UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Amendment No. 1)
þ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended:December 31, 2012
or
o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number:000-15078
GreeneStone Healthcare Corporation
(Exact name of registrant as specified in its charter)
| Colorado | 84-1227328 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
5734 Yonge Street, Suite 300
North York, Ontario, Canada M2M 4E7
(Address of principal executive offices)
(416) 222-5501
(Registrant’s telephone number, including area code)
Securities registered under Section 12(b) of the Exchange Act:
| |
Title of each class
| Name of each exchange on which registered |
| None | N/A |
Securities registered under Section 12(g) of the Act:
Common Stock, $0.01 par value per share
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes¨ Noþ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes¨ Noþ
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the last 90 days.
Yesþ 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). Yesþ No¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ¨ | Accelerated filer | ¨ | |
| Non-accelerated filer | ¨ | Smaller reporting company | þ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes¨ Noþ
Issuer’s revenues for its most recent fiscal year were approximately $5,540,909.
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant on June 30, 2012, based on a closing price of $1.41 was approximately $14,902,385.88. As of March 31, 2013, the registrant had 27,234,279 shares of its common stock, par value $0.01 per share, outstanding.
EXPLANATORY NOTE
GreeneStone Healthcare Corporation, a Colorado corporation (the “Company”) is filing this Amendment No. 1 (the “Amendment”) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2012, originally filed with the U.S. Securities and Exchange Commission (the “Commission”) on April 1, 2013 (the “Form 10-K”), in response to a comment from the Commission staff related to the auditor’s report provided in our original filing. No other changes have been made in this Amendment to the Form 10-K other than to (i) provide a revised auditor report and (ii) update the certifications required by the Sarbanes-Oxley Act of 2002. This Amendment speaks as of the original date of the Form 10-K, does not reflect events that may have occurred subsequent to the original filing date and does not modify or update in any way disclosures made in the original Form 10-K.
Item 8. Financial Statements and Supplementary Data.
GREENESTONE HEALTHCARE CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012
(Stated in U.S. $)
| -1- |
CONTENTS
| F-1 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders of
GreeneStone Healthcare Corporation:
We have audited the accompanying consolidated balance sheet of GreeneStone Healthcare Corporation (the “Company”) as of December 31, 2012 and 2011, and the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above presents fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2012 and 2011, and the results of its operations and cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in consolidated financial statement Note 2, the Company has incurred losses since inception. This raises substantial doubt about the Company’s ability to meet its obligations and to continue as a going concern. Management’s plans in regard to this matter are described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
“Jarvis Ryan Associates”
Mississauga, Ontario, Canada
March 19, 2013
CHARTERED ACCOUNTANTS
LICENSED PUBLIC ACCOUNTANTS
| F-2 |
GREENESTONE HEALTHCARE CORPORATION
AS AT DECEMBER 31, 2012
(Stated in U.S. $)
| December 31, 2012 | December 31, 2011 | |||||||
| ASSETS | ||||||||
| CURRENT | ||||||||
| Accounts receivable (note 6) | $ | 380,043 | $ | 188,423 | ||||
| Harmonized sales tax receivable | — | 5,933 | ||||||
| Prepaid expenses | 111,214 | 83,724 | ||||||
| Inventory | 16,169 | 11,784 | ||||||
| 507,426 | 289,864 | |||||||
| FIXED ASSETS (note 7, 9) | 617,567 | 641,052 | ||||||
| $ | 1,124,993 | $ | 930,916 | |||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| CURRENT | ||||||||
| Bank indebtedness | $ | 70,803 | $ | 28,281 | ||||
| Accounts payable and accrued liabilities | 863,858 | 632,497 | ||||||
| Harmonized sales tax payable | 313,295 | — | ||||||
| Withholding taxes payable | 1,039,756 | 270,118 | ||||||
| Deferred revenue | 215,793 | 116,692 | ||||||
| Convertible notes payable (note 8) | 1,820,713 | 2,498,975 | ||||||
| Current portion of loan payable (note 9) | 8,129 | — | ||||||
| Due to related party (note 10) | 190,484 | 330,302 | ||||||
| 4,522,831 | 3,876,865 | |||||||
| LOAN PAYABLE (note 9) | 38,917 | — | ||||||
| 4,561,748 | 3,876,865 | |||||||
| STOCKHOLDERS’ DEFICIT | ||||||||
| Common shares; $0.01 par value, 100,000,000 shares authorized; 27,234,279 shares issued and | ||||||||
| outstanding (note 11) | 272,343 | 135,216 | ||||||
| Additional paid-in capital | 6,642,530 | 5,716,666 | ||||||
| Accumulated other comprehensive loss | (47,726 | ) | 21,718 | |||||
| Accumulated deficit | (10,303,902 | ) | (8,819,549 | ) | ||||
| (3,436,755 | ) | (2,945,949 | ) | |||||
| $ | 1,124,993 | $ | 930,916 | |||||
| COMMITMENTS (note 12) | ||||||||
See accompanying notes to the consolidated financial statements
Subject to Report of Independent Registered Public Accounting Firm dated March 19, 2013
| F-3 |
GREENESTONE HEALTHCARE CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 2012
(Stated in U.S. $)
| Common Stock | ||||||||||||||||||||||||
| Shares | Amount | Additional Paid-In Capital | Accumulated Other Comprehensive (Loss) Income | Accumulated Deficit | Total | |||||||||||||||||||
| Balance, December 31, 2010 | 5,021,764 | $ | 50,218 | $ | 5,631,664 | $ | (12,855 | ) | $ | (6,322,688 | ) | $ | (653,661 | ) | ||||||||||
