Trafalgar International, Inc 10-Q for FY2021 Q2
Trafalgar International, Inc. (TRFA)
About this 10-Q
Trafalgar International, Inc filed this 10-Q on August 18, 2021, covering the quarter ended June 30, 2021 (FY2021 Q2).
Headline figures
Quarter ended June 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $12.63K
- down 73.7% from $48.04K a year earlier
- Net loss
- $38.96K
- compared with net income of $1.1M a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
the quarterly period ended
For the transition period from ______________ to ______________
Commission
File Number:
THE GREATER CANNABIS COMPANY, INC.
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices, including Zip Code)
(
(Issuer’s telephone number, including area code)
N/A
(Former name or former address if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| None | N/A | N/A |
Indicate
by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data
File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Smaller
reporting company | |
| Emerging
growth company |
If
an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: shares of common stock as of August 16, 2021.
TABLE OF CONTENTS
| Page | ||
| PART I | FINANCIAL INFORMATION | |
| Item 1 | Financial Statements | F-1 |
| Item 2 | Management’s Discussion and Analysis of Financial Condition and Results of Operation | 4 |
| Item 3 | Quantitative and Qualitative Disclosures About Market Risk | 6 |
| Item 4 | Controls and Procedures | 6 |
| PART II | OTHER INFORMATION | |
| Item 1 | Legal Proceedings | 7 |
| Item 1A | Risk Factors | 7 |
| Item 2 | Unregistered Sales of equity Securities and Use of Proceeds | 7 |
| Item 3 | Defaults Upon Senior Securities | 7 |
| Item 4 | Mine Safety Disclosures | 7 |
| Item 5 | Other Information | 7 |
| Item 6 | Exhibits | 8 |
| Item 7 | Signatures | 9 |
| 2 |
Cautionary Note Regarding Forward Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “may,” “should,” “could,” “will,” “plan,” “future,” “continue, “and other expressions that are predictions of or indicate future events and trends and that do not relate to historical matters identify forward-looking statements. These forward-looking statements are based largely on our expectations or forecasts of future events, can be affected by inaccurate assumptions, and are subject to various business risks and known and unknown uncertainties, a number of which are beyond our control. Therefore, actual results could differ materially from the forward-looking statements contained in this document, and readers are cautioned not to place undue reliance on such forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. A wide variety of factors could cause or contribute to such differences and could adversely impact revenues, profitability, cash flows and capital needs. There can be no assurance that the forward-looking statements contained in this document will, in fact, transpire or prove to be accurate. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021 and out Registration Statement on Form S-1 (File No. 333-255872), that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by any forward-looking statements.
Important factors that may cause the actual results to differ from the forward-looking statements, projections or other expectations include, but are not limited to, the following:
| ● | the long-term effects of the COVID-19 pandemic on our business; | |
| ● | the limited operating history with our current business; | |
| ● | significant losses incurred to date and “going concern” explanatory paragraph in our auditor’s report; | |
| ● | the need for substantial additional financing to become commercially viable; | |
| ● | dependence upon the successful development, commercial launch and acceptance of our planned products and in the successful license of our technology; | |
| ● | effectiveness of the Company’s marketing strategy; | |
| ● | the scope of intellectual property protection we can achieve; | |
| ● | our dependence on third party manufacturing; | |
| ● | competition; and | |
| ● | our reliance on key members of management. |
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this report. Except as required by law, we do not undertake to update or revise any of the forward-looking statements to conform these statements to actual results, whether as a result of new information, future events or otherwise.
As used in this quarterly report, “GCAN,” the “Company,” “we,” “us,” or “our” refer to The Greater Cannabis Company, Inc. and its subsidiary, unless otherwise indicated.
| 3 |
THE GREATER CANNABIS COMPANY, INC.
