10-K/A: Groove Botanicals Amends 10-K, Corrects Audit Report Errors

Sentiment:

Annual Report Amendment 25 August 2025 5:08 PM

Groove Botanicals Inc. filed an amendment to its annual report to correct typographical errors in the independent auditor's report, with no impact on previously published financial results.

Capital raiseThe company anticipates capital needs between $500,000 and $5,000,000 for business development and asset acquisitions.It will require substantial additional funds for operations, debt service, and business objectives.The company is taking steps to provide necessary capital, including raising equity or debt financing.There is no assurance that financing will be available or obtained on favorable terms.Issuance of equity securities would lead to dilution for existing stockholders.Issuance of debt or other equity instruments may impose operational limitations and senior rights.

Worse than expectedThe company continues to incur net losses and has an accumulated deficit of over $35 million.Cash on hand is extremely low ($2,042), indicating severe liquidity issues.Auditors express substantial doubt about the company's ability to continue as a going concern.Management identified material weaknesses in internal controls and disclosure procedures.Despite a decrease in net loss and operating expenses, this is largely due to a reduction in non-recurring consulting expenses from the prior year, not an increase in revenue or operational efficiency from its new business model.

Summary

The filing is Amendment No. 2 to the Annual Report on Form 10-K/A for the fiscal year ended March 31, 2025, originally filed on July 16, 2025, and amended on August 15, 2025.
The sole purpose of this amendment is to correct typographical errors in the Report of Independent Registered Public Accounting firm, including punctuation and an inaccurate line of text below the signature line.
These revisions have no impact on the previously published financial results of Groove Botanicals Inc.
The company has a history of operating unsuccessfully in various industries since its incorporation in 1991.
Current operations involve plans 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 does not currently own any patents or technologies related to the EV battery industry and the acquisition process is costly with no guarantee of success.
Anticipated capital needs for business development and asset acquisitions are between $500,000 and $5,000,000.
A net loss of $130,834 was reported for the fiscal year ended March 31, 2025, an improvement from a net loss of $202,089 in the prior fiscal year.
Total operating expenses decreased to $130,834 in FY2025 from $266,581 in FY2024, primarily due to a reduction in consulting expenses.
Cash used in operating activities was $107,422 in FY2025, compared to $86,835 in FY2024.
Cash provided by financing activities was $107,776 in FY2025, mainly from related party advances.
The accumulated deficit was $35,196,581 as of March 31, 2025.
Cash on hand was $2,042 as of March 31, 2025.
Auditors express substantial doubt about the company's ability to continue as a going concern.
Kent Rodriguez, the CEO, holds 51% of the voting rights through Series A Preferred Stock and 18.6% of Series B Preferred Stock.
Mr. Rodriguez's total accrued compensation was $121,195 for both FY2025 and FY2024, comprising $48,000 salary and $73,195 in accrued preferred dividends.
BF Borgers CPA PC was dismissed as the independent auditor on May 8, 2024, due to an SEC ban, and M.S. Madhava Rao, Chartered Accountant, was appointed on June 13, 2024.
Management concluded that disclosure controls and procedures and internal control over financial reporting were not effective as of March 31, 2025, citing inadequate segregation of duties and the lack of an audit committee with a financial expert.

Sentiment

Score: 2

Explanation: The company faces severe financial distress, including recurring losses, an accumulated deficit, and a going concern warning. While it has a new strategic direction, it lacks products, patents, and revenue, and has significant corporate governance and internal control weaknesses. The amendment itself is minor, correcting typographical errors, but the underlying financial health and operational challenges are highly negative.

Positives

Net loss decreased to $130,834 in FY2025 from $202,089 in FY2024, indicating a reduction in overall losses.
Total operating expenses significantly decreased to $130,834 in FY2025 from $266,581 in FY2024, primarily due to the termination of a consulting agreement.
Management believes the specialized energy industry presents a stable business model with high growth potential and is actively working towards an impactful acquisition.
The company has secured related party advances totaling $107,776 in FY2025, providing some short-term financing to cover essential operating costs.

