NOTE
F - DERIVATIVE LIABILITY
The
derivative liability at December 31, 2018 consisted of:
|
|
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
|
|
|
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
|
|
|
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
|
|
|
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
|
|
|
1,818
|
|
Total derivative
liability
|
|
$
|
280,310
|
|
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 at December 31, 2018 using the Black
Scholes option pricing model. 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 2.45% to 2.56%. Assumptions used for the calculation
of the derivative liability of the warrants at December 31, 2018 were (1) stock price of $0.1655 per share, (2) exercise price
of $0.50 per share, (3) terms ranging from 41 months to 54 months, (4) expected volatility of 286.71%, and (5) risk free interest
rates ranging from 2.47% to 2.50%.
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.
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.
THE
GREATER CANNABIS COMPANY, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
For
The Years Ended December 31, 2018 and 2017
NOTE
G - CAPITAL STOCK AND WARRANTS (continued)
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.
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).
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).
THE
GREATER CANNABIS COMPANY, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
For
The Years Ended December 31, 2018 and 2017
NOTE
G - CAPITAL STOCK AND WARRANTS (continued)
As
of December 31, 2018, the Company has four warrants issued and outstanding granting the holders the right to purchase up to a
total of 657,800 shares of its common stock.
The
following table summarizes information about warrants outstanding as of December 31, 2018:
|
|
|
Number
Outstanding
|
|
|
Average Remaining
|
Exercise
Price
|
|
|
at
December 31, 2018
|
|
|
Contractual
Life
|
|
|
|
|
|
|
|
$
|
0.50
|
|
|
|
440,000
|
|
|
41 Months
|
$
|
0.50
|
|
|
|
110,000
|
|
|
45 Months
|
$
|
0.50
|
|
|
|
96,800
|
|
|
51 Months
|
$
|
0.50
|
|
|
|
11,000
|
|
|
54 Months
|
|
Total
|
|
|
|
657,800
|
|
|
|
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, 2018 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. The Company’s
supplier of the products in these transactions was an Italy based third party 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, 2018 and 2017
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.
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 year ended December 31, 2018, the
Company expensed a total of $85,000 as officers compensation pursuant to these agreements. The remaining $100,593 officers compensation
in the year ended December 31, 2018 represents payments to the chief executive officer of Green C Corporation.
NOTE
K – SUBSEQUENT EVENTS
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. If the issuance of the 769,785 shares is not revised,
the $99,302 excess of the $100,072 fair value of the 769,785 shares over the $770 liability reduction will be recognized as a
loss on Conversion of Debt in the three months ended March 31, 2019.
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
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 the Eagle Note in tranches. The first tranche of $250,000 was received by the Company
on February 13, 2019.
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.
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 will issue 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 is 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 is less than $0.075. In such case, Emet will receive an additional number of shares
of common stock equal to the number of shares being converted divided by the applicable market price.
THE
GREATER CANNABIS COMPANY, INC.
CONSOLIDATED
BALANCE SHEETS
September
30, 2019 (unaudited and December 31, 2018
|
|
September
30,
2019
|
|
|
December
31,
2018
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
CURRENT ASSETS
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
45,848
|
|
|
$
|
59,891
|
|
Total current assets
|
|
|
45,848
|
|
|
|
59,891
|
|
|
|
|
|
|
|
|
|
|
OTHER ASSETS
|
|
|
|
|
|
|
|
|
Pharmedica Exclusive
License Agreement (less accumulated amortization of $25,251 and $ 10,251)
|
|
|
74,749
|
|
|
|
89,749
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
120,597
|
|
|
$
|
149,640
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’
DEFICIENCY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
9,700
|
|
|
$
|
17,890
|
|
Accrued interest
|
|
|
11,852
|
|
|
|
5,312
|
|
Accrued salaries
|
|
|
57,000
|
|
|
|
85,000
|
|
Loans payable to related parties
|
|
|
260,000
|
|
|
|
260,000
|
|
Notes payable to third parties (less
debt discounts of $ 99,862 and $ 550, respectively)
|
|
|
194,430
|
|
|
|
64,914
|
|
Derivative liability
|
|
|
227,332
|
|
|
|
280,310
|
|
Total current
liabilities and total liabilities
|
|
|
760,314
|
|
|
|
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 9,000,000 and 0 shares, respectively
|
|
|
9,000
|
|
|
|
-
|
|
Common stock; 500,000,000 shares authorized, $.001 par value,
as of September 30, 2019 and December 31, 2018, there are 35,447,483 and 31,880,969 shares outstanding, respectively
|
|
|
35,447
|
|
|
|
31,881
|
|
Additional paid-in capital
|
|
|
589,625
|
|
|
|
233,991
|
|
Accumulated
deficit
|
|
|
(1,283,201
|
)
|
|
|
(839,070
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders’
(deficiency)
|
|
|
(639,717
|
)
|
|
|
(563,786
|
)
|
Total liabilities
and stockholders’ (deficiency)
|
|
$
|
120,597
|
|
|
$
|
149,640
|
|
The
accompanying notes are an integral part of these consolidated financial statements.
