GROOVE BOTANICALS INC. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Quarterly Report on Form 10-Q contains predictions, estimates and other forward-looking statements relating to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “intends,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of these terms or other comparable terminology. Forward-looking statements involve known and unknown risks, uncertainties and other factors including the risks set forth in the section entitled “Risk Factors” in our registration statement on Form 10-12G/A, as filed with the Securities and Exchange Commission (the “SEC”) on November 6, 2023, that may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. Forward-looking statements represent our management’s beliefs and assumptions only as of the date of this Report. You should read this Report with the understanding that our actual future results may be materially different from what we expect. All forward-looking statements speak only as of the date on which they are made. We undertake no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they are made, except as required by federal securities and any other applicable law. The management’s discussion and analysis of our financial condition and results of operations are based upon our consolidated unaudited financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The following discussion of our financial condition and results of operations should be read in conjunction with the notes to the consolidated unaudited financial statements appearing elsewhere in this Report and the Company’s audited financial statements for the fiscal year ended March 31, 2024, as filed with the SEC in its Annual Report on Form 10-K/A on August 15, 2024, along with the accompanying notes. As used in this Quarterly Report, the terms “we,” “us,” “our” and the “Company” means Groove Botanicals, Inc. The Company relies primarily on its current sole officer and director, Kent Rodriguez to manage its day-to-day business and has outsourced professional services to third parties in an effort to maintain lower operational costs. Mr. Rodriguez, as the holder of the Company’s issued and outstanding shares of the Company’s Series A Preferred Stock, holds 51% of the voting rights of the Company. He will be able to influence the outcome of all corporate actions requiring the approval of our stockholders. Plan of Operations On September 14, 2023, we filed a registration statement on Form 10-12g which was deemed effective by the Securities and Exchange Commission (“SEC”) on November 8, 2023. We plan to assemble a portfolio of early-stage EV Battery Technologies developed from Universities in Norway, Sweden and Finland, and seek grants from the State of Minnesota Department of Economic Development to find and identify corporate partners to commercialize these technologies and ultimately produce revenues for the Company. We do not currently have any products. We are working to assemble a portfolio of early-stage EV Battery Technologies. As the Company continues its business development and asset acquisitions, the Company anticipates our capital needs to be between $500,000 and $5,000,000 (varying based on growth strategies). 12 Results of Operations Three Months Ended September 30, 2024, and September 30, 2023 Revenue We have not generated any revenue since our inception and do not expect to generate any revenue from the sale of products in the near future. Net Loss We reported a net loss of $29,833 in the three months ended September 30, 2024 as compared to a net loss of $30,045 in the three months ended September 30, 2023 and a net loss attributable to our common stockholders of $84,452 in the three months ended September 30, 2024 as compared to a net loss attributable to our common stockholders of $84,663 as of September 30, 2023 which is reflective of a dividend on our Preferred Stock of $54,618 at September 30, 2024 and September 30, 2023, respectively as follows: Three Months ended September 30, 2024 2023 Net sales $ — $ — Operating expenses: Selling, General and Administrative Expenses 18,332 21,852 Rent 3,591 4,644 Legal and Professional Expenses 7,410 1,298 Consulting Expense 500 — Total operating expenses 29,833 27,795 Income (loss) from operations (29,833 ) (27,795 ) Other income (expense) Interest Income (expense) — (2,250 ) Total other income (expense) — (2,250 ) Net income (loss) $ (29,833 ) $ (30,045 ) Dividends on Preferred Stock 54,618 54,618 Net (loss) attributable to common stockholders $ (84,452 ) $ (84,663 ) Operating Expenses Total operating expenses for the three months ended September 30, 2024, and September 30, 2023, remained relatively constant with $29,833 at September 30, 2024 compared to total operating expenses of $30,045 at September 30, 2023. The increase in operating expenses during the three months ended September 30, 2024, is mainly due to an increase in legal and professional fees from $1,298 (September 30, 2023) to $7,410 (September 30, 2024) offset by a reduction in general and administrative expenses from $21,852 in the three months ended September 30, 2023, to $18,332 for the three months e nded September 30, 2024. Rent remained relatively constant. The increase in legal and professional expenses was largely due to an increase in audit and accounting fees, filing fees and tax services from $1,298 for the period ended September 30, 2023 to $7,410 for the period ended September 30, 2024 due to continuing costs related to the audit of our interim financial statements following notice of effect for our Form 10 in November 2023. Consulting fees increased by $500 from $0 in the three months ended September 30, 2023, to $500 in the three months ended September 30, 2024. 