PART
II
ITEM
5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
(a)
Principal Market or Markets
Effective
with the close of business on June 19, 1997, our Common Stock was delisted from the NASDAQ Small Cap Market. In June of 1997,
our Common Stock began trading on the NASD Over-the-Counter Bulletin Board ("OTCBB"). Beginning in April
2010 our Common Stock began trading on the electronic OTCQB and OTCBB market. Since August 2016 our Common Stock has
traded on the OTC Pink Sheets. Market makers and other dealers provided bid and ask quotations of our Common Stock. We trade
under the symbol "GRVE".
The
table below represents the range of high and low bid quotations of our Common Stock as reported during the reporting period herein.
The following bid price market quotations represent prices between dealers and do not include retail markup, markdown, or commissions;
hence, they may not represent actual transactions.
|
Per
Share Common Stock Bid Prices by Quarter For the Two Most Recent Fiscal Years
|
|
|
|
|
|
|
|
|
|
High
|
|
|
|
Low
|
|
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Quarter Ended
March 31, 2017
|
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$
|
0.04
|
|
|
$
|
0.02
|
|
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Quarter Ended December 31, 2016
|
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$
|
0.06
|
|
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$
|
0.03
|
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Quarter Ended September 30, 2016
|
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$
|
0.05
|
|
|
$
|
0.04
|
|
|
Quarter Ended June 30, 2016
|
|
$
|
0.06
|
|
|
$
|
0.04
|
|
|
Quarter Ended March 31, 2015
|
|
$
|
0.04
|
|
|
$
|
0.02
|
|
|
Quarter Ended December 31, 2015
|
|
$
|
0.07
|
|
|
$
|
0.02
|
|
|
Quarter Ended September 30, 2015
|
|
$
|
0.10
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|
|
$
|
0.04
|
|
|
Quarter Ended June 30, 2015
|
|
$
|
0.06
|
|
|
$
|
0.04
|
|
As
of December 17, 2018, 28,293,062 shares of our Common Stock were outstanding and the number of holders of record of our Common
Stock at that date was approximately 985. However, we estimate that there are a significantly greater number of shareholders because
a substantial number of our shares are held in nominee names by brokerage firms.
(b)
Dividends
No
dividends on the Common Stock were paid by us during the fiscal year ended March 31, 2017, or the fiscal year ended March 31,
2016, nor do we anticipate paying dividends on Common Stock in the foreseeable future. Holders of Common Stock are entitled to
receive such dividends as may be declared by our Board of Directors.
(c)
Securities Authorized for Issuance Under Equity Compensation Plans.
We
have not established an Equity Compensation Plan and have not authorized the issuance of any securities under such plan.
(d)
Preferred Stock.
Our
Articles of Incorporation authorize us to issue up to 1,000,000 shares of $0.10 par value preferred stock, with such classes,
series and preferences as our Board of Directors may determine from time to time. In June 2002, our Board of Directors authorized
the issuance of 100 shares of Series A Convertible Preferred Stock (the "Series A Preferred Stock"). Our Board further
agreed to issue all of the Series A Preferred Stock to our Chairman and President, Kent Rodriguez, in satisfaction of $500,000
in loans made by Mr. Rodriguez. 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
Series A Preferred Stock accrues dividends at the rate of 8% per annum on the original purchase price for the shares. If declared
by the Board of Directors, these dividends are payable quarterly, beginning in September 2002. We are prohibited from paying any
dividends on our Common Stock until all accrued dividends are paid on our Series A Preferred Stock.
If
we liquidate or dissolve, and after payment of our debts, the holders of the Series A Preferred Stock are entitled to a preference
payment before we make any distributions to our Common Stockholders. The preference amount is equal to the original purchase price
for the Series A Preferred shares plus accrued, but unpaid dividends. As of March 31, 2017, the liquidation preference is
$576,450, or $5,764.50 per share.
The
Series A Preferred Stock is convertible at any time into 51% of the then outstanding shares of Common Stock and securities convertible
into Common Stock on a fully diluted basis. However, conversion is limited to the number of shares of Common Stock available for
issuance under our articles of incorporation.
Regardless
of whether or not the Series A Preferred Stock has been converted to our Common Stock, the Series A Preferred Stockholder is entitled
to vote, at all times, on an as-if converted basis. The Preferred Stockholder, Mr. Rodriguez, has the right to vote the Series
A Preferred Stock together with his other holdings in the Company.
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. There are currently 1,983 shares
of Series B Preferred Stock outstanding. As of March 31, 2017, the liquidation preference is $2,326,526, or $1,173.24 per share.
On
March 14, 2014, we filed an amendment with the Nevada Secretary of State increasing the interest rate on the Series B Preferred
Shares to nine percent (9.00%), effective on April 1, 2014 and changing the payment date to from January 15th of each year to
April 1st. The next interest payment on the Series B Preferred Stock will be on April 1, 2018.
The
Series B Preferred Stock accrues dividends at the rate of 9% per annum on the original purchase price for the shares. If
declared by the Board of Directors, 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 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.
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.
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.
As
of March 31, 2017, the liquidation preference is $214,037, or $1,070.19 per share.
RECENT
SALES OF UNREGISTERED SECURITIES
The
Company did not sell any unregistered securities between January 1, 2017 and March 31, 2017:
During
the twelve months ended March 31, 2017 and 2016, the Company incurred $178,488 and $165,038 in dividends on Series B preferred
stock.
During
the twelve months ended March 31, 2017 and 2016, the Company incurred $11,037 and $3,000 in dividends on AFS Series A Preferred
Stock.
All
other unregistered securities sold by the Company during the past three years, but prior to January 1, 2017, have been included
in the Company's 10-Q filings.
All
of the unregistered securities sold were issued directly by the Company, and no commissions or fees were paid in connection with
any of these transactions. The transactions were private, and the Company endeavored to comply both with Regulation D, and also
Section 4(2) of the Securities Act of 1933, as amended, as exemption(s) from registration. The Company exercised reasonable care
to assure that the purchasers of the securities are not underwriters and were "accredited investors" under Regulation
D and/or sophisticated investors.
ITEM
6. SELECTED FINANCIAL DATA
Not applicable.
ITEM
7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
RESULTS
OF OPERATIONS AND PLAN OF OPERATION
The
following discussion and analysis should be read in conjunction with our consolidated financial statements and 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.
For
the year ended March 31, 2017 compared to the year ended March 31, 2016
Revenues
Revenues
for the year ended March 31, 2017 were $57,021, an increase of $4,088 compared to revenue of $52,933 for the year ended March
31, 2016. Revenue from the sale of oil and gas increased as a result of a consulting income received.
