Attached files
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the year ended May 31, 2014
Or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ___________ to ___________
Commission File No. 333-168337
GROGENESIS, INC.
(Exact Name of Small Business Issuer as specified in its charter)
Nevada 42-1771870
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification no.)
Highway 79 North
Springville, TN 38256
(Address of principal executive offices)
Securities Registered Under Section 12(b) of the Exchange Act:
None
Securities Registered Under Section 12(g) of the Exchange Act:
Common Stock, $0.001 par value (Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer as
defined by Rule 405 of the Securities Act Yes [ ] No [X].
Indicate by check mark if the registrant is not required to file reports
pursuant to Rule 13 or Section 15(d) of the Act Yes [ ] No [X].
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 the reporting
requirements for the past 90 days. Yes [X] No [ ]
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 (ss.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 [ ] No [ ]
Indicate by check mark if disclosure of delinquent filers in response to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K/A
or any amendment to this Form 10-K/A. [X]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definition of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] 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). Yes [ ] No [X]
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity, as of the
last business day of the registrant's most recently completed fiscal quarter:
$14,346,500.
State the number of shares outstanding of each of the Issuer's classes of common
stock, as of the latest practicable date. 81,490,000 shares of common stock
issued and outstanding as of September 26, 2014.
DOCUMENTS INCORPORATED BY REFERENCE
None.
TABLE OF CONTENTS
PART 1
Item 1 Description of Business 3
Item 1A Risk Factors 7
Item 1B Unresolved Staff Comments 7
Item 2 Properties 7
Item 3 Legal Proceedings 7
Item 4 Mine Safety Disclosures 7
PART II
Item 5 Market for Registrant's Common Equity , Related Stockholder
Matters and Issuer Purchases of Equity Securities 8
Item 6 Selected Financial Data 9
Item 7 Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
Item 7A Quantitative and Qualitative Disclosure of Market Risk 10
Item 8 Financial Statements and Supplementary Data 11
Item 9 Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure 11
Item 9A(T) Controls and Procedures 11
Item 9B Other Information 12
PART III
Item 10. Directors, Executive Officers and Corporate Governance 13
Item 11 Executive Compensation 15
Item 12 Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters 17
Item 13 Certain Relationships and Related Transactions, and Director
Independence 17
PART IV
Item 14 Principal Accountant Fees and Services 18
Part 15 Exhibits, Financial Statements and Schedules 19
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This annual report contains forward-looking statements as that term is defined
in the Private Securities Litigation Reform Act of 1995. These statements relate
to future events or our future financial performance. Some discussions in this
report may contain forward-looking statements that involve risk and uncertainty.
A number of important factors could cause our actual results to differ
materially from those expressed in any forward-looking statements made in this
report. Forward-looking statements are often identified by words like:
"believe", "expect", "estimate", "anticipate", "intend", "project" and similar
expressions or words which, by their nature, refer to future events.
In some cases, you can also identify forward-looking statements by terminology
such as "may", "will", "should", "plans", "predicts", "potential" or "continue"
or the negative of these terms or other comparable terminology. These statements
are only predictions and involve known and unknown risks, uncertainties and
other factors.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity or achievements. Except as required by applicable law, including the
securities laws of the United States, we do not intend to update any of the
forward-looking statements to conform these statements to actual results.
The cautions outlined made in this statement and elsewhere in this document
should not be construed as complete or exhaustive. In many cases, we cannot
predict factors which could cause results to differ materially from those
indicated by the forward-looking statements. Additionally, many items or factors
that could cause actual results to differ materially from forward-looking
statements are beyond our ability to control. The Company will not undertake an
obligation to further update or change any forward-looking statement, whether as
a result of new information, future developments, or otherwise.
Our financial statements are stated in United States Dollars (US$) and are
prepared in accordance with United States Generally Accepted Accounting
Principles. References to common shares refer to common shares in our capital
stock.
In this reports, "GroGenesis", "the Company," "we," "us," and "our," refer to
GroGenesis, Inc., unless the context otherwise requires. Unless otherwise
indicated, the term "fiscal year" refers to our fiscal year ending May 31, 2014.
Unless otherwise indicated, the term "common stock" refers to shares of the
Company's common stock, par value $0.001 per share.
PART I
ITEM 1. BUSINESS
PRIOR OPERATIONS
We were incorporated pursuant to the laws of Nevada on May 19, 2010. Our
intended plan of operation was to operate beach front eating establishments on
the beaches on Goa, India. However, due to difficulties in raising additional
funds to cover our planned operations and obtaining the necessary permits to
operate beach shacks, prior management decided to discontinue operations in the
sector.
GROGENESIS PLANT STIMULANT BUSINESS
During the fiscal year ended May 31, 2014, we commenced business operations in
the agricultural and environmental sectors through the acquisition of the assets
relating to the natural blend of plant extracts that is used as a liquid plant
growth enhancer, known as Agraburst crop surfactant formula SURF0107
("Agraburst"). A plant surfactant is a compound that lowers the surface tension
between a liquid and a solid in order to allow for more efficient nutrient
uptake in the plant.
On September 9, 2013, we entered into an asset purchase agreements with Joseph
Fewer of Aylmer, Ontario and Stephen Moseley of Paris, Tennessee, whereby we
agreed to acquire all rights, title, and interest in and to the assets relating
Agraburst. In consideration of Joseph Fewer selling the intellectual property
comprising Agraburst to us, including the technology described in the United
States provisional patent application number 61/897,584- "Composition and Method
for Enhancing Plant Growth", as well as all related assets necessary for
operating a plant growth enhancement product manufacture and sales business as a
going concern, we issued to Mr. Fewer 12,500,000 post forward-split common
shares in our capital. The agreement also required that we complete a forward
split of our common stock such that 25 new shares of common stock are exchanged
for each currently issued share of common stock outstanding, and that 74,000,000
shares of post-forward-split common stock held by our former president be
returned to treasury. We completed this forward-split on November 1, 2013. We
have also executed a consulting agreement with Mr. Fewer whereby he will provide
his full-time management services to us in consideration of payments of $7,000
per month. The consulting agreement will become effective on the date that we
raise a minimum of $500,000 for operations.
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We also entered into an agreement with Mr. Moseley on September 9, 2013 whereby
we agreed to acquire certain equipment used in conjunction with the production,
sales, and marketing of Agraburst. In consideration of Mr. Moseley transferring
title of these assets to us, we have issued 5,000,000 post-split shares of our
common stock to him. We have also executed a consulting agreement with Mr.
Moseley whereby he will receive $5,000 per month in consideration of him
providing his full-time services to us. As with Mr. Fewer's consulting
agreement, Mr. Moseley's agreement will become effective on the date that we
raise a minimum of $500,000 for operations. The agreement recognizes that Mr.
Moseley has been involved in the sale of surfactants prior to the date of the
agreement and that he shall maintain the right to sell Agraburst to 53 existing
clients and profit exclusively from sales to them.
We also entered into an easement agreement with Joseph Fewer and Denise Fewer
whereby they have agreed to grant to us the right to use a portion of their farm
located in Alymer, Ontario for the purposes of using it as a demonstration farm
in order to evaluate and exhibit the effects of Agraburst. In consideration of
the easement, we have issued to the Fewers an aggregate of 2,500,000 post-split
shares of our common stock. The initial term of the easement is three years.
We completed the purchase of the assets necessary for the operation of the
Agraburst plant growth surfactant manufacture and sales business on February 7,
2014.
AGRABURST PRODUCT
Agraburst consists of a blend of predominantly natural plant extracts, or
phytochemicals, that are naturally-derived, non-toxic, carcinogen-free, and
biodegradable. It is a foliar-feed liquid growth enhancer that aids efficient
nutrient and water uptake in plants. Foliar feeding involves applying AgraBurst
directly to plant foliage, which then absorbs it. Agraburst can be used alone or
tank-mixed with most liquid fertilizers, herbicides, pesticides, and fungicides
in order to increase their effectiveness. It can also be utilized as a wash for
fruits and vegetables, and as a cleaner for garden and lawn sprayers,
field-sized sprayers, and agricultural tanks.
Agraburst is designed to work as a cation exchange stimulant that penetrates
plant foliage and roots in order to enhance photosynthesis and higher brix
levels. The brix level is the percentage of solids, particularly sugar and
minerals, present in the plant. A high brix level is an indication that the
plant has been grown with sufficient nutrients and water. Minute particles in
Agraburst increase the speed of nutrient transport within a plant and can carry
other blended products into plant leaves.
The small particles within Agraburst have very close to a neutral electrical
charge, which allows them to form light bonds with the hydrogen atoms in water,
which results in a reduction in water's natural surface tension. As a result,
Agraburst acts akin to a lubricant that keeps water flowing and transporting
nutrients within a plant with little resistance. This promotes higher efficiency
of water and nutrient uptake in a plant. The resulting higher brix level in the
plant better enables it to resist disease, insects, drought, and cold weather.
It is also linked to better tasting food crops.
To date, Agraburst and predecessor product formulations have been sold to a
small group of farming clients and tested in a variety of case studies that has
resulted, amongst other benefits, in increased yield for corn, soybean, tobacco,
canola, alfalfa, wheat, cabbage, cotton, corn silage, hay, tomatoes, and beans.
