Attached files
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| EX-32.1 - CERTIFICATION - Greenhouse Solutions, Inc. | grsu_ex321.htm |
| EX-31.1 - CERTIFICATION - Greenhouse Solutions, Inc. | grsu_ex311.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
| x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2017 |
or
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________to _____________ |
000-54759
Commission file number
| Greenhouse Solutions Inc. |
| (Exact name of registrant as specified in its charter) |
| Nevada |
| 45-2094634 |
| State or other jurisdiction of incorporation or organization |
| (I.R.S. Employer Identification No.) |
|
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| 600 17th Street Suite 2800 South Denver, CO |
| 80202-5428 |
| (Address of principal executive offices) |
| (Zip Code) |
(720) 437-8846
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Common
Title of each class
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. o Yes x No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. o Yes x No
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 past 90 days. o Yes x 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). o Yes x 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. o Yes x No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | o | Accelerated filer | o |
| Non-accelerated filer | o | Smaller reporting company | x |
| (Do not check if a smaller reporting company) | Emerging growth company | ¨ | |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). o Yes x No
The aggregate market value of our common shares of voting stock held by non-affiliates of our Company at September 30, 2016, computed by reference to the market price ($0.079) as of the last business day of the registrants most recently completed fiscal quarter (September 30, 2016), was $4,143,880.54.
As of September 24, 2018 there were 95,709,485 common shares, par value $0.0001, issued and outstanding.
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FORWARD LOOKING STATEMENTS
This form 10-K contains forward-looking statements. Forward-looking statements are projections of events, revenues, income, future economic performance or management’s plans and objectives for our future operations. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled “Risk Factors” and the risks set out below, any of which may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These risks include, by way of example and not in limitation:
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| · | the uncertainty of profitability based upon our history of losses; |
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| · | risks related to failure to obtain adequate financing on a timely basis and on acceptable terms to continue as going concern; |
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| · | risks related to our operations and |
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| · | other risks and uncertainties related to our business plan and business strategy. |
This list is not an exhaustive list of the factors that may affect any of our forward-looking statements. These and other factors should be considered carefully and readers should not place undue reliance on our forward-looking statements. Forward looking statements are made based on management’s beliefs, estimates and opinions on the date the statements are made and we undertake no obligation to update forward-looking statements if these beliefs, estimates and opinions or other circumstances should change. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
Our financial statements are stated in United States dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. All references to “common stock” refer to the common shares in our capital stock.
GENERAL
The following is a summary of some of the information contained in this document. Unless the context requires otherwise, references in this document to “our Company,” “us,” “we,” “our.” “Greenhouse Solutions" or the "Company" are to Greenhouse Solutions, Inc.
DESCRIPTION OF BUSINESS
Our Company was incorporated under the laws of the State of Nevada on April 8, 2009. We were previously involved in the sale and distribution of urban gardening products and greenhouses in the North American market, but we are currently expanding the business into the development, marketing, production, and sale of hemp oil enhanced products for both personal health use and canine use, in addition to probiotic-based nutraceuticals. As a nutraceutical company, we are engaging in the acquisition, licensing and commercialization of nutraceutical products and technologies. We seek strategic licensing partnerships to reduce the risks associated with the drug development process. We maintain a website at www.ghsolutionsinc.com. Such website is not incorporated into or a part of this filing. We are no longer pursuing our greenhouse design and consulting operations.
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COMPANY OVERVIEW
NUTRACEUTICAL PRODUCTS
We previously expanded our business model with efforts in the development, marketing, production, and sales of hemp oil products for both the personal health and companion pet markets utilizing a licensed probiotic delivery system (US Patent #6,080,401) and other licensed formulas. Hemp is naturally occurring from both the cannabis and hemp species of the Cannabis Sativa plant. The extracted oil is non-psychoactive and is actively being researched and investigated by others for use in a number of conditions, including: Dravet Syndrome, Multiple Sclerosis (MS), depression and schizophrenia. As research continues into the broad spectrum of uses for hemp oil products, We intend to produce and sell various products for the wellness marketplace that utilize hemp oil and Phyto cannabinoids.
In furtherance of our objectives, on November 5, 2015, the Company signed a Joint Venture Agreement with KOIOS, LLC to develop and market a hemp protein-based energy drink utilizing KOIOS proprietary formulae.
On November 19, 2015, the Company signed a Master License Agreement with Dr. M.S. Reddy. Dr. Reddy has developed intellectual property for the nutritional industries pertaining exclusively to the use of hemp and hemp related products in combination with the probiotics. The Company has agreed to acquire an exclusive license from Dr. Reddy for use of the intellectual property in the products and proprietary formulations of products for marketing. In consideration for the license, the Company issued Dr. Reddy 3,000,000 shares of the Company's restricted common stock. Dr. Reddy shall be paid 20% of the net profit from sales of each quantity of licensed products sold on a 45 day trailing basis and Dr. Reddy may demand accounting at any time.
KOIOS JOINT VENTURE
The Company entered into a Joint Venture with KOIOS, LLC to develop and market a hemp protein-based energy drink. Koios is a nootropic supplement developer, with products that support cognitive function and mental clarity. Together with Koios, we developed a new addition to its beverage product line called “Raspberry Wonder,” an infusion of its proprietary and successful blend of nootropics with hemp oil. Hemp seed oil generally contains a 3:1 ratio of Omega 6 (linolei/LA) to Omega 3 (alpha-linoleic/LNA) essential fatty acids, which has been suggested as a ratio that may increase long-term human nutrition. In addition, hemp seed oil also contains smaller amounts of three other polyunsaturated fatty acids in gamma-linolenic acid (GLA), oleic acid and stearidonic acid. This essential fatty acid combination is thought to be unique among edible oil seeds. Raspberry Wonder is marketed as a dietary supplement to enhance brain function, boost energy and burn fat, the Raspberry Wonder is available to purchase through Koios’ website, www.mentaltitan.com, as well as at stores throughout the country. Work is underway now to develop the next generation of Raspberry Wonder, which will use the Company’s patent-protected process to suspend active probiotics in the beverage.
In order to market the product, the Company and Koios ran a promotion and as a result, we had identified target distributors who indicated an interest in distributing our product. Among them are:
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| · | Europa Sports Products Inc. (“Europa Sports”) recently merged with Lone Star distribution, making them the largest distributor of Sports Nutrition Products in the country, representing over 50,000 locations. Our target is that the product will arrive at Koios in the last week in August or first week of September. |
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| o | The following is a selection of stores, via Europa Sports, that may stock Raspberry Wonder for distribution: |
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| § | Max Muscle Sports Nutrition (nationwide) |
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| § | Nutrition Zone |
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| § | Nutrition Warehouse |
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| § | Power Nutrition |
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| § | Hi-Health (45 locations) |
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| § | Gold’s Gym |
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| § | Powerhouse Gym |
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| § | Smoothie King (nationwide) |
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| § | NutriShop |
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| § | Ultimate Sport Nutrition |
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| § | Nutrition Depot |
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| § | Anytime Fitness |
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| § | Complete Nutrition |
· ·
Muscle Foods USA, the second largest sports nutrition Distributor in the country, has submitted an order for two pallets of the product when it arrives at Koios. KeHE Distributors, LLC, one of the largest natural grocery distributors in the world, is Koios’ distribution channel to large and medium size grocery stores throughout the country. KeHE will receive roughly two pallets upon arrival at Koios facilities for distribution.
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| o | Stores in which Koios is currently sold that are serviced by KeHE and that may also be carrying the Raspberry Wonder beverage with the Company’s hemp oil include: |
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| § | Sunset Foods |
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| § | Pete’s Fresh Markets |
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| § | Mazyerecks |
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| § | Tony's Fresh Market |
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| § | Better Health Stores (Koios is currently carried in 14 of their locations and they have agreed to bring in Raspberry Wonder) |
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| § | Natural Health Center |
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| § | Joseph’s Market |
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| § | Angelo Caputo’s Fresh Markets |
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| § | Harvest Health Foods |
Our joint venture, Koios, uses a brokerage firm to help facilitate new store openings along with adding new stores in the Midwest region. Koios is focused on the Midwest region because main competitors do not have a presence in these areas and there is a strong desire for natural and organic alternatives.
Koios has also invested significant time and effort into creating a user-friendly and attractive online environment, gaining approximately 6,000 Instagram followers and approximately 9,000 Facebook followers.
Koios continues to expand thier ambassador network and drive traffic to the brand. Currently, Koios athletes and ambassadors are estimated to have a combined audience of over a million people. Koios has continued to tap into the world of CrossFit and e-sports. Koios recently attended the CrossFit games, which led to approximately 20 new CrossFit gyms that carry Koios products and that will also carry the Raspberry Wonder beverage with the Company’s hemp oil.
Koios recently entered into an agreement with a Denver-based distributor, Hyperion Wholesale. Koios believes that this new relationship we will add over 300 new stores that carry their products, including Raspberry Wonder, by the end of 2016. As a result of the relationship with Hyperion, ten new 7-Eleven stores and several other convenience stores across Colorado’s Front Range.
WishingUWell is Koios’ online distributor, with a web presence on Amazon.com.
OTHER PRODUCTS
The Company intends to generate future revenues from sales of our hemp oil enhanced products for both the personal health and companion pet markets, as well as seeking out other joint venture opportunities in which our hemp oil can be used.
The Company is working with a major health supplement developer to produce water-soluble, probiotic infused Phytocannabinoid oils in an ingredient for nutraceutical product manufacturers. The water solubility of probiotics, an exclusively licensed innovation of the Company, means that this ingredient could be integrated into any number of formulations, including capsules and foods, as well as beverages. A major American university is engaged in a full study of the compound to establish the health benefits of this new ingredient. With this, the Company is also engaged in research and development of a new probiotic hemp oil-infused cold-brew coffee beverage.
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Due to the uncertainty of our ability to generate sufficient revenues from our operating activities and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due, in their report on our financial statements for the year ended March 31, 2017 and 2016, our registered independent auditors included additional comments indicating concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that led to this disclosure by our registered independent auditors. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
CORPORATE STRATEGY
We have shifted our focus entirely to nutraceutical products for humans and animals.
NUTRACEUTICAL PRODUCTS
Cannabidiol is a naturally-occurring substance found in both the cannabis and hemp species of the Cannabis Sativa plant and is generally marketed through hemp oil as a nutritional supplement. The extracted oil is non-psychoactive and is being researched by others for possible prescription for a number of conditions, including: Dravet Syndrom, Multiple Sclerosis (MS), depression, and schizophrenia. As research continues into the broad spectrum of uses for hemp oil derived products, we intend to seek to develop various products for the wellness marketplace that may utilize the ingredient.
We have begun to develop, market, produce, and sell hemp oil products, through the Koios Joint Venture, for personal health and may also enter the companion pet market, some of which may utilize a licensed probiotic delivery system (US Patent #6,080,401). We acquired a limited license to use the above referenced Patent developed by scientist Dr. M.S. Reddy for hemp oil and cannabis based products. Dr. Reddy's patent covers a wide variety of therapeutic and nutraceutical cannabis and industrial hemp products. We also acquired exclusive license rights to a number of proprietary nutraceutical formulations from MGRD, Inc., owned by Officer and Directors Rik Deitsch.
Dr. Reddy's licensed patent includes the introduction of probiotics as part of the delivery method for certain therapeutics. Probiotics are bacteria or micro-organisms that are beneficial to the health of an individual. They are essentially an opposite of antibiotics, which are inhibitory to other bacteria, including probiotic bacteria. Probiotics are predominately lactic acid producing bacteria. In contrast to herbal medicine, probiotics developed as a science only recently; and this science remains unacknowledged by many medical practitioners. One of the earliest discoveries that bacteria can improve human health was by Dr. Metchnikoff, a Russian scientist, in 1907. Since then, there have been favorable reports about probiotics’ utility, including, for example, that lactobacillus acidophilus reduces colon cancer in humans. In 2011, experts at Yale University reviewed the research. They concluded that probiotics are most effective for, but not limited to: Treating childhood diarrhea, treating ulcerative colitis, treating necrotizing enterocolitis (a type of infection and inflammation of the intestines mostly seen in infants), preventing antibiotic-associated diarrhea and infectious diarrhea, preventing pouchitis (an inflammation of the intestines that can follow intestinal surgery), treating and preventing eczema associated with cow’s milk allergy, helping the immune system, treating symptoms of irritable bowel syndrome, treating vaginitis, treating diarrhea caused by C. difficile bacteria, and treating Crohn’s disease.
The use of pre- and pro-biotics have become commonplace in the last few years, with research providing evidence for their benefit in the treatment and prevention of a variety of gastrointestinal issues, as well as immune system dysfunctions. Probiotics are bacteria or micro-organisms that are beneficial to the health of an individual. The license includes the introduction of probiotics as part of the delivery method for certain therapeutic products derived from hemp or cannabis (at this time being only CBD without THC). We intend to develop different therapeutic products with the help of probiotics, with the design to deliver therapy more efficiently and at lower dosages, intending to reduce possible complications, as well as increasing efficacy.
The Company intends to pursue different products that incorporate both hemp oil, and the licensed water-soluble probiotics, whether we produce them or we enter other joint ventures to achieve our goals.
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ONLINE RETAIL OF PRODUCTS
We intend to expand our online marketing of our products through our website, in addition to promoting the sales of our joint venture products through our website.
Strategic Focus
Our corporate strategy in developing our operations is as follows:
To design and produce hemp oil enhanced nutraceutical products for sale to the general public.
We intend to create hemp oil products that contain formulations unseen in the current market in the nutraceuticals industry. We believe that our formulations will set us apart from competing products for promoting health.
We have a license agreement for exclusive rights to formulations for hemp oil products, intended for, subject to performance, treating various symptoms of diseases and ailments. We intend to begin manufacturing and marketing of these hemp oil products with expansion of products over the next five years.
To further the joint venture relationship with Koios and seek other ventures where possible.
We plan to expand our relationship with Koios where possible, including potentially adding the probiotic aspect to the beverage selection, and seek out other opportunities for joint ventures with different product categories.
COMPETITION, MARKETS, REGULATION AND TAXATION
COMPETITION
Nutraceutical Industry
The nutraceutical industry is subject to significant competition and pricing pressures. We may experience significant competitive pricing pressures as well as competitive products. Several significant competitors may offer products with prices that may match or are lower than ours. We believe that the products we offer are generally competitive with those offered by other supplement and nutraceutical companies; however, we believe that our products are unique and will set themselves apart from competing products. It is possible that one or more of our competitors could develop a significant research advantage over us that allows them to provide superior products or pricing, which could put us at a competitive disadvantage. Continued pricing pressure or improvements in research and shifts in customer preferences away from natural supplements could adversely impact our customer base or pricing structure and have a material and adverse effect on our business, financial condition, results of operations and cash flows.
MARKETS
The user market for hemp oil products and other nutraceuticals is generally an individual who has a specific health issue where a health advisor or distributor has provided or directed that user to our product. The market for nutraceuticals is subject to many influential factors, but the main issues affecting the market are consumer spending and government regulation.
The market for greenhouses includes household consumers and agricultural businesses alike. The market for greenhouses may see increased demand amongst agricultural businesses, particularly in states like Colorado, Oregon, and Washington, with the legalization of cannabis.
REGULATION OF NUTRACEUTICALS
The formulation, manufacturing, processing, labeling, packaging, advertising and distribution of our products are subject to regulation by several federal agencies, including the Food and Drug Administration (“FDA”), the Federal Trade Commission (“FTC”), the Consumer Product Safety Commission, the U.S. Department of Agriculture (“USDA”) and the Environmental Protection Agency (“EPA”). These activities are also regulated by various agencies of the states and localities in which our products are sold. The FDA regulates the processing, formulation, safety, manufacture, packaging, labeling and distribution of dietary supplements (including vitamins, minerals, and herbs) and cosmetics, whereas the FTC has jurisdiction to regulate the advertising of these products.
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The Dietary Supplement Health and Education Act of 1994 (“DSHEA”) defines “dietary supplements” as vitamins, minerals, herbs, other botanicals, amino acids and other dietary substances for human use to supplement the diet, as well as concentrates, metabolites, constituents, extracts or combinations of such dietary ingredients. New dietary ingredients (those not marketed in the U.S. prior to October 15, 1994) must be the subject of a notification submitted to the FDA unless the ingredient has been “present in the food supply as an article used for food” without being “chemically altered.” The notification must be submitted to the FDA at least 75 days before the initial marketing of the new dietary ingredient. The FDA has issued guidance regarding the content of a new dietary ingredient notification. Should the FDA choose to enforce the guidance, it could have a negative effect on the innovation and continued marketing of dietary supplements; the FDA may not accept any particular evidence of safety for any new dietary ingredient, preventing the marketing of those dietary ingredients.
DSHEA permits “statements of nutritional support” to be included in labeling for dietary supplements without premarket FDA approval, however, such statements must be submitted within 30 days of marketing and must bear a label disclosure that “This statement has not been evaluated by the Food and Drug Administration. This product is not intended to diagnose, treat, cure, or prevent any disease.” Statements of nutritional support may describe how a particular dietary ingredient affects the structure, function or general well-being of the body, or the mechanism of action by which a dietary ingredient may affect body structure, function or well-being, but may not expressly or implicitly represent that a dietary supplement will diagnose, cure, mitigate, treat, or prevent a disease. A company using such statements must possess scientific evidence substantiating that the statement is truthful and not misleading. Any statements determined to be outside of these guidelines or unsubstantiated would be prevented from being used.
DSHEA also provides that so-called “third-party literature,” a peer-reviewed scientific publication linking a particular dietary ingredient with health benefits, may be used “in connection with the sale of a dietary supplement to consumers” without the literature being subject to regulation as labeling. Third-party literature must not be false or misleading; the literature may not “promote” a particular manufacturer or brand of dietary supplement; and a balanced view of the available scientific information on the subject matter must be presented. Any dissemination of non-compliant literature could subject our product to regulatory action as an illegal drug.
The FDA’s Good Manufacturing Practices (“GMP”) regulations require dietary supplements to be prepared, packaged and held in compliance with strict rules, and require quality control provisions similar to those in the GMP regulations for drugs. The FDA could in the future choose to inspect one of our facilities for compliance with these regulations and could cause non-compliant products made or held in the facility to be subject to FDA enforcement actions.
The FDA has broad authority to enforce the provisions of the FDCA and their regulation of foods, dietary supplements and cosmetics may increase or become more restrictive in the future. Additional legislation could be passed which would impose substantial new regulatory requirements for dietary supplements, potentially raising our costs and hindering our business.
