10-K: Botanicals Firm Pivots to EV Batteries Amidst Financial Strain and Policy Headwinds

Sentiment:

Annual Report 15 July 2025 6:42 PM

A company with a history of unsuccessful ventures is now focusing on early-stage EV battery technologies, facing significant financial challenges and a volatile regulatory landscape.

Capital raiseThe company anticipates capital needs between $500,000 and $5,000,000 to maintain operations and fund business objectives.Management explicitly states plans to raise equity or debt financing to provide necessary capital and continue operations.There is no assurance that financing will be available in the required amounts or on favorable terms.

Worse than expectedThe company continues to incur significant net losses, with an accumulated deficit exceeding $35 million.The company has not generated any revenue since inception and does not expect to in the near future, indicating a lack of operational progress in its new business model.The company's cash balance is critically low at $2,042, highlighting severe liquidity issues.Auditors have expressed substantial doubt about the company's ability to continue as a going concern.Internal controls over financial reporting are deemed ineffective due to a lack of segregation of duties and independent oversight.

Summary

The company, formerly known as Avalon Oil & Gas, Inc., and with a history of unsuccessful operations in various industries since its 1991 inception, has pivoted its business model.
The current plan is to assemble a portfolio of early-stage EV Battery Technologies from universities in Norway, Sweden, and Finland, seeking grants and corporate partners for commercialization.
The company currently has no products, patents, or technologies related to the EV battery industry and is not undertaking any marketing or sales activities.
For the fiscal year ended March 31, 2025, the company reported a net loss of $130,834, an improvement from the $202,089 net loss in the prior fiscal year.
Total operating expenses decreased to $130,834 in FY2025 from $266,581 in FY2024, primarily due to the termination of a consulting agreement.
Cash used in operating activities increased to $107,422 in FY2025 from $86,835 in FY2024.
Cash provided by financing activities was $107,776 in FY2025, solely from related party advances.
The company's cash balance as of March 31, 2025, was $2,042, with an accumulated deficit of $35,196,581.
Management has identified a need for $500,000 to $5,000,000 in capital to fund business objectives and operations.
The company's auditors express substantial doubt about its ability to continue as a going concern due to recurring net losses and limited capital.

Sentiment

Score: 2

Explanation: The company faces severe financial distress, including recurring losses, a substantial accumulated deficit, and critical liquidity issues, leading to a going concern warning. While operating expenses decreased, this is largely due to the termination of a consulting agreement rather than improved operational efficiency. The new business model is in its very early stages with no products or patents, and the target industry faces significant regulatory uncertainty. Corporate governance and internal controls are also noted as deficient.

Positives

Net loss decreased to $130,834 in fiscal year 2025 from $202,089 in fiscal year 2024.
Total operating expenses significantly decreased by over 50% from $266,581 in FY2024 to $130,834 in FY2025, mainly due to the cessation of consulting expenses.

Negatives

The company has not generated any revenue since its inception and does not expect to generate revenue from product sales in the near future.
There is substantial doubt about the company's ability to continue as a going concern due to recurring net losses and limited capital.
The accumulated deficit increased to $35,196,581 as of March 31, 2025.
Cash on hand is extremely low at $2,042 as of March 31, 2025.
The company does not currently own any patents or technologies related to the EV battery industry, and acquiring them is costly and not guaranteed.
The company has no independent directors as of July 29, 2024, following a resignation.
Internal controls over financial reporting were deemed not effective as of March 31, 2025, due to inadequate segregation of duties and the lack of an audit committee with a financial expert.
Significant related party payables to management, totaling $608,833 as of March 31, 2025, including accrued wages and preferred dividends.

Risks

Future capital requirements are substantial, with no assurance that financing will be available on favorable terms, potentially leading to dilution for existing stockholders or operational limitations if debt is issued.
The process to acquire patents and technologies in the EV battery industry is costly, and the company is not guaranteed to acquire any such patents.
The Green Energy Market is highly competitive, with many large companies and a fragmented landscape of small companies, making market entry complicated.
New U.S. political policies, such as the revocation of EV sales targets, freezing of EV charging station funds, and potential tariffs on imported vehicles, could disrupt automakers' strategies and stall EV adoption, negatively impacting the company's target market.
The potential narrowing of eligibility criteria for the $7,500 federal EV tax credit could reduce qualifying vehicles and influence consumer behavior by raising the effective cost of EVs.
The company's reliance on a single officer (Kent Rodriguez) for day-to-day business and financial reporting creates an inadequate segregation of duties and a lack of independent board oversight.
Material weaknesses in internal control over financial reporting exist due to inadequate segregation of duties and the absence of an audit committee with a financial expert.

Future Outlook

The company plans to assemble a portfolio of early-stage EV Battery Technologies from universities in Norway, Sweden, and Finland, seeking grants from the State of Minnesota and identifying corporate partners for commercialization to ultimately produce revenues. Management believes the specialized energy industry offers a stable business model with high growth potential and is actively working towards an impactful acquisition in this space. The company anticipates capital needs between $500,000 and $5,000,000, varying based on growth strategies, and intends to raise equity or debt financing to continue operations.

