NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note
1 — Organization and Operations
Grow
Solutions Holdings, Inc. (formerly known as LightTouch Vein & Laser, Inc. and Strachan, Inc.) (the “Company”)
was organized under the laws of the State of Nevada on May 1, 1981. Currently, the Company provides indoor and outdoor gardening
supplies to the rapidly growing garden industry.
The
Merger
Effective
April 28, 2015, the Company entered into an Acquisition Agreement and Plan of Merger (the “the Merger”) with Grow
Solutions, Inc., a Delaware corporation (“Grow Solutions”) and LightTouch Vein & Laser Acquisition Corporation,
a Delaware corporation and a wholly owned subsidiary of the Company (“LightTouch Acquisition”). Under the terms of
the Merger, Grow Solutions merged with LightTouch Acquisition and became a wholly owned subsidiary of the Company. The Grow Solutions’
shareholders and certain creditors of the Company received 44,005,000 shares of the Company’s common stock in exchange for
all of the issued and outstanding shares of Grow Solutions. Following the closing of the Grow Solutions Agreement, Grow Solutions’
business became the primary focus of the Company and Grow Solutions management assumed control of the management of the Company
with the former director of the Company resigning upon closing of the Agreement. Shareholders maintained 1,886,612 as part of
the recapitalization.
As
a result of the Merger, the Company discontinued its pre-Merger business. The Merger was accounted for as a “reverse merger,”
and Grow Solutions, was deemed to be the accounting acquirer in the reverse merger. Consequently, the assets and liabilities and
the historical operations that will be reflected in the financial statements prior to the Merger will be those of Grow Solutions
and will be recorded at the historical cost basis and the consolidated financial statements after completion of the Merger will
include the assets and liabilities of Grow Solutions., historical operations of the Company, and operations of the Company and
its subsidiaries from the closing date of the Merger. As a result of the issuance of the shares of the Company’s Common
Stock pursuant to the Merger, a change in control of the Company occurred as of the date of consummation of the Merger. The Merger
is intended to be treated as a tax-free exchange under Section 368(a) of the Internal Revenue Code of 1986, as amended. All historical
share amounts of the accounting acquirer were retrospectively recast to reflect the share exchange.
The
Acquisition
Effective
May 13, 2015 (the “Closing Date”), the Company entered into an Acquisition Agreement and Plan of Merger (the “OneLove
Agreement’) with Grow Solutions Acquisition LLC, a Colorado limited liability company and a wholly owned subsidiary of the
Company (“Grow Solutions Acquisition”), One Love Garden Supply LLC, a Colorado limited liability company (“OneLove”),
and all of the members of OneLove (the “Members”). On the Closing Date, OneLove merged with Grow Solutions Acquisition
and became a wholly owned subsidiary of the Company. Under the terms of the OneLove Agreement, the Members received (i) 1,450,000
shares of the Company’s common stock (the “Equity”), (ii) Two Hundred Thousand Dollars (US$200,000) (the “Cash”),
and (iii) a cash flow promissory note in the aggregate principal amount of $50,000 issued by OneLove in favor of the Members (the
“Cash Flow Note”), whereby each fiscal quarter, upon the Company recording on its financial statements $40,000 in
US GAAP Net Income (“Net Income”) from sales of the Company’s products (the “Net Income Threshold”),
the Company shall pay to the Members 33% of the Company’s Net Income generated above the Net Income Threshold. The aforementioned
obligations owed under the Cash Flow Note shall extinguish upon the earlier of (i) payment(s) by Company in an amount equal to
$50,000 in the aggregate or (ii) May 5, 2016 (collectively, the Cash Flow Note, the Equity, and the Cash, the “Consideration”).
The Consideration provided to the Members was in exchange for all of the issued and outstanding membership interests of OneLove.
Following the Closing Date, OneLove’s business was acquired by the Company and the Company’s management assumed control
of the management of OneLove with the former managing members of OneLove resigning from OneLove upon closing of the OneLove Agreement.
The
Company recorded the purchase of OneLove using the acquisition method of accounting as specified in ASC 805 “Business
Combinations.” This method of accounting requires the acquirer to (i) record purchase consideration issued to sellers
in a business combination at fair value on the date control is obtained, (ii) determine the fair value of any non-controlling
interest, and (iii) allocate the purchase consideration to all tangible and intangible assets acquired and liabilities assumed
based on their acquisition date fair values. Further, the Company commenced reporting the results of OneLove on a consolidated
basis with those of the Company effective upon the date of the acquisition.
The
Company consolidated OneLove as of May 13, 2015, and the results of operations of the Company include that of OneLove from May
13, 2015 through December 31, 2015. The Company recognized net revenues attributable to OneLove of $2,523,595 and recognized
income of $217,144 during the period May 13, 2015 through December 31, 2015.
The
following table summarizes fair values of the net liabilities assumed and the allocation of the aggregate fair value of the purchase
consideration, and net liabilities to assumed identifiable and unidentifiable intangible assets.
Purchase Consideration:
|
|
|
|
Common stock at fair market value
|
|
$
|
290,000
|
|
Cash paid
|
|
|
200,000
|
|
Cash flow note assumed
|
|
|
50,000
|
|
Current liabilities assumed
|
|
|
226,624
|
|
Total Purchase Consideration
|
|
$
|
766,624
|
|
The
fair value allocation is based on management’s estimates:
Purchase Price Allocation
|
|
|
|
Cash
|
|
$
|
9,961
|
|
Accounts receivable
|
|
$
|
13,363
|
|
Inventory
|
|
$
|
342,458
|
|
Property and equipment
|
|
$
|
932
|
|
Goodwill
|
|
$
|
399,910
|
|
Current liabilities
|
|
$
|
(226,624
|
)
|
As
per the Acquisition agreement, the Company has paid $10,000 of the $50,000 cash flow note and as of December 31, 2015, the balance
of the cash flow note is $40,000.
Asset
Purchase Agreement
On September 23, 2015 (the “Closing
Date”), the Company entered into an Asset Purchase Agreement (the “APA”) by and among OneLove and D&B Industries,
LLC, a Colorado limited liability company doing business as Hygrow. On the Closing Date, the Company purchased all of the assets,
rights, properties, and business of Hygrow including certain debts of Hygrow (the “Assets”). Under the terms and conditions
of the APA, and for full consideration of the transfer of such Assets to the Company on the Closing Date, the Company issued Hygrow
three hundred thousand (300,000) shares of common stock of the Company and a payment to Hygrow in the amount of $5,200 in cash.
Following the Closing Date the Company’s management assumed control of the management of Hygrow with the former managing
members of Hygrow resigning upon closing of the APA.
The
Company recorded the purchase of Hygrow using the acquisition method of accounting as specified in ASC 805 “Business
Combinations.” This method of accounting requires the acquirer to (i) record purchase consideration issued to sellers
in a business combination at fair value on the date control is obtained, (ii) determine the fair value of any non-controlling
interest, and (iii) allocate the purchase consideration to all tangible and intangible assets acquired and liabilities assumed
based on their acquisition date fair values. Further, the Company commenced reporting the results of Hygrow on a consolidated
basis with those of the Company effective upon the date of the acquisition.
The
Company consolidated Hygrow as of the effective date of the agreement, and the results of operations of the Company include that
of Hygrow from September 23, 2015 through December 31, 2015. The Company recognized net revenues attributable to Hygrow
of $394,017 and recognized income of $101,213 during the period September 23, 2015 through December 31, 2015.
