As filed with the Securities and Exchange Commission on August 31, 2016.

Registration No. 333-              

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

PROGREEN US, INC.

(Exact name of Registrant as specified in its charter)

 

Delaware   6552   59-3087128
(State or other jurisdiction of
incorporation or organization)
 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer
Identification Number)

 

6443 Inkster Road, Suite 170-D

Bloomfield Township, MI 48301

(248) 973-8851

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

 

Jan Telander

Chief Executive Officer

Progreen US, Inc.

6443 Inkster Road, Suite 170-D

Bloomfield Township, MI 48301

(248) 973-8851

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

Copy to:

 

Michael Paige

Michael Paige Law PLLC

1120 20th Street, NW, South Tower

Washington, DC 20036

(202) 363-4791

 

APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: From time to time after this registration statement becomes effective.

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, please check the following box:  ☒

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

 

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

 

  Large accelerated filer  ☐   Accelerated filer  ☐   Non-accelerated filer  ☐ Smaller reporting company  ☒
          (Do not check if a smaller reporting company)

 

 

 

 

Calculation of Registration Fee

 

Title of Each Class of Securities to be Registered  Amount to be Registered(1)   Proposed Maximum Offering Price Per Share   Proposed Maximum Aggregate Offering Price   Amount of Registration Fee 
Common stock to be offered for resale by selling stockholder   100,000,000 (2)  $0.020(3),(4) $2,000,000(3),(4)  $201.40(4)

 

(1) An indeterminate number of additional shares of common stock shall be issuable pursuant to Rule 416 under the Securities Act of 1933 to prevent dilution resulting from stock splits, stock dividends or similar transactions and in such an event the number of shares registered shall automatically be increased to cover the additional shares in accordance with Rule 416.
   
(2) Consists of up to 100,000,000 shares of common stock to be sold to Tangiers Global, LLC under the investment agreement dated June 23, 2016.
   
(3) Estimated solely for the purpose of calculating the amount of the registration fee in accordance with Rule 457(c) under the Securities Act of 1933.
   
(4) Based on the closing price per share ($0.020) for the Company’s common stock on August 30, 2016, as reported by the OTC Markets Group.

 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 

 

 

 

The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. 

 

SUBJECT TO COMPLETION, DATED AUGUST 31, 2016

 

PRELIMINARY PROSPECTUS

 

Progreen US, Inc.

 

100,000,000 Shares of Common Stock

 

The selling stockholder identified in this prospectus may offer and sell up to 100,000,000 shares of our common stock to be sold to Tangiers Global, LLC under the investment agreement dated June 23, 2016. All shares registered in accordance with this registration statement are being registered solely pursuant to the investment agreement. The investment agreement permits us to “put” up to $5,000,000 in shares of our common stock to Tangiers Global, LLC over a period of up to 36 months.

 

The selling stockholder may sell all or a portion of the shares being offered pursuant to this prospectus at fixed prices, at prevailing market prices at the time of sale, at varying prices or at negotiated prices.

 

Tangiers Global, LLC is an underwriter within the meaning of the Securities Act of 1933 and any broker-dealers or agents that are involved in selling the shares may be deemed to be “underwriters” within the meaning of the Securities Act of 1933 in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act of 1933.

 

Our common stock is quoted by the OTC Markets Group under the symbol “PGUS”. On August 30, 2016, the closing price of our common stock was $0.020 per share.

 

We will not receive any proceeds from the sale of shares of our common stock by the selling stockholder. However, we will receive proceeds from the sale of shares of our common stock pursuant to our exercise of the put right offered by Tangiers Global, LLC. We will pay for expenses of this offering, except that the selling stockholder will pay any broker discounts or commissions or equivalent expenses and expenses of its legal counsel applicable to the sale of its shares.

 

Investing in our common stock involves risks. See “Risk Factors” beginning on page 3.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

The date of this prospectus is _____________, 2016.

 

 

Table of Contents 

 

TABLE OF CONTENTS

 

PROSPECTUS SUMMARY 1
SUMMARY FINANCIAL DATA 2
RISK FACTORS 3
FORWARD-LOOKING STATEMENTS 9
USE OF PROCEEDS 9
DILUTION 9
THE OFFERING 9
SELLING STOCKHOLDERS 11
PLAN OF DISTRIBUTION 12
DESCRIPTION OF SECURITIES 13
EXPERTS AND COUNSEL 14
INTEREST OF NAMED EXPERTS AND COUNSEL 14
DESCRIPTION OF BUSINESS 15
LEGAL PROCEEDINGS 19
MARKET PRICE OF AND DIVIDENDS ON OUR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS 19
FINANCIAL STATEMENTS F-1
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 22
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 30
DIRECTORS AND EXECUTIVE OFFICERS 30
TRANSACTIONS WITH RELATED PERSONS, PROMOTERS AND CERTAIN CONTROL PERSONS AND CORPORATE GOVERNANCE 35
WHERE YOU CAN FIND MORE INFORMATION 36

 

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PROSPECTUS SUMMARY

 

About This Prospectus

 

You should rely only on the information that we have provided in this prospectus and any applicable prospectus supplement. We have not authorized anyone to provide you with different information. No dealer, salesperson or other person is authorized to give any information or to represent anything not contained in this prospectus and any applicable prospectus supplement. You must not rely on any unauthorized information or representation. This prospectus is an offer to sell only the securities offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. You should assume that the information in this prospectus and any applicable prospectus supplement is accurate only as of the date on the front of the document, regardless of the time of delivery of this prospectus, any applicable prospectus supplement, or any sale of a security.

 

As used in this prospectus, the terms “we”, “us”, the “Company” and “Progreen” mean Progreen US, Inc. and our subsidiaries, unless otherwise indicated. All dollar amounts refer to U.S. dollars unless otherwise indicated.

 

Prospectus Summary

 

The Offering

 

The selling stockholder identified in this prospectus may offer and sell up to 100,000,000 shares of our common stock to be sold to Tangiers Global, LLC under the investment agreement dated June 23, 2016. All shares registered in accordance with this registration statement are being registered solely pursuant to the investment agreement. The investment agreement permits us to “put” up to $5,000,000 in shares of our common stock to Tangiers Global, LLC over a period of up to 36 months.

 

We will not receive any proceeds from the sale of shares of our common stock by the selling stockholder. However, we will receive proceeds from the sale of shares of our common stock pursuant to our exercise of the put right offered by Tangiers Global, LLC. We will pay for expenses of this offering, except that the selling stockholder will pay any broker discounts or commissions or equivalent expenses and expenses of its legal counsel applicable to the sale of its shares.

 

Our Business

 

ProGreen Properties, Inc. 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 to the purchase of income producing real estate assets, and changed our name effective July 22, 2016 to Progreen US, Inc. to reflect initiation of development operations in Baja Mexico.

 

Our offices are located in Oakland County, Michigan. Our business model since our initial property purchases in 2009 has been to acquire, refurbish and upgrade existing properties into more environmentally sustainable, energy efficient, comfortable and healthier living spaces so that they meet standards that exceed what is often the norm for most single family homes, condominiums and apartments. Once a property has been acquired, refurbished and rented, the property would be put back on the market, but now as a fully managed investment property, with a favorable environmental profile and yield. These investment properties are marketed exclusively by ProGreen Realty LLC, a wholly-owned subsidiary of ProGreen and managed by ProGreen Properties Management LLC, another wholly owned subsidiary. In January 2015, ProGreen Construction LLC (“ProGreen Construction”) was formed as a wholly owned subsidiary of the Company to perform all construction and development services for properties which are held and being developed by the Company.

 

We have expanded our real estate development operations to include Baja California, Mexico. On February 12, 2016, we signed a definitive joint venture agreement with Inmobiliaria Contel S.R.L.C.V. for the first tract of land of approximately 300 acres for agriculture use. In addition, we have formed Procon Baja JV, our joint venture subsidiary owned by Progreen (51%) and Contel (49%). The Procon subsidiary is planned to be the holding company for the development of approximately 1,900 acres, with some 500-800 acres suitable for farming, depending on the amount of water that could be extracted through the drilling of fresh water wells. 

 

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Our common stock is traded over-the-counter by the OTC Markets Group under the ticker symbol “PGUS.”

 

The principal offices of our company are located at 6443 Inkster Road, Suite 170-D, Bloomfield Township, MI 84301. Our telephone number is (248) 973-8851.

 

SUMMARY FINANCIAL DATA

 

The following table summarizes certain data derived from our audited financial statements as of and for the years ended April 30, 2016 and 2015. The summary financial data should be read in conjunction with the financial statements and the notes thereto included elsewhere in this prospectus. You should read the following financial information together with the information under "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our financial statements and the notes to those financial statements, appearing elsewhere in this prospectus. Historical results are not necessarily indicative of the results to be expected in future periods.

 

Statements of Operations Data  Year Ended
April 30,
2016
   Year Ended
April 30,
2015
 
Revenue  $214,464   $486,979 
Total Operating Expenses  $664,729   $786,299 
Net Income (Loss)  $(852,116)  $(406,540)
Basic and Diluted Net Income (Loss) per Share  $(0.00)  $(0.00)

 

Balance Sheets Data  As of
April 30,
2016
   As of
April 30,
2015
 
Cash and Cash Equivalents  $189,942   $99,325 
Total Assets  $1,796,307   $164,483 
Total Liabilities  $3,093,341   $1,196,119 
Total Stockholders’ Equity (Deficit)  $(1,297,034)  $(1,031,636)
Accumulated Deficit  $(5,031,490)  $(4,179,374)

 

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RISK FACTORS

 

This Offering involves a high degree of risk. You should carefully consider the risks described below before you decide to purchase the shares of common stock offered hereby.

 

Risks Related To Our Business

 

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.

 

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, 2016, we had cash on hand of $190,000 and $1,301,000 of rental properties and properties under development. At that same date our liabilities totaled $3,093,000. On April 30, 2016, we had a stockholders’ deficit of $1,297,000.

 

The Company will require 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.

 

Risks Associated with Our Real Estate Operations in the United States

 

Because our business plan is to acquire residential housing, we are subject to all of the risks which affect residential real estate including the current severe decline.

 

Real property investments are subject to varying degrees of risk and are relatively illiquid. Several factors may adversely affect the economic performance and value of our property and any properties acquired in the future. These factors include changes in the national, regional and local economic climates, local conditions such as, the attractiveness of our properties to residents, competition from other available property owners and changes in market rental rates. Our performance also will depend on our ability to collect rent from residents and to pay for adequate maintenance, insurance and other operating costs, including real estate taxes, which could increase over time. Sources of labor and materials required for maintenance, repair, capital expenditure or development may be more expensive than anticipated. Also, the expenses of owning and operating a property are not necessarily reduced when circumstances such as market factors and competition cause a reduction in income from the property.

 

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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.

 

As a company investing in residential real estate, we face leasing risks in our proposed residential real estate investment program.

 

Our success will depend in part on leasing to residents or tenants with acceptable terms. If our residential apartment homes, condominiums or houses are not leased on schedule and on the expected terms and conditions, the returns on the property could be adversely affected. Whether or not residential tenants are willing to enter into leases on the terms and conditions we project and on the timetable we expect will depend on a large variety of factors, many of which are outside our control.

 

Because we operate in the Detroit, Michigan 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 in the greater Detroit market. In particular, unemployment is higher than in other areas of the United States.