PRODUCT SAFETY
Because Agraburst ingredients are comprised of refined extracts that originate
from tree oils and plants, it is considered to be environmentally friendly. It
complies with the United States Occupational Safety and Health Administration's
OSHA CFR - 1910.1200 Section (i) in that Agraburst contains no hazardous or
toxic components. In addition, Agraburst is comprised solely of ingredients that
are contained on the Food and Drug Administration's EAFUS list and are thus
considered safe for use with food products. Additional tests performed at the
Genetic ID testing facility in Fairfield, Iowa also confirmed that Agraburst is
free of genetically modified organisms.
MARKET FOR THE PRODUCT
As consumers become increasingly concerned over the use of synthetic pesticides
and fertilizers on food crops, the infiltration of harmful crop additives in
soil and water supplies, and the availability of food products as reasonable
prices, there is growing pressure on global farmers to provide safe food
products for consumption without causing undue environmental harm. Because
Agraburst is formulated to increase agricultural output without adverse health
and environmental impacts, the potential market for the product is large. Our
business plan is based on the premise that there will be increasing pressure on
farmers to provide more agricultural products without increasing the amount of
land cleared for farm use or creating environmental or health risks for society.
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We intend to initially manufacture and distribute Agraburst in the United States
and Canada with a view to expanding our market focus depending on our initial
success.
Our Agraburst manufacturing facility is located in Paris, Tennessee, and has the
capacity to produce approximately 100,000 gallons of Agraburst per month with
existing equipment. Currently, it takes approximately six hours to produce a
3,000 gallon batch of Agraburst. It currently involves an exothermic process
that involves ingredient mixing in large stainless steel tanks and then allowing
the product to cool. Currently, Agraburst is sold to a small group of farmers
and local cooperatives located primarily in Tennessee and Kentucky.
Our ability to market Agraburst in North America will be adversely impacted by
the fragmented and competitive nature of the agriculture fertilizer and
fertilizer enhancement industry. The sector includes large entities that produce
fertilizers in massive quantities, as well as small, boutique manufacturers that
produce fertilizers and growth enhancement products in small batches.
While the principal competitive factors in the sale of fertilizer enhancement
products are crop output and product safety, pricing and availability of the
product and geographic coverage are also critical. Most of our competitors have
an established market for their products and greater financial resources and may
be able to withstand sales or price decreases better than we will. We also
expect to continue to face competition from new market entrants. We may be
unable to compete effectively with these existing or new competitors, which
could have a material adverse effect on our financial condition and results of
operations.
EXISTING COMPETITIVE PRODUCTS
While various companies offer commercial agricultural fertilizer products and
fertilizer enhancements to farms and consumers, we are not aware of any direct
competitors that offer a product that substantially increases yields that is
also naturally-derived.
SALES AND MARKETING STRATEGY
Our proposed marketing strategy is to demonstrate to our potential end-use
customers, principally commercial farmers, that Agraburst will increase their
agricultural output. We intend to accomplish this through a combination of
independent product testing through scientific trials and by allowing farmers to
use Agraburst on a trial basis. We expect that our marketing strategy will be
most successful if farmers are able to realize improvements in crop quality and
yield on their own fields when they use Agraburst.
We intend to sell Agraburst through distribution arrangements with agricultural
input distributors and agricultural supply stores. We are subject to the risk
that large, high-profile, distributors could exert substantial pressure on us
due to their size and the small contribution that our products would likely have
to their financial success. Because of this difference in market influence, such
distributors would have leverage over the pricing and promotion of Agraburst.
We hope to enter into agreements with both national and international
distributors, though there is no guarantee that we will be successful in
reaching such arrangements. While we attempt to establish these relationships,
we will also directly market our product to farmers through a direct sales
force, as well as offer Agraburst through a corporate website. If we decide to
directly control product distribution, we will incur costs related to taking and
processing product orders from retailers; shipping and warehousing costs;
credit, collections, and in-house accounting fees.
EMERGING GROWTH COMPANY STATUS
Because we generated less than $1 billion in total annual gross revenues during
our most recently completed fiscal year, we qualify as an "emerging growth
company" under the Jumpstart Our Business Startups ("JOBS") Act.
We will lose our emerging growth company status on the earliest occurrence of
any of the following events:
1. on the last day of any fiscal year in which we earn at least $1
billion in total annual gross revenues, which amount is adjusted for
inflation every five years;
2. on the last day of the fiscal year of the issuer following the fifth
anniversary of the date of our first sale of common equity securities
pursuant to an effective registration statement;
3. on the date on which we have, during the previous 3-year period,
issued more than $1 billion in non-convertible debt; or
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4. the date on which such issuer is deemed to be a `large accelerated
filer', as defined in section 240.12b-2 of title 17, Code of Federal
Regulations, or any successor thereto."
A "large accelerated filer" is an issuer that, at the end of its fiscal year,
meets the following conditions:
1. it has an aggregate worldwide market value of the voting and
non-voting common equity held by its non-affiliates of $700 million or
more as of the last business day of the issuer's most recently
completed second fiscal quarter;
2. It has been subject to the requirements of section 13(a) or 15(d) of
the Act for a period of at least twelve calendar months; and
3. It has filed at least one annual report pursuant to section 13(a) or
15(d) of the Act.
As an emerging growth company, exemptions from the following provisions are
available to us:
1. Section 404(b) of the Sarbanes-Oxley Act of 2002, which requires
auditor attestation of internal controls;
2. Section 14A(a) and (b) of the Securities Exchange Act of 1934, which
require companies to hold shareholder advisory votes on executive
compensation and golden parachute compensation;
3. Section 14(i) of the Exchange Act (which has not yet been
implemented), which requires companies to disclose the relationship
between executive compensation actually paid and the financial
performance of the company;
4. Section 953(b)(1) of the Dodd-Frank Act (which has not yet been
implemented), which requires companies to disclose the ratio between
the annual total compensation of the CEO and the median of the annual
total compensation of all employees of the companies; and
5. The requirement to provide certain other executive compensation
disclosure under Item 402 of Regulation S-K. Instead, an emerging
growth company must only comply with the more limited provisions of
Item 402 applicable to smaller reporting companies, regardless of the
issuer's size.
Pursuant to Section 107 of the JOBS Act, an emerging growth company may choose
to forgo such exemption and instead comply with the requirements that apply to
an issuer that is not an emerging growth company. We have elected under this
section of the JOBS Act to maintain our status as an emerging growth company and
take advantage of the JOBS Act provisions relating to complying with new or
revised accounting standards under Section 102(b)(1) of the JOBS Act.
GOVERNMENT REGULATION
While agricultural fertilizers, soil amendments, and related products are highly
regulated at the state level in the United States, these regulations do not
apply to Agraburst because it is a crop surfactant that is comprised of less
than 3% active ingredients, which typically include potassium, nitrogen, and
phosphorus. In Canada, where we intend to extend our marketing efforts, such
active ingredients must constitute less than 5% of the surfactant product
ingredient mix.
We anticipate that we will incur periodic testing costs in order to ensure that
Agraburst qualifies as a crop surfactant and is not deemed to be a fertilizer or
similarly regulated product that is subject to regulatory requirements. However,
we do not anticipate that such testing costs will be material to our operations.
SUBSIDIARIES
We do not have any subsidiaries.
PATENTS AND TRADEMARKS
The composition of our crop surfactant, Agraburst, is covered by provisional
patent application number 61/897,584 - "Composition and Method for Enhancing
Plant Growth" that was filed with the United States patent office on October 30,
2013.
Our product brand name, Agraburst, is covered by a U.S. Trademark Application
Serial Number 86/092618, which was filed with the United States Trademark and
Patent Office on October 16, 2013.
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Otherwise, we do not own, either legally or beneficially, any patents or
trademarks.
RESEARCH AND DEVELOPMENT ACTIVITIES AND COSTS
We have not spent any funds on research and development activities to date.
COMPLIANCE WITH ENVIRONMENTAL LAWS
Our current operations are not subject to any environmental laws.
FACILITIES
Our Agraburst manufacturing facility is located in Paris, Tennessee, and has the
capacity to produce approximately 100,000 gallons of Agraburst per month with
existing equipment. The facility is currently leased under a 1-year rental
agreement with Bradley Morley at the rate of $800 per month, which lease term
expired on May 22, 2014 and now continues on a month-to-month basis until
terminated by either party on written notice. Management believes that this
facility's current production capacity is sufficient to satisfy customer demand
for the foreseeable future. We will consider re-locating and/or expanding
internationally to new manufacturing facilities in future based on sales
fulfilment logistics concerns, alongside sales side requirements and economics.
Pursuant to our asset purchase agreement with Joseph Fewer, we also have an
easement for a period of three years in a 10 acre portion of a hobby farm
located in Aylmer, Ontario. The easement allows us to operate an agricultural
surfactant testing and development facility on the land.
EMPLOYEES
We have commenced only limited operations, and therefore currently have no
employees.
ITEM 1A RISK FACTORS
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act
and are not required to provide the information under this item.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None
ITEM 2 PROPERTIES
Our Agraburst manufacturing facility is located in Paris, Tennessee, and has the
capacity to produce approximately 100,000 gallons of Agraburst per month with
existing equipment. The facility is currently leased under a rental agreement
with Bradley Morley at the rate of $800 per month, which lease term continues
on a month-to-month basis thereafter terminated by either party on written
notice.
