UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: June 30, 2016
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from:
Commission File Number: 000-53548
GROW CONDOS,CAPITAL, INC.
(Exact name of registrant as specified in its charter)
Nevada | 86-0970023 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
2485 Village View Drive, Suite 180
Henderson, NV 89074
(Address of principal executive offices)
702-830-7919
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $0.001
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange 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 such filing requirements for the past 90 days. (1) Yes [X] No [ ] (2) Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website,Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.files). Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company:
Large accelerated filer | Accelerated | o | |
Non-accelerated filer | o | Smaller reporting company | |
Emerging growth company | o |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Yes [ ] No [ ]
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 last 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 second quarter.
The market value of the voting and non-voting common stock held by non-affiliates totaled $4,870,728$4,774,524 based upon a valuation of $1.40 per$0.063per share, that being the closing price on June 30, 2016,December 31, 2018 the last business day of the registrant'sRegistrant's most recently completed fourthsecond fiscal quarter.
Not applicable.
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date.
DOCUMENTS INCORPORATED BY REFERENCE
Specified portions of the registrant’s Definitive Information Statement, which will be filed with the Commission pursuant to Regulation 14C, are incorporated by reference into Part III of this report. Except with respect to information specifically incorporated by reference in this report, the Information Statement is not deemed to be filed as a part hereof.
TABLE OF CONTENTS
ITEM 1B. UNRESOLVED STAFF COMMENTS8
ITEM 4: MINE SAFETY DISCLOSURES8
ITEM 6: SELECTED FINANCIAL DATA11
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION11
ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK14
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA15
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE17
ITEM 9A: CONTROLS AND PROCEDURES17
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE18
ITEM 11: EXECUTIVE COMPENSATION18
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTORS INDEPENDENCE19
ITEM 14: PRINCIPAL ACCOUNTING FEES AND SERVICES19
ITEM 15: EXHIBITS AND FINANCIAL STATEMENT SCHEDULES20
FORWARD LOOKING STATEMENTS
In this Annual Report, references to "Grow Condos,Capital," the "Company," "we," "us," "our" and words of similar import) refer to Grow Condos,Capital, Inc., a Nevada corporation, the registrant and, when appropriate, its subsidiary.
Statements made in this Form 10-K which are not purely historical are forward-looking statements with respect to the goals, plan objectives, intentions, expectations, financial condition, results of operations, future performance and business of Grow Condos.Capital. Such forward-looking statements include those that are preceded by, followed by or that include the words "may", "would", "could", "should", "expects", "projects", "anticipates", "believes", "estimates", "plans", "intends", "targets" or similar expressions.
Forward-looking statements involve inherent risks and uncertainties, and important factors (many of which are beyond our control) that could cause actual results to differ materially from those set forth in the forward-looking statements, including the following, in addition to those contained in this Annual Report: general economic or industry conditions nationally and/or in the communities in which we conduct business; legislation or regulatory requirements, including environmental requirements; conditions of the securities markets; competition; our ability to raise capital; changes in accounting principles, policies or guidelines; financial or political instability; acts of war or terrorism; and other economic, competitive, governmental, regulatory and technical factors affecting our operations, products, services and prices.
Accordingly, results actually achieved may differ materially from expected results in these statements. Forward-looking statements speak only as of the date they are made. Grow CondosCapital does not undertake, and specifically disclaims, any obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of such statements.
Item 1. Description of Business
History
Grow Condos,Capital, Inc. (the "Company") was incorporated on October 22, 1999 as Calibrus, in the State of Nevada. From its inception, the Company was a call center that contracted out as a customer contact center for a variety of business clients throughout the United States. Over time our main business became a third partythird-party verification service. After making a sale on the telephone, a company would send the call to a Company operator to confirm the order. This process protected both the customer and the company selling services from telephone sales fraud.
While continuing to operate as a call center, in 2008 we expanded our business plan to include the development of a social networking site called JabberMonkey (Jabbermonkey.com) and the development of a location based social networking application for smart phones called Fanatic Fans.
In June 2014 we acquired WCS Enterprises, LLC ("WCS Enterprises") is, an Oregon limited liability company which was formed on September 9, 2013, and was acquired by us in June 2014 in exchange for shares of our common stock. The acquisition of WCS Enterprises resulted in a change of control of the Company and at, or shortly after the closing of such acquisition, the persons designated by WCS Enterprises became the officers and directors of the Company. As a result of our acquisition of WCS Enterprises in June 2014, we became engaged in the real estate purchaser, developer and managerbusiness of specific use industrial properties business.
tenants and reduce the risk of single tenant leases. In additionlarger 7,500 sq ft grow facility to our "Condo" turn-key growing facilities we intend to provide marijuana grow consulting servicesformer CEO and equipment and supplies as part of our turn-key offerings. We are aggressively out looking for our next property in the western area of the United States where medical cannabis has been legalized and where recreational cannabis has been or is in the process of legalization. On April 1, 2016 we closed escrow on our second project located in the Pioneer Business Park in Eugene, Oregon.Chairman. The Company iswas not directly involved in the growing, distribution or sale of cannabis.
We have secured real estateacquired a second development site in Eagle Point2016 located in Jackson County, Oregon representing our sole operating location. The building is 15,000 square feet the Pioneer Business Park near Eugene, OR, which we intended to develop, howeverthe Company faced hostility from the local county government regarding the intended operations of the site, and zoned to meet the requirementsCompany abandoned its plans for specific purpose industrial usethis site in late calendar 2017 and is divided into four 1,500 square feet condo style grow rooms which, is being leased to four tenantslisted the property. In September 2018, the site was sold, and one 7,500 square feet grow facility leased to one tenant.
Smoke on the Water, Inc. (“SOTW”), was incorporated on October 21, 2016, in the cannabis production arena.State of Nevada as a second wholly owned subsidiary. SOTW was designed to capitalize on the country's growing level of recreational marijuana acceptance. In March 2017, SOTW acquired the Lake Selmac Resort located at 2700 Lakeshore Drive, Selma, Oregon. The company has relationships with tenants, brokers and investors across the cannabis industry to leverage successful transactions for both lease-to-own optionLake Selmac resort offered recreational facilities including fishing, swimming, boating, RV parking, tent camping & cabin accommodation, as well as investors lookinga small convenience store for sundry supplies.
On June 22, 2018, the Board of Directors of the Company approved an amendment to purchase facilitiesour articles of incorporation to increase our authorized capital to 180,000,000 shares, consisting of 175,000,000 shares of common stock (“Common Stock”), par value $0.001, and 5,000,000 shares of preferred stock (“Preferred Stock”), par value $0.001 (the “Recapitalization”) and to change the name of the Company to “Grow Capital, Inc.” as we intended to expand our business focus into the financial technology (“FinTech”) sector. The Company filed articles of amendment with qualified tenants providing positive cash-flow backed by commercial property.
In connection with its name change, the Company adopted a business plan focused on shifting the Company’s strategy away from rental activities focused in cannabis businessesindustry and into the FinTech sector and related sectors. In connection with turnkey cultivationthis strategy, the Company hired a new Chief Executive Officer (“CEO”) and processing management services, including facility design, licensing support,Chief Financial Officer (“CFO”) and appointed a new chairman of the Company’s board of directors, all of whom have significant experience in the FinTech sector. The Company intends to acquire FinTech companies with a clear niche and strong leadership and use its experience and understanding of the FinTech sector and access to the public markets to help its acquisitions grow.
Keeping in line with our change of operational focus as set out above, on June26, 2019 the Company entered into a stock exchange agreement (the “Exchange Agreement”) with Bombshell Technologies, Inc. (“Bombshell”) and the operational management requiredshareholders of Bombshell (the “Bombshell Holders”). Pursuant to produce premium cannabisthe Exchange Agreement, which closed on July 23, 2019, the Company acquired 100% of the outstanding shares of Bombshell (the “Bombshell Shares”) in exchange for the Bombshell Holders receiving the right to receive 110,675,328 shares (the “Consideration Shares”) of unregistered shares of the Company’s Common Stock on a pro rata basis (the “Exchange”), 33,000,000 of which were issued to the Bombshell Holders (the “Closing Shares”) at the Closing on a pro rata basis. The remaining 77,675,328 Consideration Shares (the “Secondary Shares”) were issued on September 3, 2019 upon approval of the increase to the Company’s authorized common stock to 550,000,000 shares, consisting of 500,000,000 shares of Common Stock and 50,000,000 shares of Preferred Stock, effective August 29, 2019. The Bombshell Holders are also eligible to receive earn-out consideration of up to an additional 36,769,215 shares of Common Stock (the “Earn-out Shares”) earnable in tranches of 12,256,405 shares of Common Stock in each of the second, third and fourth years after the Closing, based on whether Bombshell is able to meet certain Earnings Before Interest and Taxes thresholds in each year. The Bombshell Holders include certain limited liability companies owned by (i) Jonathan Bonnette, the Company’s CEO (ii) Joel Bonnette, the Bombshell CEO and (iii) Terry Kennedy, a majority shareholder of the Company.
Bombshell was formed as Bombshell Technologies, LLC on November 5, 2018 and converted into a corporation on June 24, 2019. Bombshell is a full-service design and software development company focused on developing and selling software to financial services firms and advisors and is the first acquisition as part of our strategic shift into the FinTech sector and related productssectors.
On July 8, 2019, the Company entered into a non-binding letter of intent (the “LOI”) to acquire Encompass More Group, Inc. (“Encompass”), a Nevada corporation. In connection with the LOI, Encompass issued a promissory note
(the “Note”) to the Company pursuant to a loan agreement (the “Loan Agreement”), dated July 22, 2019, by and between Encompass and the Company, in exchange for a loan of $100,000 (the “Loan”). Pursuant to the Loan Agreement, the proceeds of the Loan will be used by Encompass for working capital and general corporate purposes. The Note has a twelve-month term, an efficient mannerinterest rate of 5.0%, and is payable in monthly installments of $2,000, with all remaining principal and interest due on the maturity date, unless paid earlier by Encompass. The Board of Directors have subsequently determined not to allowproceed with the user quicker accessacquisition as contemplated under the LOI.
On September 4, 2019 the Company entered into a listing agreement for the sale of the Smoke on the Water site location for an offering price of $850,000, with expected 6% sales commission.
Further, in connection with the shift in the Company’s strategy away from rental activities focused in cannabis industry, the Company sold WCS on September 30, 2019 by way of a membership interest purchase agreement (the “Purchase Agreement”) with the Zallen Trust. Under the terms of the Purchase Agreement, the Company sold all of the Company’s membership interests in WCS for an aggregate purchase price of $782,450. The Zallen Trust paid the purchase price by transferring to marketthe Company 8,693,888 shares of the Company’s Common Stock, valued at $0.09 per share. The Purchase Agreement also provided that Mr. Zallen transfer to the Company an additional 400,000 shares of Common Stock to settle $36,000 in back rent owed at the time of the sale. The Company retired all of the shares received as a result of the transaction. In connection with the sale of WCS, the Company and professional-managed facilities.
Grow Capital expects to identify additional suitable acquisitions, complete those acquisitions, and grow those companies as part of our transition to a Fintech company. Any potential acquisitions or divestitures remain subject to final agreements, due diligence, and typical closing conditions.
Current Operations
Any company using the internet, mobile devices, software technology or cloud services to perform or connect with financial services are involved in FinTech. Key industries making use of this financial technology include insurance, blockchain and crypto currency, mobile payment processing, crowd funding, budgeting, stock trading and robo-advising apps.[ https://www.thestreet.com/technology/what-is-fintech-14885154]
Software as a service or “SaaS” is a key component of the FinTech industry and represents a method of software distribution where a third-party hosts applications and makes them available to customers over the internet. Saas is one of the three main categories of cloud computing.[https://searchcloudcomputing.techtarget.com/definition/software-as-a-Service]
The Company’s recently acquired subsidiary, Bombshell, is a software development service provider with a focus on the financial services sector and SaaS solutions. Bombshell has operations in both Nevada and Louisiana, providing software to several large financial services organizations and with a rapid growth strategy consisting of innovative industry-specific solutions for sales teams and management. At the present time, the majority of Bombshell’s revenue generating customers are controlled by affiliates and/or officers of the Company.
Bombshell's current software suite delivers customized back office compliance, sophisticated multi-pay commission processing, and a unique new client application submission system, along with digital engagement marketing
services centric to financial services. In addition to our software customization, licensing and Equipment
Market and competition
SaaS removes the organizations need to install and run applications on their own computers or in their own data centers. This eliminates the expense of hardware acquisition, provisioning and maintenance as well as software licensing, installation and support. Other benefits of commercial property.
The global SaaS market is estimated to grow to $117 billion by the end of 2022, with real estate agencies, agents, commercial brokersa compound annual growth rate of roughly 21 percent. [https://www.marketresearchfuture.com/reports/software-as-a-service-market-2003]
North America is dominating the SaaS industry due to various factors including, but not limited to the presence of global players, its rich entertainment industry, and consulting groups that are involvedits high adoption of on-demand software. Currently the major players operating in the cannabis industry. We will target specificSaaS industry include the following: Salesforce; Linkedin; Concur Technologies, Workaday, Inc.; IBM Corporation, Oracle Corporation, Netsuite Inc., Medidata Solutions; Service Now, Inc., Microsoft Inc., Google, Inc. and Zuora.[https://www.marketresearchfuture.com/reports/software-as-a-service-market-2003]
Intellectual property
Bombshell entered into two Intellectual Property Assignment Agreements with related parties under which we acquired 100% ownership of certain created, developed and/or programmed patentable and/or copyrightable technology, software applications, code, technical information, data, and trade shows, conferences and seminars associated with cannabis growers. Assecrets which are integral to our capital for marketing is very limitedsuite of SaaS solutions. Presently we are reviewing the costoperate these solutions as trade secrets.
The Company has not yet filed any patents or copyright applications in respect of advertising on the radio or in print or running ads on certain cannabis industry online websites.
Employees
Our subsidiary, Bombshell currently have twohas four employees, eachone of whom is an officerofficer. Grow Capital has 5 employees, all of which are officers and/or directors of the company.Company. Further we have a key consultant that is also a major shareholder of the Company providing services part time. Our employees are not represented by unions and we consider our relationship with our employees to be good.
Facilities
Our office is located at 722 W. Dutton Rd, Eagle Point, Oregon 97524a business center known as Green Valley Corporate Center South at2485 Village View Drive, Suite 180, Henderson, NV 89074 and our telephone number is in the building702-830-7919, email: info@growcapital.com. We have two corporate websites:www.growcapitalinc.com andwww.bombshelltechnologies.com.