The
following table summarizes fair values of the net liabilities assumed and the allocation of the aggregate fair value of the purchase
consideration, and net liabilities to assumed identifiable and unidentifiable intangible assets.
Purchase Consideration:
|
|
|
|
Common stock at fair market value
|
|
$
|
60,000
|
|
Cash paid
|
|
|
5,200
|
|
Current liabilities assumed
|
|
|
47,918
|
|
Total Purchase Consideration
|
|
$
|
113,118
|
|
The
fair value allocation is based on management’s estimates:
Purchase Price Allocation
|
|
|
|
Other assets
|
|
$
|
5,213
|
|
Goodwill
|
|
$
|
107,905
|
|
Current liabilities
|
|
$
|
(47,918
|
)
|
The
Financing
Also
during the period ended December 31, 2015, the Company completed a closing of a private placement offering (the “Offering”)
of 2,705,000 Units, at a purchase price of $0.20 per Unit, each Unit consisting of 1 share of the Company’s common stock,
and 1 stock purchase warrants. The warrants are exercisable at $0.40 per warrant into a share of the Company’s common stock
and have a maturity of 3 years.
The
aggregate gross proceeds from the closing were $541,000 (the Company recorded $332,570 for the fair value of the warrants as a
derivative liability see Note 7).
Note
2 — Going Concern and Management’s Plan
The
accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization
of assets and the satisfaction of liabilities in the normal course of business. As of December 31, 2015, the Company had
a working capital of $625,885 and an accumulated deficit of $1,614,848. The Company has a history net losses since
inception. The Company believes that it has sufficient cash to fund its operations. However, there is no assurance
that the Company’s projections and estimates are accurate. In the event that the Company does not receive anticipated
proceeds operations and financings, it is possible that the Company would not have sufficient resources to continue as a going
concern for the next year. In order to mitigate these risks, the Company is actively managing and controlling the Company’s
cash outflows. These matters raise substantial doubt about the Company’s ability to continue as a going concern. The
financial statements do not include any adjustments relating to the recoverability and classification of asset amounts or the
classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
The
Company’s primary sources of operating funds since inception have been private equity, and debt and equity financings. The
Company intends to raise additional capital through private debt and equity investors. The Company needs to raise additional capital
in order to be able to accomplish its business plan objectives. The Company is continuing its efforts to secure additional funds
through debt or equity instruments. Management believes that it will be successful in obtaining additional financing based on
its history of raising funds; however, no assurance can be provided that the Company will be able to do so. There is no assurance
that any funds it raises will be sufficient to enable the Company to attain profitable operations or continue as a going concern.
To the extent that the Company is unsuccessful, the Company may need to curtail or cease its operations and implement a plan to
extend payables or reduce overhead until sufficient additional capital is raised to support further operations. There can be no
assurance that such a plan will be successful.
Note
3 — Summary of Significant Accounting Policies
Basis
of presentation
The
Company’s consolidated financial statements have been prepared in accordance with accounting principles generally accepted
in the United States of America (“US GAAP”) and the rules and regulations of the Securities and Exchange Commission
(“SEC”).
Fair
value of financial instruments
The
fair value of the Company’s assets and liabilities, which qualify as financial instruments under Financial Accounting Standards
Board (“FASB”) Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements and Disclosures,”
approximates the carrying amounts represented in the balance sheet, primarily due to their short-term nature.
Principles
of Consolidation
The
accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, One Love Garden
Supply LLC. All significant intercompany accounts and transactions have been eliminated in consolidation.
Use
of estimates and assumptions
The
preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date(s) of the financial
statements and the reported amounts of revenues and expenses during the reporting period(s).
Critical
accounting estimates are estimates for which (a) the nature of the estimate is material due to the levels of subjectivity and
judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change and (b) the impact
of the estimate on financial condition or operating performance is material. The Company’s critical accounting estimates
and assumptions affecting the financial statements were:
|
(1)
|
Fair
value of long–lived assets:
Fair value is generally determined using the asset’s 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 or 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.
|
|
(2)
|
Valuation
allowance for deferred tax assets:
Management assumes that the realization of the Company’s net deferred tax assets
resulting from its net operating loss (“NOL”) carry–forwards for Federal income tax purposes that may be
offset against future taxable income was not considered more likely than not and accordingly, the potential tax benefits of
the net loss carry–forwards are offset by a full valuation allowance. Management made this assumption based on (a) the
Company has incurred a loss, (b) general economic conditions, and (c) its ability to raise additional funds to support its
daily operations by way of a public or private offering, among other factors.
|
|
|
|
|
(3)
|
Estimates
and assumptions used in valuation of equity instruments:
Management estimates expected term of share options and similar
instruments, expected volatility of the Company’s common shares and the method used to estimate it, expected annual
rate of quarterly dividends, and risk free rate(s) to value share options and similar instruments.
|
|
|
|
|
(4)
|
Estimates
and assumptions used in valuation of derivative liability
: Management utilizes an option pricing model to estimate the
fair value of derivative liabilities. The model includes subjective assumptions that can materially affect the fair value
estimates.
|
These
significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached
to these estimates or assumptions, and certain estimates or assumptions are difficult to measure or value.
Management
bases its estimates on various assumptions that are believed to be reasonable in relation to the financial statements taken as
a whole 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. Actual results could differ from those estimates.
Concentration
of credit risk
Financial
instruments that potentially subject the Company to concentration of credit risk consist of cash accounts in a financial institution
which, at times, may exceed the Federal depository insurance coverage of $250,000. The Company has not experienced losses on these
accounts and management believes the Company is not exposed to significant risks on such accounts.
Cash
and Cash Equivalents
The
Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash
equivalents. As of December 31, 2015 and 2014, the Company had cash and cash equivalents of $814,663 and $452,275, respectively.
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash deposits.
The Company maintains its cash in institutions insured by the Federal Deposit Insurance Corporation (“FDIC”). At times,
the Company’s cash and cash equivalent balances may be uninsured or in amounts that exceed the FDIC insurance limits.
Inventory
Inventory
is stated at lower of cost or market using the first-in, first-out (FIFO) valuation method. Inventory was comprised of finished
goods at December 31, 2015.
Debt
Discount and Debt Issuance Costs
Debt
discounts and debt issuance costs incurred in connection with the issuance of debt are capitalized and amortized to
interest expense based on the related debt agreements using the straight-line method. Unamortized discounts are netted against
long-term debt.
Impairment
of Long-Lived Assets
The
Company assesses the recoverability of its long-lived assets, including property and equipment, when there are indications that
the assets might be impaired. When evaluating assets for potential impairment, the Company compares the carrying value of the
asset to its estimated undiscounted future cash flows. If an asset’s carrying value exceeds such estimated cash flows
(undiscounted and with interest charges), the Company records an impairment charge for the difference.
Goodwill
Goodwill
represents the excess of the purchase price over the fair value of the assets acquired and liabilities assumed. The Company is
required to perform impairment reviews at each of its reporting units annually and more frequently in certain circumstances. The
Company performs the annual assessment on December 31.
In
accordance with ASC 350–20 “Goodwill”, the Company is able to make a qualitative assessment of whether
it is more likely than not that a reporting unit’s fair value is less than its carrying amount before applying the two–step
goodwill impairment test. If the Company concludes that it is more likely than not that the fair value of a reporting unit is
not less than its carrying amount it is not required to perform the two–step impairment test for that reporting unit.
