10-Q: Groove Botanicals Reports Q2 Loss, Faces Going Concern Doubts

Groove Botanicals, Inc. reported increased net losses for the quarter ended September 30, 2025, with auditors expressing substantial doubt about its ability to continue as a going concern amidst zero revenue and a new EV battery technology strategy.

Summary

• Net loss attributable to common stockholders increased to $87,001 for the three months ended September 30, 2025, from $84,451 in the prior year period.
• For the six months ended September 30, 2025, net loss attributable to common stockholders rose to $179,788, compared to $175,607 for the same period in 2024.
• The company has not generated any revenue since its inception and does not expect to in the near future.
• Total operating expenses for the three months ended September 30, 2025, increased by approximately 8% to $32,383, primarily due to a 45% rise in legal and professional expenses.
• Cash balance decreased to $1,492 as of September 30, 2025, from $2,042 as of March 31, 2025.
• Total current liabilities increased to $1,297,813 as of September 30, 2025, from $1,114,381 as of March 31, 2025.
• Accumulated deficit grew to $35,376,369 as of September 30, 2025.
• The company plans to assemble a portfolio of early-stage EV Battery Technologies from universities in Norway, Sweden, and Finland, and seek grants to commercialize these technologies.
• Auditors have expressed substantial doubt about the company's ability to continue as a going concern due to recurring net losses and limited capital.

Sentiment

Score: 1

Explanation: The company faces severe financial distress with recurring losses, zero revenue, a critically low cash balance, and substantial doubt about its ability to continue as a going concern. Its new business model is speculative, and it lacks the necessary capital and internal controls for effective operation.

Positives

• Net cash used in operating activities decreased to $55,674 for the six months ended September 30, 2025, from $63,468 in the prior year period.
• Selling, General and Administrative Expenses decreased for the three months ended September 30, 2025, to $16,518 from $18,332 in the prior year, mainly due to lower transfer agent fees and operational overhead.

Negatives

• No revenue generated since inception, with no expectation of revenue generation in the near future.
• Increased net losses for both the three-month ($87,001 vs $84,451) and six-month ($179,788 vs $175,607) periods ended September 30, 2025, compared to the prior year.
• Cash balance significantly decreased to $1,492 as of September 30, 2025, from $6,133 as of September 30, 2024.
• Total liabilities increased to $1,297,813 as of September 30, 2025, from $1,114,381 as of March 31, 2025.
• Accumulated deficit continues to grow, reaching $35,376,369.
• Substantial doubt exists regarding the company's ability to continue as a going concern.
• Disclosure controls and procedures were deemed ineffective due to inadequate segregation of duties and lack of a formal audit committee with a financial expert.
• Significant related party payables and dividends payable continue to accrue, including $687,957 in related party payables and $182,988 in related party dividends payable as of September 30, 2025.
• The company does not currently own any patents or technologies related to the EV battery industry and the process to acquire them can be costly with no guarantee of acquisition.
• No agreements or understandings are in place to obtain additional funds through bank loans, lines of credit, or other sources.

Risks

• Inability to generate revenue from operations in the near future.
• Failure to acquire patents and technologies related to the EV battery industry, which can be costly and is not guaranteed.
• Inability to secure necessary capital (between $500,000 and $5,000,000) through equity or debt financing to maintain operations and fund business objectives.
• Dilution of existing stockholders' ownership interest if additional funds are raised by the issuance of equity securities.
• Potential for limitations on operations or senior rights for new investors if funds are raised by debt or other equity instruments.
• Material weaknesses in disclosure controls and procedures due to inadequate segregation of duties (single officer/director) and lack of a formal audit committee with a financial expert.
• Dependence on a single officer and director, Kent Rodriguez, who holds 51% of voting rights through Series A Preferred Stock.
• Historical record of operating unsuccessfully in various industries since inception.

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 Department of Economic Development to find corporate partners for commercialization and revenue generation. It anticipates capital needs between $500,000 and $5,000,000 to support its business development and asset acquisitions, but currently lacks sufficient resources to generate revenue and expects 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.
• We plan to assemble a portfolio of early-stage EV Battery Technologies developed from Universities in Norway, Sweden and Finland, and seek grants from the State of Minnesota Department of Economic Development to find and identify corporate partners to commercialize these technologies and ultimately produce revenues for the Company.
• 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 continue to monitor the effectiveness of this action [engaging an outside accounting consultant] and make any changes that our management deems appropriate.
• Management will continue to reassess this matter [segregation of duties] to determine whether improvement in segregation of duty is feasible.

