NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2016
Note
1. Financial Statement Presentation
The
summary of significant accounting policies is presented to assist in the understanding of the financial statements. The financial
statements and notes are the representations of management. These accounting policies conform to accounting principles generally
accepted in the United States of America and have been consistently applied in the preparation of the financial statements.
History
and nature of business
ProGreen
US, Inc., a Delaware corporation, and its wholly owned subsidiaries (collectively, the “Company”) own and manage residential
real estate rental property in the Oakland County, Michigan area.
On
April 30, 2009, the Company (formerly known as Diversified Product Inspections, Inc.) ceased previous operations and settled an
outstanding lawsuit which resulted in a change of ownership and management. Following the settlement on April 30, 2009, the
Company had no assets, no liabilities, and had 13,645,990 shares of common stock outstanding.
On July
21, 2009, the Company formed ProGreen Properties, Inc. as a wholly-owned subsidiary and merged ProGreen Properties, Inc. into
the Company, which was the surviving corporation in the merger. In connection with the merger, the Company changed
its name from Diversified Product Inspections, Inc. to ProGreen Properties, Inc. The change of the Company’s
name to ProGreen Properties, Inc. became effective on September 11, 2009 with approval by the Financial Industry Regulatory Authority
(FINRA) as effective for trading purposes in the OTC Bulletin Board market under the new symbol PGEI. Pursuant to Board of
Directors authorization, the Company changed its name to Progreen US, Inc. with the filing of a Certificate of Amendment with
the Secretary of State of Delaware on July 11, 2016, which was approved by FINRA effective for trading purposes on July 22, 2016.
In
December 2009, ProGreen Realty LLC (“ProGreen Realty”) was formed as a wholly owned subsidiary of the Company. ProGreen
Realty acts as the real estate broker for the Company. All assets, liabilities, revenues and expenses are included in the consolidated
financial statements of the Company.
On
October 31, 2011 ProGreen Properties Management LLC (“Properties Management”) was formed as a wholly owned subsidiary
of the Company which manages the Company owned properties as well as certain of the sold properties under management agreements.
All assets, liabilities, revenues and expenses are included in the consolidated financial statements of the Company.
These
investment properties are marketed exclusively by ProGreen Realty and managed by ProGreen Management. As of April 30, 2015 the
Company owned no investment properties.
Effective
December 22, 2014 the Company entered into an interim operating agreement (the “Interim PAJV Operating Agreement”)
with American Residential GAP, LLC (“ARG” or “ARG LLC”) to form PAJV LLC (“PAJV”), a Michigan
limited liability company. American Residential Fastigheter AB (“AMREFA”) is ARG’s sole member. The Company
and ARG each owned 50% of PAJV. There were no capital contributions. PAJV will acquire, own, operate, improve and hold for sale
real estate properties under development. PAJV will fund the purchases of properties with loans from ARG. During fiscal 2015 PAJV
sold three leased properties to ARG LLC effective February 1, 2015, and sold a fourth property to ARG LLC in March 2015. Our agreement
with AMREFA was restructured through a March 15, 2015, amendment to the Investment Agreement with AMREFA, superseding the December
2014 Interim PAJV Operating Agreement. As of this date the Company is no longer a 50% owner of the PAJV. The amendment provides
for ARG LLC (the U.S. real estate subsidiary) to fund 100% of all financing requirements for real estate projects, which would
be owned by specific joint ventures or ARG LLC, with Progreen handling everything from acquisition to sale and receiving a profit
participation payment for a return on the property above 9.5%.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2016
Note
1. Financial Statement Presentation – continued
In
January 2015, ProGreen Construction LLC (“ProGreen Construction”) was formed as a wholly owned subsidiary of the Company.
ProGreen Construction performs all construction and development services for the properties held under development. During the
year ended April 30, 2015 ProGreen Construction recognized construction costs of $21,855 and provided construction services to
the PAJV, while the Company was a 50% owner of the PAJV, in the amount of $24,040 relating to one of PAJV’s properties under
development. ProGreen Construction charges PAJV ten percent of materials and services costs as an administrative fee. This fee
totaled $2,185 for the year ended April 30, 2015.
During
the year ended April 30, 2015 the Company spent approximately $137,000 to acquire and/or develop three properties, all of which
were sold during 2015 with cash proceeds of $75,000.
On
February 12, 2016, Progreen signed a definitive joint venture agreement with INMOBILIARIA CONTEL S.R.L.C.V. (“CONTEL”)
to form a joint venture (“Baja Joint Venture”), in connection with expanding our real estate development operations
to include Baja California, Mexico. We have committed to a contribution up to the amount of $ 350,000 and in April 2016 we contributed
$110,000 to Baja Joint Venture. See Note 6.
On
March 8, 2016, the Company restructured its working arrangements with AMREFA through entry into a purchase agreement, amended
March 16, 2016, with AMREFA for the purchase of AMREFA’s U.S. subsidiary, ARG LLC, which holds real estate properties in
Birmingham, Michigan, that were purchased by AMREFA and which we have managed for AMREFA. The purchase price was paid by the issuance
to AMREFA of 8,093,541 shares of a new Series B Preferred Stock however at April 30, 2016 the shares have not been issued and
we recorded a note payable to AMREFA in the amount $1,157,270 including a present value discount of $127,730. At April 30, 2016
the amortized balance due AMREFA totaled $1,170,811. See Notes 5, 15 and 25.
SIGNIFICANT
ACCOUNTING POLICIES
Basis
of Presentation
GOING
CONCERN
The
Company’s financial statements for the year ended April 30, 2016, have been prepared on a going concern basis which contemplates
the realization of assets and settlement of liabilities and commitments in the normal course of business. The Company
has incurred losses from operations since its change of ownership, management and line of business on April 30, 2009. Management
recognizes successful business operations and the Company’s transition to attaining profitability are dependent upon obtaining
additional financing and achieving a level of revenue adequate to support its cost structure. These conditions raise substantial
doubt about its ability to continue as a going concern. The consolidated financial statements do not include any adjustments to
reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities
that may result from the outcome of uncertainties.
The
Company will continue to incur costs that are necessary for it to remain an active public company. In the current fiscal
year, the Company used approximately $364,000 of cash to support its operations and such cash needs are expected to continue in
the upcoming year. As of April 30, 2016, the Company has approximately $190,000 in cash. During the year ended April
30, 2016 the Company financed its operations through issuance of common shares for services rendered, proceeds from related party
advances, proceeds from collection of amounts due under the stock subscription agreement and issuance of convertible debt.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2016
Note
1. Financial Statement Presentation – continued
Basis
of consolidation
The consolidated
financial statements include the accounts and records of the Company and its wholly-owned subsidiaries: ProGreen Realty, Progreen
Properties Management, ProGreen Construction, ARG, LLC and Procon Baja JV. All significant intercompany accounts and transactions
have been eliminated. FASB Accounting Standards Codification (“ASC”) Topic 810, “Consolidation,” requires
a company’s consolidated financial statements to include subsidiaries in which the company has a controlling financial interest.
This requirement usually has been applied to subsidiaries in which a company has a majority voting interest. Currently, all of
the Company’s subsidiaries are wholly-owned.
Estimates
The
preparation of financial statements in conformity with the accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Actual results could
differ from those estimates.
Concentration
of credit risk
Financial
instruments which potentially subject the Company to concentrations of credit risk consist of cash and trade receivables. The
Company places its cash with high credit quality financial institutions. At times such cash may be in excess of the FDIC limit.
With respect to trade receivables, the Company routinely assesses the financial strength of its customers and, as a consequence,
believes that the receivable credit risk exposure is limited.
Cash
Cash
consists solely of cash on deposit with financial institutions.
Properties
under development
Properties
under development are recorded at cost from expenditures relating to the acquisition, development, construction, and other costs
that enhance the value or extend the life of rental properties which are capitalized using the specific identification method
to accumulate costs.
Allowance
for doubtful accounts
An
allowance for doubtful accounts is management’s best estimate of the probable credit losses in the exiting accounts receivable.
Management determines the allowance based on historical write-off experience and an understanding of customer payment history.
All amounts deemed to be uncollectible are charged against the allowance for doubtful accounts in the period that determination
is made. Management considers all accounts receivable collectible and, therefore, an allowance for doubtful accounts has not been
recorded at April 30, 2016 and 2015.
Note
receivable – rental property
The
note receivable was carried at amortized cost. Interest income on the note receivable was recognized on the accrual basis based
on the principal balance outstanding.
During the current fiscal year management determined the note is uncollectible and
it was written off in full.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2016
Note
1. Financial Statement Presentation – continued
Goodwill
The
cost of acquiring ARG in excess of the underlying fair value of net assets at date of acquisition is recorded as goodwill and
is assessed annually for impairment. If considered impaired, goodwill will be written down to fair value and a corresponding impairment
loss recognized The Company performed goodwill impairment testing for 2016 and it did not result in an impairment.
Property
and equipment
Property
and equipment are recorded at cost.
Depreciation
is computed using the straight-line method over the estimated useful life of the property and equipment, as follows:
|
|
Lives
|
|
Method
|
Vehicles
|
|
5 years
|
|
Straight line
|
Furniture
|
|
10 years
|
|
Straight line
|
Office equipment
|
|
5 years
|
|
Straight line
|
Rental property
|
|
27.5 years
|
|
Straight line
|
Impairment
of Long Lived Assets
The
Company evaluates its real estate assets for impairment periodically or whenever events or circumstances indicate that its carrying
amount may not be recoverable. If an impairment indicator exists, we compare the expected future undiscounted cash flows against
the carrying amount of an asset. If the sum of the estimated undiscounted cash flows is less than the carrying amount of the asset,
we would record an impairment loss for the difference between the estimated fair value and the carrying amount of the asset.
Rental
revenue recognition
Real
estate properties are leased under operating leases. Rental income from these leases is recognized on a straight-line basis over
the term of each lease.
Management
fee revenue recognition
ProGreen
Management has entered into management agreements with certain property owners whereby the Company manages, leases, operates,
maintains and repairs the properties for which it receives a management fee of ten percent of the monthly rent. Revenue is recognized
as services are performed.
Construction
service revenue recognition
ProGreen
Construction performs all construction and development services for the properties held by the Company and collects ten percent
of materials and services costs as construction revenue. Revenue is recognized as services are performed.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2016
Note
1. Financial Statement Presentation – continued
Property
sales revenue recognition
Property
sales revenue and related profit are generally recognized at the time of the closing of the sale, when title to and possession
of the property are transferred to the buyer. In situations where the buyer's financing is provided by the Company and the buyer
has not made an adequate initial or continuing investment as required by ASC 360-20, "Property, Plant, and Equipment - Real
Estate Sales" ("ASC 360-20"), the profit on such sales is deferred or recognized under the installment method,
unless there is a loss on the sale in which case the loss on such sale would be recognized at the time of closing. There were
no such deferred amounts at either April 30, 2016 or 2015.
Advertising
costs
Advertising
costs are expensed as incurred. Total advertising expenditures for the years ended April 30, 2016 and 2015 were approximately
$1,400 and $3,200, respectively.
Tenant
deposits
The
Company requires tenants to pay a deposit at the beginning of each lease. This deposit may be used for unpaid lease obligations
or repair of damages based on the Company’s determination. If the tenant has not defaulted on the lease, the Company will
return the deposit to the tenant at the end of the lease. The Company holds the tenant deposits for the properties under management.
Deferred
revenue
The
Company may require tenants to prepay rent. The prepaid rent is amortized over the term of the lease using the straight-line method.
Deferred revenue is $0 at April 30, 2016 and 2015.
Derivative
Financial Instruments
The
Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify
as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument
is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported
in the statements of operations. For stock-based derivative financial instruments, the Company uses a Black-Scholes option pricing
model, in accordance with ASC 815-15 “Derivative and Hedging” to value the derivative instruments at inception and
on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded
as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified
in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could
be required within 12 months of the balance sheet date.
Income
taxes
The
Company accounts for income taxes using an asset and liability approach under which deferred income taxes are recognized by applying
enacted tax rates applicable to future years to the differences between the financial statement carrying amounts and the tax bases
of reported assets and liabilities.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2016
Note
1. Financial Statement Presentation – continued
Earnings
(loss) per Share
Basic
earnings (loss) per share assumes no dilution and is computed by dividing net income available to common stockholders by the weighted
average number of common stock outstanding during each period. Diluted earnings per share reflects, in periods in which they have
a dilutive effect, the effect of common shares issuable upon the exercise of stock options or warrants, using the treasury stock
method of computing such effects and contingent shares, or conversion of convertible debt. There are no common stock equivalents
as of April 30, 2016 and 2015.
Employee
Stock-Based Compensation
The
Company accounts for stock-based compensation in accordance with ASC 718, “Compensation-Stock Compensation”. ASC 718
requires companies to measure the cost of employee services received in exchange for an award of equity instruments, including
stock options, based on the grant-date fair value of the award and to recognize it as compensation expense over the period the
employee is required to provide service in exchange for the award, usually the vesting period.
Non-Employee
Stock-Based Compensation
The
Company accounts for stock-based compensation in accordance with the provision of ASC 505, “Equity Based Payments to Non-Employees”
(“ASC 505”), which requires that such equity instruments are recorded at their fair value on the measurement date.
The measurement of stock-based compensation is subject to periodic adjustment as the underlying equity instruments vest.
Reclassifications
Certain
amounts in previous periods have been reclassified to conform to 2016 classifications.
Related
Parties
In
accordance with ASC 850 “Related Party Disclosures” a party is considered to be related to the Company if the party
directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the
Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal
owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly
influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented
from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies
of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence
the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests
is also a related party.
Recent
Accounting Pronouncements
In
February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02,
Leases (Topic 842)
(the
“ASU”). The ASU requires the recognition of lease assets and lease liabilities by lessees for those leases classified
as operating leases under previous GAAP. The ASU allows for early adoption, however, management is currently evaluating the potential
impact of these changes in the consolidated financial statements of the Company.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2016
Note
1. Financial Statement Presentation – continued
In
April 2015 the FASB issued Accounting Standard’s Update No. 2015-03
“Interest Imputation of Interest (Subtopic
835-30): Simplifying the Presentation of Debt Issuance Costs”
The update requires that debt issuance costs related to
a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability.
The recognition and measurement guidance for debt issuance costs are not affected by this update. The adoption of the guidance
is not expected to have a material impact on the Company's Consolidated Financial Statements or the Notes thereto as it is a presentation
matter.
We
do not expect that any other recently issued accounting pronouncements will have a material impact on our consolidated financial
statements.
