
remedy such breach to the reasonable satisfaction of the other
party within thirty (30) days after being requested in writing to
do so.
The
Company has generated only minimal revenues from this asset to date
and has not paid the Year 1 Minimum Annual Royalty of $50,000 due
Pharmedica. Accordly, we recorded an impairment charge of $69,749
at December 31, 2019 and reduced the $69,749 remaining carrying
value of this intangible asset to $0.
Sub-License
Agreement with Symtomax Unipessoal Lda
On
July 15, 2019, the Company executed a Sub-License Agreement with
Symtomax Unipessoal Lda (“Symtomax”).
The
agreement provides for the Company’s grant to Symtomax of a
non-exclusive right and sub-license to use certain Company
technology and intellectual property to develop and commercialize
products for sale in Europe, the Middle East, and Africa. The
agreement provides for Symtomax payments of royalties to the
Company (payable monthly) ranging from 10% to 17% of Symtomax sales
of eluting patches developed from Company technology.
The
term of the agreement ends the earlier of (i) July 15, 2020 and
(ii) the date that Symtomax is no longer commercializing any of the
products. The term is extended for an additional year on each
anniversary of the agreement for any country where the royalty
payment in respect of such country was equal to or greater than
$1,000,000 for the previous year.
Service Agreements
On
July 31, 2018, the Company executed Services Agreements with its
newly appointed Chief Executive Officer (the “CEO”) and its newly
appointed Chief Legal Officer (the “CLO”), for terms of five years.
The Agreements provide for a monthly base salary of $10,000 for the
CEO and a monthly base salary of $7,000 for the CLO. For the years
ended December 31, 2019 and 2018, the Company expensed a total of
$204,000 and $134,593, respectively, as officers compensation
pursuant to these agreements.
NOTE
K – SUBSEQUENT EVENTS
During the first calendar quarter of 2020, we issued 21,484,688
shares of our common stock pursuant to conversions of an aggregate
of $165,350 in principal and $11,793 in interest under our
outstanding convertible notes.
The
fair value of the shares issued aggregate $406,093 and has a
conversion loss of $ 228,949.
On
January 27, 2020, the Company executed a Securities Purchase
Agreement with GW Holdings, LLC, a New York limited liability
company with its address at 137 Montague Street, Suite 291,
Brooklyn, NY 11201. For value received, the Company issued a 6%
convertible redeemable promissory note in the amoun of $ 166,500
wit a maturity date of January 27, 2021. This note was issued with
a $13,500 original issue discount such that the issuance price was
$153,000.
An
amendment to a Securities Purchase Agreement entered into between
the Company and Eagle Equities, LLC on February 12, 2019, was
executed on January 27, 2020.
A
subsequent closing of an additional $150,000 in net proceeds to the
Company note occurred on the filing of the Company’s resale
registration statement covering the $1,200,000 note being
purchased. An additional closing of $85,000 in net proceeds to the
Company occurred on the effectiveness of such registration
statement, provided that the shares registered under the
registration statement are sufficient to allow for the full
conversion of the funded portion of the Note into registered
shares. The Buyer retains the right to purchase the unfunded
balance of the $1,200,000 Note (the “Unfunded Balance”) until
February 12, 2021, provided that each purchase must be in an amount
of not less than $100,000. Any rights to purchase a portion of the
Unfunded Balance outstanding after 12 months shall be terminated
and the Buyer shall have no rights to purchase the Unfunded
Balance. The closing of the transactions contemplated by this
Agreement (the “Closing”) shall occur on the Closing Date at such
location as may be agreed to by the parties. In addition, the
Company agrees to reserve with its transfer agent, 400% of the
discount value of the funded balance of the Note at each
closing.
All
other terms and conditions of the SPA shall remain in full force
and effect, unless modified by this Amendment. This amendment shall
be governed and construed under the laws of the State of New York,
without regard to its conflict of laws provision.
