See accompanying Notes to Unaudited Condensed Consolidated
Financial Statements
NOTES TO UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
October 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 six month period ended October 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 six months ended October 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.
Fair
Value of Financial Instruments
The
Company records convertible debt and warrants at fair value on a recurring basis. Estimated fair values of the Company's
convertible debt and derivatives liability were calculated based upon quoted market prices. See Notes 8 and 9.
Going
Concern
The
Company’s unaudited condensed consolidated financial statements for the period ended October 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 $248,000 of cash to support its operations and such cash needs are expected to continue in the
upcoming year. As of October 31, 2016, the Company has approximately $30,000 in cash.
ProGreen US, INC.
NOTES TO UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
October 31, 2016
Unaudited
Note
1. Financial Statement Presentation - continued
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 October 31, 2016 and April 30, 2016.
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 October 31 and April 30, 2016 are summarized as follows:
|
|
October 31,
|
|
|
April 30,
|
|
|
|
2016
|
|
|
2016
|
|
Rental properties
|
|
$
|
824,254
|
|
|
$
|
1,012,698
|
|
Less: accumulated depreciation
|
|
|
(19,982
|
)
|
|
|
(6,138
|
)
|
Rental properties, net of accumulated depreciation
|
|
$
|
804,272
|
|
|
$
|
1,006,560
|
|
|
|
|
|
|
|
|
|
|
Property under development
|
|
$
|
294,179
|
|
|
$
|
294,179
|
|
Depreciation
expense for the six month periods ended October 31, 2016 and 2015 totaled $15,891and $0, respectively.
The
Company owned eleven and thirteen rental properties as of October 31, and April 30, 2016, respectively. The Company held one property
under development as of October 31, 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 six months ended October 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 $109,606 as of October 31, 2016.
ProGreen US, INC.
NOTES TO UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
October 31, 2016
Unaudited
Note
3. Notes Receivable - Land Contracts - continued
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 six months ended October 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 $96,435 as of October 31, 2016.
Note
4. Note Receivable - Related Party
During
the six months ended October 31, 2016, the Company contributed an additional $195,500 to Baja Joint Venture which is accounted
for as an investment. Note Receivable - Related Party totaled $305,500 and $110,000 as of October 31, 2016 and April 30, 2016,
respectively.
Note
5. Notes Payable
The
Company is indebted as follows:
|
|
October 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 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
|
|
|
|
|
|
|
|
|
|
|
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 six months ended October 31, 2016 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 six months ended October 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 October
31, 2016 and April 30, 2016, respectively. Accrued interest due AMREFA totaled $0 and $14,653 as of October 31, 2016 and April
30, 2016, respectively.
ProGreen US, INC.
NOTES TO UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
October 31, 2016
Unaudited
Note
6. Notes Payable, Related Parties
During
the six months ended October 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 14. In
connection with this payment in full, during the six months ended October 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.
As
of October 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.
On
August 2, 2016, the Company entered into a credit line promissory note (“Credit Line”) with its President and Chief
Executive Officer (“President”) whereby the Company may borrow up to $250,000 with interest at a rate of five (5%)
percent per annum due on July 31, 2017. The Credit Line is unsecured. During the six months ended October 31, 2016 the Company
borrowed $50,000 under the Credit Line. As a result of the derivatives calculation an additional discount of $9,888 was recorded.
Notes payable related parties includes the amount due to the Company’s President with a balance outstanding of $50,000 less
the unamortized discount of $8,652 as of October 31, 2016 and $0 as of April 30, 2016. Amortization of the related discount totaled
$1,236 for the six months ended October 31, 2016. The Company recorded interest expense in connection with this Credit Line in
the amount of $443 and $0 for the six months ended October 31, 2016 and 2015, respectively. Accrued interest due under this Credit
Line totaled $443 and $0 as of October 31, 2016 and April 30, 2016, respectively.
Also,
in connection with the Credit Line, the Company issued the President common stock purchase warrants. The warrants entitle the
President to purchase ten shares of common stock for each one ($1.00) dollar of total disbursements by the President to the Company,
of up to 2,500,000 shares of common stock at an exercise price of $0.05. During the six months ended October 31, 2016, 50,000
of these warrants were issued in various denominations between August 2, 2016 through September 13, 2016, resulting in a total
number of warrant shares of 500,000 as of October 31, 2016. The warrants have a five year term. See Note 8 and Note 17.
