As
filed with the Securities and Exchange Commission on August 18 , 2017
Registration
No. 333- 219013
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
S-1/ A
(Amendment
No. 1)
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
GREEN
SPIRIT INDUSTRIES INC.
(Exact
Name of Registrant as specified in its charter)
Nevada
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6512
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14-1982491
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(State
or other Jurisdiction of
Incorporation or Organization)
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(Primary
Standard Industrial
Classification Code Number)
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(I.R.S.
Employer
Identification
No.)
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Cond.
Madrid Suite 304, 1760 Loiza Street
San
Juan, Puerto Rico 00911
Tel:
(787) 641-8447
(Address,
including zip code, and telephone number, including area code, of Registrant’s principal executive offices)
Leslie
Ball
Chief
Executive Officer
Cond.
Madrid Suite 304, 1760 Loiza Street
San
Juan, Puerto Rico 00911
Tel:
(787) 641-8447
(Name,
Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)
With
copies to:
Darrin
M. Ocasio
Sichenzia
Ross Ference Kesner LLP
61
Broadway, 32nd Floor
New
York, NY 10006
Telephone:
(212) 930-9700
Facsimile:
(212) 930-9725
Approximate
date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this registration
statement.
If
any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933, check the following box. [X]
If
this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please
check the following box and list the Securities Act of 1933 registration statement number of the earlier effective registration
statement for the same offering. [ ]
If
this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
If
this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
Indicate
by a check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check One):
Large
Accelerated Filer [ ]
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Accelerated
Filer [ ]
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Non-Accelerated
Filer [ ] (Do not check if a smaller reporting company)
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Smaller
Reporting Company [X]
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Emerging
Growth Company [ ]
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If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) [ ]
CALCULATION
OF REGISTRATION FEE
Title
of Each Class of Securities to be Registered
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Amount
to be Registered (1)
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Proposed
Maximum Offering Price per Share (2)
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Proposed
Maximum Aggregate Offering Price
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Amount
of
Registration Fee (4)
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Common Stock, par value $0.001
per share (3)
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3,741,364
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$
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5.75
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$
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21,512,844.92
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$
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2,493.34
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(1)
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Pursuant
to Rule 416 under the Securities Act of 1933, as amended, the shares being registered hereunder shall be deemed to cover additional
securities to be offered to prevent dilution and thus includes such indeterminate number of shares of common stock as may
be issuable with respect to the shares being registered hereunder as a result of stock splits, stock dividends or other similar
transactions.
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(2)
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Estimated
solely for the purpose of calculating the registration fee pursuant to Rule 457(c) under the Securities Act of 1933, as amended,
using the average of the high and low prices as reported on the OTC Markets on June 19, 2017.
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(3)
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Represents
outstanding shares of common stock offered by the selling stockholders.
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(4)
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$2,493.34
was previously paid in the initial filing of the registration statement on Form S-1, filed on June 27, 2017.
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THE
REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL
THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME
EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
The
information in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement
filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell and is not soliciting
an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
PRELIMINARY
PROSPECTUS
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SUBJECT
TO COMPLETION
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DATED
AUGUST 18, 2017
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3,741,364
Shares of Common Stock
GREEN
SPIRIT INDUSTRIES INC.
Common
Stock
This
prospectus relates to the sale by the selling stockholders identified in this prospectus of up to 3,741,364 shares of our common
stock, par value $0.001 per share (the “
Common Stock
”). All of these shares of our Common Stock are being offered
for resale by the selling stockholders (the “
Selling Stockholders
”).
The
Selling Stockholders may sell some or all of their shares of Common Stock from time to time in the principal market on which the
stock is traded at the prevailing market price or in negotiated transactions.
The offering
price bears no relationship to our assets, book value, earnings or any other customary investment criteria.
We will not
receive any proceeds from the sale of these shares by the selling stockholders. We will bear all costs relating to the registration
of these shares of our Common Stock.
Our
Common Stock is quoted on the OTC Pink Tier of the OTC Markets under the symbol “GSRX.” On June 19, 2017, the last
reported sale of our Common Stock was $6.50. As of the date of this prospectus, our Common Stock is subject to only limited
quotation on the OTC Pink, and it is not otherwise regularly quoted on any other over-the-counter market. Until such time as our
Common Stock is so quoted, the shares of Common Stock covered by this prospectus will be sold by the selling stockholders from
time to time at a fixed price of $5.75 per share, representing the average of the high and low prices as reported on the OTC Markets
on June 19, 2017. As of the date of this prospectus, we have filed an application for quotation of our Common Shares on the OTCQB
Marketplace. If and when our Common Stock is regularly quoted on an over-the-counter market or on a national securities exchange,
the selling stockholders may sell their respective shares of Common Stock, from time to time, at prevailing market prices or in
privately negotiated transactions .
Investing
in our Common Stock is highly speculative and involves a high degree of risk.
We
may amend or supplement this prospectus from time to time by filing amendments or supplements as required. You should carefully
consider the risks and uncertainties described under the heading “Risk Factors” beginning on page 8 of this prospectus
before making a decision to purchase our Common Stock.
Neither
the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or
passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
The
date of this prospectus is August 18 , 2017
TABLE
OF CONTENTS
You
should rely only on the information contained in this prospectus. We have not authorized any other person to provide you with
different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not
making an offer to sell these securities in any jurisdiction where an offer or sale is not permitted. You should assume that the
information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus. Our business,
financial condition, results of operations and prospects may have changed since that date.
PROSPECTUS
SUMMARY
The
following summary highlights information contained elsewhere in this prospectus. This summary may not contain all of the information
that may be important to you. You should read this entire prospectus carefully, including the sections entitled “Risk Factors”
and “Management’s Discussion and Analysis or Plan of Operations” and our historical financial statements and
related notes included elsewhere in this prospectus. In this prospectus, unless the context provides otherwise, the terms “Green
Spirit,”, “GSRX” “the Company,” “we,” “us,” and “our” refer
to Green Spirit Industries Inc and its wholly-owned subsidiary, Project 1493, LLC (“1493”).
Green
Spirit Industries Inc. is a Nevada corporation (the “
Company
”) formed under the name Cyberspace Vita,
Inc. (“
Cyberspace
”) on November 7, 2006. Our initial business plan was related to the online sale of
vitamins and supplements. On May 11, 2017, we entered into a share exchange agreement (the “
Exchange Agreement
”)
with Peter Zachariou, the majority shareholder of the Company (the “
Shareholder
”), Project 1493, LLC, a limited
liability company organized under the laws of the Commonwealth of Puerto Rico (“
1493
”), and the sole member
of 1493 (the “
Member
”), pursuant to which the Member transferred all of the outstanding membership interests
of 1493 to the Company in exchange for 16,690,912 restricted shares of common stock of the Company (the “
Exchange Shares
”),
warrants to purchase up to 3,000,000 shares of common stock at an exercise price of $0.50 per share for a period of three (3)
years from the date of issuance (the “
Exchange Warrants
”) and 1,000 shares of Series A Preferred Stock that
grants the holders thereof fifty-one percent (51%) voting power (the “
Preferred Shares
” and together with the
Exchange Shares, and the Exchange Warrants, the “
Exchange Securities
”). As a result of the Exchange Agreement,
1493 became a wholly-owned subsidiary of the Company, and the business of 1493 became the business of the Company. At the time
of the Exchange Agreement, the Company was not actively engaged in any business activity.
Presently,
the Company, through its wholly-owned subsidiary, 1493, is in the business of acquiring, developing and operating medical cannabis
dispensaries in Puerto Rico. As of the date of this prospectus, the Company has acquired all of the legal rights, permits, licenses,
leasing contracts and assets pertaining to four medical cannabis dispensaries. The Company intends to continue identifying and
acquiring additional dispensaries with plans to operate a total of 10 dispensaries in the next 12 months, and up to a total of
15 locations by the end of 2018. The four dispensaries are located in the following cities: (1) Fajardo, which is a hub for boating
and fishing and a launching port for islands Vieques, Culebra, the U.S. Virgin Islands and the British Virgin Islands; (2) Carolina,
which is tourist center near Puerto Rico’s international airport and home of top luxury hotels and casinos; (3) Dorado,
which is deemed to be an affluent residential area in Puerto Rico; and lastly (4) San Juan, the capital of Puerto Rico and among
the largest cruise destination ports. The dispensaries will not be fully licensed until construction is completed, and the Department
of Health of Puerto Rico issues the requisite operating permit for each of the dispensaries.
The
Company has also entered into an agreement to lease property located in Isla Verde, Carolina, Puerto Rico, for the location of
a fifth dispensary for which the Company is in the process of seeking pre-qualification for a cannabis dispensary
license. The Company plans to begin construction of its fifth dispensary at its Isla Verde location once it receives pre-qualification
from the Department of Health of Puerto Rico. However, there can be no assurance that the Company will be successful in receiving
this pre-qualification.
The
Company has begun construction at two of its dispensary locations and anticipates applying for occupancy permits by the end of
its third quarter of 2017. The Company plans to begin construction at its other locations within the next three months. The Company
expects that the dispensaries located in Farjardo, Carolina, Dorado & San Juan will be fully operational during the fourth
quarter of 2017, provided that the Department, Health of prier to Rico issues the requisite operating permits.
The
Company anticipates earning revenue by selling medical cannabis, edibles, pills, creams, patches and oral drops, and paraphernalia
such as vaporizes, The average net profit for medical cannabis dispensaries is 20% in the U.S., according to a study conducted
by Marijuana Business Daily and the media annual revenue is $1,200,000. We aim to undercut our competition by acquiring our goods
at a lower than average cost which we anticipate will allow us to achieve 30% net margins, 50% higher than the industry average.
Private
Placement Financing
On
May 11, 2017, the Company entered into a subscription agreement (the “
Subscription Agreement
”) with selected
accredited investors (each, an “
Investor
” and, collectively, the “
Investors
”). Pursuant
to the terms of the Subscription Agreement, the Company offered in a private placement (the “
Offering
”) a minimum
of $1,000,000 and up to a maximum of $3,300,000 of its securities, consisting of (i) shares of its common stock (“
Shares
”);
and (ii) warrants to purchase shares of the Company’s common stock (the “
Warrants
”). Each Warrant shall
be exercisable at any time on or after the date of issuance for a period of three (3) years at an exercise price per share equal
to $0.50 per share, subject to adjustment as provided in the agreement evidencing the Warrants. The number of shares of common
stock underlying the Warrants is equal to 30% of the number of Shares issued to each Investor in the Offering (the “
Warrant
Shares
”). The Offering closed on May 11, 2017. The Company issued a total of 8,461,538 Shares and 2,538,462 Warrants
to purchase up to 2,538,462 shares of the Company’s common stock, for total gross proceeds of $3,300,000.
Shares
Issued for Services
In
connection with the Exchange Agreement and the Offering, the Company issued to certain consultants an aggregate of 3,000,000 shares
of common stock and warrants to purchase up to an aggregate of 500,000 shares of common stock at an exercise price of $0.50 per
share for a period of three (3) years from the date of issuance.
The
Offering
Common
stock offered by selling stockholders:
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3,741,364
shares of our common stock.
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Common
stock outstanding before and after the offering:
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30,000,005
shares
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Use
of proceeds:
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We
will not receive any proceeds from the sale of shares of our common stock by the selling stockholders pursuant to this prospectus.
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Terms
of the Offering:
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The
selling stockholder will determine when and how they will sell the common stock offered in this prospectus.
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Risk
Factors:
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You
should carefully consider the information set forth in this prospectus and, in particular, the specific factors set forth
in the “Risk Factors” section beginning on page 8 of this prospectus before deciding whether or not to invest
in our common stock.
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OTC
Trading Symbol:
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GSRX
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Business
Address and Telephone Number
Our
address is Cond. Madrid Suite 304, 1760 Loiza Street, San Juan, Puerto Rico 00911, and our telephone number at such address is
(787) 641-8447.
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus contains forward-looking statements. Such statements include statements regarding our expectations, hopes, beliefs
or intentions regarding the future, including but not limited to statements regarding our market, strategy, competition, development
plans (including acquisitions and expansion), financing, revenues, operations, and compliance with applicable laws. Forward-looking
statements involve certain risks and uncertainties, and actual results may differ materially from those discussed in any such
statement. Factors that could cause actual results to differ materially from such forward-looking statements include the risks
described in greater detail in the following paragraphs. All forward-looking statements in this document are made as of the date
hereof, based on information available to us as of the date hereof, and we assume no obligation to update any forward-looking
statement except where applicable law requires us to update these statements. Market data used throughout this prospectus is based
on published third party reports or the good faith estimates of management, which estimates are based upon their review of internal
surveys, independent industry publications and other publicly available information.
RISK
FACTORS
An
investment in the Company’s common stock involves a high degree of risk. In determining whether to purchase the Company’s
common stock, an investor should carefully consider all of the material risks described below, together with the other information
contained in this report. An investor should only purchase the Company’s securities if he or she can afford to suffer the
loss of his or her entire investment.
General
Business Risks
We
have a limited operating history and face many of the risks and difficulties frequently encountered by an early stage company.
Although
our management team has extensive knowledge of the cannabis industry and closely monitors changes in legislation, we also operate
in an evolving industry that may not develop as expected. Furthermore, our operations will likely continue to evolve under
our business plan as we continually assess new strategic opportunities for our business within our industry. Assessing the future
prospects of our business is challenging in light of both known and unknown risks and difficulties we may encounter. Growth prospects
in our industry can be affected by a wide variety of factors including:
● competition
from other similar companies;
● regulatory
limitations on the products we can offer and markets we can serve;
● other
changes in the regulation of medical and recreational cannabis use;
● changes
in underlying consumer behavior;
● our
ability to access adequate financing on reasonable terms and our ability to raise additional capital in order to fund our operations;
● challenges
with new products, services and markets; and
● fluctuations
in the credit markets and demand for credit.
We
may not be able to successfully address these factors, which could negatively impact our growth, harm our business and cause our
operating results to be worse than expected.
We
may need to secure additional financing.
While
we have raised funds that we believe will be sufficient to fund our operations for the next twelve months, we anticipate that
we may require additional funds for our operations in the future. If we are not successful in securing additional financing when
needed, we may be unable to execute our business strategy, which could result in curtailment of our operations.
Our
ability to raise additional capital is uncertain and dependent on numerous factors beyond our control including, but not limited
to, economic conditions and availability or lack of availability of credit. We currently do not have any committed external source
of funds.
If
we need additional capital and cannot raise it on acceptable terms, we may not be able to, among other things:
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continue
to expand our development, sales and marketing teams;
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acquire
complementary technologies, products or businesses;
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if
determined to be appropriate, expand our global operations;
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hire,
train and retain employees; and
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respond
to competitive pressures or unanticipated working capital requirements.
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To
the extent that we raise additional capital through the sale of equity or convertible debt securities, then-existing stockholders’
interests may be materially diluted, and the terms of such securities could include liquidation or other preferences that adversely
affect their rights as common stockholders. Debt financing and preferred equity financing, if available, may involve agreements
that include restrictive covenants that limit our ability to take specified actions, such as incurring additional debt, making
capital expenditures or declaring dividends.
Cannabis
remains illegal under federal law, and any change in the enforcement priorities of the federal government could render our current
and planned future operations unprofitable or even prohibit such operations.
We
operate in the cannabis industry, which is dependent on state laws and regulations pertaining to such industry; however, under
federal law, cannabis remains illegal.
The
United States federal government regulates drugs through the Controlled Substances Act (the “CSA”), which places controlled
substances, including cannabis, on one of five schedules. Cannabis is currently classified as a Schedule I controlled substance,
which is viewed as having a high potential for abuse and having no currently accepted medical use in treatment in the United States.
No prescriptions may be written for Schedule I substances, and such substances are subject to production quotas imposed by the
United States Drug Enforcement Administration (the “DEA”). Because of this, doctors may not prescribe cannabis for
medical use under federal law, although they can recommend its use under the First Amendment.
Currently,
28 U.S. states, the District of Columbia and the U.S. territories of Guam and Puerto Rico allow the use of medical cannabis. Voters
in the states of Alaska, California, Colorado, Maine, Massachusetts, Nevada, Oregon and Washington have approved ballot measures
to legalize cannabis for adult recreational use. Such state and territorial laws are in conflict with the federal CSA, which makes
cannabis use and possession illegal at the federal level. Because cannabis is a Schedule I controlled substance, the development
of a legal cannabis industry under the laws of these states is in conflict with the CSA, which makes cannabis use and possession
illegal on a national level. The United States Supreme Court has confirmed that the federal government has the right to regulate
and criminalize cannabis, including for medical purposes, and that federal law criminalizing the use of cannabis preempts state
laws that legalize its use.
In
light of such conflict between federal laws and state laws regarding cannabis, the previous administration under President Obama
had effectively stated that it was not an efficient use of resources to direct federal law enforcement agencies to prosecute those
lawfully abiding by state-designated laws allowing the use and distribution of medical cannabis. For example, the prior DOJ Deputy
Attorney General of the Obama administration, James M. Cole, issued a memorandum (the “Cole Memo”) to all United States
Attorneys providing updated guidance to federal prosecutors concerning cannabis enforcement under the CSA. The Cole Memo ultimately
emphasizes the need for robust state regulation of marijuana. The memorandum “rests on its expectation that state and local
governments that have enacted laws authorizing marijuana-related conduct will implement strong and effective regulatory and enforcement
systems that will address the threat those state laws could pose to public safety, public health, and other law enforcement interests.”
In addition, the Financial Crimes Enforcement Network (“FinCEN”) provided guidelines (the “FinCEN Guidelines”)
on February 14, 2014, regarding how financial institutions can provide services to cannabis-related businesses consistent with
their Bank Secrecy Act (“BSA”) obligations.
In
2014, the United States House of Representatives passed an amendment (the “Rohrabacher-Farr Amendment”) to the Commerce,
Justice, Science, and Related Agencies Appropriations Bill, which funds the United States Department of Justice (the “DOJ”).
The Rohrabacher-Farr Amendment prohibits the DOJ from using funds to prevent states with medical cannabis laws from implementing
such laws. In August 2016, a 9th Circuit federal appeals court ruled in United States v. McIntosh that the Rohrabacher-Farr Amendment
bars the DOJ from spending funds on the prosecution of conduct that is allowed by state medical cannabis laws, provided that such
conduct is in strict compliance with applicable state law. In March 2015, bipartisan legislation titled the Compassionate Access,
Research Expansion, and Respect States Act (the “CARERS Act”) was introduced, proposing to allow states to regulate
the medical use of cannabis by changing applicable federal law, including by reclassifying cannabis under the Controlled Substances
Act to a Schedule II controlled substance and thereby changing the plant from a federally-criminalized substance to one that has
recognized medical uses. More recently, the Respect State Marijuana Laws Act of 2017 has been introduced in the U.S. House of
Representatives, which proposes to exclude persons who produce, possess, distribute, dispense, administer or deliver marijuana
in compliance with state laws from the regulatory controls and administrative, civil and criminal penalties of the CSA.
Although
these developments have been met with a certain amount of optimism in the cannabis industry, neither the CARERS Act nor the Respect
State Marijuana Laws Act of 2017 have yet been adopted. In addition, the Rohrabacher-Farr Amendment, being an amendment to an
appropriations bill that must be renewed annually, has not been renewed beyond April 28, 2017. Furthermore, the ruling in United
States v. McIntosh is only applicable in the 9th Circuit, which does not include Colorado, the state where we currently primarily
operate. The new administration under President Trump has not yet indicated whether it will change the previously stated policy
of low-priority enforcement of federal laws related to cannabis set forth in the Cole Memo or FinCEN Guidelines. The Trump administration
could change this policy and decide to strongly enforce the federal laws applicable to cannabis. Any such change in the federal
government’s enforcement of current federal laws could cause significant financial damage to us. While we do not currently
harvest, distribute or sell cannabis, we may be irreparably harmed by a change in enforcement policies of the federal government.
Additionally,
as we are always assessing potential strategic acquisitions of new businesses, we may in the future also pursue opportunities
that include growing and distributing medical or recreational cannabis, should we determine that such activities are in the best
interest of the Company and our stockholders. Any such pursuit would involve additional risks with respect to the regulation of
cannabis.
Any
potential growth in the cannabis industry continues to be subject to new and changing state and local laws and regulations.
Continued
development of the cannabis industry is dependent upon continued legislative legalization of cannabis at the state level, and
a number of factors could slow or halt progress in this area, even where there is public support for legislative action. Any delay
or halt in the passing or implementation of legislation legalizing cannabis use, or its sale and distribution, or the re-criminalization
or restriction of cannabis at the state level could negatively impact our business. Additionally, changes in applicable state
and local laws or regulations could restrict the products and services we offer or impose additional compliance costs on us or
our customers and tenants. Violations of applicable laws, or allegations of such violations, could disrupt our business and result
in a material adverse effect on our operations. We cannot predict the nature of any future laws, regulations, interpretations
or applications, and it is possible that regulations may be enacted in the future that will be materially adverse to our business.
The
cannabis industry faces significant opposition, and any negative trends will adversely affect our business operations.
We
are substantially dependent on the continued market acceptance, and the proliferation of consumers, of medical and recreational
cannabis. We believe that with further legalization, cannabis will become more accepted, resulting in a growth in consumer demand.
However, we cannot predict the future growth rate or future market potential, and any negative outlook on the cannabis industry
may adversely affect our business operations.
Large,
well-funded business sectors may have strong economic reasons to oppose the development of the cannabis industry. For example,
medical cannabis may adversely impact the existing market for the current “cannabis pill” sold by mainstream pharmaceutical
companies. Should cannabis displace other drugs or products, the medical cannabis industry could face a material threat from the
pharmaceutical industry, which is well-funded and possesses a strong and experienced lobby. Any inroads the pharmaceutical or
any other potentially displaced, industry or sector could make in halting or impeding the cannabis industry could have a detrimental
impact on our business.
We
operate in a highly competitive industry.
The
markets for ancillary businesses in the medical cannabis and recreational cannabis industries are competitive and
evolving. There is no material aspect of our business that is protected by patents, copyrights, trademarks, or trade names, and
we face strong competition from larger companies that may offer similar products and services to ours. Many of our current and
potential competitors have longer operating histories, significantly greater financial, marketing and other resources and larger
client bases than us, and there can be no assurance that we will be able to successfully compete against these or other competitors.
Given
the rapid changes affecting the global, national, and regional economies generally and the medical cannabis and recreational
cannabis industries, in particular, we may not be able to create and maintain a competitive advantage in the marketplace.
Our success will depend on our ability to keep pace with any changes in our markets, particularly, legal and regulatory changes.
Our success will also depend on our ability to respond to, among other things, changes in the economy, market conditions, and
competitive pressures. Any failure by us to anticipate or respond adequately to such changes could have a material adverse effect
on our financial condition and results of operations.
We
may be unable to obtain capital to fully execute our business plan.
Our
business plan involves the acquisition of additional dispensaries with the goal of operating 10 locations within the next
12 months, and up to 15 locations by the end of 2018 . We anticipate that we will need additional capital in the future
to fully execute our business plan. However, there can be no assurance that we will be able to obtain financing on agreeable terms,
if at all, and any future sale of our equity securities will dilute the ownership of our existing stockholders and could be at
prices substantially below the price of the shares of common stock sold in the past. If we are unable to obtain the necessary
capital, we may need to delay the implementation of, or curtail our business plan.
We
face risks associated with strategic acquisitions.
As
an important part of our business strategy, we intend to acquire additional dispensaries. These acquisitions involve a number
of financial, accounting, managerial, operational, legal, compliance and other risks and challenges, including the following,
any of which could adversely affect our results of operations:
● The
applicable restrictions on cannabis industry and its participants may limit the number of available suitable businesses and dispensaries
that we can acquire;
● Any
acquired dispensary could under-perform relative to our expectations and the price that we paid for it, or not perform in accordance
with our anticipated timetable;
● We
may incur or assume significant debt in connection with our acquisitions;
● Acquisitions
could cause our results of operations to differ from our own or the investment community’s expectations in any given period,
or over the long term; and
● Acquisitions
could create demands on our management that we may be unable to effectively address, or for which we may incur additional costs.
Additionally,
following any business acquisition, we could experience difficulty in integrating personnel, operations, financial and other systems,
and in retaining key employees and customers.