Industry Context

Groove Botanicals is attempting to pivot into the highly competitive and capital-intensive EV battery technology sector, a market driven by global demand for sustainable energy and electric vehicles. While the industry offers high growth potential, the company's current strategy of acquiring early-stage university technologies and seeking grants positions it at the very nascent end of the value chain, far from commercialization. This approach contrasts with established players who possess significant R&D budgets, existing patent portfolios, and manufacturing capabilities, highlighting the substantial hurdles Groove Botanicals faces in a rapidly evolving technological landscape.

Comparison to Industry Standards

• The company's lack of revenue and significant accumulated deficit of over $35 million stands in stark contrast to industry leaders like Tesla, Panasonic, and LG Energy Solution, which generate billions in revenue from established EV battery production and sales.
• Unlike major players that invest heavily in proprietary R&D and manufacturing infrastructure, Groove Botanicals' strategy of acquiring early-stage university technologies and seeking grants is a high-risk, early-stage approach with no guaranteed path to commercialization or revenue, making direct comparison to profitable industry standards currently irrelevant.
• The company's cash balance of $1,492 is negligible compared to the multi-million to multi-billion dollar capital expenditures and working capital requirements typical for companies operating or entering the EV battery manufacturing or advanced R&D space.

Management Changes

Corporate Governance

Related Party Transactions

• Related party payables increased to $687,957 as of September 30, 2025, from $608,833 at March 31, 2025. These funds are contributed by management for financing operations and compensation.
• CEO Kent Rodriguez accrues $48,000 annually in wages ($4,000 per month) under an employment agreement extended to March 31, 2026.
• Kent Rodriguez, as the sole shareholder of Series A Preferred shares, accrued $20,000 in preferred dividends for each of the six months ended September 30, 2025, and 2024. Total accrued Series A dividends for him were $100,000 as of September 30, 2025.
• Kent Rodriguez, holding 18.6% of Series B Preferred shares, accrued $16,598 in preferred dividends for each of the six months ended September 30, 2025, and 2024.
• Dividends payable to related parties totaled $182,988 as of September 30, 2025, an increase from $146,390 at March 31, 2025.
• Kent Rodriguez, as the holder of Series A Preferred Stock, controls 51% of the voting rights of the company.

Stakeholder Impact

• Shareholders (Common Stockholders): Face significant dilution risk if new equity is raised, continued losses, and no clear path to profitability. The value of their shares is highly speculative given the going concern doubt and lack of revenue.
• Preferred Stockholders (Kent Rodriguez): Continue to accrue significant dividends ($100,000 for Series A, $16,598 for Series B as of Sept 30, 2025) and maintain substantial control (51% voting rights), but the recoverability of these dividends and the liquidation preference is at risk due to the company's going concern issues.
• Employees (Kent Rodriguez): Receives an accrued salary of $48,000 annually, but the company's financial instability poses a risk to the long-term security of this compensation.
• Creditors (Related Party): The related party (management) is providing financing, increasing their exposure to the company's financial distress, with related party payables reaching $687,957.
• Potential Partners/Investors: Will face a high-risk proposition due to the company's financial instability, lack of current assets/patents, and going concern warning, making it challenging to attract necessary capital or partnerships.

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.
• Raise equity or debt financing to provide necessary capital for operations.
• Evaluate processes and procedures and, where practicable and resources permit, implement changes for more effective controls over financial reporting.
• Reassess the feasibility of improving segregation of duties by hiring additional staff.
• Expand the board to include independent members.

Key Dates

Recommendation

Groove Botanicals presents an extremely high-risk investment profile. The company has a history of unsuccessful ventures, zero revenue, and consistently increasing net losses, leading to a substantial doubt about its ability to continue as a going concern. Its cash reserves are critically low, and liabilities, particularly related party payables and accrued preferred dividends, are growing. The new business model in EV battery technology is highly speculative, with no current patents or technologies, and a significant capital requirement that the company has no secured funding for. Furthermore, severe internal control weaknesses, including a lack of segregation of duties and audit committee oversight, indicate poor corporate governance. Given these factors, the stock is highly speculative with significant downside risk, warranting a strong sell recommendation.

Keywords

EV Battery Technology, Early-Stage Technology, Corporate Governance, Going Concern, SEC Filing, Quarterly Report, Financial Losses, Capital Raise, Related Party Transactions, Disclosure Controls, Minnesota Economic Development, Norway, Sweden, Finland