THE
GREATER CANNABIS COMPANY, INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS
Nine
Months Ended September 30, 2019 and 2018 (Unaudited)
|
|
September
30,
2019
|
|
|
September
30,
2018
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
Revenue:
|
|
|
|
|
|
|
|
|
Gross profit on product
transactions (Note I)
|
|
$
|
-
|
|
|
$
|
86,898
|
|
Consulting fees
( related party $ 0 and $ 8,477, respectively)
|
|
|
2,620
|
|
|
|
8,477
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
2,620
|
|
|
|
95,375
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
Officers compensation
|
|
|
153,000
|
|
|
|
134,593
|
|
Consulting fees paid to former Chief
Executive Officer
|
|
|
-
|
|
|
|
50,000
|
|
Amortization of Pharmedica Exclusive
License Agreement cost
|
|
|
15,000
|
|
|
|
5,251
|
|
Other operating
expenses (including stock-based professional fees of $ 88,130 and $ 0, respectively)
|
|
|
165,213
|
|
|
|
20,282
|
|
Total operating
expenses
|
|
|
333,213
|
|
|
|
210,126
|
|
|
|
|
|
|
|
|
|
|
Income (loss)
from operations
|
|
|
(330,593
|
)
|
|
|
(114,751
|
)
|
|
|
|
|
|
|
|
|
|
Other income (expenses):
|
|
|
|
|
|
|
|
|
Income (expense) from derivative liability
|
|
|
194,551
|
|
|
|
(212,165
|
)
|
Loss on conversion of notes payable
|
|
|
(230,839
|
)
|
|
|
(510,149
|
)
|
Interest income
|
|
|
-
|
|
|
|
5,903
|
|
Interest expense
|
|
|
(14,592
|
)
|
|
|
(14,515
|
)
|
Amortization
of debt discounts
|
|
|
(171,085
|
)
|
|
|
(17,866
|
)
|
Total other income
(expenses)
|
|
|
(221,965
|
)
|
|
|
(748,792
|
)
|
|
|
|
|
|
|
|
|
|
Income (loss) before provision for income
taxes
|
|
|
(552,558
|
)
|
|
|
(863,543
|
)
|
Provision for
income taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(552,558
|
)
|
|
$
|
(863,543
|
)
|
|
|
|
|
|
|
|
|
|
Basic and diluted income (loss) per
common share
|
|
$
|
(.02
|
)
|
|
$
|
(.03
|
)
|
Weighted average common shares outstanding-basic and diluted
|
|
|
34,439,921
|
|
|
|
29,439,590
|
|
The
accompanying notes are an integral part of these consolidated financial statements.
