UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

þ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended: December 31, 2013

 

or

 

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from __________ to __________

 

Commission file number: 000-15078

Greenestone Healthcare Corporation

(Exact name of registrant as specified in its charter)

 

 

Colorado	84-1227328
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

 

5734 Yonge Street, Suite 300

North York, Ontario, Canada M2M 4E7

(Address of principal executive offices)

 

(416) 222-5501

(Registrant’s telephone number, including area code)

 

Securities registered under Section 12(b) of the Exchange Act:
Title of each class	Name of each exchange on which registered
None	N/A

 

Securities registered under Section 12(g) of the Act:

 

Common Stock, $0.01 par value per share

(Title of class)

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No þ

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No þ

 

 

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 preceding 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 last 90 days.

Yes þ No ¨

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 þ No ¨

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

 

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 definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer	¨		Accelerated filer	¨
Non-accelerated filer	¨		Smaller reporting company	þ

 

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

 

Issuer’s revenues for its most recent fiscal year were approximately $ 5,962,304.

 

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant on December 31, 2013, based on a closing price of $ .30 was approximately $ 9,518,000. As of March 19, 2014, the registrant had 35,065,245 shares of its common stock, par value $0.01 per share, outstanding.

 

 

 

Prepared By:

 

Sunny J. Barkats, Esq.

JSBarkats, PLLC

18 East 41^st Street, 14^th Floor

New York, NY 10017

P: (646) 502-7001

F: (646) 607-5544

www.JSBarkats.com

GREENESTONE HEALTHCARE CORP.

FOR THE FISCAL YEAR ENDED

DECEMBER 31, 2013

 

TABLE OF CONTENTS

 

			Page
PART I
Item 1.	Business.		1
Item 1A.	Risk Factors.		4
Item 1B.	Unresolved Staff Comments.		4
Item 2.	Properties.		5
Item 3.	Legal Proceedings.		5
Item 4.	Mine Safety Disclosures.		5
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.		6
Item 6.	Selected Financial Data.		8
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results Of Operations.		8
Item 8.	Financial Statements and Supplementary Data.		12
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.		29
Item 9A.	Controls and Procedures.		29
Item 9B.	Other Information.		30
PART III
Item 10.	Directors, Executive Officers and Corporate Governance.		30
Item 11.	Executive Compensation.		32
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.		33
Item 13.	Certain Relationships and Related Transactions, and Director Independence.		34
Item 14.	Principal Accounting Fees and Services.		35
PART IV
Item 15.	Exhibits, Financial Statement Schedules.		36

 

PART I

 

Item 1. Business.

 

Company History

 

Greenestone Healthcare Corporation (formerly Nova Natural Resources Corporation, a Colorado corporation), was incorporated under the laws of the State of Colorado on April 1, 1993 (“Greenestone” or the “Company”), and is the surviving company of a merger, effective February 1, 1995, between the Company and Nova Natural Resources Corporation, a Delaware corporation (“Nova Delaware”). The merger was effectuated solely for the purpose of changing the Company’s domicile from Delaware to Colorado. At all times prior to 2001, the Company was engaged in the oil and gas exploration business. Nova Delaware was the successor entity to Nova Petroleum Corporation, a Delaware corporation, and Power Resources Corporation, a Delaware corporation, which merged in 1986 (“the 1986 Merger”). Prior to the 1986 Merger, Nova Petroleum Corporation and Power Resources Corporation had operated since 1979 and 1972, respectively. In 2001, the Company entered into the electronics business and this business was active in 2001 and 2002, as part of the Torita Group. After 2002, the Company continued with various stages of development in this business until 2010.

 

Change in Operations

 

On April 1, 2010, the Company, pursuant to Board of Directors resolution, changed its principal operations from development stage electronics to healthcare services. On March 29, 2010, the Company entered into a one-year consulting agreement with Greenestone Clinic Inc., a Canadian corporation (“Greenestone Clinic”), whereby Greenestone Clinic was to provide consulting services for the Company’s development and operation of medical clinics in the province of Ontario, Canada. Specifically, Greenestone would provide medical and business expertise in the initial startup of private clinics and technical assistance to ensure the clinics complied with governmental policy and procedure requirements as well as any operational requirements. At the time of this consulting agreement, Greenestone Clinic operated a clinic at the Muskoka property now housing its addiction treatment clinic and provided endoscopy services the Company planned to offer in its first Ontario medical clinic.

 

On May 15, 2010, the Company secured, through its wholly-owned subsidiary 1816191 Ontario Ltd. (“1816191”), a sublease of space (which was previously the Rothbart Pain Clinic) of approximately 8,000 sq. ft. to be used as the Company’s executive offices and to run its first endoscopy clinic. The Company started offering medical services in June 2010, offering various medical services, including endoscopy, cardiology and executive medicals.

 

In March 2011, Greenestone Clinic, a former Company consultant, gave up the premises in Bala, Ontario, previously leased by Greenestone Clinic and operated as a private medical resort and also allowed the Company to do business using the “GreeneStone” name. The Company, through its wholly-owned subsidiary GreeneStone Clinic Muskoka Inc. (“GreeneStone Muskoka”) entered into a lease with the owner of the Muskoka premises on April 1, 2011. The Company planned to offer only mental health and addiction treatment services in this location which would be run as an in-patient addiction treatment center.

 

Corporate Structure

 

The Company currently has two operating subsidiaries, both of which are 100% wholly-owned.

 

GreeneStone Muskoka Treatment Center

 

On February 1, 2011, Dr. Paul Garfinkel was retained on a six month consulting contract to advise the Company on its plan to go into the addiction treatment business. Dr. Garfinkel formed a clinical advisory group consisting of himself and Dr. Clive Chamberlain, Dr. Greg O’Donahue and Janice Harris R.N. The clinical advisory group (the “CAG”) was to create the mission and values for the addiction treatment business and locate and hire a leader for the addiction treatment business.

 

On April 1, 2011, the Company through Greenestone Muskoka, entered into a new lease (the “Bala Lease”) with the Cranberry Cove Holdings Ltd. (“Cranberry”), the owner of the Bala, Ontario property (the “Bala Property”) in order to operate a mental health and addiction treatment center at the property. On April 1, 2011 (the “Purchase Date”), Greenestone Muskoka purchased all of the assets of Greenestone Clinic that were previously used for the operation of the executive medical center located at the Bala Property. This essentially gave Greenestone Muskoka a turn-key opportunity to start up its addiction treatment business (the “GreeneStone Muskoka Treatment Center”).

 

On April 1, 2011, Dr. Susan K. Blank was hired on a one year contract to run the GreeneStone Muskoka Treatment Center. Dr. Blank worked with the CAG to refine the mission and values for the GreeneStone Muskoka Treatment Center and worked together on the policies and procedures for the operation of the treatment center.

 

In August 2011, the Greenestone Muskoka Treatment Center began providing addiction treatment services and took its first paying clients. The GreeneStone Muskoka Treatment Center offers clients a 45-day program that costs between $27,000 and $37,000 for the stay. Treatment is individualized and after the first two weeks of treatment, the client is assessed and extended treatment is often recommended. The treatment offered is concurrent and the addiction and co-occuring mental health disorders are treated at the same time. The center has a 36 bed capacity and can easily be expanded beyond that capacity. Treatment consists of group and individual therapy, as well as recreation therapy. Clients are taught about nutrition and have excellent food while in treatment.

 

In November of 2011, the CAG was disbanded after achieving their goals. In March 2012, Dr. Blank and two contract therapists, all of whom were from the United States, were replaced by a more permanent team of doctors and therapists from Canada.

 

Toronto Aftercare and Intensive Out-Patient Addiction Treatment Program

 

In March 2012, the Company entered into a lease for premises at 39 Hazelton Avenue in Toronto, Ontario for the operation of an aftercare and intensive out-patient addiction treatment program. The Company, through its subsidiary Greenestone Muskoka, hired addiction therapist Andrew Galloway on April 1, 2012, to run the outpatient operation (“Greenestone Yorkville”). This operation provides follow up and aftercare services for clients of the Greenestone Muskoka Treatment Center, as well as clients that have been to other treatment centers. Clients attend these services twice per week and are billed monthly. Greenestone Yorkville also offers one-on-one counseling for clients that have not been to treatment centers and those that have. The outpatient program for this center is designed for those clients that are able to maintain sobriety while still living at home. The company moved from Hazelton Avenue to Pleasant Boulevard in early 2013, with the same services being offered. Greenestone St. Clair currently has four employees.

 

North York Endoscopy Unit

 

The North York Endoscopy unit which runs at the Company’s North York location has been operating since June 25, 2010. The primary business at this location is the performance of gastroscopy and colonoscopy procedures. Patients are referred to the clinic by family physicians for the purpose of exploratory endoscopy services. Patients come to this location for an initial consult with a specialist that will perform the procedure. Once the specialist determines if the patient is a candidate for the out-of-hospital procedure, the patient will be scheduled for a procedure. Approximately 15 patients will be scheduled per specialist each day. The Company has two procedure rooms set up, with a third operational in Q1 2014. The procedure team includes a recovery room nurse, a procedure room nurse, an anesthetist, a specialist and an equipment technologist. This team is assembled from a pool of approximately thirty nurses, doctors and technologists. Procedures may take anywhere from fifteen minutes to one

 

hour. The procedure team is only scheduled when procedures are scheduled. The clinic employs an office manager and four full time staff that work in reception and manage the administration of the clinic and one full time nurse manager.

 

The Ontario government established the need to approve out-of-hospital premises for those clinics using any form of sedation. The responsibility was put on to the College of Physicians and Surgeons to approve or license these clinics and the North York clinic was a clinic that would require a Level II certification. This process of certification was instituted after the clinic opened and was inspected in 2012.

 

Endoscopy Unit at the Albany Medical Clinic

 

On January 31, 2011, 1816191 entered into an agreement with the Albany Medical Clinic which provided for 1816191 to manage and run the endoscopy unit in the Albany Clinic’s Toronto, Ontario location. The College of Physicians and Surgeons of Ontario inspected and approved the facility in December 2011, and endoscopy procedures at this facility began in January 2012.