Our advertising is subject to regulation by the Federal Trade Commission, or FTC, under the Federal Trade Commission Act. In recent years the FTC has initiated numerous investigations of dietary supplement and weight loss products and companies. Additionally, some states also permit advertising and labeling laws to be enforced by private attorney generals, who may seek relief for consumers, seek class action certifications, seek class wide damages and product recalls of products sold by us. Any of these types of adverse actions against us by governmental authorities or private litigants could have a material adverse effect on our business, financial condition and results of operations.
In addition to FDA and FTC regulations, our products may face further regulation under the Single Convention on Narcotic Drugs 1961, which governs international trade and domestic control of narcotic substances including cannabis extracts. Countries may interpret and implement their treaty obligations in a way that creates a legal obstacle to our obtaining marketing approval for our products in those countries. These countries may not be willing or able to amend or otherwise modify their laws and regulations to permit our products to be marketed, or achieving such amendments to the laws and regulations may take a prolonged period of time. In the case of countries with similar obstacles, we would be unable to market our product candidates in countries in the near future or perhaps at all if the laws and regulations in those countries do not change.
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CONTROLLED SUBSTANCE REGULATION
At some point our products may be developed and be subject to U.S. controlled substance laws and regulations and failure to comply with these laws and regulations, or the cost of compliance with these laws and regulations, may adversely affect the results of our business operations, both during clinical development and post approval, and our financial condition.
Certain products we may develop could contain controlled substances as defined in the federal Controlled Substances Act of 1970, or CSA. Controlled substances that are pharmaceutical products are subject to a high degree of regulation under the CSA, which establishes, among other things, certain registration, manufacturing quotas, security, recordkeeping, reporting, import, export and other requirements administered by the DEA. The DEA classifies controlled substances into five schedules: Schedule I, II, III, IV or V substances. Schedule I substances by definition have a high potential for abuse, no currently “accepted medical use” in the United States, lack accepted safety for use under medical supervision, and may not be prescribed, marketed or sold in the United States. Pharmaceutical products approved for use in the United States may be listed as Schedule II, III, IV or V, with Schedule II substances considered to present the highest potential for abuse or dependence and Schedule V substances the lowest relative risk of abuse among such substances. Schedule I and II drugs are subject to the strictest controls under the CSA, including manufacturing and procurement quotas, security requirements and criteria for importation. In addition, dispensing of Schedule II drugs is further restricted. For example, they may not be refilled without a new prescription. We do not intend to produce “controlled substances” at this time, due to regulatory complications.
RESEARCH AND DEVELOPMENT ACTIVITIES
Other than time spent researching our proposed business we have not spent any funds on research and development activities to date. We do not currently plan to spend any funds on research and development activities in the future.
COMPLIANCE WITH ENVIRONMENTAL LAWS
As we begin to manufacture nutraceutical products, we or our contract manufacturers will become subject to numerous federal, state, local and foreign laws and regulations governing our operations, including the handling, transportation and disposal of our products and our non-hazardous and hazardous substances and wastes, as well as emissions and discharges into the environment, including discharges to air, surface water and groundwater. Failure to comply with those laws and regulations could result in costs for corrective action, penalties or the imposition of other liabilities. Changes in environmental laws or the interpretation thereof or the development of new facts could also cause us to incur additional capital and operational expenditures to maintain compliance with environmental laws and regulations. We will also become subject to laws and regulations that impose liability and cleanup responsibility for releases of hazardous substances into the environment without regard to fault or knowledge about the condition or action causing the liability. Failure to comply with environmental laws could have a material adverse effect on our business or financial performance.
EMPLOYEES
We have one full-time employee at the present time, John Michak, our COO. Our officers and directors are responsible for planning, developing and operational duties, and will continue to do so throughout the early stages of our growth. We have no intention of hiring additional employees until we have sufficient, reliable revenue from our operations. We do not have written employment agreements with any of our officers or directors at this time.
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REPORTS TO SECURITIES HOLDERS
We provide an annual report that includes audited financial information to our shareholders. We will make our financial information equally available to any interested parties or investors through compliance with the disclosure rules for a small business issuer under the Securities Exchange Act of 1934. We are subject to disclosure filing requirements including filing Form 10K annually and Form 10Q quarterly. In addition, we will file Form 8K and other proxy and information statements from time to time as required. We do not intend to voluntarily file the above reports in the event that our obligation to file such reports is suspended under the Exchange Act. The public may read and copy any materials that we file with the Securities and Exchange Commission, ("SEC"), at the SEC's Public Reference Room at 100 F Street NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.
FORWARD LOOKING STATEMENTS
THIS DOCUMENT INCLUDES FORWARD-LOOKING STATEMENTS, INCLUDING, WITHOUT LIMITATION, STATEMENTS RELATING TO GREENHOUSE SOLUTIONS’ PLANS, STRATEGIES, OBJECTIVES, EXPECTATIONS, INTENTIONS AND ADEQUACY OF RESOURCES. THESE FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES, AND OTHER FACTORS THAT MAY CAUSE OUR COMPANY'S ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY THE FORWARD-LOOKING STATEMENTS. THESE FACTORS INCLUDE, AMONG OTHERS, THE FOLLOWING: OUR ABILITY OF TO IMPLEMENT OUR BUSINESS STRATEGY; ABILITY TO OBTAIN ADDITIONAL FINANCING; GREENHOUSE SOLUTIONS’ LIMITED OPERATING HISTORY; UNKNOWN LIABILITIES ASSOCIATED WITH FUTURE ACQUISITIONS; ABILITY TO MANAGE GROWTH; SIGNIFICANT COMPETITION; ABILITY TO ATTRACT AND RETAIN TALENTED EMPLOYEES; AND FUTURE GOVERNMENT REGULATIONS; AND OTHER FACTORS DESCRIBED IN THIS FILING OR IN OTHER OF GREENHOUSE SOLUTIONS’ FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION. GREENHOUSE SOLUTIONS IS UNDER NO OBLIGATION, TO PUBLICLY UPDATE OR REVISE ANY FORWARD-LOOKING STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE.
RISKS RELATED TO OUR COMPANY AND THE BUSINESS
We sell our products and services in highly competitive markets, which results in pressure on our profit margins and limits our ability to maintain or increase the market share of our services.
The nutraceutical industry is subject to significant competition and pricing pressures. We will experience significant competitive pricing pressures as well as competitive products. Several significant competitors offer products with prices that may match or are lower than ours. We believe that the products we offer are generally competitive with those offered by other supplement and nutraceutical companies. It is possible that one or more of our competitors could develop a significant research advantage over us that allows them to provide superior products or pricing, which could put us at a competitive disadvantage. Continued pricing pressure or improvements in research and shifts in customer preferences away from natural supplements could adversely impact our customer base or pricing structure and have a material and adverse effect on our business, financial condition, results of operations and cash flows.
Our future growth is largely dependent upon our ability to successfully compete with new and existing competitors by developing or acquiring new products that achieve market acceptance with acceptable margins.
Our business operates in markets that are characterized by rapidly changing products, evolving industry standards and potential new entrants. For example, a number of new companies with innovative products, which promise significant health benefits are established every year and are competitive with our products. If these companies gain market acceptance, our ability to grow our business could be materially and adversely affected. Accordingly, our future success depends upon a number of factors, including our ability to accomplish the following: identify emerging trends in our target end-markets; develop, acquire and maintain competitive products; enhance our products by adding innovative features that differentiate us from our competitors; and develop or acquire and bring products to market quickly and cost-effectively. Our ability to develop or acquire new products based on quality research can affect our competitive position and requires the investment of significant resources. These acquisitions and development efforts divert resources from other potential investments in our businesses, and they may not lead to the development of new research or products on a timely basis. New or enhanced products may not satisfy consumer preferences and potential product failures may cause consumers to reject these products. As a result, these products may not achieve market acceptance and our brand image could suffer. In addition, our competitors may introduce superior designs or business strategies, impairing our brand and the desirability of our products, which may cause consumers to defer or forego purchases of our products or services. Also, the markets for our products and services may not develop or grow as we anticipate. The failure of our products to gain market acceptance, the potential for product defects or the obsolescence of our products could significantly reduce our revenue, increase our operating costs or otherwise adversely affect our business, financial condition, results of operations or cash flows.
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Adverse publicity or consumer perception of our products and any similar products distributed by others could harm our reputation and adversely affect our sales and revenues.
We believe we are highly dependent upon positive consumer perceptions of the safety and quality of our products as well as similar products distributed by other health and wellness companies. Consumer perception of health products, nutrition supplements and our products in particular can be substantially influenced by scientific research or findings, national media attention and other publicity about product use. Adverse publicity from these sources regarding the safety, quality or efficacy of nutritional supplements and our products could harm our reputation and results of operations. The mere publication of news articles or reports asserting that such products may be harmful or questioning their efficacy could have a material adverse effect on our business, financial condition and results of operations, regardless of whether such news articles or reports are scientifically supported or whether the claimed harmful effects would be present at the dosages recommended for such products.
Our products, or elements of our products, may be shipped from overseas into the United States and any number of problems may arise during the transport.
Due to the fact that hemp is not allowed federally to be grown on American soil, it must be shipped from overseas, and the Company plans to do so through the use of cargo ships. This includes any number of inherent risks involved in travel. These are unlikely scenarios, but the ship may lose its cargo overboard, the ship itself may be lost, storms or other factors may cause loss of or damage to the products. If our competitors are able to deliver products when we cannot, our reputation may be damaged, and we may lose customers to our competitors.
Only select states allow for the growing of hemp, even without the budding of marijuana.
It is currently very difficult to grow hemp in the United States. Despite the enacting of several new state laws, it is still not legal on a federal level to grow hemp on American soil. This means that the acquisition of hemp is more difficult, and it must be shipped from foreign countries, causing a period between when an order is placed and when the product arrives from overseas. It is possible that there may be a greater demand than there is a supply from overseas suppliers and, thus, a backlog may develop. This is not expected or anticipated, but it is a remote possibility. At this time, we do not have plans to grow hemp in the United States.
We intend to purchase hemp oil from China, however it is possible that their prices, availability or any number of other factors may change.
It is possible that our Chinese suppliers may face bankruptcy or some form of litigation in the future. Although the company has no reasonable expectation that this is the case, such problems or any others may arise that could pose problems for the Company. It is also possible that the supplier may, for any number of reasons, change the price of their products and thus alter our profit margins. If any undesirable issues occur with an overseas supplier, then the Company may be forced to find another supplier, which would create at least a minimal delay in service. In addition, it is possible that the supplier may not have the necessary supply to meet the demand for the Company’s products. At this time, we have not entered into a Supplier Agreement and we do not have a formal or informal arrangement with a supplier to supply hemp.
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Due to legal controversy over the Cannabis plant within the United States, we face challenges getting our products into stores.
The majority of our products are intended for personal use. Our Company intends to release products that contain no THC and that are legal for ingestion within the U.S., however, we anticipate that we may face scrutiny and run into issues getting our products into stores due to hesitation by food chains to carry any product even affiliated with the cannabis plant.
The U.S. laws pertaining to the importation and exportation of hemp-based products may adversely affect our ability to fully implement our business plan.
In the United States today the U.S. Customs Service has a “zero tolerance standard” for the importation of industrial hemp. What this means is that a product cannot have any potentially dangerous substances contained in it or it will be considered adulterated and unfit for human consumption, and thus illegal to possess or use per U.S. Federal Law. In 2001 the DEA elaborated on this and clarified that any product with any quantity of THC in it at all cannot be imported into the United States. Since no hemp-based products containing THC are legally permitted in the United States, such products with THC are not allowed to be exported out of the United States either. Because of the strict laws that exist with the U.S. importation and exportation of hemp products, our business could be adversely affected.
We operate in a highly competitive environment, and if we are unable to compete with our competitors, our business, financial condition, results of operations, cash flows and prospects could be materially adversely affected.
We operate in a highly competitive environment. Our competition includes all other companies that are in the business of creating hemp-based products for personal use or consumption. A highly competitive environment could materially adversely affect our business, financial condition, results of operations, cash flows and prospects.
Because we are a small company and do not have much capital, our marketing campaign may not be enough to attract sufficient clients to operate profitably. If we do not make a profit, we may suspend or cease operations.
Due to the fact we are a small company and do not have much capital, we must limit our marketing activities and may not be able to make our product known to potential customers. Because we will be limiting our marketing activities, we may not be able to attract enough customers to operate profitably. If we cannot operate profitably, we may have to suspend or cease operations.
We rely on highly skilled personnel; if we are unable to retain or motivate key personnel, or hire qualified personnel, we may not be able to grow effectively.
Our performance largely depends on the talents and efforts of highly skilled individuals. Our future success depends on our continuing ability to identify, hire, develop, motivate and retain highly skilled personnel for all areas of our organization, particularly sales and marketing. Competition in our industry for qualified employees is intense. In addition, our compensation arrangements, such as our bonus programs, may not always be successful in attracting new employees or retaining and motivating our existing employees. Our continued ability to compete effectively depends on our ability to attract new employees and to retain and motivate our existing employees.
Our operating results may fluctuate, which makes our results difficult to predict and could cause our results to fall short of expectations.
Our operating results may fluctuate as a result of a number of factors, many of which may be outside of our control. As a result, comparing our operating results on a period-to-period basis may not be meaningful, and you should not rely on our past results as an indication of our future performance. Our quarterly, year-to-date, and annual expenses as a percentage of our revenues may differ significantly from our historical or projected rates. Our operating results in future quarters may fall below expectations. Each of the following factors may affect our operating results:
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| · | our ability to deliver products in a timely manner in sufficient volumes; |
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| · | our ability to recognize product trends; |
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| · | our loss of one or more significant customers; |
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| · | the introduction of successful new products by our competitors; |
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| · | adverse media reports on the use or efficacy of nutritional supplements. |
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| · | our inability to make our design and consulting service division profitable |
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| · | our inability to make our online marketing division profitable. |
Because our business is changing and evolving, our historical operating results may not be useful to you in predicting our future operating results.
We may not be able to secure additional financing to meet our future capital needs due to changes in general economic conditions.
We anticipate needing significant capital to fulfill our contractual obligations, complete the research and development of our planned services, obtain regulatory approvals, and execute our business plan, generally. We may use capital more rapidly than currently anticipated and incur higher operating expenses than currently expected, and we may be required to depend on external financing to satisfy our operating and capital needs. We may need new or additional financing in the future to conduct our operations or expand our business. Any sustained weakness in the general economic conditions and/or financial markets in the United States or globally could adversely affect our ability to raise capital on favorable terms or at all. From time to time we have relied, and may also rely in the future, on access to financial markets as a source of liquidity to satisfy working capital requirements and for general corporate purposes. We may be unable to secure debt or equity financing on terms acceptable to us, or at all, at the time when we need such funding. If we do raise funds by issuing additional equity or convertible debt securities, the ownership percentages of existing stockholders would be reduced, and the securities that we issue may have rights, preferences or privileges senior to those of the holders of our common stock or may be issued at a discount to the market price of our common stock which would result in dilution to our existing stockholders. If we raise additional funds by issuing debt, we may be subject to debt covenants, which could place limitations on our operations including our ability to declare and pay dividends. Our inability to raise additional funds on a timely basis would make it difficult for us to achieve our business objectives and would have a negative impact on our business, financial condition and results of operations.
Our business and operating results could be harmed if we fail to manage our growth or change.
Our business may experience periods of rapid change and/or growth that could place significant demands on our personnel and financial resources. To manage possible growth and change, we must continue to try to locate skilled employees and professionals and adequate funds in a timely manner.
Our insurance coverage or third party indemnification rights may not be sufficient to cover our legal claims or other losses that we may incur in the future.
We maintain insurance, including property and workers’ compensation to protect ourselves against potential loss exposures. In the future, insurance coverage may not be available at adequate levels or on adequate terms to cover potential losses, including on terms that meet our customer’s requirements. If insurance coverage is inadequate or unavailable, we may face claims that exceed coverage limits or that are not covered, which could increase our costs and adversely affect our operating results.
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If developed, our brands may become valuable, and any inability to protect them could reduce the value of our products and brand.
We may invest significant resources to build and protect our brands. However, we may be unable or unwilling to strictly enforce our rights, including our trademarks, from infringement. Our failure to enforce our intellectual property rights could diminish the value of our brands and product offerings and harm our business and future growth prospects.
We may be subject to infringement claims, which are costly to defend, could require us to pay damages and could limit our ability to sell some of our products.
Our industry is characterized by vigorous pursuit and protection of brands, which has resulted in protracted and expensive litigation for several companies. Third parties may assert claims of misappropriation of trade secrets or infringement of intellectual property rights against us or against our partners for which we may be liable.
As our business expands the number of products and competitors in our markets increases and product overlaps occur, infringement claims may increase in number and significance. Intellectual property lawsuits are subject to inherent uncertainties due to the complexity of the technical issues involved, and we cannot be certain that we would be successful in defending ourselves against intellectual property claims. Further, many potential litigants have the capability to dedicate substantially greater resources than we can to enforce their intellectual property rights and to defend claims that may be brought against them. Furthermore, a successful claimant could secure a judgment that requires us to pay substantial damages or prevents us from distributing products or performing certain services.
An increase in product returns could negatively impact our operating results and profitability.
We will permit the return of damaged or defective products and accept limited amounts of product returns in certain instances. While such returns are expected to be nominal and within management’s expectations and the provisions established, future return rates may increase more than anticipated. Any significant increase in damaged or defective products or expected returns could have a material adverse effect on our operating results for the period or periods in which such returns materialize.
We have no manufacturing capacity and anticipate continued reliance on third-party manufacturers for the development of our products.
We do not currently operate manufacturing facilities for production of our products. We lack the resources and the capabilities to manufacture our products. We do not intend to develop facilities for the manufacture of products in the foreseeable future. We will rely on third-party manufacturers to produce bulk products required to meet our sales needs. We plan to continue to rely upon contract manufacturers to manufacture commercial quantities of our products.
Our contract manufacturers’ failure to achieve and maintain high manufacturing standards, in accordance with applicable regulatory requirements, or the incidence of manufacturing errors, could result in consumer injury or death, product shortages, product recalls or withdrawals, delays or failures in product testing or delivery, cost overruns or other problems that could seriously harm our business. Contract manufacturers often encounter difficulties involving production yields, quality control and quality assurance, as well as shortages of qualified personnel. Our existing manufacturers and any future contract manufacturers may not perform as agreed or may not remain in the contract manufacturing business. In the event of a natural disaster, business failure, strike or other difficulty, we may be unable to replace a third-party manufacturer in a timely manner and the production of our products would be interrupted, resulting in delays, additional costs and reduced revenues.
A shortage in the supply of key raw materials could increase our costs or adversely affect our sales and revenues.
