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EX-32 - Progreen US, Inc.ex-32.htm
EX-31 - Progreen US, Inc.ex-31.htm
EX-21 - Progreen US, Inc.ex21.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

[X] ANNUAL REPORT PURSUANT TO SECTION 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended: April 30, 2018

 

OR

 

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from __________ to __________

 

Commission File No. 000-25429

 

PROGREEN US, INC.

(Exact name of Registrant as Specified in Its Charter)

 

Delaware   59-3087128
(State or other jurisdiction of   (I.R.S. Employer
Incorporation or organization)   Identification No.)

 

2667 Camino del Rio South, Suite 312

San Diego, CA

  92108-3763
(Address of principal executive offices)   (Zip Code)

 

Issuer’s Telephone Number, Including Area Code: (619) 487-9585

 

Securities registered pursuant to Section 12(b) of the Act: None

 

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.0001 par value per share

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [  ] No [X]

 

Indicate by checkmark if the registrant is not required to file reports to Section 13 or 15(d) Of the Act. [  ] Yes [X] No

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [  ] No

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [  ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [  ] No [X]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer [  ] Accelerated filer [  ]
Non-accelerated filer [  ] Smaller reporting company [X]
(Do not check if a smaller reporting company)      
Emerging growth company [X]      

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Yes [X] No [  ]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [  ] Yes [X] No

 

The aggregate market value of the voting and non-voting common equity held by non-affiliates as of the last business day of the registrant’s most recently completed second fiscal quarter was $4,930,991.

 

Number of shares of Common Stock outstanding as of August 12, 2018: 432,120,413 shares.

 

 

 


 

 

 

TABLE OF CONTENTS

 

   

Page

No.

     
PART I  
     
Item 1. Business 1
Item 1A. Risk Factors 7
Item 1B. Unresolved Staff Comments 12
Item 2. Properties 12
Item 3. Legal Proceedings 12
Item 4. Mine Safety Disclosures 12
     
PART II  
     
Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities 12
Item 6. Selected Financial Data 13
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 13
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 24
Item 8. Financial Statements and Supplementary Data 25
Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure 26
Item 9A (T). Controls and Procedures 26
Item 9B. Other Information 26
     
PART III  
     
Item 10. Directors, Executive Officers, and Corporate Governance 27
Item 11. Executive Compensation 29
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 30
Item 13. Certain Relationships and Related Transactions, and Director Independence 31
Item 14. Principal Accountant Fees and Services 34
Item 15. Exhibits and Financial Statement Schedules 35
     
SIGNATURES   44

 

 

 

 

FORWARD LOOKING STATEMENTS

 

This Report contains forward-looking statements within the meaning of the Private Securities Reform Act of 1995 including the adequacy of our working capital and our acquisition plans. In addition to these statements, trend analyses and other information including words such as “seek,” “anticipate,” “believe,” “plan,” “estimate,” “expect,” “intend” and other similar expressions are forward looking statements. These statements are based on our beliefs as well as assumptions we made using information currently available to us. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Because these statements reflect our current views concerning future events, these statements involve risks, uncertainties, and assumptions. Actual future results may differ significantly from the results discussed in the forward-looking statements. We anticipate that some or all of the results may not occur because of factors which we discuss in the “Risk Factors” section.

 

We are an “emerging growth company” under the federal securities laws and will be subject to reduced public company reporting requirements. Investing in our common stock involves risks. See “Risk Factors” beginning on page 7.

 

PART I

 

Item 1. Business.

 

General

 

We have recently 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. The purchase of a condominium unit on July 28, 2009 initiated our real estate development operations directed at purchasing income-producing residential real estate apartment homes, condominiums and houses in the State of Michigan. As of April 30, 2018, we had sold all properties owned in Michigan, and we have refocused our efforts to concentrate on the same line of business for our Cielo Mar development in Baja, California.

 

Real Estate Development and Marketing Operations

 

Environmental Objectives in our Operations

 

To make homes more comfortable, we try to, whenever practical, optimize space by creating openness, introducing more natural light, creating better storage areas, as well as aiming to improve insulation, all with a view to make even small condominiums and apartments eco-friendly and practical. This ideology, we believe, will increase property value as well as to further create tenant loyalty in the rental market.

 

For a healthier living environment, we use eco-friendly, paints, primers and adhesives; improve air quality through better ventilation and air filtration in heating and air conditioning system, whenever feasible.

 

Property Acquisition Strategy

 

Each property acquired utilized a separate wholly-owned limited liability company for that particular property. This limited the risk exposure to a particular property solely to that property. Our property management strategy is to deliver quality services, thereby promoting tenant satisfaction, maintaining high tenant retention, and enhancing the value of each of our operating real estate assets through eco-friendly improvements.

 

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In analyzing the potential development of a particular project, we evaluate the geographic, demographic, economic, and financial data, including:

 

  Households, population and employment growth;
     
  Prevailing rental and occupancy rates in the market area, and possible growth in those rates; and
     
  Location of the property in respect to schools and public transportation.

 

Environmental and Other Regulatory Matters

 

Under various federal, state, and local laws and regulations, an owner of real estate is liable for the costs of removal or remediation of hazardous or toxic substances on the property. Those laws often impose liability without regard to whether the owner knew of, or was responsible for, the presence of the hazardous or toxic substances. The costs of remediation or removal of the substances may be substantial, and the presence of the substances, or the failure to remediate the substances promptly, may adversely affect the owner’s ability to sell the real estate or to borrow using the real estate as collateral.

 

Insurance

 

We carry comprehensive property, general liability, fire, extended coverage and environmental on all of our existing properties, with policy specifications, insured limits, and deductibles customarily carried for similar properties.

 

Baja California

 

Our real estate development operations are now concentrated in Baja California, Mexico. On February 11, 2016, we signed a definitive agreement with Inmobiliaria Contel S.R.L.C.V. (“Contel”) for Progreen to finance the first tract of land of approximately 300 acres which is being developed by Contel for agriculture use.

 

Procon Baja JV, S. de R.L. de C.V.

 

On June 17, 2016, the Company formed Procon Baja JV, S. de R.L. de C.V. (“Procon” or “Procon joint venture”), a subsidiary owned by Progreen (51%) and Contel (49%). Procon is managed by a board of Managing Directors consisting of three members, of which two represent Progreen and one represents Contel, and Jan Telander, our CEO, is the General Manager of Procon. On January 23, 2017, Procon entered into a definitive purchase agreement for, and has took possession of, a large tract of land situated near the town of El Rosario in Baja California, Mexico. The land, planned for residential real estate development, is bordering the Pacific Ocean and covers a total area of approximately 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”. Translated into English, Cielo means “heaven” and Mar means “sea”, the Cielo Mar planned community thus being “heaven by the sea.” The Preliminary Master Plan was published April 19, 2018, and the planning for the first execution phase of the development is currently underway.

 

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Cielo Mar location photo, Bahia del Rosario, Baja California, Mexico – March 1, 2017 (above)

 

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Cielo Mar Preliminary Master Plan – April 19, 2018 (above)

 

Cielo Mar Phase I Execution Plan – July 2, 2018 (above)

 

In Mexico, as the land cost in Baja California through our joint venture is substantially below market price, we have a distinct advantage and will have a competitive edge as far as pricing is concerned. We initially found substantial amounts of water, which increases the value and attractiveness to the land.

 

On June 15, 2018, Procon entered into a definitive purchase agreement for, and took possession of a second large tract of land covering approximately 2,500 acres, situated less than a mile from the 300 acres that is being developed by Contel. Part of the land, with over 1,000 acres expected to be farmable, is planned for expansion of the ProGreen Farms™ operation.

 

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Agricultural Operations

 

Our agricultural operations are branded under the trademark name, “ProGreen Farms.” We funded our joint operating partner, Contel, for the development of a “pilot” farm operation on the 300-acre parcel at Rancho Arenoso, where 80 acres were developed for farming in 2017.

 

Last year was considered a pilot year where the farm grew 6 different types of chilies to determine the most suitable for the area/soil etc. The farm did harvest some but really only one type produced decent results, which is the type the farm is growing this year. Total income from the harvest last year was approximately $225,000 out of which $50,000 was paid back to Progreen with the balance went to cover the operating costs of the farm.

 

Also in 2017, ProGreen Farms US, LLC, a wholly owned subsidiary of the Company, was set up to handle sales and distribution of Contel’s produce.

 

The farming on the Arenoso farm is progressing well as planned. We will start harvesting in August 2018 and go on through December 2018.

 

A suitable variety of chili pepper with high yield was grown and harvested at the Arenoso farm in 2017, and was subsequently approved by Huy Fong Foods, Inc., resulting in a contract for ProGreen Farms US, LLC to supply red chili peppers to Huy Fong in 2018. The farm will be delivering 2,500 tons (worth $1,200,000) of red chilis to Huy Fong Foods as per the agreement in place, but expect to be producing more like 3,500 or perhaps even 4,000 tons this year on the 40HA or 100 acres we are actively now farming.

 

The surplus we will likely sell to the fresh produce market in Baja as we will be producing late in fall when the availability is very limited and the prices much higher than in the summer months. This will be to buyers that buy and pick up the produce directly at the farm (en campo).

 

With the successful establishment of the pilot farm operation at Rancho Arenoso and a sales contract for 2018, our agriculture operation is well-positioned for growth, with the pilot farm serving as a model for further land development and operations.

 

 

ProGreen Farms™ Rancho Arenoso farm – May 4, 2018 (above)

 

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2018 Chili Pepper Plants, ProGreen Farms™ Rancho Arenoso – May 8, 2018 (above)

 

2018 Chili Pepper Plants, ProGreen Farms™ Rancho Arenoso – July 11, 2018 (above & below)

 

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2018 Chili Pepper Plants, ProGreen Farms™ Rancho Arenoso – May 8, 2018 (above)

 

Employees

 

As of April 30, 2018, we had one full-time employee, our Chief Executive Officer. Our administrator as well as our real estate broker work as independent contractors. Our management expects to confer with consultants, attorneys and accountants as necessary.

 

Item 1A. Risk Factors.

 

Investing in our common stock involves a high degree of risk. You should carefully consider the following risk factors before deciding whether to invest in the Company. Additional risks and uncertainties not presently known to us, or that we currently deem immaterial, may also impair our business operations or our financial condition. If any of the events discussed in the risk factors below occur, our business, consolidated financial condition, results of operations or prospects could be materially and adversely affected. In such case, the value and marketability of the common stock could decline.

 

Additional risks and uncertainties not presently known to us, or that we currently deem immaterial, may also impair our business operations or our financial condition. If any of the events discussed in the risk factors below occur, our business, consolidated financial condition, results of operations or prospects could be materially and adversely affected. In such case, the value and marketability of the common stock could decline.

 

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Risks Relating to Our Business

 

Because we have a limited operating history to evaluate our company, the likelihood of our success must be considered in light of the problems, expenses, difficulties, complications and delay frequently encountered by a new company.

 

We have a limited operating history. As of April 30, 2018, we had cash on hand of approximately $106,000 and approximately $500,000 of land under development. At that same date our liabilities totaled approximately $3,482,000. As at April 30, 2018, we had a stockholders’ deficit of approximately $1,531,000.

 

The Company will require significant additional funding to execute its future strategic business plan. Successful business operations and its transition to attaining profitability is dependent upon obtaining additional financing and achieving a level of revenue adequate to support its cost structure. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. This basis of accounting contemplates the recovery of the Company’s assets and the satisfaction of liabilities in the normal course of business. 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 this uncertainty.

 

If we need additional capital to fund our growing operations, we may not be able to obtain sufficient capital and may be forced to limit the scope of our operations.

 

The severe recession, freezing of the global credit markets and the decline in the stock market which continues to affect smaller companies like us may adversely affect our ability to raise capital if we need additional working capital. Because we have not reported profitable operations to date, we may need to raise working capital. If adequate additional financing is not available on reasonable terms or at all, we may not be able to undertake expansion, and we will have to modify our business plans accordingly.

 

Even if we do find a source of additional capital, we may not be able to negotiate terms and conditions for receiving the additional capital that are acceptable to us. Any future capital investments will dilute or otherwise materially and adversely affect the holdings or rights of our existing shareholders. In addition, new equity or convertible debt securities issued by us to obtain financing could have rights, preferences and privileges senior to our common stock. We cannot give you any assurance that any additional financing will be available to us, or if available, will be on terms favorable to us.

 

Because real estate properties are illiquid and may be difficult to sell, we could face future difficulties in selling these properties and may not be able to sell them at a profit.

 

Real estate investments are relatively illiquid, which limits our ability to react quickly to adverse changes in economic or other market conditions. Our ability to dispose of assets in the future will depend on prevailing economic and market conditions. Interested buyers may be unable to obtain the financing they need. We may be unable to sell our properties when we would prefer to do so to raise capital we need to fund our planned development and construction program or to fund distributions to investors.

 

Because we operate in the Baja, Mexico, area, we are subject to risks that affect that local area.

 

General economic conditions and other factors beyond our control may adversely affect real property income and capital appreciation of our agricultural and resort development operations in the Mexico.

 

Because of environmental laws, we may have liability under environmental laws even though we did not violate these laws.

 

Under federal, state, and local environmental laws, ordinances, and regulations, we may be required to investigate and clean up the effects of releases of hazardous or toxic substances or petroleum products at our properties, regardless of our knowledge or responsibility, simply because of our current or past ownership or operation of the real estate. If environmental problems arise, we may have to take extensive measures to remedy the problems, which could adversely affect our cash flow and operating results. The presence of hazardous or toxic substances or petroleum products and the failure to remediate that contamination properly may materially and adversely affect our ability to borrow against, sell, or lease an affected property. In addition, applicable environmental laws create liens on contaminated sites in favor of the government for damages and costs it incurs in connection with a contamination.

 

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International operations expose us to political, economic and currency risks.

 

With regard to our investments in properties located in Mexico, we are subject to the risks of doing business abroad, including,

 

  Currency fluctuations;
     
  Changes in tariffs and taxes; and
     
  Political and economic instability.