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.
An accumulated deficit of $35,196,581 as of March 31, 2025, highlights significant historical losses.
Cash on hand is extremely low at $2,042 as of March 31, 2025, indicating severe liquidity constraints.
Auditors express substantial doubt about the company's ability to continue as a going concern.
Management concluded that disclosure controls and procedures and internal control over financial reporting were not effective as of March 31, 2025.
Material weaknesses in internal control include inadequate segregation of duties (due to a single principal executive and financial officer) and the absence of an audit committee with a financial expert.
The company does not currently own any patents or technologies in the EV battery industry, and the process to acquire them is costly and not guaranteed.
The green energy market is highly competitive and fragmented, with complicated barriers to entry.
The company has a history of unsuccessful operations across various industries.
Significant related party payables ($608,833 as of March 31, 2025) and accrued preferred dividends ($436,940 total as of March 31, 2025) indicate heavy reliance on insider financing and increasing liabilities.
The common stock price has experienced a substantial decline, from a high of $0.298 in Q2 2023 to $0.006 in Q1 2025.

Risks

Substantial doubt about the company's ability to continue as a going concern due to recurring net losses and limited capital.
Inability to acquire, license, and commercialize EV battery technologies due to high costs and no guarantee of acquisition.
Difficulty in establishing strategic partners and generating commercial orders for its planned EV battery technology business.
Requirement for substantial additional funds for operations, debt service, and business objectives, with no assurance that financing will be available or obtained on favorable terms.
Potential dilution for existing stockholders if additional funds are raised by the issuance of equity securities.
Limitations on operations if additional funds are raised by the issuance of debt or other equity instruments with rights senior to existing stockholders.
High competition and fragmentation in the green energy market, making market entry and success challenging.
Lack of intellectual property (patents or technologies) currently owned by the company in the EV battery industry.
Impact of new U.S. government policies, such as potential rollbacks of EV mandates, tax credits, and tariffs, which could disrupt the EV and battery sectors.
Market volatility and uncertainty resulting from U.S. policy shifts affecting the global EV industry.
Material weaknesses in internal control over financial reporting, including inadequate segregation of duties and lack of an audit committee with a financial expert.
Cybersecurity threats, although currently limited due to reliance on third-party systems, could become material as the company grows.
Reliance on a single officer (Kent Rodriguez) for day-to-day management and financial oversight, increasing operational risk.
Potential conflicts of interest due to the Board (comprised of one person) determining management compensation, nominations, and audit issues.
Delinquency in Section 16(a) filings by the CEO and a former director.

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 to find corporate partners for commercialization and revenue generation. Management believes the specialized energy industry offers a stable business model with high growth potential and is actively working towards an impactful acquisition. Capital needs are anticipated to be between $500,000 and $5,000,000, varying based on growth strategies. However, there is no assurance that financing will be available or obtained on favorable terms, and the company expects to incur increasing operating expenses.

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)."
"Presently we do not believe there are any material threats to our systems [from 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."
"In addition, we would need to expand our board to include independent members. 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 is attempting to enter the highly competitive and fragmented green energy market, specifically EV battery technologies. This sector is subject to significant government regulation and investment, as seen with the Infrastructure Investment and Jobs Act and the Inflation Reduction Act. However, recent policy shifts, such as the potential rollback of EV mandates and tax credits by a new U.S. administration, introduce significant uncertainty and market volatility. This could slow EV adoption, impact manufacturing strategies, and affect companies relying on U.S.-based battery factories or Mexican manufacturing operations. The emphasis on domestic battery manufacturing for national defense supply chains and a broader shift away from clean energy initiatives could further complicate the company's strategic entry into this space.