Pursuant to our asset purchase agreement with Joseph Fewer, we also have an
easement for a period of three years in a 10-acre portion of a hobby farm
located in Aylmer, Ontario. The easement allows us to operate an agricultural
surfactant testing and development facility on the land.
Otherwise, we do not hold any interest in real property.
ITEM 3. LEGAL PROCEEDINGS
We know of no material, existing or pending legal proceedings against us, nor
are we involved as a plaintiff in any material proceeding or pending litigation.
There are no proceedings in which any of our directors, officers or affiliates,
or any registered or beneficial shareholder, is an adverse party or has a
material interest adverse to us.
ITEM 4. MINE SAFETY DISCLOSURES
None
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
MARKET INFORMATION
Our common stock is quoted for trading on the OTC Bulletin Board under symbol
"GROG". However, during the fiscal year ended May 31, 2014, no trades of our
common stock occurred through the facilities of the OTC Bulletin Board.
The OTCBB is a regulated quotation service that displays real-time quotes, last
sale prices and volume information in over-the-counter (OTC) securities. The
OTCBB is not an issuer listing service, market or exchange. Although the OTCBB
does not have any listing requirements per se, to be eligible for quotation on
the OTCBB, issuers must remain current in their filings with the SEC or
applicable regulatory authority. Market Makers are not permitted to begin
quotation of a security whose issuer does not meet this filing requirement.
Securities already quoted on the OTCBB that become delinquent in their required
filings will be removed following a 30 or 60 day grace period if they do not
make their required filing during that time.
HOLDERS
As of the date of this annual report, we have approximately 40 registered
shareholders holding 81,490,000 of our shares of common stock. Each shareholder
of our common stock is entitled to one vote for each share on all matters
submitted to a stockholder vote.
Holders of common stock do not have cumulative voting rights. Therefore, holders
of a majority of the shares of common stock voting for the election of directors
can elect all of the directors. Holders of our common stock representing a
majority of the voting power of our capital stock issued and outstanding and
entitled to vote, represented in person or by proxy, are necessary to constitute
a quorum at any meeting of our stockholders. A vote by the holders of a majority
of our outstanding shares is required to effectuate certain fundamental
corporate changes such as liquidation, merger or an amendment to our Articles of
Incorporation.
Although there are no provisions in our charter or by-laws that may delay, defer
or prevent a change in control, we are authorized, without shareholder approval,
to issue shares of preferred stock that may contain rights or restrictions that
could have this effect.
Holders of common stock are entitled to share in all dividends that the board of
directors, in its discretion, declares from legally available funds. In the
event of liquidation, dissolution or winding up, each outstanding share entitles
its holder to participate pro rata in all assets that remain after payment of
liabilities and after providing for each class of stock, if any, having
preference over the common stock. Holders of our common stock have no
pre-emptive rights, no conversion rights and there are no redemption provisions
applicable to our common stock.
DIVIDENDS
We have never declared or paid any cash dividends on our common stock. For the
foreseeable future, we intend to retain any earnings to finance the development
and expansion of our business, and we do not anticipate paying any cash
dividends on its common stock. Any future determination to pay dividends will be
at the discretion of the Board of Directors and will be dependent upon then
existing conditions, including our financial condition and results of
operations, capital requirements, contractual restrictions, business prospects,
and other factors that the board of directors considers relevant.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
We do not have any equity compensation plans and accordingly we have no
securities authorized for issuance hereunder.
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
There were no shares of common stock or other securities issued to the issuer or
affiliated purchasers during the year ended May 31, 2014.
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ITEM 6. SELECTED FINANCIAL DATA
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act
and are not required to provide the information under this item.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
We are a company involved in the manufacturing, marketing, and sale of a natural
blend of plant extracts that is used as a liquid plant growth enhancer, known as
Agraburst. We commenced operations in this sector following our acquisition of
various assets relating to Agraburst, which was completed in February 2014.
Accordingly, we have been involved in this business sector for less than one
year. Our auditors have issued a going concern opinion. This means that our
auditors believe there is substantial doubt that we can continue as an ongoing
business for the next twelve months. While we have acquired ownership of the
formulation of Agraburst, including all related intellectual property rights,
subsequent to our most recently completed fiscal year, there is still no
assurance that our intended operations will be profitable on a long-term basis.
To meet our financing requirements, we anticipate raising funds through the sale
of our equity. At the present time, we have not made any arrangements to raise
additional cash. If we need additional cash and cannot raise it, we will either
have to delay or suspend the expansion of our operations until we do raise the
cash, or cease operations entirely.
PLAN OF OPERATION
Our plan of operation for the twelve month period following the date of this
report is to establish facilities for the commercial manufacture of Agraburst,
enter into distribution arrangements for the sale of Agraburst, and retain a
sales force necessary for the direct marketing of Agraburst to commercial
farmers in the United States and Canada.
We expect to incur the following costs in the next 12 months in connection with
our goals:
Manufacturing facilities and equipment costs: $ 500,000
Sales and Marketing: $ 350,000
Product manufacturing costs: $ 250,000
Consulting and distribution costs: $ 200,000
Wages for sales force: $ 150,000
General and administrative costs: $ 50,000
----------
Total: $1,500,000
==========
Total expenditures over the next 12 months are therefore expected to be
approximately $1,500,000. Our ability to meet these objectives will be dependent
on our ability to generate revenue from operations and to raise sufficient
additional capital to expand operations. If we are unable to generate sufficient
revenue or raise financing as required, we will delay our establishment and
expansion of operations as necessary.
SOURCES AND USES OF CASH
At May 31, 2014, our current assets totaled $55,495 and consisted of $12,188 in
cash, prepaid expenses of $18,900, accounts receivable of $19,000, and inventory
recorded at $5,407. We will have to raise additional funds in the next twelve
months in order to cover our anticipated administrative costs and costs of
expanding our operations as outlined above. We currently do not have a specific
plan of how we will obtain such funding; however, we anticipate that additional
funding will be in the form of equity financing from the sale of our common
stock. Any private placement of our common stock could result in substantial
dilution to existing shareholders.
EVENTS, TRENDS AND UNCERTAINTIES
The development of our business will depend upon our success in selling
Agraburst to commercial farmers. Our ability to generate revenue may be affected
by events and trends such as general economic conditions, changes to farm
subsidies, and competing products from existing and new companies in the same
business.
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RESULTS OF OPERATIONS
FISCAL YEAR ENDED MAY 31, 2014
We earned $60,475 in revenue from the sale of Agraburst in the fiscal year ended
May 31, 2014. All of this revenue was generated from operations in the fourth
quarter of the fiscal year following our acquisition of the Agraburst assets and
our commencement of commercial operations. Our cost of sales during the fiscal
year was $10,253, resulting in gross profit from operations of $50,222.
We incurred operating expenses in the amount of $1,407,369 during the fiscal
year. These operating expenses were comprised of an impairment loss on our
Agraburst intangible assets of $1,107,101, general and administrative expenses
of $138,094, professional fees of $72,220, consulting fees of $69,000,
depreciation expense of $10,270, transfer agent and filing fees of $7,134, and
commissions of $3,550. As a result, we incurred a net loss of $1,357,147 for the
fiscal year ended May 31, 2014.
FISCAL YEAR ENDED MAY 31, 2013
We did not earn any revenues from operations in the fiscal year ended May 31,
2013. We incurred operating expenses in the amount of $42,891 during the fiscal
year. These operating expenses were comprised of general and administrative
costs of $34,877 and professional fees of $8,014.
We have not attained profitable operations and are dependent upon obtaining
financing to continue our business operations. For these reasons, there is
substantial doubt that we will be able to continue as a going concern.
FUTURE FINANCINGS
We will require additional financing in order to enable us to proceed with our
plan of operations, as discussed above. Accordingly, we will require additional
financing in order to continue operations. There can be no assurance that
additional financing will be available to us when needed or, if available, that
it can be obtained on commercially reasonable terms. If we are not able to
obtain the additional financing on a timely basis, we will not be able to meet
our other obligations as they become due. We are pursuing various alternatives
to meet our immediate and long-term financial requirements.
We anticipate continuing to rely on equity sales of our common stock in order to
fund our business operations. Issuances of additional shares will result in
dilution to existing stockholders. There is no assurance that we will achieve
any additional sales of equity securities or arrange for debt or other financing
to fund our planned business activities.
We presently do not have any arrangements for additional financing and no
potential lines of credit or sources of financing are currently available for
the purpose of proceeding with our plan of operations.
GOING CONCERN CONSIDERATION
The report of our independent registered public accounting firm raises
substantial doubt about our ability to continue as a going concern based on the
absence of an established source of revenue, recurring losses from operations,
and our need for additional financing in order to fund our operations.
OFF-BALANCE SHEET ARRANGEMENTS
We have no off-balance sheet arrangements that have or are reasonably likely to
have a current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that is material to stockholders.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined by Rule 12b-2 of the Securities
Exchange Act of 1934 and are not required to provide the information under this
item.
10
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our financial statements are stated in United States Dollars (US$) and are
prepared in accordance with United States Generally Accepted Accounting
Principles.