Our
future success depends on our ability to grow and expand our customer base and operational territory.
Our
success and the planned growth and expansion of our business depend on our products and services achieving greater and broader
acceptance, resulting in a larger customer base, and on the expansion of our operations into new areas and markets. However, there
can be no assurance that customers will purchase our products, or that we will be able to continually expand our customer base.
Additionally, if we are unable to effectively market or expand our product offerings, we will be unable to grow and expand our
business or implement our business strategy.
Operating
in new markets may expose us to new operational, regulatory or legal risks and subject us to increased compliance costs. We may
need to modify our existing business model and cost structure to comply with local regulatory or other requirements. Facilities
we open in new markets may take longer to reach expected revenue and profit levels on a consistent basis, may have higher construction,
occupancy or operating costs, and may present different competitive conditions, consumer preferences and spending patterns than
we anticipate.
Any
of the above could materially impair our ability to increase sales and revenue.
Conditions
in the economy, the markets we serve and the financial markets generally may adversely affect our business and results of operations.
Our
business is sensitive to general economic conditions. Slower economic growth, volatility in the credit markets, high levels of
unemployment, and other challenges that affect the economy adversely could affect us and our customers and suppliers. If growth
in the economy or in any of the markets we serve slows for a significant period, if there is a significant deterioration in the
economy or such markets or if improvements in the economy do not benefit the markets we serve, our business and results of operations
could be adversely affected.
We
depend on our management, certain key personnel and board of directors, as well as our ability to attract, retain and motivate
qualified personnel.
Our
future success depends largely upon the experience, skill, and contacts of our officers and directors, and the loss of the services
of these officers or directors may have a material adverse effect upon our business. Additionally, shortages in qualified personnel
could also limit our ability to successfully implement our growth plan. As we grow, we will need to attract and retain highly
skilled experts in the cannabis industry, as well as managerial, sales and marketing, security and finance personnel. There can
be no assurance, however, that we will be able to attract and retain such personnel.
Our
reputation and ability to do business may be negatively impacted by the improper conduct by our business partners, employees or
agents.
We
depend on third party suppliers to produce and timely deliver our inventory. Products purchased from our suppliers are resold
to our customers. These suppliers could fail to produce products to our specifications or quality standards and may not deliver
units on a timely basis. Any changes in our suppliers to resolve production issues could disrupt our ability to fulfill orders.
Any changes in our suppliers to resolve production issues could also disrupt our business due to delays in finding new suppliers.
Furthermore,
we cannot provide assurance that our internal controls and compliance systems will always protects us from acts committed by our
employees, agents or business partners in violation of U.S. federal or state laws. Any improper acts or allegations could damage
our reputation and subject us to civil or criminal investigations and related stockholder lawsuits, could lead to substantial
civil and criminal monetary and non-monetary penalties, and could cause us to incur significant legal and investigatory fees.
If
we do not effectively manage changes in our business, these changes could place a significant strain on our management and operations.
Our
ability to grow successfully requires that we have an effective planning and management process. The expansion and growth of our
business could place a significant strain on our management systems, infrastructure and other resources. To manage our growth
successfully, we must continue to improve and expand our systems and infrastructure in a timely and efficient manner. Our controls,
systems, procedures and resources may not be adequate to support a changing and growing company. If our management fails to respond
effectively to changes and growth in our business, including acquisitions, this could have a material adverse effect on the Company’s
business, financial condition, results of operations and future prospects.
Catastrophic
events may disrupt our business.
Our
inventory, dispensaries and overall operations are vulnerable to damage or interruption from fires, floods, power losses, telecommunications
failures, cyber-attacks, terrorist attacks, acts of war, human errors, break-ins and similar events. Additionally, we rely on
our third-party suppliers for our inventory. In the event of a catastrophic event, we may be unable to continue our operations
and may endure system interruptions, reputational harm, delays in our product development, and lengthy interruptions in our services,
breaches of data security and loss of critical data, all of which could have an adverse effect on our future operating results.
Any
new or changes made to laws, regulations, rules or other industry standards affecting our business may have an adverse impact
on our financial results.
We
are subject to a number of foreign and domestic laws and regulations that affect companies conducting business within the cannabis
industry, many of which are still evolving and could be interpreted in ways that could harm our business. In the United States,
cannabis is currently classified as a Schedule I controlled substance under the CSA and is, therefore, illegal under federal law.
Even in those states in which the use of cannabis has been legalized pursuant to state laws, its use, possession or cultivation
remains a violation of federal law. A Schedule I controlled substance is defined as one that has no currently accepted medical
use in the United States, a lack of safety for use under medical supervision and a high potential for abuse. The U.S. Department
of Justice (the “DOJ”) defines Schedule I controlled substances as “the most dangerous drugs of all the drug
schedules with potentially severe psychological or physical dependence.”
Notwithstanding
the CSA, as of the date of this filing, 28 U.S. states, the District of Columbia and the U.S. territories of Guam and Puerto Rico
allow their residents to use medical cannabis. Voters in the states of Alaska, California, Colorado, Maine, Massachusetts, Nevada,
Oregon and Washington have approved ballot measures to legalize cannabis for adult recreational use. Such state and territorial
laws are in conflict with the federal CSA, which makes cannabis use and possession illegal at the federal level.
Such
conflict between federal laws and state laws regarding cannabis has created a complicated environment for cannabis businesses
in regards to restrictive banking regulations, interstate trade, IRS tax code and federal bankruptcy laws, especially for companies
that directly “touch the plant” such as growers and distributors. For example, since the possession or distribution
of cannabis violates federal law, banks that provide services may face the threat of prosecution or sanctions. As a result of
being denied banking services or direct access to conventional loans, many of the companies that grow or distribute cannabis directly
are forced to transact business on a cash-only basis.
The
banking issues created by the federal laws have required the cannabis industry to focus on viable alternatives and have created
opportunities for new providers, from finance companies to security and software firms. The issue of interstate trade requires
companies that grow or distribute cannabis to duplicate efforts within each state they wish to legally operate and has limited
the development of ‘national’ brands. If we are unable to raise capital or conduct operations as a result of various
laws and regulations, we may be unable to finance our activities which would have an adverse impact on our operations and financial
results.
Laws
and regulations affecting the cannabis industry are constantly changing, and this may affect our consumer base in ways that we
are unable to predict.
Local,
state and federal medical cannabis laws and regulations are broad in scope and subject to evolving interpretations. We cannot
predict the nature of any future laws, regulations, interpretations or applications that may affect us, nor can we determine what
effect additional governmental regulations or administrative policies and procedures, when and if promulgated, could have on the
vitality of the cannabis legalization movement or the unification or popularity of the community in favor of legalization, the
members of which community form our anticipated consumer base and underpin our business model.
Risks
Related to Our Common Stock
There
is not an active liquid trading market for the Company’s common stock.
The
Company’s common stock is quoted on the OTC Pink Market under the symbol “GSRX”. However, there has been minimal
reported trading to date in the Company’s common stock, and we cannot give an assurance that an active trading market will
develop. The Company has submitted an application for quotation of its common stock on the OTCQB Marketplace, however, there
can be no assurance that the application will be approved . As a result, investors may find it difficult to dispose of, or
to obtain accurate quotations of the price of, our securities. This severely limits the liquidity of the common stock, and may
adversely affect the market price of our common stock. A limited market may also impair our ability to raise capital by selling
shares of capital stock and may impair our ability to acquire other companies or assets by using common stock as consideration.
If
an active market for the Company’s common stock develops, there is a significant risk that the Company’s stock price
may fluctuate dramatically in the future in response to any of the following factors, some of which are beyond our control:
● variations
in our quarterly operating results;
● announcements
that our revenue or income are below analysts’ expectations;
● general
economic slowdowns;
● sales
of large blocks of the Company’s common stock; and
● announcements
by us or our competitors of significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments.
Our
common stock may be subject to the “penny stock” rules of the Securities and Exchange Commission, which may make it
more difficult for stockholders to sell our common stock.
The
SEC has adopted Rule 15g-9 which establishes the definition of a “penny stock,” for the purposes relevant to us, as
any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. For any transaction involving
a penny stock, unless exempt, the rules require that a broker or dealer approve a person’s account for transactions in penny
stocks, and the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity
and quantity of the penny stock to be purchased.
In
order to approve a person’s account for transactions in penny stocks, the broker or dealer must obtain financial information
and investment experience objectives of the person, and make a reasonable determination that the transactions in penny stocks
are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating
the risks of transactions in penny stocks.
The
broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating
to the penny stock market, which, in highlight form sets forth the basis on which the broker or dealer made the suitability determination,
and that the broker or dealer received a signed, written agreement from the investor prior to the transaction.
Generally,
brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make
it more difficult for investors to dispose of the Company’s common stock if and when such shares are eligible for sale and
may cause a decline in the market value of its stock.
Because
we became a public by means of a reverse acquisition, we may not be able to attract the attention of brokerage firms.
Because
we became public through a “reverse acquisition”, securities analysts of brokerage firms may not provide coverage
of us since there is little incentive to brokerage firms to recommend the purchase of our common stock. No assurance can be given
that brokerage firms will want to conduct any secondary offerings on behalf of the Company in the future.
Applicable
regulatory requirements, including those contained in and issued under the Sarbanes-Oxley Act of 2002, may make it difficult for
the Company to retain or attract qualified officers and directors, which could adversely affect the management of its business
and its ability to obtain or retain listing of its common stock.
We
may be unable to attract and retain those qualified officers, directors and members of board committees required to provide for
effective management because of the rules and regulations that govern publicly held companies, including, but not limited to,
certifications by principal executive officers. The enactment of the Sarbanes-Oxley Act has resulted in the issuance of a series
of related rules and regulations and the strengthening of existing rules and regulations by the SEC, as well as the adoption of
new and more stringent rules by the stock exchanges. The perceived increased personal risk associated with these changes may deter
qualified individuals from accepting roles as directors and executive officers.
Further,
some of these changes heighten the requirements for board or committee membership, particularly with respect to an individual’s
independence from the corporation and level of experience in finance and accounting matters. We may have difficulty attracting
and retaining directors with the requisite qualifications. If we are unable to attract and retain qualified officers and directors,
the management of its business and its ability to obtain or retain listing of our shares of common stock on any stock exchange
(assuming we elect to seek and are successful in obtaining such listing) could be adversely affected.
Voting
power is highly concentrated in one stockholder .
Peach
Management LLC currently beneficially owns approximately 59% of our outstanding common stock, as well as one thousand (1,000)
shares of Series A Preferred Stock which entitles it to 51% of the voting power. In addition, pursuant to the Certificate of Designation
for of the Series A Preferred Stock, the Company is prohibited from designating any other class or series of preferred stock without
first obtaining prior approval from the holder of the Series A Preferred Stock. Such concentrated control of the Company may adversely
affect the price of our common stock. A stockholder that acquires common stock will not have an effective voice in the
management of the Company.
We
do not intend to pay dividends for the foreseeable future.
We
have paid no dividends on our common stock to date and we do not anticipate paying any cash dividends to holders of our common
stock in the foreseeable future. While our future dividend policy will be based on the operating results and capital needs of
the business, we currently anticipate that we will retain any earnings to finance our future expansion and for the implementation
of our business plan. A lack of a dividend can further affect the market value of our stock, and could significantly affect the
value of any investment in our Company.
Our
stockholders may experience significant dilution.
We
have a significant number of warrants to purchase our common stock outstanding, the exercise of which would be dilutive to stockholders.
In certain instances, the exercise prices are subject to adjustment if we issue or sell shares of our common stock or equity-based
instruments at a price per share less than the exercise price then in effect. In such case, both the issuance and the adjustment
would be dilutive to stockholders.
We
may from time to time finance our future operations or acquisitions through the issuance of equity securities, which securities
may also have rights and preferences senior to the rights and preferences of our common stock. We may also grant options to purchase
shares of our common stock to our directors, employees and consultants, the exercise of which would also result in dilution to
our stockholders.
Our
articles of incorporation allow for our board to create new series of preferred stock without further approval by our stockholders,
which could adversely affect the rights of the holders of our common stock.
Our
Board of Directors has the authority to fix and determine the relative rights and preferences of preferred stock. Our Board of
Directors has the authority to issue, upon obtaining prior consent from the holder of Series A Preferred Stock, up to 9,999,000
shares of our preferred stock without further stockholder approval. As a result, our Board of Directors could authorize the issuance
of a series of preferred stock that would grant to holders the preferred right to our assets upon liquidation, the right to receive
dividend payments before dividends are distributed to the holders of common stock and the right to the redemption of the shares,
together with a premium, prior to the redemption of our common stock. In addition, our board of directors could authorize the
issuance of a series of preferred stock that has greater voting power than our common stock or that is convertible into our common
stock, which could decrease the relative voting power of our common stock or result in dilution to our existing stockholders.
Although we have no present intention to issue any additional shares of preferred stock or to create any additional series of
preferred stock, we may issue such shares in the future.
As
an issuer of “penny stock”, the protection provided by the federal securities laws relating to forward looking statements
does not apply to us.
Although
federal securities laws provide a safe harbor for forward-looking statements made by a public company that files reports under
the federal securities laws, this safe harbor is not available to issuers of penny stocks. As a result, we will not have the benefit
of this safe harbor protection in the event of any legal action based upon a claim that the material provided by us contained
a material misstatement of fact or was misleading in any material respect because of our failure to include any statements necessary
to make the statements not misleading. Such an action could hurt our financial condition.
USE
OF PROCEEDS
We
will not receive any proceeds from the sale of shares of our common stock by the selling stockholders pursuant to this prospectus.
We
will pay for the expenses of this offering, except that the selling stockholders will pay any broker discounts or commissions
or equivalent expenses and expenses of selling stockholder legal counsel applicable to any sale of the shares.
MARKET
FOR OUR COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Our
Common Stock trades on the OTC Pink Tier of the OTC Markets, Inc. under the symbol “GSRX”. The following table sets
forth the high and low sale prices for our Common Stock for each quarterly period within the two most recent fiscal years. There
has been minimal reported trading to date in the Company’s common stock.
The
following table sets forth the high and low closing bid prices for our Common Stock for the fiscal quarter indicated as reported
on the OTC. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent
actual transactions.
Quarter
ended
|
|
High
|
|
|
Low
|
|
June 30,
2017
|
|
$
|
16.05
|
|
|
$
|
0.96
|
|
March 31, 2017
|
|
|
0.96
|
|
|
|
0.75
|
|
December 31, 2016
|
|
|
0.96
|
|
|
|
0.50
|
|
September 30, 2016
|
|
|
0.96
|
|
|
|
0.96
|
|
June 30, 2016
|
|
|
1.00
|
|
|
|
0.96
|
|
March 31, 2016
|
|
|
1.00
|
|
|
|
1.00
|
|
December 31, 2015
|
|
|
1.00
|
|
|
|
1.00
|
|
September 30, 2015
|
|
|
1.00
|
|
|
|
1.00
|
|
June 30, 2015
|
|
|
1.00
|
|
|
|
1.00
|
|
March 31, 2015
|
|
|
1.00
|
|
|
|
1.00
|
|
As
of August 14, 2017, there were 30,000,005 shares of our Common Stock issued and outstanding. There were 18 stockholders
of record hold our Common Stock at this time.
DIVIDEND
POLICY
We
have not declared nor paid any cash dividend on our common stock, and we currently intend to retain future earnings, if any, to
finance the expansion of our business, and we do not expect to pay any cash dividends in the foreseeable future. The decision
whether to pay cash dividends on our common stock will be made by our board of directors, in their discretion, and will depend
on our financial condition, results of operations, capital requirements and other factors that our board of directors considers
significant.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
This
Management’s Discussion and Analysis or Plan of Operations includes a number of forward-looking statements that reflect
Management’s current views with respect to future events and financial performance. You can identify these statements by
forward-looking words such as “may,” “will,” “expect,” “anticipate,” “believe,”
“estimate” and “continue,” or similar words. Those statements include statements regarding the intent,
belief or current expectations of us and members of our management team as well as the assumptions on which such statements are
based. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and
involve risk and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking
statements.
Readers
are urged to carefully review and consider the various disclosures made by us in this report and in our other reports filed with
the Securities and Exchange Commission. Important factors currently known to management could cause actual results to differ materially
from those in forward-looking statements. We undertake no obligation to update or revise forward-looking statements to reflect
changed assumptions, the occurrence of unanticipated events or changes in the future operating results over time. We believe that
our assumptions are based upon reasonable data derived from and known about our business and operations. No assurances are made
that actual results of operations or the results of our future activities will not differ materially from our assumptions. Factors
that could cause differences include, but are not limited to, expected market demand for our products, fluctuations in pricing
for our products, and competition.
The
following discussion provides information that management believes is relevant to an assessment and understanding of our past
financial condition and plan of operations. The discussion below should be read in conjunction with the financial statements and
notes thereto for Green Spirit Industries Inc. (formerly known as Cyberspace Vita, Inc. ) , Project 1493, LLC, and
the pro forma financial statements and related notes, contained elsewhere in this Registration Statement.
In
this registration statement, references to the “Company,” “Green Spirit,” “Cyberspace Vita,”
“we,” “us” and “our” refer to Green Spirit Industries Inc., a Nevada corporation, and our
wholly-owned subsidiary, Project 1493, LLC, a limited liability company organized under the laws of the Commonwealth of Puerto
Rico (“1493”).
Green
Spirit Industries Inc. was incorporated in Nevada under the name
“Cyberspace Vita, Inc.” on November 7, 2006. The Company’s original business plan was to create and conduct
an online business for the sale of vitamins and supplements; however, Cyberspace never generated any meaningful revenues. On May
5, 2008, Cyberspace discontinued its prior business and changed its business plan.
Following
discontinuation of its initial business plan, the Company’s
business plan was to seek, investigate, and, if warranted, acquire one or more properties or businesses, and to pursue other related
activities intended to enhance stockholder value. The acquisition of a business opportunity may be made by purchase, merger,
exchange of stock, or otherwise, and may encompass assets or a business entity, such as a corporation, joint venture, or partnership.
On
May 11, 2017, the Company entered into an Exchange Agreement with Project 1493, and the sole member of 1493, pursuant to which
the member transferred all of the outstanding membership interests of 1493 to the Company in exchange for 16,690,912 of its restricted
shares of common stock and warrants to purchase up to 3,000,000 shares of common stock at an exercise price of $0.50 per share.
As
a result of the Exchange Agreement, 1493 became a wholly-owned subsidiary of the Company, and the business of 1493 became
the business of the Company. The Company, together with its wholly-owned subsidiary, is in the business of acquiring, developing
and operating medical cannabis dispensaries in Puerto Rico.
On
May 12, 2017, the Company changed its name from “Cyberspace Vita, Inc.” to “Green Spirit Industries Inc.”
RESULTS
OF OPERATIONS
Three
Months Ended June 30 , 2017 Compared to June 30 , 2016
The
following table summarizes the results of our operations during the three months ended June 30 , 2017 and 2016, respectively,
and provides information regarding the dollar and percentage increase or (decrease) from the current 3-month period to the prior
3-month period:
Line
Item
|
|
6/30/2017
(unaudited)
|
|
|
6/30/2016
(unaudited)
|
|
|
Increase
(Decrease)
|
|
|
Percentage
Increase
(Decrease)
|
|
Revenues
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Operating expenses
|
|
|
3,297,215
|
|
|
|
|
|
|
|
3,297,215
|
|
|
|
|
%
|
Net loss
|
|
|
(3,297,215
|
)
|
|
|
|
|
|
|
(3,297,215
|
)
|
|
|
|
%
|
Loss per share of common stock
|
|
$
|
(0.20
|
)
|
|
$
|
|
|
|
$
|
(.20
|
)
|
|
|
-
|
|
We
recorded a net loss of $3,297,215 for the three months ended June 30 , 2017.
LIQUIDITY
AND CAPITAL RESOURCES
We
have financed our operations during the quarter from the proceeds of an offering of our common stock and warrants conducted
by the Company, thru which we received net proceeds of $3,300,000.
We
had $2,968,288 cash on hand as of June 30 , 2017 compared to $0 as of June 30 , 2016. We will continue to need
additional cash during the following twelve months and these needs will coincide with the cash demands resulting from implementing
our business plan and remaining current with our Securities and Exchange Commission filings. There is no assurance that we will
be able to obtain additional capital as required, or obtain the capital on acceptable terms and conditions.
Off-Balance
Sheet Arrangements
We
do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital
resources that is material to investors.
Results
of Operations
Twelve
Months Ended December 31, 2016 Compared to December 31, 2015
The
following table summarizes the results of Cyberspace’s operations during the fiscal years ended December 31, 2016 and 2015,
respectively, and provides information regarding the dollar and percentage increase or (decrease) from the current 12-month period
to the prior 12-month period:
Line
Item
|
|
12/31/16
(audited)
|
|
|
12/31/15
(audited)
|
|
|
Increase
(Decrease)
|
|
|
Percentage
Increase (Decrease)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
0.0
|
%
|
Operating expenses
|
|
|
60,482
|
|
|
|
59,319
|
|
|
|
1,163
|
|
|
|
1.9
|
%
|
Interest expense
|
|
|
27,556
|
|
|
|
23,858
|
|
|
|
3,698
|
|
|
|
15.5
|
%
|
Net loss
|
|
|
(88,038
|
)
|
|
|
(83,177
|
)
|
|
|
4,861
|
|
|
|
5.8
|
%
|
Loss per share of common stock
|
|
|
(0.36
|
)
|
|
|
(0.34
|
)
|
|
|
0.02
|
|
|
|
5.9
|
%
|
Cyberspace
incurred a net loss of $88,038 for the fiscal year ended December 31, 2016 as compared with a net loss of $83,177 for the fiscal
year ended December 31, 2015. The loss is primarily due to professional fees related to the cost of compliance with filing requirements.
The increase in interest expense resulted from additional advances to Cyberspace from Fountainhead Capital Management Limited.
Cyberspace also paid Fountainhead Capital Management Limited an annual management fee of $40,000.
Liquidity
and Capital Resources
As
of December 31, 2016, Cyberspace had no assets, a working capital deficit of $622,023 and an accumulated deficit of $666,301 through
December 31, 2016. Its operating activities used $62,242 in cash for the fiscal year ended December 31, 2016, while its operating
activities for the fiscal year ended December 31, 2015 used $56,464 in cash. Cyberspace earned no revenue during the fiscal year
ended December 31, 2016 or 2015.
At
December 31, 2016, Cyberspace had loans and notes outstanding from a stockholder in the aggregate amount of $480,636 plus
accrued interest, which represents amounts loaned to Cyberspace to pay for its expenses of operation. On December 31, 2016, the
payee under the Note and Cyberspace agreed that the due date of the Note would be extended to December 31, 2016.
Off
Balance Sheet Arrangements
Cyberspace
did not have any off balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of operations, liquidity or capital expenditures or capital
resources that are material to an investor in our securities.
Seasonality
Cyberspace’s
operating results were not affected by seasonality.
Inflation
Cyberspace’s
business and operating results are not affected in any material way by inflation.
Critical
Accounting Policies
The
Securities and Exchange Commission issued Financial Reporting Release No. 60, “Cautionary Advice Regarding Disclosure About
Critical Accounting Policies” suggesting that companies provide additional disclosure and commentary on their most critical
accounting policies. In Financial Reporting Release No. 60, the Securities and Exchange Commission has defined the most critical
accounting policies as the ones that are most important to the portrayal of a company’s financial condition and operating
results, and require management to make its most difficult and subjective judgments, often as a result of the need to make estimates
of matters that are inherently uncertain. The nature of our business generally does not call for the preparation or use of estimates.
Due to the fact that the Company does not have any operating business, we do not believe that we have any such critical accounting
policies.
Recent
Developments
On
May 11, 2017, Cyberspace entered into an Exchange Agreement with Project 1493, LLC, a limited liability company organized under
the laws of the Commonwealth of Puerto Rico, and the sole member of 1493, pursuant to which the member transferred all of the
outstanding membership interests of 1493 to the Cyberspace in exchange for 16,690,912 of its restricted shares of common stock
and warrants to purchase up to 3,000,000 shares of common stock at an exercise price of $0.50 per share. As a result, 1493 became
a wholly-owned subsidiary of Cyberspace, and the member of 1493 acquired a controlling interest in the Cyberspace. For accounting
purposes, the Share Exchange was treated as an acquisition of Cyberspace and a recapitalization of 1493. As a result of the acquisition
of all the issued and outstanding membership interest of 1493, we have now assumed 1493’s business operations as our own.
