See accompanying notes to these unaudited
condensed consolidated financial statements
See accompanying notes to these unaudited
condensed consolidated financial statements
See accompanying notes to these unaudited
condensed consolidated financial statements
See accompanying
notes to these unaudited condensed consolidated financial statements
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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, 2017 (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, 2017,
are not necessarily indicative of the results that may be expected for the year ending April 30, 2018.
Basis
of Presentation
The
Company’s significant accounting policies are summarized in Note 1 of the Annual Report. 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 interim unaudited condensed consolidated financial statements. There were no significant changes to these accounting policies
during the three months ended July 31, 2017, 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, 2017, 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 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 $181,600 of cash to support its operations and such cash needs are expected to continue in the
upcoming year. As of July 31, 2017, the Company has approximately $48,000 in cash.
Earnings
(loss) per Share
Earnings
per share is calculated in accordance with ASC Topic 260,
Earnings Per Share
. Basic earnings per share (“EPS”)
is based on the weighted average number of common shares outstanding. Diluted EPS is based on the assumption that all dilutive
convertible shares and stock warrants were converted or exercised. Dilution is computed by applying the treasury stock method.
Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance,
if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period.
In
periods of losses from operations, basic and diluted income per share from operations are also the same, as ASC 260-10 requires
the use of the denominator used in the calculation of loss per share from operations in all other calculations of earnings per
share presented, despite the dilutive effect of potential common shares.
Based
on the conversion prices in effect, the potentially dilutive effects of 14,000,000 and 4,000,000 warrants were not considered
in the calculation of EPS as the effect would be anti-dilutive on July 31, 2017 and 2016 respectively.
Based
on the conversion prices in effect, the potentially dilutive effects of 9,037,707 and 733,333 due to convertible debt were not
considered in the calculation of EPS as the effect would be anti-dilutive on July 31, 2017 and 2016 respectively.
PROGREEN
US, INC.
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Based
on the conversion prices in effect, the potentially dilutive effects of 293,039,697 due to convertible preferred stock series
A were not considered in the calculation of EPS as the effect would be anti-dilutive on July 31 2017 and 2016.
Based
on the conversion prices in effect, the potentially dilutive effects of 59,756,142 due to convertible preferred stock series B
were not considered in the calculation of EPS as the effect would be anti-dilutive on July 31, 2017 and 2016.
Reclassifications
Certain
amounts in previous periods have been reclassified to conform to fiscal year ending 2018 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 totaled $463,934 and $732,023 as of July 31, 2017 and April 30, 2017, respectively. The Company owned six and ten rental
properties as of July 31, 2017 and April 30, 2017, respectively. The Company held no properties under development as of July 31,
2017and April 30, 2017.
Depreciation
expense for the quarters ended July 31, 2017 and 2016 totaled $5,595 and $8,398, respectively.
Note
3. Land Under Development and Liability under Land Contract-Related Party
The
Company held land under development in the amount of $500,000 as of July 31, 2017 and April 30, 2017. Under the terms of the definitive
purchase agreement, the Company has recorded land at cost in the amount of $500,000, paid $50,000 of the purchase price and recorded
a liability under land contract for the balance due in the amount of $450,000 as of July 31, 2017 and April 30, 2017. No interest
is due under the terms of the definitive purchase agreement. As of July 31, 2017 payments are due as follows:
Year
Ending
|
|
|
April
30 ,
|
|
2018
|
|
|
$
|
50,000
|
|
2019
|
|
|
|
100,000
|
|
2020
|
|
|
|
100,000
|
|
2021
|
|
|
|
100,000
|
|
2022
|
|
|
|
100,000
|
|
|
|
|
$
|
450,000
|
|
Note
4. Accounts Receivable
Accounts
receivable totaled $33,119 and $15,957 at July 31, 2017 and April 30, 2017, respectively and is comprised of amounts rent due
from tenants in the amount of $21,295 and $12,245 at July 31, 2017 and April 30, 2017, respectively, other receivables in the
amount of $1,800 and $0 at July 31, 2017 and April 30, 2017 respectively and Procon’s accounts receivable in the amount
of $17,419 and $11,107 at July 31, 2017 and April 30, 2017, respectively.
During
the year ended April 30, 2017, management determined the rent due from one tenant may not be collectible and an allowance for
uncollectible accounts receivable was established in the amount of $7,395, resulting in net accounts receivable of $33,119 and
$15,957 at July 31, 2017 and April 30, 2017, respectively. There was no bad debt expense recognized in the quarters ended July
31, 2017 and 2016.
