UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

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

 

For the quarterly period ended December 31, 2021

 

or

 

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from __________ to _______

 

Commission File Number 333-255266

 

GROVE, INC.

(Exact name of registrant as specified in its charter)

 

Nevada

 

83-3378978

(State or other jurisdiction of

 incorporation or organization)

 

(IRS Employer

Identification No.)

 

1710 Whitney Mesa Drive, Henderson NV

 

89014

(Address of principal executive offices)

 

(Zip Code)

 

(701) 353-5425

(Registrant’s telephone number, including area code)

 

_______________________________________________________________

(Former name, former address, and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act: None

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock

GRVI

Nasdaq

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). ☒ Yes ☐ No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

Non-accelerated Filer

Smaller reporting company

 

 

Emerging growth company

 

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.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) YES ☒ NO

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

As of February 11, 2022, there were 16,576,088 common shares issued and 16,472,739 outstanding.

 

 

TABLE OF CONTENTS

 

PART I - FINANCIAL INFORMATION

 

 

 

 

 

 

 

 

Item 1.

Interim Condensed Consolidated Financial Statements

 

4

 

 

 

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition or Plan of Operation

 

19

 

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

22

 

 

 

 

 

 

Item 4.

Controls and Procedures

 

22

 

 

 

 

 

PART II - OTHER INFORMATION

 

 

 

 

 

 

 

 

Item 1.

Legal Proceedings

 

23

 

 

 

 

 

 

Item 1A.

Risk Factors

 

23

 

 

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

23

 

 

 

 

 

 

Item 3.

Defaults Upon Senior Securities

 

23

 

 

 

 

 

 

Item 4.

Mine Safety Disclosures

 

23

 

 

 

 

 

 

Item 5.

Other Information

 

23

 

 

 

 

 

 

Item 6.

Exhibits

 

24

 

 

 

 

 

 

SIGNATURES

 

25

 

2

Table Of Contents

 

FORWARD-LOOKING STATEMENTS

 

This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements.

 

We operate in a rapidly changing environment and new risks emerge from time to time. As a result, it is not possible for our management to predict all risks, such as the COVID-19 outbreak and associated business disruptions including delayed clinical trials and laboratory resources, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. The forward-looking statements included in this report speak only as of the date hereof, and except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this report to conform these statements to actual results or to changes in our expectations.

 

Our unaudited condensed consolidated financial statements are prepared in accordance with United States Generally Accepted Accounting Principles. The following discussion should be read in conjunction with our unaudited consolidated financial statements and the related notes that appear elsewhere in this quarterly report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this quarterly report.

 

In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common shares” refer to shares of our common stock.

 

As used in this quarterly report, the terms “we”, “us”, “our” and “our company” mean Grove, Inc., unless otherwise indicated.

 

3

Table Of Contents

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

GROVE, INC.

 

Interim Unaudited Condensed Consolidated Financial Statements

For the Three and Six Month Periods Ended December 31, 2021

 

 

 

Page

 

 

 

 

 

Condensed Consolidated Balance Sheets as of December 31, 2021 and June 30, 2021 (Unaudited)

 

 5

 

 

 

 

 

Condensed Consolidated Statements of Operations for the Three and Six Months Ended December 31, 2021 and 2020 (Unaudited)

 

 6

 

 

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity for the Six Months Ended December 31, 2021 and 2020 (Unaudited)

 

 7

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the Six Months Ended December 31, 2021 and 2020 (Unaudited)

 

 8

 

 

 

 

 

Notes to the Unaudited Condensed Consolidated Financial Statements

 

 9

 

4

Table of Contents

 

GROVE, INC.

CONDENSED CONSOLDIATED BALANCE SHEETS (UNAUDITED)

 

 

 

 

 

 

December 31,

 

 

June 30,

 

 

 

2021

 

 

2021

 

ASSETS

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash

 

$6,595,962

 

 

$14,534,211

 

Accounts receivable, net of allowance for doubtful accounts of $92,500 and $57,500, respectively

 

 

1,247,218

 

 

 

1,277,662

 

Inventory

 

 

3,681,428

 

 

 

2,094,952

 

Prepaid expenses and other receivables

 

 

573,358

 

 

 

386,258

 

Total current assets

 

 

12,097,966

 

 

 

18,293,083

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

7,440,332

 

 

 

2,832,400

 

Intangible assets, net

 