The Report of Independent Registered Public Accounting Firm issued by PLS CPA, A
professional corporation for the audited financial statements for the years
ended May 31, 2014 and 2013 is included herein immediately preceding the audited
financial statements.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There were no disagreements related to accounting principles or practices,
financial statement disclosure, internal controls or auditing scope or procedure
during the two fiscal years and interim periods, including the interim period up
through the date the relationship ended.
ITEM 9A(T). CONTROLS AND PROCEDURES
DISCLOSURE CONTROLS AND PROCEDURES
As required by paragraph (b) of Rules 13a-15 or 15d-15 under the Securities
Exchange Act of 1934, the Company's principal executive officer and principal
financial officer evaluated our disclosure controls and procedures (as defined
in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) for the period covered by
this annual report as of our fiscal year end, May 31, 2014. Based on this
evaluation, this officer concluded that as of the end of the period, these
disclosure controls and procedures were not adequate to ensure that the
information required to be disclosed by us in reports it files or submits under
the Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the rules and forms of the Securities and Exchange
Commission and include controls and procedures designed to ensure that such
information is accumulated and communicated to management, including our
principal executive officer and principal financial officer, to allow timely
decisions regarding required disclosure.
An evaluation was conducted under the supervision and with the participation of
our management of the effectiveness of the design and operation of our
disclosure controls and procedures as of May 31, 2014. Based on that evaluation,
our management concluded that our disclosure controls and procedures were not
effective as of such date to ensure that information required to be disclosed in
the reports that we file or submit under the Exchange Act, is recorded,
processed, summarized and reported within the time periods specified in SEC
rules and forms. Such officer also confirmed that there was no change in our
internal control over financial reporting during the fiscal year that has
materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.
MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management is responsible for establishing and maintaining adequate internal
control over our financial reporting. In order to evaluate the effectiveness of
internal control over financial reporting, as required by Section 404 of the
Sarbanes-Oxley Act, management has conducted an assessment, including testing,
using the criteria in the Internal Control - Integrated Framework, issued by the
Committee of Sponsoring Organizations of the Treadway Commission ("COSO").
Our system of internal control over financial reporting is designed to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. Because of its inherent limitations,
internal control over financial reporting may not prevent or detect
misstatements.
Based on our evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that our internal controls over financial reporting were not effective
as of May 31, 2014 and were subject to material weaknesses.
A material weakness is a deficiency, or a combination of deficiencies, in
internal control over financial reporting, such that there is a reasonable
possibility that a material misstatement of the company's annual or interim
11
financial statements will not be prevented or detected on a timely basis. We
have identified the following material weaknesses in our internal control over
financial reporting using the criteria established in the COSO:
1. Failing to have an audit committee or other independent committee that
is independent of management to assess internal control over financial
reporting; and
2. Failing to have a director that qualifies as an audit committee
financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. In addition, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions and that the
degree of compliance with the policies or procedures may deteriorate.
This annual report does not include an attestation report of our independent
registered public accounting firm regarding internal control over financial
reporting. Our internal control over financial reporting was not subject to
attestation by our independent registered public accounting firm pursuant to
temporary rules of the SEC that permit us to provide only management's report in
this annual report.
C. CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING.
During the fiscal year ended May 31, 2014, our internal control over financial
reporting was not subject to changes.
ITEM 9B. OTHER INFORMATION
No items required to be reported on Form 8-K during the fourth quarter ended May
31, 2014 covered by this report were not previously reported on Form 8-K.
12
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Our executive officers and directors and their respective ages as of the date of
this current report are as follows:
DIRECTORS:
Name of Director Age
---------------- ---
Joseph Fewer 60
Alan R. Hughes 62
EXECUTIVE OFFICERS:
Name of Officer Age Office
--------------- --- ------
Joseph Fewer 60 President, C.E.O., Secretary and Treasurer
Alan R. Hughes 62 Chief Operating Officer
Ron Evinou 68 Chief Financial Officer
Stephen Moseley 57 Vice-President - Sales and Manufacturing
Manfred G. van Nostitz 73 Vice-President - Asia-Pacific Region
BIOGRAPHICAL INFORMATION
Set forth below is a brief description of the background and business experience
of each of our executive officers and directors for the past five years.
JOSEPH FEWER acts as our President, C.E.O., Secretary, Treasurer and as a
director, and has been responsible for much of the formulation and testing of
Agraburst to date. Mr. Fewer has acted as the President of Joseph Fewer Acres
Inc., a 25 acre hobby farm and supplier of agricultural products in North
America since November 2009. From May 2012 to January 2013, he also acted as
Chief Operating Officer of Premier Equipment Services Inc., a ten store John
Deere dealership business located in Ontario, Canada. From 2005 to 2012, Mr.
Fewer also acted as President and C.E.O. of AgraTurf Equipment Services Inc., a
five store John Deere dealership in southwestern Ontario that subsequently
merged with Elmira Farm Services Inc. to create Premier Equipment Services Inc.
ALAN R. HUGHES acts as our Chief Operating Officer and as a director. Mr. Hughes
has spent over 36 years with John Deere managing sales territories, as well as
being involved in product training, wholesale finance, and dealer development
improvement processes. Since 2009, he has acted as the principal of Clear
Processes, LLC, a consulting company that provides advice on business
consolidations, operational performance, and strategic business planning in the
agribusiness sector. Mr. Hughes graduated from Southern Illinois University with
a dual degree in agricultural economics and finance.
RON EVINOU has acted as our Chief Financial Officer since June 10, 2014. He has
previously acted as Chief Financial Officer in the area of mergers and
acquisitions for a John Deere dealer group and as a dealer member/advisor for
three years to biannual meetings with Deere Ltd in the United States. From 1990
to 2002, he was the Chief Executive Officer and Chief Financial Officer for
GeoLogistics, a freight forwarding company. Mr. Evinou is a Certified
Professional Accountant and a Certified Management Accountant in Canada, and
also holds a professional certification in supply chain logistics.
STEPHEN MOSELEY has been involved in the agribusiness industry since 1973. He is
the former owner and President of Moseley Farms, which merged with Smith Farms
in 2001 to become one of the leading farming operations in the United States
according to the National Farm Bureau Federation. Since 2009, he has also acted
as the principal of Richland EnviroSolutions LLC, a sustainable farming product
and practices firm.
13
MANFRED G. VON NOSTITZ has held the position as President of the Asia Pacific
Corporate Council based in Kuala Lumpur since 2005. In this role, he regularly
advises Western companies on business opportunities in the Asia Pacific region.
He has also acted as the Vice-President of Profound Automotive in Southeast Asia
and as principal advisor to Southern Bank Group. With over three decades in the
Canadian Foreign Service, he held the posts of Director General for South and
Southeast Asia, the U.N. and Security & Intelligence, and served as High
Commissioner to Malaysia and Brunei and as Ambassador to Pakistan/Afghanistan,
Thailand, Laos and Myanmar. Mr. von Nostitz holds Bachelor of Arts degrees in
International Economic Relations (University of Grenoble, Stockholm), Arts &
Science, as well as a Master of Arts in Political Science from the University of
Toronto.
TERM OF OFFICE
Our directors are appointed for a one-year term to hold office until the next
annual general meeting of our shareholders or until removed from office in
accordance with our bylaws. Our officers are appointed by the board of directors
and will hold office until removed by the board.
BOARD COMPOSITION
Our Bylaws provide that the Board of Directors shall consist of at least one
member, and that our shareholders shall determine the number of directors from
time to time. Each director serves for a term that expires until the next annual
meeting of shareholders and until her successor shall have been elected and
qualified, or until her earlier resignation, removal from office, or death.
COMMITTEES OF THE BOARD OF DIRECTORS
We do not presently have a separately constituted audit committee, compensation
committee, nominating committee, executive committee or any other committees of
our Board of Directors. Nor do we have an audit committee "financial expert." As
such, our entire Board of Directors acts as our audit committee and handles
matters related to compensation and nominations of directors.
POTENTIAL CONFLICTS OF INTEREST
Since we do not have an audit or compensation committee comprised of independent
directors, the functions that would have been performed by such committees are
performed by our sole director, who is also our sole executive officer. Thus,
there is an inherent conflict of interest.
DIRECTOR INDEPENDENCE
We are not subject to listing requirements of any national securities exchange
or national securities association and, as a result, we are not at this time
required to have our board comprised of a majority of "independent directors."
Our determination of independence of directors is made using the definition of
"independent director" contained in Rule 4200(a)(15) of the Marketplace Rules of
the NASDAQ Stock Market ("NASDAQ"), even though such definitions do not
currently apply to us because we are not listed on NASDAQ. We have determined
that our sole director does not currently meet the definition of "independent"
as within the meaning of such rules as a result of her current position as our
executive officer.
SIGNIFICANT EMPLOYEES
We have no significant employees other than our officers described above.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
No director, person nominated to become a director, executive officer, promoter
or control person of our company has, during the last ten years: (i) been
convicted in or is currently subject to a pending a criminal proceeding
(excluding traffic violations and other minor offenses); (ii) been a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
and as a result of such proceeding was or is subject to a judgment, decree or
final order enjoining future violations of, or prohibiting or mandating
activities subject to any federal or state securities or banking or commodities
laws including, without limitation, in any way limiting involvement in any
business activity, or finding any violation with respect to such law, nor (iii)
any bankruptcy petition been filed by or against the business of which such
person was an executive officer or a general partner, whether at the time of the
bankruptcy or for the two years prior thereto.