 

The endoscopy clinic spans a 911 sq. ft. area and features one endoscopy suite a recovery area and one office. The North York location administration staff take care of the Albany Clinic and just the procedure team is employed on days when there are procedures at the Albany Clinic. This arrangement allows for 1816191 to pay rent to the Albany Clinic only on days when there are procedures taking place.

 

The Albany Clinic is a large medical clinic that employs over 20 family physicians. These physicians are the primary referral source for the endoscopy unit at the Albany Clinic.

 

Castelli Clinic

 

In August 2013 the Company assumed control of the Castelli clinic from Dr. Mario Castelli. Dr. Castelli, a gastroenterologist, ran his own endoscopy clinic up until 2012 and shut down due to the high cost of CPSO compliance. He continued with his consultations and did his procedures at other clinics including the Company's clinics. His consultation practice is what the Company purchased in 2013. Dr. Castelli continues to do consultations at the clinic and does all of his procedures at the Company's two endoscopy clinics.

 

Employees

 

As of December 31, 2013, the Company had no employees and approximately 60 employees working for its two subsidiaries, not including doctors. Two management employees were split between the two subsidiaries. There were 5 full time employees working for 1816191 and 15 part time employees working on any procedure day. There were 37 full time employees working for Greenestone Muskoka.

 

Marketing

 

In 2014, the Company has implemented a formal marketing plan. The two primary lines of business are the endoscopy business and the addiction treatment business. They require unique initiatives for marketing. The endoscopy business relies heavily on family physician referrals. The Company has determined that the most effective method of securing referrals is to form one-on-one relationships between the physicians and the specialists. This is a time consuming process, but since it has started in 2012, the Company has steadily grown the base of referring physicians.

 

The specialists have made time available to meet with these physicians on a regular basis. The family physicians can be reminded more often what the capabilities of the clinic are and who is working as the specialists in the clinic by way of follow up emails, letters and faxes. It may prove difficult to market to individuals since they may ask their doctor about the services and then their doctor may refer them to another clinic. It is not cost effective to do this. The important distinction between the endoscopy service and the addiction treatment business is that the endoscopy business is an Ontario Health Insurance Plan (“OHIP”) insured service. As such, it can only be approved if there is a referring physician on the case.

 

 

The addiction treatment business operates as a private pay service. The customers get no government or OHIP subsidy to come to our treatment facility. The individual makes the decision and so it is important to market to the individual. There are a large number of mental health professionals that refer to the treatment center and it is important to maintain contact with and market to these professionals. This is the same type of long process of establishing relationships with these professionals and our treatment staff. This can be done at conferences and functions where the treatment professionals come together and make individual contact between professionals.

 

The treatment business gets about 70% of its clients via the Internet. This was the single biggest focus for the marketing team in 2013 and continues into 2014. Search Engine Optimization (SEO) is very important and the Company aggressively seeks the maximum cost/benefit relationships with specialist firms that can help in this effort. We believe our efforts in 2013 were successful and effective using this model. We do not believe that it is cost effective to market through traditional channels such as TV, radio or print advertising at this time.

 

Competition

 

Endoscopy – There are numerous private endoscopy clinics in the Greater Toronto Area including endoscopy suites in all of the local area hospitals. Referring physicians have choices where they can refer their patients. Most hospitals have very long wait times and most of the private clinics have shorter wait times. The North York, Albany and Bay Street clinics feature traditionally short wait times, which is an important advantage especially to procedures that are urgent. Easy access is also an issue with hospitals as they are not located close to transit and have high parking fees. Both of our endoscopy clinics are next to subway stations and our North York clinic has free parking. The hospitals generally have the newest generation of equipment while many of the private clinics will have third or fourth generation equipment. The Company clinics have 2^nd generation equipment that is no more than three or four years old and well maintained. There is an expectation that government spending cuts will eventually push the endoscopy clinics out of the hospitals into privately run out-of-hospital facilities. The government will want only well established and larger centers to take over this business and the Company is well positioned to grow from this expected trend.

 

Addiction Treatment – The private pay addiction treatment business is not well established in Canada and there are only a handful of competitors that provide these services. Two of the biggest providers are also government hospital licensed facilities, that do both OHIP insured services and privately paid services. Most hospitals have a mental health unit that can handle detoxification, but do not provide addiction treatment programs. There is only one large competitor that is very similar to GreeneStone Muskoka and they are on the west coast of Canada. There are hundreds of private paid facilities in the United States and they would be the major competitor for those with the highest ability to pay for service. Service in the United States that offer the same level of treatment that is offered by the Company is generally 50% to 100% more expensive. We believe that travel to the United States by those with potential travel restrictions as well as a higher cost will eliminate many U.S. facilities as competition.

 

Environmental Regulations

 

The Company is not currently subject to any pending administrative or judicial enforcement proceedings arising under environmental laws or regulations. Environmental laws and regulations may be adopted in the future which may have an impact upon the Company’s operations.

 

Item 1A. Risk Factors.

 

Not applicable because we are a smaller reporting company.

 

Item 1B. Unresolved Staff Comments.

 

Not applicable.

 

 

 

 

Item 2. Properties.

 

Greenestone Executive Offices and Endoscopy Unit

 

The Company’s executive offices are located at 5734 Yonge Street, Suite 300, Toronto, Ontario, Canada M2M 4E7. The space is approximately 8,000 sq. ft. and takes up the entire third floor of the building (the “Yonge Street Facility”). This facility is leased by 1816191 and the primary activity at this facility is endoscopy procedures with expansion being done in late 2014 to enable other surgical procedures such as plastic surgery. The lease expires on July 31, 2018.

 

Greenestone Muskoka Treatment Facility

 

The Bala Facility is in Bala, Ontario at 3571 Highway 169. The property is 43 acres in size and contains approximately 48,000 square feet of buildings. The property is leased from Cranberry and the term of the lease is for five years with renewal options at the end of the first and second years of the five year term. The lease is a net lease and the Company has a non-disturbance agreement from the mortgage lenders on the property for the whole term. Further, the Company has an option to purchase the property at any time during the term of the lease at appraised values with a minimum purchase value of $4.5 million dollars and a maximum purchase value of $8.0 million dollars during the first two years of the term and $10.0 million dollars during the last three years of the term.

 

Albany Medical Clinic

 

On January 11, 2011, 1816191 (dba Greenestone Clinic) entered into a lease with Albany Building Corporation, pursuant to which the Company leases an approximate 1,000 sq. ft. space at the Albany Medical Clinic, located at 807 Broadway Avenue in Toronto, Ontario, on Saturdays of each week for the performance of endoscopy procedures. According to the terms of the three-year lease, the Company pays $500 per day of use, such lease payment to increase over the term of the lease.

 

Castelli Clinic

The company has a month to month agreement with the Lockwood Clinic.

 

Toronto Aftercare and Addiction Treatment Program

 

The Company entered into a 5 year lease commencing July 1, 2013 at 39 Pleasant Boulevard in Toronto, this space will house the addiction treatment center, which was previously at Yorkville location, and also serve as head office for executive staff of the addiction treatment team.

 

Item 3. Legal Proceedings.

 

We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

 

PART II

 

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

 

(a) Market Information

 

The Company’s common stock is quoted on the Over-the-Counter Bulletin Board (the “OTCBB”) under the symbol “GRST”. The Company was sponsored by the market maker Wilson Davis & Co. from Salt Lake City, Utah, which filed a Form 15c2-11 application with the Financial Industry Regulatory Authority (“FINRA”) for the Company in 2011. This application was approved by FINRA in February 2012, and Wilson Davis & Co. first quoted the stock in March 2012.

 

The following table sets forth the range of high and low bid quotations for our common stock for each of the periods indicated as reported by the OTCBB. These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.

 

Period Ending December 31, 2013
Quarter Ended				High $				Low $
	March 30				0.50				0.12
	June 30				0.33				0.10
	September 30				0.15				0.02
	December 31				0.32				0.06

 

Period Ending December 31, 2012
Quarter Ended				High $				Low $
	March 30				0.95				0.70
	June 30				1.41				0.85
	September 30				1.71				1.37
	December 31				1.83				0.05

 

Quotations on the OTCBB reflect bid and ask quotations, may reflect inter-dealer prices, without retail markup, markdown or commission and may not represent actual transactions.

 

(b) Holders

 

The number of record holders of the Company’s common stock as of December 31, 2013, was approximately 472. The Depository Trust and Clearing Corporation held 3,671,326 shares for approximately 228 shareholders as of December 31, 2013.

 

(c) Dividends

 

We have never paid any cash dividends on our common shares, and we do not anticipate that we will pay any dividends with respect to those securities in the foreseeable future. Our current business plan is to retain any future earnings to finance the expansion development of our business.\

(d) Securities Authorized for Issuance Under Equity Compensation Plans

 

As of December 31, 2013, no securities were authorized for issuance under compensation plans previously approved by security holders.

 

Recent Sales of Unregistered Securities

 

The following summaries are the securities transactions during the fiscal year ended December 31, 2013:

 

On May 13, 2013 the company entered into a promissory note with JMJ Financial where the company received $75,000. If the note was not repaid within 180 days JMJ Financial could convert into company shares the principal amount plus interest based on a formula of the lower of 30 cents or 70% of the lowest trade price in the 25 trading days previous to conversion. In November and December 2013 JMJ converted $28,792 of this note to receive 800,00 shares.

 

On April 2, 2013, the Company entered into a Securities Purchase Agreement with Asher Enterprises, Inc., a Delaware corporation (“Asher”) whereby the Company entered into a Convertible Note with Asher. The Note has since been fully paid and the Securities Purchase Agreement terminated and the Convertible Note cancelled.

 

On July 25, 2013 the Company entered into another Securities Purchase Agreement with Asher which also contained a Convertible Note for $63,000 bearing an interest rate of 8% and is due and payable on April 15, 2014, with the option to prepay. After 180 days from the issuance of the Convertible Note, the principal balance is convertible into shares of the Company’s common stock. The conversion price is equal to the Market Price of the Company’s common stock as defined in the Convertible Note multiplied by 61%. The Note has since been fully paid and the Securities Purchase Agreement terminated and the Convertible Note cancelled.

 

On December 24, 2013 the company sold 500,000 shares to Kirk Moulton at a share price of 8.5 cents a share and also 500,000 warrants that are exercisable for three years from December 19, 2013, at an exercise price of US$0.15 per share.