 

Changes in currency exchange rates may affect the relative costs of operations in Mexico, and may affect the cost of developing the properties, thus possibly adversely affecting our profitability.

 

In addition, there are inherent risks for the foreseeable future of conducting business internationally. Language barriers, foreign laws and tariff and taxation issues all have a potential negative effect on our ability to transact business. Changes in tariffs or taxes applicable to investments in foreign operations may adversely affect our profitability. Political instability may increase the difficulties and costs of doing business. We may be subject to the jurisdiction of the government and/or private litigants in foreign countries where we transact business, and may be forced to expend funds to contest legal matters in those countries in disputes with those governments or with customers or suppliers.

 

Property development in Mexico has many regulatory uncertainties.

 

Our property investments in Mexico are subject to numerous risks beyond our control. Decisions to purchase, explore, develop or otherwise exploit prospects or properties in which we have invested will depend in part on the evaluation of data obtained through geophysical and geological analyses, water production data and engineering studies, the results of which are often inconclusive or subject to varying interpretations. Overruns in budgeted expenditures are common risks that can make a particular project uneconomical. Further, many factors may curtail, delay or cancel development of these properties, including the following:

 

  delays imposed by or resulting from compliance with regulatory requirements;
     
  shortages of or delays in obtaining qualified personnel or equipment;
     
  equipment failures or accidents; and
     
  adverse weather conditions, such as hurricanes and storms.

 

The presence of one or a combination of these factors at our properties could adversely affect our business, financial condition or results of operations.

 

We are subject to complex laws that can affect the cost, manner or feasibility of doing business.

 

The development of real estate is subject to extensive federal and provincial regulation in Mexico. We may be required to make large expenditures to comply with governmental regulations. Matters subject to regulation include:

 

  water production permits;
     
  reports concerning operations;

 

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  the spacing of wells;
     
  unitization and pooling of properties; and
     
  taxation.

 

Under these laws, we could be liable for personal injuries, property damage and other damages. Failure to comply with these laws also may result in the suspension or termination of our operations and subject us to administrative, civil and criminal penalties. Moreover, these laws could change in ways that could substantially increase our costs. Any such liabilities, penalties, suspensions, terminations or regulatory changes could materially adversely affect our financial condition and results of operations.

 

Operations of properties in which we have investments may incur substantial liabilities to comply with environmental laws and regulations.

 

The properties in which we have invested are subject to stringent federal and provincial laws and regulations relating to the release or disposal of materials into the environment or otherwise relating to environmental protection. These laws and regulations may require an environmental impact study before development commences; and impose substantial liabilities for pollution resulting from our operations. Failure to comply with these laws and regulations may result in the assessment of penalties or the incurrence of investigatory or remedial obligations.

 

Risks Related to Our Common Stock

 

Since we expect to incur expenses in excess of revenues for the near future, we may not become profitable and your investment may be lost.

 

We expect to incur losses for the foreseeable future. We had minimal revenues in our fiscal year ended April 30, 2018, and may never be profitable. If we become profitable, we may be unable to sustain profitability. As a result, your investment in our securities may be lost.

 

Due to factors beyond our control, our stock price may be volatile.

 

The market price for our common stock has been highly volatile at times. As long as the future market for our common stock is limited, investors who purchase our common stock may only be able to sell them at a loss.

 

Because we may not be able to attract the attention of major brokerage firms, it could have a material impact upon the price of our common stock.

 

It is not likely that securities analysts of major brokerage firms will provide research coverage for our common stock since the firm itself cannot recommend the purchase of our common stock under the penny stock rules referenced in an earlier risk factor. The absence of such coverage limits the likelihood that an active market will develop for our common stock. It may also make it more difficult for us to attract new investors at times when we require additional capital.

 

Our bylaws contain provisions indemnifying our officers and directors against all costs, charges and expenses incurred by them.

 

Our bylaws contain provisions with respect to the indemnification of our officers and directors against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, actually and reasonably incurred by them, including an amount paid to settle an action or satisfy a judgment in a civil, criminal or administrative action or proceeding to which they are made parties by reason of their being or having been our directors or officers.

 

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We do not intend to pay dividends on any investment in the shares of common stock of our company and any gain on an investment in our common stock will need to come through an increase in our stock’s price, which may never happen.

 

We have never paid any cash dividends and currently do not intend to pay any dividends on our common stock for the foreseeable future. To the extent that we require additional funding currently not provided for in our financing plan, our funding sources may prohibit the payment of a dividend. Because we do not intend to declare dividends, any gain on an investment in our company will need to come through an increase in our common stock’s price. This may never happen and investors may lose all of their investment in our company.

 

We are an emerging growth company, and reduced reporting and disclosure requirements applicable to emerging growth companies could make our common stock less attractive to investors.

 

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act, or the JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We could be an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier, including if the market value of our common stock held by non-affiliates exceeds $700 million as of any June 30 before that time, in which case we would no longer be an emerging growth company as of the following December 31. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

 

Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourself of this exemption from new or revised accounting standards and, therefore, will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

 

Because our securities are subject to penny stock rules, you may have difficulty reselling your shares.

 

Our shares as penny stocks, are covered by Section 15(g) of the Securities Exchange Act of 1934 which imposes additional sales practice requirements on broker/dealers who sell our company’s securities including the delivery of a standardized disclosure document; disclosure and confirmation of quotation prices; disclosure of compensation the broker/dealer receives; and, furnishing monthly account statements. These rules apply to companies whose shares are not traded on a national stock exchange, trade at less than $5.00 per share, or who do not meet certain other financial requirements specified by the Securities and Exchange Commission. These rules require brokers who sell “penny stocks” to persons other than established customers and “accredited investors” to complete certain documentation, make suitability inquiries of investors, and provide investors with certain information concerning the risks of trading in such penny stocks. These rules may discourage or restrict the ability of brokers to sell our shares of common stock and may affect the secondary market for our shares of common stock. These rules could also hamper our ability to raise funds in the primary market for our shares of common stock.

 

FINRA sales practice requirements may also limit a stockholder’s ability to buy and sell our stock.

 

In addition to the “penny stock” rules described above, the Financial Industry Regulatory Authority (known as “FINRA”) has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common shares, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.

 

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Item 1B. Unresolved Staff Comments.

 

Not applicable.

 

Item 2. Properties.

 

On May 30, 2017, we leased 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 four-month lease, after which the lease became month-to-month.

 

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.

 

We also continue to be obligated under a lease for our former offices at 6443 Inkster Road, Suite 170-D, Bloomfield Township, MI 48301, of approximately 1,000 sq. ft., at a monthly rent of $934 through March 1, 2019.

 

 

Item 3. Legal Proceedings.

 

We are not party to any material legal proceedings.

 

Item 4. Mine Safety Disclosures.

 

None.

PART II

 

Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities.

 

Market Information

 

Our common shares are trading in the OTC markets under the symbol “PGUS”.

 

The following table sets forth, for the periods indicated, the high and low bid prices of our common stock, as reported in published financial sources. Quotations reflect inter-dealer prices, without retail mark-up, mark-down, commission, and may not represent actual transactions.

 

   High   Low 
Fiscal Year Ended April 30, 2016  $      
Quarter Ended July 31, 2015  $0.013   $0.005 
Quarter Ended October 31, 2015  $0.004   $0.001 
Quarter Ended January 31, 2016  $0.001   $0.001 
Quarter Ended April 30, 2016  $0.004   $0.001 
Fiscal Year Ended April 30, 2017          
Quarter Ended July 31, 2016  $0.006   $0.004 
Quarter Ended October 31, 2016  $0.028   $0.005 
Quarter Ended January 31, 2017  $0.019   $0.01 
Quarter Ended April 30, 2017  $0.029   $0.011 
Fiscal Year Ended April 30, 2018          
Quarter Ended July 31, 2017  $0.022   $0.019 
Quarter Ended October 31, 2017  $0.017   $0.01 
Quarter Ended January 31, 2018  $0.0175   $0.0095 
Quarter Ended April 30, 2018  $0.037   $0.017 

 

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Holders

 

As of August 12, 2018 there were approximately 541 holders of record of our common stock.

 

Dividends

 

We do not anticipate paying cash dividends in the foreseeable future. Our current policy is to retain any earnings to finance our future development and growth. We may reconsider this policy from time to time in light of conditions then existing, including our earnings performance, financial condition and capital requirements. Any future determination to pay cash dividends will be at the discretion of our board of directors and will depend upon our financial condition, operating results, capital requirements, general business conditions and other factors that our board of directors deems relevant.

 

Securities Authorized for Issuance Under Equity Compensation Plans

 

None.

 

Item 6. Selected Financial Data.

 

Not applicable.

 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

The following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and notes thereto and other financial information included elsewhere in this report.

 

Certain statements contained in this report, including, without limitation, statements containing the words “believes,” “anticipates,” “expects” and words of similar import, constitute “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including our ability to create, sustain, manage or forecast our growth; our ability to attract and retain key personnel; changes in our business strategy or development plans; competition; business disruptions; adverse publicity; and international, national and local general economic and market conditions.

 

GENERAL

 

Throughout this report, the terms “we,” “us,” “our,” “ProGreen” and the “Company” refer to ProGreen US, Inc., a Delaware corporation and, unless the context indicates otherwise, includes our subsidiaries.

 

The Company was incorporated in Florida on April 23, 1998 and reincorporated in Delaware on December 12, 2008. Effective September 11, 2009, we changed our name from Diversified Product Inspections, Inc. to Progreen Properties, Inc. to reflect the change in our business operations from the conduct of investigations and laboratory analyses operations to the purchase of income producing properties and changed our name effective July 22, 2016 to ProGreen US, Inc., to reflect initiation of development operations in Baja Mexico.

 

OUR BUSINESS

 

Our office is in San Diego, California, which is proximate to our agricultural and development projects in Baja California, on which our current business operations are focused. The purchase of a condominium unit on July 28, 2009 initiated our real estate development operations directed at purchasing income-producing residential real estate apartment homes, condominiums and houses in the State of Michigan. As of April 30, 2018, we had sold all properties owned in Michigan, and we have refocused our efforts to concentrate on the same line of business for our Cielo Mar development in Baja, California.

 

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Michigan

 

We liquidated our real estate portfolio in Michigan by offering the properties with land contracts to buyers unable to obtain conventional financing. The goal of selling these properties is to focus on the agricultural and Cielo Mar project.

 

During the years ended April 30, 2018 and 2017 we sold ten and four of our properties, respectively. We have no properties as of April 30, 2018. We do not offer, and do not intend in the future to offer, managed properties as investment properties.

 

Baja California Joint Venture Agreement

 

On February 11, 2016, we signed a definitive agreement with Contel for Progreen to finance the first tract of land of approximately 300 acres which has been developed and is operated by Contel for agriculture use. Four wells were drilled on the first tract, and the growing operation commenced with a first produce purchase agreement for chile peppers - from Agricola Consuela, an exporter/importer to the U.S. market.

 

In addition, we have formed the Procon joint venture subsidiary, which is the holding company for further non-agricultural land and real estate developments. On January 23, 2017, Procon entered into a definitive purchase agreement for, and took possession of, a large tract of land situated near the town of El Rosario in Baja California. The land, planned for a residential real estate development, is bordering the Pacific Ocean and covers a total area of 2,016 ha (5,000 acres) with 7.5 km (4.5 miles) of ocean front.

 

The transfer of deed for 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 very large resort-type retirement and vacation community with the name “Cielo Mar”. The first phase of the development of the master plan is underway.

 

FINANCIAL CONDITION

 

At April 30, 2018, we had total assets of approximately $1,951,000 compared to total assets of approximately $2,395,000 at April 30, 2017. The decrease in total assets was primarily due to:

 

  Decrease in Cash of approximately $183,000,
     
  Rental Property decrease approximately $732,000 due to the sale of ten remaining properties during the year ended April 30, 2018,

 

Net Accounts Receivable decreased by approximately $5,000 due the write off of rent due from tenants in the amount of approximately $30,600 and $7,400, in the years ended April 30, 2018 and 2017, respectively,

 

  Notes Receivable-Related Party increased by approximately $497,000 due to a net $497,000 loan ($50,000 was repaid) to Contel for operations of the agriculture activity,
     
  Other Assets increased approximately $66,000 due to an increase in activities carried on by Procon,of approximately $70,000, offset by a decrease in miscellaneous assets of approximately $4,000,
     
  Notes Receivable Land Contract decreased approximately $87,000 due to the Company’s issuance of land contracts to the buyers of three of the properties sold in the year ended April 30, 2018, offset by an increase in allowance for uncollectible accounts of approximately $216,000.

 

Cash decreased to approximately $106,000 for the year ended April 30, 2018, compared to cash of approximately $289,000 at April 30, 2017. Cash used in operating activities was approximately $887,000 in the year ended April 30, 2018, as compared with cash used in operating activities of approximately $617,000 in the year ended April 30, 2017.

 

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At April 30, 2018, we had stockholders’ deficit of approximately $1,531,000 compared to a deficit of approximately $200,000 as of April 30, 2017. The increase in stockholders’ deficit was due to:

 

  Net operating losses of approximately $1,052,000;
  Dividend on redeemable, Convertible Preferred Stock, Series B of approximately $95,000;
  Issuance of Common Stock with true-up feature of approximately $1,258,000;
  Tainting due to convertible debt and warrants of approximately $151,000
  Other comprehensive loss of approximately $33,000,

 

Offset by

 

  Common stock issued under convertible debt of approximately $101,000;
  Common stock issued for convertible note settlement of approximately $18,000;
  Common stock issued for cash of approximately $705,000;
  Common stock warrants issued for services of approximately $23,000;
  Warrants issued related to convertible note of approximately $29,000;
  Common stock issued for services of approximately $9,000,
  Reclassification of derivative liability due to conversion of approximately $374,000.

 

Costs incurred in the renovation of the properties that enhance the value or extend the life of the properties are capitalized. The Company owned 0 and ten rental properties as of April 30, 2018 and 2017, respectively. The Company held no properties under development as of April 30, 2018 and one as of April 30, 2017.

