Company Quick10K Filing
Grey Cloak Tech
Price0.03 EPS-1
Shares3 P/E-0
MCap0 P/FCF-0
Net Debt0 EBIT-4
TEV0 TEV/EBIT-0
TTM 2018-09-30, in MM, except price, ratios
10-Q 2019-09-30 Filed 2020-06-01
10-Q 2019-06-30 Filed 2020-05-29
10-Q 2019-03-31 Filed 2020-05-28
10-K 2018-12-31 Filed 2020-04-01
10-Q 2018-09-30 Filed 2019-04-25
10-Q 2018-06-30 Filed 2018-09-11
10-Q 2018-03-31 Filed 2018-07-12
10-K 2017-12-31 Filed 2018-06-08
10-Q 2017-09-30 Filed 2017-11-15
10-Q 2017-06-30 Filed 2017-08-18
10-Q 2017-03-31 Filed 2017-05-25
10-K 2016-12-31 Filed 2017-04-17
10-Q 2016-09-30 Filed 2016-11-22
10-Q 2016-06-30 Filed 2016-08-10
10-Q 2016-03-31 Filed 2016-05-16
10-K 2015-12-31 Filed 2016-03-30
10-Q 2015-09-30 Filed 2015-11-16
10-Q 2015-06-30 Filed 2015-07-22
8-K 2020-04-13
8-K 2020-04-03
8-K 2020-04-03
8-K 2019-10-03
8-K 2019-09-24
8-K 2019-07-31
8-K 2019-02-04
8-K 2018-10-25
8-K 2018-09-28
8-K 2018-09-17
8-K 2018-03-23
8-K 2017-12-29

GRCK 10Q Quarterly Report

Part I - Financial Information
Item 1Financial Statements
Note 1 - Organization and Description of Business
Note 2 - Summary of Significant Accounting Policies
Note 3 - Going Concern
Note 4 - Related Party
Note 5 - Convertible Debt - Related Party
Note 6 - Notes Payable
Note 7 - Convertible Debt
Note 8 - Stockholders' Equity
Note 9 - Acquisitions
Note 11 - Business Segment Information
Note 12 - Subsequent Events
Item 2Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3Quantitative and Qualitative Disclosures About Market Risk
Item 4Controls and Procedures
Part II - Other Information
Item 1Legal Proceedings
Item 1Arisk Factors
Item 2Unregistered Sales of Equity Securities and Use of Proceeds
Item 3Defaults Upon Senior Securities
Item 4Mine Safety Disclosures
Item 5Other Information
Item 6Exhibits
EX-31.1 grck-20190930_10qex31z1.htm
EX-31.2 grck-20190930_10qex31z2.htm
EX-32.1 grck-20190930_10qex32z1.htm
EX-32.2 grck-20190930_10qex32z2.htm

Grey Cloak Tech Earnings 2019-09-30

Balance SheetIncome StatementCash Flow
1.20.5-0.3-1.0-1.8-2.52014201520172019
Assets, Equity
0.3-0.2-0.7-1.1-1.6-2.12014201520172019
Rev, G Profit, Net Income
0.30.20.1-0.1-0.2-0.32014201520172019
Ops, Inv, Fin

10-Q 1 grck-20190930_10q.htm FORM 10-Q FOR PERIOD ENDING SEPT 30, 2019
 
 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019

  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to _______________.

Commission file number 000-55572

 

 

 

GREY CLOAK TECH INC.
(Exact name of registrant as specified in its charter)
     
Nevada   47-2594704
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)
     
10300 W. Charleston, Las Vegas, NV   89135
(Address of principal executive offices)   (Zip Code)
     
(702) 201-6450
(Registrant's telephone number, including area code)

 

Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the previous 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No 

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 and post such files). Yes No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer   Accelerated filer  

Non-accelerated filer

(Do not check if a smaller reporting company)

 

Smaller reporting company

Emerging growth company

 

 ☒

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

 

As of May 28, 2020, there were 250,859,759 shares of common stock, $0.001 par value, issued and outstanding.

 
 
 
 

GREY CLOAK TECH INC.

 

TABLE OF CONTENTS 

 

 

 
 

PART I – FINANCIAL INFORMATION

 

This Quarterly Report includes forward-looking statements within the meaning of the Securities Exchange Act of 1934 (the “Exchange Act”). These statements are based on management’s beliefs and assumptions, and on information currently available to management. Forward-looking statements include the information concerning our possible or assumed future results of operations set forth under the heading: “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements also include statements in which words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate,” “consider” or similar expressions are used.

 

Forward-looking statements are not guarantees of future performance. They involve risks, uncertainties and assumptions. Our future results and shareholder values may differ materially from those expressed in these forward-looking statements. Readers are cautioned not to put undue reliance on any forward-looking statements.

 

 -1-

ITEM 1Financial Statements

 

GREY CLOAK TECH INC

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

   SEPTEMBER 30,  DECEMBER 31,
   2019  2018
ASSETS      
       
CURRENT ASSETS          
   Cash  $105,769   $485 
   Accounts receivable   51,313    —   
   Inventory   2,968,489    500 
   Note receivable   —      79,295 
   Accrued interest receivable   —      4,762 
Total current assets   3,125,571    85,042 
           
   Fixed assets, net of accumulated depreciation of $6,282 and $1,582, respectively   17,495    726 
   Website, net of accumulated amortization of $2,800 and $2,800, respectively   —      —   
   Trademarks   —      —   
   Deposit   —      —   
   Goodwill   193,260    —   
Total other assets   210,755    726 
           
TOTAL ASSETS  $3,336,326   $85,768 
           
           
LIABILITIES AND STOCKHOLDERS' DEFICIT          
           
LIABILITIES          
 Accounts payable  $44,176   $57,340 
 Accounts payable - related party   —      15,000 
 Accrued liabilities   27,857    —   
 Notes payable   79,667    63,000 
 Notes payable - related party   1,050,866    —   
 Convertible debt, net of discount of $0.00 and $82,116, respectively   166,750    654,453 
 Convertible debt - related party, net of discount of $0.00 and $63,247, respectively   641,876    61,223 
 Accrued interest payable   44,563    83,899 
 Accrued interest payable - related party   462,359    1,750 
Derivative liabilities   1,496,246    2,713,319 
Total current and total liabilities   4,014,360    3,649,984 
           