ITEM 9. CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM 9A. CONTROLS AND
PROCEDURES
Evaluation of Disclosure Controls and Procedures
Under
the supervision and with the participation of our management, Aitan
Zacharin, who is our chief executive officer and chief financial
officer, as of December 31, 2018, we conducted an evaluation of our
disclosure controls and procedures, as such term is defined under
Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities
Exchange Act of 1934, as amended. Based on this evaluation, our
chief executive officer has concluded that, based on the material
weaknesses discussed below, our disclosure controls and procedures
were not effective as of such date to ensure that information
required to be disclosed by us in reports filed or submitted under
the Securities Exchange Act were recorded, processed, summarized,
and reported within the time periods specified in the Securities
and Exchange Act Commission’s rules and forms and that our
disclosure controls are not effectively designed to ensure that
information required to be disclosed by us in the reports that we
file or submit under the Securities Exchange Act is accumulated and
communicated to management, including our chief executive officer,
as appropriate to allow timely decisions regarding required
disclosure.
Management’s
Annual Report on Internal Control over Financial
Reporting
Management
is responsible for establishing and maintaining adequate internal
control over financial reporting. As defined in Rules 13a-15(f)
under the Securities Exchange Act of 1934, internal control over
financial reporting is a process designed by, or under the
supervision of, Aitan Zacharin, the Company’s chief executive
officer, and effected by the Company’s board of directors,
management and other personnel, to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with GAAP.
The
Company’s internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance of
records, that, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of the Company’s assets; (2)
provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that
receipts and expenditures of the Company are being made only in
accordance with authorizations of the Company’s management and
directors; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use or
disposition of the Company’s assets that could have a material
effect on the financial statements.
Because
of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
Our
management, including our principal executive officer and principal
financial officer, assessed the effectiveness of our internal
control over financial reporting at December 31, 2018. In making
this assessment, management used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission
(COSO) in Internal Control—Integrated Framework (2013). Based on
that assessment under those criteria, management has determined
that, as of December 31, 2018, our internal control over financial
reporting was not effective.
Our
internal controls are not effective for the following reasons: (i)
there is an inadequate segregation of duties consistent with
control objectives as management is comprised of only two persons,
one of which is the Company’s principal executive officer and
principal financial officer and, (ii) the Company does not have an
audit committee with a financial expert, and thus the Company lacks
the board oversight role within the financial reporting
process.
In
order to mitigate the foregoing material weakness, we have engaged
an outside accounting consultant with significant experience in the
preparation of financial statements in conformity with GAAP to
assist us in the preparation of our financial statements to ensure
that these financial statements are prepared in conformity with
GAAP. We will continue to monitor the effectiveness of this action
and make any changes that our management deems
appropriate.
We
would need to hire additional staff to provide greater segregation
of duties. Currently, it is not feasible to hire additional staff
to obtain optimal segregation of duties. Management will continue
to reassess this matter to determine whether improvement in
segregation of duty is feasible. In addition, we would need to
expand our board to include independent members.
Going
forward, we intend to evaluate our processes and procedures and,
where practicable and resources permit, implement changes in order
to have more effective controls over financial
reporting.
This
Annual Report does not include an attestation report of our
registered public accounting firm regarding internal control over
financial reporting. Management’s report was not subject to
attestation by the Company’s registered public accounting firm
pursuant to the exemption provided to issuers that are not “large
accelerated filers” nor “accelerated filers” under the Dodd-Frank
Wall Street Reform and Consumer Protection Act.
Changes in Internal Controls
During
the twelve months ended December 31, 2019, there was no change in
internal control over financial reporting that has materially
affected or is reasonably likely to materially affect our internal
control over financial reporting.
ITEM 9B. OTHER
INFORMATION
Management
Changes
None.
Acquisitions
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS
AND CORPORATE GOVERNANCE.
