NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2018
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. 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, with a new symbol of PGUS.
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. 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, 2018 the
Company owned no investment properties.
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. All assets,
liabilities, revenues and expenses are included in the consolidated financial statements of the Company.
On
February 11, 2016, the Company signed a definitive agreement with Inmobiliaria Contel S.R.L.C.V. (“Contel”) to finance
the first tract of land of approximately 300 acres which is being developed by Contel for agriculture use in Baja California,
Mexico. The Company’s Chief Executive Officer has made personal investments in this project, and has a 49.5% minority partnership
interest in Contel. The Company and its Chief Executive Office have no management or governance authority in Contel. Contel’s
manager is not required to consult with our Chief Executive Officer on any management decisions in the conduct of Contel’s
business.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2018
A
portion of the property acquired by Contel is currently developed for agricultural purposes. The remaining parcels will be developed
for agricultural use or developed as a multi-use property. The Company initially committed to a loan of up to the amount of $350,000
and on February 1, 2017, the Company increased its loan commitment to Contel to up to $1,000,000 from $350,000. On April 18, 2018,
the loan commitment was increased to $1,500,000.
The
Company performed an initial assessment of Contel for consolidation based on the provisions of FASB ASC 810 - Consolidation
(“ASC 810”) for the year ended April 30, 2017. ASC 810 approach is to determine a variable interest entity’s
(“VIE”) primary beneficiary and requires companies to more frequently reassess whether they must consolidate or deconsolidate
VIEs. The accounting standard requires a qualitative, rather than quantitative, analysis to determine the primary beneficiary
of a VIE for consolidation purposes. The primary beneficiary of a VIE is the enterprise that has (a) the power to direct the VIE
activities that most significantly affect the VIE’s economic performance, and (b) the right to receive benefits of the VIE
that could potentially be significant to the VIE or the obligation to absorb losses of the VIE that could potentially be significant
to the VIE. The Company has determined that Contel does have the characteristics of a VIE. ProGreen has no direct ownership in
Contel and no power to direct the activities of Contel, and its relationship to Contel is limited to a loan, secured by land.
As ProGreen has no power over management of Contel, ProGreen is not the primary beneficiary and therefore does not need to consolidate
Contel. The maximum exposure for loss is limited to the outstanding loan balance. During the year ended April 30, 2018, there
were no reconsideration events under ASC 810-10-35-4. As such, the status of Contel did not change as of April 30, 2018.
The Company is entitled a 50% share
of Contel’s profits and losses after all outstanding loan amounts are repaid. See Note 7.
On
March 8, 2016, the Company restructured its working arrangements with AMREFA. The Company entered into an agreement to purchase
AMREFA’s U.S. subsidiary, ARG LLC which was, amended March 16, 2016, which holds real estate properties in Birmingham, Michigan,
that were purchased by AMREFA and which the Company 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 which were issued in the fiscal year ended April 30, 2017. Also acquired
were 14 wholly-owned subsidiaries of ARG LLC that holds ownership of the real estate properties: 21000 Westover LLC, 20210 Westover
LLC, 21112 Evergreen LLC, 21421 Greenview LLC, 21198 Berg LLC, 23270 Helen LLC, Progreen Properties VII LLC, Progreen Properties
XI LLC, Progreen Properties II, LLC, Franklin Pointe Drive LLC, 20351 Lacrosse LLC, Progreen Properties III LLC, 25825 Lahser
Unit Two LLC and 24442 Kinsel LLC. As of April 30, 2018, all properties in Michigan have been sold. See Notes 5 and 6.
On
June 17, 2016, the Company formed Procon Baja JV, S.DE R.L. DE C.V (“Procon”), a subsidiary owned by Progreen (51%)
and Inmobiliaria Contel S.R.L.C.V. (Contel). Procon is managed by a board of Managing Directors consisting of three members, of
which two represent Progreen and one represents Contel. On January 23, 2017, Procon entered into a definitive purchase agreement
for, and has taken possession of, a tract of land situated near the town of El Rosario in Baja California, Mexico. The purchased
land was formerly owned by a relative of Contel’s majority shareholder. The land, planned for residential real estate development,
is bordering the Pacific Ocean and covers a total area of approximately 2,016 ha (5,000 acres) with 4.5 miles of ocean front.
The execution of the deed transferring the 5,000-acre oceanfront property to Procon was completed on March 15, 2017, and a Master
Plan for all of this land is being created for a resort-type retirement and vacation community with the name “Cielo Mar”.
In connection with this purchase the Company has recorded land in the amount of $500,000 (for which no interest is due), paid
$50,000 during each of the years ended April 30, 2017 and 2018 and recorded a liability under land contract for the balance
due in the amount of $400,000 as of April 30, 2018. See Notes 3 and 10.
On
January 15, 2017 the Company entered into a loan agreement with its 51% owned subsidiary Procon, whereby the Company has agreed
it will grant a loan to Procon in as much amount as is needed to accomplish Procon’s objectives. Procon will repay all borrowings
received under the loan once Procon has sufficient income. The loan bears interest at a 6% per annum from the date of each borrowing
until repaid. As of the April 30, 2018 the Company loaned Procon a total of $255,000 to fund operations. The amount due under
the loan and accrued interest payable totaled $255,000 and $9,051, respectively, at April 30, 2018. 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. As Procon is owned by 51 % by Progreen, Procon is included in the Company’s consolidated financial statements
for the year ended April 30, 2018.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2018
On
June 8, 2017 Cielo Mar Reservations LLC (“Cielomar”) was formed as a wholly owned subsidiary of the Company which
manages the Company owned properties. All assets, liabilities, revenues and expenses are included in the consolidated financial
statements of the Company.
ProGreen Farms US LLC (“ProGreen
Farms”) was formed on December 28, 2017 to provide administrative assistance to Contel. The responsibilities of ProGreen
Farms is limited to the coordination and billing of shipments of Contel’s produce within the United States. ProGreen Farms
does not hold any management authority over Contel.
We
moved our offices from Oakland County, Michigan, to San Diego, California, proximate to our agricultural and development projects
in Baja California, on which our current business operations are focused.
SIGNIFICANT
ACCOUNTING POLICIES
Basis
of Presentation
GOING
CONCERN
The
Company’s financial statements for the year ended April 30, 2018, 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. 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.
While
the Company is attempting to establish an ongoing source of revenues sufficient to cover its operating costs and allow it to continue
as a going concern, the Company’s cash position may not be adequate to support the Company’s daily operations. Management
intends to raise additional funds by seeking equity and/or debt financing; however there can be no assurances that it will be
successful in those efforts. The ability of the Company to continue as a going concern is dependent upon the Company’s ability
to obtain financing, further implement its business plan, and generate revenues.
As
it is the first year for the agriculture operation and with the Cielo Mar project under development, it is impossible to identify
any trends in the Company’s business prospects. Accordingly, there can be no assurance that we will be able to pay obligations
which we may incur in the future.
The
Company’s only sources of additional funds to meet continuing operating expenses, fund additional development and fund additional
working capital are through the sale of securities and/or debt instruments. We are actively seeking additional debt or equity
financing, but no assurances can be given that such financing will be obtained or what the terms thereof will be. The Company
may need to discontinue a portion or all of our operations if the Company is unsuccessful in generating positive cash flow or
financing for the Company’s operations through the issuance of securities.
In
the current fiscal year, the Company used approximately $887,000 of cash to support its operations and such cash needs
are expected to continue in the upcoming year. As of April 30, 2018, the Company has approximately $106,000 in cash.
During
the year ended April 30, 2018 the Company financed its operations through proceeds from related party advances, proceeds from
issuance of common stock, proceeds from notes payable and issuance of convertible debt. Also, during the year ended April 30,
2018, the Company sold the remaining properties acquired in its fiscal 2016 purchase of ARG.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2018
Basis
of consolidation
The
consolidated financial statements include the accounts and records of the Company and its wholly-owned subsidiaries: Cielo Mar
Reservations LLC, ProGreen Farms US LLC, ProGreen Realty, Progreen Properties Management, ProGreen Construction, ARG, LLC,
21000 Westover LLC, 20210 Westover LLC, 21112 Evergreen LLC, 21421 Greenview LLC, 21198 Berg LLC, 23270 Helen LLC, Progreen Properties
VII LLC, Progreen Properties XI LLC, Progreen Properties II, LLC, Franklin Pointe Drive LLC, 20351 Lacrosse LLC, Progreen Properties
III LLC, 25825 Lahser Unit Two LLC and 24442 Kinsel LLC and its 51% controlling interest in Procon Baja JV, S.DE.R.L. DE
C.V.. 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.
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.
Rental
property and property under development
The
fair value of rental property and property under development acquired as part of business combination is based on estimated
selling prices of the properties, net of estimated selling costs. See Note 6.
Land
under Development
Land
under development is recorded at cost.
Cash
Cash
consists solely of cash on deposit with financial institutions.
Allowance
for doubtful accounts
An
allowance for doubtful accounts is management’s best estimate of the probable credit losses in the existing 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. An allowance for doubtful accounts in the amount of $37,960 and $7,395 has been recorded at April 30, 2018 and 2017.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2018
Notes
Receivable - Land Contracts
The
notes receivable 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. An allowance for doubtful accounts in the amount of $221,080 and $4,800 has
been recorded at April 30, 2018 and 2017.
Notes
receivable are considered impaired when, based on current information and events, it is probable that the Company will not be
able to collect all principal and interest amounts due according to the contractual terms. The Company assesses the credit quality
of the notes receivable and adequacy of notes receivable loss reserves on a quarterly basis or more frequently as necessary. Significant
judgment of the Company is required in this analysis. The Company considers the estimated net recoverable value of the notes receivable
as well as other factors, including but not limited to the fair value of any collateral, the amount and the status of any senior
debt, the quality and financial condition of the borrower and the competitive situation of the area where the underlying collateral
is located. Because this determination is based on projections of future economic events, which are inherently subjective, the
amount ultimately realized may differ materially from the carrying value as of the balance sheet date.
If
upon completion of the assessment, the estimated fair value of the underlying collateral is less than the net carrying value of
the notes receivable, notes receivable loss reserve is recorded with a corresponding charge to provision for notes receivable
losses.
The
notes receivable loss reserve for each note is maintained at a level that is determined to be adequate by management to absorb
probable losses.
Income
recognition is suspended for a note receivable when full recovery, according to the contractual terms, of income and principal
becomes doubtful. When the ultimate collectability of the principal of an impaired note receivable is in doubt, all payments are
applied to principal under the cost recovery method.
When
the ultimate collectability of the principal of an impaired note receivable is not in doubt, contractual interest is recorded
as interest income when received, under the cash basis method until an accrual is resumed when the note receivable becomes contractually
current and performance is demonstrated to be resumed. Interest accrued and not collected will be reversed against interest income.
A note receivable is written off when it is no longer realizable and/or legally discharged. As of April 30, 2018 and 2017, the
Company had four and two impaired notes receivable, respectively. See Note 5.
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 2017 relating to its acquisition of ARG and determined
that it was fully impaired. Refer to Note 6.
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
|
|
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2018
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 were leased under operating leases. Currently, as the original lease terms have expired, real estate properties
are being leased on a month-to-month basis. Rental income from these leases is recognized on a straight-line basis over the term
of each lease.
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. In in connection with the sale of three and
two properties, which the Company financed, at April 30 2018 and 2017 deferred profit on such sales totaled $64,374 and
$41,603, respectively, which are offset against the notes receivable balance on the face of balance sheets. See Note 5.
Advertising
costs
Advertising
costs are expensed as incurred. Total advertising expenditures for the years ended April 30, 2018 and 2017 were approximately
$190 and $2,900, 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.
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.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2018
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 14 and 15.
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.
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 11,550,000 warrants were not considered
in the calculation of EPS as the effect would be anti-dilutive on April 30, 2018 and 2017, respectively.
Based on the conversion prices in effect,
if all convertible debt were converted into equity (including those that were not yet convertible as of April 30 ,2018), the potentially
dilutive effects of 87,051,492 and 11,652,550 due to convertible debt were not considered in the calculation of EPS as
the effect would be anti-dilutive on April 30, 2018 and 2017, respectively.
Based
on the conversion prices in effect, the potentially dilutive effects of 293,039,697 and 290,399,700 due to convertible preferred
stock series A were not considered in the calculation of EPS as the effect would be anti-dilutive on April 30, 2018 and 2017.
Based
on the conversion prices in effect, the potentially dilutive effects of 59,756,142 and 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 April 30, 2018 and 2017,
respectively.
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 505-50, “Equity Based Payments to
Non-Employees” (“ASC 505-50”), 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.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2018
Reclassifications
Certain
amounts in previous periods have been reclassified to conform to 2018 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
July 2017,
the Financial Accounting Standards Board (“FASB”) issued ASU 2017-11
, Earnings Per Share (Topic
260) Distinguishing Liabilities from Equity (Topic 480) Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial
Instruments with Down Round Features, II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments
of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception.
(the “ASU”).
Part I of this ASU changes the classification analysis of certain equity-linked financial instruments (or embedded features) with
down round features and clarifies existing disclosure requirements. Part II does not have an accounting effect. The ASU is effective
for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018 with early adoption permitted.