Available information
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports that we own. We currently pay no rent. We believe this facility will be adequate for our needs forfile with the next twelve months.
As a smaller reporting companies.
None
(1)The Company entered into a sublease agreement to lease approximately 1,338 square feet of office space at a business center known as Green Valley Corporate Center South located in Henderson, Nevada (the “Henderson Property”), effective October 19, 2018, for use as the Company’s new headquarters. The lease has a term of 123 months, an abatement of the first four months of rent during which time the Company would complete certain required leasehold improvements and escalating base monthly rent per square foot ranging between $2.00 to $3.00 per square foot. The Company commenced occupation of the premises in February 2019. Appreciation, LLC, a related party entity, holds the master lease from which the Company derives its sublease for its headquarters.
(2)Up until its divesture in September 2019, we owned a building at 722 W. Dutton Road, Eagle Point, OR 97524 representing our first operating location for former subsidiary, WCS Enterprises. The building is 15,000 square feet and zoned to meet the requirements for specific purpose industrial use and is divided into four 1,500 square feet condo style grow rooms which, is being leased to four tenants and one 7,500 square feet grow facility leased, for whichfacility. Until relocation to our new corporate headquarters in Henderson, NV we occupied one 1,500 sq. ft. unit to use as an office space.
(3) In April 2016, the rent has yet begun, to one tenant that isCompany purchased a related party.
(4)In March 2017, the Company acquired a RV and campground park in Selma, Oregon. The property is being paid atlocated just 20 miles of Grants Pass, Oregon and 2.5 miles east of the amountRedwood Highway in Selma, Oregon and is known as the Lake Selmac Resort. The Resort facilities include fishing, swimming, boating, and in addition to RV parking, has tent camping & cabin locations established for accommodation. On September 4, 2019 the Company listed the property for an offering price of $1,335.65 on the first of each month until October 1, 2017, or the date on which site work for construction begins, whichever occurs first, at which time the full principal balance and any accrued interest will be due and payable.
The Company is not the subject of any pending legal proceedings and, to the knowledge of management, no proceedings are presently contemplated.
Not applicable.
Market Information
Our shares of common stock are quoted by the OTC Markets Group Inc. of the Financial Industry Regulatory Authority, Inc. ("FINRA") under the symbol "GRWC". Set forth below are the high and low closing bid prices for our common stock for each quarter of 2013 through 2015.the last two fiscal years ended June 30, 2019 and 2018. These bid prices were obtained from OTC MarketsGroupMarkets Group Inc. All prices listed herein reflect inter-dealer prices, without retail mark-up, mark-down or commissions and may not represent actual transactions.
Period | High | Low |
January 1, 2013 through March 31, 2013 | $ 0.25 | $ 0.15 |
April 1, 2013 through June 30, 2013 | $ 0.24 | $ 0.15 |
July 1, 2013 through September 30, 2013 | $ 0.48 | $ 0.11 |
October 1, 2013 through December 31, 2013 | $ 0.40 | $ 0.10 |
January 1, 2014 through March 31, 2014 | $ 0.75 | $ 0.29 |
April 1, 2014 through June 30, 2014 | $ 0.75 | $ 0.40 |
July 1, 2014 through September 20, 2014 | $ 1.25 | $ 0.68 |
October 1, 2014 through December 31, 2014 | $ 0.95 | $ 0.52 |
January 1, 2015 through March 31, 2015 | $ 0.50 | $ 0.30 |
April 1, 2015 through June 30, 2015 | $ 0.26 | $ 0.09 |
July 1, 2015 through September 20, 2015 | $ 2.40 | $ 1.00 |
October 1, 2015 – December 31, 2015 | $ 2.20 | $ 0.62 |
January 1, 2016 through March 31, 2016 | $ 0.62 | $ 0.22 |
April 1, 2016 through June 30, 2016 | $ 2.30 | $ 0.55 |
Period | High | Low |
|
|
|
July 1, 2017 through September 30, 2017 | $ 0.6487 | $ 0.0112 |
|
|
|
October 1, 2017 through December 31, 2017 | $ 0.255 | $ 0.0132 |
|
|
|
January 1, 2018 through March 31, 2018 | $ 0.23 | $ 0.06 |
|
|
|
April 1, 2018 through June 30, 2018 | $ 0.208 | $ 0.034 |
|
|
|
July 1, 2018 through September 30, 2018 | $0.238 | $0.10 |
|
|
|
October 1, 2018 through December 31, 2018 | $0.133 | $0.0475 |
|
|
|
January 1, 2019 through March 31, 2019 | $0.1025 | $.0582 |
|
|
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April 1, 2019 through June 30, 2019 | $0.25 | $0.08 |
Holders
The number of record holders of the Company's common stock as of the date of this ReportOctober 14, 2019 is approximately 184211, not including an indeterminate number who may hold shares in "street name."
Common Stock Dividends
The Company has not declared any cash dividends with respect to its common stock and does not intend to declare dividends in the foreseeable future. There are no material restrictions limiting, or that are likely to limit, our ability to pay dividends on our common stock.
Securities Authorized for Issuance Under Equity Compensation Plans
Options
Equity Incentive Stock Option Plan. During the year endedPlan
In December 31, 20102015, the Company increasedadopted the number2015 Equity Incentive Plan (“Incentive Plan”) with a term of 10 years. The Incentive Plan allows for the issuance up to a maximum of 2 million shares of common stock, options exercisable into common stock of the Company or stock purchase rights exercisable into shares of common stock of the Company. The plan is administered by the board of directors unless a separate delegation to an administrator is
made by the board of directors. Options granted under the plan carry a maximum term of 10 years, except to a grantee who is also a 10% beneficial owner at the time of grant, in which case the maximum term is 5 years. In addition, exercise prices of options available forgranted must be within a certain percentage of the closing price on date of grant depending on the level of beneficial ownership of common stock of the Company by the grantee. All vesting conditions are set by the board or administrator. In December 2015, the Company filed a registration statement on Form S-8 covering all shares issued or issuable under the 2001 Incentive Plan.
Stock OptionPlan
In December 2015, the Company adopted the 2015 Stock Plan by 550,000 options. Under(“Stock Plan”). As a condition of adoption of the 2001 Non-QualifiedStock Plan, the Company may grant optionsentered into a registration statement on Form S-8 and covered the shares issued under the plan, which registration statement was filed in December 2015. The Stock Plan allows for the issuance up to 2,850,000a maximum of 2 million shares of common stock. The maximum termstock of the options was five years, and they vested at various times accordingCompany. The plan is administered by the board of directors unless a separate delegation to an administrator is made by the board of directors. The Stock Plan shall continue in effect until such time as is terminated by the Board or all shares are issued pursuant to the Option Agreements. Under the 2001 Incentive Stock Option Plan, the Company may grant options for up to 2,000,000 shares of common stock. The maximum term of the options is five years and they vested at various times according to the Option Agreements.
The 2015 Equity Incentive Plan is designed to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to employees, directors and consultants and to promote the success of the Company's business. Options granted under the Plan may be Incentive Stock Options or Non-Qualified Stock Options, as determined by the Administrator at the time of grant. Stock purchase rights may also be granted under the Plan. The maximum aggregate number of shares which may be issued upon exercise of such Options or Stock Purchase Rights is two million (2,000,000) shares of Common Stock. The term of the option is five (5) years from the grant date of such shorter term as may be provided in the Option Agreement. The Plan become effective upon initial Board adoption and continues until terminated but in no case longer than ten (10) years. The Company had granted an option for the purchase of two million shares to datein April 2016, of which 1,500,000 have been exercised.
Common and Preferred Stock
The Company's authorized common stock consists of 550,000,000 shares, consisting of 500,000,000 shares of Common Stock par value $0.001 and 50,000,000 shares of Preferred Stock, par value $0.001.
Recent Sales of Unregistered Securities
On July 1, 2019 the Company issued an aggregate of 245,170 common shares to a total of 15 persons. The securities were exempt from registration under Section 5450,918 shares of the Act pursuantfully vested unregistered Common Stock to section 4(2)its directors as part of the Act since there was no public offering of the securities.
On July 31, 2019 the Company issued 3,100,000277,778 shares of pre-split common stockunregistered Common Stock in respect to private placements for Boardtotal gross proceeds of Director Services.
On October 1, 2019 the Company issued 900,000 shares of common stock to extinguish debt in the amount of $71,469 and 1,000,000 shares of common stock for consulting services.
On October 10, 2019 the Company issued a resolution authorizing, buttotal of 210,000 unregistered shares of Common Stock to a company controlled by one of its officers for services rendered with a value of $16,433. The issued shares were valued at fair market value on the date of issuance.
The above issuances did not requiring, a reverse split of our common stock at a ratio of 1-for-20. As a result of such reverse stock split, which was affected on November 16, 2015, the number of shares issuedinvolve any underwriters, underwriting discounts or commissions, or any public offering and outstanding was decreased from 44,780,879 to 2,309,044 with all fractional shares rounded up.
Not required for smaller reporting companies.
Forward-looking Statements
Statements made in this Form 10-K which are not purely historical are forward-looking statements with respect to the goals, plan objectives, intentions, expectations, financial condition, results of operations, future performance and business of Grow Condos.Capital. Such forward-looking statements include those that are preceded by, followed by or that include the words "may", "would", "could", "should", "expects", "projects", "anticipates", "believes", "estimates", "plans", "intends", "targets" or similar expressions.
Forward-looking statements involve inherent risks and uncertainties, and important factors (many of which are beyond our control) that could cause actual results to differ materially from those set forth in the forward-looking statements, including the following: general economic or industry conditions nationally and/or in the communities in which we conduct business; legislation or regulatory requirements, including environmental requirements; conditions of the securities markets; competition; our ability to raise capital; changes in accounting principles, policies or guidelines; financial or political instability; acts of war or terrorism; and other economic, competitive, governmental, regulatory and technical factors affecting our operations, products, services and prices.
Accordingly, results actually achieved may differ materially from expected results in these statements. Forward- looking statements speak only as of the date they are made. Grow CondosCapital does not undertake, and specifically disclaims, any obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of such statements.
Financial Statements
The consolidated financial statements which are a part of this Report are as of June 30, 2016,2019 and for the period from July 1, 2015 through June 30, 2016 (the "Relevant Period").2018. The consolidated financial statements are thoseinclude the accounts of Grow Capital, Inc., and its wholly-owned subsidiaries, WCS forEnterprises, LLC and Smoke on the resultsWater, Inc. as of operations becauseJune 30, 2019. All significant intercompany accounting transactions have been eliminated as a result of the reverse acquisition. consolidation.
Following is management's discussion and analysis of those financial statements.
Plan of Operations
The consolidated financial statements demonstrate a loss from operationsCompany believes that its existing capital resources may not be adequate to satisfy its cash requirements for the Relevant Period of $1,496,455; and non-cash expense of $28,228 in depreciation expense.
Results of Operations
Revenues
During the fiscal years ended June 30, 2019 and 2018, respectively we have recorded net revenues of $Nil and $Nil respectively from ongoing operations. While the Company had cash on handcontinued to operate the Lake Selmac Resort held by subsidiary SOTW and the condominium rental operation held by subsidiary WCS, these operations have been offered for sale, and as a result all operations, including all earned revenue are included as part of approximately $43,600. This is sufficient to sustaindiscontinued operations in the day to dayfinancial statements included herein for the fiscal years ended June 30, 2019 and 2018.
Operating Expenses
Our consolidated expenses from ongoing operations offor the fiscal years ended June 30, 2019 and 2018 were as follows:
Operating expenses |
|
|
|
|
|
|
General and administrative |
| $ | 114,478 |
| $ | 293,827 |
Sales and marketing |
|
| 15,974 |
|
| - |
Professional fees |
|
| 619,204 |
|
| 81,620 |
|
| 1,484,059 |
|
| 1,134,315 | |
Depreciation, amortization and impairment |
|
| 765 |
|
| 268 |
Total operating expenses |
| $ | 2,234,480 |
| $ | 1,510,030 |
Our general and administrative expenses include rent, telephone, internet services, banking charges, salaries, consulting fees and miscellaneous office costs.
During the comparative fiscal years ended June 30, 2019 and 2018, the Company for approximately 90 days. It is not likely that operating revenues willrecorded an increase in stock-based compensation expense from $1,134,315 (2018) to $1,484,059 during the near future to a sufficient extent to covercurrent fiscal year. The increase was primarily the operating expensesresult of the Company. Therefore it will be necessary to obtain additional capital from the sale of equity or debt securities.
Total operating expenses during fiscal 2019 totaled $2,234,480 as compared to $1,510,030 in fiscal 2018.
We expect operating expenses to increase in future periods as we continue to expand our operations and our revenue base, and if we continue to issue shares to settle salaries, consulting fees and expenses.
Other Expenses
Other expenses recorded in fiscal 2019 and 2018 totaled $11,183 and $919,156 respectively. The substantial decrease to other expenses in fiscal 2019 is directly related to amortization of the Companydebt discount and in its ability to grow its business and to raise capital as needed until such time as the business operations of the Company become self-sustaining.
Discontinued operations
During fiscal 2019 certain of the Company’s subsidiary operations were allocated as held for sale. Results reported in respect to these discontinued operations provided for a loss from discontinued operations of $159,434 and $53,453 for the years ended June 30, 2019 and 2018, respectively. The increase in the loss from discontinued operations in the year ended June 30, 2019 as compared to June 30, 2018 was primarily the result of increased cost of revenues, general and administrative expenses and a $112,000 impairment recorded based on the expected sale price less costs of sale of the Smoke on the Water property, offset by reduced interest expense in the current period compared to the prior year.
Net losses in the fiscal years ended June 30, 2019 and 2018 totaled $2,405,097 and $2,482,639, respectively.
Liquidity and Capital Resources
|
| At June 30, 2019 |
| At June 30, 2018 |
| ||||
|
|
|
|
|
| ||||
Current Assets |
|
| $ | 2,082,080 |
|
| $ | 385,378 |
|
Current Liabilities |
|
|
| 1,183,477 |
|
|
| 1,833,555 |
|
Working Capital (Deficit) |
|
| $ | 898,603 |
|
| $ | (1,448,177 | ) |
As of June 30, 2019, the Company had total current assets of $2,082,080 including $1,431,796 in prepaid expenses of which $1,380,459 relates to salaries and consulting fees prepaid by the issue of stock, and working capital of $898,603, compared to total current assets of $385,378 and a working capital deficit of $1,448,177 as of June 30, 2013. The decrease in our working capital deficit was due to a decrease in liabilities held from sale over the comparative periods from $1,555,240 in fiscal 2018 to $472,241 in the current fiscal year ended June 30, 2019, and an increase to non-cash prepaid expenses in the current fiscal year, as identified above.