 

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 on April 30, 2009. Management recognizes successful business operations and the Company’s transition to attaining profitability are dependent upon obtaining additional financing and achieving a level of revenue adequate to support its cost structure. These conditions raise substantial doubt about its ability to continue as a going concern. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of uncertainties.

 

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 second 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.

 

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Cash

 

Cash decreased approximately $183,000 for the year ended April 30, 2018. Cash used in operating activities was approximately $887,000 for the year ended April 30, 2018, as compared with cash used in operating activities of approximately $617,000 in fiscal 2017. During fiscal 2018, the Company loaned approximately $547,000 to Contel and purchased fixed assets in the amount of approximately $3,000, which were offset by proceeds from the sale of properties of approximately $505,000, proceeds from related party loan repayment of $50,000 and proceeds from notes receivable in the amount of approximately $4,000.

 

The Company received: approximately $705,000 in proceeds from the sale of common stock, approximately $480,000 in proceeds from advances from a related party, approximately $49,000 in proceeds from note payable and approximately $1,140,000 in proceeds from convertible debentures and repaid: approximately $53,000 of notes payable to a related party, approximately $907,000 of convertible debentures, approximately $682,000 on the line of credit, and approximately $3,000 on obligations under capital leases .

 

Rental properties and properties under development

 

The Company owned no and ten rental properties as of April 30, 2018 and 2017, respectively. Rental properties totaled $0 and $732,000 at April 30, 2018 and 2017, respectively.

 

The Company held no properties under development as of April 30, 2018 and 2017.

 

Land under Development

 

The Company owned land under development in the amount of $500,000 at April 30, 2018 and 2017.

 

Business Combination

 

On March 8, 2016, the Company restructured its working arrangements with AMREFA through entry into a purchase agreement, amended March 16, 2016, with AMREFA for the purchase of a 100% interest in AMREFA’s U.S. subsidiary, ARG LLC (ARG), which holds real estate properties in Birmingham, Michigan, that were purchased by AMREFA and which the Company managed for AMREFA. The Company recorded Goodwill in the amount of $180,000 in connection with the purchase of ARG. During fiscal 2017, 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 $180,000 and the entire goodwill balance was written off during the year ended April 30, 2017.

 

Investment

 

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 general manager is not required to consult with our Chief Executive Officer on any management decisions in the conduct of Contel’s business.

 

The property acquired by Contel will be developed for agricultural purposes and multi-use purposes. The Company initially committed to loan(s) up to the amount of $350,000 and on February 1, 2017, the Company increased its loan commitment to $1,000,000. On April 18, 2018, the loan commitment was increased to $1,500,000.

 

The Company is entitled to a 50% share of Contel’s profits and losses subsequent to repayment of all outstanding loans.

 

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In the years ended April 2018 and 2017, the Company contributed $547,000 to and received repayments in the amount of $50,000 from Contel and contributed $580,500 to Contel, respectively, which is 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.

 

RESULTS OF OPERATIONS

 

Year Ended April 30, 2018 Compared to Year Ended April 30, 2017

 

During the year ended April 30, 2018, we incurred a net loss of approximately $1,052,000 compared to a net loss of $1,478,000 for the year ended April 30, 2017. The decrease in our loss for the year ended April 30, 2018 from the comparable prior year is due to a decrease in our revenue of approximately $150,000 and an increase of approximately $79,000 in operating expenses which were partially offset by a decrease in net other expenses of approximately $654,000.

 

The decrease in revenue in the fiscal year ended April 30, 2018 compared to fiscal 2017 is due to:

 

Rental revenue decreased to approximately $25,000 during the year ended April 30, 2018 as compared to $91,000 during the prior fiscal year. The Company received rental income on five properties during portions of the year ended April 30, 2018, as compared to rental income earned on between five and seven properties during the entire year ended April 30, 2017.

 

Proceeds from the sale of properties increased to approximately $747,000 during the year ended April 30, 2018 as compared to $575,000 in the comparable prior year end and corresponding cost of properties sold increased to approximately $783,000 as compared to $554,000 during the year ended April 30, 2017. However, during 2018 and 2017, the profit in connection with the sale of three and two properties, which the Company financed, was deferred in the amount of $64,000 and $42,000, resulting in a net loss from sale of properties of approximately $100,000 and $21,000, respectively. The Company sold ten properties in the year ended April 30, 2018 as compared to four in the comparable prior year end.

 

Commission revenue was $0 for the year ended April 30, 2018 as compared to approximately $4,000 during the fiscal year ended April 30, 2017. The Company received commissions on the sale of two of the properties in the fiscal year ended April 30, 2017. There were no such commissions earned during the current fiscal year.

 

There have been fluctuations in certain expenses in the fiscal year ended April 30, 2018, as compared to the fiscal year ended April 30, 2017.

 

Selling, general and administrative expense decreased approximately $104,000 for the year ended April 30, 2018 as compared to the comparable prior year mainly due to the following:

 

Rental property costs and depreciation expense decreased approximately $29,000 for the year ended April 30, 2018 as compared to the comparable prior period as a result of the sale, during fiscal 2018 and 2017, of all of the rental properties the Company acquired from ARG in the last quarter of fiscal 2016.

 

Commission and closing costs expense decreased approximately $36,000 for the year ended April 30, 2018 as compared to the comparable prior period as a result of the sale of ten properties with no commissions paid in fiscal 2018. Commission was paid on the sale of two of the four properties sold in fiscal 2017.

 

Travel fees decreased approximately $26,000 for the year ended April 30, 2018 as compared to the comparable prior period as a result of the CEO’s move to Mexico resulting in less business travel costs between California and Mexico.

 

Salary, payroll tax and employee related expenses decreased approximately $144,000 for the year ended April 30, 2018 as compared to the comparable prior period mainly due to the reduction in the Company’s CEO salary, related payroll taxes and housing allowance and the termination of the office manager in fiscal 2018.

 

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Compensation expense decreased approximately $7,000 for the year ended April 30, 2018 as compared to the comparable prior period due to the expiration of stock options.

 

Rent and office expenses increased approximately $22,000 for the year ended April 30, 2018 as compared to the comparable prior period as a result of the Company operating out of offices in California and Mexico.

 

Investor relations expense increased approximately $27,000 for the year ended April 30, 2018 as compared to the comparable prior period as a result of more activity in publicity for the Company.

 

Miscellaneous expense and other expenses, which includes costs from ProCon increased approximately $89,000 due to architectural costs and administrative cost incurred by the architects for the Cielo Mar project.

 

Bad debt expense increased approximately $179,000 from $10,000 for the year ended April 30, 2017 to a loss of $189,000 in the current year ended April 30, 2018 as the Company recorded approximately $195,000 in connection with its Notes receivable land contracts. The Company wrote off approximately $12,000 of rent from rental properties (all of which were sold by April 30, 2018). Due to the irregular payments from the land contracts, all but one of the land contracts have been reserved 100%.

 

During the fiscal year ended April 30, 2017 the Company recorded a bad debt reserve of approximately $7,000 in connection with rent due on one of its rental properties and approximately $5,000 in connection with its Notes receivable land contracts, net of $2,000 received in payment in full on a previously written off land contract receivable.

 

Professional fees increased approximately $184,000 for the year ended April 30, 2018 as compared to the comparable prior year mainly due to:

 

Audit, accounting and legal and fees increased approximately $69,000 mainly due to, the increased complexity of accounting issues and regulatory compliance costs.

 

Consultant fees paid increased approximately $114,000 for the year ended April 30, 2018 as compared to the comparable prior period due to increased use of a consultant due to the complexity of accounting issues and increased assistance needed with securing financing arrangements.

 

Impairment loss expense decreased from approximately $180,000 for the year ended April 30, 2017 to $0 for the year ended April 30, 2018 due to the Company’s determination the goodwill relating to its acquisition of ARG was impaired and a loss in the amount of approximately $180,000 was recognized in the last quarter of fiscal 2017.

 

Interest expense was approximately $1,141,000 for the year ended April 30, 2018 as compared to approximately $300,000 for the comparable prior year mainly due to increased debt and convertible debt during the current year and the related interest and amortization of debt discounts for the year ended April 30, 2018.

 

Loss on settlement of related party liabilities, Series A decreased to $0 for the year ended April 30, 2018 as compared to approximately $428,000 for the comparable prior year due to the issuance of Series A preferred stock, in fiscal 2017, in settlement of the note payable to EIG resulting in a loss in the amount of approximately $389,000 and in settlement of the advance due EIG resulting in a loss in the amount of approximately $39,000.

 

Gain on settlement of liabilities, Series B decreased to $0 for the year ended April 30, 2018 as compared to approximately $11,000 for the year ended April 30, 2017 due to the issuance of Series B preferred stock, in fiscal 2017, in settlement of the note payable due AMREFA.

 

Loss on settlement of liabilities, common stock increased to approximately $45,000 for the year ended April 30, 2018 as compared to $0 for the year ended April 30, 2017.

 

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Derivatives gain increased from a loss of approximately $8,000 in the comparable prior year to a gain of approximately $1,114,000 for the year ended April 30, 2018 due to derivative gain on valuation of convertible debt.

 

LIQUIDITY

 

At April 30, 2018, we had total assets of approximately $1,951,000 compared to total assets of approximately $2,395,000 at April 30, 2017. The decrease in total assets was primarily due to: a decrease in Cash of approximately $183,000, Accounts Receivable decreased approximately $5,000 due the write off of rent due from tenants, Rental Property decreased approximately $732,000 due to the sale of ten remaining properties during the year ended April 30, 2018 and Notes Receivable Land Contract decreased approximately $87,000 due to the Company’s issuance of land contracts to the buyers of three of the properties sold in the year ended April 30, 2018, offset by an increase in allowance for uncollectible accounts of approximately $216,000.

 

These decreases were partially offset by: Other Assets increased approximately $66,000 due to an increase in activities carried on by Procon of approximately $70,000, offset by a decrease in miscellaneous assets of approximately $4,000, and Notes Receivable-Related Party increased by approximately $497,000 due to a net $497,000 loan ($50,000 was repaid) to Contel for operations of the agriculture activity.

 

Cash decreased approximately $183,000 for the year ended April 30, 2018. Cash used in operating activities was approximately $887,000 for the year ended April 30, 2018, as compared with cash used in operating activities of approximately $617,000 in fiscal 2017. During fiscal 2018, the Company loaned approximately $547,000 to Contel and purchased fixed assets in the amount of approximately $3,000, which were offset by proceeds from the sale of properties of approximately $505,000, proceeds from related party loan repayment of $50,000 and proceeds from notes receivable in the amount of approximately $4,000.

 

The Company received: approximately $705,000 in proceeds from the sale of common stock, approximately $480,000 in proceeds from advances from a related party, approximately $49,000 in proceeds note payable and approximately $1,140,000 in proceeds from convertible debentures and repaid: approximately $53,000 of notes payable to a related party, approximately $907,000 of convertible debentures, approximately $682,000 on the line of credit, and approximately $3,000 on obligations under capital leases .

 

At April 30, 2018, we had stockholders’ deficit of approximately $1,531,000.

 

In the current fiscal year, to expand the agricultural operation and to commence the Cielo Mar development activities in Baja California, we estimate that we will be required to find investment partners to provide financing in the range of $5 million to $25 million over the next 12-24 months. In order to fund the agricultural operations and the Cielomar Project, the Company executed a Letter of Intent with Global Capital Partners Fund Limited for a $5,000,000 loan secured by the Cielo Mar land.

 

Credit Lines

 

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 Credit Line is unsecured and is due upon demand. During the fiscal year ended April 30, 2017 the Company borrowed $250,000 under the Credit Line. 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.

 

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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 and 15.

 

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. 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.

 

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.

 

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 and 15.

 

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. 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 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. 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.

 

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Equity Line Financing

 

On June 23, 2016, the Company entered into $5,000,000 equity line financing agreement (“Investment Agreement”) with Tangiers Global, LLC, Dorado, Puerto Rico. The financing is over a maximum of 36 months. A maximum of 75 million (75,000,000) shares of our common stock has been registered for this financing.

 

The registration statement filed with the SEC for the equity line financing was declared effective by the SEC on January 31, 2017. The Company has not yet utilized this financing.

 

We issued to the Tangiers in connection with the execution of the Investment Agreement a commitment fee of a five-year warrant to purchase 4,000,000 shares of common stock, at an exercise price of $.02 per share, and Tangiers provided financing to us for our legal costs in connection with the filing of the Registration Statement through a one-year $22,000 convertible debenture, which the Company paid off in January 2017.

 

Convertible Note Financings

 

On September 13, 2016, the Company sold a private investor a 7% convertible promissory note in the principal amount of $105,000, due March 13, 2017.

 

On January 20, 2017, the Company sold a private investor a 7% convertible promissory note in the principal amount of $105,000, due July 20, 2017, convertible in the event of an event of default.

 

On February 21, 2017, the Company sold to Power Up Lending Group, Ltd. a convertible note in the amount of $103,500, bearing interest at the rate of 12% per annum, and due November 30, 2017.

 

On March 15, 2017, the Company issued to Bellridge Capital, LP an institutional lender a $5,000 Original Issue Discount 10% Convertible Debenture in the principal amount of $105,000, due March 15, 2018.

 

On March 21, 2017, the Company issued a 7% Fixed Convertible Promissory Note in the principal amount of $105,000 due September 21, 2018 to Tangiers Global, LLC.

 

On March 30, 2017, the Company issued a 7% Fixed Convertible Promissory Note in the principal amount of $100,000 due September 22, 2017 to Silo Equity Partners Venture Fund, LLC.

 

On April 27, 2017, the Company issued a 10% Fixed Convertible Promissory Note in the principal amount of $113,000 due April 3, 2018 to EMA Financial, LLC.

 

On May 3, 2017, the Company issued an 8% Fixed Convertible Promissory Note in the principal amount of $110,000 due November 29, 2017 to Vista Capital Investments, LLC. Additionally, we issued 2,000,000 warrants pursuant to the terms of the securities purchase agreement with an exercise price of $0.05 per share.