Note
2. Rental Properties and Property Under Development
Rental
properties and property under development at April 30, 2016 and 2015 are summarized as follows:
|
|
April
30,
|
|
|
April 30,
|
|
|
|
2016
|
|
|
2015
|
|
Rental properties
|
|
$
|
1,012,698
|
|
|
$
|
-
|
|
Less: accumulated
depreciation
|
|
|
(6,138
|
)
|
|
|
-
|
|
Rental properties,
net of accumultaed depreciation
|
|
$
|
1,006,560
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Property under
development
|
|
$
|
294,179
|
|
|
$
|
-
|
|
Depreciation
expense for the years ended April 30 2016 and 2015 totaled $6,138 and $0 respectively.
The
Company owned thirteen and no rental properties as of April 30, 2016 and 2015, respectively. The Company held one and no properties
under development as of April 30, 2016 and 2015, respectively.
Note
3. Accounts Receivable
Accounts
receivable totaled $1,194 and $27,365 at April 30, 2016 and 2015, respectively and is comprised of amounts due from ARG for construction
work performed by ProGreen Construction in the amount of $0 and $24,870 at April 30, 2016 and 2015, respectively and amounts due
from tenants for properties managed by Progreen Management in the amount of $1,194 and $2,495 at April 30, 2016 and 2015, respectively.
Note
4. Note Receivable - Rental Property
On
August 21, 2012 the Company sold one property with a sales price of $60,000 of which $10,000 was financed by the Company which
is recorded as a note receivable with a balance of $0 and $2,137 as of April 30, 2016 and April 30, 2015, respectively. During
the current fiscal year management determined the note is uncollectible and it was written off in full. The amount of $2,137 was
charged to bad debt expense in the year ended April 30, 2016.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2016
Note
5. Business Combination
On
March 8, 2016, the Company restructured its working arrangements with AMREFA through entry into a purchase agreement, amended
March 16, 2016, with AMREFA for the purchase of a 100% interest in AMREFA’s U.S. subsidiary, ARG LLC (ARG), which holds
real estate properties in Birmingham, Michigan, that were purchased by AMREFA and which the Company managed for AMREFA. The Company
will pay the purchase price of $1,285,000 by the issuance to AMREFA of 8,093,541 shares of a new Series B Preferred Stock however
at April 30, 2016 the shares have not been issued and we recorded a note payable to AMREFA in the amount $1,157,270 including
a present value discount of $127,730. At April 30, 2016 the note payable balance due AMREFA totaled $1,170,811, net of $114,189
of unamortized discount. During the year ended April 30, 2016, $13,541 was recognized as amortization of debt discount.
The
acquisition is accounted for under ASC 805 Business Combination and the transaction is recorded at fair value on acquisition date.
The Company recorded Goodwill in the amount of $180,011 in connection with the purchase of ARG.
The
following table summarizes the fair values of the assets acquired and liabilities assumed at the acquisition date:
Cash
|
|
$
|
71,840
|
|
Rental property and property under development
|
|
|
1,306,876
|
|
Accrued liabilities and interest
|
|
|
(14,357
|
)
|
Notes payable
|
|
|
(387,100
|
)
|
|
|
|
|
|
Total Identifiable Net Assets
|
|
|
977,259
|
|
|
|
|
|
|
Goodwill
|
|
|
180,011
|
|
|
|
|
|
|
Total Purchase Price
|
|
$
|
1,157,270
|
|
Rental
property and property under development
The
fair value of rental property and property under development acquired is based on estimated selling prices of the properties,
net of estimated selling costs.
Accrued
liabilities and interest
The
fair value of accrued liabilities and interest include amounts due to ProGreen Construction and Properties Management and accruals
for interest on notes payable which approximate acquisition date amounts.
Notes
payable
The
fair value of notes payable comprises amounts due under promissory note agreements with a bank and the Company’s controller
which approximate acquisition date amounts. See Notes 11 and 12.
Note
6. Note Receivable - Related Party
On
February 12, 2016, the Company signed a definitive joint venture agreement with INMOBILIARIA CONTEL S.R.L.C.V. (“CONTEL”)
to form a joint venture (“Baja Joint Venture”), in connection with expanding real estate development operations to
include Baja California, Mexico. The property acquired by the Baja Joint Venture will be developed for seeding purposes and eventually
sold to a third party. The Company is committed to a contribution up to the amount of $350,000. The Company accepts a share of
the Baja Joint Venture’s profits and losses and is entitled to recover all contribution upon completion of the sale of the
property. In April 2016 the Company contributed $110,000 to Baja Joint Venture which is accounted for as an investment loan.
Note
Receivable - Related Party
totaled $110,000 and $0 as of April 30, 2016 and 2015, respectively.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2016
Note
7. Property and Equipment
Major
classifications of property and equipment at April 30, 2016 and 2015 are summarized as follows:
|
|
April
30,
|
|
|
April 30,
|
|
|
|
2016
|
|
|
2015
|
|
Vehicles
|
|
$
|
40,902
|
|
|
$
|
63,252
|
|
Furniture
|
|
|
3,564
|
|
|
|
3,564
|
|
Office equipment
|
|
|
2,926
|
|
|
|
2,926
|
|
Total vehicles,
furniture and equipment
|
|
|
47,392
|
|
|
|
69,742
|
|
Less: accumulated
depreciation
|
|
|
(35,764
|
)
|
|
|
(45,347
|
)
|
Net carrying amount
|
|
$
|
11,628
|
|
|
$
|
24,395
|
|
Depreciation
expense for the years ended April 30 2016 and 2015 totaled $10,913 and $13,592, respectively.
Note
8. Payable Under Management Agreement
ProGreen
Management has entered into management agreements with certain property owners whereby the Company manages, leases, operates,
maintains and repairs the properties for which it receives a management fee of ten percent of the monthly rent. ProGreen Management
collects rent and remits the property owners’ portion of collected rent, net of a management fee to the owners. At April
30, 2016 and April 30, 2015 net rent amounts due totaled $0 and $36,900, respectively.
In
addition, for certain properties the Company guaranteed rents, in accordance with the terms of each lease, through various dates
through January 1, 2016. During this fiscal year, the rent guarantees expired with no payments required, thus the recorded reserves
in the amount of $10,000 were reversed and included in reserve for rent recovery in the accompanying Consolidated Statement of
Operations for the year ended April 30, 2016. Recorded reserves totaled $10,000 as of April 30, 2015 which are included in accounts
payable and accrued expenses in the accompanying Consolidated Balance Sheet.
Note
9. Obligations Under Capital Leases
The
Company leases a vehicle under a capital lease expiring in fiscal 2018.
The
following is a schedule by year of future minimum lease payments under the capital lease together with the present value of the
net minimum lease payments as of April 30, 2016:
Year ending April 30,
|
|
|
|
|
2017
|
|
$
|
8,152
|
|
2018
|
|
|
3,397
|
|
Total minimum
lease payments
|
|
|
11,549
|
|
|
|
|
|
|
Less amounts
representing interest
|
|
|
(247
|
)
|
Present value of
future minimum lease payments
|
|
$
|
11,302
|
|
Total
lease payments made in fiscal 2016 and 2015 were $8,152 and $13,712, consisting of $7,703 and $12,838 principal and $449 and $874
interest, respectively. Principal payments are shown on the Company’s Consolidated Statements of Cash Flow under Financing
Activities. Interest expense is included in the Company’s Consolidated Statements of Operations.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2016
Note
9. Obligations Under Capital Leases – continued
The
cost of the vehicles in the amount of $40,902 and $63,252 at April 30, 2016 and 2015, is included in the Company’s Consolidated
Balance Sheets as a component of vehicles, furniture and equipment, and is being depreciated over the estimated useful life of
five years. Depreciation expense of $10,415 and $12,650 is included in the Company’s Consolidated Statements of Operations
for the years ended April 30, 2016 and 2015, respectively. During fiscal 2016 the Company sold one of the vehicles for which the
note payable was paid in full as of April 30, 2015. The proceeds from the sale totaled $10,000 and the Company recognized a gain
on the sale of the vehicle in them amount of $8,147 which is included in the Company’s Consolidated Statement of Operations
for the year ended April 30, 2016.
Note
10. Notes Payable
On
July 19, 2013, the Company entered into an Investment Agreement (“AMREFA Agreement”) with AMREFA, which provided generally
for an intended investment of up to $3,000,000 by AMREFA for the purpose of acquisition of investment properties in the U.S. from
the Company. During the year ended April 30, 2015, AMREFA loaned the Company an additional $303,452, of which $207,122 was non
cash in connection with the sale of three properties and $96,330 was received in cash of which $75,000 was received in connection
with the sale of one of the properties. The Company reduced the amount due to AMREFA by $215,000 in the form of noncash as a result
of the Company’s sale of two properties to ARG, whose sole member was AMREFA, during the year ended April 30, 2015. The
Company also reduced the amount due to AMREFA by $135,000 in the form of noncash as a result of the Company’s sale of one
property under development to PAJV, while the Company was a 50% owner in PAJV, during year ended April 30, 2015. In addition the
Company reduced the accrued interest payable due to AMREFA in the amount of $20,219 in the form of noncash as a result of the
sales of the three properties. The Company also reduced the amount due to AMREFA by $35,000 in the form of noncash as a result
of the Company’s commission earned on the sale of one of the PAJV’s properties. The commission totaled $15,000 and
a new note payable in the amount of $22,800, which included accrued interest of $2,800, was issued.
As
of April 30, 2015 notes payable to AMREFA total $289,346 plus accrued interest totaling $13,206. The notes payable and accrued
interest were due in less than twelve months. However, pursuant to an Instalment Payment Agreement (June 2015 Instalment Payment
Agreement) entered into on June 25, 2015 with AMREFA, the Company refinanced its outstanding principal and interest on loans to
the Company from AMREFA. This agreement replaced all outstanding notes by a single 8% promissory note in the principal amount
of $289,346, due July 15, 2017, amortized by instalment payments of principal and interest commencing with an initial payment
in July 2015 of $45,000, including accrued interest of $17,000, which payment was made on July 15, 2015. EIG, a major shareholder
of the Company, guaranteed Progreen’s obligations under the June 2015 Instalment Payment Agreement. During fiscal 2016 the
Company made payments to AMREFA totaling $28,186 in connection with the June 2015 Instalment Payment Agreement.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2016
Note
10. Notes Payable – continued
The
table below summarizes the effects of sales of the three properties and the commission earned by the Company during the year ended
April 30, 2015:
|
|
|
|
|
Proceeds
in the form of :
|
|
|
|
|
|
|
|
|
|
Selling
Price
|
|
|
Cash
|
|
|
Noncash
Debt Pay Down
|
|
|
Noncash
Payment of Accrued Interest Payable
|
|
|
Issuance
of Debt
|
|
|
Book
Value
|
|
|
Gain
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23270
Helen Street, Southfield Michigan
|
|
$
|
110,000
|
|
|
|
|
|
|
$
|
175,000
|
|
|
$
|
10,459
|
|
|
$
|
89,563
|
|
|
$
|
96,699
|
|
|
$
|
13,301
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21198
Berg Street, Southfield Michigan
|
|
|
90,000
|
|
|
$
|
75,000
|
|
|
|
40,000
|
|
|
|
2,010
|
|
|
|
27,009
|
|
|
|
73,780
|
|
|
|
16,220
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24442
Kinsel Street, Southfield, Michigan
|
|
|
75,000
|
|
|
|
|
|
|
|
135,000
|
|
|
|
7,750
|
|
|
|
67,750
|
|
|
|
73,688
|
|
|
|
1,312
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Properties Sold
|
|
$
|
275,000
|
|
|
$
|
75,000
|
|
|
$
|
350,000
|
|
|
$
|
20,219
|
|
|
$
|
184,322
|
|
|
$
|
244,167
|
|
|
$
|
30,833
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commission
|
|
|
|
|
|
21000
Westover, Southfield, Michigan
|
|
|
|
|
|
|
|
|
|
$
|
35,000
|
|
|
$
|
2,800
|
|
|
$
|
22,800
|
|
|
$
|
15,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
275,000
|
|
|
$
|
75,000
|
|
|
$
|
385,000
|
|
|
$
|
23,019
|
|
|
$
|
207,122
|
|
|
$
|
15,000
|
|
|
$
|
30,833
|
|
As
of April 30, 2016 notes payable to AMREFA total $261,150 plus accrued interest totaling $14,653.
During
the year ended April 30, 2015, the Company entered into two notes payable in the form of noncash to the City of Southfield totaling
$14,106 (collectively, the “Southfield debt”) to finance the City of Southfield’s assessments on one of the
Company’s sold properties. The Southfield debt and accrued interest is due over a 17 year period commencing August 31, 2015.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2016
Note
10. Notes Payable – continued
The
Company is indebted as follows:
|
|
January
|
|
|
April , 30
|
|
|
|
2016
|
|
|
2015
|
|
Note
Payable to City of Southfield dated October 29, 2014 bears a fixed rate of interest of 3.00% and requires interest only annual
payments for the first three years of the note. Commencing in year four principal and interest are due in fifteen annual installments.
The note payable is secured by a property located at 23270 Helen Street, Southfield Michigan.
|
|
$
|
6,000
|
|
|
$
|
6,000
|
|
|
|
|
|
|
|
|
|
|
Note
Payable to City of Southfield dated September 19, 2014 bears a fixed rate of interest of 3.00% and requires interest only
annual payments for the first three years of the note. Commencing in year four principal and interest are due in fifteen annual
installments. The note payable is secured by a property located at 23270 Helen Street, Southfield Michigan.
|
|
|
8,106
|
|
|
|
8,106
|
|
|
|
|
|
|
|
|
|
|
Note
Payable to AMREFA dated June 25, 2015 bears a fixed rate of interest of 8.00%. Payments plus accrued interest are due biannually
as follows; January 15, 2016 $61,150, July 15, 2016 $65,000, January 15, 2017 $65,000 and July 15, 2017 $70,000. The note
payable is guaranteed by a majority shareholder.
|
|
|
261,150
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Note
Payable to AMREFA dated March 6, 2015 bears a fixed rate of interest of 8.00% and requires no monthly payments. The principal
and interest are due on or before March 6, 2016. The note payable is unsecured.
|
|
|
-
|
|
|
|
22,800
|
|
|
|
|
|
|
|
|
|
|
Note
Payable to AMREFA dated January 8, 2015 bears a fixed rate of interest of 8.00% and requires no monthly payments. The
principal and interest are due on or before January 8, 2016. The note payable is unsecured.
|
|
|
-
|
|
|
|
67,750
|
|
|
|
|
|
|
|
|
|
|
Note
Payable to AMREFA dated October 1, 2014 bears a fixed rate of interest of 8.00% and requires no monthly payments. The
principal and interest are due on or before October 1, 2015. The note payable is unsecured.
|
|
|
-
|
|
|
|
27,009
|
|
|
|
|
|
|
|
|
|
|
Note
Payable to AMREFA dated October 1, 2014 bears a fixed rate of interest of 8.00% and requires no monthly payments. The
principal and interest are due on or before October 1, 2015. The note payable is unsecured.
|
|
|
-
|
|
|
|
75,457
|
|
|
|
|
|
|
|
|
|
|
Note
Payable to AMREFA dated June 25, 2014 bears a fixed rate of interest of 8.00% and requires no monthly payments. The principal
and interest are due on or before June 25, 2015. The note payable is unsecured.
|
|
|
-
|
|
|
|
96,330
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
275,256
|
|
|
$
|
303,452
|
|
Note
11. Notes Payable Related Party
In
connection with the Company’s purchase of ARG, effective March 8, 2016 the Company assumed a $40,000 note payable plus accrued
interest in the amount of $907, which was due to the Company’s controller under the terms of a promissory note payable effective
November 27, 2015. The note bears a fixed rate of interest of 8.00% and requires no monthly payments. Additional interest of 5%
is due if the Company defaults on the terms of the note payable. The note is secured by the property at 24442 Kinsel Street, Southfield,
Michigan which the Company acquired in the ARG purchase. The note will be paid upon the sale of the Kinsel Street Property. See
Note 5.