13 Other Income (Expense) Other income in the three months ended September 30, 2024, was nil, as compared to other income in the three months ended September 30, 2023, of $2,250, related to interest expense of $2,250 with no comparable expense in the three months ended September 30, 2024. Dividends on Preferred Stock Dividends on Preferred Stock for the period ended September 30, 2024, and 2023 remained constant, at $54,618 for each period. These dividends on preferred stock are required subject to the designation of the preferred stock and contribute to the net loss attributable to our common stockholders. Six Months Ended September 30, 2024, and September 30, 2023 Revenue We have not generated any revenue since our inception and do not expect to generate any revenue from the sale of products in the near future. Net Loss We reported a net loss of $66,372 in the six months ended September 30, 2024 as compared to a net loss of $156,272 in the six months ended September 30, 2023 and a net loss attributable to our common stockholders of $175,607 in the six months ended September 30, 2024 as compared to a net loss attributable to our common stockholders of $265,507 as of September 30, 2023 which is reflective of a dividend on our Preferred Stock of $109,235 at September 30, 2024 and September 30, 2023 as follows: Six Months ended September 30, 2024 2023 Net sales $ — $ — Operating expenses: Selling, General and Administrative Expenses 34,931 38,816 Rent 8,235 9,288 Legal and Professional Expenses 21,956 25,368 Consulting Expense 1,250 78,300 Total operating expenses 66,372 151,772 Income (loss) from operations (66,372 ) (151,772 ) Other income (expense) Interest Income (expense) — (4,500 ) Total other income (expense) — (4,500 ) Net income (loss) $ 66,372 ) $ (156,272 ) Dividends on Preferred Stock 109,235 109,235 Net (loss) attributable to common stockholders $ (175,607 ) $ (265,507 ) 14 Operating Expenses Total operating expenses for the six months ended September 30, 2024, were $66,372 compared to total operating expenses of $151,772 for the six months ended September 30, 2023. The decrease in operating expenses during the six months ended September 30, 2024, is mainly due to reduction in consulting expenses from $78,300 (September 30, 2023) to $1,250 (September 30, 2024) and a slight reduction in general and administrative expenses from $38,816 in the six months ended September 30, 2023, to $34,931 for the six months ended September 30, 2024. Rent, legal and professional expenses remained relatively constant for the six months ended September 30, 2024, and 2023 with a slight decrease of $3,412 in the six months ended September 30, 2024. Consulting fees decreased from $78,300 in the six months ended September 30, 2023, to $1,250 in the six months ended September 30, 2024, due to a consulting agreement with an independent third party settled by shares valued at $78,300 which terminated in the period ended September 30, 2023. Other Income (Expense) Other income in the six months ended September 30, 2024, was nil, as compared to other income in the six months ended September 30, 2023, of $4500, related to interest expense of $4,500 with no comparable expense in the six months ended September 30, 2024, due to the payment of outstanding loans with no outstanding loans for the six months ended September 30, 2024. Dividends on Preferred Stock Dividends on Preferred Stock for the period ended September 30, 2024, and 2023 remained constant, $109,235 for each of the six month periods ended September 30, 2024, and 2023. These dividends on preferred stock are required subject to the designation of the preferred stock and contribute to the net loss attributable to our common stockholders. Operating Activities For the Six Months Ended September 30, 2024 2023 Net Cash Used in Operating Activities $ (63,468 ) $ (50,822 ) Net Cash From Investing Activities — — Net Cash From Financing Activities 67,913 49,102 Net Change in Cash 4,445 (1,720 ) Cash at End of Period $ 6,133 $ 2,846 Net cash used by operating activities was $63,468 for the six months ended September 30, 2024, compared to $50,822 for the six months ended September 30, 2023. Net cash used in operating activities for the six months ended September 30, 2024, was primarily the result of a net loss of $66,372, offset by non-cash items including accrued payroll of $24,000, an increase in prepaid expenses of $4,538 and a decrease in accounts payable and accrued liabilities of $16,558. Net cash used in operating activities for the six months ended September 30, 2023, was primarily the result of a net loss of $156,272, offset by non-cash items, including stock issued for outside services of $78,300, accrued interest of $4,500 and accrued payroll of $24,000, and changes in working capital including a decrease to accounts payable and accrued liabilities of $1,438 and a decrease in prepaid expenses of $88. 15 Investing Activities There was no investing activity during the six months ended September 30, 2024, and 2023. Financing Activities Net cash provided by financing activities was $67,913 for the six months ended September 30, 2024, compared to $49,102 for the six months ended September 30, 2023. During the six months ended September 30, 2024, the Company received $67,913 in proceeds from a related party in the form of unsecured advances. During the six months ended September 30, 2023, the Company received net proceeds of $49,102 from a related party in the form of unsecured advances. Liquidity and Capital Resources We are in need of additional cash resources to maintain our operations. As of September 30, 2024, we had cash of $6,133 and prepaid expenses of $4,992. We are in the early stage of development and have experienced net losses to date and have not generated revenue from operations which raises substantial doubt about our ability to continue as a going concern. There are a number of conditions that we must satisfy before we will be able to acquire, license and acquire products and