The
Company adopted ASU 2017-11 for the year ended April 30, 2018. Due to the adoption, the warrants issued to Vista Capital were
not accounted for as a derivative unless tainted otherwise. See Note 15 and Note 16. There was no activities for prior years which
fall under this guidance. As such, early adoption has no effect on prior years.
In
February 2016, the FASB issued ASU 2016-02, Leases, which will amend current lease accounting to require lessees to recognize
(i) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted
basis, and (ii) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of,
a specified asset for the lease term. ASU 2016-02 does not significantly change lease accounting requirements applicable to lessors;
however, certain changes were made to align, where necessary, lessor accounting with the lessee accounting model. This standard
will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The
Company is currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations,
cash flows or financial condition.
In April 2016, the FASB issued ASU 2016–10
Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing. The amendments in this Update
do not change the core principle of the guidance in Topic 606. Rather, the amendments in this Update clarify the following two
aspects of Topic 606: identifying performance obligations and the licensing implementation guidance, while retaining the related
principles for those areas. Topic 606 includes implementation guidance on (a) contracts with customers to transfer goods and services
in exchange for consideration and (b) determining whether an entity’s promise to grant a license provides a customer with
either a right to use the entity’s intellectual property (which is satisfied at a point in time) or a right to access the
entity’s intellectual property (which is satisfied over time). The amendments in this Update are intended render more detailed
implementation guidance with the expectation to reduce the degree of judgment necessary to comply with Topic 606. The Company
adopted Topic 606 as of May 1, 2018 as required by ASU 2016-10. The Company determined the impact of ASU 2016-10 was immaterial
as the Company has not generated revenue subsequent to April 30, 2018.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2018
Management
has considered all recent accounting pronouncements issued since and their potential effect on our financial statements. The Company’s
management believes that these recent pronouncements will not have a material effect on the Company’s consolidated financial
statements.
Note
2. Rental Properties and Property Under Development
Rental
properties and property under development at April 30, 2018 and 2017 are summarized as follows:
|
|
April
30, 2018
|
|
|
April
30, 2017
|
|
Rental
Properties
|
|
$
|
-
|
|
|
$
|
764,454
|
|
Less:
accumulated depreciation
|
|
|
-
|
|
|
|
(32,431
|
)
|
Rental
properties, net of accumulated depreciation
|
|
|
-
|
|
|
|
732,023
|
|
Depreciation
expense for the years ended April 30, 2018 and 2017 totaled $15,404 and $29,790, respectively.
The
Company sold all of its properties as of April 30, 2018 and owned ten rental properties as of April 30, 2017.
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 April 30, 2018 and 2017. During the year ended April 30, 2017,
the Company through its subsidiary Procon, purchased the first tract of land for residential real estate development. The purchased
land was formerly owned by a relative of Contel’s majority shareholder. Under the terms of the definitive purchase agreement,
the Company has recorded land at cost in the amount of $500,000, paid $50,000 during each of the years ended April 30, 2018
and 2017 of the purchase price and recorded a liability under land contract for the balance due in the amount of $400,000
and $450,000 as of April 30, 2018 and 2017. See Notes 1 and 10. No interest is due under the terms of the definitive purchase
agreement. The payments are due as follows:
Year
Ending
|
|
April
30,
|
|
2019
|
|
$
|
100,000
|
|
2020
|
|
|
100,000
|
|
2021
|
|
|
100,000
|
|
2022
|
|
|
100,000
|
|
|
|
$
|
400,000
|
|
Note
4. Accounts Receivable
Accounts
receivable totaled $0 and $4,850 at April 30, 2018 and 2017, respectively and is comprised of amounts rent due from tenants in
the amount of $37,960 and $12,245 at April 30, 2018 and 2017, respectively. During the year ended April 30, 2018 the Company sold
all its remaining properties. During the years ended April 30, 2018 and 2017, management determined the rent due from all tenants
and one tenant may not be collectible and an allowance for uncollectible accounts receivable was established in the amount of
$37,960 and $7,395, respectively, resulting in net accounts receivable of $0 and $4,850 at April 30, 2018 and 2017, respectively.
Bad debt expense in the amount of $11,646 and $7,395 is included in the accompanying Consolidated Statements of Operations
for the years ended April 30, 2018 and 2017, respectively.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2018
Note
5. Notes Receivable - Land Contracts and Gain on Sale of Properties and Property under Development
On
April 6, 2018 the Company sold one of its rental properties located at 34780 West Mile Road with a selling price of $90,000. Proceeds
net of closing costs totaled $80,906) in the year ended April 30, 2018 and the Company recognized a loss on the sale of this
property in the amount of $24,131.
On
March 8, 2018 the Company sold one of its rental properties located at 21198 Berg with a selling price of $65,000. The Company
received a deposit of $13,000 and issued a secured Land Contract to the buyer, for the balance owed in the amount of $52,000,
to be paid in monthly installments, including principal and interest, beginning April 1 2018 through March 7, 2021. The
Land Contract bears interest at 8% per annum. Proceeds net of closing costs totaled $10,354. In the year ended April 30,
2018 the Company recognized a deferred gain on the sale of this property in the amount of $22,631 which is offset against the
receivable balance on the face of balance sheet. The balance due under this Land Contract totaled $52,000 and $0 plus accrued
interest in the amount of $353 and $0 as of April 30, 2018 and 2017, respectively. At April 30, 2018 and 2017 the deferred profit
on the sale of this property totaled $22,632.
On
February 1, 2018 the Company sold one of its rental properties located at 21112 Evergreen with a selling price of $45,000. Proceeds
net of closing costs $40,311 in the year ended April 30, 2018 and the Company recognized a loss on the sale of this property
in the amount of $52,894.
On
January 8, 2018 the Company sold one of its rental properties located at 7648 Woodview with a selling price of $83,000. Proceeds
net of closing costs $75,995 in the year ended April 30, 2018 and the Company recognized a loss on the sale of this property
in the amount of $25,372.
On
December 12, 2017 the Company sold one of its rental properties located at 27971 Rollcrest Road with a selling price of $75,000.
Proceeds net of closing costs $69,824 in the year ended April 30, 2018 and the Company recognized a gain on the sale of
this property in the amount of $3,607.
On
December 8, 2017 the Company sold one of its rental properties located at 25825 Lahser Road with a selling price of $34,000. Proceeds
net of closing costs totaled $30,084 in the year ended April 30, 2018 and the Company recognized a loss on the sale of this
property in the amount of $19,502.
On
July 12, 2017 the Company sold one of its rental properties located at 20351 Lacrosse with a selling price of $126,000. Proceeds
net of closing costs $113,617 in the year ended April 30, 2018 and the Company recognized a gain on the sale of this property
in the amount of $20,621.
On
June 16, 2017 the Company sold one of its rental properties located at 26005 Franklin Pointe-with a selling price of $92,000.
Proceeds net of closing costs totaled $82,597 in year ended April 30, 2018 and the Company recognized a loss on
the sale of this property in the amount of $2,777.
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 secured 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 July 1, 2017 through May 20, 2020. The Land
Contract bears interest at 8% per annum. Proceeds net of closing costs totaled $1,475. In the in the year ended April 30,
2018 the Company recognized a deferred gain on the sale of this property in the amount of $15,297 which is offset against the
receivable balance on the face of balance sheet. The balance due under this Land Contract totaled $38,836 and $0 plus accrued
interest in the amount of $1,536 and $0 as of April 30, 2018 and 2017, respectively. At April 30, 2018 and 2017 the deferred profit
on the sale of this property totaled $15,297 and $0, respectively.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2018
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 secured 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. Proceeds net of closing costs totaled $666. In the year ended April 30, 2018 the Company
recognized a deferred gain on the sale of this property in the amount of $26,445 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 $5,691 and $0 as of April 30, 2018 and 2017, respectively. At April 30, 2018 and 2017 the deferred profit on the sale of this
property totaled $26,445 and $0 respectively.
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 secured 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 balance sheet. The balance due under this Land Contract totaled $94,306 and $ 96,276 plus accrued interest in the amount
of $0 and $1,567 as of April 30, 2018 and 2017, respectively. At April 30, 2018 and 2017 the deferred profit on the sale of this
property totaled $96 and $96, 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 $107,286 and $108,280 plus accrued interest in the amount of $13,707 and $1,655 as of April
30, 2018 and 2017, respectively. At April 30, 2018 and 2017 the deferred profit on the sale of this property totaled $41,507.
See Note 1.
During
the years ended April 30, 2018 and 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 $221,080 and $4,800, respectively, for the
portion management determined may not be collectible based on payment history. Notes receivable - land contracts, net of allowance
total $70,659 and $161,375 at April 30, 2018 and 2017, respectively. Bad debt loss in the amount of $194,992
and $4,800 is included in the accompanying Consolidated Statements of Operations for the years ended April 30, 2018 and
2017, respectively.
On
November 4, 2016, the Company sold one of its rental properties located at 29108 Tessmer Court with a selling price of $77,000.
The entire $77,000 was received in cash (net of costs) in the fiscal year ended April 30, 2017. In the fiscal year ended April
30, 2017 the Company recognized a gain on the sale of this property in the amount of $18,650.
On
April 28, 2017 the Company sold its property under development located at 24442 Kinsel Street with a selling price of $270,000.
The entire $270,000 was received in cash (net of costs) in the fiscal year ended April 30, 2017. In the fiscal year ended April
30, 2017 the Company recognized a loss on the sale of this property under development in the amount of $39,285. In connection
with this sale, the Company paid in full the amounts due to AMREFA in the amount of $200,000 and to the Company’s controller
in the amount of $40,000. See Notes 11 and 12.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2018
Note
6. Business Combination and Impairment of Goodwill
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
paid 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 had not been issued and the Company recorded a note payable to AMREFA in the amount $1,157,270 including
a present value discount of $127,730. During the fiscal year ended April 30, 2017 the 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. At April 30, 2018 and 2017 the
note payable balance due AMREFA and related unamortized discount totaled $0. During the years ended April 30, 2018 and 2017, $0
and $20,609 was recognized as amortization of debt discount, respectively.
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 12 and 13.
Goodwill
Impairment
During
the year ended April 30, 2017, based on actual selling prices, net of selling costs, of the rental properties acquired from ARG,
the Company determined the carrying amount of its net assets exceeded the estimated fair value and the Company recognized a goodwill
impairment loss in the amount of $180,011 and the entire goodwill balance was written off during the year ended April 30, 2017.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2018
Note
7. Note Receivable - Related Party
On
February 11 2016, the Company signed a definitive agreement with Inmobiliaria Contel S.R.L.C.V. (“Contel”) to finance
the first tract of land of approximately 300 acres which is being developed by Contel for agriculture use in Baja California,
Mexico. The Company’s Chief Executive Officer has made personal investments in this project, and has a 49.5% minority partnership
interest in Contel The Company and its Chief Executive Office have no management or governance authority. Contel’s manager
is not required to consult with him on any management decisions in the conduct of Contel’s business.
The
Company initially committed to a loan of up to the amount of $350,000 and on February 1, 2017, the Company increased its loan
commitment to Contel to up to $1,000,000 from $350,000. On April 18, 2018, the loan commitment was increased to $1,500,000.
The
Company accepts a 50% share of Contel’s profits and losses and is entitled to recover all contributions upon completion
of the sale of the property. During the year ended April 30, 2018, the Company loaned Contel $547,000 and received repayments
of $50,000. For the year ended April 30, 2017, the Company loaned Contel $580,500. These loans are.accounted for as an investment
loan. Note Receivable - Related Party totaled $1,187,500 and $690,500 as of April 30, 2018 and 2017, respectively. See Note 1.
Note
8. Property and Equipment
Major
classifications of property and equipment at April 30, 2018 and 2017 are summarized as follows:
|
|
April
30,
|
|
|
|
2018
|
|
|
2017
|
|
Vehicles
|
|
$
|
40,902
|
|
|
$
|
40,902
|
|
Furniture
|
|
|
6,679
|
|
|
|
3,564
|
|
Office
equipment
|
|
|
2,926
|
|
|
|
2,926
|
|
Total
vehicles, furniture and equipment
|
|
|
50,507
|
|
|
|
47,392
|
|
Less:
accumulated depreciation
|
|
|
(46,703
|
)
|
|
|
(44,301
|
)
|
Net
carrying value
|
|
|
3,804
|
|
|
$
|
3,091
|
|
Depreciation
expense for the years ended April 30 2018 and 2017 totaled $2,402 and $8,537, respectively.
Note
9. Obligations Under Capital Leases
The
Company leased a vehicle under a capital lease which expired in fiscal 2018. Total lease payments made in fiscal 2018 and 2017
were $3,397 and $8,152, consisting of $3,373 and $7,929 principal and $24 and $223 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.