JUNE 30, 2021
FORM 10-Q
INDEX
| F-1 |
THE GREATER CANNABIS COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
| June 30, 2021 | December 31, 2020 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash | $ | $ | ||||||
| Note receivable | ||||||||
| Prepaid officer compensation | - | |||||||
| Total current assets | ||||||||
| OTHER ASSETS | ||||||||
| Right of first refusal agreement cost (less accumulated amortization of $ | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIENCY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued interest | ||||||||
| Accrued officers’ compensation | ||||||||
| Loans payable to related parties | ||||||||
| Notes payable to third parties (less debt discounts of $ | ||||||||
| Derivative liability | - | |||||||
| Total current liabilities and total liabilities | ||||||||
| STOCKHOLDERS’ (DEFICIENCY) | ||||||||
| Preferred stock; shares authorized, $ par value: Series A Convertible Preferred-issued and outstanding and shares, respectively | ||||||||
| Common stock; shares authorized, $ par value, as of June 30, 2021 and December 31, 2020, there are and shares outstanding, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ (deficiency) | ( | ) | ( | ) | ||||
| Total liabilities and stockholders’ (deficiency) | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-2 |
THE GREATER CANNABIS COMPANY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Six Months Ended June 30, 2021 and 2020 (Unaudited)
| June 30, 2021 | June 30, 2020 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Revenue: | ||||||||
| Product sales | $ | $ | ||||||
| Total revenue | ||||||||
| Cost of product sales | ||||||||
| Gross profit (loss) | ( | ) | ( | ) | ||||
| Operating Expenses: | ||||||||
| Officers compensation | ||||||||
| Amortization of Right of First Refusal Agreement cost | ||||||||
| Other operating expenses | ||||||||
| Total operating expenses | ||||||||
| Income (loss) from operations | ( | ) | ( | ) | ||||
| Other income (expenses): | ||||||||
| Income (expense) from derivative liability | ||||||||
| Loss on conversions/issuances of notes payable | ( | ) | ( | ) | ||||
| Gain from Surrender Agreement with Emet Capital Partners, LLC | - | |||||||
| Interest expense | ( | ) | ( | ) | ||||
| Amortization of debt discounts | ( | ) | ( | ) | ||||
| Total other income (expenses) | ( | ) | ||||||
| Loss before provision for income taxes | ( | ) | ( | ) | ||||
| Provision for income taxes | - | |||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Basic and diluted income (loss) per common share | $ | ( | ) | $ | ( | ) | ||
| Weighted average common shares outstanding-basic and diluted | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-3 |
THE GREATER CANNABIS COMPANY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended June 30, 2021 and 2020 (Unaudited)
| June 30, 2021 | June 30, 2020 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Revenue: | ||||||||
| Product sales | $ | $ | ||||||
| Total revenue | ||||||||
| Cost of product sales | ||||||||
| Gross profit (loss) | ( | ) | ( | ) | ||||
| Operating Expenses: | ||||||||
| Officers compensation | ||||||||
| Amortization of Right of First Refusal Agreement cost | ||||||||
| Other operating expenses | ||||||||
| Total operating expenses | ||||||||
| Income (loss) from operations | ( | ) | ( | ) | ||||
| Other income (expenses): | ||||||||
| Income (expense) from derivative liability | ||||||||
| Loss on conversions/issuances of notes payable | ( | ) | ( | ) | ||||
| Gain from Surrender Agreement with Emet Capital Partners, LLC | - | |||||||
| Interest expense | ( | ) | ( | ) | ||||
| Amortization of debt discounts | ( | ) | ( | ) | ||||
| Total other income (expenses) | ||||||||
| Income (loss) before provision for income taxes | ( | ) | ||||||
| Provision for income taxes | - | |||||||
| Net income (loss) | $ | ( | ) | $ | ||||
| Basic and diluted income (loss) per common share | $ | ( | ) | $ | ||||
| Weighted average common shares outstanding-basic and diluted | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-4 |
THE GREATER CANNABIS COMPANY, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIENCY
For the Six and Three Months Ended June 30, 2021 and 2020
Unaudited
Series A Preferred | Additional | |||||||||||||||||||||||||||
| stock | Common Stock | Paid in | Accumulated | |||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||
| For the six months ended June 30, 2020: | ||||||||||||||||||||||||||||
| Balances at December 31, 2019 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Conversions
of notes payable ($ | ||||||||||||||||||||||||||||
| Conversion of note payable ($22,500) and accrued interest ($814) into 13,795,118 shares of common stock (Fair Value of $ 45,524) for the three months ended March 31, 2021 | ||||||||||||||||||||||||||||
| Conversion of note payable ($22,500) and accrued interest ($814) into 13,795,118 shares of common stock (Fair Value of $ 45,524) for the three months ended March 31, 2021, shares | ||||||||||||||||||||||||||||
| Conversion of FirstFire note | ||||||||||||||||||||||||||||
| Valuation of warrants | ||||||||||||||||||||||||||||
| Net loss for the three months ended March 31, 2020 | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||
| Balances at March 31, 2020 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Net income for the three months ended June 30, 2020 | - | - | - | |||||||||||||||||||||||||