           
STOCKHOLDERS' DEFICIT          
     Preferred stock, $0.001 par value, 75,000,000 shares authorized, none and 1,333,334 shares issued and outstanding, respectively   —      1,333 
     Common stock, $0.001 par value, 2,500,000,000 shares authorized, 121,060,085 and 6,455,354 shares issued and outstanding, respectively   121,610    6,455 
   Additional paid-in capital   9,542,603    7,440,895 
   Accumulated deficit   (10,342,247)   (11,012,899)
Total stockholders' deficit   (678,034)   (3,564,216)
           
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT  $3,336,326   $85,768 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

 -2-

GREY CLOAK TECH INC

CONSOLIDATED STATEMENT OF OPERATIONS

(Unaudited)

 

   FOR THE THREE MONTHS  FOR THE NINE MONTHS
   ENDED  ENDED
   SEPTEMBER 30  SEPTEMBER 30
   2019  2018  2019  2018
             
REVENUE  $273,302   $15,203   $571,615   $66,119 
                     
COST OF REVENUE   15,861    (839)   93,865    24,748 
                     
GROSS PROFIT   257,442    16,042    477,750    41,371 
                     
OPERATING EXPENSES                    
    General and administrative   265,755    112,053    828,380    504,931 
Total operating expenses   265,755    112,053    828,380    504,931 
                     
OTHER INCOME (EXPENSE)                    
    Interest expense, net of interest income   (24,412)   (538,591)   (56,951)   (1,150,614)
    Change in fair value on derivative   (610,835)   (122,438)   1,025,195    912,559 
    Loss on extinguishment of debt   —      —      53,038    (526,481)
    Gain on sale of asset   —      —      —      6,951 
                     
Total other income (expense)   (635,247)   (661,029)   1,021,282    (757,585)
                     
NET LOSS  $(643,560)  $(757,040)  $670,652   $(1,221,145)
                     
                     
Loss per share - basic and diluted  $(0.01)  $(0.40)  $0.01   $(0.73)
                     
Weighted average number of shares outstanding - basic and diluted   106,325,702    1,876,051    110,612,376    1,669,088 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

 -3-

GREY CLOAK TECH INC

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT

FOR THE MONTH ENDING SEPTEMBER 30, 2019 AND 2018

(Unaudited)

  

         Additional      
   Preferred Stock  Common Stock  Paid-In  Accumulated   
   Shares  Amount  Shares  Amount  Capital  Deficit  Total
Balance - December 31, 2017   1,333,334   $1,333    898,422   $900   $6,502,022   $(7,683,382)  $(1,179,127)
                                    
Issuance of common stock for debt conversion   —      —      5,556,932    5,555    920,453    —      926,008 
                                    
Debt Forgiveness   —      —      —      —      18,420    —      18,420 
                                    
Net loss for the period   —      —      —      —      —      (3,329,517)   (3,329,517)
                                    
Balance - December 31, 2018   1,333,334    1,333    6,455,354    6,455    7,440,895   $(11,012,899)  $(3,564,216)
                                    
Adjustment to issuance of common stock for debt conversion   —      —      —      —      149,700    —      149,700 
                                    
Cashless exercise of warrants   —      —      996,052    996    1,921    —      2,917 
                                    
Issuance of sharess acquisition of BergaMet   —      —      97,409,678    97,410    1,850,784         1,948,194 
                                    
Issuance of common stock for preferred stock conversion   (1,333,334)   (1,333)   15,592,986    15,593    (14,260)   —      —   
                                    
Issuance of common stock for debt conversion   —      —      806,015    806    106,912    —      107,718 
                                    
Issuance of common stock for consulting fees   —      —      350,000    350    6,650    —      7,000 
                                    
Debt Forgiveness   —      —      —      —      —      —      —   
                                    
Net loss for the period   —      —      —      —      —      670,652    670,652 
                                    
Balance - September 30, 2019   0    0    121,610,085    121,610    9,542,603   $(10,342,247)  $(678,034)

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

 -4-

 GREY CLOAK TECH INC

CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)

 

   FOR THE NINE MONTHS
   ENDED
   SEPTEMBER 30
   2019  2018
Cash Flows from Operating Activities:          
Net Loss  $670,652   $(1,221,145)
           
Adjustments to reconcile net loss to net cash          
used in operating activities:          
Depreciation and amortization   6,215    8,101 
Warrants issued for services   7,000    —   
Non-cash interest   —      743,247 
Non-cash compensation   108,260    —   
Change in fair value on derivative liability   (1,217,073)   (459,666)
Loss on extinguishment of debt   53,038    526,481 
Gain on sale of asset   —      (6,951)
Changes in operating assets and liabilities:          
Accounts receivable   (51,313)   16,000 
Inventory   (2,967,989)   14,261 
Prepaid expenses   —      —   
Accrued interest receivable   4,762    (2,373)
Deposits   —      (1,500)
Accounts payable   (13,164)   (22,328)
Accounts payable - related party   (15,000)   29,420 
Accrued liabilities   27,857    —   
Accrued interest payable   (39,336)   51,999 
Accrued interest payable - related party   460,609    213 
Net Cash used in Operating Activities   (2,965,481)   (324,241)
           
Cash Flows from Investing Activities:          
           
Purchase of fixed assets   (22,985)   —   
Cash received from sale of asset   —      50,000 
Purchase of BergaMet   1,907,010    —   
Payments of note receivable   79,295    —   
Cash flows provided by (used in) Investing Activities:   1,963,321    50,000 
           
Cash Flows from Financing Activities:          
           
Proceeds from issuance of convertible debt,   404,241    194,583 
Payments for repayment of convertible debt   (349,330)   —   
Proceeds from issuance of noted payable   16,667    3,000 
Proceeds from issuance of noted payable - related party   1,050,866    —   
Payments for repayment of notes payable - related party   (15,000)     
Liabilities assumed   —      —   
Net Cash provided by Financing Activities   1,107,444    197,583 
           
Increase (decrease) in cash   105,284    (76,658)
Cash at beginning of period   485    81,653 
Cash  at end of period  $105,769   $4,995 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

 -5-

GREY CLOAK TECH INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019 and 2018

 

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS

 

Grey Cloak Tech Inc. (the “Company”) was incorporated in the State of Nevada on December 19, 2014. The Company has additionally acquired BergaMet NA, LLC which markets and sells heath supplemental products.

