10-Q: Groove Botanicals Reports Q3 2024 Results Amidst Ongoing Restructuring Efforts

Groove Botanicals reports a net loss for the third quarter of 2024, while continuing to focus on its new EV battery technology business model.

Summary

• Groove Botanicals reported a net loss of $29,833 for the three months ended September 30, 2024, compared to a net loss of $30,045 for the same period in 2023.
• The company's net loss attributable to common stockholders was $84,452 for the three months ended September 30, 2024, compared to $84,663 for the same period in 2023, reflecting preferred stock dividends.
• For the six months ended September 30, 2024, the company reported a net loss of $66,372, compared to a net loss of $156,272 for the same period in 2023.
• The net loss attributable to common stockholders for the six months ended September 30, 2024, was $175,607, compared to $265,507 for the same period in 2023, also reflecting preferred stock dividends.
• Operating expenses for the three months ended September 30, 2024, were $29,833, compared to $27,795 for the same period in 2023, with an increase in legal and professional fees offset by a decrease in general and administrative expenses.
• Operating expenses for the six months ended September 30, 2024, were $66,372, compared to $151,772 for the same period in 2023, primarily due to a decrease in consulting expenses.
• The company's cash balance was $6,133 as of September 30, 2024, compared to $1,688 as of March 31, 2024.
• The company has an accumulated deficit of $35,022,884 as of September 30, 2024.
• Groove Botanicals is focusing on assembling a portfolio of early-stage EV battery technologies and seeking grants to commercialize these technologies.

Sentiment

Score: 3

Explanation: The document highlights significant financial losses, a going concern issue, and ineffective internal controls, which are major negatives. While there is a shift to a new business model, the overall sentiment is negative due to the company's precarious financial situation and operational challenges.

Positives

• The company's net loss decreased significantly for both the three and six month periods ended September 30, 2024, compared to the same periods in 2023.
• Operating expenses decreased for the six months ended September 30, 2024, primarily due to a reduction in consulting expenses.
• The company's cash balance increased from $1,688 to $6,133 during the period.
• Groove Botanicals is actively pursuing a new business model in the EV battery technology sector.

Negatives

• The company continues to operate at a loss, with a net loss of $29,833 for the three months ended September 30, 2024.
• The company has an accumulated deficit of $35,022,884 as of September 30, 2024.
• The company has not generated any revenue since its inception and does not expect to generate revenue in the near future.
• The company's disclosure controls and procedures were deemed ineffective due to inadequate segregation of duties and lack of a formal audit committee.

Risks

• The company has a history of net losses and has raised limited capital, raising substantial doubt about its ability to continue as a going concern.
• The company's new business model is in its early stages, and there is no guarantee of success in acquiring or commercializing EV battery technologies.
• The company's disclosure controls and procedures are not effective, which could lead to inaccurate financial reporting.
• The company relies heavily on its sole officer and director, Kent Rodriguez, for day-to-day management, which presents a key person risk.
• The company needs additional capital to maintain operations and pursue its business objectives, and there is no guarantee that financing will be available on favorable terms.

Future Outlook

The company plans to assemble a portfolio of early-stage EV Battery Technologies and seek grants to commercialize these technologies. The company anticipates capital needs between $500,000 and $5,000,000.

Management Comments

• Management believes that the technologies available in the specialized energy industry present a stable business model with high growth potential.
• Management is actively working towards an impactful acquisition in the EV battery space.
• Management is taking steps to provide the necessary capital to continue operations, including focusing on the new business model and raising equity or debt financing.

Industry Context

The company's shift towards EV battery technology aligns with the growing global focus on renewable energy and electric vehicles. The company is attempting to position itself in a high-growth sector, but faces competition from established players and other startups.

Comparison to Industry Standards

• Groove Botanicals' financial performance is significantly weaker than established companies in the EV battery technology sector, which typically have substantial revenue and funding.
• The company's lack of revenue and reliance on related party funding is not typical of companies in the sector that have secured venture capital or other forms of investment.
• Compared to companies like Tesla, Panasonic, or LG Chem, which are major players in the EV battery market, Groove Botanicals is at a very early stage of development and lacks the resources and infrastructure of these established companies.
• The company's focus on acquiring early-stage technologies from universities is a common strategy for startups in the sector, but the success of this approach is highly dependent on the quality of the technology and the company's ability to commercialize it.

Management Changes

Corporate Governance

Legal Proceedings

• There are no pending legal proceedings to which the Company is a party.

Related Party Transactions

• The company had related party payables of $544,970 as of September 30, 2024.
• The company accrues $48,000 of wages payable annually to its CEO, Kent Rodriguez.
• The company accrued $10,000 and $20,000 in preferred dividends from the Series A preferred shares to Mr. Kent Rodriguez for the three and six month periods ended September 30, 2024, respectively.
• The company received $67,913 in proceeds from a related party in the form of unsecured advances during the six months ended September 30, 2024.

Stakeholder Impact

• Shareholders face significant risk due to the company's ongoing losses and going concern issues.
• Employees are impacted by the company's financial instability and reliance on a single officer.
• Creditors face uncertainty regarding the company's ability to repay its debts.
• Potential customers and partners may be hesitant to engage with the company due to its financial challenges.

Next Steps

• The company plans to assemble a portfolio of early-stage EV Battery Technologies.
• The company will seek grants from the State of Minnesota Department of Economic Development.
• The company will work to identify corporate partners to commercialize these technologies.
• The company will continue to evaluate its processes and procedures to improve financial reporting controls.

Key Dates

Keywords

EV Battery Technology, Financial Results, Net Loss, Operating Expenses, Going Concern, Preferred Stock, Convertible Notes, Related Party Transactions, Disclosure Controls, Kent Rodriguez