NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2020 and 2019
NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
Grey Cloak Tech Inc. (the “Company”)
was incorporated in the State of Nevada on December 19, 2014. The Company has additionally acquired BergaMet NA, LLC which markets
and sells heath supplemental products, and Ultimate Brain Nutrients, LLC which develops plant-based neuro-products that provide
natural brain solutions.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited consolidated
financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America
for interim financial statements and with the instructions to Form 10-Q and Article 8 of Regulation S-X of the United States Securities
and Exchange Commission (“SEC”). Accordingly, they do not contain all information and footnotes required by accounting
principles generally accepted in the United States of America for annual financial statements. In the opinion of the Company’s
management, the accompanying unaudited consolidated financial statements contain all the adjustments necessary (consisting only
of normal recurring accruals) to present the financial position of the Company as of June 30, 2020 and the results of operations
and cash flows for the periods presented. The results of operations for the six months ended June 30, 2020 are not necessarily
indicative of the operating results for the full fiscal year or any future period. These unaudited consolidated financial statements
should be read in conjunction with the financial statements and related notes thereto included in the Company’s form 10-K
for the year ended December 31, 2019 filed with the SEC on August 10, 2020.
Use of Estimates
The preparation of financial statements
in conformity with GAAP 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 the reported amount of revenues
and expenses during the reporting period. Actual results could differ from those estimates.
Cash
Cash includes cash in banks, money
market funds, and certificates of term deposits with maturities of less than three months from inception, which are readily convertible
to known amounts of cash and which, in the opinion of management, are subject to an insignificant risk of loss in value.
Accounts Receivables
Accounts receivables are recorded at the invoice amount
and do not bear interest.
Inventory
Inventories consist of health
supplements held for sale in the ordinary course of business. The Company uses the weighted average cost method to value its inventories
at the lower of cost or market. An allowance for inventory was established in 2018 and is evaluated each quarter to determine if
all items are still sellable due to expiration dates. As of June 30, 2020 and 2019, the
total of inventory which was written off as an inventory allowance was $748,972 and $324,014.
GREY CLOAK
TECH INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2020 and 2019
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Property and Equipment
The Company’s property and equipment are recorded at cost
and depreciated using the straight-line method over the useful lives of the assets, generally from three to seven years. Upon sale
or disposal of property and equipment, the related asset cost and accumulated depreciation or amortization are removed from the
respective accounts and any gain or loss is reflected in current operations.
Goodwill
In accordance with Goodwill and
Other Intangible Assets, goodwill is defined as the excess of the purchase price over the fair value assigned to individual assets
acquired and liabilities assumed and is tested for impairment at the reporting unit level on an annual basis in the Company's fourth
fiscal quarter or more frequently if indicators of impairment exist. The performance of the test involves a two-step process. The
first step of the impairment test involves comparing the fair value of the Company's reporting units with each respective reporting
unit's carrying amount, including goodwill. The fair value of reporting units is generally determined using the income approach.
If the carrying amount of a reporting unit exceeds the reporting unit's fair value, the second step of the goodwill impairment
test is performed to determine the amount of any impairment loss. The second step of the goodwill impairment test involves comparing
the implied fair value of the reporting unit's goodwill with the carrying amount of that goodwill. The Company sees the goodwill
to have a ten-year useful life. No goodwill impairment indicators were present, for the goodwill listed on the books as of March
31, 2020, after working through our analysis of goodwill during the months ending June 30, 2020.
The Company has determined that
the method applied represents the fair value of the asset group principally because the valuation of the intangibles with the asset
group is based on the anticipated cash flows related to the revenue stream from its customers. The asset group excludes goodwill,
long term non-operational assets and liabilities and cash. As such, the principal value from the asset group relates to the cash
inflows from its customers and the cash outflows required to service these customers. The fair value for the asset group consists
of the following:
|
·
|
Fair value of net revenues:
computed using the income approach. The key input to these computations is the anticipated cash inflows from customers. These valuations
include 100% of the cash inflows related to the customer base, and taking cash outflows into consideration.