Concentration
of customers
For
the year ended March 31, 2017, four customers, Scissortail Energy, Avalon 2015-1 LP, Lexinta SA and Ward Petroleum, individually
accounted for 23%, 18%, 18% and 12% of the Company’s revenues, respectively. Except for the aforementioned customers, there
was no other single customer who accounted for more than 10% of the Company’s revenues for the year ended March 31, 2017.
For the year ended March 31, 2016, three customers, KROG Partners, Scissortail Energy and Ward Petroleum, individually accounted
for 28%, 20% and 16% of the Company’s revenues, respectively. Except for the aforementioned customers, there was no other
single customer who accounted for more than 10% of the Company’s revenues for the year ended March 31, 2016.
Lease
Operating Expenses
During
the year ended March 31, 2017, our lease operating expenses were $51,996 an increase of $1,233 compared to $50,763 for
the year ended March 31, 2016. The increase was due to workover costs on the Lincoln County, Oklahoma properties.
Selling,
General, and Administrative Expenses
Selling,
general and administrative expenses for the year ended March 31, 2017 were $183,774 a decrease of $605,062 compared to selling,
general and administrative expenses of $788,836 during the year ended March 31, 2016. Selling, general and administrative
expenses for 2017 consisted primarily non-cash consulting services of payroll and related costs of $48,000; travel and entertainment
expenses of $16,546; office expenses of $70,848 and consulting fees in the amount of $94,970. The decrease was primarily
due to non-cash consulting services of $154,546, $12,450 in legal and accounting fees and the write off of the $279,400 balance
in deposits year for the ended March 31, 2016.
Bad
Debt Expense
We
did not have any bad debt expese for the year ended March 31, 2017. Bad debt expense for the year ended March 31, 2016 was 58,741.
Impairment
Expense
Impairment
expense for the year ended March 31, 2017 was $25,620. Impairment expense for the year ended March 31, 2016 was $1,839,941. The
impairment expense was due to the reduction in the market price for oil and natural gas, the loss of economic value of the Company’s
non-proven properties and the impairment of the Company’s intellectual properties.
Stock-based
Compensation
The
stock-based compensation for the years ended March 31, 2017 and March 31, 2016 were $53,300 and $0, respectively.
Depreciation,
Depletion, and Amortization
Depreciation,
Depletion, and Amortization were $32,807 for the year ended March 31, 2017 a decrease of $52,090 compared to $84,897 for the year
ended March 31, 2016. The decrease was due to the impairment of $1,839,941 in oil and gas and intellectual property assets for
the year ended March 31, 2016.
Gain
on Settlement of Debt, Notes Payable and Accrued Interest, and Miscellaneous Income
During
the year ended March 31, 2017, the Company did not have a gain on the settlement of debt. During the year ended March 31, 2016,
we had a net gain on the settlement of debt in the amount of $283,014.
We
had $5,489 in miscellaneous income for the year ended March 31, 2017. We did not have any miscellaneous income for the year ended
March 31, 2016.
Interest
Expense, net of Interest Income
Interest
expense, net of interest expense of $11,506 for the year ended March 31, 2017, a decrease of $5,197 compared to interest
expense, net of $16,703 for the year ended March 31, 2016. This decrease is due to a reduction in the outstanding principal balances
of notes payable.
Net
(Loss)
For
the reasons stated above, our net loss for the year ended March 31, 2017, was $243,193, compared to a net loss of $2,503,934 during
the year ended March 31, 2016.
Liquidity
and Capital Resources
Going
Concern
The
Company has minimal revenues from our remaining oil and gas assets. We are in need of additional cash resources to maintain our
operations. As of March 31, 2017, the Company had a working capital deficit of $937,578, had incurred losses since inception of
$34,047,136, 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 fees 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 following 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.
Our
cash and cash equivalents were $104,574 on March 31, 2017, compared to $108,220 on March 31, 2016. We met our liquidity needs
through the issuance of our common stock, preferred stock, and notes payable for cash and from the revenue derived from our
oil and gas operations.
We
need to raise additional capital during the fiscal year, but currently have not acquired sufficient additional funding. Our
ability to continue operations as a going concern is highly dependent upon our ability to obtain immediate additional financing, or
generate revenues from the sale of our CBD skincare products, and to achieve profitability, none of which can be guaranteed.
Unless additional funding is obtained, it is highly unlikely that we can continue to operate. There is no assurance
that even with adequate financing or combined operations, we will generate revenues and be profitable.
Ultimately,
our success is dependent upon our ability to generate revenues from the sale of our CBD skin care products.
Operating
activities
Net
cash used by operating activities for the year ended March 31, 2017 was $103,646, compared to $348,922 used in the year ended
March 31, 2016.
The
Company had a net loss of $243,193 for the year ended March 31, 2017, compared to a net loss of $2,503,934 for the year ended
March 31, 2016.
Investing
activities
We
did not receive any note payments for the year ended March 31, 2017. We received note repayments of $1,429 during the year ended
March 31, 2016.
Financing
activities
Our
financing activities for the year ended March 31, 2017 provided cash of $100,000 as compared to $320,000 for the year ended March
31, 2016. We plan to raise additional capital during the coming fiscal year. Cash generated by financing activities
consisted of $100,000 from the issuance of AFS Series A Preferred Stock.
Critical
Accounting Policies
The
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
enacted accounting standards
In
May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
No. 2014-09, Revenue from Contracts with Customers, which was subsequently modified in August 2015 by ASU No. 2015-14, Revenue
from Contracts with Customers: Deferral of the Effective Date. The core principle of ASU No. 2014-09 is that companies should
recognize revenue when the transfer of promised goods or services to customers occurs in an amount that reflects what the company
expects to receive. It requires additional disclosures to describe the nature, amount, timing and uncertainty of revenue and cash
flows from contracts with customers. In 2016, the FASB issued additional ASUs that clarify the implementation guidance on principal
versus agent considerations (ASU 2016-08), on identifying performance obligations and licensing (ASU 2016-10), and on narrow-scope
improvements and practical expedients (ASU 2016-12) as well as on the revenue recognition criteria and other technical corrections
(ASU 2016-20). These new standards will identify performance obligations and narrow aspects on achieving core principle. The Company
is currently evaluating the impact the adoption of this guidance may have on its financial statements. The Company is an “emerging
growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS
Act, emerging growth companies (“EGCs”) can delay adopting new or revised accounting standards issued subsequent to
the enactment of the JOBS Act until such time as those standards apply to private companies. Therefore, the Company will not be
subject to the same new or revised accounting standards as public companies that are not EGCs. The Company anticipates adopting
this new guidance on January 1, 2019 with the modified retrospective approach and plans on giving additional updates on its progress
and further conclusions.