The
note payable to the Company’s controller had a balance outstanding of $40,000 and $0 as of April 30, 2016 and 2015, respectively
and the Company recorded interest expense in connection with this note payable in the amount of $471 and $0 for the years ended
April 30, 2016 and 2015, respectively. Accrued interest due under this note payable totaled $1,378 and $0 as of April 30, 2016
and 2015, respectively.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2016
Note
12. Note Payable Bank of Birmingham
In
connection with the Company’s purchase of ARG, effective March 8, 2016 the Company assumed a $347,100 note payable plus
accrued interest in the amount of $5,386, which was due to the Bank of Birmingham under the terms of a promissory note payable
effective January 26, 2015. Principal was due in full on February 5, 2016. Effective March 4, 2016 the Company entered into a
new note payable to Bank of Birmingham in the amount of $490,000 which was comprised of the principal and interest due under the
previous note ($352,486) plus additional proceeds and fees totaling $137,514, resulting in a note payable totaling $490,000. Interest
is calculated at 6% per annum. Principal and interest in the amount of $3,534 are payable monthly commencing May 5, 2016 until
April 5, 2021 when the then outstanding principal and interest are due. The note is secured by all properties and related rents
which the Company acquired in the ARG purchase. See Note 5.
The
note payable had a balance outstanding of $490,000 and $0 as of April 30, 2016 and 2015, respectively and the Company recorded
interest expense in connection with this note payable in the amount of $2,858 and $0 for the years ended April 30, 2016 and 2015,
respectively. Accrued interest due under the note payable totaled $2,858 and $0 as of April 30, 2016 and April 30, 2015, respectively.
Principal
payment requirements on the notes payable to Bank of Birmingham for the years ending after April 30, 2016 are as follows:
2017
|
|
$
|
11,895
|
|
2018
|
|
|
13,699
|
|
2019
|
|
|
14,556
|
|
2020
|
|
|
15,394
|
|
2021
|
|
|
434,456
|
|
Thereafter
|
|
|
-
|
|
Total
|
|
$
|
490,000
|
|
Note
13. Related Party Advances
In
July 2015 EIG, a major shareholder of the Company, advanced the Company $46,000. In November 2015 EIG advanced the Company an
additional $13,000. By agreement, which is in negotiation, between EIG and the Company, these advances have no established repayment
terms nor do they earn interest and are unsecured. Related party advance totaled from EIG totaled $59,000 and $0 at April 30,
2016 and 2015, respectively. See Note 25.
The
Company has entered into subscription agreements with three stockholders, Jan Telander, the Company’s President and CEO;
Ulf Telander, the CEO of EIG; and Frederic Telander, the CEO of SolTech Energy Sweden AB, which provides solar energy solutions
for all types of properties. The subscription agreements provide for the investment in the Company by each of the three stockholders
of $100,000 through the purchase of 100,000 shares each of Series A Preferred Stock. During the last quarter of fiscal 2016, the
Company received $200,000 as payment for 200,000 of the shares. The shares were issued subsequent to April 30, 2016 thus the Company
recorded an amount due stockholders in the amount of $200,000. The remaining 100,000 shares in the amount of $100,000 were purchased
subsequent to April 30, 2016. See Note 25.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2016
Note
14. Fair Value Measurement and Derivative Losses
The
Company utilizes the accounting guidance for fair value measurements and discloses for all financial assets and liabilities that
are recognized or disclosed at fair value in the consolidated financial statements on a recurring basis during the reporting period.
The
fair value is an exit price, representing the price that would be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants at the measurement date. The Company utilizes market data or assumptions
that market participants would use in pricing the asset or liability. ASC 820, "Fair Value Measurements and Disclosures",
establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers
are defined as follows:
|
Level 1 -
|
Observable
inputs such as quoted market prices in active markets.
|
|
|
|
|
Level 2
-
|
Inputs other
than quoted prices in active markets that are either directly or indirectly observable.
|
|
|
|
|
Level 3
-
|
Unobservable
inputs about which little or no market data exists, therefore requiring an entity to develop its own assumptions.
|
During
fiscal year ended April 30, 2016, the Company held certain financial instruments that were measured at fair value on a recurring
basis. The Company determined that the convertible feature of the convertible note should be classified as a derivative liability
under ASC 815-15 – “Derivatives and Hedging”. The fair value of the embedded instrument were categorized as
Level 3.
During
fiscal 2016, $425,413 of derivative liability was recorded as the notes became convertible of which $140,925 was recorded as debt
discount, $23,547 as loss on derivative liability and $260,941 as re-class of equity to liability.
Upon
full conversion of the convertible notes, 147,354 was recorded as loss on derivative liability, $140,925 of debt discount was
fully amortized, $212,694 re-class from derivative to equity and $360,073 was extinguished through equity from derivative liability.
The
fair value of the embedded derivative liabilities were determined using the Black-Scholes valuation model on the issuance dates
with the assumptions in the table below.
Expected dividends
|
|
0%
|
Expected Volatility
|
|
166%
- 676%
|
Stock price
|
|
$
0.001 - $ .01
|
Discount rate
|
|
.04%
-. 77%
|
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2016
Note
15. Convertible Notes
KBM
Worldwide, Inc. Convertible Note
Effective
November 24, 2014, the Company entered into a Securities Purchase Agreement (“Purchase Agreement”) with KBM Worldwide,
Inc. (“KBM”), pursuant to which the Company issued KBM a convertible note in the amount of $43,000, bearing interest
at the rate of 8% per annum (the “KBM Convertible Note”). The KBM Convertible Note provided KBM the right, during
the period beginning on the date which is one hundred eighty (180) days following the date of the KBM Convertible Note, to convert
the outstanding balance (including accrued and unpaid interest) into shares of the Company’s common stock at a 39% discount
from the market price of the common stock and is payable, together with interest thereon, on November 24, 2015. The Company had
the right to repay the KBM Convertible Note prior to maturity (or conversion), provided that it pays 110% of such the outstanding
principal amount and accrued and unpaid interest thereon) if the note is repaid within the first 30 days after the issuance date.
The prepayment penalty increases to 120% if repayment is during the period which is 31 to 60 days after the issuance date; 125%,
if repayment is during the period which is 61 to 90 days after the issuance date; 130%, if repayment is during the period which
is 91 to 120 days after the issuance date; and 135%, if repayment is during the period which is 121 days to 180 days after the
issuance date. After 180 days have elapsed from the issuance date, the Company had no right to prepay the KBM Convertible Note.
During
the year ended April 30, 2016 KBM converted the KBM Convertible Note into a total of 19,018,480 shares of Common Stock at a fair
value as follows:
Conversion
Date
|
|
Number
of Shares of Common Stock
|
|
|
Principal
and Interest Amount Converted (i)
|
|
|
Price
per Share
|
|
May 26, 2015
|
|
|
1,967,213
|
|
|
$
|
12,000
|
|
|
$
|
0.00610
|
|
July 20, 2015
|
|
|
5,204,839
|
|
|
|
16,135
|
|
|
$
|
0.00310
|
|
August 14, 2015
|
|
|
6,235,714
|
|
|
|
8,730
|
|
|
$
|
0.00140
|
|
August 17, 2015
|
|
|
5,610,714
|
|
|
|
7,855
|
|
|
$
|
0.00140
|
|
Totals
- Year ended April 30, 2016
|
|
|
19,018,480
|
|
|
$
|
44,720
|
|
|
|
|
|
(i)
Includes accrued interest of $1,720.
There
was no remaining principal balance or accrued interest due under the KBM Convertible Note at April 30, 2016. See Note 21.
Interest
expense relating to this KBM debenture totaled approximately $240 and $1,480 for years ended April 30, 2016 and 2015, respectively.
Accrued interest due totaled $0 and $1,480 at April 30, 2016 and April 30, 2015, respectively.
JMJ
Financial
Convertible Note
Effective
September 10, 2015 the Company entered into a Convertible Promissory Note (“JMJ Note”) with JMJ Financial pursuant
to which the Company issued JMJ Financial a convertible note in the amount of $250,000 with an original issue discount in the
amount of $25,000. The principal amount due JMJ is based on the consideration paid. The maturity date is two years from the effective
date of each payment. On September 10, 2015 the Company received consideration of $30,000 for which an original issue discount
of $3,333 was recorded. There were no additional borrowings under the JMJ Note during the quarter ended January 31, 2016. The
Company did not repay the JMJ Note on or before 90 days from the effective date, thus the Company was not able to make further
payments on this JMJ Note prior to the maturity date and a one-time interest charge of 12% was applied to the principal amount.
The JMJ Note provided JMJ Financial the right at any time, to convert the outstanding balance (including accrued and unpaid interest)
into shares of the Company’s common stock at 60% of the average of two lowest trade prices in the 20 trading days previous
to the conversion, additional discounts may apply in the case that conversion shares are not deliverable or if the shares are
ineligible.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2016
Note
15. Convertible Notes – continued
During
the year ended April 30, 2016 JMJ Financial converted the JMJ Convertible Note in its entirety and the original issue discount
of $3,333 was fully amortized upon conversion,, into a total of 44,738,207 shares of Common Stock at a fair value as follows :
Conversion
Date
|
|
Number
of Shares of Common Stock
|
|
|
Principal
and Interest Amount Converted *(i)
|
|
|
Price
per Share
|
|
February 25, 2016
|
|
|
14,575,000
|
|
|
$
|
3,498
|
|
|
$
|
0.00024
|
|
March 17, 2016
|
|
|
15,300,000
|
|
|
|
13,770
|
|
|
$
|
0.00090
|
|
March 28, 2016
|
|
|
14,863,207
|
|
|
|
20,065
|
|
|
$
|
0.00135
|
|
Totals
- Year ended April 30, 2016
|
|
|
44,738,207
|
|
|
$
|
37,333
|
|
|
|
|
|
(i)
Includes accrued interest of $4,000.
See
Note 21.
Vis
Vires
Convertible Notes
Effective
March 25, 2015, the Company entered into a Securities Purchase Agreement (“Purchase Agreement”) with Vis Vires pursuant
to which the Company issued Vis Vires a convertible note in the amount of $33,000, bearing interest at the rate of 8% per annum
(the “March 2015 Vis Vires Convertible Note”). The March 2015 Vis Vires Convertible Note provided Vis Vires the right,
during the period beginning on the date which is one hundred eighty (180) days following the date of the March 2015 Vis Vires
Convertible Note, to convert the outstanding balance (including accrued and unpaid interest) into shares of the Company’s
common stock at a 39% discount from the market price of the common stock and is payable, together with interest thereon, on March
16, 2016. The Company had the right to repay the March 2015 Vis Vires Convertible Note prior to maturity (or conversion), provided
that it pays 110% of such the outstanding principal amount and accrued and unpaid interest thereon) if the note is repaid within
the first 30 days after the issuance date. The prepayment penalty increases to 115% if repayment is during the period which is
31 to 60 days after the issuance date; 120%, if repayment is during the period which is 61 to 90 days after the issuance date;
125%, if repayment is during the period which is 91 to 120 days after the issuance date; 130%, if repayment is during the period
which is 121 days to 150 days after the issuance date and 135% if repayment is during the period which is 151 days to 180 days
after the issuance date. After 180 days have elapsed from the issuance date, the Company had no right to prepay the March 2015
Convertible Note.
Effective
May 11, 2015, the Company entered into a second Securities Purchase Agreement with Vis Vires pursuant to which the Company issued
Vis Vires a convertible note in the amount of $38,000, bearing interest at the rate of 8% per annum (the “May 2015 Vis Vires
Convertible Note”). The May 2015 Vis Vires Convertible Note provides Vis Vires the right, during the period beginning on
the date which is one hundred eighty (180) days following the date of the Vis Vires Convertible Note, to convert the outstanding
balance (including accrued and unpaid interest) into shares of the Company’s common stock at a 39% discount from the market
price of the common stock and is payable, together with interest thereon, on April 23, 2016. The Company had the right to repay
the Vis Vires Convertible Note prior to maturity (or conversion), provided that it pays 110% of such the outstanding principal
amount and accrued and unpaid interest thereon) if the note is repaid within the first 30 days after the issuance date. The prepayment
penalty increases to 115% if repayment is during the period which is 31 to 60 days after the issuance date; 120%, if repayment
is during the period which is 61 to 90 days after the issuance date; 125%, if repayment is during the period which is 91 to 120
days after the issuance date; 130%, if repayment is during the period which is 121 days to 150 days after the issuance date and
135% if repayment is during the period which is 151 days to 180 days after the issuance date. After 180 days have elapsed from
the issuance date, the Company had no right to prepay the Vis Vires Convertible Note.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2016
Note
15. Convertible Notes – continued
During
the year ended April, 2016 Vis Vires converted all of the March 2015 Vis Vires Convertible Note and May 2015 Vis Vires Convertible
Note into a total of 155,333,549 shares of Common Stock at a fair value as follows:
Conversion
Date
|
|
Number
of Shares of Common Stock
|
|
|
Principal
Amount Converted (i)
|
|
|
Price
per Share
|
|
September 24, 2015
|
|
|
13,655,738
|
|
|
$
|
8,330
|
|
|
$
|
0.00061
|
|
December 29, 2015
|
|
|
15,020,833
|
|
|
|
3,605
|
|
|
$
|
0.00024
|
|
December 30, 2015
|
|
|
15,020,833
|
|
|
|
3,605
|
|
|
$
|
0.00024
|
|
January 13, 2016
|
|
|
18,027,027
|
|
|
|
6,670
|
|
|
$
|
0.00037
|
|
January 29, 2016
|
|
|
11,270,833
|
|
|
|
2,705
|
|
|
$
|
0.00024
|
|
February 16, 2016
|
|
|
20,935,484
|
|
|
|
6,490
|
|
|
$
|
0.00031
|
|
February 17, 2016
|
|
|
7,878,378
|
|
|
|
1,595
|
|
|
$
|
0.00020
|
|
February 17, 2016
|
|
|
13,081,081
|
|
|
|
4,840
|
|
|
$
|
0.00037
|
|
February 18, 2016
|
|
|
25,147,887
|
|
|
|
17,855
|
|
|
$
|
0.00071
|
|
February 22,
2016
|
|
|
15,295,455
|
|
|
|
15,305
|
|
|
$
|
0.00100
|
|
Totals
- Year ended April 30, 2016
|
|
|
155,333,549
|
|
|
$
|
71,000
|
|
|
|
|
|
(i)
Includes accrued interest of $2,840
See
Note 21.