|
|
·
|
Fair value of working
capital (including accounts receivable, inventory, accrued expenses, and accounts payables). Due to the short-term nature of the
working capital, book value has been determined to be fair value. These accounts represent either avoided future outflows (inventory,
prepaids) or future cash flows (accrued expense, AP and AR) related to customer sales.
|
|
·
|
Fair value of five years
of revenue (2019 to 2023): we discounted our cash flows to the anticipated cash projected to be received. We also projected the
anticipated cash outflows required to service these customers. If the asset group was to be valued as a whole, we would expect
an income approach based on the revenues being generated from the customers and expenses required to service those customers, appropriately
adjusted for the working capital position. The sum of these values reasonably approximates this approach.
|
GREY CLOAK TECH
INC
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
June 30, 2020 and 2019
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Company’s revenue streams
align directly with the intangibles, which were recorded as a result of the BergaMet acquisition in fiscal 2019. For purposes of
the Step 2 recoverability test under ASC 360 subsection 2.3., the net revenues from BergaMet customers base were used. The revenue
stream fairly reflects anticipated future cash flows; accordingly, the intangibles associated with these revenue streams have been
tested with the expected cash flows.
Due to the purchase of Ultimate
Brian Nutrients, LLC being a related party transaction and the new division recording no revenue as of June 30, 2020, the Company
found the goodwill to be impaired. Due to the impairment the Company expensed the goodwill related to the purchase as of June 30,
2020.
Revenue Recognition
Beginning January 1, 2019, the Company
implemented ASC 606, Revenue from Contracts with Customers. Although the new revenue standard is expected to have an
immaterial impact, if any, on our ongoing net income, we did implement changes to our processes related to revenue recognition
and the control activities within them. These included the development of new policies based on the five-step model provided
in the new revenue standard, ongoing contract review requirements, and gathering of information provided for disclosures
The Company recognizes revenue
and cost of goods sold from product sales or services rendered when control of the promised goods are transferred to our clients
in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods and services. To
achieve this core principle, we apply the following five steps: identify the contract with the client, identify the performance
obligations in the contract, determine the transaction price, allocate the transaction price to performance obligations in the
contract and recognize revenues when or as the Company satisfies a performance obligation.
The Company records revenue upon
shipment of the products to the customers.
Concentration
There
is no concentration of revenue for the months ended June 30, 2019 and the months ended June 30, 2020 because the revenue was earned
from multiple customers.
Income Taxes
The Company accounts for income
taxes using the asset and liability method in accordance with ASC 740, “Accounting for Income Taxes”. The asset and
liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary
differences between the financial reporting and tax bases of assets and liabilities and for operating loss and tax credit carry
forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect
when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount
that is believed more likely than not to be realized. For the period ending December 31, 2019 and June 30, 2020, the Company did
not have any amounts recorded pertaining to uncertain tax positions.
GREY CLOAK
TECH INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2020 and 2019
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Fair Value Measurements
The Company adopted the provisions of
ASC Topic 820, “Fair Value Measurements and Disclosures”, which defines fair value as used in numerous accounting
pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements.
The estimated fair value of certain
financial instruments, including cash and cash equivalents are carried at historical cost basis, which approximates their fair
values because of the short-term nature of these instruments.
ASC 820 defines fair value as the exchange
price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous
market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes
a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable
inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:
Level 1 — quoted
prices in active markets for identical assets or liabilities
Level 2 — quoted
prices for similar assets and liabilities in active markets or inputs that are observable
Level 3 — inputs
that are unobservable (for example cash flow modeling inputs based on assumptions)
The derivative liability in connection with the conversion
feature of the convertible debt, classified as a Level 3 liability, is the only financial liability measure at fair value on a
recurring basis.