14
STOCKHOLDER COMMUNICATIONS WITH THE BOARD
We have not implemented a formal policy or procedure by which our stockholders
can communicate directly with our Board of Directors. Nevertheless, every effort
will be made to ensure that the views of stockholders are heard by the Board of
Directors, and that appropriate responses are provided to stockholders in a
timely manner. During the upcoming year, our Board will continue to monitor
whether it would be appropriate to adopt such a process.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
During the past five years, none of our officers, directors, promoters or
control persons have had any of the following events occur:
* a bankruptcy petition filed by or against any business of which such
person was a general partner or executive officer either at the time
of the bankruptcy or within two years prior to that time;
* conviction in a criminal proceeding or being subject to a pending
criminal proceeding, excluding traffic violations and other minor
offenses;
* being subject to any order, judgment or decree, not substantially
reversed, suspended or vacated, of any court of competent
jurisdiction, permanently enjoining, barring, suspending or otherwise
limiting her involvement in any type of business, securities or
banking business; and/or
* being found by a court of competent jurisdiction, in a civil action,
the SEC or the Commodity Futures Trading Commission to have violated a
federal or state securities or commodities law, and the judgment has
not been reversed, suspended or vacated.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires our executive
officers and directors and persons who own more than 10% of our common stock to
file with the SEC initial statements of beneficial ownership, reports of changes
in ownership and annual reports concerning their ownership of our common stock
and other equity securities, on Forms 3, 4 and 5 respectively. Executive
officers, directors and greater than 10% shareholders are required by the SEC
regulations to furnish us with copies of all Section 16(a) reports that they
file.
AUDIT COMMITTEE AND AUDIT COMMITTEE FINANCIAL EXPERT DISCLOSURE
The Company's Board of Directors does not have a separately designated audit
committee or an "audit committee financial expert." Audit committee functions
are performed by our Board of Directors. None of our directors is deemed
independent. All directors also hold positions as our officers. Our audit
committee is responsible for: (1) selection and oversight of our independent
accountant; (2) establishing procedures for the receipt, retention and treatment
of complaints regarding accounting, internal controls, and auditing matters; (3)
establishing procedures for the confidential, anonymous submission by our
employees of concerns regarding accounting and auditing matters; (4) engaging
outside advisors; and, (5) funding for the outside auditory and any outside
advisors engagement by the audit committee.
The Board of Directors does not have an audit committee financial expert at this
time due to the fact that the Company has only limited operations and no
revenues. We believe the cost related to retaining a financial expert at this
time is prohibitive. Further, because of our limited operations, we believe the
services of a financial expert are not warranted.
ITEM 11. EXECUTIVE COMPENSATION
GENERAL
Since our incorporation on May 19, 2010, we have not compensated and have no
arrangements to compensate our sole officer and director Ms. Fernandes for her
services to us as an officer.
The following table sets forth the compensation paid by us during the three most
recent fiscal years to our principal executive officer, as well as the two most
highly compensated executive officers other than our principal executive
officer. This information includes the dollar value of base salaries, bonus
awards and number of stock options granted, and certain other compensation, if
any. The compensation discussed addresses all compensation awarded to, earned
by, or paid to our named executive officers.
15
Change in
Pension
Value and
Non-Equity Nonqualified
Name and Incentive Deferred
Principal Stock Option Plan Compensation All Other
Position Year Salary($) Bonus($) Awards($) Awards($) Compensation($) Earnings($) Compensation($) Totals($)
-------- ---- --------- -------- --------- --------- --------------- ----------- --------------- ---------
Joseph Fewer 2014 Nil Nil Nil Nil Nil Nil Nil Nil
Chief Executive
Officer
Stephen Moseley 2014 Nil Nil Nil Nil Nil Nil $15,000 $15,000
VP Sales and
Manufacturing
Alan R. Hughes 2014 Nil Nil Nil Nil Nil Nil $ 7,500 $ 7,500
Chief Operating
Officer
Maria Fernandes 2014 Nil Nil Nil Nil Nil Nil Nil Nil
Former C.E.O. 2013 Nil Nil Nil Nil Nil Nil Nil Nil
2012 Nil Nil Nil Nil Nil Nil Nil Nil
OUTSTANDING EQUITY AWARDS AT 2014 FISCAL YEAR-END
We do not currently have a stock option plan nor any long-term incentive plans
that provide compensation intended to serve as an incentive for performance. No
individual grants of stock options or other equity incentive awards have been
made to our sole executive officer and director since our inception;
accordingly, none were outstanding at May 31, 2014.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT, CHANGE-IN-CONTROL ARRANGEMENTS
We have also executed a consulting agreement with our President and C.E.O.,
Joseph Fewer, whereby he will provide his full-time management services to us in
consideration of payments of $7,000 per month. The consulting agreement will
become effective on the date that we raise a minimum of $500,000 for operations.
We have also executed a consulting agreement with our Vice-President of Sales
and Manufacturing, Stephen Moseley, whereby he will provide his full-time
management services to us in consideration of payments of $7,000 per month. The
consulting agreement will become effective on the date that we raise a minimum
of $500,000 for operations.
There are no compensation plans or arrangements, including payments to be made
by us, with respect to our directors or officers that would result from the
resignation, retirement or any other termination of such person from us. There
are no arrangements with our director or officers that would be triggered as a
result of a change-in-control.
LONG-TERM INCENTIVE PLANS AND AWARDS
We do not have any long-term incentive plans that provide compensation intended
to serve as incentive for performance. No individual grants or agreements
regarding future payouts under non-stock price-based plans have been made to any
executive officer or any director or any employee or consultant since our
inception; accordingly, no future payouts under non-stock price-based plans or
agreements have been granted or entered into or exercised by any of the officers
or directors or employees or consultants since we were founded.
COMPENSATION OF DIRECTORS
Our two directors are not compensated for their services as directors. The board
has not implemented a plan to award options to any directors. There are no
contractual arrangements with any member of the board of directors. We have no
director's service contracts.
16
INDEBTEDNESS OF DIRECTORS, SENIOR OFFICERS, EXECUTIVE OFFICERS AND OTHER
MANAGEMENT
Our director and executive officer or any associate or affiliate of our company
during the last two fiscal years, is not or has been indebted to our company by
way of guarantee, support agreement, letter of credit or other similar agreement
or understanding currently outstanding.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The following table sets forth information regarding the beneficial ownership of
our common stock, as of the date of this report, for our sole officer and
director. There is no other person or group of affiliated persons, known by us
to beneficially own more than 5% of our common stock. The shareholder listed
below has direct ownership of her shares and possesses sole voting and
dispositive power with respect to the shares. We do not have any outstanding
options, warrants or other securities exercisable for or convertible into shares
of our common stock.
Amount of
Title of Name and address beneficial Percent
Class of beneficial owner ownership of class
----- ------------------- --------- --------
Common Joseph Fewer 24,000,000 (1) 29.5%
Stock Aylmer, Ontario
Common Maria Fernandes 11,000,000 13.5%
Stock Benaulim, Goa, India
Common Stephen Moseley 5,000,000 6.1%
Stock Paris, Tennessee
Common Alan R. Hughes 250,000 0.3%
Stock The Villages, Florida
Common Ron Evinou 250,000 0.3%
Stock Brantford, Ontario
Common Manfred G. von Nostitz 0 0.0%
Stock Kuala Lumpur, Malaysia
Common All Officers and Directors 29,500,000 36.2%
Stock as a group that consists
of five people
----------
1. includes 2,500,000 registered in the name of Joseph Fewer and his wife,
Denise Fewer
The percent of class is based on 81,490,000 shares of common stock issued and
outstanding as of the date of this current report.
There are no arrangements that may result in our change in control of the
company.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
On September 9, 2013, we entered into an asset purchase agreement with Joseph
Fewer, our president and C.E.O., whereby we acquired from him the intellectual
property comprising Agraburst to us, including the technology described in in
the United States provisional patent application number 61/897,584 -
"Composition and Method for Enhancing Plant Growth", as well as all related
assets necessary for operating a plant growth enhancement product manufacture
and sales business as a going concern. In connection with the acquisition, we
issued to Mr. Fewer 12,500,000 post forward-split common shares in our capital.
We have also executed a consulting agreement with Mr. Fewer whereby he will
provide his full-time management services to us in consideration of payments of
$7,000 per month. The consulting agreement will become effective on the date
that we raise a minimum of $500,000 for operations.
17
We have also entered into an easement agreement with Joseph Fewer and Denise
Fewer, Mr. Fewer's wife, whereby they have agreed to grant to us the right to
use a portion of their farm located in Alymer, Ontario for the purposes of using
it as a demonstration farm in order to evaluate and exhibit the effects of
Agraburst. In consideration of the easement, we have issued to the Fewers an
aggregate of 2,500,000 post-split shares of our common stock. The initial term
of the easement is three years.
We also entered into an agreement with our Vice-President of Sales and
Manufacturing, Stephen Moseley, on September 9, 2013 whereby we agreed to
acquire certain equipment used in conjunction with the production, sales, and
marketing of Agraburst. In consideration of Mr. Moseley transferring title of
these assets to us, we have issued 5,000,000 post-split shares of our common
stock to him. We have also executed a consulting agreement with Mr. Moseley
whereby he will receive $5,000 per month in consideration of him providing his
full-time services to us. As with Mr. Fewer's consulting agreement, Mr.