Derivative
Liability
The
Company evaluates its debt and equity issuances to determine if those contracts or embedded components of those contracts qualify
as derivatives to be separately accounted for in accordance with paragraph 815-10-05-4 and Section 815-40-25 of the FASB Accounting
Standards Codification. The result of this accounting treatment is that the fair value of the embedded derivative is marked-to-market
each balance sheet date and recorded as either an asset or a liability. In the event that the fair value is recorded as a liability,
the change in fair value is recorded in the consolidated statement of operations as other income or expense. Upon conversion,
exercise or cancellation of a derivative instrument, the instrument is marked to fair value at the date of conversion, exercise
or cancellation and then the related fair value is reclassified to equity.
In
circumstances where the embedded conversion option in a convertible instrument is required to be bifurcated and there are also
other embedded derivative instruments in the convertible instrument that are required to be bifurcated, the bifurcated derivative
instruments are accounted for as a single, compound derivative instrument.
The
classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is
re-assessed at the end of each reporting period. Equity instruments that are initially classified as equity that become subject
to reclassification are reclassified to liability at the fair value of the instrument on the reclassification date. Derivative
instrument liabilities will be classified in the balance sheet as current or non-current based on whether or not net-cash settlement
of the derivative instrument is expected within 12 months of the balance sheet date.
The
Company adopted Section 815-40-15 of the FASB Accounting Standards Codification (“Section 815-40-15”) to determine
whether an instrument (or an embedded feature) is indexed to the Company’s own stock. Section 815-40-15 provides
that an entity should use a two-step approach to evaluate whether an equity-linked financial instrument (or embedded feature)
is indexed to its own stock, including evaluating the instrument’s contingent exercise and settlement provisions.
The
Company utilizes an option pricing model to compute the fair value of the derivative and to mark to market the fair value of the
derivative at each balance sheet date. The Company records the change in the fair value of the derivative as other income or expense
in the consolidated statements of operations.
Revenue
Recognition
The
Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable
and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has
been shipped to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.
Equity–based
compensation
The
Company recognizes compensation expense for all equity–based payments in accordance with ASC 718 “Compensation
– Stock Compensation". Under fair value recognition provisions, the Company recognizes equity–based compensation
net of an estimated forfeiture rate and recognizes compensation cost only for those shares expected to vest over the requisite
service period of the award.
Restricted
stock awards are granted at the discretion of the Company. These awards are restricted as to the transfer of ownership and generally
vest over the requisite service periods, typically over a five year period (vesting on a straight–line basis). The fair
value of a stock award is equal to the fair market value of a share of Company stock on the grant date.
The
fair value of an option award is estimated on the date of grant using the Black–Scholes option valuation model. The Black–Scholes
option valuation model requires the development of assumptions that are inputs into the model. These assumptions are the value
of the underlying share, the expected stock volatility, the risk–free interest rate, the expected life of the option, the
dividend yield on the underlying stock and the expected forfeiture rate. Expected volatility is benchmarked against similar companies
in a similar industry over the expected option life and other appropriate factors. Risk–free interest rates are calculated
based on continuously compounded risk–free rates for the appropriate term. The dividend yield is assumed to be zero as the
Company has never paid or declared any cash dividends on its Common stock and does not intend to pay dividends on its Common stock
in the foreseeable future. The expected forfeiture rate is estimated based on management’s best estimate.
Determining
the appropriate fair value model and calculating the fair value of equity–based payment awards requires the input of the
subjective assumptions described above. The assumptions used in calculating the fair value of equity–based payment awards
represent management’s best estimates, which involve inherent uncertainties and the application of management’s judgment.
As a result, if factors change and the Company uses different assumptions, our equity–based compensation could be materially
different in the future. In addition, the Company is required to estimate the expected forfeiture rate and recognize expense only
for those shares expected to vest. If the Company’s actual forfeiture rate is materially different from its estimate, the
equity–based compensation could be significantly different from what the Company has recorded in the current period.
The
Company accounts for share–based payments granted to non–employees in accordance with ASC 505-40, “Equity
Based Payments to Non–Employees”. The Company determines the fair value of the stock–based payment as either
the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. If
the fair value of the equity instruments issued is used, it is measured using the stock price and other measurement assumptions
as of the earlier of either (1) the date at which a commitment for performance by the counterparty to earn the equity instruments
is reached, or (2) the date at which the counterparty’s performance is complete. The fair value of the equity instruments
is re-measured each reporting period over the requisite service period.
Loss
Per Share
Basic
net loss per common share is computed by dividing net loss attributable to common stockholders by the weighted-average number
of common shares outstanding during the period. Diluted net loss per common share is determined using the weighted-average number
of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents. In periods when
losses are reported, which is the case for the year ended December 31, 2015 and the period March 21, 2014 (Inception) through
December 31, 2014 presented in these consolidated financial statements, the weighted-average number of common shares outstanding
excludes common stock equivalents because their inclusion would be anti-dilutive.
The
Company had the following common stock equivalents at December 31, 2015 and 2014:
|
|
December 31,
2015
|
|
|
December 31,
2014
|
|
Convertible notes payable
|
|
|
6,622,718
|
|
|
|
-
|
|
Warrants
|
|
|
4,955,000
|
|
|
|
-
|
|
Totals
|
|
|
11,577,718
|
|
|
|
-
|
|
Income
Taxes
The
Company accounts for income taxes under ASC Topic 740 “Income Taxes” (“ASC 740”). ASC 740 requires the
recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statement
and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry
forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a
portion of deferred tax assets will not be realized.
ASC
740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and
prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position
taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not
to be sustained upon examination by taxing authorities. ASC 740 also provides guidance on derecoginition, classification, interest
and penalties, accounting in interim periods, disclosure and transition. Based on the Company’s evaluation, it has been
concluded that there are no significant uncertain tax positions requiring recognition in the Company’s financial statements.
Since the Company was incorporated on March 21, 2014, the evaluation was performed for the 2014 and 2015 tax years, which will
be the only periods subject to examination upon filing of appropriate tax returns. The Company believes that its income tax positions
and deductions would be sustained on audit and does not anticipate any adjustments that would result in material changes to its
financial position.
The
Company’s policy for recording interest and penalties associated with audits is to record such expense as a component of
income tax expense. There were no amounts accrued for penalties or interest as of or during the year ended December 31, 2015.
Management is currently unaware of any issues under review that could result in significant payments, accruals or material deviations
from its position.
Subsequent
events
The
Company has evaluated events that occurred subsequent to December 31, 2015 and through the date the financial statements were
issued.
Recent
Accounting Pronouncements
In
February 2015, the FASB issued Accounting Standards Update No. 2015-02, “Consolidation (Topic 810): Amendments to the Consolidation
Analysis” (“ASU 2015-02”). The new consolidation standard changes the way reporting enterprises evaluate whether
(a) they should consolidate limited partnerships and similar entities, (b) fees paid to a decision maker or service provider are
variable interests in a variable interest entity ("VIE"), and (c) variable interests in a VIE held by related parties
of the reporting enterprise require the reporting enterprise to consolidate the VIE. The guidance is effective for public business
entities for annual and interim periods in fiscal years beginning after December 15, 2015. Early adoption is allowed, including
early adoption in an interim period. A reporting entity may apply a modified retrospective approach by recording a cumulative-effect
adjustment to equity as of the beginning of the fiscal year of adoption or may apply the amendments retrospectively. The Company
is currently assessing the impact, if any, of the adoption of this guidance on the consolidated financial statements.
In
March 2015, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2015-03, Interest - Imputation
of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. The amendments in this ASU require that debt
issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying
amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs
are not affected by the amendments in this ASU. The amendments are effective for financial statements issued for fiscal years
beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption of the amendments is permitted
for financial statements that have not been previously issued. The amendments should be applied on a retrospective basis, wherein
the balance sheet of each individual period presented should be adjusted to reflect the period-specific effects of applying the
new guidance. Upon transition, an entity is required to comply with the applicable disclosures for a change in an accounting principle.