| Common shares issued for convertible note | 8,500,000 | 85,000 | 85,000 | — | — | 170,000 | ||||||||||||||||||
| Adjustments | (196 | ) | (2 | ) | 2 | — | — | — | ||||||||||||||||
| Foreign currency translation | — | — | — | 34,573 | — | 34,573 | ||||||||||||||||||
| Net loss | — | — | — | — | (2,496,861 | ) | (2,496,861 | ) | ||||||||||||||||
| Balance, December 31, 2011 | 13,521,568 | $ | 135,216 | $ | 5,716,666 | $ | 21,718 | $ | (8,819,549 | ) | $ | (2,945,949 | ) | |||||||||||
| Balance, December 31, 2011 | 13,521,568 | $ | 135,216 | $ | 5,716,666 | $ | 21,718 | $ | (8,819,549 | ) | $ | (2,945,949 | ) | |||||||||||
| Common shares issued for convertible note (note 11) | 13,712,711 | 137,127 | 925,864 | — | — | 1,062,991 | ||||||||||||||||||
| Foreign currency translation | — | — | — | (69,444 | ) | — | (69,444 | ) | ||||||||||||||||
| Net loss | — | — | — | — | (1,484,353 | ) | (1,484,353 | ) | ||||||||||||||||
| Balance, December 31, 2012 | 27,234,279 | $ | 272,343 | $ | 6,642,530 | $ | (47,726 | ) | $ | (10,303,902 | ) | $ | (3,436,755 | ) | ||||||||||
See accompanying notes to the consolidated financial statements
Subject to Report of Independent Registered Public Accounting Firm dated March 19, 2013
| F-4 |
GREENESTONE HEALTHCARE CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2012
(Stated in U.S. $)
| December 31, 2012 | December 31, 2011 | |||||||
| REVENUES | $ | 5,540,909 | $ | 1,678,804 | ||||
| COST OF SERVICES PROVIDED | 1,050,002 | 648,773 | ||||||
| GROSS PROFIT | 4,490,907 | 1,030,031 | ||||||
| OPERATING EXPENSES | ||||||||
| Continuing education | 25,739 | 7,049 | ||||||
| Depreciation | 223,984 | 129,766 | ||||||
| General and administrative | 546,563 | 510,147 | ||||||
| Interest and fees | 214,207 | 26,568 | ||||||
| Management fees (note 10) | 179,924 | 461,895 | ||||||
| Meals and entertainment | 3,385 | 1,462 | ||||||
| Medical supplies | 132,253 | 81,139 | ||||||
| Professional fees | 128,578 | 434,804 | ||||||
| Rent (note 10) | 847,558 | 465,035 | ||||||
| Salaries and wages | 3,410,659 | 1,532,678 | ||||||
| Subcontract fees | 42,890 | 9,386 | ||||||
| Supplies | 181,590 | 72,076 | ||||||
| Travel | 37,930 | 16,093 | ||||||
| 5,975,260 | 3,748,098 | |||||||
| (1,484,353 | ) | (2,718,067 | ) | |||||
| OTHER INCOME Rental income | — | 221,206 | ||||||
| NET LOSS APPLICABLE TO COMMON SHAREHOLDERS | $ | (1,484,353 | ) | $ | (2,496,861 | ) | ||
| OTHER COMPREHENSIVE INCOME (LOSS) | ||||||||
| Foreign currency translation | (69,444 | ) | 34,573 | |||||
| TOTAL COMPREHENSIVE LOSS | $ | (1,553,797 | ) | $ | (2,462,288 | ) | ||
| BASIC AND DILUTED LOSS PER COMMON SHARE | $ | (0.08 | ) | $ | (0.34 | ) | ||
| WEIGHTED AVERAGE SHARES OUTSTANDING | 19,453,717 | 7,443,626 | ||||||
See accompanying notes to the consolidated financial statements
Subject to Report of Independent Registered Public Accounting Firm dated March 19, 2013
| F-5 |
GREENESTONE HEALTHCARE CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
FOR THE YEAR ENDED DECEMBER 31, 2012
(Stated in U.S. $)
| December 31, 2012 | December 31, 2011 | |||||||
| OPERATING ACTIVITIES | ||||||||
| Net loss | $ | (1,484,353 | ) | $ | (2,496,861 | ) | ||
| Adjustment to reconcile net loss to cash used in operating activities: | ||||||||
| Depreciation | 223,984 | 129,766 | ||||||
| (1,260,369 | ) | (2,367,095 | ) | |||||
| Changes in operating assets and liabilities | ||||||||
| Accounts receivable | (191,620 | ) | (147,516 | ) | ||||
| Harmonized sales tax | 319,228 | (5,933 | ) | |||||
| Prepaid expenses | (27,490 | ) | (31,288 | ) | ||||
| Inventory | (4,385 | ) | (819 | ) | ||||
| Accounts payable and accrued liabilities | 231,361 | 333,967 | ||||||
| Withholding taxes payable | 769,638 | 270,118 | ||||||
| Deferred revenue | 99,101 | 116,692 | ||||||
| (64,536 | ) | (1,831,874 | ) | |||||
| INVESTING ACTIVITIES | ||||||||
| Purchase of fixed assets | (200,499 | ) | (428,122 | ) | ||||
| FINANCING ACTIVITIES | ||||||||
| Proceeds from bank indebtedness | 42,522 | 28,266 | ||||||
| Repayment of convertible notes payable | (678,262 | ) | 2,053,374 | |||||
| Proceeds of loan payable | 47,046 | — | ||||||
| Repayment of related party notes | (139,818 | ) | (74,593 | ) | ||||
| Proceeds from issuance of common shares | 137,127 | 84,998 | ||||||
| Proceeds from additional paid-in capital | 925,864 | 85,002 | ||||||
| 334,479 | 2,177,047 | |||||||
| Effect of exchange rate on cash | (69,444 | ) | 34,573 | |||||
| DECREASE IN CASH | — | (48,376 | ) | |||||
| CASH, beginning of year | 48,376 | |||||||
| CASH, end of year | $ | — | $ | — | ||||
| SUPPLEMENTAL CASH FLOW INFORMATION: | ||||||||
| Cash paid for interest and fees | $ | 214,207 | $ | 26,568 | ||||
| Cash paid for income taxes | $ | — | $ | — | ||||
See accompanying notes to the consolidated financial statements
Subject to Report of Independent Registered Public Accounting Firm dated March 19, 2013
| F-6 |
GREENESTONE HEALTHCARE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012
(Stated in U.S. $)
1.Nature of business
GreeneStone Healthcare Corporation (the “Company”) was incorporated under the laws of the state of Colorado, USA, on April 1, 1993. Effective May 2012, the Company changed its corporate name to GreeneStone Healthcare Corporation from Nova Natural Resources Corporation. As at December 31, 2012, the Company owns 100% of the outstanding shares of each of 1816191 Ontario Limited and Greenestone Clinic Muskoka Inc., both of which were incorporated in 2010 under the laws of the Province of Ontario, Canada. 1816191 Ontario Limited and Greenestone Clinic Muskoka Inc. provide medical services to various patients in clinics located in two regions in Ontario, Canada; the city of Toronto and the regional municipality of Muskoka. These consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles ("US GAAP").