PROGREEN
US, INC.
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note
5. Notes Receivable - Land Contracts and Gain on Sale of Properties and Property under Development
On
July 12, 2017 the Company sold one of its rental properties located at 20351 Lacrosse with a selling price of $126,000. The entire
$126,000 was received in cash (net of costs totaled $113,617) in the quarter ended July 31 2017 and the Company recognized a gain
on the sale of this property in the amount of $30,339.
On
June 16, 2017 the Company sold one of its rental properties located at 26005 Franklin Pointe-with a selling price of $92,000.
The entire $92,000 was received in cash (net of costs totaled $82,597) in the quarter ended July 31 2017 and the Company recognized
a gain on the sale of this property in the amount of $9,566.
On May 23, 2017 the Company sold one of its
rental properties located at 20210 Westover with a selling price of $45,000. The Company received a deposit of $5,000 and issued
a Land Contract to the buyer, for the balance owed in the amount of $40,000, to be paid in monthly installments, including principal
and interest, beginning August 1, 2017 through May 22, 2020. The Land Contract bears interest at 8% per annum. In the quarter
ended July 1, 2017 the Company recognized a deferred gain on the sale of this property in the amount of $18,822 which is
offset against the receivable balance on the face of balance sheet. The balance due under this Land Contract totaled $40,000 and
$0 plus accrued interest in the amount of $605 and $0 as of July 31, 2017 and April 30, 2017, respectively. At July 31, 2017 and
April 30 2017 the deferred profit on the sale of this property totaled $18,822 and $0 respectively.
On
May 23, 2017 the Company sold one of its rental properties located at 21000 Westover with a selling price of $92,000. The Company
received a deposit of $8,000 and issued a Land Contract to the buyer, for the balance owed in the amount of $84,000, to be paid
in monthly installments, including principal and interest, beginning June 1, 2017 through May 10, 2020. The Land Contract bears
interest at 9% per annum. In the quarter ended July 31, 2017 the Company recognized a deferred gain on the sale of this property
in the amount of $33,779 which is offset against the receivable balance on the face of balance sheet. The balance due under this
Land Contract totaled $84,000 and $0 plus accrued interest in the amount of $2,216 and $0 as of July 31, 2017 and April 30, 2017,
respectively. At July 31, 2017 and April 30 2017 the deferred profit on the sale of this property totaled $33,779 and $0 respectively.
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 fiscal year ended April 30, 2017 the Company recognized a deferred gain on the sale of
this property in the amount of $41,507, which is offset against the receivable balance on the face of balance sheet. The balance
due under this Land Contract totaled $108,280 plus accrued interest in the amount of $4,136 and $1,655 as of July, 2017 April
30, 2017, respectively. At July 31, 2017 and April 30 2017 the deferred profit on the sale of this property totaled $41,507.
On
June 25, 2016 the Company sold 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 fiscal year ended April 30, 2017 the Company recognized a deferred gain on the
sale of this property in the amount of $96, which is offset against the receivable balance on the face of balance sheet. The balance
due under this Land Contract totaled $96,276 plus accrued interest in the amount of $2,157 and $1,567 as of July 31, 2017 and
April 30, 2017, respectively. At July 31, 2017 and April 30 2017 the deferred profit on the sale of this property totaled $96.
During
the year ended April 30, 2017, management determined the amounts due under the land contracts may not be collectible in full and
an allowance for uncollectible accounts was established in the amount of $4,800 for the portion management determined may not
be collectible based on payment history. Notes receivable - land contracts, net of allowance total $229,552 and $158,153 at July
31, 2017 April 30, 2017, respectively. There was no bad debt expense recognized in the quarters ended July 31, 2017 and 2016.
PROGREEN
US, INC.
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note
6. Note Receivable - Related Party
During
the quarter ended July 31, 2017, the Company contributed an additional $265,000 to Inmobiliaria Contel S.R.L.C.V. which is accounted
for as an investment loan. Note Receivable - Related Party totaled $955,500 and $690,500 as of July 31, 2017 and April 30, 2017,
respectively.
Note
7. Reservation Deposits
During
the quarter ended July 31, 2017, the Company’s subsidiary Procon has collected deposits (“Reservation Deposit”)
in the amount of $5,000. Reservation deposits totaled $17,500 and $12,500 at July 31, 2107 and April 30, 2017, respectively.