 

On December 24, 2013 the company sold 1,000,000 shares to Irwin Zalcberg at a share price of 8.5 cents a share and also 1,000,000 warrants that are exercisable for three years from December 19, 2013, at an exercise price of US$0.15 per share.

 

Rule 10B-18 Transactions

 

During the year ended December 31, 2013, there were no repurchases of the Company’s common stock by the Company.

 

Penny Stock

 

The U.S. Securities and Exchange Commission (the “SEC”) has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a market price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that: (a) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; (b) contains a description of the broker’s or dealer’s duties to the customer and of the rights and remedies available to the customer with respect to a violation of such duties or other requirements of the securities laws; (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price; (d) contains a toll-free telephone number for inquiries on disciplinary actions; (e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and (f) contains such other information and is in such form, including language, type size and format, as the SEC shall require by rule or regulation.

 

 

The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (d) a monthly account statement showing the market value of each penny stock held in the customer’s account.

 

In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written acknowledgment of the receipt of a risk disclosure statement, a written agreement as to transactions involving penny stocks, and a signed and dated copy of a written suitability statement.

 

These disclosure requirements may have the effect of reducing the trading activity for our common stock. Therefore, stockholders may have difficulty selling our securities.

 

Item 6. Selected Financial Data.

 

Not applicable because we are a smaller reporting company.

 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

Forward-Looking Statements

 

This annual report on Form 10-K and other reports filed by Greenestone Healthcare Corp. (“we,” “us,” “our,” or the “Company”) from time to time with the SEC contain or may contain forward-looking statements and information that are based upon beliefs of, and information currently available to, the Company’s management as well as estimates and assumptions made by Company’s management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used in the filings, the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan,” or the negative of these terms and similar expressions as they relate to the Company or the Company’s management identify forward-looking statements. Such statements reflect the current view of the Company with respect to future events and are subject to risks, uncertainties, assumptions, and other factors. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned.

 

Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.

 

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These accounting principles require us to make certain estimates, judgments, and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments, and assumptions are made. These estimates, judgments, and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our financial statements would be affected to the extent there are material differences between these estimates. This discussion and analysis should be read in conjunction with the Company’s financial statements and accompanying notes to the financial statements for the year ended December 31, 2013.

 

 

Plan of Operation

 

During the next twelve months, the Company plans to continue its operations as a provider of addiction and after-care treatment services, as well as a provider of endoscopy and other specialized medical procedures at its various locations. The Company plans to focus on the growth of its existing business units while simultaneously paring costs in operations.

 

The company has announced plans to merge its addiction treatment side of the business ( Greenestone Clinic Muskoka ) into a private entity in exchange for cash and shares of the private entity. This letter of intent is non-binding and the company has agreed to that the transaction will be a simultaneous signing and closing once all aspects of the transaction have been agreed to. This could potentially be finalized in Q1 or Q2 of 2014. If this transaction is completed the company will no longer be a direct operator of addiction and mental health services but will be a minority partner in a privately held addiction business which in total will be much larger than it is currently operation. The company will look to potentially operate or hold interest addiction treatment businesses in the United States.

Dependant on the merger occurring, a non binding letter of intent to acquire and hold the Bala property that its addiction treatment center is operated in, which will be leased out to new private entity.

 

In 2014, the Company plans to aggressively market the current endoscopy segment of the business to family practitioners, as they are a major referral source for the Company’s business. The Company also plans to begin a marketing campaign focused on corporations and insurance companies as referral sources, as well as create an internet-based marketing campaign. Further, the Company plans to add additional specialist offices at the Company’s North York location, as well as an operating room, thereby providing the opportunity to deliver additional services to patients and increase overall revenue.

 

The Company believes that the planned merger and acquisition of the real estate, together, will provide approximately $4.5 million of new financing to the company. This is a combination of cash from the merger and new debt on the acquired property. This will be enough to address the working deficiency thereby stabilizing the business and it capital for acquisitions.

If the merger and property acquisition does not happen the company believes it will need $3.5m to fund operations for the next 12 months, this estimate includes (i) $500,000 for marketing; (ii) 2,500,000 for tax obligations; and (iii) $500,000 for general costs .

 

The Company, in an attempt to hire top talent in the addition treatment segment of its business, hired excess employees in the start-up phase in 2012. The Company has already replaced its initial U.S. based clinical team with a permanent Canadian based team, the best of which have been retained as the core of the Company’s current clinical team. We believe that the additional reductions in staffing the Company plans to make to its existing operations in 2014 in order to increase operational efficiency will result in a net reduction in payroll of approximately $500,000 in 2014 compared to 2013. This plan is what will take place if planned merger and acquisition does not happen.

 

If the merger and property acquisition do not happen then In addition to planned staff reductions, the Company plans to reduce the rent expenses in 2014. On May 1, 2014 the company plans to reduce the rent it is paying on the Bala facility by a renegotiation on the existing lease agreement.

 

Results of Operations

 

For the Fiscal Year Ended December 31, 2013, Compared to the Fiscal Year Ended December 31, 2012

 

Revenue

 

During the year ended December 31, 2013, revenues increased to $ 5,962,304 from $ 5,540,909 during the year ended December 31, 2012, an increase of $ 421,395. This increase is mainly attributable to a steady increase in business volume since the Company began operations. A large portion of revenue earned was through endoscopy procedures paid for by the Ontario Health Insurance Plan (“OHIP”), a provincially funded health plan backed by the

 

Ontario government. The Company believes that revenue will continue to grow steadily and the Company will become more profitable as most of its costs, such as rent and salaries and wages are relatively fixed, and therefore will reduce as a percentage as business volume grows.

 

Cost of Revenue

 

The cost of revenue represents payments made to the doctors for endoscopy procedures performed. These amounts are calculated based on amounts billed to the Ontario Ministry of Health under the Ontario Health Insurance Plan (OHIP). In general, the doctor performing the actual medical procedure will receive approximately 55% of the amount received from OHIP adjusted for amounts deducted received in facility fees.

 

Gross Profit

 

During the year ended December 31, 2013, gross profits increased to $ 4,705,820 from $ 4,490,907 during the year ended December 31, 2012, an increase of $ 214,913. This increase is mainly attributable to an increase in business volume since the Company began operations.

 

Operating Expenses

 

Operating expenses for the year ended December 31, 2013, were $ 6,336,876, compared to $ 5,975,260 for the year ended December 31, 2012, an increase of $ 361,616. This increase in expenses is mainly attributable to increased interest expense incurred on short term debt and interest on payroll and HST. The increase in expenses is also attributable to higher professional fees incurred relating to investor relations. Total operating expenses for the year ended December 31, 2013, primarily consisted of salaries and wages to medical support staff of $ 3,118,718; rent payments of $ 1,016,387; management fees of $ 233,016; and general and administrative expenses of $ 601,863.

 

Net Loss

 

During the year ended December 31, 2013, the net loss increased to ($ 1,631,056) from ($ 1,484,353) during the year ended December 31, 2012, an increase of $146,703. This increase is attributable to the interest charges and professional fees mentioned above.

 

Liquidity and Capital Resources

 

The following table summarizes working capital at December 31, 2013, compared to December 31, 2012.

 

		December 31, 2013				December 31, 2012				Increase/ (Decrease)
Current Assets		$	563,320			$	507,426			$	55,894
Current Liabilities		$	4,269,702			$	4,522,831			$	253,128
Working Capital (Deficit)		$	(3,706,385	)		$	(4,015,405	)		$	309,202

 

Over the next twelve months we believe that the company requires $3.5M to cover working capital deficit and properly market and promote the company. If the proposed merger does not go through the company will have to raise equity or secure debt. There is no assurance that the Company will be successful with future financing ventures, and the inability to secure such financing may have a material adverse effect on the Company’s financial condition. In the opinion of management, the Company’s liquidity risk is assessed as high and remains unchanged from the prior year.

 

 

Accounts receivable at December 31, 2013 and December 31, 2012, was $440,918 and $ 380,043, respectively, representing an increase of $ 60,875. The Company is economically dependent on and earns a significant portion of revenues from the Ontario Ministry of Health for its ability to carry out its normal activities. These revenues account for approximately 38% of the Company’s consolidated sales in the twelve month period ending December 31, 2013.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GREENESTONE HEALTHCARE CORPORATION

 

DECEMBER 31, 2013

(Stated in U.S. $)

 

CONTENTS

 

 

 

 

				Page
INDEPENDENT AUDITOR’S REPORT				13
FINANCIAL STATEMENTS
Consolidated Balance Sheet				14
Consolidated Statement of Changes in Stockholders’ Deficit				15
Consolidated Statement of Operations				16
Consolidated Statement of Cash Flows				17
Notes to the Consolidated Financial Statements				18 - 28

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

REPORT OF INDEPENDANT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

To the Shareholders of

GreeneStone Healthcare Corporation

 

We have audited the accompanying consolidated balance sheet of GreeneStone Healthcare Corporation as of December 31, 2013 and December 31, 2012 and the related consolidated statements of operations, changes in stockholders’ deficit, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to above presents fairly, in all material respects, the consolidated financial position of GreeneStone Healthcare Corporation as of December 31, 2013 and December 31, 2012, and the results of its operations and cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying consolidated financial statements have been prepared assuming the company will continue as a going concern. As discussed in consolidated financial statement note 2, the company has incurred losses since inception. This raises substantial doubt about the company’s ability to meet its obligations and to continue as a going concern. Management’s plans in regard to this matter are described in note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

 

“Jarvis Ryan Associates”

Mississauga, Ontario, Canada

March 26, 2014	CHARTERED ACCOUNTANTS
	LICENSED PUBLIC ACCOUNTANTS

 

 

 

 

 

Item 8. Financial Statements and Supplementary Data.