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements and with the instructions to Form 10-Q and Article 8 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not contain all information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements. In the opinion of the Company’s management, the accompanying unaudited consolidated financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of September 30, 2019 and the results of operations and cash flows for the periods presented. The results of operations for the nine months ended September 30, 2019 are not necessarily indicative of the operating results for the full fiscal year or any future period. These unaudited consolidated financial statements should be read in conjunction with the financial statements and related notes thereto included in the Company’s form 10-K for the year ended December 31, 2018 filed with the SEC on April 1, 2020.

 

Use of Estimates

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

 

Cash

 

Cash includes cash in banks, money market funds, and certificates of term deposits with maturities of less than three months from inception, which are readily convertible to known amounts of cash and which, in the opinion of management, are subject to an insignificant risk of loss in value.

 

Accounts Receivables

 

Accounts receivables are recorded at the invoice amount and do not bear interest.

 

Sharerails Note Receivable and Accrued Interest

 

On January 1, 2019, the Company decided to write off the money loaned to Sharerails as being not collectible. The amount written off was $84,057.06.

 

 -6-

GREY CLOAK TECH INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019 and 2018

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Inventory

 

Inventories consist of health supplements held for sale in the ordinary course of business. The Company uses the weighted average cost method to value its inventories at the lower of cost or market. An allowance for inventory was established in 2018 and is evaluated each quarter to determine if all items are still sellable due to expiration dates.

 

Property and Equipment

 

The Company’s property and equipment are recorded at cost and depreciated using the straight-line method over the useful lives of the assets, generally from three to seven years. Upon sale or disposal of property and equipment, the related asset cost and accumulated depreciation or amortization are removed from the respective accounts and any gain or loss is reflected in current operations.

 

Goodwill

 

In accordance with Goodwill and Other Intangible Assets, goodwill is defined as the excess of the purchase price over the fair value assigned to individual assets acquired and liabilities assumed and is tested for impairment at the reporting unit level on an annual basis in the Company's fourth fiscal quarter or more frequently if indicators of impairment exist. The performance of the test involves a two-step process. The first step of the impairment test involves comparing the fair value of the Company's reporting units with each respective reporting unit's carrying amount, including goodwill. The fair value of reporting units is generally determined using the income approach. If the carrying amount of a reporting unit exceeds the reporting unit's fair value, the second step of the goodwill impairment test is performed to determine the amount of any impairment loss. The second step of the goodwill impairment test involves comparing the implied fair value of the reporting unit's goodwill with the carrying amount of that goodwill. The Company sees the goodwill to have a ten-year useful life. No goodwill impairment was recognized during the quarter ending September 30, 2019.

 

Revenue Recognition

 

Beginning January 1, 2019, the Company implemented ASC 606, Revenue from Contracts with Customers.  Although the new revenue standard is expected to have an immaterial impact, if any, on our ongoing net income, we did implement changes to our processes related to revenue recognition and the control activities within them.  These included the development of new policies based on the five-step model provided in the new revenue standard, ongoing contract review requirements, and gathering of information provided for disclosures

 

 -7-

GREY CLOAK TECH INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019 and 2018

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

The Company recognizes revenue and cost of goods sold from product sales or services rendered when control of the promised goods are transferred to our clients in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods and services.  To achieve this core principle, we apply the following five steps:  identify the contract with the client, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to performance obligations in the contract and recognize revenues when or as the Company satisfies a performance obligation.

 

The Company records revenue upon shipment of the products to the customers.

 

Concentration

 

There is no concentration of revenue for the year ended December 31, 2018 and the nine months ended September 30, 2019 because the revenue was earned from multiple customers. One customer accounted for 100% of total revenue earned during the year ended December 31, 2017.

 

Income Taxes

 

The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, “Accounting for Income Taxes”. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities and for operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized. As of September 30, 2019, the Company did not have any amounts recorded pertaining to uncertain tax positions.

 

Fair Value Measurements

 

The Company adopted the provisions of ASC Topic 820, “Fair Value Measurements and Disclosures”, which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements.

 

The estimated fair value of certain financial instruments, including cash and cash equivalents are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.

 

 -8-

GREY CLOAK TECH INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019 and 2018

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:

 

Level 1 — quoted prices in active markets for identical assets or liabilities

 

Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable

 

Level 3 — inputs that are unobservable (for example cash flow modeling inputs based on assumptions)

 

The derivative liability in connection with the conversion feature of the convertible debt, classified as a Level 3 liability, is the only financial liability measure at fair value on a recurring basis.

 

The change in Level 3 financial instrument is as follows:

 

Balance, July 1, 2019  $885,411 
Issued during the three months ended September 30, 2019   —   
Change in fair value recognized in operations   610,835 
Converted during the three months ended September 30, 2019   —   
Balance, September 30, 2019  $1,496,246 

 

Recent Accounting Pronouncements

 

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 amends the guidance for revenue recognition to replace numerous, industry specific requirements and converges areas under this topic with those of the International Financial Reporting Standards. The ASU implements of five–step process for customer contract revenue recognition that focuses on transfer of control, as opposed to transfer of risk and rewards. The amendment also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenues and cash flows from contracts with customers. Other major provisions include the capitalization and amortization of certain contract cost, ensuring the time value of money is considered in the transaction price, and allowing estimates of variable consideration to be recognized before contingencies are resolved in certain circumstances. The amendments in this ASU are effective for reporting period beginning after December 15, 2016, and early adoption is prohibited. Entities can transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption.

 

 -9-

GREY CLOAK TECH INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019 and 2018

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

The Company’s revenues are recognized when control of the promised goods or services is transferred to our clients (upon shipment of goods) in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods and services. To achieve this core principle, we apply the following five steps: (1) Identify the contract with a client; (2) Identify the performance obligations in the contract; (3) Determine the transaction price; (4) Allocate the transaction price to performance obligations in the contract; and (5) Recognize revenues when or as the Company satisfies a performance obligation.

