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Groove Botanicals Inc. – ‘10-Q’ for 12/31/17

On:  Thursday, 4/25/19, at 12:10pm ET   ·   For:  12/31/17   ·   Accession #:  1607062-19-179   ·   File #:  1-12850

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  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 4/25/19  Groove Botanicals Inc.            10-Q       12/31/17   51:2.1M                                   SimpleSEC/FA

Document/Exhibit                   Description                      Pages   Size 

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                (Parenthetical)                                                  
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                (Unaudited)                                                      
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                (Unaudited)                                                      
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                (Policies)                                                       
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                (Details Narrative)                                              
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________

FORM 10-Q

____________

☒  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2017

Or

☐  TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission File Number: 1-12850

GROOVE BOTANICALS, INC.

(Exact Name of Small Business Issuer as specified in its charter)

310 Fourth Avenue South, Suite 7000

Minneapolis, MN 55415

(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code:

(952) 746-9652

Indicate by check mark whether the Issuer:

(1) Has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports):

Yes  ☒    No  ☐

(2) Has been subject to such filing requirements for the past 90 days.

Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes  ☒  No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes ☐  No ☒

28,293,062  shares of our common stock were issued and outstanding as of April 24, 2019.

Table of Contents

GROOVE BOTANICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2017

(Unaudited)

NOTE 1: DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Corporate Structure

Groove Botanicals, Inc. (the "Company"), (formerly known as Avalon Oil & Gas, Inc.), was originally incorporated in Colorado in April 1991 under the name Snow Runner (USA), Inc. The Company was the general partner of Snow Runner (USA) Ltd.; a Colorado limited partnership to sell proprietary snow skates under the name "Sled Dogs" which was dissolved in August 1992. In late 1993, the Company relocated its operations to Minnesota and in January 1994 changed our name to Snow Runner, Inc. In November 1994 we changed our name to the Sled Dogs Company. On November 5, 1997, we filed for protection under Chapter 11 of the U.S. Bankruptcy Code. In September 1998, we emerged from protection of Chapter 11 of the U.S. Bankruptcy Code. In May, 1999, we changed our state of domicile to Nevada and our name to XDOGS.COM, Inc. On July 22, 2005, the Board of Directors and a majority of the Company's shareholders approved an amendment to our Articles of Incorporation to change the Company's name to Avalon Oil & Gas, Inc., and to increase the authorized number of shares of our common stock from 200,000,000 shares to 1,000,000,000 shares par value of $0.001, and engage in the acquisition of producing oil and gas properties. On November 16, 2011, a majority of the Company's shareholders approved an amendment to our Articles of Incorporation to increase the authorized number of shares of our common stock from 1,000,000,000 shares to 3,000,000,000 shares par value of $0.001.  This amendment was not filed with the Nevada Secretary of State.  

On June 4, 2012 the Board of Directors approved an amendment to our Articles of Incorporation to a reverse split of the issued and outstanding shares of Common Stock of the Corporation (“Shares”) such that each holder of Shares as of the record date of June 4, 2012 shall receive one (1) post-split Share on the effective date of June 4, 2012 for each three hundred (300) Shares owned.  The reverse split was effective on July 23, 2012.   On September 28, 2012, we held a special meeting of Avalon’s shareholders and approved an amendment to the Company’s Articles of Incorporation such that the Company would be authorized to issue up to 200,000,000 shares of common stock.  We filed an amendment with the Nevada Secretary of State on April 10, 2013, to increase our authorized shares to 200,000,000.

On March 21, 2018 the Board of Directors and a majority of the Company's shareholders approved an amendment to our Articles of Incorporation to change the Company's name to Groove Botanicals, Inc. We filed an amendment to our Articles of Incorporation with the State of Nevada on May 18, 2018.

Principles of consolidation

The condensed consolidated financial statements include the accounts of the Company and the Company’s subsidiary’s Oiltek, Inc., AFS Holdings, Inc., and Weyer Partners, LLC. All significant inter-company items have been eliminated in consolidation.

Basis of Preparation of Financial Statements 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q.  They do not include all of the information and footnotes required by Accounting Principles generally accepted accounting principles in United States America (“US GAAP”) for complete financial statements and related notes. The accompanying unaudited condensed consolidated financial statements and related notes should be read in conjunction with the audited consolidated financial statements of the Company and notes thereto for the year ended March 31, 2017.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (which include only normal recurring adjustments) necessary to present fairly the balance sheets of Groove Botanicals, Inc. and subsidiaries as of December31, 2017 and the results of their operations for the three months and nine months ended December 31, 2017 and 2016, and cash flows for the nine months ended December 31, 2017 and 2016, and are not necessarily indicative of the results to be expected for the entire year.

GROOVE BOTANICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2017

(Unaudited)

Going Concern

The Company has minimal revenues from our remaining oil and gas assets. We are in need additional cash resources to maintain our operations. The company has incurred a loss of $34,328,577 from inception through December 31, 2017. The Company has a working capital deficit of $1,163,589 and total deficit of $1,128,731 at December 31, 2017. The company has not yet received any revenue from the sale our CBD skincare products. These factors raise substantial doubt about its ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent on its ability to raise additional capital or obtain necessary debt financing. The Company is presently dependent on its controlling shareholder to provide us funding for its daily operation and expenses, including professional fee and fees charged by regulators, although he is under no obligation to do so.

The Company intends to meet the cash requirements for the next 12 months from the issuance date of this report through a combination of debt and equity financing by way of private placements, friends, family and business associates. The Company currently does not have any arrangements in place to complete any private placement financings and there is no assurance that the Company will be successful in completing any such financings on terms that will be acceptable to it.

If we do not have sufficient working capital to pay our operating costs for the next 12 months, we will require additional funds to pay our legal, accounting and other fees associated with our Company and our filing obligations under United States federal securities laws, as well as to pay our other accounts payable generated in the ordinary course of our business. Once these costs are accounted for, we will focus on the manufacture and sale of our CBD skincare products.

Any failure to raise money will have the effect of delaying the timeframes in the business plan as set forth above, and the Company may have to push back the dates of such activities.

The financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company has incurred losses and further losses are anticipated as a result of the development of business which raises substantial doubt about the Company’s ability to continue as a going concern within the next twelve months from the issuance date of this report.  The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or obtaining financing necessary to meet the Company’s obligations and repay its liabilities arising from normal business operations when they come due. Management intends to finance operating costs over the next twelve months with existing cash on hand and loans from directors and/or private placement of the Company’s common stock.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates and assumptions.

GROOVE BOTANICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2017

(Unaudited)

Cash and Cash Equivalents

Cash and cash equivalents consist of cash. The Company maintains its cash balances at several financial institutions. Accounts at the institutions are insured by the Federal Deposit Insurance Corporation up to $250,000.

Fair Value of Financial Instruments

The Company's financial instruments are cash and cash equivalents, accounts payable, notes payable and long-term debt. The recorded values of cash and cash equivalents, and accounts payable approximate their fair values based on their short-term nature. The recorded values of notes payable and long-term debt approximate their fair values, as interest approximates market rates. 

Oil and Natural Gas Properties

The Company follows the full cost method of accounting for natural gas and oil properties.  Under the full cost concept, all costs incurred in acquiring, exploring, and developing properties cost center are capitalized when incurred and are amortized as mineral reserves in the cost center are produced, subject to a limitation that the capitalized costs not exceed the value of those reserves.  The unamortized costs relating to a property that is surrendered, abandoned, or otherwise disposed of are accounted for as an adjustment of accumulated amortization, rather than as a gain or loss that enters into the determination of net income, until all of the properties constituting the amortization base are disposed of, at which point gain or loss is recognized. All acquisition, exploration, and development costs are capitalized. The Company capitalizes all internal costs, including: salaries and related fringe benefits of employees directly engaged in the acquisition, exploration and development of natural gas and oil properties, as well as other identifiable general and administrative costs associated with such activities.  During the three and nine month period ended December 31, 2017, no acquisition costs were capitalized. Oil and natural gas properties are reviewed for recoverability at least annually or when events or changes in circumstances indicate that its carrying value may exceed future undiscounted cash inflows. For the three and nine months ended December 31, 2017 and 2016, the company impaired $0 and $0 in Oil and Gas Properties.

Property and Equipment, net

Property and equipment is reviewed for recoverability when events or changes in circumstances indicate that its carrying value may exceed future undiscounted cash inflows. As of December 31, 2017 and March 31, 2017, the Company had not identified any such impairment. Repairs and maintenance are charged to operations when incurred and improvements and renewals are capitalized.

Property and equipment are stated at cost. Depreciation is calculated using the straight-line method for financial reporting purposes and accelerated methods for tax purposes.

Their estimated useful lives are as follows:

Asset Retirement Obligations

In accordance with the provisions of Financial Accounting Standards Board “FASB” Accounting Standard Codification “ASC” 410-20-15, “Accounting for Asset Retirement Obligations”, the Company records the fair value of its liability for asset retirement obligations in the period in which it is incurred and a corresponding increase in the carrying amount of the related long live assets. Over time, the liability is accreted to its present value at the end of each reporting period, and the capitalized cost is depreciated over the useful life of the related assets. Upon settlement of the liability, the Company will either settle the obligation for its recorded amount or incur a gain or loss upon settlement. The Company's asset retirement obligations relate to the plugging and abandonment of its oil properties.

GROOVE BOTANICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2017

(Unaudited)

Stock Based Compensation

Share awards granted to employees and independent directors are accounted for under ASC 718, "Share-Based Payment". ASC 718-10 eliminates accounting for share-based compensation transaction using the intrinsic value method and requires instead that such transactions be accounted for using a fair-value-based method. The Company has elected to adopt the provisions of ASC 718-10 effective January 1, 2006, under the modified prospective transition method, in which compensation cost was recognized beginning with the effective date (a) based on the requirements of ASC 718-10 for all share-based payments granted after the effective date and (b) based on the requirements of ASC 718-10 for all awards granted to employees prior to the effective date of ASC 718-10 that remain unvested on the effective date. 

The Company records share-based compensation expense for awards granted to non-employees in exchange for services at fair value in accordance with the provisions of ASC 505-50, "Equity Based" payment to non-employees. For the awards granted to non-employees, the Company will record compensation expenses equal to the fair value of the share options at the measurement date, which is determined to be the earlier of the performance commitment date or the service completion date.

Earnings (loss) per Common Share

ASC 260-10-45, “Earnings Per Share”, requires presentation of "basic" and "diluted" earnings per share on the face of the statements of operations for all entities with complex capital structures. Basic earnings per share are computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted during the period. Dilutive securities having an anti-dilutive effect on diluted earnings per share are excluded from the calculation.

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial   statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets, including tax loss and credit carry forwards, and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred income tax expense represents the change during the period in the deferred tax assets and deferred tax liabilities. The components of the deferred tax assets and liabilities are individually classified as current and non-current based on their characteristics. 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.

ASC 740-10-25, “Accounting for Uncertainty in Income Taxes”, is intended to clarify the accounting for uncertainty in income taxes recognized in a company's financial statements and prescribes the recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC 740-10-25 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

GROOVE BOTANICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2017

(Unaudited)

Under ASC 740-10-25, evaluation of a tax position is a two-step process. The first step is to determine whether it is more-likely-than-not that a tax position will be sustained upon examination, including the resolution of any related appeals or litigation based on the technical merits of that position. The second step is to measure a tax position that meets the more-likely-than-not threshold to determine the amount of benefit to be recognized in the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement.

Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent period in which the threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not criteria should be de-recognized in the first subsequent financial reporting period in which the threshold is no longer met.

Revenue Recognition

In accordance with the requirements ASC topic 605 "Revenue Recognition", revenues are recognized at such time as (1) persuasive evidence of an arrangement exists, (2) delivery has occurred or services have been rendered, (3) the seller's price to the buyer is fixed or determinable and (4) collectability is reasonably assured. Specifically, oil and gas sales are recognized as income at such time as the oil and gas are delivered to a viable third party purchaser at an agreed price. Interest income is recognized as it is earned.