All of the raw materials for our products are obtained from third-party suppliers. Shortages in certain ingredients could result in materially higher raw material prices or adversely affect our ability to have a product manufactured. Price increases from a supplier would directly affect our profitability if we are not able to pass price increases on to customers. Our inability to obtain adequate supplies of raw materials in a timely manner or a material increase in the price of our raw materials could have a material adverse effect on our business, financial condition and results of operations.
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Because we are subject to numerous laws and regulations, and we may become involved in litigation from time to time, we could incur substantial judgments, fines, legal fees and other costs.
Our industry is highly regulated. The manufacture, labeling and advertising for our products are regulated by various federal, state and local agencies as well as those of each foreign country to which we distribute. These governmental authorities may commence regulatory or legal proceedings, which could restrict the permissible scope of our product claims or the ability to manufacture and sell our products in the future. The U.S. Food and Drug Administration, or FDA, regulates our products to ensure that the products are not adulterated or misbranded. Failure to comply with FDA requirements may result in, among other things, injunctions, product withdrawals, recalls, product seizures, fines and criminal prosecutions. Our advertising is subject to regulation by the Federal Trade Commission, or FTC, under the Federal Trade Commission Act. In recent years the FTC has initiated numerous investigations of dietary supplement and weight loss products and companies. Additionally, some states also permit advertising and labeling laws to be enforced by private attorney generals, who may seek relief for consumers, seek class action certifications, seek class wide damages and product recalls of products sold by us. Any of these types of adverse actions against us by governmental authorities or private litigants could have a material adverse effect on our business, financial condition and results of operations.
Our products may be unable to achieve the expected market acceptance and, consequently, limit our ability to generate revenue from new products.
Even when product development is successful, our ability to generate significant revenue depends on the acceptance of our products by consumers. We cannot assure you that any planned products will achieve market acceptance and revenue if and when they obtain the requisite regulatory approvals. The market acceptance of any product depends on a number of factors, including the indication statement and warnings approved by regulatory authorities in the product label, continued demonstration of efficacy and safety in commercial use, the price of the product, competition, and marketing and distribution support. Any factors preventing or limiting the market acceptance of our products could have a material adverse effect on our business, results of operations and financial condition.
Problems in our manufacturing process, failure to comply with manufacturing regulations or unexpected increases in our manufacturing costs could harm our business, results of operations and financial condition.
The manufacturing of products necessitates compliance with international Good Manufacturing Practice, or GMP, and other international regulatory requirements. Important to this is our ability to obtain a successful manufacturer of our proposed products, which involves obtaining botanical raw material under highly controlled and standardized conditions, extraction and purification processes, manufacture of finished products and labeling and packaging, which includes product information, tamper evidence and anti-counterfeit features. In addition, we must ensure consistency among our batches. Demonstrating such consistency may require typical manufacturing controls as well as clinical data. For each step in the manufacturing process, we will rely on single manufacturing facilities and no back-up facilities are yet in place. If we are unable to obtain manufactured products in accordance with regulatory specifications, or if there are disruptions in our manufacturing process due to damage, loss or otherwise, or failure to pass regulatory inspections of our manufacturing facilities, we may not be able to meet the demand for product or supply sufficient product for use in clinical trials, and this may also harm our ability to commercialize our product designs on a timely or cost-competitive basis, if at all. Any problems in our manufacturing process could have a material adverse effect on our business, results of operations and financial condition
Product recalls or inventory losses caused by unforeseen events, cold chain interruption and testing difficulties may adversely affect our operating results and financial condition.
Our products will be manufactured and distributed using technically complex processes requiring specialized facilities, highly specific raw materials and other production constraints. The complexity of these processes, as well as strict company and government standards for the manufacture of our products, subjects us to production risks.
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Consumption of products we sell may decline.
We rely on consumers’ demand for our products. Consumer preferences may shift due to a variety of factors, including changes in demographic or social trends, public health policies, and changes in leisure, dining and beverage consumption patterns. Our continued success will require us to anticipate and respond effectively to shifts in consumer behavior and tastes. If consumer preferences were to move away from our products, in any of our major markets, our financial results might be adversely affected.
A limited or general decline in consumption in one or more of our product categories could occur in the future due to a variety of factors, including:
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| · | a general decline in economic or geopolitical conditions; |
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| · | concern about the health consequences of consuming various nutraceutical products; |
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| · | consumer dietary preferences; |
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| · | increased federal, state, provincial and foreign excise or other taxes on certain products and possible restrictions on advertising and marketing; |
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| · | increased regulation placing restrictions on the purchase or consumption of our products or increasing prices due to the imposition of duties or excise tax; |
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| · | inflation; and |
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| · | wars, pandemics, weather and natural or man-made disasters. |
In addition, our continued success depends, in part, on our ability to develop new products. The launch and ongoing success of new products are inherently uncertain especially with regard to their appeal to consumers. The launch of a new product can give rise to a variety of costs and an unsuccessful launch, among other things, can affect consumer perception of existing brands and our reputation. Unsuccessful implementation or short-lived popularity of our product innovations may result in inventory write-offs and other costs.
Climate change, or legal, regulatory or market measures to address climate change, may negatively affect our business or operations, and water scarcity or poor water quality could negatively impact our production costs and capacity.
There is a growing concern that carbon dioxide and other so-called 'greenhouse' gases in the atmosphere may have an adverse impact on global temperatures, weather patterns and the frequency and severity of extreme weather and natural disasters. In the event that such climate change has a negative effect on agricultural productivity, we may be subject to decreased availability or increased pricing for certain raw materials that are necessary for our products, such as sugar, cereals, agave and grapes. Water is likely to be a main ingredient in substantially all of our products and it is also a limited resource in many parts of the world. As demand for water continues to increase, and as water becomes scarcer and the quality of available water deteriorates, we may be affected by increasing production costs or capacity constraints, which could adversely affect our operations and profitability.
An increase in the cost of raw materials or energy could affect our profitability.
The components of our products are largely commodities that are subject to price volatility caused by changes in global supply and demand, weather conditions, agricultural uncertainty and/or governmental controls. Commodity price changes may result in unexpected increases in the cost of raw materials, plastics, flavors and other packaging materials and our products. We may also be adversely affected by shortages of such materials or by increases in energy costs resulting in higher transportation, freight and other operating costs. We may not be able to increase our prices to offset these increased costs without suffering reduced volume, sales and operating profit.
Various diseases, pests and certain weather conditions.
Various diseases, pests, fungi, viruses, drought, frosts and certain other weather conditions could affect the quality and quantity of plants and other agricultural raw materials available, decreasing the supply of our products and negatively impacting profitability. We cannot guarantee that our suppliers of agricultural raw materials will succeed in preventing contamination in existing fields. Future government restrictions regarding the use of certain materials used in growing agricultural raw materials may increase costs and/or reduce production of crops. Growing agricultural raw materials also requires adequate water supplies. A substantial reduction in water supplies could result in material losses of crops, which could lead to a shortage of our product supply.
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Reliance on manufacturers and distributors.
Local market structures and distribution channels vary worldwide. We sell our joint venture products through distributors to retail outlets. Koios has entered into arrangements with distributors that generate the majority of our U.S. sales. The replacement or poor performance of the main distributors could result in temporary or longer-term sales disruptions or could materially and adversely affect our results of operations and financial condition for a particular period. Our inability to collect accounts receivable from our manufacturers or distributors could also materially and adversely affect our results of operations and financial condition.
Regulatory decisions and changes in the legal and regulatory environment could increase our costs and liabilities or limit its business activities.
Our operations and those of any contractors are subject to extensive regulatory requirements relating to production, distribution, importation, marketing, advertising, promotion, sales, pricing, labeling, packaging, product liability, labor, pensions, antitrust, compliance and control systems, and environmental issues. Changes in laws, regulations or governmental or regulatory policies and/or practices could cause us to incur material additional costs or liabilities that could adversely affect its business. In particular, governmental bodies may impose new labeling, product or production requirements, limitations on the marketing, advertising and/or promotion activities used to market or products, restrictions on retail outlets, restrictions on importation and distribution or other restrictions on the locations or occasions where beverage alcohol is sold which directly or indirectly limit the sales of our products.
Regulatory authorities under whose laws we operate may also have enforcement power that can subject us to actions such as product recall, seizure of products or other sanctions which could have an adverse effect on our sales or damage its reputation.
Any changes to the regulatory environment in which we operate could cause us to incur material additional costs or liabilities, which could adversely affect our performance.
Our products may also become subject to national excise, import duty and other duties in most countries around the world. An increase in any such duties could have a significant adverse effect on our sales revenue or margin, both through reducing overall consumption and by encouraging consumers to switch to lower-taxed categories of products.
Our reported after-tax income is calculated based on extensive tax and accounting requirements in each of its relevant jurisdictions of operation. Changes in tax law (including tax rates), accounting policies and accounting standards could materially reduce our reported after tax income.
Damage to our reputation.
Maintaining a good reputation is critical to selling our branded products. Product contamination or tampering or the failure to maintain our standards for product quality, safety and integrity, including with respect to raw materials, naturally occurring compounds, packaging materials or product components obtained from suppliers, may reduce demand for our products or cause production and delivery disruptions. Although our producer/distributors maintain standards for the materials and product components received from suppliers, it is possible that a supplier may not provide materials or product components that meet the required standards or may falsify documentation associated with the fulfillment of those requirements. If any of our products becomes unsafe or unfit for consumption, is misbranded or causes injury, we may have to engage in a product recall and/or be subject to liability and incur additional costs. A widespread product recall, multiple product recalls, or a significant product liability judgment could cause our products to be unavailable for a period of time, which could further reduce consumer demand and brand equity. Our reputation could be impacted negatively by public perception, adverse publicity (whether or not valid), negative comments in social media, or our responses relating to:
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| · | a perceived failure to maintain high ethical, social and environmental standards for all of our operations and activities; |
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| · | a perceived failure to address concerns relating to the quality, safety or integrity of our products; |
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| · | our environmental impact, including use of agricultural materials, packaging, water and energy use, and waste management; or |
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| · | effects that are perceived as insufficient to promote the responsible use of our products. |
Failure to comply with local laws and regulations, to maintain an effective system of internal controls, to provide accurate and timely financial statement information, or to protect our information systems against service interruptions, misappropriation of data or breaches of security, could also hurt our reputation. Damage to our reputation or loss of consumer confidence in our products for any of these or other reasons could result in decreased demand for our products and could have a material adverse effect on our business, financial condition and results of operations, as well as require additional resources to rebuild our reputation, competitive position and brand equity.
Contamination.
The success of our brands depends upon the positive image that consumers have of those brands. Contamination, whether arising accidentally or through deliberate third-party action, or other events that harm the integrity or consumer support for our brands, could adversely affect their sales. Contaminants in raw materials, packaging materials or product components purchased from third parties and used in the production of our products or defects in the process could lead to low quality as well as illness among, or injury to, consumers of our products and may result in reduced sales of the affected brand or all of our brands.
Dependence upon trademarks and proprietary rights, failure to protect our intellectual property rights.
Our future success depends significantly on our ability to protect our current and future brands and products and to defend our intellectual property rights. We intend to seek trademark registrations covering our newly developed brands and products. We cannot be sure that trademark registrations will be issued with respect to any of our trademark applications. There is also a risk that we could, by omission, fail to timely renew or protect a trademark or that our competitors.
Business interruptions could delay us in the process of developing our product candidates and could disrupt our product sales.
Loss of manufacturing contracts, stored inventory or other facilities through fire or other causes, or loss of our botanical raw material due to pathogenic infection or other causes, could have an adverse effect on our ability to meet demand for product, to continue product development activities and to conduct our business. Failure to supply our distribution channels with commercial product may lead to adverse consequences. We currently have no insurance coverage to compensate us for such business interruptions; however, if obtained, such coverage may prove insufficient to fully compensate us for the damage to our business resulting from any significant property or casualty loss to our inventory or facilities.
If product liability lawsuits are successfully brought against us, we will incur substantial liabilities and may be required to limit the commercialization of our product designs.
As a marketer and distributor of products designed for both human and animal consumption, we will be subject to product liability claims if the use of our products is alleged to have resulted in injury. Our products consist of vitamins, minerals, herbs and other ingredients that are classified as dietary supplements and topical animal products and in most cases are not subject to pre-market regulatory approval in the United States or internationally. Previously unknown adverse reactions resulting from human consumption of these ingredients could occur.
We have not had any product liability claims filed against us, but in the future we may be subject to various product liability claims, including among others that our products had inadequate instructions for use, or inadequate warnings concerning possible side effects and interactions with other substances. The cost of defense can be substantially higher than the cost of settlement even when claims are without merit. The high cost to defend or settle product liability claims could have a material adverse effect on our business and operating results. While we continue to take what we believe are appropriate precautions, we may be unable to avoid significant liability if any product liability lawsuit is brought against us. Although we have purchased insurance to cover product liability lawsuits, if we cannot successfully defend ourselves against product liability claims, or if such insurance coverage is inadequate, we will incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:
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| · | decreased demand for our products; |
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| · | injury to our reputation; |
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| · | costs of related litigation; |
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| · | substantial monetary awards to consumers; |
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| · | increased cost of liability insurance; |
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| · | loss of revenue; and |
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| · | the inability to successfully commercialize our products. |
We intend to offer our products in highly competitive markets, which results in pressure on our profit margins and may limit our ability to maintain or increase the market share of our services.
The nutraceutical industry is subject to significant competition and pricing pressures. We will experience significant competitive pricing pressures. Several competitors offer products similar to ours. We believe that the products we offer are generally competitive with those offered by other services. It is possible that one or more of our competitors could develop a significant advantage, which could put us at a competitive disadvantage. Continued pricing pressure or shifts in customer preferences for nutraceutical products could adversely impact our customer base or pricing structure and have a material and adverse effect on our business, financial conditions, results of operations, and cash flows.
Our future growth of our services is largely dependent upon our ability to successfully compete with new and existing competitors by achieving market acceptance with acceptable margins.
Our business operates in markets that are characterized by rapidly changing demands, evolving industry standards, and potential new entrants. If these companies gain market acceptance, our ability to grow our consulting business could be material and adversely affected. Accordingly, our future success depends upon a number of factors, including our ability to accomplish the following: identify emerging trends in our target end-markets; develop, acquire, and maintain competitive product offerings, and differentiate us from our competitors. Our ability to market our products can affect our competitive position and requires the investment of significant resources. These development efforts may divert resources from other potential investments in our businesses, and they may not lead to the development of revenues on a timely basis. As a result, these products may not achieve market acceptance and our brand image could suffer. In addition, our competitors may introduce superior business strategies, impairing desirability which may cause users to defer or forego purchase of our products. Also, the markets for our products may not develop or grow as we anticipate. The failure of our products to gain market acceptance could significantly reduce our revenue, increase our operating costs, or otherwise adversely affect our business, financial condition, results of operations or cash flows.
Our joint venture may be unsuccessful or the relationship may deteriorate.
We currently have a Joint Venture Agreement with Koios, LLC. Our joint venture may not be successful and we may not fulfill the goals of the joint venture for any number of reasons. If the relationship is unsuccessful for any reason, the Company will have to find alternative business ventures or avenues in order to continue generating new products.
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We depend upon our key personnel and our ability to attract and retain employees.
Our future growth and success depend on our ability to recruit, retain, manage and motivate our employees. The loss of the services of any member of our senior management or the inability to hire or retain experienced management personnel could adversely affect our ability to execute our business plan and harm our operating results. Because of the specialized scientific and managerial nature of our business, we rely heavily on our ability to attract and retain qualified scientific, technical and managerial personnel. The competition for qualified personnel in the pharmaceutical field is intense. Due to this intense competition, we may be unable to continue to attract and retain qualified personnel necessary for the development of our business or to recruit suitable replacement personnel.
We have limited history of operations and we may incur losses.
As a company with limited operating history, we are subject to all of the risks associated with a new business enterprise. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stages of development, especially in challenging and competitive industries. We are unable to give you any assurance that we will generate material revenues or that any revenues generated will be sufficient for us to continue operations or achieve profitability.
We have limited assets.
We have incurred an accumulated deficit since inception of $4,619,039 through March 31, 2017 and have not yet established a consistent on-going source of revenues sufficient to cover its operating costs and allow us to continue as a going concern. The ability of our Company to continue as a going concern is dependent on us obtaining adequate capital to fund operating losses until it becomes profitable. If we are unable to obtain adequate capital, we could be forced to cease operations. Our success will initially depend upon continuing our business and growing our business by raising the necessary funds to expand operations.
For future additional capital requirements, we may raise capital by issuing equity or convertible debt securities, and when we do, the percentage ownership of our existing stockholders may be diluted. In addition, any new securities we issue could have rights, preferences and privileges senior to the common shares offered herein.
Conflicts of Interest.
Certain conflicts of interest may exist between our Company and our officers and directors. They have other business interests to which they devote their attention, and may be expected to continue to do so although management time should be devoted to the business of our Company. As a result, conflicts of interest may arise that can be resolved only through exercise of such judgment as is consistent with fiduciary duties to our Company.
Need for Additional Financing.
In the event our Company decides to expand our operations we may have very limited funds to do so. The ultimate success of our Company may depend upon our ability to raise additional capital. Our Company is continuing to assess the need for additional capital. If additional capital is needed, there is no assurance that funds will be available from any source or, if available, that they can be obtained on terms acceptable to our Company. If not available, our Company’s operations will be limited to those that can be financed with its modest capital.
Limited Revenue History.
Our Company is considered in development stage. Our Company must be regarded as a new or development venture with all of the unforeseen costs, expenses, problems, risks and difficulties to which such ventures are subject.
No Assurance of Success or Profitability.
There is no assurance that our Company will ever operate profitably. There is no assurance that we will generate profits, or that the value of our Company’s Shares will be increased thereby.
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Lack of Diversification.
Because of the limited financial resources that we have, it is unlikely that we will be able to diversify our operations. Our probable inability to diversify our activities into more than one area will subject us to economic fluctuations within our business or industry and therefore increase the risks associated with our operations.
Dependence upon Management. Limited Participation of Management.
Our Company will be heavily dependent upon our management skills, talents, and abilities, as well as our consultants, to implement our business plan, and may, from time to time, find that their inability to devote full time attention to the business of our Company results in a delay in progress toward implementing our business plan.
Dependence upon Outside Advisors.
To supplement the business experience of our officers and directors, we may be required to employ accountants, technical experts, appraisers, attorneys, or other consultants or advisors. Our Company’s management, without any input from stockholders, will make the selection of any such advisors. Furthermore, it is anticipated that such persons may be engaged on an “as needed” basis without a continuing fiduciary or other obligation to our Company. In the event our Company considers it necessary to hire outside advisors, they may elect to hire persons who are affiliates, if they are able to provide the required services.