The change in Level 3 financial instrument is as follows:
Balance, January 1, 2020
|
|
$
|
1,060,388
|
|
Issued during the months ended June 30, 2020
|
|
|
1,668,799
|
|
Change in fair value recognized in operations
|
|
|
(593,602
|
)
|
Converted during the months ended June 30, 2020
|
|
|
(217,862
|
)
|
Balance, June 30, 2020
|
|
$
|
1,917,723
|
|
GREY CLOAK
TECH INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2020 and 2019
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Recent Accounting Pronouncements
In May 2014, the Financial Accounting
Standards Board (“FASB”) issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 amends
the guidance for revenue recognition to replace numerous, industry specific requirements and converges areas under this topic with
those of the International Financial Reporting Standards. The ASU implements of five–step process for customer contract revenue
recognition that focuses on transfer of control, as opposed to transfer of risk and rewards. The amendment also requires enhanced
disclosures regarding the nature, amount, timing and uncertainty of revenues and cash flows from contracts with customers. Other
major provisions include the capitalization and amortization of certain contract cost, ensuring the time value of money is considered
in the transaction price, and allowing estimates of variable consideration to be recognized before contingencies are resolved in
certain circumstances. The amendments in this ASU are effective for reporting period beginning after December 15, 2016, and early
adoption is prohibited. Entities can transition to the standard either retrospectively or as a cumulative-effect adjustment as
of the date of adoption.
The Company’s revenues are
recognized when control of the promised goods or services is transferred to our clients (upon shipment of goods) in an amount that
reflects the consideration to which we expect to be entitled in exchange for those goods and services. To achieve this core principle,
we apply the following five steps: (1) Identify the contract with a client; (2) Identify the performance obligations in the contract;
(3) Determine the transaction price; (4) Allocate the transaction price to performance obligations in the contract; and (5) Recognize
revenues when or as the Company satisfies a performance obligation.
We adopted ASC 2014-09 on January
1, 2019. Although the new revenue standard is expected to have an immaterial impact, if any, on our ongoing net income, we did
implement changes to our processes related to revenue recognition and the control activities with them.
Convertible Instruments
The Company evaluates and account
for conversion options embedded in convertible instruments in accordance with ASC 815 “Derivatives and Hedging Activities”.
Applicable GAAP
requires companies to bifurcate conversion options from their host instruments and account for them as free-standing derivative
financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics
and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks
of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is
not re-measured at fair value under other GAAP with changes in fair value reported in earnings as they occur and (c) a separate
instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.
The Company accounts for convertible
instruments (when it has been determined that the embedded conversion options should not be bifurcated from their host instruments)
as follows: The Company records when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded
in debt instruments based upon the differences between the fair
value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded
in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption.
GREY CLOAK
TECH INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2020 and 2019
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
The Company accounts for the conversion
of convertible debt when a conversion option has been bifurcated using the general extinguishment standards. The debt and equity
linked derivatives are removed at their carrying amounts and the shares issued are measured at their then-current fair value, with
any difference recorded as a gain or loss on extinguishment of the two separate accounting liabilities. During the months ended
March 31, 2020, the Company did not have any conversions of convertible debt with a bifurcated conversion option.
Common Stock Purchase Warrants
The Company classifies as equity
any contracts that require physical settlement or net-share settlement or provide a choice of net-cash settlement or settlement
in the Company’s own shares (physical settlement or net-share settlement) provided that such contracts are indexed to our
own stock as defined in ASC 815-40 ("Contracts in Entity's Own Equity"). The Company classifies as assets or liabilities
any contracts that require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and
if that event is outside our control) or give the counterparty a choice of net-cash settlement or settlement in shares (physical
settlement or net-share settlement). The Company assesses classification of common stock purchase warrants and other free-standing
derivatives at each reporting date to determine whether a change in classification is required.
Gain on Extinguishment of debt
Note Satisfaction Agreements
Prior to the Exchange, the Company entered
into a Note Satisfaction Agreement with each of Auctus Fund, Crown Bridge Partners, LLC, Power Up Lending Group Ltd., GS Capital
Partners LLC, Oakmore Opportunity Fund I LP, and Adar Bays, LLC. All of these entities were holders of the Company’s convertible
debt, and these Note Satisfaction Agreements terminate their convertible notes unless the Company fails to perform its payment
obligations. The Company agreed to pay these note holders an aggregate of $520,658 plus interest. The Company paid an aggregate
of $353,908 on or before February 15, 2019. The balance owed and outstanding of $160,000 plus interest has not been paid and the
two remaining notes are currently in default.