Comparison to Industry Standards

The company's current state of having no products, no patents, and no revenue, while planning to enter the EV battery technology market, places it significantly behind established industry players like Tesla, General Motors, and Ford, which have already invested heavily in EV development and U.S.-based battery factories.
Compared to South Korean battery manufacturers like LG Energy Solution and SK Innovation, which experienced stock declines due to U.S. policy shifts, Groove Botanicals is at a much earlier stage, lacking any market presence or established technology to be affected in the same way, but faces the same macro-level policy risks.
The company's reliance on related party financing and its 'going concern' warning are not typical of healthy, competitive companies in a high-growth industry, which usually attract diverse institutional investment.
The lack of an audit committee with a financial expert and inadequate segregation of duties are significant corporate governance deficiencies compared to industry best practices for publicly traded companies.

Management Changes

Role	Previous Person	New Person	Effective Date	Reason
Director	Douglas Barton	NA	2024-07-29	Resignation

Corporate Governance

Change Type	Description	Effective Date	Impact Assessment
Internal Control Weakness	Inadequate segregation of duties due to management being comprised of only one person (CEO/CFO).	2025-03-31	Raises substantial doubt about the effectiveness of internal control over financial reporting and disclosure controls.
Internal Control Weakness	Lack of an audit committee with a financial expert.	2025-03-31	Lacks board oversight role within the financial reporting process, contributing to ineffective internal controls.
Auditor Change	Dismissal of BF Borgers CPA PC due to SEC ban and appointment of M.S. Madhava Rao, Chartered Accountant.	2024-05-08	Ensures compliance with regulatory requirements for independent auditing, but highlights previous auditor's issues.
Board Composition	Reduction to one director (Kent Rodriguez) following Douglas Barton's resignation.	2024-07-29	Further concentrates power and oversight in a single individual, exacerbating segregation of duties issues and lack of independent oversight.
Policy Absence	No formal, written policy or procedure for related party transactions, risk and compensation policies, or code of business conduct and ethics.	NA	Increases risk of conflicts of interest and reduces transparency and accountability.

Legal Proceedings

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 of $608,833 as of March 31, 2025, and $453,057 as of March 31, 2024, consisting of funds contributed by management for financing operations and compensation. These accrue no interest and have no maturity date.
Annual accrual of $48,000 in wages payable to CEO Kent Rodriguez under an employment agreement renewed through March 31, 2026.
Accrued $40,000 in preferred dividends annually from Series A preferred shares to CEO Kent Rodriguez (sole holder).
Accrued $33,195 in preferred dividends annually to CEO Kent Rodriguez for his 18.6% ownership of Series B preferred shares.
Total dividends payable to related party (Kent Rodriguez) were $146,390 as of March 31, 2025, and $73,195 as of March 31, 2024.

Stakeholder Impact

Shareholders: Significant dilution risk from future equity raises, continued losses, and substantial doubt about the company's ability to continue as a going concern. Common stock value has declined significantly. Preferred shareholders (primarily CEO Kent Rodriguez) have liquidation preferences and accruing dividends, which are senior to common stock.
Employees: Limited impact as there is only one full-time employee (CEO) and a part-time administrative assistant. CEO's compensation is accrued but not necessarily paid in cash.
Creditors: Related party creditors (CEO Kent Rodriguez) are providing financing, but the company's going concern status poses a risk to all creditors.
Potential Partners/Investors: The company's financial instability, lack of current assets/revenue, and governance weaknesses will likely deter external investors and make securing strategic partnerships challenging.