2.Going concern
The Company’s consolidated financial statements have been prepared in accordance with US GAAP applicable to a going concern, which assumes that the Company will be able to meet its obligations and continue its operations in the normal course of business. As at December 31, 2012, the Company has a working capital deficiency of $4,015,405 (2011: $3,587,001) and accumulated deficit of $10,303,902 (2011: $8,819,549). Accordingly, the Company will be dependent upon the raising of additional capital through placement of common shares, and, or debt financing in order to implement its business plan. There is no assurance that the Company will be successful with future financing ventures, and the inability to secure such financing may have a material adverse effect on the Company’s financial condition. These consolidated financial statements do not include any adjustments to the amounts and classifications of assets and liabilities that might be necessary should the Company be unable to continue operations.
3.Significant accounting policies
The accounting policies of the Company are in accordance with US GAAP applied on a basis consistent with that of the preceding year. Outlined below are those policies considered particularly significant.
Principals of consolidation
The accompanying consolidated financial statements include the accounts of the Company, its two subsidiaries, as noted in note 1. All inter-company transactions and balances have been eliminated on consolidation.
The Company’s subsidiaries functional currency is the Canadian dollar (CAD), while the Company’s reporting currency is the US dollar (USD). All transactions initiated in Canadian dollars are translated into US dollars in accordance with ASC 830, "Foreign Currency Translation" as follows:
| (i) | Monetary assets and liabilities at the rate of exchange in effect at the balance sheet date. |
| (ii) | Equity at historical rates. |
| (iii) | Revenue and expense items at the average rate of exchange prevailing during the period. |
Subject to Report of Independent Registered Public Accounting Firm dated March 19, 2013
| F-7 |
GREENESTONE HEALTHCARE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012
(Stated in U.S. $)
3.Significant accounting policies (cont’d)
Principals of consolidation (cont’d)
Adjustments arising from such translations are deferred until realization and are included as a separate component of stockholders’ deficit as a component of accumulated other comprehensive income or loss. Therefore, translation adjustments are not included in determining net income (loss) but reported as other comprehensive income (loss).
For foreign currency transactions, the Company translates these amounts to the Company’s functional currency at the exchange rate effective on the invoice date. If the exchange rate changes between the time of purchase and the time actual payment is made, a foreign exchange transaction gain or loss results which is included in determining net income for the period.
Revenue recognition
The Company recognizes revenue from the rendering of services when they are earned; specifically when all the following conditions are met:
| · | the significant risks and rewards of ownership are transferred to customers and the Company retains neither continuing involvement nor effective control; |
| · | there is clear evidence that an arrangement exists; |
| · | the amount of revenue and related costs can be measured reliably; and |
| · | it is probable that the economic benefits associated with the transaction will flow to the Company. |
In particular, the Company recognizes:
| · | Fees for gastrointestinal clinical services, out-patient counseling, coaching, intervention, psychological assessments and other related services when patients receive the service; and |
| · | Fees for in-patient addiction treatments proportionately over the term of the patient’s treatment. |
Deferred revenue represents monies deposited by the patients for future services to be provided by the Company. Such monies will be recognized into revenue as the patient progresses through their treatment term.
Rental income is recognized when on a straight-line basis over the term of the rental period, at which time title to the service, significant risks of ownership and ultimate collection is reasonably assured.
Use of estimates
The preparation of consolidated financial statements in accordance with US GAAP requires management to make estimates and assumptions that affect the recognition, measurement and disclosure of amounts reported in the financial statements and accompanying notes.
Subject to Report of Independent Registered Public Accounting Firm dated March 19, 2013
| F-8 |
GREENESTONE HEALTHCARE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012
(Stated in U.S. $)
3.Significant accounting policies (cont’d)
Use of estimates (cont’d)
The reported amounts, including depreciation, allowance for doubtful accounts, inventory, furniture and equipment additions, accounts payable and accrued liabilities, deferred revenue and note disclosures are determined using management's best estimates based on assumptions that reflect the most probable set of economic conditions and planned courses of action. Actual results will differ from such estimates.
Non-monetary transactions
The Company’s policy is to measure an asset exchanged or transferred in a non-monetary transaction at the more reliable measurement of the fair value of the asset given up and the fair value of the asset received, unless:
| (i) | The transaction lacks commercial substance; |
| (ii) | The transaction is an exchange of a product or property held for sale in the ordinary course of business for a product or property to be sold in the same line of business to facilitate sales to customers other than the parties to the exchange; |
| (iii) | Neither the fair value of the asset received nor the fair value of the asset given up is reliably measurable; or |
| (iv) | The transaction is a non-monetary non-reciprocal transfer to owners that represents a spin-off or other form of restructuring or liquidation. |
Cash
The Company's policy is to disclose bank balances under cash, including bank overdrafts with balances that fluctuate frequently from being positive to overdrawn and term deposits with a maturity period of three months or less from the date of acquisition.
Accounts receivable
The Company's policy is to disclose accounts receivable net of a reserve for doubtful accounts.
Inventory
Inventory is valued at the lower of cost and net realizable value. Cost is determined using the first-in, first-out method.
Financial instruments
The Company initially measures its financial assets and liabilities at fair value, except for certain non-arm's length transactions. The Company subsequently measures all its financial assets and financial liabilities at amortized cost.
Financial assets measured at amortized cost include accounts receivable. Financial liabilities measured at amortized cost include bank indebtedness, accounts payable and accrued liabilities, harmonized sales tax payable, withholding taxes payable, convertible notes payable, loan payable and due to related party.