Various other holders of Convertible Promissory
Notes agreed to convert their notes for an aggregate of 806,015 shares of common stock prior to the Exchange. As a result of these
transactions, no convertible promissory notes remain outstanding, except for those convertible notes subject to revival if the
Company fails to make payments pursuant to the Note Satisfaction Agreements.
NOTE 3 – GOING CONCERN
The accompanying financial statements
have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and
the satisfaction of liabilities in the normal course of business. The Company has generated minimal revenues from operations. Since
its inception, the Company has been engaged substantially in financing activities and developing its business plan and incurring
startup costs and expenses. As a result, the Company incurred accumulated net losses from Inception (December 19, 2014) through
the period ended June 30, 2020 of $13,140,485. In addition, the Company’s development activities since inception have been
financially sustained through equity financing.
Management plans to seek funding through debt and equity financing and has recently acquired a new company as a wholly owned subsidiary.
GREY CLOAK
TECH INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2020 and 2019
NOTE 4 – RELATED PARTY
For the months ended June 30,
2020 and 2019, the Company had expenses totaling $80,000 and $24,000 respectively, to an officer and director for salaries, which
is included in general and administrative expenses on the accompanying statement of operations As of June 30, 2020, there was a
total of convertible debt of $1,050,866 and accrued interest payable of $480,217 due to an officer and director, employees, and
shareholders.
NOTE 5 – CONVERTIBLE DEBT – RELATED
PARTY
As of June 30, 2020, the Company had the following:
Unsecured convertible debt, due 01/17/24, 4% interest, converts at $0.05 for a total of 30,604,333 shares
|
|
|
1,050,000
|
|
TOTAL
|
|
$
|
1,050,000
|
|
As of June 30, 2020, the Company has an outstanding
total of $480,213 in accrued interest for the above convertible notes.
Below represent the Black-Scholes Option Pricing Model
calculations for the above convertible note payables:
Payee
|
Number of options valued
|
Value of Convertible Option
|
Unsecured Convertible debt #1
|
30,604,333
|
$1,668,799
|
NOTE 6 – NOTES PAYABLE
As of June 30, 2020, the Company had the following:
Unsecured debt with shareholders of the Company, due 02/04/2020, 4% interest, interest due quarterly.
|
|
|
79,667
|
|
Unsecured debt with shareholders of the Company, no due date, 0% interest,
|
|
|
866
|
|
|
|
|
|
|
TOTAL
|
|
$
|
80,533
|
|
GREY CLOAK TECH INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2020 and 2019
NOTE 6 – NOTES PAYABLE (CONTINUED)
As of June 30, 2020, the Company has an outstanding
total of $4,479 in accrued interest for the above note and past obligations which are unpaid.
NOTE 7 – CONVERTIBLE DEBT
As of June 30, 2020, the Company had the following:
Unsecured convertible debt, due 11/01/18, 12% interest, converts at a 50% discount to market price based on the last 25 days trading price
|
|
|
110,000
|
|
Unsecured convertible debt, due 02/02/19, 8% interest, converts at a 55% discount to market price based on the last 20 days trading price
|
|
|
50,000
|
|
Unsecured convertible debt, due 01/19/17, 8% interest, default interest at 18%, converts at a 54% discount to market price based on the lowest trading prices in the last 20 days trading price
|
|
|
6,750
|
|
|
|
|
|
|
SUBTOTAL
|
|
|
166,750
|
|
Less: Discount
|
|
|
—
|
|
TOTAL
|
|
$
|
166,750
|
|
Below represent the Black-Scholes Option Pricing Model
calculations for the above convertible note payables:
Payee
|
Number of options valued
|
Value of Convertible Option
|
Unsecured Convertible debt #1
|
6,044,465
|
$181,531
|
Unsecured Convertible debt #2
|
2,136,272
|
$ 58,916
|
Unsecured Convertible debt #3
|
312,896
|
$ 8,477
|
GREY CLOAK
TECH INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2020 and 2019
NOTE 7 – CONVERTIBLE DEBT (CONTINUED)
As of June 30, 2020, the Company
has an outstanding total of $55,976 in accrued interest for the above convertible notes.