 

We adopted ASC 2014-09 on January 1, 2019. Although the new revenue standard is expected to have an immaterial impact, if any, on our ongoing net income, we did implement changes to our processes related to revenue recognition and the control activities with them.

 

Convertible Instruments

 

The Company evaluates and account for conversion options embedded in convertible instruments in accordance with ASC 815 “Derivatives and Hedging Activities”.

 

Applicable GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free-standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under other GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.

The Company accounts for convertible instruments (when it has been determined that the embedded conversion options should not be bifurcated from their host instruments) as follows: The Company records when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption.

 

The Company accounts for the conversion of convertible debt when a conversion option has been bifurcated using the general extinguishment standards. The debt and equity linked derivatives are removed at their carrying amounts and the shares issued are measured at their then-current fair value, with any difference recorded as a gain or loss on extinguishment of the two separate accounting liabilities. During the six months ending September 30, 2019, the Company recognized a gain on extinguishment of $394,208 from the conversion of convertible debt with a bifurcated conversion option.

 

 -10-

GREY CLOAK TECH INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019 and 2018

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Common Stock Purchase Warrants

 

The Company classifies as equity any contracts that require physical settlement or net-share settlement or provide a choice of net-cash settlement or settlement in the Company’s own shares (physical settlement or net-share settlement) provided that such contracts are indexed to our own stock as defined in ASC 815-40 ("Contracts in Entity's Own Equity"). The Company classifies as assets or liabilities any contracts that require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside our control) or give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement). The Company assesses classification of common stock purchase warrants and other free-standing derivatives at each reporting date to determine whether a change in classification is required.

 

Gain on Extinguishment of debt

 

Note Satisfaction Agreements

 

Prior to the Exchange, the Company entered into a Note Satisfaction Agreement with each of Auctus Fund, Crown Bridge Partners, LLC, Power Up Lending Group Ltd., GS Capital Partners LLC, Oakmore Opportunity Fund I LP, and Adar Bays, LLC. All of these entities were holders of the Company’s convertible debt, and these Note Satisfaction Agreements terminate their convertible notes unless the Company fails to perform its payment obligations. The Company agreed to pay these note holders an aggregate of $518,486 plus interest. The Company paid an aggregate of $353,908 on or before February 15, 2019, and it will pay another $164,578 plus interest in approximately one (1) year.

 

Various other holders of Convertible Promissory Notes agreed to convert their notes for an aggregate of 806,015 shares of common stock prior to the Exchange. As a result of these transactions, no convertible promissory notes remain outstanding, except for those convertible notes subject to revival if the Company fails to make payments pursuant to the Note Satisfaction Agreements. 

 

NOTE 3 – GOING CONCERN

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has generated minimal revenues from operations. Since its inception, the Company has been engaged substantially in financing activities and developing its business plan and incurring startup costs and expenses. As a result, the Company incurred accumulated net losses from Inception (December 19, 2014) through the period ended September 30, 2019 of $10,339,871. In addition, the Company’s development activities since inception have been financially sustained through equity financing. Management plans to seek funding through debt and equity financing and has recently acquired a new company as a wholly owned subsidiary.

 

 -11-

GREY CLOAK TECH INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019 and 2018

 

NOTE 4 – RELATED PARTY

 

For the three months ended September 30, 2019 and 2018, the Company had expenses totaling $13,215 and $50,000, respectively, to an officer and director for salaries, which is included in general and administrative expenses on the accompanying statement of operations As of September 30, 2019, there was convertible debt of $641,876 and accrued interest payable of $14,109 due to an officer and director, employees, and shareholders.

 

NOTE 5 – CONVERTIBLE DEBT – RELATED PARTY

 

As of September 30, 2019, the Company had the following:

 

Unsecured convertible debt, due 04/13/20, 4% interest, converts at a 30% discount to market price based on the last 20 days trading price
   61,876 
Unsecured convertible debt, due 04/13/20, ranging between 4% and 8% interest, converts at $0.03 for a total of 19,333,333 shares
   580,000 
TOTAL  $641,876 

 

As of September 30, 2019, the Company has an outstanding total of $14,109 in accrued interest for the above convertible notes.

 

Below represent the Black-Scholes Option Pricing Model calculations for the above convertible note payables:

 

Payee  Number of options valued  Value of Convertible Option
Unsecured Convertible debt #1   13,125,194   $370,171 
Unsecured Convertible debt #2   19,700,518   $491,180 

 

NOTE 6 – NOTES PAYABLE

 

As of September 30, 2019, the Company had the following:

 

Unsecured debt with shareholders of the Company, due 01/17/2024, 4% interest.  $1,050,000 
Unsecured debt with shareholders of the Company, due 02/04/2020, 4% interest, interest due quarterly.   79,667 
Unsecured debt with shareholders of the Company, no due date, 0% interest,   866 
Less: Discount   —   
TOTAL  $1,130,533 

 

As of September 30, 2019, the Company has an outstanding total of $450,339 in accrued interest for the above note and past obligations which are unpaid.

 

 -12-

GREY CLOAK TECH INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019 and 2018

 

NOTE 7 – CONVERTIBLE DEBT

 

As of September 30, 2019, the Company had the following:

 

Unsecured convertible debt, due 11/01/18, 12% interest, converts at a 50% discount to market price based on the last 25 days trading price   110,000 
Unsecured convertible debt, due 02/02/19, 8% interest, converts at a 55% discount to market price based on the last 20 days trading price   50,000 
Unsecured convertible debt, due 01/19/17, 8% interest, default interest at 18%, converts at a 54% discount to market price based on the lowest trading prices in the last 20 days trading price   6,750 
      
SUBTOTAL   166,750 
Less: Discount   —   
TOTAL  $166,750 

 

Below represent the Black-Scholes Option Pricing Model calculations for the above convertible note payables:

 

Payee  Number of options valued  Value of Convertible Option
Unsecured Convertible debt #1   17,503,228   $455,725 
Unsecured Convertible debt #2   6,212,763   $160,200 
Unsecured Convertible debt #3   913,592   $18,969 

 

As of September 30, 2019, the Company has an outstanding total of $42,474 in accrued interest for the above convertible notes.