Based on our current cash reserves, we will have relatively small operational budget for the operations that we cannot expand without additional raising capital.
If we are unable to begin to generate enough revenue to cover our operational costs, we will need to seek additional sources of funds. Currently, we have no committed source for any funds as of date hereof. No representation is made that any funds will be available when needed. In the event funds cannot be raised if and when needed, we may not be able to carry out our business plan and could fail in business as a result of these uncertainties.
We cannot give any assurances that we will be able to raise enough capital to fund acquisitions and product development.
We will need to raise additional funds to support not only our budget, but our expansion operations. We cannot make any assurances that we will be able to raise such funds or whether we would be able to raise such funds with terms that are favorable to us. We may seek to borrow monies from lenders at commercial rates, but such lenders will probably be at higher than bank rates, which higher rates could, depending on the amount borrowed, make the net operating income insufficient to cover the interest.
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RISKS RELATED TO CONTROLLED SUBSTANCES
Controlled substance legislation differs between countries and legislation in certain countries may restrict or limit our ability to develop our product candidates.
Most countries are parties to the Single Convention on Narcotic Drugs 1961, which governs international trade and domestic control of narcotic substances, including hemp oil extracts. Countries may interpret and implement their treaty obligations in a way that creates a legal obstacle to our obtaining marketing approval for our products in those countries. These countries may not be willing or able to amend or otherwise modify their laws and regulations to permit our products to be marketed, or achieving such amendments to the laws and regulations may take a prolonged period of time. In the case of countries with similar obstacles, we would be unable to market our product candidates in countries in the near future or perhaps at all if the laws and regulations in those countries do not change.
At some point our products may be developed and be subject to U.S. controlled substance laws and regulations and failure to comply with these laws and regulations, or the cost of compliance with these laws and regulations, may adversely affect the results of our business operations, both during clinical development and post approval, and our financial condition.
At this time we do not intend to use controlled substances in any products.
Certain products we may develop could contain controlled substances as defined in the federal Controlled Substances Act of 1970, or CSA. Controlled substances that are pharmaceutical products are subject to a high degree of regulation under the CSA, which establishes, among other things, certain registration, manufacturing quotas, security, recordkeeping, reporting, import, export and other requirements administered by the DEA. The DEA classifies controlled substances into five schedules: Schedule I, II, III, IV or V substances. Schedule I substances by definition have a high potential for abuse, no currently “accepted medical use” in the United States, lack accepted safety for use under medical supervision, and may not be prescribed, marketed or sold in the United States. Pharmaceutical products approved for use in the United States may be listed as Schedule II, III, IV or V, with Schedule II substances considered to present the highest potential for abuse or dependence and Schedule V substances the lowest relative risk of abuse among such substances. Schedule I and II drugs are subject to the strictest controls under the CSA, including manufacturing and procurement quotas, security requirements and criteria for importation. In addition, dispensing of Schedule II drugs is further restricted. For example, they may not be refilled without a new prescription. We do not intend to produce “controlled substances” at this time, due to regulatory complications.
RISK FACTORS RELATED TO OUR SECURITIES
We may in the future issue more shares which could cause a loss of control by our present management and current stockholders.
We may issue further shares as consideration for the cash or assets or services out of our authorized but unissued common stock that would, upon issuance, represent a majority of the voting power and equity of our Company. The result of such an issuance would be those new stockholders and management would control our Company, and persons unknown could replace our management at this time. Such an occurrence would result in a greatly reduced percentage of ownership of our Company by our current shareholders, which could present significant risks to investors.
We have not paid dividends but may in the future.
We have not paid dividends on our common stock. While we intend to pay dividends in future after allocating adequate reserves, we do not guarantee, commit and undertake that dividends will be paid in the foreseeable future.
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A limited public market exists for our common stock at this time, and there is no assurance of a future market.
Our common stock has been quoted on the OTC Pink since November 24, 2010, under the symbol “GRSU.” There is a limited public market for our common stock, and no assurance can be given that a market will continue or that a shareholder ever will be able to liquidate his investment without considerable delay, if at all. If a market should develop, the price may be highly volatile. Factors such as those discussed in the “Risk Factors” section may have a significant impact upon the market price of the shares offered hereby. Due to the low price of our securities, many brokerage firms may not be willing to effect transactions in our securities. Even if a purchaser finds a broker willing to effect a transaction in our shares, the combination of brokerage commissions, state transfer taxes, if any, and any other selling costs may exceed the selling price. Further, many lending institutions will not permit the use of our shares as collateral for any loans.
The regulation of penny stocks by SEC and FINRA may discourage the tradability of our securities.
We are a “penny stock” company. None of our securities currently trade in any market and, if ever available for trading, will be subject to a Securities and Exchange Commission rule that imposes special sales practice requirements upon broker-dealers who sell such securities to persons other than established customers or Accredited Investors. For purposes of the rule, the phrase “Accredited Investors” means, in general terms, institutions with assets in excess of $5,000,000, or individuals having a net worth in excess of $1,000,000 or having an annual income that exceeds $200,000 (or that, when combined with a spouse’s income, exceeds $300,000). For transactions covered by the rule, the broker-dealer must make a special suitability determination for the purchaser and receive the purchaser’s written agreement to the transaction prior to the sale. Effectively, this discourages broker-dealers from executing trades in penny stocks. Consequently, the rule will affect the ability of purchasers of our stock to sell their securities in any market that might develop therefore because it imposes additional regulatory burdens on penny stock transactions.
In addition, the Securities and Exchange Commission has adopted a number of rules to regulate “penny stocks”. Such rules include Rules 3a51-1, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6, 15g-7, and 15g-9 under the Securities and Exchange Act of 1934, as amended. Because our securities constitute “penny stocks” within the meaning of the rules, the rules would apply to us and to our securities. The rules will further affect the ability of owners of shares to sell our securities in any market that might develop for them because it imposes additional regulatory burdens on penny stock transactions.
Shareholders should be aware that, according to Securities and Exchange Commission, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include (i) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (ii) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (iii) “boiler room” practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (iv) excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and (v) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired consequent investor losses. Our management is aware of the abuses that have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive within the confines of practical limitations to prevent the described patterns from being established with respect to our securities.
Rule 144 sales in the future may have a depressive effect on our stock price.
Our shareholders may be able to use Rule 144 as an exemption for resale, but resales under Rule 144 could have a depressive effect on the market trading price, if any. Investors will have no effective way to combat this.
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Our shares are thinly traded.
The shares of our common stock may continue to be thinly-traded on the OTC Markets under the symbol GRSU, meaning that the number of persons interested in purchasing our common shares at or near ask prices at any given time may be relatively small or non-existent. This situation is attributable to a number of factors, including the fact that we are a small company which is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven, early stage company such as ours or purchase or recommend the purchase of any of our Securities until such time as we became more seasoned and viable. As a consequence, there may be periods of several days or more when trading activity in our Securities is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on Securities price. We cannot give you any assurance that an active public trading market for our common Securities will ever develop or be sustained, or that any trading levels will be sustained. Due to these conditions, we can give investors no assurance that they will be able to sell their shares at or any prices or at all if they need money or otherwise desire to liquidate their securities of our Company. Our common stock may not be able to be liquidated at or near ask prices in any volume in the markets.
Our common stock market prices may be volatile, which substantially increases the risk that investors may not be able to sell their Securities at or above the price that was paid for the security.
Because of the limited trading market for our common stock and because of the possible price volatility, shareholders may not be able to sell their shares of common stock when desired. The inability to sell Securities in a rapidly declining market may substantially increase the risk of loss because of such illiquidity and because the price for our Securities may suffer greater declines because of our price volatility.
Certain factors, some of which are beyond our control, that may cause our share price to fluctuate significantly include, but are not limited to the following:
|
| · | Variations in our quarterly operating results; |
|
| · | Loss of a key relationship or failure to complete significant transactions; |
|
| · | Additions or departures of key personnel; and |
|
| · | Fluctuations in stock market price and volume. |
Additionally, in recent years the stock market in general, and the personal care markets in particular, have experienced extreme price and volume fluctuations. In some cases, these fluctuations are unrelated or disproportionate to the operating performance of the underlying company. These market and industry factors may materially and adversely affect our stock price, regardless of our operating performance. In the past, class action litigation often has been brought against companies following periods of volatility in the market price of those companies common stock. If we become involved in this type of litigation in the future, it could result in substantial costs and diversion of management attention and resources, which could have a further negative effect on shareholders’ investments in our stock.
Future dilution may occur due to issuances of Shares for various consideration in the future.
There may be substantial dilution to our shareholders as a result of future decisions of the Board to issue shares without shareholder approval for cash, services, acquisitions, or pursuant to a Employee/Consultant Stock Option Plan for which one million shares have been reserved but are not issued. Award/Earnings/Vesting criteria under the Plan have not been set, however the price per share for exercise will be no less than market value at the date of issue. No options are currently outstanding under the Plan.
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Our new investors will suffer a disproportionate risk and there will be immediate dilution of purchasers' investments.
Our present shareholders have acquired their securities at a cost significantly less than that which the investors purchasing pursuant to warrants will pay for their stock holdings or at which future purchasers in the market may pay. Therefore, new investors will bear most of the risk of loss.
Possible Depressive Effect of Future Sales of Shares issued pursuant to a Warrant Exercise.
We intend to register the shares underlying warrants that we have issued or may issue in the future. If the securities are sold prior to registration, the securities must bear a legend to the effect that the transfer is prohibited, pursuant to registration under the Act, or pursuant to an available exemption from registration. In the event all of the warrants are eventually exercised, and a registration statement was effective the resulting common shares would be free trading and could be sold into the secondary market. Such sales would most likely have a depressive effect on the price of the common stock in any over-the-counter market that may develop, since the large supply of shares available in the market would most likely reduce the price purchasers need to pay for the stock. The exercise of the warrants would also reduce the percentage of our common stock owned by our shareholders.
Our business is highly speculative and the investment is therefore highly risky.
Due to the speculative nature of our business, it is probable that the investment in shares offered hereby will result in a total loss to the investor. Investors should be able to financially bear the loss of their entire investment. Investment should, therefore, be limited to that portion of discretionary funds not needed for normal living purposes or for reserves for disability and retirement.
The ongoing economic downturn and continued uncertainty in the financial markets and other adverse changes in general economic or political conditions may adversely affect our industry, business and results of operations.
The global credit and financial markets have continued to experience disruptions, including diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates, and uncertainty about economic stability. There can be no assurance that there will not be future deterioration in credit and financial markets and confidence in economic conditions. These economic uncertainties affect businesses such as ours in a number of ways, making it difficult to accurately forecast and plan our future business activities. We are unable to predict the likely duration and severity of the current disruptions in the credit and financial markets and adverse global economic conditions, and if the current uncertain economic conditions continue or further deteriorate, our business and results of operations could be materially and adversely affected.
Potential changes in accounting practices and/or taxation may adversely affect our financial results.
We cannot predict the impact that future changes in accounting standards or practices may have on our financial results. New accounting standards could be issued that change the way we record revenues, expenses, assets and liabilities. These changes in accounting standards could adversely affect our reported earnings. Increases in direct and indirect income tax rates could affect after tax income. Equally, increases in indirect taxes could affect our products affordability and reduce our sales.
We will rely on third parties for services in conducting our business and any disruption of these relationships could adversely affect our business.
We will have contracts with third parties. If these relationships are disrupted for any reason our results of operation and financial condition could be adversely affected.
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There is a risk that shareholders will never receive dividends.
We do not guarantee, commit or undertake to issue a dividend to shareholders for the foreseeable future even if cash were available to do so as we would re-invest those available funds back into the operations of our Company to attempt to expand. We cannot assure shareholders that we will achieve results or maintain a tax status that will ever allow any specified level of cash distribution or year-to-year increases in cash distribution.
Reporting Information.
Our Company is subject to the reporting requirements under the Securities and Exchange Act of 1934. As a result, shareholders will have ready access to the information required to be reported by publicly held companies under the Securities and Exchange Act and the regulations thereunder. Our Company intends to provide our shareholders with annual reports containing financial information prepared in accordance with Generally Accepted Accounting Principles as required by Sec. 13 of the Securities Exchange Act of 1934.
Limited Financing – Lack of Loan Availability.
The monies currently on hand may not be sufficient for the continued expanded operations of our Company. There is no assurance that additional monies or financing will be available in the future or, if available, will be at terms favorable to our Company. (See “Business Summary”)
Our Company may borrow money to finance its operations on terms to be determined. Any such borrowing will increase the risk of loss to the investor in the event our Company is unsuccessful in repaying such loans.
Capital Resources.
The only capital resources of our Company are our shares.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.
REAL ESTATE.
None.
OIL AND GAS.
None.
PATENTS.
None.
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SUBLICENSES.
US6080401A License #1 and Sublicense #2
We have entered into Sublicenses for two sets of intellectual property for nutraceuticals. The following is not intended to be a recitation of all of the terms of the licenses and reference is made to the detailed terms as filed in the Form 8K filed with the Securities & Exchange Commission (www.sec.gov) on January 22, 2015.
|
| a) | License #1 |
|
|
| Dr. M.S. Reddy has granted a License to us for intellectual property for probiotic formulas for cannabis combinations in the homeopathic and nutraceutical industries developed by Dr. M.S. Reddy. On January 21, 2015, Greenhouse Solutions Inc. agreed to acquire the exclusive License, for use of the intellectual property in the product testing and development of proprietary formulations of products for marketing in exchange for issuance of 7,000,000 shares of restricted common stock to Dr. M.S. Reddy (Licensor).
Sublicense #2 On January 21, 2015, Evolutionary Ventures, LLC granted a Sublicense for intellectual property for the homeopathic and nutraceutical industries and to market products based thereon. Greenhouse Solutions Inc. agreed to acquire an exclusive Sublicense for issuance of 4,000,000 shares of common stock to MGRD, Inc., an affiliate of Rik J. Deitsch, our incoming CEO, for use of the intellectual property in the product testing and development, and proprietary formulations of products for testing and marketing. EVO is a shareholder of Greenhouse Solutions Inc. |
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. We anticipate that we (including current and any future subsidiaries) will from time to time become subject to claims and legal proceedings arising in the ordinary course of business. It is not feasible to predict the outcome of any such proceedings and we cannot assure that their ultimate disposition will not have a materially adverse effect on our business, financial condition, cash flows or results of operations.
ITEM 4. MINE SAFETY DISCLOSURE.
Not applicable.
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Our common stock is currently quoted on the OTC Pink. Our common stock has been quoted on the OTC Pink since November 24, 2010, under the symbol “GRSU”. Because we are quoted on the OTC Pink, our securities may be less liquid, receive less coverage by security analysts and news media, and generate lower prices than might otherwise be obtained if they were listed on a national securities exchange.
The following table sets forth the high and low bid quotations for our common stock as reported on the OTC Pink for the periods indicated.
| Fiscal 2016 |
| Low |
|
| High |
| ||
| First Quarter – ended June 30, 2015 |
| $ | .29 |
|
| $ | .29 |
|
| Second Quarter – ended September 30, 2015 |
| $ | .17 |
|
| $ | .17 |
|
| Third Quarter – ended December 31, 2015 |
| $ | .08 |
|
| $ | .08 |
|
| Fourth Quarter – ended March 31, 2016 |
| $ | .08 |
|
| $ | .08 |
|
|
|
|
|
|
|
|
|
|
|
| Fiscal 2017 |
| Low |
|
| High |
| ||
| First Quarter – ended June 30, 2016 |
| $ | .11 |
|
| $ | .09 |
|
| Second Quarter – ended September 30, 2016 |
| $ | .008 |
|
| $ | .065 |
|
| Third Quarter – ended December 31, 2016 |
| $ | .029 |
|
| $ | .034 |
|
| Fourth Quarter – ended March 31, 2017 |
| $ | .023 |
|
| $ | .019 |
|
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Holders.
As of March 31, 2017, there are approximately 129 record holders of 95,709,458 shares of our common stock.
Dividends.
We have not paid any cash dividends to date and do not anticipate or contemplate paying dividends in the foreseeable future. It is the present intention of management to utilize all available funds for the development of our business.
Securities Authorized for Issuance Under Equity Compensation Plans.
None.
Recent Sales of Unregistered Securities.
During the fiscal year ended March 31, 2017 and 2016, we made the following sales of our unregistered shares.
| DATE OF SALE (1) |
| TITLE OF SECURITIES |
| NO. OF SHARES |
| CONSIDERATION |
| CLASS OF PURCHASER |
| June 2015 |
| Common Shares |
| 1,075,000 |
| $215,000 |
| Accredited Investors |
| July 2015 |
| Common Shares |
| 250,000 |
| $50,000 |
| Accredited Investors |
| October 23, 2015 |
| Common Shares |
| 500,000 |
| Legal Services |
| Business Associates |
| October 23, 2015 |
| Common Shares |
| 78,939 |
| Consulting Services |
| Business Associates |
| October 23, 2015 |
| Common Shares |
| 55,274 |
| Services |
| Officers and Directors |
| October 23, 2015 |
| Common Shares |
| 3,000,000 |
| IP License – Additional Consideration |
| Business Associates |
| November 1, 2015 |
| Common Shares |
| 600,000 |
| Consulting Services |
| Business Associates |
| November 2015 |
| Common Shares |
| 650,000 |
| $65,000 |
| Accredited Investors |
| December 2015 |
| Common Shares |
| 1,550,000 |
| Anti-dilutive distribution by Board of Directors |
| Accredited Investors |
| March 11, 2016 |
| Common Shares |
| 400,000 |
| Marketing Services |
| Business Associates |
| September 21, 2016 |
| Common Shares |
| 503,245 |
| Legal Fees |
| Business Associates |
____________
(1) Date of first sale. Securities sold pursuant to a Rule 506(b) exemption.
EXEMPTION FROM REGISTRATION CLAIMED
All of the above sales by our Company of our unregistered securities were made by us in reliance upon Rule 506 of Regulation D and Section 4(a)(2) of the Securities Act of 1933, as amended (the "1933 Act"). All of the individuals and/or entities that purchased the unregistered securities were either primarily existing shareholders, sophisticated shareholders, consultants or sophisticated investors known to us and our management, through pre-existing business relationships. All purchasers were provided access to all material information, which they requested, and all information necessary to verify such information and were afforded access to management of our Company in connection with their purchases. All purchasers of the unregistered securities acquired such securities for investment and not with a view toward distribution, acknowledging such intent to us. All certificates or agreements representing such securities that were issued contained restrictive legends, prohibiting further transfer of the certificates or agreements representing such securities, without such securities either being first registered or otherwise exempt from registration in any further resale or disposition.