The
cost of the vehicles in the amount of $40,902 at April 30, 2018 and 2017, 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 $2,045 and $8,180 is included in the Company’s Consolidated Statements of Operations for the years
ended April 30, 2018 and 2017, respectively.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2018
Note
10. Reservation Deposits
In
connection with Procon’s planned development of a residential community to be known as Cielo Mar (see Notes 1 and 3), located
in Bahia de El Rosario, El Rosario, Baja California, Mexico (the “Development Project”); Procon has collected deposits
(“Reservation Deposit”) from Depositors to reserve development lots until the first execution phase of the development
and a Definitive Purchase Agreement is executed at which time the Depositor may proceed with the purchase which will result in
the Reservation Deposit’s conversion to a purchase deposit. The Depositor may decide not to proceed with the purchase and
the Reservation Deposit will be returned, unless waived in the Reservation Request, less 10% for administrative charges. Reservation
deposits totaled $48,085 and $12,500 at April 30, 2018 and 2017, respectively.
Note
11. Notes Payable
On
August 22, 2017 the Company entered into an unsecured promissory note payable with an unrelated party, borrowing $9,000. The note
is an unsecured and is due July 19, 2018. The promissory note has a onetime interest charge of 15% (in the amount of $1,350) plus
accrued interest of 5% per annum. The Company recorded interest expense in connection with the promissory note in the amount of
$1,656 and $0 for the years ended April 30, 2018 and 2017, respectively. Accrued interest due under the promissory notes totaled
$1,656 and $0 as of April 30, 2018, and 2017, respectively. The amount outstanding under the note payable totaled $9,000 and $0
at April 30, 2018 and 2017, respectively.
On
August 22, 2017 the Company entered into an unsecured promissory note payable with an unrelated party, borrowing $10,000. The
note is an unsecured and is due July 19, 2018. The promissory note has a onetime interest charge of 15% (in the amount of $1,500)
plus accrued interest of 5% per annum. The Company recorded interest expense in connection with the promissory note in the amount
of $1,788 and $0 for the years ended April 30, 2018 and 2017, respectively. On February 24, 2018 the note payable and accrued
interest, in the amount of $11,788 was paid in full, in cash. Accrued interest due under the promissory notes totaled $0 as of
April 30, 2018 and 2017. The amount outstanding under the note payable totaled $0 at April 30, 2018 and 2017.
On
August 22, 2017 the Company entered into an unsecured promissory note payable with an unrelated party, borrowing $30,000. The
note is an unsecured and is due July 19, 2018. The promissory bears interest of 5% per annum. The Company recorded interest expense
in connection with the promissory note in the amount of $703 and $0 for the years ended April 30, 2018 and 2017, respectively.
On January 24, 2018, the Company paid off the note payable in full. The repayment amount was $30,000 plus $703 of accrued interest.
Accrued interest due under the promissory note totaled $0 and $0 as of April 30, 2018 and April 30, 2017, respectively.
Under
the terms of a July 19, 2013 Investment Agreement (“AMREFA Agreement”) with AMREFA, as of April 30, 2015 the Company
had notes payable to AMREFA totaling $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 Installment Payment Agreement (June 2015 Installment 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 installment 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 Installment Payment Agreement.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2018
During
the fiscal year ended April 30, 2017, in connection with the fiscal 2016 purchase of ARG, the note payable due to AMREFA under
the June 2015 Installment 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 24. 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 fiscal year ended April 30, 2017, 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 was secured by the property at 24442 Kinsel Street, Southfield, Michigan. On April 28,
2017 the Kinsel Street property was sold and in May 2017 the Mortgage Note was paid in full. See Note 5. Notes payable to AMREFA
totaled $0 and $200,000 as of April 30 2018 and 2017, respectively. Accrued interest due AMREFA totaled $0 as of April 30, 2018
and 2017.
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.
During the years ended April 30, 2018 and 2017 the Company recognized interest expense of $105 and $301, respectively.
Accrued interest totaled $0 and $301 as of April 30, 2018 and 2017, respectively. Accrued interest of $406 was rolled into principal.
Notes payable to City of Southfield totaled $14,512 and $14,106 as of April 30, 2018 and 2017, respectively.
Note
12. Notes Payable Related Parties
Promissory
Notes
Credit
Line 1
On
August 2, 2016, the Company entered into a credit line promissory note (“Credit Line 1”) 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. The original due date of the credit line was July 31, 2017 and is now due on demand. The Credit Line
is unsecured. During the fiscal year ended April 30, 2017 the Company borrowed $250,000 under the Credit Line. As a result of
the derivatives calculation an additional discount of $39,299 was recorded in 2017. Notes payable related parties includes the
amount due under the Credit Line with a balance outstanding of $250,000 less the unamortized discount of $0 and $14,947 as of
April 30, 2018 and 2017, respectively.
Amortization
of the related discount totaled $14,947 and $24,352 for the years ended April 30, 2018 and 2017, respectively. The Company recorded
interest expense in connection with the Credit Line in the amount of $13,907 and $5,061 for the years ended April 30, 2018 and
2017, respectively. Accrued interest due under the Credit Line totaled $18,968 and $5,061 as of April 30, 2018 and April 30, 2017,
respectively.
Credit
Line 2
On
February 21, 2017 the Company’s President entered into an additional one year 5% Promissory Note credit line agreement (“Credit
Line 2”) whereby the Company may borrow up to $250,000 with interest at a rate of five (5%) percent per annum with an original
due date of February 22, 2018. Credit Line 2 is unsecured and is now due upon demand. During the fiscal year ended April 30, 2017
the Company borrowed $205,000 under Credit Line 2 and during the fiscal year ended April 30, 2018 the Company borrowed the remaining
$45,000 under the Credit Line 2.
As
a result of the derivatives calculation an additional discount of $7,590 and $51,303 was recorded during the years ended April
30, 2018 and 2017, respectively. Notes payable related parties includes the amount due under the Credit Line 2 with a balance
outstanding of $250,000 and $205,000 less the unamortized discount of $0 and $43,058 as of April 30, 2018 and 2017, respectively.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2018
Amortization
of the related discount totaled $50,648 and $8,245 for the years ended April 30, 2018 and 2017, respectively. The Company recorded
interest expense in connection with the Credit Line in the amount of $9,554 and $1,581 for the years ended April 30, 2018 and
2017, respectively. Accrued interest due under the Credit Line 2 totaled $11,135 and $1,581 as of April 30, 2018 and April 30,
2017, respectively.
Credit
Line 3
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. This
Promissory note is outstanding as of August 8, 2018 and is now a due on demand Promissory Note. During the year ended April
30, 2018 the Company borrowed $250,000 under Credit Line 3 and repaid $20,100. Notes payable related parties includes the amount
due under Credit Line 3 with a balance outstanding of $229,900 and $0 as of April 30, 2018 and 2017, respectively. The Company
recorded interest expense in connection with Credit Line 3 in the amount of $13,784 and $0 for the years ended April 30, 2018
and 2017, respectively. Accrued interest due under the Credit Line 3 totaled $13,784 and $0 as of April 30, 2018 and April 30,
2017, respectively.
Credit
Line 4
During
the year ended April 30, 2018, the Company’s President entered into an unsecured 5% Promissory Note (“Credit
Line 4”) whereby the Company borrowed a total of $185,155 with interest at a rate of five (5%) percent per annum, which
is payable on July 19, 2018. The Promissory Note is outstanding as of August 8, 2018 and is now a due on demand Promissory
Note. During the year ended April 30, 2018 the Company repaid $32,500 of Credit Line 4. Notes payable related parties includes
the amount due under these notes, with a balance outstanding of $152,655 and $0 as of April 30, 2018 and 2017, respectively. The
Company recorded interest expense in connection with these notes in the amount of $6,730 and $0 for the year ended April 30, 2018
and 2017, respectively. Accrued interest due under the Credit Line totaled $6,730 and $0 as of April 30, 2018 and 2017, respectively.
Warrants
In
connection with Credit Line 1, 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 year ended April 30, 2017, 250,000 of these warrants
were issued in various denominations between August 2, 2016 through February 21, 2017, resulting in a total number of warrant
shares of 2,500,000 as of April 30, 2018 and 2017. The warrants have a five year term. See Notes 14, 15, and 26.
In
connection with the 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 year ended April 30, 2017, 205,000 of these warrants
were issued in various denominations between February 22, 2017 through March 20, 2017, resulting in a total number of warrant
shares of 2,050,000 as of April 30, 2017. During the year ended April 30, 2018 the remaining 450,000 warrants were issued in three
150,000 increments between July 5, 2017 and July 13, 2017 resulting in a total number of warrant shares of 2,500,000 as of April
30, 2018. The warrants have a five year term. See Notes 14, 15 and 26.
Other
Notes Payable Related Parties
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 bore a fixed rate of interest of 8.00% and required no monthly payments. Additional interest of 5%
was paid upon payment of the note payable. The note was secured by the property at 24442 Kinsel Street, Southfield, Michigan which
the Company acquired in the ARG purchase and was sold during the fiscal year ended April 30, 2017. Upon the sale of the Kinsel
Street Property on April 28, 2017, the note was paid in full in the amount of $40,000 plus accrued interest of $6,604. See Notes
5 and 11.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2018
The
note payable to the Company’s controller had a balance outstanding of $0 as of April 30, 2018 and 2017 and the Company recorded
interest expense in connection with this note payable in the amount of $0 and $5,226 for the fiscal years ended April 30, 2018
and 2017, respectively. Accrued interest due under this note payable totaled $0 as of April 30, 2018 and 2017.
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 a November 5, 2009 (as amended) 13.5% convertible debenture due to RF, which agreed to
assumption of the convertible debenture obligations by EIG. 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.
During
the fiscal year ended April 30, 2017, 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 22. In
connection with this payment in full, during the fiscal year ended April 30, 2017 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 April 30, 2018 and 2017 the outstanding balance of the note payable due EIG and accrued interest was $0.
Note
13. Note Payable to Bank of Ann Arbor
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 Ann Arbor 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 Ann Arbor 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 the properties sold under land contract and related rents which the Company acquired in the ARG purchase. See Note
6.
The
note payable had a balance outstanding of $58,952 and $450,258 as of April 30, 2018 and 2017, respectively and the Company recorded
interest expense in connection with this note payable in the amount of $18,625 and $31,753 for the years ended April 30, 2018
and 2017, respectively. During the year ended April 30, 2018 accrued interest of $275 was rolled into principal. Accrued interest
due under the note payable totaled $304 and $1,953 as of April 30, 2018 and April 30, 2017, respectively.
Principal
payment requirements on the notes payable to Bank of Ann Arbor for the years ending after April 30, 2018 are as follows:
2019
|
|
$
|
36,348
|
|
2020
|
|
|
22,604
|
|
Thereafter
|
|
|
-
|
|
Total
|
|
$
|
58,952
|
|
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2018
Note
14. 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.
|
During
fiscal year ended April 30, 2018 and 2017, 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. As of April 30, 2018 and 2017, the financial instruments that are measured at fair
value on a recurring basis consisted of convertible debt totaling $0 and $105,000 with a derivative liability totaling $0
(including 12,000,000 stock warrants) and $361,742 (including 10,550,000 stock warrants) at April 30, 2018 and 2017,
respectively, which are categorized as Level 3.
The Company also determined that the true-up
feature of the valuation dates of the subscription agreements represents an embedded derivative since the true-Up feature represent
a variable number of shares upon each valuation date (See Note17). The derivative liability on the true-up feature totaled $772,895
and $0 at April 30, 2018 and 2017, respectively, which are categorized as Level 3.
Liabilities measured at fair value on a
recurring basis are summarized as follows:
|
|
April 30, 2018
|
|
|
April 30, 2017
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion feature embedded within Convertible Note
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
136,406
|
|
|
|
136,406
|
|
Tainting of all other convertible instruments (all warrants)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
225,336
|
|
|
|
225,336
|
|
True of feature of subscription agreement
|
|
|
-
|
|
|
|
-
|
|
|
|
772,895
|
|
|
|
772,895
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
772,895
|
|
|
|
772,895
|
|
|
|
-
|
|
|
|
-
|
|
|
|
361,742
|
|
|
|
361,742
|
|
The
related gain/(loss) on derivatives totaled $1,114,269 and ($7,793) for the fiscal years ended April 30, 2018 and 2017,
respectively.
See
Notes 12, 15 and 16.
Note
15. Derivative Liabilities
2018
Activity
During
the fiscal year ended April 30, 2018, the Company identified conversion features embedded within its convertible debt. During
the years ended April 30, 2018 the Company has determined that the conversion feature of the convertible note represents an embedded
derivative since the Notes are convertible into a variable number of shares upon conversion. See Note 16.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2018
Accordingly,
the Notes are 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. Since the convertible notes are not convertible until 180 days subsequent to the
execution date (“conversion date”), only notes which were outstanding as of the conversion date were considered for
valuation. In prior periods, it was determined that due to the conversion terms of the convertible debt along with the convertible
debt reserve requirement, no common shares were available under the authorized common share limit. As such, convertible debt beyond
the conversion date along with warrants were valued as a derivative.