 

Greenestone Healthcare Corporation
Consolidated Balance Sheet
As at December 31, 2013
(Stated in U.S. $)
		December 31, 2013				December 31, 2012
CURRENT
Cash (note 3e)		$	—			$	—
Accounts receivable (note 6)			440,918				380,043
Prepaid expenses			109,854				111,214
Inventory			12,548				16,169
Total Current Assets			563,320				507,426
Cash – Restricted (note 3e)			94,020				—
FIXED ASSETS (note 7, 9)			536,124				617,567
Total Assets		$	1,193,464			$	1,124,993
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT
Bank indebtedness (note 18)		$	126,073			$	70,803
Accounts payable and accrued liabilities			703,918				863,858
Harmonized sales tax payable			594,120				313,295
Withholding taxes payable			1,796,655				1,039,756
Deferred revenue			107,477				215,793
Convertible notes payable (note 8)			246,612				1,820,713
Current portion of auto loan payable ( note 9 )			7,953				8,129
Short-Term loan (note 10)			64,541				—
Related party notes (note 11)			622,356				190,484
Total Current Liabilities			4,269,705				4,522,831
LOAN PAYABLE (note 9)			28,452				38,917
Total Liabilities			4,298,157				4,561,748
STOCKHOLDERS' DEFICIT
Common stock; $0.01 par value, 500,000,000 shares authorized; 41,065,564 shares issued and outstanding (note 12)			410,656				272,343
Additional paid-in capital			8,155,474				6,642,530
Accumulated other comprehensive income (loss)			264,135				(47,726	)
Accumulated deficit			(11,934,958	)			(10,303,902	)
Total Stockholders' Deficit			(3,104,693	)			(3,436,755	)
Total Liabilities and Stockholders' Deficit		$	1,193,464			$	1,124,993
COMMITMENTS (note 13)

 

 

 

 

 

 

Greenestone Healthcare Corporation
Consolidated Statement of Changes in Stockholders' Deficit
For the Year Ended December 31, 2013
(Stated in U.S. $)
			Common Stock  Shares				Common Stock  Amount				Additional Paid-in Capital				Accumulated Other Comprehensive Income (Loss)				Accumulated Deficit				Total
Balance, December 31, 2011			13,521,568			$	135,216			$	5,716,666			$	21,718			$	(8,819,549	)		$	(2,945,949	)
Common stock issued for convertible note			13,712,711				137,127				925,864												1,062,991
Foreign currency translation			—				—				—				(69,444	)			—				(69,444	)
Net loss, year ended December 31, 2012			—				—				—				—				(1,484,353	)			(1,484,353	)
Balance, December 31, 2012			27,234,279			$	272,343			$	6,642,530			$	(47,726	)		$	(10,303,902	)		$	(3,436,755	)
Balance, December 31, 2012			27,234,279			$	272,343			$	6,642,530			$	(47,726	)		$	(10,303,902	)		$	(3,436,755	)
Common stock issued for convertible note (notes 8 & 12)			13,831,285				138,313				1,512,944				—				—				1,651,257
Foreign currency translation			—				—				—				311,861				—				311,861
Net loss, year ended December 31, 2013			—				—				—				—				(1,631,056	))			(1,631,056	)
Balance, December 31, 2013			41,065,564			$	410,656			$	8,155,474			$	264,135			$	(11,934,958	)		$	(3,104,693	)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Greenestone Healthcare Corporation
Consolidated Statement of Operations
For the Year Ended December 31, 2013 ( Stated in U.S. $ )
		2013				2012
Revenues		$	5,962,304			$	5,540,909
Cost of services provided			1,256,483				1,050,002
Gross margin			4,705,821				4,490,907
Operating expenses
Continuing education			—				25,739
Depreciation			183,260				223,984
General and administrative			601,863				546,563
Interest			397,298				214,207
Management fees (note 11)			233,016				179,924
Meals and entertainment			1,830				3,385
Medical records			—				132,253
Professional fees			402,995				128,578
Rent (note 11)			1,016,387				847,558
Salaries and wages			3,118,718				3,410,659
Subcontract fees			—				42,890
Supplies			339,029				181,590
Travel			42,481				37,930
Total operating expenses			6,336,877				5,975,260
Net loss applicable to common shareholders		$	(1,631,056	)		$	(1,484,353	)
Other comprehensive income ( loss )
Foreign currency translation adjustment			311,861				(69,444	)
Total comprehensive loss		$	(1,319,195	)		$	(1,553,797	)
Basic and diluted loss per common share			(0.05	)			(0.08	)
Weighted average shares outstanding			33,588,851				19,453,717

 

 

 

 

 

 

 

 

 

 

 

Greenestone Healthcare Corporation
Consolidated Statements of Cash Flows
For the Year Ended December 31, 2013
(Stated in U.S. $)
		Year ended December 31
		2013				2012
Operating activities
Net loss		$	(1,631,056	)		$	(1,484,353	)
Adjustment to reconcile net loss to net cash used in operating activities:
Depreciation			183,260				223,984
			(1,447,796	)			(1,260,369	)
Changes in operating assets and liabilities
Accounts receivable			(60,875	)			(191,620	)
Harmonized sales tax			280,825				319,228
Prepaid expenses			1,360				(27,490	)
Inventory			3,621				(4,385	)
Accounts payable and accrued liabilities			(159,940	)			231,361
Withholding taxes payable			756,899				769,638
Deferred revenue			(108,318	)			99,101
Net cash provided by (used in) operating activities			(734,222	)			(64,536	)
Investing activities
Purchase of fixed assets			(101,818	)			(200,499	)
Net cash provided by (used in) investing activities			(101,818	)			(200,499	)
Financing activities
Net increase in restricted cash			(94,020	)			—
Proceeds from bank indebtedness			55,270				42,522
Proceeds from loan payable			53,900				47,046
Proceeds from related party notes			531,708				68,397
Repayment of related party notes			(99,834	)			(208,215	)
Proceeds from issuance of common stock			9,044				38,473
Net proceeds from additional paid in capital			68,111				346,256
Net cash provided by (used in) financing activities			524,179				334,479
Effect of exchange rate on cash			311,861				(69,444	)
Net change in cash			—				—
Beginning cash balance (deficiency)			—				—
Ending cash balance ( Including restricted )		$	—			$	—
Supplemental cash flow information
Cash paid for interest		$	397,298			$	214,207
Cash paid for income taxes		$	—			$	—

 

 

 

Notes to Consolidated Interim Financial Statements

 

1. Nature of business

 

GreeneStone Healthcare Corporation (the “Company”) was incorporated under the laws of the state of Colorado, USA, on April 1, 1993. Effective May 2012, the Company changed its corporate name to GreeneStone Healthcare Corporation from Nova Natural Resources Corporation. As at December 31, 2013, the Company owns 100% of the outstanding shares of each of 1816191 Ontario Limited and Greenestone Clinic Muskoka Inc., both of which were incorporated in 2010 under the laws of the province of Ontario, Canada. 1816191 Ontario Limited and Greenestone Clinic Muskoka Inc. provide medical services to various patients in clinics located in two regions in Ontario, Canada; the city of Toronto and the regional municipality of Muskoka. These consolidated interim financial statements have been prepared in accordance with United States generally accepted accounting principles ("US GAAP").

 

 

2. Going concern

 

The Company’s consolidated interim financial statements have been prepared in accordance with US GAAP applicable to a going concern, which assumes that the Company will be able to meet its obligations and continue its operations in the normal course of business. As at December 31, 2013 the Company has a working capital deficiency of $3,706,385 ( 2012 : $4,015,405 ) and accumulated deficit of $11,934,958 ( 2012: 10,303,902 ). Accordingly, the Company will be dependent upon the raising of additional capital through placement of common shares, and, or debt financing in order to implement its business plan. There is no assurance that the Company will be successful with future financing ventures, and the inability to secure such financing may have a material adverse effect on the Company’s financial condition. These consolidated interim financial statements do not include any adjustments to the amounts and classifications of assets and liabilities that might be necessary should the Company be unable to continue operations.

 

3. Significant accounting policies

 

The accounting policies of the Company are in accordance with US GAAP applied on a basis consistent with that of the preceding year. Outlined below are those policies considered particularly significant.

 

a) Principals of consolidation

The accompanying consolidated interim financial statements include the accounts of the Company, its two subsidiaries, as noted in note 1. All inter-company transactions and balances have been eliminated on consolidation.

 

The Company’s subsidiaries functional currency is the Canadian dollar, while the Company’s reporting currency is the U.S. dollar. All transactions initiated in Canadian dollars are translated into US dollars in accordance with ASC 830, "Foreign Currency Translation" as follows:

 

i)		Monetary assets and liabilities at the rate of exchange in effect at the balance sheet date.
ii)		Equity at historical rates.
iii)		Revenue and expense items at the average rate of exchange prevailing during the period.

 

 

Adjustments arising from such translations are deferred until realization and are included as a separate component of stockholders’ deficit as a component of accumulated other comprehensive income or loss. Therefore, translation adjustments are not included in determining net income (loss) but reported as other comprehensive income (loss).

 

For foreign currency transactions, the Company translates these amounts to the Company’s functional currency at the exchange rate effective on the invoice date. If the exchange rate changes between the time of purchase and the time actual payment is made, a foreign exchange transaction gain or loss results which is included in determining net income for the period.

 

 

 

 

3. Significant accounting policies (cont’d)

 

b) Revenue recognition

The Company recognizes revenue from the rendering of services when they are earned; specifically when all of the following conditions are met:

 

·		the significant risks and rewards of ownership are transferred to customers and the Company retains neither continuing involvement nor effective control;
·		there is clear evidence that an arrangement exists;
·		the amount of revenue and related costs can be measured reliably; and
·		it is probable that the economic benefits associated with the transaction will flow to the Company.

 

In particular, the Company recognizes:

 

·		Fees for gastrointestinal clinical services, out-patient counseling, coaching, intervention, psychological assessments and other related services when patients receive the service; and
·		Fees for in-patient addiction treatments proportionately over the term of the patient’s treatment.

 

Deferred revenue represents monies deposited by the patients for future services to be provided by the Company. Such monies will be recognized into revenue as the patient progresses through their treatment term.

 

c) Use of estimates

The preparation of consolidated interim financial statements in accordance with US GAAP requires management to make estimates and assumptions that affect the recognition, measurement and disclosure of amounts reported in the consolidated interim financial statements and accompanying notes. The reported amounts, including depreciation, allowance for doubtful accounts, inventory, accounts payable and accrued liabilities and note disclosures are determined using management's best estimates based on assumptions that reflect the most probable set of economic conditions and planned courses of action. Actual results will differ from such estimates.