During the fiscal year ended June 30, 2019, cash used by operating activities totaled $415,864, primarily as a result of a net loss from operations of $2,405,097, offset by a loss from discontinued operations of $159,434 and certain non-cash adjustments including non-cash interest of $6,612, a loss from the sale of land and depreciation, amortization and impairment expenses of $765, as well as stock-based compensation expenses of $1,484,059. In fiscal 2018 cash used by operating activities totaled $400,344, primarily as a result of a net loss from operations of $2,482,639, offset by a loss from discontinued operations of $236,036, and certain non-cash adjustments including non-cash interest of $930,715, depreciation, amortization and impairment expenses of $268 and stock-based compensation expenses of $1,134,315.
Net cash provided by investing activities was $18,003 in fiscal 2019 as compared to net cash used in investing activities of $40,268 in fiscal 2018. Results for fiscal 2019 include $5,412 expended on equipment, offset by amounts due to a related party of $23,415, as compared to $40,268 receivable from a related party in fiscal 2018.
Net cash provided by financing activities was $1,765,000 in fiscal 2019 as compared to $277,000 in fiscal 2018. During fiscal 2018 the Company received proceeds from private placements of $232,000 and proceeds from related party advances of $45,000, compared to proceeds from private placements totaling $1,765,000 in fiscal 2019.
Net cash flows used in discontinued operations were $897,600 in fiscal 2019 as compared to net cash provided by discontinued activities of $147,436 in fiscal 2018.
During fiscal 2019 the Company reported a net increase in cash of $469,539 as compared to a decrease in cash of $16,176 in fiscal 2018.
Going Concern
During the fiscal year ended June 30, 2019 and 2018, the Company reported a net loss of $2,405,097 and $2,482,639, respectively, combined with a working capital deficit of approximately $481,000 (after removing prepaid stock-based compensation) with approximately $483,000 of cash on hand. The Company believes that as of June 30, 2019 its existing capital resources are not adequate to enable it to fully execute its business plan. While the
Company acquired an industry thatoperating business is illegal under federal law,the FinTech sector subsequent to fiscal year end, which is generating net income as at June 30, 2019, we havedo not believe the additional cash flows are yet sufficient to achieve profitable operations, we have a significant accumulated deficit and are dependent onmeet all of our ability to raise capital from stockholders or other sources to sustain operations and to ultimately achieve viable profitable operations.anticipated operational overhead for fiscal 2020. These factorsconditions raise substantial doubt aboutas to the Company's ability to continue as a going concern. Management'sDuring fiscal 2019 the Company raised gross proceeds from private placements of our common shares of $1,765,000which were allocated to working capital and to retire certain debt obligations. These funds were raised for use in the execution of the Company’s shift away from the cannabis industry and towards its new business plan focused on acquisitions in the FinTech sector and other related sectors. As part of this plan, the Company has sold WCS as of September 30, 2019 and Smoke on the Water is currently being offered for sale (See Note 3). If the Company fails to sell Smoke on the Water, generate positive cash flow or obtain additional financing, when required, the Company may have to modify, delay, or abandon some or all of its business and expansion plans, in regard to these matters are described in Note 1 in theand potentially cease operations altogether. The accompanying consolidated financial statements.
Off-Balance Sheet Arrangements
We had no off-balance sheet arrangements of any kind for the period ended June 30, 2016.
Not required for smaller reporting companies.
TABLE OF CONTENTS FOR FINANCIAL STATEMENTS
Page | |
Reports of Independent Registered Public Accounting | F-1 |
Consolidated Balance | F-2 |
Consolidated | F-3 |
Statement of Changes in Stockholders' Equity | F-4 |
Consolidated | F-5 |
Notes to Consolidated Financial Statements | F-7 |
To the Board of Directors and
Stockholders
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheetsheets of Grow Condos,Capital, Inc. and subsidiary (f/k/a Fanatic Fans Inc. and Calibrus, Inc.)(the Company) as of June 30, 20162019 and 2015,2018, and the related consolidated statements of operations, changes in stockholders'stockholders’ equity (deficit), and cash flows for each of the years then ended. in the two year period ended June 30, 2019, and the related notes (collectively referred to as the financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of June 30, 2019 and 2018, and the results of its operations and its cash flows for each of the years in the two year period ended June 30, 2019, in conformity with accounting principles generally accepted in the United States of America.
Explanatory Paragraph on Going Concern
The accompanying 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 significant operating losses raise substantial doubt about its ability to continue as a going concern. Management’s plans in regards to this uncertainty are included Note 1 to the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company'sCompany’s management. Our responsibility is to express an opinion on thesethe Company’s consolidated financial statements based on our audit.
We conducted our auditaudits in accordance with the standards of the Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included considerationAs part of our audits, we are required to obtain an understanding of internal control over financial reporting, as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company'sCompany’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supportingregarding the amounts and disclosures in the financial statements, assessingstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit providesaudits provide a reasonable basis for our opinion.
/s/ L J Soldinger Associates, LLC | |
We have served as the Company’s auditor since 2017. | |
Deer Park, Illinois United States of America | |
October 15, 2019 | |
F-1
AND SUBSIDIARIES (Formerly Grow Condos, Inc.) | |||||
Consolidated Balance Sheets | |||||
|
|
|
|
|
|
|
| June 30, |
|
| June 30, |
ASSETS |
| 2019 |
|
| 2018 |
|
|
|
|
|
|
CURRENT ASSETS: |
|
|
|
| |
Cash | $ | 483,430 |
| $ | 13,891 |
Subscription receivable |
| 150,000 |
|
| - |
Prepaid expenses |
| 1,431,796 |
|
| 1,373 |
Assets held for sale |
| - |
|
| 329,846 |
Due from related party |
| 16,854 |
|
| 40,268 |
Total current assets |
| 2,082,080 |
|
| 385,378 |
|
|
|
|
|
|
Property, plant and equipment, net |
| 67,772 |
|
| 893 |
Assets held for sale |
| 1,658,503 |
|
| 1,751,437 |
Deposits |
| 5,367 |
|
| 2,323 |
TOTAL ASSETS | $ | 3,813,722 |
| $ | 2,140,031 |
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) |
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES: |
|
|
|
|
|
Accounts payable | $ | 333,268 |
| $ | 94 |
Accrued liabilities |
| 270,292 |
|
| 223,221 |
Advances from related parties |
| 105,000 |
|
| 105,000 |
Deferred rent |
| 2,676 |
|
| - |
Liability held for sale |
| 472,241 |
|
| 1,555,240 |
Total current liabilities |
| 1,183,477 |
|
| 1,883,555 |
|
|
|
|
|
|
Liability held for sale |
| 597,865 |
|
| 685,022 |
TOTAL LIABILITIES |
| 1,781,342 |
|
| 2,568,577 |
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS' EQUITY (DEFICIT) |
|
|
|
|
|
Preferred stock, $0.001 par value, 5,000,000 shares authorized, none issued and outstanding | $ | - |
| $ | - |
Common stock, $0.001 par value, 175,000,000 shares and 100,000,000 shares authorized, 140,744,030 and 94,205,542 issued, issuable and outstanding at June 30, 2019 and June 30, 2018 respectively. |
| 140,743 |
|
| 94,205 |
Additional paid-in capital |
| 49,632,970 |
|
| 44,813,485 |
Accumulated deficit |
| (47,741,333) |
|
| (45,336,236) |
Total stockholders' equity (deficit) |
| 2,032,380 |
|
| (428,546) |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | $ | 3,813,722 |
| $ | 2,140,031 |
The accompanying notes are an integral part of these audited consolidated financial statements referredstatements.
F-2
GROW CAPITAL, INC.
AND SUBSIDIARIES
(Formerly Grow Condos, Inc.)
Consolidated Statements of Operations
|
|
| Fiscal Year Ended | |||
|
|
| June 30, | |||
|
|
| 2019 |
|
| 2018 |
|
|
|
|
|
|
|
Net revenues |
| $ | - |
| $ | - |
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
General and administrative |
|
| 114,478 |
|
| 293,827 |
Sales and marketing |
|
| 15,974 |
|
| - |
Professional fees |
|
| 619,204 |
|
| 81,620 |
Stock based compensation |
|
| 1,484,059 |
|
| 1,134,315 |
Depreciation, amortization and impairment |
|
| 765 |
|
| 268 |
Total operating expenses |
|
| 2,234,480 |
|
| 1,510,030 |
|
|
|
|
|
|
|
Income (Loss) from operations |
|
| (2,234,480) |
|
| (1,510,030) |
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
Loss on disposal of property |
|
| (5,412) |
|
| - |
Interest expense |
|
| (5,771) |
|
| (919,156) |
Total other income (expense), net |
|
| (11,183) |
|
| (919,156) |
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
| (2,245,663) |
|
| (2,429,186) |
Income (loss) from discontinued operations |
|
| (159,434) |
|
| (53,453) |
Net income (loss) |
| $ | (2,405,097) |
| $ | (2,482,639) |
|
|
|
|
|
|
|
| $ | (0.02) |
| $ | (0.03) | |
Basic and diluted net loss from discontinued operations |
| $ | 0.00 |
| $ | (0.00) |
Basic and diluted net loss |
| $ | (0.02) |
| $ | (0.03) |
|
|
|
|
|
|
|
Weighted average shares used in completing basic and diluted net loss per common share |
|
| 118,247,407 |
|
| 75,233,420 |
|
|
|
|
|
|
|
The accompanying notes are an integral part of these audited consolidated financial statements.
F-3
GROW CAPITAL, INC.
AND SUBSIDIARIES
(Formerly Grow Condos, Inc.)
Consolidated Statements of Changes in Stockholders Equity (Deficit)
|
| Preferred Shares |
| Common Stock |
|
| Additional |
|
| Accumulated |
|
| Total | ||||
|
| Shares |
| Amount |
| Shares |
| Amount |
|
| Paid-in Capital |
|
| Deficit |
|
| Shareholders Equity (Deficit) |
Balance, June 30, 2017 |
| - |
| - |
| 30,795,375 | $ | 30,795 |
| $ | 41,891,602 |
| $ | (42,853,597) |
| $ | (931,200) |
Stock settled debt upon default |
|
|
|
|
|
|
|
|
|
| 110,000 |
|
|
|
|
| 110,000 |
Shares issued due to conversion of convertible notes and unpaid interest |
|
|
|
|
| 44,010,791 |
| 44,011 |
|
| 1,037,635 |
|
|
|
|
| 1,081,646 |
Private placements |
|
|
|
|
| 6,400,000 |
| 6,400 |
|
| 225,600 |
|
|
|
|
| 232,000 |
Conversion of advances from related party into stock |
|
|
|
|
| 1,333,333 |
| 1,333 |
|
| 292,000 |
|
|
|
|
| 293,333 |
Conversion of accrued payroll into stock – related parties |
|
|
|
|
| 4,466,667 |
| 4,467 |
|
| 981,867 |
|
|
|
|
| 986,334 |
Shares issued to Officers, Directors and employees |
|
|
|
|
| 4,579,148 |
| 4,579 |
|
| 173,802 |
|
|
|
|
| 178,381 |
Shares issued to non-employees for services |
|
|
|
|
| 2,620,228 |
| 2,620 |
|
| 100,979 |
|
|
|
|
| 103,599 |
Loss for the period |
|
|
|
|
|
|
|
|
|
|
|
|
| (2,482,639) |
|
| (2,482,639) |
Balance, June 30, 2018 |
| - |
| - |
| 94,205,542 |
| 94,205 |
|
| 44,813,485 |
|
| (45,336,236) |
|
| (428,546) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private placements |
|
|
|
|
| 25,854,172 |
| 25,854 |
|
| 1,889,146 |
|
|
|
|
| 1,915,000 |
Shares issued to Officers, Directors and employees |
|
|
|
|
| 15,252,547 |
| 15,253 |
|
| 2,072,119 |
|
|
|
|
| 2,087,372 |
Shares issued to non-employees for services |
|
|
|
|
| 4,283,104 |
| 4,283 |
|
| 762,763 |
|
|
|
|
| 767,046 |
Conversion of accounts payable into stock |
|
|
|
|
| 1,148,665 |
| 1,148 |
|
| 95,457 |
|
|
|
|
| 96,605 |
Loss for the period |
|
|
|
|
|
|
|
|
|
|
|
|
| (2,405,097) |
|
| (2,405,097) |
Balance, June 30, 2019 |
| - |
| - |
| 140,744,030 | $ | 140,743 |
| $ | 49,632,970 |
| $ | (47,741,333) |
| $ | 2,032,380 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these audited consolidated financial statements.
F-4
GROW CAPITAL, INC.
AND SUBSIDIARIES
(Formerly Grow Condos, Inc.)
Consolidated Statements of Cash Flows
| Fiscal Year Ended | ||||
| June 30, | ||||
|
| 2019 |
|
| 2018 |
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
Net loss | $ | (2,405,097) |
| $ | (2,482,639) |
Loss from discontinued operations |
| 159,434 |
|
| 53,453 |
Net loss from continuing operations: |
| (2,245,663) |
|
| (2,429,186) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
Depreciation, amortization and impairment expense |
| 765 |
|
| 268 |
Non-cash interest |
| 6,612 |
|
| 930,715 |
Stock based compensation |
| 1,484,059 |
|
| 1,134,315 |
Loss on sale of land |
| 5,412 |
|
| - |
Changes in operating assets and liabilities: |
|
|
|
|
|
Prepaid expenses and other assets |
| (50,000) |
|
| 1,631 |
Accounts payable, trade |
| 333,174 |
|
| (12,416) |
Accrued expenses |
| 47,101 |
|
| (25,671) |
Deferred rent expense |
| 2,676 |
|
| - |
Net cash (used in) in operating activities |
| (415,864) |
|
| (400,344) |
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
Proceeds used in purchase of property, plant, and equipment |
| (5,412) |
|
| - |
Due from related party |
| 23,415 |
|
| (40,268) |
Net cash (used in) provided by investing activities |
| 18,003 |
|
| (40,268) |
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
Proceeds from related party |
| - |
|
| 45,000 |
Proceeds from private placement |
| 1,765,000 |
|
| 232,000 |
Net cash provided by financing activities |
| 1,765,000 |
|
| 277,000 |
|
|
|
|
|
|
CASH FLOWS FROM DISCONTINUED OPERATIONS: |
|
|
|
|
|
Operating activities |
| (51,828) |
|
| 236,036 |
Investing activities |
| 68,309 |
|
| (31,635) |
Financing activities |
| (914,081) |
|
| (56,965) |
Net cash (used) provided by discontinued activities |
| (897,600) |
|
| 147,436 |
|
|
|
|
|
|
Net increase (decrease) in cash |
| 469,539 |
|
| (16,176) |
Cash at beginning of period |
| 13,891 |
|
| 30,067 |
Cash at the end of the period | $ | 483,430 |
| $ | 13,891 |
F-5
|
| 8 |
|
|
|
Supplemental Disclosure of Cash Flows Information: |
|
|
|
|
|
Cash paid for interest, discontinued activities | $ | 41,493 |
| $ | 98,890 |
Cash paid for income taxes | $ | - |
| $ | - |
|
|
|
|
|
|
Non-cash Investing and Financing Activities: |
|
|
|
|
|
Conversion of debt and accrued interest into common stock | $ | - |
| $ | 1,191,470 |
Stock settled advances from related party | $ | 67,643 |
| $ | 40,000 |
$ |
|
| $ | 253,333 | |
Stock settled payroll liability | $ | - |
| $ | 134,000 |
Repayment of mortgage from escrow | $ | 252,141 |
| $ | - |
Stock issued for prepaid compensation | $ | 2,303,195 |
| $ | - |
Stock issued for settlement of accounts payable | $ | 25,505 |
| $ | - |
The accompanying notes are an integral part of these audited consolidated financial statements. |
F-6
GROW CAPITAL, INC.