 

On May 15, 2017, the Company issued a 12% Fixed Convertible Promissory Note in the principal amount of $46,500 due February 15, 2018 to Power Up Lending Group, Ltd.

 

On May 10, 2017, the Company issued a 12% Fixed Convertible Promissory Note in the principal amount of $113,000 due February 10, 2018 to JSJ Investments Inc.

 

On August 25, 2017, the Company issued to Power Up Lending Group, Ltd. a convertible Promissory Note in the principal amount of $78,000 due May 20, 2018.

 

Pursuant to a Securities Purchase Agreement, dated November 8, 2017, between the Company and Power Up Lending Group Ltd., the Company issued a 12% Convertible Promissory Note in the principal amount of $51,500 due August 15, 2018 to the lender.

 

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On October 17, 2017, the Company issued to Tangiers Global LLC a 12% Fixed Convertible Promissory Note in the principal amount of $306,804 due July 13, 2018. In connection with the Tangiers Convertible Note, the Company entered into a Forbearance Agreement, dated as of April 27, 2018 (the “Forbearance Agreement”), pursuant to which Tangiers agreed to refrain and forbear from exercising and enforcing its remedies under 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. 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 $122,721.60 cash payment to Tangiers as a Forbearance Payment.

 

On May 7, 2018, as a part of the Forbearance Agreement modification to the October 17, 2017 Tangiers Convertible Note, we issued Tangiers a 12% Fixed Convertible Promissory Note dated April 27, 2018 in the principal amount of $236,085 due November 27, 2018. The amount of $13,363.40 was retained by the Tangiers through an original issue discount for due diligence and legal bills related to this transaction, and the Company received net proceeds of $222,721.60. The Company paid $122,721.60 to Tangiers to make the required payment in that amount under the Forbearance Agreement described above. In connection with the Forbearance Agreement, on April 27, 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.

 

On November 24, 2017, the Company issued to Blue Hawk Capital, LLC a 12% Fixed Convertible Promissory Note in the principal amount of $65,000 due August 20, 2018. Pursuant to a June 14, 2018 amendment to the Convertible Note, Blue Hawk Capital agreed to extend the Maturity Date of the Convertible Note to July 10, 2018, in exchange for increasing the applicable prepayment penalty under the Convertible Note from 125% to 135%.

 

On December 4, 2017, the Company issued to Auctus Fund, LLC a 12% Convertible Promissory Note in the principal amount of $110,875 due August 29, 2018. We entered into an agreement with Auctus Fund to amend the Note effective May 31, 2018, which provided for the following amendments to the Note: in consideration of the Company’s having made a cash payment of $5,000 by before June 4, 2018, which does not reduce the balance owed under the Note, (i) Auctus Fund is 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 Auctus Note is increased to “135%”, and (iii) the Company is permitted to exercise its right to prepay the Note at any time before July 10, 2018.

 

Effective on January 17, 2018, the Company Power Up Lending, Ltd. a convertible note in the amount of $63,000, bearing interest at the rate of 12% per annum, and due October 30, 2018.

 

Effective on February 17, 2018, the Company issued Power Up Lending Group Ltd. a convertible note in the principal amount of $83,000, bearing interest at the rate of 12% per annum. The Convertible Note is payable, along with interest thereon on November 30, 2018.

 

On March 14, 2018, issued to Adar Bays, LLC an 8% Convertible Redeemable Note in the principal amount of $78,750 and due on March 12, 2019. In connection with the issuance of the Adar Bays Note, the Company issued two back end notes (“Back End Note”) each in the principal amount of $78,750, where the Company has the option to have Adar Bays fund the notes.

 

Effective on April 6, 2018, the Company issued a convertible note in the principal amount of $113,000, bearing interest at the rate of 12% per annum, to JSJ Investments Inc. The Maturity Date of the Note is April 6, 2019.

 

The Company issued on May 24, 2018 a 12% Fixed Convertible Promissory Note in the original principal amount of $105,000 due November 22, 2018 to Tangiers Global, LLC.

 

On May 30, 2018 the Company entered into a financing commitment agreement with Global Capital Partners Fund Limited (the “Lender”) for a 12 month and one 12 month extension $5,000,000 financing 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 the Company 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.

 

22

 

 

Pursuant to the terms of a Securities Purchase Agreement, dated June 14, 2018, the Company issued to Bellridge Capital, LP a $7,500 Original Issue Discount 12% Convertible Debenture in the principal amount of $157,500, due June 14, 2019.

 

Critical Accounting Policies

 

The summary of critical accounting policies below should be read in conjunction with the discussion of the Company’s accounting policies included in the financial statements in this report. We consider the following accounting policies to be the most critical going forward:

 

Basis of Presentation - 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 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.

 

Estimates - The preparation of financial statements required us to make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported periods. We based our estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. There can be no assurances that actual results will not differ from those estimates. On an ongoing basis, we will evaluate our accounting policies and disclosure practices as necessary.

 

Basis of consolidation - The consolidated financial statements include the accounts and records of the Company and its wholly-owned subsidiaries: ProGreen Realty, ProGreen Farms US LLC, 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.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.

 

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.

 

23

 

 

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.

 

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 properties, which the Company financed, at April 30, 2018 and 2017, deferred profit on such sales totaled approximately $64,000 and $42,000, respectively, which is offset against the notes receivable balance on the face of balance sheet. See Note 5.

 

Emerging growth company status - As an emerging growth company under the JOBS Act, we have elected to opt out of the extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the Act. This election is irrevocable.

 

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

 

Not applicable.

 

24

 

 

Item 8. Financial Statements and Supplementary Data.

 

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 

  Page
   
Consolidated Financial Statements  
   
Reports of Independent Registered Public Accounting Firm F-1
   
Consolidated Balance Sheets as of April 30, 2018 and 2017 F-2
   
Consolidated Statements of Operations for the Years Ended April 30, 2018 and 2017 F-3
   
Consolidated Statements of Stockholders’ Deficit for the years ended April 30, 2018 and 2017 F-4
   
Consolidated Statements of Cash Flows for the Years Ended April 30, 2018 and 2017 F-5
   
Notes to Consolidated Financial Statements F-7

 

25

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the shareholders and board of directors of

ProGreen US, Inc.

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidated balance sheets of ProGreen US, Inc. and its subsidiaries (collectively, the “Company”) as of April 30, 2018 and 2017, and the related consolidated statements of operations, stockholders’ deficit, and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of April 30, 2018 and 2017, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

 

Going Concern Matter

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

/s/ MaloneBailey, LLP

www.malonebailey.com

We have served as the Company’s auditor since January, 2015.

Houston, Texas

August 14, 2018

 

F-1

 

 

ProGreen US, Inc.

Consolidated Balance Sheets

 

   April 30, 2018   April 30, 2017 
         
Assets          
Rental property, net accumulated depreciation of $0 and $32,431  $-   $732,023 
Land under development   500,000    500,000 
Property   500,000    1,232,023 
Cash   106,256    289,095 
Accounts receivable, net of allowance of $37,960 and $7,395   -    4,850 
Notes receivable - land contracts, net of allowance of $221,080 and $4,800   70,659    158,153 
Other assets   82,909    17,063 
Note receivable - related party   1,187,500    690,500 
Property and equipment:          
Vehicles, furniture and equipment, net of accumulated depreciation of $46,703 and $44,301   3,804    3,091 
Total assets  $1,951,128   $2,394,775 
           
Liabilities and Stockholders’ Deficit          
Accounts payable and accrued expenses  $348,657   $117,068 
Obligations under capital lease   -    3,373 
Reservation and tenant deposits   48,085    21,313 
Notes payable   23,512    214,106 
Note payable, related parties, net of discount of $0 and $58,005, respectively   882,555    396,995 
Note payable - Ann Arbor   58,952    450,258 
Derivative liabilities   772,895    361,742 
Convertible debentures, net of discount of $32,682 and $65,184, respectively   839,247    566,316 
Dividend payable   108,579    13,767 
Liability under land contract – related party   400,000    450,000 
Total liabilities   3,482,482    2,594,938 
           
Stockholders’ deficit          
Convertible preferred stock, Series A $.0001 par value, 1,000,000 shares authorized, 967,031 and 967,031 shares issued and outstanding, at April 30, 2018 and April 30, 2017                             97     97  
Convertible preferred stock, Series B  $.0001 par value, 8,534,625 shares authorized, 8,534,625 and 8,534,625 shares issued and outstanding at April 30, 2018 and April 30, 2017                           853     853  
Common stock, $.0001 par value, 1,250,000,000 shares authorized, 421,577,283 and 349,811,110 outstanding          
at April 30, 2018 and April 30, 2017   42,157    34,981 
Additional paid in capital   6,221,833    6,379,564 
Accumulated other comprehensive income   (30,999)   2,357 
Accumulated deficit   (7,723,312)   (6,617,353)
Total controlling interest   (1,489,371)   (199,501)
Noncontrolling interest in consolidated subsidiary   (41,983)   (662)
Total stockholders’ deficit   (1,531,354)   (200,163)
Total liabilities and stockholders’ deficit  $1,951,128   $2,394,775 

 

See accompanying Notes to Consolidated Financial Statements

 

F-2

 

 

ProGreen US, Inc.

Consolidated Statements of Operations

 

   Years Ended 
   April 30 
   2018   2017 
Revenues:          
           
Rental revenue  $24,819   $90,768 
Net loss on sale of properties   (99,998)   (20,635)
Commission revenue   -    3,570 
Other income   -    1,138 
Total Revenue  $(75,179)  $74,841 
Expenses:          
Selling, General & administrative   305,036    409,413 
Bad debt loss net of recovery   189,046    9,960 
Professional fees   412,089    228,067 
Impairment loss   -    180,011 
Total operating expenses  $906,171   $827,451 
           
Operating loss   (981,350)   (752,610)
Other expenses and income:          
Interest expense, net   (1,140,728)   (300,241)
Loss on settlement of related party liabilities, convertible preferred stock, Series A   -    (428,105)
Gain on settlement of liabilities, redeemable, convertible preferred stock, Series B   -    10,803 
Loss on settlement of liabilities, common stock   (44,659)   - 
Gain (loss) on change in fair value of derivative liabilities   1,114,269    (7,793)
Loss before income tax expense  $(1,052,468)  $(1,477,946)
Net Loss  $(1,052,468)  $(1,477,946)
Less: Net loss attributable to noncontrolling interest  $(41,321)  $(662)
Net Loss attributable to parent  $(1,011,147)  $(1,477,284)
Deemed dividend on redeemable, convertible preferred stock, Series B  $94,812   $98,025 
Net Loss attributable to parent common shareholders  $(1,105,959)  $(1,575,309)
Other comprehensive (loss) income          
Change in foreign currency translation adjustments  $(33,356)  $2,357 
Other comprehensive (loss) income  $(33,356)  $2,357 
Comprehensive net loss  $(1,139,315)  $(1,572,952)
           
Net loss per share - basic and fully diluted  $(0.00)  $(0.00)
Weighted average shares outstanding - basic and fully diluted   377,694,493    345,686,744 

 

See accompanying Notes to Consolidated Financial Statements

 

F-3

 

 

ProGreen US, Inc.

Consolidated Statements of Stockholders’ Deficit

 

   Controlling Interest       
   Number of Common Stock Issued and Outstanding   Common Stock   Number of Series A Preferred Stock Issued and Outstanding   Preferred Stock Series A   Number of Series B Preferred Stock Issued and Outstanding   Preferred Stock Series B   Additional Paid In Capital  

Accumulated

Deficit

   Accumulated Other Comprehensive Income   Net Stockholders’ Deficit   Noncontrolling Interest   Total Stockholders’ Deficit 
Balance at April  30, 2016   336,919,939   $33,692    -   $-    -   $-   $3,700,764   $(5,031,490)  $-   $(1,297,034)  $-   $(1,297,034)
                                                             
Stock issued under convertible debenture   1,426,000    143    -    -    -    -    19,812    -    -    19,955    -    19,955 
Stock issued under previous subscription agreement   9,775,171    977    -    -    -    -    (977)   -    -    -    -    - 
Stock issued in settlement of accrued interest   1,690,000    169    -    -    -    -    50,531    -    -    50,700    -    50,700 
Tainting due to convertible debt and warrants   -    -    -    -    -    -    (83,302)   -    -    (83,302)   -    (83,302)
Accretion of redeemable, convertible preferred stock, Series B   -    -    -    -    -    -    (98,025)   -    -    (98,025)   -    (98,025)
Dividend on redeemable, convertible preferred stock, Series B   -    -    -    -    -    -    -    (108,579)   -    (108,579)   -    (108,579)
Convertible preferred stock, Series B issued in settlement of liabilities   -    -    -    -    8,534,625    853    1,353,592    -    -    1,354,445    -    1,354,445 

Convertible preferred stock, Series A issued in settlement of related party

liabilities

   -    -    667,031    67    -    -    1,111,651    -    -    1,111,718    -    1,111,718 
Convertible preferred stock, Series A issued for subscription receivable   -    -    200,000    20    -    -    199,980    -    -    200,000    -    200,000 
Convertible preferred stock, Series A issued for cash from related party             100,000    10    -    -    99,990    -    -    100,000    -    100,000 
Compensation - restricted stock units   -    -    -    -    -    -    6,626    -    -    6,626    -    6,626 
Common stock warrants issued for services                       -    -    16,516    -    -    16,516    -    16,516 
Capital contribution Procon subsidiary   -    -    -    -    -    -    2,406    -    -    2,406    -    2,406 
Net loss   -    -    -    -    -    -    -    (1,477,284)   -    (1,477,284)   (662)   (1,477,946)
Other comprehensive income                       -    -              2,357    2,357    -    2,357 
Balance at April 30, 2017   349,811,110   $34,981    967,031   $97    8,534,625   $853   $6,379,564   $(6,617,353)  $2,357   $(199,501)  $(662)  $(200,163)
                                                             

Common stock issued for conversion of convertible debt

   15,234,935    1,523    -    -    -    -    99,575    -    -    101,098    -    101,098 
Dividend on redeemable, convertible preferred stock, Series B                                      (94,812)        (94,812)        (94,812)
Compensation - restricted stock units   -    -    -    -    -    -    1,000   -    -    1,000   -    1,000
Common stock issued for convertible note settlement   926,000    93    -    -    -    -    17,686    -    -    17,779    -    17,779 
Common Stock issued for cash   47,714,255    4,771    -    -    -    -    699,831    -    -    704,602    -    704,602 
Reclassification of derivative liability due to conversion   -    -    -    -    -    -    374,354    -    -    374,354    -    374,354 
Tainting due to convertible debt and warrants   -    -    -    -    -    -    (151,166)   -    -    (151,166)   -    (151,166)
Warrants issued for services   -    -    -    -    -    -    22,533         -    22,533    -    22,533 
Common stock issued for cashless warrant exercise   7,390,983    739    -    -    -    -    (739)   -    -    -    -    - 
Warrants issued related to convertible debt                                 28,810              28,810         28,810 
Common Stock - True Up Features   -    -    -    -    -    -    (1,258,239)   -    -    (1,258,239)   -    (1,258,239)
Common stock issued for services   500,000    50    -    -    -    -    8,624    -    -    8,674    -    8,674 
Other comprehensive loss   -    -    -    -    -    -         -    (33,356)   (33,356)   -    (33,356)
Net loss   -    -    -    -    -    -         (1,011,147)   -    (1,011,147)   (41,321)   (1,052,468)
Balance at April 30, 2018   421,577,283   $42,157    967,031  $97    8,534,625   $853   $6,221,833   $(7,723,312)  $(30,999)  $(1,489,371)  $(41,983)   (1,531,354)

 

 

See accompanying Notes to Consolidated Financial Statements

 

F-4

 

 

ProGreen US, Inc.

