Progreen US, Inc. - FORM 10-Q

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EXCEL - IDEA: XBRL DOCUMENT - Progreen US, Inc.	Financial_Report.xls
EX-31 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002,. - Progreen US, Inc.	f10q0114ex31_progreen.htm
EX-32 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002,. - Progreen US, Inc.	f10q0114ex32_progreen.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended January 31, 2014

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to _________________

Commission File Number 000-25429

PROGREEN PROPERTIES, INC.

(Exact name of registrant as specified in its charter)

DELAWARE		59-3087128
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

380 North Old Woodward Ave., Suite 300, Birmingham, MI		48009
(Address of Principal Executive Offices)		(Zip Code)

(248) 530-0770

(Registrant’s Telephone Number, Including Area Code)

(Former Name, Former Address and Former Fiscal Year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES x NO o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a smaller reporting company. (Check One):

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	x

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes x No

The number of shares outstanding the issuer's common stock, par value $.0001 per share, was 104,329,703 as of March , 2014.

PROGREEN PROPERTIES, INC.

INDEX

	Page

Part I. Financial Information	3

Item 1. Financial Statements	3

Condensed Consolidated Balance Sheets as of January 31, 2014 (unaudited) and as of April 30, 2013	4

Condensed Consolidated Statements of Operations for the Nine Months Ended January 31, 2014 and 2013 (unaudited)	5

Condensed Consolidated Statements of Stockholders’ Equity (unaudited)	6

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended January 31, 2014 and 2013 (unaudited)	7

Notes to Unaudited Condensed Consolidated Financial Statements	8

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.	13

Item 3. Quantitative and Qualitative Disclosures about Market Risk	16

Item 4.Controls and Procedures.	16

Part II. Other Information	17

Item 6. Exhibits.	17

Signatures	17

ProGreen Properties, Inc.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Certain information and footnote disclosures required under accounting principles generally accepted in the United States of America have been condensed or omitted from the following financial statements pursuant to the rules and regulations of the Securities and Exchange Commission. It is suggested that the following financial statements be read in conjunction with the year-end financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended April 30, 2013.

The results of operations for the three and nine months ended January 31, 2014 and 2013 are not necessarily indicative of the results for the entire fiscal year or for any other period.

ProGreen Properties, Inc.

Condensed Consolidated Balance Sheets

	January 31,			April 30,
	2014			2013
Assets	(Unaudited)

Cash	$	81,373		$	152,318
Property under development		35,009			-
Accounts receivable		5,176			6,007
Accrued interest receivable		-			1,380
Investment - non-marketable securities		-			51,000
Note receivable - ARG		-			9,000
Note receivable - rental property		4,545			7,325
Prepaid expenses		-			666
Deposits		5,000			6,000
Property and equipment:
Vehicles, furniture and equipment, net of accumulated depreciation of $28,357 and $18,163		41,385			51,579
Total assets	$	172,488		$	285,275

Liabilities and Stockholders' Deficit

Accounts payable and accrued expenses	$	60,068		$	63,693
Accrued interest		68,664			16,459
Payable under management agreement		13,458			12,457
Obligations under capital leases		35,011			44,106
Notes payable		175,000			-
Tenant deposits		12,437			11,137
Convertible debenture payable to related party, net of unamortized discount of $5,907 and $11,224		494,093			488,776
Total liabilities		858,731			636,628
Stockholders' deficit
Preferred stock, $.0001 par value, 10,000,000 shares authorized, no shares issued and outstanding		-			-
Common stock, $.0001 par value, 250,000,000 shares authorized and 104,329,703 outstanding at January 31, 2014 and April 30, 2013		10,433			10,433
Additional paid in capital		3,107,790			3,062,707
Less: amount due from related party subscriber under subscription agreement		(147,897	)		(137,689	)
Accumulated deficit		(3,656,569	)		(3,286,804	)
Total stockholders' deficit		(686,243	)		(351,353	)
Total liabilities and stockholders' deficit	$	172,488		$	285,275

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements

ProGreen Properties, Inc.