AND SUBSIDIARIES
(formerly Grow Condos, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – Organization and Description of Business
Grow Capital, Inc. (the "Company," “we,” or “us”) (f/k/a Grown Condos, Inc.) was incorporated on October 22, 1999, in the State of Nevada.
Our former wholly owned subsidiary, WCS Enterprises, Inc. (“WCS”) is an Oregon limited liability company which was formed on September 9, 2013 with operations beginning in October 2013. WCS is a real estate purchaser, developer and manager of specific use industrial properties providing "Condo" style turn-key aeroponics grow facilities to above present fairly,support cannabis farmers. WCS owns, leases, sells and manages multi- tenant properties so as to reduce the risk of ownership and reduce costs to tenants and owners. WCS currently owns a condominium property in all material respects,Eagle Point, Oregon (the “Eagle Point Property”). On September 30, 2019, we sold WCS to the Wayne A. Zallen Trust u/a/d/ 10/24/2014 (the “Zallen Trust”), of which Wayne Zallen, our former CEO and Chairman, is the trustee and a beneficiary. See Note 3 for further information.
Our wholly owned subsidiary, Smoke on the Water, Inc. was incorporated on October 21, 2016, in the State of Nevada. Smoke on the Water is focused on operating properties in the RV and campground rental industry and currently owns the Lake Selmac Resort located at 2700 Lakeshore Drive, Selma, Oregon (the “Lake Selmac Property”).
Our wholly owned subsidiary Bombshell Technologies, Inc. (“Bombshell”), was formed as Bombshell Technologies, LLC on November 5, 2018 and converted into a corporation on June 24, 2019. We acquired Bombshell on July 23, 2019 (See Note 11). Bombshell is a full-service design and software development company focused on developing and selling software to financial services firms and advisors and is the first acquisition as part of our strategic shift into the financial positiontechnology (“FinTech”) sector and related sectors.
On July 23, 2019, and effective July 25, 2019, the Board of Directors of the Company and the holders of our outstanding capital stock having a majority of the voting power, respectively, adopted resolutions to amend and restate our articles of incorporation to increase our authorized capital to 550,000,000 shares, consisting of 500,000,000 shares of Common Stock and 50,000,000 shares of Preferred Stock. The effective date of the aforementioned actions was August 29, 2019.
In connection with its name change, the Company has adopted a business plan focused on shifting the Company’s strategy away from rental activities focused in the cannabis industry and into the FinTech sector and related sectors. In connection with this strategy, the Company has hired a new Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) and appointed a new chairman of the Company’s board of directors (the “Board”), all of whom have significant experience in the FinTech sector. The Company intends to acquire FinTech companies, such as Bombshell (see Note 11), with a clear niche and strong leadership and use its experience and understanding of the FinTech sector and access to the public markets to help its acquisitions grow. The Company is currently in the process of identifying suitable acquisitions and completing those acquisitions. In connection with the shift in the Company’s strategy away from rental activities focused in the cannabis industry, the Company sold WCS on September 30, 2019, and has determined to divest Smoke on the Water, which it is currently actively marketing . In connection with these efforts, management of the Company has determined it is appropriate to include the operations of WCS and Smoke on the Water in this report as Assets and Liabilities Held for Sale (See Note 3). As the Company moves away from the cannabis industry and into financial technology and related sectors,Grow
F-7
GROW CAPITAL, INC.
AND SUBSIDIARIES
(formerly Grow Condos, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Capital expects to identify suitable acquisitions, complete those acquisitions, and subsidiary (f/k/grow those companies. Any potential acquisitions or divestitures remain subject to final agreements, due diligence, and typical closing conditions.
During the fiscal year ended June 30, 2019 and 2018, the Company reported a Fanatic Fans Inc. net loss of $2,405,097 and Calibrus, Inc.)$2,482,639, respectively, combined with a working capital deficit of approximately $481,000 (after removing prepaid stock-based compensation) with approximately $483,000 of cash on hand. The Company believes that as of June 30, 2019 its existing capital resources are not adequate to enable it to fully execute its business plan. While the Company acquired an operating business is the FinTech sector subsequent to fiscal year end, which is generating net income as at June 30, 2016 and 2015, and2019, we do not believe the results of its operations, changes in stockholders' equity and itsadditional cash flows are yet sufficient to meet all of our anticipated operational overhead for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
ASSETS | ||||||||
June 30, | June 30, | |||||||
2016 | 2015 | |||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 44,148 | $ | 42,747 | ||||
Lease receivables | 79 | 1,161 | ||||||
Prepaid expenses | 20,896 | 5,450 | ||||||
Total Current Assets | 65,123 | 49,358 | ||||||
Property and Equipment, net | 1,523,244 | 1,257,368 | ||||||
Deposits | 5,381 | 8,618 | ||||||
Debt Discount, summary | 104,983 | - | ||||||
Total Assets | $ | 1,698,731 | $ | 1,315,344 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | ||||||||
Current Liabilities | ||||||||
Accounts payable, trade | 3,000 | 70,036 | ||||||
Accrued liabilities | 353,788 | 112,058 | ||||||
Derivatives, net | 792,445 | - | ||||||
Mortgages payable, current portion | 33,187 | 31,304 | ||||||
Total Current Liabilities | 1,182,420 | 213,398 | ||||||
Mortgages payable, less current portion | 1,203,054 | 967,053 | ||||||
Customer deposits | 4,900 | 4,900 | ||||||
Deferred option revenue | 15,400 | 21,400 | ||||||
Total Liabilities | 2,405,774 | 1,206,751 | ||||||
Shareholder's Equity | ||||||||
Preferred stock, $.001par value, 5,000,000 shares authorized none issued or outstanding | - | - | ||||||
Common stock, $.001 par value, 100,000,000 shares authorized 28,284,924 and 2,084,925 shares issued and outstanding | 228,680 | 2,085 | ||||||
Additional paid-in capital | 12,001,259 | 11,547,035 | ||||||
Accumulated deficit | (12,936,983 | ) | (11,440,527 | ) | ||||
Total Shareholder's Equity | (707,044 | ) | 108,593 | |||||
Total Liabilities and Shockholder's Equity | $ | 1,698,731 | $ | 1,315,344 |
2016 | 2015 | |||||||
Rental revenues | $ | 118,533 | $ | 54,998 | ||||
Total revenues | 118,533 | 54,998 | ||||||
Operating expenses | 1,041,370 | 256,979 | ||||||
Gain/(Loss) from operations | (922,837 | ) | (201,981 | ) | ||||
Interest expense | 69,907 | 49,357 | ||||||
Derivative Liability Expense | 503,711 | |||||||
Loss before provision for income taxes | (1,496,455 | ) | (251,338 | ) | ||||
Provision for income taxes | - | - | ||||||
Net income/(loss) | $ | (1,496,455 | ) | $ | (251,338 | ) | ||
Net loss per common share: | ||||||||
Basic and diluted | $ | (0.06 | ) | $ | (0.13 | ) | ||
Weighted average common shares; basic and diluted | 14,374,487 | 1,946,359 | ||||||
Shares | Amount | Additional Paid-In Capital | Accumulated Deficit | Total Shareholders’ Equity | ||||||||||||||||
For the Years Ended June 30, 2016 and 2015 | ||||||||||||||||||||
Balance at June 30, 2014 | 41,435,709 | $ | 41,436 | $ | 11,422,282 | $ | (11,189,189 | ) | $ | 274,529 | ||||||||||
Founding contributed capital and debt forgiveness | - | - | ||||||||||||||||||
Common Stock for cash | - | - | ||||||||||||||||||
Common Stock for services | - | - | ||||||||||||||||||
Warrants Exercised for Common Stock | 262,770 | 229 | 85,173 | 85,402 | ||||||||||||||||
Net loss for the period ended June 30, 2015 | - | (251,338 | ) | (251,338 | ) | |||||||||||||||
Balance at June 30, 2015 | 41,698,479 | $ | 41,665 | $ | 11,507,455 | $ | (11,440,527 | ) | $ | 108,593 | ||||||||||
Balance at June 30, 2015 | 41,698,479 | 41,665 | 11,507,455 | (11,440,527 | 108,593 | |||||||||||||||
Founding contributed capital and debt forgiveness | - | - | ||||||||||||||||||
Common Stock for cash | 500,000 | 199,490 | 500 | 199,990 | ||||||||||||||||
Common Stock for services | 5,005,000 | 5,005 | 73,814 | 78,819 | ||||||||||||||||
Stock Based Compensation Valuation - Stock Options | - | 397,010 | 397,010 | |||||||||||||||||
Twenty (20) for One (1) Reverse Split | (43,413,555 | ) | (42,480 | ) | 42,480 | - | ||||||||||||||
Convert 5,000,000 Preferred to 25,000,000 Common | 25,000,000 | 25,000 | (20,000 | ) | 5,000 | |||||||||||||||
Net loss for the period ended June 30, 2016 | - | (1,496,455 | ) | (1,496,455 | ) | |||||||||||||||
Balance at June 30, 2016 | 28,789,924 | $ | 228,680 | $ | 12,001,259 | $ | (12,936,983 | ) | $ | (707,044 | ) | |||||||||
For the Twelve Months Ended | ||||||||
2016 | 2015 | |||||||
Cash flows from operating activities: | (Umaudited) | |||||||
Net loss | $ | (1,496,455 | ) | $ | (251,338 | ) | ||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 28,226 | 27,872 | ||||||
Stock issued for services | ||||||||
Allowance for doubtful accounts | ||||||||
Changes in assets and liabilities: | ||||||||
�� Deposits | 3,237 | (7,800 | ) | |||||
Lease receivable | 1,082 | (211 | ) | |||||
Prepaids | (15,446 | ) | (5,046 | ) | ||||
Accounts payable, trade | (67,036 | ) | 34,975 | |||||
Accrued expenses | 241,730 | (7,238 | ) | |||||
Security deposit | - | 1,300 | ||||||
Deferred options revenue | (6,000 | ) | 17,500 | |||||
Net cash used by operating activities | (1,310,662 | ) | (189,986 | ) | ||||
Cash flows from investing activities: | ||||||||
Purchase of property and improvements | (294,102 | ) | (83,390 | ) | ||||
Net cash used by investing activities | (294,102 | ) | (83,390 | ) | ||||
Cash flows from financing activities: | ||||||||
Repayments of mortgage | (29,254 | ) | (29,420 | ) | ||||
Proceeds of debt | 680,829 | |||||||
Proceeds from short-term debt | 954,590 | 105,000 | ||||||
Proceeds from exercise of warrants | 85,390 | |||||||
Net cash provided by financing activities | 1,606,165 | 160,970 | ||||||
Net increase (decrease) in cash and cash equivalents | 1,401 | (112,406 | ) | |||||
Cash and cash equivalents at beginning of period | 42,747 | 155,153 | ||||||
Cash and cash equivalents at end of period | $ | 44,148 | $ | 42,747 | ||||
Supplemental disclosure of cash flow information: | ||||||||
Cash paid during the period for: | ||||||||
Interest | $ | 69,907 | $ | 49,357 | ||||
Taxes | $ | - | $ | 7,551 | ||||
Note 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States ("GAAP"), and pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC").
Consolidation
These consolidated financial statements include the accounts of Grow Condos,Capital, Inc., and its wholly-owned subsidiary, WCS.subsidiaries, WCS and Smoke on the Water, as of June 30, 2019. All significant intercompany accounting transactions have been eliminated as a result of consolidation.
Use of an enterprise about which separate financial information is available that is evaluated on a regular basis by the chief operating decision maker, or decision making group, in deciding how to allocate resources to an individual segment and in assessing the performance of the segment.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We believe that it is at least reasonably possible that the effect on the financial statementsestimates of a condition, situation, or set of circumstances that existedamounts realizable upon our properties currently for sale at the date of the financial statements will change in the near term due to one or more future confirming events and the effect of the change would be material to the financial statements. Significant estimates include, but are not limited to, the estimate of the allowance for doubtful accounts, equity compensation, allocation of purchase price for acquired assets, and depreciable lives of long lived assets.
Cash and Cash Equivalents
For financial accounting purposes, cash and cash equivalents are considered to be all highly liquid investments with a maturity of three (3) months or less at the time of purchase.
Concentration of Credit Risk
F-8
GROW CAPITAL, INC.
AND SUBSIDIARIES
(formerly Grow Condos, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash deposits. Accounts at each institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. At June 30, 2019, the Company had $212,985 in excess of the FDIC insured limit, respectively.
Lease Receivables
Lease receivables are recognized when rents are due, and for the straight-line adjustment to rents over the term of the lease less an allowance for expected uncollectible amounts. Inherent in the assessment of the allowance for doubtful accounts are certain judgments and estimates including, among others, the customer's willingness or ability to pay, the Company's compliance with lease terms, the effect of general economic conditions and the ongoing relationship with the customer. Accounts with outstanding balances longer than the payment terms are considered past due. We do not charge interest on past due balances. The Company writes off lease receivables when it determines that they have become uncollectible after all reasonable collection efforts have been made. If we record bad debt expense, the amount is reflected as a component of operating expenses in the statements of operations. As of June 30, 2016,2019, and June 30, 2018, an allowance for doubtful accounts was recorded in the amount of $ 2,861.00.