| Balances at June 30, 2020 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| For the six months ended June 30, 2021: | ||||||||||||||||||||||||||||
| Balances at December 31, 2020 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Conversion
of note payable ($ | ||||||||||||||||||||||||||||
| Net loss for the three months ended March 31, 2021 | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||
| Balances at March 31, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Balance, value | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Conversion of FirstFire note | ||||||||||||||||||||||||||||
| Valuation of warrants | ||||||||||||||||||||||||||||
| Net loss for the three months ended June 30, 2021 | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||
| Net income (loss) for the three months ended June 30, 2021 | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||
| Balances at June 30, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Balance, value | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
| F-5 |
THE GREATER CANNABIS COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2021 and 2020 (Unaudited)
| June 30, 2021 | June 30, 2020 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| OPERATING ACTIVITIES | ||||||||
| Net income (loss) | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net income (loss) to net cash provided (used) in operating activities: | ||||||||
| Loss on conversion of notes payable and accrued interest to common stock | | |||||||
| Gain from Surrender Agreement with Emet Capital Partners, LLC | - | ( | ) | |||||
| (Income) expense from derivative liability | ( | ) | ( | ) | ||||
| Amortization of Right of First Refusal Agreement cost | ||||||||
| Amortization of debt discounts | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid officer compensation | - | |||||||
| Advance to supplier | - | |||||||
| Note receivable | - | ( | ) | |||||
| Accounts payable | ( | ) | ( | ) | ||||
| Accrued interest | ||||||||
| Accrued salaries | ||||||||
| Advance from customer | - | ( | ) | |||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| INVESTING ACTIVITIES | ||||||||
| Purchase of Right of First Refusal Agreement | - | ( | ) | |||||
| Net cash used in investing activities | - | ( | ) | |||||
| FINANCING ACTIVITIES | ||||||||
| Amount paid in connection with Surrender Agreement with Emet Capital Partners, LLC | - | ( | ) | |||||
| Proceeds from notes payable to third parties | ||||||||
| Net cash provided by financing activities | ||||||||
| NET INCREASE IN CASH | ||||||||
| CASH BALANCE, BEGINNING OF PERIOD | ||||||||
| CASH BALANCE, END OF PERIOD | $ | $ | ||||||
| Supplemental Disclosures of Cash Flow Information: | ||||||||
| Interest paid | $ | $ | ||||||
| Income tax paid | $ | $ | ||||||
| Non-cash Investing and Financing Activities: | ||||||||
| Initial derivative liability charged to debt discounts | $ | $ | ||||||
| Issuances of warrants | $ | $ | ||||||
| Conversion of note payable ($ | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements
| F-6 |
THE GREATER CANNABIS COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(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
Green C was incorporated on December 21, 2017 under the laws of the Province of Ontario Canada with its principal place of business in North York, Ontario.
Green C was 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.
Principles of Consolidation
The consolidated financial statements include the accounts of The Greater Cannabis Company, Inc., and its wholly owned subsidiaries Green C Corporation and Biocanrx Inc.
| F-7 |
THE GREATER CANNABIS COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Interim Financial Statements
The interim financial statements as of June 30, 2021 are unaudited and have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. These statements reflect all normal and recurring adjustments that, in the opinion of management, are necessary for a fair presentation of the information contained herein. Operating results for the six and three months ended June 30, 2021 are not necessarily indicative of results that may be expected for the year ending December 31, 2021.
Certain information and finance disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to the Securities and Exchange Commission’s rules and regulations. These unaudited financial statements should be read in conjunction with our audited financial statements and notes for the year ended December 31, 2020 as included in our report on Form 10-K.
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 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 June 30, 2021, 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:
| F-8 |
THE GREATER CANNABIS COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(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 using level three inputs 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. (see Note-G)
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.
| F-9 |
THE GREATER CANNABIS COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Equity Instruments Issued to Non-Employees for Acquiring Goods or Services
The Company in the current period has updated for ASU 2018-07 as it was effective in 2019. The Company is evaluating the impact of the new ASU, however, it is not expected to have a material impact on the financial statements.