Recently Issued Accounting Policies

In May 2014, the FASB issued ASU 2014-9, "Revenue from Contracts with Customers (Topic 606)," which supersedes the revenue recognition requirements in ASC Topic 605, "Revenue Recognition," and most industry-specific guidance. ASU 2014-9 is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-9 also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. ASU 2014-9 applies to all contracts with customers except those that are within the scope of other topics in the FASB ASC. The new guidance is effective for interim and annual reporting periods beginning after December 15, 2017 for public companies. Early adoption is not permitted. Entities have the option of using either a full retrospective or modified retrospective approach to adopt ASU 2014-9.

Additionally, in March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus agent considerations (reporting revenue gross versus net), which clarifies the implementation guidance on principal versus agent considerations on such matters. In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying performance obligations and licensing, which clarifies guidance related to identifying performance obligations and licensing implementation guidance contained in the new revenue recognition standard. In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-scope improvements and practical expedients, which addresses narrow-scope improvements to the guidance on collectability, non-cash consideration, and completed contracts at transition. Additionally, the amendments in this update provide a practical expedient for contract modifications at transition and an accounting policy election related to the presentation of sales taxes and other similar taxes collected from customers. In December 2016, the FASB issued ASU No. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers, which clarifies the guidance or corrects unintended application of guidance.

The Company completed its assessment of the new accounting standard and does not expect the adoption of this standard to have a material impact to our revenue recognition based on our existing contracts with customers. We adopted the new standard during the first quarter of 2018 using the modified retrospective approach and there will be no material impact to our previously recorded revenue under the new standard.  

GROOVE BOTANICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2017

(Unaudited)

NOTE 2: PROPERTY AND EQUIPMENT, NET

A summary of property and equipment at December 31, 2017 and March 31, 2017 is as follows:

Depreciation expense for the three months periods ended December 31, 2017 and 2016 was $1,133 and $1,133, respectively. 

Depreciation expense for the nine months periods ended December 31, 2017 and 2016 was $3,399 and $3,399, respectively.

NOTE 3: OIL AND GAS PROPERTY ACTIVITY 

Producing oil and gas properties consist of the following at December 31, 2017 and March 31, 2017: 

For the three month periods ended December 31, 2017 and 2016, depletion per Bbl was $1.30 and $8.81.

For the nine month periods ended December 31, 2017 and 2016, depletion per Bbl was $1.30 and $8.81.

NOTE 4: ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities consisted of the following:

GROOVE BOTANICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2017

(Unaudited)

NOTE 5: NOTES PAYABLE

Notes Payable are summarized as follows:

The maturity of notes payable, amount of $9,200, has been extended until April 1, 2018. The outstanding principal balance and all outstanding interest was converted into 1,850,000 shares in subsequent three months.

The note payable in the amount of $50,000, issued on November 11, 2008, and its accrued interest, and the $30,000 note payable, issued in the amount of $50,000 on January 27, 2009, and its accrued interest, were settled on March 9, 2018 for $2,500 plus the issuance of 600,000 shares of Common Stock

The principal and accrued interest on $60,000 notes payables were settled in March 20, 2018 for $5,000.

 NOTE 6: RELATED PARTY TRANSACTIONS

Notes Payable

On April 21, 2011, Mr. Rodriguez advanced the Company $35,000. As of December 31, 2017 and March 31, 2017, amount outstanding is $20,000. This note is non-interest bearing and is due on demand.

Series A Convertible Preferred Stock issued to Related Party

Refer to Notes 8, STOCKHOLDERS’ EQUITY, for details of series A convertible preferred stock issued to related party transactions. 

GROOVE BOTANCALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2017

(Unaudited)

Employment Agreements

In 2017, Mr. Rodriguez, our President, was under an employment agreement dated April 1, 2015 that expires on March 31, 2019,  The Company charged to operations the amount of $12,000 and $36,000 for the three and nine month periods ended December 31, 2017 and December 31, 2016, of which $7,520 and $23,545 was paid to him during the three month and nine month periods ending December 31, 2017, and $12,450 and $21,750 during the three and nine month periods ending December 31 2016, respectively.  As of December 31, 2017, and March 31, 2017, the balances of accrued and unpaid salaries were $232,017 and $219,562. 

NOTE 7: INCOME TAXES

Deferred income taxes result from the temporary difference arising from the use of accelerated depreciation methods for income tax purposes and the straight-line method for financial statement purposes, and an accumulation of Net Operating Loss carry-forwards for income tax purposes with a valuation allowance against the carry-forwards for book purposes.

In assessing the value of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. Included in deferred tax assets are Federal and State net operating loss carry forwards of $34,328,577, which will expire beginning in 2028.  The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon our cumulative losses through December 31, 2017, we have provided a valuation allowance reducing the net realizable benefits of these deductible differences to $0 at December 31, 2017.  The amount of the deferred tax asset considered realizable could change in the near term if projected future taxable income is realized.  Due to significant changes in the Company's ownership, the Company's future use of its existing net operating losses may be limited.

NOTE 8: STOCKHOLDERS' DEFICIT

Preferred Stock

Series A Convertible Preferred Stock Issued to Related Party  

The company is authorized 1,000,000 shares of preferred stock, par value of $0.10 per share. The 100 shares of Series A Convertible Preferred Stock Issued to Related Party (“Series A Convertible Preferred Stock”) were issued on June 3, 2002 as payment for $500,000 in promissory notes, are convertible into the number of shares of common stock sufficient to represent forty percent (40%) of the fully diluted shares outstanding after their issuance The holder of these shares of Series A Convertible Preferred Stock is our President, Kent Rodriguez. The Series A Convertible Preferred Stock pays an eight percent (8%) dividend. The dividends are cumulative and payable quarterly. The Series A Convertible Preferred Stock carries liquidating preference, over all other classes of stock, equal to the amount paid for the stock plus any unpaid dividends. The Series A Convertible Preferred Stock provides for voting rights on an "as converted to common stock" basis.

During the years ended March 31, 2017 and 2016, the Company incurred $40,000 in series A convertible preferred stock dividends, respectively.

