10-K/A: Groove Botanicals Amends 10-K, Faces Going Concern

Sentiment:

Annual Report Amendment 15 August 2025 12:21 PM

Groove Botanicals Inc. filed an amended annual report correcting financial errors while revealing persistent losses and substantial doubt about its ability to continue as a going concern.

Capital raiseThe company anticipates capital needs to be between $500,000 and $5,000,000 to fund its business development and asset acquisitions.It explicitly states a need for 'substantial additional funds for operations, the service of debt and to fund our 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 in the amount required or on favorable terms, and equity issuance would lead to dilution.

Worse than expectedThe company continues to report recurring net losses and has not generated any revenue since inception, which is worse than a healthy, growing business.The accumulated deficit has grown to over $35 million, indicating a persistent inability to achieve profitability.The auditors express 'substantial doubt' about the company's ability to continue as a going concern, a critical red flag for financial viability.Internal controls over financial reporting and disclosure controls were deemed 'not effective,' highlighting significant operational and governance weaknesses.

Summary

Groove Botanicals Inc. filed an Amendment No. 1 to its Annual Report on Form 10-K for the fiscal year ended March 31, 2025, primarily to correct typographical errors in its financial statements, with no impact on previously published financial results.
The company reported a net loss of $130,834 for fiscal year 2025, an improvement from a net loss of $202,089 in fiscal year 2024, primarily due to a reduction in consulting expenses.
Net loss attributable to common shareholders was $349,304 in fiscal year 2025, compared to $420,559 in fiscal year 2024, after accounting for preferred stock dividends.
Operating expenses decreased to $130,834 in fiscal year 2025 from $266,581 in fiscal year 2024, largely due to the absence of consulting expenses ($78,300 in FY2024) and reduced legal and professional fees.
The company has not generated any revenue since its inception and does not expect to in the near future, raising substantial doubt about its ability to continue as a going concern.
Cash on hand was $2,042 as of March 31, 2025, a slight increase from $1,688 as of March 31, 2024.
The company's accumulated deficit reached $35,196,581 as of March 31, 2025.
Groove Botanicals plans to assemble a portfolio of early-stage EV Battery Technologies from Nordic universities but currently owns no related patents or technologies, and the acquisition process is costly and uncertain.
The company dismissed its previous auditor, BF Borgers CPA PC, on May 8, 2024, due to an SEC ban and appointed M.S. Madhava Rao, Chartered Accountant, on June 13, 2024.
Disclosure controls and internal control over financial reporting were deemed not effective as of March 31, 2025, primarily due to inadequate segregation of duties and the lack of an audit committee with a financial expert.
CEO Kent Rodriguez is the sole director and holds significant control through preferred shares (51% voting rights upon conversion of Series A) and is a major related party creditor.

Sentiment

Score: 2

Explanation: The sentiment is overwhelmingly negative due to the company's long history of unprofitability, lack of revenue, significant accumulated deficit, and explicit 'going concern' warning from auditors. While operating expenses decreased, this was largely due to the cessation of consulting services rather than operational efficiency gains. The pivot to EV battery technology is highly speculative given the lack of current IP and capital, and the challenging industry context. Governance issues further compound the negative outlook.

Positives

Net loss decreased from $202,089 in fiscal year 2024 to $130,834 in fiscal year 2025.
Total operating expenses significantly decreased from $266,581 in fiscal year 2024 to $130,834 in fiscal year 2025, primarily due to the cessation of consulting expenses.
Cash balance slightly increased to $2,042 as of March 31, 2025, from $1,688 in the prior year.

Negatives

The company has not generated any revenue since its inception and does not expect to in the near future.
Recurring net losses and an accumulated deficit of $35,196,581 as of March 31, 2025, raise substantial doubt about the company's ability to continue as a going concern.
Disclosure controls and internal control over financial reporting were deemed not effective due to inadequate segregation of duties and lack of an audit committee with a financial expert.
The company is in the early stage of development for its new EV battery technology business model and currently owns no patents or technologies, with acquisition being costly and not guaranteed.
The EV battery industry is highly competitive with high barriers to entry.
Significant policy reversals by the new U.S. administration regarding EV incentives and manufacturing could negatively impact the industry and the company's future prospects.
Related party payables increased to $608,833 as of March 31, 2025, from $453,057 in the prior year, indicating continued reliance on management for financing operations.