DIRECTORS
AND EXECUTIVE OFFICERS
The
following table sets forth certain information regarding the
members of our Board of Directors and our executive officers as of
December 31, 2019
The
names and ages of our Directors and Executive Officers are set
forth below. Our By-Laws provide for not less than one Director.
All Directors are elected annually by the stockholders to serve
until the next annual meeting of the stockholders and until their
successors are duly elected and qualified. The officers are elected
by our Board.
DIRECTORS
AND EXECUTIVE OFFICERS
Our
executive officers and directors and their respective ages as at
the date hereof are as follows:
|
Name |
|
Age |
|
Positions
and Offices |
| Aitan
Zacharin |
|
35 |
|
President,
Chief Executive Officer, Treasurer and Director |
| Mark
Radom |
|
51 |
|
General
Counsel |
| David
Tavor |
|
69 |
|
Director |
The
directors named above will serve until the next annual meeting of
the stockholders or until his resignation or removal from office.
Thereafter, directors are anticipated to be elected for one-year
terms at the annual stockholders’ meeting. Officers will hold their
positions pursuant to their respective service
agreements.
Set
forth below is a brief description of the background and business
experience of our executive officers and directors for the past
five years.
Professional
History of Aitan Zacharin
Mr.
Zacharin is an experienced executive with a broad knowledge in
building and managing technology and consumer products businesses.
In 2012, he co-founded Fuse Science, an innovative biotechnology
company headquartered in Miami, Florida and Oxnard, California. Mr.
Zacharin was responsible for the development and growth of the
business from a seed stage R&D company to a publicly traded CPG
and biotech business with multiple subsidiaries. During his tenure
he was tasked with expanding the biotechnology IP portfolio,
spearheading multiple in vitro studies, and growing the consumer
products business. In scaling the company, Mr. Zacharin identified
and hired executive talent to lead the commercialization strategy
including the past President of SC Johnson Company and previous CEO
of Champs and Footlocker Sports. He successfully led the company to
raise over $10M in three over-subscribed rounds, as well as
negotiated contracts with 26 world renowned athlete and celebrity
brand ambassadors, which included top ranked pro golfer Tiger
Woods. Under Mr. Zacharin’s leadership the company developed and
commercialized multi-category consumer products through a retail
footprint of 15,000 doors. Since his exit from Fuse Science, he has
been advising and investing in mid to late stage technology
startups, and assisting them with capitalization, business strategy
and development, and accelerating growth. Mr. Zacharin holds dual
degrees from the University of South Florida in Tampa Bay. He
resides in Baltimore, Maryland, and maintains various board
appointments both professionally and philanthropically.
Professional
History of Mark Radom
From
August 2015 to July 2018, Mr. Radom served as chief executive
officer of Graphite Corp. From February 2010 through July 2015, Mr.
Radom served as the chief carbon officer and general counsel of
Blue Sphere Corporation. From 2009 through 2010, Mr. Radom was
managing director of Carbon MPV Limited, a Cyprus company focused
on developing renewable energy and carbon credit projects. From
2007 to 2009, Mr. Radom was general counsel and chief operating
officer of Carbon Markets Global Limited, a London-based carbon
credit and renewable energy project developer. Mr. Radom has
extensive experience in business development in the renewable
energy and carbon credit sectors. He has sourced over U.S.
$100,000,000 in renewable energy, industrial gas and carbon credit
projects and managed many complex aspects of their implementation.
He was legal counsel for a number of carbon and ecological project
developers and was responsible for structuring joint ventures and
advising on developing projects through the CDM/JI registration
cycle and emission reduction purchase agreements under the auspices
of the Kyoto Protocol. Prior to this, he worked on Wall Street and
in the City of London as a US securities and capital markets lawyer
where he represented sovereigns, global investment banks and
fortune 500 companies across a broad range of capital raising and
corporate transactions. He is a graduate of Duke University and
Brooklyn Law School. Mr. Radom is admitted to practice law in New
York and New Jersey and speaks fluent Russian.