The holders of the Series A Convertible Preferred Stock have the right to convert each share of preferred stock into a sufficient number of shares of common stock to equal 40% of the then fully-diluted shares outstanding. Fully diluted shares outstanding is computed as the sum of the number of shares of common stock outstanding plus the number of shares of common stock issuable upon exercise, conversion or exchange of outstanding options, and warrants. In the event that the Company does not have an adequate number of shares of Common Stock authorized, upon a conversion request, only the maximum allowable number of shares of Series A convertible preferred stock shall convert into Common Stock and the remaining shares of Series A convertible preferred Stock shall convert upon lapse of the applicable restrictions.

On January 12, 2018, our Board of Directors agreed to amend Designation of the Series A Convertible Preferred Stock be amended by changing the ratio for conversion, in Article IV, subparagraph (a), from .4% to .51% so that upon conversion the number of shares of common stock to be exchanged shall equal 51% of then issued and outstanding common stock.

GROOVE BOTANCIALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2017

(Unaudited)

As of December 31, 2017, the Company has 100 shares of Series A convertible preferred stock issued and outstanding.

During the three months ended December 31, 2017 and 2016, the Company incurred $10,000 and $10,000 in Series A Convertible Preferred Stock dividends, paid $0 and $0 for the three months ended December 31, 2017 and 2016. During the nine months ended December 31, 2017 and 2016, the Company incurred $30,000 and $30,000 in Series A Convertible Preferred Stock dividends, and paid $0 and $1,000 for the nine months ended December 31, 2017 and 2016. As of December 31, 2017 and March 31, 2017, the accrued balance due Mr. Rodriguez was $106,450 and $76,450 respectively. The liquidation preference of Series A Convertible Preferred Stock as of December 31, 2017 and March 31, 2017 was $606,450 and $576,450 or $6,064.50 and $5,764.50 per share. 

Dividends payable for Series A convertible preferred stock at December 31, 2017 and March 31, 2017 were $106,450 and $76,450, respectively.

Series B Preferred Stock

In March, 2013, our Board of Directors authorized the issuance of 2,000 shares of Series B Preferred Stock, (the "Series B Preferred Stock").  The face amount of share of the Series B Preferred Stock is $1,000.  As of December 31, 2017 and March 31, 2017, the Company has 1,983 and 1,983 shares of Series B preferred stock respectively issued and outstanding.  

The Series B Preferred Stock accrues dividends at the rate of 9% per annum on the original purchase price for the shares. These dividends are payable annually, beginning in January 2014. We are prohibited from paying any dividends on our Common Stock until all accrued dividends are paid on our Series B Preferred Stock.  The Series B Preferred Stock ranks junior to the Series A Convertible Preferred Stock owned by our President and Chief Executive Officer, as to Dividends and to a distribution of assets in the event of a liquidation of assets.

The Holders of Series B Preferred Stock do not have any voting rights and their consent is not required to take any sort of corporate action.

During the nine month periods ended December 31, 2017 and December 31, 2016, the Company did not issue any Series B Preferred Stock.

During the three month periods ended December 31, 2017 and 2016, the Company incurred $44,622 and $44,622 in dividends on Series B preferred stock.  The Company did not pay any dividends for the three or nine months period ended December 31, 2017 and December 31, 2016.

During the nine month periods ended December 31, 2017 and 2016, the Company incurred $133,866 and $133,866 in dividends on Series B preferred stock. Dividends payable for Series B Preferred Stock at December 31, 2017 and March 31, 2017 were $477,392 and $343,526 respectively. The liquidation preference of Series B Preferred Stock as of December 31, 2017 and March 31, 2017 was $2,460,392 and $2,326,526 or $1,240,74 and $1,173.24 per share, respectively.

Total dividends payable from both Series A and Series B preferred shares at December 31, 2017 and March 31, 2017 were $583,842 and $419,976 respectively.

AFS Holdings, Inc. Series A Preferred Stock

On October 5, 2015, the Articles of Incorporation of AFS were amended to authorize the issuance of 5,000,000 shares of Preferred Stock, par value $0.001, of which 1,000 shares are designated as Series A Preferred Stock. As of December 31, 2017 and March 31, 2017, the Company has 200 shares of Series A preferred stock respectively, issued and outstanding.  

AFS Series A Preferred Stock accrues dividends at the rate of 12% per annum on the original purchase price for the shares. These dividends are payable annually in cash or the AFS Common Stock at the discretion of the Board of Directors, beginning in March 2016. AFS is prohibited from paying any dividends on AFS Common Stock until all accrued dividends are paid on our Series A preferred Stock. Upon liquidation, the Series A Preferred Stock shareholders shall be entitled to the stated value of each shares held, in addition to accrued and unpaid dividends, as long as AFS possesses the funds necessary to make payments. AFS may, at any time, redeem the shares of Series A Preferred Stock without the prior written consent of the Series A Preferred Stock shareholders. The Series A Preferred Stock ranks senior to AFS Common Stock in a distribution of assets in the event of a liquidation of assets.

During the three months ended December 31, 2017, the Company did not issue any Series A Preferred Stock. During the three months ended December 31, 2016, AFS issued issued 50 shares of its Series A Preferred Stock for consulting services and 100 shares for $100,000 in cash to an unaffiliated third parties.

During the three month periods ended December 31, 2017 and 2016, the Company incurred $6,000 and $2,037 in dividends on Series A preferred stock.  The Company did not pay any dividends for the three or nine months periods ended December 31, 2017 and December 31, 2016.

During the nine month periods ended December 31, 2017 and 2016, the Company incurred $18,000 and $5,037 in dividends on Series A preferred stock. Dividends payable for Series A Preferred Stock at December 31, 2017 and March 31, 2017 were $32,037 and $14,037 respectively. The liquidation preference of Series A Preferred Stock as of December 31, 2017 and March 31, 2017 was $232,037 and $214,037 or $1,160.19 and $1,070.19 per share, respectively.

GROOVE BOTANCIALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2017

(Unaudited)

Common Stock

We did not issue any common stock for the three and nine month periods ended December 31, 2017 and December 31, 2016. 

Our subsidiary AFS, Inc., issued 825,000 Shares of common stock to 100,000 to our President, 25,000 shares to each of our directors, 50,000 shares to a holder of our Series A Preferred Stock for consulting services rendered, 100,000 shares for consulting services rendered and 500,000 shares to a consultant for services rendered., during the three month period ending December 31, 2016.

Warrants

There are no warrants outstanding as of December 31, 2017 and March 31, 2017.