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.
| F-10 |
THE GREATER CANNABIS COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Revenue recognition:
The Company adopted Accounting Standards Codification Topic 606, “Revenue from Contracts with Customers” (“ASC 606”) on January 1, 2018. In accordance with ASC 606, revenue is recognized when promised goods or services are transferred to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services, in accordance with the following five-step process:
| ● | Identify the contract(s) with a customer | |
| ● | Identify the performance obligations | |
| ● | Determine the transaction price | |
| ● | Allocate the transaction price | |
| ● | Recognize revenue when the performance obligations are met |
For the periods presented prior to the adoption of ASC 606, revenues from long-term construction contracts were recognized in accordance with ASC Topic 605-35, “Revenue Recognition-Construction-Type and Production-Type Contracts.”
The Company recognizes construction contract revenue over time using the percentage-of-completion method, based primarily on contract cost incurred to date compared to total estimated contract cost. Cost of revenue includes an allocation of depreciation, amortization and general overhead cost. Changes to total estimated contract cost or losses, if any, are recognized in the period in which they are determined.
The Company generally provides limited warranties for work performed under its construction contracts with periods typically extending for a limited duration following substantial completion of the Company’s work on a project.
The Company classifies construction-related receivables and payables that may be settled in periods exceeding one year from the balance sheet date, if any, as current assets and liabilities consistent with the length of time of its project operating cycle. For example:
| ● | Contract assets represent costs and estimated earnings in excess of billings represent the excess of contract costs and profits (or contract revenue) over the amount of contract billings to date and are classified as a current asset. | |
| ● | Contract liabilities represent billings in excess of costs and estimated earnings represent the excess of contract billings to date over the amount of contract costs and profits (or contract revenue) recognized to date and are classified as a current liability. |
Contract liabilities result when either: 1) costs are incurred related to certain claims and unapproved change orders, or 2) the appropriate contract revenue amount has been recognized in accordance with the percentage-of-completion accounting method, but a portion of the revenue recorded cannot be billed currently due to the billing terms defined in the contract. Claims occur when there is a dispute regarding both a change in the scope of work and the price associated with that change. Unapproved change orders occur when there is a dispute regarding only the price associated with a change in scope of work. For both claims and unapproved change orders, the Company recognizes revenue, but not profit, when it is determined that recovery of incurred cost is probable and the amounts can be reliably estimated.
Advertising Costs
Advertising
costs are expensed as incurred. For the periods presented, we had
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 shares relating to the Series A Convertible Preferred Stock (see Note G), shares relating to convertible notes payable to third parties (Please see NOTE F - NOTES PAYABLE TO THIRD PARTIES for further information) and shares relating to outstanding warrants (Please see NOTE H - 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.
| F-11 |
THE GREATER CANNABIS COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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 became effective for annual periods beginning after December 15, 2018.
| F-12 |
THE GREATER CANNABIS COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(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 June 30, 2021, the Company had cash of $
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 August 2022.
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 – NOTE RECEIVABLE
On
June 10, 2020, in anticipation of developing a CBD business with Koltuv Ventures, LLC (the “Borrower”) (see Note D), the
Company agreed to lend the Borrower USD $
NOTE D – RIGHT OF FIRST REFUSAL AGREEMENT
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 provided for the Company to pay KTV $
| F-13 |
THE GREATER CANNABIS COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE E - LOANS PAYABLE TO RELATED PARTIES
Loans payable to related parties consist of:
SCHEDULE OF LOANS PAYABLE TO RELATED PARTIES
| June 30, 2021 | December 31, 2020 | |||||||
| Loans from Elisha Kalfa and Yonah Kalfa, holders of a total of shares of Series A Convertible Preferred stock | $ | $ | ||||||
| Loan from Fernando Bisker and Sigalush, LLC, holders of a total of shares of Series A Convertible Preferred stock | ||||||||
| Total | $ | $ | ||||||
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 $
| F-14 |
THE GREATER CANNABIS COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE F - NOTES PAYABLE TO THIRD PARTIES
Notes payable to third parties consist of:
SCHEDULE OF NOTES PAYABLE TO THIRD PARTIES
June 30, 2021 | December 31, 2020 | |||||||