In
addition, notes payable related parties includes an amount due to the Company’s controller with a balance outstanding of
$40,000 as of October 31, 2016 and April 30, 2016. The Company recorded interest expense in connection with this note payable
in the amount of $1,635 and $0 for the six months ended October 31, 2016 and 2015, respectively. Accrued interest due under this
note payable totaled $3,013 and $1,378 as of October 31, 2016 and April 30, 2016, respectively.
ProGreen US, INC.
NOTES TO UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
October 31, 2016
Unaudited
Note
7. Note Payable Bank of Birmingham
The
note payable had a balance outstanding of $484,666 and $490,000 as of October 31, 2016 and April 30, 2016, respectively and the
Company recorded interest expense in connection with this note payable in the amount of $17,970 and $0 for the six months ended
October 31, 2016 and 2015, respectively. Accrued interest due under the note payable totaled $2,100 and $2,858 as of October 31,
2016 and April 30, 2016, respectively.
Principal
payment requirements on the notes payable to Bank of Birmingham are as follows:
2017
|
|
$
|
6,584
|
|
2018
|
|
|
13,701
|
|
2019
|
|
|
14,558
|
|
2020
|
|
|
15,395
|
|
2021
|
|
|
434,428
|
|
Thereafter
|
|
|
-
|
|
Total
|
|
$
|
484,666
|
|
Note
8. Fair Value Measurement
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.
|
As
of October 31, 2016, the Company held certain financial instruments that are measured at fair value on a recurring basis. These
consisted of convertible debt totaling $34,270 and $0 with a derivative liability totaling $168,983 (including stock warrants)
and $0 at October 31, 2016 and 2015, respectively, which are categorized as Level 3. The related gain on derivatives totaled $16,660
for the six month period ended October 31, 2016. Gain on derivatives totaled $5,777 for the six month period ended October 31,
2015.
See
Notes 7 and 9.
ProGreen US, INC.
NOTES TO UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
October 31, 2016
Unaudited
Note 9
- Derivative Liabilities
During
the six months ended October 31, 2016, the Company identified conversion features embedded within its convertible debt. See Note
10. The Company has determined that the conversion feature of the Hoppel convertible note represents an embedded derivative since
the Note is convertible into a variable number of shares upon conversion. Accordingly, the Note is not considered to be conventional
debt and the embedded conversion feature must be bifurcated from the debt host and accounted for as a derivative liability. The
Hoppel convertible note tainted all other convertible instruments (Tangier convertible notes and all warrants) and these convertible
instruments were treated as derivatives as well. Therefore, the fair value of the derivative instruments has been recorded as
liabilities on the balance sheet with the corresponding amount recorded as discounts to the Notes. Such discounts will be accreted
from the issuance date to the maturity date of the Notes. The change in the fair value of the derivative liabilities will be recorded
in other income or expenses in the statement of operations at the end of each period, with the offset to the derivative liabilities
on the balance sheet. The fair value of the embedded derivative liabilities on the convertible notes were determined using a multinomial
lattice models on the issuance dates with the assumptions in the table below. The fair value of the warrants was calculated using
a Black-Scholes valuation model.
The
fair value of the Company’s derivative liabilities at October 31, 2016 is as follows:
April 30, 2016 balance
|
|
$
|
-
|
|
Discount on debt
|
|
|
102,341
|
|
Reclass from equity due to tainting
|
|
|
83,302
|
|
Fair value mark- to market adjustment
|
|
|
(16,660
|
)
|
Derivatives liabilities, balance
|
|
$
|
168,983
|
|
The
fair values at the commitment dates and remeasurement dates for the convertible debt and warrants treated as derivative liabilities
are based upon the following estimates and assumptions made by management for the six months ended October 31, 2016:
The
stock prices ranged from $0.0198 to $0.0114 in this periods would fluctuate with the Company projected volatility;
An
event of default for the Convertible Note would occur 0% of the time, increasing 0.5% per month to a maximum of 5%;
Alternative
financing for the Convertible Notes would be initially available to redeem the note 0% of the time and increase monthly by 1%
to a maximum of 10%;
The
Holder would automatically convert (limited by trading volume and ownership limits of 4.99% to 9.99%) the note starting after
180 days if the company was not in default.