Interest
expense relating to the Vis Vires debentures totaled approximately$4,174 and $0 for years ended April 30, 2016 and 2015, respectively.
Accrued interest due totaled $0 and $260 at April 30, 2016 and April 30, 2015, respectively.
Note
16. Note Payable Related Party and Convertible Debenture
On
November 5, 2009, the Company issued a 13.5% Secured Convertible Debenture (the “Debenture”) to Rupes Futura AB (“RF”),
an investment company controlled by Henrik Sellmann, a former director of the Company, providing for a loan to the Company of
$500,000. The Debenture is due November 2014. Additionally, the Company issued to RF 500,000 shares of Common Stock of the Company
as a Commitment Fee. The value of the Common Stock at the time of issuance was $30,000 and is recorded as debt discount. The Commitment
Fee is being amortized over five years, the term of the Debenture, using the effective interest method.
Interest
is payable at an annual rate of 13.5%, payable annually in arrears in shares of Common Stock of the Company, valued at the Conversion
Price (defined below) as of the due date of the interest payment or the Company, at its sole option, may elect to pay any interest
payment on the Debenture in cash, such cash interest payment to be payable no later than one hundred eighty (180) days from the
original interest payment due date. The Debenture is convertible in whole or in part into Common Stock at the option of RF at
the Conversion Price at any time following the date that is two years from the Closing Date. If RF elects to convert any unpaid
principal amount of the Debenture it shall be entitled to receive shares of Common Stock on conversion equal in value, at the
Conversion Price, to 115% of the unpaid principal amount of the Debenture. The conversion feature has intrinsic value of $75,000
that is recorded as debt discount which was amortized over two years, the required holding period for RF, using the effective
interest method. The debt discount was fully amortized as of April 30, 2016 and 2015. The effective interest rate on the Debenture
as a result of the debt discounts noted above was 11.75% and 14.36% which resulted in interest expense of $48,591 and $71,500
for the years ended April 30, 2016 and 2015, respectively. On February 6, 2015 6,000,000 shares of Common Stock were issued to
RF pursuant to a partial conversion in the amount of $24,000 of the $500,000 convertible debenture. The conversion price was $0.004
per common share.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2016
Note
16. Note Payable Related Party and Convertible Debenture – continued
On
October 22, 2014, Henrik Sellmann resigned as a director of the Company thus RF is no longer a related party. The outstanding
balance of the convertible debenture in the amount of $476,000 was reclassified to Convertible Debenture from Convertible Debenture
Payable to a Related Party in the accompanying Consolidated Balance as of April 30, 2015.
Effective
December 19, 2014 the debenture was amended to allow the Company to elect to pay the 2013 interest due in the amount of $50,700
(the “2013 Interest”), on the debenture by the issuance of 1,690,000 shares of the Company’s Common Stock to
RF. See Note 24.
Effective
February 9, 2016, the Company entered into an agreement with the Company’s largest stockholder, whereby EIG assumed all
of the Company’s obligations under this 13.5% convertible debenture due to RF, which has agreed to assumption of the convertible
debenture obligations by EIG. Subsequent to April 30, 2016 EIG was compensated by the issuance of shares of Series A Preferred
Stock. See Note 25.
The
convertible debenture was transferred to note payable related party, which is not convertible. The portion of the accrued interest
assumed by EIG in the amount of $148,613 was transferred to accrued interest payable related party. As of April 30, 2016 the outstanding
balance of the note payable related party was $476,000, plus accrued interest of $148,613. As of April 30, 2015 the outstanding
balance of the convertible debenture was $476,000 plus accrued interest of $150,722.
Note
17. Related Party Subscription Agreement
On
July 21, 2009, the Company entered into a Subscription Agreement with EIG, an investment company then controlled by Jan Telander,
the Company’s Chief Executive Officer and controlling stockholder for the sale by the Company to EIG of an aggregate of
97,751,710 shares of the Company’s Common Stock, at a fixed price of $0.01023 per share, in three tranches: the Phase I
tranche consisted of 5,767,350 shares of Common Stock to be purchased by EIG on or before July 16, 2009; the Phase II tranche
of 43,108,504 shares to be purchased by EIG on or before December 31, 2009; and the Phase III tranche of 48,875,855 shares of
Common Stock to be purchased by EIG on or before July 16, 2010. As of April 30, 2015 all of the Phase I and Phase II shares, and
39,100,684 shares of the Phase III tranche, have been purchased.
Under a December 1, 2009 Amendment to the Subscription
Agreement, EIG paid penalty interest at a rate of 13.5% per annum on the unpaid balance as of the final purchase date of the Phase
III shares from that date to the date the shares are purchased.
As
of April 30, 2015 the remainder of the Phase III purchase price and the applicable interest was included in stockholders’
equity as amount due from subscriber under subscription agreement. In December 2014, the Company received $109,120 comprised of
$50,000 of the remaining $100,000 purchase price balance and $59,120 of related interest. The Company recorded $10,900 of interest
which is included in amount due under subscription agreement for the year ended April 30, 2015. In connection with the related
party Subscription Agreement, in the year ended April 30, 2016 the Company recorded $1,038 of interest. The remaining balance
of the purchase price in the amount of $53,999 was received on July 3, 2015 to complete payment of the Phase III purchase price.
See Note 25.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2016
Note
17. Related Party Subscription Agreement – continued
On
April 30, 2015 Jan Telander divested for no consideration all equity interests owned by him in EIG and its affiliated companies
and resigned from all board of director and management positions with EIG. Accordingly, pursuant to the SEC’s rules for
calculation of securities owned beneficially by stockholders of reporting companies under the Securities Exchange Act of 1934,
the 85,679,118 shares of the Company’s common stock held by EIG are no longer deemed to be beneficially owned for SEC reporting
purposes by Mr. Telander.
Note
18. Corporate Lease Agreement
Effective
April 1, 2016, the Company entered into a lease agreement for office space for a period of thirty-six (36) months. The monthly
lease payments for the period April 1, 2016 through March 1, 2017 total $872, for the period April 1, 2017 through March 1, 2018
total $903 and the period April 1, 2018 through March 1, 2019 total 934. Lease payments are as follows:
Year
ending April 30,
|
|
Rental
Amount
|
|
2017
|
|
$
|
10,495
|
|
2018
|
|
|
10,867
|
|
2019
|
|
|
10,274
|
|
Thereafter
|
|
|
-
|
|
|
|
$
|
31,636
|
|
At
the beginning of the lease the Company paid a security deposit of $934, which is reflected as deposits on the April 30, 2016 balance
sheet.
During
2016 and 2015, the Company recorded $18,342 and $24,147 in rental expense which includes rent from the prior lease which expired
during fiscal 2016.
Note
19. Income Taxes
For
tax purposes the Company has federal net operating loss (“NOL”) carryovers of $2,290,000 that are available to offset
future taxable income. These NOL carryovers expire beginning in the year 2030. As a result of the Company’s reorganization,
as further described in Note 1, the NOL carryovers generated prior to the reorganization are limited by Section 382 of the Internal
Revenue Code resulting in no NOL carryover for the years prior to reorganization. Deferred income taxes reflect the net tax effects
of the temporary differences between the carrying amounts of the assets and liabilities for financial reporting purposes and the
amounts used for income tax purposes.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2016
Note
19. Income Taxes – continued
Significant
components of the Company’s deferred tax assets and liabilities are as follows:
|
|
April
30, 2016
|
|
|
April
30,
2015
|
|
Deferred tax assets:
|
|
|
|
|
|
|
NOL carryovers
|
|
$
|
412,432
|
|
|
$
|
298,390
|
|
Related party interest expense
|
|
|
(7,359
|
)
|
|
|
24,961
|
|
Discount on debenture
|
|
|
(23,670
|
)
|
|
|
3
|
|
Loss on derivatives
|
|
|
(25,635
|
)
|
|
|
-
|
|
Depreciation
|
|
|
(2,558
|
)
|
|
|
(2,130
|
)
|
Stock issued under services contracts
|
|
|
(8,025
|
)
|
|
|
-
|
|
Stock compensation
|
|
|
(1,725
|
)
|
|
|
17,931
|
|
Total deferred
tax assets
|
|
|
343,460
|
|
|
|
339,155
|
|
|
|
|
|
|
|
|
|
|
Valuation allowance
|
|
$
|
(343,460
|
)
|
|
$
|
(339,155
|
)
|
Net deferred tax
assets
|
|
$
|
-
|
|
|
$
|
-
|
|
The
Company periodically assesses whether it is more likely than not that it will generate sufficient taxable income to reduce the
deferred tax assets. The ultimate realization of these assets is dependent upon generation of future taxable income sufficient
to offset the related deductions and NOL carryovers within the applicable carryover periods as previously discussed. Management
is unsure of the Company’s ability to generate sufficient taxable income to realize the deferred tax assets. As such, the
Company has recorded a valuation allowance for the entire net deferred tax asset.
The
effective rate used for estimation of deferred taxes was 15% for the years ended April 30, 2016 and 2015.
The
tax years that remain subject to taxing authorities’ examination at April 30, 2016 are 2009 through 2016. The Company’s
policy is to classify penalties and interest associated with uncertain tax positions, if required, as a component of its income
tax provisions.
Note
20. Preferred Stock
On
July 8, 2009 the Company’s Articles of Incorporation were amended to authorize the issuance of Ten Million (10,000,000)
shares of Preferred Stock with a par value $0.0001 per share (“Preferred Stock"). Shares of the Preferred Stock of
the Company may be issued from time to time in one or more classes or series, each of which class or series shall have such distinctive
designation, number of shares, or title as shall be fixed by the Board of Directors prior to the issuance of any shares thereof.
Each such class or series of Preferred Stock shall consist of such number of shares, and have such voting powers, full or limited,
or no voting powers and such preferences and relative, participating optional or other special rights and such qua1ifications,
limitations or restrictions thereof. as shall be stated in such resolution or resolutions providing for the issue of such series
of Preferred Stock as may be adopted from time to time by the Board of Directors prior to the issuance of any shares thereof pursuant
to the; authority hereby expressly vested in it, all in accordance with the laws of the State of Delaware.
As
of April 30, 2016 and 2015 no shares were issued and outstanding. See Notes 22 and 23.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2016
Note
21. Common Stock
On
February 9, 2016 the Company’s Articles of Incorporation were amended to authorize the issuance of One Billion Five Hundred
Million (1,500,000,000) shares of Common Stock with a par value $0.0001 per share ("Common Stock"). The terms and provisions
of the Common Stock are as follows:
Voting
Rights
The
holders of shares of Common Stock shall be entitled to one vote for each share held with respect to all matters voted on by the
stockholders of the Corporation.
Liquidation
Rights
Subject
to the prior and superior right of the Preferred Stock upon any voluntary or involuntary liquidation, dissolution or winding up
of the affairs of the Corporation, the holders of Common Stock shall be entitled to receive that portion of the remaining funds
to be distributed. Such funds to be paid to the holder of Common Stock shall be paid to the holders of Common Stock on the basis
of the number of shares of Common Stock held by each of them.
Dividends
Dividends
may be paid on the Common Stock as and when declared by the Board of Directors.
During
fiscal year 2015, the Company issued 6,000,000 Common stock pursuant to conversion of $24,000 of the principal amount of a convertible
debenture.
On
May 7, 2015 2,500,000 shares of Common Stock which was recorded at fair value of $ .010 per common stock share, were issued to
an outside investor in payment of professional services in the amount of $ 25,000.
On
June 4, 2015 5,000,000 shares of Common Stock, which was recorded at fair value of $ .00057 per common stock share, were issued
to an outside investor in payment of professional services in the amount of $28,500.
During
fiscal year 2016, the Company issued 219,090,236 Common stock to settle conversions of $155,893 of the principal amounts of convertible
debentures and accrued interest.
As
of April 30, 2016 and 2015, 336,919,939 and 110,329,703 shares of Common Stock were issued and outstanding, respectively.
Note
22. Series A Preferred Stock
On
February 9, 2016, the Board of Directors of the Company authorized the issuance of an aggregate of 1,000,000 shares of Series
A Convertible Preferred Stock (“Series A Preferred Stock”); par value $.0001 per share, and a Stated Value of $1.00
per share (the “Stated Value”) with the following terms:
Distributions:
So
long as any shares of Series A Preferred Stock remain outstanding, neither the Company nor any subsidiary thereof shall, without
the consent of the Holders of ninety percent (90%) of the shares of Series A Preferred Stock then outstanding (the “Requisite
Holders”), (a) redeem, repurchase or otherwise acquire directly or indirectly any Common Stock of the Company (“Common
Stock”) (b) directly or indirectly pay or declare any dividend or make any distribution upon, nor shall any distribution
be made in respect of, any Common Stock or (c) set, aside any monies to the purchase or redemption (through a sinking fund or
otherwise) of any Common Stock. The sale, conveyance or transfer (for cash, shares of stock, securities or other consideration)
of all or substantially all of the property and assets of the Company shall be deemed a voluntary liquidation, dissolution or
winding up of the Company for purposes of this paragraph. The merger or consolidation of the Company into or with any other corporation,
or the merger or consolidation of any other corporation into or with the Company shall not he deemed to be an event of liquidation,
dissolution or winding up, if the holders of the Series A Preferred Stock outstanding upon the effectiveness of such merger or
combination, receive for each share of Series A Preferred Stock one share of preference stock of the resulting or surviving corporation,
which share of preferred stock will have rights and privileges roughly equivalent to the rights and privileges of the Series A
Preferred Stock.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2016
Note
22. Series A Preferred Stock – continued
Dividends:
Holders
of Series A Preferred Stock shall be entitled to receive dividends, when and as declared by the Board of Directors out of funds
legally available therefor.