| Promissory Note dated March 28, 2017 payable to John T. Root, Jr., interest at | $ | $ | ||||||
| Convertible Promissory Note dated February 12, 2019 payable to Eagle Equities, LLC (“Eagle”), interest at | ||||||||
| Convertible Promissory Note dated March 15, 2021 payable to FirstFire Global Opportunities Fund, LLC (“FF”), interest at | ||||||||
| Total | $ | $ | ||||||
| (i) | ||
| (ii) |
| PREPAY DATE | PREPAY AMOUNT | |
| ≤ 30 days | ||
| 31- 60 days | ||
| 61-90 days | ||
| 91-120 days | ||
| 121-150 days | ||
| 151-180 days |
| F-15 |
THE GREATER CANNABIS COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE F - NOTES PAYABLE TO THIRD PARTIES (continued)
Any
amount of principal or interest on the FF Note, which is not paid when due shall bear interest at the rate of twenty-four (
| F-16 |
THE GREATER CANNABIS COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE G - DERIVATIVE LIABILITY
The derivative liability consists of:
SCHEDULE OF DERIVATIVE LIABILITY
June 30, 2021 | December 31, 2020 | |||||||
Convertible Promissory Note dated February 12, 2019 payable to Eagle Equities, LLC. Please see NOTE F – NOTES PAYABLE TO THIRD PARTIES for further information (i): Due February 12, 2020 | $ | $ | ||||||
Convertible Promissory Note dated March 15, 2021 and June 30, 2021 payable to FirstFire Global Opportunities Fund, LLC, See Note F (ii) Due March 11, 2022 | - | - | ||||||
| Total derivative liability | $ | $ | ||||||
| F-17 |
THE GREATER CANNABIS COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE G - DERIVATIVE LIABILITY (continued)
The Convertible Promissory Notes (the “Notes”) 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 is indeterminate. As of June 30, 2021, the note no longer carries variable conversion features and as such, the derivative was reduced to zero.
The
fair value of the derivative liability is 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 December 31, 2020 were (1) stock
price of $ per share, (2) conversion price of $
NOTE H - CAPITAL STOCK AND WARRANTS
Preferred Stock
On
July 31, 2018, The Greater Cannabis Company, Inc. (the “Company”) acquired
On
February 14, 2019, the Company issued 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.
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
$
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 shares
of its common stock. shares were issued to Sylios Corp (representing
| F-18 |
THE GREATER CANNABIS COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE H - CAPITAL STOCK AND WARRANTS (continued)
During
the three months ended March 31, 2020, the Company issued a total of shares of common stock pursuant to conversions of an
aggregate of $
During
the three months ended June 30, 2020, the Company issued a total of shares of common stock pursuant to conversions of an aggregate
of $
During
the three months ended September 30, 2020, the Company issued a total of shares of common stock pursuant to conversions of
an aggregate of $
During
the three months ended December 31, 2020, the Company issued a total of shares of common stock pursuant to conversions of
an aggregate of $
During the three months ended June 30, 2021, the Company recorded the
value of the warrants at $
| F-19 |
THE GREATER CANNABIS COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE H - CAPITAL STOCK AND WARRANTS (continued)
Warrants
On March 11, 2021, in connection with the issuance of a Convertible Promissory Note to FirstFire Global Opportunities Fund, LLC (“FF”) (see Note F), we issued three warrants (Warrant A, Warrant B and Warrant C) to purchase shares of our common stock, as follows:
Warrant
A permits FF to purchase
Warrant
B permits FF to purchase
Warrant
C permits FF to purchase
Each warrant has other customary terms found in like instruments, including, but not limited to, events of default.
In
any event of default, the exercise price for each warrant automatically becomes $
Copies of Warrant A, Warrant B and Warrant C are attached as Exhibits 10.4, 10.5 and 10.6 to our current report on Form 8-K dated March 16, 2021 and the above summary of the warrant terms are subject to full terms of the applicable warrants.
NOTE I - INCOME TAXES
The Company and its United States subsidiaries file consolidated Federal income tax returns. Green C Corporation, its Ontario Canada subsidiary, files Canada and Ontario income tax returns.
At June 30, 2021 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. If there are 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 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 provided for Green C payments to Pharmedica of a $
The
Company generated only minimal revenues from this asset through December 31, 2019 and did not pay the Year 1 Minimum Annual Royalty of
$
On September 2, 2020, Green C notified Pharmedica of Green C’s termination of the Exclusive License Agreement and Green C’s intention to wind up Green C.
On
September 17, 2020, Pharmedica notified Green C of Pharmedica’s acceptance of Green C’s proposal to terminate the license
agreement and Pharmedica’s intention not to burden Green C further. Accordingly, we recorded “Forgiveness of Royalty Payable”
other income of $
| F-20 |
THE GREATER CANNABIS COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE J - COMMITMENTS AND CONTINGENCIES (continued)
Sub-License Agreement with Symtomax Unipessoal Lda
On July 15, 2019, the Company executed a Sub-License Agreement with Symtomax Unipessoal Lda (“Symtomax”).