Note
8. Notes Payable
During
the quarter ended July 31, 2017 the Company paid in full the note payable due to AMREFA in amount of $200,000. The note was non-interest
bearing. The note payable due to AMREFA had a balance outstanding of $0 and $ 200,000 as of July 31, 2017 and April 30, 2017.
The
amount due under the Southfield debt had a balance outstanding of $14,470 and $14,106 as of July 31, 2017 and April 30, 2017,
respectively. In connection with the Southfield debt, during the quarters ended July 31 2017 and 2016, the Company capitalized
interest expense of $364 and $0 respectively. The $364 interest expense recorded during the quarter ended July 31, 2017 was rolled
into principal. Accrued interest totaled $63 and $301 at July 31, 2017 and April 30, 2017, respectively.
Note
9. Note Payable, Related Party
On
July 19, 2017 the Company’s President entered into a one year unsecured 5% Promissory Note (“Credit Line 3”)
whereby the Company may borrow up to $250,000 with interest at a rate of five (5%) percent per annum due on July 19, 2018. During
the quarter ended July 31, 2017 the Company borrowed $59,970 under Credit Line 3. Notes payable related parties includes the amount
due under Credit Line 3 with a balance outstanding of $59,970 and $0 as of July 31, 2017 and April 30, 2017, respectively. The
Company recorded interest expense in connection with Credit Line 3 in the amount of $62 and $0 for the quarters ended July 31,
2017 and 2016, respectively. Accrued interest due under the Credit Line totaled $62 and $0 as of July 31, 2017 and April 30, 2017,
respectively.
Notes
payable related parties includes the amount due under Credit Line 1 with a balance outstanding of $250,000 less the unamortized
discount of $0 and $14,497 as of July 31, 2017 and April 30, 2017, respectively.
Amortization
of the related discount totaled $14,947 and $0 for the quarters ended July 31, 2017 and 2016, respectively. The Company recorded
interest expense in connection with Credit Line 1 in the amount of $3,151 and $0 for the quarters ended July 31, 2017 and 2016,
respectively. Accrued interest due under the Credit Line totaled $8,212 and $5,061 as of July 31, 2017and April 30, 2017, respectively.
During
the quarter ended July 31, 2017, the Company borrowed the remaining $45,000 under Credit Line 2. As a result of the derivatives
calculation an additional discount of $7,590 was recorded in the quarter end July 31, 2017. Notes payable related parties includes
the amount due under Credit Line 2, with a balance outstanding of $250,000 and $205,000, less the unamortized discount of $34,304
and $43,058 as of July 31, 2017 and April 30, 2017, respectively.
Amortization
of the related discount totaled $16,344 and $0 for the quarters ended July 31, 2017 and 2016, respectively. The Company recorded
interest expense in connection with Credit Line 2 in the amount of $2,725 and $0 for the quarters ended July 31, 2017 and 2016,
respectively. Accrued interest due under the Credit Line totaled $4,306 and $1,581 as of July 31, 2017and April 30, 2017, respectively.
PROGREEN
US, INC.
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Also,
in connection with Credit Line 1, the Company issued the President common stock purchase warrants. The number of warrant shares
totals 2,500,000 as of July 31, 2017 and April 30, 2017. The warrants have a five year term. See Notes 11 and 12.
In
connection with Credit Line 2, 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 quarter ended July 31, 2017 the remaining 450,000
warrants were issued in three 150,000 increments between July 5, 2017 and July13, 2017, resulting in a total number of warrant
shares of 2,500,000 and 2,050,000 as of July 31, 2017 and April 30, 2017. The warrants have a five year term. See Notes 11 and
12.
Note
10. Note Payable to Bank of Ann Arbor
The
note payable had a balance outstanding of $ 314,107 and $450,258 as of July 31, 2017 and April 30, 2017, respectively and the
Company recorded interest expense in connection with this note payable in the amount of $7,005 and $2,520 for the quarters ended
July 31, 2017 and 2016, respectively. The change in the outstanding balance is attributable to payments of $136,426 and $275 accrued
interest which was rolled into principal. Accrued interest due under the note payable totaled $0 and $1,953 as of July 31, 2017
and April 30, 2017, respectively.