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 fiscal year ended April 30, 2018:
Stock Price
|
|
|
$0.0175-$0.0100
|
|
Exercise Price
|
|
|
$0.0497 - $0.05
|
|
Risk free rate
|
|
|
0.08% - 1.27
|
%
|
Volatility
|
|
|
62.1% - 267
|
%
|
Term (Years)
|
|
|
0.08 - 5.00
|
|
As
of April 30, 2018, there were no convertible debt which could convert into common stock. Also, as there are sufficient shares
for conversion, the warrants were no longer considered derivative. Therefore, the derivative liability was released.
Under
the terms of the Subscription Agreement (See Note 17) each Investor agrees to invest an amount for the purchase of shares in the
Company, at a price per share equal to the average closing price of the Company’s common stock for the ten trading days
prior to the date of closing (“Closing”) of the purchase by the Investor of the Shares (the “Purchase Price”),
on the terms provided for herein. As of the date 180 days after the Closing (the “Initial Valuation Date”), if the
Shares issued at the Closing, valued at a price per share equal to the average closing price of the Company’s common stock
for the ten trading days prior to the First Valuation Date (“First Valuation Date Price”) do not represent a minimum
of 150% of the amount invested by the Investor at the Closing, the Company shall issue to the Investor within 10 business days
additional shares of common stock equal to the shortfall in valuation (calculated using the First Valuation Day Price) at the
Initial Valuation Date or, at the option of the Company, pay to the Investor within 10 business days the amount of such shortfall
in cash.
As
of the date 360 days after the Closing (the “Second Valuation Date”), if the Shares issued at the Closing, plus any
additional shares of common stock issued to the Investor at the First Valuation Date, valued at a price per share equal to the
average closing price of the Company’s common stock for the ten trading days prior to the Second Valuation Date (“Second
Valuation Date Price”) do not represent a minimum of 200% of the amount invested by the Investor at the Closing, the Company
shall issue to the Investor within 10 business days additional shares of common stock equal to the shortfall in valuation (calculated
using the Second Valuation Date Price”) at the Second Valuation Date.
The
Company determined that the True-Up feature of the valuation dates of the subscription agreements represents an embedded derivative
since the True-Up feature represents a variable number of shares upon each valuation date.
The
fair value of the embedded derivative liabilities on the subscription agreements at commitment date and remeasurement date
were determined using the Black Scholes model with the assumptions in the table below.
Stock Price
|
|
|
.0095
- .0358
|
|
Exercise Price
|
|
|
$
.0149
- $.0574
|
|
Risk free rate
|
|
|
1.21%
- 2.19
|
%
|
Volatility
|
|
|
44%
- 131
|
%
|
Term (Years)
|
|
|
0.0
– 1.0
|
|
The
fair value of the Company’s derivative liabilities at April 30, 2018 is as follows:
April
30, 2017 balance
|
|
$
|
361,742
|
|
Reclassification
of APIC to derivative liability due to true up feature
|
|
|
1,258,239
|
|
Debt
discount on derivative liability
|
|
|
490,371
|
|
Reclassification
of derivative liability to equity due to conversion
|
|
|
(374,354
|
)
|
Reclassification
of derivative liability due to tainting
|
|
|
151,166
|
|
Fair
value mark to market
|
|
|
(1,114,269
|
)
|
Derivative
liabilities, balance
|
|
$
|
772,895
|
|
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2018
2017
Activity
During
the fiscal year ended April 30, 2017, the Company identified conversion features embedded within its convertible debt. See Note
16. 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 warrants was calculated using a Black-Scholes valuation model.
The
fair value of the Company’s derivative liabilities at April 30, 2017 is as follows:
April
30, 2016 balance
|
|
$
|
-
|
|
Discount
on debt
|
|
|
270,647
|
|
Reclass
to equity due to tainting
|
|
|
83,302
|
|
Fair
value mark to market adjustment
|
|
|
7,793
|
|
Derivative
liabilities, balance
|
|
$
|
361,742
|
|
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 fiscal year ended April 30, 2017:
The
stock prices ranged from $0.0214 to $0.0239 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 0.5% 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%;
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2018
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 86% to 164% and 295% to 305%.
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 1.90%.
Note
16. Financing Agreement and Convertible Debentures
BlueHawk
Capital LLC Convertible Note
On
November 24, 2017, the Company issued an unsecured 12% Convertible Promissory Note in the principal amount of $65,000 to
BlueHawk Capital, LLC (“BlueHawk Convertible Note”). The Note is due August 20, 2018. The Holder has the right at
any time during the period beginning on the date which is 180 days following the Issue 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 is 55% of the lowest trading price for the common stock during the twenty 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 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 115% of the unpaid principal and accrued
interest of this Note; (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 120% 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 180th day this Note is in effect,
then for an amount equal to 125% of the unpaid principal amount of this Note along with any accrued interest. After the expiration
of one hundred eighty (180) days following the date of the Note, the Company may not prepay the BlueHawk Convertible Note.
In
connection with the BlueHawk Convertible Note the Company paid $5,000 in debt issuance costs which are being amortized to interest
expense using the effective interest method. During the years ended April 30, 2018 and 2017, the Company recognized interest expense
in the amount of $2,918 and $0, respectively, relating to the amortization of the debt issuance costs. The unamortized balance
of debt issuance costs totaled $2,082 and $0 at April 30, 2018 and 2017, respectively.
The
Company recorded interest expense in connection with the BlueHawk Convertible Note in the amount of $3,356 and $0 for the years
ended April 30, 2018 and 2017, respectively. Accrued interest due under the Blue Hawk Convertible Note totaled $3,356 and $0 as
of April 30, 2018 and 2017, respectively.
Effective
June 14, 2018 the BlueHawk Convertible Note was amended. See Note 27.
Auctus
Fund LLC
On
December 4, 2017, the Company issued an unsecured 12% Convertible Promissory Note, in the principal amount of $110,875
to Auctus Fund, LLC (“Auctus Convertible Note”). The Note is due August 29, 2018. The Holder has the right from time
to time, at any time during the period beginning on the date which is six months following the Issue 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 the lesser of (i) the lowest trading price during the previous twenty-five trading day
period ending on the latest complete trading day prior to the date of the note and (ii) 55% of the lowest trading price for the
common stock during the twenty-five trading day period ending on the latest complete trading day prior to the conversion date.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2018
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 115% of the unpaid principal amount
of this Note along with any interest that has accrued and unpaid during that period; (ii) if the redemption is on the 91st
day this Note is in effect, up to and including the 180th day this Note is in effect, then for an amount equal to 125% of the
unpaid principal amount of this Note along with any accrued and unpaid interest. After the expiration of one hundred eighty (180)
days following the date of the Note, the Company may not prepay the Auctus Convertible Note.
In
connection with the Auctus Convertible Note the Company paid $10,875 in debt issuance costs which are being amortized to interest
expense using the effective interest method. During the years ended April 30, 2018 and 2017, the Company recognized interest expense
in the amount of $6,055 and $0, respectively, relating to the amortization of the debt issuance costs. The unamortized balance
of debt issuance costs totaled $4,820 and $0 at April 30, 2018 and 2017, respectively. The Company recorded interest expense in
connection with the Auctus Convertible Note in the amount of $5,540 and $0 for the years ended April 30, 2018 and 2017, respectively.
Accrued interest due under the Actus Convertible Note totaled $5,540 and $0 as of April 30, 2018 and 2017, respectively.
Effective
May 31, 2018 the Auctus Convertible Note was amended. See Note 27
.
Vista
Capital Investments LLC Convertible Note
On
May 3, 2017, the Company issued an unsecured 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.
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 years ended April 30, 2018 and 2017, respectively the Company recognized interest expense in the amount of $10,000 and $0
relating to the amortization of the original issue discount. The unamortized balance of original issue discount totaled $0 at
April 30, 2018 and 2017. As a result of the derivatives calculation an additional discount of $33,722 relating to warrants granted,
was recorded in the year ended April 30, 2018. During the years ended April 30, 2018 and 2017 the Company recognized interest
expense in the amount of $33,722 and $0 relating to the derivatives discount, respectively. The unamortized balance of the derivatives
discount totaled $0 at April 30, 2018 and 2017.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2018
The
Company recorded interest expense in connection with the Vista Capital Convertible Note in the amount of $8,800 and $0, in the
years ended April 30, 2018 and 2017, respectively. Accrued interest due under the Vista Capital Convertible Note totaled $0 as
of April 30, 2018 and 2017.
On
November 29, 2017, the Company paid $75,000 of the Vista Capital Convertible Note and the remaining balance due in the amount
of $67,560 was paid on December 4, 2017. The Note was paid in full in the amount of $110,000 plus accrued interest in the amount
of $8,800 and a prepayment premium of $23,760 which the Company recorded
as
interest expense.
The
principal balance of the Vista Capital Convertible Note was $0 at April 30, 2018 and 2017.
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. Due to anti-dilution provision contained in
the warrant agreement, the warrant exercise price changed to $.0099 (the Company issued stock at $.0099 on January 18, 2018,
see Note 17) resulting in a revised number of warrant shares exercisable of up to 10,101,010 common stock shares. On March
26, 2018 Vista Capital Investments LLC gave notice and exercised the 10,101,010 warrants, on a cashless basis, for 7,390,983 shares
of common stock and on April 19, 2018 the shares were issued. The remaining number of warrant shares exercisable for common stock
shares totals 0 at April 30, 2018. See Notes 12, 14, 22 and 26. The Company adopted ASU 2017-11 for the year ended April 30,
2018. Due to the adoption, the anti-dilution provision of the warrants issued to Vista Capital were not accounted for as a derivative
unless tainted otherwise.
JSJ
Investments Inc. - Convertible Note #1
On
May 10, 2017, the Company issued an unsecured 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 prepayment
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).
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 the years ended April 30, 2018 and 2017, the Company recognized interest expense
in the amount of $7,000 and $0, respectively, relating to the amortization of the debt issuance costs. The unamortized balance
of debt issuance costs totaled $0 at April 30, 2018 and 2017. The Company recorded interest expense in connection with the JSJ
Convertible Note in the amount of $6,992 and $0 for the years ended April 30, 2018 and 2017, respectively. Accrued interest due
under the JSJ Convertible Note totaled $0 as of April 30, 2018 and 2017.
On
November 10, 2017, the Company paid the JSJ Convertible Note in full in the amount of $113,000 plus accrued interest in the amount
of $6,992 and a prepayment premium of $28,094 which the Company recorded as interest expense.
The
principal balance of the JSJ Convertible Note was $0 at April 30, 2018 and 2017.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2018
Power
Up Lending Group Ltd - Convertible Note #1 & #2
On
May 15, 2017, the Company issued a second unsecured 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 the years ended April 30, 2018 and 2017, the Company recognized interest expense in
the amount of $1,500 and $0, respectively, relating to the amortization of the debt issuance costs. The unamortized balance of
debt issuance costs totaled $0 at April 30, 2018 and 2017. The Company recorded interest expense in connection with the Power
Up Convertible Note # 2 in the amount of $2,816 and $0 for years ended April 30, 2018 and 2017, respectively. Accrued interest
due under Power Up Convertible Note #2 totaled $0 as of April 30, 2018 and 2017.
On
November 7, 2017, the Company paid the Power Up Convertible Note # 2 in full in the amount of $46,500 plus accrued interest in
the amount of $2,816 and a prepayment premium of $12,172 which the Company recorded as interest expense. The principal balance
of the Power Up Convertible Note # 2 was $0 at April 30, 2018 and 2017.
On
February 21, 2017, the Company issued an unsecured convertible promissory note in the amount of principal amount of $103,500
to Power Up Lending Group Ltd (“Power Up Convertible Note #1”). This convertible note is due and payable on November
30, 2017 plus interest on the unpaid principal balance at a rate of 12% per annum.
The
Holder shall have the right from time to time, and at any time during the period beginning on the date which is one hundred eighty
(180) days following the date of this Note (February 21,2017) and ending on the later of: (i) the Maturity Date (November 30,
2017) and (ii) the date of payment of the Default Amount (as defined in the Note), each in respect of the remaining outstanding
principal amount of this Note to convert all or any part of the outstanding and unpaid principal amount of the Note into fully
paid and nonassessable shares of Common Stock. The conversion price hereunder (the “Conversion Price”) shall equal
58% multiplied by the average of the lowest 2 Trading Prices for the Common Stock during the 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 #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 the years ended April 30, 2018 and 2017, the
Company recognized interest expense in the amount of amount of $2,655 and $845 relating to the amortization of the debt issuance
costs, respectively. The unamortized balance of debt issuance costs totaled $0 and $2,655 at April 30, 2018 and 2017, respectively.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2018
As
a result of the derivatives calculation an additional discount of $102,956 was recorded in the year ended April 30, 2018. The
unamortized balance of the discount totaled $0 at April 30, 2018 and 2017.