 

One of the convertible promissory notes is in default but management has not been able to make contact with this party, due to them living out of the country. We have calculated the derivative liability as if it is in default (but the note’s default interest rate stays the same at 8%) and will still accrue appropriate interest until the note is fully satisfied or converted into the Company’s common stock.

 

The Company has determined that the conversion feature embedded in the notes referred to above that contain a potential variable conversion amount constitutes a derivative which has been bifurcated from the note and recorded as a derivative liability, with a corresponding discount recorded to the associated debt.

 

 -13-

GREY CLOAK TECH INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019 and 2018

 

NOTE 8 – STOCKHOLDERS’ EQUITY

 

Authorized Stock 

 

The Company has authorized 75,000,000 common shares with a par value of $0.001 per share.  Each common share entitles the holder to one vote on any matter on which action of the stockholders of the corporation is sought. During February 2017, the Company increased the authorized number of shares to 500,000,000. Also, the Company increased the authorized preferred stock to 75,000,000 shares and designated 25,000,000 shares of preferred stock to Series A Convertible Preferred Stock. During January 2018, the Company increased its authorized number of common shares to 1,000,000,000. During April 2018, the Company increased its authorized number of common shares to 2,500,000,000. The Board of Directors, in the future, has the authority to increase the authorized capital up to 4,000,000,000 shares based on shareholder approval.

 

The shareholders of the Company approved a reverse stock split at a ratio of between 1-for-100 and 1-for 250. The Company received approval from FINRA for a reverse stock split of 1-for-250, which was effective as of July 23, 2018.

 

On October 16, 2017, the Company filed an Amended and Restated Certificate of Designation of the Rights, Preferences, Privileges and Restrictions of the Series A Convertible Preferred Stock (the “Amended Certificate”) with the Secretary of State of the State of Nevada. The Amended Certificate reduces the number of preferred shares designated as Series A Preferred Stock from 25,000,000 shares to 1,333,334 shares. The Amended Certificate also changes the conversion and voting rights of the Series A Preferred Stock. The Series A Preferred Stock is now convertible into the number of shares of our common stock equal to 0.00006% of our outstanding common stock upon conversion. The voting rights of the Series A Preferred Stock are now equal to the number of shares of common stock into which the Series A Preferred Stock may convert.

 

As of September 30, 2019, there are no outstanding shares of preferred stock. All the preferred stock was converted in common stock on February 4, 2019. See recent developments for details.

 

Common Share Issuances

 

During the nine months ended September 30, 2019, the Company issued a total of 1,802,067 shares of common stock for the conversion of debt totaling $270,300 including interest of $31,774.

 

Warrant Issuances

 

As of September 30, 2019, there were 16,800 warrants outstanding, of which 8,800 warrants are fully vested.

 

Adjustment to Additional Paid in Capital (APIC)

 

On January 1, 2019, the Company made an adjustment to APIC of $149,699.40 due to preferred stock conversions back in 2017 and 2018.

 

 -14-

GREY CLOAK TECH INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019 and 2018

 

NOTE 8 – STOCKHOLDERS’ EQUITY (CONTINUED)

 

Stock Issued for Services

 

On January 28, 2019, the Company entered into a marketing and sales consulting agreement with an individual for a period of six months. The Company issued 350,000 shares of common stock as the compensation for this agreement.

 

Share Conversion Agreements

 

All of the holders of the Company’s Series A Convertible Preferred Stock (the “Preferred Holders”) entered into a Preferred Stock Conversion Agreement. Pursuant to the Conversion Agreements, the Preferred Holders converted their shares of preferred stock into common stock, effective as of the Exchange. As a result, no shares of the Company’s Series A Convertible Preferred Stock are outstanding. An aggregate of 15,592,986 shares of common stock were issued to the Preferred Holders. The Preferred Holders agreed to convert each share of Series A Convertible Preferred Stock into eighteen (18) shares of common stock and agreed to retire a total of 467,057 shares of Series A Convertible Preferred Stock. The Company cancelled the retired shares.

 

NOTE 9 – ACQUISITIONS

 

Acquisition of BergaMet and the Share Exchange Agreement

 

On February 4, 2019, the Company entered into a Share Exchange Agreement with BergaMet NA, LLC, a Delaware limited liability company (“BergaMet”), and the members of BergaMet, whereby the Company issued and exchanged 97,409,678 shares of its common stock for all of the outstanding equity securities of BergaMet (the “Exchange”). Through the Exchange, BergaMet became a wholly-owned subsidiary of the Company. The shares of common stock issued in the Exchange were equal to 80.1% of the Company’s outstanding common stock (post-exchange).

 

The assets acquired and liabilities assumed as part of our acquisition were recognized at their fair values as of the effective acquisition date, February 4, 2019. The following table summarizes the fair values assigned to the assets acquired and liabilities assumed.

 

Cash  $437,826 
Current assets   2,801,317 
Current liabilities   (1,484,210)
Net assets acquired  $1,754,934 

 

The purchase price method was used when calculating the fair market value of the BergaMet purchase. On February 4, 2019 the closing stock price for GRCK was $0.02. The total number of shares exchanged multiplied by the closing stock price equaled a purchase value of $1,948,194. The difference between the net assets acquired and the purchase value was recorded as $193,260 of goodwill for the purchase. The Company viewed BergaMet’s balance sheet as being fairly valued as of February 4, 2019 so no adjustment was needed under the purchase price method of valuation.

 

 -15-

GREY CLOAK TECH INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019 and 2018

 

NOTE 10 – DISCONTINUED OPERATIONS

 

Healthy Extracts

 

On January 1, 2019, the Company decided to discontinue operating the Healthy Extracts division. This division did not have any operations in 2019. Due to the closure, the Company wrote off the two inter-company loans totaling $714, the common stock and APIC held from the purchase totaling $52,071, and retained earnings of $52,071 in the 1st quarter of 2019.