Condensed Consolidated Statements of Operations

(UNAUDITED)

	Three Months Ended						Nine Months Ended
	January 31,						January 31,
	2014			2013			2014			2013
Revenues:
Condominium Sales	$	-		$	95,000		$	85,000		$	200,000
Rental revenue		-			7,861			-			25,641
Commissions revenue		1,000			1,305			2,500			2,305
Management fee revenue		3,413			2,977			9,403			7,538
Other income		50			100			150			5,000
Total Revenue	$	4,463		$	107,243		$	97,053		$	240,484
Expenses:
Cost of property sales		-			43,145			67,916			108,193
Rental property operating costs (recovery)		(1,168	)		4,853			(2,461	)		29,924
Reserve for rent guarantee (recovery)		(2,400	)		4,750			(1,550	)		7,000
Advertising		10,847			10,931			21,658			33,318
Depreciation		3,398			4,431			10,194			11,676
Compensation expense		11,625			11,250			34,875			28,750
General & administrative		54,387			56,158			160,314			176,782
Other expenses		-			-			1,706			1,484
Professional fees		32,752			18,812			115,507			107,021
Total operating expenses	$	109,440		$	154,330		$	408,159		$	504,148

Operating loss		(104,977	)		(47,087	)		(311,106	)		(263,664	)
Other expenses and income:
Interest expense		(20,498	)		(19,933	)		(59,156	)		(57,515	)
Interest income		120			1,219			497			6,884
Loss before income tax expense	$	(125,354	)	$	(65,801	)	$	(369,765	)	$	(314,295	)
Deferred income tax expense	$	-			-			-			-
Net Loss	$	(125,354	)	$	(65,801	)	$	(369,765	)	$	(314,295	)
Net loss per share - basic	$	-		$	-		$	-		$	-
Net loss per share - diluted	$	-		$	-		$	-		$	-
Weighted average shares outstanding - basic and fully diluted		104,329,703			104,329,703			104,329,703			104,329,703

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements

ProGreen Properties, Inc.

Condensed Consolidated Statement of Stockholders' Deficit

(UNAUDITED)

	Number of						Amount Due
	Shares				Additional		Under						Net
	Issued and		Common		Paid In		Subscription			Accumulated			Stockholders'
	Outstanding		Stock		Capital		Agreement			Deficit			Deficit

Balance at April 30, 2012		104,329,703	$	10,433	$	3,008,832	$	(124,189	)	$	(2,911,097	)	$	(16,021	)

Amount due from subscriber under subscription agreement						13,500		(13,500	)
Amount due under restricted stock unit agreement						40,375								40,375
Net loss											(375,707	)		(375,707	)
Balance at April 30, 2013		104,329,703	$	10,433	$	3,062,707	$	(137,689	)	$	(3,286,804	)	$	(351,353	)

Amount due from subscriber under subscription agreement						10,208		(10,208	)
Amount due under restricted stock unit agreement						34,875								34,875
Net loss											(369,765	)		(369,765	)
Balance at January 31, 2014		104,329,703	$	10,433	$	3,107,790	$	(147,897	)	$	(3,656,569	)	$	(686,243	)

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements

ProGreen Properties, Inc.

Condensed Consolidated Statements of Cash Flows

(UNAUDITED)

	Nine Months Ended
	January 31,
	2014			2013
Cash provided by (used in) operating activities
Net loss	$	(369,765	)	$	(314,295	)
Adjustments to reconcile net loss to net cash used in operating activities:
Compensation - restricted stock units		34,875			28,750
Depreciation and amortization		10,194			11,676
Loss (gain) on sale of properties		(17,084	)		(91,807	)
Interest expense on debenture to related party		-			51,589
Amortization of discounts on debenture to related party		5,317			4,425
Acquisition and development of properties		(102,925	)		(68,622	)
Proceeds from sale of properties		58,000			318,590
Changes in operating assets and liabilities:
Accounts receivable		831			(6,557	)
Accrued interest receivable		1,380			(3,045	)
Note receivable		2,780			75,603
Prepaid expenses		666			5,417
Deposits		1,000			-
Accounts payable and accrued expenses		49,880			14,623
Payable under management agreement		43,001			6,373
Cash provided by (used in) operating activities		(281,850	)		32,720

Cash provided by (used in) investing activities
Purchase of vehicles, furniture and equipment		-			(40,902	)
Proceeds from sale of investment notes		60,000			30,000
Cash provided by (used in) investing activities		60,000			(10,902	)