 

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.

 

As an owner of real property, we will face risks related to ownership including mold and Chinese drywall.

 

Recently, there have been a large number of lawsuits against owners and managers of properties alleging personal injury and property damage caused by the presence of mold in real estate. Some of these lawsuits have resulted in substantial monetary judgments or settlements. We cannot provide any assurance that we will be able to obtain insurance coverage in the future for mold-related claims at a commercially reasonable price or at all. The presence of significant mold could expose us to liability to residents, tenants, and others if allegations regarding property damage, health concerns, or similar claims arise. Remediation of mold is expensive and involves hiring a specialty contractor and may involve extensive renovations, which costs cannot be passed on to tenants. Additionally, although still evolving, drywall from China has posed a major health risk and has rendered homes uninhabitable. This problem is relatively new and still evolving. We do not know if it will affect properties in our target market. If it affects properties we acquire, we will incur substantial remediation costs and the loss of income.

 

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Failure to comply with the Americans with Disabilities Act or other similar laws could result in substantial costs.

 

A number of federal, state, and local laws and regulations (including the Americans with Disabilities Act) may require modifications to existing buildings or restrict certain renovations by requiring improved access to such buildings by disabled persons and may require other structural features that add to the cost of buildings under construction. Legislation or regulations adopted in the future may impose further burdens or restrictions on us with respect to improved access by disabled persons. The costs of compliance with these laws and regulations may be substantial, which could have a material adverse effect on our results of operation.

 

Risks Associated With Our Proposed Property Development in Baja Mexico

 

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.

 

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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;
     
  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, 2016, 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.

 

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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.

 

We do not intend to pay dividends on any investment in the shares of stock of our company and any gain on an investment in our company 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 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 the stock’s price. This may never happen and investors may lose all of their investment in our company.

 

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.

 

Tangiers Global, LLC will pay less than the then-prevailing market price for our common stock.

 

Our common stock to be issued to Tangiers Global, LLC pursuant to the investment agreement dated June 23, 2016 will be purchased at the 89% of the average of the (5) five lowest daily trading prices of the Common Stock during the five-day Valuation Period under the investment agreement by Tangiers Global, LLC of the put notice shares that they are required to purchase. Tangiers Global, LLC has a financial incentive to sell our common stock immediately upon receiving the shares to realize the profit equal to the difference between the discounted price and the market price. If Tangiers Global, LLC sells the shares, the price of our common stock could decrease. 

 

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Your ownership interest may be diluted and the value of our common stock may decline by exercising the put right pursuant to the investment agreement with Tangiers Global, LLC.

 

Pursuant to the investment agreement with Tangiers Global, LLC, when we deem it necessary, we may raise capital through the private sale of our common stock to Tangiers Global, LLC at a discounted price. Because the put price is lower than the prevailing market price of our common stock, to the extent that the put right is exercised, your ownership interest may be diluted.

 

We may not have access to the full amount available under the investment agreement with Tangiers Global, LLC.

 

Our ability to draw down funds and sell shares under the investment agreement with Tangiers Global, LLC requires that the registration statement of which this prospectus forms a part to be declared effective and continue to be effective. The registration statement of which this prospectus forms a part registers the resale of 100,000,000 shares issuable under the investment agreement with Tangiers Global, LLC, and our ability to sell any remaining shares issuable under the investment with Tangiers Global, LLC is subject to our ability to prepare and file one or more amendments to this registration statement or additional registration statements registering the resale of these shares. These amendments or registration statements may be subject to review and comment by the staff of the Securities and Exchange Commission, and will require the consent of our independent registered public accounting firm. Therefore, the timing of effectiveness of these additional required filings cannot be assured. Even if we are successful in causing one or more amendments or additional registration statements registering the resale of some or all of the shares issuable under the investment agreement with Tangiers Global, LLC to be declared effective by the Securities and Exchange Commission in a timely manner, we may not be able to sell the shares unless certain other conditions are met. For example, we might have to increase the number of our authorized shares in order to issue the shares to Tangiers Global, LLC. Increasing the number of our authorized shares will require board and stockholder approval. Accordingly, because our ability to draw down any amounts under the investment agreement with Tangiers Global, LLC is subject to a number of conditions, there is no guarantee that we will be able to draw down any portion or all of the proceeds of $5,000,000 under the investment agreement with Tangiers Global, LLC.

 

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Forward-Looking Statements

 

This prospectus contains forward-looking statements. Forward-looking statements are projections in respect of future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “intend”, “expect”, “plan”, “anticipate”, “believe”, “estimate”, “predict”, “potential”, or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, including the risks in the section entitled “Risk Factors”, uncertainties and other factors, which may cause our company’s or our industry’s actual results, levels of activity or performance to be materially different from any future results, levels of activity or performance expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity or performance. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

 

Use of Proceeds

 

We will not receive any proceeds from the sale of shares of our common stock by the selling stockholder. However, we will receive proceeds from the sale of shares of our common stock pursuant to our exercise of the put right offered by Tangiers Global, LLC. We will use these proceeds from the sale of shares of our common stock to Tangiers Global, LLC for general corporate and working capital purposes and acquisitions or assets, businesses or operations or for other purposes that our board of directors, in its good faith, deems to be in the best interest of our company.

 

We will pay for expenses of this offering, except that the selling stockholder will pay any broker discounts or commissions or equivalent expenses and expenses of its legal counsel applicable to the sale of its shares.

 

Dilution

 

The sale of our common stock to Tangiers Global, LLC in accordance with the investment agreement dated June 23, 2016 will have a dilutive impact on our stockholders. As a result, our net loss per share could increase in future periods and the market price of our common stock could decline. In addition, the lower our stock price is at the time we exercise our put option, the more shares of our common stock we will have to issue to Tangiers Global, LLC in order to drawdown pursuant to the investment agreement. If our stock price decreases during the pricing period, then our existing stockholders would experience greater dilution.

 

The Offering

 

Tangiers Global, LLC may offer and sell up 100,000,000 shares of our common stock to be sold under the investment agreement dated June 23, 2016. The investment agreement permits us to “put” up to $5,000,000 in shares of our common stock to Tangiers Global, LLC over a period of up to 36 months. All shares registered in accordance with this registration statement are being registered solely pursuant to the investment agreement.

 

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Investment Agreement with Tangiers Global, LLC

 

On June 23, 2016, we entered into an investment agreement with Tangiers Global, LLC, a Wyoming limited liability company (“Tangiers”). Pursuant to the terms of the investment agreement, Tangiers committed to purchase up to $5,000,000 of our common stock over a period of up to 36 months. From time to time during the 36 month period commencing from the effectiveness of the registration statement, we may deliver a put notice to Tangiers which states the put amount in shares of Common Stock that the Company intends to sell to the Investor pursuant to the terms of the Agreement and stating the current number of Shares issued and outstanding on such date. The maximum number of shares that the Company shall be entitled to put to Tangiers per any applicable put notice is equal to one hundred percent (100%) of the average of the daily trading volume of the common stock for the ten consecutive trading days immediately prior to the applicable Put Notice Date; Tangiers’ purchase price for the shares of common stock put pursuant to a put notice is 89% of average of the five lowest daily trading prices of the common stock during the Valuation Period, which immediately follows the clearing date associated with the applicable put notice and during which the purchase price of the common stock is valued. The Company shall not be entitled to submit a put notice until after the previous closing has been completed. Additionally, the Company may not deliver a put notice on or earlier of the tenth trading day immediately following the preceding put notice date unless a written waiver to deliver a put notice during the waiting period is obtained by the Company from the Tangiers in advance.

 

In connection with the investment agreement with Tangiers, we also entered into a registration rights agreement with Tangiers covering the registration and resale of 100,000,000 shares of our common stock underlying the investment agreement with Tangiers.

 

The 100,000,000 shares being offered pursuant to this prospectus represent 28.7% of the shares currently issued and outstanding, assuming that the selling stockholder will sell all of the shares offered for sale. The 100,000,000 shares being offered pursuant to this prospectus represent 40% of the shares issued and outstanding held by non-affiliates of our company. The investment agreement with Tangiers is not transferable and any benefits attached thereto may not be assigned.

 

We may be required to further increase our authorized shares in order to receive the entire purchase price. Tangiers has agreed to refrain from holding an amount of shares which would result in Tangiers owning more than 4.99% of the then-outstanding shares of our common stock at any one time.

 

There are substantial risks to investors as a result of the issuance of shares of our common stock under the investment agreement with Tangiers. These risks include dilution of stockholders’ percentage ownership, significant decline in our stock price and our inability to draw sufficient funds when needed.

 

We intend to sell Tangiers periodically our common stock under the investment agreement and Tangiers will, in turn, sell such shares to investors in the market at the market price. This may cause our stock price to decline, which will require us to issue increasing numbers of common shares to Tangiers to raise the same amount of funds, as our stock price declines.

 

The aggregate investment amount of $5 million was determined based on numerous factors, including the following: The proceeds received from any “puts” tendered to Tangiers under the investment agreement will be used for general corporate and working capital purposes and acquisitions or assets, businesses or operations or for other purposes that our board of directors, in its good faith deem to be in the best interest of our company. We are involved in the Contel joint venture development project in Baja Mexico, and would need the full amount of this funding properly to initiate development work.

 

Because our ability to draw down any amounts under the investment agreement with Tangiers is subject to a number of conditions, there is no guarantee that we will be able to draw down any portion or all of the proceeds of $5,000,000 under the investment agreement with Tangiers.

 

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Selling Stockholders

 

The selling stockholder may offer and sell, from time to time, any or all of shares of our common stock to be sold to Tangiers Global, LLC under the investment agreement dated June 23, 2016.

 

The following table sets forth certain information regarding the beneficial ownership of shares of common stock by the selling stockholder as of August 30, 2016 and the number of shares of our common stock being offered pursuant to this prospectus. We believe that the selling stockholder has sole voting and investment powers over its shares.

 

Because the selling stockholder may offer and sell all or only some portion of the 100,000,000 shares of our common stock being offered pursuant to this prospectus, the numbers in the table below representing the amount and percentage of these shares of our common stock that will be held by the selling stockholder upon termination of the offering are only estimates based on the assumption that the selling stockholder will sell all of its shares of our common stock being offered in the offering. being offered pursuant to this prospectus upon the occurrence of any event that makes any statement in this. The selling stockholder has not had any position or office, or other material relationship with us or any of our affiliates over the past three years. To our knowledge, the selling stockholder is not a broker-dealer or an affiliate of a broker-dealer. We may require the selling stockholder to suspend the sales of the shares of our common stock.

 

Name of Selling  Stockholder   Shares Owned by the Selling Stockholder before the Offering (1)     Total Shares Offered in the
Offering
    Number of Shares to Be Owned by Selling Stockholder After the Offering and Percent of Total Issued and Outstanding Shares (1)  
                # of
Shares (3)
    % of
Class (2),(3)
 
Tangiers Global, LLC (4)     0 (5)     100,000,000       -0-       0 % *

  

(1) Beneficial ownership is determined in accordance with Securities and Exchange Commission rules and generally includes voting or investment power with respect to shares of common stock. Shares of common stock subject to options and warrants currently exercisable, or exercisable within 60 days, are counted as outstanding for computing the percentage of the person holding such options or warrants but are not counted as outstanding for computing the percentage of any other person.
   
