Greater Cannabis Company, Inc. revealed 10-Q form on Monday, May 20.
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).
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.
(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.
(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.
(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 is to mature 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.
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.
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 March 31, 2019 were (1) stock price of $0.107 per share, (2) conversion price ranging from $0.05 to $.065 per share, (3) terms ranging from 6 months to 318 days, (4) expected volatility of 117,60%, and (5) risk free interest rates ranging from 2.43% to 2.44%. 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%.
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.
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).
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.
In accordance with the terms of the Exchange Agreement, the Company issued 9,411,998 shares of its preferred stock, par value $0.001 (the ‘Shares’) to the Selling Shareholders and certain individuals named below (collectively, the ‘Shareholder Group’) in exchange for 100% of the issued and outstanding capital stock of Green C (the ‘Exchange Transaction’). As a result of the Exchange Transaction, the Selling Shareholders acquired 94.12% of the Company’s authorized shares of preferred stock, Green C became the Company’s wholly-owned subsidiary and the Company acquired 100% of the business and operations of Green C.
On December 20, 2018, the United States federal government passed The Agriculture Improvement Act of 2018, which amends the Controlled Substances Act of 1970 concerning cannabis for the first time. Specifically, it refers to a new definition of ‘hemp’ as being any C. Sativa plant that has Tetrahydrocannabinol (‘THC’) below 0.3% on a dry weight basis. The effect of this act is to legalize hemp or, in other words, strains of cannabis with low THC.
On February 12, 2019, we issued a convertible note to Eagle Equities, LLC the terms and conditions of which are incorporated by reference in this report as Exhibit 10.1 to our current report on Form 8-K dated February 15, 2019. The note is convertible into shares of our common stock at (depending on certain factors) a 35-45% discount to the market price at the time of conversion. We intend to file in fiscal 2019 a registration statement on Form S-1 to cover the resale of the shares into which the note is convertible. As a result of these transactions, shareholders of the Company may experience substantial dilution.
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