NOTES TO FINANCIAL STATEMENTS
June 30, 2016
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.
Basis of presentation - Unaudited Financial Statements
The accompanying unaudited financial statements have been prepared in
accordance with U. S. generally accepted accounting principles for financial
information and with the instructions to Form 10-Q. They do not include all
information and footnotes required by United States generally accepted
accounting principles for complete financial statements. However, except as
disclosed herein, there has been no material change in the information
disclosed in the notes to the financial statements for the year ended March 31,
2016 included in the Company's Annual Report on Form 10-K filed with the
Securities and Exchange Commission. These unaudited financial statements should
be read in conjunction with those financial statements included in the Form
10-K. In the opinion of Management, all adjustments considered necessary for a
fair presentation, consisting solely of normal recurring adjustments, have been
made. Operating results for the three months and nine months ended June 30,
2016 are not necessarily indicative of the results that may be expected for the
year ending March 31, 2017.
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 $4,264,970 through June 30, 2016, 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.
-7-
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 shares 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 June 30, 2016 and March 31, 2016 there
were warrants outstanding for 6,900,000 common shares. These warrants are not
included in the diluted loss per share as the effect of the inclusion would be
antidilutive.
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.
-8-
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.
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 June
30, 2016 the Company had computer equipment of $1,398 with corresponding
accumulated depreciation of $233 which is being depreciated over 3 years.
Depreciation expense for the quarters ended June 30, 2016 and 2015 were $70
each respectively.
-9-
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.
As of June 30, 2016 the Company had no stock-based compensation plans nor
had it granted any stock options. Accordingly no stock-based compensation has
been recorded to date.
Recent pronouncements
Management has evaluated accounting standards and interpretations issued
but not yet effective as of June 30, 2016, 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 quarter ended June 30, 2016 a stockholder of the Company
advanced a total of $1,400. In addition the Company incurred
$25,500 in accounts payable to related parties. These payables represent
compensation owed to these parties. These advances are unsecured, not
represented by any formal loan agreement and bear no interest.
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 June 30, 2016 there are no preferred shares
issued or outstanding.
As at June 30, 2016 the total number of common shares outstanding was
95,281,213. The Company has an ongoing program of private placements to raise
funds to support the operations. During the quarter ended June 30, 2016 the
Company did not receive any proceeds through private placement activity.
-10-
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.
As at June 30, 2016 there were money's received for 662,000 shares that
had not yet been issued.
NOTE 5 - 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:
|
|
June
30, 2016
|
|
June
30, 2015
|
Net loss before income taxes
|
$
|
(37,023)
|
$
|
(158,351)
|
Income tax rate
|
|
39%
|
|
39%
|
Income tax recovery
|
|
(14,440)
|
|
(61,760)
|
Valuation allowance change
|
|
14,440
|
|
61,760
|
Provision for income taxes
|
$
|
-
|
$
|
-
|
The significant
components of deferred income tax assets at June 30, 2016 and 2015 are as
follows:
|
|
|
June 30, 2016
|
|
June 30, 2015
|
Net operating loss carry-forward
|
|
$
|
4,264,900
|
$
|
4,227,900
|
Valuation allowance
|
|
|
(4,264,900)
|
|
(4,227,900)
|
Net deferred income tax asset
|
|
$
|
-
|
$
|
-
|
As of June 30, 2016 and 2015, 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, 2016 and 2015, and no interest or penalties have been accrued as of
June 30, 2016 and 2015. As of June 30, 2016 and 2015 the Company did not have
any amounts recorded pertaining to uncertain tax positions. Current management
believes that the last time a corporation tax return was filed was for fiscal year
2010. Management is currently taking the necessary actions to correct this
deficiency. Due to a history of ongoing losses it is not expected that there
would be any penalties or interest owed due to the non-filing status.
The tax years from 2011 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.
-11-
NOTE 6 - RESTATEMENT
In connection with the filing of a restated form 10-K for the fiscal year
ended March 31, 2015 there were certain adjustments made in each quarterly
period during the fiscal year. Management has reviewed these changes for this
current quarter and determined that the changes are not material. In the
interests of clarity and information the following notes detailing the changes
are hereby included:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Statement of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
June 30,
|
|
|
|
|
|
|
2015
|
|
2015
|
|
|
|
|
|
|
|
|
As filed
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
$
-
|
|
$
-
|
Cost
of revenues
|
|
|
|
-
|
|
-
|
Gross
profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
Consulting
services
|
|
|
|
42,489
|
|
52,989
|
|
Corporate
communications
|
|
|
15,000
|
|
-
|
|
Depreciation
expense
|
|
|
70
|
|
-
|
|
Management
consulting - related parties
|
|
25,500
|
|
9,000
|
|
Professional
fees
|
|
|
|
41,302
|
|
41,302
|
|
Research
and development
|
|
|
15,000
|
|
-
|
|
General
and administrative
|
|
|
|
|
|
|
|
|
|
|
|
158,351
|
|
152,421
|
|
|
|
|
|
|
|
|
|
Net
loss from operations
|
|
|
|
(158,351)
|
|
(152,421)
|
|
|
|
|
|
|
|
|
|
-12-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Statement of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
June 30,
|
|
|
|
|
|
|
2015
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Flows from Operating Activities
|
|
|
|
|
|
|
Net
Loss
|
|
|
|
|
(158,351)
|
|
(152,421)
|
|
|
|
|
|
|
|
|
|
|
Adjustments
to reconcile net loss to net
|
|
|
|
|
|
cash
used in operating activities
|
|
|
|
|
|
|
Depreciation
|
|
|
|
70
|
|
140
|
Changes
in operating assets and liabilities
|
|
|
|
|
|
(Decrease)
in accounts payable and accrued liabilities
|
(78,109)
|
|
(84,109)
|
|
Increase
in accounts payable - related parties
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in operating activities
|
|
|
(230,390)
|
|
(230,390)
|
|
|
|
|
|
|
|
|
|
Cash
Flows from Financing Activities
|
|
|
|
|
|
|
Proceeds
from Common Stock sales
|
|
230,000
|
|
230,000
|
|
|
|
|
|
|
|
|
|
Net
(Decrease) in Cash
|
|
|
|
(390)
|
|
(390)
|
|
|
|
|
|
|
|
|
|
Cash
at the Beginning of the Period
|
|
|
11,164
|
|
11,164
|
|
|
|
|
|
|
|
|
|
Cash
at the End of the Period
|
|
|
$ 10,774
|
|
$ 10,774
|
|
|
|
|
|
|
|
|
|
NOTE 7 - SUBSEQUENT EVENTS
Management has examined the activities of the Company subsequent to the
closing date of these financial statements and had determined that there is
nothing that requires disclosure.
-13-