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 uncertainty of success.
Highly competitive green energy market with many large companies and high barriers to entry.
Lack of current patents or technologies related to the EV battery industry, with no guarantee of future acquisition.
Potential negative impact from U.S. government policy changes regarding EV incentives, manufacturing, and tariffs, which could stall EV adoption and affect market dynamics.
Ineffective disclosure controls and internal control over financial reporting due to inadequate segregation of duties and lack of an independent audit committee.
Reliance on a single individual (CEO Kent Rodriguez) for management and financial oversight, creating potential conflicts of interest and control weaknesses.
Future capital requirements are substantial ($500,000 to $5,000,000), with no assurance of obtaining financing on favorable terms, leading to potential dilution for existing stockholders if equity is issued.
Dependence on related party advances for ongoing operations, which may not be sustainable or sufficient.

Future Outlook

The company plans to assemble a portfolio of early-stage EV Battery Technologies from universities in Norway, Sweden, and Finland, and seek grants from the State of Minnesota to find corporate partners for commercialization. Management believes the specialized energy industry offers a stable business model with high growth potential and is actively working towards an impactful acquisition. The company anticipates capital needs between $500,000 and $5,000,000, varying based on growth strategies. However, there is no assurance that financing will be available on favorable terms, and the process to acquire patents and technologies is costly and not guaranteed.

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 will require substantial additional funds for operations, the service of debt and to fund our business objectives.
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 is attempting to pivot into the highly competitive Green Energy Market, specifically EV Battery Technologies, which is currently dominated by large players and has high barriers to entry. Recent U.S. government policy shifts under the new administration, including the revocation of EV sales targets, freezing of EV charging station funds, and potential elimination of state emissions waivers, create significant uncertainty and potential headwinds for the EV sector. These policy changes have already led to market volatility, with shares of some Asian automakers and battery makers dropping, while Chinese EV manufacturers saw gains. The company's strategy relies on acquiring early-stage technologies and securing grants, which is a challenging endeavor in this dynamic and politically influenced environment.

Comparison to Industry Standards

The company's lack of revenue and recurring net losses stand in stark contrast to established EV battery technology companies like LG Energy Solution, SK Innovation, and CATL, which are generating substantial revenues and often profits from large-scale production and sales.
Unlike major automakers such as Tesla, General Motors, and Ford, which have invested heavily in U.S.-based battery factories and benefit from existing (though potentially changing) subsidies, Groove Botanicals is in the very early stages of identifying technologies and has no current manufacturing capabilities or intellectual property.
The company's stated capital needs of $500,000 to $5,000,000 are significantly lower than the multi-billion dollar investments typically required for meaningful entry into the EV battery manufacturing or large-scale technology development space, suggesting a very limited scope or high-risk early-stage venture.
The company's reliance on related party financing and lack of external debt/equity agreements is not typical for a company seeking to enter a capital-intensive industry like EV battery technology, where significant institutional investment is usually required.

Management Changes

Role	Previous Person	New Person	Effective Date	Reason
Director	Douglas Barton	N/A (position became vacant)	2024-07-29	Resignation

Corporate Governance

Change Type	Description	Effective Date	Impact Assessment
Internal Control Weakness	Inadequate segregation of duties consistent with control objectives, as management is comprised of only one person (CEO/CFO Kent Rodriguez).	2025-03-31	Material weakness in internal control over financial reporting, increasing risk of financial misstatement and operational inefficiency.
Board Oversight Deficiency	The company does not have an audit committee with a financial expert, lacking board oversight within the financial reporting process.	2025-03-31	Material weakness in internal control over financial reporting, potentially compromising the integrity and reliability of financial statements.
Policy Absence	No formal, written policy or procedure for the review and approval of related party transactions.	N/A	Increases risk of conflicts of interest and transactions not being at arm's length, potentially disadvantaging shareholders.
Policy Absence	No code of ethics applicable to principal executive, financial, or accounting officers.	N/A	Lack of formal ethical guidelines may expose the company to reputational and operational risks.
Policy Absence	No risk and compensation policies.	N/A	Absence of these policies can lead to unmanaged risks and potentially misaligned executive incentives.
Board Composition Change	Loss of the sole independent director, Mr. Douglas Barton, leaving the board with only one member (Kent Rodriguez).	2024-07-29	Further concentrates power and oversight in a single individual, exacerbating existing governance weaknesses and potential conflicts of interest.

Related Party Transactions

Related party payables increased to $608,833 as of March 31, 2025, from $453,057 as of March 31, 2024. These funds are contributed by management to cover essential operating costs during periods of low or negative cash flow, and also include funds payable to management as compensation.
CEO Kent Rodriguez's annual wages payable are $48,000, under an employment agreement renewed to March 31, 2026.
Kent Rodriguez, as the sole holder of Series A Preferred shares, accrued $40,000 in preferred dividends in both fiscal years ended March 31, 2025, and 2024. Total outstanding Series A dividends to him were $80,000 as of March 31, 2025.
Kent Rodriguez, holding 18.6% of Series B Preferred shares, accrued $33,195 in preferred dividends in both fiscal years ended March 31, 2025, and 2024. This amount is included in the total Series B dividends outstanding of $356,940 as of March 31, 2025.