(2) We have assumed that the selling stockholder will sell all of the shares being offered in this offering.
   
(3) Based on 348,385,110 shares of our common stock issued and outstanding as of August 30, 2016. Shares of our common stock being offered pursuant to this prospectus by a selling stockholder are counted as outstanding for computing the percentage of the selling stockholder.
   
(4) Robert Papiri has the voting and dispositive power over the shares owned by Tangiers Global, LLC.
   
(5)

As of August 30, 2016, Tangiers held 0 shares of our common stock pursuant to the puts made under the investment agreement and -0- shares of our common stock issued pursuant to a 5.83% convertible promissory note in the principal amount of $22,000 with Tangiers dated June 23, 2016, as amended and restated as of August 25, 2016.

 

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Plan of Distribution

 

The selling stockholder may, from time to time, sell any or all of shares of our common stock covered hereby on the OTC Markets Group market, or any other stock exchange, market or trading facility on which the shares are traded or in private transactions. A selling stockholder may sell all or a portion of the shares being offered pursuant to this prospectus at fixed prices, at prevailing market prices at the time of sale, at varying prices or at negotiated prices. A selling stockholder may use any one or more of the following methods when selling securities:

 

  ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
     
  block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;
     
  purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
     
  an exchange distribution in accordance with the rules of the applicable exchange;
     
  privately negotiated transactions;
     
  in transactions through broker-dealers that agree with the selling stockholder to sell a specified number of such securities at a stipulated price per security;
     
  through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;
     
  a combination of any such methods of sale; or
     
  any other method permitted pursuant to applicable law.

 

The selling stockholder may also sell securities under Rule 144 under the Securities Act of 1933, if available, rather than under this prospectus.

 

Broker-dealers engaged by the selling stockholder may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the selling stockholder (or, if any broker-dealer acts as agent for the purchaser of securities, from the purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this prospectus, in the case of an agency transaction not in excess of a customary brokerage commission in compliance with FINRA Rule 2440; and in the case of a principal transaction a markup or markdown in compliance with FINRA IM-2440.

 

Tangiers Global, LLC is an underwriter within the meaning of the Securities Act of 1933 and any broker-dealers or agents that are involved in selling the shares may be deemed to be “underwriters” within the meaning of the Securities Act of 1933 in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act of 1933. We are required to pay certain fees and expenses incurred by us incident to the registration of the securities.

 

The selling stockholder will be subject to the prospectus delivery requirements of the Securities Act of 1933 including Rule 172 thereunder.

 

The resale securities will be sold only through registered or licensed brokers or dealers if required under applicable state securities laws. In addition, in certain states, the resale securities covered hereby may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with.

 

Under applicable rules and regulations under the Securities Exchange Act of 1934, any person engaged in the distribution of the resale securities may not simultaneously engage in market making activities with respect to the common stock for the applicable restricted period, as defined in Regulation M, prior to the commencement of the distribution. In addition, the selling stockholder will be subject to applicable provisions of the Securities Exchange Act of 1934 and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of securities of the common stock by the selling stockholder or any other person. We will make copies of this prospectus available to the selling stockholder and will inform it of the need to deliver a copy of this prospectus to each purchaser at or prior to the time of the sale (including by compliance with Rule 172 under the Securities Act of 1933).

 

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Description of Securities

 

General

 

Our authorized capital stock consists of 1,510,000,000 shares of which 1,500,000,000 are common stock, par value $.0001 per share and 10,000,000 are preferred stock, par value $.0001 per share. As of August 30, 2016, we had 348,385,110 shares of common stock issued and outstanding. The transfer agent and registrar for our common stock is Interwest Stock Transfer Company, Salt Lake City, Utah.

 

The following statements set forth the material terms of our classes of authorized stock; however, reference is made to the more detailed provisions of, and such statements are qualified in their entirety by reference to, our Articles of Incorporation, as amended.

 

Common Stock

 

Holders of shares of common stock are entitled to one vote for each share on all matters to be voted on by the stockholders. Holders of common stock do not have cumulative voting rights. Holders of common stock are entitled to share ratably in dividends, if any, as may be declared from time to time by the Board of Directors in its discretion from funds legally available therefore. In the event of a liquidation, dissolution or winding up of the Company, the holders of common stock are entitled to share pro rata all assets remaining after payment in full of all liabilities. All of the outstanding shares of common stock are fully paid and non-assessable. Holders of common stock have no preemptive rights to purchase our common stock. There are no conversion or redemption rights or sinking fund provisions with respect to the common stock.

 

The Board of Directors does not at present intend to seek stockholder approval prior to any issuance of currently authorized stock, unless otherwise required by law or stock exchange rules.

 

Preferred Stock

 

The Board of Directors has the authority to issue up to 10,000,000 shares of preferred stock and to fix the price, rights, preferences, privileges and restrictions, including voting rights, of those shares without any further vote or action by the stockholders. The rights of the holders of Common Stock will be subject to, and may be adversely affected by, the rights of the holders of any preferred stock that may be issued in the future.

 

We currently have outstanding 967,031 shares of Series A Convertible Preferred Stock, convertible into common stock at a conversion price of $0.0033 per share, and 8,534,625 shares of Series B Convertible Preferred Stock, the per share conversion price of which is to be determined in February 2017 when the shares of Series B Convertible Preferred Stock commence to be convertible into common stock.

 

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Experts and Counsel

 

The financial statements of our company included in this prospectus have been audited by MaloneBailey, LLP, to the extent and for the period set forth in their report (which contains an explanatory paragraph regarding our ability to continue as a going concern) appearing elsewhere in the prospectus, and are included in reliance upon such report given upon the authority of said firm as experts in auditing and accounting.

 

Michael Paige Law PLLC, Washington, D.C. has provided us with an opinion on the validity of the shares of our common stock being offered pursuant to this prospectus.

 

Interest of Named Experts and Counsel

 

No expert named in the registration statement of which this prospectus forms a part as having prepared or certified any part thereof (or is named as having prepared or certified a report or valuation for use in connection with such registration statement) or counsel named in this prospectus as having given an opinion upon the validity of the securities being offered pursuant to this prospectus or upon other legal matters in connection with the registration or offering such securities was employed for such purpose on a contingency basis. Also at the time of such preparation, certification or opinion or at any time thereafter, through the date of effectiveness of such registration statement or that part of such registration statement to which such preparation, certification or opinion relates, no such person had, or is to receive, in connection with the offering, a substantial interest, direct or indirect, in our company or any of its parents or subsidiaries. Nor was any such person connected with our company or any of its parents or subsidiaries as a promoter, managing or principal underwriter, voting trustee, director, officer or employee.

 

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Description of Business

 

General

 

Our offices are located in Oakland County, Michigan. The purchase of a condominium unit on July 28, 2009 initiated our planned new business operations directed at purchasing income-producing residential real estate apartment homes, condominiums and houses in the State of Michigan.

 

As of April 30, 2016, we own 14 properties, two of which have been subsequently sold.

  

Our business model since our initial property purchases, has been to acquire, refurbish and upgrade existing properties into more environmentally sustainable, energy efficient, comfortable and healthier living spaces so that they meet standards that exceed what is often the norm for most single family homes, condominiums and apartments. Once a property has been acquired, refurbished and rented, the property would be put back on the market, but now as a fully managed investment property, with a favorable environmental profile and yield. These investment properties are then by ProGreen Realty LLC, a wholly-owned subsidiary of ProGreen and managed by ProGreen Properties Management LLC, another wholly owned subsidiary. 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 properties which are held and under development.

 

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Real Estate Development and Marketing Operations

 

Michigan

 

We are proceeding to liquidate our current real estate portfolio in Michigan, once the lease agreements expire, and instead offer the properties with land contracts to buyers unable to obtain conventional financing. We have recently sold two of our properties with a favorable return this way. If this trend continues, we may continue to acquire more distressed properties and market the properties in this manner. We are also looking into the viability of taking the ProGreen concept even further in connection with larger projects, with possible implementation of solar technology, as well as other sustainable eco features. ProGreen's goal is to be able to develop its first "green" apartment complex, attracting a new generation of renters that appreciate and believe in the need for green technology in the residential market place. We also plan to commence an effort to identify partners with whom to acquire larger scale multi-family properties in Detroit as well as possibly in other parts of the country. We believe that the implementation of the ProGreen concept would create a new aspect and attraction to rental properties.  

 

Baja California

 

The Company has signed a definitive joint venture agreement with Inmobiliaria Contel S.R.L.C.V. (Contel), formed under the laws of Mexico, for the first tract of land of approximately 300 acres for agriculture use in Baja California, Mexico, as well as a Debt Mortgage Guarantee for the initial amount of $300,000 for the joint venture. Jan Telander, our Chief Executive Officer, has made personal investments in this project, and has a minority partnership interest and participates in the management of Contel, which was recently formed. The intent is to involve Progreen in the development plan for properties acquired by Contel. The joint venture agreement with Progreen provides for Contel to contribute the land to the joint venture at a low cost and under favorable terms, as well as handling all planning, permits, preparation and construction, in order for the property to be marketed as prime farm land. The Company will be responsible for providing the financing. Once sold, the Company will, with priority, receive the return of the financed amount and profits from the resale of the property as developed farm land will be split equally between the two parties. Work on this first tract of land is in process, and has included clearing and levelling of the land, drilling of wells and other site work. The majority of the work has now been completed, and the property is presently being actively marketed and planned to be sold. 

 

In addition, we have formed Procon joint venture subsidiary. Procon will be the holding company for further land developments, the first being of approximately 1,900 acres, with some 500-800 acres suitable for farming, depending on the amount of water that could be extracted through the drilling of fresh water wells. The company will be managed by a board of Managing Directors consisting of three members, of which two will be representing Progreen and one representing Contel.

 

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 we acquire is acquired separately through a wholly-owned limited liability company for that particular property. This will limit the risk exposure to a particular property solely to that property. Our property management strategy will be 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.

 

Competition

 

In Michigan, we operate in a competitive housing market environment where a variety of individuals and corporations are trying to maximize gains on the acquisition of undervalued property through housing market conditions. We may experience competition from companies that have similar business models involving rehabilitation of properties using environmentally friendly renovation techniques, and there is no assurance that we will continue to be able to purchase residential rental properties at attractive prices or that we will not experience competition from other developers that are marketing energy efficient and environmentally friendly properties.

 

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

 

Employees

 

As of April 30, 2016, 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. In July we hired a full time office manager/book keeper and we expect to further expand our staff in the current fiscal year.

 

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Properties

 

We lease our offices at 6443 Inkster Road, Suite 170-D, Bloomfield Township, MI 48301, of approximately 1,000 sq. ft., at a current monthly rent of $872, under a three-year lease.

 

The following table shows properties held for resale or rent owned by the Company as at April 30, 2016. All properties shown below were acquired March 8, 2016 in the purchase of ARG LLC from AMREFA.