On
May 12, 2017, the Board of Directors (the “
Board
”) of the Company approved a change in the name of the Company
to “Green Spirit Industries Inc.” (the “
Name Change
”). On the same day, the holder of a majority
of the Company’s issued and outstanding stock also approved the Name Change by written consent.
Limited
Operating History
There
is no historical financial information about us which to base an evaluation of our performance. As of the date of this filing,
we have not generated any revenues from our operations. We cannot guarantee we will be successful in our business operations.
Our business is subject to risks inherent in the establishment of a new business enterprise in a complicated regulatory environment.
The
following discussion and analysis should be read in conjunction with the audited financial statements for Cyberspace Vita, Inc.,
for the period ended December 31, 2016, and accompanying notes, in the Company’s Annual Report on Form 10-K filed with
the Securities and Exchange Commission (“
Commission
”) on March 28, 2017, as well as the audited financial statements
for 1493 for the period ending April 30, 2017, and accompanying notes thereto contained, in the Company’s Current Report
on Form 8-K filed with the Commission on May 16, 2017.
Plan
of Operations
We
have not yet generated or realized any revenues from our current business operations. Two dispensary locations are currently under
construction, and we anticipate applying for occupancy permits for those locations by the end of our third quarter of 2017. We
plan to begin construction at our other locations within the next three months. We expect that all four locations will be fully
operational during the fourth quarter of 2017, provided the Department of Health of Puerto Rico (the “
DHPR
”)
issues the requisite operating permits for both locations. However, there can be no assurance that all four dispensaries will
be fully operational at such time.
We
also entered into an agreement to lease property located in Isla Verde, Carolina, Puerto Rico, for the location of a fifth dispensary
for which we are in the process of seeking pre-qualification for a dispensary license from the DHPR. We plan to begin construction
at the Isla Verde location once we receive pre-qualification from the DHPR. However, there can be no assurance that we will be
successful in receiving pre-qualification for a dispensary license.
Over
the next 12 months, we plan to continue identifying, purchasing and operating medical cannabis dispensaries. We expect to operate
10 locations in the next 12 months and 15 locations by the end of 2018. It is anticipated that costs associated with constructing,
licensing, stocking inventory and operating these dispensaries will be approximately $1.2 million. Our current
fixed overhead, which includes our ongoing leasing obligations, is approximately $45,000 per month. We anticipate
that fixed overhead will increase at such time as the dispensaries begin operations. In addition, we expect that our
fixed costs will continue to increase so long as we are successful in our plan of expansion. We anticipate supporting our
operations through the proceeds from the offering previously conducted, from anticipated revenue once the dispensaries become
fully operational and, if necessary, through the sale of our securities in order to complete the development of our dispensaries.
However, there can be no assurance that we will be successful in raising sufficient revenues necessary to support our operations,
or that we will be successful in selling our securities.
Our
primary source of revenue is expected to be derived from selling medical cannabis and cannabis related products in the dispensaries.
In order to acquire a significant market share, we will have to advertise and market our products. We plan to advertise online
and use traditional advertising outlets. We have no specific budget set forth at this time for either form of advertising. In
order to maximize our product sales, we will require additional market research and testing to enable us to be efficient with
purchasing and inventory management to determine which products our customers will purchase.
BUSINESS
Overview
Green
Spirit Industries Inc., formerly known as Cyberspace Vita, Inc. (“
Cyberspace
”), was organized on November 7,
2006 in Nevada. Our
initial business plan was related to the
online sale of vitamins and supplements. Effective May 5, 2008, we discontinued these operations. Prior to the Exchange
Agreement described above, we did not have any significant assets or operations.
Project
1493, LLC, is a limited liability company organized under the laws of the Commonwealth of Puerto Rico. 1493 was organized on
March 24, 2011 under the name “Grey Finland Advisors, LLS.” 1493 filed a Certificate of Restoration on March 17, 2017
and elected to change its name to “Project 1493, LLC.” 1493’s business plan relates to the acquisition,
development and operation of medical cannabis dispensaries. 1493 intends to initially operate in Puerto Rico and may potentially
expand into other markets located within the U.S. and U.S. territories in the future. However, there can be no assurance that
we will expand into such other markets.
As
a result of the Exchange Agreement, 1493 became our wholly-owned subsidiary, and the business of 1493 became our business.
Our
Business
We
are a holding company that, through our wholly-owned subsidiary, 1493, is in the business of acquiring, developing and operating
medical cannabis dispensaries in Puerto Rico. As of the date of this prospectus, we have acquired all of the legal rights, permits,
licenses, leasing contracts and assets pertaining to four medical cannabis dispensaries in exchange for or aggregate of $375,000.
The four dispensaries are located in the following cities: (1) Fajardo, which is a hub for boating and fishing and a launching
port for islands Vieques, Culebra, the U.S. Virgin Islands and the British Virgin Islands; (2) Carolina, which is tourist center
near Puerto Rico’s international airport and home of top luxury hotels and casinos; (3) Dorado, which is deemed to be an
affluent residential area in Puerto Rico; and lastly (4) San Juan, the capital of Puerto Rico and among the largest cruise destination
ports. These four medical cannabis dispensaries will not be fully licensed until construction is completed, and the Department
of Health of Puerto Rico (“
DHPR
”) issues the requisite operating permit for each of the dispensaries.
We
also entered into an agreement to lease property located in Isla Verde, Carolina, Puerto Rico, for the location of a fifth dispensary
for which we are in the process of seeking pre-qualification for a dispensary license from the DHPR. However,
there can be no assurance that we will be successful in receiving pre-qualification for a dispensary license.
Of
the five dispensaries, two are currently under construction, and we anticipate that construction will be completed by the end
of our third quarter. We anticipate beginning construction on the remaining locations in the next three months, with the goal
of having the dispensaries located in Farjardo, Carolina, Dorado and San Juan fully operational during the fourth quarter,
provided the DHPR issues the requisite operating permits for each location. However, there can be no assurance that construction
of the dispensaries will be completed at such time, or that the DHPR will issue the requisite operating permits for each dispensary
at such time.
Over the next 12 months,
we plan to continue identifying, purchasing and operating medical cannabis dispensaries. We expect to operate 10 locations in
the next 12 months and 15 locations by the end of 2018. It is anticipated that costs associated with constructing, licensing,
stocking inventory and operating these dispensaries will be approximately $1.2 million. Our current fixed overhead, which includes
our ongoing leasing obligations, is approximately $45,000 per month. We anticipate that fixed overhead will increase at such time
as the dispensaries begin operations. In addition, we expect that our fixed costs will continue to increase so long as we are
successful in our plan of expansion. We anticipate supporting our operations through the proceeds from the offering previously
conducted, from anticipated revenue once the dispensaries become fully operational and, if necessary, through the sale of our
securities in order to complete the development of our dispensaries. However, there can be no assurance that we will be successful
in raising sufficient revenues necessary to support our operations, or that we will be successful in selling our securities.
We
anticipate
earning revenue by selling medical cannabis ,
edibles, pills, creams, patches and oral drops, and paraphernalia such as vaporizers. The average net profit for medical
marijuana dispensaries is 20% in the U.S., according to a study conducted by Marijuana Business Daily and the media annual revenue
is $1,200,000. We aim to undercut our competition by acquiring our goods at a lower than average cost which we anticipate will
allow us to achieve 30% net margins, 50% higher than the industry average.
The
Dispensaries
We
acquired all of the legal rights, permits, licenses, leasing contracts and assets to four medical marijuana
dispensaries located in cities in Puerto Rico , which were chosen due to their strategic location relevant to important
factors such as population density, disposable income, and proximity to key commercial and district tourist destinations:
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(1)
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Carolina
:
The municipality of Carolina is home to Luis Munos Marin Airport, Puerto Rico’s main airport. With a population density
of 177,000, Carolina is a center of manufacturing and commerce. The township has one of the island’s largest shopping
areas, Plaza Carolina. Carolina also has a high concentration of young professionals, whom industry trends suggest is a growing
user class of medical marijuana. Carolina is also strategically located between San Juan and the east coast of the island.
The east coast is home to many of the island’s most spectacular beaches, and a heavy tourist area.
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(2)
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Fajardo
:
Fajardo is located in the Northeast coast of the island. It is known for its luxury hotels such as the Waldorf Astoria and
the Puerto Del Rey Marina. While its population is only 36,000 it is the watersports capital of the island as well as the
primary access point to the Keys of Puerto Rico and the British and U.S. Virgin Islands and thus is a popular tourist spot
and a favorite vacation and recreational area for Puerto Rican citizens.
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(3)
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Dorado
:
Dorado, situated 15 miles west of San Juan, is a township located on the north shore of Puerto Rico and the wealthiest community
on the island with a population of approximately 38,165 people. The municipality’s demographic consists of upper-income
and retired residents as well as upper-income tourists. It is also the home to several resort hotels such as Embassy Suites,
Sheraton and the Reserve at Ritz Carlton.
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(4)
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San
Juan
: the capital of Puerto Rico, is the cultural and historic center of Puerto Rico with the island’s largest
population center of 395,326. Well known for the port at Old San Juan, and cruise ships that bring thousands of tourists daily
to the island. The hotels, beaches and points of interest in the area attract millions of visitors each year. Our goal in
San Juan is to create a flagship store to capitalize on the tourism in this area and build a large local following of patients.
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As
previously stated, the four medical cannabis dispensaries will not be fully licensed until construction of the dispensaries is
completed, and the Department of Health of Puerto Rico issues the requisite operating permit for each of the dispensaries.
In
addition, have also entered into an agreement to lease property located in Isla Verde, Carolina, Puerto Rico, for the location
of a fifth medical marijuana for which we are in the process of seeking pre-qualification for a dispensary license
from the Department of Health of Puerto Rico.
Business
Model
We
plan to operate as a service business specializing in the sale of medical cannabis , edibles and paraphernalia, including,
oils, lotions, THC pills, vaporizers, rigs, grinders, t-shirts, hats, logo items, and bongs and pipes with vaporizer attachments
through our strategically located dispensaries in Puerto Rico.
We
have entered into a long-term supply agreement (the “
Supply Agreement
”)
to purchase our products from one of the largest growers on the island, who operates a state-of-the art facility
and currently has over 36 strands available and is able to produce up to 2,000 pounds a week. Pursuant to the terms of the
Supply Agreement, the supplier agrees to sell products to us, upon the issuance by the Department of Health of Puerto Rico of
the requisite operating permit for each of the dispensaries, at a 20% discount to current wholesale market prices. We anticipate
that based on such prices, we will realize gross margins of approximately 75%. However, there can be no assurance that we will
realize such margins.
We
intend to sell and keep inventory of the top 5 selling brands, which will be determined by sales velocity. We intend to use a
state-of-art CRM to track our customers, their buying habits and monthly spend. Customer Segments will be categorized by age,
occupation and medical condition.
In
addition, we will focus on providing the best and most friendly customer service, and provide the highest quality brands and widest
variety possible in order to attract repeat business. We expect to realize, although no assurance can be given, approximately
30% net margins on edibles, with 50% net margins on edibles and paraphernalia.
Revenue
Streams:
We
anticipate that revenues will be generated from the following:
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Medical
Cannabis, up to 10 strains in each dispensary.
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Derivatives
(oils, lotions, edibles, THC pills)
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Paraphernalia
(vaporizers, grinders, rigs, bongs and pipes with vaporizer attachments)
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Clothing
(hats, t-shirts, logos)
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Cost
Structure:
We
intend to price our product at below market rates, however we intend to market certain items as “boutique” items,
such as gourmet style edibles or exotic strains and clothing and paraphernalia.
Marketing
Our
marketing and sales strategy will be aimed at generating long-term, repeat customers, as well as attracting tourists who visit
the island who wish to purchase medical marijuana. In order to generate repeat customers, we intend to provide the highest quality
medical marijuana, at the lowest possible cost to insure we build a loyal customer base. Further, we intend to train all of our
employees to provide excellent customer service.
At
this time Puerto Rico only allows digital advertising for medical cannabis . Thus, we intend to leverage the Internet and
social media platforms, including, Instagram, Facebook, Twitter, YouTube, Google+, LinkedIn, the Yellow Pages online, YELP and
over 50 marijuana websites we have identified. Our marketing will focus on the wide variety of our cannabis products and their
high quality and low cost point relative to our competition.
We
also intend to utilize blogs, micro-ads, testimonial interviews, articles and deploy this media across all social media channels
and websites accessed by our customer targets.
The
Cannabis Industry—Market Opportunity
The
legal cannabis markets in the United States are expanding rapidly. There are now twenty-eight states and Washington, D.C., with
medical cannabis programs and eight of these states (Alaska, California, Colorado, Maine, Massachusetts, Nevada, Oregon and Washington),
plus Washington, D.C. have also legalized cannabis for recreational use.
We
believe the market will continue to rapidly expand as existing states broaden the definition of the approved uses for cannabis
(i.e. from medicinal to recreational use) and additional states legalize cannabis for at least some other purposes. Despite the
fact that the Federal Controlled Substances Act makes the use and possession of marijuana illegal on a national level, recent
guidance from the federal government suggests that it will continue to tolerate legalization at the state level, especially when
backed by strong and effective regulation. We believe it is significant that in 2016, the Congressional Spending Bill specifically
prevented the Justice Department from spending money to enforce the federal ban on growing or selling cannabis in states where
cannabis has been approved.
The
Company believes that not since the repeal of Prohibition in 1933, has a consumer product business opportunity of this magnitude
been created simply by changes in the law. According to an
IBISWorld
report, the cannabis industry is expected to achieve
rapid growth over the next five years. We believe the industry will continue to benefit from increasingly favorable attitudes
towards medical cannabis-based treatments and applications as acceptance and legitimacy of cannabis continues to grow.
Our
target markets are those where states or U.S. territories have legalized the production and use of cannabis, such as Puerto Rico
and, eventually, Colorado. According to published reports, Colorado’s cannabis industry reported estimated wholesale and
retail sales during calendar years 2016 and 2015 of $1,313 million and $996 million, respectively.
Most
recently, voters in California, Nevada, Maine and Massachusetts approved ballot measures to legalize cannabis for adult recreational
use, bringing the total number of states with legalized recreational cannabis use to eight, in addition to the District of Columbia.
As
of December 31, 2016, 28 U.S. states, the District of Columbia and the territories of Guam and Puerto Rico have legalized the
use of cannabis for medical use in some form, including five states in 2016 alone. While it is difficult to estimate the amount
of time it would take for a state to establish regulations relating to the sale of cannabis, or for those businesses engaged in
this activity to begin generating revenue from operations, we anticipate, but no assurance can be given, that for new states legalizing
the medical use of cannabis, revenues will begin to be realized in 2018 and 2019.
Continued
development of the regulated cannabis industry depends on continued legislative authorization at the state level. Progress, while
encouraging, is not assured and any number of factors could slow or halt progress in the cannabis industry.
Puerto
Rico – a Unique Market Opportunity
Puerto
Rico benefits from a large and growing tourism industry. According to an article published by Travel Pulse in March 2016 and by
PRT Newswire dated December 2016, Puerto Rico’s tourism doubled from 5 million visitors in 2015 to 10 million in 2016. Importantly,
patients who hold a license to buy medical marijuana in the 28 states where it is now legal may use their patient license to purchase
marijuana at Puerto Rico’s dispensaries.
The
Academic Sciences of Puerto Rico (ASPR), in collaboration with the Cannabis Doctors of Puerto Rico, conducted a certification
program for doctors to obtain the Health Department (HD) license and recommended medicinal cannabis to nearly 200,000 patients.
Based on such, and considering that Puerto Rico is an island with a population of 3.5 million, there is a potential market of
200,000 patients, or 6% of Puerto Rico’s current population. In addition, there is a potentially very large market opportunity
presented by the burgeoning tourist industry. If only 2% of the tourist visiting Puerto Rico purchase medical marijuana, that
would add another 200,000 patients on an annual basis or an average of approximately 18,000 patients per month.
We
believe our initial locations present significant revenue potential and growth opportunity. We have strategically picked our initial
locations based on the following factors: population density, disposable income, and proximity to commercial and districts tourist
destinations.
Medical
Cannabis Market
The
last five years have seen a dramatic shift in public opinion on medical marijuana, which is reflected in the direction of individual
states toward legalization. A
Quinnipiac Poll
published by Politico on June 6, 2016 showed 89% of registered voters in
the United States favor the use of medically prescribed cannabis. Twenty-eight states and Washington, D.C., have enacted medical
cannabis laws, and there are approximately 1.2 million registered patients within these states. The five states with the largest
known current medical marijuana patient populations are: California, Colorado, Michigan, Oregon and Washington.
Cannabis
is used for medicinal purposes and has proven to be an effective treatment for pain relief, inflammation and a number of other
medical disorders. According to an
IBISWorld
report, new medical research and changing public opinion have boosted industry
growth.
Doctors
may prescribe ‘legalized’ medical cannabis in approved states where patients can receive a “recommendation”
from a state-approved, licensed physician for the treatment of certain conditions specified by the state.
Medical
cannabis is being used to treat severe or chronic pain, inflammation, nausea and vomiting, neurologic symptoms (including muscle
spasticity), glaucoma, cancer, multiple sclerosis, post-traumatic stress disorder, anorexia, arthritis, Alzheimer’s, Crohn’s
disease, fibromyalgia, ADD, ADHD, Tourette’s syndrome, spinal cord injury and numerous other conditions. Cannabis oil has
also been proven effective in treating epileptic seizures in children.
Recreational
Cannabis Market
Eight
states have legalized recreational cannabis – Alaska, California, Colorado, Maine, Massachusetts, Nevada, Oregon, Washington,
plus Washington, D.C. In November 2012, Colorado voters legalized recreational marijuana use. This history-changing legislation
created a window of opportunity for the commercialization and state taxation of a plant group that has, until recently, been virtually
untouchable and has set the wheels in motion for other states to follow. In July of 2014, Washington State launched its recreational
program, while Oregon and Alaska and the District of Columbia voted to introduce recreational programs commencing in 2015. In
November 2016, California, Maine, Massachusetts, and Nevada all passed ballot initiatives for the legalization of recreational
cannabis. A Gallup Poll survey from October 2016 showed that 60% of Americans are in favor of legalizing cannabis.
Competition
We
face significant competition in all aspects of our business. Specifically, we face competition from a number of companies that
operate dispensaries in the legal cannabis market within the United States and U.S. territories.
While
such competition exists within the industry as a whole, there is limited competition in Puerto Rico. Currently, there are seven
dispensaries with approved licenses in Puerto Rico, and one of the seven is currently closed for lack of proper permits. There
are 170 pre-qualified dispensary licenses, but it is expected that only 70-80 of those pre-qualified dispensary licenses will
meet all the government criteria and will have the necessary funding to operate.
We
also anticipate additional competition from the unauthorized sale and purchase of cannabis through the “black market”
in Puerto Rico, which is estimated by the government at $200 million annually. While we deem the “black market” to
be a major competitor, we believe, although no assurance can be given, that we can transition those consumers by offering a greater
variety of product at competitive prices.
Competitive
Strengths
Consumers
generally choose their dispensary based on several factors, including proximity to where they live and work, price, quality, variety
and the overall service experience. We believe that our advantage stems from our relationships with our supplier. Our supplier,
who operates a state-of-the art facility, has over 36 strands available and can produce up to 2,000 pounds a week. Our supplier,
the largest in Puerto Rico in total production capacity, has agreed to sell products to us at reduced prices which we believe
will allow us to achieve 75% gross margins, all while maintaining a major price advantage over competitors.
We
also believe we possess certain other competitive strengths and advantages in the industries in which we intend to operate:
Range
of Services
. We intend to leverage our breadth of services and resources to deliver comprehensive, integrated solutions
to companies in the cannabis industry—from operational, compliance and marketing consulting to products, security and financing
services.
Strategic
Alliances
. We are dedicated to growing our business through strategic acquisitions, partnerships and agreements that
will enable us to enter and expand into new markets. Our strategy is to pursue alliances with potential targets that have the
ability to generate positive cash flow, effectively meet customer needs and supply desirable products, services or technologies,
among other considerations. We anticipate that strategic alliances will play a significant role as more states pass legislation
permitting the cultivation and sale of hemp and cannabis.
Regulatory
Compliance
. The state laws regulating the cannabis industry are changing at a rapid pace. Currently, there are 28 U.S. states,
the District of Columbia and the territories of Guam and Puerto Rico that have created a legislative body to manage the medical
cannabis industry. Eight of those states also allow recreational use. We intend to take such steps necessary to ensure
that all aspects of our operations are in compliance with all laws, policies, guidance and regulations to which we are subject
and providing an opportunity to our customers and allies to use our services in order to ensure that they, too, are in full compliance
are both critical components of our business plan.
Industry
Knowledge
. We continue to create, share and leverage information and experiences with the purpose of creating awareness and
identifying opportunities to increase stockholder value. Our management team has business expertise, extensive knowledge
of the cannabis industry and closely monitors changes in legislation. We intend to work with partners who will enhance the breadth
of our industry knowledge.
Lending
Capabilities
. In February 2014, the Treasury Department issued guidelines for financial institutions dealing with cannabis-related
businesses. Nevertheless, many banks and traditional financial institutions refuse to provide financial services to cannabis-related
businesses. We plan to provide finance and leasing solutions to market participants using the FinCEN guidelines as a primary guide
for compliance with federal law.
Government
and Industry Regulation
Cannabis
is currently a Schedule I controlled substance under the CSA and is, therefore, illegal under federal law. Even in those states
in which the use of cannabis has been legalized pursuant to state law, its use, possession or cultivation remains a violation
of federal law. A Schedule I controlled substance is defined as one that has no currently accepted medical use in the United States,
a lack of safety for use under medical supervision and a high potential for abuse. The U.S. Department of Justice (the “
DOJ
”)
defines Schedule I controlled substances as “the most dangerous drugs of all the drug schedules with potentially severe
psychological or physical dependence.” If the federal government decides to enforce the CSA in Colorado with respect to
cannabis, persons that are charged with distributing, possessing with intent to distribute or growing cannabis could be subject
to fines and/or terms of imprisonment, the maximum being life imprisonment and a $50 million fine.
Notwithstanding
the CSA, as of the date of this filing, 28 U.S. states, the District of Columbia and the U.S. territories of Guam and Puerto Rico
allow their residents to use medical cannabis. Voters in the states of Alaska, California, Colorado, Maine, Massachusetts, Nevada,
Oregon and Washington have approved ballot measures to legalize cannabis for adult recreational use. Such state and territorial
laws are in conflict with the federal CSA, which makes cannabis use and possession illegal at the federal level.
In
light of such conflict between federal laws and state laws regarding cannabis, the previous administration under President Obama
had effectively stated that it was not an efficient use of resources to direct federal law enforcement agencies to prosecute those
lawfully abiding by state-designated laws allowing the use and distribution of medical cannabis. For example, the prior DOJ Deputy
Attorney General of the Obama administration, James M. Cole, issued a memorandum (the “
Cole Memo
”) to all United
States Attorneys providing updated guidance to federal prosecutors concerning cannabis enforcement under the CSA. The Cole Memo
ultimately emphasizes the need for robust state regulation of marijuana. The memorandum “rests on its expectation that state
and local governments that have enacted laws authorizing marijuana-related conduct will implement strong and effective regulatory
and enforcement systems that will address the threat those state laws could pose to public safety, public health, and other law
enforcement interests.” In addition, the Financial Crimes Enforcement Network (“
FinCEN
”) provided guidelines
(the “
FinCEN Guidelines
”) on February 14, 2014, regarding how financial institutions can provide services to
cannabis-related businesses consistent with their Bank Secrecy Act (“
BSA
”) obligations.