 

5,189,234

 

 

 

1,845,166

 

Goodwill

 

 

8,533,923

 

 

 

2,413,813

 

Deferred tax asset

 

 

1,225,917

 

 

 

1,403,591

 

Other assets

 

 

69,068

 

 

 

49,068

 

Right-of-use asset

 

 

648,626

 

 

 

417,443

 

Total other assets

 

 

23,107,100

 

 

 

8,961,481

 

 

 

 

 

 

 

 

 

 

Total assets

 

$35,205,066

 

 

$27,254,564

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$895,846

 

 

$1,604,723

 

Accrued compensation

 

 

679,000

 

 

 

1,020,936

 

Deferred revenue

 

 

959,329

 

 

 

485,973

 

Accrued liabilities

 

 

873,585

 

 

 

296,021

 

Acquisition payable

 

 

600,000

 

 

 

1,764,876

 

Current portion of notes payable

 

 

1,006,197

 

 

 

447,100

 

     Current portion of operating lease payable

 

 

248,572

 

 

 

199,532

 

Total current liabilities

 

 

5,262,529

 

 

 

5,819,161

 

 

 

 

 

 

 

 

 

 

     Operating lease payable, net of current portion

 

 

395,085

 

 

 

217,430

 

Notes payable, net of current portion

 

 

26,766

 

 

 

-

 

Total long-term liabilities

 

 

421,851

 

 

 

217,430

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value, 100,000,000 shares authorized, and 500,000 and 500,000 shares issued and outstanding, respectively

 

 

500

 

 

 

500

 

Common stock, $0.001 par value, 100,000,000 shares authorized, and 16,378,006 and 15,262,394 shares issued and outstanding, respectively

 

 

16,378

 

 

 

15,262

 

Additional paid in capital

 

 

33,097,300

 

 

 

25,372,247

 

Accumulated deficit

 

 

(3,593,492)

 

 

(4,170,036)

Total stockholers' equity

 

 

29,520,686

 

 

 

21,217,973

 

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders' equity

 

$35,205,066

 

 

$27,254,564

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

   

5

Table of Contents

 

GROVE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

 

 

 

Three Month's Ended December 31,

 

 

Six Month's Ended December 31,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

 

10,666,781

 

 

 

4,164,894

 

 

 

19,116,535

 

 

 

7,102,336

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of Revenue

 

 

3,956,358

 

 

 

2,234,259

 

 

 

7,023,734

 

 

 

3,853,467

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

6,710,423

 

 

 

1,930,635

 

 

 

12,092,801

 

 

 

3,248,869

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

1,852,118

 

 

 

459,446

 

 

 

3,363,805

 

 

 

824,704

 

General and administrative expenses

 

 

4,740,705

 

 

 

1,714,484

 

 

 

8,175,853

 

 

 

3,427,546

 

 

 

 

6,592,823

 

 

 

2,173,930

 

 

 

11,539,658

 

 

 

4,252,250

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

 

117,600

 

 

 

(243,295)

 

 

553,143

 

 

 

(1,003,381)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense), net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest (expense) income, net

 

 

(26,605)

 

 

(42,049)

 

 

(42,561)

 

 

(84,740)

Other (expense) income, net

 

 

-

 

 

 

4

 

 

 

-

 

 

 

(6,292)

Settlement of cancelled lease

 

 

-

 

 

 

387,860

 

 

 

-

 

 

 

387,860

 

Gain on SBA PPP loan extingushment

 

 

-

 

 

 

-

 

 

 

300,995

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense), net

 

 

(26,605)

 

 

345,815

 

 

 

258,434

 

 

 

296,828

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before income tax

 

 

90,995

 

 

 

102,520

 

 

 

811,577

 

 

 

(706,553)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

 

(26,162)

 

 

-

 

 

 

(235,033)

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

 

64,833

 

 

 

102,520

 

 

 

576,544

 

 

 

(706,553)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic income (loss) per share

 

$0.00

 

 

$0.01

 

 

$0.04

 

 

$(0.06)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted income (loss) per share

 

$0.00

 

 

$0.01

 

 

$0.03

 

 

$(0.06)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding

 

 

16,378,006

 

 

 

13,455,013

 

 

 

15,915,154

 

 

 

11,830,013

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fully diluted weighted average shares outstanding

 

 

17,685,717

 

 

 

13,455,013

 