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ISSUER PURCHASES OF EQUITY SECURITIES
We did not repurchase any shares of our common stock during the year ended March 31, 2017.
ITEM 6. SELECTED FINANCIAL DATA.
Not applicable.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Forward-Looking Statements and Associated Risks.
This form 10-K contains certain statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. For this purpose, any statements contained in this Form 10-K that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, words such as “may”, “will”, “expect”, “believe”, “anticipate”, “estimate, or “continue” or comparable terminology are intended to identify forward-looking statements. These statements by their nature involve substantial risks and uncertainties, and actual results may differ materially depending on a variety of factors, many of which are not within our control. These factors include but are not limited to economic conditions generally and in the industries in which we may participate; competition within our chosen industry, including competition from much larger competitors; technological advances and failure to successfully develop business relationships.
Based on our financial history since inception, our auditor has expressed substantial doubt as to our ability to continue as a going concern. As reflected in the accompanying financial statements, as of March 31, 2017, we had an accumulated deficit totaling $4,619,039. This raises substantial doubts about our ability to continue as a going concern.
Plan of Operation
The Company was incorporated under the laws of the State of Nevada on April 8, 2009. The Company was involved in the sale and distribution of gardening products and greenhouses in the North American market. On September 2, 2009 we incorporated a wholly owned (ownership interest – 100%) subsidiary Greenhouse Solutions, Inc. an Ontario, Canada based company to facilitate our operations and cross border goods transfer to and from Canada. We did conduct our operations in Canada through our Canadian subsidiary and our operations in USA through our parent corporation, Greenhouse Solutions, Inc. (USA). References in this Report to “Greenhouse Solutions” refer to Greenhouse Solutions Inc. and its subsidiary, on a consolidated basis, unless otherwise indicated or the context otherwise requires. Operations of our subsidiary were discontinued and sold on September 9, 2011.
We do not expect to generate revenue for the next 12 months, which would be sufficient to sustain our operations. Accordingly, for the foreseeable future, we will continue to be dependent on additional financing in order to maintain our operations and continue with our corporate activities. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Results of Operations
For the Year ended March 31, 2017, we had $Nil in revenues compared to $Nil for the same period one year earlier. For the Year ended March 31, 2017 we incurred $Nil in sales related expenses compared to $Nil for the previous year. For the Year ended March 31, 2017, General and Administrative Expenses were $19,393 as compared to General and Administrative Expenses of $49,650 for the Year ended March 31, 2016. For the year ended March 31, 2017 the Company incurred expenses of $2,875 for corporate communications compared to $20,700 for the year ended March 31, 2016. For the year ended March 31, 2017 the Company incurred expenses of $Nil for impairment expenses compared to $510,000 for the year ended March 31, 2016 For. the Year ended March 31, 2017 we incurred expenses of $24,000 for Consulting Services compared to $218,409 for the year ended March 31, 2016. We incurred $280 in Depreciation and Amortization expenses in the current year compared to $280 for the prior year. We incurred $102,000 for Management consulting and Fees paid to Related parties in the current year compared to $108,000 for the prior year. For the year ended March 31, 2017 we incurred Professional Fees expense of $87,281 compared to the prior year of $167,155. We incurred a Private Placement expense of $Nil in the current year compared to $372,000 for the prior year. During the current year we incurred an expense of $Nil for Research and Development compared to $18,800 for the prior year. During the current year the Company incurred $Nil as a Warrant expense compared to $1,354,015 during the prior year. For the Year ended March 31, 2017, we incurred an operating loss of $235,829. This compares to the operating loss of $2,819,009, for the Year ended March 31, 2016.
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For the Year ended March 31, 2017, we had $109 in other income compared to $10,278 for the same period one year earlier. For the Year ended March 31, 2017 we gained $25 in other income interest compared to $Nil for the previous year. For the Year ended March 31, 2017, other income interest expenses were $56 as compared and $Nil for the Year ended March 31, 2016. For the year ended March 31, 2017 the Company incurred expenses of $12,709 for amortization of loan costs and discount compared to $Nil for the year ended March 31, 2016. For the year ended March 31, 2017 the Company incurred expenses of $134,504 for loss on marketing agreement compared to $Nil for the year ended March 31, 2016. For the Year ended March 31, 2017 we incurred expenses of $8,128 for interest expense related to convertible debt compared to $Nil for the year ended March 31, 2016. For the Year ended March 31, 2017, we incurred an “other income” loss of $155,263. This compares to the “other income” loss of $10,278, for the Year ended March 31, 2016.
Our auditor has expressed substantial doubt as to whether we will be able to continue to operate as a “going concern” due to the fact that the Company has an accumulated deficit of $4,619,039 as of March 31, 2017 and has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining the adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations. For the Year ended March 31, 2017, we had $391,092 of net loss compared to $2,808,731 for the same period one year earlier.
Financing Activities
During the year ended March 31, 2017 the Company received $Nil in private placement subscriptions for the Company’s common stock. As of March 31, 2017, there remain 75,000 shares which have been paid for but not issued.
On November 18, 2016, the Company signed a Convertible Promissory Note with SBI Investments LLC. The terms and conditions are as follows:
The face value of the note is $275,000 and the maturity date is November 18, 2018. The note includes a reduction of proceeds in the amount of $25,000 which is considered Original Issue Discount, which will be amortized as interest expense over the one-year life of the note. At the time of disbursement there was a deduction from proceeds to the Company of $5,000 for legal fees related to the issuance of the promissory note. Repayment is to begin six months after the date of the note, is to be made bi-weekly and shall be 1/12 of the outstanding principal and interest until paid in full. In the event the note is not paid in full by the maturity date the entire balance becomes due and payable.
The Securities Purchase Agreement includes a right to buy up to 300,000 warrants attached for 150,000 warrant shares of Series A warrants and 150,000 warrant shares of Series B warrants. These warrants are discussed in the preceding Note 5.
Any payment on the note or the note principal and interest in full may be converted into Common Stock at the sole option of the holder at a price equal to 65% of the three lowest Volume Weighted Average Price (VWAP) of the Common Stock for the 20 consecutive trading days ending on the trading day that is immediately prior to the conversion date. The Beneficial Ownership Limitation is 4.99% except that the holder of the note may increase this limitation to no more 9.99% under certain circumstances. At March 31, 2017, there were 95,709,458 shares of Common Stock of the Company outstanding. Under these restrictions, the maximum number of shares that could be issued by the Company would be 5,030,675 under the 4.99% limitation and 10,630,893 under the 9.99% limitation. The warrants issues as part of the Securities Purchase Agreement are subject to this limitation. SBI Investments, LLC may begin to excise its conversion rights six months following the signing of the note, or May 18th, 2017.
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The Company will account for this beneficial conversion feature as a derivative under ASC 815-10-15-83 and will value separately from the note at fair value as of May 18, 2017. The beneficial conversion feature of the note is revalued at each subsequent reporting date at fair value and any changes in fair value will result in a gain or loss in those periods. These warrants were valued using a Black-Scholes model resulting in a fair value of $9,877, recorded as a debt discount. Amortization of this discount totals $3,599 for year ending March 31, 2017. The Original Issue Discount of $25,000 was recorded as a discount to the note with the amortization for the year ending March 31, 2017 being $9110. Discount on the note as of March 31, 2017 was $22,168.
During the year ended March 31, 2016 the Company received $345,000 in private placement subscriptions for the Company’s common stock and issued 2,350,000 shares which included shares for $90,000 which had been received in the prior year. As of March 31, 2016, there remain 137,000 shares which have been paid for but not issued. During the current year the Company issued 55,274 to a Related party for services rendered and authorized 1,178,939 shares for services rendered. Of these shares 400,000 have not yet been issued. As of the date of these financial statements, a total of 537,000 common shares have not been issued.
Investing Activities
During the year ended March 31, 2017 there was no investment activity.
On March 2, 2015 the Company entered into a joint-venture agreement with KOIOS, Inc. a non-publicly traded company for a non-exclusive license for the use and development of proprietary homeopathic and nutraceutical formulations. The Company paid KOIOS $50,000 for this license. Due to the uncertainty of continuing operations management deemed it appropriate to consider the license impaired, therefore incurred an impairment charge of $50,000 against income for that year.
On January 21, 2015 the Company exchanged 7,000,000 shares of its common stock, valued at $0.10 per share, with Dr. M. S. Reddy for a License to exploit Dr. Reddy’s intellectual property for probiotic formulas for cannabis combinations in the homeopathic and nutraceutical industries. This License is valid for a period of 15 years. Due to the uncertainty of continuing operations management deemed it appropriate to consider the license impaired, therefore the Company incurred an impairment charge of $700,000 against income for that year.
On January 21, 2015 the Company exchanged 4,000,000 shares of its common stock, valued at $0.10 per share, with EVO for a Sublicense for its intellectual property for the homeopathic and nutraceutical industries and to market products based thereon. Due to the uncertainty of continuing operations management deemed it appropriate to consider the license impaired, therefore the Company incurred an impairment charge of $400,000 against income for that year.
Concurrent with the acquisition of these licenses, George Dory a former officer of the Company, returned to the Company 11,000,000 shares of its common stock for cancellation. This was accounted for as a reduction in the number of shares outstanding and a corresponding reduction of $1,100 in Additional Paid-in Capital.
On November 14, 2015, the Company exchanged 3,000,000 shares of its common stock valued at $0.17 per share with Dr. M. S. Reddy for a License to exploit a second grouping of Dr. Reddy’s intellectual properties for probiotic formulas for cannabis combinations in the homeopathic and nutraceutical industries. This License is valid for a period of 15 years. Due to the uncertainty of continuing operations management deemed it appropriate to consider the license impaired, therefore the Company incurred an impairment charge of $510,000 against income for the current year.
We intend to seek additional funding through public or private financings to fund our operations through fiscal 2016 and beyond. However, if we are unable to raise additional capital when required or on acceptable terms, or achieve cash flow positive operations, we may have to significantly delay product development and scale back operations both of which may affect our ability to continue as a going concern.
| 32 |
| Table of Contents |
Operating Activities
For the Year ended March 31, 2017 we incurred $280 in depreciation compared to $280 for the previous year. For the Year ended March 31, 2017 we incurred $12,709 in amortization as compared to $Nil for the Year ended March 31, 2016. For the year ended March 31, 2017 there was a increase in accounts payable of $54,947 compared to $(40,097) for the year ended March 31, 2016. For the year ended March 31, 2017 the Company had in increase in related party accounts payable of $66,893 compared to $63,000 for the year ended March 31, 2016. For the Year ended March 31, 2017 we incurred an increase in accrued expenses of $8,128 compared to $Nil for the year ended March 31, 2016. For the Year ended March 31, 2017 there was an increase in stock purchase refunds of $Nil compared to $15,000 for the year ended March 31, 2016. For the Year ended March 31, 2017 there was a decrease in accounts receivable of $Nil compared to $19,366 for the year ended March 31, 2016. For the Year ended March 31, 2017 there was a decrease in inventory of $29,504 compared to an increase of $29,504 for the year ended March 31, 2016. For the Year ended March 31, 2017, the net cash used in operating activities was $218,631. This compares to $2,066,555 for the Year ended March 31, 2016.
Liquidity and Capital Resources
As at March 31, 2017, our cash balance was $31,994 as compared to $625 at March 31, 2016. Our plan for satisfying our cash requirements for the next twelve months is through the sale of shares of our common stock, third party financing, and/or traditional bank financing. We do not anticipate generating sufficient amounts of revenues to meet our working capital requirements. Consequently, we intend to make appropriate plans to insure sources of additional capital in the future to fund growth and expansion through additional equity or debt financing or credit facilities.
The Company must raise additional funds in order to fund our continued operations. We may not be successful in our efforts to raise additional funds or achieve profitable operations. Even if we are able to raise additional funds through the sale of our securities or through the issuance of debt securities, or loans from our directors or financial institutions our cash needs could be greater than anticipated in which case we could be forced to raise additional capital. At the present time, we have no commitments for any additional financing, and there can be no assurance that, if needed, additional capital will be available to us on commercially acceptable terms or at all. These conditions raise substantial doubt as to our ability to continue as a going concern, which may make it more difficult for us to raise additional capital when needed. If we cannot get the needed capital, we may not be able to become profitable and may have to curtail or cease our operations.
Off Balance Sheet Arrangements
None
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Act of 1934 and are not required to provide the information under this item.
| 33 |
| Table of Contents |
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
FINANCIAL STATEMENTS
For the years ended March 31, 2017 and 2016
| REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM – BF BORGERS CPA PC & M&K CPAS, PLLC |
| F-1 | ||
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| F-7 |
| 34 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Greenhouse Solutions, Inc.:
We have audited the accompanying balance sheet of Greenhouse Solutions, Inc. (“the Company”) as of March 31, 2016 and 2015 and the related statement of operations, stockholders’ equity (deficit) and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Greenhouse Solutions, Inc., as of March 31, 2016 and 2015, and the results of its operations and its cash flows for the years then ended, in conformity with generally accepted accounting principles in the United States of America.
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 Company's internal control over financial reporting. Accordingly, we express no such opinion.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company’s significant operating losses raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ B F Borgers CPA PC
B F Borgers CPA PCLakewood, CO
August 10, 2016
| F-1 |
| Table of Contents |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of Greenhouse Solutions Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheet of Greenhouse Solutions Inc. (the Company) as of March 31, 2017, and the related statement of operations, stockholders’ equity, and cash flows for the year ended March 31, 2017, and the related notes and schedules (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2017, and the results of its operations and its cash flows for the year ended March 31, 2017, in conformity with accounting principles generally accepted in the United States of America. The financial statements of Greenhouse Solutions Inc. as of March 31, 2016, were audited by other auditors whose report dated August 10, 2016 expressed an unqualified opinion on those statements.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, 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.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company suffered a net loss from operations and has a net capital deficiency, which raises substantial doubt about its ability to continue as a going concern. Management's plans regarding those matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
| /s/ M&K CPAS, PLLC | |
| We have served as the Company’s auditor since 2017. | |
| Houston, TX | |
| September 25, 2018 | |
| F-2 |
| Table of Contents |
| CONDENSED BALANCE SHEETS | |||||||||||||
|
|
|
|
|
|
|
| |||||||
|
|
| March 31, |
|
| March 31, |
| |||||||
|
|
| 2017 |
|
| 2016 |
| |||||||
|
|
|
|
|
|
|
| |||||||
| ASSETS |
|
|
|
|
|
| |||||||
|
|
|
|
|
|
|
| |||||||
| Current assets |
|
|
|
|
|
| |||||||
| Cash |
| $ | 31,994 |
|
| $ | 625 |
| |||||
| Inventory |
|
| - |
|
|
| 29,504 |
| |||||
| Total Current assets |
|
| 31,994 |
|
|
| 30,129 |
| |||||
|
|
|
|
|
|
|
|
|
| |||||
| Fixed assets |
|
|
|
|
|
|
|
| |||||
| Office equipment |
|
| 1,398 |
|
|
| 1,398 |
| |||||
| Accumulated depreciation |
|
| (583 | ) |
|
| (303 | ) | |||||
| Net fixed assets |
|
| 815 |
|
|
| 1,095 |
| |||||
|
|
|
|
|
|
|
|
|
| |||||
| Other assets |
|
|
|
|
|
|
|
| |||||
| Licenses |
|
| - |
|
|
| 510,000 |
| |||||
| Impairment |
|
| - |
|
|
| (510,000 | ) | |||||
| Net other assets |
|
| - |
|
|
| - |
| |||||
|
|
|
|
|
|
|
|
|
| |||||
| Total Assets |
| $ | 32,809 |
|
| $ | 31,224 |
| |||||
|
|
|
|
|
|
|
|
|
| |||||
| LIABILITIES & STOCKHOLDERS' DEFICIT |
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
| |||||
| Current liabilities |
|
|
|
|
|
|
|
| |||||
| Accounts payable |
| $ | 55,809 |
|
| $ | 46,154 |
| |||||
| Accounts payable - related party |
|
| 129,893 |
|
| $ | 63,000 |
| |||||
| Convertible note payable, net of discount of $22,168 and $Nil as of March 31, 2017 and 2016, respectively |
|
| 252,832 |
|
|
| - |
| |||||
| Accrued interest payable |
|
| 8,128 |
|
|
| - |
| |||||
| Stock offer recission |
|
| 15,000 |
|
|
| 15,000 |
| |||||
| Total Current Liabilties |
|
| 461,662 |
|
|
| 124,154 |
| |||||
|
|
|
|
|
|
|
|
|
| |||||
| Stockholders' Equity (Deficit) |
|
|
|
|
|
|
|
| |||||
| Preferred stock, 25,000,000 shares authorized |
|
|
|
|
|
|
|
| |||||
| with $0.0001 par value. No Preferred |
|
|
|
|
|
|
|
| |||||
| shares issued or outstanding |
|
| - |
|
|
| - |
| |||||
| Common stock, 200,000,000 shares authorized |
|
|
|
|
|
|
|
| |||||
| with $0.0001 par value. 95,709,458 and |
|
|
|
|
|
|
|
| |||||
| 95,206,213 issued and outstanding at |
|
|
|
|
|
| |||||||
| March 31, 2017 and March 31, 2016, respectively |
|
| 9,571 |
|
|
| 9,521 |
| |||||
| Additional paid in capital |
|
| 2,771,723 |
|
|
| 2,726,481 |
| |||||
| Additional paid in capital - Warrants |
|
| 1,363,892 |
|
|
| 1,354,015 |
| |||||
| Common stock payable |
|
| 45,000 |
|
|
| 45,000 |
| |||||
| Accumulated deficit |
|
| (4,619,039 | ) |
|
| (4,227,947 | ) | |||||
| Total Stockholders' Equity (Deficit) |
|
| (428,853 | ) |
|
| (92,930 | ) | |||||
|
|
|
|
|
|
|
|
|
| |||||
| Total Liabilities and Stockholders' Deficit |
| $ | 32,809 |
|
| $ | 31,224 |
| |||||
The accompanying notes are an integral part of these condensed financial statements
| F-3 |
| Table of Contents |
| CONDENSED STATEMENTS OF OPERATIONS | |||||||||
|
|
|
|
|
|
|
| |||
|
|
| For the Year Ended |
| ||||||
|
|
| March 31, |
| ||||||
|
|
| 2017 |
|
| 2016 |
| |||
|
|
|
|
|
|
|
| |||
| Revenue |
| $ | - |
|
| $ | - |
| |
| Cost of revenues |
|
| - |
|
|
| - |
| |
| Gross Profit |
|
| - |
|
|
| - |
| |
|
|
|
|
|
|
|
|
|
| |
| General and administrative |
|
|
|
|
|
|
|
| |
| Consulting services |
|
| 24,000 |
|
|
| 218,409 |
| |
| Corporate communications |
|
| 2,875 |
|
|
| 20,700 |
| |
| Depreciation expense |
|
| 280 |
|
|
| 280 |
| |
| Impairment expense |
|
| - |
|
|
| 510,000 |
| |
| Management consulting - related parties |
|
| 102,000 |
|
|
| 108,000 |
| |
| Professional fees |
|
| 87,281 |
|
|
| 167,155 |
| |
| Research and development |
|
| - |
|
|
| 18,800 |
| |
| Private placement expense |
|
| - |
|
|
| 372,000 |
| |
| Warrant expense |
|
| - |
|
|
| 1,354,015 |
| |
| General and administrative |
|
| 19,393 |
|
|
| 49,650 |
| |
| Total operating expenses |
|
| 235,829 |
|
|
| 2,819,009 |
| |
|
|
|
|
|
|
|
|
|
| |
| Net loss from operations |
|
| (235,829 | ) |
|
| (2,819,009 | ) | |
|
|
|
|
|
|
|
|
|
| |
| Other income (expense) |
|
|
|
|
|
|
|
| |
| Other income |
|
| 109 |
|
|
| 10,278 |
| |
| Interest income |
|
| 25 |
|
|
| - |
| |
| Interest expense |
|
| (56 | ) |
|
| - |
| |
| Amortization of loan costs and discount |
|
| (12,709 | ) |
|
| - |
| |
| Loss on marketing agreement |
|
| (134,504 | ) |
|
| - |
| |
| Interest expense related to convertible debt |
|
| (8,128 | ) |
|
| - |
| |
| Total other income (expense) |
|
| (155,263 | ) |
|
| 10,278 |
| |
|
|
|
|
|
|
|
|
|
| |
| Net loss |
| $ | (391,092 | ) |
| $ | (2,808,731 | ) | |
|
|
|
|
|
|
|
|
|
| |
| Net income (loss) per share |
|
|
|
|
|
|
|
| |
| (Basic and fully diluted) |
| $ | (0.00 | ) |
| $ | (0.03 | ) | |
|
|
|
|
|
|
|
|
|
| |
| Weighted average number of common shares outstanding |
|
| 95,466,797 |
|
|
| 89,191,314 |
| |
The accompanying notes are an integral part of these financial statements.