The
total balance due was $122,135 comprised of principal of $103,500, interest of $6,370 and prepayment premium of $12,265. During
the year ended April 30, 2018 the Company repaid $61,989 of the amount due under Power Up Convertible Note 1 in cash and the remaining
balance of $60,146 was converted to 8,534,554 shares of the Company’s Common Stock at fair value as follows:
Conversion
Date
|
|
Number
of Shares of Common Stock
|
|
|
Principal
and Amount Converted
|
|
|
Price
per share
|
|
August
24, 2017
|
|
|
2,386,634
|
|
|
$
|
20,000
|
|
|
$
|
0.00838
|
|
August
29, 2017
|
|
|
2,898,551
|
|
|
|
20,000
|
|
|
$
|
0.00690
|
|
August
31, 2017
|
|
|
3,249,369
|
|
|
|
20,146
|
|
|
$
|
0.00620
|
|
Totals
- Year Ended April 30, 2018
|
|
|
8,534,554
|
|
|
$
|
60,146
|
|
|
|
|
|
See
Note 22.
In
connection with the prepayment of the debt, during the year ended April 30, 2018 the Company recognized $12,265 in prepayment
penalties which recorded as interest expense.
The
balance of the convertible note was $0 and $103,500 at April 30, 2018 and 2017, respectively.
The
Company recorded interest expense in connection with the Power Up Convertible Note 1 in the amount of $3,990 and $2,380 for the
years ended April 30, 2018 and 2017, respectively. Accrued interest due under the Power Up Convertible Note totaled $0 and $2,380
as of April 30, 2018 and 2017, respectively.
Hoppel
Convertible Notes
Hoppel
Convertible Note #2
On
January 20, 2017, the Company issued an unsecured convertible promissory note in the amount of principal amount of $105,000
to Lucas Hoppel (“Hoppel Convertible Note 2”). This convertible note is due and payable on July 20, 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, under either Hoppel convertible note, 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 the Note plus accrued and unpaid interest
on the unpaid principal amount of the Note.
In
connection with Hoppel Convertible Note 2, 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 $0.03. The warrant expires on January 20,
2022. The warrant contains standard adjustments for stock dividends and splits, and allows cashless exercise after six months.
In addition, Lucas Hoppel was issued 926,000 common shares as an inducement to enter into the financing. See Note 22. 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 926,000 shares. The price of Common Shares fell below .0125 on January 25, 2017 resulting in
an additional 926,000 shares due. These shares were not issued at April 30, 2017 and are part of a negotiation to restructure
the Note. 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.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2018
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 unsecured 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 1, 2017. The second cash payment was due on or before August 10, 2017 and the third and
final cash payment was due on or before August 20, 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. See Note 22. The total balance of the note was
$130,832 comprised of the principal of $105,000, interest of $7,350, penalty of $5,000 and prepayment premium of $13,482. During
the year ended April 30, 2018 the Company made the first two cash payments of $89,880 due under the Settlement Agreement. The
Company recorded a total loss of $44,659 as a loss on the settlement of liabilities relating to this transaction, including $17,779
for the fair value of the 926,000 shares of common stock and $26,880 for increase of the principal balance.
The
remaining balance of the note was satisfied through conversion of debt into common stock as follows:
Conversion
Date
|
|
Number
of Shares of Common Stock
|
|
|
Principal
and Amount Converted
|
|
|
Price
per share
|
|
August
25, 2017
|
|
|
1,500,000
|
|
|
|
13,650
|
|
|
$
|
0.00910
|
|
August 29,
2017
|
|
|
3,000,000
|
|
|
|
15,750
|
|
|
$
|
0.00525
|
|
August
31, 2017
|
|
|
2,200,381
|
|
|
|
11,552
|
|
|
$
|
0.00525
|
|
Totals
- Year Ended April 30, 2018
|
|
|
6,700,381
|
|
|
$
|
40,952
|
|
|
|
|
|
The
outstanding Note balance totaled $0 and $57,739, net of the unamortized discount of $0 and $47,261 at April 30, 2018 and 2017,
respectively. Amortization of the related discounts totaled $47,261 and $57,739 for years ended April 30, 2018 and 2017, respectively.
Accrued
interest due totaled $0 and $7,350 at April 30, 2018 and 2017 respectively.
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 12 and 13.
The
Company recorded interest expense in connection with the Hoppel Convertible Note 2 of $0 and $7,350 for years ended
April 30, 2018 and 2017, respectively.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2018
Hoppel
Convertible Note 1
On
September 13, 2016, the Company issued an unsecured convertible promissory note in the amount of principal amount of $105,000
to Lucas Hoppel (“Hoppel Convertible Note 1”). 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.
In
connection with Hoppel Convertible Note 1, 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. See Note 14. 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 Hoppel Convertible Note 1 including original issuance discount of $5,000, stock
issuance discount of $7,547 and derivative discount of $92,453. On March 16, 2017 Hoppel Convertible Note 1 was paid in full,
in cash without any conversions. Amortization of the related discounts and interest expense totaled $105,000 and $7,350, respectively
for the fiscal year ended April 30, 2017.
The
principal balance of the Hoppel Convertible Note 1 was $0 at April 30, 2018 and 2017.
EMA
Financial, LLC Convertible Note
On
April 3, 2017, the Company issued an unsecured convertible promissory note in the principal amount of $113,000 to EMA Financial,
LLC (“EMA Convertible Note”), including debt issuance costs of $6,800 which are being amortized to interest expense
using the effective interest method. 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. 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 (April 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 the lower of: (i)
the closing sale price of the Common Stock on the Principal Market on the Trading Day immediately preceding the Closing Date,
and (ii) 55% of either the lowest sale price for the Common Stock on the Principal Market during the fifteen (15) consecutive
Trading Days immediately preceding the Conversion Date or the closing bid price.
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 90 days)
up to 125%, 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 plus Default Interest, if any. After the Prepayment Date, the Note may not be prepaid.
During
the years ended April 30, 2018 and 2017 the Company recognized interest expense in the amount of amount of $6,278 and $522, respectively,
relating to the amortization of the debt issuance in connection with the EMA Convertible Note. The unamortized balance of debt
issuance totaled $0 and $6,278 at April 30, 2018 and 2017, respectively. The Company recorded interest expense in connection with
the EMA Convertible Note in the amount of $5,301 and $868 for the years ended April 30, 2018 and 2017, respectively. Accrued interest
due under the EMA Convertible Note totaled $0 and $868 as of April 30, 2018 and 2017, respectively.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2018
On
October 19, 2017, the Company paid the EMA Convertible Note in full in the amount of $113,000 plus accrued interest in the amount
of $6,200, resulting in prepayment penalties of $29,792 which the Company recorded as interest expense.
As
a result of the derivative calculation an additional discount of $113,000 was recorded in the year ended April 30, 2018. The unamortized
balance of the discount totaled $0 at April 30, 2018 and April 30, 2017.
The
principal balance of the EMA Convertible Note was $0 and $113,000 at April 30, 2018 and2017, respectively.
Bellridge
Capital, LP
On
March 15, 2017, the Company issued an unsecured 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. At any time after the sooner
to occur of (i) 180 days from March 15, 2017 (ii) when the shares issuable upon conversion of this Debenture have been registered
on a registration statement that has been declared effective by the Commission or (iii) if the Company is in breach or default
of any of the Transaction Documents and until this Debenture is no longer outstanding (including principal and accrued but unpaid
interest on any principal being converted, if any) shall be convertible, in whole or in part, into shares of Common Stock at the
option of the Holder, at any time and from time to time. The conversion price hereunder (the “Conversion Price”) shall
equal the 55% of the lowest trading price for the Company’s Common Stock on the Trading Market for the 15 Trading Days prior
to the conversion.
During
the first six months this Note is in effect, the Company may redeem this Note by paying to the Holder an amount as follows: (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 115% 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 120% 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 180th day this Note is in effect, then for an amount equal to 125% of the
unpaid principal amount of this Note along with any accrued interest.
During
the years ended April 30, 2018 and 2017 the Company recognized interest expense in the amount of amount of $4,356 and $644, respectively,
relating to the amortization of the original issuance discount. The unamortized balance of original issuance totaled $0 and $4,356
at April 30, 2018 and 2017. The Company recorded interest expense in connection with the Bellridge Convertible Note in the amount
of $4,176 and $1,334 for the years ended April 30, 2018 and 2017, respectively. Accrued interest due under the Bellridge Convertible
Note totaled $0 and $1,334 as of April 30, 2018 and April 30, 2017, respectively.
On
September 12, 2017, the Company paid $105,000 of the Bellridge Convertible Note and the remaining balance due in the amount of
$32,811 was paid on September 21, 2017. The Note was paid in full in the amount of $105,000 plus accrued interest in the amount
of $5,510 and a prepayment premium of $27,301 which the Company recorded as interest expense.
The
principal balance of the Bellridge Convertible Note was $0 and $105,000 at April 30, 2018 and 2017, respectively. As a result
of the derivative calculation an additional discount of $102,854 was recorded in the year ended April 30, 2018. The unamortized
balance of the discount totaled $0 at April 30, 2018 and 2017.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2018
Silo
Equity Partners Venture Fund LLC Convertible Note
On
March 22, 2017, the Company issued an unsecured 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 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 (March 22, 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 hereunder (the “Conversion Price”) shall equal the lower of: (i) the closing sale price of the Common Stock
on the Principal Market on the Trading Day immediately preceding the Closing Date, and (ii) 50% of the lowest sale price for the
Common Stock on the Principal Market during the fifteen (15) consecutive Trading Days immediately preceding 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 115% (for the first 60 days),
to 120% (between 61 -120 days) up to 125% (anytime after 120 days) , 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 plus Default Interest, if any.
The
Company recorded interest expense in connection with the Silo Convertible Note in the amount of $3,483 and $858 for the years
ended April 30, 2018 and 2017, respectively. Accrued interest due under the Silo Convertible Note totaled $0 and $858 as of April
30, 2018 and April 30, 2017, respectively.
On
September 22, 2017, the Company paid $30,000 of the Silo Convertible Note and the remaining balance due in the amount of $100,397
was paid on October 5 and 6, 2017. The Note was paid in full in the amount of $100,000 plus accrued interest in the amount of
$4,341 and a prepayment premium of $26,056 which the Company recorded as interest expense. As a result of the derivative calculation
an additional discount of $100,000 was recorded in the year ended April 30, 2018. The unamortized balance of the discount totaled
$0 at April 30, 2018 and 2017.
The
principal balance of the Silo Convertible Note was $0 and $100,000 at April 30, 2018 and 2017, respectively.
Tangiers
Global, LLC Convertible Note
On
March 21, 2017, the Company issued an unsecured 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. At any time after 180 days from the Effective Date (March 21,2017) of the Note, the Holder shall have the right,
at the Holder’s sole option, at any time and from time to time to convert in whole or in part the outstanding and unpaid
Principal Amount under this Note into shares of Common Stock as per the Conversion Formula. The conversion price is $.015. 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 100% of Principal amount (for
the first 89 days), to 115% of Principal amount (between 90 -120 days) to 120% of Principal amount (between 121 -150 days) and
to 125% of Principal amount (between 151-180 days). After 180 days from the Effective Date this Note may not be prepaid without
written consent from Holder, which consent may be withheld.
During
the years ended April 30, 2018 and 2017 the Company recognized interest expense in the amount of amount of $ 4,634 and
$366, respectively, relating to the amortization of the original issue discount in connection with the Tangiers Convertible Note.
The unamortized balance of original issue discount totaled $0 and $4,634 at April 30, 2018 and 2017, respectively.
The
Company recorded interest expense in connection with the Tangiers Convertible Note in the amount of $6,543 and $807 for
the years ended April 30, 2018 and 2017, respectively. Accrued interest due under the Tangiers Convertible Note totaled $0 and
$807 and $0 as of April 30, 2018 and April 30, 2017, respectively.
As
a result of the derivative calculation an additional discount of $30,249 was recorded in the year ended April 30, 2018. The unamortized
balance of the discount totaled $0 at April 30, 2018 and 2017.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2018
On
October 19, 2017, the Company paid the Tangiers Convertible Note in full in the amount of $105,000 plus accrued interest in the
amount of $7,350, prepayment premium of $28,088 which the Company recorded as interest expense.
The
principal balance of the Tangiers Convertible Note was $0 and $105,000 at April 30, 2018 and 2017, respectively.
Tangiers
Global, LLC Convertible Note 2
On
October 17, 2017, the Company issued an unsecured convertible promissory note in the amount of principal amount of $306,804 to
Tangiers Global, LLC (“Tangiers Convertible Note 2”) including an Original Issue Discount (“OID”) of $17,366.
This convertible note is due and payable on July 13, 2018, plus interest on the unpaid principal balance at a rate of 12% per
annum. Guaranteed interest totals $36,820.
The
Company may pay Tangiers Convertible Note 2 in full, together with any and all accrued and unpaid interest, at any time on or
prior to the date which occurs 180 days after the October 17, 2017 (the “Funding Date”). Under the Ninetieth (90th)
day after the Funding Date the Company may pay the principal at a cash redemption premium of 115%, in addition to outstanding
interest, without the Holder’s consent; from the 90th day to the 150th day, the Company may pay the principal at a
cash redemption premium of 120%, in addition to outstanding interest, without the Holder’s consent and from the 151st day
to the 180th day, the Company may pay the principal at a cash redemption premium of 125%, in addition to outstanding interest,
without the Holder’s consent.