NOTE 9: TECHNOLOGY LICENSE AGREEMENTS

On December 1, 2014, the Company entered into an exclusive license agreement for anti-corrosion technology from Ronald Knight in exchange for three hundred thousand (300,000) shares of our common stock. This license calls for an earned royalty of three percent (3.00%) on sales of licensed products and services as they may relate to corrosion prevention and maintenance of sump pumps at gasoline and diesel dispensing locations, including, but not limited to gas stations, convenience stores, trucking companies, bus companies, and any other locations where gasoline and/or diesel is dispensed. We did not have any revenue for the period from December 1, 2014 through December 31, 2016.

This agreement was terminated on August 7, 2017.

NOTE 10: LOSS PER SHARE

ASC 260-10-45 requires a reconciliation of the numerator and denominator of the basic and diluted earnings per share (EPS) computations. We have included the basic and diluted earnings per share (EPS) computation for the three and nine months periods ended December 31, 2017 and 2016.

Basic and diluted earnings per share for each of the periods presented is calculated as follows:

GROOVE BOTANICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2017

(Unaudited)

For the three months ending December 31, 2017 and December 31, 2016, the diluted earnings per share calculation did not include the effect of the shares resulted from assumed conversion of the Series A convertible preferred stock and the shares convertible from convertible notes payable with the principal amount of $149,200 and the related accrued interest, because the effect is anti-dilutive, as the Company incurred a loss during the periods.

For the nine months ending December 31, 2017 and December 31, 2016, the diluted earnings per share calculation did not include the effect of the shares resulted from assumed conversion of the Series A convertible preferred stock and the shares convertible from convertible notes payable with the principal amount of $149,200 and the related accrued interest, because the effect is anti-dilutive, as the Company incurred a loss during the periods. 

The holders of the Series A Convertible Preferred Stock have the right to convert each share of preferred stock into a sufficient number of shares of common stock to equal 40% of the then fully-diluted shares outstanding. Fully diluted shares outstanding is computed as the sum of the number of shares of common stock outstanding plus the number of shares of common stock issuable upon exercise, conversion or exchange of outstanding options, and warrants. In the event that the Company does not have an adequate number of shares of Common Stock authorized, upon a conversion request, only the maximum allowable number of shares of Series A convertible preferred stock shall convert into Common Stock and the remaining shares of Series A convertible preferred Stock shall convert upon lapse of the applicable restrictions.

On January 12, 2018, our Board of Directors agreed to amend Designation of the Series A Convertible Preferred Stock be amended by changing the ratio for conversion, in Article IV, subparagraph (a), from .4% to .51% so that upon conversion the number of shares of common stock to be exchanged shall equal 51% of then issued and outstanding common stock.

NOTE 11: COMMITMENTS AND CONTINGENCIES

Commitments and contingencies through the date of these financial statements were issued have been considered by the Company and none were noted which were required to be disclosed.

NOTE 12: SUBSEQUENT EVENTS

The company has reviewed the subsequent event through the date of this report. Below are our subsequent events:

On January 12, 2018, our Board of Directors agreed to amend Designation of the Series A Convertible Preferred Stock be amended by changing the ratio for conversion, in Article IV, subparagraph (a), from .4% to .51% so that upon conversion the number of shares of common stock to be exchanged shall equal 51% of then issued and outstanding common stock.

On January 29, 2018 the Company executed a Promissory Note between the Company and Carebourn Capital, LLC in the amount of $230,000. On December 18, 2018, the maturity date of this note was extended until July 31, 2019.

On March 9, 2018, we issued 600,000 shares of Common Stock and $2,500 in cash for settlement of two promissory notes payable in the amount of $80,000, plus $69,279 in accrued interest. The shares were valued at $12,000 or $0.02 per share. The value of the shares was based on the closing bid price of the Company's common stock on the date the Agreement was executed by the Company.

On March 19, 2018 we issued 2,015,000 to our Series B Preferred Stock shareholder’s for all accrued interest from the date of issuance to March 31, 2018 on their Series B Preferred Stock. The shares were valued at $43,300 or $0.02 per share and were valued based on the closing bid price of the Company's common stock on the date the shares were issued. $481,714 was treated as a gain from this transaction.

The principal and accrued interest on $60,000 notes payables were settled in March 20, 2018 for $5,000.

On March 21, 2018 the Board of Directors and a majority of the Company's shareholders approved an amendment to our Articles of Incorporation to change the Company's name to Groove Botanicals, Inc. We filed an amendment to our Articles of Incorporation with the State of Nevada on May 18, 2018. Our Company’s new name reflects our new corporate direction as a consumer health products company dedicated to improving people’s health and well-being. We will assemble a portfolio of assets via royalty agreements, equity investments, and licensing agreements, as well as develop our own proprietary CB3 skin care products. Our products will contain premium hemp extracts with a broad range of cannabinoids, including cannabidiol (CBD). CBD is a cannabinoid compound naturally derived from the hemp plant. It is not a drug and has no intoxicating effects, but has a long history of natural uses. Recent breakthroughs in research have shown the powerful health benefits of CBD on the body. CBD is also rich in vitamins A, B, D, and E, antioxidants, and fatty acids, all of which dramatically improve skin health. When applied topically to the skin, CBD has been shown to reduce inflammation, retain skin moisture levels, reduce cellular damage, inhibit oil production leading to breakouts, and protect skin from free radicals that damage collagen and elastin.

On March 26, 2018 we issued 300,000 shares of our Common Stock to our directors for their services. The shares were valued at $6,000 or $0.02 per share and were valued based on the closing bid price of the Company's common stock on the date the shares were issued.

On March 26, 2018 we issued 4,800,000 to seven Consultants for services rendered. The shares were valued at $96,000 or $0.02 per share and were valued based on the closing bid price of the Company's common stock on the date the shares were issued.

The maturity of notes payable, amount of $9,200, has been extended until April 1, 2018. The outstanding principal balance and all outstanding interest was converted into 1,850,000 shares in subsequent three months.

On July 7, 2018, we issued 700,000 shares of our common stock to a consultant. We valued the shares at $14,000 or $0.02 per share. The value of the shares was based on the closing bid price of the Company's common stock on the date the Agreement was executed by the Company.