In
January 2016, the FASB issued ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial
Assets and Financial Liabilities, which requires that equity investments, except for those accounted for under the equity method
or those that result in consolidation of the investee, be measured at fair value, with subsequent changes in fair value recognized
in net income. However, an entity may choose to measure equity investments that do not have readily determinable fair values at
cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical
or a similar investment of the same issuer. It also impacts the presentation and disclosure requirements for financial instruments.
It is effective for public business entities for annual periods, and interim periods within those annual periods, beginning after
December 15, 2017, while for EGCs the amendment will become effective for fiscal years beginning after December 15, 2018. Early
adoption is permitted only for certain provisions. The Company is in the process of evaluating the impact of adoption of this
guidance on the Company’s consolidated financial statements and will adopt this guidance since January 1, 2019.
Off-Balance
Sheet Arrangements
We
have no off-balance sheet arrangements.
Material
Commitments
We
have no material commitments during the next twelve (12) months.
Purchase
of Significant Equipment
During
the twelve months ended March 31, 2017 and March 31, 2016, we used $0 for the purchase of equipment.
ITEM
8. FINANCIAL STATEMENTS.
Our
audited Financial Statements begin on page F-1.
ITEM
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM
9A. CONTROLS AND PROCEDURES
Management’s
Annual Report on Internal Control over Financing Reporting
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 March 31, 2017 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 March 31, 2017, our internal control over financial reporting was not effective. The material weaknesses identified
related to (i) lack of segregation of duties due to a lack of accounting staff; (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.
This
annual report does not include an attestation report of our registered public accounting firm regarding internal control over
financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant
to an exemption for non-accelerated filers set forth in Section 989G of the Dodd-Frank Wall Street Reform and Consumer Protection
Act.
Changes
in Internal Controls over Financial Reporting
We
regularly review our system of internal control over financial reporting and make changes to our processes and systems to improve
controls and increase efficiency, while ensuring that we maintain an effective internal control environment. Changes may include
such activities as implementing new, more efficient systems, consolidating activities, and migrating processes.
During
the last fiscal quarter’ assessment, we noted the material weaknesses as stated above.
Limitations
on Controls
Management
does not expect that the Company’s disclosure controls and procedures or the Company’s internal control over financial
reporting will prevent or detect all error and fraud. Any control system, no matter how well designed and operated, is based upon
certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be met. Further, no evaluation
of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues
and instances of fraud, if any, within the Company have been detected. The Company’s disclosure controls and procedures
are designed to provide reasonable assurance of achieving their objectives and the Company’s Chief Executive Officer (who
is also our Chief Financial Officer) has concluded that the Company’s disclosure controls and procedures are effective at
that reasonable assurance level.
ITEM
9B. OTHER INFORMATION
None.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2017 AND 2016
NOTE
1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature
of Operations
Groove
Botanicals, Inc. (the "Company") (formally 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.
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.
The
Company is currently in the process of raising funds to manufacture and sell our CBD skincare products.
On
September 22, 2007 the Company entered into an agreement with respect to its purchase of a 75.6% interest in Oiltek, Inc. (Oiltek)
for $50,000 and the right of Oiltek to market Avalon's intellectual property.
On
March 19, 2014, the Company formed Weyer Partners, LLC, (“Weyer”) a one hundred percent (100%) wholly owned Minnesota
Corporation. Weyer Partners, LLC, was formed to operate oil and gas properties in Oklahoma and Texas. Weyer is consolidated
in these financial statements.
On
May 9, 2014, the Company formed AFS Holdings, Inc., (“AFS”) a one hundred percent (100%) wholly owned Nevada Corporation.
AFS Holding, Inc., was formed to leverage the Company’s relationship with IP TechEx, and market technology licensed from
IP TechEx. AFS is consolidated in these financial statements.
GROOVE
BOTANICAL, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2017 AND 2016
Principles
of consolidation
The
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.
Going
Concern
The
Company has minimal revenues from our remaining oil and gas assets. We are in need of additional cash resources to maintain our
operations. As of March 31, 2017, the Company had a working capital deficit of $937,578, had incurred losses since inception of
$34,047,136, 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 following 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.
Our
cash and cash equivalents were $104,574 on March 31, 2017, compared to $108,220 on March 31, 2016. We met our liquidity needs
through the issuance of our common stock, preferred stock, and notes payable for cash and from the revenue derived from our oil
and gas operations.
We
need to raise additional capital during the fiscal year, but currently have not acquired sufficient additional funding. Our ability
to continue operations as a going concern is highly dependent upon our ability to obtain immediate additional financing, or generate
revenues from the sale of our CBD skincare products, and to achieve profitability, none of which can be guaranteed. Unless additional
funding is obtained, it is highly unlikely that we can continue to operate. There is no assurance that even with adequate financing
or combined operations, we will generate revenues and be profitable.
Ultimately,
our success is dependent upon our ability to generate revenues from the sale of our CBD skin care products.
Reclassifications
Certain
prior year amounts have been reclassified to conform with current year presentation, specifically the classification of asset
retirement obligation accretion and depreciation expenses which were included in Lease operating expense, severance taxes as of
March 31, 2016 and in depreciation, depletion and amortization as of March 31, 2017.
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 consolidated financial
statements and accompanying notes. Actual results could differ from those estimates and assumptions.
Basis
of Accounting
The
Company's financial statements are prepared using the accrual method of accounting. Revenues are recognized when earned and expenses
when incurred.
GROOVE
BOTANICAL, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2017 AND 2016
Cash
and Cash Equivalents
Cash
and cash equivalents consist primarily of cash on deposit. 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 receivable, accounts payable, notes payable, notes receivable
and long-term debt. The recorded values of cash and cash equivalents, accounts receivable, and accounts payable approximate their
fair values based on their short-term nature. The recorded values of notes payable, notes receivable and long-term debt approximate
their fair values, as interest approximates market rates.
Accounts
Receivable and Receivables from the Joint Interest
Management
periodically assesses the collectability of the Company's accounts receivable and receivables from the Joint Interest. Accounts
determined to be uncollectible are charged to operations when that determination is made. The Company determined that the accounts
receivable from the Joint Interest accounts were uncollectable for the year ended March 31, 2016.
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. 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 years ended March 31, 2017 and March 31, 2016 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. Under the full
cost method of accounting, a ceiling test is performed on a quarterly basis. The full cost ceiling test is an impairment test
prescribed by SEC Regulation S-X Rule 4-10. The ceiling test determines a limit on the book value of oil and natural gas properties.
The capitalized costs of proved oil and natural gas properties, net of accumulated depletion in the Company’s Consolidated
Balance Sheets, may not exceed the estimated future net cash flows from proved oil and natural gas reserves, excluding future
cash outflows associated with settling asset retirement obligations that have been accrued in the Company’s Consolidated
Balance Sheets, using the unweighted average first day of the month commodity sales prices for the previous twelve months (adjusted
for quality and basis differentials), held constant for the life of production, discounted at 10%, plus the cost of unevaluated
properties and major development projects excluded from the costs being amortized. If capitalized costs exceed this limit, the
excess is charged to expense. As of March 31, 2017 and 2016, the Company impaired $128,462 in Proven Oil and Gas Properties and
$1,690,183 in Unproven Oil and Gas Properties.