The
agreement provides for the Company’s grant to Symtomax of a non-exclusive right and sub-license to use certain Company technology
and intellectual property to develop and commercialize products for sale in Europe, the Middle East, and Africa. The agreement provides
for Symtomax payments of royalties to the Company (payable monthly) ranging from
On
May 27, 2020, the Company executed an amended and restated sub-license agreement with Symtomax (the “Amended License Agreement”).
The term of the Amended License Agreement ends the earlier of (i) August 31, 2021 and (ii) the date that Symtomax is no longer commercializing
any of the products. The term is extended for an additional year on each anniversary of the agreement for any country where the royalty
payment in respect of such country was equal to or greater than $
To date, Symtomax has not made any sales requiring the payment of royalties to the Company.
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 $
Registration Rights Agreement
On March 11, 2021, we entered into a registration rights agreement pursuant to which we agreed to prepare and file with the SEC a registration statement or registration statements (as is necessary) covering the resale- of all of the shares of common stock into which the FF Note is convertible and the shares to be received upon the exercise of the warrants. The registration statement also covers such indeterminate number of additional shares of securities as may become issuable upon stock splits, stock dividends or similar transactions. We agreed to use our best efforts to have the registration statement filed with the SEC within thirty (30) days following the closing date. The registration statement on Form S-1 was filed with the SEC on May 7, 2021 but has not yet been declared effective by the SEC.
A copy of the registration rights agreement is attached as Exhibit 10.2 to our current report on Form 8-K dated March 16, 2021 and the above summary of the registration rights agreement terms is subject to full terms of the registration rights agreement.
| F-21 |
THE GREATER CANNABIS COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE K- SUBSEQUENT EVENTS
On July 21, 2021, GCAN entered into a License Agreement and a Research Agreement, with Shaare Zedek Medical Center in Jerusalem, Israel, pursuant to which GCAN (a) licensed the rights to a Cannabidiol (CBD) formulation developed at Shaare Zedek as a therapeutic for treatment of autism, attention deficit syndrome (ASD) and other neuropsychiatric disorders in children and adolescents; and (b) agreed to sponsor further clinical research at Shaare Zedek with respect to commercialization of the licensed CBD formulation.
On
July 15, 2021, FF converted $
| F-22 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Company Overview
Our current business focus is on commercializing our own and licensed technologies worldwide for transmucosal and transdermal delivery of legal medical or recreational cannabis (other than in the field of oral care) and cannabinoids (“CBD”) (collectively, the “Technology”). While part of the cannabis family, CBD, which contains less than 0.3% tetrahydrocannabinol (“THC”), the psychoactive compound that produces the “high” in marijuana, is distinguished from cannabis by its use, physical appearance and lower THC concentration (cannabis generally has a THC level of 10% or more). The Company’s initial product is an oral transmucosal patch platform which provides for loaded actives to be absorbed by the buccal mucosa into the body.
On December 5, 2019, the Company received its first purchase order for 125,000 oral patches employing the Technology, which was filled in the second quarter of 2020. The Company has subsequently received and is negotiating additional orders for the oral patches.
The Company intends to continue to commercialize the Technology by sublicensing or partnering with companies in the legal cannabis and CBD industries to bring the product to market. Potential partners include licensed producers, distributors, processors, consumer product and pharmaceutical companies. The Company intends to focus on the North American market in legal medical and recreational cannabis and CBD segments.
The Company is pursuing additional business opportunities in the CBD space, including in cosmetic, beauty, and health and wellness products. The Company is also seeking to license cannabinoid therapeutic technologies from medical and academic institutions with the intention of advancing those technologies through clinical studies, product development, and commercialization.
On July 21, 2021, GCAN entered into a License Agreement and a Research Agreement, with Shaare Zedek Medical Center in Jerusalem, Israel, pursuant to which GCAN (a) licensed the rights to a CBD formulation developed at Shaare Zedek as a therapeutic for treatment of autism related spectrum disorders (ASD), attention deficit syndrome (ASD), Alzheimer’s disease (AD), Parkinson’s disease (PD) and other neuropsychiatric disorders in children and adolescents; and (b) agreed to sponsor further clinical research at Shaare Zedek with respect to commercialization of the licensed CBD formulation.