Investment In and Valuation of Real Estate Assets
Real estate assets are stated at cost, less accumulated depreciation and amortization. Amounts capitalized to real estate assets consist of the cost of acquisition (excluding acquisition related expenses), construction costs, and mortgage interest during the period the facilities are under construction and prior to readiness for occupancy, and any tenant improvements, major improvements and betterments that extend the useful life of the real estate assets and leasing costs. All repairs and maintenance are expensed as incurred.
The Company is required to make subjective assessments as to the useful lives of its depreciable assets. The Company considers the period of future benefit of each respective asset to determine the appropriate useful life of the assets. Real estate assets, other than land, are depreciated on a straight-line basis over the estimated useful life of the asset.
The estimated useful lives of the Company's real estate assets by class are generally as follows:
Land | Indefinite |
Buildings | 40 years |
Tenant improvements | Lesser of useful life or lease term |
Intangible lease assets | Lease term |
Revenue Recognition
Condominium rentals
We may utilize independent appraisals to assist in the determination of the fair values of the tangible assets of an acquired property (which includes land and building). The information available to our management is used in estimating the amount of the purchase price that is allocated to land. Other information, such as building value and market rents, is used by our management in estimating the allocation of purchase price to the building and to intangible lease assets and liabilities. If an appraisal firm is used, the firm would have no involvement in management's allocation decisions other than providing this market information.
Campground space rentals and concession sales
Because we rent to individuals who plan on engaging in activities that include the Real Property or Services Have Been Performed
F-9
GROW CAPITAL, INC.
AND SUBSIDIARIES
(formerly Grow Condos, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Purchase Options
From time to time we enter into contracts with our tenants that allow the laws oftenants the state of Oregon, usually are non-cancellable and range from six to thirty-six months with a cash security deposit and personal guarantee required. We account for our leases in accordance with Accounting Standard Codification ("ASC") Topic 840, Leases, as operating leases. Leases may include escalating rental rates, an option to extend the term of the lease at a fixed rental rate, and an optionright to purchase the portion ofcondominium spaces that they rent from us. Those contracts contain provisions that allow the building being leased attenant to deposit monthly or quarterly their down payment for the end ofproposed sale, which we retain as a long-term deposit. In the lease term. Leases may be assigned with our approval. Common area maintenance and water are paid byevent that the customer exercises the contract right, the Company withand tenant determine a fair value and use the amount deposited as the tenants down payment against the sales price. In the event that the tenant responsible for maintenance, repairs and liability insurance associated with their specific unit within the building. Cash received for purchase optionsrental contract is recorded as deferred option revenue in the accompanying consolidated financial statements. These amounts are recorded to revenue upon thecancelled, ends without exercise of the option or the tenant fails to make timely deposits under the purchase option, any amounts already held under the purchase option are forfeited by the tenant or the expiration of the unused option.
Advertising Costs
Advertising costs are expensed as incurred. Advertising and promotion expense was $205,000$15,974 and $0 for the fiscal yearyears ended June 30, 2016.
Fair Value of Financial Instruments
The Company follows the fair value measurement rules, which provides guidance on the use of fair value in accounting and disclosure for assets and liabilities when such accounting and disclosure is called for by other accounting literature. These rules establish a fair value hierarchy was established that prioritizes thefor inputs to be used to measure fair value. Thevalue of financial assets and liabilities. This hierarchy givesprioritizes the highest priorityinputs to unadjustedvaluation techniques used to measure fair value into three levels: Level 1 (highest priority), Level 2, and Level 3 (lowest priority).
Level 1—Unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurements).
Level 2—Inputs other than quoted prices included within Level 1 that are observable for the conversion featureasset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).
Level 3—Inputs are unobservable and reflect the Company’s assumptions as to what market participants would use in pricing the asset or liability. The Company develops these notes is not indexedinputs based on the best information available.
Investments are reflected in the accompanying financial statements at fair value. The carrying amount of receivables and accounts payable and accrued expenses approximates fair value due to the Company's stock, and is considered to be a derivative that requires bifurcation. The debt discountshort-term nature of these notes is amortized over the life of the notes. For the year ended June 30, 2016, the Company amortized $51,052 of debt discount. The Company calculated the fair value of this conversion feature using the Black-Scholes model and the following assumptions: Risk-free interest rates ranging from .45% to .61%; Dividend rate of 0%; and, historical volatility rates ranging from 216% to 224%.
Fair Value Measurements Using | ||||
Total Fair | Quoted prices in | Significant other | Significant | |
Value at | active markets | observable inputs | Unobservable inputs | |
Description | June 30, 2016 | (Level 2) | (Level 2) | (Level 3) |
Derivative liabilities | $461,162 | $ - | $ 461,162 | $ - |
The estimated fair values for financial instruments are determined at discrete points in time based on relevant market information. These estimates involve uncertainties and cannot be determined with precision. The carrying amounts of lease receivables, accounts payable, and accrued liabilities and mortgages payable approximate fair value given their short termshort-term nature or effective interest rates.
Share-based compensation
The Company measures the cost of employee services received in exchange for an acquisitionaward of a business in accordance with ASC Topic 805, Business Combinations. Intangible assets that we acquire are recognized separately if they arise from contractual or other legal rights or if they are separable and are recorded at fair value. Goodwill is recorded asequity instruments based on the excess of (i) the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisitiongrant date fair value of the award. Unregistered stock awards are measured based on the fair market values of the underlying stock on the dates of grant. For service type awards, share-based compensation expense is recognized on a straight-line basis over the period during which the employee is required to provide service in exchange for the entire award. For awards that vest or begin vesting upon achievement of a performance condition, the Company estimates the likelihood of satisfaction of the performance condition and recognizes compensation expense when achievement of the performance condition is deemed probable using an accelerated attribution model.
F-10
GROW CAPITAL, INC.
AND SUBSIDIARIES
(formerly Grow Condos, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company capitalizes the cost of issuance grants that cover a period of employment or consulting agreement under contract or performance obligation related to future performance and amortizes the compensation related to these contracts ratably over the period of employment or at percentage of completion or other appropriate method for future performance grants. There are no issuance grants outstanding with a performance term longer than one year at June 30, 2019. Prepaid expenses for the fiscal years ended June 30, 2019 and 2018 include unamortized costs of issuance grants under employment and consulting contracts totalling $1,380,459 and $0, respectively.
Convertible debt and beneficial conversion features
The Company evaluates embedded conversion features within convertible debt under ASC 815 "Derivatives and Hedging" to determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in earnings. If the conversion feature does not require derivative treatment under ASC 815, the instrument is evaluated under ASC 470-20 "Debt with Conversion and Other Options" for consideration of any previous equity interestbeneficial conversion features.
Stock settled debt
In certain instances, the Company will issue convertible notes which contain a provision in which the price of the conversion feature is priced at a fixed discount to the trading price of the Company’sshares of Common Stockas traded in the acquired entity overover-the-counter market. In these instances, the (ii) fairCompany records a liability, in addition to the principal amount of the convertible note, as stock-settled debt for the fixed value transferred to the convertible note holder from the fixed discount conversion feature. As of June 30, 2019, and June 30, 2018, the Company had recorded within convertible notes, net of discount, the amount of $0 for the value of the net identifiable assets acquired.
Equity instruments (21,025,709 common shares of the Company) issued | 10,302,597 | |||
Fair value of total consideration transferred | $ | 10,302,597 | ||
Recognized amounts of identifiable assets acquired and liabilities assumed: | ||||
Cash | $ | 76,774 | ||
Property, plant, and equipment | 350 | |||
Deposits | 818 | |||
Accounts payable and accrued liabilities assumed | (41,710 | ) | ||
Total identifiable net liabilities | 36,232 | |||
Goodwill | 10,266,365 | |||
Total purchase price allocated | $ | 10,302,597 |
Impairment of Long-Lived Assets
The Company monitors its long-lived assets and finite-lived intangibles for indicators of impairment. If such indicators are present, the Company assesses the recoverability of affected assets by determining whether it is more likely than not that the faircarrying value of the reporting unitsuch assets is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step quantitative goodwill impairment test. The Company measures the carrying amount of the asset against the estimated discounted future cash flows associated with it. Should the sum of the expectedundiscounted future net discounted cash flows be less than the carrying value of the asset being evaluated, an impairment loss wouldassets. If such assets are found not to be recognized. The impairment loss would be calculated asrecoverable, the Company measures the amount of such impairment by whichcomparing the carrying value of the assets exceeds implied fair value. Our test of goodwill impairment includes assessing qualitative factors and the use of judgment in evaluating economic conditions, industry and market conditions, cost factors, and entity-specific events, as well as overall financial performance. Based on our analysis as of June 30, 2014, the Company recorded goodwill impairment in the amount of $10,266,365. Any future increases in fair value would not result in an adjustment to the impairment loss that was recorded in our consolidated financial statements.
Income Taxes
Deferred income taxes are provided using the asset and liability method, whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the future tax consequences attributable to differences between the reportedfinancial statement carrying amounts of existing assets and liabilities and their respective tax basis. Netbases and net operating loss and credit carryforwards. Deferred tax assets and liabilities are measured at rates expected to apply to taxable income in the years in which those temporary differences and carryforwards are expected to be recovered or settled. The effect on deferred tax assets are reduced byand liabilities of a change in tax rates is recognized in the statement of operations in the period that includes the enactment date. A valuation allowance is recorded when in the opinion of management, it is not more likely than not that someall or a portion or all of the net deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of the changes in tax laws and rates at the date of enactment.
Net (loss) income taxes in the statement of operations. During the period from inception (September 9, 2013) through June 30, 2015, there were no interest or penalties incurred related to income taxes. The Company is no longer subject to U.S. federal, state, or non-U.S. income tax examinations by tax authorities for tax years before 2010, except that earlier years can be examined for the sole purpose of challenging the net operating loss carry-forwards arising in those years.
Basic earnings per share includes no dilution and is computed by dividing income available to common stockholdersshareholders by the weighted average number of common shares of Common Stock outstanding for the period.period and contains no dilutive securities. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity, using the treasury stock method for stock options and warrants and the if-converted method for convertible debt.
June 30, 2016 | ||||
Net loss | $ | (1,496.455 | ) | |
Weighted average number of common shares used in basic earnings per share | 14,374,487 | |||
Effect of dilutive securities: | ||||
Stock options | - | |||
Stock warrants | - | |||
Weighted average number of common shares and dilutive potential common stock used in diluted loss per share | 14,374,487 | |||
F-11
GROW CAPITAL, INC.
AND SUBSIDIARIES
(formerly Grow Condos, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
All dilutive common stock equivalents are reflected in our net lossearnings (loss) per share calculations. Anti-dilutive common stock equivalents are not included in our lossearnings (loss) per share calculations. At
The following table sets forth the number of dilutive shares outstanding as of June 30, 2015, the Company had no outstanding options.
Options | 500,000 |
Total dilutive shares | 500,000 |
Reclassification
Certain prior period balances have been prepared in conformity with accounting principles generally acceptedreclassified to conform to the current period presentation in the United States of America, which contemplate continuation of the Company as a going concern. The Company operates within an industry that is illegal under federal law, has yet to achieve profitable operations, has a significant accumulated deficit and is dependent on our ability to raise capital from stockholders or other sources to sustain operations and ultimately achieve viable profitable operations. As reported in theseCompany’s consolidated financial statements and the Company has not yet achieved profitable operationsaccompanying notes.
Recent accounting pronouncements
In August 2018, the Securities and has an accumulated deficitExchange Commission (“SEC”) adopted amendments to eliminate, integrate, update or modify certain of $12,936,982, which we have determined raises substantial doubt about the Company's ability to continue as a going concern.
In May 2014, the Financial Accounting Standards Board ("FASB"(“FASB”) issued Accounting Standards Updates ("ASU") 2014-15, Presentation of Financial Statements – Going Concern and 2014-10, Development Stage Entities both of which have been adopted by the Company in the accompanying consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, “(Topic 842) Leases,” (“ASU 2016-02”) which requires lease assets and canliabilities to be applied either retrospectively to each period presented or asrecorded on the balance sheet for leases with terms greater than twelve months. We adopted this ASU and related amendments effective July 1, 2019 and will elect certain practical expedients permitted under the transition guidance. Additionally, we will elect the optional transition method that allows for a cumulative-effect adjustment in the period of adoption and will not restate prior periods.
Management has considered all recent accounting pronouncements issued and their potential effect on our financial statements. The Company's management believes that these recent pronouncements will not have a material effect on the Company’s financial statements.
Note 3 – Assets Held for Sale
(1)Assets in Oregon within the Pioneer Business Park
In April 2016, the Company purchased a parcel of land near Eugene, Oregon within the Pioneer Business Park (the “Pioneer Property”) from a private seller for the amount of $326,629 plus closing costs. As part of the purchase, the Seller financed through a note payable $267,129 of the purchase price (See Note 3). The intent of the Company was to build an industrial condominium building on the parcel, akin to the Eagle Point Property. The Company was unable to secure additional funding via debt or equity and due to the hostility of the local county government towards the intended operations of the tenants, and consequently, the Company abandoned those plans in late calendar 2017.
In December 2017, the Company made the decision to put the Pioneer Property up for sale, retained a sales agent and listed the Pioneer Property for sale at a purchase price of $399,000. At that time the Company impaired all costs
F-12
GROW CAPITAL, INC.
AND SUBSIDIARIES
(formerly Grow Condos, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
incurred towards development of the land which amounted to $31,843 The financial statements show the value of the land and the related mortgage under Assets Held for Sale and Liabilities Held for Sale on the balance sheet as of June 30, 2018, respectively. In September 2018, the Company completed the sale of the Pioneer Property for a gross sales price of $349,000 (See Note 3). After payment of all closing costs, the Company recorded a loss on sale of approximately $5,400.
(2)WCS Enterprises, Inc.
In the quarter ended March 31, 2019, the Company began to actively market WCS for sale and has begun negotiations with certain parties for the sale of WCS, subject to diligence, negotiation of a purchase agreement and fulfillment of typical closing conditions. In connection with these efforts, management has determined that it is appropriate to classify WCS as Assets Held for Sale.