Principal
payment requirements on the notes payable to Bank of Ann Arbor (acquired Bank of Birmingham in July 2017) are as follows:
2018
|
|
|
$
|
18,013
|
|
2019
|
|
|
|
25,330
|
|
2020
|
|
|
|
26,851
|
|
2021
|
|
|
|
243,913
|
|
Thereafter
|
|
|
|
-
|
|
Total
|
|
|
$
|
314,107
|
|
Note
11. 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.
Financial
Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820,
Fair Value
Measurements and Disclosures
, requires disclosure of the fair value of financial instruments held by the Company. FASB ASC
Topic 825,
Financial Instruments
, defines fair value, and establishes a three-level valuation hierarchy for disclosures
of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the
balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of
their fair values because of the short period of time between the origination of such instruments and their expected realization
and their current market rate of interest.
The
three levels of valuation hierarchy 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.
|
The
Company held certain financial instruments that are measured at fair value on a recurring basis. These consisted of convertible
debt totaling $89,880 and $105,000 at July 31, 2017 and April 30, 2017 respectively, with a derivative liability totaling $288,426
(including 13,000,000 stock warrants) and $361,742 (including 10,550,000 stock warrants) at July 31, 2017 and April 30, 2017,
respectively, which are categorized as Level 3. The related gain on derivatives totaled $114,628 and $0 for the quarters ended
July 31, 2017 and 2016, respectively.
PROGREEN
US, INC.
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note
12. Derivative Liabilities
During
the quarter ended July 31, 2017 the Company identified conversion features embedded within its convertible debt. See Note 13.
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 (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 Company’s derivative liabilities at July 31, 2017 is as follows:
April 30, 2017, balance
|
|
$
|
361,742
|
|
Discount on debt
|
|
|
41,312
|
|
Fair value mark to market adjustment
|
|
|
(114,628
|
)
|
Derivative liabilities, balance
|
|
$
|
288,426
|
|
The
fair values at the commitment dates and re-measurement dates for the convertible debt and warrants treated as derivative liabilities
are based upon the following estimates and assumptions made by management for the three months ended July 31, 2017.
|
●
|
The
stock prices ranged from
$0.0180
to
0.0169
(7/31/17) in this period would fluctuate with the Company projected
volatility;
|
|
●
|
An
event of default for the Convertible Note would occur
0%
of the time, increasing
0%
per month to a maximum of
0
%
;
|
|
●
|
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
114%
and
287% to 291%
.
|
|
●
|
Default
at maturity would occur 100% of the time for the Hoppel Notes and they would convert at a percentage of market.
|
|
●
|
The
risk–free rates were based on the remaining term of the instrument and ranged from
0.68% to 1.60%.
|
Note
13. Financing Agreement and Convertible Debenture
Vista
Capital Investments LLC Convertible Note
On
May 3, 2017, the Company issued an 8% Fixed Rate Convertible Debenture in the principal amount of $110,000, with an Original Issue
Discount of $10,000, to Vista Capital Investments LLC (“Vista Capital Convertible Note”). This convertible note is
due and payable on November 29, 2017, plus interest on the unpaid principal balance at a rate of 8% per annum. The Holder shall
have the right, in its sole and absolute discretion, as of the date which is one hundred and eighty days following the Closing
Date (May 3, 2017), to convert all or any part of the outstanding amount due under this Note into fully paid and nonassessable
shares of Common Stock. The conversion price shall equal $.035.
PROGREEN
US, INC.
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The
Company may prepay the amounts outstanding to the holder at any time up to the 180th day (the “Prepayment Date”) following
the issue date of this note by making a payment to the note holder of an amount in cash equal i) if the redemption is prior to
the 90th day this Note is in effect (including the 90th day), then for an amount equal to 105% of the unpaid principal amount
of this Note along with any interest that has accrued during that period; (ii) if the redemption is on the 91st day this
Note is in effect, up to and including the 120th day this Note is in effect, then for an amount equal to 110% of the unpaid principal
amount of this Note along with any accrued interest; (iii) if the redemption is on the 121st day this Note is in effect,
up to and including the 150th day this Note is in effect, then for an amount equal to 115% of the unpaid principal amount of this
Note along with any accrued interest, ; (iv) if the redemption is on the 151st day this Note is in effect, up to and including
the 151th day this Note is in effect, then for an amount equal to 120% of the unpaid principal amount of this Note along with
any accrued interest.