 

 

17,453,141

 

 

 

11,830,013

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

6

Table of Contents

 

GROVE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)

 

 

 

Preferred Stock

 

 

Preferred Stock

 

 

Common Stock

 

 

Common Stock

 

 

Additional Paid

 

 

Accumulated

 

 

Non-controlling

 

 

Total

Shareholders'

 

 

 

 Shares

 

 

Par

 

 

 Shares

 

 

Par

 

 

In Capital

 

 

Deficit

 

 

Interest

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, June 30, 2020

 

 

-

 

 

$-

 

 

 

10,222,223

 

 

$10,223

 

 

$7,314,341

 

 

$(7,098,984)

 

$1,953,801

 

 

$2,179,381

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of Trunano subsidiary stock into Grove common stock

 

 

-

 

 

 

-

 

 

 

1,277,778

 

 

 

1,278

 

 

 

1,952,523

 

 

 

-

 

 

 

(1,953,801)

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for acquisition of Infusionz

 

 

-

 

 

 

-

 

 

 

222,223

 

 

 

223

 

 

 

339,777

 

 

 

-

 

 

 

-

 

 

 

340,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for acquisition costs

 

 

-

 

 

 

-

 

 

 

83,334

 

 

 

83

 

 

 

127,417

 

 

 

-

 

 

 

-

 

 

 

127,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

93,193

 

 

 

-

 

 

 

 

 

 

 

93,193

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(809,073)

 

 

-

 

 

 

(809,073)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, September 30, 2020

 

 

-

 

 

$-

 

 

 

11,805,558

 

 

$11,807

 

 

$9,827,251

 

 

$(7,908,057)

 

$-

 

 

$1,931,001

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

134,125

 

 

 

-

 

 

 

 

 

 

 

134,125

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for acquisition of Infusionz

 

 

-

 

 

 

-

 

 

 

101,389

 

 

 

100

 

 

 

155,025

 

 

 

-

 

 

 

-

 

 

 

155,125

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

102,520

 

 

 

-

 

 

 

102,520

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, September 30, 2020

 

 

-

 

 

$-

 

 

 

11,906,947

 

 

$11,907

 

 

$10,116,401

 

 

$(7,805,537)

 

$-

 

 

$2,322,771

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, June 30, 2021

 

 

500,000

 

 

$500

 

 

 

15,262,394

 

 

$15,262

 

 

$25,372,247

 

 

$(4,170,036)

 

$-

 

 

$21,217,973

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for acquisition of Infusionz

 

 

-

 

 

 

-

 

 

 

306,945

 

 

 

307

 

 

 

1,764,569

 

 

 

-

 

 

 

-

 

 

 

1,764,876

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for acquisition of VitaMedica

 

 

-

 

 

 

-

 

 

 

100,000

 

 

 

100

 

 

 

481,900

 

 

 

-

 

 

 

-

 

 

 

482,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for acquisition costs

 

 

-

 

 

 

-

 

 

 

7,000

 

 

 

7

 

 

 

33,733

 

 

 

-

 

 

 

-

 

 

 

33,740

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

593,098

 

 

 

-

 

 

 

-

 

 

 

593,098

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for services

 

 

-

 

 

 

-

 

 

 

35,000

 

 

 

35

 

 

 

174,965

 

 

 

-

 

 

 

-

 

 

 

175,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

511,711

 

 

 

-

 

 

 

511,711

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, September 30, 2021

 

 

500,000

 

 

$500

 

 

 

15,711,339

 

 

$15,711

 

 

$28,420,512

 

 

$(3,658,325)

 

$-

 

 

$24,778,398

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

677,455

 

 

 

-

 

 

 

-

 

 

 

677,455

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for acquisition of Interactive Offers

 

 

-

 

 

 

-

 

 

 

666,667

 

 

 

667

 

 

 

3,999,333

 

 

 

-

 

 

 

-

 

 

 

4,000,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

64,833

 

 

 

-

 

 

 

64,833

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2021

 

 

500,000

 

 

$500

 

 

 

16,378,006

 

 

$16,378

 

 

$33,097,300

 

 

$(3,593,492)

 

$-

 

 

$29,520,686

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

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Table of Contents

 

GROVE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

 

 

 

 

 

 

Six Month's Ended December 31,

 

 

 

2021

 

 

2020

 

Cash flows from operating activities

 

 

 

 

 

 