Management Comments

Management believes that the technologies available in the specialized energy industry present a stable business model with high growth potential and we are actively working towards an impactful acquisition in this space.
As the Company continues its business development and asset acquisitions, the Company anticipates our capital needs to be between $500,000 and $5,000,000 (varying based on growth strategies).
We are in the process of identifying and establishing strategic partners and technologies in order to establish a market and generate commercial orders by customers and licensing which will include effective marketing and sales capabilities for any products.
We currently do not believe there are any material threats to our systems (cybersecurity).
We would need to hire additional staff to provide greater segregation of duties. Currently, it is not feasible to hire additional staff to obtain optimal segregation of duties.
Management will continue to reassess this matter to determine whether improvement in segregation of duty is feasible.
Going forward, we intend to evaluate our processes and procedures and, where practicable and resources permit, implement changes in order to have more effective controls over financial reporting.

Industry Context

The company's pivot to early-stage EV battery technologies aligns with global trends towards electric transportation, supported by significant U.S. legislation like the Infrastructure Investment and Jobs Act and the Inflation Reduction Act, which aim to bolster U.S. manufacturing and supply chains in the EV sector. However, the industry faces considerable uncertainty due to recent U.S. policy reversals, including the revocation of EV sales targets, frozen funding for charging stations, and potential tariffs on imported vehicles, which could stall EV adoption and create market volatility. This creates a challenging and unpredictable environment for new entrants like Groove Botanicals, especially given the highly competitive nature of the green energy market with established large players and a fragmented landscape of smaller companies.

Comparison to Industry Standards

Management Changes

Role	Previous Person	New Person	Effective Date	Reason
Director	Douglas Barton	NA	2024-07-29	Resignation, resulting in no independent directors.

Corporate Governance

Change Type	Description	Effective Date	Impact Assessment
Board Composition	The board of directors consists of only one member, Kent Rodriguez, following the resignation of Douglas Barton, leaving no independent directors.	2024-07-29	Leads to inadequate segregation of duties and a lack of independent oversight, as the sole director manages all corporate governance functions including audit oversight, nominations, and compensation.
Committees	No audit, nominating, or compensation committees have been established. The entire Board (sole director) participates in these functions.	NA	Creates a potential conflict of interest as the sole director determines issues concerning management compensation, nominations, and audit issues that may affect management decisions. Also, the company lacks a financial expert on the board.
Policies	No formal, written policy or procedure for the review and approval of related party transactions. No code of ethics adopted. No risk and compensation policies.	NA	Increases governance risk and potential for conflicts of interest, as related party transactions are reviewed and approved solely by the Board (sole director). Lack of a code of ethics and risk/compensation policies indicates underdeveloped corporate governance for a public company.
Internal Control Over Financial Reporting	Internal control over financial reporting was not effective as of March 31, 2025, due to inadequate segregation of duties and the lack of an audit committee with a financial expert.	2025-03-31	Raises concerns about the reliability of financial reporting and the ability to prevent or detect material misstatements. The company has engaged an outside accounting consultant to assist in financial statement preparation as a mitigating step.

Legal Proceedings

There are no pending legal proceedings to which the company is a party or in which any director, officer, or significant shareholder has a material adverse interest.

Related Party Transactions

Related party payables totaled $608,833 as of March 31, 2025, consisting of funds contributed by management (Kent Rodriguez) for financing operations and compensation.
The company accrues $48,000 annually in wages payable to CEO Kent Rodriguez under an employment agreement, which was extended to March 31, 2026.
Kent Rodriguez, as the sole holder of Series A Preferred shares, accrued $40,000 in preferred dividends during FY2025, with a total of $80,000 outstanding.
Kent Rodriguez, holding 18.6% of Series B Preferred shares, accrued $33,195 in preferred dividends during FY2025, contributing to the total $356,940 in Series B dividends outstanding.

Stakeholder Impact

Shareholders: Face significant dilution risk if future capital raises involve equity issuance, and potential subordination if debt is issued. Common shareholders are also impacted by preferred stock dividends that contribute to net loss attributable to them. The stock price has seen a significant decline over the past year.
Employees: The company has only one full-time employee (President Kent Rodriguez) and a part-time administrative assistant, indicating limited employment opportunities.
Creditors: Related party payables are substantial and increasing, with no interest accrual or maturity date, indicating reliance on management for financing.
Customers/Partners: The company currently has no products, marketing, or sales activities, and is in the early stages of identifying partners, meaning no immediate impact on customers or commercial partners.

Next Steps

Assemble a portfolio of early-stage EV Battery Technologies from universities in Norway, Sweden, and Finland.
Seek grants from the State of Minnesota Department of Economic Development.
Find and identify corporate partners to commercialize technologies and ultimately produce revenues.
Actively work towards an impactful acquisition in the specialized energy industry.
Raise equity or debt financing to provide necessary capital for ongoing operations and business objectives.
Evaluate processes and procedures and implement changes to have more effective controls over financial reporting, where practicable and resources permit.
Reassess the feasibility of hiring additional staff to improve segregation of duties.
Expand the board to include independent members.