intellectual property, not the least of which is negotiating and financing any acquisitions. We are in the process of identifying and establishing strategic partners and technologies in order to establish a market and generate commercial orders by customers and licensing which will include effective marketing and sales capabilities for any products. We do not currently have sufficient resources to accomplish any of these conditions necessary for us to generate revenue and expect to incur increasing operating expenses. We will require substantial additional funds for operations, the service of debt and to fund our business objectives. There can be no assurance that financing, whether debt or equity, will always be available to us in the amount required at any particular time or for any particular period or, if available, that it can be obtained on terms favorable to us. If additional funds are raised by the issuance of equity securities, such as through the issuance and exercise of warrants, then existing stockholders will experience dilution of their ownership interest. If additional funds are raised by the issuance of debt or other equity instruments, we may be subject to certain limitations in our operations, and issuance of such securities may have rights senior to those of the then existing stockholders. We currently have no agreements, arrangements or understandings with any person or entity to obtain funds through bank loans, lines of credit or any other sources. Going Concern The accompanying consolidated financial statements have been prepared on a going concern basis which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the consolidated financial statements, the Company has incurred recurring net losses since its inception and has raised limited capital. The Company had a net loss of $66,372 and $156,272 for the six month periods ended September 30, 2024, and 2023, respectively. The Company’s accumulated deficit was $35,022,884 and $34,847,277 as of September 30, 2024, and March 31, 2024, respectively. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustment relating to the recoverability and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company is taking certain steps to provide the necessary capital to continue its operations. These steps include but are not limited to: 1) focus on our new business model and 2) raising equity or debt financing. Our auditors express substantial doubt about our ability to continue as a going concern. Off-Balance Sheet Arrangements We have no off-balance sheet arrangements. 16 Critical Accounting Estimates The financial statements are prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”). The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, costs and expenses and related disclosures. We base our estimates on historical experience, as appropriate, and on various other assumptions that we believe are reasonable under the circumstances. Changes in the accounting estimates are reasonably likely to occur from period to period. Accordingly, actual results could differ significantly from the estimates made by our management. We evaluate our estimates and assumptions on an ongoing basis. To the extent that there are material differences between these estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected. Our significant accounting policies are more fully discussed in Note 2 to our unaudited condensed financial statements contained herein. Estimates The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Specifically, such estimates were made by the Company for the valuation of derivative liability, stock compensation and beneficial conversion feature expenses. Actual results could differ from those estimates. Recent Accounting Pronouncements In November 2023, the FASB issued Accounting Standards Update 2023-07, Segment Reporting—Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which requires incremental disclosures related to a public entity’s reportable segments. Required disclosures include, on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss, an amount for other segment items (which is the difference between segment revenue less segment expenses and less segment profit or loss) and a description of its composition, the title and position of the CODM, and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. The standard also permits disclosure of more than one measure of segment profit. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company does not believe the adoption of ASU 2023-07 will have any impact on our financial statements. In December 2023, the FASB issued Accounting Standards Update 2023-09, Improvements to Income Tax Disclosures (“ASU 2023-09”), which requires public entities on an annual basis to (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income or loss by the applicable statutory income tax rate). ASU 2023-09 is effective for fiscal years beginning after December 15, 2025. We are evaluating the impact of adopting ASU 2023-09 on our financial statements. In March 2024, the SEC adopted the final rule under SEC Release No. 33-11275, The Enhancement and Standardization of Climate Related Disclosures for Investors , which requires registrants to disclose climate-related information in registration statements and annual reports. The new rules would be effective for annual reporting periods beginning in fiscal year 2025. However, in April 2024, the SEC exercised its discretion to stay these rules pending the completion of judicial review of certain consolidated petitions with the United States Court of Appeals for the Eighth Circuit in connection with these rules. We are evaluating the impact the adoption of this rule, if any, may have on our financial statements. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are a smaller reporting company and are not required to provide this information. 17