On August 29, 2018, we issued 1,000,000 shares of our common stock to a consultant. We valued the shares at $30,000 or $0.03 per share. The value of the shares was based on the closing bid price of the Company's common stock on the date the Agreement was executed by the Company.

On October 4, 2018, we issued 1,100,000 shares of our common stock to a holder of 368 shares of our Series B Preferred Stock for accrued interest for the period from April 1, 2018 to March 31, 2019. We valued the shares at $66,000 or $0.06 per shares. The value of the shares was based on the closing bid price of the Company's common stock on the date the Agreement was executed by the Company.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with our financial statements and the notes related thereto. The discussion of results, causes and trends should not be construed to infer conclusions that such results, causes or trends necessarily will continue in the future.

Corporate Structure

Groove Botanicals, Inc. (the "Company") (formerly known as Avalon Oil & Gas, Inc.), was originally incorporated in Colorado in April 1991 under the name Snow Runner (USA), Inc. The Company was the general partner of Snow Runner (USA) Ltd.; a Colorado limited partnership to sell proprietary snow skates under the name "Sled Dogs" which was dissolved in August 1992. In late 1993, the Company relocated its operations to Minnesota and in January 1994 changed our name to Snow Runner, Inc. In November 1994 we changed our name to the Sled Dogs Company. On November 5, 1997, we filed for protection under Chapter 11 of the U.S. Bankruptcy Code. In September 1998, we emerged from protection of Chapter 11 of the U.S. Bankruptcy Code. In May, 1999, we changed our state of domicile to Nevada and our name to XDOGS.COM, Inc. On July 22, 2005, the Board of Directors and a majority of the Company's shareholders approved an amendment to our Articles of Incorporation to change the Company's name to Avalon Oil & Gas, Inc., and to increase the authorized number of shares of our common stock from 200,000,000 shares to 1,000,000,000 shares par value of $0.001, and engage in the acquisition of producing oil and gas properties. On November 16, 2011, a majority of the Company's shareholders approved an amendment to our Articles of Incorporation to increase the authorized number of shares of our common stock from 1,000,000,000 shares to 3,000,000,000 shares par value of $0.001.  This amendment was not filed with the Nevada Secretary of State.  

On June 4, 2012 the Board of Directors approved an amendment to our Articles of Incorporation to a reverse split of the issued and outstanding shares of Common Stock of the Corporation (“Shares”) such that each holder of Shares as of the record date of June 4, 2012 shall receive one (1) post-split Share on the effective date of June 4, 2012 for each three hundred (300) Shares owned.  The reverse split was effective on July 23, 2012.   On September 28, 2012, we held a special meeting of Avalon’s shareholders and approved an amendment to the Company’s Articles of Incorporation such that the Company would be authorized to issue up to 200,000,000 shares of common stock.  We filed an amendment with the Nevada Secretary of State on April 10, 2013, to increase our authorized shares to 200,000,000.

On January 12, 2018, our Board of Directors agreed to amend Designation of the Series A Convertible Preferred Stock be amended by changing the ratio for conversion, in Article IV, subparagraph (a), from .4% to .51% so that upon conversion the number of shares of common stock to be exchanged shall equal 51% of then issued and outstanding common stock.

The note payable in the amount of $50,000, issued on November 11, 2008, and its accrued interest, and the $30,000 note payable, issued in the amount of $50,000 on January 27, 2009, and its accrued interest, were settled on March 9, 2018 for $2,500 plus the issuance of 600,000 shares of Common Stock

The principal and accrued interest on $60,000 notes payables were settled on March 20, 2018 for $5,000.

On March 21, 2018 the Board of Directors and a majority of the Company's shareholders approved an amendment to our Articles of Incorporation to change the Company's name to Groove Botanicals, Inc. We filed an amendment to our Articles of Incorporation with the State of Nevada on May 18, 2018.

The maturity of notes payable, amount of $9,200, has been extended until April 1, 2018. The outstanding principal balance and all outstanding interest was converted into 1,850,000 shares in subsequent three months.

Corporate Strategy

Our Company’s new name reflects our new corporate direction as a consumer health products company dedicated to improving people’s health and well-being. We will assemble a portfolio of assets via royalty agreements, equity investments, and licensing agreements, as well as develop our own proprietary CB3 skin care products. Our products will contain premium hemp extracts with a broad range of cannabinoids, including cannabidiol (CBD). CBD is a cannabinoid compound naturally derived from the hemp plant. It is not a drug and has no intoxicating effects, but has a long history of natural uses. Recent breakthroughs in research have shown the powerful health benefits of CBD on the body. CBD is also rich in vitamins A, B, D, and E, antioxidants, and fatty acids, all of which dramatically improve skin health. When applied topically to the skin, CBD has been shown to reduce inflammation, retain skin moisture levels, reduce cellular damage, inhibit oil production leading to breakouts, and protect skin from free radicals that damage collagen and elastin.

We have partnered with top leaders in CBD research, cultivation, and extraction to create the world’s finest cannabis skincare product line. Our Groove Botanicals, Inc. proprietary CB3 launches with three foundational products: Revita Wash, a gentle yet effective daily wash that removes toxins and smooths skin; Phyto Lotion, a light-weight, long-lasting daily moisturizer that hydrates, softens, and protects; and Eye Matter, a powerfully effective eye cream that diminishes dark circles, puffiness, expression lines, and wrinkles. Together, these products offer a minimalist skincare routine designed to deliver immediate and transformative results to all skin types. We are also proud to say that our products are 100% American made and non-toxic, paraben free, sulfate free, artificial fragrance free, dye free, vegan, animal by-product free, and 100% pet friendly. We look forward to announcing further developments in the coming months as we expand and develop both our CBD skin care line and our other innovative new product lines.

We plan to raise additional capital during the coming fiscal year, but currently have not identified additional funding sources. Our ability to continue operations is highly dependent upon our ability to obtain additional financing, or generate revenues from the sale of our CBD skincare products, none of which can be guaranteed.

Ultimately, our success is dependent upon our ability to generate revenues from the sale our CBD skincare products, and to achieve profitability, which is dependent upon a number of factors, including general economic conditions and the sustained profitability resulting from the sale of our CBD skincare products. There is no assurance that even with adequate financing or combined operations, we will generate revenues and be profitable. 