Voting
Rights and Negative Covenants
The
Series A Preferred Stock shall have the right to vote together with holders of Common Stock on an as “as converted basis”,
on any matter that the Company's shareholders may be entitled to vote on, either by written consent or by proxy. So long as any
shares of Series A Preferred Stock are outstanding, the Company shall not and shall cause its subsidiaries not to, without the
affirmative vote of the Requisite Holders, (a) alter or change adversely the powers, preferences or rights given to the Series
A Preferred Stock, (b) alter or amend the Certificate of Designation, (c) amend its certificate of incorporation, bylaws or other
charter documents so as to effect adversely any rights of any holders of the Series A Preferred Stock, (d) increase the authorized
or designated number of shares of Series A Preferred Stock. (e) issue any additional shares of Series A Preferred Stock (including
the reissuance of any shares of Series A Preferred Stock converted for Common Stock), (f) issue any Senior Securities, or (g)
enter into any agreement with respect to the foregoing.
Liquidation
Upon
any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary or a sale (a “Liquidation”),
the holders of the Series A Preferred Stock shall be entitled to receive out of the assets of the Company, whether such assets
are capital or surplus, for each share of Series A Preferred Stock an amount equal to the Stated Value. and all other amounts
in respect thereof of then due and payable prior to distribution or payment shall be made to the holders of any Common Stock,
and if the assets of the Company shall be insufficient to pay in full such amounts, then the entire assets to be distributed to
the holders of Series A Preferred Stock shall be distributed among the holders of Series A Preferred Stock ratably in accordance
with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full.
Conversion
Conversion
at the Option of the Holder - On and after January 1, 2017, each share of Series A Preferred Stock shall be convertible into Common
Stock at n conversion price of S0.0033 per share ("Conversion Price"). To effect a conversion of Converted Shares, the
Holder must deliver or fax an executed Notice of Conversion to the Company (“Conversion Notice”). The Conversion Notice
shall be executed by the Holder of one or more shares of Series A Preferred Stock and shall indicate the Holder’s intention
to convert the specific number of Converted Shares, representing all or a portion of the Holder's shares of Series A Preferred
Stock, the date on which the conversion is to be effected, which may not be before the date the Holder delivers the Conversion
Notice (“Conversion Date”). The Conversion price is subject to adjustment in the event of a Sale of the Company a
spinoff or if the Company effectuates a stock split, a reverse stock split or declares a stock dividend.
Rank
The
shares of Series A Preferred Stock shall rank junior to any stock of all other series of preferred stock currently issued, as
to liquidation, winding up or dissolution, as applicable, in preference or priority to the holders of such other class or classes.
As
of April 30, 2016 and 2015, no shares of Series A Preferred Stock were issued and outstanding.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2016
Note
23. Series B Convertible Preferred Stock
On
March 8, 2016 the Board of Directors of the Company authorized the issuance of an aggregate of 8,534,625 shares of Series B Convertible
Preferred Stock (“Series B Preferred Stock”); par value $.0001 per share and a Stated Value of $0.1587 per share (the
“Stated Value”) with the following terms:
Dividends:
Each
holder of record on September 8, 2016 and March 8, 2017 of the Series B Preferred Stock shall be entitled to receive a cash dividend
at the annual rate of 7% of the Stated Value of the shares of Series B Preferred Stock held by such holder. Additionally, holders
of Series B Preferred Stock shall be entitled to receive dividends, when and as declared by the Board of Directors out of funds
legally available therefor. For any other dividends or distributions, the Series B Preferred Stock will participate with the Corporation’s
Common Stock on an as-converted basis.
Liquidation
Preference
:
In
the event of any liquidation of Progreen, or merger or sale in which the shareholders of Progreen do not own a majority of the
outstanding shares of the surviving corporation, the holders of Series B Preferred Stock will be entitled to receive in preference
to the holders of Progreen Common Stock an amount per share equal to their Stated Value plus all accrued but unpaid dividends
(“Liquidation Preference”).
Conversion
and Redemption Rights:
The
shares of Series B Preferred Stock shall be convertible into shares of Progreen common stock, par value $.0001 per share (“Progreen
Common Stock”) at a conversion price per share of the Progreen Common Stock equal to the weighted average closing prices
of the Progreen Common Stock for the 20 trading days immediately prior to the one-year anniversary of the Effective Date (the
“Conversion Price”) on which date the Series B Preferred Stock shall first become convertible. Further terms of the
Series B Preferred Stock shall be as follows:
The
Series B Preferred Stock shall have full voting rights in accordance with the underlying conversion shares of PROGREEN Common
Stock and full rights to all dividends and distributions with respect to such shares of Series B Preferred Stock as declared by
the Progreen Board of Directors;
The
Conversion Price shall be proportionately adjusted to reflect all stock splits or combinations of shares generally applicable
to the Progreen Common Stock;
The
Series B Preferred Stock shall provide for option of the holder or holders of the Series B Preferred Stock to notify Progreen
within the period commencing February 1, 2017 and ending February 15, 2017, of their election to redeem their shares of Series
B Preferred Stock at the Stated Value thereof, Progreen to effect payment for shares as to which the redemption is requested by
the holder or holders thereof on or prior to August 31, 2017; and
On
and after September 1, 2017, the shares of Series B Preferred Stock shall automatically convert into Progreen Common Stock if
the market price for the Progreen Common Stock is 150% of the Conversion Price for a period of 20 trading days.
Other
provisions:
Anti-dilution:
The
conversion price of the Series B Preferred Stock will be adjusted on a “broad-based weighted-average” basis, in the
event that the Progreen issues additional shares of Common Stock or Common equivalents (other than for stock option grants and
other customary exclusions) at a purchase price less than the applicable Series B Preferred Stock conversion price. Proportional
anti-dilution protection for stock splits, stock dividends, combinations, recapitalizations, etc.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2016
Note
23. Series B Convertible Preferred Stock - continued
Voting
Rights
For
so long as shares of Series B Preferred Stock remain outstanding, the prior vote or written consent of a majority of the Series
B Preferred Stock will be required for any action that , (a) alter or change adversely the powers, preferences or rights given
to the Series B Preferred Stock, (b) alter or amend the Certificate of Designation, (c) amend its certificate of incorporation,
bylaws or other charter documents so as to affect adversely any rights of any Holders of the Series B Preferred Stock, (d) increase
the authorized or designated number of shares of Series B Preferred Stock, (e) issue any additional shares of Series B Preferred
Stock (including the reissuance of any shares of Series B Preferred Stock converted for Common Stock), (f) issue any Senior Securities,
or (g) enter into any agreement with respect to the foregoing.
As
of April 30, 2016 and 2015, no shares of Series B Preferred Stock were issued and outstanding.
Note
24. Employee Stock Option Plan
Restricted
Stock Units
As
of April 30, 2012, the Board of Directors approved the Company’s 2012 Employee Stock Option Plan, pursuant to which 10,000,000
shares of Common Stock are reserved for issuance to employees and officers and directors of, and consultants to, the Company.
Effective June 1, 2012 the Board of Directors approved the award of 4,200,000 restricted stock units (“RSUs”) under
the Company’s 2012 Employee Stock Option Plan as follows: 3,000,000 RSUs were awarded to the Company’s Chief Executive
Officer; 600,000 RSUs to a director of the Company; and 600,000 RSUs to the manager of the Company’s real estate operations.
Effective December 3, 2012 Company retained a Controller to whom 600,000 RSUs were issued as part of his initial remuneration
package. The Board approved effective June 1, 2014, the award of 600,000 restricted stock units under the Company’s 2012
Employee Stock Option Plan to a director of the Company.
The
RSUs were awarded pursuant to restricted stock units agreements (“RSU Agreement”) which provide for a period of five
years from the date of the award during which, once vesting conditions are satisfied, that the shares of our common stock underlying
the RSU at the option of the holder of the RSU can be released. The vesting conditions set forth in the three RSU Agreements approved
June 1, 2012 are as follows: The interest of the holder of the RSU’s pursuant to a RSU Agreement shall become non-forfeitable
or vested in 1/3 increments on the later of (i) the first, second and third anniversary dates of the grant of the award, and (ii)
the trading price of our common stock for a period of twenty days having equaled or exceeded $0.15 per share for the first annual
vesting date, $0.25 per share for the second annual vesting date, and $0.35 per share for the third annual vesting date.
The
vesting set forth in the RSU Agreement dated December 3, 2012 is as follows: The interest of the holder of the RSU’s shall
become non-forfeitable or vested as follows: i)150,000 shall become Vested as of December 1, 2013, or such later date as of which
the Common Stock Market Price shall have equaled or exceeded $0.15 per share; ii) 150,000 shall become Vested as of December 1,
2014, or such later date as of which the Common Stock Market Price shall have equaled or exceeded $0.25 per share; iii) 150,000
of the RSU's shall become Vested as of December 1,2015, or such later date as of which the Common Stock Market Price shall have
equaled or exceeded $0.35 per share; and iv) 150,000 of the RSU 's shall become Vested as of December 1, 2016, or such later date
as of which the Common Stock Market Price shall have equaled or exceeded $0.45 per share. The Agreement also requires the controller
be the financial controller of the Company (or alternatively have been appointed an executive officer of the Company) as of the
applicable Vesting Date and have been so engaged throughout the period beginning on the date of the Agreement and ending on the
applicable Vesting Date and (b) that the common stock has traded for a period of twenty trading days at the market price as specified
in Agreement.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2016
Note
24. Employee Stock Option Plan – continued
On
October 22, 2014, Henrik Sellmann resigned as a director of the Company. The 600,000 RSUs awarded to him on June 1, 2012 were
not fully vested and they expired with his resignation. During the year ended April 30, 2015, the Company reversed compensation
expense accrued since inception, relating to these RSUs in the amount of $13,000. This amount is included in Company’s Consolidated
Balance Sheets and Consolidated Statement of Stockholders’ Deficit as a component of accumulated paid in capital and compensation
expense recovery is included in the Company’s Consolidated Statements of Operations for the year ended April 30, 2015.
As
of April 30, 2016 and 2015 compensation expense of $ 11,500 and $32,667 respectively, was recorded as follows:
|
|
April
30
|
|
April 30
|
|
|
|
2016
|
|
2015
|
|
Number
of restricted stock units issued on June 1, 2012
|
|
|
3,600,000
|
|
|
3,600,000
|
|
Stock
price on grant date
|
|
$
|
0.03
|
|
$
|
0.03
|
|
Vesting
Period
|
|
|
3
years
|
|
|
3
years
|
|
Estimated
fair value at issuance
|
|
$
|
108,000
|
|
$
|
108,000
|
|
May
1, 2015 through April 30, 2016 Compensation Expense
|
|
$
|
3,000
|
|
|
|
|
May
1, 2014 through April 30, 2015 Compensation Expense
|
|
|
|
|
$
|
36,000
|
|
|
|
|
|
|
|
|
|
Number
of restricted stock units issued on June 1, 2012 to Director through July 31, 2014
|
|
|
|
|
|
600,000
|
|
Stock
price on grant date
|
|
|
|
|
$
|
0.03
|
|
Vesting
Period
|
|
|
|
|
|
3
years
|
|
Monthly
amount vested
|
|
|
|
|
$
|
500
|
|
Number
of months May 1, 2014 through July 31, 2014
|
|
|
|
|
|
3
months
|
|
May
1, 2014 through April 30, 2015 Compensation Expense
|
|
|
|
|
$
|
1,500
|
|
|
|
|
|
|
|
|
|
Number
of restricted stock units issued on December 3, 2012
|
|
|
600,000
|
|
|
600,000
|
|
Stock
price on grant date
|
|
$
|
0.03
|
|
$
|
0.03
|
|
Vesting
Period
|
|
|
4
years
|
|
|
4
years
|
|
Estimated
fair value at issuance
|
|
$
|
18,000
|
|
$
|
18,000
|
|
May
1, 2015 through April 30, 2016 Compensation Expense
|
|
$
|
4,500
|
|
|
|
|
May
1, 2014 through April 30, 2015 Compensation Expense
|
|
|
|
|
$
|
4,500
|
|
|
|
|
|
|
|
|
|
Number
of restricted stock units issued on June 1, 2014
|
|
|
600,000
|
|
|
600,000
|
|
Stock
price on grant date
|
|
$
|
0.02
|
|
$
|
0.02
|
|
Vesting
Period
|
|
|
3
years
|
|
|
3
years
|
|
Estimated
fair value at issuance
|
|
$
|
12,000
|
|
$
|
12,000
|
|
May
1, 2015 through April 30, 2016 Compensation Expense
|
|
$
|
4,000
|
|
|
|
|
May
1, 2014 through April 30, 2015 Compensation Expense
|
|
|
|
|
$
|
3,667
|
|
|
|
|
|
|
|
|
|
Total
compensation expense
|
|
$
|
11,500
|
|
$
|
45,667
|
|
Note
25. Subsequent Events
Subsequent
to April 30, 2016, in connection with the Company’s purchase of ARG LLC, 8,093,541 shares of Series B Preferred Stock were
issued to AMREFA and the note payable to AMREFA in the amount $1,170,811 was paid in full. See Notes 5 and 23.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2016
Note
25. Subsequent Events – continued
Also
in connection with the purchase of ARG, subsequent to April 30, 2016, the note payable due to AMREFA under the June 2015 Instalment
Payment Agreement was paid in full and cancelled with the delivery of a $200,000 Mortgage Note payable to AMREFA together with
issuance of 441,084 shares of Series B Preferred Stock to AMREFA, with a stated value of $70,000, in payment of note plus accrued
interest. The amount due was comprised of $261,150 principal plus accrued interest of $14,653, for a total due to AMREFA of $275,803.
The Mortgage Note is non-interest bearing and is secured by the property at 24442 Kinsel Street, Southfield, Michigan which the
Company acquired in the ARG purchase. The Mortgage Note will be paid upon the sale of the Kinsel Street Property. See Notes 10
and 23.
Subsequent
to April 30, 2016, in payment of accrued interest due RF in the amount of $50,700, the Company issued 1,690,000 shares Common
Stock, to RF. See Note 16.
Subsequent
to April 30, 2016, in payment of the note payable related party the Company issued EIG 608,031 shares of Series A Preferred Stock
with a total stated value equal to that of the agreed upon principal and accrued interest of the debt assumed in the amount of
$624,613. See Notes 16 and 22.
Subsequent
to April 30, 2016, in payment of the non-interest bearing advances due EIG in the amount of $59,000 the Company issued 59,000
shares of Series A Preferred Stock to EIG, with a total stated value of $59,000. See Notes13 and 22.
Subsequent
to April 30, 2016 in connection with the subscription agreements with three stockholders, the Company issued 300,000 shares of
Series A Preferred Stock. See Notes 13 and 22.
Subsequent
to April 30, 2016 the Company issued the remaining 9,775,171shares of Common Stock due EIG under the Stock Subscription. See Note
17.
Subsequent
to April 30, 2016 the Company sold two of its rental properties subject to land contract agreements. The Company sold one of its
rental properties located at 23270 Helen Street, with a selling price of $119,000. The Company received a deposit of $10,000 and
issued a Land Contract to the buyer, for the balance owed in the amount of $109,000, to be paid in monthly installments, including
principal and interest, beginning June 1, 2016 through June 1, 2019. The Land Contract bears interest at 9% per annum.