Cash provided by (used in) financing activities
Increase notes payable		160,000			-
Increase (decrease) in obligations under capital leases		(9,095	)		32,053
Cash provided by financing activities		150,905			32,053

Net change in cash		(70,946	)		53,871

Cash at beginning of period		152,318			12,984
Cash at end of period	$	81,373		$	66,855
Supplemental information:
Noncash transaction: sale of investment in payment of debenture interest	$	-		$	91,800
Noncash transaction: payment from accumulated rent due	$	27,000		$	16,000
Noncash transaction: note payable from accumulated rent due	$	15,000		$	-
Cash paid for interest	$	18,900		$	590
Cash paid for income taxes	$	-		$	-

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements

ProGreen Properties, Inc.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

January 31, 2014

Unaudited

Note 1. Financial Statement Presentation

The unaudited condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”)for interim information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all the information and footnotes required by U.S. GAAP for complete financial statements and they should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended April 30, 2013 (the “Annual Report”). The accompanying interim financial statements are unaudited; however, in the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The results of operations for the three and nine month periods ended January 31, 2014, are not necessarily indicative of the results that may be expected for the year ending April 30, 2014.

Basis of Presentation

The Company’s significant accounting policies are summarized in Note 1 of the Annual Report. These accounting policies conform to U.S.GAAP and have been consistently applied in the preparation of the interim unaudited condensed consolidated financial statements. There were no significant changes to these accounting policies during the nine months ended January 31, 2014, and the Company does not expect the adoption of other recent accounting pronouncements will have a material impact on its financial statements.

Going Concern

The Company’s unaudited condensed consolidated financial statements for the period ended January 31, 2014, have been prepared on a going concern basis which contemplates the realization of assets and settlement of liabilities and commitments in the normal course of business. The Company has incurred losses from operations since its change of ownership, management and line of business on April 30, 2009. Management recognizes successful business operations and the Company’s transition to attaining profitability are dependent upon obtaining additional financing and achieving a level of revenue adequate to support its cost structure. The accompanying unaudited condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of uncertainties.

The Company will continue to incur costs that are necessary for it to remain an active public company. In the current fiscal year, the Company used approximately $282,000 of cash to support its operations and such cash needs are expected to continue in the upcoming year. As of January 31, 2014, the Company has approximately $81,000 in cash.

In the nine months ended January 31, 2014 the Company financed a portion its operations through the sale of its investment notes and securities in the amount of $60,000. Also, during the nine months ended January 31, 2014 the Company spent approximately $103,000 to acquire and develop two properties, one of which was sold in the prior quarter with cash proceeds of $58,000. The Company does not expect to receive revenues to cover its costs of property acquisitions in the near future and will require external financing to continue acquisitions and sales of properties. There is no guarantee that the Company will be successful in arranging financing on acceptable terms.

On July 19, 2013, the Company entered into an Investment Agreement (“AMREFA Agreement”) with American Residential Fastigheter AB (“AMREFA”), which provides generally for an intended investment of up to $3,000,000 by AMREFA for the purpose of acquisition of investment properties in the U.S. from the Company. During the quarter ended January 31, 2014 AMREFA has loaned the Company $175,000.

ProGreen Properties, Inc.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

January 31, 2014

Unaudited

Note 1. Financial Statement Presentation (continued)

Reclassifications

Certain amounts in previous periods have been reclassified to conform to 2014 classifications.

Note 2. Rental Properties and Properties under Development

The Company held one property under development and no rental properties at January 31, 2014. The Company held no rental properties and no properties under development at April 30, 2013.

Note 3. Residential Leases

As of January 31, 2014 and April 30, 2013 the Company owned no renovated leased properties.

Note 4. Note Receivable - Rental Property

On August 21, 2012 the Company sold one property with a sales price of $60,000 of which $10,000 was financed by the Company which is recorded as a note receivable with a balance of $4,600 and $7,300 as of January 31, 2014 and April 30, 2013, respectively. The note is due in August 21, 2014 with monthly payments of $457, including interest at 9.00% per annum.