 

d) Non-monetary transactions

The Company’s policy is to measure an asset exchanged or transferred in a non-monetary transaction at the more reliable measurement of the fair value of the asset given up and the fair value of the asset received, unless:

 

 

i)		The transaction lacks commercial substance;
ii)		The transaction is an exchange of a product or property held for sale in the ordinary course of business for a product or property to be sold in the same line of business to facilitate sales to customers other than the parties to the exchange;
iii)		Neither the fair value of the asset received nor the fair value of the asset given up is reliably measurable; or
iv)		The transaction is a non-monetary, non-reciprocal transfer to owners that represents a spin-off or other form of restructuring or liquidation.

 

 

e) Cash

The Company's policy is to disclose bank balances under cash, including bank overdrafts with balances that fluctuate frequently from being positive to overdrawn and term deposits with a maturity period of three months or less from the date of acquisition.

 

The Company has $94,020 in restricted cash held by their bank to cover against the possibility of services not performed.

 

f) Accounts receivable

The Company's policy is to disclose accounts receivable net of a reserve for doubtful accounts.

 

 

3. Significant accounting policies (cont’d)

 

g) Inventory

Inventory is valued at the lower of cost and net realizable value. Cost is determined using the first-in, first-out method. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

 

h) Financial instruments

The Company initially measures its financial assets and liabilities at fair value, except for certain non-arm's length transactions. The Company subsequently measures all its financial assets and financial liabilities at amortized cost.

 

 

Financial assets measured at amortized cost include cash and accounts receivable.

 

Financial liabilities measured at amortized cost include bank indebtedness, accounts payable and accrued liabilities, harmonized sales tax payable, withholding taxes payable, convertible notes payable, loan payable, short term loan and related party notes.

 

Financial assets measured at cost are tested for impairment when there are indicators of impairment. The amount of the write-down is recognized in net income. The previously recognized impairment loss may be reversed to the extent of the improvement, directly or by adjusting the allowance account, provided it is no greater than the amount that would have been reported at the date of the reversal had the impairment not been recognized previously. The amount of the reversal is recognized in net income. The Company recognizes its transaction costs in net income in the period incurred. However, financial instruments that will not be subsequently measured at fair value are adjusted by the transaction costs that are directly attributable to their origination, issuance or assumption.

 

 

FASB ASC 820 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

 

Level 1.		Observable inputs such as quoted prices in active markets;
Level 2.		Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
Level 3.		Unobservable inputs in which there is little or no market data, which requires the reporting entity to develop its own assumptions.

 

The Company does not have assets or liabilities measured at fair value on a recurring basis at December 31, 2013 and December 31, 2012. The Company did not have any fair value adjustments for assets and liabilities measured at fair value on a non-recurring basis during the twelve month period ended December 31, 2013 and December 31, 2012.

 

i) Fixed assets

Fixed assets are recorded at cost. Depreciation is calculated on the declining balance method at the following annual rates:

 

 

Computer Equipment		30%
Computer Software		100%
Furniture and Equipment		30%
Medical Equipment		25%
Vehicles		30%

 

 

Leasehold improvements are depreciated using the straight-line method over the term of the lease. Half rates are used for all fixed assets in the year of acquisition. Leasehold improvements-work in process are not amortized until fully completed and in use.

 

 

3. Significant accounting policies (cont’d)

 

j) Leases

Leases are classified as either capital or operating leases.  Leases that transfer substantially all of the benefits and inherent risks of ownership of property to the Company are accounted for as capital leases.  At the time a capital lease is entered into, an asset is recorded together with its related long-term obligation to reflect the acquisition and financing.  Equipment recorded under capital leases is amortized on the same basis as described above.  Payments under operating leases are expensed as incurred.

 

k) Income taxes

The Company uses the future income tax method to account for income taxes. Under this method, future income tax assets and liabilities are determined based on the difference between the carrying value and the tax basis of the assets and liabilities. Any change in the net amount of future income tax assets and liabilities is included in income. Future income tax assets and liabilities are determined based on enacted or substantively enacted tax rates and laws which are expected to apply to the Company's taxable income for the periods in which the assets and liabilities will be recovered. Future income tax assets are recognized when it is more likely than not that they will be realized.

 

 

l) Earnings per share information

FASB ASC 260, “Earnings Per Share” provides for calculation of "basic" and "diluted" earnings per share. Basic earnings per share includes no dilution and is computed by dividing net income (loss) applicable to common shareholders by the weighted average common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity similar to fully diluted earnings per share. Basic and diluted loss per share was the same, at the reporting dates, as there were no common share equivalents outstanding.

 

m) Share based expenses

ASC 718 "Compensation - Stock Compensation" codified SFAS No. 123 prescribes accounting and reporting standards for all stock-based payments awarded to employees, including employee stock options, restricted stock, employee stock purchase plans and stock appreciation rights that may be classified as either equity or liabilities. The Company should determine if a present obligation to settle the share-based payment transaction in cash or other assets exists. A present obligation to settle in cash or other assets exists if: (a) the option to settle by issuing equity instruments lacks commercial substance or (b) the present obligation is implied because of an entity's past practices or stated policies. If a present obligation exists, the transaction should be recognized as a liability; otherwise, the transaction should be recognized as equity.

 

The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of ASC 505-50 "Equity - Based Payments to Non-Employees" which codified SFAS 123 and the Emerging Issues Task Force consensus in Issue No. 96-18 ("EITF 96-18"), "Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring or in Conjunction with Selling, Goods or Services". Measurement of share-based payment transactions with non-employees shall be based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction should be determined at the earlier of performance commitment date or performance completion date.

 

4. Recently adopted accounting pronouncements

 

In December 2011 the Financial Accounting Standards Board “FASB” issued new guidance on the disclosures about offsetting assets and liabilities. The new guidance enhances disclosures required by US GAAP by requiring improved information about financial instruments and derivative instruments. The new guidance is to be adopted for annual reporting periods beginning on or after January 1, 2013 and interim periods within those annual periods. The new guidance is to be retrospectively applied for all comparative periods presented. The Company has reviewed and adopted this guidance. The Company has concluded that the result of adopting of this guidance does not have a material impact on the consolidated interim and annual financial statements.

 

 

5. Financial instruments

 

The Company is exposed to various risks through its financial instruments. The following analysis provides a measure of the Company's risk exposure and concentrations at the balance sheet date, December 31, 2013.

 

(a) Credit risk

 

Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. Financial instruments that subject the Company to credit risk consist primarily of accounts receivable.

 

With respect to accounts receivable of $440,918 (December 31, 2012: $380,043), the Company receives most of its revenues in 1816191 Ontario Inc. from the Ontario Ministry of Health and Long-Term Care, a provincially regulated program (note 6). The Company performs frequent reviews of billing reports submitted to the Ontario Ministry of Health and Long-Term Care, to ensure accuracy and filing on a timely basis. Allowances are provided for potential losses that have been incurred at the balance sheet date.

 

Credit risk associated with accounts receivable of Greenestone Clinic Muskoka Inc. is mitigated due to balances from many customers, as well as through credit checks and frequent reviews of receivables to ensure timely collection. In addition, there is no concentration risk with the Greenestone Clinic Muskoka Inc. accounts receivable balance since balances are due from many customers.

 

In the opinion of management, credit risk with respect to accounts receivable is assessed as low, not material and remains unchanged from the prior year.

 

(b) Liquidity risk

 

Liquidity risk is the risk the Company will not be able to meet its financial obligations as they fall due. The Company is exposed to liquidity risk through its working capital deficiency of $3,706,385 and accumulated deficit of $11,934,958. As disclosed in note 2, the Company will be dependent upon the raising of additional capital in order to implement its business plan. There is no assurance that the Company will be successful with future financing ventures, and the inability to secure such financing may have a material adverse effect on the Company’s financial condition. In the opinion of management, liquidity risk is assessed as high, material and remains unchanged from the prior year.

 

In the opinion of management, liquidity risk associated with bank indebtedness of $ 126,073 (December 31, 2012: $70,803) is assessed as low. The Company ensures that financial liabilities are placed with two financial institutions both with a high credit rating in order to mitigate the risk.

 

(c) Market risk

 

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises of three types of risk: interest rate risk, currency risk, and other price risk. The Company is exposed to interest rate risk and currency risk.

 

 

i. Interest rate risk

 

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is exposed to interest rate risk on its bank indebtedness as there is a balance of $126,073 at December 31, 2013. This liability is based on floating rates of interest that have been stable during the current reporting period. In the opinion of management, interest rate risk is assessed as low, not material and remains unchanged from the prior year.

 

 

5. Financial instruments (cont’d)

 

ii. Currency risk

 

Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Company is subject to currency risk as its subsidiaries operate in Canada and are subject to fluctuations in the Canadian dollar. Most of the Company’s financial assets and liabilities are denominated in Canadian dollars. Based on the net exposures at December 31, 2013, a 5% depreciation or appreciation of the Canadian dollar against the U.S. dollar would result in an approximate $80,000 increase or decrease in the Company’s after-tax net loss, respectively. The Company has not entered into any hedging agreements to mediate this risk. In the opinion of management, currency risk is assessed as low, material and remains unchanged from the prior year.

 

 

iii. Other price risk

 

Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market. In the opinion of management, the Company is not exposed to this risk and remains unchanged from the prior year.

 

6. Accounts receivable

 

The consolidated accounts receivable balance consists primarily of amounts due from the following parties:

 

		December 31, 2013				December 31, 2012
The Ontario Ministry of Health and Long-Term Care		$	246,415			$	181,129
Treatment program			134,291				115,914
Outpatient services			88,790				59,683
Other accounts receivable			—				23,317
Allowance for doubtful accounts			(28,578	)			—
		$	440,918				380,043

 

The Company is economically dependent on and earns a significant portion of revenues from the Ontario Ministry of Health for its ability to carry out its normal activities. These revenues account for 38% of the Company’s consolidated revenue in the twelve month period ending December 31, 2013 (December 31, 2012: 35%).