Two of the convertible promissory
notes feel into default during the first quarter of 2020, but we have been able to secure an extension for repayment on one of
the two notes which will be August 1st, 2020. We are in talks with the other party to extend the other note. With the
note still being negotiated, we have calculated the derivative liability as if it is in default (but the note’s default interest
rate stays the same at 8%) and will still accrue appropriate interest until the note is fully satisfied or converted into the Company’s
common stock.
One of the convertible promissory
notes is in default but management has not been able to make contact with this party, due to them living out of the country. We
have calculated the derivative liability as if it is in default (but the note’s default interest rate stays the same at 8%)
and will still accrue appropriate interest until the note is fully satisfied or converted into the Company’s common stock.
The Company has determined that
the conversion feature embedded in the notes referred to above that contain a potential variable conversion amount constitutes
a derivative which has been bifurcated from the note and recorded as a derivative liability, with a corresponding discount recorded
to the associated debt.
NOTE 8 – STOCKHOLDERS’ EQUITY
Authorized Stock
The Company has authorized 75,000,000
common shares with a par value of $0.001 per share. Each common share entitles the holder to one vote on any matter on which
action of the stockholders of the corporation is sought. During February 2017, the Company increased the authorized number of shares
to 500,000,000. Also, the Company increased the authorized preferred stock to 75,000,000 shares and designated 25,000,000 shares
of preferred stock to Series A Convertible Preferred Stock. During January 2018, the Company increased its authorized number of
common shares to 1,000,000,000. During April 2018, the Company increased its authorized number of common shares to 2,500,000,000.
The Board of Directors, in the future, has the authority to increase the authorized capital up to 4,000,000,000 shares based on
shareholder approval.
The shareholders of the Company
approved a reverse stock split at a ratio of between 1-for-100 and 1-for 250. The Company received approval from FINRA for a reverse
stock split of 1-for-250, which was effective as of July 23, 2018.
On October 16, 2017, the Company
filed an Amended and Restated Certificate of Designation of the Rights, Preferences, Privileges and Restrictions of the Series
A Convertible Preferred Stock (the “Amended Certificate”) with the Secretary of State of the State of Nevada. The Amended
Certificate reduces the number of preferred shares designated as Series A Preferred Stock from 25,000,000 shares to 1,333,334 shares.
The Amended Certificate also changes the conversion and voting rights of the Series A Preferred Stock. The Series A Preferred Stock
is now convertible into the number of shares of our common stock equal to 0.00006% of our outstanding common stock upon conversion.
The voting rights of the Series A Preferred Stock are now equal to the number of shares of common stock into which the Series A Preferred
Stock may convert.
As of June 30, 2020, there are no outstanding shares
of preferred stock. All the preferred stock was converted into common stock on February 4, 2019. See recent developments for details.
GREY CLOAK
TECH INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2020 and 2019
NOTE 8 – STOCKHOLDERS’ EQUITY (CONTINUED)
Common Share Issuances
During the months ended June 30,
2020, the Company issued 142,449,674 shares of common stock. 90,000,960 were issued for the purchase of Ultimate Brian Nutrients,
LLC on April 3, 2020. On April 13, 2020, the Company issued 39,248,714 shares after coming to terms with the several of the convertible
note holders. On June 17, 2020, the Company raised $660,000 in convertible notes and the note holders agreed to immediately convert
the notes in to 13,200,000 shares.
Warrant Issuances
As of June 30, 2020, there were 16,800 warrants outstanding,
of which 8,800 warrants are fully vested.
Stock Issued for Services
On January 28, 2019, the Company entered into
a marketing and sales consulting agreement with an individual for a period of six months. The Company issued 350,000 shares of
common stock as the compensation for this agreement.