GROOVE
BOTANICAL, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2017 AND 2016
Property
and Equipment
Other
property and equipment is reviewed on an annual basis for impairment and as of 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.
Other
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:
|
Office
Equipment:
|
5-7 Years
|
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.
Intellectual
Property
The
cost of licensed technologies acquired is capitalized and will be amortized over the shorter of the term of the licensing agreement
or the remaining life of the underlying patents.
The
Company evaluates recoverability of identifiable intangible assets whenever events or changes in circumstances indicate that intangible
assets carrying amount may not be recoverable. Such circumstances include, but are not limited to: (1) a significant decrease
in the market value of an asset, (2) a significant adverse change in the extent or manner in which an asset is used, or (3) an
accumulation of cost significantly in excess of the amount originally expected for the acquisition of an asset. The Company measures
the carrying amount of the assets against the estimated undiscounted future cash flows associated with it.
The
Company impaired $21,292 for the year ended March 31, 2016. There were noimpairment loss for the fiscal year ended March
31, 2017.
Should
the sum of the expected cash flows be less than the carrying amount of assets being evaluated, an impairment loss would be recognized.
The impairment loss would be calculated as the amount by which the carrying amount of the assets, exceed fair value. Estimated
amortization of intangible assets over the next five years is as follows:
|
March
31,
|
|
|
|
|
|
2017
and thereafter
|
|
$
|
—
|
|
GROOVE
BOTANICAL, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2017 AND 2016
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.
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. In
addition, the Company had a net loss during current period so dilutive securities would decrease negative EPS and have an anti-dilutive
effect.
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.
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.
GROOVE
BOTANICAL, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2017 AND 2016
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.
Recent
Accounting Standards
In
May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
No. 2014-09, Revenue from Contracts with Customers, which was subsequently modified in August 2015 by ASU No. 2015-14, Revenue
from Contracts with Customers: Deferral of the Effective Date. The core principle of ASU No. 2014-09 is that companies should
recognize revenue when the transfer of promised goods or services to customers occurs in an amount that reflects what the company
expects to receive. It requires additional disclosures to describe the nature, amount, timing and uncertainty of revenue and cash
flows from contracts with customers. In 2016, the FASB issued additional ASUs that clarify the implementation guidance on principal
versus agent considerations (ASU 2016-08), on identifying performance obligations and licensing (ASU 2016-10), and on narrow-scope
improvements and practical expedients (ASU 2016-12) as well as on the revenue recognition criteria and other technical corrections
(ASU 2016-20). These new standards will identify performance obligations and narrow aspects on achieving core principle. The Company
is currently evaluating the impact the adoption of this guidance may have on its financial statements. The Company is an “emerging
growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS
Act, emerging growth companies (“EGCs”) can delay adopting new or revised accounting standards issued subsequent to
the enactment of the JOBS Act until such time as those standards apply to private companies. Therefore, the Company will not be
subject to the same new or revised accounting standards as public companies that are not EGCs. The Company anticipates adopting
this new guidance on January 1, 2019 with the modified retrospective approach and plans on giving additional updates on its progress
and further conclusions.
In
January 2016, the FASB issued ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial
Assets and Financial Liabilities, which requires that equity investments, except for those accounted for under the equity method
or those that result in consolidation of the investee, be measured at fair value, with subsequent changes in fair value recognized
in net income. However, an entity may choose to measure equity investments that do not have readily determinable fair values at
cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical
or a similar investment of the same issuer. It also impacts the presentation and disclosure requirements for financial instruments.
It is effective for public business entities for annual periods, and interim periods within those annual periods, beginning after
December 15, 2017, while for EGCs the amendment will become effective for fiscal years beginning after December 15, 2018. Early
adoption is permitted only for certain provisions. The Company is in the process of evaluating the impact of adoption of this
guidance on the Company’s consolidated financial statements and will adopt this guidance since January 1, 2019.
GROOVE
BOTANICAL, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2017 AND 2016
NOTE
2: RECEIVABLE FROM JOINT INTERESTS
The
Company is the operator of certain wells acquired in the Expanded Bedford Agreement. Pursuant to a joint interest operating
agreement (the “Joint Interest Agreement”), the Company charges the other owners of the Grace Wells for their
pro-rata share of operating and workover expenses. These receivables are carried on the Company’s balance sheet
as Receivable from Joint Interests. At March 31, 2016 and March 31, 2017 the amount of these receivables is $153,209. During
the year ended March 31, 2016 and March 31, 2017, the Company deemed the collectability of the receivable from joint interests
in the amount of $153,209, as unlikely.
NOTE
3: DEPOSITS AND PREPAID EXPENSES
During
the years ended March 31, 2017 and 2016 the Company advanced $- 0- toward the purchase of properties.
We
wrote off $279,400 in deposits of $279,400 on March 31, 2016.
During
the year ended March 31, 2015 the Company incurred prepaid consulting fees in the amount of $100,000 which was being amortized
over 36 months. In November 2015 the Company incurred prepaid consulting fees to Rene Haeusler, a director of the company, in
the amount of $50,000 which is being amortized over 48 months. Amortization through March 31, 2016 was $37,131.
We
wrote off the remaining balance of our prepaid consulting fees in the on March 31, 2016.
|
|
|
March
31,
2017
|
|
March
31,
2016
|
|
Deposits
on wells
|
|
$
|
—
|
|
|
$
|
279,400
|
|
|
Prepaid
consulting fees
|
|
|
—
|
|
|
|
150,000
|
|
|
|
|
|
—
|
|
|
|
429,400
|
|
|
|
|
|
|
|
|
|
|
|
|
Less:
Accumulated Amortization on Prepaid Consulting Fees
|
|
|
—
|
|
|
|
(37.131
|
)
|
|
Less:
Impairment of Well Deposits and Consulting Fees
|
|
|
—
|
|
|
|
(392,269
|
)
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
NOTE
4: PROPERTY AND EQUIPMENT
A
summary of property and equipment at March 31, 2017 and 2016 is as follows:
|
|
|
March
31,
2017
|
|
March
31,
2016
|
|
Office
Equipment
|
|
$
|
41,778
|
|
|
$
|
41,778
|
|
|
Vehicles
|
|
|
22,657
|
|
|
|
22,657
|
|
|
|
|
|
64,435
|
|
|
|
64,435
|
|
|
Less:
Accumulated depreciation
|
|
|
(55,374
|
)
|
|
|
(50,843
|
)
|
|
Total
|
|
$
|
9,061
|
|
|
$
|
13,592
|
|
Depreciation
expense for the years ended March 31, 2017 and 2016 was $4,531 and $4,532 respectively.