Note 5. Payable Under Management Agreement

ProGreen Management has entered into management agreements with certain property owners whereby the Company manages, leases, operates, maintains and repairs the properties for which it receives a management fee of ten percent of the monthly rent. ProGreen Management collects rent and remits the property owners’ portion of collected rent, net of a management fee to the owners. At January 31, 2014 and April 30, 2013 net rent amounts due totaled $13,500 and $12,500, respectively.

In addition, for certain properties the Company has guaranteed rents, in accordance with the terms of each lease, through various dates through November 1, 2014. In connection with the guarantees the Company has recorded reserves totaling $5,650 and $12,500 as of January 31, 2014 and April 30, 2013, respectively which are included in accounts payable and accrued expenses in the accompanying unaudited condensed consolidated balance sheet.

ProGreen Properties, Inc.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

January 31, 2014

Unaudited

Note 6. Obligations Under Capital Leases

The Company leases vehicles under capital leases expiring in various years though fiscal 2018.

The following is a schedule by year of future minimum lease payments under the capital leases together with the present value of the net minimum lease payments as of January 31, 2014:

Year ending April 30,

	2014	$	3,428
	2015		13,711
	2016		8,152
	2017		8,152
	2018		3,397
Thereafter			-
Total minimum lease payments			36,840

Less amounts representing interest			(1,829	)
Present value of future minimum lease payments		$	35,011

Total lease payments made in the nine months ended January 31, 2014 and 2013 were $10,283 and $6,887 consisting of $9,095 and $5,842 principal and $1,188 and $1,045 interest, respectively. Principal payments are shown on the Company’s Unaudited Condensed Consolidated Statements of Cash Flow under Financing Activities. Interest expense is included in the Company’s Unaudited Condensed Consolidated Statements of Operations.

The cost of the vehicles in the amount of $63,252 at January 31, 2014 and April 30, 2013, is included in the Company’s Unaudited Condensed Consolidated Balance Sheets as a component of vehicles, furniture and equipment, and is being depreciated over the estimated useful life of five years. Depreciation expense of $9,489and $7,444 is included in the Company’s Unaudited Condensed Consolidated Statements of Operations for the nine months ended January 31, 2014 and January 31, 2013, respectively.

Note 7. Notes Payable

Effective November 14, 2013 the Company issued a $15,000 principal amount promissory note payable to AMREFA, of which $15,000 was outstanding at January 31, 2014. The note bears a fixed rate of interest of 8.00% and requires no monthly payments. The principal and interest are due on or before May 30, 2014. The note payable was funded by a reduction in the amount due to AMREFA under a management agreement.

Effective December 18, 2013 the Company issued a $60,000 principal amount promissory note payable to AMREFA, of which $60,000 was outstanding at January 31, 2014. The note bears a fixed rate of interest of 8.00% and requires no monthly payments. The principal and interest are due on or before December 31, 2014. .

Effective January 16, 2014 the Company issued a $100,000 principal amount promissory note payable to AMREFA, of which $100,000 was outstanding at January 31, 2014. The note bears a fixed rate of interest of 8.00% and requires no monthly payments. The principal and interest are due on or before December 31, 2014.

ProGreen Properties, Inc.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

January 31, 2014

Unaudited

Note 8. Corporate Lease Agreement

The Company recorded $18,110 rental expense as a result of the lease for each of the nine months ended January 31, 2014 and 2013.

Note 9. Related Party Secured Convertible Debenture Agreement

The effective interest rate on the convertible debenture payable to a related party as a result of discounts was 15.23% and 15.30 % which resulted in interest expense of $56,600 and $56,000 for the January 31, 2014 and 2013, respectively. Accrued interest due totaled $67,500 and $16,500 at January 31, 2014 and April 30, 2013, respectively.

Note 10. Related Party Subscription Agreement

In connection with the related party Subscription Agreement, as of January 31, 2014 and April 30, 2013 the remainder of the purchase price and the applicable interest have been included in stockholders’ equity as amount due from subscriber under subscription agreement. The remaining balance of $100,000 and related interest have not been received prior to the issuance of the financial statements.

Note 11. Income Taxes

The Company has not recorded any income tax benefit for the nine months ended January 31, 2014 and 2013. The Company has recorded an income tax valuation allowance equal to the benefit of its income tax carry forward because of the uncertainty relating to the Company’s ability to utilize the Net Operating Loss carry forward.