Consolidated Statements of Cash Flows

 

 

   Years Ended 
   April 30, 
   2018   2017 
Cash used in operating activities          
Net loss  $(1,052,468)  $(1,477,946)
Adjustments to reconcile net loss to net cash used in operating activities:          
Compensation - restricted stock units   1,000    6,626 
Depreciation   17,806    38,327 
Bad debt expense net of recovery   189,046    9,960 
Net loss on sale of rental properties   99,998    20,635 
(Gain) loss on change in fair value of derivative liabilities   (1,114,269)   7,793 
Loss on settlement of liabilities   44,659    - 
Gain on settlement of liabilities,  Series B   -    (10,803)
Loss on settlement of related party liabilities, Series A   -    428,105 
Amortization of debt discount   656,381    220,322 
Warrants issued for services   22,533    16,516 
Warrants issued related to convertible debt   28,810    - 
Common stock issued for services   8,674    - 
Impairment of goodwill   -    180,011 
Changes in operating assets and liabilities:          
Accounts receivable   13,090    (19,923)
Accounts payable and accrued expenses   238,640    (39,014)
Reservation and tenant deposits   35,585    5,283 
Other assets   (76,953)   (3,163)
Cash Provided used in operating activities   (887,468)   (617,271)
           
Cash used in investing activities          
Purchase of office equipment   (3,115)   - 
Proceeds from sale of properties   504,995    369,000 
Proceeds from notes receivable-land contracts   4,128    1,444 
Purchase of land   -    (50,000)
Loan for note receivable - related party   (547,000)   (580,500)
Loan repayment by related party   50,000    - 
Cash provided by (used in) investing activities   9,008    (260,056)

 

See accompanying Notes to Consolidated Financial Statement

 

F-5

 

 

ProGreen US, Inc.

Consolidated Statements of Cash Flows

 

Cash provided by (used in) financing activities        
Proceeds from convertible preferred stock, Series A issued for cash from related party   -    100,000 
Proceeds from the sale of common stock   704,602    - 
Proceeds from notes payable-related party   480,155    455,000 
Proceeds from notes payable   49,000    - 
Repayment of notes payable – Bank of Ann Arbor   (631,581)   (39,742)
Repayment of notes payable related party   (52,600)   (40,000)
Repayment of liability under land contract   (50,000)   - 
Proceeds from convertible debentures   1,139,938    726,200 
Repayment of convertible debentures   (907,164)   (127,000)
Dividend paid by cash   -    (94,812)

Capital Contribution – Procon Subsidirary

   -    2,406 
Decrease in obligations under capital leases   (3,373)   (7,929)
Cash provided by financing activities   728,977    974,123 
Effect of foreign exchange on cash   (33,356)   2,357 
Net change in cash   (182,839)   99,153 
           
Cash at beginning of period   289,095    189,942 
Cash at end of period  $106,256   $289,095 
Supplemental information:          
Cash paid for interest  $280,027   $77,037 
           
Noncash investing and financing transactions:          
Convertible preferred stock, Series A issued in settlement of related party liabilities  $-   $683,613 
Convertible preferred stock, Series A issued for subscription receivable  $-   $200,000 
Redeemable, convertible preferred stock, Series B issued in settlement of liabilities  $-   $1,256,420 
Re-class of temporary equity to permanent equity  $-   $1,354,445 
Tainting on convertible notes and warrants  $151,166   $83,302 
Reclassification of derivative liability due to conversion  $374,354   $- 
Accretion of redeemable, convertible preferred stock, Series B  $-   $98,025 
Series B preferred stock dividend declared but not paid  $94,812   $13,767 
Stock issued under previous subscription agreement  $-   $977 
Discount on derivative liability  $490,371   $270,647 

Common stock issued for conversion of convertible debt

  $101,098    - 
Deferred gain on sale of rental properties  $64,374   $41,603 
Note receivable - land contracts issued for sale of properties  $176,000   $206,000 
Land purchased under land contract  $-   $450,000 
Accrued interest rolled into principal  $681   $- 
Derivative liability due to true up feature of common shares issued  $1,258,239   $- 
Stock issued in settlement of accrued interest  $-   $50,700 
Debt discount on common stock issued under convertible debentures  $-   $19,955 
Common stock issued for cashless warrant exercise  $739   $- 

 

See accompanying Notes to Consolidated Financial Statement

 

F-6

 

 

PROGREEN US, INC.

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.

 

F-7

 

 

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.

 

F-8

 

 

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.

 

F-9

 

 

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.

 

F-10

 

 

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 

 

F-11

 

 

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.

 

F-12

 

 

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.

 

F-13

 

 

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.

 

F-14

 

 

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.

 

F-15

 

 

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.

 

F-16

 

 

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.

 

F-17

 

 

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.

 

F-18

 

 

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.

 

F-19

 

 

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.

 

F-20

 

 

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.

 

F-21

 

 

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.

 

F-22

 

 

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 

 

F-23

 

 

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.

 

F-24

 

 

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 

 

F-25

 

 

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%;

 

F-26

 

 

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.

 

F-27

 

 

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.

 

F-28

 

 

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.

 

F-29

 

 

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.

 

F-30

 

 

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.

 

F-31

 

 

 

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.

 

F-32

 

 

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.

 

F-33

 

 

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.

 

F-34

 

 

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.

 

 

F-35

 

 

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.

 

F-36

 

 

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.

 

F-37

 

 

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.

 

F-38

 

 

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.

 

F-39

 

 

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.

 

F-40

 

 

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.

 

F-41

 

 

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.

 

F-42

 

 

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.

 

F-43

 

 

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.

 

F-44

 

 

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.

 

F-45

 

 

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).

 

F-46

 

 

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.

 

F-47

 

 

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:

 

F-48

 

 

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.

 

F-49

 

 

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.

 

F-50

 

 

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.

 

F-51

 

 

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  

 

F-52

 

 

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. 

 

F-53

 

 

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.

 

amendment 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.

 

F-54

 

 

Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.

 

Not applicable.

 

Item 9A. Controls and Procedures.

 

As supervised by our board of directors and our Chief Executive and Chief Financial Officer, management has established a system of disclosure controls and procedures and has evaluated the effectiveness of that system. The system and its evaluation are reported on in the below Management’s Annual Report on Internal Control over Financial Reporting. Our management in this evaluation has concluded that our disclosure controls and procedures (as defined in the Securities Exchange Act of 1934, as amended (“Exchange Act”) Rule 13a-15(e)) as of April 30, 2018, are not effective, due to lack of segregation of duties, based on the evaluation of these controls and procedures required by paragraph (b) of Rule 13a-15.

 

Management’s Annual Report on Internal Control over Financial Reporting

 

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Management assessed the effectiveness of internal control over financial reporting as of April 30, 2018. We carried out this assessment using the criteria of the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework. Management concluded in this assessment that, as of April 30, 2018, our internal control over financial reporting is not effective and management’s evaluation was based on the following material weakness:

 

  Segregation of duties: The Company did not effectively segregate certain accounting duties due to the small size of its accounting staff.
     
  Financial reporting system: The Company did not maintain a fully integrated financial consolidation and reporting system throughout the period and as a result, adjustments relating were required in order to produce financial statements for external reporting purposes.

 

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm, pursuant to rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.

 

There have been no significant changes in our internal control over financial reporting (as defined in Rules 13a-15(f) under the Exchange Act) during the fourth quarter of our April 30, 2018 fiscal year that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

Item 9B. Other Information.

 

Not applicable.

 

26

 

 

PART III

 

Item 10. Directors, Executive Officers, and Corporate Governance.

 

The following table sets forth the names, positions and ages of our executive officers and directors as of August 1, 2018.

 

Name   Age   Title
Jan Telander   68   Chief Executive Officer, Chief Financial Officer and Director; and General Manager, Procon joint venture
Michael Hylander   59   Director
Christina M. Lombera   50   Secretary

 

On March 14, 2014, our Board of Directors elected Michael Hylander as a director of the Company to fill an existing vacancy on the Board of Directors. Henrik Sellmann resigned as a director on October 22, 2014.

 

Set forth below is a brief description of the background of each of our executive officers and directors, based on the information provided to us by them.

 

Jan Telander is the Company’s Chief Executive Officer and a director, and is the general manager of the Procon joint venture in Mexico, where the Company is the 51% owner. He has been the president of EIG Venture Capital Ltd (“EVC”) since 2001. EVC was founded by Mr. Telander and two other family members as a private investment company with an aim to purchase early stage companies and build these into larger entities with a view to seek exit through public listing on a suitable stock exchange. From 2001 until May 31, 2008, Mr. Telander was a member of the Board of Directors of Gas Turbine Efficiency, Inc., a former EIG portfolio company.

 

Michael Hylander has been with Repco S.L., Madrid, Spain, which represents in Spain and Portugal international food processing and packaging machinery manufacturers, and is currently its General Manager and a partner. From 1986 through 1992, Mr. Hylander was a Vice President and a director of Morgan Gestion, S.A., and its head of Private Banking in Madrid, where his responsibilities included management, investments, administration and marketing of the local investment funds and fiscal planning. From 1980 to 1984 he was with several international companies and had responsibilities for sales and marketing. He received a baccalaureate from Sigtuna Humanistiska Läroverk, Sigtuna, Sweden, in 1976, and completed his Swedish military service in 1977-1978. He received a degree in business administration from Stockholm University, Stockholm, Sweden in 1980, and a Masters in Business Administration from Insead Fontainbleau, Fontainbleau, France in 1985. Mr. Hylander is a first cousin of Jan Telander, our Chief Executive Officer.

 

Christina M. Lombera is the corporate Secretary of our Company and has, since inception, been the Principal Broker for ProGreen Realty, our real estate brokerage subsidiary. With over twenty years experience as a paralegal in real estate, corporate, estate planning and litigation, Ms. Lombera has managed complex real estate and corporate transactions. She has also handled a wide variety of document preparations, due diligence and corporate governance, as well as extensive legal research, writing and estate planning. Ms Lombera is a member of the State Bar of Michigan, Legal Assistants Chapter. Ms. Lombera has also been a licensed real estate consultant since 1998 and has negotiated, directed and closed voluminous real estate transactions ranging from single-family purchases, sales and leases, to complex multi-family and commercial real estate sales and acquisitions. As our Principal Broker, Ms. Lombera provides a broad spectrum of real estate knowledge, expertise and experience. A native of Oakland County, Michigan, Ms. Lombera is familiar with ProGreen’s target real estate market, and utilizes a hands-on approach in locating, evaluating, negotiating, and closing real estate acquisitions on behalf of ProGreen. Ms. Lombera is a dedicated ProGreen Team member. Ms. Lombera graduated as a paralegal with a Business Degree from Cañada College, California in 1993.

 

Corporate Governance

 

Directors are elected at the annual stockholder meeting or appointed by our Board of Directors and serve for one year or until their successors are elected and qualified. When a new director is appointed to fill a vacancy created by an increase in the number of directors, that director holds office until the next election of one or more directors by stockholders. Officers are appointed by our Board of Directors and their terms of office are at the discretion of our Board of Directors.

 

27

 

 

Committees of our Board of Directors

 

Audit Committee. Our Board of Directors plans to establish an Audit Committee, the members of which shall be considered as independent under the standards for independence for audit committee members established by the NYSE. The Audit Committee will operate under a written charter.

 

Other Committees. The Board does not have standing compensation or nominating committees. The Board does not believe a compensation or nominating committee is necessary based on the size of the Company, the current levels of compensation to corporate officers and the beneficial ownership by our major stockholders of in excess of 82% of the Company’s outstanding common stock. The Board will consider establishing compensation and nominating committees at the appropriate time.

 

Stockholder Communications

 

The Board has not established a formal process for stockholders to send communications, including director nominations, to the Board; however, the names of all directors are available to stockholders in this report. Any stockholder may send a communication to any member of the Board of Directors, in care of the Company, at 2667 Camino del Rio South, Suite 312, San Diego, CA 92108 (Attention: Secretary). Director nominations submitted by a stockholder will be considered by the full Board. Due to the infrequency of stockholder communications to the Board, the Board does not believe that a more formal process is necessary. However, the Board will consider, from time to time, whether adoption of a more formal process for such stockholder communications has become necessary or appropriate.

 

Other Information about our Board of Directors

 

During our fiscal year ended April 30, 2018, our Board of Directors acted by written consent 10 times.