GROOVE
BOTANICAL, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2017 AND 2016
NOTE
5: INTELLECTUAL PROPERTY RIGHTS
A
summary of the intellectual property rights at March 31, 2017 and 2016, are as follows:
|
|
|
March
31,
2017
|
|
March
31,
2016
|
|
Intelli-well
|
|
$
|
—
|
|
|
$
|
425,850
|
|
|
Less:
accumulated amortization
|
|
|
—
|
|
|
|
(404,558
|
)
|
|
Less:
impairment
|
|
|
—
|
|
|
$
|
(21,292
|
)
|
|
Total
|
|
$
|
—
|
|
|
$
|
0
|
|
Amortization
expense for the years ended March 31, 2016 $31,938. We impaired the remaining $21,292 for the year ended March 31, 2016.
GROOVE
BOTANICAL, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2017 AND 2016
NOTE 6:
OIL AND GAS PROPERTY ACTIVITY
Producing
oil and gas properties consist of the following:
|
|
|
March
31,
2017
|
|
March
31,
2016
|
|
Lincoln
County, Oklahoma
|
|
$
|
111,402
|
|
|
$
|
111,402
|
|
|
Lipscomb
County, Texas
|
|
|
250,082
|
|
|
|
250,082
|
|
|
Miller
County, Arkansas
|
|
|
139,909
|
|
|
|
139,909
|
|
|
Ward
Petroleum Assets
|
|
|
290,500
|
|
|
|
290,500
|
|
|
Kensington
Energy Assets
|
|
|
120,000
|
|
|
|
120,000
|
|
|
Other
Properties
|
|
|
325,185
|
|
|
|
325,185
|
|
|
Total
Properties
|
|
|
1,237,078
|
|
|
|
1,237,078
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset
retirement cost, net
|
|
|
31,884
|
|
|
|
34,870
|
|
|
Property
impairments
|
|
|
(635,154
|
)
|
|
|
(609,534
|
)
|
|
Less:
Depletion
|
|
|
(599,223
|
)
|
|
|
(587,508
|
)
|
|
Net
|
|
$
|
34,585
|
|
|
$
|
74,816
|
|
For
the year ended March 31, 2017 and 2016, depletion per Bbl was $4.95 and $6.85 respectively.
GROOVE
BOTANICAL, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2017 AND 2016
NOTE
7: ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts
payable and accrued liabilities consisted of the following:
|
|
|
March
31,
2017
|
|
March
31,
2016
|
|
Accounts
payable
|
|
$
|
132,746
|
|
|
$
|
130,747
|
|
|
Accrued
interest
|
|
|
75,713
|
|
|
|
63,944
|
|
|
Total
|
|
$
|
208,459
|
|
|
$
|
194,691
|
|
NOTE
8: NOTES PAYABLE
|
|
|
March
31, 2017
|
|
March 31,
2016
|
|
On
May 8, 2006, the Company entered into a convertible note payable agreement with a shareholder in the amount of $100,000. The
note carries an interest rate of 10% per annum and matures of November 8, 2006. The note holder has the right to
convert the note and accrued interest at a rate of $0.01 per share. The value of this conversion feature was treated
as a loan discount for the full $100,000 of the loan and was amortized to interest expense over the life of the loan. During
the year ended March 31, 2016, the Company issued 700,000 shares of common stock for the conversion of $100 of principal.
Interest in the amount of of $170 and $175 were accrued on this note during the year ended March 31, 2017 and 2016,
respectively. The maturity of this note has been extended until April 1, 2018. The outstanding principal balance and all outstanding
interest was converted into 500,000 shares on June 15, 2018.
|
|
$
|
1,700
|
|
|
$
|
1,700
|
|
|
On
November 11, 2008, the Company issued a convertible promissory note to an investor in the amount of $50,000. The
current balance of the note is $30,000. The note carries an interest rate of 10% per annum and a maturity date of October
1, 2009. The note holder has the right to convert the note and accrued interest into shares of the Company’s
common stock at a rate of $3.00 per share. The discount is being amortized to interest expense over the life of the note
via the effective interest method. Interest in the amount of $3,000 and $3,000 was accrued on this note during the year ended March
31, 2015 and 2014, respectively. Accrued interest was $20,884 and $17,884 respectively at March 31, 2017 and 2016. This
remaining balance of $30,000 on this promissory note and the promissory note issued in the amount of $50,000 on January 27,
2009 and accrued interest, was settled on March 9, 2018 for $2,500 plus the issuance of 600,000 shares of Common Stock
|
|
|
30,000
|
|
|
|
30,000
|
|
|
On
January 27, 2009, the Company issued a promissory note to an investor in the amount of $50,000. The note carries
an interest rate of 10% per annum and matures on December 15, 2009. In addition to the note payable, the Company
issued 1,000,000 shares of common stock to the note holder. The shares are considered a discount to the note payable. The
shares are value using the closing market price on the date the note was signed and have a value of $25,000. The
discount will be amortized over the life of the note via the effective interest method. Accrued interest was $40,877
and $35,877 at March 31, 2017 and 2016 respectively. This note and the promissory note issued in the amount of $50,000 on
November 11, 2008, with a remaining balance of $30,000 plus accrued interest was settled on March 9, 2018 for $2,500 plus
the issuance of 600,000 shares of Common Stock.
|
|
|
50,000
|
|
|
|
50,000
|
|
|
On
November 28, 2006, Oiltek, of which the Company has a majority interest in, issued a convertible note payable in the amount
of $2,500. This note bears interest at a rate of 8% per annum and matures on October 1, 2007. The principal
amount of the note and accrued interest are convertible into shares of the Company’s common stock at a price of $0.01
per share. A beneficial conversion feature in the amount of $2,500 was recorded as a discount to the note and was
amortized to interest expense during the period ended December 31, 2006. Interest in the amount of $200 and $200
was accrued on this note during the twelve months ended March 31, 2017 and 2016, respectively. The maturity date of this note
has been extended until Apri1 1, 2018. The outstanding principal balance and all accrued interest was converted into
950,000 shares on April 19, 2018.
|
|
|
2,500
|
|
|
|
2,500
|
|
|
On
November 28, 2006, Oiltek, of which the Company has a majority interest in, issued a convertible note payable in the amount
of $5,000. This note bears interest at a rate of 8% per annum and matured on October 1, 2007. The principal
amount of the note and accrued interest are convertible into shares of the Company’s common stock at a price of $0.01
per share. A beneficial conversion feature in the amount of $5,000 was recorded as a discount to the note and was
amortized to interest expense during the period ended December 31, 2006. Interest in the amount of $400 and $400
was accrued on this note during the twelve months ended March 31, 2017 and 2016, respectively. The maturity date of this note
has been extended until Apri1 1, 2018. The outstanding principal balance and all accrued interest was converted into
400,000 shares on April 19, 2018.