Note 12. Loss per Share

Basic net income (loss) per share is computed using the weighted average number of common stock outstanding during each period. Diluted net income per share is computed using the weighted average number of common stock outstanding during each period and any dilutive potential common shares. Diluted net loss per common share is computed using the weighted average number of common stock outstanding and excludes all dilutive potential common shares because the Company is in a net loss position and their inclusion would be antidilutive.

Note 13. Commitments

The Company has no pending offers to purchase additional properties as of January 31, 2014.

ProGreen Properties, Inc.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

January 31, 2014

Unaudited

Note 14. Employee Stock Option Plan

Restricted Stock Units

Under the its 2012 Employee Stock Option Plan the Company has awarded 4,800,000 restricted stock units (“RSUs”) to certain employees, officers, directors and consultants. As of January 31, 2014 compensation expense relating to these RSUs of $34,875 was recorded as follows:

Number of restricted stock units issued on June 1, 2012		4,200,000
Stock price on grant date	$	0.03
Vesting Period	3 years
Estimated fair value at issuance	$	126,000

May 1, 2013 through January 31, 2014 Compensation Expense	$	31,500


Number of restricted stock units issued on December 3, 2012		600,000
Stock price on grant date	$	0.03
Vesting Period	4 years
Estimated fair value at issuance	$	18,000

May 1, 2013 through January 31, 2014 Compensation Expense	$	3,375


Total compensation expense as of January 31, 2014	$	34,875

Note 15. Subsequent Events

On February 28, 2014, the Company purchased a property in the amount of $21,335 for refurbishment.

On March 14, 2014, the Company elected a new director to fill an existing vacancy on the Board.

Management has evaluated subsequent events through March 14, 2014 the date on which the financial statements were available to be issued.

ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and notes thereto and other financial information included elsewhere in this report.

Certain statements contained in this report, including, without limitation, statements containing the words "believes," "anticipates," "expects" and words of similar import, constitute "forward looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including our ability to create, sustain, manage or forecast our growth; our ability to attract and retain key personnel; changes in our business strategy or development plans; competition; business disruptions; adverse publicity; and international, national and local general economic and market conditions.

GENERAL

Throughout this Form 10-Q, the terms "we," "us," "our," “ProGreen” and the "Company" refer to ProGreen Properties, Inc., a Delaware corporation, and, unless the context indicates otherwise, includes our subsidiaries.

The Company was incorporated in Florida on April 23, 1998 and reincorporated in Delaware on December 12, 2008. Effective September 11, 2009, we changed our name from Diversified Product Inspections, Inc. to ProGreen Properties, Inc. to reflect the change in our business operations from the conduct of investigations and laboratory

Our Business

Our offices are located in Birmingham, Oakland County, Michigan. The purchase of a condominium unit on July 28, 2009 initiated our planned new business operations directed at purchasing income-producing residential real estate apartment homes, condominiums and houses in the State of Michigan, where we believe favorable investment opportunities exist based on current market conditions.

Our business model since our initial property purchases has been to acquire, refurbish and upgrade existing properties into more energy efficient, comfortable and healthier living spaces so that they meet standards that exceed what is often the norm for most single family homes, condominiums and apartments. Once a property has been acquired, refurbished and rented, we put the property back on the market, but now as a fully managed investment property, with a favorable yield. These investment properties are marketed exclusively by ProGreen Realty LLC, a wholly owned subsidiary of ProGreen and managed by ProGreen Properties Management LLC, another wholly owned subsidiary.

We will have to raise additional capital to continue to purchase residential properties and to expand our property portfolio by purchasing large-scale multi-family properties. We have no firm third party commitments for the capital we will require for these planned investments, although in fiscal 2013 we concluded a working agreement, resulting in the sale of eight properties, with one group, and on July 19, 2013, we entered into an Investment Agreement (the “Agreement”) with American Residential Fastigheter AB (“AMREFA”), a company formed under the laws of Sweden, which provides generally for an intended investment of $3,000,000 by AMREFA for the purpose of acquisition of investment properties in the U.S. from the Company. Under the Agreement, Progreen would be provided with 100% property acquisition and refurbishment financing by AMREFA, in the form of property loans secured by mortgages on the properties. Once the properties acquired have been reformed and updated to ProGreen standards and subsequently leased, showing a minimum initial return of 9.5% per annum to AMREFA, the properties would be acquired by AMREFA as income producing investment properties, managed by ProGreen. Pursuant to the Agreement, AMREFA’s stated plan is to conduct an offering in Sweden to fund an intended investment of up to US$3,000,000 during 2013 and 2014, with a maximum of 10% of such investment funds designated for subscription, at AMREFA’s sole option, to purchase Progreen common stock. AMREFA has made initial investments, structured as loans, in Progreen of $175,000 in the quarter ended January 31, 2014, and subsequent thereto has invested an additional $75,000 as of the date of this report. Such funds have been utilized for the purchase and refurbishment of two properties pursuant to the AMREFA Agreement.