Subject to Report of Independent Registered Public Accounting Firm dated March 19, 2013
| F-9 |
GREENESTONE HEALTHCARE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012
(Stated in U.S. $)
3.Significant accounting policies (cont’d)
Financial instruments (cont’d)
Financial assets measured at cost are tested for impairment when there are indicators of impairment. The amount of the write-down is recognized in net income. The previously recognized impairment loss may be reversed to the extent of the improvement, directly or by adjusting the allowance account, provided it is no greater than the amount that would have been reported at the date of the reversal had the impairment not been recognized previously. The amount of the reversal is recognized in net income. The Company recognizes its transaction costs in net income in the period incurred. However, financial instruments that will not be subsequently measured at fair value are adjusted by the transaction costs that are directly attributable to their origination, issuance or assumption.
FASB ASC 820 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
| Level 1. | Observable inputs such as quoted prices in active markets; |
| Level 2. | Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and |
| Level 3. | Unobservable inputs in which there is little or no market data, which requires the reporting entity to develop its own assumptions. |
The Company does not have assets or liabilities measured at fair value on a recurring basis at December 31, 2012 and December 31, 2011. The Company did not have any fair value adjustments for assets and liabilities measured at fair value on a non-recurring basis during the twelve month period ended December 31, 2012 and December 31, 2011.
Fixed assets
Fixed assets are recorded at cost. Depreciation is calculated on the declining balance method at the following annual rates:
| Computer equipment | 30 | % | ||
| Computer software | 100 | % | ||
| Furniture and equipment | 30 | % | ||
| Medical equipment | 25 | % | ||
| Vehicles | 30 | % |
Leasehold improvements are depreciated using the straight-line method over the term of the lease. Half rates are used for all fixed assets in the year of acquisition.
Subject to Report of Independent Registered Public Accounting Firm dated March 19, 2013
| F-10 |
GREENESTONE HEALTHCARE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012
(Stated in U.S. $)
3.Significant accounting policies (cont’d)
Leases
Leases are classified as either capital or operating leases. Leases that transfer substantially all of the benefits and inherent risks of ownership of property to the Company are accounted for as capital leases. At the time a capital lease is entered into, an asset is recorded together with its related long-term obligation to reflect the acquisition and financing. Equipment recorded under capital leases is amortized on the same basis as described above. Payments under operating leases are expensed as incurred.
Income taxes
The Company uses the future income tax method to account for income taxes. Under this method, future income tax assets and liabilities are determined based on the difference between the carrying value and the tax basis of the assets and liabilities. Any change in the net amount of future income tax assets and liabilities is included in income. Future income tax assets and liabilities are determined based on enacted or substantively enacted tax rates and laws which are expected to apply to the Company's taxable income for the periods in which the assets and liabilities will be recovered. Future income tax assets are recognized when it is more likely than not that they will be realized.
Earnings per share information
FASB ASC 260, “Earnings Per Share” provides for calculation of "basic" and "diluted" earnings per share. Basic earnings per share includes no dilution and is computed by dividing net income (loss) applicable to common shareholders by the weighted average common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity similar to fully diluted earnings per share. Basic and diluted loss per share was the same, at the reporting dates, as there were no common share equivalents outstanding.
Share based expenses
ASC 718"Compensation - Stock Compensation" codified SFAS No. 123 prescribes accounting and reporting standards for all stock-based payments awarded to employees, including employee stock options, restricted stock, employee stock purchase plans and stock appreciation rights that may be classified as either equity or liabilities. The Company should determine if a present obligation to settle the share-based payment transaction in cash or other assets exists. A present obligation to settle in cash or other assets exists if: (a) the option to settle by issuing equity instruments lacks commercial substance or (b) the present obligation is implied because of an entity's past practices or stated policies. If a present obligation exists, the transaction should be recognized as a liability; otherwise, the transaction should be recognized as equity.
The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of ASC 505-50"Equity - Based Payments to Non-Employees" which codified SFAS 123 and the Emerging Issues Task Force consensus in Issue No. 96-18 ("EITF 96-18"),"Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring or in Conjunction with Selling, Goods or Services". Measurement of share-based payment transactions with non-employees shall be based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction should be determined at the earlier of performance commitment date or performance completion date.
Subject to Report of Independent Registered Public Accounting Firm dated March 19, 2013
| F-11 |
GREENESTONE HEALTHCARE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012
(Stated in U.S. $)
4. Recently issued accounting pronouncements
In December 2011 the Financial Accounting Standards Board “FASB” issued new guidance on the disclosures about offsetting assets and liabilities. The new guidance enhances disclosures required by US GAAP by requiring improved information about financial instruments and derivative instruments. The new guidance is to be adopted for annual reporting periods beginning on or after January 1, 2013 and interim periods within those annual periods. The new guidance is to be retrospectively applied for all comparative periods presented. The Company does not expect adoption of the new guidance to have a material impact on the consolidated interim and annual financial statements.
5. Financial instruments
The Company is exposed to various risks through its financial instruments. The following analysis provides a measure of the Company's risk exposure and concentrations at the balance sheet date, December 31, 2012:
| (a) | Credit risk |
Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. Financial instruments that subject the Company to credit risk consist primarily of bank indebtedness and accounts receivable.
In the opinion of management, credit risk associated with bank indebtedness of $70,803 (2011: $28,281) is assessed as low and unchanged from the prior year. The Company ensures that financial assets and liabilities are placed with financial institutions with high credit ratings in order to mitigate the risk.
With respect to accounts receivable of $380,043 (2011: $188,423), the Company receives most of its revenues in 1816191 Ontario Inc. from the Ontario Ministry of Health and Long-Term Care, a provincially regulated program. (Note 6) The Company performs frequent reviews of billing reports submitted to the Ontario Ministry of Health and Long-Term Care, to ensure accuracy and filing on a timely basis. Allowances are provided for potential losses that have been incurred at the balance sheet date.
Credit risk associated with accounts receivable of Greenestone Clinic Muskoka Inc. is mitigated due to balances from many customers, as well as through credit checks and frequent reviews of receivables to ensure timely collection.
In the opinion of management, credit risk is assessed as low, not material and remains unchanged from the prior year.