The
projected annual volatility for each valuation period was based on the historical volatility of the company and the remaining
term of the instrument and ranged from 160% to 306%.
The
risk-free rates were based on the remaining term of the instrument and ranged from 0.51% to 1.84%.
See
Note 8.
ProGreen US, INC.
NOTES TO UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
October 31, 2016
Unaudited
Note
10. Financing Agreement and Convertible Debentures
Tangiers
Convertible Note and Financing Agreement
On August 25, 2016, the Company entered into an Amended and
Restated 5.83% Fixed Convertible Promissory Note with Tangiers Global, LLC (“Tangiers convertible note”). This note
amended the previously entered into 5.83% Fixed Convertible Promissory Note dated June 23, 2016 in the principal amount of $22,000
including an original issue discount in the amount of $2,000. This convertible note is due and payable on June 23, 2017 with guaranteed
interest of 5.83% of the principal amount. This note is convertible at the election of the Holder from time to time after the issuance
date. The note converts at $0.03. Conversion is limited such that the holder cannot exceed 9.99% beneficial ownership. In the event
of default, the amount of principal not paid is subject to a default interest rate of 15% and a default penalty of 35%.
The Company may prepay the
amounts outstanding to the holder at any time up to the 180th day following the issue date of this note by making a payment to
the note holder of an amount in cash equal to 115% (for the first 90 days) up to 135%, multiplied by the sum of: the then outstanding
principal amount of this Note plus accrued and unpaid interest on the unpaid principal amount of this Note.
The prepayment
term was further amended in the subsequent period, s
ee Note 17.
In
connection with the Tangiers convertible note, the Company issued Tangiers a Common Stock Purchase Warrant. The warrant entitled
the holder to purchase up to 4,000,000 shares of common stock at an exercise price of $0.02. The warrant expires on June 23, 2021.
The warrant contains standard adjustments for stock dividends and splits, allows cashless exercise, and provides for alternative
consideration or cash payment upon a fundamental transaction.
The
outstanding Tangiers convertible note balance totaled $20,712 at October 31, 2016, net of the unamortized original issue discount
of $1,288. Amortization of the related discount totaled $712 for the six months ended October 31, 2016. Accrued interest totaled
$457 and $0 at October 31, 2016 and April 30, 2016, respectively.
On
June 23, 2016, the Company entered into a $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 October, 2016 there have been no draws under the Investment Agreement thus the outstanding balance totaled $0 at October
31, 2016 and April 30, 2016.
Hoppel
Convertible Note
On
September 13, 2016, the Company issued a convertible promissory note in the amount of principal amount of $105,000 to Lucas Hoppel
(“Hoppel convertible note”). This convertible note is due and payable on March 13, 2017 with interest of a one-time
charge of 7%. This note is convertible upon the event of default (as defined in the Hoppel convertible note agreement), if not
cured within five calendar days following the default event, at the election of the Holder. The note converts at 65% of the average
of the three daily lowest trades occurring during the fifteen previous trading days. Conversion is limited such that the holder
cannot exceed 4.99% beneficial ownership, or 9.99% if the market capitalization is less than $2,500,000. In the event of default,
the amount of principal not paid is subject to a 25% penalty and a daily penalty of $1,000 and the note becomes immediately due
and payable.
The
Company may prepay the amounts outstanding to the holder at any time up to the 180th day following the issue date of this note
by making a payment to the note holder of an amount in cash equal to 100%(for the first 90 days) up to 120%, multiplied by the
sum of: the then outstanding principal amount of this Note plus accrued and unpaid interest on the unpaid principal amount of
this Note.
ProGreen US, INC.