Moseley's agreement will become effective on the date that we raise a minimum of
$500,000 for operations. The agreement recognizes that Mr. Moseley has been
involved in the sale of surfactants prior to the date of the agreement and that
he shall maintain the right to sell Agraburst to 53 existing clients and profit
exclusively from sales to them.
On March 1, 2014, we entered into a Consulting Agreement with our C.O.O., Alan
R. Hughes, whereby the Company agreed to pay the COO $2,500 per month. During
the year ended May 31, 2014, the Company recorded $7,500 of consulting fees for
services that Mr. Hughes provided. As at May 31, 2014, the Company owes Mr.
Hughes $7,500 (2013 - $nil), which is unsecured, non-interest bearing and due on
demand.
During the year ended May 31, 2014, Stephen Moseley, the Vice President of Sales
and Manufacturing, paid for expenses on behalf of the Company and collected
revenue on sales on behalf of the Company. As at May 31, 2014, the Company owes
Mr. Moseley $12,605 (2013 - $nil), which is unsecured, non-interest bearing and
due on demand.
As at May 31, 2014, the Company owes Mr. Fewer $15,998 (2013 - $nil) for general
and administration expenses and travel expenses paid on behalf of the Company.
The amount is unsecured, non-interest bearing and due on demand.
Otherwise, no director, executive officer, shareholder holding at least 5% of
shares of our common stock, or any family member thereof, had any material
interest, direct or indirect, in any transaction, or proposed transaction in the
past two most recently completed fiscal years.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The aggregate fees billed for the most recently completed fiscal year ended May
31, 2014 and for fiscal year ended May 31, 2013 for professional services
rendered by the principal accountant, PLS CPA, a Professional Corporation,
("PLS) for the audit of our annual financial statements and review of the
financial statements included in our quarterly reports on Form 10-Q and services
that are normally provided by the accountant in connection with statutory and
regulatory filings or engagements for these fiscal periods were as follows:
Year Ended
May 31 2014 May 31, 2013
----------- ------------
Audit Fees $11,000 $10,500
Audit Related Fees Nil Nil
Tax Fees Nil Nil
All Other Fees Nil Nil
------- -------
Total $11,000 $10,500
======= =======
The other fees consist of PLS's review of our reviews of our interim unaudited
financial statements.
We do not use PLS for financial information system design and implementation.
These services, which include designing or implementing a system that aggregates
source data underlying the financial statements or generates information that is
significant to our financial statements, are provided internally or by other
service providers. We do not engage PLS to provide compliance outsourcing
services.
18
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a) Financial Statements
Financial statements for our Company are presented after the signature of
this document
(b) Exhibits
Exhibit No. Description
----------- -----------
(3) ARTICLES OF INCORPORATION AND BY-LAWS
3.1 Articles of Incorporation (1)
3.2 Bylaws (1)
(31) SECTION 302 CERTIFICATION
31.1 Certification Statement of the Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 *
31.2 Certification Statement of the Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 *
(32) SECTION 906 CERTIFICATION
32.1 Certification of Chief Executive Officer under Section 1350 as
Adopted Pursuant Section 906 of the Sarbanes-Oxley Act. *
32.2 Certification of Chief Financial Officer under Section 1350 as
Adopted Pursuant Section 906 of the Sarbanes-Oxley Act. *
101 Interactive data files pursuant to Rule 405 of Regulation S-T. *
----------
* Filed herewith.
(1) Previously filed with the Securities and Exchange Commission.
19
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
GROGENESIS, INC.
Date: October 7, 2014
By: /s/ Joseph Fewer
----------------------------------------
Joseph Fewer
Principal Executive Officer
By: /s/ Ron Evinou
----------------------------------------
Ron Evinou
Principal Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
GROGENESIS, INC.
Date: October 7, 2014
By: /s/ Joseph Fewer
----------------------------------------
Joseph Fewer
Principal Executive Officer
By: /s/ Ron Evinou
----------------------------------------
Ron Evinou
Principal Financial Officer
20
GroGenesis, Inc.
May 31, 2014
Index
-----
Report of Independent Registered Public Accounting Firm.................... F-1
Balance Sheets............................................................. F-2
Statements of Operations................................................... F-3
Statements of Stockholders' Deficit........................................ F-4
Statements of Cash Flows................................................... F-5
Notes to the Financial Statements.......................................... F-6
PLS CPA, A PROFESSIONAL CORPORATION
* 4725 MERCURY ST. #210 * SAN DIEGO * CALIFORNIA 92111 *
* TELEPHONE (858) 722-5953 * FAX (858) 761-0341 * FAX (858) 433-2979
* E-MAIL changgpark@gmail.com *
--------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
GroGenesis, Inc. (formerly Lisboa Leisure, Inc.)
We have audited the accompanying balance sheets of GroGenesis, Inc. (formerly
Lisboa Leisure, Inc.) (A Development Stage "Company") as of May 31, 2014 and
2013 and the related statements of operations, changes in shareholders' equity
and cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of GroGenesis, Inc. (formerly
Lisboa Leisure, Inc.) as of May 31, 2014 and 2013, and the result of its
operations and its cash flows for the years then ended in conformity with U.S.
generally accepted accounting principles.
The financial statements have been prepared assuming that the Company will
continue as a going concern. As discussed in Note 1 to the financial statements,
the Company's losses from operations raise substantial doubt about its ability
to continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ PLS CPA
-----------------------------------
PLS CPA, A Professional Corp.
October 7, 2014
San Diego, CA. 92111
Registered with the Public Company Accounting Oversight Board
F-1
GroGenesis, Inc.
Balance Sheets
(Expressed in US Dollars)
May 31, 2014 May 31, 2013
------------ ------------
ASSETS
Current Assets
Cash $ 12,188 $ 9,473
Prepaid expense 18,900 --
Amounts receivable 19,000 --
Inventory 5,407 --
----------- -----------
Total Current Assets 55,495 9,473
Property, plant and equipment 159,259 --
Intangible assets 241,260 --
----------- -----------
Total Assets $ 456,014 $ 9,473
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts payable and accrued liabilities $ 115,005 $ 2,300
Related party payables 36,103 --
Advance 21,750 23,900
----------- -----------
Total Liabilities 172,858 26,200
----------- -----------
Stockholders' Deficit
Common stock, 200,000,000 shares authorized, $0.001 par value;
81,430,000 shares and 135,000,000 shares issued and outstanding
as of May 31, 2014 and 2013, respectively 81,430 135,000
Common stock subscribed 21,000 --
Additional paid-in capital (deficiency) 1,605,600 (84,000)
Deficit (1,424,874) (67,727)
----------- -----------
Total Stockholders' Equity (Deficit) 283,156 (16,727)
----------- -----------
Total Liabilities and Stockholders' Equity (Deficit) $ 456,014 $ 9,473
=========== ===========
(The accompanying notes are an integral part of these financial statements)
F-2
GroGenesis, Inc.
Statements of Operations
(Expressed in US Dollars)
For the For the
Year Ended Year Ended
May 31, 2014 May 31, 2013
------------ ------------
Revenue $ 60,475 $ --
Cost of Sales (10,253) --
------------ ------------
Gross Profit 50,222 --
------------ ------------
Expenses
Commissions 3,550 --
Consulting fees 69,000 --
Depreciation 10,270 --
General and administrative 138,094 34,877
Impairment loss on intangible assets 1,107,101 --
Transfer agent and filing fees 7,134 --
Professional fees 72,220 8,014
------------ ------------
Total Expenses (1,407,369) (42,891)
------------ ------------
Net Loss $ (1,357,147) $ (42,891)
============ ============
Net Loss Per Share - Basic and Diluted $ (0.01) $ (0.00)
============ ============
Weighted Average Shares Outstanding 118,468,000 124,918,000
============ ============
(The accompanying notes are an integral part of these financial statements)
F-3
GroGenesis, Inc.
Statement of Stockholder's Deficit
(Expressed in US Dollars)
Common Stock Additional Common
---------------------- Paid-in Stock
Number Par Value Capital Subscribed Deficit Total
------ --------- ------- ---------- ------- -----
Balance, May 31, 2012 95,000,000 $ 95,000 $ (76,000) $ -- $ (24,836) $ (5,836)
Common stock issued for cash 40,000,000 40,000 (8,000) -- -- 32,000
Net loss -- -- -- -- (42,891) (42,891)
----------- -------- ----------- -------- ----------- -----------
Balance, May 31, 2013 135,000,000 135,000 (84,000) -- (67,727) (16,727)
Common stock issued for cash 430,000 430 150,070 -- -- 150,500
Finders fees -- -- (6,300) -- -- (6,300)
Common stock issued pursuant to
asset purchase agreements (Note 9) 17,500,000 17,500 1,449,130 -- -- 1,466,630
Common stock issued pursuant to an
easement agreement (Note 9) 2,500,000 2,500 22,700 -- -- 25,200
Return to treasury (74,000,000) (74,000) 74,000 -- -- --
Share subscriptions -- -- -- 21,000 -- 21,000
Net loss -- -- -- -- (1,357,147) (1,357,147)
----------- -------- ----------- -------- ----------- -----------
Balance, May 31, 2014 81,430,000 $ 81,430 $ 1,605,600 $ 21,000 $(1,424,874) $ 283,156
=========== ======== =========== ======== =========== ===========
(The accompanying notes are an integral part of these financial statements)
F-4
GroGenesis, Inc.