Effects of the COVID-19 Pandemic on Our Business
Since March 2020 there has been and there continues to be a significant and growing volatility and uncertainty in the global economy due to the worldwide Covid-19 pandemic affecting all business sectors and industries. ,The fulfillment of our first order of patches was delayed from the first quarter to the second quarter of 2020 due to the COVID-19 shutdowns in the United States. Moreover, our customers and suppliers could be further adversely affected as a result of additional or future quarantines, facility closures and logistics restrictions imposed or which otherwise occur in connection with the pandemic. More broadly, the high degree unemployment resulting from the pandemic could potentially lead to an extended economic downturn, which would likely decrease spending, adversely affect demand for our products and harm our business, results of operations and financial condition. At this time, we cannot accurately predict the long-term effects the COVID-19 pandemic will have on our business.
| 4 |
Results of Operations
Six months ended June 30, 2021, as compared to six months ended June 30, 2020
For the six months ended June 30, 2021, the Company generated $12,630 sales, as compared to $48,044 in the 2020 period.
For the six months ended June 30, 2021, our cost of sales was $12,655, as compared to $48,090 in the same period in 2020.
Our operating expenses in the six months ended June 30, 2021 amounted to $148,681, as compared to $169,954 in the 2020 period.
Our net loss for the six months ended June 30, 2021, was $153,617, as compared to a net loss of $109,120 in the same period of 2020.
Three months ended June 30, 2021, as compared to three months ended June 30, 2020
For the three months ended June 30, 2021, the Company generated $12,630 in sales, as compared to $48,044 in the 2020 quarter.
For the three months ended June 30, 2021, our cost of sales was $12,655, as compared to $0 in the same quarter in 2020.
Our operating expenses in the three months ended June 30, 2021 amounted to $12,655, as compared to $48,090 for the 2020 quarter.
Our net loss for the three months ended June 30, 2021, was $38,964, as compared to a net loss of $1,102,449 during the same quarter in 2020.
The amounts presented in the financial statements do not provide for the effect of inflation on our operations or our financial position. Amounts shown for costs and expenses reflect historical cost and do not necessarily represent replacement cost. The net operating losses shown would be greater than reported if the effects of inflation were reflected either by charging operations with amounts that represent replacement costs or by using other inflation adjustments.
Liquidity and Capital Resources
We had $528,930 cash at June 30, 2021, compared to $112,953 at December 31, 2020.
At June 30, 2021, we had $545,000 in principal amount of outstanding notes to third parties compared to $22,875 at December 31, 2020.
The proceeds from loans and convertible debentures as well as cash on hand is being used to fund the operations of our current operations.
On March 15, 2021, the Company entered into a securities purchase agreement (the “Securities Purchase Agreement”) with FirstFire Global Opportunities Fund, LLC (“FFG”) pursuant to which it issued to FFG an initial 6% convertible note to FFG in the principal amount of $272,500, of which $22,500 constituted an original issue discount. On June 28, 2021, the Company issued a second 6% convertible note to FFG in the principal amount of $272,500, of which $22,500 constituted an original issue discount (the first and second promissory notes being collectively, the “FFG Notes”).
The FFG Notes bear interest at the rate of six percent (6%) per annum, which accrues from the date of funding of and will mature on March 11, 2021. The FFG Notes may be pre-paid in whole or in part by paying FFG 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 FFG Notes, 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”).
FFG has the right beginning on The earlier of (i) the date a registration statement covering the shares issuable upon conversion of the FF Note is declared effective by the Securities and Exchange Commission (the “SEC”) or (ii) (one hundred eighty (180) days following the issuance of the first FFG Note, to convert all or any part of the outstanding and unpaid principal amount of the FFG Notes and accrued but unpaid interest thereon into shares of our common stock at a conversion price equal to the lower of $.01 or 70% of the 5-day average prior to the date the registration statement is qualified, $0.0052 per share (the “Conversion Price”). The Conversion Price of the FFG Notes is subject to adjustment for stock splits, stock dividends, recapitalizations or other customary events. In the case of an Event of Default (as defined in the FFG Notes), the FFG Notes shall become immediately due and payable in an amount (the “Default Amount”) equal to the principal amount then outstanding plus accrued interest (including any Default Interest) through the date of full repayment, multiplied by one hundred twenty-five percent (125%). and interest shall accrue at the rate of Default Interest. Certain events of default will result in further penalties.