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 Tangiers Convertible Note 2 to convert all or any part of the outstanding and unpaid principal
amount of this Note into fully paid and non-assessable shares of Common Stock. The conversion price shall equal 55% multiplied
by the lowest Trading Price for the Common Stock during the fifteen (15) Trading Days prior to the date on which the holder elects
to convert all or part of the Tangiers Convertible Note 2.
During
the years ended April 30, 2018 and 2017 the Company recognized interest expense in the amount of amount of $12,592 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 $4,774 and $0 at April 30, 2018 and 2017, respectively. The Company recorded interest expense in
connection with the Tangiers Convertible Note in the amount of $26,691 and $0 for the years ended April 30, 2018 and 2017, respectively.
Accrued interest due under the Tangiers Convertible Note totaled $26,691 and $0 as of April 30, 2018 and 2017, respectively. The
principal balance of the convertible promissory note was $306,804 and $0 at April 30, 2018 and 2017, respectively.
Tangiers
Forbearance Agreement and Warrant
In
connection with the Tangiers Convertible Note 2, the Company entered into a Forbearance Agreement, dated as of April 27, 2018
(the “Forbearance Agreement”), Tangiers Global, LLC, (“Tangiers”), pursuant to which Tangiers agreed to
refrain and forbear from exercising and enforcing its remedies under the Company’s outstanding note payable to Tangiers
in the principal amount of $306,804 (“the Outstanding Note”), or any of the other agreements entered into in connection
with the transactions contemplated thereby, until July 16, 2018, and to extend the Maturity Date of the Outstanding Note to July
16, 2018. Tangiers agreed to extend the prepayment schedule as to provide for the Company’s prepayment right in under 90
days at 115% of Principal Amount of the Outstanding Note. After 90 days from the Execution Date of the Forbearance Agreement,
the Outstanding Note may not be prepaid without written consent from Tangiers. Tangiers further agreed to refrain from exercising
its conversion rights under the Outstanding Note until July 16, 2018. Contemporaneously with the execution of the Forbearance
Agreement, the Company agreed to make a $122,721 cash payment to Lender as a Forbearance Payment. See Note 27. In connection with
the Forbearance Agreement, on April 23, 2018 the Company issued Tangiers a five-year common stock purchase warrant to purchase
1,000,000 shares of the Company’s Common Stock, exercisable at a price of $0.05 per share. The warrants were valued at
$28,810 and recorded as an interest expense.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2018
Upon
paying the forbearance fee of $122,722, any unpaid interest on the $306,804 note was waived. The $122,722 forbearance amount was
not paid as of April 30, 2018. The Company had accrued $26,691 of accrued interest on the Outstanding Note and therefore accrued
additional $96,030 as interest expense.
During
the year ended April 30, 2018 the Company recognized interest expense in the amount of $96,030. Accrued interest due under
the Forbearance Agreement totaled $96,030 and $0 as of April 30, 2018 and 2017, respectively. See Note 27.
Power
Up Lending Group Ltd - Convertible Notes #3, #4, #5 and #6
Note
# 3
On
August 25, 2017, the Company issued a third unsecured convertible promissory note in the principal amount of $78,000 to Power
Up Lending Group Ltd (“Power Up Convertible Note #3”), including debt issuance costs of $3,000. This convertible note
is due and payable on May 30, 2018 plus interest on the unpaid principal balance at a rate of 12% per annum.
The
Company may pay Power Up Convertible Note #3 in full, together with any and all accrued and unpaid interest, at any time on or
prior to the date which occurs 180 days after the August 25, 2017 (the “Issue Date”). From Issue Date through One
hundred and fifty days (150th) day after the Issue Date the Company may pay the principal at a cash redemption premium of 125%,
in addition to outstanding interest, without the Holder’s consent and from the 151st day to the 180th day, the Company may
pay the principal at a cash redemption premium of 130%, in addition to outstanding interest, without the Holder’s consent.
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 non-assessable 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
connection with the Power Up Convertible Note #3 paid $3,000 in debt issuance costs which are being amortized to interest expense
using the effective interest method. During the years ended April 30, 2018 and 2017, the Company recognized interest expense in
the amount of $3,000 and $0, respectively, relating to the amortization of the debt issuance costs. The unamortized balance of
debt issuance costs totaled $0 at April 30, 2018 and 2017. The Company recorded interest expense in connection with the Power
Up Convertible Note #3 in the amount of $4,308 and $0 for years ended April 30, 2018 and 2017, respectively. Accrued interest
due under Power Up Convertible Note #3 totaled as of April 30, 2018 and 2017.
On
February 15, 2018, the Company paid the Power Up Convertible Note #3 in full in the amount of $78,000 plus accrued interest in
the amount of $4,308 and a prepayment premium of $20,577 which the Company recorded as interest expense.
The
principal balance of the Power Up Convertible Note #3 was $0 at April 30, 2018 and 2017, respectively.
Note
# 4
On
November 8, 2017, the Company issued a fourth unsecured convertible promissory note in the principal amount of $51,500 to Power
Up Lending Group Ltd (“Power Up Convertible Note #4”), including debt issuance costs of $1,500. This convertible note
is due and payable on August 15, 2018 plus interest on the unpaid principal balance at a rate of 12% per annum. In the event that
any principal or interest is not timely paid, such amount accrues interest at 22% per annum until paid in full.
The
Company may pay Power Up Convertible Note #4 in full, together with any and all accrued and unpaid interest at any time on or
prior to the date which occurs 180 days after the November 8, 2017 (the “Issue Date”). following the issue date of
this note by making a payment to the note holder of an amount in cash equal to 125%. After 180 days from the Issue Date this Note
may not be prepaid.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
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 non-assessable 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
connection with the Power Up Convertible Note #4 the Company paid $1,500 in debt issuance costs which are being amortized to interest
expense using the effective interest method. During the years ended April 30, 2018 and 2017, the Company recognized interest expense
in the amount of $927 and $0, respectively, relating to the amortization of the debt issuance costs. The unamortized balance of
debt issuance costs totaled $573 and $0 at April 30, 2018 and 2017, respectively.
The
Company recorded interest expense in connection with the Power Up Convertible Note #4 in the amount of $2,941 and $0 for years
ended April 30, 2018 and 2017, respectively. Accrued interest due under Power Up Convertible Note #4 totaled $2,941 and $0 as
of April 30, 2018 and 2017, respectively.
The
principal balance of the Power Up Convertible Note #4 was $51,500 and $0 at April 30, 2018 and 2017, respectively.
Note
#5
On
January 17, 2018 the Company issued a fifth unsecured convertible promissory note in the principal amount of $63,000 to Power
Up Lending Group Ltd (“Power Up Convertible Note #5”), including debt issuance costs of $1,500. This convertible note
is due and payable on October 30, 2018 plus interest on the unpaid principal balance at a rate of 12% per annum.
The
Company may repay the Power Up Convertible Note #5 (prior to conversion), at 120% of such note (and accrued and unpaid interest
thereon) if the note is repaid during the period beginning on January 17, 2018 the (“Issue Date”) and ending 150 days
following the Issue Date; and 125% of such note (and accrued and unpaid interest thereon) if such note is repaid during the period
beginning on the date that is 151 days from the Issue Date and ending 180 days following the Issue Date. After 180 days have elapsed
from the Issue Date the Company has no right to prepay the Power Up Convertible Note #5.
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 non-assessable 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
connection with the Power Up Convertible Note #5 the Company paid $1,500 in debt issuance costs which are being amortized to interest
expense using the effective interest method. During the years ended April 30, 2018 and 2017, the Company recognized interest expense
in the amount of $540 and $0, respectively, relating to the amortization of the debt issuance costs. The unamortized balance of
debt issuance costs totaled $960 and $0 at April 30, 2018 and 2017, respectively. The Company recorded interest expense in connection
with the Power Up Convertible Note #5 in the amount of $2,133 and $0 for the years ended April 30, 2018 and 2017, respectively.
Accrued interest due under Power Up Convertible Note #5 totaled $2,133 and $0 as of April 30, 2018 and 2017, respectively.
The
principal balance of the Power Up Convertible Note #5 was $63,000 and $0 at April 30, 2018 and 2017, respectively.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2018
Note
#6
On
February 17, 2018 the Company issued a sixth unsecured convertible promissory note in the principal amount of $83,000 to Power
Up Lending Group Ltd (“Power Up Convertible Note #6”), including debt issuance costs of $1,500. This convertible note
is due and payable on November 30, 2018 plus interest on the unpaid principal balance at a rate of 12% per annum.
The
Company may repay the Power Up Convertible Note #6 (prior to conversion), at 120% of such note (and accrued and unpaid interest
thereon) if the note is repaid during the period beginning on February 17, 2018 the (“Issue Date”) and ending 150
days following the Issue Date; and 125% of such note (and accrued and unpaid interest thereon) if such note is repaid during the
period beginning on the date that is 151 days from the Issue Date and ending 180 days following the Issue Date. After 180 days
have elapsed from the Issue Date the Company has no right to prepay the Power Up Convertible Note #6.
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 non-assessable 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
connection with the Power Up Convertible Note #6 the Company paid $1,500 in debt issuance costs which are being amortized to interest
expense using the effective interest method. During the years ended April 30, 2018 and 2017, the Company recognized interest expense
in the amount of $378 and $0, respectively, relating to the amortization of the debt issuance costs. The unamortized balance of
debt issuance costs totaled $1,122 and $0 at April 30, 2018 and 2017, respectively. The Company recorded interest expense in connection
with the Power Up Convertible Note #6 in the amount of $1,965 and $0 for the years ended April 30, 2018 and 2017, respectively.
Accrued interest due under Power Up Convertible Note #6 totaled $1,965 and $0 as of April 30, 2018 and 2017, respectively.
The
principal balance of the Power Up Convertible Note #6 was $83,000 and $0 at April 30, 2018 and 2017, respectively.
Adar
Bays, LLC
On
March 14, 2018 the Company issued a unsecured convertible promissory note in the principal amount of $78,750 to Adar Bays, LLC
(“Adar Convertible Note”), including debt issuance costs of $9,000. This convertible note is due and payable on March
14, 2019 plus interest on the unpaid principal balance at a rate of 8% per annum.
The
Company may repay the Adar Convertible Note (prior to conversion), at 120% of such note (and accrued and unpaid interest thereon)
if the note is repaid during the period beginning on March 14, 2018 the (“Issue Date”) and ending 150 days following
the Issue Date; and 125% of such note (and accrued and unpaid interest thereon) if such note is repaid during the period beginning
on the date that is 151 days from the Issue Date and ending 180 days following the Issue Date. After 180 days have elapsed from
the Issue Date the Company has no right to prepay the Adar Convertible Note.
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 non-assessable shares of Common Stock. The conversion price shall equal 58% multiplied by the lowest closing
bid for the Common Stock for the 15 Trading Days prior to the Conversion Date.
In
connection with the Adar Convertible Note the Company paid $9,000 in debt issuance costs which are being amortized to interest
expense using the effective interest method. During the years ended April 30, 2018 and 2017, the Company recognized interest expense
in the amount of $1,159 and $0, respectively, relating to the amortization of the debt issuance costs. The unamortized balance
of debt issuance costs totaled $7,841 and $0 at April 30, 2018 and 2017, respectively. The Company recorded interest expense in
connection with the Adar Convertible Note in the amount of $1,217 and $0 for the years ended April 30, 2018 and 2017, respectively.
Accrued interest due under the Adar Convertible Note totaled $1,217 and $0 as of April 30, 2018 and 2017, respectively.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2018
The
principal balance of the Adar Convertible Note was $78,750 and $0 at April 30, 2018 and 2017, respectively.
JSJ
Investments Inc. - Convertible Note #2
On
April 6, 2018 the Company issued a unsecured convertible promissory note in the principal amount of $113,000 to JSJ Investments
Inc. (“JSJ Convertible Note #2”), including debt issuance costs of $11,250. This convertible note is due and
payable on April 6, 2019 plus interest on the unpaid principal balance at a rate of 12% per annum.
The
Company may repay the JSJ Convertible Note #2 (prior to conversion), at 120% of such note (and accrued and unpaid interest thereon)
if the note is repaid during the period beginning on April 6, 2018 the (“Issue Date”) and ending 90 days following
the Issue Date; and 125% of such note (and accrued and unpaid interest thereon) if such note is repaid during the period beginning
on the date that is 180 days from the Issue Date and ending 180 days following the Issue Date. After 180 days have elapsed from
the Issue Date up to the maturity date the note has a cash redemption premium of 135% of the then outstanding note, plus accrued
interest and Default interest, if any, which the Company may pay upon the Holder’s consent After the maturity date the Company
may repay the then outstanding principal plus accrued interest and Default interest, if any.
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 non-assessable shares of Common Stock at a price (“Conversion Price”) for each share of common
stock equal to a 45% discount to the two lowest trading prices during the previous twenty (20) trading days to the date of a Conversion
Notice.