 

We do not have a formal policy on attendance at meetings of our shareholders; however, we encourage all Board members to attend shareholder meetings that are held in conjunction with a meeting of our Board of Directors.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Exchange Act requires our director, executive officer and persons who beneficially own more than ten percent of our outstanding common stock to file reports with the SEC regarding initial statement of ownership, statement of changes of ownership and, where applicable, annual statement of ownership of our common stock. Such persons are required by SEC regulations to furnish us with copies of all such statements they file. For the fiscal year ended April 30, 2018, we believe that all required filings under Section 16(a) have been made by our officers and directors, except that (1) Michael Hylander was elected to our Board of Directors on March 14, 2014 and has not as of the date of this report filed the Form 3 due March 24, 2014; and (2) the Section 16(a) filings of our CEO, Jan Telander, were late as follows:, Mr. Telander reported late two purchases of common stock on May 4, 2017 and April 27, 2017; on May 18, 2017, Mr. Telander reported late two purchases of common stock on May 15, 2017; on May 23, 2017, Mr. Telander filed a late Form 4 with respect to one stock purchase on May 18, 2017; on August 23, 2017, Mr. Telander filed a late Form 4 with respect to four stock purchases on August 15, 2017; and on July 10, 2018, Mr. Telander filed a late Form 5, with respect to the purchase of 400,000 shares of common stock on September 18, 2017.

 

Code of Ethics

 

We have adopted a Code of Ethics within the meaning of Item 406(b) of Regulation S-B of the Exchange Act. A copy of this Code may be obtained by requesting a copy in writing to the Company at 2667 Camino del Rio South, Suite 312, San Diego, CA 92108. This Code applies to our directors and executive officers, such as our principal executive officer, principal financial officer, controller, and persons performing similar functions for us.

 

28

 

 

Item 11. Executive Compensation.

 

Summary Compensation Table

 

The following table sets forth all compensation awarded to, earned by, or paid for all services rendered to the Company during fiscal years 2018, 2017 and 2016 by our Chief Executive Officer and any executive officer who received annual compensation in salary and bonus combined in excess of $100,000 during those years. Each person below is referred to as a named executive officer.

 

SUMMARY COMPENSATION TABLE

 

Name and
Principal
Position
(a)
  Year
(b)
   Salary
($) (c)
   Bonus
($)
(d)
   Stock
Awards
($)
(e)
   Option
Awards
($)
(f)
   Non-Equity Incentive
Plan
Compensa-tion
($)
(g)
   Change in
Pension
Value and
Nonquali-
fied Deferred
Compensation Earnings
($)
(h)
   All
Other
Compen-
sation
(i)
    Total
($)
(j)
 
Jan Telander,   2018   $11,643                     $ 9,210(1)   $-0- 
CEO (1)   2017   $96,000                     $ 21,000(1)   $117,000 
    2016   $96,000                     $ 21,000(1)   $117,000 

 

  (1) Mr. Telander was paid a $9,210- housing allowance in fiscal 2018; a $21,000 housing allowance in fiscal 2017; and a $21,000 housing allowance in 2016.

 

Stock Options Granted and Director Compensation in the Year Ended April 30, 2018

 

None.

 

Employment Agreements

 

Neither the Company, nor any of our subsidiaries, has entered into an employment contract with a named executive officer. Furthermore, we do not, nor do any of our subsidiaries, anticipate entering into an employment contract with any named executive officer in the near future.

 

Employee Benefit Plans

 

On April 30, 2012, the Board of Directors of the Company adopted and approved the Company’s 2012 Employee Stock Option Plan (the “2012 Plan”), which was approved by our stockholders. The Plan authorized the grant, over a ten-year period, options or Restricted Stock Awards to purchase up to a maximum of 10,000,000 shares of the Company’s common stock. Under the 2012 Plan, effective June 1, 2012, our Board of Directors approved the award of restricted stock units under the 2012 Plan to our two directors and one employee as follows: an award of 3,000,000 restricted stock units to the Company’s Chief Executive Officer, Jan Telander; an award of 600,000 restricted stock units to Henrik Sellmann, a director of the Company; and an award of 600,000 restricted stock units to the Secretary of the Company who is the manager of our real estate subsidiary. Effective December 3, 2012 Company retained a Controller to whom 600,000 RSUs were issued as part of his initial remuneration package. Effective June 1, 2014, our Board of Directors authorized the issuance of 600,000 RSUs to Michael Hylander, who was elected to our Board of Directors on March 14, 2014. The Company has terminated the 2012 Plan following the expiration of all outstanding restricted stock units issued under the 2012 Plan.

 

29

 

 

On June 30, 2017, the Board of Directors of the Company adopted and approved the Company’s 2017 Employee Stock Option Plan (the “Plan”), for which approval or our stockholders was required. The Company during the one-year period following adoption of the Plan by the Board did not obtain approval of our stockholders, and the Plan has been terminated. No options were issued under the Plan.

 

Long-Term Incentive Plans

 

There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers, except that our directors and executive officers receive stock options at the discretion of our Board. We do not have any material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of our Board.

 

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

 

The table below sets forth information regarding the beneficial ownership of our common stock as of July 9, 2018 by the following individuals or groups:

 

  each person or entity who we know beneficially owns more than 5.0% in the aggregate;
     
  each of our named executive officers;
     
  each of our directors; and
     
  all directors and named executive officers as a group.

 

The percentage of beneficial ownership in the following table is based upon 416,485,891 shares of common stock outstanding as of July 9, 2018. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. We do not have any outstanding options, warrants or other conversion rights.

 

Title of Class  Name of Beneficial Owner  Number of
Shares
Beneficially
Owned
   Approximate
Percentage
of Class
Outstanding
 
Common Stock             
   Jan Telander (1)
c/o Progreen US, Inc.
1667 Camino del Rio South
Suite 312
San Diego, CA 92108(1)
   55,196,195    12.35%
              
   Michael Hylander
c/o Progreen US, Inc.
1667 Camino del Rio South
Suite 312
San Diego, CA 92108
   0    0 
              
   Ulf Telander (2)
Calle Sierra Nevada 64C
Urb Loma de Marbella Club
29602 Marbella, Spain
   318,112,754    49.02%
              
   Frederic Telander (3)
Floragatan 16
SE 11431
Stockholm, Sweden
   30,303,030    6.78%
              
   All officers and directors as a group   53,771,029    12.35%
              
Series A Convertible Preferred Stock             
   Frederic Telander (3)   100,000    10.34%
              
   Ulf Telander (2)   767,031    79.32%
              
   Jan Telander (1)   100,000    10.34%
              
Series B Convertible Preferred Stock             
   American Residential Fastigheter AB (4)          
   DRottninggatan 36
SE 411 14 Goteborg, Sweden
   8,534,625    100%

 

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(1) Mr. Jan Telander owns an aggregate of 24,863,865 shares common stock directly, and holds 100,000 shares of Series A Convertible Preferred Stock, convertible January 1, 2017 into 30,303,030 shares of common stock, at a conversion price of $0.0033 per share. The table above reflects conversion of the preferred stock held by Mr. Telander in calculating the percentage of common stock shown as owned by Mr. Telander. As of April 30, 2015, Mr. Telander had divested himself of all equity interests in EIG Venture Capital Ltd. and its affiliates, and resigned from all management and governing body positions with companies in this group.
   
(2) Mr. Ulf Telander holds 100,000 shares of Series A Convertible Preferred Stock, which vote as, and are convertible on and after January 1, 2017 into, 30,303,030 shares of common stock, at a conversion price of $0.0033 per share. Mr. Telander is the owner of 66% of the equity interests in and controls EIG Venture Capital Ltd. (“EIG”). EIG owns 84,804,436 shares of common stock directly and is the sole stockholder of EIG Capital Investments Ltd. and Sofcon, Ltd., which own directly 497,197 and 377,485 shares of the Company’s common stock, respectively. EIG holds 667,031 shares of Series A Convertible Preferred Stock, which vote as, and are convertible into, 202,130,606 shares of common stock. EIG’s direct ownership of 85,679,118 shares of common stock and 667,031 shares of Series A Convertible Preferred Stock is included in Mr. Ulf Telander’s ownership of common stock and Series A Convertible Preferred Stock as shown in the table. The table above reflects conversion of the Series A Convertible Preferred Stock held by EIG and Mr. Telander in calculating the number of shares of common stock shown as beneficially owned by Mr. Telander.
   
  Mr. Telander is the brother of Jan Telander, CEO of the Company.
   
(3) Mr. Frederic Telander holds 100,000 shares of Series A Convertible Preferred Stock, which vote as, and are convertible into, 30,303,030 shares of common stock, at a conversion price of $0.0033 per share. The table above reflects conversion of the preferred stock held by Frederic Telander in calculating the percentage of common stock shown as owned by him.
   
(4) Michael Lindstrom does not own any equity interest in, and is President of and controls, American Residential Fastigheter AB.

 

Changes in Control

 

We are unaware of any contract or other arrangement the operation of which may at a subsequent date result in a change in control of our company.

 

Item 13. Certain Relationships and Related Transactions, and Director Independence.

 

Other than as disclosed below, there has been no transaction, since May 1, 2017, or currently proposed transaction, in which our company was or is to be a participant and the amount involved exceeds, $9,800 being the lesser of $120,000 or one percent of the average of our total assets at year end for the last two completed fiscal years, and in which any of the following persons had or will have a direct or indirect material interest:

 

  (a) Any director or executive officer of our company;
     
  (b) Any person who beneficially owns, directly or indirectly, more than 5% of any class of our voting securities; and
     
  (c) Any member of the immediate family (including spouse, parents, children, siblings and in- laws) of any of the foregoing persons.

 

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We have entered into the following transactions with related parties in the last two years:

 

Authorization of Series A Preferred Stock and Debt Conversions

 

On February 9, 2016, the Board of Directors of the Company authorized a new series of preferred stock, the Series A Convertible Preferred Stock, with a stated value of $1.00 per share, and we filed a Certificate of Designations for the Series A Preferred Stock with the Secretary of State of Delaware on February 17, 2016. Also, effective on February 9, 2016, our Board approved and the Company entered into two agreements with the Company’s largest stockholder, EIG Venture Capital Ltd., a major shareholder of the company, to reduce the amount of the Company’s outstanding debt, and improve our balance sheet. First, the Company entered into an Assignment and Assumption Agreement, pursuant to which EIG has assumed all of the Company’s obligations under the 13.5% convertible debenture of the Company due to Rupes Futura AB (Sweden), which has agreed to assumption of the convertible debenture obligations by EIG. The outstanding principal of the debenture, together with two years of accumulated unpaid interest, totaled $608,031, and EIG was compensated by the issuance of shares of Series A Preferred Stock with a total stated value equal to that of the principal and accrued interest of the debt assumed. Second, the Company negotiated a debt conversion agreement effective February 9, 2016 with EIG, under which $59,000 of non-interest bearing advances made to the Company by EIG in July 2015 were converted into shares of Series A Preferred Stock with a total stated value of $59,000.

 

Authorization of Series B Preferred Stock and Purchase of Properties from AMREFA

 

On March 8, 2016, the Company entered into a purchase agreement with American Residential Fastigheter AB, a company formed under the laws of Sweden (“AMREFA”), in connection with our purchase of AMREFA’s U.S. subsidiary, American Residential Gap LLC, a Michigan limited liability company (the “ARG”), which held real estate properties in Birmingham, Michigan, that were purchased by AMREFA and which we have managed for AMREFA. The purchase price for ARG was $1,285,000 (the net asset value of ARG, as determined by the parties, which was paid by the issuance to AMREFA of 8,093,541 shares of a new Series B Convertible Preferred Stock of Progreen. The stated value, for purposes of liquidation or redemptions, of the shares of Series B Preferred Stock issued to AMREFA equals the purchase price for ARG.

 

Credit Line Facilities with Our Chief Executive Officer

 

On August 2, 2016, the Company entered into a credit line promissory note (“Credit Line 1”) with its President and Chief Executive Officer (“President”) pursuant to which the Company borrowed $250,000 with interest at a rate of five (5%) percent per annum.

 

In connection with Credit Line 1, the Company issued the President five-year 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.

 

On February 21, 2017 the Company’s President entered into an additional one year 5% Promissory Note credit line agreement (“Credit Line 2”) under which the Company borrowed $250,000 in fiscal 2017 and 2018 with interest at a rate of five (5%) percent per annum with an original due date of February 22, 2018.

 

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In connection with the Credit Line 2, the Company issued the President five-year 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.

 

On July 19, 2017 the Company’s President entered into a one year unsecured 5% Promissory Note (“Credit Line 3”) pursuant to which the Company borrowed $250,000 with interest at a rate of five (5%) percent per annum, the Note being due on July 19, 2018. During the year ended April 30, 2018 the Company borrowed $250,000 under Credit Line 3 and repaid $20,100.

 

During the year April 30, 2018 ended 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. 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.

 

Investment in Inmobiliaria Contel S.R.L.C.V. by Our Chief Executive Officer

 

In January 2016, Jan Telander, our CEO, made a loan of $75,000 to Contel. The Company in 2016 and through April 30, 2018, has made loans aggregating $1,187,500 as of April 30, 2018, to Contel for Contel’s agricultural operations. In January 2016 Mr. Telander received a 49.5% interest in Contel, which interest under the statutes (By-Laws) of Contel does not vest any management authority in Mr. Telander, since sole management authority for Contel under the statutes is vested in Flavio Contreras, and provides no voting rights except with respect to the approval of purchase and sale of real estate properties by Contel.

 

Subscription Agreements

 

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, which 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 (100,000 share of Series A Preferred Stock being convertible into a total of 30,303,030 shares of common stock). All subscriptions were completed by June 8, 2016.

 

Compensation for Executive Officers and Directors

 

For information regarding compensation for our executive officers and directors, see “Executive Compensation”.

 

Director Independence

 

We currently act with two directors consisting of Jan Telander and Michael Hylander. Our common stock is quoted by the OTC Market Group, which do not impose any director independence requirements. Under NASDAQ rule 5605(a)(2), a director is not independent if he or she is also an executive officer or employee of the corporation or was, at any time during the past three years, employed by the corporation. Using this definition of independent director, one of our directors, Michael Hylander, would be viewed as independent.