 

7. Fixed assets

 

										Net Book Value
		Cost				Accumulated Amortization				December 31, 2013				December 31, 2012
Computer equipment		$	21,451			$	10,333			$	11,118			$	16,602
Computer software			25,912				25,912				—				4,096
Furniture and equipment			419,102				220,866				198,236				264,476
Medical equipment			353,884				201,789				152,095				205,697
Vehicles			67,575				22,055				45,520				42,472
Leasehold improvements			146,857				79,822				67,035				84,224
Work in process			62,120				—				62,120				—
		$	1,096,901			$	560,777			$	536,124			$	617,567

 

 

 

8. Convertible notes payable

 

The notes are convertible at the option of the holder up to the maturity date; any convertible debentures still outstanding as at their maturity date will automatically convert into common shares of the Company. Accordingly, these convertible notes payable are considered current liabilities by nature. The Company has adequate common shares in its treasury to cover the conversions if all notes are exercised.

 

The Company has the following convertible notes outstanding.

 

Amount				Issuance Date		Conversion Price in USD				Number of Shares				Effect on Dilution				Maturity Date
	50,000			January 15, 2012		$	0.20				250,000				0.63	%		January 15, 2014
	9,402			January 24, 2012		$	0.20				47,010				0.12	%		January 24, 2014
	7,052			January 26, 2012		$	0.20				36,398				0.09	%		January 26, 2014
	28,206			January 31, 2012		$	0.20				141,030				0.36	%		January 31, 2014
	9,402			February 10, 2012		$	0.20				47,010				0.12	%		February 10, 2014
	94,020			April 18, 2012		$	0.45				215,689				0.53	%		April 18, 2014
	48,530			May 31, 2012		$	1.00				48,530				0.12	%		May 31, 2014
$	246,612										785,667

 

*The actual number of shares issued if converted will vary depending on the exchange rate at time of conversion.

 

 

 

 

During the year ended December 31, 2013, the Company issued 12,331,285 common shares from convertible notes payable at an average conversion rate of $0.12 per share.

 

On December 31, 2013 convertible debentures totaling $ 381,260 had matured and were to be converted to restricted shares. This is dependent on a Directors Resolution being issued by the Company. As of the date of our report a Directors Resolution had not been formally issued. The Board of Directors has indicated that in due time they will pass the resolution. Since the convertible debentures include an automatic conversion on maturity feature, and to ccurately reflect the maturity of the debt and conversion to shares as of December 31, 2013, the financial information presented in these consolidated interim financial statements has treated the debt of $381,260 as matured and converted into restricted shares totaling 3,206,286.

 

9. Loan payable

 

The Company has an automobile loan payable bearing interest at 4.49% with blended monthly payments of $835 that matures March 2018. The loan is secured by the vehicle with a net book value as at December 31, 2013 of $31,665. Estimated principal re-payments to December 31 ^st are as follows:

 

	Current			$	7,953
	Long Term
	2015				8,317
	2016				8,699
	2017				9,097
	2018				2,339
				$	28,452

 

 

 

Interest on loan payable totaled $ 1,880 during the year ended December 31, 2013 (December 31, 2012 : $ 2,086 )

 

 

10. Short term loan

 

The company has a loan with JMJ Financial in the amount of $64,541 with an interest rate of 12%. The lender has the right, at any time after 180 days from effective date to convert all or part of the outstanding and unpaid principal and accrued interest into common stock. The company expects this loan to be fully converted into shares.

 

11. Related party transactions

 

The balance due to related party as at December 31, 2013 to Greenestone Clinic Inc. is $ 413,078. The Company is related to Greenestone Clinic Inc. as it is controlled by one of the Company’s directors. The balance owing is non-interest bearing, not secured and has no specified terms of repayment.

 

The Company had management fees totaling $233,016 during the year ended December 31, 2013 (December 31, 2012: $179,924) to the director for services which are included in management fees.

 

The Company entered into an agreement to lease premises from Cranberry Cove Holdings Ltd. at market terms. During the year ended December 31, 2013, the Company had rent expense of $454,381 (December 31, 2012: $431,827) to Cranberry Cove Holdings Ltd. Cranberry Cove Holdings Ltd. is related to the Company by virtue of its shareholder being a director of the Company.

 

The other portion of related party at December 31, 2013 is to Jay Parekh in the amount of $224,269. He is a director of the Gastrointestinal clinical company. The company had doctors fees totaling $196,356 paid during the year ended December 31, 2013. The amount due in related party fees is non-interest bearing and has no specified terms of repayment.

 

 

12. Stockholders’ deficit

 

Authorized common shares

On June 30, 2012, the Company filed a Certificate of Amendment with the Colorado Secretary of State to increase the aggregate number of shares which the Company has authority to issue to one hundred million (100,000,000) common shares, issued at $0.01 par value per share from 50,000,000 common shares with par value at $0.01. The amendment was approved by the Colorado Secretary of State in May 2012.

 

 

 

On March 25, 2013 the Company filed a certificate of Amendment with the Colorado Secretary of State to increase the aggregate number of shares which the Company has the authority to issue to five hundred million (500,000,000) common shares, issued at $0.01 par value per share from 100,000,000 common shares with par value at $0.01, to authorize three million (3,000,000) series A convertible preferred shares, par value of $1.00 per share, and to the authorize ten million (10,000,000) series B convertible preferred shares, par value $0.01 per share. Each series B convertible preferred shares is convertible into 10 Common shares. The amendment was approved by the Colorado Secretary of State on March 26, 2013.

 

 

 

Issued common shares

The Company has a total of 41,065,564 issued and outstanding common shares as at December 31, 2013. In the prior year, the Company had 27,234,279 issued and outstanding common shares at December 31, 2012. 

 

The Company issued 13,831,285 common shares during the year ended December 31, 2013, at $ .01 per share and with paid in capital of $1,512,944.

 

Net loss per common share

Net loss per share is computed using the basic and diluted weighted average number of common shares outstanding during the period. The weighted-average number of common shares outstanding during each year is used to compute basic loss per share.  Diluted loss per share is computed using the weighted average number of shares and dilutive potential common shares outstanding unless common stock equivalent shares are anti-dilutive.  Dilutive potential common shares are additional common shares that will be exercised. Basic net loss per common share is based on the weighted average number of shares of common shares outstanding during the 12 month period ended December 31, 2013.  

 

 

13. Commitments

 

The Company is committed under three non-cancellable operating lease agreements for rental of premises. The rental of premise agreement for the subsidiary, 1816191 Ontario Inc. which expires July 2018 and the premise agreements for the subsidiary, Greenestone Clinic Muskoka Inc. which expires June 2018 and March 2016 (note 11).

 

Future minimum annual payment requirements are as follows:

 

	2014			$	796,196
	2015				815,036
	2016				362,385
	2017 2018				209,868 117,008
				$	2,300,493

 

14. Income taxes

 

Current or future U.S. federal income tax provision or benefits have not been provided for any of the periods presented because the Company has experienced operating losses since inception. Under ASC 740 “Income Taxes,” when it is more likely than not that a tax asset cannot be realized through future income the Company must allow for this future tax benefit. The Company has provided a full valuation allowance on the net future tax asset, consisting of net operating loss carry forwards, because management has determined that it is more likely than not that they will not earn income sufficient to realize the future tax assets during the carry forward period.

 

The Company has not taken a tax position that, if challenged, would have a material effect on the financial statements for the year ended December 31, 2013, applicable under ASC 740. As a result of the adoption of ASC 740, the Company did not recognize any adjustment to the liability for uncertain tax position and therefore did not record any adjustment to the beginning balance of accumulated deficit on the balance sheet.

 

The components of the Company’s future tax asset as at December 31, 2013 and December 31, 2012 are as follows:

 

		December 31, 2013				December 31, 2012
Net operating loss carry forward		$	11,934,958			$	10,303,902
Valuation allowance			(11,934,958	)			(10,303,902	)
Net future tax asset		$	—			$	—

 

 

 

A reconciliation of income taxes computed at the 35% statutory rate to the income tax recorded is as follows:

 

		December 31, 2013				December 31,  2012
Tax at statutory rate		$	570,870			$	519,529
Valuation allowance			(570,870	)			(519,529	)
Net future tax asset		$	—			$	—

 

 

The Company did not pay any income taxes during the year ended December 31, 2013 and the year ended December 31, 2012.

 

The net federal operating loss carry forwards will expire in 2023 through 2033. This carry forward may be limited upon the consummation of a business combination under IRC Section 381.

 

 

 

 

15. Management of capital

 

The Company’s objectives of capital management are to safeguard its ability to support the Company’s normal operating requirements on an ongoing basis. The Company defines capital as the total of its total assets less total liabilities.

 

The Company manages its capital structure and makes adjustments in light of changes in its economic environment and the risk characteristics of the Company’s assets. To effectively manage the Company’s capital requirements, the Company has in place a planning, budgeting and forecasting process to help determine the funds required to ensure the Company has the appropriate liquidity to meet its operating and growth objectives. The Company is dependent upon the raising of additional capital through placement of common shares, and, or debt financing to support its normal operating requirements. There is no assurance that the Company will be successful with future financing ventures, and the inability to secure such financing may have a material adverse effect on the Company’s financial condition. As at December 31, 2013 there was no externally imposed capital requirement to which the Company is subject and with which the Company has not complied.

 

16. Asset retirement obligations

 

As at December 31, 2013, the Company has no legal obligations associated with the retirement of its tangible long-lived assets that it is required to settle.

 

17. Segmented information

 

The Company has two reportable segments: gastrointestinal clinical services and addiction and rehabilitation treatments. The accounting policies of the segments are the same as those described in the summary of significant accounting policies (note 3). The Company evaluates performance based on profit or loss from operations before income taxes not including non-recurring gains and losses and foreign exchange gains and losses. The Company’s reportable segments are strategic business units that offer different services. They are managed separately because each business requires different technology, specialists and marketing strategies.

 

 

2013 Segment Results

		Gastrointestinal Clinical Services				Addiction and Rehabilitation Treatments				Corporation				Total
Revenues from external customers		$	2,276,577			$	3,685,727				—			$	5,962,304
Interest expense			16,168				231,557				149,573				397,298
Depreciation of fixed assets			68,793				114,467				—				183,260
Segment loss			(162,875	)			(712,001	)			(756,181	)			(1,631,057	)
Segment assets			580,798				611,412				1,254				1,193,464

 

2012 Segment Results

		Gastrointestinal Clinical Services				Addiction and Rehabilitation Treatments				Corporation				Total
Revenues from external customers		$	1,874,105			$	3,666,804				—			$	5,540,909
Interest expense			16,380				197,831				—				214,207
Depreciation of fixed assets			87,226				136,762				—				223,984
Segment loss			(154,990	)			(1,356,723	)			27,360				(1,484,353	)
Segment assets			531,662				593,331				—				1,124,993

 

18. Bank indebtedness

 

The Company does not have any operating line of credit facility or bank overdraft feature with any of its bank accounts.