 

Rental Properties  Monthly Rent   Status  Construction
Year
21000 Westover Ave.          
Southfield, MI 48075  $1,095   Fully Remodeled  1941
20210 Westover Ave.           
Southfield, MI 48075   775   Fully Remodeled  1943
21112 Evergreen           
Southfield, MI 48075   1,120   Fully Remodeled  1942
21198 Berg           
Southfield, MI 48033   1,175   Fully Remodeled  1938
27971 Rollcrest, Unit #13           
Farmington Hills, MI 48334   1,050   Fully Remodeled  1987
29108 Tessmer Court, #29           
Madison Heights, MI 48071   1,075   Fully Remodeled  1957
34780 W. 8 Mile           
Farmington Hills, MI 48334   1,200   Fully Remodeled  1999
26005 Franklin Pointe Drive           
Southfield, MI 48034   1,300   Fully Remodeled  1971
20351 Lacrosse           
Southfield, MI 48076   1,400   Fully Remodeled  1955
7648 Woodview Drive           
Waterford, MI 48327   1,050   Fully Remodeled  1989
25825 Lahser, #23           
Southfield, MI 48033   700   Fully Remodeled  1967
            
Vacant Properties           
24442 Kinsel           
Southfield, MI 48025       Partially Remodeled  1951
21421 Greenview Ave.           
Southfield, MI 48076       Fully Remodeled  1939
23270 Helen Street           
Southfield, MI 48033       Fully Remodeled  1969

 

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Legal Proceedings

 

We know of no material pending legal proceedings to which our company or any of our subsidiaries is a party or of which any of our properties, or the properties of any of our subsidiaries, is the subject. In addition, we do not know of any such proceedings contemplated by any governmental authorities.

 

We know of no material proceedings in which any of our directors, officers or affiliates, or any registered or beneficial stockholder is a party adverse to our company or any of our subsidiaries or has a material interest adverse to our company or any of our subsidiaries.

 

Market Price of and Dividends on Our Common Equity
and Related Stockholder Matters

 

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, 2015        
Quarter Ended July 31, 2014  $0.03   $0.015 
Quarter Ended October 31, 2014  $0.034   $0.018 
Quarter Ended January 31, 2015  $0.03   $0.019 
Quarter Ended April 30, 2015  $0.04   $0.013 
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

 

 

Holders

 

As of July 15, 2016 there were approximately 530 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.

 

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Securities Authorized for Issuance Under Equity Compensation Plans

 

As of April 30, 2012, our 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.

 

The following table sets forth certain information regarding the Company’s equity compensation plans as of April 30, 2016.

 

   (a)   (b)   (c) 
Plan category  Number of securities to be issued upon exercise of outstanding options, warrants and rights   Weighted-average exercise price of outstanding options, warrants and rights   Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) 
Equity compensation plans approved by security holders   4,800,000    0.02875    5,200,000 
Equity compensation plans not approved by security holders               
Total   4,800,000   $0.02875    5,200,000 

 

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Financial Statements

 

PROGREEN US, INC.

CONSOLIDATED FINANCIAL STATEMENTS

April 30, 2016 and 2015

 

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 

  Page
   
Consolidated Financial Statements  
   
Reports of Independent Registered Public Accounting Firm F-2
   
Consolidated Balance Sheets as of April 30, 2016 and 2016 F-3
   
Consolidated Statements of Operations for the Years Ended April 30, 2016 and  2015 F-4
   
Consolidated Statements of Stockholders’ (Deficit)/Equity for the years ended April 30, 2016 and 2015 F-5
   
Consolidated Statements of Cash Flows for the Years Ended April 30, 2016 and 2015 F-6
   
Notes to Consolidated Financial Statements F-7

 

 F-1 

Table of Contents 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Stockholders of

ProGreen US, Inc.

Bloomfield, MI

 

We have audited the accompanying consolidated balance sheets of ProGreen US, Inc. and its subsidiaries (collectively the “Company”) as of April 30, 2016 and 2015, and the related consolidated statements of operations, stockholders’ deficit and cash flows for the years then ended. In connection with our audit of the consolidated financial statements, we have also audited the financial statement schedule III as listed in the accompanying index. These financial statements and financial statements schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of ProGreen US, Inc. and its subsidiaries as of April 30, 2016 and 2015 and the results of their operations and their cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.

 

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 incurred losses since inception and further losses are anticipated. These conditions raise significant doubt about the Company’s ability to continue as a going concern. Management’s plans in this regard are described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

/s/ MaloneBailey, LLP

www.malonebailey.com

Houston, Texas

 

August 15, 2016, except for Note 25 which is dated August 31, 2016.

 

 F-2 

Table of Contents 

 

ProGreen US, Inc.

Consolidated Balance Sheets

 

   April 30,   April 30, 
   2016   2015 
         
Assets          
Rental property, net accumulated depreciation of $6,138 and $0  $1,006,560     
Property under Development   294,179     
Property   1,300,739     
Cash   189,942    99,325 
Other receivables - related party   1,859    2,915 
Accounts receivable   1,194    27,365 
Note receivable - rental property       2,137 
Prepaid expenses       3,346 
Deposits   934    5,000 
Goodwill   180,011     
Note receivable - related party   110,000     
Property and equipment:          
  Vehicles, furniture and equipment, net of accumulated depreciation of $35,764 and $45,347   11,628    24,395 
Total assets  $1,796,307   $164,483 
           
Liabilities and Stockholders' Deficit          
Accounts payable and accrued expenses  $136,740   $100,500 
Accrued interest   68,211    165,668 
Accrued interest related party   149,991     
Payable under management agreement       36,884 
Obligations under capital leases   11,302    19,005 
Tenant deposits   16,030    18,610 
Notes payable   275,256    303,452 
Note payable, related party   516,000     
Note payable -Bank of Birmingham   490,000     
Note Payable - AMREFA, net of discount of $114,189 and $0, respectively   1,170,811     
Related party advances   259,000     
Convertible notes       76,000 
Convertible debenture       476,000 
Total liabilities   3,093,341    1,196,119 
           
Stockholders' deficit          
Convertible preferred stock, Series A $.0001 par value, 1,000,000 shares authorized, 0 shares issued and outstanding, at April 30, 2016 and April 30, 2015        
Convertible preferred stock, Series B  $.0001 par value, 8,534,625 shares authorized, 0 shares issued and outstanding at April 30, 2016 and April 30, 2015        
Common stock, $.0001 par value, 1,500,000,000 shares authorized, 336,919,939 and 110,329,703 outstanding          
at April 30, 2016 and April 30, 2015   33,692    11,033 
Additional paid in capital   3,700,764    3,189,666 
Less: amount due from related party subscriber under subscription agreement       (52,961)
Accumulated deficit   (5,031,490)   (4,179,374)
Total stockholders' deficit   (1,297,034)   (1,031,636)
Total liabilities and stockholders' deficit  $1,796,307   $164,483 

 

See accompanying Notes to Consolidated Financial Statements

 

 F-3 

Table of Contents 

 

ProGreen US, Inc.

Consolidated Statements of Operations

 

   Years Ended 
   April 30, 
   2016   2015 
Revenues:        
         
Proceeds from sale of properties  $-   $200,000 
Proceeds from sale of properties, related party   -    75,000 
Rental revenue   23,880    - 
Commissions revenue   -    82,594 
Management fee revenue   12,078    11,052 
Construction services revenue   177,171    92,389 
Construction services revenue, related party   -    24,040 
Other income   1,335    1,904 
Total Revenue  $214,464   $486,979 
Expenses:          
Cost of properties sold   -    170,479 
Cost of properties sold, related party   -    73,688 
Cost of construction services   177,823    84,278 
Cost of construction services, related party   -    21,855 
Selling, General & administrative   230,156    262,134 
Professional fees   256,750    173,865 
Total operating expenses  $664,729   $786,299 
           
Operating loss   (450,265)   (299,320)
Other expenses and income:          
Interest expense, net   (239,097)   (107,220)
Gain on Sale of Asset   8,147    - 
Derivatives loss   (170,901)   - 
Loss before income tax expense  $(852,116)  $(406,540)
           
Net Loss  $(852,116)  $(406,540)
           
Net loss per share - basic and fully diluted  $(0.00)  $(0.00)
           
Weighted average shares outstanding - basic and fully diluted   179,909,164    105,365,319 

 

See accompanying Notes to Consolidated Financial Statements

 

 F-4 

Table of Contents 

 

ProGreen US, Inc.

Consolidated Statements of Stockholders' Deficit

 

   Number of           Amount Due         
   Shares       Additional   Under       Net 
   Issued and   Common   Paid In   Subscription   Accumulated   Stockholders' 
   Outstanding   Stock   Capital   Agreement   Deficit   Deficit 
                         
Balance at April 30, 2014   104,329,703   $10,433   $3,122,707   $(151,189)  $(3,772,834)  $(790,883)
                               
Amount due from subscriber under subscription agreement             10,892    (10,892)        - 
Amount received from subscriber under subscription agreement                  109,120         109,120 
Stock issued under convertible debenture   6,000,000    600    23,400              24,000 
Compensation - restricted stock units             32,667              32,667 
Net loss                       (406,540)   (406,540)
Balance at April 30, 2015   110,329,703   $11,033   $3,189,666   $(52,961)  $(4,179,374)  $(1,031,636)
                               
Amount due from subscriber under subscription agreement             1,038    (1,038)        - 
Amount received from subscriber under subscription agreement                  53,999         53,999 
Stock issued under convertible debenture   219,090,236    21,909    133,984              155,893 
Derivative liability extinguished on conversion             360,073              360,073 
Reclass of APIC to derivative             (260,941)             (260,941)
Reclass from derivative to APIC             212,694              212,694 
Stock issued under services contracts   7,500,000    750    52,750              53,500 
Compensation - restricted stock units             11,500              11,500 
Net loss                       (852,116)   (852,116)
Balance at April 30, 2016   336,919,939   $33,692   $3,700,764   $-   $(5,031,490)  $(1,297,034)

  

See accompanying Notes to Consolidated Financial Statements

 

 F-5 

Table of Contents 

 

ProGreen US, Inc.

Consolidated Statements of Cash Flows

 

   Years Ended 
   April 30, 
   2016   2015 
Cash provided by (used in) operating activities        
Net loss  $(852,116)  $(406,540)
Adjustments to reconcile net loss to net cash used in operating activities:          
Compensation - restricted stock units   11,500    32,667 
Depreciation   17,051    13,592 
Bad debt expense   2,137    - 
Gain on sale of asset   (8,147)   - 
Gain on sale of properties   -    (30,833)
Noncash Commission   -    (15,000)
Loss on derivatives   170,901    - 
Amortization of discounts on debenture to related party   -    4,031 
Amortization of debt discount   157,799    - 
Acquisition and development of properties   -    (137,331)
Proceeds from sale of properties   -    75,000 
Common shares issued for services   53,500    - 
Changes in operating assets and liabilities:          
Other receivables - related party   1,055    1,306 
Accounts receivable   26,171    (24,065)
Prepaid expenses   3,346    108 
Deposits   1,486    - 
Accounts payable and accrued expenses   96,420    149,336 
Payable under management agreement   (44,950)   30,113 
Cash used in operating activities   (363,847)   (307,616)
           
Cash provided by investing activities          
Proceeds from sale of asset   10,000    - 
Proceeds from note receivable   -    1,570 

Loan to note receivable - related party

   (110,000)     
Cash received in ARG acquisition   71,840      
Cash provided by (used in) investing activities   (28,160)   1,570 
           
Cash provided by (used in) financing activities          
Proceeds from notes payable   -    96,329 
Repayment of notes payable   (28,186)   - 
Proceeds from advances from related party   259,000    - 
Repayment of notes payable related party   -    (40,000)
Proceeds from convertible debentures   68,000    76,000 
Proceeds from line of credit   137,514    - 
Decrease in obligations under capital leases   (7,703)   (12,838)
Collection of amount due under stock subscription   53,999    109,120 
Cash provided by financing activities   482,624    228,611 
           
Net change in cash   90,617    (77,435)
Cash at beginning of period   99,325    176,760 
Cash at end of period   189,942    99,325 
Supplemental information:          
Cash paid for interest  $17,676   $4,869 
           
Noncash investing and financing transactions:          
Noncash transaction: assignment of debt  $476,000   $- 
Noncash transaction: note payable issued to purchase ARG  $1,157,270   $- 
Noncash transaction: accrued interest added to debt principal  $5,376   $- 
Noncash transaction: stock issued under convertible debenture  $155,893   $24,000 
Noncash transaction: discount on derivatives  $140,925   $- 
Noncash transaction:  derivative liability extinguished on conversion  $360,073   $- 
Noncash transaction:  reclass of APIC to derivative  $(260,941)  $- 
Noncash transaction: reclass from derivative to APIC  $212,694   $- 
Noncash transaction: proceeds from notes payable upon sale of properties  $-   $207,122 
Noncash transaction: repayment of notes payable upon sale of properties  $-   $385,000 
Noncash transaction: transfer of convertible debenture from related party  $-   $476,000 

 

See accompanying Notes to Consolidated Financial Statements

 

 F-6 

Table of Contents 

 

PROGREEN US, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

APRIL 30, 2016

 

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 under the new symbol PGEI. 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.