Additional
existing and pending legislation provides, or seeks to provide, protection to persons acting in violation of federal law but in
compliance with state laws regarding cannabis. The Rohrabacher-Farr Amendment to the Commerce, Justice, Science and Related Agencies
Appropriations Bill, which funds the DOJ, prohibits the DOJ from using funds to prevent states with medical cannabis laws from
implementing such laws. The Rohrabacher-Farr Amendment is effective through April 28, 2017, but as an amendment to an appropriations
bill, it must be renewed annually. The Compassionate Access Compassionate Access, Research Expansion, and Respect States Act (the
“
CARERS Act
”) has been introduced in the U.S. Senate, which proposes to reclassify cannabis under the CSA to
Schedule II, thereby changing the plant from a federally criminalized substance to one that has recognized medical uses. More
recently, the Respect State Marijuana Laws Act of 2017 has been introduced in the U.S. House of Representatives, which proposes
to exclude persons who produce, possess, distribute, dispense, administer or deliver marijuana in compliance with state laws from
the regulatory controls and administrative, civil and criminal penalties of the CSA.
However,
as of the date of this filing, neither the CARERS Act nor the Respect State Marijuana Laws Act of 2017 has been enacted, the Rohrabacher-Farr
Amendment has not yet been renewed beyond April 28, 2017, and the new administration under President Trump has not yet indicated
whether it will change the previously stated policy of low-priority enforcement of federal laws related to cannabis set forth
in the Cole Memo or the FinCEN Guidelines. The Trump administration could change this policy and decide to strongly enforce the
federal laws applicable to cannabis. Any such change in the federal government’s enforcement of current federal laws could
cause significant financial damage to us. While we do not currently harvest, distribute or sell cannabis, we may be irreparably
harmed by a change in enforcement policies of the federal government. However, once we commence operations, we could be deemed
to be aiding and abetting illegal activities, a violation of federal law.
Absent
any future changes in cannabis-related policies under the Trump administration, we intend to remain within the guidelines outlined
in the Cole Memo and the FinCEN Guidelines, where applicable; however, we cannot provide assurance that we are in full compliance
with the Cole Memo, the FinCEN Guidelines or any applicable federal laws or regulations.
Licensing
and Local Regulations
Where
applicable, we will apply for state licenses that are necessary to conduct our business in compliance with local laws. Local laws
at the city, county and municipal levels add a layer of complexity to legalized cannabis. Despite a state’s adoption of
legislation legalizing cannabis, cities, counties and municipalities within the state may have the ability to otherwise restrict
cannabis activities, including but not limited to cultivation, retail or consumption.
Zoning
sets forth the approved use of land in any given city, county or municipality. Zoning is set by local governments or local voter
referendum, and may otherwise be restricted by state laws. For example, under certain state laws a seller of liquor may not be
allowed to operate within 1,000 feet of a school. There may be similar restrictions imposed on cannabis operators, which will
restrict where cannabis operations may be located and the manner and size to which they can grow and operate. Zoning can be subject
to change or withdrawal, and properties can be re-zoned. The zoning of our properties will have a direct impact on our business
operations.
Regulatory
Environment
The
regulatory status of the cannabis industry is shifting rapidly at the state level, with momentum toward a change at the federal
level through pressure on the U.S. Congress and the White House. Current federal regulations classify cannabis as a Schedule 1
substance, defined as “drugs with no currently accepted medical use and a high potential for abuse.” This drug classification
also includes heroin, LSD and ecstasy.
The
legal cannabis industry has evolved considerably over the past 3-5 years. We believe the industry has reached the tipping point
for legalization through pressure from citizens’ groups in individual states for the legalization of medical and/or recreational
marijuana. As reported by Pew Research Center in April 2015, nearly half (49%) of Americans say they have tried marijuana, and
12% have tried it within the past year.
In
a national poll in October 2014 by Third Way, a public policy think tank, 78% of respondents favored allowing individuals to use
marijuana for medical purposes if “recommended” by a doctor. This trend is further illustrated in recent surveys of
public opinion for marijuana legalization rapidly outpacing opposition. A majority of Americans now favor broad legalization of
marijuana. Opinions have changed drastically since 1969, when Gallup first asked the question and found that just 12% favored
legalizing marijuana use compared to 89% as of June 6, 2016 showed 89%.
Millennials
(currently 18-34) have been in the forefront of this change: 68% favor legalizing marijuana use, by far the highest percentage
of any age group. But across all generations - except for the Silent Generation (ages 70- 87) – support for legalization
has risen sharply over the past decade. Third Way also found that 67% of respondents favor Congress passing a bill giving states
that have legalized marijuana a safe haven from federal marijuana laws, so long as they have a strong regulatory system, and when
given an option of state or federal control, 60% favor states’ control in deciding whether to legalize marijuana.
Public
support has given rise to the passage of new marijuana laws and regulations in a number of states, as well as multiple legal reforms
on legislative dockets. Each state’s legal environment is unique, making it critical for businesses to know and understand
the regulatory landscape on a state-by-state basis.
Another
regulatory variable adding to the complexity of the legal cannabis market are the local laws at the municipality and county levels.
Even when a state enacts legislation legalizing cannabis, each level of local government has the right to exercise restrictions
on cannabis activities, such as retail, consumption, transportation and cultivation. Zoning is an area of particular concern,
which is set forth at the local level. This can restrict where businesses can be located and the manner and size in which they
operate. Understanding individual state’s laws and local regulations requires business operators and investors to account
for multiple levels of regulatory compliance, such as how marijuana may be sourced, processed, distributed, and to whom, where
and how it may be sold.
State
Legal Status
While
new state-level legalization efforts continue to expand the number of states involved in the cannabis industry, only a handful
of existing states have any meaningful full-scale operations for the cultivation and distribution of cannabis. This presents a
significant growth opportunity for investment over the next several years as the existing legalized states and new states’
markets come online.
|
●
|
Medical
Cannabis Legalization - 28 states have legalized medical marijuana, plus Washington, D.C. and the U.S. territories of Guam
and Puerto Rico
|
|
●
|
Recreational
Cannabis Legalization - 8 states (AK, CA, CO, ME, MA, NV, OR, WA, plus Washington, D.C.) have passed laws that allow for adult
recreational use of marijuana
|
Federal
Legal Status
Cannabis
is still classified as an illegal substance in the U.S. The Drug Enforcement Agency (“
DEA
”) and the Food and
Drug Administration (“
FDA
”) currently classify cannabis as a Schedule 1 drug under the Controlled Substances
Act. The classification makes cannabis illegal under federal law to cultivate, manufacture, distribute or possess cannabis, and
has created a discrepancy between state’s rights and federal law.
This
discrepancy has created a complicated environment for cannabis businesses in regards to restrictive banking regulations, interstate
trade, IRS tax code and federal bankruptcy laws, especially for companies that directly “touch the plant” such as
growers and distributors. For example, FinCEN provided guidance regarding how financial institutions can provide services to cannabis-related
businesses consistent with their BSA obligations. While we believe we do not qualify as a financial institution in the United
States, we cannot be certain that we do not fall under the scope of the FinCEN guidelines. We plan to use the FinCEN Guidelines,
as may be amended, as a basis for assessing our relationships with potential tenants, clients and customers. As such, as we engage
in financing activities, we intend to adhere to the guidance of FinCEN in conducting and monitoring our financial transactions.
Because this area of the law is uncertain but expected to evolve rapidly, we believe that FinCEN’s guidelines will help
us best operate in a prudent, reasonable and acceptable manner. There is no assurance, however, that our activities will not violate
some aspect of the CSA. If we are found to violate the federal statute or any other in connection with our activities, our company
could face serious criminal and civil sanctions.
Additionally,
because the possession or distribution of cannabis violates federal law, banks that provide services may face the threat of prosecution
or sanctions and thus we may have difficulty acquiring or maintaining bank accounts and insurance, and our stockholders may find
it difficult to deposit their stock with brokerage firms.
The
banking issues created by the federal laws have required the cannabis industry to focus on viable alternatives and have created
opportunities for new providers, from finance companies to security and software firms. The issue of interstate trade requires
companies that grow or distribute cannabis to duplicate efforts within each state they wish to legally operate and has limited
the development of ‘national’ brands. These laws do not directly affect companies operating in ancillary businesses.
In
February 2014, the White House and the Department of the Treasury gave a roadmap for conducting transactions with cannabis companies
operating within state regulations. The most sweeping federal reforms to date, however, have come from Congress in the federal
spending bill that passed both Houses in June 2015 and continued in June 2016. Congress voted to protect state medical marijuana
and hemp laws from federal interference and cut the DEA’s budget. As an example of increased support for the removal of
federal laws banning medical marijuana, the medical marijuana-protecting amendment passed the House 219-189 and became law last
year and was accepted by a larger 242-186 majority this year, with even more Republican members’ support.
The
Senate also introduced The Compassionate Access, Research Expansion and Respect States (CARERS) Act in March 2015, co-sponsored
by Senator Rand Paul (R-Ky.) and now by 19 total U.S. Senators, which seeks to drastically reduce the federal government’s
ability to crack down on state-legal medical marijuana programs, open the banking system, reclassify cannabis’ Schedule
1 drug rating and encourage more research through several major changes in federal law. This legislation currently is waiting
for the Senate Judiciary Chair to grant the bill a hearing.
Ancillary
Cannabis-Related Businesses
As
more states enact cannabis legislation, the demand for cannabis-related products and services grows. The rapid expansion of the
cannabis market combined with more sophisticated management teams and business models entering the market has spurred the development
of numerous cannabis-related niche markets. These ancillary markets that do not physically “touch the plant” include
infrastructure and support for the cannabis industry in such areas as social media, security, consulting, delivery systems, financial
services, software & high-tech, electronic hardware, infused products, extracts & oils, hemp production, ancillary cultivation
solutions, and retail.
As
mentioned, the federal government still classifies cannabis as a Schedule 1 substance, which leaves many traditional businesses
fearing reputational and legal risks of serving the cannabis industry. However, ancillary businesses that do cater to the legal
cannabis industry are well positioned to benefit from the growth in the industry.
Employees
As
of June 19, 2017, we have 2 full time employees and no part time employees. None of our employees are covered by a collective
bargaining agreement. We consider our relationship with our employees to be good.
Property
We
have acquired all of the legal rights, permits, licenses, leasing contracts and assets of four medical marijuana dispensaries.
The dispensaries will not be fully licensed until construction is completed and the Department of Health of Puerto Rico issues
the requisite operating permit for each of the dispensaries. We also entered into an agreement to lease property in Isla Verde
for the location of a fifth dispensary for which we are in the process of seeking pre-qualification for a dispensary
license.
Property
Name
|
|
Location
|
|
Description
|
Fajardo
|
|
Bo.
Quebrada de Fajardo, Carr. #3 Km. 44.9, Fajardo, P.R. 00648
|
|
●
2,774 square feet
|
Carolina
|
|
65th
Infantry Avenue, Km. 11.0, marginal 3, Lomas de Carolina, Carolina, P.R. 00987
|
|
●
2,500 square feet
|
Dorado
|
|
Paseo
del Plata Shopping Center, Building No. 3, P.R. 696, int. José Efrón Avenue, Dorado, P.R., 00646
|
|
●
1,900 square feet
|
San
Juan
|
|
Calle
Andalucía 509, San Juan, Puerto Rico
|
|
●
1,500 square feet
|
Isla Verde
|
|
PR-37, Km
0.2, Isla Verde sector, Carolina, Puerto Rico
|
|
● 1,800
square feet
|
MANAGEMENT
In
connection with the change in control of the Company on May 11, 2017, Alexander Diener, our previous Chief Executive Officer,
Chief Financial Officer, Treasurer, Secretary and sole director resigned from all of his positions with the Company effective
May 11, 2017. Concurrently therewith, Leslie Ball was appointed to serve as our Chief Executive Officer and director, and Thomas
Gingerich was appointed to serve as our Chief Financial Officer. Subsequently on May 16, 2017, Thomas Gingerich was appointed
to also serve as our Secretary.
Set
forth below is certain information concerning our current director and officers, following the reverse merger:
Name
|
|
Age
|
|
Positions
Held
|
|
|
|
|
|
Leslie
Ball
|
|
71
|
|
Chief
Executive Officer
|
|
|
|
|
|
Thomas
Gingerich
|
|
56
|
|
Chief
Financial Officer, Secretary
|
Leslie
Ball
is the sole member of our board of directors and is our Chief Executive Officer. Mr. Ball has served as Vice Chairman
of the Board of Directors of Cinsay, Inc. since 2009. Before that, Mr. Ball was the Chief Executive Officer and president of Corral
West Ranchwear. Under his guidance, the company became one of the largest retailers of western and workware and grew to 140 locations
in the United States. At Montgomery Ward Corporation, Mr. Ball was President of Softgoods and Foreign Offices as well as Executive
Vice President, where he headed its apparel business. His retail experience also encompasses another 22 years in various executive
roles at R.H. Macy, Inc., including President of Macy’s East, President of Macy’s Wholesale, President of Macy’s
South, and Chairman and Chief Executive Officer of Macy’s Midwest. Mr. Ball attended the Detroit Institute of Technology.
Thomas
Gingerich
serves as our Chief Financial Officer and Secretary. He has 33 years of accounting experience in public and
private practice, specializing in tax compliance, structures and tax planning. He is a former Partner at Lain, Faulkner &
Co, PC specializing in forensic accounting. He is a Certified Public Accountant and a member of the American Institute of Certified
Public Accountants.
Family
Relationships
No
family relationships exist between any of our current or former directors or executive officers.
Involvement
is Certain Legal Proceedings
No
director, executive officer or control person of the Company has been involved in any legal proceeding listed in Item 401(f) of
Regulation S-K in the past 10 years.
Board
Leadership Structure and Role in Risk Oversight
Due
to the small size and early stage of the Company, we have not adopted a formal policy on whether the Chairman and Chief Executive
Officer positions should be separate or combined.
Our
Board of Directors is primarily responsible for overseeing our risk management processes on behalf of the Company. The Board of
Directors receives and reviews periodic reports from management, auditors, legal counsel, and others, as considered appropriate
regarding our company’s assessment of risks. The Board of Directors focuses on the most significant risks facing our company
and our company’s general risk management strategy, and also ensures that risks undertaken by our Company are consistent
with the board’s appetite for risk. While the board oversees our company’s risk management, management is responsible
for day-to-day risk management processes. We believe this division of responsibilities is the most effective approach for addressing
the risks facing our company and that our board leadership structure supports this approach.
Involvement
in Certain Legal Proceedings
To
our knowledge, our directors and executive officers have not been involved in any of the following events during the past ten
years:
|
1.
|
any
bankruptcy petition filed by or against such person or any business of which such person was a general partner or executive
officer either at the time of the bankruptcy or within two years prior to that time;
|
|
|
|
|
2.
|
any
conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other
minor offenses);
|
|
|
|
|
3.
|
being
subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining him from or otherwise limiting his involvement in any type of business, securities or
banking activities or to be associated with any person practicing in banking or securities activities;
|
|
4.
|
being
found by a court of competent jurisdiction in a civil action, the SEC or the Commodity Futures Trading Commission to have
violated a Federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;
|
|
|
|
|
5.
|
being
subject of, or a party to, any Federal or state judicial or administrative order, judgment decree, or finding, not subsequently
reversed, suspended or vacated, relating to an alleged violation of any Federal or state securities or commodities law or
regulation, any law or regulation respecting financial institutions or insurance companies, or any law or regulation prohibiting
mail or wire fraud or fraud in connection with any business entity; or
|
|
|
|
|
6.
|
being
subject of or party to any sanction or order, not subsequently reversed, suspended, or vacated, of any self-regulatory organization,
any registered entity or any equivalent exchange, association, entity or organization that has disciplinary authority over
its members or persons associated with a member.
|
Board
Committees
There
are currently no committees of the Board of Directors, and the Company does not presently have a director who meets the definition
of an “audit committee financial expert”.
Code
of Ethics
Our
board of directors intends to adopt a code of ethics that our officers, directors and any person who may perform similar functions
will be subject to.
EXECUTIVE
COMPENSATION
No
past officer or director of the Company has received any compensation and none is due or payable prior to the reverse merger.
Our former sole officer and director, Alexander Diener, did not receive any compensation for the services he rendered to the Company,
has not received compensation in the past, and is not accruing any compensation pursuant to any agreement with the Company. No
retirement, pension, profit sharing, stock option or insurance programs or other similar programs have been adopted by the Company
for the benefit of the Company’s employees prior to the reverse merger. In addition, no compensation has been paid or due
to our current officers and director.
Employment
Agreements with Named Officers
We
have not entered into employment agreements our officer but anticipate entering into such agreement in the near future. It is
anticipated that such agreement would contain provisions regarding compensation, and other applicable terms relating to competition
and term of employment.
Outstanding
Equity Awards at Fiscal Year-End
We
have not granted any equity or option awards to our executive officers as of December 31, 2016.
Director
Compensation
We
have not paid any compensation to our directors as of December 31, 2016.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Certain
Relationships and Related Transactions
Peach
Management LLC, former sole member of Project 1493, LLC and current majority shareholder of the Company, advanced
$40,734 to 1493 for various prepaid expenses for professional fees and restoration fees for 1493 to be in compliance
with Puerto Rico laws. The Company repaid this amount on May 11, 2017 in connection with the Exchange Agreement.
On
April 18, 2017 Peach Management LLC made a short term advance of $150,000 to 1493 . The proceeds of the loan were used as
a 50% deposit for the purchase of the first three dispensaries, according to the Memorandum of Understanding with Puerto Rico
Industrial Commercial Holdings Biotech Corporation.
On
May 11, 2017, the Company entered into a debt exchange agreement (the “
Debt Exchange
”) with Fountainhead Capital
Management Limited (“
Fountainhead
”), whereby Fountainhead agreed to cancel a promissory note in the aggregate
amount of $510,652 plus accrued interest of $129,265, which represented all amounts owed to Fountainhead as of the date of the
Debt Exchange. As consideration, Fountainhead received an aggregate of 1,800,000 shares of the Company’s common stock, of
which 200,000 shares of common stock had been previously issued.
Also
on May 11, 2017, immediately prior to closing of the Exchange Agreement, Fountainhead entered into a private share exchange agreement
with Peter Zachariou, a certain creditor of Fountainhead, whereby Zachariou agreed to extinguish the debt owed to him by Fountainhead
in exchange for an aggregate of 1,800,000 shares of the Company’s common stock, of which 200,000 shares of common stock
has been previously issued to Fountainhead. As a result, Zachariou acquired all of the common stock issued to Fountain head under
the Debt Exchange and consequently became the majority stockholder of the Company immediately prior to the closing of the Exchange
Agreement.
Director
Independence
The
Company currently has
one director who does not meet the definition of “independent”.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNER AND MANAGEMENT.
The
following table sets forth certain information with respect to the beneficial ownership of our voting securities following the
completion of the Exchange Agreement of this report by (i) any person or group owning more than 5% of any class of voting securities;
(ii) our director and chief executive officer; (iii) our chief financial officer; and (iv) all executive officers and directors
as a group as of June 19, 2017. Unless otherwise indicated, the address of all listed stockholders is c/o Green Spirit Industries
Inc., Cond. Madrid Suite 304, 1760 Loiza Street, San Juan, Puerto Rico 00911.
Name
of Beneficial Owner
|
|
Common
Stock Beneficially Owned
|
|
|
Percentage
of Common Stock
|
|
Directors and Officers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leslie Ball (1)
|
|
|
335,000
|
(1)
|
|
|
1.11
|
%
|
|
|
|
|
|
|
|
|
|
Thomas Gingerich
|
|
|
150,000
|
(1)
|
|
|
*
|
%
|
|
|
|
|
|
|
|
|
|
All officers and directors as a group (2 person)
|
|
|
485,000
|
|
|
|
1.60
|
%
|
|
|
|
|
|
|
|
|
|
Beneficial owners of more than 5%:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peter Zachariou (2)
|
|
|
1,800,000
|
(3)
|
|
|
6.00
|
%
|
|
|
|
|
|
|
|
|
|
Peach Management LLC (4)
|
|
|
19,690,912
|
(5)(6)
|
|
|
59.67
|
%
|
|
|
|
|
|
|
|
|
|
RACE Holdings, LLC (7)
|
|
|
9,416,667
|
(8)
|
|
|
29.27
|
%
|
*
Less than 1%
|
(1)
|
Includes warrants
to purchase up to 100,000 shares of the Company’s common stock exercisable within 60 days.
|
|
(2)
|
The address of Peter
Zachariou is 132 Calo Den Real, 07830 San Josep, Ibiza, Spain.
|
|
(3)
|
Includes 100,000
shares withheld by the Company pursuant to the terms of the Exchange Agreement.
|
|
(4)
|
The
Briggs Family 2017 Trust, managing member, holds sole voting and dispositive power over these shares.
|
|
(5)
|
Represents (i) 16,690,912
shares of the Company’s common stock and (ii) warrants to purchase up to 3,000,000 shares of the Company’s common
stock, exercisable within 60 days.
|
|
(6)
|
Does not include
shares of Series A Preferred Stock held by the stockholder , which gives the holder 51% of the voting power of the Company.
|
|
(7)
|
Keith
Michael Jensen, managing member, holds sole voting and dispositive power over these shares.
|
|
(8)
|
Represents (i) 7,243,590
shares of the Company’s common stock and (ii) warrants to purchase up to 2,173,077 shares of the Company’s common
stock, exercisable within 60 days.
|
SELLING
STOCKHOLDERS
This
prospectus covers the resale, from time to time by the selling stockholders identified below, of up to 3,741,364 shares of our
common stock. All of these shares of our common stock are being offered for resale by the selling stockholders.
We
are registering the shares hereby pursuant to the terms of our agreements with certain stockholders, in order to permit the selling
stockholders identified in the table below to offer the shares for resale from time to time.
The
table below sets forth certain information regarding the selling stockholders and the shares of our common stock offered by them
in this prospectus. The selling stockholders have not had a material relationship with us within the past three years other than
as described in the footnotes to the table below or as a result of their acquisition of our shares or other securities. To our
knowledge, subject to community property laws where applicable, each person named in the table has sole voting and investment
power with respect to the shares of common stock set forth opposite such person’s name. Except where indicated, the mailing
address of the selling stockholders is c/o Green Spirit Industries Inc. Cond. Madrid Suite 304, 1760 Loiza Street, San Juan, Puerto
Rico 00911.
|
|
Number
of Shares
|
|
|
Number
of
|
|
|
Number
of Shares
|
|
|
|
Beneficially
Owned
|
|
|
Shares
|
|
|
Beneficially
Owned
|
|
|
|
Prior
to this Offering
|
|
|
Being
Sold
|
|
|
After
this Offering**
|
|
Selling
Stockholder
|
|
Number
|
|
|
Percent
(1)
|
|
|
Offered
|
|
|
Number
|
|
|
Percent
(1)
|
|
RACE Holdings,
LLC ***
|
|
|
9,416,667
|
|
(2)
|
|
29.27
|
%
|
|
|
978,891
|
|
|
|
8,437,776
|
|
|
|
26.23
|
%
|
Kenneth David Milne
|
|
|
83,333
|
|
(3)
|
|
*
|
%
|
|
|
8,663.
|
|
|
|
74,671
|
|
|
|
*
|
%
|
Stone Micro Valve, LLC
|
|
|
166,667
|
|
(4)
|
|
*
|
%
|
|
|
17,326
|
|
|
|
149,341
|
|
|
|
*
|
%
|
Fred Schaner
|
|
|
166,667
|
|
(5)
|
|
*
|
%
|
|
|
17,326
|
|
|
|
149,341
|
|
|
|
*
|
%
|
Digital Man, LLC
|
|
|
363,333
|
|
(6)
|
|
1.21
|
%
|
|
|
37,770
|
|
|
|
325,563
|
|
|
|
1.08
|
%
|
Stuart Singer
|
|
|
260,000
|
|
(7)
|
|
*
|
%
|
|
|
27,028
|
|
|
|
232,972
|
|
|
|
*
|
%
|
Raley Holdings, LLC
|
|
|
573,333
|
|
(8)
|
|
1.90
|
%
|
|
|
59,600
|
|
|
|
513,734
|
|
|
|
1.70
|
%
|
RedChip Companies, Inc.
|
|
|
1,020,000
|
|
(9)
|
|
3.39
|
%
|
|
|
106,032
|
|
|
|
913,968
|
|
|
|
3.04
|
%
|
Darrin M. Ocasio
|
|
|
715,000
|
|
(10)
|
|
2.38
|
%
|
|
|
74,326
|
|
|
|
640,674
|
|
|
|
2.13
|
%
|
ACB Management Inc.
|
|
|
200,000
|
|
(11)
|
|
*
|
%
|
|
|
20,791
|
|
|
|
179,209
|
|
|
|
*
|
%
|
Granada Investments LLC
|
|
|
200,000
|
|
(12)
|
|
*
|
%
|
|
|
20,791
|
|
|
|
179,209
|
|
|
|
*
|
%
|
RD3 Acquisitions, LLC
|
|
|
850,000
|
|
(13)
|
|
2.82
|
%
|
|
|
88,360
|
|
|
|
761,640
|
|
|
|
2.53
|
%
|
Leslie Ball
|
|
|
335,000
|
|
(14)
|
|
1.11
|
%
|
|
|
34,824
|
|
|
|
300,176
|
|
|
|
1.00
|
%
|
Thomas Gingerich
|
|
|
150,000
|
|
(15)
|
|
*
|
%
|
|
|
15,593
|
|
|
|
134,407
|
|
|
|
*
|
%
|
Peach Management LLC
|
|
|
19,690,912
|
|
(16)
|
|
59.67
|
%
|
|
|
2,046,930
|
|
|
|
17,643,982
|
|
|
|
53.47
|
%
|
Peter Zachariou
|
|
|
1,800,000
|
|
|
|
6.00
|
%
|
|
|
187,115
|
|
|
|
1,612,885
|
|
|
|
5.38
|
%
|
*
**
|
Denotes
less than 1%.