The
Company sold a second one of its rental properties located at 21421 Greenview Avenue with a selling price of $109,000. The Company
received a deposit of $12,000 and issued a Land Contract to the buyer, for the balance owed in the amount of $97,000, to be paid
in monthly installments, including principal and interest, beginning August 1, 2016 through June 30, 2019. The Land Contract bears
interest at 9% per annum.
On June 23, 2016, the Company entered into $5,000,000 equity
line financing agreement (“Investment Agreement”) with Tangiers Global, LLC, Dorado, Puerto Rico. The financing is
over a maximum of 36 months. A maximum of 100 million (100,000,000) shares of our common stock will be registered for this financing.
We have issued to the Tangiers in connection with the execution of the Investment Agreement a commitment fee of a five-year warrant
to purchase 4,000,000 shares of common stock, at an exercise price of $.02 per share, and Tangiers has provided financing to us
for our legal costs in connection with the filing of the Registration Statement through a one-year $22,000 convertible debenture,
due June 23, 2017, as amended and restated on August 25, 2016, convertible into our common stock at a conversion price of $.03
per share.
Financial
Statement Schedules
PROGREEN
US, INC.
SCHEDULE
III - REAL ESTATE AND ACCUMULATED DEPRECIATION
APRIL
30, 2016
COL.
A
|
|
COL.
B
|
|
|
COL.
C
|
|
|
COL.
D
|
|
|
COL.
E
|
|
|
COL.
F
|
|
|
COL.
G
|
|
|
COL.
H
|
|
COL.
I
|
|
|
|
|
|
Initial
Cost to Company
|
Cost
Capitalized
Subsequent to
Acquisition
|
|
|
Gross
Amount at which carried at
close of period
|
|
|
|
|
|
|
|
|
Life
on Which Depreciation in
|
Description
|
|
Encumbrances
|
|
|
Land
|
|
|
Buildings
and Improvements
|
|
|
Improvements
|
|
|
Carrying
Costs
|
|
|
Land
|
|
|
Buildings
and Improvements
|
|
|
Total
|
|
|
Accumulated
Depreciation
|
|
|
Year
of Construction
|
|
|
Date
Acquired
|
|
Latest Income
Statements is Computed
|
Property Under
Development:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24442
Kinsel Southfield, MI 48025
|
|
$
|
-
|
|
|
|
|
|
|
$
|
294,179
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
294,179
|
|
|
$
|
294,179
|
|
|
$
|
-
|
|
|
|
1951
|
|
|
3/8/2016
|
|
NA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental
Properties
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21000
Westover Ave. Southfield, MI 48075
|
|
|
-
|
|
|
|
|
|
|
|
60,800
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
60,800
|
|
|
|
60,800
|
|
|
|
368
|
|
|
|
1941
|
|
|
3/8/2016
|
|
27.5
|
20210
Westover Ave. Southfield, MI 48075
|
|
|
-
|
|
|
|
|
|
|
|
27,600
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
27,600
|
|
|
|
27,600
|
|
|
|
167
|
|
|
|
1943
|
|
|
3/8/2016
|
|
27.5
|
21112
Evergreen Southfield, MI 48075
|
|
|
-
|
|
|
|
|
|
|
|
101,178
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
101,178
|
|
|
|
101,178
|
|
|
|
613
|
|
|
|
1942
|
|
|
3/8/2016
|
|
27.5
|
21421
Greenview Ave. Southfield, MI 48076
|
|
|
-
|
|
|
|
|
|
|
|
110,240
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
110,240
|
|
|
|
110,240
|
|
|
|
668
|
|
|
|
1939
|
|
|
3/8/2016
|
|
27.5
|
21198
Berg Southfield, MI 48033
|
|
|
-
|
|
|
|
|
|
|
|
43,120
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
43,120
|
|
|
|
43,120
|
|
|
|
261
|
|
|
|
1938
|
|
|
3/8/2016
|
|
27.5
|
23270
Helen Street Southfield, MI 48033
|
|
|
-
|
|
|
|
|
|
|
|
78,204
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
78,204
|
|
|
|
78,204
|
|
|
|
474
|
|
|
|
1969
|
|
|
3/8/2016
|
|
27.5
|
27971
Rollcrest, Unit #13 Farmington Hills, MI 48334
|
|
|
-
|
|
|
|
|
|
|
|
72,852
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
72,852
|
|
|
|
72,852
|
|
|
|
442
|
|
|
|
1987
|
|
|
3/8/2016
|
|
27.5
|
29108
Tessmer Court, #29 Madison Heights, MI 48071
|
|
|
-
|
|
|
|
|
|
|
|
59,800
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
59,800
|
|
|
|
59,800
|
|
|
|
362
|
|
|
|
1957
|
|
|
3/8/2016
|
|
27.5
|
34780
W. 8 Mile Farmington Hills, MI 48334
|
|
|
-
|
|
|
|
|
|
|
|
113,040
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
113,040
|
|
|
|
113,040
|
|
|
|
685
|
|
|
|
1999
|
|
|
3/8/2016
|
|
27.5
|
26005
Franklin Pointe Drive Southfield, MI 48034
|
|
|
-
|
|
|
|
|
|
|
|
86,229
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
86,229
|
|
|
|
86,229
|
|
|
|
523
|
|
|
|
1971
|
|
|
3/8/2016
|
|
27.5
|
20351
Lacrosse Southfield, MI 48076
|
|
|
-
|
|
|
|
|
|
|
|
100,696
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
100,696
|
|
|
|
100,696
|
|
|
|
610
|
|
|
|
1955
|
|
|
3/8/2016
|
|
27.5
|
7648
Woodview Drive Waterford, MI 48327
|
|
|
-
|
|
|
|
|
|
|
|
105,930
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
105,930
|
|
|
|
105,930
|
|
|
|
642
|
|
|
|
1989
|
|
|
3/8/2016
|
|
27.5
|
25825
Lahser, #23 Southfield, MI 48033
|
|
|
-
|
|
|
|
|
|
|
|
53,009
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
53,009
|
|
|
|
53,009
|
|
|
|
321
|
|
|
|
1967
|
|
|
3/8/2016
|
|
27.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,306,877
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,306,877
|
|
|
$
|
1,306,877
|
|
|
$
|
6,138
|
|
|
|
|
|
|
|
|
|
Note:
A
|
|
|
|
Investment
in real estate:
|
|
|
|
Balance
at beginning of year
|
|
$
|
-
|
|
Additions
through acquisition of ARG , LLC
|
|
|
1,306,877
|
|
|
|
|
|
|
Balance
at end of year
|
|
$
|
1,306,877
|
|
Accumulated
Depreciation
|
|
|
|
|
Balance
at beginning of year
|
|
$
|
-
|
|
Additions
charged to costs and expenses
|
|
|
6,138
|
|
Balance
at end of year
|
|
$
|
6,138
|
|
PROGREEN
US, INC.
UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
JULY
31, 2016 and 2015
INDEX
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
ProGreen
US, INC.
Condensed
Consolidated Balance Sheets
|
|
July
31,
|
|
|
April
30,
|
|
|
|
2016
|
|
|
2016
|
|
|
|
(Unaudited)
|
|
|
|
|
Assets
|
|
|
|
|
|
|
Rental
property, net accumulated depreciation of $12,489 and $6,138
|
|
$
|
811,765
|
|
|
$
|
1,006,560
|
|
Property
under Development
|
|
|
294,179
|
|
|
|
294,179
|
|
Property
|
|
|
1,105,944
|
|
|
|
1,300,739
|
|
Cash
|
|
|
33,735
|
|
|
|
189,942
|
|
Other
receivables - related party
|
|
|
1,848
|
|
|
|
1,859
|
|
Accounts
receivable
|
|
|
6,165
|
|
|
|
1,194
|
|
Prepaid
expenses
|
|
|
14,690
|
|
|
|
-
|
|
Notes
receivable - land contracts
|
|
|
205,747
|
|
|
|
-
|
|
Deposits
|
|
|
934
|
|
|
|
934
|
|
Goodwill
|
|
|
180,011
|
|
|
|
180,011
|
|
Note
receivable - related party
|
|
|
260,500
|
|
|
|
110,000
|
|
Property
and equipment:
|
|
|
|
|
|
|
|
|
Vehicles,
furniture and equipment, net of accumulated depreciation of $37,898 and $35,764
|
|
|
9,494
|
|
|
|
11,628
|
|
Total
assets
|
|
$
|
1,819,068
|
|
|
$
|
1,796,307
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and Stockholders' Deficit
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$
|
124,243
|
|
|
$
|
136,740
|
|
Accrued
interest
|
|
|
4,849
|
|
|
|
68,211
|
|
Accrued
interest related party
|
|
|
50,700
|
|
|
|
149,991
|
|
Obligations
under capital lease
|
|
|
9,341
|
|
|
|
11,302
|
|
Tenant
deposits
|
|
|
11,755
|
|
|
|
16,030
|
|
Notes
payable
|
|
|
214,106
|
|
|
|
275,256
|
|
Note
payable, related party
|
|
|
40,000
|
|
|
|
516,000
|
|
Note
payable -Bank of Birmingham
|
|
|
487,803
|
|
|
|
490,000
|
|
Convertible
debenture, net of discount of $1,792 and $0, respectively
|
|
|
20,208
|
|
|
|
-
|
|
Note
Payable - AMREFA, net of discount of $0 and $114,189, respectively
|
|
|
-
|
|
|
|
1,170,811
|
|
Related
party advances
|
|
|
-
|
|
|
|
259,000
|
|
Total
liabilities
|
|
|
963,005
|
|
|
|
3,093,341
|
|
Redeemable
convertible preferred stock, Series B
|
|
|
|
|
|
|
|
|
Redeemable,
convertible preferred stock, Series B $.0001 par value, 8,534,625 shares authorized, 8,534,625 and 0 shares issued and outstanding
at July 31, 2016 and April 30, 2016
|
|
|
1,256,420
|
|
|
|
-
|
|
Stockholders'
deficit
|
|
|
|
|
|
|
|
|
Convertible
preferred stock, Series A $.0001 par value, 1,000,000 shares authorized, 967,031 and 0 shares issued and outstanding, at July
31, 2016 and April 30, 2016
|
|
|
97
|
|
|
|
-
|
|
Common stock,
$.0001 par value, 1,500,000,000 shares authorized, 336,919,939 outstanding at July 31, 2016 and April 30, 2016
|
|
|
33,692
|
|
|
|
33,692
|
|
Additional
paid in capital
|
|
|
5,114,510
|
|
|
|
3,700,764
|
|
Accumulated
deficit
|
|
|
(5,548,656
|
)
|
|
|
(5,031,490
|
)
|
Total
stockholders' deficit
|
|
|
(400,357
|
)
|
|
|
(1,297,034
|
)
|
Total
liabilities and stockholders' deficit
|
|
$
|
1,819,068
|
|
|
$
|
1,796,307
|
|
See
accompanying Notes to Unaudited Condensed Consolidated Financial Statements
ProGreen
US, INC.
Condensed
Consolidated Statements of Operations
(Unaudited)
|
|
Three Months Ended
|
|
|
|
July 31,
|
|
|
|
2016
|
|
|
2015
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental revenue
|
|
$
|
29,065
|
|
|
$
|
-
|
|
Net gain from sale of properties
|
|
|
41,603
|
|
|
|
-
|
|
Commissions revenue
|
|
|
3,570
|
|
|
|
-
|
|
Management fee revenue
|
|
|
-
|
|
|
|
3,657
|
|
Construction services revenue
|
|
|
-
|
|
|
|
41,900
|
|
Other income
|
|
|
50
|
|
|
|
405
|
|
Total Revenue
|
|
$
|
74,288
|
|
|
$
|
45,962
|
|
Expenses:
|
|
|
|
|
|
|
|
|
Cost of construction services
|
|
|
-
|
|
|
|
41,492
|
|
Selling, General & administrative
|
|
|
103,703
|
|
|
|
55,564
|
|
Professional fees
|
|
|
41,354
|
|
|
|
72,858
|
|
Total operating expenses
|
|
$
|
145,057
|
|
|
$
|
169,914
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(70,769
|
)
|
|
|
(123,952
|
)
|
Other expenses and income:
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
(29,095
|
)
|
|
|
(23,908
|
)
|
Loss on settlement of liabilities, Series A
|
|
|
(428,105
|
)
|
|
|
-
|
|
Gain on settlement of liabilities, Series B
|
|
|
10,803
|
|
|
|
-
|
|
Loss before income tax expense
|
|
$
|
(517,166
|
)
|
|
$
|
(147,860
|
)
|
Net Loss
|
|
$
|
(517,166
|
)
|
|
$
|
(147,860
|
)
|
Net loss per share - basic and fully diluted
|
|
$
|
(0.00
|
)
|
|
($
|
0.00
|
)
|
Weighted average shares outstanding - basic and fully diluted
|
|
|
336,919,939
|
|
|
|
117,798,065
|
|
See
accompanying Notes to Unaudited Condensed Consolidated Financial Statements
ProGreen
US, INC.
Condensed
Consolidated Statements of Stockholders’ Deficit
(Unaudited)
|
|
Number of Common
Stock Issued and Outstanding
|
|
|
Common Stock
|
|
|
Number of Series
A Preferred Stock Issued and Outstanding
|
|
|
Preferred Stock
Series A
|
|
|
Additional Paid
In Capital
|
|
|
Accumulated Deficit
|
|
|
Net Stockholders'
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at April 30, 2016
|
|
|
336,919,939
|
|
|
$
|
33,692
|
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
3,700,764
|
|
|
$
|
(5,031,490
|
)
|
|
$
|
(1,297,034
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Series A stock
issued in settlement of liabilities
|
|
|
-
|
|
|
|
-
|
|
|
|
667,031
|
|
|
|
67
|
|
|
|
1,111,651
|
|
|
|
-
|
|
|
|
1,111,718
|
|
Preferred Series A stock
issued for cash
|
|
|
-
|
|
|
|
-
|
|
|
|
300,000
|
|
|
|
30
|
|
|
|
299,970
|
|
|
|
-
|
|
|
|
300,000
|
|
Compensation - restricted
stock units
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,125
|
|
|
|
-
|
|
|
|
2,125
|
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(517,166
|
)
|
|
|
(517,166
|
)
|
Balance
at July 31, 2016
|
|
|
336,919,939
|
|
|
$
|
33,692
|
|
|
|
967,031
|
|
|
$
|
97
|
|
|
$
|
5,114,510
|
|
|
$
|
(5,548,656
|
)
|
|
$
|
(400,357
|
)
|
See
accompanying Notes to Unaudited Condensed Consolidated Financial Statements
ProGreen
US, INC.