During
the quarters ended July 31, 2017 and 2016 the Company recognized interest expense in the amount of $4,238 and $0 relating to the
amortization of the original issue discount. The unamortized balance of original issue discount totaled $5,762 and $0 at July
31, 2017 and April 30, 2017, respectively. As a result of the derivatives calculation an additional discount of $33,722 was recorded
in the quarter end July 31, 2017. The unamortized balance of the discount totaled $19,430 and $0 at July 31, 2017 and April 30,
2017, respectively
During
the quarters ended July 31, 2017 and 2016 the Company recognized interest expense in the amount of $14,292 and $0 relating to
the discount. The Company recorded interest expense in connection with the Vista Capital Convertible Note in the amount of $3,738
and $0, for the quarters ended July 31, 2017 and 2016, respectively. Accrued interest due under the Vista Capital Convertible
Note totaled $3,738 and $0 as of July 31, 2017 and April 30, 2017, respectively.
In
connection with Vista Capital Convertible Note 1, the Company granted Vista Capital Investments LLC 2,000,000 Warrant Shares of
the Company’s common stock, par value $0.0001 per share. The warrant entitles the holder to purchase up to 2,000,000 shares
of common stock at an exercise price of $0.05. The warrant expires on May 3, 2022. See Notes 11 and 12.
JSJ
Investments Inc.
On
May 10, 2017, the Company issued a convertible promissory note in the principal amount of $113,000 to JSJ Investments Inc. (“JSJ
Convertible Note”). This convertible note is due and payable on February 10, 2018 plus interest on the unpaid principal
balance at a rate of 12% per annum. The Holder shall have the right, in its sole and absolute discretion, as of the date which
is one hundred and eighty days following the Closing Date (On May 10, 2017), to convert all or any part of the outstanding amount
due under this Note into fully paid and nonassessable shares of Common Stock. The conversion price shall equal 52% discount to
the lowest trading price during the previous fifteen trading days to the date of Conversion Notice.
The
Company may pay JSJ Convertible Note in full,
together with
any and all accrued and
unpaid
interest,
plus
any
applicable
pre-payment premium at any time
on or
prior to
the
date
which
occurs
180
days
after
the May 10, 2017
(the
“Prepayment Date”).
In
the
event
the Note
is
not
prepaid in full
on or
before
the
Prepayment
Date,
it shall
be
deemed a “Pre-Payment Default” hereunder.
Until
the Ninetieth
(90th)
day after
the
Issuance
Date (May 10, 2017)
the
Company may pay
the
principal
at a cash redemption premium
of 120%,
in
addition
to
outstanding
interest,
without
the
Holder’s
consent;
from
the
91st day to
the
Prepayment
Date,
the
Company may pay
the
principal
at
a cash redemption premium
of 125%,
in
addition
to
outstanding
interest,
without
the
Holder’s
consent.
After
the
Prepayment
Date up
to
the
Maturity
Date
this Note
shall
have
a cash redemption
premium
of
135%
of
the
then
outstanding
principal
amount
of
the
Note, plus
accrued interest and Default Interest, if any,
which
may
only
be paid by
the
Company
upon
Holder’s prior written
consent. At
any time
on
or
after
the
Maturity
Date,
the
Company may repay
the
then
outstanding
principal
plus
accrued interest
and Default Interest (as defined in the JSJ Convertible Note).
PROGREEN
US, INC.
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In
connection with the JSJ Convertible Note the Company paid $7,000 in debt issuance costs which are being amortized to interest
expense using the effective interest method. During quarters ended July 31, 2017 and 2016, the Company recognized interest expense
in the amount of $2,080 and $0, respectively, relating to the amortization of the debt issuance costs. The unamortized balance
of debt issuance costs totaled $4,920 and $0 at July 31, 2017 and April 30, 2017, respectively. The Company recorded interest
expense in connection with the JSJ Convertible Note in the amount of $3,116 and $0 for the quarters ended July 31, 2017 and 2016,
respectively. Accrued interest due under JSJ Convertible Note totaled $3,116 and $0 as of July 31, 2017 and April 30, 2017, respectively.
Power
Up Lending Group Ltd
On
May 15, 2017, the Company issued a second convertible promissory note in the amount of principal amount of $46,500 to Power Up
Lending Group Ltd (“Power Up Convertible Note # 2”). This convertible note is due and payable on February 15, 2018
plus interest on the unpaid principal balance at a rate of 12% per annum.