Key Dates

Date	Description
1991-04-25	Company originally incorporated in Colorado as Snow Runner (USA), Inc.
1992-08-01	Snow Runner (USA) Ltd. dissolved.
1994-01-01	Company changed its name to Snow Runner, Inc.
1994-11-01	Company changed its name to The Sled Dogs Company.
1998-07-31	Company split shares One (1) for Fifty-Four (54).
1999-05-01	Company changed state of domicile to Nevada and name to XDOGS.COM, Inc.
2000-08-24	Company split shares One (1) for Five (5) and changed name to XDOGS, Inc.
2005-06-22	Company changed name from XDOGS, Inc. to Avalon Oil and Gas, Inc.
2005-07-22	Board and shareholders approved amendment to Articles of Incorporation to change name to Avalon Oil & Gas, Inc. and increase authorized common stock to 1,000,000,000 shares.
2007-05-15	Company split its shares One (1) for Twenty (20).
2009-05-01	Kent Rodriguez joined the Company as Chief Executive Officer, Secretary, and Principal Financial Officer.
2012-06-04	Board approved a 1-for-300 reverse stock split.
2012-07-23	Reverse stock split became effective.
2012-09-28	Shareholders approved amendment to Articles of Incorporation to authorize up to 200,000,000 shares of common stock.
2013-04-10	Amendment filed with Nevada Secretary of State to increase authorized shares to 200,000,000.
2018-01-12	Board of Directors agreed to amend Series A Convertible Preferred Stock conversion ratio from 0.4% to 0.51% and forgive accrued interest, pausing accruals until April 1, 2023.
2018-05-14	Company changed its name from Avalon Oil and Gas, Inc., to Groove Botanicals, Inc.
2020-04-01	Company entered into an employment agreement with CEO Kent Rodriguez for monthly payments of $4,000.
2021-03-05	A $40,000 Convertible Promissory Note issued by management to a third party.
2021-08-02	Company filed a Form 15-12B to suspend its duty to file reports under sections 13 and 15(d) of the Securities Exchange Act of 1934.
2022-03-07	An additional convertible promissory note in the amount of $60,000 issued.
2022-04-08	Company issued 500,000 shares of common stock for $10,000 and 2,500,000 shares for $40,000.
2022-07-18	Letter Agreement drafted between the Company and debtholder to settle debts once Form 10 goes effective.
2022-10-04	Company issued 150,000 shares of common stock for $3,000 and 250,000 shares for $4,963.
2022-12-01	Company issued 500,000 shares of common stock for consulting services and 1,500,000 shares for $29,970 and 250,000 shares for $4,970.
2023-01-23	Company and convertible note holder mutually agreed to settle amounts owed from two convertible promissory notes.
2023-01-24	$10,000 paid as part of debt settlement.
2023-01-31	Company issued 2,750,000 shares of common stock for conversion of debt.
2023-02-21	Company issued 50,000 shares of common stock for website and social media services.
2023-04-01	Dividends began to accrue on Series A and Series B Preferred Stock.
2023-04-15	Company issued 1,000,000 shares of common stock in exchange for consulting services.
2023-09-14	Company filed a Form 10 with the Securities and Exchange Commission, which became effective 60 days later.
2023-11-06	Form 10-12g/A filed with the SEC.
2023-12-20	Company issued 1,000,000 shares of common stock for $20,000 in cash proceeds.
2023-12-31	$40,000 paid as part of debt settlement.
2024-03-31	Employment agreement with CEO Kent Rodriguez expired.
2024-05-03	SEC announced settlement charges against BF Borgers CPA PC, leading to a permanent ban.
2024-05-08	Board of Directors approved the dismissal of BF Borgers CPA PC as the independent registered public accounting firm.
2024-06-13	Board of Directors approved the appointment of M.S. Madhava Rao, Chartered Accountant as the new independent registered public accounting firm.
2024-07-29	Mr. Douglas Barton resigned as a director of the Company, leaving no independent directors.
2024-07-30	Company and Kent Rodriguez agreed to extend his employment contract for a further two-year term to March 31, 2026, retroactive to April 1, 2024.
2024-09-30	Aggregate market value of common stock held by non-affiliates was approximately $709,689.
2025-03-31	End of fiscal year for this report.
2025-06-30	Number of shares of common stock outstanding was 59,643,062.
2025-07-15	Date of the Independent Registered Public Accounting Firm's report and filing date of the 10-K.
2026-03-31	New expiration date for CEO Kent Rodriguez's employment contract.
2026-12-15	Effective date for ASU 2024-03 (Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures) for annual reporting periods.
2027-12-15	Effective date for ASU 2024-03 (Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures) for interim reporting periods.

Recommendation

sell

Keywords

EV battery technology, Electric vehicles, Green energy, SEC filing, 10-K, Going concern, Startup, Financial reporting, Corporate governance, Risk factors, Capital raise, Preferred stock, Related party transactions

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