 

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 as well as certain of the sold properties under management agreements. 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, 2015 the Company owned no investment properties.

 

Effective December 22, 2014 the Company entered into an interim operating agreement (the “Interim PAJV Operating Agreement”) with American Residential GAP, LLC (“ARG” or “ARG LLC”) to form PAJV LLC (“PAJV”), a Michigan limited liability company. American Residential Fastigheter AB (“AMREFA”) is ARG’s sole member. The Company and ARG each owned 50% of PAJV. There were no capital contributions. PAJV will acquire, own, operate, improve and hold for sale real estate properties under development. PAJV will fund the purchases of properties with loans from ARG. During fiscal 2015 PAJV sold three leased properties to ARG LLC effective February 1, 2015, and sold a fourth property to ARG LLC in March 2015. Our agreement with AMREFA was restructured through a March 15, 2015, amendment to the Investment Agreement with AMREFA, superseding the December 2014 Interim PAJV Operating Agreement. As of this date the Company is no longer a 50% owner of the PAJV. The amendment provides for ARG LLC (the U.S. real estate subsidiary) to fund 100% of all financing requirements for real estate projects, which would be owned by specific joint ventures or ARG LLC, with Progreen handling everything from acquisition to sale and receiving a profit participation payment for a return on the property above 9.5%.

  

 F-7 

Table of Contents 

 

PROGREEN US, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

APRIL 30, 2016

 

Note 1. Financial Statement Presentation – continued

 

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. During the year ended April 30, 2015 ProGreen Construction recognized construction costs of $21,855 and provided construction services to the PAJV, while the Company was a 50% owner of the PAJV, in the amount of $24,040 relating to one of PAJV’s properties under development. ProGreen Construction charges PAJV ten percent of materials and services costs as an administrative fee. This fee totaled $2,185 for the year ended April 30, 2015.

 

During the year ended April 30, 2015 the Company spent approximately $137,000 to acquire and/or develop three properties, all of which were sold during 2015 with cash proceeds of $75,000.

 

On February 12, 2016, Progreen signed a definitive joint venture agreement with INMOBILIARIA CONTEL S.R.L.C.V. (“CONTEL”) to form a joint venture (“Baja Joint Venture”), in connection with expanding our real estate development operations to include Baja California, Mexico. We have committed to a contribution up to the amount of $ 350,000 and in April 2016 we contributed $110,000 to Baja Joint Venture. See Note 6.

 

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 AMREFA’s U.S. subsidiary, ARG LLC, which holds real estate properties in Birmingham, Michigan, that were purchased by AMREFA and which we have 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 however at April 30, 2016 the shares have not been issued and we recorded a note payable to AMREFA in the amount $1,157,270 including a present value discount of $127,730. At April 30, 2016 the amortized balance due AMREFA totaled $1,170,811. See Notes 5, 15 and 25.

 

SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

GOING CONCERN

 

The Company’s financial statements for the year ended April 30, 2016, 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.

 

The Company will continue to incur costs that are necessary for it to remain an active public company.  In the current fiscal year, the Company used approximately $364,000 of cash to support its operations and such cash needs are expected to continue in the upcoming year.  As of April 30, 2016, the Company has approximately $190,000 in cash. During the year ended April 30, 2016 the Company financed its operations through issuance of common shares for services rendered, proceeds from related party advances, proceeds from collection of amounts due under the stock subscription agreement and issuance of convertible debt.

 

 F-8 

Table of Contents 

 

PROGREEN US, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

APRIL 30, 2016

 

Note 1. Financial Statement Presentation – continued

 

Basis of consolidation

 

The consolidated financial statements include the accounts and records of the Company and its wholly-owned subsidiaries: ProGreen Realty, Progreen Properties Management, ProGreen Construction, ARG, LLC and Procon Baja JV. 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. Currently, all of the Company’s subsidiaries are wholly-owned.

 

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.

 

Cash

 

Cash consists solely of cash on deposit with financial institutions.

 

Properties under development

 

Properties under development are recorded at cost from expenditures relating to the acquisition, development, construction, and other costs that enhance the value or extend the life of rental properties which are capitalized using the specific identification method to accumulate costs.

 

Allowance for doubtful accounts

 

An allowance for doubtful accounts is management’s best estimate of the probable credit losses in the exiting 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. Management considers all accounts receivable collectible and, therefore, an allowance for doubtful accounts has not been recorded at April 30, 2016 and 2015.

 

Note receivable – rental property

 

The note receivable was carried at amortized cost. Interest income on the note receivable was recognized on the accrual basis based on the principal balance outstanding. During the current fiscal year management determined the note is uncollectible and it was written off in full.

 

 F-9 

Table of Contents 

 

PROGREEN US, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

APRIL 30, 2016

 

Note 1. Financial Statement Presentation – continued

 

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 2016 and it did not result in an impairment.

 

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

 

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 are leased under operating leases. Rental income from these leases is recognized on a straight-line basis over the term of each lease.

 

Management fee revenue recognition

 

ProGreen Management has entered into management agreements with certain property owners whereby the Company manages, leases, operates, maintains and repairs the properties for which it receives a management fee of ten percent of the monthly rent. Revenue is recognized as services are performed.

 

Construction service revenue recognition

 

ProGreen Construction performs all construction and development services for the properties held by the Company and collects ten percent of materials and services costs as construction revenue. Revenue is recognized as services are performed.

 

 F-10 

Table of Contents 

 

PROGREEN US, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

APRIL 30, 2016

 

Note 1. Financial Statement Presentation – continued

 

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. There were no such deferred amounts at either April 30, 2016 or 2015.

 

Advertising costs

 

Advertising costs are expensed as incurred. Total advertising expenditures for the years ended April 30, 2016 and 2015 were approximately $1,400 and $3,200, 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.

 

Deferred revenue

 

The Company may require tenants to prepay rent. The prepaid rent is amortized over the term of the lease using the straight-line method. Deferred revenue is $0 at April 30, 2016 and 2015.

 

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. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.

 

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.

 

 F-11 

Table of Contents 

 

PROGREEN US, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

APRIL 30, 2016

 

Note 1. Financial Statement Presentation – continued

 

Earnings (loss) per Share

 

Basic earnings (loss) per share assumes no dilution and is computed by dividing net income available to common stockholders by the weighted average number of common stock outstanding during each period. Diluted earnings per share reflects, in periods in which they have a dilutive effect, the effect of common shares issuable upon the exercise of stock options or warrants, using the treasury stock method of computing such effects and contingent shares, or conversion of convertible debt. There are no common stock equivalents as of April 30, 2016 and 2015.

 

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, “Equity Based Payments to Non-Employees” (“ASC 505”), 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.

 

Reclassifications

 

Certain amounts in previous periods have been reclassified to conform to 2016 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 February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02, Leases (Topic 842) (the “ASU”). The ASU requires the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. The ASU allows for early adoption, however, management is currently evaluating the potential impact of these changes in the consolidated financial statements of the Company.

 

 F-12 

Table of Contents 

 

PROGREEN US, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

APRIL 30, 2016

 

Note 1. Financial Statement Presentation – continued

 

In April 2015 the FASB issued Accounting Standard’s Update No. 2015-03 “Interest Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs” The update requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. The recognition and measurement guidance for debt issuance costs are not affected by this update. The adoption of the guidance is not expected to have a material impact on the Company's Consolidated Financial Statements or the Notes thereto as it is a presentation matter.

 

We do not expect that any other recently issued accounting pronouncements will have a material impact on our consolidated financial statements.

 

Note 2. Rental Properties and Property Under Development

 

Rental properties and property under development at April 30, 2016 and 2015 are summarized as follows:

 

   April 30,   April 30, 
   2016   2015 
Rental properties  $1,012,698   $- 
Less: accumulated depreciation   (6,138)   - 
Rental properties, net of accumultaed depreciation  $1,006,560    - 
           
Property under development  $294,179   $- 

 

Depreciation expense for the years ended April 30 2016 and 2015 totaled $6,138 and $0 respectively. 

 

The Company owned thirteen and no rental properties as of April 30, 2016 and 2015, respectively. The Company held one and no properties under development as of April 30, 2016 and 2015, respectively.

 

Note 3. Accounts Receivable

 

Accounts receivable totaled $1,194 and $27,365 at April 30, 2016 and 2015, respectively and is comprised of amounts due from ARG for construction work performed by ProGreen Construction in the amount of $0 and $24,870 at April 30, 2016 and 2015, respectively and amounts due from tenants for properties managed by Progreen Management in the amount of $1,194 and $2,495 at April 30, 2016 and 2015, respectively.

 

Note 4. Note Receivable - Rental Property

 

On August 21, 2012 the Company sold one property with a sales price of $60,000 of which $10,000 was financed by the Company which is recorded as a note receivable with a balance of $0 and $2,137 as of April 30, 2016 and April 30, 2015, respectively. During the current fiscal year management determined the note is uncollectible and it was written off in full. The amount of $2,137 was charged to bad debt expense in the year ended April 30, 2016.

 

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Table of Contents 

 

PROGREEN US, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

APRIL 30, 2016

 

Note 5. 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 will pay 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 have not been issued and we recorded a note payable to AMREFA in the amount $1,157,270 including a present value discount of $127,730. At April 30, 2016 the note payable balance due AMREFA totaled $1,170,811, net of $114,189 of unamortized discount. During the year ended April 30, 2016, $13,541 was recognized as amortization of debt discount.

 

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 11 and 12.