PATENTS, TRADEMARKS, AND PROPRIETARY RIGHTS

On July 18, 2018 the Company filed five trademark applications with the United States Patent and Trademark Office for CB3SKINCARE: U.S. Trademark Application Serial No. 88/040,563, CB3: U.S. Trademark Application Serial No. 88/040,571, EYE MATTER: U.S. Trademark Application Serial No. 88/040,574, REVITA WASH: U.S. Trademark Application Serial No. 88/040,580, and TAKE YOUR SKIN HIGHER: U.S. Trademark Application Serial No. 88/040,584.

GOING CONCERN

The Company has minimal revenues from our remaining oil and gas assets. We are in need additional cash resources to maintain our operations. The Company has a working capital deficiency of $1,163,589, total deficit of $1,128,731 and has incurred losses since inception of $34,328,577, and have not yet received any revenue from the sale our CBD skincare products. These factors raise substantial doubt about its ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent on its ability to raise additional capital or obtain necessary debt financing. The Company is presently dependent on its controlling shareholder to provide us funding for its daily operation and expenses, including professional fee and fees charged by regulators, although he is under no obligation to do so.

The Company intends to meet the cash requirements for the next 12 months from the issuance date of this report through a combination of debt and equity financing by way of private placements, friends, family and business associates. The Company currently did not have any arrangements in place to complete any private placement financings and there is no assurance that the Company will be successful in completing any such financings on terms that will be acceptable to it.

If we do not have sufficient working capital to pay our operating costs for the next 12 months, we will require additional funds to pay our legal, accounting and other fees associated with our Company and our filing obligations under United States federal securities laws, as well as to pay our other accounts payable generated in the ordinary course of our business. Once these costs are accounted for, we will focus on the manufacture and sale of our CBD skincare products.

Any failure to raise money will have the effect of delaying the timeframes in the business plan as set forth above, and the Company may have to push back the dates of such activities.

The financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company has incurred losses and further losses are anticipated as a result of the development of business which raises substantial doubt about the Company’s ability to continue as a going concern within the next twelve months from the issuance date of this report.  The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or obtaining financing necessary to meet the Company’s obligations and repay its liabilities arising from normal business operations when they come due. Management intends to finance operating costs over the next twelve months with existing cash on hand and loans from directors and/or private placement of the Company’s common stock. 

Financing Activities

We have been funding our obligations through the issuance of our Common Stock for services rendered and for notes payable owed or for cash in private placements. The Company may seek additional funds in the private or public equity or debt markets in order to execute its plan of operation and business strategy. There can be no assurance that we will be able to attract capital or obtain such financing when needed or on acceptable terms in which case the Company's ability to execute its business strategy will be impaired.

Results of Operations

Three and nine month periods ended December 31, 2017 compared to the three and nine month periods ended December 31, 2016:

Revenues

Revenues for the three months ended December 31, 2017 were $28,634, an increase of $9,034 compared to revenue of $19,600 for the three months ended December 31, 2016.  Revenues increased due to the receipt of $28,365 in unclaimed royalties from the State of Oklahoma compared to unclaimed royalties in the amount of $9,600 for the three months ended December 31, 2016, and no consulting income in the three months ended December 31, 2017.

Revenues for the nine months ended December 31, 2017 were $51,121, an increase of $5,405 compared to revenue of $45,716 for the nine months ended December 31, 2016.  Revenues increased due to the receipt of $50,851 in unclaimed royalties from the State of Oklahoma compared to unclaimed royalties in the amount of $25,716 for the nine months ended December 31, 2016, and no consulting income in the nine months ended December 31, 2017.

Lease Operating Expenses

During the three months ended December 31, 2017, our lease operating expenses were $12,159, an increase of $3,483 compared to $8,676 for the three months ended December 31, 2016.  The increase was due to operating costs on the Company's properties purchased from Kensington Energy.

During the nine months ended December 31, 2017, our lease operating expenses were $51,518, an increase of $11,617 compared to $39,901 for the nine months ended December 31, 2016.  The increase was due to operating costs on the Company's properties purchased from Kensington Energy and an increase in operating costs on our properties in Lincoln County, Oklahoma.

Selling, General, and Administrative Expenses

Selling, general and administrative expenses for the three months ended December 31, 2017 were $28,544, a decrease of $97,251 compared to selling, general and administrative expenses of $125,795 during the three months ended December 31, 2016.   Selling, general and administrative expenses for the three months ended December 31, 2017 consisted primarily of payroll and related costs of $12,000 and office expense of $16,544. The decrease was due to a reduction in legal, accounting and consulting fees.

Selling, general and administrative expenses for the nine months ended December 31, 2017 were $61,579, a decrease of $102,259 compared to selling, general and administrative expenses of $163,838 during the nine months ended December 31, 2016.   Selling, general and administrative expenses for the nine months ended December 31, 2017 consisted primarily of payroll and related costs of $36,000; travel and entertainment expenses of $2,431, and $23,148 in office expenses. The decrease was due to a reduction in legal, accounting and consulting fees.

Depreciation, Depletion, and Amortization

Depreciation, Depletion, and Amortization was $1,631 for the three months ended December 31, 2017, an decrease of $4,892 or compared to $6,523 for the three months ended December 31, 2016.  Depreciation, Depletion and Amorization decreased due to the drop in the value of depletable oil and gas properties.

Depreciation, Depletion, and Amortization was $5,473 for the nine months ended December 31, 2017, a decrease of $12,775 compared to $18,248 for the nine months ended December 31, 2016. Depreciation, Depletion and Amorization decreased due to the drop in the value of depletable oil and gas properties.

Interest Expense, net of Interest Income

Interest expense, net of interest income was $2,873 for the three months ended December 31, 2017, a decrease of $27 compared to interest expense, net of interest income of $2,900 for the three months ended December 31, 2016.

Interest expense, net of interest income was $8,614 for the nine months ended December 31, 2017, a decrease of $53 compared to interest expense, net of interest income of $8,667 for the nine months ended December 31, 2016.