Subject to Report of Independent Registered Public Accounting Firm dated March 19, 2013
| F-12 |
GREENESTONE HEALTHCARE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012
(Stated in U.S. $)
5. Financial instruments (cont’d)
| (b) | Liquidity risk |
Liquidity risk is the risk the Company will not be able to meet its financial obligations as they fall due. The Company is exposed to liquidity risk through its working capital deficiency of $4,015,405 (2011: $3,587,001) and accumulated deficit of $10,303,902 (2011: $8,819,549). As disclosed in note 2, the Company will be dependent upon the raising of additional capital in order to implement its business plan. There is no assurance that the Company will be successful with future financing ventures, and the inability to secure such financing may have a material adverse effect on the Company’s financial condition. In the opinion of management, liquidity risk is assessed as high and remains unchanged from the prior year.
| (c) | Market risk |
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises of three types of risk: interest rate risk, currency risk, and other price risk. The Company is exposed to interest rate risk and currency risk.
| i. | Interest rate risk |
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is exposed to interest rate risk on its bank indebtedness of $70,803 (2011: $28,281). This liability is based on floating rates of interest that have been stable during the current reporting period. In the opinion of management, interest rate risk is assessed as low, not material and remains unchanged from the prior year.
| ii. | Currency risk |
Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Company is subject to currency risk as its subsidiaries operate in Canada and are subject to fluctuations in the Canadian dollar. All of the Company’s financial assets and liabilities are denominated in Canadian dollars. Based on the net exposures at December 31, 2012, a 10% depreciation or appreciation of the Canadian dollar against the U.S. dollar would result in an approximate $10,000 increase or decrease in the Company’s after-tax net earnings, respectively. The Company has not entered into any hedging agreements to mediate this risk. In the opinion of management, currency risk is assessed as low, material and remains unchanged from the prior year.
| iii. | Other price risk |
Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market. The Company is not exposed to this risk and is unchanged from the prior year.
Subject to Report of Independent Registered Public Accounting Firm dated March 19, 2013
| F-13 |
GREENESTONE HEALTHCARE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012
(Stated in U.S. $)
6. Accounts receivable
The consolidated accounts receivable balance consists primarily of amounts due from the following parties.
| December 31, 2012 | December 31, 2011 | |||||||
| The Ontario Ministry of Health | $ | 181,129 | $ | 173,242 | ||||
| Treatment program | 115,914 | 15,181 | ||||||
| Outpatient services | 59,683 | — | ||||||
| Other accounts receivable | 23,317 | — | ||||||
| $ | 380,043 | $ | 188,423 | |||||
The Company is economically dependent on and earns a significant portion of revenues from the Ontario Ministry of Health for its ability to carry out its normal activities. These revenues account for 35% of the Company’s consolidated sales in the twelve month period ending December 31, 2012 (2011: 70%).
7. Fixed assets
| Net Book Value | ||||||||||||||||
| Opening Cost | Accumulated Amortization | December 31, 2012 | December 31, 2011 | |||||||||||||
| Computer equipment | $ | 22,667 | $ | 6,065 | $ | 16,602 | $ | 11,910 | ||||||||
| Computer software | 27,701 | 23,605 | 4,096 | 14,315 | ||||||||||||
| Furniture and equipment | 416,518 | 152,042 | 264,476 | 322,282 | ||||||||||||
| Medical equipment | 368,802 | 163,105 | 205,697 | 231,192 | ||||||||||||
| Vehicles | 49,967 | 7,495 | 42,472 | — | ||||||||||||
| Leasehold improvements | 142,047 | 57,823 | 84,224 | 61,353 | ||||||||||||
| $ | 1,027,702 | $ | 410,135 | $ | 617,567 | $ | 641,052 | |||||||||
Subject to Report of Independent Registered Public Accounting Firm dated March 19, 2013
| F-14 |
GREENESTONE HEALTHCARE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012
(Stated in U.S. $)
8. Convertible notes payable
The notes are convertible at the option of the holder up to the maturity date; any convertible debentures still outstanding as at their maturity date will automatically convert into common shares of the Company. Accordingly, these convertible notes payable are considered current liabilities by nature. The Company has adequate common shares in its treasury to cover the conversions if all notes are exercised.
The Company has the following convertible notes outstanding.
| Note | Amount | Issuance Date | Conversion Price in USD | Number of Shares | Effect on Dilution | Maturity Date | ||
| 1 | $ | 48,245 | January 31, 2011 | $ | 0.10 | 482,448 | 1.90% | January 31, 2013 |
| 2 | 25,128 | March 30, 2011 | $ | 0.15 | 167,517 | 0.67% | March 30, 2013 | |
| 3 | 50,000 | March 30, 2011 | $ | 0.15 | 333,333 | 1.32% | March 30, 2013 | |
| 4 | 15,000 | March 30, 2011 | $ | 0.15 | 100,000 | 0.40% | March 30, 2013 | |
| 5 | 30,153 | March 30, 2011 | $ | 0.15 | 201,020 | 0.80% | March 30, 2013 | |
| 6 | 10,051 | March 31, 2011 | $ | 0.15 | 67,007 | 0.27% | March 31, 2013 | |
| 7 | 10,051 | March 31, 2011 | $ | 0.15 | 67,007 | 0.27% | March 31, 2013 | |