| F-4 |
| Table of Contents |
| CONDENSED STATEMENT OF STOCKHOLDER'S EQUITY | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
|
| Common Stock |
|
|
|
|
| Common |
|
| Paid in |
|
|
|
|
|
|
| ||||||||||
|
|
|
|
|
| Amount |
|
| Paid in |
|
| Stock |
|
| Capital |
|
| Accumulated |
|
| Stockholders' |
| |||||||
|
|
| Shares |
|
| ($0.001 Par) |
|
| Capital |
|
| Subscribed |
|
| Warrants |
|
| Deficit |
|
| Deficit |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
| Balances - March 31, 2015 |
|
| 86,822,000 |
|
|
| 8,682 |
|
|
| 1,205,900 |
|
|
| 90,000 |
|
|
| - |
|
|
| (1,419,216 | ) |
|
| (114,634 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Shares issued for cash |
|
| 2,275,000 |
|
|
| 228 |
|
|
| 389,772 |
|
|
| (45,000 | ) |
|
| - |
|
|
| - |
|
|
| 345,000 |
|
| Stock offer rescinded |
|
| (75,000 | ) |
|
| (8 | ) |
|
| (14,992 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (15,000 | ) |
| Shares issued for licenses |
|
| 3,000,000 |
|
|
| 300 |
|
|
| 509,700 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 510,000 |
|
| Shares issued for services - RP |
|
| 55,274 |
|
|
| 6 |
|
|
| 5,994 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 6,000 |
|
| Shares issued for services |
|
| 1,578,939 |
|
|
| 158 |
|
|
| 258,262 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 258,420 |
|
| Shares for private placement exp |
|
| 1,550,000 |
|
|
| 155 |
|
|
| 371,845 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 372,000 |
|
| Paid in Capital - Warrants |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1,354,015 |
|
|
| - |
|
|
| 1,354,015 |
|
| Net loss for the period |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (2,808,731 | ) |
|
| (2,808,731 | ) |
| Balances - March 31, 2016 |
|
| 95,206,213 |
|
|
| 9,521 |
|
|
| 2,726,481 |
|
|
| 45,000 |
|
|
| 1,354,015 |
|
|
| (4,227,947 | ) |
|
| (92,930 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Shares issued for debt |
|
| 503,245 |
|
|
| 50 |
|
|
| 45,242 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 45,292 |
|
| Paid in Capital - Warrants |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 9,877 |
|
|
| - |
|
|
| 9,877 |
|
| Net loss for the period |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (391,092 | ) |
|
| (391,092 | ) |
| Balances - March 31, 2017 |
|
| 95,709,458 |
|
| $ | 9,571 |
|
| $ | 2,771,723 |
|
| $ | 45,000 |
|
| $ | 1,363,892 |
|
| $ | (4,619,039 | ) |
| $ | (428,853 | ) |
The accompanying notes are an integral part of these condensed financial statements
| F-5 |
| Table of Contents |
| CONDENSED STATEMENTS OF CASH FLOWS |
|
|
| For the Year Ended March 31, |
| |||||
|
|
| 2017 |
|
| 2016 |
| ||
|
|
|
|
|
|
|
| ||
| Cash Flows From Operating Activities: |
|
|
|
|
|
| ||
| Net income (loss) |
| $ | (391,092 | ) |
| $ | (2,808,731 | ) |
|
|
|
|
|
|
|
|
|
|
| Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
| Depreciation |
|
| 280 |
|
|
| 280 |
|
| Amortization |
|
| 12,709 |
|
|
| - |
|
| Impairment Expense |
|
| - |
|
|
| 510,000 |
|
| Forgiveness of debt |
|
| - |
|
|
| (10,278 | ) |
| Changes in operating assets and liabilities |
|
|
|
|
|
|
|
|
| Increase/(Decrease) in accounts payable |
|
| 54,947 |
|
|
| 40,097 |
|
| Increase in accounts payable - related party |
|
| 66,893 |
|
|
| 63,000 |
|
| Increase in accrued expenses |
|
| 8,128 |
|
|
| - |
|
| Increase in Stock purchase refund |
|
| - |
|
|
| 15,000 |
|
| Common stock issued for service |
|
| - |
|
|
| 258,420 |
|
| Common stock issued for service - Related party |
|
| - |
|
|
| 6,000 |
|
| Decrease in advances payable |
|
| - |
|
|
| (50,011 | ) |
| (Increase)/Decrease in accounts receivable |
|
| - |
|
|
| 19,364 |
|
| (Increase)/Decrease in inventory |
|
| 29,504 |
|
|
| (29,504 | ) |
| NET CASH USED IN OPERATING ACTIVITIES |
|
| (218,631 | ) |
|
| (2,066,555 | ) |
|
|
|
|
|
|
|
|
|
|
| CASH FLOWS USED IN INVESTING ACTIVITIES |
|
| - |
|
|
| - |
|
| Investment |
|
| - |
|
|
| (510,000 | ) |
|
|
|
|
|
|
|
|
|
|
| NET CASH USED IN INVESTING ACTIVITIES |
|
| - |
|
|
| 510,000 |
|
|
|
|
|
|
|
|
|
|
|
| CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
| Common stock issued for cash |
|
| - |
|
|
| 435,000 |
|
| Proceeds from 8% Convertible note payable |
|
| 250,000 |
|
|
| - |
|
| Common stock offer rescind |
|
| - |
|
|
| (15,000 | ) |
| Common stock issued for investment |
|
| - |
|
|
| 510,000 |
|
| Common stock issued for private placement expenses |
|
| - |
|
|
| 372,000 |
|
| Paid in capital - warrants |
|
| - |
|
|
| 1,354,015 |
|
| Proceeds from shares subscribed |
|
|
|
|
|
| (90,000 | ) |
| NET CASH PROVIDED BY FINANCING ACTIVITIES |
|
| 250,000 |
|
|
| 2,566,015 |
|
|
|
|
|
|
|
|
|
|
|
| Net Increase (Decrease) In Cash |
|
| 31,369 |
|
|
| (10,540 | ) |
|
|
|
|
|
|
|
|
|
|
| Cash At The Beginning Of The Period |
|
| 625 |
|
|
| 11,164 |
|
|
|
|
|
|
|
|
|
|
|
| Cash At The End Of The Period |
| $ | 31,994 |
|
| $ | 624 |
|
|
|
|
|
|
|
|
|
|
|
| Supplemental Disclosure |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cash paid for interest |
| $ | - |
|
| $ | - |
|
| Cash paid for income taxes |
| $ | - |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
|
| Schedule of non-cash investing and financing activity |
| $ | - |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
|
| Warrents issued as debt financing |
| $ | 9,877 |
|
| $ | - |
|
| Accounts payable converted to common stock |
| $ | 45,292 |
|
| $ | - |
|
The accompanying notes are an integral part of these condensed financial statements.
| F-6 |
| Table of Contents |
NOTES TO FINANCIAL STATEMENTS,
MARCH 31, 2017
NOTE 1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION:
Greenhouse Solutions, Inc. (the “Company” or “Greenhouse Solutions”), is a Nevada corporation. The Company was incorporated under the laws of the State of Nevada on April 8, 2009. The Company is involved in the sale and distribution of urban gardening products and greenhouses on the North American Market.
Going Concern
The Company’s financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has incurred an accumulated deficit since inception of $4,619,039 through March 31, 2017 and has not yet established a minimal on-going source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.
The Company may raise additional capital through the sale of its equity securities, through an offering of debt securities, or through borrowings from financial institutions or related parties. By doing so, the Company hopes to generate sufficient capital to execute its business plan of providing financial consulting services on an ongoing basis. Management believes that actions presently being taken to obtain additional funding provide the opportunity for the Company to continue as a going concern.
The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and cash equivalents
The Company considers all cash on hand, cash accounts not subject to withdrawal restrictions or penalties and all highly liquid investments with an original maturity of three months or less as cash equivalents.
Revenue recognition
The Company has realized minimal revenues from operations. The Company recognizes revenues when the sale and/or distribution of products is complete, risk of loss and title to the products have transferred to the customer, there is persuasive evidence of an agreement, acceptance has been approved by the customer, the fee is fixed or determinable based on the completion of stated terms and conditions, and collection of any related receivable is probable. Net sales will be comprised of gross revenues less expected returns, trade discounts, and customer allowances that will include costs associated with off-invoice markdowns and other price reductions, as well as trade promotions and coupons. The incentive costs will be recognized at the later of the date on which the Company recognized the related revenue or the date on which the Company offers the incentive.
Basic and Diluted Loss per Share
The Company computes loss per share in accordance with “ASC-260,” “Earnings per Share” which requires presentation of both basic and diluted earnings per share on the face of the statement of operations. Basic loss per share is computed by dividing net loss available to common shareholders by the weighted average number of outstanding common share during the period. Diluted loss per share gives effect to all dilutive potential common shares outstanding during the period. Diluted loss per share excludes all potential common shares if their effect is anti-dilutive. As of March 31, 2017, there were warrants outstanding to claim 3,600,000 additional common shares of the Company. At March 31, 2017 there were no potentially dilutive securities outstanding.
| F-7 |
| Table of Contents |
Income Taxes
The Company accounts for income taxes pursuant to ASC 740. Under ASC 740 deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases.
The Company maintains a valuation allowance with respect to deferred tax asset. Greenhouse Solutions establishes a valuation allowance based upon the potential likelihood of realizing the deferred tax asset and taking into consideration the Company’s financial position and results of operations for the current period. Future realization of the deferred tax benefit depends on the existence of sufficient taxable income within the carry-forward period under Federal tax laws.
Changes in circumstances, such as the Company generating taxable income, could cause a change in judgment about the realizability of the related deferred tax asset. Any change in the valuation allowance will be included in income in the year of the change estimate.
Carrying Value, Recoverability and Impairment of Long-Lived Assets
The Company has adopted paragraph 360-10-35-17 of FASB Accounting Standards Codification for its long-lived assets. The Company’s long –lived assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.
The company assesses the recoverability of its long-lived assets by comparing the projected undiscounted net cash flows associated with the related long-lived asset or group of assets over their remaining estimated useful lives against their respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets. Fair value is generally determined using the assets expected future discounted cash flows or market value, if readily determinable. If long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives.
The Company considers the following to be some examples of important indicators that may trigger an impairment review; (i) significant under-performance or losses of assets relative to expected historical or projected future operating results; (ii) significant changes in the manner or use of assets or in the Company’s overall strategy with respect to the manner of use of the acquired assets or changes in the Company’s overall business strategy; (iii) significant negative industry or economic trends; (iv) increased competitive pressures; (v) a significant decline in the Company’s stock price for a sustained period of time; and (vi) regulatory changes. The Company evaluates acquired assets for potential impairment indicators at least annually and more frequently upon the occurrence of such events.
The impairment charges, if any, are included in operating expenses in the accompanying statements of operations.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
| F-8 |
| Table of Contents |
The Company’s significant estimates include income taxes provision and valuation allowance of deferred tax assets; the fair value of financial instruments; the carrying value and recoverability of long-lived assets, and the assumption that the Company will continue as a going concern. Those significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached to those estimates or assumptions, and certain estimates or assumptions are difficult to measure or value.
Management regularly reviews its estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such reviews, and if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates.
Fair value of Financial Instruments
The estimated fair values of financial instruments were determined by management using available market information and appropriate valuation methodologies. The carrying amounts of financial instruments including cash approximate their fair value because of their short maturities.
Office Furniture and Equipment
Office furniture and equipment are recorded at cost and depreciated under the straight-line method over the estimated useful life of the asset. At March 31, 2017 the Company had computer equipment of $1,398 with corresponding accumulated depreciation of $583. There corresponding balances for the fiscal year ended March 31, 2016 were $1,398 and $303 respectively. Depreciation expense for the years ended March 31, 2017 and 2016 were $280 and $280 respectively.
Other Assets
The Company has acquired other assets consisting of the following:
|
| 1. | An exclusive license signed on January 20, 2015 for the use of intellectual property for probiotic formulas for cannabis combinations in the homeopathic and nutraceutical industries developed by Dr. M. S. Reddy. This license has a life of 15 years. The license was acquired in exchange for 7,000,000 shares of the common stock of the Company and valued at $0.10 per share consistent with other sakes to private placement buyers. |
|
|
|
|
|
| 2. | A sublicense signed on February 1, 2015 for the intellectual property for the homeopathic and nutraceutical industries and to market products based thereon granted by EVO. This license has a life of 15 years and was acquired in exchange for 4,000,000 shares of the common stock of the Company using the same valuation approach as license #1. |
|
|
|
|
|
| 3. | A payment of $50,000 to KOIOS, Inc. for a non-exclusive license for the use of proprietary formulations for the homeopathic and nutraceutical industries. This license and agreement will be for the development and marketing of homeopathic and nutraceutical supplements. This was originally reported as an investment in Panorama, LLC but was subsequently transferred to KOIOS with an effective date of March 15, 2015. |
|
|
|
|
|
| 4. | An additional license effective November 4, 2015 for the use of intellectual property for probiotic formulas for cannabis combinations in the homeopathic and nutraceutical industries developed by Dr. M. S. Reddy. This license continues until either party, through inaction or prohibited action causes a termination. The license was acquired in exchange for 3,000,000 shares of the common stock of the Company and valued at $0.17 per share. |
At March 31, 2017 and 2016 the Company had a cumulative investment in these other assets of $1,660,000 with a corresponding impairment write-down due to the uncertainty of the Company’s ability to continue as a going concern and total lack of sufficient cash flow or revenues with which to amortize the assets against. Impairment expense for the years ended March 31, 2017 and 2016 were $Nil and $510,000 respectively.
| F-9 |
| Table of Contents |
Long Lived Assets
In accordance with ASC 350 the Company regularly reviews the carrying value of intangible and other long-lived assets for the existence of facts or circumstances both internally and externally that suggest impairment. If impairment testing indicates a lack of recoverability, an impairment loss is recognized by the Company if the carrying amount of a long-lived asset exceeds its fair value.
Stock-based Compensation
The Company accounts for stock-based compensation issued to employees based on FASB accounting standard for Share Based Payment. It requires an entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award – the requisite service period (usually the vesting period). It requires that the compensation cost relating to share-based payment transactions be recognized in financial statements. That cost will be measured based on the fair value of the equity or liability instruments issued. The scope of the FASB accounting standard includes a wide range of share-based compensation arrangements including share options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans.
Recent pronouncements
Management has evaluated accounting standards and interpretations issued but not yet effective as of March 31, 2017 and does not expect such pronouncements to have a material impact on the Company’s financial position, operations, or cash flows.
NOTE 3 - RELATED PARTY TRANSACTIONS
Transactions involving related parties cannot be presumed to be carried out on an arm’s length basis, as the requisite conditions of competitive, free market dealings may not exist. Representation about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm’s length transactions unless such representations can be substantiated. It is not, however, practical to determine the fair value of advances from stockholders due to their related party nature.
During the year ended March 31, 2015 a stockholder of the Company advanced a total of $60,000 of which $10,000 was repaid. As of March 31, 2016, the total advance has been repaid. These advances are unsecured, not represented by any formal loan agreement and bear no interest.
There are three officers of the Company receiving compensation for services rendered. One is compensated at the rate of $3,000 per month and has received $24,472 in payments and is owed $28,393 as at March 31, 2017. Another is compensated at the rate of $3,500 per month. He has received $10,500 in cash payments and is owed a balance of $59,500 as of March 31, 2017. The third is compensated at the rate of $2,000 per month. He has received $6,000 in cash payments and at March 31, 2017 this officer is owed a total of $42,000.
NOTE 4 – STOCKHOLDER’S DEFICIT
The total number of common shares authorized that may be issued by the Company is 200,000,000 shares with a par value of $0.0001 per share. The Company is authorized to issue 25,000,000 shares of preferred stock with a par value of $0.0001 per share. As at March 31, 2017 there are no preferred shares issued or outstanding.