(3)Smoke on the Water
The Results of the Discounted Operations which included the results of Smoke on the water and WCS are as follows:
|
|
| Fiscal Year Ended | |||
|
|
| June 30, | |||
|
|
| 2019 |
|
| 2018 |
Net revenues |
| $ | 341,016 |
| $ | 330,850 |
Operating expenses |
|
|
|
|
|
|
Cost of revenue |
|
| 100,096 |
|
| 80,034 |
General and administrative |
|
| 204,263 |
|
| 181,553 |
Depreciation, amortization and impairment |
|
| 141,469 |
|
| 61,267 |
Total operating expenses |
|
| 445,828 |
|
| 322,854 |
Income (Loss) from operations |
|
| (104,812) |
|
| 7,996 |
Gain on cancellation of purchase option |
|
| - |
|
| 25,900 |
Interest expense |
|
| (54,622) |
|
| (87,349) |
Income (loss) from discontinued operations |
| $ | (159,434) |
| $ | (53,453) |
F-13
GROW CAPITAL, INC.
AND SUBSIDIARIES
(formerly Grow Condos, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Groups of assets and liabilities held for sale as of June 30, 2019 and 2018:
| June 30, |
|
| June 30, | |
|
| 2019 |
|
| 2018 |
|
|
|
|
|
|
ASSETS: |
|
|
|
| |
Lease receivable | $ | 32,307 |
| $ | 2,440 |
Prepaid expenses |
| 13,449 |
|
| 4,309 |
Property, plant and equipment, net
|
| 1,606,097 |
|
| 2,067,884 |
Other assets |
| 6,650 |
|
| 6,650 |
TOTAL ASSETS | $ | 1,658,503 |
| $ | 2,081,283 |
|
|
|
|
|
|
LIABILITIES: |
|
|
|
|
|
Accounts payable and accrued liabilities | $ | 385,647 |
| $ | 393,735 |
Mortgage |
| 605,359 |
|
| 1,767,427 |
Other liabilities |
| 79,100 |
|
| 79,100 |
TOTAL LIABILITIES |
| 1,070,106 |
|
| 2,240,262 |
NET ASSETS | $ | 588,397 |
| $ | (158,979) |
(4)Mortgages Payable
(i)Mortgage related to assets held for sale on Pioneer Property and Eagle Mountain Property
|
| June 30, 2019 |
|
| June 30, 2018 |
| ||
Liability held for sale – Mortgages on Eagle Mountain Property |
| $ | - |
|
| $ | 902,711 |
|
Liability held for sale – Mortgage on Pioneer Property |
|
| - |
|
|
| 250,868 |
|
|
| $ | - |
|
| $ | 1,153,579 |
|
In 2013, upon the acquisition of the Eagle Point Property, WCS assumed the sellers’ mortgage from People’s Bank of Commerce, NA (“People’s Bank”). The original principal amount of the mortgage was $930,220, had an interest rate equal to People’s Bank’s prime rate plus 1.75%, required 58 monthly payments of $5,946 and required a balloon payment of $802,294 on June 28, 2018, the maturity date. The mortgage was secured by liens against certain properties owned by the seller. In August 2018, the Company paid the mortgage in full. As of June 30, 2019, and June 30, 2018, the balance on the mortgage was $0 and $797,476, respectively.
In 2013, after the acquisition of the Eagle Point Property, WCS entered into a second mortgage with People’s Bank for the amount of $120,000. The mortgage had an interest rate equal to People’s Bank’s prime rate plus 3%, required 56 monthly payments of $883, and required a balloon payment of $104,329 on October 15, 2018, the maturity date. The mortgage was collateralized by a deed of trust and assignment of rents with the seller and WCS in the amount of $120,000. In August 2018, the Company paid the mortgage in full. As of June 30, 2019, and June 30, 2018, balance on the mortgage was $0 and $105,235, respectively.
(i)Mortgage related to assets held for sale on Pioneer Property and Eagle Mountain Property (continued)
In April 2016, as more fully described in Note 3, the Company acquired the Pioneer Property and entered into a mortgage with the seller for the amount of $267,129. The mortgage originally had an interest rate of 6% per annum and a maturity date of the earlier of (a) October 1, 2017 or the date construction begins on the condominium building proposed to be built. In October 2017, the Company entered into an amended mortgage by making a
F-14
GROW CAPITAL, INC.
AND SUBSIDIARIES
(formerly Grow Condos, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
principal payment of adoption. We are evaluating$15,000 and financing the impactremaining balance of adopting this new accounting standard$252,129. The amended mortgage bears interest at the rate of 6% per annum and required interest only monthly payments of $1,261 from November 2017 through June 2018 with the remaining amount due in the form of a final balloon payment in July 2018. As noted above in Note 3, in September 2018, the Company closed on the sale of the parcel of land acquired with financing provided by the mortgage. As a condition of the sale, the mortgage was fully repaid at closing. As of June 30, 2019, and June 30, 2018, the balance on the mortgage was $0 and $250,868, respectively.
(ii)Mortgage related to assets held for sale on Smoke on the Water
|
| June 30, 2019 |
|
| June 30, 2018 |
| ||
Liability held for sale on Smoke on the Water |
| $ | 605,359 |
|
| $ | 613,848 |
|
In March 2017, as more fully described in Note 3, the Company acquired the Lake Selmac Property. Upon closing, the Company entered into mortgage payable with the seller in the amount of $625,000 with a maturity date of March 6, 2022. The mortgage had an interest rate of 5% per annum covering the monthly payments of $3,355 for the initial 12 months, which increased to 6% per annum for the monthly payments of $3,747 for the following 48 months. Upon maturity, the remaining balance due on the note is required to be paid through a balloon payment. In fiscal year periods ended June 30, 2019, the Company paid $8,489 to the principal of mortgage and $41,493 to the interests of the mortgage. As of June 30, 2019, and June 30, 2018, the balance on the mortgage was $605,359 and $613,848, respectively. The note is unsecured.
As of June 30, 2019, the approximate future aggregate principal payments in respect of our consolidated financial statements.
2020 | $ | 8,012 |
2021 |
| 9,419 |
2022 |
| 587,928 |
| $ | 605,359 |
Note 4 – PROPERTY AND EQUIPMENT, NET
Property and improvements consisted of the following as of June 30, 2016:
Buildings and improvements | $ | 1,117181 | ||
Land | 482,205 | |||
1,599,386 | ||||
Less: accumulated depreciation | (76,142 | ) | ||
$ | 1,523,244 |
|
| June 30, 2019 |
|
| June 30, 2018 |
| ||
Cost |
|
|
|
|
|
| ||
Leaseholder improvement |
| $ | 67,644 |
|
| $ | - |
|
Furniture and Fixtures |
|
| 1,875 |
|
|
| 1,875 |
|
|
|
| 69,519 |
|
|
| 1,875 |
|
Less: accumulated depreciation and impairment |
|
| (1,747) |
|
|
| (982) |
|
|
| $ | 67,772 |
|
| $ | 893 |
|
Depreciation expense (excluding impairment) amounted to $765 and $268, for the Eagle Point projectfiscal year ended June 30, 2019 and furniture2018, respectively.
F-15
GROW CAPITAL, INC.
AND SUBSIDIARIES
(formerly Grow Condos, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 5 – Accrued Liabilities
Accrued Liabilities at June 30, 2019 and equipment totaled $76,142June 30, 2018 consist of the following:
|
| Fiscal year Ended June 30, |
| |||||
|
| 2019 |
|
| 2018 |
| ||
Accrued salaries and wages |
| $ | 113,823 |
|
| $ | 189,220 |
|
Accrued expenses |
|
| 156,469 |
|
|
| 34,001 |
|
|
| $ | 270,292 |
|
| $ | 223,221 |
|
Note 6 – Convertible Notes Payable
At June 30, 2019 and June 30, 2018, convertible notes payable consisted of the following:
June 30, 2019 | June 30, 2018 | |||||||
Principal amount | $ | - | $ | - | ||||
Liability on stock settled debt | - | - | ||||||
Less: unamortized debt discount | - | - | ||||||
Convertible notes payable, net | $ | - | $ | - |
Auctus Fund, LLC Agreement:
On January 23, 2017 the Company entered into a convertible promissory note with Auctus Fund, LLC, and received net proceeds of $150,000 in the gross amount of $175,000. The Company paid original issuance cost of $25,000 in connection with this note which will be amortized over the term of the note. The Note had a maturity date of October 23, 2017 and interest at 10% per annum with fixed conversion price of 50% of the lowest closing price for the 10 trading days prior to the conversion date. The Company recorded $175,000 as liability on stock settled debt associated with this convertible note. In connection with the issuance of the Note the Company also issued a one-year warrant to purchase 150,000 of Common Stock of the Company at $0.85 subject to adjustment for standard anti-dilution events. The warrant had a term of 21 months, which expired in October 2018. The Company has granted the holder piggy back rights for the Common Stock underlying the convertible debenture and warrants. Total beneficial conversion feature discount recognized was $325,000 which is being amortized over the terms of the convertible notes payable. During the year ended June 30, 2016; there has been no depreciation taken on2018, the Company recognized interest expense of $136,905 related to the Pioneer Business Park project asamortization of the building is not yet available for its intended use .
Bank term loan, prime rate plus 1.75%, currently 5%, P&I payments of $5,946 due monthly, balloon payment of $802,294 due June 28, 2018, secured by property | $ | 859,210 | ||
Bank term loan, prime rate plus 1.75%, currently 5%, P&I payments of $5,946 due monthly, balloon payment of $802,294 due June 28, 2018, secured by property | 109,903 | |||
Private loan, 5% interest, interest only payments of $1,335.65 due monthly, balloon payment of $267,129.00 due October 1, 2017. | 267,129 | |||
Less: current portion | (33,187 | ) | ||
$ | 1,203,054 |
2017 | $ | 33,187 | ||
2018 | 1,169,867 | |||
Total | $ | 1,203,054 |
On January 20, 2017 the Company entered into an investment agreement (IA) as of April 15, 2016 with Tangiers Global, LLC, a Wyoming limited liability company. The agreement requires the Company to file a registration statement for the common stock underlying the IA. Subject to various limitations set forth in the IA, Tangiers, after effectiveness of such registration statement, is required to purchase up to $5,000,000 worth of the Company's common stock at a price equal to 82.5% of the market price as determined under the IA (prior five trading days). Any funds realized through the IA will be used by the Company as working capital for its operations.
Current portion: | ||||
Net operating loss carryforward | $ | 61,363 | ||
Less: valuation allowance | -61,363 | |||
Deferred tax asset-current portion | $ | - |
F-16
GROW CAPITAL, INC.
AND SUBSIDIARIES
(formerly Grow Condos, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
debenture and warrants. Total beneficial conversion feature discount recognized was $140,000 which being amortized over the term of the convertible note payable. On July 20, 2017, the Company recognized additional beneficiary conversion feature in the opinionamount of management, uncertainties exist that some portion or all$110,000 upon default for non-payment. During the year ended June 30, 2018, the Company recognized interest expense of $115,470 related to the amortization of the deferred tax assets will be realized. Deferred tax assetsbeneficial conversion feature discount and liabilities are adjusted for$2,762 related to the effectsamortization of changes in tax lawsoriginal issuance cost and rates on the date of enactment.legal fees. As of June 30, 2016,2018 the unamortized balance of beneficial conversion feature was $nil and the unamortized balance of original issuance cost was $nil. During theyear ended June 30, 2018, Tangiers gave notice to the Company and converted the entire principal and accrued interest under the note of $165,000 into 15,023,320 shares of Common Stock of the Company.
EMA Financing Agreement:
On January 9, 2017 the Company entered into a convertible promissory note with EMA Financial LLC and received net proceeds of $150,000 on the gross amount of $175,000. The Company paid the original issuance cost of $25,000 in connection with this note which will be amortized over the term of the note. The note had a maturity date of January 9, 2018 and an interest rate of 10% per annum with a fixed conversion price of 50% of the lowest closing price for the 10 trading days prior to the conversion date. The Company recorded $175,000 as liability on stock settled debt associated with this convertible note. Total beneficial conversion feature discount recognized was $325,000 which was amortized over the terms of the convertible note payable. As of June 30, 2018, and 2019, the unamortized balance of beneficial conversion feature was $niland the unamortized balance of original issuance cost was $nil. During the year ended June 30, 2018, EMA gave notice to the Company and converted the entire principal and accrued interest under the note of $175,000 into 15,583,632 shares of Common Stock of the Company.
Note 7 – Capital Stock
On June 22, 2018, the Board of Directors of the Company approved the Recapitalization, which increased the Company’s authorized Common Stock from 100,000,000 to 175,000,000 shares, effective July 10, 2018. As of June 30, 2019, the Company's authorized stock consisted of 175,000,000 shares and 5,000,000 shares of Preferred Stock. As of August 29, 2019, the Company has net federal operating loss carry forwards500,000,000 shares of approximately $61 thousand and state net operating loss carry forwards of approximately $61 thousand.
Common Stock for cash and debt forgiveness in the statement of changes in stockholders' equity. As a result of the Company's reverse acquisition of GCI, the shares issued for the 10% membership interest in connection with the acquisition of WCS were valued based on the quoted market price of GCI as of the date of the share issuance, which resulted in compensatory expense of $900,090. Compensation expense was determined in accordance with ASC 505 subtopic 50, Equity-Based Payments to Non-Employees, by multiplying the number of GCI shares received by the two members of WCS in the reverse acquisition in exchange for their 10% membership interest multiplied by the trading price of GCI Common Stock on June 27, 2014, less the $100,000 of cash and debt redemption comprising the capital contributions made by the two members for the 10% membership interest.
During the fiscal year ended June 30, 2015,2019, the Company issued an aggregate of 245,170 common shares to a total of 15 persons.
During the fiscal year ended June 30, 2016
During the fiscal year ended June 30, 2019, the Company issued 1,000,000 to the Company’s secretary for services rendered, valued at $115,000, or $0.115 per share, the closing price of the Company’s Common Stock on the date of issuance as posted on OTCMarkets.
During the year ended June 30, 2019, the Company issued an aggregate of 8,331,364 shares of Common Stock to its officers and directors, as compensation for their services pursuant to the terms of their employment agreements. The Company valued the issuances at the closing price of the Company’s Common Stock as traded on the OTCMarkets on the date of each grant. Because the share compensation is all of the compensation earned by the officers and directors for their services, the Company treated the issuances as akin to a cash payment and recorded $1,268,649 into prepaid expense upon issuance. The Company will ratably amortize the prepaid compensation over the term of
F-17
GROW CAPITAL, INC.
AND SUBSIDIARIES
(formerly Grow Condos, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
the employment covered in the employment agreements. For the fiscal year ended June 30, 2019, the Company expensed $195,337 as stock-based compensation.