In
connection with the JSJ Convertible Note #2 the Company paid $11,250 in debt issuance costs which are being amortized to interest
expense using the effective interest method. During the years ended April 30, 2018 and 2017, the Company recognized interest expense
in the amount of $740 and $0, respectively, relating to the amortization of the debt issuance costs. The unamortized balance of
debt issuance costs totaled $10,510 and $0 at April 30, 2018 and 2017, respectively. The Company recorded interest expense in
connection with the JSJ Convertible Note #2 in the amount of $892 and $0 for the years ended April 30, 2018 and 2017, respectively.
Accrued interest due under the JSJ Convertible Note #2 totaled $892 and $0 as of April 30, 2018 and 2017, respectively.
The
principal balance of the JSJ Convertible Note #2 was $113,000 and $0 at April 30, 2018 and 2017, respectively.
Tangiers
Convertible Note and Financing Agreement
On
August 25, 2016, the Company entered into an Amended and Restated 5.83% unsecured 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. 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.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2018
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
Tangiers convertible note was redeemed in full on January 9, 2017. Amortization of the related discount totaled $2,000 for the
year ended April 30, 2017. Interest in the amount of $9,200 was paid in the final settlement of Tangiers convertible note.
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 registration statement was declared effective by the Securities and Exchange Commission on January 31, 2017. The financing
is over a maximum of 36 months. A maximum of 75 million (75,000,000) shares of the Company’s common stock have been registered
for this financing. As of April 30, 2018 and 2017, there have been no draws under the Investment Agreement; thus, the outstanding
balance totaled $0 at April 30, 2018 and 2017.
Note
17. Subscription Agreements
In
November, 2017 the Company began offering the sale of up to $1,000,000 aggregate purchase price of shares of its common stock
under a Subscription Agreement (the “Subscription Agreement”). Under the terms of the Subscription Agreement each
Investor agrees to invest an amount for the purchase of shares in the Company, at a price per share equal to the average closing
price of the Company’s common stock for the ten trading days prior to the date of closing (“Closing”) of the
purchase by the Investor of the Shares (the “Purchase Price”), on the terms provided for herein.
As
of the date180 days after the Closing (the “Initial Valuation Date”), if the Shares issued at the Closing, valued
at a price per share equal to the average closing price of the Company’s common stock for the ten trading days prior to
the First Valuation Date (“First Valuation Date Price”) do not represent a minimum of 150% of the amount invested
by the Investor at the Closing, the Company shall issue to the Investor within 10 business days additional shares of common stock
equal to the shortfall in valuation (calculated using the First Valuation Day Price) at the Initial Valuation Date or, at the
option of the Company, pay to the Investor within 10 business days the amount of such shortfall in cash. As of the date 360 days
after the Closing (the “Second Valuation Date”), if the Shares issued at the Closing, plus any additional shares of
common stock issued to the Investor at the First Valuation Date, valued at a price per share equal to the average closing price
of the Company’s common stock for the ten trading days prior to the Second Valuation Date (“Second Valuation Date
Price”) do not represent a minimum of 200% of the amount invested by the Investor at the Closing, the Company shall issue
to the Investor within 10 business days additional shares of common stock equal to the shortfall in valuation (calculated using
the Second Valuation Date Price”) at the Second Valuation Date.
On
October 5, 2017, the Company entered into a Subscription Agreement with an accredited investor, for the sale of an aggregate of
6,818,182 shares of the Company’s Common Stock, with an investment in the amount of $75,000, at a price of $.011 per share.
On
November 1, 2017, the Company entered into a Subscription Agreement with Rupes Futura AB, for the sale by the Company to Rupes
Futura AB an aggregate of 4,502,252 shares of the Company’s Common Stock, with an investment in the amount of $50,000, at
a price of $.01110556 per share.
On November 27, 2017, the Company
entered into a Subscription Agreement with Michael Hylander, member of the Company’s Board of Directors, for the sale by
the Company to Michael Hylander of an aggregate of 2,706,887 shares of the Company’s Common Stock, with an investment in
the amount of $28,899, at a price of $0.010676 per share.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2018
On
March 15, 2018, the Company entered into a Subscription Agreement with an accredited investor, for the sale of an aggregate
of 430,904 shares of the Company’s Common Stock, with an investment in the amount of $10,000, at a price of $0.0232072 per
share.
On
January 18, 2018 the Company issued 5,050,505 shares of Common Stock at a purchase price of $.0099 to an accredited investor for
cash in the amount of $50,000 pursuant to a November 6, 2017 Subscription Agreement.
On
January 23, 2018 the Company issued 4,333,333 shares of Common Stock at a purchase price of $.0150 to BlueHawk Capital LLC, for
cash in the amount of $65,000 pursuant to a January 16, 2018 Subscription Agreement.
On
January 24, 2018 the Company issued 2,628,781 shares of Common Stock at a purchase price of $.01168 to Telaj Consulting LLC, in
payment of amount due, in the amount of $30,703 pursuant to a January 3, 2018 Subscription Agreement. See Note 11.
On
January 27, 2018, the Company entered into a Subscription Agreement with Park, LLC, for the sale by the Company to Park, LLC an
aggregate of 6,823,144 shares of the Company’s Common Stock, with an investment in the amount of $100,000, at a price of
$0.014656 per share.
On
February 9, 2018 the Company entered into a Subscription Agreement with Park, LLC, for the sale by the Company to Park, LLC an
aggregate of 5,422,993 shares of the Company’s Common Stock, with an investment in the amount of $100,000, at a price of
$0.01844 per share.
On
March 21, 2018, the Company entered into a Subscription Agreement with BiCoastal Equities LLC, for the sale by the Company to
BiCoastal Equities LLC an aggregate of 2,390,057 shares of the Company’s Common Stock, with an investment in the amount
of $50,000, at a price of $0.02092 per share.
On
March 12, 2018, the Company entered into a Subscription Agreement with SM1Town Holdings LLC, for the sale by the Company to SM1Town
Holdings LLC an aggregate of 2,390,057 shares of the Company’s Common Stock, with an investment in the amount of $50,000,
at a price of $0.02092 per share.
On
March 12, 2018, the Company entered into a Subscription Agreement with Telaj Consulting LLC, for the sale by the Company to Telaj
Consulting LLC an aggregate of 3,346,080 shares of the Company’s Common Stock, with an investment in the amount of $70,000,
at a price of $0.02092 per share.
On
March 23, 2018, the Company entered into a Subscription Agreement with an accredited investor, for the sale by the Company to
an accredited investor an aggregate of 871,080 shares of the Company’s Common Stock, with an investment in the amount of
$25,000, at a price of $0.02870 per share.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2018
The
Company determined that the True-Up feature of the valuation dates of the subscription agreements represents an embedded derivative
since the True-Up feature represents a variable number of shares upon each valuation date (See Note 14).
Note
18. 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 between EIG and the Company, these advances had no established repayment terms nor did they earn
interest and they were unsecured. During the year ended April 30, 2017 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 year ended April 30, 2017 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 Consolidated Statements of Operations. Related party advances
totaled from EIG totaled $0 at April 30, 2018 and 2017. See Note 23.
The
Company 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. The subscription agreements provided 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 year ended April 30, 2017, 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 fiscal year ended April 30, 2017. See Note 23.
Note
19. Corporate Lease Agreements
Effective
April 1, 2016, the Company entered into a lease agreement for office space for a period of thirty-six (36) months for its Michigan
office. 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. Future lease payments due through
the lease termination in fiscal 2019 total $10,274.
At
the beginning of the lease the Company paid a security deposit of $934, which is reflected as other assets on the April 30, 2018
and 2017 balance sheets.
On
May 30, 2017, the Company
lease our offices at 2667 Camino
del Rio South, Suite 312, San Diego, CA 92108, of approximately 740 sq. ft., at a current monthly rent of $1,250, under a month-to-month
lease.
On May 16, 2017, ProCon leased an office
in Ensenada, Mexico of approximately 3,300 Sq. Ft, at a current monthly rent of $30,000 pesos per month, the rent will increase
to $40,000 peso per month on May 16, 2018. The lease commenced on May 16, 2017 and will expire on May 15, 2020.
Corporate lease payments for offices in
Michigan and Ensenada, Mexico for the years ending after April 30, 2018 are as follows:
2019
|
|
|
|
35,138
|
|
2020
|
|
|
|
25,393
|
|
2021
|
|
|
|
-
|
|
2022
|
|
|
|
-
|
|
2023
|
|
|
|
-
|
|
Thereafter
|
|
|
|
-
|
|
The Ensenada, Mexico rent payment was translated
to US dollar using the exchange rate as of August 13, 2018 of 18.9026 peso to the dollar.
During
2018 and 2017, the Company recorded $31,811 and $10,464 in rental expense, respectively.
Note
20. Income Taxes
For
tax purposes the Company has federal net operating loss (“NOL”) carryovers of $4,400,000 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, 2018
Significant
components of the Company’s deferred tax assets and liabilities are as follows:
|
|
April
30, 2018
|
|
|
April
30, 2017
|
|
|
|
|
|
|
|
|
Deferred
tax assets:
|
|
|
|
|
|
|
|
|
NOL
carryovers
|
|
$
|
908,611
|
|
|
$
|
628,762
|
|
Amortization
of debt discount
|
|
|
(137,839
|
)
|
|
|
(33,048
|
)
|
Loss
on settlement of liabilities, Common Stock
|
|
|
(9,378
|
)
|
|
|
-
|
|
Loss
on settlement of liabilities, Series A
|
|
|
-
|
|
|
|
(64,216
|
)
|
Warrants
issued for services
|
|
|
(4,732
|
)
|
|
|
(2,477
|
)
|
Gain
on settlement of liabilities, Series B
|
|
|
-
|
|
|
|
1,620
|
|
Loss
from sale of rental properties
|
|
|
(21,000
|
)
|
|
|
(3,095
|
)
|
Gain/(Loss)
on change in FV of derivative liabilities
|
|
|
233,997
|
|
|
|
(1,169
|
)
|
Compensation
- Restricted stock units
|
|
|
(210
|
)
|
|
|
(994
|
)
|
Bad
debt expense
|
|
|
(39,700
|
)
|
|
|
(1,494
|
)
|
Impairment
of goodwill
|
|
|
-
|
|
|
|
(27,002
|
)
|
Depreciation
expense
|
|
|
(3,739
|
)
|
|
|
(5,749
|
)
|
Total
deferred tax assets
|
|
|
926,010
|
|
|
|
491,138
|
|
|
|
|
|
|
|
|
|
|
Valuation
allowance
|
|
|
(926,010
|
)
|
|
|
(491,138
|
)
|
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.
On
December 22, 2017 the Tax Cuts and JOBS Act (the “Act”) was signed into law. The Act changed many aspects of U.S.
corporate income taxation and included the change of the maximum corporate income tax rate from 35% to 21%. The effective rate
used for estimation of deferred taxes was 21% and 15% for the years ended April 30, 2018 and 2017, respectively.
The
tax years that remain subject to taxing authorities’ examination at April 30, 2018 are 2010 through 2018. 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
21. 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, 2018 and 2017 9,501,656 preferred shares were issued and outstanding. See Notes 23 and 24.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2018
Note
22. Common Stock
On
March 12, 2018 the Company filed Schedule 14C Information Statement with the Securities and Exchange Commission. This information
Statement was furnished to our stockholders on behalf of the Board of Directors pursuant to Rule 14c-2 promulgated
under the Securities Exchange Act of 1934, as amended, for the purpose of informing our stockholders of amendments to our Certificate
of Incorporation to increase the number of common stock that the Company is authorized to issue from 950,000,000 shares of common
stock, par value $.0001 per share to 1,250,000,000 shares of common stock, par value $.0001 per share. The Board of Directors
approved the amendments to the Certificate of Incorporation to increase the authorized common stock from 950,000,000 shares to
1,250,000,000 shares on March 8, 2018. The Company also received on March 8, 2018, the written consent from Stockholders of the
Company who hold a majority of the voting power of the Company’s common stock. Upon the expiration of the 20 day period
required by Rule 14c-2 and in accordance with the General Corporation Law of the State of Delaware, the Company filed a
Certificate of Amendment to the Certificate of Incorporation to effect the Amendment to increase the Company’s authorized
Common Stock. The Certificate of Amendment was filed subsequent to the 20 days after filing the Definitive Information
Statement with the Securities and Exchange Commission and deliver the Definitive Information Statement to the Company’s
stockholders.
Fiscal
2018 Activity
During
the year ended April 30, 2018, the Company issued in total 47,714,255 shares of Common Stock for cash in the amount of $704,602.
See Note 17.
On
July 17, 2017 the Company issued 926,000 shares of Common Stock in connection with the Hoppel Convertible Note 2 Settlement Agreement.
See Note16.
During
the year April 30, 2018 the Company issued an additional 15,234,935 shares of Common Stock to settle conversions of $101,098 of
the principal amounts of convertible debentures. See Note 16.
During
the year April 30, 2018 the Company issued an additional 7,390,983 shares of Common Stock in connection with the cashless exercise
of 10,101,010 warrants. See Note 26.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2018
On
February 28, 2018, 500,000 shares of Common Stock, which was recorded at fair value of $ .017348 per common
stock share, were issued to an outside investor in payment of professional services in the amount of $8,674.