The
Holder shall have the right from time to time, at any time during the period beginning on the date which is one hundred eighty
(180) days following the date of the Note, to convert all or any part of the outstanding and unpaid principal amount of this Note
into fully paid and nonassessable shares of Common Stock. The conversion price shall equal 58% multiplied by the average of the
lowest two (2) Trading Prices for the Common Stock during the fifteen (15) Trading Day period ending on the latest complete Trading
Day prior to the Conversion Date.
The
Company may prepay the amounts outstanding to the holder at any time up to the 180th day (the “Prepayment Date”) following
the issue date of this note by making a payment to the note holder of an amount in cash equal to 120% (for the first 150 days)
and to 125% (between 151 -180 days). After 180 days from the Effective Date this Note may not be prepaid.
In
connection with the Power Up Convertible Note 2 paid $1,500 in debt issuance costs which are being amortized to interest expense
using the effective interest method. During quarters ended July 31, 2017 and 2016, the Company recognized interest expense in
the amount of $418 and $0, respectively, relating to the amortization of the debt issuance costs. The unamortized balance of debt
issuance costs totaled $1,082 and $0 at July 31, 2017 and April 30, 2017, respectively. The Company recorded interest expense
in connection with the Power Up Convertible Note # 2 in the amount of $1,232 and $0 for the quarters ended July 31, 2017 and 2016,
respectively. Accrued interest due under Power Up Convertible Note #2 totaled $1,232 and $0 as of July 31, 2017 and April 30,
2017, respectively.
In
connection with the Power Up Convertible Note 1 (dated February 21, 2017) the Company paid $3,500 in debt issuance costs which
are being amortized to interest expense using the effective interest method. During quarters ended July 31 2017 and 2016 the Company
recognized interest expense in the amount of amount of $1,143 and $0 relating to the amortization of the debt issuance costs,
respectively. The unamortized balance of debt issuance costs totaled $1,512 and $2,655 at July 31 2017 and April 30, 2017. The
balance of the convertible note was $103,500 at July 31, 2017 and April 30, 2017, respectively.
The
Company recorded interest expense in connection with the Power Up Convertible Note 1 in the amount of $3,220 and $0 for the quarters
ended July 31, 2017 and 2016, respectively. Accrued interest due under the Power Up Convertible Note totaled $5,600 and $2,380
as of July 31, 2017 and April 30, 2017, respectively.
Hoppel
Convertible Note
On
July 17, 2017 the Company entered into a Settlement Agreement with Mr. Luca Hoppel to settle all claims between them with respect
to the Hoppel Convertible Note 2. The terms of the Settlement Agreement are as follows: In exchange for Mr. Hoppel’s settlement
and release of the Settled Claims, the Company was required to make three equal cash payments of $44,940. The first cash payment
was due on or before August 1st, 2017. The second cash payment was be due on or before August 10th 2017 and the third and final
cash payment was due on or before August 20th, 2017. Upon the issuance of 926,000 shares and payment of $134,820, the Note would
be considered fully repaid.
On
July 17, 2017 the Company issued 926,000 shares of Common Stock at an issuance price of $0.0192 per Common Share, to Lucas Hopple
under the terms of the Settlement Agreement for a total fair value of $17,779. The $17,779 was recognized as loss on settlement
of liabilities. See Note 14. During the quarter ended July 31, 2017 the Company paid the first cash payment of $42,000 (plus accrued
interest in the amount of $2,940) due under the Settlement Agreement. See Note 19. Subsequent to this payment, the Company increased
the balance due of the convertible note to $89,880, which represents the balance of the remaining two payments. A loss of $26,880
was recognized for the increase in principal balance. The Company recorded a total loss of $44,659 as a loss on the settlement
of liabilities relating to this transaction.
PROGREEN
US, INC.
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
A
total of $105,000 debt discount was recorded on Hoppel Convertible Note 2 including original issuance discount of $5,000, stock
issuance discount of $12,408 and derivative discount of $87,592. See Notes 11 and 12. The outstanding Hoppel Convertible Note
2 balance totaled $58,373 and $57,739, net of the unamortized discount of $31,507 and $47,261 at July 31, 2017 and April 30, 2017,
respectively. Amortization of the related discounts totaled $15,754 and $0 for the quarters ended July 31 2017 and 2016, respectively.
Accrued
interest due under the Hoppel Convertible Note2 totaled $4,900 and $7,350 at July 31, 2017 and April 30, 2017 respectively.
The
Company recorded interest expense in connection with the Hoppel convertible note of $2,940 and 0 for the quarters ended July 31,
2017 and 2016, respectively.