These disclosures include the nature of and reason for the change in accounting principle, the transition method, a description
of the prior-period information that has been retrospectively adjusted, and the effect of the change on the financial statement
line items (i.e., debt issuance cost asset and the debt liability). The Company is currently evaluating the effects of ASU 2015-03
on the condensed consolidated financial statements.
In
July 2015, the FASB issued the FASB Accounting Standards Update No. 2015-11 “
Inventory (Topic 330)
:
Simplifying
the Measurement of Inventory” (“ASU 2015-11”).
The amendments in this Update do not apply to inventory that
is measured using last-in, first-out (LIFO) or the retail inventory method. The amendments apply to all other inventory, which
includes inventory that is measured using first-in, first-out (FIFO) or average cost. An entity should measure inventory within
the scope of this Update at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in
the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement
is unchanged for inventory measured using LIFO or the retail inventory method.
For public business entities, the amendments
in this Update are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal
years. The Company is currently evaluating the effects of ASU 2015-11 on the condensed consolidated financial statements.
In
January 2016, Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-01,
Recognition
and Measurement of Financial Assets and Financial Liabilities
. ASU 2016-01 requires equity investments to be measured at fair
value with changes in fair value recognized in net income; simplifies the impairment assessment of equity investments without
readily determinable fair values by requiring a qualitative assessment to identify impairment; eliminates the requirement for
public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required
to be disclosed for financial instruments measured at amortized cost on the balance sheet; requires public business entities to
use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; requires an entity to
present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from
a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance
with the fair value option for financial instruments; requires separate presentation of financial assets and financial liabilities
by measurement category and form of financial assets on the balance sheet or the accompanying notes to the financial statements
and clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale
securities in combination with the entity’s other deferred tax assets. ASU 2016-01 is effective for financial statements
issued for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company is currently
evaluating the impact that ASU 2016-01 will have on its consolidated financial statements.
Note
4 — Notes Receivable and accrued interest
In
April 2014, the Company signed a letter of intent with Delta Entertainment Group (‘Delta”) to enter into a reverse
merger transaction. In exchange for Delta’s exclusivity until the earlier of the execution of a stock exchange agreement
or June 30, 2014, the Company paid Delta $25,000. Delta was to use the $25,000 to become current with its public filings. Since
the stock exchange transaction was not executed by June 30, 2014, the $25,000 that the Company provided to Delta reverted to a
one year note with an interest rate at 8% per annum. The Company determined that since Delta lacked the financial resources to
get current in its public filings, the collectability of the note was doubtful. Accordingly, the Company has not accrued any interest
income on the note and has booked a 100% reserve against the note receivable.
Note
5 – Property and Equipment
Property
and equipment consisted of the following at December 31, 2015:
|
|
|
|
|
December 31,
|
|
|
|
Lives
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
Equipment
|
|
|
5
years
|
|
|
$
|
23,044
|
|
Office equipment
|
|
|
7
years
|
|
|
|
3,724
|
|
Leasehold improvements
|
|
|
5
years
|
|
|
|
1,585
|
|
Less: accumulated depreciation
|
|
|
|
|
|
|
(7,535
|
)
|
Property and equipment, net
|
|
|
|
|
|
$
|
20,818
|
|
Depreciation
expense for the year ended December 31, 2015 and the period from March 21, 2014 (inception) through December 31, 2014 was $2,149
and $0, respectively.
Note
6 — Convertible notes
Debt
Offering (A)
On
September 2, 2015, the Company entered into an agreement for the issuance of a convertible note to a third party lender for $120,000.
The note accrues interest at 12% per annum maturing on July 2, 2016. The notes are convertible into shares of common stock at
a conversion price equal to approximately 58% of the average of the lowest 3 trading prices for the common stock during the 20
day trading period ending on the latest and complete trading day prior to the conversion.
Debt
Offering (B)
Effective December 7, 2015, Grow
Solutions Holdings, Inc. (the “Company”) closed a Credit Agreement (the “Credit Agreement”) by and among
the Company, as borrower, Grow Solutions, Inc. and One Love Garden Supply LLC as joint and several guarantors (such guarantors,
collectively, the “Subsidiaries” and together with the Company, the “Borrowers”) and TCA Global Credit
Master Fund, LP, a Cayman Islands limited partnership, as lender (“TCA”). Pursuant to the Credit Agreement, TCA agreed
to loan the Company up to a maximum of $3,000,000 for the Company’s product division, construction and renovation of two
stores, and inventory. An initial amount of $950,000 was funded by TCA at the closing of the Credit Agreement. Any increase
in the amount extended to the Borrowers shall be at the discretion of TCA.
The
amounts borrowed pursuant to the Credit Agreement are evidenced by a Revolving Note (the “Revolving Note”) and the
repayment of the Revolving Note is secured by a first position security interest in substantially all of the Company’s assets
in favor of TCA, as evidenced by a Security Agreement by and between the Company and TCA (the “Company Security Agreement”)
and a first position security interest in substantially all of the Subsidiaries’ assets in favor of TCA, as evidenced by
a Security Agreement by and among the Subsidiaries and TCA (the “Subsidiaries Security Agreement” and, together with
the Company Security Agreement, the “Security Agreements”). The Revolving Note is in the original principal
amount of $950,000, is due and payable, along with interest thereon, on June 7, 2017 (the “Maturity Date”), and bears
interest at the rate of 18% per annum, with the first four months of payments by the Company under the Revolving Note being interest
only. Upon the occurrence of an Event of Default (as defined in the Credit Agreement) the interest rate shall increase to the
Default Rate (as defined in the Credit Agreement). The payments under the Revolving Note are amortized over 18 months.
Only
upon the occurrence of an Event of Default or mutual agreement between TCA and the Company, at the sole option of TCA, TCA may
convert all or any portion of the outstanding principal, accrued and unpaid interest, and any other sums due and payable under
the Revolving Note into shares of the Company’s common stock at a conversion price equal to 85% of the lowest daily volume
weighted average price of the Company’s common stock during the five trading days immediately prior to such applicable conversion
date, in each case subject to TCA not being able to beneficially own more than 4.99% of the Company’s outstanding common
stock upon any conversion.
As
further consideration for TCA entering into and structuring the Credit Agreement, the Company shall pay to TCA an advisory fee
by issuing shares of restricted common stock of the Company (the “Advisory Fee Shares”) equal to $325,000 (the “Advisory
Fee”). In the event that the Company pays TCA all of the outstanding obligations due under the Credit Agreement on or before
June 7, 2016, the Advisory Fee shall be reduced to $292,500. Additionally, as long as there is (i) no Event of Default, (ii) no
occurrence of any other event that would cause an Event of Default, and (iii) the Company makes timely Advisory Fee Payments (as
defined below), TCA agrees that it will not sell any Advisory Fee Shares in the Principal Trading Market (as defined in the Credit
Agreement) prior to the Maturity Date, in exchange for monthly cash payments by the Company beginning on July 4, 2016 and ending
on the Maturity Date as set forth in the Credit Agreement, which shall be credited and applied towards the repayment of the Advisory
Fee (the “Advisory Fee Payments”). In the event that TCA shall sell the Advisory Fee Shares, as long as there is no
Event of Default, TCA shall not, during any given calendar week, sell Advisory Fee Shares in excess of 25% of the average weekly
volume of the common stock of the Company on the Principal Trading Market over the immediately preceding calendar week.