 

19. Subsequent events

 

Further to the announcement on December 20, 2013 regarding Greenestone’s potential merger of assets, talks continue to be ongoing. There has not been a shareholders meeting as of yet to vote on proposed transaction.

 

The company closed on the balance of the private placement of equity in the first quarter of 2014. The company raised in aggregate $510,000 through a share issue at 8.5 cents a share ( 6,000,000 shares ) with a corresponding number of warrants with a conversion price of 15 cents a share.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

 

No events requiring disclosure under Item 307 and 308 of Regulation S-K occurred during the fiscal year ended December 31, 2013.

 

Item 9A. Controls and Procedures.

 

(a) Evaluation of Disclosure and Control Procedures

 

The Company’s disclosure controls and procedures are designed to ensure (i) that information required to be disclosed by the Company in the reports the Company files or submits under the Exchange Act are recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms; and (ii) that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

 

Our principal executive officer and principal financial officer evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2013, and concluded that the disclosure controls and procedures were not effective as a whole, and that the deficiency involving internal controls constituted a material weakness as discussed below.

 

(b) Management’s Assessment of Internal Control over Financial Reporting

 

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in the Exchange Act Rules 13a-15(f). A system of internal control over financial reporting is a process designed 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.

 

Under the supervision and with the participation of management, including the principal executive officer and the principal financial officer, the Company’s management has evaluated the effectiveness of its internal control over financial reporting as of December 31, 2013, based on the criteria established in a report entitled “Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission” and the interpretive guidance issued by the Commission in Release No. 34-55929. Based on this evaluation, the Company’s management, including the Company’s principal executive officer and principal financial officer, has evaluated and concluded that the Company’s internal control over financial reporting was ineffective as of December 31, 2013, and identified the following material weaknesses:

 

• There are insufficient written policies and procedures to insure the correct application of accounting and financial reporting with respect to the current requirements of GAAP and SEC disclosure requirements; and

 

Notwithstanding the existence of this material weakness in our internal control over financial reporting, our management believes that the consolidated financial statements included in its reports fairly present in all material respects the Company’s financial condition, results of operations and cash flows for the periods presented.

 

The Company will strive to document its policies and procedures for this. There was an accountant brought on in Q3 on a contractual basis to be responsible for financial filings and this has also helped in the segregation of duties.

 

This annual report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. The Company’s registered public accounting firm was not required to issue an attestation on its internal controls over financial reporting pursuant to temporary rules of the Securities and Exchange Commission. The Company will continue to evaluate the effectiveness of internal controls and procedures on an on-going basis.

 

(c) Changes in Internal Control over Financial Reporting

 

 

There were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

Item 9B. Other Information.

 

On March 20, 2013, the Company entered into an agreement with CSIR Group LLC (“CSIR”), a New York limited liability company whereby CSIR will render financial communications and public relations services to the Company. As compensation the Company agreed to pay $2,500 the first month of the agreement and $3,000 per month thereafter. The agreement is for three months and automatically renewable thereafter. In addition, the Company granted CSIR warrants to purchase up to 150,000 shares of the Company’s common stock at a price of $0.12 per share for a three year exercise period. In addition, in the event the average trading volume of the Company’s stock reaches or exceeds $100,000 per day over a ten (10) day trading period, then CSIR will receive an increase in its monthly fee to $5,000 per month and an additional warrant to purchase up to 150,000 shares of the Company’s common stock at a price of $0.12 per share for a three year exercise period.

 

PART III

 

Item 10. Directors, Executive Officers, and Corporate Governance.

 

The following table sets forth the names and ages of the members of the Company’s Board of Directors (the “Board”) and executive officers, and the positions held by each:

 

Name		Age		Position		Dir./Off. Since
Shawn E. Leon		[54]		Chief Executive Officer, President, Director		November 2010 (1)
Dr. Luke Fazio		[37]		Director		May 2010
Michael Howlett		[66]		Director		April 2011
Ken Lorimer		[58]		Chief Financial Officer		March 2013

 

(1)

Mr. Leon was elected as a director and appointed as the president in November 2010 and subsequently as the Company’s Chief Executive Officer in April 2011.

 

Set forth below is a brief description of the background and business experience of each of our current executive officers and directors.

 

Shawn E. Leon, age [54], Chief Executive Officer, President, Director

 

Shawn E. Leon has been an officer and director of the Company since November 2010 and served as the President of the Company’s subsidiaries at all times. In April 2011, Mr. Leon as appointed as the Company’s Chief Executive Officer. Prior to joining the Company, Mr. Leon held the role of President of Greenestone Clinic Inc., Leon Developments Ltd, Port Carling Inn Developments Ltd., 1871 at the Locks Developments Ltd. and JLeon Developments Ltd. since 2008, 2008, 2008, 2008 and 2006 respectively. Mr. Leon graduated with Honors in Business Administration, Wilfrid Laurier University in 1982. Mr. Leon was elected to the Board because of his prior management experience.

 

Dr. Luke Fazio, age [37], Director

 

Dr. Luke Fazio, MD, CM, FRCSC has been a member of the Company’s Board since May 2010. Dr. Fazio completed his medical school training at McGill University in Montreal in 1999. He performed his training in Urology at the University of Western Ontario and became a fellow of the Royal College of Surgeons of Canada in

 

2004. Dr. Fazio went on to a fellowship in endourology and minimally-invasive surgery at St. Michael’s Hospital in Toronto in association with the University of Toronto. Dr. Fazio has been on staff as an attending urologist at Kingston General Hospital in association with Queen’s University. Dr. Fazio is currently on staff at Humber River Hospital in Toronto, practicing general urology with a special interest in the management of urinary stones and minimally-invasive surgery. Dr. Fazio was elected to the Board because of his business and medical knowledge.

 

Michael Howlett, age [66], Director

 

Michael Howlett has served as a member of the Company’s Board since April 2011. Mr. Howlett brings more than three decades of experience in the private sector. He currently serves as the Chairman and Chief Executive Officer of Carmichael & Holmes Inc., a California based consulting firm specializing in corporate governance and communication and providing these consulting services to clients throughout the United States, Canada, England and Europe. Prior to joining Carmichael, Mr. Howlett served as Chief Executive Officer and Chairman of the Preston Group (“Preston”), an office furniture distributor. In his role at Preston, Mr. Howlett was responsible for strategic planning, operations and mergers and acquisitions. Additionally, Mr. Howlett served as the President and Chief Executive Officer of the Canadian Diabetes Association from September 2003 to April 2008, leading the organization to national and international recognition through its research, education programs and influence in changing public policy. In 2008, Mr. Howlett accepted an invitation from the Canadian Government to direct the two-year launch of the Mental Health Commission (“MHC”). Mr. Howlett developed the financial, strategic and operational framework that would support the MHC’s ten-year mandate to generate awareness and understanding of mental health. Mr. Howlett was added to the Board for his invaluable experience in the Mental Health field.

 

Ken Lorimer, age [58], Chief Financial Officer

 

Ken Lorimer was appointed as the Company’s Chief Financial Officer in March 2013. Prior to Mr. Lorimer’s appointment, he served as the Company’s primary accountant from March 2011 to March 2013, where he oversaw all of the Company’s accounting functions. Prior to joining the Company, from January 1994 to February 2011, Mr. Lorimer operated as sole practitioner providing management consulting services to various companies in industries from manufacturing to real estate development. Prior to starting his management consulting practice, from 1984 to 1993, Mr. Lorimer served as the Chief Financial Officer of Terrazzo Mosaic & Tile Company Limited, which was one of the largest commercial finishing trade companies in North America. Mr. Lorimer received his Bachelor of Business Management from Ryerson University in 1979.

 

Involvement in Certain Legal Proceedings

 

To the best of our knowledge, during the past ten years, none of the following occurred with respect to a present or former director, executive officer, or employee: (1) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (2) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) being subject to any order, judgment or decree, not subsequently reversed, suspended vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his or her involvement in any type of business, securities or banking activities; and (4) being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.

 

Compliance with Section 16(A) of the Exchange Act

 

Section 16(a) of the Exchange Act requires the Company’s directors, executive officers and persons who beneficially own 10% or more of a class of securities registered under Section 12 of the Exchange Act to file reports of beneficial ownership and changes in beneficial ownership with the SEC. Directors, executive officers and greater than 10% stockholders are required by the rules and regulations of the SEC to furnish the Company with copies of all reports filed by them in compliance with Section 16(a). At December 31, 2012, none of the officers, directors or 10% shareholders was in compliance with Section 16(a).

 

 

Based solely on our review of certain reports filed with the SEC pursuant to Section 16(a) of the Securities Exchange Act of 1934, as amended, at December 31, 2013, none of the officers, directors or 10% shareholders were in compliance with Section 16(a).

 

Code of Ethics

 

The Board adopted a Code of Business Conduct and Ethics applicable to all of our directors, officers and employees, including our Chief Executive Officer. A copy of our Code of Ethics is incorporated by reference to an exhibit in our exhibit table. Shareholders may also request a copy of the Code of Ethics from the Company’s headquarters, Attn.: Investor Relations.

 

Board Meetings and Committees

 

The Company holds regular Board meetings each quarter. There are no sub committees of the Board. All Directors act on all matters before the Board.

 

Audit Committee

 

Effective May 6, 2003, the SEC adopted rules that require that before our auditor is engaged by us to render any auditing or permitted non-audit related service, the engagement be:

 

• approved by our audit committee; or

 

• entered into pursuant to pre-approval policies and procedures established by the audit committee, provided the policies and procedures are detailed as to the particular service, the audit committee is informed of each service, and such policies and procedures do not include delegation of the audit committee’s responsibilities to management.

 

We do not currently have an audit committee. The Board pre-approves all services provided by our independent auditors. The Company does not believe that not having an audit committee will have any adverse effect on the Company’s financial statements or current operations. The Company’s management will assess whether an audit committee may be necessary in the future.