Assumes
that all the shares are sold
|
(1)
|
Applicable percentage
ownership is based on 30,000,005 shares of common stock outstanding as of August 14 , 2017. “Beneficial ownership”
includes shares for which an individual, directly or indirectly, has or shares voting or investment power, or both, and also
includes options that are exercisable within 60 days of August 14 , 2017. Unless otherwise indicated, all of the listed
persons have sole voting and investment power over the shares listed opposite their names. Beneficial ownership as reported
in the above table has been determined in accordance with Rule 13d-3 of the Exchange Act.
In
computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares
beneficially owned by such person (and only such person) by reason of these acquisition rights.
|
(2)
|
Represents
(i) 7,243,590 shares of common stock and (ii) warrants to purchase up to 2,173,077 shares of common stock, sold to the selling
stockholder in the Company’s private placement, which closed in the second quarter of 2017. Keith Michael Jensen, managing
member, holds sole voting and dispositive power.
|
(3)
|
Represents
(i) 64,103 shares of common stock and (ii) warrants to purchase 19,231 shares of common stock sold to the selling stockholder
in the Company’s private placement, which closed in the second quarter of 2017.
|
(4)
|
Represents
(i) 128,205 shares of common stock and (ii) warrants to purchase 38,462 shares of common stock sold to the selling stockholder
in the Company’s private placement, which closed in the second quarter of 2017. Andrew Limpert, managing member, holds
sole voting and dispositive power.
|
(5)
|
Represents
(i) 128,205 shares of common stock and (ii) warrants to purchase 38,462 shares of common stock sold to the selling stockholder
in the Company’s private placement, which closed in the second quarter of 2017.
|
(6)
|
Represents
(i) 256,410 shares of common stock and (ii) warrants to purchase 106,923 shares of common stock, sold to the selling stockholder
in the Company’s private placement, which closed in the second quarter of 2017. Alexander Karis, managing member, holds
sole voting and dispositive power.
|
(7)
|
Represents
(i) 200,000 shares of common stock and (ii) warrants to purchase 60,000 shares of common stock, sold to the selling stockholder
in the Company’s private placement, which closed in the second quarter of 2017.
|
(8)
|
Represents
(i) 441,026 shares of common stock and (ii) warrants to purchase 132,308 shares of common stock, sold to the selling stockholder
in the Company’s private placement, which closed in the second quarter of 2017. Richard Raley, managing member, holds
sole voting and dispositive power.
|
(9)
|
Represents:
(1) 1,000,000 shares of common stock and (ii) warrants to purchase 20,000 shares of common stock, issued to the selling stockholder
for services rendered to the Company. Dave Gentry, managing member, holds sole voting and dispositive power.
|
(10)
|
Represents
(i) 665,000 shares of common stock and (ii) warrants to purchase 50,000 shares of common stock, issued to the selling stockholder
for services rendered to the Company.
|
(11)
|
Represents
(i) 150,000 shares of common stock and (ii) warrants to purchase 50,000 shares of common stock, issued to the selling stockholder
for services rendered to the Company. Fundación Para el Estudio del Derecho Constitucional, managing member, holds
sole voting and dispositive power.
|
(12)
|
Represents
(i) 150,000 shares of common stock and (ii) warrants to purchase 50,000 shares of common stock, issued to the selling stockholder
for services rendered to the Company. Manual Viota, managing member, holds sole voting and dispositive power.
|
(13)
|
Represents
(i) 750,000 shares of common stock and (ii) warrants to purchase 100,000 shares of common stock, issued to the selling stockholder
for services rendered to the Company. David Mitchell, managing member, holds sole voting and dispositive power.
|
(14)
|
The
selling stockholder is chief executive officer and sole director of the Company. Includes warrants to purchase
100,000 shares of common stock.
|
(15)
|
The
selling stockholder is chief financial officer and secretary of the Company. Includes warrants to purchase 100,000
shares of common stock.
|
(16)
|
Includes
warrants to purchase 3,000,000 shares of common stock. Does not include 1,000 shares of Series A Preferred Stock that grants
the holders thereof fifty-one percent (51%) voting power. The shares offered by the selling stockholder were issued in consideration
of the Exchange Agreement. The Briggs Family 2017 Trust, managing member, holds sole voting and dispositive power over these
shares.
|
DESCRIPTION
OF SECURITIES
Authorized
and Outstanding Capital Stock
We
have authorized 100,000,000 shares of common stock, par value $0.001, of which 30,000,005 are currently issued and outstanding.
We currently have 9,999,000 shares of “blank check” preferred stock, and 1,000 shares of Series A Preferred Stock.
Common
Stock
The
holders of our common stock are entitled to one vote per share. In addition, the holders of our common stock will be entitled
to receive ratably dividends, if any, declared by our board of directors out of legally available funds; however, the current
policy of our board of directors is to retain earnings, if any, for operations and growth. Upon liquidation, dissolution or winding-up,
the holders of our common stock will be entitled to share ratably in all assets that are legally available for distribution. The
holders of our common stock will have no preemptive, subscription, redemption or conversion rights. The rights, preferences and
privileges of holders of our common stock will be subject to, and may be adversely affected by, the rights of the holders of any
series of preferred stock, which may be designated solely by action of our board of directors and issued in the future.
Series
A Preferred Stock
The
holder of Series A Preferred Stock
shall have full voting right and shall vote together
as a single class with the holders of the Company’s common stock. The holder of Series A Preferred Stock are entitled to
fifty-one percent (51%) of the total votes on all matters brought before shareholders of the Company, regardless of the actual
number of shares of Series A Preferred Stock then outstanding. In addition, the Company is prohibited from issuing any other class
of preferred stock without first obtaining the prior approval of the holders of Series A Preferred Stock.
Blank
Check Preferred Stock
Our
board of directors will be authorized, subject to any limitations prescribed by law, without further vote or action by our stockholders,
to issue from time to time shares of preferred stock in one or more series. Each series of preferred stock will have the number
of shares, designations, preferences, voting powers, qualifications and special or relative rights or privileges as shall be determined
by our board of directors, which may include, among others, dividend rights, voting rights, liquidation preferences, conversion
rights and preemptive rights.
Warrants
As
of June 19, 2017, we have outstanding warrants to purchase 6,038,462 shares of common stock (the “
Warrants
”).
Each Warrant represents the right to purchase one share of our common stock at an exercise price of $0.50 per share for a period
of three (3) years from the date of issuance.
PLAN
OF DISTRIBUTION
This
prospectus relates to the resale of an aggregate of 3,741,364 shares of our common stock, par value $0.001 per share.
The
selling stockholders may, from time to time, sell any or all of the shares of our common stock covered by this prospectus at
a fixed price of $5.75 per share, representing the average of the high and low prices as reported on the OTC Markets on June 19,
2017. If and when our common stock is regularly quoted on an over-the-counter market or on a national securities exchange,
the selling stockholders may sell all or a portion of their respective shares of common stock covered by this prospectus
from time to time at prevailing market prices at the time of sale, at varying prices or at negotiated prices. A selling stockholder
may use any one or more of the following methods when selling securities:
|
●
|
ordinary
brokerage transactions and transactions in which the broker-dealer solicits purchasers;
|
|
●
|
block
trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block
as principal to facilitate the transaction;
|
|
●
|
purchases
by a broker-dealer as principal and resale by the broker-dealer for its account;
|
|
●
|
an
exchange distribution in accordance with the rules of the applicable exchange;
|
|
●
|
privately
negotiated transactions;
|
|
●
|
in
transactions through broker-dealers that agree with the selling stockholder to sell a specified number of such securities
at a stipulated price per security;
|
|
●
|
through
the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;
|
|
●
|
a
combination of any such methods of sale; or
|
|
●
|
any
other method permitted pursuant to applicable law.
|
The
selling stockholders may also sell securities under Rule 144 under the Securities Act of 1933, if available, rather than under
this prospectus.
Broker-dealers
engaged by the selling stockholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the selling stockholders (or, if any broker-dealer acts as agent for the purchaser of securities,
from the purchaser) in amounts to be negotiated, but, except as may be set forth in a supplement to this prospectus, in the case
of an agency transaction, not in excess of a customary brokerage commission in compliance with FINRA Rule 2440; and in the case
of a principal transaction a markup or markdown in compliance with FINRA IM-2440.
In
connection with the sale of the securities or interests therein, the selling stockholders may enter into hedging transactions
with broker-dealers or other financial institutions, which may in turn engage in short sales of the securities in the course of
hedging the positions they assume. The selling stockholders may also sell securities short and deliver these securities to close
out such short positions, or loan or pledge the securities to broker-dealers that in turn may sell these securities. The selling
stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or create one
or more derivative securities that require the delivery to such broker-dealer or other financial institution of securities offered
by this prospectus, which securities such broker-dealer or other financial institution may resell pursuant to this prospectus
(however, in such case, we must file a prospectus supplement or an amendment to this registration statement under applicable provisions
of the Securities Act amending it to include such successors in interest as selling stockholders under this prospectus).
The
selling stockholders might not sell any, or all, of the shares of our common stock offered pursuant to this prospectus. In addition,
we cannot assure you that the selling stockholders will not transfer the shares of our common stock by other means not described
in this prospectus.
The
selling stockholders and any brokers, dealers, agents or underwriters that participate with the selling stockholders in the distribution
of our common stock pursuant to this prospectus may be deemed to be “underwriters” within the meaning of the Securities
Act in connection with such sales. In this case, any commissions received by these broker-dealers, agents or underwriters and
any profit on the resale of our common stock purchased by them may be deemed to be underwriting commissions or discounts under
the Securities Act. In addition, any profits realized by the selling stockholders may be deemed to be underwriting commissions.
If the selling stockholders and any brokers, dealers, agents or underwriters that participate with the selling stockholders in
the distribution of our common stock pursuant to this prospectus are deemed to be an underwriter, the selling stockholders and
such other participants in the distribution may be subject to certain statutory liabilities and would be subject to the prospectus
delivery requirements of the Securities Act in connection with sales of shares of our common stock.
The
resale securities will be sold only through registered or licensed brokers or dealers if required under applicable state securities
laws. In addition, in certain states, the resale securities covered hereby may not be sold unless they have been registered or
qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and
is complied with.
Under
applicable rules and regulations under the Securities Exchange Act of 1934, any person engaged in the distribution of the resale
securities may not simultaneously engage in market making activities with respect to the common stock for the applicable restricted
period, as defined in Regulation M, prior to the commencement of the distribution. In addition, the selling stockholder will be
subject to applicable provisions of the Securities Exchange Act of 1934 and the rules and regulations thereunder, including Regulation
M, which may limit the timing of purchases and sales of securities of the common stock by the selling stockholders or any other
person. We will make copies of this prospectus available to the selling stockholders and will inform them of the need to deliver
a copy of this prospectus to each purchaser at or prior to the time of the sale (including by compliance with Rule 172 under the
Securities Act).
EXPERTS
The
financial statements of Cyberspace Vita, Inc. for the fiscal years ended December 31, 2016 and 2015 have been audited by Paritz
& Company P.A., an independent registered public accounting firm as set forth in its report, and are included in reliance
upon such report given on the authority of such firm as experts in accounting.
The
financial statements of Project 1493, LLC for the period ended April 30. 2017 have been audited by
Turner,
Stone & Company, LLP
, an independent registered public accounting firm as set forth in its report, and are included
in reliance upon such report given on the authority of such firm as experts in accounting.
LEGAL
MATTERS
Sichenzia
Ross Ference Kesner LLP., New York, New York, will pass upon the validity of the shares of our common stock to be sold in this
offering.
AVAILABLE
INFORMATION
The
public may read and copy any materials we file with the SEC, including our annual reports, quarterly reports, current reports,
proxy statements, information statements and other information, at the SEC’s Public Reference Room at 100 F Street, NE,
Washington, DC 20549, on official business days during the hours of 10 a.m. to 3 p.m. The public may obtain information on the
operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains
reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov.
INDEX
TO FINANCIAL STATEMENTS
Green
Spirit Industries Inc.
Consolidated
Balance Sheets
June
30, 2017 and December 31, 2016
|
|
June
30, 2017
|
|
|
December
31, 2016
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
915,522
|
|
|
$
|
-
|
|
Cash, held in escrow
|
|
|
2,052,766
|
|
|
|
|
|
Prepaid
Expenses
|
|
|
17,500
|
|
|
|
-
|
|
Total Current Assets
|
|
|
2,985,788
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Other Assets
|
|
|
|
|
|
|
|
|
Deposit (Note 5)
|
|
|
150,000
|
|
|
|
-
|
|
Construction
in progress (Note 6)
|
|
|
63,747
|
|
|
|
-
|
|
Total
Other Assets
|
|
|
213,747
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$
|
3,199,535
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Accounts Payable
|
|
$
|
4,750
|
|
|
$
|
-
|
|
Advances
Payable
|
|
|
1,000
|
|
|
|
-
|
|
Total
Current Liabilities
|
|
|
5,750
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities
|
|
|
5,750
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies
(Note 7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
Equity (Note 3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock, convertible, $.001 par value; 1,000 shares authorized;
1,000 issued and outstanding as of June 30, 2017
|
|
|
1
|
|
|
|
-
|
|
Common Stock $.001 par value 100,000,000 authorized; 30,000,005
issued and outstanding as of June 30, 2017
|
|
|
30,000
|
|
|
|
248
|
|
Additional paid-in capital
|
|
|
6,460,999
|
|
|
|
(248
|
)
|
Retained deficit
|
|
|
(3,297,215
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total
Stockholders’ Equity
|
|
|
3,193,785
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities and Stockholders’ Equity
|
|
$
|
3,199,535
|
|
|
$
|
-
|
|
The
accompanying footnotes are an integral part of these consolidated financial statements.
Green
Spirit Industries Inc.
Consolidated
Statements of Operations
For
the Three and Six Months Ended June 30, 2017 and 2016
(Unaudited)
|
|
For
the Three Months Ended June 30,
|
|
|
For
the Six Months Ended June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Total
Revenues
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting
Fees
|
|
|
30,000
|
|
|
|
-
|
|
|
|
30,000
|
|
|
|
-
|
|
General and administrative
|
|
|
20,965
|
|
|
|
-
|
|
|
|
20,965
|
|
|
|
-
|
|
Professional Fees
|
|
|
56,250
|
|
|
|
|
|
|
|
56,250
|
|
|
|
|
|
Stock based compensation
(Note 3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting fees
|
|
|
1,069,600
|
|
|
|
-
|
|
|
|
1,069,600
|
|
|
|
-
|
|
Investor relations
|
|
|
991,000
|
|
|
|
-
|
|
|
|
991,000
|
|
|
|
-
|
|
Professional
fees
|
|
|
1,129,400
|
|
|
|
-
|
|
|
|
1,129,400
|
|
|
|
-
|
|
Total
Stock based compensation
|
|
|
3,190,000
|
|
|
|
-
|
|
|
|
3,190,000
|
|
|
|
-
|
|
Total
Operating Expenses
|
|
|
3,297,215
|
|
|
|
-
|
|
|
|
3,297,215
|
|
|
|
-
|
|
Loss
from operations
|
|
|
(3,297,215
|
)
|
|
|
-
|
|
|
|
(3,297,215
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income (Expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Expense
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other Income
(Expenses)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations before provision for income taxes
|
|
|
(3,297,215
|
)
|
|
|
-
|
|
|
|
(3,297,215
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for income taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(3,297,215
|
)
|
|
$
|
-
|
|
|
$
|
(3,297,215
|
)
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
earnings per share
|
|
$
|
(0.20
|
)
|
|
|
|
|
|
$
|
(0.39
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common
shares outstanding
|
|
|
16,595,057
|
|
|
|
|
|
|
|
8,466,462
|
|
|
|
|
|
The
accompanying footnotes are an integral part of these consolidated financial statements.
Green
Spirit Industries Inc.
Consolidated
Statement of Changes in Stockholders’ Equity
For
the Six Months Ended June 30, 2017
(Unaudited)
|
|
Shares
|
|
|
Preferred
|
|
|
Common
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
Preferred
|
|
|
Common
|
|
|
Stock
|
|
|
Stock
|
|
|
Paid-in
|
|
|
Retained
|
|
|
|
|
|
|
Stock
|
|
|
Stock
|
|
|
Amount
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December
31, 2016
|
|
|
-
|
|
|
|
247,555
|
|
|
$
|
-
|
|
|
$
|
248
|
|
|
$
|
(248
|
)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalization of subsidiary
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,000
|
|
|
|
-
|
|
|
|
1,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Share Exchange Agreement on
May 11, 2017 Shares issued to Peach Management, LLC
|
|
|
1,000
|
|
|
|
16,690,912
|
|
|
|
1
|
|
|
|
16,691
|
|
|
|
(16,692
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Debt Exchange Agreement on
May 11, 2017 Shares issued to Peter Zachariou
|
|
|
|
|
|
|
1,600,000
|
|
|
|
|
|
|
|
1,600
|
|
|
|
(1,600
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares for cash
|
|
|
-
|
|
|
|
8,461,538
|
|
|
|
-
|
|
|
|
8,461
|
|
|
|
3,291,539
|
|
|
|
-
|
|
|
|
3,300,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares for services
|
|
|
|
|
|
|
3,000,000
|
|
|
|
|
|
|
|
3,000
|
|
|
|
2,877,000
|
|
|
|
|
|
|
|
2,880,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of warrants
for services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
310,000
|
|
|
|
-
|
|
|
|
310,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,297,215
|
)
|
|
|
(3,297,215
|
)
|
Balance as of
June 30, 2017
|
|
|
1,000
|
|
|
|
30,000,005
|
|
|
$
|
1
|
|
|
$
|
30,000
|
|
|
$
|
6,460,999
|
|
|
$
|
(3,297,215
|
)
|
|
$
|
3,193,785
|
|
The
accompanying footnotes are an integral part of these consolidated financial statements.
Green
Spirit Industries Inc.
Consolidated
Statements of Cash Flows
For
the Six Months Ended June 30, 2017 and 2016
(Unaudited)
|
|
For
the Six Months Ended June 30,
|
|
|
|
2017
|
|
|
2016
|
|
Cash Flow from Operating
Activities
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$
|
(3,297,215
|
)
|
|
$
|
-
|
|
Adjustments to Reconcile
Net Income (Loss) to Net Cash (used in) provided by Operating Activities
|
|
|
|
|
|
|
|
|
Issuance of common
stock for services
|
|
|
3,190,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
|
(17,500
|
)
|
|
|
-
|
|
Accounts Payable
|
|
|
4,750
|
|
|
|
-
|
|
Advances
payable
|
|
|
1,000
|
|
|
|
-
|
|
Net
cash (used in) provided by operating activities
|
|
|
(118,965
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Cash Flow from Investing
Activities
|
|
|
|
|
|
|
|
|
Deposit
|
|
|
(150,000
|
)
|
|
|
-
|
|
Construction
in Progress
|
|
|
(63,747
|
)
|
|
|
-
|
|
Net
cash used in investing activities
|
|
|
(213,747
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Cash Flow from Financing
Activities
|
|
|
|
|
|
|
|
|
Issuance of common
stock
|
|
|
3,300,000
|
|
|
|
-
|
|
Capitalization of
subsidiary for prepaid expenses
|
|
|
1,000
|
|
|
|
|
|
Advances payable,
related party
|
|
|
150,000
|
|
|
|
|
|
Advances
Payable, related party
|
|
|
(150,000
|
)
|
|
|
-
|
|
Net
cash provided by financing activities
|
|
|
3,301,000
|
|
|
|
-
|
|
Net increase (decrease) in cash
|
|
|
2,968,288
|
|
|
|
-
|
|
Cash at beginning of period
|
|
|
-
|
|
|
|
-
|
|
Cash at end
of period
|
|
$
|
2,968,288
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Disclosures of Cash Flow Information
|
|
|
|
|
|
|
|
|
Cash paid during the period for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
-
|
|
|
$
|
-
|
|
Income Taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
The
accompanying footnotes are an integral part of these consolidated financial statements.
Green
Spirit Industries Inc.
Notes
to Consolidated Financial Statements
June
30, 2017
References
to the “Company,” “Green Spirit,” “we,” “us,” and “our” refer to Green
Spirit Industries Inc., a Nevada corporation, and its wholly-owned subsidiary, Project 1493, LLC, a limited liability company
organized under the laws of the Commonwealth of Puerto Rico (“1493”).
1.
Nature of Operations
Green
Spirit Industries Inc. (the “Company”) is a Nevada corporation formed under the name Cyberspace Vita, Inc. (“Cyberspace”)
on November 7, 2006. Our initial business plan was related to the online sale of vitamins and supplements. On May 11, 2017, we
entered into a share exchange agreement (the “Exchange Agreement”) with Peter Zachariou, the majority shareholder
of the Company (the “Shareholder”), Project 1493, LLC, a limited liability company organized under the laws of the
Commonwealth of Puerto Rico (“1493”), and the sole member of 1493 (the “Member”), pursuant to which the
Member transferred all of the outstanding membership interests of 1493 to the Company in exchange for 16,690,912 restricted shares
of common stock of the Company (the “Exchange Shares”), warrants to purchase up to 3,000,000 shares of common stock
at an exercise price of $0.50 per share for a period of three (3) years from the date of issuance (the “Exchange Warrants”)
and 1,000 shares of Series A Preferred Stock that grants the holders thereof fifty-one percent (51%) voting power (the “Preferred
Shares” and together with the Exchange Shares, and the Exchange Warrants, the “Exchange Securities”). As a result
of the Exchange Agreement, 1493 became a wholly-owned subsidiary of the Company, and the business of 1493 became the business
of the Company. At the time of the Exchange Agreement, the Company was not engaged in any business activity. The Company accounted
for the acquisition of 1493 as a reverse merger and all prior periods presented are those of 1493.
Project
1493, LLC (“1493”) was organized under the laws of the Commonwealth of Puerto Rico on March 17, 2017. The Company
was formerly known as Grey Finland Advisors, LLC (“Grey”), which was organized under the laws of the Commonwealth
of Puerto Rico on March 24, 2011, and has had no operations since that time. 1493 filed a Certificate of Restoration on March
17, 2017 and elected to change its name to Project 1493, LLC.
The
Company will operate licensed cannabis dispensaries throughout Puerto Rico. Currently, the Company is focused on identifying sites,
purchasing pre-qualifications to dispensary licenses, building sites and opening dispensaries for service. The Company has executed
two Final Purchasing Agreements (“FPA”) to acquire four cannabis dispensaries. See Note 7.
2.
Summary of Significant Accounting Policies
Basis
of Presentation
The
consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial
statements prepared in accordance with U.S. generally accepted accounting principles have been omitted. However, in the opinion
of management, all adjustments (which include only normal recurring adjustments, unless otherwise indicated) necessary to present
fairly the financial position and results of operations for the periods presented have been made. The results for interim periods
are not necessarily indicative of trends or of results to be expected for the full year. These financial statements should be
read in conjunction with the financial statements of the Company for the year ended December 31, 2016 (including the notes thereto)
set forth in Form 10-K.