|
|
|
5,000
|
|
|
|
5,000
|
|
|
On
September 29, 2014, the Company issued two promissory notes note payable in the total amount of $60,000. These
notes bear interest at a rate of 5% per annum, matured on January 1, 2014, and were extended until December 1, 2016. Accrued
interest as of March 31, 2016 and March 31, 2017 was $4,512 and 7,512. The principal and accrued interest on these notes
were settled in March 2018 for $5,000.
|
|
|
60,000
|
|
|
|
60,000
|
|
|
Total
outstanding
|
|
$
|
149,200
|
|
|
$
|
149,200
|
|
GROOVE
BOTANICAL, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2017 AND 2016
|
|
|
Note
|
|
Unamortized
|
|
Net
of
|
|
March
31, 2017:
|
|
Amount
|
|
Discounts
|
|
Discount
|
|
Notes
payable – long-term portion
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Notes
payable – current portion
|
|
|
149,200
|
|
|
|
—
|
|
|
|
149,200
|
|
|
Total
|
|
$
|
149,200
|
|
|
$
|
—
|
|
|
$
|
149,200
|
|
|
|
|
Note
|
|
Unamortized
|
|
Net
of
|
|
March
31, 2016:
|
|
Amount
|
|
Discounts
|
|
Discount
|
|
Notes
payable – long-term portion
|
|
$
|
149,200
|
|
|
$
|
—
|
|
|
$
|
149,200
|
|
|
Notes
payable – current portion
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Total
|
|
$
|
149,200
|
|
|
$
|
—
|
|
|
$
|
149,200
|
|
Minimum
future principal payments under the note payable are due as follows during the year ended March 31:
GROOVE
BOTANICAL, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2017 AND 2016
NOTE
9: RELATED PARTY TRANSACTIONS
During
the fiscal year ended March 31, 2017 and 2016, the president advanced the Company $0 and $0, respectively. The balance as of March
31, 2017 and 2016 were $20,000 and $20,000, respectively.
Preferred
Stock
The
100 shares of Series A 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 Preferred Stock is our President, Kent Rodriguez. The Series
A Preferred Stock pays an eight percent (8%) dividend. The dividends are cumulative and payable quarterly. The Series A 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 Preferred Stock provides for voting rights on an "as converted to common stock" basis.
The
holders of the Series A 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 preferred stock shall
convert into Common Stock and the remaining shares of Series A 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.
During
the years ended March 31, 2016 and March 31, 2017, the Company incurred $40,000 in Series A preferred stock dividends, and
paid $1,000 and $35,500 for years ended March 31, 2017 and March 31, 2016, respectively. As of March 31, 2017 and March 31, 2016,
the accrued balance due Mr. Rodriguez was $76,450 and $37,450 respectively. The liquidation preference as of March 31, 2016 and
March 31, 2017 was $576,450 and $537,450 or $5,764.50 and $5,374.50 per share respectively.
Employment
Agreements
KENT
RODRIGUEZ
During
the years ended March 31, 2017 and 2016, the Company charged to operations the amount of $49,800 and $49,202 in annual salary
for Mr. Rodriguez, of which $35,700 and $50,457 was paid to him during the years ended March 31, 2017 and 2016, respectively. As
of March 31, 2017 and 2016, the balances of accrued and unpaid salaries were $219,562 and $205,462.
In
March, 2013, our Board of Directors authorized the issuance of 2,000 shares of Series B Preferred Stock, par value $0.10 per share
(the "Series B Preferred Stock"). The face amount of share of the Series B Preferred Stock is $1,000. As
of March 31, 2017 and 2016, the Company has 1,983 and 1,983 shares of Series B preferred stock respectively issued and outstanding.
The liquidation preference as of March 31, 2017 was $2,326,526 or $1,173.24 per share.
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 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.
NOTE
10: 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 carryforwards for
income tax purposes with a valuation allowance against the carryforwards for book purposes.
GROOVE
BOTANICAL, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2017 AND 2016
In
assessing the realizability 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
carryforwards of $34,047,136 which will expire beginning in 2029. 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 March 31, 2017, we have provided a valuation allowance reducing
the net realizable benefits of these deductible differences to $0 at March 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.
Deferred
income taxes arise from the temporary differences between financial statement and income tax recognition of net operating losses.
These loss carryovers are limited under the Internal Revenue Code should a significant change in ownership occur.
|
|
|
March
31, 2017
|
|
March
31, 2016
|
|
|
|
|
Temporary
Difference
|
|
|
|
Tax
Effect
|
|
|
|
Temporary
Difference
|
|
|
|
Tax
Effect
|
|
|
Deferred
tax assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
operating (loss) income
|
|
|
243,193
|
|
|
|
100,852
|
|
|
|
2,503,934
|
|
|
|
1,038,381
|
|
|
Valuation
allowance
|
|
|
(243,193
|
)
|
|
|
(100,852
|
)
|
|
|
(2,503,934
|
)
|
|
|
(1,038,381
|
)
|
|
Total
deferred tax asset
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Net
deferred tax asset
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Deferred
income taxes arise from the temporary differences between financial statement and income tax recognition of net operating losses.
These loss carryovers are limited under the Internal Revenue Code should a significant change in ownership occur.
At
March 31, 2017 and March 31, 2016, the Company had approximately $34,047,136 and income of $33,610,746 respectively, in unused
federal net operating loss carryforwards, which begin to expire principally in the year 2029. A deferred tax asset at each date
of approximately $14,119,347 and $13,938,376 resulting from the loss carryforwards has been offset by a 100% valuation allowance.
The change in the valuation allowance for the period ended March 31, 2017 and 2016 was approximately $180,971 and $336,107.
|
|
|
March
31,
|
|
|
|
2017
|
|
2016
|
|
U.S.
Federal statutory graduated rate
|
|
|
35.00
|
%
|
|
|
35.00
|
%
|
|
State
income tax rate, net of federal benefit
|
|
|
6.47
|
%
|
|
|
6.47
|
%
|
|
Net
rate
|
|
|
41.47
|
%
|
|
|
41.47
|
%
|
|
Net operating
loss used
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
Net
operating loss for which no tax benefits is currently available
|
|
|
(41.47
|
)%
|
|
|
(41.47
|
)%
|
|
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
NOTE
11: STOCKHOLDERS’ EQUITY
Preferred
Stock
Series
A Preferred Stock
The
Company is authorized to issue 1,000,000 shares of preferred stock, par value $0.10 per share. As of March 31, 2017
and 2016, the Company has 100 shares of Series A preferred stock issued and outstanding.