Condensed
Consolidated Statements of Cash Flows
(Unaudited)
|
|
Three Months Ended
|
|
|
|
April 30,
|
|
|
|
2016
|
|
|
2015
|
|
Cash used in operating activities
|
|
|
|
|
|
|
Net loss
|
|
$
|
(517,166
|
)
|
|
$
|
(147,860
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Compensation - restricted stock units
|
|
|
2,125
|
|
|
|
5,125
|
|
Depreciation
|
|
|
10,532
|
|
|
|
3,398
|
|
Gain on sale of properties
|
|
|
(41,603
|
)
|
|
|
-
|
|
Loss on settlement of liabilities, Series A
|
|
|
428,105
|
|
|
|
-
|
|
Gain on settlement of liabilities, Series B
|
|
|
(10,803
|
)
|
|
|
-
|
|
Amortization of debt discount
|
|
|
20,817
|
|
|
|
-
|
|
Common shares issued for services
|
|
|
-
|
|
|
|
53,500
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Other receivables - related party
|
|
|
11
|
|
|
|
-
|
|
Accounts receivable
|
|
|
(4,971
|
)
|
|
|
21,470
|
|
Prepaid expenses
|
|
|
(14,690
|
)
|
|
|
2,192
|
|
Deposits
|
|
|
(4,275
|
)
|
|
|
-
|
|
Accounts payable and accrued expenses
|
|
|
(11,884
|
)
|
|
|
(16,606
|
)
|
Payable under management agreement
|
|
|
-
|
|
|
|
(19,460
|
)
|
Cash used in operating activities
|
|
|
(143,802
|
)
|
|
|
(98,241
|
)
|
|
|
|
|
|
|
|
|
|
Cash provided by investing activities
|
|
|
|
|
|
|
|
|
Proceeds from (payment of) note receivable
|
|
|
-
|
|
|
|
(49
|
)
|
Proceeds from sale of properties
|
|
|
22,000
|
|
|
|
-
|
|
Loan for note receivable - related party
|
|
|
(150,500
|
)
|
|
|
-
|
|
Proceeds on land contract
|
|
|
253
|
|
|
|
-
|
|
Cash used in investing activities
|
|
|
(128,247
|
)
|
|
|
(49
|
)
|
|
|
|
|
|
|
|
|
|
Cash provided by (used in) financing activities
|
|
|
|
|
|
|
|
|
Proceeds from related party stock purchase
|
|
|
100,000
|
|
|
|
-
|
|
Proceeds from advances from related party
|
|
|
-
|
|
|
|
46,000
|
|
Repayment of notes payable
|
|
|
-
|
|
|
|
(28,196
|
)
|
Proceeds from convertible debenture
|
|
|
20,000
|
|
|
|
38,000
|
|
Payments on line of credit
|
|
|
(2,197
|
)
|
|
|
-
|
|
Decrease in obligations under capital leases
|
|
|
(1,961
|
)
|
|
|
(1,905
|
)
|
Collection of amount due under stock subscription
|
|
|
-
|
|
|
|
53,999
|
|
Cash provided by financing activities
|
|
|
115,842
|
|
|
|
107,898
|
|
|
|
|
|
|
|
|
|
|
Net change in cash
|
|
|
(156,207
|
)
|
|
|
9,608
|
|
|
|
|
|
|
|
|
|
|
Cash at beginning of period
|
|
|
189,942
|
|
|
|
99,325
|
|
Cash at end of period
|
|
|
33,735
|
|
|
|
108,933
|
|
Supplemental information:
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
17,676
|
|
|
$
|
16,936
|
|
|
|
|
|
|
|
|
|
|
Noncash investing and financing transactions:
|
|
|
|
|
|
|
|
|
Noncash transaction: proceeds from land contracts
issued for sale of properties
|
|
$
|
206,000
|
|
|
$
|
-
|
|
Noncash transaction: Series A Preferred Stock issued
in settlement of liabilities
|
|
$
|
683,613
|
|
|
$
|
-
|
|
Noncash transaction: Series A Preferred Stock for
subscription receivable
|
|
$
|
200,000
|
|
|
$
|
-
|
|
Noncash transaction: Series B Preferred Stock issued
in settlement of liabilities
|
|
$
|
1,246,614
|
|
|
$
|
-
|
|
Noncash transaction: stock issued under convertible
debenture
|
|
$
|
-
|
|
|
$
|
28,135
|
|
Noncash transaction: consolidation of note payable
|
|
$
|
-
|
|
|
$
|
289,346
|
|
See
accompanying Notes to Unaudited Condensed Consolidated Financial Statements
ProGreen
US, INC.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
July
31, 2016
(Unaudited)
Note
1. Financial Statement Presentation
The
unaudited condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted
accounting principles in the United States of America (“U.S. GAAP”) for interim information and in accordance with
the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission (the “SEC”).
Accordingly, they do not include all the information and footnotes required by U.S. GAAP for complete financial statements and
they should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company’s
Annual Report on Form 10-K for the year ended April 30, 2016 (the “Annual Report”). The accompanying interim financial
statements are unaudited; however, in the opinion of management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. The results of operations for the three month period ended July 31, 2016,
are not necessarily indicative of the results that may be expected for the year ending April 30, 2017.
Basis
of Presentation
The
Company’s significant accounting policies are summarized in Note 1 of the Annual Report. These accounting policies conform
to U.S.GAAP and have been consistently applied in the preparation of the interim unaudited condensed consolidated financial statements.
There were no significant changes to these accounting policies during the three months ended July 31, 2016, and the Company does
not expect the adoption, as applicable, of other recent accounting pronouncements will have a material impact on its financial
statements.
Going
Concern
The
Company’s unaudited condensed consolidated financial statements for the period ended July 31, 2016, have been prepared on
a going concern basis which contemplates the realization of assets and settlement of liabilities and commitments in the normal
course of business. The Company will require additional funding to execute its future strategic business plan. Successful business
operations and its transition to attaining profitability are dependent upon obtaining additional financing and achieving a level
of revenue adequate to support its cost structure. These conditions raise substantial doubt about the Company’s ability
to continue as a going concern.
The
Company’s ability to continue as a going concern is dependent upon the success of management’s plans and the Company’s
ability to use its common stock to raise working capital. The accompanying unaudited condensed consolidated financial statements
do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the
amounts and classification of liabilities in the event management’s plans are not successful.
The
Company will continue to incur costs that are necessary for it to remain an active public company. In the current fiscal year,
the Company used approximately $144,000 of cash to support its operations and such cash needs are expected to continue in the
upcoming year. As of July 31, 2016, the Company has approximately $34,000 in cash.
Notes
Receivable - Land
Contracts
The
note receivables land contracts are carried at amortized cost. Interest income on the notes receivable is recognized on the accrual
basis based on the principal balances outstanding. Management believes the notes are collectible and therefore, an allowance for
doubtful accounts has not been recorded at July 31, 2016 and April 30, 2016.
ProGreen
US, INC.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
July
31, 2016
(Unaudited)
Note
1. Financial Statement Presentation - continued
Reclassifications
Certain
amounts in previous periods have been reclassified to conform to fiscal year ending 2017 classifications.
Recent
Accounting Pronouncements
We
do not expect that any recently issued accounting pronouncements will have a material impact on our consolidated financial statements.
Note
2. Rental Properties and Property Under Development
Rental
properties and property under development at July 31, 2016 and April 30, 2016 are summarized as follows:
|
|
July 31,
|
|
|
April 30,
|
|
|
|
2016
|
|
|
2016
|
|
Rental properties
|
|
$
|
824,254
|
|
|
$
|
1,012,698
|
|
Less: accumulated depreciation
|
|
|
(12,489
|
)
|
|
|
(6,138
|
)
|
Rental properties, net of accumulated depreciation
|
|
$
|
811,765
|
|
|
$
|
1,006,560
|
|
|
|
|
|
|
|
|
|
|
Property under development
|
|
$
|
294,179
|
|
|
$
|
294,179
|
|
|
|
|
|
|
|
|
|
|
Depreciation
expense for the quarters ended July 31, 2016 and 2015 totaled $8,398 and $0 respectively.
The
Company owned eleven and thirteen rental properties as of July 31, 2016 and April 30, 2016, respectively. The Company held one
property under development as of July 31, 2016 and April 30, 2016.
Note
3. Notes Receivable - Land Contracts
On
May 20, 2016 the Company sold one of its rental properties located at 23270 Helen Street, with a selling price of $119,000. The
Company received a deposit of $10,000 and issued a Land Contract to the buyer, for the balance owed in the amount of $109,000,
to be paid in monthly installments, including principal and interest, beginning June 1, 2016 through June 1, 2019. The Land Contract
bears interest at 9% per annum. In the quarter ended July 31, 2016 the Company recognized a gain on the sale of this property
in the amount of $41,507. The balance due under this Land Contract totaled $108,747 as of July 31, 2016.
On
June 25, 2016 the Company sold a second one of its rental properties located at 21421 Greenview Avenue with a selling price of
$109,000. The Company received a deposit of $12,000 and issued a Land Contract to the buyer, for the balance owed in the amount
of $97,000, to be paid in monthly installments, including principal and interest, beginning August 1, 2016 through June 30, 2019.
The Land Contract bears interest at 9% per annum. In the quarter ended July 31, 2016 the Company recognized a gain on the sale
of this property in the amount of $96. The balance due under this Land Contract totaled $97,000 as of July 31, 2016.
ProGreen
US, INC.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
July
31, 2016
(Unaudited)
Note
4. Note Receivable - Related Party
During
the quarter ended July 31, 2016, the Company contributed an additional $150,500 to Baja Joint Venture which is accounted for as
a note receivable. Note Receivable - Related Party totaled $260,500 and $110,000 as of July 31, 2016 and April 30, 2016, respectively.
Note
5. Notes Payable
The
Company is indebted as follows:
|
|
July 31,
|
|
|
April , 30
|
|
|
|
2016
|
|
|
2016
|
|
Note Payable to City of Southfield dated
October 29, 2014 bears a fixed rate of interest of 3.00% and requires interest only annual payments for the first three years
of the note. Commencing in year four principal and interest are due in fifteen annual installments. The note payable is secured
by a property located at 23270 Helen Street, Southfield Michigan.
|
|
$
|
6,000
|
|
|
$
|
6,000
|
|
|
|
|
|
|
|
|
|
|
Note Payable to City of Southfield dated September
19, 2014 bears a fixed rate of interest of 3.00% and requires interest only annual payments for the first three years of the
note. Commencing in year four principal and interest are due in fifteen annual installments. The note payable is secured by
a property located at 23270 Helen Street, Southfield Michigan.
|
|
|
8,106
|
|
|
|
8,106
|
|
|
|
|
|
|
|
|
|
|
Note Payable to AMREFA dated June 25, 2015 bears a
fixüed rate of interest of 8.00%. Payments plus accrued interest are due biannually as follows; January 15, 2016 $61,150,
July 15, 2016 $65,000, January 15, 2017 $65,000 and July 15, 2017 $70,000. The note payable is guaranteed by a majority shareholder.
|
|
|
-
|
|
|
|
261,150
|
|
|
|
|
|
|
|
|
|
|
Mortgage Note payable to AMREFA,
is non-interest bearing and is secured by the property at 24442 Kinsel Street, Southfield, Michigan. The note is due upon
the sale of the Kinsel Street Property.
|
|
|
200,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
214,106
|
|
|
$
|
275,256
|
|
During
the quarter ended July 31, 2106 in connection with the purchase of ARG, the note payable due to AMREFA under the June 2015 Instalment
Payment Agreement was paid in full and cancelled with the delivery of a $200,000 Mortgage Note payable to AMREFA together with
issuance of 441,084 shares of Series B Preferred Stock to AMREFA, with a fair value of $65,000 in payment of note plus accrued
interest. See Note 12. The amount due was comprised of $261,150 principal plus accrued interest of $14,653, for a total due to
AMREFA of $275,803. In connection with this payment in full, during the quarter ended July 31, 2016, the Company recorded a gain
on settlement of a liability in the amount of $10,803, which is included in other expenses and income in the accompanying unaudited
Condensed Consolidated Statements of Operations.
The
Mortgage Note is non-interest bearing and is secured by the property at 24442 Kinsel Street, Southfield, Michigan. The Mortgage
Note will be paid upon the sale of the Kinsel Street property. Notes payable to AMREFA totaled $200,000 and $265,150 as of July
31, 216 and April 30, 2016, respectively. Accrued interest due AMREFA totaled $0 and $14,653 as of July 31, 2016 and April 30,
2016, respectively. .
Note
6. Note Payable, Related Party
During
the quarter ended July 31, 2016, in payment of the note payable related party the Company issued EIG 608,031 shares of Series
A Preferred Stock with a total stated value equal to that of the agreed upon principal in the amount of $476,000 plus accrued
interest in the amount of $148,613, for a total agreed upon amount of $624,613 and a fair value of $1,013,385. See Note 11. In
connection with this payment in full, during the quarter ended July 31, 2016 the Company recorded a loss on settlement of a liability
in the amount of $388,772 which is included in other expenses and income in the accompanying unaudited Condensed Consolidated
Statements of Operations.
ProGreen
US, INC.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
July
31, 2016
(Unaudited)
Note
6. Note Payable, Related Party – continued
As
of July 31, 2016 and April 30, 2016 the outstanding balance of the note payable related party was $0 and $476,000, plus accrued
interest of $0 and $148,613, respectively.
The
note payable related party is due to the Company’s controller had a balance outstanding of $40,000 as of July 31, 2016 and
April 30, 2016. The Company recorded interest expense in connection with this note payable in the amount of $818 and $0 for the
quarters ended July 31, 2016 and 2015, respectively. Accrued interest due under this note payable totaled $2,196 and $1,378 as
of July 31, 2016 and April 30, 2016, respectively.
Note
7. Note Payable Bank of Birmingham
The
note payable had a balance outstanding of $487,803 and $490,000 as of July 31, 2016 and April 30, 2016, respectively and the Company
recorded interest expense in connection with this note payable in the amount of $2,520 and $0 for the quarters ended July 31,
2016 and 2015, respectively. Accrued interest due under the note payable totaled $2,520 and $2,858 as of July 31, 2016 and April
30, 2016, respectively.
Principal
payment requirements on the notes payable to Bank of Birmingham are as follows:
2017
|
|
$
|
9,698
|
|
2018
|
|
|
13,699
|
|
2019
|
|
|
14,556
|
|
2020
|
|
|
15,394
|
|
2021
|
|
|
434,456
|
|
Thereafter
|
|
|
-
|
|
Total
|
|
$
|
487,803
|
|
Note
8.