Net income (loss)

 

$576,544

 

 

$(706,553)

Adjustments to reconcile net income (loss) to net cash provided by (used in)

 

 

 

 

 

 

 

 

operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

914,511

 

 

 

503,244

 

Inventory write-offs

 

 

140,000

 

 

 

156,844

 

Issuance of common stock for acquisition costs

 

 

-

 

 

 

-

 

Shares issued for services

 

 

175,000

 

 

 

127,500

 

Shares issued for finder fee

 

 

33,740

 

 

 

-

 

Bad debt expense

 

 

1,000

 

 

 

1,165

 

Loss on sale of equipment

 

 

-

 

 

 

6,292

 

Gain on forgiveness of SBA PPP loan

 

 

(300,995)

 

 

-

 

Stock based compensation

 

 

1,270,553

 

 

 

227,317

 

Changes in assets and liabilities, net of acquiried amounts

 

 

 

 

 

 

 

 

Accounts receivable

 

 

235,681

 

 

 

(12,358)

Inventory

 

 

(1,106,639)

 

 

(368,389)

Prepaid expenses and other assets

 

 

284,871

 

 

 

(151,455)

Change in deferred tax asset

 

 

177,674

 

 

 

-

 

Accounts payable and accrued liabilities

 

 

(1,184,302)

 

 

(319,068)

Deferred revenue

 

 

(5,029)

 

 

(133,860)

Net cash provided by (used in) operating activities

 

 

1,212,609

 

 

 

(669,321)

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

Acquisition of VitaMedica

 

 

(2,074,589)

 

 

-

 

Acquisition of Infusionz, Inc., net of cash acquired

 

 

-

 

 

 

212,122

 

Acquisition of Interactive Offers, net of cash acquired

 

 

(1,854,193)

 

 

-

 

Proceeds from sale of property and equipment

 

 

-

 

 

 

64,000

 

Acquisition of property and equipment

 

 

(5,071,072)

 

 

(34,337)

Net cash (used in) provided by investing activities

 

 

(8,999,854)

 

 

241,785

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

Proceeds from issuance of related party note payable

 

 

-

 

 

 

750,000

 

Repayment of notes payable

 

 

(151,004)

 

 

(12,000)

Net cash (used in) provided by financing activities

 

 

(151,004)

 

 

738,000

 

 

 

 

 

 

 

 

 

 

Net (decrease) increase in cash

 

 

(7,938,249)

 

 

310,464

 

Cash, beginning of period

 

 

14,534,211

 

 

 

887,517

 

Cash, end of period

 

$6,595,962

 

 

$1,197,981

 

 

 

 

 

 

 

 

 

 

Supplemental cash flow disclosures

 

 

 

 

 

 

 

 

Interest paid

 

$-

 

 

$-

 

Income tax paid

 

$-

 

 

$-

 

Non-cash financing activities

 

 

 

 

 

 

 

 

Issuance of common stock for acquisition of Infusionz

 

$1,764,876

 

 

$495,125

 

Issuance of common stock for acquisition of VitaMedica

 

$482,000

 

 

$-

 

Repayment of Infusionz LLC debt to Grove, Inc.

 

$-

 

 

$72,000

 

Issuance of debt for acquisition of VitaMedica

 

$1,000,000

 

 

$-

 

Liabilities assumed from acquisition of Infusionz

 

$-

 

 

$(680,480)

Liabilities assumed from acquisition of VitaMedica

 

$(309,574)

 

$-

 

Issuance of stock for acquisition of Interactive

 

$4,000,000

 

 

$-

 

Liabilities assumed from acquisition of Interactive

 

$(1,099,993)

 

$-

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

  

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GROVE, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

 

Note 1. Background Information

 

We are in the business of developing, producing, marketing, and selling raw materials, white label products and end consumer products containing the hemp plant extract, Cannabidiol (“CBD”). We sell to numerous consumer markets including the nutraceutical, beauty care, pet care and functional food sectors. We seek to take advantage of an emerging worldwide trend to re-energize the production of industrial hemp and to foster its many uses for consumers.

 

In addition, we have an advertising platform that connects publishers and advertisers, programmatically.  The platform is flexible to conduct several types of campaigns for advertisers simultaneously through direct purchases or through a bidding process.  The platform provides advertisers options for dedicated/sponsorship emails, SMS, push notifications, and display campaigns.