Professional
History of David Tavor
Mr.
Tavor has more than 18-years’ experience serving as General Manager
and founder of companies in different areas: Pharmaceutical (Cure
Medical; manufacturing and marketing of Intra-Venus solutions
including for dialysis), Biotech (Minapro; cultivation and
marketing of Micro Algae for Anti-aging; Anti-oxidants, Cosmetics
and fish and shrimps industries), Clean-tech (Jet; treating
industrial and cowsheds waste waters), Natural products (Hadas
Natural Products; production and marketing of natural food
additives and vitamins), and Medical Device companies (Fluorinex
Active; manufacturing and marketing of Oral Care products for
Anti-carries, Desensitizing, Teeth Fluoridation and
Whitening).
Mr.
Tavor has extensive experience in conducting negotiations abroad
and preparing and implementing business plans. He is experienced in
business development, sales and marketing, fundraising, senior
management, patent registration and regulation, and managed
companies “from idea to market”. Prior to that, Mr. Tavor served as
the representative of the United Israel Appeal in Melbourne,
Australia for four years. For the first 23 years of his career, Mr.
Tavor served as a fighter pilot and a commander in the Israeli Air
Force and retired with the rank of Colonel.
Mr.
Tavor holds an MBA, and MA in Political Science and National
Defense studies from Haifa University, Israel.
Audit Committee and Financial Expert
We do
not have an audit committee or an audit committee financial expert.
Our corporate financial affairs are simple at this stage of
development and each financial transaction can be viewed by any
officer or Director at will. We will form an audit committee if it
becomes necessary as a result of growth of the Company or as
mandated by public policy.
Code of Ethics
We do
currently have a Code of Ethics applicable to our principal
executive, financial and accounting officers.
Potential Conflicts of Interest
Since
we do not have an audit or compensation committee comprised of
independent Directors, the functions that would have been performed
by such committees are performed by our Board of Directors. Thus,
there is a potential conflict of interest, in that our Directors
who are also our officers have the authority to determine issues
concerning management compensation, and audit issues that may
affect management decisions. We are not aware of any other
conflicts of interest with any of our Directors or
officers.
ITEM 11. EXECUTIVE
COMPENSATION
Executive Compensation
Our
executive officer(s) have not received any cash compensation since
the date of our formation. Please see NOTE H -ISSUANCES
OF COMMON STOCK AND WARRANTS for further
information.
Summary
Compensation Table
The
following table sets forth information concerning the compensation
of our principal executive officer, our principal financial officer
and each of our other executive officers during 2019.
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Non-Equity |
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Stock |
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Incentive Plan |
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All
Other |
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| Name and Principal |
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Salary |
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Bonus |
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Awards |
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Compensation |
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|
Compensation |
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Total |
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|
Position |
|
Year |
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($) |
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($) |
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($) |
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($) |
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($) |
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($) |
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| Aitan Zacharin(1) |
|
2018 |
|
$ |
50,000 |
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2019 |
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$ |
120,000 |
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| Mark Radom(2) |
|
2018 |
|
$ |
35,000 |
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2019 |
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$ |
84,000 |
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(1) |
Mr.
Aitan Zacharin became the Company’s principal executive officer,
principal financial officer and Chairman of the Board of Directors
on July 31, 2018. Mr. Zacharin’s principal address is 15 Walker
Avenue, Suite 101, Baltimore, MD 21208. |
|
|
|
|
(2) |
Mr.
Mark Radom became the Company’s chief legal officer on July 31,
2018. Mr. Radom’s principal address is 15 Walker Avenue, Suite 101,
Baltimore, MD 21208. |
Employment Contracts. We have employment agreements with
Aitan Zacharin and Mark Radom, our Executive Officer(s).