Green
Spirit Industries Inc.
Notes
to Consolidated Financial Statements
June
30, 2017
Use
of Estimates and Assumptions
The
preparation of the financial statements in conformity with U.S. generally accepted accounting principles 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 of the financial statements and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Cash
and cash equivalents
The
Company considers all cash on hand, cash in banks and all highly liquid debt instruments purchased with a maturity of three months
or less to be cash and cash equivalents. At times, cash and cash equivalent balances at a limited number of banks and financial
institutions may exceed insurable amounts. The Company believes it mitigates its risks by depositing cash or investing in cash
equivalents in major financial institutions.
At
June 30, 2017 the Company had a cash and escrow balance of $2,968,288.
Cash
held in escrow, in the name of the Company, is held by Sichenzia Ross Ference Kesner (“Sichenzia”). The escrow account
was established to hold the deposits from the sale of common stock. There are no restrictions on the funds held by Sichenzia on
the Company’s behalf.
Revenue
Recognition
The
Company will recognize revenue when:
|
●
|
Persuasive
evidence of an arrangement exists:
|
|
●
|
Delivery
has occurred;
|
|
●
|
Price
is fixed or determinable; and
|
|
●
|
Collectability
is reasonably assured.
|
The
Company follows the provisions of the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic (“ASC”)
605, “Revenue Recognition”, which includes the guidelines of Staff Accounting Bulletin No. 104 as described above.
Inventory
The
Company’s inventory will be stated at the lower of cost or market with cost being determined using the first-in, first-out
method.
Share
based Compensation
Compensation
cost relating to share-based payment transactions (including the cost of all employee stock options) is required to be recognized
in the consolidated financial statements and covers 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. That cost will
be measured based on the estimated fair value of the equity or liability instruments issued. See Note 3.
Green
Spirit Industries Inc.
Notes
to Consolidated Financial Statements
June
30, 2017
Fair
Value of Financial Instruments
The
carrying value of the Company’s current liabilities approximates fair value because of the short maturity of these instruments.
Unless otherwise noted, it is management’s opinion the Company is not exposed to significant interest, currency or credit
risks arising from these financial instruments.
Income
Taxes
The
Company will follow the accrual method of accounting for income taxes. Under this method, deferred income tax assets and liabilities
are recognized for the estimated tax consequences attributable to differences between the financial statement carrying values
and their respective income tax basis (temporary differences). The effect on the deferred income tax assets and liabilities of
a change in tax rates is recognized in income in the period that includes the enactment date. The Company was incorporated in
Nevada, and therefore will be taxed at normal U.S. federal corporate income tax rates.
Basic
Earnings per Share
The
Company computes net loss per share in accordance with FASB ASC 260 “Earnings per Share”, which specifies the computation,
presentation and disclosure requirements for earnings (loss) per share for entities with publicly held common stock.
Basic
net loss per share amounts is computed by dividing the net loss by the weighted average number of common shares outstanding. Diluted
earnings per share are the same as basic earnings per share due to the Company’s net loss. Potentially dilutive securities
have been excluded from the Company’s earnings per share calculation due to the effect being anti-dilutive. The total number
of potentially dilutive securities which have been excluded is 6,038,462. See Note 3.
Recent
Accounting Pronouncements
As
of June 30, 2017 and through August 14, 2017, there were several new accounting pronouncements issued by the Financial Accounting
Standards Board. Each of these pronouncements, as applicable, has been or will be adopted by the Company. Management does not
believe the adoption of any of these accounting pronouncements has had or will have a material impact on the Company’s financial
position or future operating results. The Company will monitor these emerging issues to assess any potential future impact on
its financial statements.
Green
Spirit Industries Inc.
Notes
to Consolidated Financial Statements
June
30, 2017
3.
Equity
Authorized
and Outstanding Capital Stock
We
have authorized 100,000,000 shares of common stock, par value $0.001, of which 30,000,005 are currently issued and outstanding.
We currently have 9,999,000 shares of “blank check” preferred stock, and 1,000 shares of Series A Preferred Stock.
Common
Stock
The
holders of our common stock are entitled to one vote per share. In addition, the holders of our common stock will be entitled
to receive ratably dividends, if any, declared by our board of directors out of legally available funds; however, the current
policy of our board of directors is to retain earnings, if any, for operations and growth. Upon liquidation, dissolution or winding-up,
the holders of our common stock will be entitled to share ratably in all assets that are legally available for distribution. The
holders of our common stock will have no preemptive, subscription, redemption or conversion rights. The rights, preferences and
privileges of holders of our common stock will be subject to, and may be adversely affected by, the rights of the holders of any
series of preferred stock, which may be designated solely by action of our board of directors and issued in the future.
The
following table illustrates the common stock transactions for the six months ended June 30, 2017:
|
|
Preferred
|
|
|
Common
|
|
Category
|
|
Shares
|
|
|
Shares
|
|
Cash
|
|
|
|
|
|
|
8,461,538
|
|
Share Exchange Agreement
|
|
|
1,000
|
|
|
|
16,690,912
|
|
Debt Exchange Agreement
|
|
|
0
|
|
|
|
1,600,000
|
|
Services
|
|
|
0
|
|
|
|
3,000,000
|
|
Total
|
|
|
1,000
|
|
|
|
29,752,450
|
|
On
May 11, 2017, the Company authorized the issuance of 16,690,912 shares of common stock at $.39 and 1,000 shares of preferred stock
at $1.00 per share, (100% of the preferred stock issued) to Peach Management, LLC (“Peach”) in accordance with the
Share Exchange Agreement. See Note 7.
On
May 11, 2017, the Company authorized the issuance of 1,600,000 shares of common stock at $.39 to Peter Zachariou for the Debt
Exchange Agreement. See Note 7.
On
May 11, 2017, the Company authorized the issuance of 235,000 shares of common stock at $.39 to Leslie Ball, Chief Executive Officer,
for services rendered to the Company.
On
May 11, 2017, the Company authorized the issuance of 50,000 shares of common stock at $.39 to Thomas Gingerich, Chief Financial
Officer, for services rendered to the Company.
On
May 11, 2017, the Company authorized the issuance of 1,000,000 shares of common stock at $.39 to RedChip Companies, Inc. for investor
relation services rendered to the Company.
On
May 11, 2017, the Company authorized the issuance of 750,000 shares of common stock at $.39 to RD3 Acquisitions, LLC for investor
relation services rendered to the Company.
On
May 11, 2017, the Company authorized the issuance of 665,000 shares of common stock at $.39 to Darrin Ocasio for legal services
rendered to the Company.
Green
Spirit Industries Inc.
Notes
to Consolidated Financial Statements
June
30, 2017
On
May 11, 2017, the Company authorized the issuance of 150,000 shares of common stock at $.39 to ACB Management, Inc. for legal
services rendered to the Company.
On
May 11, 2017, the Company authorized the issuance of 150,000 shares of common stock at $.39 to Granada Investments, LLC for professional
services rendered to the Company.
Series
A Preferred Stock
The
holder of Series A Preferred Stock
shall have full voting rights and shall vote together
as a single class with the holders of the Company’s common stock. The holder of Series A Preferred Stock is entitled to
fifty-one percent (51%) of the total votes on all matters brought before shareholders of the Company, regardless of the actual
number of shares of Series A Preferred Stock then outstanding. In addition, the Company is prohibited from issuing any other class
of preferred stock without first obtaining the prior approval of the holders of Series A Preferred Stock.
Blank
Check Preferred Stock
Our
board of directors will be authorized, subject to any limitations prescribed by law, without further vote or action by our stockholders,
to issue from time to time shares of preferred stock in one or more series. Each series of preferred stock will have the number
of shares, designations, preferences, voting powers, qualifications and special or relative rights or privileges as shall be determined
by our board of directors, which may include, among others, dividend rights, voting rights, liquidation preferences, conversion
rights and preemptive rights.
Warrants
As
of June 30, 2017, we have outstanding warrants to purchase 6,038,462 shares of common stock (the “
Warrants
”).
Each Warrant represents the right to purchase one share of our common stock at an exercise price of $0.50 per share for a period
of three (3) years from the date of issuance.
The
Company may issue warrants to non-employees in capital raising transactions or for services. In accordance with guidance in ASC
Topic 718, the cost of warrants issued to non-employees is measured on the grant date based on the fair value. The fair value
is determined using the Black-Scholes option pricing model. The resulting amount is charged to expense on the straight-line basis
over the period in which the Company expects to receive the benefit, which is generally the vesting period. During the six months
ended June 30, 2017, $310,000 was charged to expense.
The
fair value of stock warrants was determined at the date of grant using the Black-Scholes option pricing model. The Black-Scholes
option model requires management to make various estimates and assumptions, including expected term, expected volatility, risk-free
rate, and dividend yield. The expected term represents the period of time that stock-based compensation awards granted are expected
to be outstanding and is estimated based on considerations including the vesting period, contractual term and anticipated employee
exercise patterns. Expected volatility is based on the historical volatility of the Company’s stock. The risk-free rate
is based on the U.S. Treasury yield curve in relation to the contractual life of stock-based compensation instrument. The dividend
yield assumption is based on historical patterns and future expectations for the Company dividends.
Green
Spirit Industries Inc.
Notes
to Consolidated Financial Statements
June
30, 2017
The
following table includes the estimates and assumptions used in the Black Scholes model:
Stock price
|
|
$
|
0.96
|
|
Exercise price
|
|
$
|
0.50
|
|
Expected term
|
|
|
3
years
|
|
Expected volatility
|
|
|
72.0
|
%
|
Annual risk-free rate
|
|
|
1.55
|
%
|
Dividend yield
|
|
|
0.00
|
%
|
The
following table is a summary of outstanding stock warrants at June 30, 2017 and activity during the six months then ended:
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
Number of
|
|
|
Exercise
|
|
|
Average
|
|
|
|
Shares
|
|
|
Price
|
|
|
Price
|
|
Issued during quarter ended June 30, 2017
|
|
|
6,038,462
|
|
|
$
|
0.50
|
|
|
$
|
0.50
|
|
Expired and forfeited
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Warrants as of June 30, 2017
|
|
|
6,038,462
|
|
|
$
|
0.50
|
|
|
$
|
0.50
|
|
All
of the outstanding warrants granted during the period ended June 30, 2017 were fully vested on the grant date.
Subsidiary
Equity
On
March 17, 2017, 1493 authorized the issuance of 1,000 units to Peach for $1,000, used for prepaid expenses on behalf of the Company.
Peach is beneficially owned 100% by the Briggs Family 2017 Trust, Peach’s sole manager.
4.
Income Taxes
Deferred
income taxes are reported using the liability method. Deferred tax assets are recognized for deductible temporary differences
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. Deferred tax assets are reduced by a valuation allowance when,
in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.
Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Current
and accumulated deferred tax benefit will be at the effective U.S. Federal corporate income tax rates.
5.
Related Party Transactions
On
April 18, 2017, Peach made a short term advance of $150,000 to the Company. The proceeds of the advance were used as a 50% deposit
for the purchase of the first three dispensaries, according to the Memorandum of Understanding with Puerto Rico Industrial Commercial
Holdings Biotech Corporation (“PRICHBC”), an unrelated third party. The advance was repaid on May 12, 2017. See Note
7.
6.
Construction in progress
On
June 8, 2017 the Company entered into construction contracts for the construction and finish out of two dispensaries for the Carolina
and Dorado locations for $123,700 and $84,800, respectively. As of June 30, 2017, the Company has paid $63,747 on interim payment
applications to the contractor.
Green
Spirit Industries Inc.
Notes
to Consolidated Financial Statements
June
30, 2017
7.
Commitments and Contingencies
Share
Exchange Agreement
On
May 11, 2017, the Company entered into a share exchange agreement (the “Exchange Agreement”) with Peter Zachariou,
the majority shareholder of the Company (the “Shareholder”), Project 1493, LLC, a limited liability company organized
under the laws of the Commonwealth of Puerto Rico (“1493”), and the sole member of 1493 (the “Member”),
pursuant to which the Member transferred all of the outstanding membership interests of 1493 to the Company in exchange for 16,690,912
restricted shares of common stock of the Company (the “Exchange Shares”), warrants to purchase up to 3,000,000 shares
of common stock at an exercise price of $0.50 per share for a period of three (3) years from the date of issuance (the “Exchange
Warrants”) and 1,000 shares of Series A Preferred Stock that grants the holders thereof fifty-one percent (51%) voting power
(the “Preferred Shares” and together with the Exchange Shares, and the Exchange Warrants, the “Exchange Securities”).
The transaction closed on May 11, 2017 (the “Closing Date”).
Debt
Exchange Agreement
On
May 11, 2017, the Company also entered into a debt exchange agreement (the “Debt Exchange”) with Fountainhead Capital
Management Limited (“Fountainhead”), a related party, whereby Fountainhead agreed to cancel a promissory note in the
aggregate amount of $510,652 plus accrued interest of $129,265. As consideration, Fountainhead received an aggregate of 1,800,000
shares of the Common Stock, of which 200,000 shares of Common Stock had already been issued.
Escrow
Agreement
On
April 18, 2017, the Company entered into an escrow agreement with PRIHBC with the intention of purchasing three pre-qualified
medicinal cannabis licenses for $300,000. The agreement states the funds will be held by the escrow agent, Sichenzia Ross Ference
Kesner (“Sichenzia”). The Company deposited $150,000 into the escrow account as of June 30, 2017. The escrow agreement
expired June 2, 2017. As of June 30, 2017, the Company had not paid PRIHBC towards the purchase of the dispensaries. The Company
paid $200,000 and $100,000 on July 7, 2017 and August 1, 2017, paying the obligation in full.
Memorandum
of Understanding and Final Purchasing Agreement - PRIHBC
On
April 19, 2017, the Company entered into a Memorandum of Understanding (“MOU”) with PRIHBC to purchase three pre-qualified
medical marijuana licenses in Puerto Rico for $300,000. The Company deposited $150,000 into escrow with Sichenzia for a deposit
towards the purchase price. The agreement sells all legal rights, permits, licenses, leasing contracts and assets of the three
dispensaries from PRIHBC to the Company. As of June 30, 2017 the funds had not been disbursed from escrow. During the due diligence
period, the Company has exclusive negotiation rights regarding the proposed acquisition.
On
July 7, 2017, the Company entered into a final purchasing agreement (the “PRIHBC Agreement”) with Puerto Rico Industrial
Holdings Biotech Corporation, a corporation formed under the laws of the Commonwealth of Puerto Rico (“PRIHBC”), pursuant
to which we acquired all of the legal rights, permits, licenses, leasing contracts and assets pertaining to three dispensaries
located in Carolina, Dorado and Fajardo, in exchange for $300,000, $150,000 of which shall be deposited into an escrow account
until the closing of the PRIHBC Agreement. The Company paid $200,000 and $100,000 on July 7, 2017 and August 1, 2017, paying the
obligation in full.
Green
Spirit Industries Inc.
Notes
to Consolidated Financial Statements
June
30, 2017
In
connection with the PRIHBC Agreement, 1493, PRIHBC and
Heras P.M. & I, Corp., a corporation
formed under the laws of the Commonwealth of Puerto Rico (“Heras”),
entered
into an assignment of lease on June 15, 2017, (the “Carolina Lease Assignment”) which transfers and/or assigns the
rights under the lease agreement for the location of the Carolina Dispensary to 1493. PRIHBC entered into such lease agreement,
dated August 26, 2016,
with Heras to lease approximately 2,500 rentable square feet
for a term of five (5) years, commencing on September 1, 2016. The lease payments for such location will be $4,500 per month,
with an annual increase of 5%.
1493,
PRIHBC and Efron Dorado, S.E., a corporation formed under the laws of the Commonwealth of Puerto Rico (“Efron”),
entered
into an assignment of lease on June 7, 2017, (the “Dorado Lease Assignment”) which transfers and/or assigns the rights
under the lease agreement for the location of the
dispensary in Dorado
to 1493.
PRIHBC
entered into such lease agreement, dated August 30, 2016, with Efron to lease approximately 1,900 rentable square feet for a term
of three (3) years, commencing on December 1, 2016. The lease payments for such location will be an annual amount of $57,000,
with an additional monthly marketing fee of $158.33.
Pursuant
to a non-compete clause set forth in the PRIHBC Agreement, PRIHBC has agreed not to establish a medical cannabis dispensary within
a two-mile radius from any of the three dispensaries. Each of the parties to the PRIH Agreement has made customary representations
and considerations in the PRIH Agreement.
Memorandum
of Understanding and Final Purchasing Agreement – Good Vibes Distributors, LLC (“GVD”)
On
April 6, 2017, the Company entered into a MOU with Good Vibes Distributors, LLC (“GVD”) to purchase one medicinal
cannabis dispensary in Puerto Rico for $75,000 (the “San Juan Dispensary”). The MOU called for $7,500 funded into
escrow with Sichenzia for a deposit towards the purchase price. The agreement sells all assets, rights and licenses from GVD to
the Company.
On
July 7, 2017, the Company entered into a final purchasing agreement (the “GVD Agreement”) with Good Vibes Distributors,
LLC, a corporation formed under the laws of the Commonwealth of Puerto Rico (“GVD”), pursuant to which it acquired
the dispensary prequalification license for the San Juan Dispensary, in exchange for $75,000. Pursuant to the GVD Agreement, the
Company agreed to deposit the $7,500 to an escrow account until the closing of the GVD Agreement. The Company paid $75,000 on
July 7, 2017, paying the obligation in full
Pursuant
to non-compete clause set forth in the GVD Agreement, GVD has agreed not to establish a Medical Cannabis dispensary within a two-mile
radius from the San Juan Dispensary. Each of parties to the GVD Agreement has made customary representations and considerations
in the GVD Agreement.
On
July 11, 2017, the Company entered into a lease agreement (the “Lease Agreement”) with Olympic Properties, Inc., a
corporation formed under the laws of the Commonwealth of Puerto Rico, to lease approximately 1,500 square feet and 8 parking spaces
on the first floor of 509-511 Andalucia Street in San Juan, Puerto Rico, for the location of the San Juan Dispensary. The lease
payments pursuant to the Lease Agreement shall be $1,600 per month for the initial three (3) years commencing on August 1, 2017,
after which the lease payment shall increase each year by 5% commencing on July 31, 2020.
Green
Spirit Industries Inc.
Notes
to Consolidated Financial Statements
June
30, 2017
Long
Term Supply Agreement
On
April 18, 2017, the Company entered into a long term supply agreement (“supply agreement”) to purchase flower and
manufactured products for the dispensaries upon approval of the appropriate licensing by the Puerto Rico Department of Health.
The Company will purchase at least 50% of all flower and manufactured products to be sold in the dispensaries owned by the Company
or its affiliates. The supply agreement is valid for ten years from the moment of its coming into effect. If neither party announces
termination of the supply agreement thirty days before its stated expiration, the supply agreement shall be automatically extended
for each subsequent year with no limit of years.
Risk
of Prosecution for Marijuana-Related Companies
A
company that is connected to the marijuana industry must be aware that marijuana-related companies may be at risk of federal,
and perhaps state, criminal prosecution. The Department of Treasury recently issued guidance noting: “The Controlled Substances
Act” (“CSA”) makes it illegal under federal law to manufacture, distribute, or dispense marijuana. Many states
impose and enforce similar prohibitions. As of June 30, 2017, the Company has not been notified of any pending investigations
regarding its planned business activities, and is not currently involved in any such investigations with any regulators.
8.
Subsequent Events
On
July 7, 2017, the Company entered into a final purchasing agreement (the “PRIHBC Agreement”) with Puerto Rico Industrial
Holdings Biotech Corporation, a corporation formed under the laws of the Commonwealth of Puerto Rico (“PRIHBC”), pursuant
to which we acquired all of the legal rights, permits, licenses, leasing contracts and assets pertaining to dispensaries located
in Carolina, Dorado and Fajardo, in exchange for $300,000, $150,000 of which shall be deposited into an escrow account until the
closing of the PRIHBC Agreement. The Company paid $200,000 and $100,000 on July 7, 2017 and August 1, 2017, paying the obligation
in full.
On
July 7, 2017, the Company entered into a final purchasing agreement (the “GVD Agreement”) with Good Vibes Distributors,
LLC, a corporation formed under the laws of the Commonwealth of Puerto Rico (“GVD”), pursuant to which we acquired
the dispensary prequalification license for the San Juan Dispensary, in exchange for $75,000. Pursuant to the GVD Agreement, the
Company agreed to deposit the $7,500 to an escrow account until the closing of the GVD Agreement. The Company paid $75,000 on
July 7, 2017, paying the obligation in full
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Board of Directors and Stockholders of Cyberspace Vita, Inc.
We
have audited the accompanying balance sheets of Cyberspace Vita, Inc. as of December 31, 2016 and 2015, and the related statements
of income, stockholders’ deficit, and cash flows for the years then ended. Cyberspace Vita’s management is responsible
for these financial statements. 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). Those
standards require that we plan and perform the audit 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 audit included consideration of internal control over financial reporting as a basis for designing
audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In
our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Cyberspace
Vita, Inc. as of December 31, 2016 and 2015, and the results of its operations and its cash flows for the years then ended, 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 described
in Note 3 to the financial statements, the Company has not generated any revenue and has accumulated losses of $666,301 since
inception. As of December 31, 2016, the Company had a working capital deficit of $622,023. These factors, among others, raise
substantial doubt regarding the Company’s ability to continue as a going concern. Management’s plans in regard to
these matters are also described in Note 3 to the accompanying financial statements. The accompanying financial statements do
not include any adjustments that might result from the outcome of this uncertainty.
/s/
Paritz & Company, P.A.
|
|
Hackensack, NJ
|
|
March 27, 2017
|
|
Cyberspace
Vita, Inc.
Balance
Sheets
|
|
December
31, 2016
|
|
|
December
31, 2015
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Total current
assets
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES &
STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Accrued expenses
|
|
$
|
3,496
|
|
|
$
|
5,256
|
|
Accrued interest- related party
|
|
|
121,916
|
|
|
|
94,360
|
|
Note payable- related party
|
|
|
496,611
|
|
|
|
434,369
|
|
|
|
|
|
|
|
|
|
|
Total current
liabilities
|
|
|
622,023
|
|
|
|
533,985
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
622,023
|
|
|
|
533,985
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
deficit
|
|
|
|
|
|
|
|
|
Preferred stock, par value $0.001,
10,000,000 shares authorized, no shares issued and outstanding at December 31, 2016 and December 31, 2015
|
|
|
-
|
|
|
|
-
|
|
Common stock, par value $0.001, 100,000,000
shares authorized, 247,550 shares issued and outstanding at December 31, 2016 and December 31, 2015
|
|
|
248
|
|
|
|
248
|
|
Additional paid-in capital
|
|
|
44,030
|
|
|
|
44,030
|
|
Accumulated Deficit
|
|
|
(666,301
|
)
|
|
|
(578,263
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders’
deficit
|
|
|
(622,023
|
)
|
|
|
(533,985
|
)
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES
AND STOCKHOLDERS’ DEFICIT
|
|
$
|
-
|
|
|
$
|
-
|
|
See
accompanying notes to financial statements.
Cyberspace
Vita, Inc.
Statements
of Operations
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
8,232
|
|
|
|
6,849
|
|
Professional fees
|
|
|
12,250
|
|
|
|
12,470
|
|
Management fee payable to related
party
|
|
|
40,000
|
|
|
|
40,000
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
60,482
|
|
|
|
59,319
|
|
|
|
|
|
|
|
|
|
|
Other expenses
|
|
|
|
|
|
|
|
|
Interest
expense- related party
|
|
|
27,556
|
|
|
|
23,858
|
|
|
|
|
|
|
|
|
|
|
Net loss before
tax
|
|
$
|
(88,038
|
)
|
|
$
|
(83,177
|
)
|
|
|
|
|
|
|
|
|
|
Provision for
tax
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(88,038
|
)
|
|
$
|
(83,177
|
)
|
|
|
|
|
|
|
|
|
|
Net loss per common
share
|
|
$
|
(0.36
|
)
|
|
$
|
(0.34
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average number of common
shares
|
|
|
247,550
|
|
|
|
247,550
|
|
See
accompanying notes to financial statements.
Cyberspace
Vita Inc.
