GROOVE BOTANICALS INC. 10-Q

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) We plan to raise additional capital during the coming fiscal year, but currently have not identified additional funding sources. Our ability to continue operations is highly dependent upon our ability to obtain additional financing, or generate revenues from the sale of our CBD skincare products, none of which can be guaranteed. Ultimately, our success is dependent upon our ability to generate revenues from the sale our CBD skincare products, and to achieve profitability, which is dependent upon a number of factors, including general economic conditions and the sustained profitability resulting from the sale of our CBD skincare products. There is no assurance that even with adequate financing or combined operations, we will generate revenues and be profitable. PATENTS, TRADEMARKS, AND PROPRIETARY RIGHTS On July 18, 2018 the Company filed five trademark applications with the United States Patent and Trademark Office for CB3SKINCARE: U.S. Trademark Application Serial No. 88/040,563, CB3: U.S. Trademark Application Serial No. 88/040,571, EYE MATTER: U.S. Trademark Application Serial No. 88/040,574, REVITA WASH: U.S. Trademark Application Serial No. 88/040,580, and TAKE YOUR SKIN HIGHER: U.S. Trademark Application Serial No. 88/040,584. Financing Activities We have been funding our obligations through the issuance of our Common Stock for services rendered and for notes payable owed or for cash in private placements. The Company may seek additional funds in the private or public equity or debt markets in order to execute its plan of operation and business strategy. There can be no assurance that we will be able to attract capital or obtain such financing when needed or on acceptable terms in which case the Company's ability to execute its business strategy will be impaired. Results of Operations Results of Operations Three month periods ended June 30, 2016 compared to the three month period ended June 30, 2015: Revenues Revenues for the three months ended June 30, 2016 were $17,898, an increase of $9,367 or approximately 110% compared to revenue of $8,531 for the three months ended June 30, 2015. Revenues increased as a result of consulting income. Lease Operating Expenses During the three months ended June 30, 2016, our lease operating expenses were $19,115, an increase of $8,568 or approximately 81% compared to $10,547 for the three months ended June 30, 2015. The increase was due to the workover expense on the Company's properties in Miller County, Arkansas. 18 Selling, General, and Administrative Expenses Selling, general and administrative expenses for the three months ended June 30, 2016 were $21,937, a decrease of $52,116 or approximately 70% compared to selling, general and administrative expenses of $74,053 during the three months ended June 30, 2016. Selling, general and administrative expenses for the three months ended June 30, 2015 consisted primarily of payroll and related costs of $12,000, legal and accounting fees in the amount of $500, travel and entertainment expenses of $1,549, facilities costs in the amount of $3,000, and office and miscellaneous expenses of $7,888. Stock Based Compensation We did not have any stock based compensation for the three months ended June 30, 2016, compared to stock based compensation of $20,333 for the three months ended June 30, 2015. Depreciation, Depletion, and Amortization Depreciation, Depletion, and Amortization was $6,253 for the three months ended June 30, 2016, a decrease of $8,315 or approximately 57% compared to $14,568 for the three months ended June 30, 2015. The decrease was due to no amortization and lower depletion costs during the three months ended June 30, 2016. Interest Income, net of Interest Expense Interest expense was $2,868 for the three months ended June 30, 2016 compared to interest income of $4,950 for the three months ended June 30, 2015. The interest income for the three months ended June 30, 2015 was due to the forgiveness of interest on a $25,000 promissory note that was exchanged for 25 shares of the Company’s Series B Preferred Stock. Net Income (Loss) Our net loss for the three months ended June 30, 2016, was $32,275. We had net income of $138,952 for the three months ended June 30, 2015 due to a gain on the settlement of an account payable of $280,972.06 for $5,000 in cash, a $5,000 promissory note and the issuance of 650,000 shares of the Company’s common stock. LIQUIDITY AND CAPITAL RESOURCES The Company has minimal revenues from our remaining oil and gas assets. We are in need of additional cash resources to maintain our operations. Our cash and cash equivalents were $107,302 on June 30, 2016, compared to $108,220 on March 31, 2015. We met our liquidity needs through the issuance of our common and preferred stock for cash and the revenue derived from our oil and gas operations. As of June 30, 2016, the Company had a working capital deficit of $754,896, had incurred losses since inception of $33,699,087, and have not yet received any revenue from the sale our CBD skincare products. These factors raise substantial doubt about its ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent on its ability to raise additional capital or obtain necessary debt financing. The Company is presently dependent on its controlling shareholder to provide us funding for its daily operation and expenses, including professional fee and fees charged by regulators, although he is under no obligation to do so. The Company intends to meet the cash requirements for the next 12 months from the issuance date of this report through a combination of debt and equity financing by way of private placements, friends, family and business associates. The Company currently did not have any arrangements in place to complete any private placement financings and there is no assurance that the Company will be successful in completing any such financings on terms that will be acceptable to it. If we do not have sufficient working capital to pay our operating costs for the next 12 months, we will require additional funds to pay our legal, accounting and other fees associated with our Company and our filing obligations under United States federal securities laws, as well as to pay our other accounts payable generated in the ordinary course of our business. Once these costs are accounted for, we will focus on the manufacture and sale of our CBD skincare products. 19 Any failure to raise money will have the effect of delaying the timeframes in the business plan as set forth above, and the Company may have to push back the dates of such activities. The financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company has incurred losses and further losses are anticipated as a result of the development of business which raises substantial doubt about the Company’s ability to continue as a going concern within the next twelve months from the issuance date of this report. The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or obtaining financing necessary to meet the Company’s obligations and repay its liabilities arising from normal business operations when they come due. Management intends to finance operating costs over the next twelve months with existing cash on hand and loans from directors and/or private placement of the Company’s common stock. Ultimately, our success is dependent upon our ability to generate revenues from the sale of our CBD skincare products. Investing activities We did not invest any funds during the three months ended June 30, 2016, we invested $714 during the three months ended June 30, 2015. Financing Activities We did not receive any funds from investing activities during the three months ended June 30, 2016. During the three months ended June 30, 2015, we received $100,000 from the sale of preferred stock and paid dividends on preferred stock of $13,500. Operating activities Our net loss for the three months ended June 30, 2016, was $32,275 compared to net income of $138,952, during the three months ended June 30, 2015. The net income for the three months ended June 30, 2015 was due to a gain on the settlement of an account payable of 280,972.06, for $5,000 in cash, the issuance of a $5,000 promissory note and the issuance of 650,000 shares of the Company’s common stock. The common stock was valued at $.04 per share, and was based on the closing bid price. Critical Accounting Policies The condensed consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America. As such, we are required to make certain estimates, judgments and assumptions that we believe are reasonable based on information available. These estimates and assumptions affect the reporting amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. A summary of the significant accounting policies is described in Note 1 to the financial statements. Recently Issued Accounting Policies For a discussion of recent accounting pronouncements, see Note 1 to our Financial Statements – “DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.” Off-Balance Sheet Arrangements We have no off-balance sheet arrangements. 20 Material Commitments We have no material commitments during the next twelve (12) months. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK This information has been omitted, as the Company qualifies as a smaller reporting company.