 

Grove, Inc. (the “Company”) is a Nevada Corporation and has nine wholly owned subsidiaries, Trunano Labs, Inc., a Nevada corporation, Cresco Management, a California corporation, Steam Distribution, LLC, a California limited liability company; One Hit Wonder, Inc., a California corporation; Havz, LLC, d/b/a Steam Wholesale, a California limited liability company, Grove Acquisition Subsidiary, Inc, d/b/a VitaMedica a Nevada corporation, One Hit Wonder Holdings, LLC a California corporation, Infusionz LLC, a Colorado corporation, Interactive Offers LLC a Delaware corporation, and SWCH, a Delaware corporation.

 

Basis of Presentation and Principles of Consolidation

 

The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The consolidated financial statements include the accounts of all subsidiaries in which the Company holds a controlling financial interest as of December 31, 2021 and June 30, 2021.

 

In the opinion of management, the unaudited interim condensed consolidated financial statements reflect all adjustments of a normal recurring nature that are necessary for a fair presentation of the results for the interim periods presented. All significant intercompany transactions and balances are eliminated in consolidation. However, the results of operations included in such financial statements may not necessary be indicative of annual results.

 

The significant accounting policies adopted during the 2022 fiscal year are as follows:

 

In August 2020, the FASB issued ASU 2020-06-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity, which simplifies the guidance for certain convertible debt instruments by removing the separation models for convertible debt with a cash conversion feature or convertible instruments with a beneficial conversion feature. As a result, convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. Additionally, ASU 2020-06 requires the application of the if-converted method for calculating diluted earnings per share and the treasury stock method will be no longer available. The provisions of ASU 2020-06 are applicable for fiscal years beginning after December 15, 2021, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020.  In addition, the Company will be required to use the if-converted method for calculating diluted earnings per share. We adopted ASU 2020-06 as of the beginning of our 2022 fiscal year. The adoption of this standard did not have a significant impact on our condensed consolidated financial statements as there were no unamortized beneficial conversion features as of June 30, 2021.

 

In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which removed certain exceptions related to the approach for intraperiod tax allocations, the calculation of income taxes in interim periods, and the recognition of deferred taxes for investments. This guidance also simplified aspects of accounting for recognizing deferred taxes for taxable goodwill. We adopted ASU 2019-12 as of the beginning of our 2022 fiscal year. The adoption of this standard did not have a significant impact on our condensed consolidated financial statements.

 

The Company uses the same accounting policies in preparing quarterly and annual financial statements, except for the adoption of ASU 2020-06 and ASU 2019-12 for the current fiscal year. Certain information and footnote disclosures normally included in the annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s annual audited consolidated financial statements as of and for the years ended June 30, 2021 and 2020 as filed with the Securities and Exchange Commission on September 28, 2021.

 

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Table of Contents

 

Note 2. Acquisitions

 

VitaMedica Corporation

 

Effective August 1, 2021, the Company entered into and closed an asset purchase agreement (the “VitaMedica Agreement”) with Grove Acquisition Subsidiary, Inc., a Nevada corporation and wholly owned subsidiary of the Company and VitaMedica Corporation, a California corporation, David Rahm and Yvette La-Garde (“Seller”). VitaMedica Corporation is a leading online seller of supplements for surgery, recovery, skin, beauty, health and wellness.

 

The Company agreed to purchase substantially all of the assets of the Seller as of August 1, 2021.  The transaction was valued at an estimated fair value of $3,556,589. The purchase price consisted of 100,000 shares of the Company’s common stock valued at $482,000, $4.82 per common share, the closing price on August 4, 2021 (close date of the transaction), a non-negotiable promissory note from the Company in favor of the Seller in the original principal amount of $500,000, a non-negotiable convertible promissory note from the Company in favor of the Seller in the original principal amount of $500,000, convertible at $5.00 per share for a total of 100,000 shares of Company Common Stock and a cash payment of $2,000,000 which was paid on August 5, 2021. In addition, $74,589 cash payment was made on October 29, 2021, for the excess working capital acquired.

 

A finder’s fee of $103,740 was paid by the Company, $70,000 in cash and 7,000 share of common stock, valued at $33,740, $4.82 per common share, the closing market price on August 4, 2021 (close date of the transaction). These fees were expensed in the six month period ended December 31, 2021.