| 8 | 10,051 | March 31, 2011 | $ | 0.15 | 67,007 | 0.27% | March 31, 2013 | |
| 9 | 100,510 | March 31, 2011 | $ | 0.15 | 670,067 | 2.62% | March 31, 2013 | |
| 10 | 50,255 | March 31, 2011 | $ | 0.15 | 335,033 | 1.33% | March 31, 2013 | |
| 11 | 30,153 | March 31, 2011 | $ | 0.15 | 201,020 | 0.80% | March 31, 2013 | |
| 12 | 5,026 | March 31, 2011 | $ | 0.15 | 33,503 | 0.13% | March 31, 2013 | |
| 13 | 6,031 | June 15, 2011 | $ | 0.10 | 60,306 | 0.24% | June 15, 2013 | |
| 14 | 8,041 | June 15, 2011 | $ | 0.10 | 80,408 | 0.32% | June 15, 2013 | |
| 15 | 4,020 | June 15, 2011 | $ | 0.10 | 40,204 | 0.16% | June 15, 2013 | |
| 16 | 201,020 | June 24, 2011 | $ | 0.15 | 1,340,133 | 5.10% | June 24, 2013 | |
| 17 | 30,153 | June 30, 2011 | $ | 0.15 | 201,020 | 0.80% | June 30, 2013 | |
| 18 | 16,082 | June 30, 2011 | $ | 0.15 | 107,211 | 0.43% | June 30, 2013 | |
| 19 | 70,357 | June 30, 2011 | $ | 0.15 | 469,047 | 1.85% | June 30, 2013 | |
| 20 | 14,574 | June 30, 2011 | $ | 0.15 | 97,160 | 0.39% | June 30, 2013 | |
| 21 | 50,255 | June 30, 2011 | $ | 0.15 | 335,033 | 1.33% | June 30, 2013 | |
| 22 | 145,740 | June 30, 2011 | $ | 0.15 | 971,597 | 3.75% | June 30, 2013 | |
| 23 | 5,026 | July 30, 2011 | $ | 0.15 | 33,503 | 0.13% | July 30, 2013 | |
| 24 | 5,026 | July 30, 2011 | $ | 0.15 | 33,503 | 0.13% | July 30, 2013 | |
| 25 | 5,026 | July 30, 2011 | $ | 0.15 | 33,503 | 0.13% | July 30, 2013 | |
| 26 | 10,000 | July 30, 2011 | $ | 0.15 | 66,667 | 0.27% | July 30, 2013 | |
| 27 | 10,051 | July 30, 2011 | $ | 0.15 | 67,007 | 0.27% | July 30, 2013 | |
| 28 | 9,046 | July 30, 2011 | $ | 0.15 | 60,306 | 0.24% | July 30, 2013 | |
| 29 | 2,261 | July 30, 2011 | $ | 0.15 | 15,077 | 0.06% | July 30, 2013 | |
*The actual number of shares issued if converted will vary depending on the exchange rate at time of conversion. | ||||||||
Subject to Report of Independent Registered Public Accounting Firm dated March 19, 2013
| F-15 |
GREENESTONE HEALTHCARE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012
(Stated in U.S. $)
8. Convertible notes payable (cont’d)
| Note | Amount | Issuance Date | Conversion Price in USD | Number of Shares | Effect on Dilution | Maturity Date | ||
| 30 | 50,255 | October 26, 2011 | $ | 0.10 | 502,550 | 1.98% | October 26, 2013 | |
| 31 | 100,510 | October 31, 2011 | $ | 0.15 | 670,067 | 2.62% | October 31, 2013 | |
| 32 | 70,357 | November 24, 2011 | $ | 0.15 | 469,047 | 1.85% | November 24, 2013 | |
| 33 | 15,077 | November 30, 2011 | $ | 0.15 | 100,510 | 0.40% | November 30, 2013 | |
| 34 | 15,077 | November 30, 2011 | $ | 0.15 | 100,510 | 0.40% | November 30, 2013 | |
| 35 | 23,720 | November 30, 2011 | $ | 0.15 | 158,136 | 0.63% | November 30, 2013 | |
| 36 | 25,160 | December 31, 2011 | $ | 0.15 | 167,733 | 0.67% | December 31, 2013 | |
| 37 | 20,102 | December 31, 2011 | $ | 0.15 | 134,013 | 0.53% | December 31, 2013 | |
| 38 | 10,051 | December 31, 2011 | $ | 0.15 | 67,007 | 0.27% | December 31, 2013 | |
| 39 | 22,615 | December 31, 2011 | $ | 0.15 | 150,765 | 0.60% | December 31, 2013 | |
| 40 | 45,230 | December 31, 2011 | $ | 0.15 | 301,530 | 1.19% | December 31, 2013 | |
| 41 | 50,255 | December 31, 2011 | $ | 0.15 | 335,033 | 1.33% | December 31, 2013 | |
| 42 | 20,102 | December 31, 2011 | $ | 0.15 | 134,013 | 0.53% | December 31, 2013 | |
| 43 | 15,077 | December 31, 2011 | $ | 0.15 | 100,510 | 0.40% | December 31, 2013 | |
| 44 | 50,000 | January 15, 2012 | $ | 0.20 | 250,000 | 0.99% | January 15, 2014 | |
| 45 | 10,051 | January 24, 2012 | $ | 0.20 | 50,255 | 0.20% | January 24, 2014 | |
| 46 | 7,538 | January 26, 2012 | $ | 0.20 | 37,691 | 0.15% | January 26, 2014 | |
| 47 | 30,153 | January 31, 2012 | $ | 0.20 | 150,765 | 0.60% | January 31, 2014 | |
| 48 | 10,051 | February 10, 2012 | $ | 0.20 | 50,255 | 0.20% | February 10, 2014 | |
| 59 | 100,510 | March 4, 2012 | $ | 0.20 | 502,550 | 1.98% | March 4, 2014 | |
| 50 | 100,510 | April 18, 2012 | $ | 0.45 | 223,356 | 0.89% | April 18, 2014 | |
| 51 | 50,255 | May 31, 2012 | $ | 1.00 | 50,255 | 0.20% | May 31, 2014 | |
$ |
1,820,713 |
11,945,746 | ||||||
*The actual number of shares issued if converted will vary depending on the exchange rate at time of conversion.
During the year ended December 31, 2011, the Company issued 8,500,000 common shares from convertible notes payable at a conversion rate of $0.02 per share.
During the year ended December 31, 2012, the Company issued 5,050,000 common shares from convertible notes payable at a conversion rate of $0.01 per share.
On December 1, 2012 convertible debentures totaling $231,875 had matured and were to be converted to restricted shares. This is dependent on a Directors Resolution being issued by the Company. As of December 31, 2012 a Directors Resolution had not been formally issued and was issued subsequent to year end.
Subject to Report of Independent Registered Public Accounting Firm dated March 19, 2013
| F-16 |
GREENESTONE HEALTHCARE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012
(Stated in U.S. $)
8. Convertible notes payable (cont’d)
Since the convertible debentures include an automatic conversion on maturity feature, and to accurately reflect the maturity of the debt and conversion to shares as of December 1, 2012, the financial information presented in these statements has treated the debt of $231,875 as matured and converted into restricted shares totaling 2,318,746.