Fiscal
2017 Activity
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”). 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.
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.
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.
In
connection with Hoppel Financing on October 17, 2016 and January 26, 2017, the Company issued 500,000 and 926,000 shares of Common
Stock, respectively. See Note 16.
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.
As
of April 30, 2018 and 2017, 413,937,240 and 349,811,110 shares of Common Stock were issued and outstanding, respectively. As of
April 30, 2018 an additional 7,640,043 shares of Common Stock were due under subscription agreement (see Note17).
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2018
Note
23. 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.
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.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2018
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 a 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, 2018 and 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 year ended April 30, 2018.
2017
Activity
During
the year ended April 30, 2017, the Company issued 967,031 of 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
|
|
|
Liability
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 year ended April 30, 2017, 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 fiscal year ended April 30, 2017.
See
Notes 12, 18 and 21.
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
24. 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:
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2018
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.
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.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2018
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. For the year ended
April 30, 2018, the Board of Directors declared a dividend of $94,812 to holders of the Series B Preferred Stock. During the
year ended April 30, 2018, the Company paid no cash dividends and accrued an additional $94,812. During the year ended
April 30, 2017, the Company paid Series B cash dividends in the amount of $94,812 and accrued an additional $13,767 for a total
dividend of $108,579 for the year ended April 30, 2017. Accrued dividend payable totaled $108,579 and $13,767 as of April
30, 2018 and 2017, respectively.
As
of April 30, 2018, there have been no conversion of the Preferred Stock into Common Stock.
2017
Activity
During
the year ended April 30, 2017, 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:
Series
B Shares
Issued and
Outstanding
|
|
|
Preferred
Stock
Series B
|
|
|
Additional
Paid In
Capital Series B
|
|
|
Total
Series B
|
|
|
Gain
on Settlement
of Liabilities
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
Notes 6, 11 and 20.
From
the date of issuance of the Series B Preferred Shares through April 30, 2017 the Company accreted $98,025 of the purchase discount.
As April 30, 2017, the Series B Preferred Shares had a fair value of $1,354,445.
Series
B was presented as temporary equity in the accompanying Consolidated Balance Sheet pursuant to ASC 480 as it was not initially
redeemable until September 1, 2017 however no holders of the Series B Preferred Stock notified the Company within the period commencing
February 1, 2017 and ending February 15, 2017, of their election to redeem their shares of Series B Preferred Stock thus Series
B was transferred to equity in the accompanying Consolidated Balance Sheet as of April 30, 2017.
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
25. Employee Stock Option Plan
2012
Stock Option Plan
The
Company terminated its 2012 Stock Option Plan following the expiration of all outstanding restricted stock units issued under
that plan. Below is a description of the terminated plan and the activity for the years ending April 30, 2018 and 2017.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2018
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.
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. 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, 2018
As
of April 30, 2018 and April 30, 2017 compensation expense of $1,000 and $6,636 respectively, was recorded as follows:
|
|
April,
2018
|
|
|
April,
2017
|
|
|
|
|
|
|
|
|
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 April 30, 2017 Compensation Expense
|
|
|
|
|
|
$
|
2,626
|
|
|
|
|
|
|
|
|
|
|
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, 2017 through April 30, 2018 Compensation Expense
|
|
$
|
1,000
|
|
|
|
|
|
May
1, 2016 through April 30, 2017 Compensation Expense
|
|
|
|
|
|
$
|
4,000
|
|
|
|
|
|
|
|
|
|
|
Total
compensation expense
|
|
$
|
1,000
|
|
|
$
|
6,626
|
|
Note
26. Warrants
For
the year ended April 30, 2018, 3,450,000 warrants were issued along with debt, and 2,000,000 were exercised and none forfeited.
For the year ended April 30, 2017, 10,550,000 warrants were issued along with debt, none exercised and none forfeited. See Notes
12 and 16.
On
February 1, 2017 the Company issued a total of 3,000,000 of common stock warrants to two outside consultants. The warrants have
an exercise price of $.0110 and expire on February 1, 2022. The warrants vest in one-third increments on April 30, 2017, 2018
and 2019. The fair value of the warrants was calculated using a Black-Scholes valuation model. As a result of this fair value
calculation the Company recognized warrant expenses in the amount of $22,533 and $16,516 for the years ended April 30, 2018 and
April 30, 2017, respectively.
The
Company’s outstanding and exercisable warrants as of April 30, 2018 and 2017 are presented below:
|
|
Number
Outstanding
|
|
|
Weighted
Average Exercise Price
|
|
|
Weighted
Average Contractual Life in Years
|
|
|
Intrinsic
Value
|
|
Warrants outstanding as of April 30, 2016
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Warrants exercisable as of April 30, 2016
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants granted
|
|
|
13,550,000
|
|
|
|
0.03
|
|
|
|
|
|
|
|
|
|
Warrants forfeited
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Warrants exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
3,450,000
|
|
|
|
0.05
|
|
|
|
|
|
|
|
|
|
Warrants forfeited
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Warrants exercised
|
|
|
(2,000,000
|
)
|
|
|
0.05
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants outstanding as of April 30, 2018
|
|
|
15,000,000
|
|
|
$
|
0.03
|
|
|
|
3.65
|
|
|
|
|
|
Warrants exercisable as of April 30, 2018
|
|
|
14,000,000
|
|
|
$
|
0.03
|
|
|
|
3.64
|
|
|
$
|
58,560
|
|
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2018
Note
27. Subsequent Events
Convertible
Note issued to Tangiers Global, LLC on May 7, 2018
On
May 7, 2018, the Company issued an unsecured 12% Convertible Promissory Note, in the principal amount of $236,085 to Tangiers
Global, LLC (Tangiers Note#3) with an original issue discount in the amount of $13,363. The Note is due November 27, 2018. The
Holder has the right, at the Holder’s sole option, at any time and from time to time, 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 is 55% of the lowest trading price for the common stock during the fifteen trading day period ending on the latest complete
trading day prior to the conversion date. This Note may be prepaid by the Company, in whole or in part within 90 days from
the effective date, at 135% of the Principal Amount. After 180 days from the date of funding of the Note (the “Effective
Date”) the Note may not be prepaid without written consent from Holder, which consent may be withheld, delayed or denied
in Holder’s sole and absolute discretion. If the Note is in default, the Company may not prepay the Note without written
consent of the Holder.
On
May 8, 2018 the Company paid Tangiers a forbearance amount of $122,722 which represents the guaranteed interest and prepayment
premium in connection with Tangiers Note 2. See Note 16.
Convertible
Note issued to Tangiers Global, LLC on May 24, 2018
On
May 24, 2018, the Company issued an unsecured 12% Fixed Convertible Promissory Note dated May 22, 2018 in the original
principal amount of $105,000 due November 22, 2018 to Tangiers Global, LLC. The amount of $5,000 was retained by the Holder through
an original issue discount for due diligence and legal bills related to this transaction, and the Company received net proceeds
of $100,000. The Note is convertible at any time at a conversion price equal to 55% of the lowest trading price of the Company’s
common stock during the 15 consecutive Trading Days prior to the date on which Holder elects to convert all or part of the Note.
The Company may prepay the Note between 0 and 180 days from the Note’s effective date at amounts ranging from 115% to 125%
of principal.
Global
Capital Partners Fund Limited
On
May 30, 2018 the Company entered into a financing commitment agreement with Global Capital Partners Fund Limited (the “Lender”)
for a 12 month with one 12 month extension $5,000,000 financing (the “Loan”) secured by a first mortgage lien
on our Cielo Mar property in Baja California, Mexico. The financing commitment is subject to execution of definitive agreements
and fulfillment of the closing conditions in such agreements. The Lender’s fee is 3%, or $150,000, of which we have paid
$55,000, the balance being due at closing. The Company also paid for appraisal costs of $19,795. The initial Loan
term is one year, with the option of the Company at the end of the first year to extend the term of the Loan for an additional
year. The interest rate on the Loan is up to 13% per annum in the first year term and increases to up to 14% for the second year.
The initial prepayment penalty is 5%; decreasing to none following 12 months of timely payments. The commitment provides that
closing shall take place prior to July 15, 2018.
On
July 19, the Lender extended their original commitment agreement to allow additional time for the lender-ordered MAI appraisal
to be completed and delivered, specifically, as well as any other outstanding items currently in-progress to be completed.
Amendment
to Auctus Fund Convertible Note
The
Company entered into an agreement with the Holder of the Auctus Convertible Note to amend the Note effective May 31, 2018, which
provides for the following amendments to the Note: in consideration of the Company’s having made a cash payment of $5,000
(the “Cash Payment”) to the Holder on or before June 4, 2018, which does not reduce the balance owed under the Note,
(i) the Holder shall only be entitled to effectuate a conversion under the Note on or after July 10, 2018, (ii) the “125%”
prepayment amount in Section 1.9(b) of the Note is increased to “135%”, and (iii) the Company shall be permitted to
exercise its right to prepay the Note pursuant to Section 1.9(b) of the Note (as amended by this Amendment) at any time before
July 10, 2018. See Note 16.
Bellridge
Capital, LP Convertible Debenture Issued June 14, 2018
Pursuant
to the terms of a Securities Purchase Agreement, dated June 14, 2018, the Company issued to Bellridge Capital, LP (the “Holder”)
a $7,500 Original Issue Discount 12% unsecured Convertible Debenture (the “
Debenture
”) in the principal
amount of $157,500, due June 14, 2019. In addition to the Original Issue Discount, the Holder deducted $5,000 as a due diligence
fee along with a $15 wire banking fee. At any time after the sooner to occur of (i)180 days from June 14, 2018, (ii)
when the shares issuable upon conversion of the Debenture have been registered on a registration statement that has been declared
effective by the Commission or (iii) if the Company is in breach or default of any of the Transaction Documents and until the
Debenture is no longer outstanding, the Debenture (including principal and accrued but unpaid interest on any principal being
converted, if any) is convertible, in whole or in part, into shares of Common Stock at the option of the Holder, at a conversion
price equal to 65% of the lowest closing price for the Company’s Common Stock on the Trading Market for the 15 Trading Days
prior to the conversion.
PROGREEN
US, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2018
During
the first six months the Debenture is in effect, the Company may redeem the Debenture by paying to the Holder an amount as follows:
(i) if the redemption is prior to the 90th day the Debenture is in effect (including the 90th day), then for an amount equal to
110% of the unpaid principal amount of the Debenture along with any interest that has accrued during that period; (ii) if the
redemption is on the 91st day the Debenture is in effect, up to and including the 120th day the Debenture is in effect, then for
an amount equal to 120% of the unpaid principal amount of the Debenture along with any accrued interest; (iii) if the redemption
is on the 121st day the Debenture is in effect, up to and including the 180th day the Debenture is in effect, then for an amount
equal to 125% of the unpaid principal amount of the Debenture along with any accrued interest.
a
mendment
to BlueHawk Capital LLC Convertible Promissory Note
Pursuant
to a June 14, 2018 amendment BlueHawk LLC (“BlueHawk”) agreed to extend the Maturity Date of the BlueHawk Convertible
Note to July 10, 2018, in exchange for increasing the applicable prepayment penalty under the BlueHawk Convertible Note from 125%
to 135%. See Note 16.
On
July 12, 2018, the Company entered into an agreement with Blue Hawk to amend and restate terms of the June 14, 2018 Amendment
to the Convertible Note. In consideration of the Company (i) issuing BlueHawk 400,000 shares of the Company’s restricted
common stock and (ii) adding $26,000 to the Principal amount of the Note (“Forbearance Amount”), BlueHawk agrees to
forbear its conversion rights until August 10, 2018.
Conversion
- Auctus Fund Convertible Note
On
July 10, 2018, the Auctus Fund converted $23,233 in principal together with $7,947 of accrued interest and $500 of conversion
fees. The conversion price was $0.00704 and 4,500,000 shares were issued. The remaining principal of the note is $87,642.
Conversion
- Power Up Lending Group Convertible Note
On
July 19, 2018, the Power Up Lending Group converted $15,000 in principal of the Note #5 convertible note. The conversion price
was $0.0102 and 1,470,588 shares were issued. The remaining principal of the note was $48,000.
On
July 23, 2018, the Power Up Lending Group converted $15,000 in principal of the Note #5 convertible note. The conversion price
was $0.0073 and 2,054,795 shares were issued. The remaining principal of the note is $33,000.
Subscription
Agreement
On
May 24, 2018, the Company entered into a Subscription Agreement with Tangiers Global, LLC for the sale by the Company to Tangiers
Global LLC an aggregate of 2,117,747 shares of the Company’s Common Stock, with an investment in the amount of $50,000,
at a price of $0.02361 per share.
Acquisition
of New Land for Baja California Agriculture and Real Estate Projects
On
June 15, 2018, ProGreen US, Inc.’s subsidiary in Baja California, Mexico, Procon Baja JV (Procon), entered into a definitive
purchase agreement for, and has taken possession of, a 2,500 acre tract of land in Baja California. The total purchase price is
$160,000. $30,000 was due at the signing of the agreement with subsequent payment of $10,000 per month, beginning in June 2018
to June 2019.