RESULTS OF OPERATIONS

Quarter Ended January 31, 2014 Compared to Quarter Ended January 31, 2013

During the quarter ended January 31, 2014, we incurred a net loss of approximately $125,400 compared to a net loss of approximately $65,800 for the quarter ended January 31, 2013. Revenue decreased approximately $102,800 in the quarter ended January 31, 2014 compared to the quarter ended January 31, 2013. Revenue decreased mainly due to a decrease in rental revenue from approximately $8,000 in the quarter ended January 31, 2013 to $0 in the quarter ended January 31, 2014, and a decrease in condominium sales from $95,000 in the quarter ended January 31, 2013 to $0 in the comparable 2014 quarter ended. The Company held no rental properties in the current quarter as compared to two rental properties in the quarter ended January 31, 2013. Revenue from management fees was approximately $3,400 and $3,000 in quarters ended January 31, 2014 and 2013, respectively.

There have been fluctuations in certain expenses in the three months ended January 31, 2014, as compared to the three months ended January 31, 2013. Cost of property sales decreased from approximately $43,100 for the quarter ended January 31, 2013 to $0 for the quarter ended January 31, 2014 as there were no sales in the current quarter. Rental property operating costs decreased approximately $6,000 from the quarter ended January 31, 2013 mainly due to insurance premiums refunds received in the current quarter.

Nine Months Ended January 31, 2014 Compared to Nine Months Ended January 31, 2013

During the nine months ended January 31, 2014, we incurred a net loss of approximately $ 369,800 compared to a net loss of approximately $314,300 for the nine months ended January 31, 2013. Revenue decreased approximately $143,400 for the nine months ended January 31, 2014 compared to the nine months ended January 31, 2013. During this period revenue decreased due to a decrease in condominium sales revenue from approximately $200,000 resulting from the sale of three properties in the nine months ended January 31, 2013 to $85,000 from the sale of one property in the nine months ended January 31, 2014. Revenue also decreased due to a decrease in rental revenue from approximately $25,600 in the nine months ended January 31, 2013 to $0 in the nine months ended January 31, 2014. The Company held no rental properties in the current nine months as compared to two rental properties in the nine months ended January 31, 2013. Revenue also decreased approximately $4,900 over the comparable nine months due to a decrease in other income relating to property upgrades charged in the nine months ended January 31, 2013 with no such charges in the current nine months. Revenue increased approximately $1,900 as the Company earned management fee revenue of approximately $9,400 for the nine months ended January 31, 2014 as compared with approximately $7,500 for the comparable period in 2013. This increase is the result of the management agreements the Company has entered into to manage some of the sold properties.

There have been fluctuations in certain expenses in the nine months ended January 31, 2014, as compared to the nine months ended January 31, 2013. Cost of property sales decreased approximately $40,300 from approximately $108,200 for the nine months ended January 31, 2013 to approximately $67,900 for the nine months ended January 31, 2014 as there were three properties sold in the previous nine months as compared to one property sold in the nine months ended January 31, 2014.

Rental property operating costs decreased approximately $32,400 from approximately $29,900 for the nine months ended January 31, 2013 as compared to a credit of approximately $2,500 for the nine months ended January 31, 2014 as there were no rental properties in the current nine months and the Company received insurance premium refunds in the current year to date period.

Reserve for rent guarantee decreased approximately $8,600 from approximately $7,000 for the nine months ended January 31, 2013 as compared to a credit of approximately $1,600 for the nine months ended January 31, 2014 as the rental guarantees on two property sales have expired with no payment required.