EMA
Financial, LLC Convertible Note
On
April 3, 2017, the Company issued a convertible promissory note in the principal amount of $113,000 to EMA Financial, LLC (“EMA
Convertible Note”). This convertible note is due and payable on April 3, 2018 plus interest on the unpaid principal balance
at a rate of 10% per annum.
During quarters ended July 31 2017 and 2016
the Company recognized interest expense in the amount of amount of $1,696 and $0 relating to the amortization of the original
issuance discount in connection with the EMA Convertible Note. The unamortized balance of original issuance totaled $4,582 and
$6,278 at July 31, 2017 and April 30, 2017, respectively. The Company recorded interest expense in connection with the EMA Convertible
Note in the amount of $2,821 and $0 for the quarters ended July 31 2017 and 2016, respectively. Accrued interest due under the
EMA Convertible Note totaled $3,689 and $868 as of July 31, 2017 and April 30, 2017, respectively.
The
principal balance of the convertible note was $113,000 at July 31, 2017 and April 30, 2017.
Bellridge
Capital, LP
On
March 15, 2017, the Company issued a convertible promissory note in the amount of principal amount of $105,000 to Bellridge Capital,
LP (“Bellridge Convertible Note”) including an OID of $5,000 This convertible note is due and payable on March 15,
2018 plus interest on the unpaid principal balance at a rate of 10% per annum.
During
quarters ended July 31 2017 and 2016 the Company recognized interest expense in the amount of amount of $1,288 and $0 relating
to the amortization of the original issuance discount in connection with the Bellridge Convertible Note. The unamortized balance
of original issuance totaled $3,068 and $4,356 at July 31, 2017 and April 30, 2017, respectively. The Company recorded interest
expense in connection with the Bellridge Convertible Note in the amount of $2,668 and $0 for the quarters ended July 31 2017 and
2016, respectively. Accrued interest due under the Bellridge Convertible Note totaled $4,002 and $1,334 as of July 31, 2017 and
April 30, 2017, respectively. See Note
19
.
The
principal balance of the convertible promissory note was $105,000 at July 31, 2017 and April 30, 2017.
Silo
Equity Partners Venture Fund LLC Convertible Note
On
March 22, 2017, the Company issued a convertible promissory note in the amount of principal amount of $100,000 to Silo Equity
Partners Venture Fund LLC (“Silo Convertible Note”). This convertible note is due and payable on September 22, 2017
plus interest on the unpaid principal balance at a rate of 8% per annum.
The
Company recorded interest expense in connection with the Silo Convertible Note in the amount of $ 2,024 and $0 for the quarters
ended July 31 2017 and 2016, respectively. Accrued interest due under the Silo Convertible Note totaled $2,882 and $858 as of
July 31, 2017 and April 30, 2017, respectively.
PROGREEN
US, INC.
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The
principal balance of the convertible promissory note was $100,000 at July 31, 2017 and April 30, 2017.
Tangiers
Global, LLC Convertible Note
On
March 21, 2017, the Company issued a convertible promissory note in the amount of principal amount of $105,000 to Tangiers Global,
LLC (“Tangiers Convertible Note”) including an Original Issue Discount (“OID”) of $5,000. This convertible
note is due and payable on September 21, 2018 plus interest on the unpaid principal balance at a rate of 7% per annum.
During
quarters ended July 31 2017 and 2016 the Company recognized interest expense in the amount of amount of $839 and $0 relating to
the amortization of the original issuance discount in connection with the Tangiers Convertible Note. The unamortized balance of
original issuance totaled $3,795 and $4,634 at July 31, 2017 and April 30, 2017, respectively. The Company recorded interest expense
in connection with the Tangiers Convertible Note in the amount of $1,835 and $0 for the quarters ended July 31 2017 and 2016,
respectively. Accrued interest due under the Tangiers Convertible Note totaled $2,662 and $827 as of July 31, 2017 and April 30,
2017, respectively.
The
principal balance of the convertible promissory note was $105,000 at July 31, 2017 and April 30, 2017.
Note
14. Common Stock
On
July 17, 2017 the Company issued 926,000 shares of Common Stock in connection with the Hoppel Convertible Note 2. These shares
were issued in accordance with securities purchase agreement executed as part of the Hopple convertible note (See Note 13). As
part of the Hopple convertible note, 926,000 shares were originally issued. Additionally, if the note was not repaid and price
of the common shares falls below $0.0125, the Company was obligated to issue and additional 926,000 shares.