As at March 31, 2017 the total number of common shares outstanding was 95,709,458. The Company has an ongoing program of private placements to raise funds to support the operations. The terms and conditions of these private placements in the past have remained constant as follows: i.e. the offering price per share is $0.10 and each share includes a warrant for the purchase of an additional share at $0.20.for a period of two years from the date of the subscription. During the quarter ended June 30, 2015 the Company received $215,000 in net proceeds through a private placement at terms that changed as follows, $0.20 per share for cash and the Company will issue 1,075,000 common shares of the Company under the terms described. Also during this quarter the Company issued 300,000 shares of its common stock in exchange for $90,000 which had been received in the previous year. This money was shown in the stockholder equity report as “Common Stock Subscribed.” During the quarter ended September 30, 2015 the Company received $50,000 in net proceeds through a private placement for $0.20 per share and will issue 250,000 common shares of the Company. During the quarter ended December 31, 2015 the Company received $65,000 in net proceeds through a private placement for $0.10 per share and will issue 650,000 common shares of the Company.
| F-10 |
| Table of Contents |
During the quarter ended December 31, 2015 the Company issued an additional 1,550,000 shares of its common stock to the participants of the private offerings during the past three quarters. This was voluntarily done by the Board of Directors to effectively value each share previously received at $0.10 to match current shares issued and to help offset any dilution they may have experienced. There was no legal obligation to do this but this was decided to be done by the Board of Directors on November 10, 2015. The closing share price on this date of $0.24 was used and the value attributed for the issuance of these additional shares of $372,000 was booked to Private Placement Expense on the financial statements.
On October 23, 2015 the Company authorized the issuance 3,634,213 shares as compensation expense which was allocated as follows: (1) 500,000 shares for legal services provided; (2) 78,939 for consulting services; (3) 55,274 for Related Party Officer compensation and (4) 3,000,000 for additional consideration for IP License #2. These were expensed to the appropriate corresponding categories on the “Statement of Income and Expense” for items (1), (2) and (3) with the value of (4) being allocated to the Other Asset category of the Balance Sheet with its corresponding write down in value. For recording purposes these shares were valued at $0.17 which was the average price for the Company’s common stock for the quarter ending March 31, 2017.
On November 1, 2015 the Company authorized the issuance of 600,000 shares of its common stock as compensation for consulting services to be performed. An expense of $90,000 was recorded on the Company’s books as consulting expense. These shares were valued at $0.15 for per share was the closing price for that date.
In August of 2015 the Company received notice from an investor that they wished to rescind the transaction and have their money refunded. Since the shares had not been issued the refund is shown as a liability of the Company.
On March 11, 2016 the Company authorized the issuance of 400,000 shares for marketing consulting services and recorded an expense of $40,000.
On September 21, 2016, 503,245 shares were issued to settle an account payable of $45,292. No gain or loss was recorded as they were issued at the closing price on the agreement date. In addition to this, the Company received $45,000 in exchange for 75,000 shares subscribed for in fiscal year ending March 31, 2016 that are yet issued.
NOTE 5 – WARRANTS
In connection with the common stock subscriptions referenced above each subscription included one warrant for each share subscribed. These warrants have an exercise price of $0.20 per share and an expiration date that is two years from the date of the subscription.
During the year ended March 31, 2015 the Company issued 225,000 warrants. During the quarter ended June 30, 2015 the Company issued 2,150,000 warrants. During the quarter ended September 30, 2015 the Company issued 500,000 warrants. During the quarter ended December 31, 2015 the Company issued 650,000 warrants.
Using the Black-Scholes valuation model a value of $1,354,015 is assigned to these warrants. The parameters used in the Black-Scholes model were as follows: stock price $0.08; strike price $0.20; volatility 350%; risk free rate 1.75% and time to expiration of 1.33 years. This expense is recorded on the books of the Company as “Warrant expense” with an offsetting entry in the Stockholder’s Deficit section as “Additional paid in capital – Warrants.”
As of March 31, 2017, the Company has not received any notifications with respect to any exercise of any outstanding warrants.
| F-11 |
| Table of Contents |
There were 300,000 warrants issued in conjunction with a $275,000 note, see “Note 14” for details. Using the Black-Sholes valuation model a value of $9,877 is assigned to these warrants. The parameters used in the Black-Scholes model were as follows: stock price $0.072, strike price $0.96-$0.107, volatility 95.45%, risk-free rate 1.07% and time to expire of 2 years. The amount is recorded on the books of the company as debt discount with an offsetting entry in the stockholders deficit section as “additional paid in capital – warrants”
A summary of warrant activity for the periods indicated is as follows:
|
|
| Shares under |
|
| Exercise |
|
| Remaining |
| |||
|
|
| Warrant |
|
| Price |
|
| Life |
| |||
| Balance at March 31, 2014 |
|
| 0 |
|
| $ | - |
|
|
| 0 |
|
| Granted |
|
| 300,000 |
|
| $ | 0.20 |
|
|
| 0 |
|
| Exercised |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
| Expired |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
| Balance at March 31, 2015 |
|
| 300,000 |
|
|
|
|
|
|
|
|
|
| Granted |
|
| 3,525,000 |
|
| $ | 0.20 |
|
|
| 0.2 |
|
| Exercised |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
| Expired |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
| Balance at March 31, 2016 |
|
| 3,825,000 |
|
|
|
|
|
|
| 0.2 |
|
| Granted |
|
| 300,000 |
|
| $ | 0.10 |
|
|
| 1.64 |
|
| Exercised |
|
| - |
|
|
| 0 |
|
|
| 0 |
|
| Expired |
|
| (525,000 | ) |
|
| 0 |
|
|
| 0 |
|
| Balance at March 31, 2017 |
|
| 3,600,000 |
|
|
|
|
|
|
| 0.29 |
|
NOTE 6 – RESEARCH AND DEVELOPMENT
During the year ended March 31, 2017 and 2016 the Company spent a total of $Nil and $18,800 respectively on research and development. The nature of this research was to determine the viability of converting the pill form of our supplement into a functioning beverage form.
NOTE 7 – INCOME TAXES
A reconciliation of the provision for income taxes at the United States federal statutory rate of 34% and a Colorado state rate of 5% compared to the Company’s income tax expense as reported is as follows:
|
|
| March 31, 2017 |
|
| March 31, 2016 |
| ||
| Net loss before income taxes |
| $ | (391,092 | ) |
| $ | (2,808,731 | ) |
| Adjustment for warrant expense |
|
| 3,599 |
|
|
| 1,354,015 |
|
| Adjustment for impairment expense |
|
| - |
|
|
| 510,000 |
|
| Deductible net loss |
|
| (387,493 | ) |
|
| (944,716 | ) |
| Income tax rate |
|
| 39 | % |
|
| 39 | % |
| Income tax recovery |
|
| (151,122 | ) |
|
| (368,440 | ) |
| Valuation allowance change |
|
| 151,122 |
|
|
| 368,440 |
|
| Provision for income taxes |
| $ | - |
|
| $ | - |
|
| F-12 |
| Table of Contents |
The significant components of deferred income tax assets at March 31, 2017 and 2016 are as follows:
|
|
| March 31, 2017 |
|
| March 31, 2016 |
| ||
| Net operating loss carryforward |
| $ | (4,619,039 | ) |
| $ | (4,227,947 | ) |
| Adjustment for warrant expense |
|
| 1,357,614 |
|
|
| 1,354,015 |
|
| Adjustment for impairment expense |
|
| 1,660,000 |
|
|
| 1,660,000 |
|
| Deductible net loss |
|
| (1,601,425 | ) |
|
| (1,213,932 | ) |
| Valuation allowance |
|
| 1,601,425 |
|
|
| 1,213,932 |
|
| Net deferred income tax asset |
|
| - |
|
|
| - |
|
As of March 31, 2017, and 2016, the Company has no unrecognized income tax benefits. The Company’s policy for classifying interest and penalties associated with unrecognized income tax benefits is to include such items as tax expense. No interest or penalties have been recorded during the years ended March 31, 2017 and 2016, and no interest or penalties have been accrued as of March 31, 2017 and 2016. As of March 31, 2017, and 2016 the Company did not have any amounts recorded pertaining to uncertain tax positions.
The tax years from 2012 and forward remain open to examination by federal and state authorities due to net operating loss and credit carryforwards. The Company is currently not under examination by the Internal Revenue Service or any other taxing authorities.
NOTE 8 – FORGIVENESS OF DEBT
As of March 31, 2015, the Company had two outstanding invoices that dated from activities carried on by prior operations. It was management’s decision that these two debts were no longer to be considered an obligation of the Company and therefore were written off. These amounts were reclassified to “Forgiveness of debt” income with the assent of the creditors.
NOTE 9 – STOCK OFFER RECISSION
On September 5, 2015 the Company received notice from an investor who had not yet received the stocks subscribed for that they wished to rescind the offer. This amount is carried on the books and financial statements as a current liability in the amount of $15,000. It is the Company’s intent to refund this money when it has sufficient cash resources to do so.
NOTE 10 – CUSTOMER REFUND
The sale that was recorded on February 18, 2015 included an amount, $5,128 in sales taxes. The Company was not nor is not licensed to collect such taxes. The Company has been in communication with its customer regarding this amount and the customer has agreed to allow the Company to retain this money as additional compensation for the transaction. Accordingly, the Company has recorded this amount as “Other income” in its 2016 “Statement of Operations.”
NOTE 11 – ADVANCES
At March 31, 2017 the Company has in total $0 of advances. At March 31, 2015 the Company carried on its books of account the sum of $55,161. During the year ended March 31, 2016, the Company paid $50,011 against this balance. Further research showed that $5,000 of this balance was related to a former major stockholder who relinquished all rights to debts and assets at the time the new major stockholders assumed control of the Company. This occurred on August 28, 2015 and the debt was reclassified as “Forgiveness of debt” income during the final quarter of the Company’s fiscal year. An additional $150 was advanced to open the initial bank account. This was forgiven and reclassified as “Forgiveness of debt” income also.
NOTE 12 – INVENTORY
In October of 2015 the Company purchased aluminum cans and lids in preparation for producing a product for the retail market. These cans are for the nutraceutical products that are under development. During the year ended March 31, 2017, inventory of $29,504 was written off due to abandoning of joint venture with KOIOS. This was recorded as a loss on marketing agreement in other income.
| F-13 |
| Table of Contents |
NOTE 13 – PRIVATE PLACEMENT EXPENSE
In December of 2015 the Board of Directors decided that investors that had purchased stock from the beginning of 2015 through July 31, 2015 should be granted parity with more recent stockholders who were issued stock valued at $0.10 per share. In order to achieve this parity those designated stockholders received an additional 1,550,000 shares of common stock of the Company. In accordance with GAAP the Company booked an expense of $372,000 in connection with the issuance of these additional shares based on the share price at the time of issuance of these shares. There were no additional warrants attached to these shares.
NOTE 14 – SECURITIES PURCHASE AGREEMENT & CONVERTIBLE PROMISSORY NOTE
On November 18, 2016, the Company signed a Convertible Promissory Note with SBI Investments LLC. The terms and conditions are as follows:
The face value of the note is $275,000 and the maturity date is November 18, 2018. The note includes a reduction of proceeds in the amount of $25,000 which is considered Original Issue Discount, which will be amortized as interest expense over the one-year life of the note. At the time of disbursement there was a deduction from proceeds to the Company of $5,000 for legal fees related to the issuance of the promissory note. Repayment is to begin six months after the date of the note, is to be made bi-weekly and shall be 1/12 of the outstanding principal and interest until paid in full. In the event the note is not paid in full by the maturity date the entire balance becomes due and payable.
The Securities Purchase Agreement includes a right to buy up to 300,000 warrants attached for 150,000 warrant shares of Series A warrants and 150,000 warrant shares of Series B warrants. These warrants are discussed in the preceding Note 5.
Any payment on the note or the note principal and interest in full may be converted into Common Stock at the sole option of the holder at a price equal to 65% of the three lowest Volume Weighted Average Price (VWAP) of the Common Stock for the 20 consecutive trading days ending on the trading day that is immediately prior to the conversion date. The Beneficial Ownership Limitation is 4.99% except that the holder of the note may increase this limitation to no more 9.99% under certain circumstances. At March 31, 2017, there were 95,709,458 shares of Common Stock of the Company outstanding. Under these restrictions, the maximum number of shares that could be issued by the Company would be 5,030,675 under the 4.99% limitation and 10,630,893 under the 9.99% limitation. The warrants issues as part of the Securities Purchase Agreement are subject to this limitation. SBI Investments, LLC may begin to excise its conversion rights six months following the signing of the note, or May 18th, 2017.
The Company will account for this beneficial conversion feature as a derivative under ASC 815-10-15-83 and will value separately from the note at fair value as of May 18, 2017. The beneficial conversion feature of the note is revalued at each subsequent reporting date at fair value and any changes in fair value will result in a gain or loss in those periods. These warrants were valued using a Black-Scholes model resulting in a fair value of $9,877, recorded as a debt discount. Amortization of this discount totals $3,599 for year ending March 31, 2017. The Original Issue Discount of $25,000 was recorded as a discount to the note with the amortization for the year ending March 31, 2017 being $9,110. Discount on the note as of March 31, 2017 was $22,168.
NOTE 15 – JOINT MARKETING AGREEMENT
During the year ended March 31, 2017, the Company entered into a Joint Marketing Agreement with a local company to produce and distribute a neutraceutical drink fortified with the Company’s proprietary formula. This agreement produced approximately $70,000 in revenues over a six-month period of time. The corresponding costs were approximately $185,000 resulting in a loss of $105,000. After a considered analysis of the operation, management decided to discontinue the agreement and record the loss.
NOTE 16 – SUBSEQUENT EVENTS
The Company has evaluated subsequent events from the date on the balance sheet through the date these financial statements are being filed with the Securities and Exchange Commission. No material events or transactions have occurred during this subsequent event reporting period which required recognition or disclosure in the financial statements.
| F-14 |
| Table of Contents |
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
ITEM 9A. CONTROLS AND PROCEDURES.
EVALUATION OF DISCLOSURE CONTROLS & PROCEDURES
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time period specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is accumulated and communicated to management including our principal executive officer and principal financial officer as appropriate, to allow timely decisions regarding required disclosure.
In connection with this annual report, as required by Rule 15d-15 under the Securities Exchange Act of 1934, we have carried out an evaluation of the effectiveness of the design and operation of our company’s disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of our company’s management, including our company’s principal executive officer and principal financial officer concluded that subject to the inherent limitations noted in this Part II, Item 9A(T) as of March 31, 2017, our disclosure controls and procedures were not effective due to the existence of material weaknesses in our internal controls over financial reporting as discussed below.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) or 15d-15(f)) during the quarter ended March 31, 2017 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
It is Management’s responsibility to establish and maintain adequate internal control over financial reporting. The matters involving internal controls and procedures that our Company’s management considered to be material weaknesses and may have been ineffective under the standards of the Public Company Accounting Oversight Board were: (1) lack of a functioning audit committee and lack of a majority of outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; (2) inadequate segregation of duties consistent with control objectives; (3) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements; (4) ineffective controls over period end financial disclosure and reporting processes; and (5) The Company has no formal control process related to the identification and approval of related party transactions.
Management has assessed the effectiveness of its internal controls over financial reporting at the end of the most recent fiscal year, and has determined several weaknesses and has determined that its internal controls have not been effective due, in part, to untrained and inexperienced executive management, and in part due to lack of full-time financial accounting professionals.
Management believes that the material weaknesses and ineffectiveness set forth in items (2), (3) and (4) above did not have an effect on our Company's financial results. However, management believes that the lack of a functioning audit committee, lack of a Chief Financial Officer, and lack of a majority of outside directors on our Company's board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures may result in our Company's financial statements for the future years being subject to error and inaccurate if controls, procedures, and professional financial officers are not maintained.
We are committed to improving our financial organization. As part of this commitment, we intend to create a position to segregate duties consistent with control objectives and intend to increase our personnel resources and technical accounting expertise within the accounting function when funds are available to our Company: i) Appointing one or more outside directors to our board of directors who shall be appointed to the audit committee of our Company resulting in a fully functioning audit committee who will undertake the oversight in the establishment and monitoring of required internal controls and procedures; and ii) Preparing and implementing sufficient written policies and checklists which will set forth procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements.
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| Table of Contents |
Management believes that the appointment of one or more outside directors, who shall be appointed to a fully functioning audit committee, will remedy the lack of a functioning audit committee and a lack of a majority of outside directors on our Company's Board. In addition, management believes that preparing and implementing sufficient written policies and checklists will remedy the following material weaknesses (i) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements; and (ii) ineffective controls over period end financial close and reporting processes. Further, management believes that the hiring of additional personnel who have the technical expertise and knowledge will result proper segregation of duties and provide more checks and balances within the department. Additional personnel will also provide the cross training needed to support our Company if personnel turn over issues within the department occur. This coupled with the appointment of additional outside directors will greatly decrease any control and procedure issues our Company may encounter in the future.
Due to insufficient funds during the year ended March 31, 2017, the Company has been unable to implement many of the remedies to the ineffective oversight. The Company will continue to implement the changes as laid out above as soon as funds are available to the Company.
We will continue to monitor and evaluate the effectiveness of our internal controls and procedures and our internal controls over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.
This annual report does not include an attestation report of our Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit our Company to provide only management’s report in this annual report.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rules 13a-15 or 15d-15 under the Exchange Act that occurred during the small business issuer's last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
None
| 36 |
| Table of Contents |
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
We do not, at present, have any employees other than the current officers and directors. We have not entered into any employment agreements, as we currently do not have any employees other than the current officer and director.
The following table sets forth information as to persons who currently serve as directors or executive officers, including their ages as of March 31, 2017.
Identification of Directors and Executive Officers
| Name |
| Age |
| Term Served |
| Title |
|
| ||||||
| Redgie Green |
| 64 |
| Since Nov. 26, 2014 |
| President and Director |
|
| ||||||
| John G. Michak III |
| 33 |
| Since Apr. 29, 2014 and COO since Feb. 10, 2015 |
| Chief Operating Officer and Director |
|
| ||||||
| Rik J. Deitsch |
| 50 |
| Since Jan. 28, 2015 |
| Chief Executive Officer and Director |
There are no other persons nominated or chosen to become directors or executive officers, nor do we have any employees other than above mentioned officers and directors. We have, however, entered into consulting agreements with Ted Tinsman, Vice President of Architecture, and Lorent Priest, Vice President of Engineering. Copies of the consulting agreements can be found in our 8-K filing dated January 27, 2015 found at www.sec.gov.
The officers are elected by the board of directors at the first meeting after each annual meeting of our shareholders and hold office until their successors are duly elected and qualified under Greenhouse Solutions, Inc. bylaws.
Our directors hold office until the next annual meeting of shareholders and the election and qualification of their successors. Directors receive no compensation for serving on the board of directors other than the reimbursement of reasonable expenses incurred in attending meetings. Officers are appointed by the board of directors and serve at the discretion of the board.