9. Loan payable
The Company has an automobile loan payable bearing interested at 4.49% with blended monthly payments of $835 that matures March 2018. The loan is secured by the vehicle with a net book value as at December 31, 2012 of $42,472. Estimated principal and interest re-payments to December 31st are as follows:
| 2013 | $ | 8,129 | ||||
| 2014 | 8,502 | |||||
| 2015 | 8,891 | |||||
| 2016 | 9,299 | |||||
| 2017 | 9,725 | |||||
| Thereafter | 2,500 | |||||
| $ | 47,046 |
10. Related party transactions
The balance due to related party as at December 31, 2012 and December 31, 2011 is to Greenestone Clinic Inc. The Company is related to Greenestone Clinic Inc. since it is controlled by one of the Company’s directors. The balance owing is non-interest bearing, not secured and has no specified terms of repayment.
The Company had management fees totaling $179,924 during the twelve month period ended December 31, 2012 (2011: $178,032) to the director for services which are included in management fees.
The Company entered into an agreement to lease premises from Cranberry Cove Holdings Ltd. at market terms. During the twelve month period ended December 31, 2012, the Company had rent expense of $431,827 (2011: $201,770) to Cranberry Cove Holdings Inc. Cranberry Cove Holdings Ltd. is related to the Company by virtue of its shareholder being a director of the Company.
All related party transactions occur in the normal course of operations and are measured at the exchange amount, as agreed upon by the related parties.
Subject to Report of Independent Registered Public Accounting Firm dated March 19, 2013
| F-17 |
GREENESTONE HEALTHCARE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012
(Stated in U.S. $)
11. Stockholders’ deficit
Common shares
On June 30, 2012, the Company filed a Certificate of Amendment with the Colorado Secretary of State to increase the aggregate number of shares which the Company has authority to issue to one hundred million (100,000,000) common shares, issued at $0.01 par value per share from 50,000,000 common shares with par value at $0.01. The amendment was approved by the Colorado Secretary of State in May 2012.
Issued common shares
The Company has a total of 27,234,279 issued and outstanding common shares as at December 31, 2012. In the prior year, December 31, 2011, the Company issued 13,521,568 of common shares at $0.01 per share. Of the issued common shares, $1,062,831 notes were converted into 7,187,711 restricted common shares and 6,525,000 unrestricted common shares.
Net loss per common share
Net loss per share is computed using the basic and diluted weighted average number of common shares outstanding during the period. The weighted-average number of common shares outstanding during each year is used to compute basic loss per share. Diluted loss per share is computed using the weighted average number of shares and dilutive potential common shares outstanding unless common stock equivalent shares are anti-dilutive. Dilutive potential common shares are additional common shares that will be exercised. Basic net loss per common share is based on the weighted average number of shares of common shares outstanding during the twelve month period ended December 31, 2012 and December 31, 2011.
12. Commitments
The Company is committed under three non-cancellable operating lease agreements for rental of premises. The rental of premise agreement for the subsidiary, 1816191 Ontario Inc. expires July 2013 and the premise agreements for the subsidiary, Greenestone Clinic Muskoka Inc. expire May 2013, July 2013 and March 2016 (note 10).
Future minimum annual payment requirements are as follows:
| 2013 | $ | 841,269 | ||||
| 2014 | 663,366 | |||||
| 2015 | 663,366 | |||||
| 2016 | 165,842 | |||||
| $ | 2,333,843 |
13. Income taxes
Current or future U.S. federal income tax provision or benefits have not been provided for any of the periods presented because the Company has experienced operating losses since inception. Under ASC 740“Income Taxes,” when it is more likely than not that a tax asset cannot be realized through future income the Company must allow for this future tax benefit.
Subject to Report of Independent Registered Public Accounting Firm dated March 19, 2013
| F-18 |
GREENESTONE HEALTHCARE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012
(Stated in U.S. $)
13. Income taxes (cont’d)
The Company has provided a full valuation allowance on the net future tax asset, consisting of net operating loss carry forwards, because management has determined that it is more likely than not that they will not earn income sufficient to realize the future tax assets during the carry forward period.
The Company has not taken a tax position that, if challenged, would have a material effect on the financial statements for the twelve month period ended December 31, 2012 and December 31, 2011, applicable under ASC 740. As a result of the adoption of ASC 740, the Company did not recognize any adjustment to the liability for uncertain tax position and therefore did not record any adjustment to the beginning balance of accumulated deficit on the balance sheet.
The components of the Company’s future tax asset as at December 31, 2012, and December 31, 2011 are as follows:
| December 31, 2012 | December 31, 2011 | |||||||
| Net operating loss carry forward | $ | 10,303,902 | $ | 8,819,549 | ||||
| Valuation allowance | (10,303,902 | ) | (8,819,549 | ) | ||||
| Net future tax asset | $ | — | $ | — | ||||
A reconciliation of income taxes computed at the 35% statutory rate to the income tax recorded is as follows:
| December 31, 2012 | December 31, 2011 | |||||||
| Tax at statutory rate | $ | 519,529 | $ | 873,901 | ||||
| Valuation allowance | (519,529 | ) | (873,901 | ) | ||||
| Net future tax asset | $ | — | $ | — | ||||
The Company did not pay any income taxes during the twelve month period ended December 31, 2012 and the year ended December 31, 2011.
The net federal operating loss carry forwards will expire in 2023 through 2032. This carry forward may be limited upon the consummation of a business combination under IRC Section 381.
14. Management of capital
The Company’s objectives of capital management are to safeguard its ability to support the Company’s normal operating requirements on an ongoing basis. The Company defines capital as the total of its total assets less total liabilities.
Subject to Report of Independent Registered Public Accounting Firm dated March 19, 2013
| F-19 |
GREENESTONE HEALTHCARE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012
(Stated in U.S. $)
14. Management of capital (cont’d)
The Company manages its capital structure and makes adjustments in light of changes in its economic environment and the risk characteristics of the Company’s assets. To effectively manage the Company’s capital requirements, the Company has in place a planning, budgeting and forecasting process to help determine the funds required to ensure the Company has the appropriate liquidity to meet its operating and growth objectives. The Company is dependent upon the raising of additional capital through placement of common shares, and, or debt financing to support its normal operating requirements. There is no assurance that the Company will be successful with future financing ventures, and the inability to secure such financing may have a material adverse effect on the Company’s financial condition. As at December 31, 2012 and December 31, 2011, there was no externally imposed capital requirement to which the Company is subject and with which the Company has not complied.