Pursuant to the Securities Purchase Agreement, on March 15, 2021, the Company also issued three warrants to FFG (the “Warrants”) to purchase 25,000,000, 15,000,000 and 10,000,000 shares of our common stock, respectively. The Warrants are exercisable for a period of eighteen (18) months from issuance, at exercise prices of $0.025, $0.05 and $0.075, respectively. The exercise prices are subject to adjustment for stock splits, stock dividends, recapitalizations or other customary events.
On March 15, 2021, the Company also entered into a registration rights agreement (the “Registration Rights Agreement”) with FFG, pursuant to which it agreed to prepare and file with the SEC registration statement or registration statements (as is necessary) covering the resale of all of the shares of common stock into which the FFG Notes are convertible and the shares issuable upon exercise of the Warrants. The initial registration statement was declared effective by the SEC on June 14, 2021. On June 29, 2021 and July 15, 2021, FFG converted $25,858 and $52,080 in principal and interest under the FFG Notes into 5,000,000 and 10,000,000 shares of our common stock, respectively.
The following table provides detailed information about our net cash flows for the three months ended June 30, 2021 and 2020.
June 30, 2021 | June 30, 2020 | |||||||
| Net cash used in operating activities | $ | (84,023 | ) | $ | (210,812 | ) | ||
| Net cash used in investing activities | - | (25,000 | ) | |||||
| Net cash provided by financing activities | 500,000 | 439,668 | ||||||
| Net increase in cash | $ | 415,977 | 203,856 | |||||
Critical Accounting Policies and Estimates
The SEC issued Financial Reporting Release No. 60, “Cautionary Advice Regarding Disclosure About Critical Accounting Policies” suggesting that companies provide additional disclosure and commentary on their most critical accounting policies. In Financial Reporting Release No. 60, the SEC has defined the most critical accounting policies as the ones that are most important to the portrayal of a company’s financial condition and operating results and require management to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, we have identified the following significant policies as critical to the understanding of our financial statements. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make a variety of estimates and assumptions that affect (i) the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and (ii) the reported amounts of revenues and expenses during the reporting periods covered by the financial statements. Our management expects to make judgments and estimates about the effect of matters that are inherently uncertain. As the number of variables and assumptions affecting the future resolution of the uncertainties increase, these judgments become even more subjective and complex. Although we believe that our estimates and assumptions are reasonable, actual results may differ significantly from these estimates. Changes in estimates and assumptions based upon actual results may have a material impact on our results.
| 5 |
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company, we are not required to provide this information.
ITEM 4. CONTROLS AND PROCEDURES
The Company has adopted and maintains disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in the reports filed under the Exchange Act, such as this Form 10-Q, is collected, recorded, processed, summarized and reported within the time periods specified in the rules of the Securities and Exchange Commission. The Company’s disclosure controls and procedures are also designed to ensure that such information is accumulated and communicated to management to allow timely decisions regarding required disclosure. As required under Exchange Act Rule 13a-15, the Company’s management, including the Principal Executive Officer and Principal Financial Officer, has conducted an evaluation of the effectiveness of disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, the Company’s President concluded that the Company’s disclosure controls and procedures are not effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s President, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Controls
During the quarter ended June 30, 2021, there was no change in internal control over financial reporting that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.
| 6 |
PART II- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 1A. RISK FACTORS
See the risks in the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021 and our Registration Statement on Form S-1 (File No. 333-255872).
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
| 7 |
ITEM 6. EXHIBITS
The following exhibits are filed as part of this report:
| 8 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| THE GREATER CANNABIS COMPANY, INC. | |
| August 16, 2021 | /s/ Aitan Zacharin |
| Chief Executive Officer and Chief Financial Officer | |
| (Principal executive, financial and accounting officer). |
| 9 |
Exhibit 31.1
CERTIFICATIONS
I, Aitan Zacharin, Chief Executive Officer and Chief Financial Officer of The Greater Cannabis Company, Inc., certify that:
| 1. | I have reviewed this Form 10-Q for the quarter ended June 30, 2021 of The Greater Cannabis Company, Inc.; | |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
| 4. | I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| THE GREATER CANNABIS COMPANY, INC. | |
| August 16, 2021 | /s/ Aitan Zacharin |
| Chief Executive Officer Chief Financial Officer |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of The Greater Cannabis Company, Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Aitan Zacharin, Chief Executive Officer and Chief Financial Officer of The Greater Cannabis Company, Inc., certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
| THE GREATER CANNABIS COMPANY, INC. | |
| August 16, 2021 | /s/ Aitan Zacharin |
| Chief Executive Officer Chief Financial Officer |