 

Note 6. Note Receivable - Related Party

 

On February 12, 2016, the Company signed a definitive joint venture agreement with INMOBILIARIA CONTEL S.R.L.C.V. (“CONTEL”) to form a joint venture (“Baja Joint Venture”), in connection with expanding real estate development operations to include Baja California, Mexico. The property acquired by the Baja Joint Venture will be developed for seeding purposes and eventually sold to a third party. The Company is committed to a contribution up to the amount of $350,000. The Company accepts a share of the Baja Joint Venture’s profits and losses and is entitled to recover all contribution upon completion of the sale of the property. In April 2016 the Company contributed $110,000 to Baja Joint Venture which is accounted for as an investment loan. Note Receivable - Related Party totaled $110,000 and $0 as of April 30, 2016 and 2015, respectively.

 

 F-14 

Table of Contents 

 

PROGREEN US, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

APRIL 30, 2016

 

Note 7. Property and Equipment

 

Major classifications of property and equipment at April 30, 2016 and 2015 are summarized as follows:

 

 

   April 30,   April 30, 
   2016   2015 
Vehicles  $40,902   $63,252 
Furniture   3,564    3,564 
Office equipment   2,926    2,926 
Total vehicles, furniture and equipment   47,392    69,742 
Less: accumulated depreciation   (35,764)   (45,347)
Net carrying amount  $11,628   $24,395 

 

Depreciation expense for the years ended April 30 2016 and 2015 totaled $10,913 and $13,592, respectively. 

 

Note 8. Payable Under Management Agreement

 

ProGreen Management has entered into management agreements with certain property owners whereby the Company manages, leases, operates, maintains and repairs the properties for which it receives a management fee of ten percent of the monthly rent. ProGreen Management collects rent and remits the property owners’ portion of collected rent, net of a management fee to the owners. At April 30, 2016 and April 30, 2015 net rent amounts due totaled $0 and $36,900, respectively.

 

In addition, for certain properties the Company guaranteed rents, in accordance with the terms of each lease, through various dates through January 1, 2016. During this fiscal year, the rent guarantees expired with no payments required, thus the recorded reserves in the amount of $10,000 were reversed and included in reserve for rent recovery in the accompanying Consolidated Statement of Operations for the year ended April 30, 2016. Recorded reserves totaled $10,000 as of April 30, 2015 which are included in accounts payable and accrued expenses in the accompanying Consolidated Balance Sheet.

 

Note 9. Obligations Under Capital Leases

 

The Company leases a vehicle under a capital lease expiring in fiscal 2018.

 

The following is a schedule by year of future minimum lease payments under the capital lease together with the present value of the net minimum lease payments as of April 30, 2016:

 

Year ending April 30,     
2017  $8,152 
2018   3,397 
Total minimum lease payments   11,549 
      
Less amounts representing interest   (247)
Present value of future minimum lease payments  $11,302 

 

Total lease payments made in fiscal 2016 and 2015 were $8,152 and $13,712, consisting of $7,703 and $12,838 principal and $449 and $874 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.

 

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Table of Contents 

 

PROGREEN US, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

APRIL 30, 2016

 

Note 9. Obligations Under Capital Leases – continued

 

The cost of the vehicles in the amount of $40,902 and $63,252 at April 30, 2016 and 2015, 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 $10,415 and $12,650 is included in the Company’s Consolidated Statements of Operations for the years ended April 30, 2016 and 2015, respectively. During fiscal 2016 the Company sold one of the vehicles for which the note payable was paid in full as of April 30, 2015. The proceeds from the sale totaled $10,000 and the Company recognized a gain on the sale of the vehicle in them amount of $8,147 which is included in the Company’s Consolidated Statement of Operations for the year ended April 30, 2016.

 

Note 10. Notes Payable

 

On July 19, 2013, the Company entered into an Investment Agreement (“AMREFA Agreement”) with AMREFA, which provided generally for an intended investment of up to $3,000,000 by AMREFA for the purpose of acquisition of investment properties in the U.S. from the Company. During the year ended April 30, 2015, AMREFA loaned the Company an additional $303,452, of which $207,122 was non cash in connection with the sale of three properties and $96,330 was received in cash of which $75,000 was received in connection with the sale of one of the properties. The Company reduced the amount due to AMREFA by $215,000 in the form of noncash as a result of the Company’s sale of two properties to ARG, whose sole member was AMREFA, during the year ended April 30, 2015. The Company also reduced the amount due to AMREFA by $135,000 in the form of noncash as a result of the Company’s sale of one property under development to PAJV, while the Company was a 50% owner in PAJV, during year ended April 30, 2015. In addition the Company reduced the accrued interest payable due to AMREFA in the amount of $20,219 in the form of noncash as a result of the sales of the three properties. The Company also reduced the amount due to AMREFA by $35,000 in the form of noncash as a result of the Company’s commission earned on the sale of one of the PAJV’s properties. The commission totaled $15,000 and a new note payable in the amount of $22,800, which included accrued interest of $2,800, was issued.

 

As of April 30, 2015 notes payable to AMREFA total $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 Instalment Payment Agreement (June 2015 Instalment 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 instalment 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 Instalment Payment Agreement. During fiscal 2016 the Company made payments to AMREFA totaling $28,186 in connection with the June 2015 Instalment Payment Agreement.

 

 F-16 

Table of Contents 

 

PROGREEN US, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

APRIL 30, 2016

 

Note 10. Notes Payable – continued

 

The table below summarizes the effects of sales of the three properties and the commission earned by the Company during the year ended April 30, 2015:

 

       Proceeds in the form of :         
   Selling Price   Cash   Noncash Debt Pay Down   Noncash Payment of Accrued Interest Payable   Issuance of Debt   Book Value   Gain 
                             
23270 Helen Street, Southfield Michigan  $110,000        $175,000   $10,459   $89,563   $96,699   $13,301 
                                    
21198 Berg Street, Southfield Michigan   90,000   $75,000    40,000    2,010    27,009    73,780    16,220 
                                    
24442 Kinsel Street, Southfield, Michigan   75,000         135,000    7,750    67,750    73,688    1,312 
                                    
                                    
Total Properties Sold  $275,000   $75,000   $350,000   $20,219   $184,322   $244,167   $30,833 
                                    
                            Commission      
21000 Westover, Southfield, Michigan            $35,000   $2,800   $22,800   $15,000      
                                    
Total  $275,000   $75,000   $385,000   $23,019   $207,122   $15,000   $30,833 

 

As of April 30, 2016 notes payable to AMREFA total $261,150 plus accrued interest totaling $14,653.

 

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. 

 

 F-17 

Table of Contents 

 

PROGREEN US, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

APRIL 30, 2016

 

Note 10. Notes Payable – continued

 

The Company is indebted as follows:

 

   January   April , 30 
   2016   2015 
Note Payable to City of Southfield dated October 29, 2014 bears a fixed rate of interest of 3.00% and requires interest only annual payments for the first three years of the note. Commencing in year four principal and interest are due in fifteen annual installments. The note payable is secured by a property located at 23270 Helen Street, Southfield Michigan.  $6,000   $6,000 
           
Note Payable to City of Southfield dated September 19, 2014 bears a fixed rate of interest of 3.00% and requires interest only annual payments for the first three years of the note. Commencing in year four principal and interest are due in fifteen annual installments. The note payable is secured by a property located at 23270 Helen Street, Southfield Michigan.   8,106    8,106 
           
Note Payable to AMREFA dated June 25, 2015 bears a fixed rate of interest of 8.00%. Payments plus accrued interest are due biannually as follows; January 15, 2016 $61,150, July 15, 2016 $65,000, January 15, 2017 $65,000 and July 15, 2017 $70,000. The note payable is guaranteed by a majority shareholder.   261,150    - 
           
Note Payable to AMREFA dated March 6, 2015 bears a fixed rate of interest of 8.00% and requires no monthly payments. The principal and interest are due on or before March 6, 2016. The note payable is unsecured.   -    22,800 
           
Note Payable to AMREFA dated January 8, 2015 bears a fixed rate of interest of 8.00% and requires no monthly payments. The principal and interest are due on or before January 8, 2016. The note payable is unsecured.   -    67,750 
           
Note Payable to AMREFA dated October 1, 2014 bears a fixed rate of interest of 8.00% and requires no monthly payments. The principal and interest are due on or before October 1, 2015. The note payable is unsecured.   -    27,009 
           
Note Payable to AMREFA dated October 1, 2014 bears a fixed rate of interest of 8.00% and requires no monthly payments. The principal and interest are due on or before October 1, 2015. The note payable is unsecured.   -    75,457 
           
Note Payable to AMREFA dated June 25, 2014 bears a fixed rate of interest of 8.00% and requires no monthly payments. The principal and interest are due on or before June 25, 2015. The note payable is unsecured.   -    96,330 
           
   $275,256   $303,452 

 

Note 11. Notes Payable Related Party

 

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 bears a fixed rate of interest of 8.00% and requires no monthly payments. Additional interest of 5% is due if the Company defaults on the terms of the note payable. The note is secured by the property at 24442 Kinsel Street, Southfield, Michigan which the Company acquired in the ARG purchase. The note will be paid upon the sale of the Kinsel Street Property. See Note 5.

 

The note payable to the Company’s controller had a balance outstanding of $40,000 and $0 as of April 30, 2016 and 2015, respectively and the Company recorded interest expense in connection with this note payable in the amount of $471 and $0 for the years ended April 30, 2016 and 2015, respectively. Accrued interest due under this note payable totaled $1,378 and $0 as of April 30, 2016 and 2015, respectively.

 

 F-18 

Table of Contents 

 

PROGREEN US, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

APRIL 30, 2016

 

Note 12. Note Payable Bank of Birmingham

 

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 Birmingham 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 Birmingham 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 all properties and related rents which the Company acquired in the ARG purchase. See Note 5.

 

The note payable had a balance outstanding of $490,000 and $0 as of April 30, 2016 and 2015, respectively and the Company recorded interest expense in connection with this note payable in the amount of $2,858 and $0 for the years ended April 30, 2016 and 2015, respectively. Accrued interest due under the note payable totaled $2,858 and $0 as of April 30, 2016 and April 30, 2015, respectively.

 

Principal payment requirements on the notes payable to Bank of Birmingham for the years ending after April 30, 2016 are as follows:

 

2017  $11,895 
2018   13,699 
2019   14,556 
2020   15,394 
2021   434,456 
Thereafter   - 
Total  $490,000 

 

Note 13. 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, which is in negotiation, between EIG and the Company, these advances have no established repayment terms nor do they earn interest and are unsecured. Related party advance totaled from EIG totaled $59,000 and $0 at April 30, 2016 and 2015, respectively. See Note 25.

 

The Company has 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 provides solar energy solutions for all types of properties. The subscription agreements provide 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 last quarter of fiscal 2016, the Company received $200,000 as payment for 200,000 of the shares. The shares were issued subsequent to April 30, 2016 thus the Company recorded an amount due stockholders in the amount of $200,000. The remaining 100,000 shares in the amount of $100,000 were purchased subsequent to April 30, 2016. See Note 25.

 

 F-19 

Table of Contents 

 

PROGREEN US, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

APRIL 30, 2016

 

Note 14. Fair Value Measurement and Derivative Losses

 

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.

 

The fair value is an exit price, representing the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability.  ASC 820, "Fair Value Measurements and Disclosures", establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value.  These tiers 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, 2016, 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.

 

During fiscal 2016, $425,413 of derivative liability was recorded as the notes became convertible of which $140,925 was recorded as debt discount, $23,547 as loss on derivative liability and $260,941 as re-class of equity to liability.