Note
15. Series A Convertible Preferred Stock
As
of July 31 2017 and April 30, 2017, 967,031 shares of Series A Preferred Stock were issued and outstanding. There was no activity
relating to the Company’s Shares of Series A Preferred Stock during the quarter ended July 31, 2017.
Note
16. Series B Convertible Redeemable Preferred Stock
As
of July 31, 2017 and April 30, 2017, 8,534,625 shares of Series B Preferred Stock were issued and outstanding.
During
the Quarter ended July 31, 2017, the Company paid no cash dividends Series B and accrued an additional dividend payable of $23,898.
Dividend payable totaled $37,665 and $13,767 as of July 31, 2017 and April 30, 2017, respectively.
PROGREEN
US, INC.
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note
17. Employee Stock Option Plan
Restricted
Stock Units
For
the three month period ended July 31, 2017 compensation expense relating to RSUs was recorded as follows:
|
|
July
31, 2017
|
|
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, 2017 through July 31, 2017
Compensation Expense
|
|
$
|
1,000
|
|
|
|
|
|
|
Total compensation
expense
|
|
$
|
1,000
|
|
Note
18. Warrants
For
the three months ended July 31, 2017, 450,000 warrants were issued, and none were exercised or forfeited. The Company’s
outstanding and exercisable warrants as of July 31, 2017 are presented below:
|
|
Number
Outstanding
|
|
|
Weighted
Average Exercise
Price
|
|
|
Contractual
Life in Years
|
|
|
Intrinsic
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants outstanding as of April 30, 2017
|
|
|
13,550,000
|
|
|
$
|
0.03
|
|
|
|
4.53
|
|
|
|
|
|
Warrants exercisable as of April 30, 2017
|
|
|
11,550,000
|
|
|
$
|
0.03
|
|
|
|
4.49
|
|
|
$
|
16,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants Granted
|
|
|
2,450,000
|
|
|
|
0.05
|
|
|
|
|
|
|
|
|
|
Warrants Forfeited
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Warrants Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants Outstanding as of July 31, 2017
|
|
|
16,000,000
|
|
|
$
|
0.03
|
|
|
|
4.36
|
|
|
|
|
|
Warrants exercisable as of July 31, 2017
|
|
|
14,000,000
|
|
|
$
|
0.04
|
|
|
|
4.34
|
|
|
$
|
5,900
|
|
Note
19. Subsequent Events
In connection with the Hoppel Convertible Note
2, on August 21, 2017, the Company entered into an amendment of the note and securities purchase agreement where the maturity date
was extended to September 30, 2017, and which allows conversion of the note regardless if an event of default has occurred. During
August 2017, the effective conversion price fell below $0.01. As such in accordance with provisions of the note, the conversion
price was redefined to equal 50% of the average of the three daily lowest trades occurring during the fifteen consecutive trading
days immediately preceding the applicable conversion date and a sub-penny penalty of $5,000 was incurred.
On August 10, 2017, the Company paid the second
cash payment of $42,000 (plus accrued interest in the amount of $2,940) due under the Settlement Agreement. On August 23, August
28, and August 31, 2017, $13,650, $15,750 and $11,552, respectively, worth of common stock was converted for a total of 6,700,381
shares. (See Note 13). With the cash payments and conversions into common shares, this note was paid off.
On August 22, 2017, the Company made a
cash payment of $61,989 to Power Up Lending Group, Ltd for payment towards Convertible Note 1 (see Note 13). On August 24, August
29 and August 31, 2017, PowerUp Lending Group, Ltd converted $20,000, $20,000 and $20,146, respectively, worth of common stock
for a total of 8,534,554 shares. With the cash payment and conversion into common shares, this note was paid off.
On August 23, 2017, the Company issued to Power
Up Lending Group Ltd. a 12% Fixed Rate Convertible Promissory Note in the principal amount of $78,000 due on May 30, 2018. The
Holder shall have the right from time to time, at any time during the period beginning on the date which is one hundred eighty
(180) days following the date of the Note, to convert all or any part of the outstanding and unpaid principal amount of this Note
into fully paid and nonassessable shares of Common Stock. The conversion price shall equal 58% multiplied by the average of the
lowest two (2) Trading Prices for the Common Stock during the fifteen (15) Trading Day period ending on the latest complete Trading
Day prior to the Conversion Date.
In September 2017, the Company paid $103,000 of the Bellridge Convertible
Note. See Note 13.