Share Conversion Agreements
All of the holders of the Company’s Series
A Convertible Preferred Stock (the “Preferred Holders”) entered into a Preferred Stock Conversion Agreement. Pursuant
to the Conversion Agreements, the Preferred Holders converted their shares of preferred stock into common stock, effective as of
the Exchange. As a result, no shares of the Company’s Series A Convertible Preferred Stock are outstanding. An aggregate
of 15,592,986 shares of common stock were issued to the Preferred Holders. The Preferred Holders agreed to convert each share of
Series A Convertible Preferred Stock into eighteen (18) shares of common stock and agreed to retire a total of 467,057 shares of
Series A Convertible Preferred Stock. The Company cancelled the retired shares.
NOTE 9 – ACQUISITIONS
Acquisition of Ultimate Brain Nutrients,
LLC
On April 3, 2020, the Company entered into
a Share Exchange Agreement by and among Grey Cloak Tech Inc., Ultimate Brain Nutrients, LLC, a Delaware limited liability company
(“UBN”), and the members of UBN, whereby we issued and exchanged 90,000,960 shares of our common stock for all of the
outstanding equity securities of UBN. UBN is now our wholly-owned subsidiary. The shares of common stock issued in the Exchange
are equal to approximately 42.5% of our outstanding common stock immediately following the exchange.
The assets acquired
and liabilities assumed as part of our acquisition were recognized at their fair values as of the effective acquisition date, April
3, 2020. The following table summarizes the fair values assigned to the assets acquired and liabilities assumed.
Cash
|
|
$
|
(5,466
|
)
|
Current assets
|
|
|
315,604
|
|
Current liabilities
|
|
|
0
|
|
Net assets acquired
|
|
$
|
310,137
|
|
GREY
CLOAK TECH INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2020 and 2019
NOTE 9 – ACQUISITIONS (CONTINUED)
The purchase price
method was used when calculating the fair market value of the UBN purchase. On April 3, 2020 the closing stock price for GRCK was
$0.021. The total number of shares exchanged multiplied by the closing stock price equaled a purchase value of $1,890,020. The
difference between the net assets acquired and the purchase value was recorded as $1,579,883 of goodwill for the purchase. Due
to the goodwill impairment, the Company fully expensed the goodwill recorded in this transaction. The Company viewed UBN’s
balance sheet as being fairly valued as of April 3, 2020 so no adjustment was needed under the purchase price method of valuation.
Acquisition of BergaMet and the
Share Exchange Agreement
On February 4, 2019, the Company entered into
a Share Exchange Agreement with BergaMet NA, LLC, a Delaware limited liability company (“BergaMet”), and
the members of BergaMet, whereby the Company issued and exchanged 97,409,678 shares of its common stock for all of the outstanding
equity securities of BergaMet (the “Exchange”). Through the Exchange, BergaMet became a wholly-owned
subsidiary of the Company. The shares of common stock issued in the Exchange were equal to 80.1% of the Company’s outstanding
common stock (post-exchange).
The assets acquired
and liabilities assumed as part of our acquisition were recognized at their fair values as of the effective acquisition date, February
4, 2019. The following table summarizes the fair values assigned to the assets acquired and liabilities assumed.
Cash
|
|
$
|
437,826
|
|
Current assets
|
|
|
2,801,317
|
|
Current liabilities
|
|
|
(1,484,210
|
)
|
Net assets acquired
|
|
$
|
1,754,934
|
|
The purchase price
method was used when calculating the fair market value of the BergaMet purchase. On February 4, 2019 the closing stock price for
GRCK was $0.02. The total number of shares exchanged multiplied by the closing stock price equaled a purchase value of $1,948,194.
The difference between the net assets acquired and the purchase value was recorded as $193,260 of goodwill for the purchase. The
Company viewed BergaMet’s balance sheet as being fairly valued as of February 4, 2019 so no adjustment was needed under the
purchase price method of valuation.
NOTE 10 – DISCONTINUED OPERATIONS
Healthy Extracts
On January 1, 2019, the Company decided to
discontinue operating the Healthy Extracts division and did not operate it in 2019. At the time of the closure, the Company incurred
a loss for the year of $714 which eliminated all carrying values of assets and liabilities for the division.