Statements of Cash Flows
(Expressed in US Dollars)
For the For the
Year Ended Year Ended
May 31, 2014 May 31, 2013
------------ ------------
Cash Flows Used in Operating Activities
Net loss $(1,357,147) $ (42,891)
Adjustments to reconcile to net cash used
in operating activities:
Depreciation 10,270 --
Impairment of intangible assets 1,107,101 --
Changes in operating assets and liabilities:
Prepaid expenses 6,300 --
Amounts receivable (19,000) --
Inventory (5,407) --
Accounts payable and accrued liabilities 106,445 (4,486)
Related party payables 36,103 --
----------- -----------
Net Cash Used In Operating Activities (115,335) (47,377)
----------- -----------
Cash Flows Used in Investing Activities
Purchase of property, plant and equipment (45,000) --
----------- -----------
Net Cash Used in Investing Activities (45,000) --
----------- -----------
Cash Flows from Financing Activities
Proceeds from common stock issued for cash 150,500 32,000
Proceeds from share subscriptions 21,000 --
Finders fees paid (6,300) --
Proceeds from advances from related parties -- 23,900
Repayment of advances to related parties (2,150) --
----------- -----------
Net Cash Provided by Financing Activities 163,050 55,900
----------- -----------
Increase in Cash 2,715 8,523
Cash - Beginning of Year 9,473 950
----------- -----------
Cash - End of Year $ 12,188 $ 9,473
=========== ===========
Supplementary Information:
Interest paid $ -- $ --
=========== ===========
Income taxes paid $ -- $ --
=========== ===========
Non-cash Investing and Financing Activities:
Common stock issued for acquisition of assets 1,466,630 --
Common stock issued for prepaid expenses 25,200 --
(The accompanying notes are an integral part of these financial statements)
F-5
GroGenesis, Inc.
Notes to the Financial Statements
May 31, 2014
Note 1: Nature and Continuance of Operations
GroGenesis, Inc. (the "Company") was incorporated in the state of Nevada on May
19, 2010. The Company was formed to become an operator of a beach shack in the
State of Goa, India.
On September 9, 2013, the Company entered into two asset purchase agreements
whereby the Company agreed to purchase certain assets necessary for the
operation of a plant growth surfactant manufacture and sales business. The
agreements closed on February 7, 2014. The assets acquired are used in
conjunction with the production, marketing, and sale of the crop surfactant to
be sold under the name "GroGenesis". Effective November 1, 2013, the Company
changed its name to GroGenesis, Inc. The Company's former president, Maria
Fernandes, resigned on closing. In addition, the Company has entered into an
easement agreement whereby it was granted the right to use a portion of a farm
located in Aylmer, Ontario, Canada for the purposes of using it as a
demonstration farm in order to evaluate and exhibit the effects of GroGenesis.
These financial statements have been prepared on a going concern basis which
assumes the Company will be able to realize its assets and discharge its
liabilities in the normal course of business for the foreseeable future. The
Company has incurred a loss since inception resulting in an accumulated deficit
of $1,424,874 as at May 31, 2014 and further losses are anticipated in the
development of its business raising substantial doubt about the Company's
ability to continue as a going concern. The ability to continue as a going
concern is dependent upon the Company generating profitable operations in the
future and/or obtaining the necessary financing to meet its obligations and
repay its liabilities arising from normal business operations when they come
due. Management intends to finance operating costs over the next twelve months
with existing cash on hand and loans from directors and/or the private placement
of common stock. There is however no assurance that the Company will be able to
raise any additional capital through any type of offering on terms acceptable to
the Company.
Note 2: Summary of Significant Accounting Policies
a) Basis of Accounting
The Company's financial statements are prepared in accordance with
accounting principles generally accepted in the United States. The Company
has a May 31 year-end.
b) Use of Estimates
The preparation of financial statements in accordance with United States
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenue and expenses in the reporting period. The Company
regularly evaluates estimates and assumptions related to useful life and
recoverability of long-lived assets, valuation of shares for services and
assets, deferred income tax asset valuations and loss contingencies. The
Company bases its estimates and assumptions on current facts, historical
experience and various other factors that it believes to be reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities and the
accrual of costs and expenses that are not readily apparent from other
sources. The actual results experienced by the Company may differ
materially and adversely from the Company's estimates. To the extent there
are material differences between the estimates and the actual results,
future results of operations will be affected.
c) Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid instruments with maturity of three months or less at the time
of issuance to be cash equivalents.
d) Inventory
Inventory is stated at the lower of cost or market. At May 31, 2014,
inventory consists of raw materials.
F-6
GroGenesis, Inc.
Notes to the Financial Statements
May 31, 2014
e) Basic and Diluted Net Income (Loss) Per Share
The Company computes net income (loss) per share in accordance with ASC
260, EARNINGS PER SHARE which requires presentation of both basic and
diluted earnings per share (EPS) on the face of the income statement. Basic
EPS is computed by dividing net income (loss) available to common
shareholders (numerator) by the weighted average number of shares
outstanding (denominator) during the period. Diluted EPS gives effect to
all dilutive potential common shares outstanding during the period
including convertible debt, stock options, and warrants, using the treasury
stock method, and convertible securities, using the if-converted method. In
computing diluted EPS, the average stock price for the period is used in
determining the number of shares assumed to be purchased from the exercise
of stock options or warrants. Diluted EPS excludes all dilutive potential
shares if their effect is anti-dilutive.
f) Financial Instruments
The Company's financial instruments consist of cash and cash equivalents,
amounts receivable, accounts payable and accrued liabilities, related party
payables, and advances. The Company believes that the recorded values of
all of the other financial instruments approximate their current fair
values because of their nature and respective maturity dates or durations.
g) Property and Equipment
Property and equipment consists of a trade show booth and a manufacturing
facility and is recorded at cost, less accumulated depreciation. Property
and equipment is amortized on a straight-line basis over its estimated
life.
Trade show booth 2 years
Manufacturing facility 10 years
h) Intangible Assets
Intangible assets consists of intellectual property and all costs incurred
to acquire a trademark and a patent application. Intellectual properties
have been capitalized in accordance with ASC Topic 350 "Intangibles -
Goodwill and Other."
i) Revenue Recognition
The Company recognizes revenue when product is sold at a fixed or
determinable price, persuasive evidence of an arrangement exists, delivery
has occurred and title has transferred, and collectability is reasonably
assured.
j) Accounts Receivable
Accounts receivable are generally reported net of an allowance for
uncollectible accounts. The allowance for uncollectible accounts is
determined based on past collection experience and an analysis of
outstanding balances. As of May 31, 2014, the Company has not recorded an
allowance as all receivables are deemed collectable at this time.
k) Long-lived Assets
In accordance with ASC 360, PROPERTY, PLANT AND EQUIPMENT, the carrying
value of intangible assets and other long-lived assets is reviewed on a
regular basis for the existence of facts or circumstances that may suggest
impairment. The Company recognizes impairment when the sum of the expected
undiscounted future cash flows is less than the carrying amount of the
asset. Impairment losses, if any, are measured as the excess of the
carrying amount of the asset over its estimated fair value. During the year
ended May 31, 2014, the Company recognized an impairment charge of
$1,107,101 (2013 - $0) for intangible assets.
l) Comprehensive Loss
ASC 220, COMPREHENSIVE INCOME establishes standards for the reporting and
display of comprehensive loss and its components in the financial
statements. As at May 31, 2014 and 2013, the Company has no items that
represent comprehensive loss and, therefore, has not included a schedule of
comprehensive loss in the financial statements.
F-7
GroGenesis, Inc.
Notes to the Financial Statements
May 31, 2014
m) Income Taxes
Potential benefits of income tax losses are not recognized in the accounts
until realization is more likely than not. The Company has adopted ASC 740,
INCOME TAXES as of its inception. Pursuant to ASC 740, the Company is
required to compute tax asset benefits for net operating losses carried
forward. The potential benefits of net operating losses have not been
recognized in these financial statements because the Company cannot be
assured it is more likely than not it will utilize the net operating losses
carried forward in future years.
n) Fair value
The Company measures and discloses the estimated fair value of financial
assets and liabilities using the fair value hierarchy prescribed by US
generally accepted accounting principles. The fair value hierarchy has
three levels, which are based on reliable available inputs of observable
data. The hierarchy requires the use of observable market data when
available. The three-level hierarchy is defined as follows:
Level 1 - quoted prices for identical instruments in active markets.
Level 2 - quoted prices for similar instruments in active markets; quoted
prices for identical or similar instruments in markets that are not active;
and model derived valuations in which significant inputs and significant
value drivers are observable in active markets; and.
Level 3 - fair value measurements derived from valuation techniques in
which one or more significant inputs or significant value drivers are
unobservable.
Financial instruments consist principally of cash and cash equivalents,
amounts receivable, accounts payable and accrued liabilities, related party
payables and advances. The recorded values of all financial instruments
approximate their current fair values because of their nature and
respective relatively short maturity dates or durations.
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial statement.