Advertising decreased approximately $11,700 for the nine months January 31, 2013 as compared to the nine months ended January 31, 2014 as there was a decrease in available rental properties. Compensation expense increased approximately $6,100 from the comparable period as a result of the increased vesting of the restricted stock units in the nine months ended January 31, 2014.

General and administrative fees decreased approximately $16,500 for the nine months ended January 31, 2014 as compared to the same period of the prior nine months due to decreased Company activity in the current nine months. Professional fees increased approximately $8,500 which is attributable to an increase in legal services fees of approximately $4,900 relating to drafting the AMREFA agreement and other corporate matters, and an increase in accounting and consulting fees of $3,600 for the nine months ended January 31, 2014 as compared to the comparable the nine months ended January 31, 2013.

LIQUIDITY AND CAPITAL RESOURCES

At January 31, 2014, we had total assets of approximately $172,500, compared to total assets of approximately $285,300 at April 30, 2013. The decrease in total assets was due to the following: Investment - non-marketable securities decreased $51,000 and Note Receivable ARG decreased $9,000 as the Company sold 18 ARG debt obligation bonds in the amount of $9,000 and 51,000 ARG common shares with a total cost of $51,000 to Rupes Futura AB for $60,000, the agreed value between the parties, and cash decreased approximately $70,900.

Cash decreased from approximately $152,300 as of April 30, 2013 to approximately $81,400 as of January 31, 2014. At January 31, 2014, we had stockholders’ deficit of approximately $686,200 compared to deficit of approximately $351,400 as of April 30, 2013. The increase in stockholders’ deficit was primarily due to net operating losses of approximately $369,800 offset by amount due under restricted stock units of approximately $35,000 in the nine month period ended January 31, 2014.

Rental property

The Company held no rental properties as of January 31, 2014 or April 30, 2013.

Properties under development

In May 2013 the Company purchased one property for development, which was sold on October 21, 2013. In January 2014 the Company purchased one property for development, which is held for development as of January 31, 2014. The Company purchased an additional property for refurbishment in February 2014.

Cash

Cash decreased approximately $70,900 for the nine months ended January 31, 2014. The Company received $60,000 in proceeds from the sale of investments and securities. The Company received $160,000 in proceeds from loans payable to a related party. The Company invested approximately $103,000 in properties under development, received $58,000 in proceeds on the sale of a property, expended approximately $236,800 to fund operations and repaid $9,100 on obligations under capital leases.

Related Party Subscription Agreement

On July 21, 2009, the Company entered into a Subscription Agreement with EIG Venture Capital, Ltd. (“EIG”), an investment company controlled by Jan Telander, the Company’s Chief Executive Officer and controlling stockholder for the sale by the Company to EIG of an aggregate of 97,751,710 shares of the Company’s Common Stock at a fixed price of $0.01023 per share, in three tranches: the Phase I tranche consisted of 5,767,350 shares of Common Stock, to be purchased by EIG on or before July 16, 2009; the Phase II tranche, of 43,108,504 shares, to be purchased by EIG on or before December 31, 2009; and the Phase III tranche, of 48,875,855 shares of Common Stock, to be purchased by EIG on or before July 16, 2010. As of January 31, 2012 all of the Phase I and Phase II shares, and 39,100,684 shares of the Phase III tranche, have been purchased, and there is a remaining balance of $100,000 payable to complete payment of the Phase II purchase price. Under a December 1, 2009, Amendment to the Subscription Agreement, EIG pays a penalty interest rate of 13.5% per annum on the unpaid balance as of the final purchase date of the Phase III shares from that date to the date the shares are purchased.

In the current fiscal year, management expects to satisfy capital needs of the Company for the purchase and sale of renovated condominiums and purchase of remaining shares under the subscription agreement described above to be approximately $3,000,000. For continued purchases of properties for renovation, we are looking to AMREFA and other financing sources to provide the necessary capital. With any purchases of larger apartment complex properties, we estimate that we will be required to find investment partners to provide financing in the range of $5 million to $25 million over the next 12-24 months.