Compensation
of Directors
The
following table sets forth information concerning the compensation
earned during 2019 by each individual who served as a non-employee
director at any time during the fiscal year:
2019
DIRECTOR COMPENSATION
|
Name |
|
Fees Earned or
Paid in Cash
($) |
|
|
Stock
Awards ($) |
|
|
Total ($) |
|
| Aitan Zacharin |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
| David Tavor |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
Stock Options/SAR Grants. None.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
We
have not entered into any transactions in which any of our
directors, executive officers, or affiliates, including any member
of an immediate family, had or are to have a direct or indirect
material interest.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The
following table sets forth certain information, as of April 24,
2018, with respect to any person (including any “group”, as that
term is used in Section 13(d)(3) of the Securities Exchange Act of
1934, as amended (the “Exchange Act”)) who is known to us to be the
beneficial owner of more than five percent (5%) of any class of our
voting securities, and as to those shares of our equity securities
beneficially owned by each of our directors and executive officers
and all of our directors and executive officers as a group. Unless
otherwise specified in the table below, such information, other
than information with respect to our directors and executive
officers, is based on a review of statements filed with the
Securities and Exchange commission (the “Commission”) pursuant to
Sections 13 (d), 13 (f), and 13 (g) of the Exchange Act with
respect to our common stock. As of April 24, 2018, there were
29,380,969 shares of our common stock outstanding.
The
number of shares of common stock beneficially owned by each person
is determined under the rules of the Commission and the information
is not necessarily indicative of beneficial ownership for any other
purpose. Under such rules, beneficial ownership includes any shares
as to which such person has sole or shared voting power or
investment power and also any shares which the individual has the
right to acquire within sixty (60) days after the date hereof,
through the exercise of any stock option, warrant or other right.
Unless otherwise indicated, each person has sole investment and
voting power (or shares such power with his or her spouse) with
respect to the shares set forth in the following table. The
inclusion herein of any shares deemed beneficially owned does not
constitute an admission of beneficial ownership of those
shares.
The
following table lists, as at the date hereof, the number of shares
of common stock of our Company that are beneficially owned by (i)
each person or entity known to our Company to be the beneficial
owner of more than 5% of the outstanding common stock; (ii) each
officer and director of our Company; and (iii) all officers and
directors as a group. Information relating to beneficial ownership
of common stock by our principal shareholders and management is
based upon information furnished by each person using “beneficial
ownership” concepts under the rules of the Securities and Exchange
Commission. Under these rules, a person is deemed to be a
beneficial owner of a security if that person has or shares voting
power, which includes the power to vote or direct the voting of the
security, or investment power, which includes the power to vote or
direct the voting of the security. The person is also deemed to be
a beneficial owner of any security of which that person has a right
to acquire beneficial ownership within 60 days. Under the
Securities and Exchange Commission rules, more than one person may
be deemed to be a beneficial owner of the same securities, and a
person may be deemed to be a beneficial owner of securities as to
which he or she may not have any pecuniary beneficial interest.
Except as noted below, each person has sole voting and investment
power.
|
Name of Beneficial Owner |
|
Common Stock
Beneficially Owned(1) |
|
|
Percentage of
Common Stock (1) |
|
| Wayne Anderson (2) |
|
|
5,647,098 |
|
|
|
9.29 |
% |
| TD Ameritrade (3) |
|
|
4,405,632 |
|
|
|
7.24 |
% |
| Aitan Zacharin (4)(5) |
|
|
84,766,650 |
|
|
|
58.23 |
% |
| Mark Radom (4)(5) |
|
|
74,166,650 |
|
|
|
54.95 |
% |
| Elisha Kalfa (5) |
|
|
74,166,650 |
|
|
|
54.95 |
% |
| Yonah Kalfa (5) |
|
|
74,166,650 |
|
|
|
54.95 |
% |
| Fernando Bisker (5) |
|
|
74,166,650 |
|
|
|
54.95 |
% |
| Sigalush LLC (5) |
|
|
74,166,650 |
|
|
|
54.95 |
% |
| David Tavor (4) |
|
|
15,000,000 |
|
|
|
19.79 |
% |
| |
|
|
|
|
|
|
|
|
| Officers and directors as a Group
(5) |
|
|
470,599,900 |
|
|
|
83.91 |
% |
(1)
Beneficial Ownership is determined in accordance with the rules of
the Securities and Exchange Commission and generally includes
voting or investment power with respect to securities. Shares of
common stock subject to options, warrants, convertible debt or
convertible preferred shares currently exercisable or convertible,
or exercisable or convertible within 60 days of April 15, 2020 are
deemed outstanding for computing percentage of the person holding
such option or warrant but are not deemed outstanding for computing
the percentage of any other person. Percentages are based on a
total of shares of common stock outstanding on April 15, 2020,
which was 60,786,011 and the shares issuable upon exercise of
options, warrants exercisable, preferred stock and debt convertible
on or within 60 days of April 15, 2020.