During
the twelve months ended March 31, 2017 and 2016, the Company incurred $40,000 respectively in Series A preferred stock dividends,
and paid $1,000 and $35,500 for the twelve months ended March 31, 2017 and 2016 respectively. As of March 31, 2016 and 2015, the
accrued balance due Mr. Rodriguez was $76,450 and $37,450 respectively. The liquidation preference as of March 31, 2017 and March
31, 2016 was $576,450 or $5,764.50 per share and $537,450 or $5,374.50 per share.
The
100 shares of Series A Preferred Stock, issued to Mr. Rodriguez as payment for $500,000 in promissory notes, are convertible into
the number of shares of common stock sufficient to represent 40 percent (40%) of the fully diluted shares outstanding after their
issuance. The Series A Preferred Stock pays an eight percent (8%) dividend. The dividends are cumulative and payable quarterly.
The Series A 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 Preferred Stock provides for voting rights on an "as converted to common stock"
basis.
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
holders of the Series A Preferred Stock have the right to convert the preferred stock into shares of common stock such that if
converted simultaneously, they shall represent fifty-one percent (51%) of the fully diluted shares outstanding after their issuance.
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, warrants, or convertible securities.
GROOVE
BOTANICAL, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2017 AND 2016
Series
B Preferred Stock
In
March, 2013, our Board of Directors authorized the issuance of 2,000 shares of Series B Preferred Stock, par value $0.10 per share
(the "Series B Preferred Stock"). The face amount of share of the Series B Preferred Stock is $1,000. As
of March 31, 2017 and 2016, the Company has 1,983 and 1,983 shares of Series B preferred stock respectively issued and outstanding.
The liquidation preference as of March 31, 2017 and 2016 were $2,326,526 or $1,173.24 per share and 1,983,000 or $1,000.00
per share, respectively.
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 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.
Series
B Preferred Stock Issuances during the year ended March 31, 2017:
We
did not issue any Series B Preferred Shares during the year ended March 31, 2017.
In
March 2018 we issued 2,015000 Shares of Common Stock for all accrued interest as of March 31, 2018, on the outstanding 1,625 shares
of our Series B Preferred Stock.
During
the twelve months ended March 31, 2017 and 2016, the Company incurred $178,488 and $165,038 in dividends on Series B preferred
stock.
Total
dividends payable from both A and B preferred shares at March 31, 2017 and 2016 is $419,976 and $205,488 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.
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.
There
are currently 200 shares of AFS Series A Preferred Stock outstanding. Accrued interest as of March 31, 2017 is $14,037. As of
March 31, 2017, the liquidation preference is $214,037 or $1070.19 per share.
The
Holders of AFS Series A Preferred Stock do not have any voting rights and their consent is not required to take any sort of corporate
action.
AFS
Series A Preferred Stock Issuances during the year ended March 31, 2017:
In
December 2016, the Company issued 100 shares of AFS Series A Preferred Stock for $100,000 in cash to a non-affiliated accredited
investor, and 50 shares to a non affiliated accredited investor for Consulting Services.
GROOVE
BOTANICAL, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2017 AND 2016
Common
Stock
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.
The
Company has authorized 200,000,000 shares of common stock with a par value of $0.001 per share. As of March 31, 2017
and 2016, the Company has 18,198,062 and 18,198,062 shares of common stock issued and outstanding.
The
Company did not issue any Common stock during the year ended March 31, 2017.
Options
There
are no stock options outstanding.
GROOVE
BOTANICAL, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2017 AND 2016
Warrants
None
NOTE
12: 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 ended
March 31, 2015. The Company terminated this agreement on August 7, 2017.
GROOVE
BOTANICAL, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2017 AND 2016
NOTE
13: 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 compute basic EPS by dividing net income (loss) attributable to common stockholders by the weighted-average number of shares
of common stock outstanding during the period. The calculation of income (loss) available to common stockholders and EPS is based
on the underlying premise that all income after payment of dividends on preferred shares is available to and will be distributed
to the common stockholders. As the Company is in a loss position during the year ended March 31, 2017 and 2016, there is no dilutive
effect included. The net loss per share was $0.024 and $0.154 for March 31, 2017 and 2016.
NOTE
14:
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
15: ASC 932-235-55 SUPPLEMENTAL DISCLOSURES
Net
Capitalized Costs
The
Company's aggregate capitalized costs related to natural gas and oil producing activities are summarized as follows:
|
|
|
March
31,
2017
|
|
March
31,
2016
|
|
Natural
gas and oil properties and related equipment:
|
|
|
|
|
|
|
|
|
|
Proven
|
|
$
|
1,268,962
|
|
|
$
|
1,271,858
|
|
|
Unproven
|
|
|
1,867,183
|
|
|
|
1,867,183
|
|
|
Accumulated
depreciation, depletion, and impairment
|
|
|
(2,924,560
|
)
|
|
|
(2,887,225
|
)
|
|
Net
capitalized costs
|
|
$
|
211,585
|
|
|
$
|
251,816
|
|
Costs
Incurred
Costs
incurred in natural gas and oil property acquisition, exploration and development activities that have been capitalized are summarized
as follows:
|
|
|
|
March
31,
2017
|
|
|
|
March
31,
2016
|
|
|
Acquisition
of properties
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Development
costs
|
|
|
—
|
|
|
|
—
|
|
|
Total
costs incurred
|
|
$
|
—
|
|
|
$
|
—
|
|
GROOVE
BOTANICAL, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2017 AND 2016
Results
of Operations for Natural Gas and Oil Producing Activities
The
Company's results of operations from natural gas and oil producing activities are presented below for the fiscal years ended March
31, 2017 and 2016. The following table includes revenues and expenses associated directly with the Company's natural gas and oil
producing activities. It does not include any interest costs and general and administrative costs and, therefore, is not necessarily
indicative of the contribution to consolidated net operating results of the Company's natural gas and oil operations.
|
|
|
March
31,
2017
|
|
March
31,
2016
|
|
Production
revenues
|
|
$
|
57,021
|
|
|
$
|
52,933
|
|
|
Production
costs
|
|
|
(54,892
|
)
|
|
|
(53,659
|
)
|
|
Depreciation
and depletion expense
|
|
|
(32,807
|
)
|
|
|
(84,897
|
)
|
|
|
|
$
|
(30,678
|
)
|
|
$
|
(85,623
|
)
|
|
Imputed
income tax provision (1)
|
|
|
—
|
|
|
|
—
|
|
|
Results
of operation for natural gas / oil producing activity
|
|
$
|
(30,678
|
)
|
|
$
|
(85,623
|
)
|
(1) Concentration
of customers
For
the year ended March 31, 2017, four customers, Scissortail Energy, Avalon 2015-1 LP, Lexinta SA and Ward Petroleum, individually
accounted for 23%, 18%, 18% and 12% of the Company’s revenues, respectively. Except for the aforementioned customers, there
was no other single customer who accounted for more than 10% of the Company’s revenues for the year ended March 31, 2017.