 

33

 

 

Item 14. Principal Accountant Fees and Services.

 

The following table presents fees accrued for audit services and other services provided for our fiscal years ended April 30, 2018 and 2017.

 

   2018   2017 
Audit Fees  $67,000   $65,000 
Audit-related Fees   -    - 
Tax Fees   -      
All Other Fees   -    - 
Total Fees  $67,000   $65,000 

 

Audit Fees

 

Audit fees were for professional services rendered for the audit of our annual financial statements, the review of the financial statements, services in connection with our statutory and regulatory filings for fiscal 2018 and 2017.

 

Audit-Related Fees

 

Audit related fees were for assurance and related services rendered that are reasonably related to the audit and reviews of our financial statements for fiscal 2018 and 2017, exclusive of the fees disclosed as Audit Fees above. These fees include assistance with registration statements and consents not performed directly in connection with audits.

 

All Other Fees

 

We did not incur fees for any services, other than the fees disclosed above relating to audit, audit-related and tax services, rendered during fiscal 2018 and 2017.

 

Audit Services. Audit services include the annual financial statement audit and other procedures required to be performed by the independent auditor to be able to form an opinion on our financial statements.

 

Audit-Related Services. Audit-related services are assurance and related services that are reasonably related to the performance of the audit or review of our financial statements which historically have been provided to us by the independent auditor and are consistent with the SEC’s rules on auditor independence.

 

Tax Services - Tax Services includes service provided by the principal accounting firm for tax compliance, tax advice, and tax planning.

 

All Other Services. Other services are services provided by the independent auditor that do not fall within the

 

34

 

 

Item 15. Exhibits and Financial Statement Schedules.

 

(a)(1) Financial Statements filed with this report.

 

  Page
   
Consolidated Financial Statements  
   
Reports of Independent Registered Public Accounting Firm F-1
   
Consolidated Balance Sheets as of April 30, 2018 and 2017 F-2
   
Consolidated Statements of Operations for the Years Ended April 30, 2018 and 2017 F-3
   
Consolidated Statements of Stockholders’ (Deficit)/Equity for the years ended April 30, 2018 and 2017 F-4
   
Consolidated Statements of Cash Flows for the Years Ended April 30, 2018 and 2017 F-5
   
Notes to Consolidated Financial Statements F-7

 

35

 

 

(a)(2) Exhibits

 

Exhibit
No.
  Description
2.1   Share Exchange Agreement, dated March 6, 2001, by and between the Fairfax Group, Inc., a Florida corporation, and Diversified Product Inspections, Inc., a Florida corporation. (Incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed with the Commission on March 6, 2001.)
     
3.1   Certificate of Incorporation. (Incorporated by reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-K, filed with the Commission on March 31, 2009.)
     
3.1a   Amendment to Certificate of Incorporation, filed July 8, 2009. (Incorporated by reference to Exhibit 3.6 to the Company’s Current Report on Form 8-K/A, filed with the Commission on September 16, 2009.)
     
3.1b   Certificate of Ownership merging the Company’s wholly-owned subsidiary, Progreen Properties, Inc., into the Company, effective September 11, 2009. (Incorporated by reference to Exhibit 3.7 to the Company’s Current Report on Form 8-K, filed with the Commission on July 28, 2009.)
     
3.1c   Restated Certificate of Incorporation of the Company. (Incorporated by reference to Exhibit 3.8 to the Company’s Current Report on Form 8-K/A, filed with the Commission on September 16, 2009.)
     
3.1d   Certificate of Designations for Series A Convertible Preferred Stock, filed with the Delaware Secretary of State on February 17, 2016. (Incorporated by reference to Exhibit 3.1d to the Company’s Current Report on Form 8-K, filed with the Commission on February 18, 2016.)
     
3.1 e   Certificate of Designations for Series B Convertible Preferred Stock, filed with the Delaware Secretary of State on March 9, 2016. (Incorporated by reference to Exhibit 3.1e to the Company’s Current Report on Form 8-K, filed with the Commission on March 9, 2016.)
     
3.1 f   Certificate of Amendment, filed with the Delaware Secretary of State on February 9, 2016. (Incorporated by reference to Exhibit 3.1f to the Company’s Annual Report on Form 10-K, filed with the Commission on July 11, 2016.)
     
3.1 g   Certificate of Amendment, filed with the Delaware Secretary of State on July 12, 2016. (Incorporated by reference to Exhibit 3.1g to the Company’s Current Report on Form 8-K, filed with the Commission on July 11, 2016.)
     
3.1 h   Certificate of Amendment, filed with the Delaware Secretary of State on December 6, 2016. (Incorporated by reference to Exhibit 3.1g to the Company’s Quarterly Report on Form 10-Q, filed with the Commission on December 20, 2016.)
     
3.1i   Certificate of Amendment to the Company’s Certificate of Incorporation, filed April 20, 2018. (Incorporated by reference to Exhibit 3.1i to the Company’s Current Report on Form 8-K filed May 8, 2018.)
     
3.2   By-Laws of the Company. (Incorporated by reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-K, filed with the Commission on March 31, 2009.)
     
3.3   Agreement and Plan of Merger, dated December 11, 2008, between the Company and Diversified Product Inspections, Inc., a Florida corporation. (Incorporated by reference to Exhibit 3.3 to the Company’s Annual Report on Form 10-K, filed with the Commission on March 31, 2009.)
     
3.4   Articles of Merger of Diversified Product Inspections, Inc., a Florida corporation, with the Company, dated December 11, 2008, filed with the Florida Secretary of State. (Incorporated by reference to Exhibit 3.4 to the Company’s Annual Report on Form 10-K, filed with the Commission on March 31, 2009.)
     
3.5   Certificate of Merger of Diversified Product Inspections, Inc., a Florida corporation, with the Company, dated December 11, 2008, filed with the Delaware Secretary of State. (Incorporated by reference to Exhibit 3.5 to the Company’s Annual Report on Form 10-K, filed with the Commission on March 31, 2009.)

 

36

 

 

Exhibit
No.
  Description
10.5   Settlement Agreement and Asset Purchase Agreement dated as of September 30, 2008 among Diversified Product Inspections, LLC, a Tennessee limited liability company, the Company, John Van Zyll, Ann Furlong, and Marvin Stacy, Sofcon, Limited, EIG Venture Capital, Limited, and EIG Capital Investments Limited, and the First and Second Amendments thereto. (Incorporated by reference to Annex A to the Company’s definitive proxy statement for its special meeting of shareholders held on March 26, 2009, filed on February 13, 2009.)
     
10.6   Subscription Agreement, dated July 22, 2009, between the Company and EIG Venture Capital, Ltd. (Incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K, filed with the Commission on July 28, 2009.)
     
10.6 a   (Amendment No. 1, dated December 1, 2009, to Subscription Agreement, dated July 22, 2009, between the Company and EIG Venture Capital, Ltd. (Incorporated by reference to Exhibit 10.6a to the Company’s Current Report on Form 8-K, filed with the Commission on December 12, 2009.)
     
10.7   Form of Subscription Agreement for the Company’s 13.5% Secured Convertible Debentures. (Incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K, filed with the Commission on November 10, 2009.)
     
10.8   Form of the Company’s 13.5% Secured Convertible Debenture. (Incorporated by reference to Exhibit 10.8 to the Company’s Current Report on Form 8-K, filed with the Commission on November 10, 2009.)
     
10.9   Amendment to Secured Convertible Debenture, dated as of December 14, 2011. (Incorporated by reference to Exhibit 10.9 to the Company’s Quarterly Report on Form 10-Q, filed with the Commission on December 16, 2011.)
     
10.10   Second Amendment to Secured Convertible Debenture, dated as of February 8, 2012. (Incorporated by reference to Exhibit 10.9 to the Company’s Quarterly Report on Form 10-Q, filed with the Commission on March 16, 2012.)
     
10.11   2012 Employee Stock Option Plan. (Incorporated by reference to Exhibit 10.11 to the Company’s Current Report on Form 8-K, filed with the Commission on June 7, 2012.)
     
10.12   Form of Restricted Stock Units Agreement issued pursuant to 2012 Employee Stock Option Plan. (Incorporated by reference to Exhibit 10.12 to the Company’s Current Report on Form 8-K, filed with the Commission on June 7, 2012.)
     
10.13   Membership Interest Purchase Agreement made and entered into effective April 30, 2012, by and among the Company, American Residential Gap LLC, and Progreen Properties III LLC; Progreen Properties VII, LLC; Progreen Properties VIII LLC; Progreen Properties IX LLC; and Progreen Properties XI, LLC [including Assignment of Membership Interest by the Company, dated April 30, 2012; Assignment and Assumption of Leases, dated as of May 1, 2012, between the Company and American Residential Gap LLC; one-year Lease Guaranty of the Company, dated as of May 1, 2012. (Incorporated by reference to Exhibit 10.13 to the Company’s Annual Report on Form 10-K, filed with the Commission on July 30, 2012.)
     
10.14   Management Agreement, made and entered into as of April 30, 2012, by and between Progreen Properties Management LLC and American Residential Gap LLC. (Incorporated by reference to Exhibit 10.14 to the Company’s Annual Report on Form 10-K, filed with the Commission on July 30, 2012.)

 

37

 

 

Exhibit
No.
  Description
10.15   Agreement, dated May 30, 2013, between the Company and Rupes Futura AB, for the Sale of Investment Units in American Residential Gap ApS. (Incorporated by reference to Exhibit 10.15 to the Company’s Annual Report on Form 10-K, filed with the Commission on August 13, 2013.)
     
10.16   Promissory Note issued to KBM Worldwide, Inc. (Incorporated by reference to Exhibit 10.15 to the Company’s Annual Report on Form 10-K, filed with the Commission on August 13, 2013.)
     
10.17   Securities Purchase Agreement, dated as of November 19, 2014, between KBM Worldwide, Inc. and the Company. (Incorporated by reference to Exhibit 10.17 to the Company’s Current Report on Form 8-K, filed with the Commission on November 25, 2014.)
     
10.18   Fifth Amendment to Secured Convertible Debenture, dated as of December 19, 2014. (Incorporated by reference to Exhibit 10.18 to the Company’s Annual Report on Form 10-K, filed with the Commission on August 13, 2015.)
     
10.19   Working Construction Agreement between American Residental GAP LLC and Progreen Construction LLC, dated as of March 1, 2015. (Incorporated by reference to Exhibit 10.19 to the Company’s Annual Report on Form 10-K, filed with the Commission on August 13, 2015.)
     
10.20   Promissory Note issued March 12, 2015 to Vis Vires Group, Inc., (Incorporated by reference to Exhibit 10.20 to the Company’s Annual Report on Form 10-K, filed with the Commission on August 13, 2015.)
     
10.21   Securities Purchase Agreement, dated as of March 12, 2015, between Vis Vires Group, Inc. and the Company. (Incorporated by reference to Exhibit 10.21 to the Company’s Annual Report on Form 10-K, filed with the Commission on August 13, 2015.).
     
10.22   Amendment, dated as of March 15, 2015, to Investment Agreement between American Residential Fastigheter AB and the Company. (Incorporated by reference to Exhibit 10.22 to the Company’s Annual Report on Form 10-K, filed with the Commission on August 13, 2015.)
     
10.23   Promissory Note issued April 21, 2015 to Vis Vires Group, Inc. (Incorporated by reference to Exhibit 10.23 to the Company’s Annual Report on Form 10-K, filed with the Commission on August 13, 2015.)
     
10.24   Securities Purchase Agreement, dated as of April 21, 2015, between Vis Vires Group, Inc. and the Company. (Incorporated by reference to Exhibit 10.24 to the Company’s Annual Report on Form 10-K, filed with the Commission on August 13, 2015.)
     
10.25   Instalment Payment Agreement, dated June 25, 2015, between American Residential Fastigheter AB and the Company. (Incorporated by reference to Exhibit 10.25 to the Company’s Annual Report on Form 10-K, filed with the Commission on August 13, 2015.)
     
10.26   Promissory Note issued to JMJ Financial, issued September 2, 2015. (Incorporated by reference to Exhibit 10.26 to the Company’s Current Report on Form 8-K, filed with the Commission on September 14, 2015.)
     
10.27   Representations and Warranties Agreement, dated September 2, 2015, between JMJ Financial and the Company. (Incorporated by reference to Exhibit 10.27 to the Company’s Current Report on Form 8-K, filed with the Commission on September 14, 2015.)

 

38

 

 

Exhibit
No.
  Description
10.28   Assignment and Assumption Agreement, dated February 9, 2016, by and between the Company, EIG Venture Capital Ltd and Rupes Futura AB, with regard to assignment of 13.5% Secured Convertible Debenture, due November 5, 2015. (Incorporated by reference to Exhibit 10.28 to the Company’s Current Report on Form 8-K, filed with the Commission on February 18, 2016.)
     
10.29   Conversion Agreement, dated as of February 9, 2016, between EIG Venture Capital Ltd. and the Company. (Incorporated by reference to Exhibit 10.29 to the Company’s Current Report on Form 8-K, filed with the Commission on February 18, 2016.)
     
10.30   Form of Subscription Agreement for purchase of shares of Series A Convertible Preferred Stock. (Incorporated by reference to Exhibit 10.30 to the Company’s Current Report on Form 8-K, filed with the Commission on February 18, 2016.)
     
10.31   Purchase Agreement, dated March 8, 2016, between the Company and American Residential Fastigheter AB. (Incorporated by reference to Exhibit 10.31 to the Company’s Current Report on Form 8-K, filed with the Commission on March 9, 2016.)
     
10.31a   Amendment No. 1 to Purchase Agreement, dated March 8, 2016, between the Company and American Residential Fastigheter AB. (Incorporated by reference to Exhibit 10.31a to the Company’s Quarterly Report on Form 10-Q, filed with the Commission on March 21, 2016.)
     
10.32   Joint Venture Contract, dated February 12, 2016, between Immobiliaria Contel and the Company. (Incorporated by reference to Exhibit 10.32 to the Company’s Quarterly Report on Form 10-Q, filed with the Commission on March 21, 2016.)
     