NOTES TO UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
October 31, 2016
Unaudited
Note
10. Financing Agreement and Convertible Debentures
-
continued
In connection with the Hoppel convertible note, the
Company issued Lucas Hoppel a Common Stock Purchase Warrant. The warrant entitled the holder to purchase up to 1,000,000 shares
of common stock at an exercise price of $0.05. The warrant expires on September 13, 2023. The warrant contains standard adjustments
for stock dividends and splits, and allows cashless exercise after six months. In addition, Lucas Hoppel was issued 500,000 common
shares as an inducement to enter into the financing. If the note has not been repaid in full and the share price at any time falls
below $0.0125 after the six month repayment period, then the Company will issue an additional 500,000 shares. A total of $105,000
debt discount was recorded on the note including original issuance discount of $5,000, stock issuance discount of $7,547 and derivative
discount of $92,453.
The outstanding Hoppel convertible note balance totaled $13,558 at October
31, 2016, net of the unamortized discount of $91,442. Amortization of the related discounts totaled $13,558 for the six months
ended October 31, 2016. Accrued interest totaled $7,350 and $0 at October 31, 2016 and April 30, 2016, respectively. See Note 9.
Note
11. Note Payable AMREFA
During
the six months ended October 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 six months ended October 31, 2016. See Note 15.
Note
12. Related Party Advances
During
the six months ended October 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 six months ended
October 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 October 31, 2016 and April 30, 2016, respectively. See Note 14.
During
the six months ended October 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 October 31, 2016 and April 30,
2016, respectively. See Note 14.
Note
13. Common Stock
On
August 10, 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.
On
August 10, 2016, the Company issued the remaining 9,775,171 shares of Common Stock due EIG under the Stock Subscription for
which the proceeds were received in a prior year.
On October 17, 2016, in connection Hoppel Financing the Company
issued 500,000 shares of Common Stock.See Note 10.
ProGreen US, INC.
NOTES TO UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
October 31, 2016
Unaudited
Note
14. Series A Convertible Preferred Stock
During
the six months ended October 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 six months ended October 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 in the six months ended October 31, 2016.
See
Note 6 and Note 12.
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
15. Series B Convertible Redeemable Preferred Stock
During
the six months ended October 31, 2016, the Company issued all 8,534,625 of the authorized shares of Series B Preferred Stock to
AMREFA, recorded at fair value as of the issuance date, 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
|
|
ProGreen US, INC.
NOTES TO UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
October 31, 2016
Unaudited
Note
15. Series B Convertible Redeemable Preferred Stock - continued
See
Notes 5 and 11.
From the date of issuance of the Series B Preferred Shares through October
31, 2016 the Company accreted $22,045 of the purchase discount. As of October 31, 2015, the Series B Preferred Shares had a fair
value of $1,278,465.
Series
B is presented as temporary equity in the accompanying Condensed Consolidated Balance Sheet pursuant to ASC 480 as it is not redeemable
until February 1, 2017. As of October 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.
Note
16. Employee Stock Option Plan
Restricted
Stock Units
For
the six month period ended October 31, 2016 compensation expense relating to RSUs was recorded as follows:
|
|
October 31,
|
|
|
|
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 October 31, 2016 Compensation Expense
|
|
$
|
2,250
|
|
|
|
|
|
|
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 October 31, 2016 Compensation Expense
|
|
$
|
2,000
|
|
|
|
|
|
|
Total compensation expense
|
|
$
|
4,250
|
|
ProGreen US, INC.
NOTES TO UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
October 31, 2016
Unaudited
Note
17. Subsequent Events
Subsequent
to October 31, 2016 the Company borrowed an additional $112,000 under the Credit Line with its President resulting in the issuance
of an additional warrants to purchase 1,120,000 shares of the Company’s common stock with an exercise price of $0.05. The
warrants have a five year term. See Note 6.
On
December 6, 2016 the Company amended its Certificate of Incorporation to reduce the number of shares of common stock the Company
is authorized to issue from 1,500,000,000 to 950,000,000.
On
December 9, 2016, the Company amended the Tangiers convertible note as follows; The Company may prepay the amounts outstanding to
the holder at any time up to the 204th day following the issue date of this note by making a payment to the note holder of an
amount in cash equal to: 115% (for the first 90 days), 125% (for the next 91-135 days), 135% (for the next 136-180 days) multiplied
by the then outstanding principal amount of this Note or $31,200 (135% of Principal plus $1,500, including interest). After January
16, 2017 the Note may not be prepaid without consent from the Holder. If the Note is in default (as defined by the Original Note)
the Company may not prepay the note without consent of the Holder. See Note10.