During the year ended June 30, 2019, the Company issued 3,000,000 unregistered shares of Common Stock to Jonathan Bonnette, pursuant to the terms of his employment agreement as compensation for his initial year as President and CEO. Of the Common Stock issued, 1,500,000 vested at grant and the remaining 1,500,000 shares of Common Stock vested 180 days after the signing of the employment agreement in July 2018. The Company valued the issuance at $0.12 per share, the closing price of the Company’s Common Stock as traded on the OTCMarkets on the date of grant. Because the share compensation was all of the compensation earned by Mr. Bonnette for his services as CEO and President during the term of his employment agreement, the Company treated the issuance as akin to a cash payment and recorded $390,000 into prepaid expense upon issuance. The Company will ratably amortize the prepaid compensation over the initial 12-month period of employment covered in the employment agreement. For the fiscal year ended June 30, 2019, the Company expensed $390,000 as stock-based compensation.
During the fiscal year ended June 30, 2019, the Company issued 1,148,665 fully vested unregistered shares of Common Stock to settle certain liabilities. The Company valued those issuances at the closing price of the Company’s Common Stock as traded on the OTCMarkets on the date of grant and recorded a $79,894 liability settlement and interest expense of $6,612 and stock-based compensation of $10,099 on the statement of operations.
Preferred Stock
In 2015, the Company designated all 5,000,000 shares of its Preferred Stock as Series A Convertible Preferred Stock (the "Series A Preferred"), par value $0.001. The Series A Preferred shareholders voted together with the Common Stock as a single class and were entitled to receive all notices relating to voting that are required to be given to the holders of the Common Stock. The holders of shares of Series A Preferred were entitled to five votes per share and each share was convertible by the holder into five shares of Common Stock. All of the Series A Preferred shares were issued and converted into Common Stock in November 2015.
Equity Incentive Plan
In December 2015, the Company adopted the 2015 Equity Incentive Plan (the “Incentive Plan”) with a term of 10 years. The Incentive Plan allows for the issuance up to a maximum of 2 million shares of Common Stock, options exercisable into Common Stock of the Company or stock purchase rights exercisable into shares of Common Stock of the Company. The Incentive Plan is administered by the Board unless a separate delegation to an administrator is made by the Board. Options granted under the Incentive Plan carry a maximum term of 10 years, except to a grantee who is also a 10% beneficial owner at the time of grant, in which case the maximum term is 5 years. In addition, exercise prices of options granted must be within a certain percentage of the closing price on date of grant depending on the level of beneficial ownership of Common Stock of the Company by the grantee. All vesting conditions are set by the Board or a designated administrator. In December 2015, the Company filed a registration statement on Form S-8 covering all shares issued or issuable under the Incentive Plan. The Company has granted options to purchase 2 million shares under the Incentive Plan during April 2016, 1.5 million of which have been exercised and 0.5 million of which have vested and remain outstanding. There are no remaining shares available under the Incentive Plan
F-18
GROW CAPITAL, INC.
AND SUBSIDIARIES
(formerly Grow Condos, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Stock Plan
In December 2015, the Company adopted the 2015 Stock Plan (the “Stock Plan”). As a condition of adoption of the Stock Plan, the Company filed a registration statement on Form S-8 in December 2015 to register the shares issued under the Stock Plan. The Stock Plan allows for the issuance of up to a maximum of 2 million shares of Common Stock of the Company. The Stock Plan is administered by the Board unless a separate delegation to an administrator is made by the Board. The Stock Plan shall continue in effect until it is terminated by the Board or all shares are issued pursuant to the Stock Plan. The Company has not granted any shares under the Stock Plan.
A summary of the change in stock purchase warrants outstanding for the period ended June 30, 2019 and 2018 is as follows:
|
|
|
|
|
|
|
| Weighted Average |
|
|
|
| ||||
|
|
|
|
|
|
|
| Remaining |
|
| Aggregate |
| ||||
|
| Number of |
|
| Weighted Average |
|
| Contractual Term |
|
| Intrinsic |
| ||||
|
| Warrants |
|
| Exercise Price |
|
| (in years) |
|
| Value |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Outstanding at June 30, 2017 |
|
| 300,000 |
|
| $ | 0.85 |
|
|
| 0.58 |
|
| $ | - |
|
Granted |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Exercised |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Forfeited |
|
| (150,000) |
|
|
| 0.85 |
|
|
|
|
|
|
|
|
|
Outstanding at June 30, 2018 |
|
| 150,000 |
|
| $ | 0.85 |
|
|
| 0.14 |
|
| $ | - |
|
Granted |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Exercised |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Forfeited |
|
| (150,000) |
|
|
| 0.85 |
|
|
| - |
|
|
| - |
|
Exercisable at June 30, 2018 |
|
| - |
|
| $ | - |
|
|
| - |
|
| $ | - |
|
F-19
GROW CAPITAL, INC.
AND SUBSIDIARIES
(formerly Grow Condos, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Options
A summary of the change in stock purchase options outstanding for the period ended June 30, 2019 and 2018 is as follows:
|
|
|
|
|
|
|
| Weighted |
|
| Remaining |
| |
|
|
|
|
|
|
|
| Average |
|
| Contractual |
| |
|
| Options |
|
| Exercise |
|
| Grant Date |
|
| Life |
| |
|
| Outstanding |
|
| Price |
|
| Fair Value |
|
| (Years) |
| |
Balance – June 30, 2017 |
| 500,000 |
|
| $0.40 |
|
| $0.52 |
|
| 3.83 |
| |
Options issued |
|
| - |
|
| - |
|
| - |
|
| - |
|
Options expired |
|
| - |
|
| - |
|
| - |
|
| - |
|
Options exercised |
|
| - |
|
| - |
|
| - |
|
| - |
|
Balance – June 30, 2018 |
|
| 500,000 |
|
| $0.40 |
|
| $0.52 |
|
| 2.83 |
|
Options issued |
|
| - |
|
| - |
|
| - |
|
| - |
|
Options expired |
|
| - |
|
| - |
|
| - |
|
| - |
|
Options exercised |
|
| - |
|
| - |
|
| - |
|
| - |
|
Balance – June 30, 2019 |
|
| 500,000 |
|
| $0.40 |
|
| $0.52 |
|
| 1.83 |
|
There were no unvested options outstanding during the years ended June 30, 2019 and 2018. Options outstanding had intrinsic value as of June 30, 2019 and 2018 of $nil. In the year ended June 30, 2016 the Company made available for grant up to 2,000,000 shares of common stock. The maximumissued an option with no term ofattached. Of the original option, is five years.
Weighted | ||||||||||||||||||||
Average | ||||||||||||||||||||
Weighted | Remaining | Aggregate | ||||||||||||||||||
Number of | Average | Contractual | Intrinsic | |||||||||||||||||
Options | Exercise Price | Term (in years) | Value | |||||||||||||||||
Options outstanding at January 25, 2016 | 4,000,000 | 0.40 | ||||||||||||||||||
Granted | 2,000,000 | - | ||||||||||||||||||
Exercised | 1,500,000 | - | ||||||||||||||||||
Forfeited | - | - | ||||||||||||||||||
Options outstanding at June 30, 2016 | 500,000 | $ | 0.40 | 1 | $ | - | ||||||||||||||
Options exercisable at June 30, 2016 | 500,000 | $ | 0.40 | 1 | $ | - |
Note 8 – RELATED PARTY TRANSACTIONS
Until its sale of their facilities toWCS on September 30, 2019, the Company was leasing units in the building located at no costs to the Company since our inception.
On July 1, 2018, Wayne Zallen resigned as the President and CEO of the Company and David Tobias resigned his position as a member of the Board. On the same day, Jonathan Bonnette was elected to the Board to fill the vacancy created by the resignation of David Tobias and was also appointed President and CEO of the Company. Mr. Zallen remained the Chairman of the Board and served as the CFO until the appointment of James Olson as Chairman of the Board and the appointment of Trevor Hall as CFO, respectively. Mr. Zallen’s employment contract was terminated upon his resignation as CEO, and the Company agreed to pay Mr. Zallen $2,500 per month for his continued services.
In July 2018, the Company entered into an employment agreement requires no rental paymentswith Mr. Bonnette. The employment agreement had an initial term of one year and includes compensation for the first 12year of $240,000 payable in unregistered shares of Common Stock at a valuation of $0.08 per share or 3,000,000 shares of Common Stock, which were issued in July 2018. The shares were valued at $390,000 upon grant, recorded to prepaid compensation and amortized ratably over the term of the agreement.
F-20
GROW CAPITAL, INC.
AND SUBSIDIARIES
(formerly Grow Condos, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In July 2018, the Company entered into a consulting agreement with Mr. Kennedy with a one year term. Mr. Kennedy received a fixed fee of $100,000 for his services which was payable in unregistered shares of Common Stock valued at $0.10 per share for the first $50,000 on July 1, 2018 and at $0.034 for the second $50,000 payable on January 1, 2019 for a total of 1,970,805 unregistered shares of Common Stock, all of which have been issued. The shares payable on January 1, 2019 were valued at $394,161 and are being expensed in the fiscal year ended June 30, 2019.
On January 28, 2019, the Company entered into a consulting agreement with Trevor Hall and appointed Mr. Hall to serve as a part-time CFO of the Company through December 31, 2019. Mr. Hall succeeded Wayne Zallen as CFO, who resigned from the position in connection with Mr. Hall’s appointment. Pursuant to the consulting agreement, Mr. Hall received $63,000 in compensation, payable as 1,000,000 shares of Common Stock of unregistered Common Stock of the Company and will devote enough of his time to the Company as is reasonably necessary to meet the needs of the Company during the term. The shares were issued on January 29, 2019.
On April 29, 2019, Mr. Wayne Zallen resigned as a member of the Board of Directors and Chairman. Concurrently the board appointed James Olson to fill the Board vacancy and as Chairman of the Board. Mr. Olson will also be entitled to compensation for his service on the Board of Directors in the amount of $10,000 per quarter paid in the form of fully vested unregistered shares of the Company’s Common Stock at a discount of 35% to market on the first day of each calendar quarter. On April 29, 2019 Mr. Olson was issued a total of 108,853 shares in connection with his appointment at the discount to market described above.
In fiscal 2018, the Company was notified by its primary banks that these banks would no longer accept the Company as a client for its banking services. As of June 30, 2018, WCS, was notified that its bank, which also holds both of its mortgages, would no longer continue to accept WCS as a customer shortly after its fiscal year
F-21
GROW CAPITAL, INC.
AND SUBSIDIARIES
(formerly Grow Condos, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
end. Because the Company rents its properties to those who engage in a federal crime under the Controlled Substances Act, most banks subject to any federal oversight (the Office of the Comptroller of the Currency or any of the Federal Reserve Bank’s of the United States) have declined to do business with any entity that is related in any way to cannabis operations. The Company’s management and directors have as of June 30, 20162018 transferred the Company’s cash and no revenue associatedits banking operations to an entity owned and controlled by them. The Company has treated the cash transferred as amounts due from this related entity and the cash expended from these accounts on behalf of the Company as reductions of the amounts due from the related entity. As of June 30, 2019, and June 30, 2018, the amount held in cash by the related entity and reported as a current asset as due from related party was $16,854 and $40,268.
See Note 10 for a description of the related parties involved in the Bombshell acquisition.
Note 9 - Commitments
During the three months ended September 30, 2018, the Company negotiated a sublease agreement with thisAppreciation, LLC effective October 19, 2018 to lease the Henderson Property for use as the Company’s new headquarters.The lease has been recordeda term of 123 months, an abatement of the first four months of rent during which time the Company would complete certain required leasehold improvements and escalating base monthly rent per square foot ranging between $2.00 to $3.00 per square foot. The Company commenced occupation of the premises in February 2019.
Total rent expenses for the fiscal year ended June 30, 2019 and 2018 are $17,538 and $0, respectively.
As of June 30, 2019, the approximate future aggregate minimum lease payments in respect of our current obligations were as follows:
2020 | $ | 36,567 |
2021 |
| 38,896 |
2022 |
| 40,020 |
2023 |
| 41,264 |
2024 |
| 42,548 |
Remining periods |
| 207,243 |
| $ | 406,538 |
Note 10 – Income Taxes
The income tax expense (benefit) consisted of the following for the fiscal year ended June 30, 2019 and 2018:
June 30, 2019 | June 30, 2018 | ||||||
Total current | $ | - | $ | - | |||
Total deferred | - | - | |||||
$ | - | $ | - |
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
F-22
GROW CAPITAL, INC.
AND SUBSIDIARIES
(formerly Grow Condos, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following is a reconciliation of the expected statutory federal income tax and state income tax provisions to the actual income tax benefit for the fiscal year ended June 30, 2019 and 2018:
|
| June 30, 2019 |
|
| June 30, 2018 |
| ||
Expected benefit at federal statutory rate |
| $ | 649,000 |
|
|
| 670,000 |
|
Non-deductible expenses |
|
| (360,000) |
|
|
| (554,000) |
|
Change in valuation allowance (including the effect from change in tax rates) |
|
| (289,000) |
|
|
| (116,000) |
|
|
| $ | - |
|
| $ | - |
|
Significant components of the Company’s deferred tax assets and liabilities were as follows for the fiscal year ended June 30, 2019 and 2018:
|
| June 30, 2019 |
|
| June 30, 2018 |
| ||
Deferred tax assets: |
|
|
|
|
|
|
|
|
Net operating loss carryforwards |
| $ | 2,589,000 |
|
| $ | 2,993,000 |
|
Deferred payroll |
|
| 81,200 |
|
|
| 150,000 |
|
Impairments |
|
| 82,900 |
|
|
| 109,000 |
|
Other |
|
| - |
|
|
| 29,000 |
|
Total deferred tax assets |
|
| 2,753,100 |
|
|
| 3,281,000 |
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities |
|
|
|
|
|
|
|
|
Deferred revenue |
|
| - |
|
|
| - |
|
Total deferred tax liabilities |
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets |
|
| 2,753,100 |
|
|
| 3,281,000 |
|
Less valuation allowance |
|
| (2,753,100) |
|
|
| (3,281,000) | ) |
Net deferred tax assets (liabilities) |
| $ | - |
|
| $ | - |
|
During the fiscal year ended June 30, 2019 and 2018 the, the Company recognized no amounts related to tax interest or penalties related to uncertain tax positions. The Company is subject to taxation in the accompanying financial statements.
As of June 30, 2019, the Company aestimates it has approximately $11.3 million in US Federal net operating loss carryforwards, which will begin to expire in 2030 and an additional approximately $3.1 million in the state of $15,575 as of March 31, 2016. At this time there is no note in place with terms for re-payment.
Note 11- Subsequent Events
On July 1, 2016, two2019 the Company issued a total of 450,918 shares of unregistered Common Stock to its directors as part of their respective compensation package.