 

Upon full conversion of the convertible notes, 147,354 was recorded as loss on derivative liability, $140,925 of debt discount was fully amortized, $212,694 re-class from derivative to equity and $360,073 was extinguished through equity from derivative liability.

 

The fair value of the embedded derivative liabilities were determined using the Black-Scholes valuation model on the issuance dates with the assumptions in the table below.

 

Expected dividends  0%
Expected Volatility  166% - 676%
Stock price $ 0.001 - $ .01
Discount rate  .04% -. 77%

 

 F-20 

Table of Contents 

 

PROGREEN US, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

APRIL 30, 2016

 

Note 15. Convertible Notes

 

KBM Worldwide, Inc. Convertible Note

 

Effective November 24, 2014, the Company entered into a Securities Purchase Agreement (“Purchase Agreement”) with KBM Worldwide, Inc. (“KBM”), pursuant to which the Company issued KBM a convertible note in the amount of $43,000, bearing interest at the rate of 8% per annum (the “KBM Convertible Note”). The KBM Convertible Note provided KBM the right, during the period beginning on the date which is one hundred eighty (180) days following the date of the KBM Convertible Note, to convert the outstanding balance (including accrued and unpaid interest) into shares of the Company’s common stock at a 39% discount from the market price of the common stock and is payable, together with interest thereon, on November 24, 2015. The Company had the right to repay the KBM Convertible Note prior to maturity (or conversion), provided that it pays 110% of such the outstanding principal amount and accrued and unpaid interest thereon) if the note is repaid within the first 30 days after the issuance date. The prepayment penalty increases to 120% if repayment is during the period which is 31 to 60 days after the issuance date; 125%, if repayment is during the period which is 61 to 90 days after the issuance date; 130%, if repayment is during the period which is 91 to 120 days after the issuance date; and 135%, if repayment is during the period which is 121 days to 180 days after the issuance date. After 180 days have elapsed from the issuance date, the Company had no right to prepay the KBM Convertible Note.

 

During the year ended April 30, 2016 KBM converted the KBM Convertible Note into a total of 19,018,480 shares of Common Stock at a fair value as follows:

 

Conversion Date  Number of Shares of Common Stock   Principal and Interest Amount Converted (i)   Price per Share 
May 26, 2015   1,967,213   $12,000   $0.00610 
July 20, 2015   5,204,839    16,135   $0.00310 
August 14, 2015   6,235,714    8,730   $0.00140 
August 17, 2015   5,610,714    7,855   $0.00140 
Totals - Year ended April 30, 2016   19,018,480   $44,720      

 

 

(i) Includes accrued interest of $1,720. 

 

There was no remaining principal balance or accrued interest due under the KBM Convertible Note at April 30, 2016. See Note 21.

 

Interest expense relating to this KBM debenture totaled approximately $240 and $1,480 for years ended April 30, 2016 and 2015, respectively. Accrued interest due totaled $0 and $1,480 at April 30, 2016 and April 30, 2015, respectively.

 

JMJ Financial Convertible Note

 

Effective September 10, 2015 the Company entered into a Convertible Promissory Note (“JMJ Note”) with JMJ Financial pursuant to which the Company issued JMJ Financial a convertible note in the amount of $250,000 with an original issue discount in the amount of $25,000. The principal amount due JMJ is based on the consideration paid. The maturity date is two years from the effective date of each payment. On September 10, 2015 the Company received consideration of $30,000 for which an original issue discount of $3,333 was recorded. There were no additional borrowings under the JMJ Note during the quarter ended January 31, 2016. The Company did not repay the JMJ Note on or before 90 days from the effective date, thus the Company was not able to make further payments on this JMJ Note prior to the maturity date and a one-time interest charge of 12% was applied to the principal amount. The JMJ Note provided JMJ Financial the right at any time, to convert the outstanding balance (including accrued and unpaid interest) into shares of the Company’s common stock at 60% of the average of two lowest trade prices in the 20 trading days previous to the conversion, additional discounts may apply in the case that conversion shares are not deliverable or if the shares are ineligible.

 

 F-21 

Table of Contents 

 

PROGREEN US, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

APRIL 30, 2016

 

Note 15. Convertible Notes – continued

  

During the year ended April 30, 2016 JMJ Financial converted the JMJ Convertible Note in its entirety and the original issue discount of $3,333 was fully amortized upon conversion,, into a total of 44,738,207 shares of Common Stock at a fair value as follows :

 

Conversion Date  Number of Shares of Common Stock   Principal and Interest Amount Converted *(i)   Price per Share 
February 25, 2016   14,575,000   $3,498   $0.00024 
March 17, 2016   15,300,000    13,770   $0.00090 
March 28, 2016   14,863,207    20,065   $0.00135 
Totals - Year ended April 30, 2016   44,738,207   $37,333      

 

 

(i) Includes accrued interest of $4,000. 

 

See Note 21.

 

Vis Vires Convertible Notes

 

Effective March 25, 2015, the Company entered into a Securities Purchase Agreement (“Purchase Agreement”) with Vis Vires pursuant to which the Company issued Vis Vires a convertible note in the amount of $33,000, bearing interest at the rate of 8% per annum (the “March 2015 Vis Vires Convertible Note”). The March 2015 Vis Vires Convertible Note provided Vis Vires the right, during the period beginning on the date which is one hundred eighty (180) days following the date of the March 2015 Vis Vires Convertible Note, to convert the outstanding balance (including accrued and unpaid interest) into shares of the Company’s common stock at a 39% discount from the market price of the common stock and is payable, together with interest thereon, on March 16, 2016. The Company had the right to repay the March 2015 Vis Vires Convertible Note prior to maturity (or conversion), provided that it pays 110% of such the outstanding principal amount and accrued and unpaid interest thereon) if the note is repaid within the first 30 days after the issuance date. The prepayment penalty increases to 115% if repayment is during the period which is 31 to 60 days after the issuance date; 120%, if repayment is during the period which is 61 to 90 days after the issuance date; 125%, if repayment is during the period which is 91 to 120 days after the issuance date; 130%, if repayment is during the period which is 121 days to 150 days after the issuance date and 135% if repayment is during the period which is 151 days to 180 days after the issuance date. After 180 days have elapsed from the issuance date, the Company had no right to prepay the March 2015 Convertible Note.

 

Effective May 11, 2015, the Company entered into a second Securities Purchase Agreement with Vis Vires pursuant to which the Company issued Vis Vires a convertible note in the amount of $38,000, bearing interest at the rate of 8% per annum (the “May 2015 Vis Vires Convertible Note”). The May 2015 Vis Vires Convertible Note provides Vis Vires the right, during the period beginning on the date which is one hundred eighty (180) days following the date of the Vis Vires Convertible Note, to convert the outstanding balance (including accrued and unpaid interest) into shares of the Company’s common stock at a 39% discount from the market price of the common stock and is payable, together with interest thereon, on April 23, 2016. The Company had the right to repay the Vis Vires Convertible Note prior to maturity (or conversion), provided that it pays 110% of such the outstanding principal amount and accrued and unpaid interest thereon) if the note is repaid within the first 30 days after the issuance date. The prepayment penalty increases to 115% if repayment is during the period which is 31 to 60 days after the issuance date; 120%, if repayment is during the period which is 61 to 90 days after the issuance date; 125%, if repayment is during the period which is 91 to 120 days after the issuance date; 130%, if repayment is during the period which is 121 days to 150 days after the issuance date and 135% if repayment is during the period which is 151 days to 180 days after the issuance date. After 180 days have elapsed from the issuance date, the Company had no right to prepay the Vis Vires Convertible Note.

 

 F-22 

Table of Contents 

 

PROGREEN US, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

APRIL 30, 2016

 

Note 15. Convertible Notes – continued

 

During the year ended April, 2016 Vis Vires converted all of the March 2015 Vis Vires Convertible Note and May 2015 Vis Vires Convertible Note into a total of 155,333,549 shares of Common Stock at a fair value as follows:

 

Conversion Date  Number of Shares of Common Stock   Principal Amount Converted (i)   Price per Share 
September 24, 2015   13,655,738   $8,330   $0.00061 
December 29, 2015   15,020,833    3,605   $0.00024 
December 30, 2015   15,020,833    3,605   $0.00024 
January 13, 2016   18,027,027    6,670   $0.00037 
January 29, 2016   11,270,833    2,705   $0.00024 
February 16, 2016   20,935,484    6,490   $0.00031 
February 17, 2016   7,878,378    1,595   $0.00020 
February 17, 2016   13,081,081    4,840   $0.00037 
February 18, 2016   25,147,887    17,855   $0.00071 
February 22, 2016   15,295,455    15,305   $0.00100 
Totals - Year ended April 30, 2016   155,333,549   $71,000      

 

 

(i) Includes accrued interest of $2,840 

 

See Note 21.

 

Interest expense relating to the Vis Vires debentures totaled approximately$4,174 and $0 for years ended April 30, 2016 and 2015, respectively. Accrued interest due totaled $0 and $260 at April 30, 2016 and April 30, 2015, respectively.

  

Note 16. Note Payable Related Party and Convertible Debenture

 

On November 5, 2009, the Company issued a 13.5% Secured Convertible Debenture (the “Debenture”) to Rupes Futura AB (“RF”), an investment company controlled by Henrik Sellmann, a former director of the Company, providing for a loan to the Company of $500,000. The Debenture is due November 2014. Additionally, the Company issued to RF 500,000 shares of Common Stock of the Company as a Commitment Fee. The value of the Common Stock at the time of issuance was $30,000 and is recorded as debt discount. The Commitment Fee is being amortized over five years, the term of the Debenture, using the effective interest method.

 

Interest is payable at an annual rate of 13.5%, payable annually in arrears in shares of Common Stock of the Company, valued at the Conversion Price (defined below) as of the due date of the interest payment or the Company, at its sole option, may elect to pay any interest payment on the Debenture in cash, such cash interest payment to be payable no later than one hundred eighty (180) days from the original interest payment due date. The Debenture is convertible in whole or in part into Common Stock at the option of RF at the Conversion Price at any time following the date that is two years from the Closing Date. If RF elects to convert any unpaid principal amount of the Debenture it shall be entitled to receive shares of Common Stock on conversion equal in value, at the Conversion Price, to 115% of the unpaid principal amount of the Debenture. The conversion feature has intrinsic value of $75,000 that is recorded as debt discount which was amortized over two years, the required holding period for RF, using the effective interest method. The debt discount was fully amortized as of April 30, 2016 and 2015. The effective interest rate on the Debenture as a result of the debt discounts noted above was 11.75% and 14.36% which resulted in interest expense of $48,591 and $71,500 for the years ended April 30, 2016 and 2015, respectively. On February 6, 2015 6,000,000 shares of Common Stock were issued to RF pursuant to a partial conversion in the amount of $24,000 of the $500,000 convertible debenture. The conversion price was $0.004 per common share.

 

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PROGREEN US, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

APRIL 30, 2016

 

Note 16. Note Payable Related Party and Convertible Debenture – continued

  

On October 22, 2014, Henrik Sellmann resigned as a director of the Company thus RF is no longer a related party. The outstanding balance of the convertible debenture in the amount of $476,000 was reclassified to Convertible Debenture from Convertible Debenture Payable to a Related Party in the accompanying Consolidated Balance as of April 30, 2015.