Net Loss

Our net loss for the three months ended December 31, 2017, was $16,573 a decrease of $107,721 compared to a net loss of $124,294 during the three months ended December, 2016. The decrease was due to an increase in revenue and a decrease in operating expenses during the three months ended December 31,2017.

Our net loss for the nine months ended December 31, 2017, was $79,627 a decrease of $105,311 or acompared to a net loss of $184,938, during the nine months ended December 31, 2016. The decrease was due to an increase in revenue and a decrease in operating expenses during the nine months ended December 31,2017.

LIQUIDITY AND CAPITAL RESOURCES

The Company has minimal revenues from our remaining oil and gas assets. We are in need of additional cash resources to maintain our operations. Our cash and cash equivalents were $99,380 on Decmber 31, 2017, compared to $104,574 on March 31, 2017. We met our liquidity needs through the issuance of our common and preferred stock for cash and the revenue derived from our oil and gas operations.

As of December 31, 2017, the Company had a working capital deficit of $1,163,589, has incurred losses since inception of $34,328,577 and have not yet received any revenue from the sale our CBD skincare products. These factors raise substantial doubt about its ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent on its ability to raise additional capital or obtain necessary debt financing. The Company is presently dependent on its controlling shareholder to provide us funding for its daily operation and expenses, including professional fee and fees charged by regulators, although he is under no obligation to do so.

The Company intends to meet the cash requirements for the next 12 months from the issuance date of this report through a combination of debt and equity financing by way of private placements, friends, family and business associates. The Company currently did not have any arrangements in place to complete any private placement financings and there is no assurance that the Company will be successful in completing any such financings on terms that will be acceptable to it.

If we do not have sufficient working capital to pay our operating costs for the next 12 months, we will require additional funds to pay our legal, accounting and other fees associated with our Company and our filing obligations under United States federal securities laws, as well as to pay our other accounts payable generated in the ordinary course of our business. Once these costs are accounted for, we will focus on the manufacture and sale of our CBD skincare products.

Any failure to raise money will have the effect of delaying the timeframes in the business plan as set forth above, and the Company may have to push back the dates of such activities.

The financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company has incurred losses and further losses are anticipated as a result of the development of business which raises substantial doubt about the Company’s ability to continue as a going concern within the next twelve months from the issuance date of this report.  The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or obtaining financing necessary to meet the Company’s obligations and repay its liabilities arising from normal business operations when they come due. Management intends to finance operating costs over the next twelve months with existing cash on hand and loans from directors and/or private placement of the Company’s common stock.

Ultimately, our success is dependent upon our ability to generate revenues from the sale of our CBD skincare products.

Investing activities

We sold the property in Lipscomb County, Texas, for $13,000, with $3,564 loss in sale of the property during the nine month period ended on December 31, 2017.

We did not invest any funds during the nine month period ended December 31, 2017.

Financing Activities

During the three month period ended December 30, 2017 we did not receive any funds from financing activities. During the three months ended December 31, 2016, the Company received $100,000 from the sale of preferred stock. 

Operating activities

Our net loss for the three months ended December 31, 2017, was $16,573 a decrease of $107,721 compared to a net loss of $124,294 during the three months ended December 31, 2016. The decrease was due to an increase in revenue and a decrease in operating expenses during the three months ended December 31,2017.

Our net loss for the nine months ended December 31, 2017, was $79,627 a decrease of $105,311 or acompared to a net loss of $184,938, during the nine months ended December 31, 2016. The decrease was due to an increase in revenue and a decrease in operating expenses during the nine months ended December 31,2017.

The condensed consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America. As such, we are required to make certain estimates, judgments and assumptions that we believe are reasonable based on information available. These estimates and assumptions affect the reporting amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. A summary of the significant accounting policies is described in Note 1 to the financial statements. 

Recently Issued Accounting Policies

For a discussion of recent accounting pronouncements, see Note 1 to our Financial Statements – “DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.”

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Material Commitments

We have no material commitments during the next twelve (12) months.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

This information has been omitted, as the Company qualifies as a smaller reporting company.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934). Management has assessed the effectiveness of our internal control over financial reporting under COSO Framework 2013 as of December 31, 2016 based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. As a result of this assessment, management concluded that, as of December 31, 2016, our internal control over financial reporting was not effective. The material weaknesses identified related to (i) a lack of accounting staff and resources with appropriate knowledge of U.S. GAAP and SEC reporting and compliance requirements; (ii) a lack of sufficient documented financial closing policies and procedures; and (iii) a lack of independent directors and an audit committee.

We plan to take steps to enhance and improve the design of our internal control over financial reporting. During the period covered by this annual report on Form 10-K, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we hope to implement the following changes during our fiscal year ending March 31, 2019: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; (ii) adopt sufficient written policies and procedures for accounting and financial reporting, and (iii) strengthen our financial team by employing more qualified accountant(s) conversant with US GAAP to enhance the quality of our financial reporting function. The remediation efforts set out in (i), (ii) and (iii) are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting identified during this quarter ended December 31, 2017, which have materially affected, or were reasonably likely to materially affect, our internal control over financial reporting.

PART II

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None. 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

N/A

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Form 8-K

NONE 

(b) Exhibits

* Incorporated by reference to a previously filed exhibit or report.

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

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Dates Referenced Herein   and   Documents Incorporated by Reference

This ‘10-Q’ Filing		Date		Other Filings
		7/31/19
Filed on:		4/25/19		10-Q
		4/24/19
		3/31/19
		12/18/18
		10/4/18
		8/29/18
		7/18/18
		7/7/18
		5/18/18
		4/1/18
		3/31/18
		3/26/18
		3/21/18
		3/20/18
		3/19/18
		3/9/18
		1/29/18
		1/12/18
For Period end:		12/31/17
		12/30/17
		12/15/17
		8/7/17
		3/31/17		10-K
		12/31/16		10-Q
		3/31/16		10-K,  NT 10-K
		10/5/15
		4/1/15
		12/1/14
		4/10/13
		9/28/12		8-K
		7/23/12
		6/4/12
		11/16/11		DEF 14C,  PRE 14C
		4/21/11
		1/27/09
		11/11/08
		1/1/06
		7/22/05
		6/3/02
		11/5/97
				List all Filings

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Filing Submission 0001607062-19-000179   –   Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

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