Financing Agreement and Convertible Debenture
On
June 23, 2016, the Company entered into $5,000,000 equity line financing agreement (“Investment Agreement”) with Tangiers
Global, LLC, Dorado, Puerto Rico and filed a Registration Statement for the financing with the SEC on August 31, 2016. . The financing
is over a maximum of 36 months. A maximum of 100 million (100,000,000) shares of the Company’s common stock will be registered
for this financing. In connection with the execution of the Investment Agreement, the Company issued to Tangiers a commitment
fee of a five-year warrant to purchase 4,000,000 shares of common stock, at an exercise price of $.02 per share. As of July, 2016
there have been no draws under the Investment Agreement thus the outstanding balance totaled $0 at July 31, 2016 and April 30,
2016.
Tangiers
provided financing to the Company for legal costs in connection with the filing of the Registration Statement through a one-year
$22,000 convertible debenture, due June 23, 2017, as amended August 25, 2016, which is convertible into common stock at a conversion
price of $.03 per share (“Convertible Debenture”). Under the terms of the Convertible Debenture the Company borrowed
the principal amount of $22,000 plus accrued interest at 5.83% per annum with an original issue discount of $2,000. As an investment
incentive, the Company issued 4,000,000 5 year cashless warrants, exercisable at $.02 per share. This Note may be prepaid by the
Company, in whole or in part, according to the following schedule: under 90 days the prepayment amount is 115% of the principal
amount, between 91-135 days the prepayment amount is 125% of the principal amount and between 136-180 days the prepayment amount
is 135% of principal. After 180 days from the Effective Date of the Original Note, this Note may not be prepaid without written
consent from Holder. Accrued interest totaled $134 and $0 at July 31, 2016 and April 30, 2016, respectively. The outstanding convertible
debenture balance totaled $20,208 at July 31, 2016, net of the unamortized original issue discount of $1,792. Amortization of
the related discount totaled $208 for the quarter ended July 31, 2016.
ProGreen
US, INC.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
July
31, 2016
(Unaudited)
Note
8.
Financing Agreement and Convertible Debenture – continued
The
Company analyzed the embedded conversion option for derivative accounting consideration under ASC 815-15 “Derivatives and
Hedging” and determined that the conversion option should be classified as equity.
The
Company further analyzed the conversion option for beneficial conversion features consideration under ASC 470-20 “Convertible
Securities with Beneficial Conversion Features” and noted beneficial conversion features do not exist.
Note
9. Note Payable AMREFA
During
the quarter ended July 31, 2016, in connection with the Company’s purchase of ARG LLC, 8,093,541 shares of Series B Preferred
Stock were issued to AMREFA and the note payable to AMREFA in the amount $1,170,811 was paid in full. Amortization of the related
discount totaled $20,609 for the quarter ended July 31, 2016. See Note 12.
Note
10. Related Party Advances
During
the quarter ended July 31, 2016 in payment of the non-interest bearing advances due EIG in the amount of $59,000 the Company issued
59,000 shares of Series A Preferred Stock to EIG. In connection with this payment in full, during the quarter ended July 31, 2016
the Company recorded a loss on settlement of a liability in the amount of $39,333, which is included in other expenses and income
in the accompanying unaudited Condensed Consolidated Statements of Operations. Related party advance from EIG totaled $0 and $59,000
at July 31, 2016 and April 30, 2016, respectively. See Note 11.
During
the quarter ended July 31, 2016 in connection with the amount due stockholders in the amount of $200,000, the Company issued 200,000
shares of Series A Preferred Stock. Amount due stockholders totaled $0 and $200,000 at July 31, 2016 and April 30, 2016, respectively.
See Note 11.
Note
11. Series A Convertible Preferred Stock
During
the quarter ended July 31, 2016, the Company issued all 967,031of the authorized shares of Series A Preferred Stock as follows:
Number of
Series A
Shares Issued
and
Outstanding
|
|
|
Preferred Stock
Series A
|
|
|
Additional Paid in
Capital Series A
|
|
|
Liabilities
Settled
|
|
|
Loss on Settlement
of Liabilities
Series A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
608,031
|
|
|
$
|
61
|
|
|
$
|
1,013,324
|
|
|
$
|
624,613
|
|
|
$
|
(388,772
|
)
|
|
59,000
|
|
|
|
6
|
|
|
|
98,327
|
|
|
|
59,000
|
|
|
|
(39,333
|
)
|
|
300,000
|
|
|
|
30
|
|
|
|
299,970
|
|
|
|
-
|
|
|
|
-
|
|
|
967,031
|
|
|
$
|
97
|
|
|
$
|
1,411,621
|
|
|
$
|
683,613
|
|
|
$
|
(428,105
|
)
|
During
the quarter ended July 31, 2016 the Company issued 300,000 shares of Series A Preferred Stock settled in cash of which $200,000
was received in the last quarter of fiscal 2016 and was recorded as amount due stockholders in the amount of $200,000 at April
30, 2016, The remaining $100,000 was received from a related party in the quarter ended July 31, 2016.
See
Note 6 and Note 10.
ProGreen
US, INC.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
July
31, 2016
(Unaudited)
Note
11. Series A Convertible Preferred Stock – continued
The
Company analyzed the embedded conversion option for derivative accounting consideration under ASC 815-15 “Derivatives and
Hedging” and determined that the conversion option should be classified as equity.
The
Company further analyzed the conversion option for beneficial conversion features consideration under ASC 470-20 “Convertible
Securities with Beneficial Conversion Features” and noted beneficial conversion features do not exist.
Note
12. Series B Convertible Redeemable Preferred Stock
During
the quarter ended July 31, 2016, the Company issued all 8,534,625 of the authorized shares of Series B Preferred Stock to AMREFA
as follows:
Number of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series B Shares
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Gain on Settlement
|
|
Issued and
|
|
|
Preferred Stock
|
|
|
Paid In
|
|
|
|
|
|
of Liabilities
|
|
Outstanding
|
|
|
Series B
|
|
|
Capital Series B
|
|
|
Total Series B
|
|
|
Series B
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
441,084
|
|
|
$
|
44
|
|
|
$
|
64,956
|
|
|
$
|
65,000
|
|
|
$
|
10,803
|
|
|
8,093,541
|
|
|
|
809
|
|
|
|
1,190,611
|
|
|
|
1,191,420
|
|
|
|
-
|
|
|
8,534,625
|
|
|
$
|
853
|
|
|
$
|
1,255,567
|
|
|
$
|
1,256,420
|
|
|
$
|
10,803
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
Note 5 and Note 9.
Series
B is presented as temporary equity pursuant to ASC 480 as it is not redeemable until February 1, 2017. As of July 31, 2016 and
April 30, 2016, 8,534,625 and no shares of Series B Preferred Stock were issued and outstanding, respectively.
The
Company further analyzed the conversion option for beneficial conversion features consideration under ASC 470-20 “Convertible
Securities with Beneficial Conversion Features” and noted beneficial conversion features do not exist.
ProGreen
US, INC.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
July
31, 2016
(Unaudited)
Note
13. Employee Stock Option Plan
Restricted
Stock Units
For
the three month period ended July 31, 2016 compensation expense relating to RSUs was recorded as follows:
|
|
April 30
|
|
|
|
2016
|
|
Number of restricted stock units issued on December 3, 2012
|
|
|
600,000
|
|
Stock price on grant date
|
|
$
|
0.03
|
|
Vesting Period
|
|
|
4
years
|
|
Estimated fair value at issuance
|
|
$
|
18,000
|
|
|
|
|
|
|
May 1, 2016 through July 31, 2016 Compensation Expense
|
|
$
|
1,125
|
|
|
|
|
|
|
Number of restricted stock units issued on June 1, 2014
|
|
|
600,000
|
|
Stock price on grant date
|
|
$
|
0.02
|
|
Vesting Period
|
|
|
3
years
|
|
Estimated fair value at issuance
|
|
$
|
12,000
|
|
|
|
|
|
|
May 1, 2016 through July 31, 2016 Compensation Expense
|
|
$
|
1,000
|
|
|
|
|
|
|
Total compensation expense
|
|
$
|
2,125
|
|
Note
14. Subsequent Events
Subsequent
to July 31, 2016, in payment of accrued interest due RF in the amount of $50,700, the Company issued 1,690,000 shares Common Stock,
to RF.
Subsequent
to July 31, 2016 the Company issued the remaining 9,775,171 shares of Common Stock due EIG under the Stock
Subscription.
The Company’s board of directors approved the amendments
to the Certificate of Incorporation to decrease the authorized Common Stock from 1,500,000,000 shares to 950,000,000 shares on
August 24, 2016.
Management’s
Discussion and Analysis of Financial Condition
and Results of Operations
The
following discussion of our financial condition and results of operations should be read in conjunction with the financial statements
and notes thereto and other financial information included elsewhere in this report.
Certain
statements contained in this prospectus, including, without limitation, statements containing the words "believes," "anticipates,"
"expects" and words of similar import, constitute "forward looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks and uncertainties. Our
actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors,
including our ability to create, sustain, manage or forecast our growth; our ability to attract and retain key personnel; changes
in our business strategy or development plans; competition; business disruptions; adverse publicity; and international, national
and local general economic and market conditions.
OUR
BUSINESS
The
purchase of a condominium unit on July 28, 2009 initiated our planned new business operations directed at purchasing income-producing
residential real estate apartment homes, condominiums and houses in the State of Michigan, where we believe favorable investment
opportunities exist based on current market conditions.
Our
offices are located in Oakland County, Michigan. Our business model since our initial property purchases in 2009 has been to acquire,
refurbish and upgrade existing properties into more environmentally sustainable, energy efficient, comfortable and healthier living
spaces so that they meet standards that exceed what is often the norm for most single family homes, condominiums and apartments.
Once a property has been acquired, refurbished and rented, the property would be put back on the market, but now as a fully managed
investment property, with a favorable environmental profile and yield. These investment properties are marketed exclusively by
ProGreen Realty LLC, a wholly-owned subsidiary of ProGreen and managed by ProGreen Properties Management LLC, another wholly owned
subsidiary. In January 2015, ProGreen Construction LLC (“ProGreen Construction”) was formed as a wholly owned subsidiary
of the Company to perform all construction and development services for properties which are held and being developed by the Company.
We
have expanded our real estate development operations to include Baja California, Mexico. On February 12, 2016, we signed a definitive
joint venture agreement with Inmobiliaria Contel S.R.L.C.V. for the first tract of land of approximately 300 acres for agriculture
use. In addition, we have formed Procon Baja JV, our joint venture subsidiary owned by Progreen (51%) and Contel (49%). The Procon
subsidiary is planned to be the holding company for the development of approximately 1,900 acres, with some 500-800 acres suitable
for farming, depending on the amount of water that could be extracted through the drilling of fresh water wells.
RESULTS
OF OPERATIONS
Three
months Ended July 31, 2016 Compared to Three Months Ended July 31, 2015
During
the three months ended July 31, 2016, we incurred a net loss of approximately $517,000 compared to a net loss of
approximately $148,000 for the three months ended July 31, 2015. Revenue increased approximately $28,000 in the three months
ended July 31, 2016 compared to the three months ended July 31, 2015. Proceeds from the sale of properties increased to
$228,000 as compared to $0 during the three months ended July 31, 2015 and corresponding cost of properties sold increased to
approximately $186,000 as compared to $0 in the three months ended July 31, 2015, resulting in an increase in net gain from
sale of properties to approximately $42,000. The Company sold two properties in the three months ended July 31, 2016 as
compared to none in the comparable prior period.
Rental
revenue increased to approximately $29,000 as compared to $0 during the three months ended July 31, 2015. The Company received
rental income on eleven properties during the three months ended July 31, 2016 as compared to none in the comparable prior period.
Commission
revenue increased to approximately $4,000 as compared to $0 during the three months ended July 31, 2015. The Company received
commissions on the sale of two properties in the three months ended July 31, 2016. There were no such commissions earned during
the three months ended July 31, 2015. Management fee revenue decreased to $0 during the three months ended July 31, 2016 as compared
to approximately $4,000 in 2015 as the Company managed no properties in the current fiscal three month period. Construction services
revenues were $0 in the three months ended July 31, 2016 as compared to approximately $42,000 in 2015. The decrease is a result
of the Company’s acquisition of ARG, for whom the fiscal 2015 construction services were provided.
There
have been fluctuations in certain expenses in the three months ended July 31, 2016, as compared to the three months ended July
31, 2015. In the three months ended July 31, 2016 cost of construction services decreased to $0 as compared to approximately $42,000
in the three months ended July 31, 2015, as a result of the Company’s acquisition of ARG, for whom the fiscal 2015 construction
services cost were incurred.
General
and administrative expenses increased approximately $43,000 for the three months ended July 31, 2016 as compared to the comparable
prior period mainly due to the following:
Rental
property costs and depreciation expense increased approximately $37,000 and $7,000, respectively, for the three months ended July
31, 2016 as compared to the comparable prior period as a result of costs incurred in connection with the rental properties the
Company acquired from ARG in the last quarter of fiscal 2016.
Commission
expense increased approximately $7,100 for the three months ended July 31, 2016 as compared to the comparable prior period as
a result of a commission paid on the sale of one of the properties.
These
increases were partially offset by decreases in certain expenses:
Salary
expense decreased approximately $2,100 as result of a reduction in the President’s salary, net of a salary increase due
to the addition of an office manager in the current three month period.
Compensation
expense decreased approximately $3,000 for the three months ended July 31, 2016 as compared to the comparable prior period. This
decrease is attributable to the full vesting of a portion of restricted stock units.
Office
rent expense approximately $4,300 for the three months ended July 31, 2016 as compared to the comparable prior period due the
Company’s new office space lease.
Professional
fees decreased approximately $32,000 for the three months ended July 31, 2016 as compared to the comparable prior period mainly
due to fees paid with the issuance of common stock to two consultants in the amount of approximately $54,000 in the three month
period ended July 31, 2015. This decrease was partially offset by an increase in legal fees of approximately $11,000 and an increase
in accounting and audit fees of approximately $11,000, as a result of fees incurred relating to the Company’s ongoing compliance
and financing costs.
Interest
expense increased approximately $5,000 for the three months ended July 31, 2016 as compared to the comparable prior period mainly
due to increased debt mainly attributable to the ARG purchase in the last quarter of fiscal 2016.
Loss
on settlement of liabilities, Series A increased to approximately $428,000 for the three months ended July 31, 2016 as compared
to $0 for the comparable prior period due to the issuance of Series A preferred stock in settlement of the note payable to EIG
resulting in a loss in the amount of approximately $389,000 and in settlement of the advance due EIG resulting in a loss in the
amount of approximately $39,000.
Gain
on settlement of liabilities, Series increased to approximately $11,000 for the three months ended July 31, 2016 as compared to
$0 for the comparable prior period due to the issuance of Series B preferred stock in settlement of the note payable due AMREFA.