Officer and Director Biographical Information:
Redgie Green – Age 64, President and Director
Mr. Green was appointed President and a Director of our Company on November 26, 2014.
Since 2010, Mr. Green has been Chief Executive Officer and a Director of Legacy Technology Holdings, Inc. Mr. Green served as the Chief Executive Officer of Sun River Energy, Inc. January 2009 through August 3, 2010. From January 2009 through October 2009, he served as the President of Sun River Energy, Inc. He has served as a director of Sun River Energy, Inc. from 1998 through October 2010. Mr. Green was a director of Colorado Gold & Silver, Inc. in 2000. He was a director for Houston Operating Company in late 2004 until December 2004. He served as a director for Mountains West Exploration, Inc. 2005. He was a director of Concord Ventures, Inc. (renamed Golden Dragon Holdings, Inc. 2006 to 2014. He has served as a director of ASPI, Inc. from 2006 through the fall of 2009 and was appointed as an officer and director of Captech Financial, Inc. in May 2006 to 2007. He has been a director of INTREorg, Inc. since 2008. He served as a director of Baymark Technologies, Inc. 2005-2006.
| 37 |
| Table of Contents |
John George Michak III – Age 33, COO and Director
Mr. Michak was appointed Director on April 29, 2014 and Chief Operating Officer on February 10, 2015. As a Nordstrom’s credit communications planner from April 2013 to January 2014, Mr. Michak supported the development of business operational documents and drove the execution for all credit related customers facing collateral. Managed the collateral budget and worked with colleagues to identify and implement customer communications enhancements and or cost reduction opportunities for the company. While at Morgan Stanley Global Wealth Management from January 2012 to January 2013, Mr. Michak worked as a technology analyst, and as a strategic partner along with the firm’s business units and some of the world’s leading technology companies to redefine how Morgan Stanley does business in global financial markets that are extremely fast and vastly complex. While assisting the firm with the conversion effort of combining Smith Barney and Morgan Stanley to create Morgan Stanley Global Wealth Management Group. Mr. Michak also worked for Alpert Homes from March 2010 to January 2012 and helped manage relationships with sales center representatives in assigned communities and followed up regularly regarding prospects. He also assisted in managing new home construction sites start to finish. He has been working with global companies aiding in their growth and expansion since 2010. Mr. Michak was a student at Colorado State University from 2004 to June 2009. From June 2009 until March 2010 Mr. Michak expanded his intellectual horizons by traveling abroad.
Mr. Michak holds a liberal arts degree from Colorado State University as well as attended Kaplan real estate school in Denver.
Rik J. Deitsch – Age 50, CEO and Director
Mr. Deitsch was appointed Chief Executive Officer and a Director on January 28, 2015. Rik J. Deitsch has been the President, Chief Executive Officer and a Director of Nutra Pharma Corporation since November 7, 2002. From February 1998 through November 2002, Mr. Deitsch served as the President of NDA Consulting Inc., a biotechnology research group that provided consulting services to the pharmaceutical industry. NDA Consulting specialized in the research of peptides derived from Cone Snail venom, Cobra venom and Gila Monster venom. Mr. Deitsch holds both a B.S. in Chemistry and an M.S. in Biochemistry from Florida Atlantic University and has conducted clinical and laboratory research in collaboration with scientists at Duke University Medical Center and the Cleveland Clinic. Mr. Deitsch is an adjunct professor and teaches several courses for Florida Atlantic University's College of Business and Continuing Education Department. He has been appointed as a Director and as the CEO due to his extensive experience in the nutraceutical industry.
Committees of the Board of Directors
We managed under the direction of our board of directors.
EXECUTIVE COMMITTEE
We do not have an executive committee, at this time.
AUDIT COMMITTEE
We do not have an audit committee at this time.
Conflicts of Interest – General
Our directors and officers are, or may become, in their individual capacities, officers, directors, controlling shareholder and/or partners of other entities engaged in a variety of businesses. Thus, there exist potential conflicts of interest including, among other things, time, efforts and corporation opportunity, involved in participation with such other business entities. Each officer and director of our business is engaged in business activities outside of our business. The amount of time Mr. Michak devotes to our business is 40 hours per week. Mr. Deitsch, our Chief Executive Officer, devotes up to 10 hours per week to our business.
| 38 |
| Table of Contents |
CONFLICTS OF INTEREST - CORPORATE OPPORTUNITIES
Presently no requirement contained in our Articles of Incorporation, Bylaws, or minutes which requires officers and directors to disclose to our business opportunities which come to their attention. Our officers and directors do, however, have a fiduciary duty of loyalty us to disclose to it any business opportunities which come to their attention, in their capacity as an officer and/or director or otherwise. Excluded from this duty would be opportunities which the person learns about through his involvement as an officer and director of another company. We have no intention of merging with or acquiring an affiliate, associate person or business opportunity from any affiliate or any client of any such person, at this time.
Involvement in Legal Proceedings
No executive Officer or Director of our Company has been convicted in any criminal proceeding (excluding traffic violations) or is the subject of a criminal proceeding that is currently pending.
No executive Officer or Director of our Company is the subject of any pending legal proceedings.
No Executive Officer or Director of our Company is involved in any bankruptcy petition by or against any business in which they are a general partner or executive officer at this time or within two years of any involvement as a general partner, executive officer, or Director of any business.
| 39 |
| Table of Contents |
ITEM 11. EXECUTIVE COMPENSATION.
The following table sets forth the compensation paid to officers during the fiscal years ended March 31, 2017, 2016, 2015 and 2014. The table sets forth this information for Greenhouse Solutions, Inc. including salary, bonus, and certain other compensation to the named executive officers for the past three fiscal years.
| Name and |
|
|
| Salary |
|
| Bonus Awards |
|
| Stock Awards |
|
| Option Awards |
|
| Non-Equity Incentive Plan Compen-sation |
|
| Nonqualified Deferred Compen-sation Earnings |
|
| All Other Compensa-tion |
|
| Total |
| ||||||||
| Position |
| Year |
| ($) |
|
| ($) |
|
| ($) |
|
| ($) |
|
| ($) |
|
| ($) |
|
| ($) |
|
| ($) |
| ||||||||
| (a) |
| (b) |
| (c) |
|
| (d) |
|
| (e) |
|
| (f) |
|
| (g) |
|
| (h) |
|
| (i) |
|
| (j) |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
| Matt Brown, Former |
| 2015 |
|
| 59,097 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 59,097 |
|
| CEO (1) |
| 2014 |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Pramuan Upatch (2), Former |
| 2015 |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
| CEO & CFO |
| 2014 |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| John G. Michak III (7) |
| 2017 |
|
| 14,500 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 14,500 |
|
| Chief Operating Officer |
| 2016 |
|
| 25,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 25,000 |
|
|
|
| 2015 |
|
| 5,000 | (5) |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 5,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Rik J. Deitsch (3) |
| 2017 |
|
| 10,500 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 10,500 |
|
| Chief Executive Officer |
| 2016 |
|
| 14,000 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 14,000 |
|
|
|
| 2015 |
|
| 3,500 | (5) |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 3,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Redgie Green (6), |
| 2017 |
|
| 6,000 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 6,000 |
|
| President |
| 2016 |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
|
| 2015 |
|
| 4,000 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 4,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Ted Tinsman, |
| 2016 |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
| Vice President (4) |
| 2015 |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Lorent Priest, |
| 2016 |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
| Vice President (4) |
| 2015 |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
_______________
(1) Resigned as Officer and Director November 26, 2014; was paid through his consulting company, Linnaeus & Lamarck, Ltd.
(2) Resigned as Officer and Director June 18, 2014
(3) Paid through his consulting company, MGRD, Inc. Mr. Deitsch is owed $59,500 of his salary for the year ended March 31, 2017.
(4) Appointed as Officers, on an hourly consulting basis for services
| 40 |
| Table of Contents |
(5) Paid as consulting fees
(6) Mr. Green received 55,274 shares of common stock to compensate him for the first three months of 2015, at a value of $4,000. Mr. Green’s salary of $42,000 for the year ended March 31, 2017 is accrued but not paid.
(7) Mr. Michak is owed $28,393 of his salary for the year ended March 31, 2017.
There are no current employment agreements between our Company and our executive officers or directors. Our executive officers and directors have agreed to work with minimal remuneration on a month to month consulting fee basis as follows: Redgie Green will earn $2,000 per month, Rik Deitsch will earn $3,500 per month, and John Michak will earn $3,000 per month until such time as we receive revenues that are sufficiently necessary to provide proper salaries to the officer and compensate the officer or directors for participation. These officers have agreed to accept shares in lieu of cash at the market close price on June 31, 2015, for accrued fees for first 6 months of 2015. Our executive officers and directors has the responsibility of determining the timing of remuneration programs for key personnel based upon such factors as positive cash flow, shares sales, product sales, estimated cash expenditures, accounts receivable, accounts payable, notes payable, and a cash balances. At this time, management cannot accurately estimate when sufficient revenues will occur to implement this compensation, or the exact amount of compensation.
There are no annuity, pension or retirement benefits proposed to be paid to officers, directors or employees of the corporation in the event of retirement at normal retirement date pursuant to any presently existing plan provided or contributed to by our Company.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END
None.
OPTION/SAR GRANTS IN THE LAST FISCAL YEAR
None.
CONSULTING AGREEMENTS WITH OFFICERS AND DIRECTORS
We have an arrangement to pay consulting fees for services to the following officers/directors:
Redgie Green, Director $2,000 per month
John Michak, COO and Director $3,000 per month
Rik Deitsch, CEO and Director, $3,500 per month
DIRECTOR COMPENSATION
All of our officers and/or directors will continue to be active in other companies. All officers and directors have retained the right to conduct their own independent business interests.
We do not pay any Directors fees for meeting attendance.
| 41 |
| Table of Contents |
The following table sets forth the compensation paid to officers and board members during the fiscal years ended March 31, 2017, 2016, 2015 and 2014. The table sets forth this information for our Company including salary, bonus, and certain other compensation to the Board members and named executive officers for the past three fiscal years.
| Name |
|
| Fees Earned or Paid in Cash ($) |
|
| Stock Awards ($) |
|
| Option Awards ($) |
|
| Non-Equity Incentive Plan Compen-sation ($) |
|
| Non-Qualified Deferred Compen-sation Earnings ($) |
|
| All Other Compen-sation ($) |
|
| Total ($) |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
| Matt Brown (1) |
| 2014 |
|
| 59,097 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 59,097 |
|
| Former President, Director |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Pramuan Upatch (2), Former President, |
| 2014 |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
| Treasurer, Secretary, Director |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| George Dory (3), Former |
| 2014 |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
| Director, President, Treasurer, Secy |
|
|
|
|
|
|
|
|
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|
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
| John G. Michak III Director (5) |
| 2014 |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
|
| 2015 |
|
| 5,000 | (6) |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 5,000 |
|
|
|
| 2016 |
|
| 25,000 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 25,000 |
|
|
|
| 2017 |
|
| 14,500 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 14,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
| Rik J. Deitsch (4) |
| 2015 |
|
| 3,500 | (6) |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 3,500 |
|
| Director |
| 2016 |
|
| 14,000 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 14,000 |
|
|
|
| 2017 |
|
| 10,500 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 10,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
| Redgie Green |
| 2014 |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
| Director |
| 2015 |
|
| 4,000 | (6) |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 4,000 |
|
|
|
| 2016 |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
|
| 2017 |
|
| 6,000 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 6,000 |
|
____________
(1) Resigned as Officer and Director November 26, 2014; paid through his consulting company, Linnaeus & Lamarck, Ltd. from June 18, 2014
(2) Resigned as Officer and Director June 18, 2014
(3) Resigned as of July 13, 2013
(4) Paid through his consulting company, MGRD, Inc.
(5) Since April 29, 2014
(6) Paid for officer services, not as additional compensation of directors.
| 42 |
| Table of Contents |
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our officers and directors are indemnified as provided by the Nevada Revised Statutes and the bylaws.
Under the Nevada Revised Statutes, director immunity from liability to a company or its shareholders for monetary liabilities applies automatically unless it is specifically limited by a company's Articles of Incorporation. Our Articles of Incorporation do not specifically limit the directors' immunity. Excepted from that immunity are: (a) The director’s or officer’s act or failure to act constituted a breach of his or her fiduciary duties as a director or officer; and (b) The breach of those duties involved intentional misconduct, fraud or a knowing violation of law.
Our bylaws provide that it will advance to any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a director or officer of our Company, or is or was serving at our request of as a director or executive officer of another company, partnership, joint venture, trust or other enterprise, prior to the final disposition of the proceeding, promptly following request therefore, all expenses incurred by any director or officer in connection with such proceeding upon receipt of an undertaking by or on behalf of such person to repay said amounts if it should be determined ultimately that such person is not entitled to be indemnified under the bylaws or otherwise.
The following table sets forth certain information with respect to the beneficial ownership of our common shares as it relates to our named directors and executive officers, and each person known to us to be the beneficial owner of more than five percent (5%) of said securities, and all of our directors and executive officers as a group.
Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Shares of common stock and options, warrants and convertible securities that are currently exercisable or convertible within 60 days of the date of this document into shares of our common stock are deemed to be outstanding and to be beneficially owned by the person holding the options, warrants or convertible securities for the purpose of computing the percentage ownership of the person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.
The information below is based on the number of shares of our common stock that we believe was beneficially owned by each person or entity as of March 31, 2017.
| Name, Position and Address (1) |
| Shares |
| Percent (2) |
| Security |
| John G. Michak III, COO and Director |
| 29,000,000 |
| 30.28% |
| Common |
|
| ||||||
| Dr. Malireddy S. Reddy |
| 10,000,000 |
| 10.44% |
| Common |
|
| ||||||
| Rik J. Deitsch, Chief Executive Officer and Director (3) |
| 4,000,000 |
| 4.18% |
| Common |
|
| ||||||
| Redgie Green, President and Director |
| 255,274 |
| 0.27% |
| Common |
| Officers and Directors as a Group |
| 33,255,274 |
| 34.73% |
| Common |
______________
(1) The Address for the above individuals is c/o 600 17th St., Suite 2800, South Denver, CO 80202.
(2) Based on 95,709,458 shares issued and outstanding.
(3) Shares held by MGRD, Inc.
Rule 13d-3 under the Securities Exchange Act of 1934 governs the determination of beneficial ownership of securities. That rule provides that a beneficial owner of a security includes any person who directly or indirectly has or shares voting power and/or investment power with respect to such security. Rule 13d-3 also provides that a beneficial owner of a security includes any person who has the right to acquire beneficial ownership of such security within sixty days, including through the exercise of any option, warrant or conversion of a security. Any securities not outstanding which are subject to such options, warrants or conversion privileges are deemed to be outstanding for the purpose of computing the percentage of outstanding securities of the class owned by such person. Those securities are not deemed to be outstanding for the purpose of computing the percentage of the class owned by any other person.
| 43 |
| Table of Contents |
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END
There were no grants of stock options since inception to March 31, 2017. We do not have any long-term incentive plans that provide compensation intended to serve as incentive for performance.
Our Board of Directors have not adopted a stock option plan. We have no plans to adopt one but may choose to do so in the future. If such a plan is adopted, this may be administered by the board or a committee appointed by the board (the “Committee”). The committee would have the power to modify, extend or renew outstanding options and to authorize the grant of new options in substitution therefore, provided that any such action may not impair any rights under any option previously granted. We may develop an incentive-based stock option plan for our officers and directors and may reserve up to 10% of its outstanding shares of common stock for that purpose.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
Other than the stock transactions discussed below, we have not entered into any transaction nor is there any proposed transactions in which any of the founders, directors, executive officers, shareholders or any members of the immediate family of any of the foregoing had or is to have a direct or indirect material interest.
CONSULTING AGREEMENTS WITH OFFICERS AND DIRECTORS
We have no formal written employment agreement or other contracts with our current officers and there is no assurance that the services to be provided by them will be available for any specific length of time in the future. The amounts of compensation and other terms of any full-time employment arrangements would be determined, if and when, such arrangements become necessary.
EQUITY ISSUANCES TO OFFICERS AND DIRECTORS
None.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
Our auditor, M&K CPAS, PLLC has served as the company’s independent registered public accountants for the fiscal year 2017. Our auditor, BF Borgers CPA PC served as the Company’s independent registered public accountant for the fiscal year 2016
During the fiscal year ended March 31, 2017 we incurred approximately $30,000 in audit fees to our principal independent accountants for professional services rendered in connection with the audit of financial statements for the fiscal year ended March 31, 2017. During the fiscal year ended March 31, 2016 we incurred approximately $30,000 in audit fees to our principal independent accountants for professional services rendered in connection with the audit of financial statements for the fiscal year ended March 31, 2016.
During the fiscal years ended March 31, 2017 and 2016, we did not incur any other fees for professional services rendered by our principal independent accountants for all other non-audit services which may include, but not limited to, tax related services, actuarial services or valuation services.
| 44 |
| Table of Contents |
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
The following exhibits are incorporated into this Form 10-K Annual Report:
| Exhibit No. |
| Description |
|
| ||
|
| ||
|
| ||
|
| ||
|
| ||
|
| ||
|
| ||
|
| ||
|
| ||
|
| ||
| 31.1 |
| Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934 |
|
| ||
| 32.1 |
| Certification of Chief Financial Officer under Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| 101.INS |
| XBRL Instance Document |
| 101.SCH |
| XBRL Taxonomy Extension Schema Document |
| 101.CAL |
| XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF |
| XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB |
| XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE |
| XBRL Taxonomy Extension Presentation Linkbase Document |
______________
| [1] | Incorporated by reference from the Company’s S-1 filed with the Commission on June 21, 2010. |
| [2] | Incorporated by reference from the Company’s S-1 filed with the Commission on June 21, 2010. |
| [3] | Incorporated by reference from the Company's 8-K filed January 22, 2015. |
| [4] | Incorporated by reference from the Company's 8-K filed January 27, 2015. |
| [5] | Incorporated by reference from the Company’s 10-K filed August 3, 2015. |
| 45 |
| Table of Contents |
Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
| Greenhouse Solutions, Inc. |
| |
|
|
| ||
| Dated: September 25, 2018 | By: | /s/ Rik J. Deitsch |
|
|
| Rik J. Deitsch |
| |
|
| CEO and Director |
| |
|
| Principal Executive 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.
| Dated: September 25, 2018 | |
|
|
|
|
| DIRECTORS
/s/ John G. Michak John G. Michak, III, Director
/s/ Redgie Green Redgie Green, Director
/s/ Rik J. Deitsch Rik J. Deitsch, Director, Chief Executive Officer, Principal Financial Officer, Principal Accounting Officer |
| 46 |