Statement of Stockholders’ Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
Preferred
|
|
|
Preferred
|
|
|
Common
|
|
|
Common
|
|
|
Paid-in
|
|
|
Accumulated
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance January 1, 2014
|
|
|
-
|
|
|
|
-
|
|
|
|
247,550
|
|
|
|
248
|
|
|
$
|
44,030
|
|
|
|
(415,501
|
)
|
|
|
(371,224
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(79,585
|
)
|
|
|
(79,585
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2014
|
|
|
-
|
|
|
|
-
|
|
|
|
247,550
|
|
|
|
248
|
|
|
|
44,030
|
|
|
|
(495,086
|
)
|
|
|
(450,808
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(83,177
|
)
|
|
|
(83,177
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2015
|
|
|
-
|
|
|
$
|
-
|
|
|
|
247,550
|
|
|
$
|
248
|
|
|
$
|
44,030
|
|
|
$
|
(578,263
|
)
|
|
$
|
(533,985
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(88,038
|
)
|
|
|
(88,038
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2016
|
|
|
-
|
|
|
$
|
-
|
|
|
|
247,550
|
|
|
$
|
248
|
|
|
$
|
44,030
|
|
|
$
|
(666,301
|
)
|
|
$
|
(622,023
|
)
|
See
accompanying notes to financial statements.
Cyberspace
Vita, Inc.
Statements
of Cash Flows
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Cash flows relating
to operating activities
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(88,038
|
)
|
|
$
|
(83,177
|
)
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Increase in accrued interest- related
party
|
|
|
27,556
|
|
|
|
23,858
|
|
Increase (decrease) in accounts payable
|
|
|
(1,760
|
)
|
|
|
2,855
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
(62,242
|
)
|
|
|
(56,464
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows relating
to financing activities
|
|
|
|
|
|
|
|
|
Proceeds from loans - related party
|
|
|
62,242
|
|
|
|
56,464
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
62,242
|
|
|
|
56,464
|
|
|
|
|
|
|
|
|
|
|
Decrease in cash
|
|
|
-
|
|
|
|
-
|
|
Cash, beginning
of year
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Cash, end of year
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure
of cash flow information
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
-
|
|
|
$
|
-
|
|
Cash paid for income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
See
accompanying notes to financial statements.
CYBERSPACE
VITA, INC.
(A
Development Stage Company)
NOTES
TO THE FINANCIAL STATEMENTS
December
31, 2016 and 2015
(audited)
NOTE
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
Business
description
Cyberspace
Vita, Inc. (the “Company”) was incorporated under the laws of the State of Nevada on November 7, 2006. The purpose
for which the Corporation is organized is to engage in any lawful act or activity for which a corporation may be organized under
the General Corporation Law of the State of Nevada. The Company’s original business plan was to create and conduct an online
business for the sale of vitamins and supplements, however, the Company never generated any meaningful revenues. On May 5, 2008,
the Company discontinued its prior business and changed its business plan. The Company’s current business plan is to seek,
investigate, and, if warranted, acquire one or more properties or businesses, and to pursue other related activities intended
to enhance shareholder value.
NOTE
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A.
BASIS OF PRESENTATION
The
Company’s financial statements are presented in accordance with accounting principles generally accepted (GAAP) in the United
States. Effective December 31, 2014, the Company elected to early adopt Accounting Standards Update No. 2014-10, Development Stage
Entities (Topic 915): Elimination of Certain Financial Reporting Requirements. The adoption of this ASU allows the Company to
remove the inception to date information and all references to development stage.
B.
CASH EQUIVALENTS
The
Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.
C.
USE OF ESTIMATES
The
preparation of financial statements in conformity with generally accepted accounting principles 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 of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
D.
BASIC EARNINGS PER SHARE
The
Company computes net loss per share in accordance with FASB ASC 260 “Earnings per Share”, which specifies the computation,
presentation and disclosure requirements for earnings (loss) per share for entities with publicly held common stock. FASB ASC
260 supersedes the provisions of APB No. 15, and requires the presentation of basic earnings (loss) per share and diluted earnings
(loss) per share.
CYBERSPACE
VITA, INC.
(A
Development Stage Company)
NOTES
TO THE FINANCIAL STATEMENTS
December
31, 2016 and 2015
(audited)
Basic
net loss per share amounts is computed by dividing the net income by the weighted average number of common shares outstanding.
Diluted earnings per share are the same as basic earnings per share due to the lack of dilutive items in the Company.
E.
INCOME TAXES
Income
taxes are provided in accordance with FASB ASC 740 “Income Taxes”. A deferred tax asset or liability is recorded for
all temporary differences between financial and tax reporting and net operating loss carryforwards. Deferred tax expense (benefit)
results from the net change during the year of deferred tax assets and liabilities.
Deferred
tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion
or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes
in tax laws and rates on the date of enactment.
F.
REVENUE RECOGNITION
The
Company has not recognized any revenues from its operations.
G.
SHARE-BASED PAYMENT
The
Company records stock-based compensation in accordance with the guidance in ASC 718. ASC Topic 718 requires the Company to recognize
expense related to the fair value of its employee stock option awards. This eliminates accounting for share-based compensation
transactions using the intrinsic value and requires instead that such transactions be accounted for using a fair-value-based method.
The Company recognizes the cost of all share-based awards on a graded vesting basis over the vesting period of the award.
During
the years ended December 31, 2016 and 2015, there were no stock options granted or outstanding.
H.
FAIR VALUE MEASUREMENTS
The
Company adopted the provisions of ASC Topic 820, “Fair Value Measurements and Disclosures”, which defines fair value
as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair
value measurements.
The
estimated fair value of certain financial instruments, payables to related parties, and accounts payable and accrued expenses
are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.
ASC
820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price)
in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants
on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable
inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may
be used to measure fair value:
Level
1 — quoted prices in active markets for identical assets or liabilities
Level
2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable
Level
3 — inputs that are unobservable (for example cash flow modeling inputs based on assumptions)
CYBERSPACE
VITA, INC.
(A
Development Stage Company)
NOTES
TO THE FINANCIAL STATEMENTS
December
31, 2016 and 2015
(audited)
I.
NEW ACCOUNTING PRONOUNCEMENTS
From
time to time new accounting pronouncements are issued by the Financial Accounting Standards Board or other standard setting bodies
that may have an impact on the Company’s accounting and reporting. The Company believes that such recently issued accounting
pronouncements and other authoritative guidance for which the effective date is in the future will not have an impact on its accounting
or reporting or that such impact will not be material to its financial position, results of operations and cash flows when implemented.
Recently
adopted and pending accounting pronouncements
In
June 2014, the FASB issued ASU No. 2014-10: Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting
Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation , to improve financial
reporting by reducing the cost and complexity associated with the incremental reporting requirements of development stage entities.
The amendments in this update remove all incremental financial reporting requirements from U.S. GAAP for development stage entities,
thereby improving financial reporting by eliminating the cost and complexity associated with providing that information. The amendments
in this Update also eliminate an exception provided to development stage entities in Topic 810, Consolidation, for determining
whether an entity is a variable interest entity on the basis of the amount of investment equity that is at risk. The amendments
to eliminate that exception simplify U.S. GAAP by reducing avoidable complexity in existing accounting literature and improve
the relevance of information provided to financial statement users by requiring the application of the same consolidation guidance
by all reporting entities. The elimination of the exception may change the consolidation analysis, consolidation decision, and
disclosure requirements for a reporting entity that has an interest in an entity in the development stage. The amendments related
to the elimination of inception-to-date information and the other remaining disclosure requirements of Topic 915 should be applied
retrospectively except for the clarification to Topic 275, which shall be applied prospectively. The Company has elected early
adoption of this ASU.
In
August 2014, the FASB issued Accounting Standard Update No. 2014-15,
Presentation of Financial Statements—Going Concern
(Subtopic 205-40), (ASU No. 2014-15), which requires management to assess an entity’s ability to continue as a going
concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, ASU
2014-15 provides a definition of the term substantial doubt and requires an assessment for a period of one year after the date
that the financial statements are issued (or available to be issued). It also requires certain disclosures when substantial doubt
is alleviated as a result of consideration of management’s plans and requires an express statement and other disclosures
when substantial doubt is not alleviated. ASU No. 2014-15 is effective for fiscal years, and interim periods within those years,
beginning after December 15, 2016, and early application is permitted.
CYBERSPACE
VITA, INC.
(A
Development Stage Company)
NOTES
TO THE FINANCIAL STATEMENTS
December
31, 2016 and 2015
(audited)
NOTE
3. GOING CONCERN
The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has
not generated any revenue and has accumulated losses of $666,301 since inception. As of December 31, 2016, the Company had a working
capital deficit of $622,023. These conditions, among others, raise substantial doubt about the Company’s ability to continue
as a going concern. The Company’s continuation as a going concern is dependent on its ability to meet its obligations, to
obtain additional financing as may be required and ultimately to attain profitability. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty. The Company intends to seek additional working capital
advances from the Company’s majority shareholder and other sources. There is no assurance that the working capital advances
will continue in the future nor that Company will be successful in raising additional funds through other sources.
NOTE
4. RELATED PARTY TRANSACTIONS
At
December 31, 2016, the Company had a Note outstanding from a related party (Fountainhead Capital Management Limited in the aggregate
amount of $496,611, which bears interest at 6% per annum and represents amounts loaned to the Company to pay the Company’s
operating expenses. On December 31, 2016, the Payee under the Note and the Company agreed to extend the maturity date of the Note
to December 31, 2017.
The
Company entered into a Services Agreement with a related party (Fountainhead Capital Management Limited (“FHM”)),
a shareholder who holds approximately 80.8% of the Company’s issued and outstanding common stock. The initial term of the
Services Agreement was one year and the Company is obligated to pay FHM a quarterly fee in the amount of $10,000, in cash or in
kind, on the first day of each calendar quarter commencing May 5, 2008. The term of the Services Agreement has been extended to
December 31, 2017. Total fees paid to FHM for the years ended December 31, 2016 and 2015 were $40,000 and $40,000, respectively.
NOTE
5. INCOME TAXES
The
components of the Company’s deferred tax asset as of December 31, 2016 and 2015 are as follows:
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Net operating loss carry
forward
|
|
$
|
233,190
|
|
|
$
|
202,377
|
|
Valuation
allowance
|
|
|
(233,190
|
)
|
|
|
(202,377
|
)
|
Net deferred tax asset
|
|
$
|
-
|
|
|
$
|
-
|
|
CYBERSPACE
VITA, INC.
(A
Development Stage Company)
NOTES
TO THE FINANCIAL STATEMENTS
December
31, 2016 and 2015
(audited)
A
reconciliation of income taxes computed at the statutory rate to the income tax amount recorded is as follows:
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Tax at statutory rate
(35%)
|
|
$
|
(30,813
|
)
|
|
$
|
(29,112
|
)
|
Increase in valuation allowance
|
|
|
30,813
|
|
|
|
29,112
|
|
Net deferred tax asset
|
|
$
|
-
|
|
|
$
|
-
|
|
As
of December 31, 2016 and 2015, we have provided a 100% valuation allowance for all deferred tax assets as management has detemined
that it is more-likely-than-not that we will not realize the use of our net operating loss carryforwards.
Upon
adoption of ASC 740 as of January 1, 2008, the Company had no gross unrecognized tax benefits that, if recognized, would favorably
affect the effective income tax rate in future periods. At December 31, 2016, the amount of gross unrecognized tax benefits before
valuation allowances and the amount that would favorably affect the effective income tax rate in future periods after valuation
allowances were $0. The Company has not accrued any additional interest or penalties as a result of the adoption of ASC 740.
The
Company files income tax returns in the United States federal jurisdiction and certain states in the United States. No tax returns
are currently under examination by any tax authorities.
NOTE
6. STOCKHOLDERS’ DEFICIT
The
stockholders’ deficit section of the Company’s financial statements contains the following classes of capital stock
as of December 31, 2016:
* Preferred
stock, $0.001 par value: 10,000,000 shares authorized; -0- shares issued and outstanding.
* Common
stock, $0.001 par value: 100,000,000 shares authorized; 247,550 shares issued and outstanding.
NOTE
7. SUBSEQUENT EVENTS
The
Company has evaluated subsequent events through the date of these financial statements were issued and no events subsequent to
December 31, 2016 have occurred that require recognition or disclosure to the financial statements.
Report
of Independent Registered Public Accounting Firm
Member
of
Project
1493, LLC
Dorado,
Puerto Rico
We
have audited the accompanying balance sheet of Project 1493, LLC. (the “Company”) as of April 30, 2017. This financial
statement is the responsibility of the Company’s management. Our responsibility is to express an opinion on this financial
statement based on our audit.
We
conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the balance sheet.
An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating
the overall balance sheet presentation. We believe that our audit of the balance sheet provides a reasonable basis for our opinion.
In
our opinion, the balance sheet referred to above presents fairly, in all material respects, the financial position of Project
1493, LLC at April 30, 2017, in conformity with accounting principles generally accepted in the United States of America.
/s/
Turner, Stone & Company, LLP
Dallas,
Texas
May
15, 2017
Project
1493, LLC filed a Certificate of Restoration on March 17, 2017. As such, there is no comparative information presented related
to the three months ended April 30, 2016.
Project
1493, LLC
Balance
Sheet
April
30, 2017
Assets
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
Prepaid
Expenses
|
|
$
|
21,734
|
|
Total Curent Assets
|
|
|
21,734
|
|
|
|
|
|
|
Other Assets
|
|
|
|
|
Deposit
(Note 7)
|
|
|
150,000
|
|
Total Other Assets
|
|
|
150,000
|
|
|
|
|
|
|
Total
Assets
|
|
$
|
171,734
|
|
|
|
|
|
|
Liabilities and Member
Equity
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
Advances Payable,
related party (Note 5)
|
|
$
|
20,734
|
|
Short
term advance, related parties
(Notes 5 and 6)
|
|
|
150,000
|
|
Total
Current Liabilities
|
|
|
170,734
|
|
|
|
|
|
|
Total
Liabilities
|
|
|
170,734
|
|
|
|
|
|
|
Commitments and Contingencies
(Note 7)
|
|
|
|
|
|
|
|
|
|
Member Equity (Note
3)
|
|
|
|
|
|
|
|
|
|
Member equity
|
|
|
1,000
|
|
|
|
|
|
|
Total
Member Equity
|
|
|
1,000
|
|
|
|
|
|
|
Total
Liabilities and Member Equity
|
|
$
|
171,734
|
|
The
accompanying footnotes are an integral part of this financial statement.
Project
1493, LLC
Notes
to Balance Sheet
April
30, 2017
1.
Nature of Operations
Project
1493, LLC (“Company”) was organized under the laws of the Commonwealth of Puerto Rico on March 17, 2017. The Company
was formerly known as Grey Finland Advisors, LLC (“Grey”), which was organized under the laws of the Commonwealth
of Puerto Rico on March 24, 2011, and has had no operations since that time. The Company filed a Certificate of Restoration on
March 17, 2017 and elected to change its name to Project 1493, LLC.
The
Company will operate licensed cannabis dispensaries throughout Puerto Rico. Currently, the Company is focused on identifying sites,
purchasing pre-qualifications to dispensary licenses, building sites and opening dispensaries for service. The Company has executed
two Memorandums of Understanding (“MOU”) to acquire four cannabis dispensaries. (Note 7).
Omitted
financial statements
Since
the Company has had nominal activity since its inception through April 30, 2017, the Company is omitting the Statement of Operations
and Statement of Cash Flows. The Company has had nominal equity activity since inception through April 30, 2017. As of April 30,
2017 the sole member contributed $1,000. See Note 3.
2.
Summary of Significant Accounting Policies
Basis
of Presentation
The
balance sheet of the Company has been prepared in accordance with generally accepted accounting principles in the United States
of America.
Use
of Estimates and Assumptions
The
preparation of the balance sheet in conformity with U.S. generally accepted accounting principles 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 of the balance sheet.
Cash
and cash equivalents
The
Company considers all cash on hand, cash in banks and all highly liquid debt instruments purchased with a maturity of three months
or less to be cash and cash equivalents. At times, cash and cash equivalent balances at a limited number of banks and financial
institutions may exceed insurable amounts. The Company believes it mitigates its risks by depositing cash or investing in cash
equivalents in major financial institutions. At April 30, 2017 the Company had no cash.
Revenue
Recognition
The
Company will recognize revenue when:
|
●
|
Persuasive
evidence of an arrangement exists:
|
|
●
|
Delivery
has occurred;
|
|
●
|
Price
is fixed or determinable; and
|
|
●
|
Collectability
is reasonably assured.
|
Project
1493, LLC
Notes
to Balance Sheet
April
30, 2017
The
Company follows the provisions of the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic (“ASC”)
605, “Revenue Recognition”, which includes the guidelines of Staff Accounting Bulletin No. 104 as described above.
Fair
Value of Financial Instruments
The
carrying value of the Company’s current liabilities approximates fair value because of the short maturity of these instruments.
Unless otherwise noted, it is management’s opinion the Company is not exposed to significant interest, currency or credit
risks arising from these financial instruments.
Income
Taxes
The
Company will follow the accrual method of accounting for income taxes. Under this method, deferred income tax assets and liabilities
are recognized for the estimated tax consequences attributable to differences between the financial statement carrying values
and their respective income tax basis (temporary differences). The effect on the deferred income tax assets and liabilities of
a change in tax rates is recognized in income in the period that includes the enactment date. The Company was organized under
the laws of the Commonwealth of Puerto Rico, and therefore will be taxed at normal U.S. Federal corporate income tax rates.
Recent
Accounting Pronouncements
As
of April 30, 2017 and through May 15, 2017, there were several new accounting pronouncements issued by the Financial Accounting
Standards Board. Each of these pronouncements, as applicable, has been or will be adopted by the Company. Management does not
believe the adoption of any of these accounting pronouncements has had or will have a material impact on the Company’s financial
position or future operating results. The Company will monitor these emerging issues to assess any potential future impact on
its financial statements.
3.
Member Equity
On
March 17, 2017, the Company authorized the issuance of 1,000 units to Peach Management, LLC (“Peach”) for $1,000,
used for prepaid expenses on behalf of the Company. Peach is beneficially owned 100% by Christian Briggs, the Company’s
sole manager.
4.
Income Taxes
Deferred
income taxes are reported using the liability method. Deferred tax assets are recognized for deductible temporary differences
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. Deferred tax assets are reduced by a valuation allowance when,
in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.
Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Current
and accumulated deferred tax benefit will be at the effective U.S. Federal corporate income tax rates.
Project
1493, LLC
Notes
to Balance Sheet
April
30, 2017
5.
Related Party Transactions
Since
inception of the Company through April 30, 2017, Peach advanced $20,734, unsecured and payable upon demand, to the Company for
various prepaid expenses for professional fees and restoration fees for the Company to be in compliance with Puerto Rico laws.
The advance does not bear interest or accrue interest.
On
April 18, 2017 Peach made a short term advance of $150,000 to the Company. The proceeds of the loan were used as a 50% deposit
for the purchase of the first three dispensaries, according to the Memorandum of Understanding with Puerto Rico Industrial Commercial
Holdings Biotech Corporation (“PRICHBC”), an unrelated third party. See Note 7.
6.
Short Term Advance
On
April 18, 2017 the Company entered into an unsecured short term advance from Peach of $150,000, payable upon demand. The short
term advance does not carry an interest rate and is not subject to an interest accrual.
7.
Commitments and Contingencies
Reverse
Acquisition
On
March 22, 2017 the Company entered a binding term sheet (“term sheet”) with Cyberspace Vita, Inc. (“CVI”)
whereby CVI will acquire 100% of the membership interests of the Company. The anticipated closing date was April 1, 2017, but
was amended on April 28, 2017 to extend the transaction until May 31, 2017. CVI is a publicly traded company listed on the OTC
markets. The Company will enter into a securities exchange agreement with CVI which exchange shall qualify as a tax-free reorganization
under the U.S. Internal Revenue Code, and pursuant to which all of the outstanding membership interests of the Company will be
exchanged for shares of CVI common stock. In the exchange, Peach will receive 16,178,091 CVI shares.
Escrow
Agreement
On
April 18, 2017, the Company entered into an escrow agreement with PRIHBC with the intention of purchasing three medicinal cannabis
dispensaries for $300,000. The agreement states the funds will be held by the escrow agent, Sichenzia Ross Ference Kesner (“Sichenzia”).
The Company deposited $150,000 into the escrow account as of April 30, 2017. The escrow agreement expires June 2, 2017. If the
Company determines that a misrepresentation of fact has been made, the Company will be entitled to the full reimbursement of any
amount that may be held in escrow and termination of the agreement.
Memorandum
of Understanding – PRIHBC
On
April 19, 2017, the Company entered into a Memorandum of Understanding (“MOU”) with PRIHBC to purchase three medical
marijuana dispensaries in Puerto Rico for $300,000. The Company deposited $150,000 into escrow with Sichenzia for a deposit towards
the purchase price. The agreement sells all legal rights, permits, licenses, leasing contracts and assets of the three dispensaries
from PRIHBC to the Company. The Company is in the 45 day due diligence period, which ends June 2, 2017 and the funds have not
been disbursed from escrow. During the due diligence period, the Company has exclusive negotiation rights regarding the proposed
acquisition. The Company can terminate the MOU for misrepresentation of material facts with the due diligence period or failure
to cooperate with the Company during the due diligence period as it may pertain to furnishing material information related to
the representations made by PRIHBC.
Project
1493, LLC
Notes
to Balance Sheet
April
30, 2017
Memorandum
of Understanding – Good Vibes Distributors, LLC (“Good Vibes”)
On
April 6, 2017, the Company entered into a MOU with Good Vibes to purchase one medicinal cannabis dispensary in Puerto Rico for
$75,000. The MOU called for $7,500 funded into escrow with Sichenzia for a deposit towards the purchase price. As of May 10, 2017
the deposit has not been made to the escrow account. The agreement sells all assets, rights and licenses from Good Vibes to the
Company. The Company is in the 45 day due diligence period which ends on May 21, 2017. During the due diligence period, the Company
has exclusive negotiation rights regarding the proposed acquisition. The agreement establishes a non-compete clause with Good
Vibes for a five mile radius of the dispensary. The Company can terminate the MOU for misrepresentation of material facts with
the due diligence period or failure to cooperate with the Company during the due diligence period as it may pertain to furnishing
material information related to the representations made by Good Vibes. If there is a misrepresentation by Good Vibes, the Company
is entitled to any amount held in escrow and $50,000 for legal and accounting expenses incurred during the due diligence period.
Long
Term Supply Agreement
On
April 18, 2017 the Company entered into a long term supply agreement (“supply agreement”) with to purchase flower
and manufactured products for the dispensaries upon approval of the appropriate licensing by the Puerto Rico Department of Health.
The Company will purchase at least 50% of all flower and manufactured products to be sold in the dispensaries owned by the Company
or its affiliates. The supply agreement is valid for ten years from the moment of its coming into effect. If neither party announces
termination of the supply agreement thirty days before its stated expiration, the supply agreement shall be automatically extended
for each subsequent year with no limit of years.
Risk
of Prosecution for Marijuana-Related Companies
A
company that is connected to the marijuana industry must be aware that marijuana-related companies may be at risk of federal,
and perhaps state, criminal prosecution. The Department of Treasury recently issued guidance noting: “The Controlled Substances
Act” (“CSA”) makes it illegal under federal law to manufacture, distribute, or dispense marijuana. Many states
impose and enforce similar prohibitions. Notwithstanding the federal ban, as of the date of this guidance, 20 states and the District
of Columbia have legalized certain marijuana-related activity.
CONTENTS
Cyberspace
Vita, Inc.
Pro
Forma Consolidated Balance Sheets
(Unaudited)
|
|
Cyberspace
|
|
|
Project
|
|
|
|
|
|
|
|
|
|
|
|
Vita, Inc.
|
|
|
1493, LLC
|
|
|
Pro Forma
|
|
|
|
|
Pro Forma
|
|
|
|
Mar.