(1)
The number of common shares outstanding used in computing the
percentages is 60,786,011.
(2)
The address for Mr. Anderson is 244 2nd Ave N., Suite 9, St.
Petersburg, FL 33701.
(3)
The address for TD Ameritrade is 500/510 Maryville Center Dr, St.
Louis, MO 63141.
(4)
The shares included under “Officers and Directors as a Group”
include those held by Aitan Zacharin, the Company’s chief executive
officer, Mark Radom, the Company’s general counsel and David Tavor,
director. Aitan Zacharin holds 1,695,333 shares of Series A
Convertible Preferred Stock, Mark Radom holds 1,483,333 shares of
Series A Convertible Preferred Stock and David Tavor holds 300,000
shares of Series A Convertible Preferred Stock. Each share of
Series A Convertible Preferred Stock is convertible into 50 shares
of common stock.
(5)
These individuals are persons who received shares of Series A
Preferred Shares in connection with the reverse merger described in
the Company’s current report on Form 8-K dated August 3, 2018. Each
of the persons who received Series A Preferred Shares agreed not to
request or effect any conversions of any shares until the Company
has increased its authorized shares from 500,000,000 to the greater
of (i) (no less than) 600,000,000 or such number of shares as is
necessary to accommodate the conversion of all Series A Preferred
Shares and the then number of shares of common stock
outstanding.
ITEM 13. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS
None
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND
SERVICES
During
fiscal year ended December 31, 2019, we incurred approximately
$13,500 in fees to our principal independent accountants for
professional services rendered in connection with the audit of our
financial statements and for the quarterly reviews of our financial
statements.
| |
|
2019 |
|
|
2018 |
|
| Audit Fees |
|
$ |
13,500 |
|
|
$ |
13,500 |
|
| Tax Fees |
|
|
Nil |
|
|
|
Nil |
|
| All Other
Fees |
|
|
Nil |
|
|
|
Nil |
|
| Total |
|
$ |
13,500 |
|
|
$ |
13,500 |
|
The
following exhibits are filed as part of this report:
|
No. |
|
Description |
|
3.1 |
|
Articles
of Organization (previously filed with Form S-1 on June 20,
2017) |
|
3.2 |
|
Notice
of Conversion (previously filed with Form S-1 on June 20,
2017) |
|
3.3 |
|
Articles
of Incorporation (previously filed with Form S-1 on June 20,
2017) |
|
3.4 |
|
Bylaws
(previously filed with Form S-1 on June 20, 2017) |
|
3.5 |
|
The
Greater Cannabis Company, LLC Reinstatement State of Florida dated
January 12, 2017 (previously filed with Form S-1 on June 20,
2017) |
|
3.6 |
|
Articles
of Organization GCC Investment Holdings, LLC dated July 20, 2017
(previously filed on Amendment No. 2 to Form S-1 on August 8,
2017) |
|
4.1 |
|
Specimen
certificate of common stock (previously filed with Form S-1 on June
20, 2017) |
|
5.1 |
|
Legal
Opinion of John T. Root, Jr. |
|
10.1 |
|
Anti-Dilution
Agreement between Sylios Corp and The Greater Cannabis Company,
Inc. dated as of February 22, 2017 (previously filed with Form S-1
on June 20, 2017) |
|
10.2 |
|
Licensing
Agreement with Artemis Technologies (previously filed with Form S-1
on June 20, 2017) |
|
10.3 |
|
Valvasone
Trust Consulting Agreement dated as of December 24, 2016
(previously filed with Form S-1 on June 20, 2017) |
|
10.4 |
|
Asset
Acquisition Agreement between Sylios Corp and The Greater Cannabis
Company, Inc. dated April 21, 2017 (previously filed with Form S-1
on June 20, 2017) |
|
10.5 |
|
Collateral
Agreement with SLMI Energy Holdings, LLC and Sylios Corp dated as
of March 22, 2017 (previously filed with Form S-1 on June 20,
2017) |
|
10.6 |
|
Resale
Certificate (previously filed with Form S-1 on June 20,
2017) |
|
10.7 |
|
Promissory
Note between Sylios Corp and The Greater Cannabis Company, Inc.