10.33   Recognition Agreement with Debt Mortgage Guarantee, dated February 12, 2016, between Immobiliaria Contel and the Company. (Incorporated by reference to Exhibit 10.33 to the Company’s Quarterly Report on Form 10-Q, filed with the Commission on March 21, 2016.)
     
10.34   Investment Agreement, dated June 23, 2016, between the Company and Tangiers Global, LLC. (Incorporated by reference to Exhibit 10.34 to the Company’s Current Report on Form 8-K, filed with the Commission on June 27, 2016.)
     
10.35   Registration Rights Agreement, dated June 23, 2016, between the Company and Tangiers Global, LLC. (Incorporated by reference to Exhibit 10.35 to the Company’s Current Report on Form 8-K, filed with the Commission on February 18, 2016.)
     
10.36   Common Stock Purchase Warrant, dated June 23, 2016, between the Company and Tangiers Global, LLC. (Incorporated by reference to Exhibit 10.36 to the Company’s Current Report on Form 8-K, filed with the Commission on February 18, 2016.)
     
10.37   Form of $22,000 Convertible Debenture issued to Tangiers Global, LLC June 23, 2016. (Incorporated by reference to Exhibit 10.37 to the Company’s Current Report on Form 8-K, filed with the Commission on February 18, 2016.)
     
10.37a   Amended and Restated 5.83% Fixed Convertible Promissory Note, dated August 25, 2016, issued to Tangiers Global, LLC. (Incorporated by reference to Exhibit 10.37a to the Company’s Form S-1, filed with the Commission on August 31, 2016.)

 

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10.37b   Amendment dated December 9, 2016 to Amended and Restated 5.83% Fixed Convertible Promissory Note, dated August 25, 2016, issued to Tangiers Global, LLC. (Incorporated by reference to Exhibit 10.37b to the Company’s Quarterly Report on Form 10-Q, filed with the Commission on December 20, 2016.)
     
10.37c   Convertible 7% Promissory Note, dated January 20, 2017, issued to Lucas Hoppel. (Incorporated by reference to Exhibit 10.37 to the Company’s Quarterly Report on Form 10-Q, filed with the Commission on March 22, 2017.)
     
10.38   Securities Purchase Agreement, dated January 20, 2017, between the Company and Lucas Hoppel. (Incorporated by reference to Exhibit 10.38 to the Company’s Quarterly Report on Form 10-Q, filed with the Commission on March 22, 2017.)
     
10.39   Convertible Promissory Note dated February 21, 2017, issued to Power Up Lending Group Ltd. (Incorporated by reference to Exhibit 10.39 to the Company’s Quarterly Report on Form 10-Q, filed with the Commission on March 22, 2017.)
     
10.40   Securities Purchase Agreement, dated February 21, 2017, between the Company and Power Up Lending Group Ltd. (Incorporated by reference to Exhibit 10.40 to the Company’s Quarterly Report on Form 10-Q, filed with the Commission on March 22, 2017.)
     
10.41   Convertible Debenture, dated March 15, 2017, issued to Bellridge Capital, LP. (Incorporated by reference to Exhibit 10.41 to the Company’s Quarterly Report on Form 10-Q, filed with the Commission on March 22, 2017.)
     
10.42   Securities Purchase Agreement, dated March 15, 2017, between the Company and Bellridge Capital, LP. (Incorporated by reference to Exhibit 10.42 to the Company’s Quarterly Report on Form 10-Q, filed with the Commission on March 22, 2017.)
     
10.43   Convertible Promissory Note, dated March 21, 2017, issued to Tangiers Global, LLC. (Incorporated by reference to Exhibit 10.43 to the Company’s Quarterly Report on Form 10-Q, filed with the Commission on March 22, 2017.)
     
10.44   Convertible Note issued to Silo Equity Partners Venture Fund, LLC. (Incorporated by reference to Exhibit 10.44 to the Company’s Current Report on Form 8-K, filed with the Commission on April 3, 2017.)
     
10.45   Securities Purchase Agreement, dated March 22, 2017, between the Company and Silo Equity Partners Venture Fund, LLC. (Incorporated by reference to Exhibit 10.45 to the Company’s Current Report on Form 8-K, filed with the Commission on April 3, 2017.)
     
10.46   Convertible Note issued April 27, 2017 to EMA Financial, LLC. (Incorporated by reference to Exhibit 10.46 to the Company’s Current Report on Form 8-K, filed with the Commission on May 3, 2017.)
     
10.47   Securities Purchase Agreement, dated April 3, 2017, between the Company and EMA Financial, LLC. . (Incorporated by reference to Exhibit 10.47 to the Company’s Current Report on Form 8-K, filed with the Commission on May 3, 2017.)
     
10.48   Convertible Note dated May 11, 2017, issued to Vista Capital Investments LLC. (Incorporated by reference to Exhibit 10.48 to the Company’s Current Report on Form 8-K, filed with the Commission on May 17, 2017.)
     
10.49   Common Stock Purchase Warrant issued to Vista Capital Investments, LLC. (Incorporated by reference to Exhibit 10.49 to the Company’s Current Report on Form 8-K, filed with the Commission on May 17, 2017.)
     
10.50   Convertible Promissory Note issued May 15, 2017 to Power Up Lending Group Ltd. (Incorporated by reference to Exhibit 10.50 to the Company’s Current Report on Form 8-K, filed with the Commission on May 17, 2017.)

 

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10.51   Securities Purchase Agreement, dated May 15, 2017, between the Company and Power Up Lending Group Ltd. (Incorporated by reference to Exhibit 10.51 to the Company’s Current Report on Form 8-K, filed with the Commission on May 17, 2017.)
     
10.52   Convertible Promissory Note issued May 16, 2017 to JSJ Investments Inc. (Incorporated by reference to Exhibit 10.52 to the Company’s Current Report on Form 8-K, filed with the Commission on May 17, 2017.)
     
10.53   2017 Employee Stock Option Plan. (Incorporated by reference to Exhibit 10.53 to the Company’s Current Report on Form 8-K, filed with the Commission on July 10, 2017.)
     
10.54  

Settlement Agreement, dated July 17, 2017, between the Company and Lucas Hoppel. (Incorporated by reference to Exhibit 10.54 to the Company’s Quarterly Report on Form 10-Q filed September 19, 2017.)

     
10.55   Amendment, dated August 21, 2017, to Securities Purchase Agreement and $105,000 Convertible Promissory Note, between the Company and Lucas Hoppel. (Incorporated by reference to Exhibit 10.55 to the Company’s Quarterly Report on Form 10-Q filed September 19, 2017.)
     
10.56   Convertible Promissory Note dated August 25, 2017, issued to Power Up Lending Group Ltd. (Incorporated by reference to Exhibit 10.561 to the Company’s Quarterly Report on Form 10-Q filed September 19, 2017.)
     
10.57   Securities Purchase Agreement, dated August 23, 2017, between the Company and Power Up Lending Group Ltd. (Incorporated by reference to Exhibit 10.57 to the Company’s Quarterly Report on Form 10-Q filed September 19, 2017.)
     
10.58   Convertible Note issued October 17, 2017 to Tangiers Global, LLC. (Incorporated by reference to Exhibit 10.58 to the Company’s Current Report on Form 8-K filed October 19, 2017.)
     
10.59   Convertible Promissory Note dated November 8, 2017, issued to Power Up Lending Group Ltd. (Incorporated by reference to Exhibit 10.59 to the Company’s Quarterly Report on Form 10-Q filed December 20, 2017.)
     
10.60   Securities Purchase Agreement, dated November 8, 2017, between the Company and Power Up Lending Group Ltd. (Incorporated by reference to Exhibit 10.60 to the Company’s Quarterly Report on Form 10-Q filed December 20, 2017.)
     
10.61   Convertible Promissory Note dated November 24, 2017, issued to Blue Hawk Capital, LLC. (Incorporated by reference to Exhibit 10.61 to the Company’s Quarterly Report on Form 10-Q filed December 20, 2017.)
     
10.62   Securities Purchase Agreement, dated November 24, 2017, between the Company and Blue Hawk Capital, LLC. (Incorporated by reference to Exhibit 10.62 to the Company’s Quarterly Report on Form 10-Q filed December 20, 2017.)
     
10.63   Convertible Promissory Note dated November 29, 2017, issued to Actus Fund, LLC. (Incorporated by reference to Exhibit 10.63 to the Company’s Quarterly Report on Form 10-Q filed December 20, 2017.)
     
10.64   Securities Purchase Agreement, dated November 29, 2017, between the Company and Actus Fund, LLC. (Incorporated by reference to Exhibit 10.64 to the Company’s Quarterly Report on Form 10-Q filed December 20, 2017.)
     
10.65   Convertible Note issued January 19, 2018 to Power Up Lending Group Ltd. (Incorporated by reference to Exhibit 10.65 to the Company’s Current Report on Form 8-K filed January 29, 2018.)

 

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10.66   Securities Purchase Agreement, dated January 17, 2018, between the Company and Power Up Lending Group Ltd. (Incorporated by reference to Exhibit 10.66 to the Company’s Current Report on Form 8-K filed January 29, 2018.)
     
10.67   Convertible Promissory Note dated February 13, 2018, issued to Power Up Lending Group Ltd. (Incorporated by reference to Exhibit 10.67 to the Company’s Quarterly Report on Form 10-Q filed March 26, 2018.)
     
10.68   Securities Purchase Agreement, dated February 13, 2018, between the Company and Power Up Lending Group Ltd. (Incorporated by reference to Exhibit 10.68 to the Company’s Quarterly Report on Form 10-Q filed March 26, 2018.)
     
10.69   Convertible Promissory Note dated February 14, 2018, issued to Adar Bays, LLC. (Incorporated by reference to Exhibit 10.69 to the Company’s Quarterly Report on Form 10-Q filed March 26, 2018.).
     
10.70   Securities Purchase Agreement, dated March 14, 2018, between the Company and Adar Bays, LLC. (Incorporated by reference to Exhibit 10.70 to the Company’s Quarterly Report on Form 10-Q filed March 26, 2018.)
     
10.71  

Promissory Note issued by the Company on December 31, 2017 to American Residential Fastigheter AB. (Incorporated by reference to Exhibit 10.71 to the Company’s Current Report on Form 8-K filed May 8, 2018.)

     
10.72   Convertible Promissory Note issued by the Company on April 6, 2016 to JSJ Investments Inc. (Incorporated by reference to Exhibit 10.72 to the Company’s Current Report on Form 8-K filed May 8, 2018.)
     
10.73   Convertible Promissory Note issued by the Company on April 27, 2018 to Tangiers Global, LLC. (Incorporated by reference to Exhibit 10.73 to the Company’s Current Report on Form 8-K filed May 8, 2018.)
     
10.74   Forbearance Agreement, dated April 27, 2018, between Tangiers Global, LLC and the Company. (Incorporated by reference to Exhibit 10.74 to the Company’s Current Report on Form 8-K filed May 8, 2018.)
     
10.75   Common Stock Purchase Warrant issued April 27, 2018 to Tangiers Global, LLC. (Incorporated by reference to Exhibit 10.75 to the Company’s Current Report on Form 8-K filed May 8, 2018.)
     
10.76   Convertible Promissory Note issued May 22, 2018 to Tangiers Global, LLC. (Incorporated by reference to Exhibit 10.76 to the Company’s Current Report on Form 8-K filed June 5, 2018.)
     
10.77   Global Capital Partners Financing Commitment May 30, 2018. (Incorporated by reference to Exhibit 10.77 to the Company’s Current Report on Form 8-K filed June 5, 2018.)
     
10.78   Amendment No. 1, effective May 31, 2018, to Promissory Note issued December 4, 2017 to Auctus Fund, LLC. (Incorporated by reference to Exhibit 10.78 to the Company’s Current Report on Form 8-K filed June 4, 2018.)
     
10.79   Convertible Promissory Debenture issued June 14, 2018 to Bellridge Capital, LP. (Incorporated by reference to Exhibit 10.79 to the Company’s Current Report on Form 8-K filed June 20, 2018.)
     
10.80   Securities Purchase Agreement, dated June 14, 2018, between the Company and Bellridge Capital, LP. (Incorporated by reference to Exhibit 10.80 to the Company’s Current Report on Form 8-K filed June 20, 2018.)

 

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10.81   BlueHawk Capital LLC Amendment to Convertible Promissory Note, dated June 14, 2018. (Incorporated by reference to Exhibit 10.81 to the Company’s Current Report on Form 8-K filed June 20, 2018.)
     
14.1   Code of Ethics. (Incorporated by reference to Exhibit 14.1 to the Company’s Annual Report on Form 10-KSB, filed with the Commission on March 31, 2006.)
     
21   Subsidiaries of Registrant.
     
31   Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 302 of the Sarbanes Oxley Act of 2002.*
     
32   Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Oxley Act of 2002.**

 

Copies of the following documents are included as exhibits to this report pursuant to Item 601 of Regulation S-K.

 

SEC Ref. No.   Title of Document
101.INS   XBRL Instance Document
101.SCH   XBRL Taxonomy Extension Schema Document
101.CAL   XBRL Taxonomy Calculation Linkbase Document
101.DEF   XBRL Taxonomy Extension Definition Linkbase Document
101.LAB   XBRL Taxonomy Label Linkbase Document
101.PRE   XBRL Taxonomy Presentation Linkbase Document

 

The XBRL related information in Exhibits 101 to this Annual Report on Form 10-K shall not be deemed “filed” or a part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, and is not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of those sections.

 

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SIGNATURES

 

Pursuant to the requirements of Section 12(g) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  PROGREEN US, INC
     
Date: August 14, 2018 By: /s/ Jan Telander
    Jan Telander, Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer and Director

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person on behalf of the Registrant in the capacities indicated, on August 14, 2018.

 

  /s/ Jan Telander
  Jan Telander, Chief Executive Officer, Chief
  Financial Officer and Director

 

  By: /s/ Michael Hylander
    Michael Hylander, Director

 

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