The
Company booked the $325,000 as debt discount.
The
Company issued 2,167,933 shares of common stock to the creditor as compensation for financing costs of $325,000. The issuance
of the 2,167,933 shares has been recorded at par value with a corresponding decrease to paid-in capital. Upon the sale of the
shares by the creditor, the financing cost liability will be reduced by the amount of the proceeds with a corresponding increase
to paid-in capital. The Company will still be liable for any shortfall from the proceeds realized by the creditor. The ultimate
amount to be recorded in satisfaction of the debt will not exceed the balance of the financing cost recorded.
Derivative
Analysis
Because
the conversion feature included in the convertible note payable has full reset adjustments tied to future issuances of equity
securities by the Company, it is subject to derivative liability treatment under Section 815-40-15 of the FASB Accounting Standard
Codification (“Section 815-40-15”).
Generally
accepted accounting principles require that:
a.
|
Derivative
financial instruments be recorded at their fair value on the date of issuance and then adjusted to fair value at each subsequent
balance sheet date with any change in fair value reported in the statement of operations; and
|
|
|
b.
|
The
classification of derivative financial instruments be reassessed as of each balance sheet date and, if appropriate, be reclassified
as a result of events during the reporting period then ended.
|
Upon
issuance of the note, a debt discount was recorded and any difference in comparison to the face value of the note, representing
the fair value of the conversion feature and the warrants in excess of the debt discount, was immediately charged to interest
expense. The debt discount is amortized over the earlier of (i) the term of the debt or (ii) conversion of the debt, using
the straight-line method which approximates the interest method. The amortization of debt discount is included as a component
of interest expense in the consolidated statements of operations. There was unamortized debt discount of $961,237 as of December
31, 2015.
The
fair value of the embedded conversion feature was estimated using the Black-Scholes option-pricing model. See Note 6 for the estimates
and assumptions used.
Note
7 — Derivative Liabilities
In
connection with the private placement transactions during the period ended December 31, 2015, the Company issued 4,955,000 warrants,
to purchase common stock with an exercise price of $0.40 and a three year term. The Company identified certain put features embedded
in the warrants that potentially could result in a net cash settlement in the event of a fundamental transaction, requiring the
Company to classify the warrants as a derivative liability.
In
connection with the issuance of a convertible note as discussed above in Note 5, the Company evaluated the note agreement to determine
if the agreement contained any embedded components that would qualify the agreement as a derivative. The Company identified certain
put features embedded in the convertible note agreement that potentially could result in a net cash settlement in the event of
a fundamental transaction, requiring the Company to classify the conversion feature as a derivative liability.
Level
3 Financial Liabilities – Derivative convertible note and warrant liabilities
The
following are the major categories of assets and liabilities that were measured at fair value during the year ended December 31,
2015, using quoted prices in active markets for identical assets (Level 1), significant other observable inputs (Level 2), and
significant unobservable inputs (Level 3):
|
|
Quoted
Prices
In
Active
Markets
for
Identical
Liabilities
(Level
1)
|
|
|
Significant
Other
Observable
Inputs
(Level
2)
|
|
|
Significant
Unobservable
Inputs
(Level
3)
|
|
|
Balance
at
December 31,
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Embedded conversion feature
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
730,584
|
|
|
$
|
730,584
|
|
Warrant liability
|
|
|
-
|
|
|
|
-
|
|
|
|
437,252
|
|
|
|
437,252
|
|
December 31, 2015
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,167,836
|
|
|
$
|
1,167,836
|
|
The
following table provides a summary of the changes in fair value, including net transfers in and/or out, of all financial assets
measured at fair value on a recurring basis using significant unobservable inputs during the year ended December 31, 2015.
|
|
Warrant
Liability
|
|
|
Embedded
Conversion
Feature
|
|
|
Total
|
|
Balance - December 31, 2014
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Change in fair value of derivative liability
|
|
|
104,682
|
|
|
|
7,660
|
|
|
|
112,342
|
|
Issuance of derivative warrant liabilities
|
|
|
332,570
|
|
|
|
-
|
|
|
|
332,570
|
|
Included in debt discount
|
|
|
-
|
|
|
|
722,924
|
|
|
|
722,924
|
|
Balance – December 31, 2015
|
|
$
|
437,252
|
|
|
$
|
730,584
|
|
|
$
|
1,167,836
|
|
The
fair value of the derivative feature of the convertible notes and warrants on the issuance dates and at the balance sheet date
were calculated using an option model valued with the following weighted average assumptions:
|
|
December 31,
2015
|
|
Risk free interest rate
|
|
|
0.49% - 1.06
|
%
|
Dividend yield
|
|
|
0.00
|
%
|
Expected volatility
|
|
|
113%
- 115
|
%
|
Remaining term
|
|
|
0.83
- 3.00 years
|
|
Risk-free
interest rate: The Company uses the risk-free interest rate of a U.S. Treasury Note with a similar term on the date of the grant.
Dividend
yield: The Company uses a 0% expected dividend yield as the Company has not paid dividends to date and does not anticipate declaring
dividends in the near future.
Volatility:
The Company calculates the expected volatility of the stock price based on the corresponding volatility of the Company’s
peer group stock price for a period consistent with the warrants’ expected term.
Remaining
term: The Company’s remaining term is based on the remaining contractual maturity of the warrants.
During
the year ended December 31, 2015, the Company marked the derivative feature of the warrants to fair value and recorded a loss
of $112,342 relating to the change in fair value.
Note
8 — Stockholders’ Equity
Preferred
Stock
The
Company is authorized to issue 25,000,000 shares of preferred stock, $.001 par value, with such rights, preferences, variations
and such other designations for each class or series within a class as determined by the Board of Directors. The preferred stock
is not convertible into common stock, does not contain any cumulative voting privileges, and does not have any preemptive rights.
No shares of preferred stock have been issued.
Common
Stock
The Company is authorized to issue
100,000,000 ordinary shares with a par value of $0.001 per share.
On
March, 21, 2014, the Company issued 43,005,000 shares of stock to its founding members for $0.001 per share for total cash consideration
of $43,005.
On
August 11, 2014, the Company issued 1,000,000 shares of stock for legal services. The Company expensed $10,000 for the shares
issued. In November 2014, the Company issued 2,250,000 shares of common stock to investors at $0.20 a unit in connection with
the private placement of the Company’s stock. In addition, the investors received 2,250,000 three year warrants with an
exercise price of $0.40. Each warrant is callable by the Company upon the Company’s common stock trading at $0.60 or higher
for 20 consecutive days.
During
the year ended December 31, 2015, the Company issued 1,500,000 shares of common stock to 6 consultants for services rendered.
The issuances were recorded at fair value ($0.20 per share) and the Company recognized $300,000 in stock based compensation charges.
On
August 3, 2015, the Company issued four members of the Board of Directors an aggregate of 600,000 shares of the Company’s
common stock. The issuances were recorded at fair value ($0.20 per share) and the Company recognized $110,000 in stock based compensation
charges.
As
discussed in Note 6, the Company issued 2,167,933 shares of common stock to TCA as compensation for financing costs of $325,000.
The issuance of the 2,167,933 shares has been recorded at par value with a corresponding decrease to paid-in capital. Upon the
sale of the shares by the creditor, the financing cost liability will be reduced by the amount of the proceeds with a corresponding
increase to paid-in capital. The Company will still be liable for any shortfall from the proceeds realized by the creditor. The
ultimate amount to be recorded in satisfaction of the debt will not exceed the balance of the financing cost recorded. The shares
were issued in January 2016.