 

Item 11. Executive Compensation.

 

Executive Compensation

 

The Company’s Chief Executive Officer has received convertible notes for some of his compensation during the Company’s last two fiscal years. There have been no annuity, pension or retirement benefits paid to our officers or directors during the past two fiscal years. We currently do not have an employment agreement with the Company’s Chief Executive Officer.

 

The table below summarizes all compensation awarded to, earned by, or paid to each named executive officer for our last two completed fiscal years for all services rendered to us.

 

SUMMARY COMPENSATION TABLE

 

[insert]

 

Outstanding Equity Awards at Fiscal Year End

 

As of December 31, 2013, the Company did not have an equity compensation plan. There were no equity awards issued to executive officers during the fiscal year ended December 31, 2012.

 

 

Director Compensation

 

The following summary compensation table sets forth all compensation awarded to, earned by, or paid to the named directors by us during the year ended December 31, 2013.

 

DIRECTOR COMPENSATION TABLE
Name		Fees Earned or Paid in Cash ($)				Stock Awards ($)				Option Awards ($)				Non-Equity Incentive Plan Compensation ($)				Non-Qualified Deferred Compensation Earnings ($)				All Other Compensation ($)				Total ($)
Shawn E. Leon			233,016				—				—				—				—				—				233,016
Dr. Luke Fazio			—				—				—				—				—				—				—
Michael Howlett			—				—				—				—				—				—				—

 

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

 

The following table sets forth the beneficial ownership of our capital stock by each executive officer and director, by each person known by us to beneficially own more than five percent (5%) of any class of stock and by the executive officers and directors as a group. Except as otherwise indicated, all shares of common stock are owned directly and the percentage shown is based on 46,815,564 shares of common Stock issued and outstanding as of March 19, 2014.

 

Title of Class	Name and Address	Current Ownership	Current Ownership Percentage (1)	Amount of Beneficial Ownership (2)	Beneficial Ownership Percentage (3)
Current Executive Officers & Directors:
Common Stock	Shawn E. Leon Chief Executive Officer, President, Director 46 Fairway Heights Drive Thornhill, Ontario	6,635,150	14.2%	8,935,150 (4)	19.1%
Common Stock	Dr. Luke Fazio Director 200 Fairview Road Mississauga, Ontario	500,000	1.1%	500,000	1.1%
Common Stock	Michael Howlett Director 2265 Uxbridge Pickering Road Claremont, Ontario	0	0%	0	0%
Common Stock	Ken Lorimer 25-2175 Stavebank Road Mississauga, Ontario	0	0%	250,720 (5)	.5%
Total of All Current Officers and Directors		7,135,150	15.2%	9,685,870	20.7%
5% Beneficial Owners:
Common Stock	Irwin Zalcberg	6,300,000	13.5%	9,600,000 (6)	20.5%
Total of All Current Officers, Directors and 5% Owners		13,435,150	28.7%	19,285,870	41.2%

 

(1)

This percentage is based on 46,815,564 shares of common stock outstanding as of March 19, 2014.

 

 

 

(2)

As used in this table, “beneficial ownership” means the sole or shared power to vote, or to direct the voting of, a security, or the sole or shared investment power with respect to a security (i.e., the power to dispose of, or to direct the disposition of, a security). In addition, for purposes of this table, a person is deemed, as of any date, to have “beneficial ownership” of any security that such person has the right to acquire within 60 days after such date.

 

(3)

Based on 46,815,564 shares of common stock outstanding as of March 19, 2014, and including those shares beneficially owned by the Company’s officers and directors, respectively, as described below.

 

(4)

This total includes 1,150,000 shares of common stock held by Eileen Greene, spouse of Shawn Leon and 1,150,000 warrants to purchase common stock also held by Eileen Greene.

 

(5)

This total of 250,720 is in the name of Patricia Lorimer, spouse of Ken Lorimer.

 

(6)

This total includes 5,500,000 shares by Irwin Zalcberg Profit Sharing Plan and 2,000,000 warrants owned by Irwin Zalcberg Profit Sharing Plan.

 

Item 13. Certain Relationships and Related Transactions, and Director Independence.

 

Related Transactions

 

The Bala Facility is in Bala, Ontario at 3571 Highway 169. The property is 43 acres in size and contains approximately 48,000 square feet of buildings. The property is leased from Cranberry and the term of the lease is for five years with renewal options at the end of the first and second years of the five year term. The lease is a net lease and the Company has a non-disturbance agreement from the mortgage lenders on the property for the whole term. Further, the Company has an option to purchase the property at any time during the term of the lease at appraised values with a minimum purchase value of $4.5 million dollars and a maximum purchase value of $8.0 million dollars during the first two years of the term and $10.0 million dollars during the last three years of the term. Shawn Leon, the Company’s Chief Executive Officer is also the managing partner of Cranberry.

 

As of December 31, 2013, a total of $637,347 is owed to executive officers or their affiliates for loans payable, as detailed in the below table:

 

Name		Total Amount Owed ($)
Greenestone Clinic, Inc.		$	-
Shawn E. Leon (1 & 2)		$	[413,078]
Dr. Jay Parekh (3)		$	[224,269]

 

(1)

Shawn E. Leon, the Company’s Chief Executive Officer, is also the Chief Executive Officer of Greenestone Clinic, Inc.

 

(2)

This amount owed is represented in the form of loans and management fees.

 

(3)

Dr. Jay Parekh is a 5% holder of the Company’s common stock and an officer of a Company subsidiary; and amounts consist of advances and loans

 

 

 

Director Independence

 

The common stock of the Company is currently quoted on the OTCBB, a quotation system which currently does not have director independence requirements. On an annual basis, each director and executive officer will be obligated to disclose any transactions with the Company in which a director or executive officer, or any member of his or her immediate family, have a direct or indirect material interest in accordance with Item 407(a) of Regulation S-K. Following completion of these disclosures, the Board will make an annual determination as to the independence of each director using the current standards for “independence” that satisfy the criteria for the NASDAQ Stock Market, Inc.

 

As of December 31, 2013, the Board determined that the following directors are independent under these standards:

 

Dr. Luke Fazio and Michael Howlett

 

Item 14. Principal Accountant Fees and Services.

 

Audit Fees

 

Audit Fees consist of assurance and related services that are reasonably related to the performance of the audit or review of our financial statements. This category includes fees related to the performance of audits and attest services not required by statute or regulations, and accounts consultations regarding the application of GAAP to proposed transactions. The aggregate Audit Fees billed for the fiscal years ended December 31, 2013 and 2012, were $ 75,725 and $ 85,970, respectively.

 

Audit Related Fees

 

The aggregate fees billed for assurance and related services by our principal accountant that are reasonably related to the performance of the audit or review of our financial statements (other than those previously reported above) for the fiscal years ended December 31, 2013 and 2012, were $0 and $0, respectively.

 

Tax Fees

 

Tax Fees consist of the aggregate fees billed for professional services rendered by our principal accounts for tax compliance, tax advice, and tax planning. These services include preparation for federal and state income tax returns. The aggregate Tax Fees billed for the fiscal years ended December 31, 2013 and 2012, were $0 and $0, respectively.

 

All Other Fees

 

We did not incur any other fees billed by auditors for services rendered to our Company, other than the services listed above for the fiscal years ended December 31, 2013 and 2012, respectively.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PART IV

 

Item 15. Exhibits, Financial Statement Schedules.

 

(a)	Financial Statements and Schedules

 

See Item 8.

 

(b)

Exhibits

 

EXHIBIT INDEX

 

Incorporated by Reference

Exhibit No.

Description

Form

SEC File No.

Exhibit

Filing Date

Filed Herewith

Furnished Herewith

2.1

Agreement and Plan of Merger, dated January 3, 1994, by and between NNRC, Inc. and Nova Natural Resources Corporation

x

2.2

Articles of Merger (as filed with the Secretary of State of Colorado on February 21, 1995)

x

3.1

Articles of Incorporation of NNRC, Inc. (as filed with the Secretary of State of Colorado on April 1, 1993)

x

3.2

Articles of Amendment to the Articles of Incorporation of Nova Natural Resources, Inc. (as filed with the Secretary of State of Colorado on May 8, 2012)

x

3.3

Articles of Amendment to the Articles of Incorporation of Greenestone Healthcare Corporation (as filed with the Secretary of State of Colorado on March 26, 2013)

8-K

000-15078

3.1

March 29, 2013

3.4

Amended and Restated Bylaws of Greenestone Healthcare Corporation

8-K

000-15078

3.2

March 29, 2013

10.1

Lease Agreement, dated April 1, 2011, by and between Cranberry Cove Holdings Ltd. and Greenestone Clinic Muskoka Inc.

x

31.1

Certification by the Principal Executive Officer of registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a))

x

31.2

Certification by the Principal Financial Officer of registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a))

x

32.1

Certification by the Principal Executive Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

x

32.2

Certification by the Principal Financial Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

x

101.INS

INS XBRL Instance Document

x

101.SCH

SCH XBRL Schema Document

x

101.CAL

CAL XBRL Calculation Linkbase Document

x

101.DEF

DEF XBRL Definition Linkbase Document

x

101.LAB

LAB XBRL Label Linkbase Document

x

101.PRE

PRE XBRL Presentation Linkbase Document

x

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SIGNATURE

 

Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

			GREENESTONE HEALTHCARE CORP.
Date: March 28, 2014			By:	/s/ Shawn E. Leon
				Name: Shawn E. Leon
				Title: Chief Executive Officer (Principal Executive Officer)

 

 

Date: March 28, 2014			By:	/s/ Ken Lorimer
				Name: Ken Lorimer
				Title: Chief Financial Officer (Principal Financial Officer) (Principal Accounting Officer)

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Name		Position		Date
/s/ Shawn E. Leon		Chief Executive Officer (Principal Executive Officer)		March 28, 2014
Shawn Leon		President, Director
/s/ Dr. Luke Fazio		Director		March 28, 2014
Dr. Luke Fazio
/s/ Michael Howlett		Director		March 28, 2014
Michael Howlett

 

 

/s/ Ken Lorimer		Chief Financial Officer (Principal Financial Officer)		March 28, 2014
Ken Lorimer		(Principal Accounting Officer)