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 to find corporate partners.
Actively work towards an impactful acquisition in the specialized energy industry.
Raise equity or debt financing to provide necessary capital for operations and business objectives.
Monitor the effectiveness of engaging an outside accounting consultant to assist with GAAP financial statement preparation.
Reassess the feasibility of hiring additional staff to improve segregation of duties.
Evaluate processes and procedures to implement more effective controls over financial reporting, where practicable and resources permit.
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.
1993-12-01	Company relocated operations to Minnesota.
1994-01-01	Name changed to Snow Runner, Inc.
1994-11-01	Name changed to The Sled Dogs Company.
1998-07-31	Company split shares One (1) for Fifty-Four (54).
1999-05-01	State of domicile changed to Nevada and name to XDOGS.COM, Inc.
2000-08-24	Company split shares One (1) for Five (5) and name changed to XDOGS, Inc.
2005-06-22	Name changed from XDOGS, Inc. to Avalon Oil and Gas, Inc.
2005-07-22	Board and shareholders approved name change to Avalon Oil & Gas, Inc. and increased authorized common stock to 1,000,000,000 shares.
2007-05-15	Company split 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 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 and Series A Holder agreed to amend Series A conversion ratio to 0.51% and forgive accrued interest until April 1, 2023.
2018-05-14	Name changed from Avalon Oil and Gas, Inc. to Groove Botanicals, Inc.
2020-04-01	Employment agreement with CEO Kent Rodriguez for $4,000 monthly payments began.
2021-03-05	Convertible Promissory Note of $40,000 issued to a third party.
2021-08-02	Filed Form 15-12B to suspend duty to file reports.
2022-03-07	Issued additional convertible promissory note of $60,000.
2022-04-08	Issued 500,000 shares of common stock for $10,000.
2022-04-08	Issued 2,500,000 shares of common stock for $40,000.
2022-10-04	Issued 150,000 shares of common stock for $3,000.
2022-10-04	Issued 250,000 shares of common stock for $4,963.
2022-12-01	Issued 500,000 shares of common stock for consulting services.
2022-12-01	Issued 1,500,000 shares of common stock to three different parties for $29,970.
2022-12-01	Issued 250,000 shares of common stock for $4,970.
2023-01-23	Company and convertible note holder mutually agreed to settle debts.
2023-01-24	$10,000 paid towards debt settlement.
2023-01-31	Issued 2,750,000 shares of common stock for conversion of debt.
2023-02-21	Issued 50,000 shares of common stock for website and social media services.
2023-03-31	Accrued interest and arrearages in preferred share dividends of Series A Preferred Stock forgiven through this date.
2023-03-31	All accrued dividends on Series B Preferred Stock settled through this date.
2023-04-01	Dividends began to accrue on Series A and Series B Preferred Stock.
2023-04-15	Issued 1,000,000 shares of common stock in exchange for consulting services.
2023-09-14	Filed a Form 10 with the SEC, which became effective 60 days later.
2023-11-06	Filed Form 10-12g/A with the SEC.
2023-12-20	Issued 1,000,000 shares of common stock for $20,000 in cash proceeds.
2023-12-31	$40,000 paid towards debt settlement.
2024-03-31	End of fiscal year 2024.
2024-04-01	Employment contract with CEO Kent Rodriguez renewed for a further two-year term to March 31, 2026.
2024-05-03	SEC announced settlement charges against BF Borgers CPA PC, leading to a permanent ban.
2024-05-08	Board approved the dismissal of BF Borgers CPA PC as the independent registered public accounting firm.
2024-06-13	Board 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.
2024-09-30	Aggregate market value of common stock held by non-affiliates was approximately $709,689.
2025-03-31	End of fiscal year 2025.
2025-06-30	Number of shares of common stock outstanding was 59,643,062 shares.
2025-07-16	Original filing date of the Form 10-K/A.
2025-08-15	First amendment date of the Form 10-K/A.
2025-08-25	Filing date of this Amendment No. 2 to the Form 10-K/A.

Recommendation

strong sell

The company exhibits severe financial distress with recurring net losses, a substantial accumulated deficit, and a 'going concern' warning from its auditors. Cash on hand is minimal, and the business model is in an early, unproven stage with no current products, patents, or revenue. Significant corporate governance issues, including a lack of independent directors, inadequate segregation of duties, and reliance on related-party financing, further compound the risk. While the company has a stated strategic shift towards EV battery technology, this is highly speculative, competitive, and capital-intensive, with no clear path to commercialization or profitability. The stock has experienced a significant decline, and the fundamental issues suggest a high probability of further value erosion or potential failure.

Keywords

Groove Botanicals, GRVE, SEC filing, 10-K/A, EV Battery Technology, Electric Vehicles, Green Energy, Financial Report, Going Concern, Internal Controls, Corporate Governance, Related Party Transactions, Audit Report Amendment, Minnesota Economic Development, Preferred Stock, Accumulated Deficit, Operating Loss

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