(2) The
imputed income tax provision is hypothetical (at the statutory rate) and determined without regard to the Company's deduction
for general and administrative expenses, interest costs and other income tax credits and deductions, nor whether the hypothetical
tax provision will be payable.
GROOVE
BOTANICAL, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2017 AND 2016
Natural
Gas and Oil Reserve Quantities
The
following schedule contains estimates of proved natural gas and oil reserves attributable to the Company. Proved reserves are
estimated quantities of natural gas and oil that geological and engineering data demonstrate with reasonable certainty to be recoverable
in future years from known reservoirs under existing economic and operating conditions. Proved developed reserves are those which
are expected to be recovered through existing wells with existing equipment and operating methods. Reserves are stated in thousand
cubic feet (mcf) of natural gas and barrels (bbl) of oil. Geological and engineering estimates of proved natural gas and oil reserves
at one point in time are highly interpretive, inherently imprecise and subject to ongoing revisions that may be substantial in
amount. Although every reasonable effort is made to ensure that the reserve estimates are accurate, due to their nature reserve
estimates are generally less precise than other estimates presented in connection with financial statement disclosures.
|
|
|
|
Oil
- bbls
|
|
|
Proved
reserves:
|
|
|
|
|
|
Balance as
of March 31, 2014
|
|
|
6,883
|
|
|
Production
|
|
|
(567
|
)
|
|
Purchase of reserves-in-place
|
|
|
3,414
|
|
|
Technical
Revision
|
|
|
338
|
|
|
Economic
Revision
|
|
|
(80
|
)
|
|
Balance
as of March 31, 2015
|
|
|
9,988
|
|
|
Production
|
|
|
(1,136
|
)
|
|
Purchase of reserves-in-place
|
|
|
—
|
|
|
Technical
Revisions
|
|
|
39
|
|
|
Economic
Revision
|
|
|
(3,616
|
)
|
|
Balance as of March 31, 2016
|
|
|
5,275
|
|
|
|
|
|
|
|
|
Production
|
|
|
(568
|
)
|
|
Purchase of reserves-in-place
|
|
|
—
|
|
|
Technical
Revisons
|
|
|
(4,200
|
)
|
|
Balance as of March 31, 2017
|
|
|
507
|
|
|
|
|
|
Gas
- mcf
|
|
|
|
Proved
reserves:
|
|
|
|
|
|
Balance as
of March 31, 2014
|
|
|
133,136
|
|
|
Production
|
|
|
(9,470
|
)
|
|
Purchase of reserves-in-place
|
|
|
8,071
|
|
|
Technical
Revision
|
|
|
17,957
|
|
|
Economic
Revision
|
|
|
—
|
|
|
Balance
as of March 31, 2015
|
|
|
149,694
|
|
|
Production
|
|
|
(15,744
|
)
|
|
Purchase of reserves-in-place
|
|
|
—
|
|
|
Technical
Revisions
|
|
|
4,270
|
|
|
Economic
Revision
|
|
|
(29,387
|
)
|
|
Balance as of March 31, 2016
|
|
|
108,833
|
|
|
Production
|
|
|
(10,793
|
)
|
|
Purchase of reserves-in-place
|
|
|
—
|
|
|
Technical
Revisions
|
|
|
(28,100
|
)
|
|
Economic
Revision
|
|
|
—
|
|
|
Balance
as of March 31, 2017
|
|
|
69,940
|
|
GROOVE
BOTANICAL, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2017 AND 2016
Standardized
Measure of Discounted Future Net Cash Flows
The
following schedule presents the standardized measure of estimated discounted future net cash flows from the Company's proved reserves
for the fiscal years ended March 31, 2017 and 2016. Estimated future cash flows are based on independent reserve data. Because
the standardized measure of future net cash flows was prepared using the prevailing economic conditions existing at March 31,
2017 and 2016, it should be emphasized that such conditions continually change. Accordingly, such information should not serve
as a basis in making any judgment on the potential value of the Company's recoverable reserves or in estimating future results
of operations.
|
|
|
March
31,
2017
|
|
March
31,
2016
|
|
Future
production revenue
|
|
$
|
171,741
|
|
|
$
|
428,105
|
|
|
Future
production costs
|
|
|
(120,868
|
)
|
|
|
(317,887
|
)
|
|
Future
development costs
|
|
|
—
|
|
|
|
—
|
|
|
Future
cash flows before income taxes
|
|
|
50,873
|
|
|
|
110,218
|
|
|
Future
income tax
|
|
|
—
|
|
|
|
—
|
|
|
Future
net cash flows
|
|
|
50,873
|
|
|
|
110,218
|
|
|
Effect
of discounting future annual cash flows at 10%
|
|
|
(16,288
|
)
|
|
|
(35,402
|
)
|
|
Standard
measure of discounted net cash flows
|
|
$
|
34,585
|
|
|
$
|
74.816
|
|
(1) The
weighted average oil wellhead price used in computing the Company's reserves were $42.36 per bbl and $42.10 per bbl at March 31,
2017 and 2016, respectively. The weighted average gas wellhead price used in computing the Company's reserves were $2.06 and $1.824
/mmbtu at March 31, 2017 and 2016, respectively. The oil and gas pricing were calculated using the arithmetic average of the price
on the first day of each month that was received for each property during the previous fiscal year. These prices were
held constant throughout the economic life of the properties. Previous year run checks were used to determine the actual
prices received.
The
following schedule contains a comparison of the standardized measure of discounted future net cash flows to the net carrying value
of proved natural gas and oil properties at March 31, 2017 and 2016:
|
|
|
March
31,
2017
|
|
March
31,
2016
|
|
Standardized
measure of discount future net cash flows
|
|
$
|
34,585
|
|
|
$
|
74,816
|
|
Proved
natural oil and gas property, net of accumulated
depreciation, depletion, and amortization, including
impairment
|
|
|
34,585
|
|
|
|
74,816
|
|
|
Standardized
measure of discount future net cash flows in excess of net carrying value of proved natural oil and gas properties
|
|
$
|
—
|
|
|
$
|
-0-
|
|
GROOVE
BOTANICAL, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED MARCH 31, 2017 AND 2016
NOTE
16: SUBSEQUENT EVENTS
The
Company has reviewed the subsequent event through the date of this report. Below are our subsequent events:
On
January 29, 2018 the Company executed a Promissory Note between the Company and Carebourn Capital, LLC in the amount of $230,000.
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.