Critical Accounting Policies

The summary of critical accounting policies below should be read in conjunction with the discussion of the Company’s accounting policies included in the Company’s Annual Report on Form 10-K for the year ended April 30, 2013. We consider the following accounting policies to be the most critical going forward:

Property sales revenue recognition - Condominium sales revenue and related profit are generally recognized at the time of the closing of the sale, when title to and possession of the property are transferred to the buyer. In situations where the buyer's financing is provided by the Company and the buyer has not made an adequate initial or continuing investment as required by ASC 360-20, "Property, Plant, and Equipment - Real Estate Sales" ("ASC 360-20"), the profit on such sales is deferred or recognized under the installment method, unless there is a loss on the sale in which case the loss on such sale would be recognized at the time of closing.

Rental Revenue Recognition - Rental income is recognized on a straight-line basis over the term of each lease.

Rental Property and Real Estate Costs - Our property is recorded at cost and depreciation is computed using the straight-line method over the estimated useful lives of the assets. We charge repairs and maintenance to expense as it is incurred.

Estimates - The preparation of financial statements required us to make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported periods. We based our estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. There can be no assurances that actual results will not differ from those estimates. On an ongoing basis, we will evaluate our accounting policies and disclosure practices as necessary.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

ITEM 4. CONTROLS AND PROCEDURES

a. Disclosure controls and procedures.

As of the end of period covered by this report, the Company carried out an evaluation, with the participation of the Company's Chief Executive Officer and Principal Financial Officer, of the effectiveness of the Company's disclosure controls and procedures pursuant to Securities Exchange Act Rule 13a-15. Based upon that evaluation, the Company's Chief Executive Officer and Principal Financial Officer concluded that the Company's disclosure controls and procedures were effective in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms.

b. Changes in internal controls over financial reporting.

No changes were made to the Company's internal controls in the quarterly period covered by this report that have materially affected, or are reasonably likely materially to affect, the Company’s internal control over financial reporting.

PART II—OTHER INFORMATION

ITEM 5. OTHER INFORMATION

On March 14, 2014, our Board of Directors elected Michael Hylander as a director of the Company to fill an existing vacancy on the Board of Directors.

Michael Hylander, age 56, has been with Repco S.L., Madrid, Spain, which represents in Spain and Portugal international food processing and packaging machinery manufacturers, and is currently its General Manager and a partner. From 1986 through 1992, Mr. Hylander was a Vice President and a director of Morgan Gestion, S.A., and its head of Private Banking in Madrid, where his responsibilities included management, investments, administration and marketing of the local investment funds and fiscal planning. From 1980 to 1984 he was with several international companies and had responsibilities for sales and marketing. He received a baccalaureate from Sigtuna Humanistiska Läroverk, Sigtuna, Sweden, in 1976, and completed his Swedish military service in 1977-1978. He received a degree in business administration from Stockholm University, Stockholm, Sweden in 1980, and a Masters in Business Administration from Insead Fontainbleau, Fontainbleau, France in 1985. Mr. Hylander is a first cousin of Jan Telander, our Chief Executive Officer.

ITEM 6. EXHIBITS.

31	Certification of Chief Executive Officer and Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.
32	Certification of Chief Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.

101.INS* XBRL Instance Document

101.SCH* XBRL Taxonomy Extension Schema Document

101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF* XBRL Taxonomy Extension Definition Linkbase Document

101.LAB* XBRL Taxonomy Extension Label Linkbase Document

101.PRE* XBRL Taxonomy Extension Presentation Linkbase Document

SIGNATURES

In accordance with the requirements of the Exchange Act, the Company has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	PROGREEN PROPERTIES, INC.

	BY:	/s/ Jan Telander
		Jan Telander
		President and Chief Executive Officer

Dated: March 17, 2014

EXHIBIT INDEX

31	Certification of Chief Executive Officer and Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.
32	Certification of Chief Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.

101.INS* XBRL Instance Document

101.SCH* XBRL Taxonomy Extension Schema Document

101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF* XBRL Taxonomy Extension Definition Linkbase Document

101.LAB* XBRL Taxonomy Extension Label Linkbase Document

101.PRE* XBRL Taxonomy Extension Presentation Linkbase Document

* XBRL information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934, and is not subject to liability under those sections, is not part of any registration statement or prospectus to which it relates and is not incorporated or deemed to be incorporated by reference into any registration statement, prospectus or other document.

Progreen US, Inc. - FORM 10-Q - March 17, 2014

Attached files

Progreen US, Inc. Reports