Also
during the period ended December 31, 2015, the Company completed a closing of a private placement offering (the “Offering”)
of 2,705,000 Units, at a purchase price of $0.20 per Unit, each Unit consisting of 1 share of the Company’s common stock,
and 1 stock purchase warrants. The warrants are exercisable at $0.40 per warrant into a share of the Company’s common stock
and have a maturity of 3 years.
The
aggregate gross proceeds from the closing were $541,000 (the Company recorded $332,570 for the fair value of the warrants as a
derivative liability see Note 7).
As
a result of the OneLove Acquisition and the Hygrow Acquisition, the Company issued 1,450,000 and 300,000 shares of common stock,
respectively, to consummate the acquisitions.
Warrants
The
following is a summary of the Company’s warrant activity during the period from March 21, 2014 to December 31, 2015:
|
|
Warrants
|
|
|
Weighted
Average
Exercise Price
|
|
|
|
|
|
|
|
|
Outstanding – March 21, 2014
|
|
|
-
|
|
|
$
|
-
|
|
Granted
|
|
|
2,250,000
|
|
|
$
|
-
|
|
Exercised
|
|
|
-
|
|
|
$
|
-
|
|
Forfeited/Cancelled
|
|
|
-
|
|
|
$
|
-
|
|
Outstanding – December 31,
2014
|
|
|
2,250,000
|
|
|
$
|
0.40
|
|
Exercisable – December 31,
2014
|
|
|
2,250,000
|
|
|
$
|
0.40
|
|
Granted
|
|
|
2,705,000
|
|
|
$
|
0.40
|
|
Exercised
|
|
|
-
|
|
|
$
|
-
|
|
Forfeited/Cancelled
|
|
|
-
|
|
|
$
|
-
|
|
Outstanding – December 31,
2015
|
|
|
4,955,000
|
|
|
$
|
0.40
|
|
Exercisable – December 31,
2015
|
|
|
4,955,000
|
|
|
$
|
0.40
|
|
As
of December 31, 2015 and 2014, the total intrinsic value of options outstanding and exercisable was $0.
Note
9 — Related Party Transactions
As
per the Acquisition agreement, fully described in Note 1, the Company has paid $10,000 of the $50,000 cash flow note and as of
December 31, 2015, the balance of the cash flow note is $40,000, payable to a related party.
Note
10 — Commitments and Contingencies
Joint
Marketing Agreement with Jasper Group Holdings, Inc.
On
June 29, 2015, the Company and Jasper Group Holdings, Inc. (“Jasper”), entered into a Joint Marketing Agreement (the
“Joint Marketing Agreement”) to provide services related to website creation for a legal cannabis job posting platform.
The website shall include an employee leasing program and allow employers, recruiters and potential employees to communicate through
its platform for a fee. All potential employees will be screened with background checks by independent third parties and provided
the necessary applications and related materials for individuals to become licensed in the legal cannabis industry on a state
by state basis. In accordance with the terms of the Joint Marketing Agreement, Jasper shall invest all funds necessary to form
the website.
Pursuant
to the Joint Marketing Agreement, the Company issued to Jasper 250,000 common shares upon execution, the shares were issued on
July 22, 2015. Additionally, upon the transfer of ownership in the website from Jasper to the Company, the Company shall issue
to Jasper an additional 500,000 shares of common stock of the Company.
Proceeds
derived from the Company’s website shall be divided as follows: (i) the Company shall retain 75% of the gross proceeds less
any sales commissions to third parties collected by the Company for all business that is generated through the website (the “Net
Fees”) and pay to Jasper a commission equal to 25% of the Net Fees with payments due within 15 days of the end of each quarter
(ii) the Company shall grant to Jasper a warrant for the purchase of one share of common stock of the Company, with an exercise
price of $0.75 per share, for every dollar of revenue that the Company earns from the website, up to a maximum of One Million
Dollars ($1,000,000).
The
initial term of the Joint Marketing Agreement shall be for three (3) years and shall automatically renew for additional three
year periods unless terminated by the Company with written notice at least 30 days prior to the expiration of the initial term,
or any subsequent term.
Operating
Lease
The
Company assumed the OneLove lease for storefront property in Colorado, which in November 2012, OneLove extended to an additional
three years to run from May 1, 2013 through April 30, 2016. The lease requires base annual rent of $60,000 and the Company’s
pro-rata charges for operating expenses and taxes for the first year, with 3% increments thereafter.
The
Company assumed the Hygrow leases for the storefront properties in Boulder, Colorado and Pueblo, Colorado. The leases are on a
month to month basis with monthly payments of $3,500 and $800, respectively.
Rent
expense totaled $84,460 and $0 for the year ended December 31, 2015 and 2014, respectively.
Future
minimum lease payments under these non-cancelable operating leases are approximately as follows:
Year Ending December 31,
|
|
|
|
2016
|
|
$
|
20,000
|
|
Litigation
In
the normal course of business, the Company may be involved in legal proceedings, claims and assessments arising in the ordinary
course of business. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. There are
no such matters as of December 31, 2015.
Note
11 — Income Taxes
As
of December 31, 2015, the Company had net operating loss carry forwards of approximately $1,691,000 that may be available to reduce
future years’ taxable income in varying amounts through 2035. Future tax benefits which may arise as a result of these losses
have not been recognized in these financial statements, as their realization is determined not likely to occur and accordingly,
the Company has recorded a valuation allowance for the deferred tax asset relating to these tax loss carry-forwards.
The
provision for Federal income tax consists of the following:
|
|
December 31,
2015
|
|
|
December 31,
2014
|
|
Federal income tax benefit attributable to:
|
|
|
|
|
|
|
Current Operations
|
|
$
|
1,565,297
|
|
|
$
|
126,017
|
|
Less: valuation allowance
|
|
|
(1,565,297
|
)
|
|
|
(126,017
|
)
|
Net provision for Federal income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
The
cumulative tax effect at the expected rate of 38.6% of significant items comprising our net deferred tax amount is as follows:
|
|
December
31,
2015
|
|
|
December
31,
2014
|
|
Deferred tax asset attributable to:
|
|
|
|
|
|
|
Net operating loss carryover
|
|
$
|
653,354
|
|
|
$
|
48,680
|
|
Less: valuation allowance
|
|
|
(653,354
|
)
|
|
|
(48,680
|
)
|
Net deferred tax asset
|
|
$
|
-
|
|
|
$
|
-
|
|
Due
to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards of approximately $1,691,000
for Federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating
loss carry forwards may be limited as to use in future years.
Note
12 — Subsequent Events
The
Company has evaluated all events that occurred after the balance sheet date through the date when the consolidated financial statements
were issued to determine if they must be reported. The Management of the Company determined that there were no reportable subsequent
events, other than those mentioned elsewhere within this filing, to be disclosed.
Russell E. Anderson, CPA
Russ Bradshaw, CPA
William R. Denney, CPA
Kristofer Heaton, CPA
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Officers
and Directors
LightTouch
Vein & Laser, Inc.
We
have audited the accompanying balance sheets of LightTouch Vein & Laser, Inc. as of December 31, 2014 and 2013, and the related
statements of operations, changes in stockholders’ deficit, and cash flows for the years ended December 31, 2014 and 2013.
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 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 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 includes examining,
on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes 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 LightTouch
Vein & Laser, Inc. as of December 31, 2014 and 2013, and the results of its operations, and its cash flows for the years ended
December 31, 2014 and 2013, in conformity with accounting principles generally accepted in the United States of America.