31, 2017
|
|
|
April
30, 2017
|
|
|
Adjustments
|
|
|
Notes
|
|
Balance
Sheet
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
3,300,000
|
|
|
2b
|
|
$
|
3,300,000
|
|
Prepaid
Expenses
|
|
|
0
|
|
|
|
21,734
|
|
|
|
0
|
|
|
|
|
|
21,734
|
|
Total
Current Assets
|
|
|
0
|
|
|
|
21,734
|
|
|
|
3,300,000
|
|
|
|
|
|
3,321,734
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
0
|
|
|
|
150,000
|
|
|
|
0
|
|
|
|
|
|
150,000
|
|
Total
Other Assets
|
|
|
0
|
|
|
|
150,000
|
|
|
|
0
|
|
|
|
|
|
150,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
0
|
|
|
$
|
171,734
|
|
|
$
|
3,300,000
|
|
|
|
|
$
|
3,471,734
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Owner
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
6,516
|
|
|
$
|
0
|
|
|
($
|
6,516
|
)
|
|
2b
|
|
$
|
0
|
|
Advance payable
- related party
|
|
|
0
|
|
|
|
20,734
|
|
|
|
0
|
|
|
|
|
|
20,734
|
|
Short term advance,
related party
|
|
|
0
|
|
|
|
150,000
|
|
|
|
0
|
|
|
|
|
|
150,000
|
|
Accrued interest
- related party
|
|
|
129,265
|
|
|
|
0
|
|
|
|
(129,265
|
)
|
|
2b
|
|
|
0
|
|
Notes
payable - related party
|
|
|
510,652
|
|
|
|
0
|
|
|
|
(510,652
|
)
|
|
2b
|
|
|
0
|
|
Total
current liabilities
|
|
|
646,433
|
|
|
|
170,734
|
|
|
|
(646,433
|
)
|
|
|
|
|
170,734
|
|
Total
Liabilities
|
|
|
646,433
|
|
|
|
170,734
|
|
|
|
(646,433
|
)
|
|
|
|
|
170,734
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
and Member Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock
|
|
|
0
|
|
|
|
0
|
|
|
|
1
|
|
|
2b
|
|
|
1
|
|
Common Stock
|
|
|
248
|
|
|
|
0
|
|
|
|
29,753
|
|
|
2a, 2b
|
|
|
30,001
|
|
Member Equity
|
|
|
0
|
|
|
|
1,000
|
|
|
|
(1,000
|
)
|
|
2a, 2b
|
|
|
0
|
|
Additional paid-in
capital
|
|
|
44,030
|
|
|
|
0
|
|
|
|
3,226,968
|
|
|
2a
|
|
|
3,270,998
|
|
Accumulated
Deficit
|
|
|
(690,711
|
)
|
|
|
0
|
|
|
|
690,711
|
|
|
2a
|
|
|
0
|
|
Total
Stockholders’ (Deficit) and Member Equity
|
|
|
(646,433
|
)
|
|
|
1,000
|
|
|
|
3,946,433
|
|
|
|
|
|
3,301,000
|
|
Total
Liabilities and Stockholders’ (Deficit) and Member Equity
|
|
$
|
0
|
|
|
$
|
171,734
|
|
|
$
|
3,300,000
|
|
|
|
|
$
|
3,471,734
|
|
Cyberspace
Vita, Inc.
Pro
Forma Consolidated Statement of Operations
(Unaudited)
|
|
Cyberspace
|
|
|
Project
|
|
|
|
|
|
|
|
|
|
|
|
Vita, Inc.
|
|
|
1493, LLC
|
|
|
|
|
|
|
|
|
|
|
|
For
the Three Months Ended Mar. 31, 2017
|
|
|
For
the Four Months Ended Apr. 30, 2017
|
|
|
Pro
Forma Adjustments
|
|
|
Notes
|
|
Pro
Forma Statement of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Professional fees
|
|
|
5,500
|
|
|
|
0
|
|
|
|
(5,500
|
)
|
|
2a
|
|
|
0
|
|
Management Fees-related party
|
|
|
10,000
|
|
|
|
0
|
|
|
|
(10,000
|
)
|
|
2a
|
|
|
0
|
|
General and administrative
|
|
|
1,561
|
|
|
|
0
|
|
|
|
(1,561
|
)
|
|
2a
|
|
|
0
|
|
Operating
Loss
|
|
|
(17,061
|
)
|
|
|
0
|
|
|
|
17,061
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense-related
party
|
|
|
(7,349
|
)
|
|
|
0
|
|
|
|
7,349
|
|
|
2a
|
|
|
(7,349
|
)
|
Net
Loss
|
|
$
|
(24,410
|
)
|
|
$
|
0
|
|
|
$
|
24,410
|
|
|
|
|
$
|
(7,349
|
)
|
Cyberspace
Vita, Inc.
Pro
Forma Consolidated Statement of Stockholders’ Equity
(Unaudited)
|
|
Preferred
|
|
|
Preferred
|
|
|
Common
|
|
|
Common
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Stock
|
|
|
Stock
|
|
|
Stock
|
|
|
Member
|
|
|
Paid-in
|
|
|
Retained
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Equity
|
|
|
Capital
|
|
|
Deficit
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December
31, 2016
|
|
|
0
|
|
|
$
|
0
|
|
|
|
247,550
|
|
|
$
|
248
|
|
|
$
|
0
|
|
|
$
|
44,030
|
|
|
$
|
(690,711
|
)
|
|
$
|
(646,433
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,000
|
|
|
|
|
|
|
|
|
|
|
$
|
1,000
|
|
Common stock issued for debt exchange
|
|
|
0
|
|
|
|
0
|
|
|
|
1,600,000
|
|
|
|
1,600
|
|
|
|
0
|
|
|
|
(706,403
|
)
|
|
|
0
|
|
|
|
(704,803
|
)
|
Recapitalization for reverse acquistion
of Project 1493, LLC
|
|
|
1,000
|
|
|
|
1
|
|
|
|
16,690,912
|
|
|
|
16,691
|
|
|
|
(1,000
|
)
|
|
|
644,833
|
|
|
|
690,711
|
|
|
|
1,351,236
|
|
Common stock issued for cash
|
|
|
0
|
|
|
|
0
|
|
|
|
8,461,530
|
|
|
|
8,462
|
|
|
|
0
|
|
|
|
3,291,538
|
|
|
|
0
|
|
|
|
3,300,000
|
|
Comons stock issued for services
|
|
|
0
|
|
|
|
0
|
|
|
|
3,000,000
|
|
|
|
3,000
|
|
|
|
0
|
|
|
|
(3,000
|
)
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of April 30, 2017
|
|
|
1,000
|
|
|
$
|
1
|
|
|
|
29,999,992
|
|
|
$
|
30,001
|
|
|
$
|
-
|
|
|
$
|
3,270,998
|
|
|
$
|
0
|
|
|
$
|
3,301,000
|
|
The
accompanying notes are an integral part of these consolidated financial statements.
Cyberspace
Vita, Inc.
Pro
Forma Consolidated Statement of Cash Flows
|
|
Cyberspace
|
|
|
Project
|
|
|
|
|
|
|
|
|
|
|
|
Vita,
Inc.
|
|
|
1493,
LLC
|
|
|
|
|
|
|
|
|
|
|
|
For
the Three Months Ended Mar. 31, 2017
|
|
|
For
the Four Months Ended Apr. 30, 2017
|
|
|
Pro
Forma Adjustments
|
|
|
Notes
|
|
Pro
Forma Statement of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Operating
Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(24,410
|
)
|
|
$
|
0
|
|
|
$
|
24,410
|
|
|
2a
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to Reconcile
Net Loss to Net Cash used in Operating Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (Decrease)
in accounts payable
|
|
|
3,020
|
|
|
|
0
|
|
|
|
(3,020
|
)
|
|
2a
|
|
|
0
|
|
Increase
in accrued interest- related party
|
|
|
7,349
|
|
|
|
0
|
|
|
|
(7,349
|
)
|
|
2a
|
|
|
0
|
|
Net
cash used in operating activities
|
|
|
(14,041
|
)
|
|
|
0
|
|
|
|
14,041
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing
Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from shareholder loans
|
|
|
14,041
|
|
|
|
0
|
|
|
|
(14,041
|
)
|
|
2a
|
|
|
0
|
|
Net
Cash Provided by Financing Activities
|
|
|
14,041
|
|
|
|
0
|
|
|
|
(14,041
|
)
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing
Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from issuance of common stock
|
|
|
0
|
|
|
|
0
|
|
|
|
3,300,000
|
|
|
2b
|
|
|
3,300,000
|
|
Net
Cash Provided by Investing Activities
|
|
|
0
|
|
|
|
0
|
|
|
|
3,300,000
|
|
|
|
|
|
3,300,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
|
0
|
|
|
|
0
|
|
|
|
3,300,000
|
|
|
|
|
|
3,300,000
|
|
Cash at beginning of period
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
0
|
|
Cash at end of period
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
3,300,000
|
|
|
|
|
$
|
3,300,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash
flow information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during period for interest
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
$
|
0
|
|
Cash paid during period for income taxes
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
$
|
0
|
|
Cyberspace
Vita, Inc.
Notes
to Unaudited Pro Forma
Consolidated
Financial Statements
April
30, 2017
On
May 11, 2017, Cyberspace Vita, Inc., a Nevada corporation (the “
Company
”) entered into a share exchange agreement
(the “
Exchange Agreement
”) with Project 1493, LLC, a private Puerto Rican limited liability company (“
1493
”),
and the member of 1493 (the “
Members
”), pursuant to which the Members transferred all of the outstanding membership
interests of 1493 to the Company in exchange for 16,690,912 restricted shares of common stock of the Company (the “
Exchange
Shares
”), warrants to purchase up to 3,000,000 shares of common stock at an exercise price of $0.50 per share for a
period of three (3) years from the date of issuance (the “
Exchange Warrants
”) and 1,000 shares of Series A
Preferred Stock that grants the holders thereof fifty-one percent (51%) voting power (the “
Preferred Shares
”
and together with the Exchange Shares, and the Exchange Warrants, the “
Exchange Securities
”). The transaction
closed on May 11, 2017 (the “
Closing Date
”).
As
a result, 1493 became a wholly-owned subsidiary of the Company, and the Members acquired a controlling interest in the Company
(the “
Share Exchange
”). For accounting purposes, the Share Exchange was treated as an acquisition of Cyberspace
Vita and a recapitalization of 1493. 1493 is the accounting acquirer, and the results of its operations carryover. Accordingly,
the operations of Cyberspace Vita are not carried over and have been adjusted to $0.
In
issuing the Exchange Securities to the Members, the Company relied upon the exemption from registration provided by Section 4(a)(2)
of the Securities Act of 1933, as amended, as, among other things, the transaction did not involve a public offering and the securities
were acquired for investment purposes only and not with a view to or for sale in connection with any distribution thereof.
In
connection with the Exchange Agreement, Alexander Diener, our previous Chief Executive Officer, Chief Financial Officer, Treasurer,
Secretary and sole director resigned from all of his positions with the Company effective May 11, 2017. Concurrently therewith,
Leslie Ball was appointed to serve as our Chief Executive Officer and director, and Thomas Gingerich was appointed to serve as
our Chief Financial Officer.
The
unaudited consolidated pro forma statements include the historical unaudited consolidated statements of Cyberspace Vita, Inc.
and Project 1493, LLC giving effect to the Share Exchange and other related events as if it had occurred on April 30, 2017. These
unaudited consolidated pro forma financial statements have been prepared for comparative purposes only and do not purport to be
indicative of the results of operations which actually would have resulted had the transaction occurred on the date indicated
and are not necessarily indicative of the results that may be expected in the future.
Debt
Exchange Agreement
On
May 11, 2017, the Company also entered into a debt exchange agreement (the “
Debt Exchange
”) with Fountainhead
Capital Management Limited (“
Fountainhead
”), a related party, whereby Fountainhead agreed to cancel a promissory
note in the aggregate amount of $510,652 plus accrued interest of $129,265. As consideration, Fountainhead received an aggregate
of 1,800,000 shares of the Company’s common stock, of which 200,000 shares of common stock has been previously issued.
Private
Placement Offering
On
May 11, 2017, the Company entered into a subscription agreement (the “Subscription Agreement”) with selected accredited
investors (each, an “Investor” and, collectively, the “Investors”). Pursuant to the terms of the Subscription
Agreement, the Company offered in a private placement (the “Offering”) a minimum of $1,000,000 and up to a maximum
of $3,300,000 of its securities, consisting of (i) shares of its common stock (“Shares”); and (ii) warrants to purchase
shares of the Company’s common stock (the “Warrants”). Each Warrant shall be exercisable at any time on or after
the date of issuance for a period of three (3) years at an exercise price per share equal to $0.50 per share, subject to adjustment
as provided in the agreement evidencing the Warrants. The number of shares of common stock underlying the Warrants is equal to
30% of the number of Shares issued to each Investor in the Offering (the “Warrant Shares”).
Cyberspace
Vita, Inc.
Notes
to Unaudited Pro Forma
Consolidated
Financial Statements
April
30, 2017
The
Offering closed on May 11, 2017. The Company issued a total of 8,461,538 Shares and 2,538,462 Warrants to purchase up to 2,538,462
shares of the Company’s common stock, for total gross proceeds of $3,300,000.
The
foregoing descriptions of the Exchange Agreement, Debt Exchange and Subscription Agreement does not purport to be complete and
is qualified in its entirety by reference to the complete text of the Exchange Agreement, Debt Exchange and Subscription Agreement,
filed as Exhibits 10.1, 10.2, and 10.3, respectively, hereto and incorporated herein by reference.
Other
Issuances
In
connection with the Exchange Agreement, Debt Exchange and Subscription Agreement, the Company issued to certain consultants an
aggregate of 3,000,000 shares of common stock and warrants to purchase up to an aggregate of 500,000 shares of common stock at
an exercise price of $0.50 per share for a period of three (3) years from the date of issuance.
In
connection with the foregoing issuances, the Company relied upon the exemption from securities registration provided by Section
4(a)(2) under the Securities Act of 1933, as amended (the “
Securities Act
”) for transactions not involving
a public offering.
|
2.
|
Summary
of Significant Accounting Policies
|
Basis
of Presentation
The
accompanying unaudited pro forma consolidated balance sheet have been presented as of April 30, 2017.The unaudited pro forma consolidated
statements of operations, cash flow and stockholders’ ended April 30, 2017, as well as the unaudited pro forma consolidated
statement of changes in stockholders’ equity for the period ended April 30, 2017 have been presented as if the acquisition
had occurred April 30, 2017.
As
described in Note 1 above, on May 11, 2017, we acquired all the issued and outstanding shares of 1493 pursuant to the Exchange
Agreement and 1493 became our wholly-owned subsidiary. The acquisition was accounted for as a recapitalization effected by a share
exchange, wherein 1493 is considered the acquirer for accounting and financial reporting purposes. The assets and liabilities
of 1493 have been brought forward at their book value and no goodwill has been recognized.
As
a result of the acquisition of all the issued and outstanding membership interest of 1493, we have now assumed 1493’s business
operations as our own and we are no longer a shell corporation as the term is defined in Rule 405 of the Securities Act and Rule
12b-2 of the Exchange Act.
The
unaudited pro forma adjustments are included in the accompanying unaudited pro forma consolidated balance sheet as of April 30,
2017, the unaudited pro forma consolidated statements of operations for the period ended April 30, 2017.
|
a.
|
To
record the spin-off of the Company’s liabilities prior to the reverse acquisition;
|
|
b.
|
These
adjustments reflect the recapitalization as a result of the transactions related to the
share exchange.
|
The
unaudited pro forma consolidated statements do not necessarily represent the actual results that would have been achieved had
the companies been combined at the beginning of the year, nor may they be indicative of future operations. These unaudited pro
forma financial statements should be read in conjunction with the companies’ respective historical financial statements
and notes included thereto.
PART
II - INFORMATION NOT REQUIRED IN PROSPECTUS
Item
13. Other Expenses of Issuances and Distribution.
The
following table sets forth the costs and expenses payable by us in connection with the issuance and distribution of the securities
being registered. None of the following expenses are payable by the selling stockholders. All of the amounts shown are estimates,
except for the SEC registration fee.
SEC registration fee
|
|
$
|
3,000.00
|
|
Legal fees and expenses
|
|
$
|
50,000.00
|
|
Accounting fees and expenses
|
|
$
|
5,000.00
|
|
Miscellaneous
|
|
$
|
5,000.00
|
|
TOTAL
|
|
$
|
63,000.00
|
|
Item
14. Indemnification of Directors and Officers.
Nevada
Revised Statutes (“NRS”) Sections 78.7502 and 78.751 provide us with the power to indemnify any of our directors and
officers. The director or officer must have conducted himself/herself in good faith and reasonably believe that his/her conduct
was in, or not opposed to, our best interests. In a criminal action, the director, officer, employee or agent must not have had
reasonable cause to believe his/her conduct was unlawful.
Under
NRS Section 78.751, advances for expenses may be made by agreement if the director or officer affirms in writing that he/she believes
he/she has met the standards and will personally repay the expenses if it is determined such officer or director did not meet
the standards.
We
are also permitted to apply for insurance on behalf of any director, officer, employee or other agent for liability arising out
of his actions, whether or not the NRS would permit indemnification.
Insofar
as indemnification for liabilities arising under the Securities Act may be permitted for our directors, officers and controlling
persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the SEC such indemnification
is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
Item
15. Recent Sales of Unregistered Securities.
Share
Exchange Agreement
On
May 11, 2017, the Company entered into the Exchange Agreement with Peter Zachariou, the majority shareholder of the Company (the
“Shareholder”), Project 1493, LLC, a limited liability company organized under the laws of the Commonwealth of Puerto
Rico (“1493”), and the sole member of 1493 (the “Member”), pursuant to which the Member transferred all
of the outstanding membership interests of 1493 to the Company in exchange for 16,690,912 restricted shares of common stock of
the Company (the “Exchange Shares”) and warrants to purchase up to 3,000,000 shares of common stock at an exercise
price of $0.50 per share for a period of three (3) years from the date of issuance (the “Exchange Warrants”, and together
with the Exchange Shares, the “Exchange Securities”). The transaction closed on May 11, 2017 (the “Closing Date”).
In
issuing the Exchange Securities to the Member, the Company relied upon the exemption from registration provided by Section 4(a)(2)
of the Securities Act of 1933, as amended, as, among other things, the transaction did not involve a public offering and the securities
were acquired for investment purposes only and not with a view to or for sale in connection with any distribution thereof.
Debt
Exchange Agreement
On
May 11, 2017, the Company also entered into a debt exchange agreement (the “Debt Exchange”) with Fountainhead Capital
Management Limited (“Fountainhead”), a related party, whereby Fountainhead agreed to cancel a promissory note in the
aggregate amount of $510,652 plus accrued interest of $129,265. As consideration, Fountainhead received an aggregate of 1,800,000
shares of the Company’s common stock, of which 200,000 shares of common stock have already been issued.
Private
Placement Offering
On
May 11, 2017, the Company entered into a subscription agreement (the “Subscription Agreement”) with selected accredited
investors (each, an “Investor” and, collectively, the “Investors”). Pursuant to the terms of the Subscription
Agreement, the Company had the right to sell in a private placement (the “Offering”) a minimum of $1,000,000 and up
to a maximum of $3,300,000 of its securities, consisting of (i) shares of its common stock (“Shares”), and (ii) warrants
to purchase shares of common stock (the “Warrants”), at a purchase price of $0.39 per Share. Each Warrant shall be
exercisable at any time on or after the date of issuance for a period of three (3) years at an exercise price per share equal
to $0.50 per share, subject to adjustment as provided in the agreement evidencing the Warrants. The number of shares of common
stock underlying the Warrants is equal to 30% of the number of Shares issued to each Investor in the Offering (the “Warrant
Shares”).
The
Offering closed on May 11, 2017. The Company issued a total of 8,461,538 Shares and 2,538,462 Warrants to purchase up to 2,538,462
for total gross proceeds of $3,300,000.
Other
Issuances
In
connection with the Exchange Agreement, Debt Exchange and Subscription Agreement, the Company issued to certain consultants an
aggregate of 3,000,000 shares of common stock and warrants to purchase up to an aggregate of 500,000 shares of common stock at
an exercise price of $0.50 per share for a period of three (3) years from the date of issuance.
In
connection with the foregoing issuances, the Company relied upon the exemption from securities registration provided by Section
4(a)(2) under the Securities Act for transactions not involving a public offering.
Item
16. Exhibits and Financial Statement Schedules.
(a)
Exhibits.
The
exhibits to the registration statement are listed in the Exhibit Index to this registration statement and are incorporated by
reference herein.
(b)
Financial Statement Schedules.
All
financial statement schedules have been omitted, since the required information is not applicable or is not present in amounts
sufficient to require submission of the schedule, or because the information required is included in the financial statements
and notes thereto.
Item
17. Undertakings.
The
undersigned registrant hereby undertakes:
(1)
To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i)
To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
(ii)
To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement;
(iii)
To include any material information with respect to the plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement.
(2)
That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial
bona fide
offering thereof.
(3)
To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold
at the termination of the offering.
(4)
That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, each prospectus filed pursuant
to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule
430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration
statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement
or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference
into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of
contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus
that was part of the registration statement or made in any such document immediately prior to such date of first use.
(5)
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that
in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy
as expressed in the Act and will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement on Form S-1 to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Juan, Commonwealth of Puerto Rico on the
18 day of August 2017.
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GREEN
SPIRIT INDUSTRIES INC.
(Registrant)
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By:
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/s/
Leslie Ball
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Name:
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Leslie
Ball
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Title:
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Chief
Executive Officer and Director
(Principal
Executive Officer)
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Pursuant
to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Name
|
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Title
|
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Date
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|
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/s/
Leslie Ball
|
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Chief
Executive Officer and Director
(Principal
Executive Officer)
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August
18,
2017
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Leslie
Ball
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/s/
Thomas Gingerich
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Chief
Financial Officer, (Principal Accounting Officer), and Secretary
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August
18, 2017
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Thomas
Gingerich
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EXHIBIT
INDEX
Exhibit
No.
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Exhibit
Description
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3.1
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Articles of Incorporation
(Incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission
on May 15, 2017)
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3.3
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By-Laws (Incorporated
by reference to Exhibit 3.2 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on May 15,
2017)
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3.4
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Certificate of Designation
of Series A Convertible Preferred Stock (Incorporated by reference to Exhibit 3.3 to the Current Report on Form 8-K filed
with the Securities and Exchange Commission on May 15, 2017)
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5.1
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Opinion of Sichenzia
Ross Ference Kesner LLP
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10.1
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Share Exchange Agreement
(Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission
on May 15, 2017)
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10.2
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Form of Debt Exchange
Agreement (Incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed with the Securities and Exchange
Commission on May 15, 2017)
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10.3
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Form of Private
Placement Subscription Agreement (Incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed with the
Securities and Exchange Commission on May 15, 2017)
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10.4
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Form of Warrant
(Incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K filed with the Securities and Exchange Commission
on May 15, 2017)
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10.5
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Final
Purchasing Agreement between Puerto Rico Industrial Commercial Holdings Biotech Corporation and Project 1493, LLC, dated July
7, 2017 (Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the Securities and Exchange
Commission on July 17, 2017)
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10.6
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Carolina
Lease Assignment, dated June 15, 2017 (Incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed with
the Securities and Exchange Commission on July 17, 2017)
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10.7
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Dorado
Lease Assignment, dated June 7, 2017 (Incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed with
the Securities and Exchange Commission on July 17, 2017)
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10.8
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Final
Purchasing Agreement between Good Vibes Distributors, LLC, and Project 1493, LLC, dated July 7, 2017 (Incorporated by reference
to Exhibit 10.4 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on July 17, 2017)
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10.9
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Lease
Agreement between Olympic Properties, Inc. and Project 1493, LLC, dated July 11, 2017 (Incorporated by reference to Exhibit
10.5 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on July 17, 2017)
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10.10
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Fajardo Lease Assignment, dated
July 27, 2017 (Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the Securities and Exchange
Commission on July 31, 2017)
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10.11
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Isla
Verde Lease Agreement, dated July 25, 2017 (Incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed
with the Securities and Exchange Commission on July 31, 2017)
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10.12
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Long-term
Supply Agreement, dated April 18, 2017 *
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23.1
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Consent of Paritz
& Company, P.A. *
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23.2
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Consent of Turner,
Stone & Company, LLP *
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23.3
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Consent of Sichenzia
Ross Ference Kesner LLP (Included in Exhibit 5.1) *
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*
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Filed
herewith.
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