dated as of August 12, 2014 (previously filed with Form S-1 on June
20, 2017) |
|
10.8 |
|
Board
of Directors Services Agreement with Jimmy Wayne Anderson dated as
of March 10, 2017 (previously filed with Form S-1 on June 20,
2017) |
|
10.9 |
|
Promissory
Note between The Greater Cannabis Company, Inc. and Expert Witness
Locators dated as of March 22, 2017 (previously filed with Form S-1
on June 20, 2017) |
|
10.10 |
|
Promissory
Note between The Greater Cannabis Company, Inc. and John T. Root,
Jr. dated as of March 22, 2017 (previously filed with Form S-1 on
June 20, 2017) |
|
10.11 |
|
Promissory
Note between Sylios Corp and The Greater Cannabis Company, Inc.
dated as of March 31, 2017 (previously filed with Form S-1 on June
20, 2017) |
|
10.12 |
|
Registration
Rights Agreement between The Greater Cannabis Company, Inc. and
Emet Capital Partners, LLC dated as of May 25, 2017 (previously
filed with Form S-1 on June 20, 2017) |
|
10.13 |
|
Securities
Purchase Agreement between The Greater Cannabis Company, Inc. and
Emet Capital Partners, LLC dated as of May 25, 2017 (previously
filed with Form S-1 on June 20, 2017) |
|
10.14 |
|
Convertible
Note between The Greater Cannabis Company, Inc. and Emet Capital
Partners, LLC dated as of May 25, 2017 (previously filed with Form
S-1 on June 20, 2017) |
|
10.15 |
|
Escrow
Agreement among The Greater Cannabis Company, Inc., Emet Capital
Partners, LLC and Grushko & Mittman, P.C., as escrow agent,
dated as of May 25, 2017 (previously filed with Form S-1 on June
20, 2017) |
|
10.16 |
|
Common
Stock Purchase Warrant Agreement between The Greater Cannabis
Company, Inc. and Emet Capital Partners, LLC dated as of May 25,
2017 (previously filed with Form S-1 on June 20,
2017) |
|
10.17 |
|
Advisory
Agreement between The Greater Cannabis Company, Inc. and MCAP, LLC
dated July 17, 2017 (previously filed with Amendment No. 1 to Form
S-1 on July 20, 2017) |
|
10.18 |
|
Convertible
Promissory Note and Warrant Coverage between The Greater Cannabis
Company, Inc. and Xeraflop Technologies, Inc. dated July 17, 2017
(previously filed with Amendment No. 1 to Form S-1 on July 20,
2017) |
|
10.19 |
|
Securities
Purchase Agreement between The Greater Cannabis Company, Inc. and
Emet Capital Partners, LLC dated as of September 14, 2017
(previously filed on Form 8-K on September 19,
2017) |
|
10.20 |
|
Common
Stock Purchase Warrant Agreement between The Greater Cannabis
Company, Inc. and Emet Capital Partners, LLC dated as of September
14, 2017 (previously filed on Form 8-K on September 19,
2017) |
|
10.21 |
|
Convertible
Note between The Greater Cannabis Company, Inc. and Emet Capital
Partners, LLC dated as of September14, 2017 (previously filed on
Form 8-K on September 19, 2017) |
|
10.22 |
|
Waiver
between The Greater Cannabis Company, Inc. and Emet Capital