 

Eqova Life Science

 

On June 1, 2019, the Company decided to discontinue operating the Eqova Life Science division. The divisions last business activities occurred in May 2019. Due to the closure, the Company wrote off the common stock and APIC held from the purchase totaling $21,510 and retained earnings of $21,510 in the 2nd quarter of 2019.

 

NOTE 11 – BUSINESS SEGMENT INFORMATION

 

As of September 30, 2019, the Company operated in three reportable segments (Corporate, CBD, Health Supplements) supported by a corporate group which conducts activities that are non-segment specific. The following table presents selected financial information about the Company’s reportable segments for the six months ended September 30, 2019.

 

   CONSOLIDATED  HEALTH SUPPLEMENTS  CBD  CORPORATE
Revenue   571,615    571,615    —      —   
Cost of Revenue   93,865    93,365    500    —   
Long-lived Assets   —      —      —      —   
Gain Before Income Tax   673,027    (241,544)   92,609    821,962 
Identifiable Assets   3,336,326    3,142,090    —      194,236 
Depreciation and Amortization   6,215    5,786    —      429 

 

The following table presents selected financial information about the Company’s reportable segments for the three months ended September 30, 2019.

 

   CONSOLIDATED  HEALTH SUPPLEMENTS  CBD  CORPORATE
Revenue   273,302    273,302    —      —   
Cost of Revenue   15,861    15,861    —      —   
Long-lived Assets   —      —      —      —   
Loss Before Income Tax   (643,560)   2,614    —      (646,174)
Identifiable Assets   3,336,326    3,142,090    —      194,236 
Depreciation and Amortization   2,312    2,213    —      99 

 

 -16-

GREY CLOAK TECH INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019 and 2018

 

NOTE 12 – SUBSEQUENT EVENTS

 

Note Conversion Agreements and Advance Conversion Agreements

 

Effective April 13, 2020, we entered into a total of eighteen (18) agreements (16 Note Conversion Agreements and 2 Advance Conversion Agreements) whereby an aggregate of $1,508,407.84 in outstanding principal and accrued interest was converted into an aggregate of 39,248,714 shares of our common stock. The conversion price was either $0.03 per share or $0.05 per share, depending on the individual agreement. The conversions included notes and advances held by our officers and directors and our largest shareholder, as follows: 

 

Name  Aggregate Principal and Interest  Aggregate Shares
Jay W. Decker  $1,282,231.11    33,418,004 
William Bossung  $65,677.84    2,189,262 
First Capital Properties LLC  $16,180.00    539,334 
Shelton S. Decker  $33,717.78    782,223 
Logan B. Decker  $33,717.78    782,223 
Kevin Pitts  $51,255.56    1,025,112 
Innovation Group Holdings, LLC  $25,627.78    512,556 

 

Acquisition of Ultimate Brain Nutrients, LLC

 

On April 3, 2020, we entered into a Share Exchange Agreement by and among Grey Cloak Tech Inc., Ultimate Brain Nutrients, LLC, a Delaware limited liability company (“UBN”), and the members of UBN, whereby we issued and exchanged 90,000,960 shares of our common stock for all of the outstanding equity securities of UBN. UBN is now our wholly-owned subsidiary. The shares of common stock issued in the Exchange are equal to approximately 42.5% of our outstanding common stock immediately following the exchange.

 

COVID-19

 

The COVID-19 outbreak in early 2020 has adversely affected, and may continue to adversely affect economic activity globally, nationally and locally. These economic and market conditions and other effects of the COVID-19 outbreak may adversely affect the Company. At this point, the extent to which COVID-19 may impact the Company's business is uncertain.

 

 -17-

ITEM 2Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Our Management’s Discussion and Analysis contains not only statements that are historical facts, but also statements that are forward-looking (within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934). Forward-looking statements are, by their very nature, uncertain and risky. These risks and uncertainties include international, national and local general economic and market conditions; demographic changes; our ability to sustain, manage, or forecast growth; our ability to successfully make and integrate acquisitions; raw material costs and availability; new product development and introduction; existing government regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; the loss of significant customers or suppliers; fluctuations and difficulty in forecasting operating results; changes in business strategy or development plans; business disruptions; the ability to attract and retain qualified personnel; the ability to protect technology; and other risks that might be detailed from time to time in our filings with the Securities and Exchange Commission.

 

Although the forward-looking statements in this Quarterly Statement reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by them. Consequently, and because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. You are urged to carefully review and consider the various disclosures made by us in this report and in our other reports as we attempt to advise interested parties of the risks and factors that may affect our business, financial condition, and results of operations and prospects.

 

The following discussion and analysis of financial condition and results of operations of the Company is based upon, and should be read in conjunction with, its unaudited financial statements and related notes elsewhere in this Form 10-Q, which have been prepared in accordance with accounting principles generally accepted in the United States.

 

Summary Overview

 

We were formed in December 2014. We had revenues of $66,119 in the year ended December 31, 2018 from a variety of sources. We had revenues of $571,615 for the nine months ended September 30, 2019, which included $273,302 (or nearly 48% of the nine month total) for the three months ended September 30, 2019. In March 2018, we discontinued our previous business to shift our focus solely to sales of our hemp oil and nutraceutical products.

 

Eqova Life Sciences

 

On October 17, 2017, we acquired Eqova Life Sciences, a Nevada corporation (“Eqova”), through an exchange of shares of our Series A Convertible Preferred Stock for all of the outstanding equity interest of Eqova. As part of the Exchange, we have brought on Eqova’s President and Director, Patrick Stiles, to serve as our President and Chief Executive Officer and as a Director on our Board of Directors.

 

 -18-

Eqova is a medically-focused CBD company that develops clinical grade full spectrum hemp oil products, sold exclusively via partnerships with licensed medical practitioners to use with their patients. To date, we know of no other hemp oil company exclusively focused on the practitioner market, leaving it largely underserved. According to The Hemp Business Journal, CBD products marketplace are projected to grow by 700% by 2020 with annual sales reaching $2.1 billion. With a head start in a growing marketplace, we believe that Eqova provides us with a prime growth opportunity with an established business. Revenues of our hemp oil products from the acquisition of Eqova for the year ended December 31, 2018 were $64,384, compared to $0 for the nine months ended September 30, 2019. We closed this business in the second quarter of 2019.