 

Effective December 19, 2014 the debenture was amended to allow the Company to elect to pay the 2013 interest due in the amount of $50,700 (the “2013 Interest”), on the debenture by the issuance of 1,690,000 shares of the Company’s Common Stock to RF. See Note 24.

 

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 this 13.5% convertible debenture due to RF, which has agreed to assumption of the convertible debenture obligations by EIG. Subsequent to April 30, 2016 EIG was compensated by the issuance of shares of Series A Preferred Stock. See Note 25.

 

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. As of April 30, 2016 the outstanding balance of the note payable related party was $476,000, plus accrued interest of $148,613. As of April 30, 2015 the outstanding balance of the convertible debenture was $476,000 plus accrued interest of $150,722.

 

Note 17. Related Party Subscription Agreement

 

On July 21, 2009, the Company entered into a Subscription Agreement with EIG, an investment company then controlled by Jan Telander, the Company’s Chief Executive Officer and controlling stockholder for the sale by the Company to EIG of an aggregate of 97,751,710 shares of the Company’s Common Stock, at a fixed price of $0.01023 per share, in three tranches: the Phase I tranche consisted of 5,767,350 shares of Common Stock to be purchased by EIG on or before July 16, 2009; the Phase II tranche of 43,108,504 shares to be purchased by EIG on or before December 31, 2009; and the Phase III tranche of 48,875,855 shares of Common Stock to be purchased by EIG on or before July 16, 2010. As of April 30, 2015 all of the Phase I and Phase II shares, and 39,100,684 shares of the Phase III tranche, have been purchased.

 

Under a December 1, 2009 Amendment to the Subscription Agreement, EIG paid penalty interest at a rate of 13.5% per annum on the unpaid balance as of the final purchase date of the Phase III shares from that date to the date the shares are purchased.

 

As of April 30, 2015 the remainder of the Phase III purchase price and the applicable interest was included in stockholders’ equity as amount due from subscriber under subscription agreement. In December 2014, the Company received $109,120 comprised of $50,000 of the remaining $100,000 purchase price balance and $59,120 of related interest. The Company recorded $10,900 of interest which is included in amount due under subscription agreement for the year ended April 30, 2015. In connection with the related party Subscription Agreement, in the year ended April 30, 2016 the Company recorded $1,038 of interest. The remaining balance of the purchase price in the amount of $53,999 was received on July 3, 2015 to complete payment of the Phase III purchase price. See Note 25.

 

 F-24 

Table of Contents 

 

PROGREEN US, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

APRIL 30, 2016

 

Note 17. Related Party Subscription Agreement – continued

 

On April 30, 2015 Jan Telander divested for no consideration all equity interests owned by him in EIG and its affiliated companies and resigned from all board of director and management positions with EIG. Accordingly, pursuant to the SEC’s rules for calculation of securities owned beneficially by stockholders of reporting companies under the Securities Exchange Act of 1934, the 85,679,118 shares of the Company’s common stock held by EIG are no longer deemed to be beneficially owned for SEC reporting purposes by Mr. Telander.

 

Note 18. Corporate Lease Agreement

 

Effective April 1, 2016, the Company entered into a lease agreement for office space for a period of thirty-six (36) months. 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. Lease payments are as follows:

 

Year ending April 30,  Rental Amount 
2017  $10,495 
2018   10,867 
2019   10,274 
Thereafter   - 
   $31,636 

 

At the beginning of the lease the Company paid a security deposit of $934, which is reflected as deposits on the April 30, 2016 balance sheet.

 

During 2016 and 2015, the Company recorded $18,342 and $24,147 in rental expense which includes rent from the prior lease which expired during fiscal 2016.

 

Note 19. Income Taxes

 

For tax purposes the Company has federal net operating loss (“NOL”) carryovers of $2,290,000 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-25 

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PROGREEN US, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

APRIL 30, 2016

 

Note 19. Income Taxes – continued

 

Significant components of the Company’s deferred tax assets and liabilities are as follows:

 

   April 30, 2016   April 30,
2015
 
Deferred tax assets:        
NOL carryovers  $412,432   $298,390 
Related party interest expense   (7,359)   24,961 
Discount on debenture   (23,670)   3 
Loss on derivatives   (25,635)   - 
Depreciation   (2,558)   (2,130)
Stock issued under services contracts   (8,025)   - 
Stock compensation   (1,725)   17,931 
Total deferred tax assets   343,460    339,155 
           
Valuation allowance  $(343,460)  $(339,155)
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.

 

The effective rate used for estimation of deferred taxes was 15% for the years ended April 30, 2016 and 2015.

 

The tax years that remain subject to taxing authorities’ examination at April 30, 2016 are 2009 through 2016. 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 20. 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, 2016 and 2015 no shares were issued and outstanding. See Notes 22 and 23.

 

 F-26 

Table of Contents 

 

PROGREEN US, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

APRIL 30, 2016

 

Note 21. Common Stock

 

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"). 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.

 

During fiscal year 2015, the Company issued 6,000,000 Common stock pursuant to conversion of $24,000 of the principal amount of a convertible debenture.

 

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.

 

During fiscal year 2016, the Company issued 219,090,236 Common stock to settle conversions of $155,893 of the principal amounts of convertible debentures and accrued interest.

 

As of April 30, 2016 and 2015, 336,919,939 and 110,329,703 shares of Common Stock were issued and outstanding, respectively.

 

Note 22. 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.

 

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Table of Contents 

 

PROGREEN US, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

APRIL 30, 2016

 

Note 22. Series A Preferred Stock – continued

 

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.

 

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 n 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, 2016 and 2015, no shares of Series A Preferred Stock were issued and outstanding.

 

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PROGREEN US, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

APRIL 30, 2016

 

Note 23. 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:

 

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.

 

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Table of Contents 

 

PROGREEN US, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

APRIL 30, 2016

 

Note 23. Series B Convertible Preferred Stock - continued

 

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.

 

As of April 30, 2016 and 2015, no shares of Series B Preferred Stock were issued and outstanding.

 

Note 24. Employee Stock Option Plan

 

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. 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.

 

 

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Table of Contents 

 

PROGREEN US, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

APRIL 30, 2016

 

Note 24. Employee Stock Option Plan – continued

 

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. During the year ended April 30, 2015, the Company reversed compensation expense accrued since inception, relating to these RSUs in the amount of $13,000. This amount is included in Company’s Consolidated Balance Sheets and Consolidated Statement of Stockholders’ Deficit as a component of accumulated paid in capital and compensation expense recovery is included in the Company’s Consolidated Statements of Operations for the year ended April 30, 2015.

 

As of April 30, 2016 and 2015 compensation expense of $ 11,500 and $32,667 respectively, was recorded as follows:

 

   April 30  April 30 
   2016  2015 
Number of restricted stock units issued on June 1, 2012   3,600,000   3,600,000 
Stock price on grant date  $0.03  $0.03 
Vesting Period   3 years     3 years  
Estimated fair value at issuance  $108,000  $108,000 
May 1, 2015 through April 30, 2016 Compensation Expense  $3,000     
May 1, 2014 through April 30, 2015 Compensation Expense      $36,000 
          
Number of restricted stock units issued on June 1, 2012 to Director through July 31, 2014       600,000 
Stock price on grant date      $0.03 
Vesting Period        3 years  
Monthly amount vested      $500 
Number of months May 1, 2014 through July 31, 2014       3 months 
May 1, 2014 through April 30, 2015 Compensation Expense      $1,500 
          
Number of restricted stock units issued on December 3, 2012   600,000   600,000 
Stock price on grant date  $0.03  $0.03 
Vesting Period   4 years  4 years
Estimated fair value at issuance  $18,000  $18,000 
May 1, 2015 through April 30, 2016 Compensation Expense  $4,500     
May 1, 2014 through April 30, 2015 Compensation Expense      $4,500 
          
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, 2015 through April 30, 2016 Compensation Expense  $4,000     
May 1, 2014 through April 30, 2015 Compensation Expense      $3,667 
          
Total compensation expense  $11,500  $45,667 

 

Note 25. Subsequent Events

 

Subsequent to April 30, 2016, in connection with the Company’s purchase of ARG LLC, 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. See Notes 5 and 23.

 

 F-31 

Table of Contents 

 

PROGREEN US, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

APRIL 30, 2016

 

Note 25. Subsequent Events – continued

 

Also in connection with the purchase of ARG, subsequent to April 30, 2016, the note payable due to AMREFA under the June 2015 Instalment 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 stated value of $70,000, in payment of note plus accrued interest. The amount due was comprised of $261,150 principal plus accrued interest of $14,653, for a total due to AMREFA of $275,803. The Mortgage Note is non-interest bearing and is secured by the property at 24442 Kinsel Street, Southfield, Michigan which the Company acquired in the ARG purchase. The Mortgage Note will be paid upon the sale of the Kinsel Street Property. See Notes 10 and 23.

 

Subsequent to April 30, 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. See Note 16.

 

Subsequent to April 30, 2016, 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 and accrued interest of the debt assumed in the amount of $624,613. See Notes 16 and 22.

 

Subsequent to April 30, 2016, 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, with a total stated value of $59,000. See Notes13 and 22.

 

Subsequent to April 30, 2016 in connection with the subscription agreements with three stockholders, the Company issued 300,000 shares of Series A Preferred Stock. See Notes 13 and 22.

 

Subsequent to April 30, 2016 the Company issued the remaining 9,775,171shares of Common Stock due EIG under the Stock Subscription. See Note 17.

 

Subsequent to April 30, 2016 the Company sold two of its rental properties subject to land contract agreements. 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.

 

The Company sold a second one of its rental properties located at 21421 Greenview Avenue with a selling price of $109,000. The Company received a deposit of $12,000 and issued a Land Contract to the buyer, for the balance owed in the amount of $97,000, to be paid in monthly installments, including principal and interest, beginning August 1, 2016 through June 30, 2019. The Land Contract bears interest at 9% per annum.

 

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 100 million (100,000,000) shares of our common stock will be registered for this financing.  We have 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 has 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, due June 23, 2017, as amended and restated on August 25, 2016, convertible into our common stock at a conversion price of $.03 per share.

 

 F-32 

Table of Contents 

 

Financial Statement Schedules

 

PROGREEN US, INC.

SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION

APRIL 30, 2016

 

COL. A   COL. B     COL. C     COL. D     COL. E     COL. F     COL. G     COL. H   COL. I
          Initial Cost to Company Cost Capitalized
Subsequent to
Acquisition
    Gross Amount at which carried at
close of period
                Life on Which Depreciation in
Description   Encumbrances     Land     Buildings and Improvements     Improvements     Carrying Costs     Land     Buildings and Improvements     Total     Accumulated Depreciation     Year of Construction     Date Acquired   Latest Income Statements is Computed 
Property Under Development:                                                                                              
                                                                                         
24442 Kinsel Southfield, MI 48025   $              -             $ 294,179     $           -     $         -     $             -     $ 294,179     $ 294,179     $         -       1951      3/8/2016   NA
                                                                                         
Rental Properties                                                                                        
                                                                                         
21000 Westover Ave. Southfield, MI 48075     -               60,800       -       -       -       60,800       60,800       368       1941      3/8/2016   27.5
20210 Westover Ave. Southfield, MI 48075     -               27,600       -       -       -       27,600       27,600       167       1943      3/8/2016   27.5
21112 Evergreen Southfield, MI 48075     -               101,178       -       -