On July 8, 2019, the Company entered into a non-binding letter of intent (the “LOI”) to acquire Encompass More Group, Inc. (“Encompass”), a Nevada corporation. In connection with the LOI, Encompass issued a promissory note (the “Note”) to the Company pursuant to a loan agreement (the “Loan Agreement”), dated July 22, 2019, by and between Encompass and the Company, in exchange for a loan of $100,000 (the “Loan”). Pursuant to the Loan Agreement, the proceeds of the units under leaseLoan will be used by Encompass for working capital and general corporate purposes. The Note has a twelve-month term, an entityinterest rate of 5.0%, and is payable in monthly installments of $2,000, with all remaining principal and interest due on the maturity date, unless paid earlier by Encompass.
F-23
GROW CAPITAL, INC.
AND SUBSIDIARIES
(formerly Grow Condos, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Pursuant to the LOI, the Company and Encompass have agreed to enter into a stock exchange agreement (the “Encompass Exchange Agreement”) pursuant to which the Company will issue up to $1,800,000 in unregistered shares (the “Encompass Closing Shares”) of Common Stock, to the stockholders of Encompass (the “Encompass Holders”) in exchange for all of the capital stock of Encompass (the “Encompass Exchange”). After the closing of the Encompass Exchange, the Encompass Holders will also be eligible to receive earn-out consideration of up to an additional $3,000,000 in unregistered shares of Common Stock (the “Encompass Earn-out Shares”) earnable in tranches of $1,000,000 unregistered shares of Common Stock in each of the second, third and fourth years after the Closing, based on whether Encompass is able to meet certain revenue thresholds in each year.
The Encompass Exchange is subject to certain signing and closing conditions, including, among other conditions, (i) completion of diligence by the Company, (ii) the receipt of any necessary regulatory approvals and third party consents, (iii) the negotiation and execution of the Encompass Exchange Agreement, (iv) the approval by the Company’s stockholders of an amendment to the Company’s articles of incorporation authorizing additional shares of Common Stock, (v) there being no material adverse change in Encompass’ business, results of operations, prospects, condition (financial or otherwise) or assets, and (vi) certain other customary conditions.
On July 23, 2019, (the “Closing Date”), the Company acquired Bombshell, a Nevada corporation, pursuant to a stock exchange agreement (the “Exchange Agreement”), dated June 26, 2019, by and between Bombshell, the shareholders of Bombshell (the “Bombshell Holders”). At the Closing, Bombshell became a wholly-owned subsidiary of the Company. Joel Bonnette, the current President and Chief Executive Officer of Bombshell, now serves as the Chief Executive Officer of Bombshell.
Immediately prior to the Closing, the Company, Bombshell and the Bombshell Holders entered into an amendment to the Exchange Agreement (the “Amendment”). Pursuant to the Amendment, at the Closing, the Company acquired 100% of the outstanding shares of Bombshell (the “Bombshell Shares”) in exchange for the Bombshell Holders receiving the right to receive 110,675,328 shares (the “Consideration Shares”) of unregistered shares of the Company’s Common Stock on a pro rata basis (the “Exchange”), 33,000,000 of which were issued to the Bombshell Holders (the “Closing Shares”) at the Closing on a pro rata basis. The remaining 77,675,328 Consideration Shares (the “Secondary Shares”) were issued on September 3, 2019, to the Bombshell Holders upon the Company filing an effective amended and restated articles of incorporation (the “Charter Amendment”) that increased the number of authorized shares of Common Stock. The Bombshell Holders are also eligible to receive earn-out consideration of up to an additional 36,769,215 shares of Common Stock (the “Earn-out Shares”) earnable in tranches of 12,256,405 shares of Common Stock in each of the second, third and fourth years after the Closing, based on whether Bombshell is able to meet certain Earnings Before Interest and Taxes thresholds in each year. The Bombshell Holders include certain limited liability companies owned by (i) Jonathan Bonnette, (ii) Joel Bonnette, and (iii) Terry Kennedy.
On July 31, 2019 the Company issued 277,778 shares of Common Stock in respect to private placements for total gross proceeds of $50,000.
On September 30, 2019, the Company sold WCS to the Zallen Trust (See Note 3).
On October 1, 2019 the Company issued 1,074,381 fully vested unregistered shares of Common Stock to officers and directors as part of their respective board compensation package.
On October 10, 2019 the Company issued a total of 210,000 unregistered shares of Common Stock to a company controlled by our CEO will begin paying monthly rent as well asone of its officers for services rendered with a value of $16,433. The issued shares were valued at fair market value on the monthly option fee.
The Company has evaluated subsequent events through October 14, 2019, the date these financial statements were available for issuance.
F-24
None.
Evaluation of Disclosure Controls and Procedures
We intend to maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the specified time periods and accumulated and communicated to our management, including our Chief Executive Officer ("Principal Executive Officer") and our Chief Financial Officer ("Principal Financial Officer"), as appropriate, to allow timely decisions regarding required disclosure. Our management, with the participation of our Principal Executive and Financial Officers, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a- 15(e) and 15d- 15(e) under the Exchange Act). Based on this evaluation, our Principal Executive and Financial Officer concluded that, as of June 30, 2016,2019, our disclosure controls and procedures were not effective, for the reasons discussed below, to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is (i) recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms, and (ii) is accumulated and communicated to our management, including our Principal Executive and Financial Officers, as appropriate to allow timely decisions regarding required disclosure.
Management's Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with GAAP.
Due to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate due to changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Under the supervision and with the participation of our management, including our Principal Executive and Financial Officers, we conducted an evaluation of the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission inInternal Control—Integrated Framework(2013). In connection with our evaluation, we identified a material weakness in our internal control over financial reporting as of June 30, 2015.
A material weakness is a deficiency, or combination of deficiencies, that creates a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected in a timely manner. The material weakness related to our company was due to not having the adequate personnel to address the reporting requirements of a public company and to fully analyze and account for our transactions. We do not believe that this material weakness has resulted in deficient financial reporting because we have worked through the year end close process performing additional review and analysis to assure compliance with accounting principles generally accepted in the United States ("GAAP") and SEC reporting requirements.
Accordingly, while we identified a material weakness in our system of internal control over financial reporting as of June 30, 2015,2019, we believe that we have taken reasonable steps to ascertain that the financial information contained in this report is in accordance with GAAP. We are committed to remediating the control deficiencies that constitute the material weaknesses by implementing changes to our internal control over financial reporting. Management is
responsible for implementing changes and improvements in the internal control over financial reporting and for remediating the control deficiencies that gave rise to the material weaknesses.
We plan to implement measures to remediate the underlying causes of the control deficiencies that gave rise to the material weaknesses through additional training efforts as well as ensuring appropriate review of the related significant accounting policies by the members of management with the requisite level of knowledge, experience and training to appropriately apply GAAP. We plan to undertake additional review processes to ensure the related significant accounting policies are implemented and applied properly on a consistent basis throughout the Company. We believe these measures will remediate the control deficiencies. However, we have not completed all of the corrective processes, procedures and related evaluation or remediation that we believe are necessary. As we continue to evaluate and work to remediate the control deficiencies that gave rise to the material weaknesses, we may determine to take additional measures to address the control deficiencies.
This Report on Form 10-K does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Our management's report was not subject to attestation by our independent registered public accounting firm pursuant to rules of the SEC that permit us to provide only management's report in this Report on Form 10-K.
Changes in Internal Control Over Financial Reporting
None.
None
Certain information required by Part III
The following table sets forth the names of all currentinformation required by this Item concerning our directors and executive officers of the Company. These persons will serve until the next annual meeting of the stockholders or until their successors are elected or appointed and qualified, or their prior resignation or termination.
The following table sets forthinformation required by this Item is hereby incorporated by reference to the aggregate compensation paid by the Company for services rendered during the periods indicated:
Name and Position | Year | Salary($) | All other Compensation($)(3)(4) | Total($) |
2016 | $12,500 | 0 | $12,500 | |
Wayne A. Zallen, CEO (1) | 2015 | $30,000 | 0 | $30,000 |
Transition Period | 0 | 0 | 0 | |
2013 | 0 | 0 | 0 | |
2016 | $7,500 | 0 | $7,500 | |
Joann Z. Cleckner, CFO (1) | 2015 | $9,000 | 0 | $9,000 |
Transition Period | 0 | 0 | 0 | |
2013 | 0 | 0 | 0 | |
2016 | 0 | 0 | 0 | |
Jeff W. Holmes, CEO (2) (3) (4) | 2015 | 0 | 0 | 0 |
Transition Period | 78,722 | 188,786 | 267,508 | |
2013 | 153,722 | 2,406 | 156,128 |
(a)Equity Compensation Plans
Equity Incentive Plan
In December 2015, the Company adopted the 2015 Equity Incentive Plan (the “Incentive Plan”) with a term of 10 years. The Incentive Plan allows for the issuance up to a maximum of 2 million shares of Common Stock, options exercisable into Common Stock of the Company or stock purchase rights exercisable into shares of Common Stock of the Company. The Incentive Plan is administered by the Board unless a separate delegation to an administrator is made by the Board. Options granted under the Incentive Plan carry a maximum term of 10 years, except to a grantee
who is also a 10% beneficial owner at the time of grant, in which case the maximum term is 5 years. In addition, exercise prices of options granted must be within a certain percentage of the closing price on date of grant depending on the level of beneficial ownership of Common Stock of the Company by the grantee. All vesting conditions are set by the Board or a designated administrator. In December 2015, the Company filed a registration statement on Form S-8 covering all shares issued or issuable under the Incentive Plan. The Company has granted options to purchase 2 million shares under the Incentive Plan during April 2016, 1.5 million of which have been exercised and 0.5 million of which have vested and remain outstanding. There are no remaining shares available under the Incentive Plan.
Stock Plan
In December 2015, the Company adopted the 2015 Stock Plan (the “Stock Plan”). As a condition of adoption of the Stock Plan, the Company filed a registration statement on Form S-8 in December 2015 to register the shares issued under the Stock Plan. The Stock Plan allows for the issuance of up to a maximum of 2 million shares of Common Stock of the Company. The Stock Plan is administered by the Board unless a separate delegation to an administrator is made by the Board. The Stock Plan shall continue in effect until it is terminated by the Board or all shares are issued pursuant to the Stock Plan. The Company has not granted any shares under the Stock Plan.
Options
A summary of the change in stock purchase options outstanding for the period ended June 30, 2019 and 2018 is as follows:
|
|
|
|
|
|
|
| Weighted |
|
| Remaining |
| |
|
|
|
|
|
|
|
| Average |
|
| Contractual |
| |
|
| Options |
|
| Exercise |
|
| Grant Date |
|
| Life |
| |
|
| Outstanding |
|
| Price |
|
| Fair Value |
|
| (Years) |
| |
Balance – June 30, 2017 |
| 500,000 |
|
| $0.40 |
|
| $0.52 |
|
| 3.83 |
| |
Options issued |
|
| - |
|
| - |
|
| - |
|
| - |
|
Options expired |
|
| - |
|
| - |
|
| - |
|
| - |
|
Options exercised |
|
| - |
|
| - |
|
| - |
|
| - |
|
Balance – June 30, 2018 |
|
| 500,000 |
|
| $0.40 |
|
| $0.52 |
|
| 2.83 |
|
Options issued |
|
| - |
|
| - |
|
| - |
|
| - |
|
Options expired |
|
| - |
|
| - |
|
| - |
|
| - |
|
Options exercised |
|
| - |
|
| - |
|
| - |
|
| - |
|
Balance – June 30, 2019 |
|
| 500,000 |
|
| $0.40 |
|
| $0.52 |
|
| 1.83 |
|
There were no unvested options outstanding during the years ended June 30, 2019 and 2018. Options outstanding had intrinsic value as of June 30, 2019 and 2018 of $nil. In the year ended June 30, 2016 the Company issued an option with no term attached. Of the original option, 500,000 remain outstanding.
(b) Security Ownership
The information required by this Item is hereby incorporated by reference to the section of our Information Statement entitled “Security Ownership of Certain Beneficial Owners
The followinginformation required by this Item is a summary ofhereby incorporated by reference to the fees billed to us by our principal accountants during the fiscal years ended December 31, 2012, and 2013 and during the Transition Period:
Fee Category | Transition Period | 2015 | 2016 | |||||||||
Audit Fees | $ | 3,850 | $ | 78,923 | $ | 99,945 | ||||||
Audit-related Fees | - | - | - | |||||||||
Tax Fees | - | - | $ | 2,000 | ||||||||
All Other Fees | - | - | - | |||||||||
Total Fees | $ | 59,900 | $ | 3,850 | $ | 119,945 |
(a)(1)(2) Financial Statements. See the audited financial statements for the Fiscal Year ended June 30, 20152019 and 2018 contained in Item 8 above which are incorporated herein by this reference.
(b)Exhibits. The following exhibits are filed as part of this Transition Report:
Exhibit Number | Description |
3.1 | |
3.2 | |
10.1# | |
10.2# | |
10.3# | |
10.4# | |
10.5# | |
10.6 | |
10.7# | |
10.8# | |
10.9 | |
10.10 |
10.11 | |
10.12 | |
10.13 | |
10.14 | |
10.15 | |
10.16 | |
10.17 | |
10.18 | |
21* | |
31.1* | |
31.2* | |
32.1* | |
32.2* | |
101 | XBRL Instance |
101 | XBRL Taxonomy Extension Presentation Linkbase |
101 | XBRL Taxonomy Extension Label Linkbase |
101 | XBRL Taxonomy Extension Definition Linkbase |
101 | XBRL Taxonomy Extension Calculation Linkbase |
101 | XBRL Taxonomy Extension Schema |
*Filed herewith.
# Management contract or any compensatory plan, contract or arrangement.
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.
Grow Capital Inc. | |||
Date: October 15, 2019 | By: | /s/ Jonathan Bonnette | |
Jonathan Bonnette Chief Executive Officer, and President (Principal Executive Officer) | |||
Date: October 15, 2019 | By: | /s/ Trevor K. Hall | |
Trevor K. Hall Chief Financial Officer (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.
Signature | Title | Date | |||
/s/ Jonathan Bonnette | Chief Executive Officer, President and a Director (Principal Executive Officer) | October 15, 2019 | |||
Jonathan Bonnette | |||||
/s/ Carl S. Sanko | Director and Secretary/Treasurer | October 15, 2019 | |||
Carl S. Sanko | |||||
/s/ James Olson | Director and Chairman of the Board | October 15, 2019 | |||
Wayne A. Zallen | |||||
/s/ Trevor K. Hall | Chief Financial Officer (Principal Financial and Accounting Officer) | October 15, 2019 | |||
Trevor K. Hall |
22