Eqova Life Science
On June 1, 2019, the Company decided to discontinue
operating the Eqova Life Science division which ceased all activities in May 2019. Due to the closure, the Company incurred a loss
for the year of $92,609 which eliminated all carrying values of assets and liabilities for the division.
GREY CLOAK
TECH INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2020 and 2019
NOTE 11 – BUSINESS SEGMENT INFORMATION
As
of June 30, 2020, the Company operated in two reportable segments (Corporate and Health Supplements) supported by a corporate group
which conducts activities that are non-segment specific. The following table presents selected financial information about the
Company’s reportable segments for the months ended June 30, 2020.
|
|
CONSOLIDATED
|
|
HEALTH SUPPLEMENTS
|
|
CORPORATE
|
|
|
|
|
BergaMet
|
|
UBN
|
|
|
Revenue
|
|
|
607,558
|
|
|
|
607,558
|
|
|
|
—
|
|
|
|
—
|
|
Cost of Revenue
|
|
|
216,646
|
|
|
|
216,646
|
|
|
|
—
|
|
|
|
—
|
|
Long-lived Assets
|
|
|
530,151
|
|
|
|
—
|
|
|
|
336,891
|
|
|
|
193,260
|
|
Gain (Loss) Before Income Tax
|
|
|
(2,760,363
|
)
|
|
|
(175,950
|
)
|
|
|
(77,341
|
)
|
|
|
(2,507,072
|
)
|
Identifiable Assets
|
|
|
3,072,356
|
|
|
|
3,072,356
|
|
|
|
—
|
|
|
|
—
|
|
Depreciation and Amortization
|
|
|
4,623
|
|
|
|
4,425
|
|
|
|
—
|
|
|
|
198
|
|
The
following table presents selected financial information about the Company’s reportable segments for the three months ended
June 30, 2020.
|
|
CONSOLIDATED
|
|
HEALTH SUPPLEMENTS
|
|
CORPORATE
|
|
|
|
|
BergaMet
|
|
UBN
|
|
|
Revenue
|
|
|
151.719
|
|
|
|
151,719
|
|
|
|
—
|
|
|
|
—
|
|
Cost of Revenue
|
|
|
20,589
|
|
|
|
20,589
|
|
|
|
—
|
|
|
|
—
|
|
Long-lived Assets
|
|
|
530,151
|
|
|
|
—
|
|
|
|
336,891
|
|
|
|
193,260
|
|
Gain (Loss) Before Income Tax
|
|
|
(3,385,173
|
)
|
|
|
(220,206
|
)
|
|
|
(77,341
|
)
|
|
|
(3,087,626
|
)
|
Identifiable Assets
|
|
|
3,072,356
|
|
|
|
3,072,356
|
|
|
|
—
|
|
|
|
0
|
|
Depreciation and Amortization
|
|
|
2,312
|
|
|
|
2,213
|
|
|
|
—
|
|
|
|
99
|
|
GREY CLOAK
TECH INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2020 and 2019
NOTE 12 – SUBSEQUENT EVENTS
On May 30, 2020, the Company proposed a stock
options agreement in the amount of 10,550,000 shares with a strike price of $0.05 to sixteen individuals.
During August 2020, two of the Company issued
convertible debt notes were purchased by third parties totaling $160,000 in company convertible debt. The parties whom purchased
these notes came to terms with the Company on the total debt and interest outstanding and agreed to convert those notes to shares
in the third quarter of 2020. The total of $213,874 of debt and accrued interest was satisfied with the conversion to 3,400,000
shares.
On August 25, 2020, the Company came to agreement
with two of the convertible debt note holders to execute the conversion of the note to shares. The amount converted was $1,129,667
in principal and $491,716 in accrued interest for 32,427,651 shares.
COVID-19
The COVID-19 outbreak in early 2020 has adversely
affected, and may continue to adversely affect economic activity globally, nationally and locally. These economic and market conditions
and other effects of the COVID-19 outbreak may adversely affect the Company. At this point, the extent to which COVID-19 may impact
the Company's business is uncertain.