 

BergaMet NA, LLC

 

On February 4, 2019, we issued and exchanged shares of our common stock for all of the outstanding equity securities of BergaMet.

 

Through the exchange, we were able to secure funds in BergaMet to pay off some debt and provide capital for operations. We paid an aggregate of $353,908 and are obligated to pay another $164,578 approximately one (1) year later to retire convertible debt. Currently, we are default on these obligations. Prior to the exchange, we also entered into agreements with other holders of convertible debt to convert their notes for an aggregate of 806,015 shares of common stock. We also entered into conversion agreements with the holders of our Series A Convertible Preferred Stock whereby all of the outstanding preferred stock was converted for an aggregate of 15,592,986 shares of common stock. The conversion and repayment of the preferred stock and convertible debt have greatly improved our capitalization structure.

 

The acquisition of BergaMet has been extremely beneficial to us. In addition to paying off our convertible debt, we are now able to better position ourselves in the market. BergaMet is an established company that was already generating revenues when we acquired it. BergaMet also has unique products that will fit nicely with our existing business. We now plan on expanding our product line to other nutraceuticals.

 

Going Concern

 

As a result of our financial condition, we have received a report from our independent registered public accounting firm for our financial statements for the years ended December 31, 2018 and 2017 that includes an explanatory paragraph describing the uncertainty as to our ability to continue as a going concern. From inception (December 19, 2014) through the end of December 31, 2018, we have incurred accumulated net losses of $11,012,899. In order to continue as a going concern we must effectively balance many factors and generate more revenue so that we can fund our operations from our sales and revenues. If we are not able to do this we may not be able to continue as an operating company. At our current revenue and burn rate, our cash on hand will last less than one month, and thus we must raise capital by issuing debt or through the sale of our stock. However, there is no assurance that our existing cash flow will be adequate to satisfy our existing operating expenses and capital requirements.

 

 -19-

Results of Operations for the Three and Nine Months Ended September 30, 2019 and 2018

 

Introduction

 

We had revenues of $273,302 and $571,615 for the three and nine months ended September 30, 2019, compared to $15,203 and $66,119 for the three and nine months ended September 30, 2018. Our revenues for the three months ended June 30, 2019 were $201,040, thus our revenues for the three months ended September 30, 2019 were nearly 36% higher than the immediately preceding quarter.

 

Our operating expenses were $265,755 and $828,380 for the three and nine months ended September 30, 2019, compared to $112,053 and $504,931 for the three and nine months ended September 30, 2018. Operating expenses for three months ended June 30, 2019 were $300,109. Our operating expenses were 11% lower for the three months ended September 30, 2019 than the immediately preceding quarter.

 

Our operating expenses for all periods consisted entirely of general and administrative expenses.

 

Revenues and Net Operating Loss

 

Our revenue, operating expenses, net operating loss, and net loss for the three and nine months ended September 30, 2019 and 2018 were as follows:

 

   Three Months Ended  Nine Months Ended
   September 30,  September 30,  September 30,  September 30,
   2019  2018  2019  2018
             
Revenue  $273,302   $15,203   $571,615    66,119 
                     
Cost of Revenue   15,861    (839)   93,865    24,748 
                     
Operating expenses:                    
General and administrative   265,755    112,053    828,380    504,931 
Total operating expenses   265,755    112,053    828,380    504,931 
                     
Other income (expense)                    
Interest expenses, net of interest income   (24,412)   (538,591)   (56,951)   (1,150,614)
Change in fair value on derivative   (610,835)   (122,438)   1,025,195    912,559 
Loss on extinguishment of debt   —      —      53,038    (526,481)
Gain on sale of asset   —      —      —      6,951 
Total other income (expense)                    
                     
Net income (loss)  $(643,560)  $(757,040)  $670,652    (1,221,145)

 

Revenues

 

Revenues were $273,302 and $571,615 for the three and nine months ended September 30, 2019, compared to $15,203 and $66,119 for the three and nine months ended September 30, 2018, an increase of 1,698% and 765%, respectively. The increase supports the transition to our new business selling health nutrition products.

 

 -20-

Cost of Revenue

 

Cost of revenue was $15,861 and $93,865 for the three and nine months ended September 30, 2019, compared to $(839) and $24,748 for the three and nine months ended September 30, 2018, an increase of 1,990% and 279%, respectively. Gross profit was $257,442 and $477,750 for the three and nine months ended September 30, 2019, compared to $16,042 and $41,371 for the three and nine months ended September 30, 2018, an increase of 1,604% and 1,155%, respectively.

 

Cost of revenue as a percentage of revenues was 6% for the three months ended September 30, 2019, compared to 16% for the nine months ended September 30, 2019.

 

General and Administrative

 

General and administrative expenses were $265,755 and $828,380 for the three and nine months ended September 30, 2019, compared to $112,053 and $504,931 for the three and nine months ended September 30, 2018. In the three months ended September 30, 2019, general and administrative expenses consisted mainly of professional fees of $7,500, consulting fees of $122,557, salary and wages of $40,930, postage of $7,746, advertising of $42,710, and transfer agent and filing fees of $136. In the three months ended September 30, 2018, general and administrative expense consisted mainly of professional fees of $1,639, consulting fees of $3,197, salary and wages of $68,835, postage of $38, advertising of $186, and transfer agent and filing fees of $0.

 

Other Income (Expense)

 

Other income (expense) was $(635,247) and 1,021,282 for the three and nine months ended September 30, 2019, compared to $(661,029) and $(757,585) for the three and nine months ended September 30, 2018. In the three months ended September 30, 2019, other income (expense) consisted of interest expense, net of interest income of $(24,412), and change in fair value on derivative of $(610,835). Other income (expense) for the three months ended September 30, 2018 consisted of interest expense, net of interest income of $(538,591), and change in fair value on derivative of $(122,438).

 

Net Income (Loss)

 

Net income (loss) was $(643,560) and $670,652, or $(0.01) and $0.01 per share, for the three and nine months ended September 30, 2019, compared to $(757,040) and $(1,221,145), or $(0.40) and ($0.73) per share, for the three and nine months ended September 30, 2018.