15. Asset retirement obligations
As at December 31, 2012 and December 31, 2011, the Company has no legal obligations associated with the retirement of its tangible long-lived assets that it is required to settle.
16. Segmented information
The Company has two reportable segments: gastrointestinal clinical services and addiction and rehabilitation treatments. The accounting policies of the segments are the same as those described in the summary of significant accounting policies (Note 3). The Company evaluates performance based on profit or loss from operations before income taxes not including non-recurring gains and losses and foreign exchange gains and losses. The Company’s reportable segments are strategic business units that offer different services. They are managed separately because each business requires different technology, specialists and marketing strategies.
| 2012 Segment Results | Gastrointestinal Clinical Services | Addiction and Rehabilitation Treatments | Other Segments | Total | ||||||||||||
| Revenues from external customers | $ | 1,874,105 | $ | 3,666,804 | $ | — | $ | 5,540,909 | ||||||||
| Interest and fees expense | 16,380 | 197,831 | — | 214,207 | ||||||||||||
| Depreciation of fixed assets | 87,226 | 136,762 | — | 223,984 | ||||||||||||
| Segment loss | (154,990 | ) | (1,356,723 | ) | 27,360 | (1,484,353 | ) | |||||||||
| Segment assets | 531,662 | 593,331 | — | 1,124,993 | ||||||||||||
Subject to Report of Independent Registered Public Accounting Firm dated March 19, 2013
| F-20 |
GREENESTONE HEALTHCARE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012
(Stated in U.S. $)
16. Segmented information (cont’d)
| 2011 Segment Results | Gastrointestinal Clinical Services | Addiction and Rehabilitation Treatments | Other Segments | Total | ||||||||||||
| Revenues from external customers | $ | 1,160,284 | $ | 518,520 | $ | — | $ | 1,678,804 | ||||||||
| Interest and fees expense | 13,674 | 12,894 | — | 26,568 | ||||||||||||
| Depreciation of fixed assets | 98,888 | 30,878 | — | 129,766 | ||||||||||||
| Segment loss | (2,192,838 | ) | (309,025 | ) | 5,002 | (2,496,861 | ) | |||||||||
| Segment assets | 561,545 | 369,369 | — | 930,916 | ||||||||||||
17. Subsequent events
Application to stock exchange
The Company is in the process of applying to the New York Stock Exchange (“NYSE”) which would allow the Company to be listed on the NYSE-Amex exchange. The Company believes being listed on the NYSE will allow it to attract the capital needed to support its operations.
Clinic expansion
The Company is seeking to significantly increase its capacity at its in-patient treatment facility from 36 beds to 200 beds over the next twenty four months.
Amendments to Articles of Incorporation
The Company resolved that, subject to shareholder approval, the Company’s officers shall file a Certificate of Amendment to the Company’s Articles of Incorporation with the Colorado Secretary of State, increasing the aggregate number of shares it is allowed to issue to five hundred million (500,000,000) common shares with a $0.01 par value, from one hundred million (100,000,000) common shares with a $0.01 par value.
The Company also resolved, subject to shareholder approval, the Company’s officers shall file a Certificate of Amendment to the Company’s Articles of Incorporation with the Colorado Secretary of State to authorize the Company’s issuance of up to 10,000,000 preferred shares, convertible to common shares at a 1 to 10 ratio at the board’s discretion.
Awarded Ontario Police Force contract
The Company was awarded an exclusive contract to provide treatment services for a major regional Ontario Police Force with regards to post traumatic stress disorder. The Company plans to open a second facility in order to service this contact.
Surgical Suite
The Company has decided to move forward with a multi-year lease extension at its North York facility which will allow the company to make the investment to expand into providing surgical procedures such as gastric banding and non-related procedures such as plastic surgery.
Subject to Report of Independent Registered Public Accounting Firm dated March 19, 2013
| F-21 |
GREENESTONE HEALTHCARE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012
(Stated in U.S. $)
18. Comparative figures
The presentation of certain amounts on the financial statements for the previous year has been changed to conform with the financial statement presentation adopted for 2012. The net loss for the previous year is not affected by this reclassification.
Subject to Report of Independent Registered Public Accounting Firm dated March 19, 2013
| F-22 |
Item 15. Exhibits, Financial Statement Schedules.
| (a) | Financial Statements and Schedules |
See Item 8.
| (b) | Exhibits |
EXHIBIT INDEX
| Incorporated by Reference | ||||||||||||||
| Exhibit No. | Description | Form | SEC File No. | Exhibit | Filing Date | Filed Herewith | Furnished Herewith | |||||||
| 31.1 | Certification by the Principal Executive Officer of registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)) | x | ||||||||||||
| 31.2 | Certification by the Principal Financial Officer of registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)) | x | ||||||||||||
| 32.1 | Certification by the Principal Executive Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | x | ||||||||||||
| 32.2 | Certification by the Principal Financial Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | x | ||||||||||||
| -2- |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| GREENESTONE HEALTHCARE CORP. | |||||
| Date: January 7, 2014 | By: | /s/ Shawn E. Leon | |||
| Name: Shawn E. Leon | |||||
Title: Chief Executive Officer (Principal Executive Officer) | |||||
| Date: January 7, 2014 | By: | /s/ Ken Lorimer | |||
| Name: Ken Lorimer | |||||
Title: Chief Financial Officer (Principal Financial Officer) (Principal Accounting Officer) | |||||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Name | Position | Date | ||
| ||||
| /s/ Shawn E. Leon | Chief Executive Officer (Principal Executive Officer) | January 7, 2014 | ||
| Shawn Leon | President, Director | |||
| ||||
| /s/ Dr. Luke Fazio | Director | January 7, 2014 | ||
| Dr. Luke Fazio | ||||
| /s/ Michael Howlett | Director | January 7, 2014 | ||
| Michael Howlett | ||||
| /s/ Ken Lorimer | Chief Financial Officer (Principal Financial Officer) | January 7, 2014 | ||
| Ken Lorimer | (Principal Accounting Officer) |
| -3- |