THE
GREATER CANNABIS COMPANY, INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS
Three
Months Ended September 30, 2019 and 2018 (Unaudited)
|
|
September
30,
2019
|
|
|
September
30,
2018
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
Revenue:
|
|
|
|
|
|
|
|
|
Gross profit on product transactions
(Note I)
|
|
$
|
-
|
|
|
$
|
-
|
|
Consulting
fees from related party
|
|
|
2,620
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
2,260
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
Officers compensation
|
|
|
51,000
|
|
|
|
134,593
|
|
Consulting fees paid to former Chief
Executive Officer
|
|
|
-
|
|
|
|
50,000
|
|
Amortization of Pharmedica Exclusive
License Agreement cost
|
|
|
5,000
|
|
|
|
5,251
|
|
Other operating
expenses (including stock-based professional fees of $ 12,250 and $ 0, respectively)
|
|
|
25,059
|
|
|
|
10,783
|
|
Total operating
expenses
|
|
|
81,059
|
|
|
|
200,627
|
|
|
|
|
|
|
|
|
|
|
Income (loss)
from operations
|
|
|
(78,439
|
)
|
|
|
(200,627
|
)
|
|
|
|
|
|
|
|
|
|
Other income (expenses):
|
|
|
|
|
|
|
|
|
Income (expense) from derivative liability
|
|
|
24,035
|
|
|
|
(212,165
|
)
|
Loss on conversion of notes payable
|
|
|
-
|
|
|
|
(510,149
|
)
|
Interest expense
|
|
|
(3,972
|
)
|
|
|
(14,515
|
)
|
Interest income
|
|
|
-
|
|
|
|
-
|
|
Amortization
of debt discounts
|
|
|
(68,054
|
)
|
|
|
(17,866
|
)
|
Total other income
(expenses)
|
|
|
(47,991
|
)
|
|
|
(754,695
|
)
|
|
|
|
|
|
|
|
|
|
Income (loss) before provision for income
taxes
|
|
|
(126,430
|
)
|
|
|
(955,322
|
)
|
Provision for
income taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(126,430
|
)
|
|
$
|
(955,322
|
)
|
|
|
|
|
|
|
|
|
|
Basic and diluted income (loss) per
common share
|
|
$
|
(.00
|
)
|
|
$
|
(.03
|
)
|
Weighted average common shares outstanding-basic and diluted
|
|
|
35,359,983
|
|
|
|
29,556,832
|
|
The
accompanying notes are an integral part of these consolidated financial statements.
THE
GREATER CANNABIS COMPANY, INC.
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ DEFICIENCY
For
The Nine Months Ended September 30, 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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances
at December 31, 2018
|
|
|
9,411,998
|
|
|
$
|
9,412
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
31,880,969
|
|
|
$
|
31,881
|
|
|
$
|
233,991
|
|
|
$
|
(839,070
|
)
|
|
$
|
(563,786
|
)
|
Unaudited:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
)
|
Nine
Months Ended September 30, 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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(955,322
|
)
|
|
|
(955,322
|
)
|
Balances at September
30, 2018
|
|
|
9,411,998
|
|
|
$
|
9,412
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
30,846,492
|
|
|
$
|
30,846
|
|
|
$
|
121,234
|
|
|
$
|
(863,543
|
)
|
|
$
|
702,051
|
|
The
accompanying notes are an integral part of these financial statements.