 

Net income increased in 2019 primarily because of a change in fair value on derivative.

 

 -21-

Liquidity and Capital Resources

 

Introduction

 

During the nine months ended September 30, 2019, we were unable to generate sufficient revenues and had negative operating cash flows. Our cash on hand as of December 31, 2018 was $485, as of March 31, 2019 was $339,650, as of June 30, 2019 was $194,679, and as of September 30, 2019 was 105,769. The increase in cash on hand over December 31, 2018 was primarily from the purchase of BergaMet and proceeds from the issuance of notes payable. Our monthly cash flow burn rate for 2018 was approximately $27,400, for the three months ended March 31, 2019 it was approximately $721,000, for the six months ended June 30, 2019 it was approximately $432,000, and for the nine months ended September 30, 2019 it was approximately $328,000. We have strong short and medium term cash needs. We anticipate that these needs will be satisfied through increased revenues and the issuance of debt or the sale of our securities until such time as our cash flows from operations will satisfy our cash flow needs.

 

Our cash, current assets, total assets, current liabilities, and total liabilities as of September 30, 2019 and December 31, 2018, respectively, are as follows:

 

   June 30,  December 31,  Increase/
   2019  2018  (Decrease)
          
Cash  $105,769   $485   $105,284 
Total Current Assets   3,125,571    85,042    3,040,529 
Total Assets   3,336,326    85,768    3,250,558 
Total Current and Total Liabilities   4,014,360    3,649,984   $364,376 

 

Our cash increased because, upon the acquisition of BergaMet, we were able to access their cash, and we issued notes payable to raise cash. Our total current assets and total assets increased for the same reason, including inventory in the amount of $2,968,489 as of September 30, 2019 that was owned by BergaMet. Our total current and total liabilities increased during the nine months ended September 30, 2019 primarily because we were able to shed over $1,217,000 in derivative liabilities. Our accumulated deficit decreased during the nine months ended September 30, 2019 by $670,652 to $10,342,247 while our total stockholders’ deficit decreased by $2,886,182.

 

In order to repay our obligations in full or in part when due, we will be required to raise significant capital from other sources. There is no assurance, however, that we will be successful in these efforts.

 

Cash Requirements

 

Our cash on hand as of September 30, 2019 was $105,769. Based on our current level of revenues and monthly burn rate of approximately $328,000 per month, we will need to continue to fund operations by raising capital from the sale of our stock and debt financings.

 

Sources and Uses of Cash

 

Operating Activities

 

We had net cash used in operating activities of $2,956,481 for the nine months ended September 30, 2019, compared to $324,241 for the nine months ended September 30, 2018. We use our cash for normal business operations.

 

 -22-

Investing Activities

 

We had $1,963,321 cash flows provided by investing activities for the nine months ended September 30, 2019, compared to $50,000 for the nine months ended September 30, 2018. The increase was primarily because of cash from the acquisition of BergaMet.

 

Financing Activities

 

Our net cash provided by financing activities for the nine months ended September 30, 2019 was $1,107,444, compared to $197,583 for the nine months ended September 30, 2018. The increase of $909,861 was primarily because of the proceeds of notes payable, offset in part by repayments of notes payable.

 

ITEM 3Quantitative and Qualitative Disclosures About Market Risk

 

As a smaller reporting company, we are not required to provide the information required by this Item.

 

ITEM 4Controls and Procedures

 

(a)       Disclosure Controls and Procedures

 

We conducted an evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as of September 30, 2019, to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities Exchange Commission’s rules and forms, including to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of September 30, 2019, our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses identified and described in our Annual Report on Internal Control Over Financial Reporting filed in our Annual Report on Form 10-K.

 

Our principal executive officers do not expect that our disclosure controls or internal controls will prevent all errors and all fraud. Although our disclosure controls and procedures were designed to provide reasonable assurance of achieving their objectives and our principal executive officers have determined that our disclosure controls and procedures are effective at doing so, a control system, no matter how well conceived and operated, can provide only reasonable, not absolute assurance that the objectives of the system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented if there exists in an individual a desire to do so. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

 

(b)       Changes in Internal Control over Financial Reporting

 

No change in our system of internal control over financial reporting occurred during the period covered by this report, the nine month period ended September 30, 2019, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

 -23-

PART II – OTHER INFORMATION

 

ITEM 1Legal Proceedings

 

We are not a party to or otherwise involved in any legal proceedings.

 

In the ordinary course of business, we are from time to time involved in various pending or threatened legal actions. The litigation process is inherently uncertain and it is possible that the resolution of such matters might have a material adverse effect upon our financial condition and/or results of operations. However, in the opinion of our management, other than as set forth herein, matters currently pending or threatened against us are not expected to have a material adverse effect on our financial position or results of operations.

 

ITEM 1ARisk Factors

 

As a smaller reporting company, we are not required to provide the information required by this Item.

 

ITEM 2Unregistered Sales of Equity Securities and Use of Proceeds

 

There were no unregistered sales of equity securities during the three months ended September 30, 2019. 

 

ITEM 3Defaults Upon Senior Securities

 

There have been no events which are required to be reported under this Item.

 

ITEM 4Mine Safety Disclosures

 

Not applicable.

 

ITEM 5Other Information

 

None.

 

 -24-

ITEM 6Exhibits

 

(a)       Exhibits

 

Exhibit Number   Name and/or Identification of Exhibit
     
31.1   Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
     
31.2   Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
     
32.1   Chief Executive Officer Certification Pursuant to 18 USC, Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
32.2   Chief Financial Officer Certification Pursuant to 18 USC, Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
100.INS   XBRL Instance Document
     
100.SCH   XBRL Schema Document
     
100.CAL   XBRL Calculation Linkbase Document
     
100.DEF   XBRL Definition Linkbase Document
     
100.LAB   XBRL Labels Linkbase Document
     
100.PRE   XBRL Presentation Linkbase Document

 

 -25-

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 thereunto duly authorized.

 

 

  Grey Cloak Tech Inc.
   
   
Dated:  June 1, 2020 /s/ Kevin Pitts
  By: Kevin “Duke” Pitts
  Its: President

 

 -26-