Stakeholder Impact

**Shareholders**: Face significant dilution risk if the company raises capital through equity issuance. Common shareholders are junior to preferred shareholders in liquidation. The 'going concern' warning indicates a high risk of losing their investment. The lack of effective internal controls and concentrated management also poses governance risks.
**Employees**: Limited impact as there is only one full-time employee (CEO) and a part-time administrative assistant. The company's financial instability could affect future employment opportunities.
**Creditors**: Related party creditors (primarily CEO Kent Rodriguez) are providing ongoing financing, but the company's 'going concern' status suggests high risk for any external creditors. Related party payables accrue no interest and have no maturity date, which is favorable to the company but indicates reliance on a single source.
**Customers/Suppliers**: Currently no products or marketing/sales activities, so direct impact is minimal. Future suppliers of EV battery technologies or partners for commercialization face uncertainty due to the company's early stage, lack of IP, and financial instability.

Next Steps

Focus on the new business model of assembling a portfolio of early-stage EV Battery Technologies.
Seek grants from the State of Minnesota Department of Economic Development.
Identify and establish corporate partners to commercialize technologies.
Generate commercial orders by customers and licensing for any products.
Raise equity or debt financing to provide necessary capital for operations and business objectives.
Evaluate processes and procedures to implement changes for more effective internal controls over financial reporting.
Reassess 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.
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 changed to XDOGS.COM, Inc.
2000-08-24	Company split shares One (1) for Five (5) and name changed from XDOGS.COM to XDOGS, Inc.
2005-06-22	Name changed 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.
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 reverse split of common stock (1 for 300).
2012-07-23	Reverse split became effective (1 for 300).
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 all accrued interest on Series A 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 commenced, designating monthly payments of $4,000.
2021-03-05	$40,000 Convertible Promissory Note issued by management to a third party.
2021-08-02	Filed Form 15-12B to suspend duty to file reports under sections 13 and 15(d) of the Securities Exchange Act of 1934.
2022-03-07	$60,000 Convertible Promissory Note issued.
2022-04-08	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	Issued 150,000 shares of common stock for $3,000 and 250,000 shares for $4,963.
2022-12-01	Issued 500,000 shares of common stock for consulting services and 1,500,000 shares 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 amounts owed from two convertible promissory notes.
2023-01-24	$10,000 paid as part of 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.
2023-04-01	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 Securities and Exchange Commission, which became effective 60 days later.
2023-12-20	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	End of fiscal year 2024. Employment contract with CEO Kent Rodriguez expired and was subsequently renewed.
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 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.
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 2025.
2025-06-30	Number of shares of common stock outstanding was 59,643,062 shares.
2025-07-15	Audit report signed by M.S. Madhava Rao.
2025-07-16	Original Annual Report on Form 10-K for the annual period ended March 31, 2025, filed with the SEC.
2025-08-15	Amendment No. 1 to the Annual Report on Form 10-K/A filed.
2026-03-31	Extended term of CEO Kent Rodriguez's employment contract ends.
2026-12-15	Effective date for ASU 2024-03 (Income Statement Expense Disaggregation Disclosures) for annual reporting periods.
2027-12-15	Effective date for ASU 2024-03 (Income Statement Expense Disaggregation Disclosures) for interim reporting periods.

Recommendation

strong sell

The company presents an extremely high-risk investment profile. It has a long history of unprofitability across multiple failed ventures, no current revenue, and a substantial accumulated deficit. The explicit 'going concern' warning from its auditors indicates severe financial distress and a high probability of failure. While the pivot to EV battery technology is a high-growth sector, the company lacks any proprietary technology or patents, has minimal capital, and faces intense competition. Governance is severely compromised with a single director and ineffective internal controls. The reliance on related party financing is unsustainable for long-term growth. Given these fundamental weaknesses and the high likelihood of further losses and potential dissolution, a seasoned investor would strongly recommend selling any existing shares and avoiding new investment.

Keywords

EV Battery Technology, Green Energy, SEC Filing, 10-K/A, Going Concern, Financial Reporting, Corporate Governance, Startup, Clean Energy, Electric Vehicles, Investment Risk, Groove Botanicals

Disclaimer:The information provided here is for general informational purposes only and does not constitute financial advice, recommendation, or endorsement of any kind. It may contain errors or omissions. You should not rely on this information to make financial decisions. Always seek the advice of a qualified financial professional before making any investment or financial decisions. Use of this information is at your own risk.