These estimates are subjective in nature and involve uncertainties and
matters of significant judgment and therefore cannot be determined with
precision. Changes in assumptions could significantly affect the estimates.
o) Recent Accounting Pronouncements
The Company has limited operations and is considered to be in the
development stage. During the year ended May 31, 2014, the Company has
elected to early adopt Accounting Standards Update No. 2014-10, DEVELOPMENT
STAGE ENTITIES (TOPIC 915): ELIMINATION OF CERTAIN FINANCIAL REPORTING
REQUIREMENTS. The adoption of this Update allows the Company to remove the
inception-to-date information and all references to development stage.
The Company has implemented all new accounting pronouncements that are in
effect and that may impact its financial statements and does not believe
that there are any other new accounting pronouncements that have been
issued that might have a material impact on its financial position or
results of operations.
Note 3: Property and Equipment
Trade show Manufacturing
booth facility
-------- --------
$ $
Cost:
Balance, May 31, 2013 -- --
Additions 45,000 124,529
-------- --------
Balance, May 31, 2014 45,000 124,529
======== ========
Accumulated amortization:
Balance, May 31, 2013 -- --
Additions 6,611 3,659
-------- --------
Balance, May 31, 2014 6,611 3,659
======== ========
Carrying amounts:
Balance, May 31, 2013 -- --
-------- --------
Balance, May 31, 2014 38,389 120,870
======== ========
F-8
GroGenesis, Inc.
Notes to the Financial Statements
May 31, 2014
Note 4: Intangible Assets
On September 30, 2014, the Company entered into an asset purchase agreement
(Note 9) whereby the Company issued 12,500,000 shares of restricted common stock
in exchange for intellectual property and related assets necessary for operating
a Plant Surfactant manufacture and sale business. The fair value of the
12,500,000 shares of common stock of $1,342,101 has been recorded as intangible
assets. On May 31, 2014, the Company performed an impairment test on the
intellectual property. The Company recorded impairment of $1,107,101, leaving a
carrying balance of $235,000 as at May 31, 2014.
The following represents changes in gross carrying amount of intangibles as at
May 31, 2014 and 2013:
Intellectual
Trademark Patent property
---------- ---------- ----------
$ $ $
Cost:
Balance, May 31, 2013 -- -- --
Additions 1,131 5,130 1,342,101
---------- ---------- ----------
Balance, May 31, 2014 1,131 5,130 1,342,101
========== ========== ==========
Accumulated amortization and impairment:
Balance, May 31, 2013 -- -- --
Additions -- -- --
Impairment -- -- 1,107,101
---------- ---------- ----------
Balance, May 31, 2014 -- -- 1,107,101
========== ========== ==========
Carrying amounts:
Balance, May 31, 2013 -- -- --
---------- ---------- ----------
Balance, May 31, 2014 1,131 5,130 235,000
========== ========== ==========
Note 5: Advance
As at May 31, 2014 the Company owed $21,750 to an associate of the Company's
management. The advance is unsecured, payable on demand and non-interest
bearing.
Note 6: Related Parties
On March 1, 2014, the Company entered into a Consulting Agreement with the
Company's Chief Operations Officer (the "COO") whereby the Company agreed to pay
the COO $2,500 per month. During the year ended May 31, 2014, the Company
recorded $7,500 of consulting fees for services provided by the COO. As at May
31, 2014, the Company owes the COO of the Company $7,500 (2013 - $nil), which is
unsecured, non-interest bearing and due on demand.
During the year ended May 31, 2014, the Vice President of Sales and
Manufacturing ("VPSM") paid for expenses on behalf of the Company and collected
revenue on sales on behalf of the Company. As at May 31, 2014, the Company owes
the VPSM of the Company $12,605 (2013 - $nil), which is unsecured, non-interest
bearing and due on demand.
As at May 31, 2014, the Company owes the President of the Company $15,998 (2013
- $nil) for general and administration expenses and travel expenses paid on
behalf of the Company. The amount is unsecured, non-interest bearing and due on
demand.
The Company's manufacturing facility was leased under a 1-year rental agreement
at the rate of $800 per month, which lease term expired on May 22, 2014. The
lease continues on a month-to-month basis thereafter until terminated by either
party on written notice.
F-9
GroGenesis, Inc.
Notes to the Financial Statements
May 31, 2014
Note 7: Capital Stock
Effective November 1, 2013, the number of common shares authorized that may be
issued by the Company increased from 75,000,000 common shares to 200,000,000
common shares with a par value of $0.001 per share.
The Company became a reporting company on June 27, 2012 and on August 21, 2012,
the Company completed the sale of 40,000,000 common shares at the price of
$0.0008 per share for total proceeds of $32,000.
Effective November 1, 2013, the Company completed a 25:1 forward split of the
Company's issued and outstanding common stock. Every one share of common stock
issued and outstanding prior to the split was exchanged for 25 post-split shares
of common stock. All share and per share amounts have been restated
retroactively.
During the year ended May 31, 2014, the Company issued 430,000 shares of common
stock at $0.35 per share for total gross proceeds of $150,500. The Company paid
finders fees of $6,300.
During the year ended May 31, 2014, the Company issued 17,500,000 shares of
common stock at a fair value of $1,466,630 pursuant to the two asset purchase
agreements signed on September 9, 2013.
During the year ended May 31, 2014, the Company issued 2,500,000 shares of
common stock at a fair value of $25,200 pursuant to the easement agreement
signed on September 9, 2013.
During the year ended May 31, 2014, the former President of the Company returned
74,000,000 shares of common stock to treasury.
Note 8: Commitments
On September 9, 2013, the Company entered into an Asset Purchase Agreement
whereby the Company agreed to acquire intellectual property as well as all
related assets necessary for operating a plant growth enhancement product
("Plant Surfactant") manufacture and sale business. The agreement was closed on
February 7, 2014. In consideration, the Company issued 12,500,000 shares of
restricted common stock. In addition, the Company also agreed to incorporate a
wholly-owned subsidiary that will hold these assets and conduct operations, and
execute a consulting agreement with the President of the Company whereby he will
receive $7,000 per month. The consulting agreement will become effective on the
date that the Company raises a minimum of $500,000 to fund operations. As at May
31, 2014, the company has not incorporated a wholly-owned subsidiary.
On September 9, 2013, the Company entered into an Asset Purchase Agreement
whereby the Company agreed to acquire certain equipment used in conjunction with
the production, marketing and sale of the Plant Surfactant. The agreement was
closed on February 7, 2014. In consideration, the Company issued 5,000,000
shares of restricted common stock. In addition, the Company also agreed to
execute a consulting agreement with the seller whereby he will receive $5,000
per month. The consulting agreement will become effective on the date that the
Company raises a minimum of $500,000 to fund operations.
On September 9, 2013, the Company entered into an Easement Agreement whereby the
Company agreed to acquire the exclusive right to 10 acres of farm property
located in Aylmer, Ontario, Canada, to operate as a demonstration farm in order
to evaluate and exhibit the effects of using the Plant Surfactant for an initial
term of 3 years. In consideration, the Company issued 2,500,000 shares of
restricted common stock.
On March 1, 2014, the Company entered into a Consulting Agreement with the
Company's Chief Operations Officer (the "COO") whereby the Company agreed to pay
the COO $2,500 per month.
On March 1, 2014, the Company entered into a Consulting Agreement whereby the
Company agreed to pay the consultant $2,500 per month effective January 1, 2014.
F-10
GroGenesis, Inc.
Notes to the Financial Statements
May 31, 2014
Note 9: Income Taxes
As of May 31, 2014, the Company had net operating loss carry forwards of
approximately $1,424,874 that may be available to reduce future years' taxable
income through 2032. Future tax benefits which may arise as a result of these
losses have not been recognized in these financial statements, as their
realization is determined not likely to occur and accordingly, the Company has
recorded a valuation allowance for the deferred tax asset relating to these tax
loss carry-forwards.
The components of the deferred tax asset, the statutory tax rate, the effective
tax rate and the elected amount of the valuation allowance are indicated below:
For the For the
Year Ended Year Ended
May 31, 2014 May 31, 2013
------------ ------------
Operating loss $1,357,147 $ 42,891
Statutory tax rate 34% 34%
Refundable federal income tax
attributable to current operations 461,430 14,583
Change in valuation allowance (461,430) (14,853)
---------- ----------
Net refundable amount $ -- $ --
========== ==========
The cumulative tax effect at the expected rate of 34% of significant items
comprising the net deferred tax amount is:
May 31, 2014 May 31, 2013
------------ ------------
Deferred tax asset attributed to:
Net operating loss $ 484,457 $ 23,027
Less, valuation allowance (484,457) (23,027)
---------- ----------
Net deferred tax assets $ -- $ --
========== ==========
The Company has provided a valuation allowance against its deferred tax assets
given that it is in the exploration stage and there is substantial uncertainty
as the Company's ability to realize future tax benefits through utilization of
operating loss carry forwards.
Note 10: Subsequent Event
On June 1, 2014, the Company signed a Consulting Agreement with the Company's
Chief Financial Officer (the "CFO") whereby the Company agreed to pay the CFO
$2,500 per month.
On June 30, 2014, the Company completed a private placement consisting of 60,000
shares of common stock at a price of $0.35 per share for total proceeds of
$21,000, which was received prior to May 31, 2014.
F-1