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 has cash flow constraints, an accumulated deficit, and has suffered recurring
losses from operations. These factors, among others, raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans in regard to these 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/Anderson
Bradshaw PLLC
Salt
Lake City, Utah
March
25, 2015
LightTouch
Vein & Laser, Inc.
Balance
Sheets
|
|
December
31,
|
|
|
|
2014
|
|
|
2013
|
|
Assets:
|
|
|
|
|
|
|
Current assets
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Deficit:
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
25,793
|
|
|
$
|
33,195
|
|
Payable
to stockholders
|
|
|
148,739
|
|
|
|
115,565
|
|
Total
Liabilities
|
|
|
174,532
|
|
|
|
148,760
|
|
|
|
|
|
|
|
|
|
|
Stockholders' deficit:
|
|
|
|
|
|
|
|
|
Preferred
stock, $0.001 par value, 25,000,000 shares authorized, no shares issued and outstanding
|
|
|
-
|
|
|
|
-
|
|
Common stock,
$0.001 par value, 100,000,000 shares authorized, 418,895 shares issued and outstanding
|
|
|
419
|
|
|
|
419
|
|
Additional Paid-in capital
|
|
|
7,142,744
|
|
|
|
7,142,744
|
|
Retained deficit
|
|
|
(7,317,695
|
)
|
|
|
(7,291,923
|
)
|
Total
Stockholders' Deficit
|
|
|
(174,532
|
)
|
|
|
(148,760
|
)
|
Total
Liabilities and Stockholders' Deficit
|
|
$
|
-
|
|
|
$
|
-
|
|
See
accompanying notes to financial statements.
LightTouch
Vein & Laser, Inc.
Statements
of Operations
|
|
Years
Ended December 31,
|
|
|
|
2014
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
General
and Administrative Expenses
|
|
|
16,264
|
|
|
|
16,672
|
|
Total
operating expenses
|
|
|
16,264
|
|
|
|
16,672
|
|
Loss from operations
|
|
|
(16,264
|
)
|
|
|
(16,672
|
)
|
Other Income (Expenses):
|
|
|
|
|
|
|
|
|
Other income
|
|
|
3,728
|
|
|
|
-
|
|
Interest
expense – related party
|
|
|
(13,236
|
)
|
|
|
(9,939
|
)
|
Total
Other Expense
|
|
|
(9,508
|
)
|
|
|
(9,939
|
)
|
|
|
|
|
|
|
|
|
|
Net (Loss)
|
|
$
|
(25,772
|
)
|
|
$
|
(26,611
|
)
|
|
|
|
|
|
|
|
|
|
Net (Loss) per common share
|
|
$
|
(0.06
|
)
|
|
$
|
(0.06
|
)
|
|
|
|
|
|
|
|
|
|
Weighted number of common shares outstanding
|
|
|
418,895
|
|
|
|
418,895
|
|
See
accompanying notes to financial statements.
LightTouch
Vein & Laser, Inc.
Statements
of Changes in Stockholders’ Deficit
|
|
Common Stock
|
|
|
Paid-in
|
|
|
Retained
|
|
|
Total Equity
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
(Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2013
|
|
|
418,895
|
|
|
$
|
419
|
|
|
$
|
7,142,744
|
|
|
$
|
(7,265,312
|
)
|
|
$
|
(122,149
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss, year ended December 31, 2013
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(26,611
|
)
|
|
|
(26,611
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2013
|
|
|
418,895
|
|
|
$
|
419
|
|
|
$
|
7,142,744
|
|
|
$
|
(7,291,923
|
)
|
|
$
|
(148,760
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss, year ended December 31, 2014
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(25,772
|
)
|
|
|
(25,772
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2014
|
|
|
418,895
|
|
|
$
|
419
|
|
|
$
|
7,142,744
|
|
|
$
|
(7,317,695
|
)
|
|
$
|
(174,532
|
)
|
See
accompanying notes to financial statements.
LightTouch
Vein & Laser, Inc.
Statements
of Cash Flows
|
|
Years
Ended December 31,
|
|
|
|
2014
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
Net loss
|
|
$
|
(25,772
|
)
|
|
$
|
(26,611
|
)
|
Adjustments to reconcile net
loss to net cash used by operating activities:
|
|
|
|
|
|
|
|
|
Changes in operating assets
and liabilities:
|
|
|
|
|
|
|
|
|
Increase (decrease) in accounts
payable
|
|
|
(7,402
|
)
|
|
|
1,186
|
|
Increase
(decrease) in payable to stockholders and related party
|
|
|
33,174
|
|
|
|
25,425
|
|
Net Cash
used in operating activities
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net Cash
Provided by Investing Activities
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net Cash
Provided by Financing Activities
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net change in cash
|
|
|
-
|
|
|
|
-
|
|
Cash, beginning of period
|
|
|
-
|
|
|
|
-
|
|
Cash, end of period
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
Cash paid during the period
for:
|
|
|
|
|
|
|
|
|
Income
taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
Interest
|
|
$
|
-
|
|
|
$
|
-
|
|
See
accompanying notes to financial statements.
LightTouch
Vein & Laser, Inc.
Notes
to Financial Statements
December
31, 2014
Note
1: Summary of Significant Accounting Policies
Organization
– LightTouch Vein & Laser, Inc. (the “Company”) was organized under the laws of the State of Nevada on May
1, 1981 under the name of Strachan, Inc. and during 1999, the Company changed its name to its present name. Between 1999 and 2000,
the Company acquired several subsidiary corporations and conducted its business operations primarily through them. Subsequent
to August 2000, financial difficulties prevented these subsidiary corporations from operating profitably and each of them ceased
operations. In most cases these subsidiary corporations filed for bankruptcy in the applicable federal court, the proceedings
of which lasted in some cases through 2005. At the present time the Company is seeking a business combination with an operating
entity through a reverse acquisition.
Going
Concern – The accompanying financial statements have been prepared in conformity with accounting principles generally accepted
in the United States of America, which contemplate continuation of the Company as a going concern. However, the Company has not
conducted any revenue producing operations during the past several years, has no assets but has incurred liabilities of $174,532
as of December 31, 2014. These factors raise substantial doubt concerning the ability of the Company to continue as a going concern.
The Company’s sole officer and an affiliate have paid the Company’s expenses (See Note 3. Related Party Transactions).
An amount of $148,739, which includes accrued interest, is due them as of December 31, 2014. The Company proposes to continue
this method of paying for its expenses unless other capital raising means can be employed, of which there can be no assurance
that such will be available. In addition, the Company is dependent on its management serving without monetary remuneration. The
Company assumes that its arrangement with management will continue into the future. These financial statements do not include
any adjustments that might result from a negative outcome of these uncertainties. A change in these circumstances would have a
material negative effect on the Company's future.
Use
of Estimates – These financial statements are prepared in conformity with accounting principles generally accepted in the
United States of America and require that management make estimates and assumptions that affect the reported amounts of assets
and liabilities and the disclosure of contingent assets and liabilities. The use of estimates and assumptions may also affect
the reported amounts of revenues and expenses. Actual results could differ from those estimates or assumptions.
(Loss)
Per Common Share – The loss per share of common stock is computed by dividing the net loss during the period presented by
the weighted average number of shares of common stock outstanding during that same period. There were no potential common shares
outstanding during any period presented that would result in a dilution to the actual number of common shares outstanding. However,
the Company may have a contingent obligation to issue additional shares based on acquisitions that the Company made of entities
that became subsidiaries of the Company. Such contingent obligation has not been given consideration in computing the loss per
common share (See Note 2: Capital Stock).