Partners, LLC dated as of January 9, 2018 (previously filed on Form
8-K on April 2, 2018) |
|
10.23 |
|
Convertible
Note between The Greater Cannabis Company, Inc. and Emet Capital
Partners, LLC dated as of January 9, 2018 (previously filed on Form
8-K on April 2, 2018) |
|
10.24 |
|
Allonge
made by The Greater Cannabis Company, Inc. to Emet Capital
Partners, LLC dated March 28, 2018 (previously filed on Form 10-K
on April 17, 2018) |
|
10.25 |
|
Common
Stock Purchase Warrant Agreement between The Greater Cannabis
Company, Inc. and Emet Capital Partners, LLC dated as of March 28,
2018 (previously filed on Form 10-K on April 17,
2018) |
|
10.26 |
|
Emet
Exchange Agreement dated February 14, 2019 (previously filed on
Form 8-K on February 15, 2019) |
|
10.28 |
|
Eagle
Convertible Note dated February 12, 2019 (previously filed on Form
8-K on February 15, 2019) |
|
10.30 |
|
Eagle
Securities Purchase Agreement dated February 12, 2019 (previously
filed on Form 8-K on February 15, 2019) |
|
10.31 |
|
Emet
Certificate of Designation dated February 14, 2019 (previously
filed on Form 8-K on February 15, 2019) |
|
10.32 |
|
GW
Note dated January 27, 2020 (previously filed on Form 8-K on
February 3, 2020) |
|
10.33 |
|
GW
Securities Purchase Agreement dated January 27, 2020 (previously
filed on Form 8-K on February 3, 2020) |
|
14.1 |
|
Code
of Business Conduct and Ethics (previously filed with Form S-1 on
June 20, 2017) |
|
21.1 |
|
Articles
of Organization GCC Superstore, LLC (previously filed with Form S-1
on June 20, 2017) |
|
23.1 |
|
Consent
of John T. Root, Jr. (Please see Exhibit 5.1 Legal Opinion of John
T. Root, Jr.) (previously filed with Amendment No. 3 to Form S-1 on
August 25, 2017) |
|
23.2 |
|
Consent
of Michael T. Studer, CPA |
|
Graphic |
|
Corporate
logo- GCC (previously filed with Form S-1 on June 20,
2017) |
|
Graphic |
|
Corporate
logo GCC Superstore (previously filed with Form S-1 on June 20,
2017) |
|
31.1 |
|
Certification
of Chief Executive Officer pursuant to Rule 13(a)-14(a)/15d-14(a)
of the Securities Exchange Act of 1934, as amended (filed
herewith). |
|
31.2 |
|
Certification
of Principal Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act and Rule 13a-14(a) or 15d-14(a) under the
Securities Exchange Act of 1934 |
|
32.1 |
|
Certification
of Chief Executive Officer pursuant to 18 U.S.C. Section 1350,
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(filed herewith). |
++ To
be filed by subsequent amendment.
XBRL
Exhibits will be filed by subsequent amendment.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
|
Signatures |
|
Title |
|
Date |
|
|
|
|
|
|
|
/s/
Aitan Zacharin |
|
President
(Principal Executive Officer), Acting Chief Financial
Officer |
|
April
14, 2020 |
|
|
|
(Principal
Accounting Officer) and Chairman of the Board of
Directors |
|
|
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