THE
GREATER CANNABIS COMPANY, INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
Nine
Months Ended September 30, 2019 and 2018 (Unaudited)
|
|
September
30,
2019
|
|
|
September
30,
2018
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(552,558
|
)
|
|
$
|
(863,543
|
)
|
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
|
|
|
230,839
|
|
|
|
510,149
|
|
Issuance of stock-based professional
fees
|
|
|
88,130
|
|
|
|
-
|
|
(Income) expense from derivative liability
|
|
|
(194,551
|
)
|
|
|
212,165
|
|
Amortization of Pharmedica Exclusive
License Agreement cost
|
|
|
15,000
|
|
|
|
5,251
|
|
Interest expense for default added to
note payable balance
|
|
|
|
|
|
|
11,000
|
|
Amortization of debt discounts
|
|
|
171,085
|
|
|
|
17,866
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
and accrued expenses
|
|
|
(8,190
|
)
|
|
|
31,338
|
|
Accrued interest
|
|
|
14,202
|
|
|
|
3,515
|
|
Accrued
salaries
|
|
|
(28,000
|
)
|
|
|
-
|
|
Net cash used
in operating activities
|
|
|
(264,043
|
)
|
|
|
(72,259
|
)
|
|
|
|
|
|
|
|
|
|
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
notes payable to third parties
|
|
|
250,000
|
|
|
|
160,000
|
|
|
|
|
|
|
|
|
|
|
Net cash provided
by financing activities
|
|
|
250,000
|
|
|
|
160,000
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE (DECREASE) IN CASH
|
|
|
(14,043
|
)
|
|
|
87,741
|
|
|
|
|
|
|
|
|
|
|
CASH BALANCE, BEGINNING OF PERIOD
|
|
|
59,891
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
CASH BALANCE, END OF PERIOD
|
|
$
|
45,848
|
|
|
$
|
87,741
|
|
|
|
|
|
|
|
|
|
|
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
|
|
$
|
9,000
|
|
|
$
|
-
|
|
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
|
|
$
|
-
|
|
|
$
|
28,224
|
|
Accrued interest
|
|
|
-
|
|
|
|
3,246
|
|
Notes payable to third parties
|
|
|
-
|
|
|
|
83,323
|
|
Derivative liability
|
|
|
-
|
|
|
|
270,502
|
|
Total
|
|
$
|
-
|
|
|
$
|
385,295
|
|
Conversion of note payable and accrued
interest to 1,465,523 shares of common stock on September 19, 2018:
|
|
|
|
|
|
|
|
|
Accrued interest
|
|
$
|
-
|
|
|
$
|
4,638
|
|
Notes payable
to third parties
|
|
|
-
|
|
|
|
32,000
|
|
Total
|
|
$
|
-
|
|
|
$
|
36,638
|
|
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 Nine Months Ended September 30, 2019 and 2018
(Unaudited)
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 Nine Months Ended September 30, 2019 and 2018
(Unaudited)
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 September 30, 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 Nine Months Ended September 30, 2019 and 2018
(Unaudited)
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.
THE
GREATER CANNABIS COMPANY, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
For
The Nine Months Ended September 30, 2019 and 2018
(Unaudited)
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 Nine Months Ended September 30, 2019 and 2018
(Unaudited)
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 Nine Months Ended September 30, 2019 and 2018
(Unaudited)
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 presented.
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 effect
adjustment reduction of accumulated deficit. See Note F.
THE
GREATER CANNABIS COMPANY, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
For
The Nine Months Ended September 30, 2019 and 2018
(Unaudited)
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 September 30, 2019, the Company had cash of $ 45,848, total current
liabilities of $ 760,314 , and negative working capital of $ 714,466 . For the nine months ended September 30, 2019, we incurred
a net loss of $ 552,558 and used $ 264,043 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 November 2020.
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 Nine Months Ended September 30, 2019 and 2018
(Unaudited)
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:
|
|
September
30,
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 Nine Months Ended September 30, 2019 and 2018
(Unaudited)
NOTE
E - NOTES PAYABLE TO THIRD PARTIES
Notes
payable to third parties consist of:
|
|
September
30,
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)
|
|
$
|
2,799
|
|
|
$
|
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)
|
|
|
14,520
|
|
|
|
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)
|
|
|
6,600
|
|
|
|
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 Promissory
Note dated February 12, 2019 payable to Eagle Equities, LLC (“Eagle”), interest at 6%, due February 12, 2020-less
unamortized debt discount of $99,862 and $ 0, respectively (vi)
|
|
|
170,136
|
|
|
|
-
|
|
Total
|
|
$
|
194,430
|
|
|
$
|
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 Nine Months Ended September 30, 2019 and 2018
(Unaudited)
(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 the Eagle Note in tranches.
The first tranche of $ 250,000 was received by the Company on February 13, 2019.
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)
|
THE
GREATER CANNABIS COMPANY, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
For
The Nine Months Ended September 30, 2019 and 2018
(Unaudited)
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.