Income
taxes – The Company has no deferred taxes arising from temporary differences between income for financial reporting and
for income tax purposes. Deferred tax assets and liabilities are measured using enacted tax rates to taxable income in the years
in which those temporary differences are expected to reverse. A valuation allowance is provided for deferred tax assets if it
is more likely than not that these items will either expire before the Company is able to realize their benefits, or that future
deductibility is uncertain.
At
December 31, 2014, the Company has a net operating loss carry forward of approximately $172,200 that expires if unused through
2034. A deferred tax asset in the amount of $34,940 is fully offset by a valuation allowance in the same amount. The change in
the valuation allowance was $2,520 and $3,990 for the years ended December 31, 2014 and 2013, respectively. The Company’s
likelihood to utilize any net operating loss carry forward from years prior to 2008 is remote as a result of its intended change
in business activities and other tax regulations relating to those prior years.
The
Company adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, on January 1, 2007.
As a result of the implementation of Interpretation 48, the Company recognized approximately no increase in the liability
for unrecognized tax benefits.
The
Company has no tax positions at December 31, 2014 and 2013 for which the ultimate deductibility is highly certain but for which
there is uncertainty about the timing of such deductibility.
The
Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses.
During the years ended December 31, 2014 and 2013, the Company recognized no interest and penalties. The Company had
no accruals for interest and penalties at December 31, 2014 and 2013.
Tax
years open to examination by the IRS are 2011 through 2014.
Recently
Enacted Accounting Standards
The
Company has reviewed all recently issued, but not yet adopted, accounting standards in order to determine their effects, if any,
on its results of operation, financial position or cash flows. Based on that review, the Company believes that none of these
pronouncements will have a significant effect on its current or future earnings or operations.
Note
2: Capital Stock
Preferred
Stock – The Company is authorized to issue 25,000,000 shares of preferred stock, $.001 par value, with such rights, preferences,
variations and such other designations for each class or series within a class as determined by the Board of Directors. The preferred
stock is not convertible into common stock, does not contain any cumulative voting privileges, and does not have any preemptive
rights. No shares of preferred stock have been issued.
Common
Stock – On August 15, 2000, the Company acquired Vanishing Point, Inc. (“Vanishing Point”) as a wholly-owned
subsidiary through a triangular reorganization whereby an existing subsidiary of the Company acquired all of the Vanishing Point
common stock, options to acquire common stock, warrants, and convertible notes (collectively the “Exchange Securities”)
in exchange for 85,766 shares of the Company’s common stock. The conditions of the exchange require that the Exchange Securities
be surrendered to the Company’s transfer agent and that payment, either in services or in a cash amount, be made to the
Company. As a result of the demise of the business operations of the Company’s subsidiaries shortly after the Vanishing
Point acquisition, both the terms and conditions of surrendering the Exchange Securities were not completed. The Company believes
that all properly allowable issuances of the Company’s common stock for the Exchange Securities have occurred, but no assurance
thereof can be given. (See Note 4: Contingent Liabilities)
During
the year ended December 31, 2010, the sole officer of the Company converted a note in the amount of $25,000 into 250,000 shares
of common stock of the Company. The stock was valued at $0.10 per share which approximated market value.
Pursuant
to approval of the Company’s management and shareholders on June 17, 2013, effective July 16, 2013, the Company recapitalized
the issued and outstanding shares of common stock which resulted in the outstanding shares of the Company being reduced from 40,969,007
to approximately 418,895 through a reverse split of the issued and outstanding common stock on a one (1) for one hundred (100)
basis, after taking into account rounding of shares. All share amounts have been adjusted to reflect the split retrospectively.
Note
3: Related Party Transactions
Commencing
in 2006, the Company’s sole officer made payment of general and administrative expenses incurred by the Company and in 2007
entered into an unsecured line of credit note. This note bears interest at a rate of 18% per annum and has been extended on several
occasions. Commencing in 2008, an affiliate of the Company’s sole officer made similar payment of general and administrative
expenses incurred by the Company at a rate of 18% per annum. Furthermore, certain general and administrative expenses related
to the Company filing its reports with the Securities and Exchange Commission have been accrued and are payable to the Company’s
sole officer and affiliate. Collectively, these amounts total $148,739 and $115,564 at December 31, 2014 and 2013, respectively.
Accrued interest included in these amounts is $52,016 and $38,779 at December 31, 2014 and 2013, respectively.
Note
4: Subsequent Events
On
February 16, 2015, the Company entered into an Acquisition Agreement and Plan of Merger (the “Agreement’) with Grow
Solutions, Inc., a Delaware corporation (“Grow Solutions”) and LightTouch Vein & Laser Acquisition Corporation,
a wholly owned subsidiary of the Company (“LightTouch Acquisition”). Under the terms of the Agreement, Grow
Solutions will merge with LightTouch Acquisition and become a wholly owned subsidiary of the Company. Grow Solutions’
shareholders and certain creditors of the Company (as described below) will receive up to fifty five million shares (55,000,000)
of the Company’s common stock (the “Issuance Amount”) in exchange for all of the issued and outstanding shares
of Grow Solutions. Following the closing of the Agreement, Grow Solutions’ business will be the primary focus of the
Company and Grow Solutions management will assume control of the management of the Company with the current director of the Company
resigning upon closing of the Agreement. In accordance with the terms of the Agreement, closing shall occur upon the earlier of
60 days from February 16, 2015, or the completion of Grow Solutions audit of its financial statements.
Additionally,
on February 16, 2015, the Company issued a convertible promissory note to Grow Solutions in the principal amount of one hundred
fifty thousand dollars ($150,000) (the “Grow Note”). The principal and interest of the Grow Note is convertible
into 7,500,000 shares of the Company’s common stock. The Company also issued convertible promissory notes to lenders
and creditors of the Company in the principal amount of thirty three thousand dollars ($33,000) in the aggregate (the “Creditor
Notes” and together with the Grow Note, the “Notes”), convertible into 1,650,000 shares of common stock of the
Company. All shares of common stock of the Company issued under the Notes shall be included in the Issuance Amount. Proceeds
from the Notes were used to pay outstanding obligations of the Company including funds owed to the sole officer and director who
had been funding the Company’s operation through various loans. In addition to the Agreement being executed between
the Company, Grow Solutions and LightTouch Acquisition, the majority shareholder agreed to sell his ownership interest in the
Company which consisted of 250,000 shares of the Company’s common stock for a purchase price of one hundred thousand dollars
($100,000). The shares represented approximately 61% of the Company’s issued and outstanding shares.
The
Company has evaluated subsequent events pursuant to ASC Topic 855 and has determined that there are no other events that require
disclosure.
14,825,000 Shares of Common Stock
GROW
SOLUTIONS HOLDINGS, INC.
______________________
PROSPECTUS
______________________
YOU
SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR THAT WE HAVE REFERRED YOU TO. WE HAVE NOT AUTHORIZED ANYONE
TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT. THIS PROSPECTUS IS NOT AN OFFER TO SELL COMMON STOCK AND IS NOT SOLICITING
AN OFFER TO BUY COMMON STOCK IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
Until
_____________, all dealers that effect transactions in these securities whether or not participating in this offering may be required
to deliver a prospectus. This is in addition to the dealer’s obligation to deliver a prospectus when acting as underwriters
and with respect to their unsold allotments or subscriptions.
The
Date of This Prospectus is ______________, 2016
PART
II — INFORMATION NOT REQUIRED IN THE PROSPECTUS