NOTE
F - DERIVATIVE LIABILITY
The
derivative liability consists of:
|
|
September
30,
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
|
|
$
|
3,869
|
|
|
$
|
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
|
|
|
20,070
|
|
|
|
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
|
|
|
9,123
|
|
|
|
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
|
|
|
194,270
|
|
|
|
-
|
|
Total derivative
liability
|
|
$
|
227,332
|
|
|
$
|
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
GREATER CANNABIS COMPANY, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
For
The Nine Months Ended September 30, 2019 and 2018
(Unaudited)
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%.
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 (see Note K- Subsequent Events), 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.
THE
GREATER CANNABIS COMPANY, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
For
The Nine Months Ended September 30, 2019 and 2018
(Unaudited)
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.
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.
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).
THE
GREATER CANNABIS COMPANY, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
For
The Nine Months Ended September 30, 2019 and 2018
(Unaudited)
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).
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 (see Note
K- Subsequent Events), this exchange agreement was reversed.
At
September 30, 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
September 30, 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.
THE
GREATER CANNABIS COMPANY, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
For
The Nine Months Ended September 30, 2019 and 2018
(Unaudited)
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.
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.
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 nine months ended September 30, 2019
and 2018, the Company expensed a total of $153,000 and $34,000, respectively, as officers compensation pursuant to these agreements.
NOTE
K – SUBSEQUENT EVENTS
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 6, 2019, the Company issued 1,748,363 shares of its common stock pursuant to the conversion by Emet of
$53,705 in principal and $2,680 in accrued interest and fees of its convertible note dated October 18, 2019.
On December 18, 2019, the Company issued
1,468,204 shares of its common stock pursuant to the conversion by Emet of $29,000 in principal and $4,035 in accrued interest
and fees under the Company’s convertible note dated October 18, 2019.
On December 19, 2019, the Company issued
637,273 shares of its common stock pursuant to the conversion by Eagle Equities, LLC (“Eagle”) of $10,000 in principal
and $515 in accrued interest and fees under the Company’s convertible note dated February 12, 2019.
On January 10, 2020, the Company issued
965,680 shares of its common stock pursuant to the conversion by Eagle of $15,000 in principal and $828 in accrued interest and
fees under the Company’s convertible note dated February 12, 2019.
On
January 15, 2020, the Company issued 1,998,246 shares of its common stock pursuant to the conversion by Emet of $30,000 in principal
and $2,971in accrued interest and fees of its convertible note dated October 18, 2019.
On
January 28, 2020, the Company received $150,000 pursuant to a securities purchase agreement with GW Holdings Group, LLC and the
issuance of a 6% Convertible Redeemable Promissory Note thereunder in the principal amount of $166,500 (the “GW Note”).
The GW Note bears interest at the rate of 6% (24% following an event of default), is due January 27, 2021, and is convertible
in shares of common stock at a conversion price equal to 55% of the lowest closing price of the common stock for the 15 preceding
trading days.
Also
on January 28, 2020, the Company received $150,000 from Eagle representing the second tranche of funding pursuant to the 6% Convertible
Redeemable Note issued to Eagle on February 12, 2019. See Note E (Notes Payable to Third Parties).
On January 30, 2020, the Company executed
a Right of First Refusal Agreement with an entity engaged in the business of cosmetics, health, and well-being (“KTV”).
The Agreement provides for the Company to pay KTV $25,000 on January 30, 2020 (which was paid January 30, 2020) and to make other
investments in opportunities to be pursued by KTV and/or payments to KTV to enable KTV to pursue and secure Cannabidiol (“CBD”)
opportunities. The Agreement provides the Company an exclusive right of first refusal to participate in all CBD opportunities
to be pursued by KTV for a term of five years.
On
January 31, 2020, the Company issued 1,166,575 shares of its common stock pursuant to the conversion by Eagle of $15,000 in principal
and $880 in accrued interest and fees under the Company’s convertible note dated February 12, 2019.
On
February 6, 2020, the Company issued 1,783,991 shares of its common stock pursuant to the conversion by Emet of $24,000 in principal
and $2,971 in accrued interest and fees under the Company’s convertible note dated October 18, 2019.