 

The intangibles will be recorded, based on the Company’s preliminary estimate of fair value, which are expected to consist primarily of customer lists with an estimated life of five to ten years and goodwill. Upon completion of a purchase price allocation, the allocation intangible assets will be adjusted accordingly.

 

The assets and liabilities of VitaMedica are recorded at their preliminary respective fair values as of the closing date of the VitaMedica Agreement, and the following table summarizes these values based on the balance sheet on August 1, 2021, the effective closing date.

 

Tangible Assets

 

$860,738

 

Intangible Assets

 

 

1,624,000

 

Goodwill

 

 

1,271,780

 

Liabilities Acquired

 

 

(199,929)

Total Purchase Price

 

$3,556,589

 

 

The Company’s condensed consolidated financial statements for the six months ended December 31, 2021, include the actual results of VitaMedica for the period August 1, 2021, to December 31, 2021.

 

Interactive Offers, LLC

 

Effective October 1, 2021, the Company entered into an Equity Interest Purchase Agreement (the “I/O Agreement”) with Gyprock Holdings LLC, a Delaware limited liability company, MFA Holdings Corp., a Florida corporation and Sherwood Ventures, LLC, a Texas limited liability company (each an “I/O Seller” and collectively the “I/O Sellers”). The I/O Sellers owned all the membership interests in Interactive Offers, LLC, a Delaware limited liability company (“Interactive”). The Company’s CEO and Chairman, Allan Marshall, was the controlling stockholder and the president of MFA Holdings Corp. MFA Holdings Corp., owning 20% of the outstanding membership interests in Interactive. Interactive provides programmatic advertising with its SAAS platform which allows for programmatic advertisement placement automatically on any partners’ sites from a simple dashboard.

    

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Table of Contents

   

The Company purchased all the outstanding membership interests of Interactive as of October 1, 2021. The purchase price for the sale was $6,700,000, which consisted of 666,667 shares of common stock of the Company valued at $4,000,000, the negotiated value of the stock for the transaction, and a cash payment of $2,100,000. Additionally, Sellers will be paid up to an additional cash payment of $600,000 in the form of an earnout payment based on certain revenue milestones. 

 

The intangibles will be recorded, based on the Company’s preliminary estimate of fair value, which are expected to consist primarily of customer lists with an estimated life of five to ten years and goodwill. Upon completion of a purchase price allocation, the allocation intangible assets will be adjusted accordingly.

 

The assets and liabilities of Interactive are recorded at their preliminary respective fair values as of the closing date of the I/O Agreement, and the following table summarizes these values based on the balance sheet on October 1, 2021, the effective closing date.

 

Tangible Assets

 

$563,663

 

Intangible Assets

 

 

2,388,000

 

Goodwill

 

 

4,848,330

 

Liabilities Acquired

 

 

(1,099,993)

Total Purchase Price

 

$6,700,000

 

 

The Company’s condensed consolidated financial statements for the three and six months ended December 31, 2021, include the actual results of Interactive for the period October 1, 2021, to December 31, 2021.

 

Consolidated pro-forma unaudited financial statements.

 

The following unaudited pro forma combined financial information is based on the historical financial statements of the Company, VitaMedica and Interactive after giving effect to the Company’s acquisitions of both companies as if the acquisitions occurred on July 1, 2020.  

 

The following unaudited pro forma information does not purport to present what the Company’s actual results would have been had the acquisitions occurred on July 1, 2020, nor is the financial information indicative of the results of future operations. The following table represents the unaudited consolidated pro forma results of operations for the six months ended December 31, 2021 and the three and six months ended December 31, 2020 as if the acquisition occurred on July 1, 2020 as both acquisitions operations were included in the three months ended December 31, 2021.  Operating expenses have been increased for the amortization expense associated with the fair value adjustment of definite lived intangible assets of VitaMedica and Interactive by approximately $413,000 and $531,000 per year, respectively.

 

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Table of Contents

 

Pro Forma, Unaudited

 

 

 

 

 

 

 

 

 

 

Proforma

 

 

 

 

Three months ended December 31, 2020

 

Grove, Inc.

 

 

VitaMedica

 

 

Interactive

 

 

Adjustments

 

 

Proforma

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$4,164,894

 

 

$936,582

 

 

$367,001

 

 

$

 

 

$5,468,477

 

Cost of sales

 

$2,234,259

 

 

$277,232

 

 

$-

 

 

$

 

 

$2,511,491

 

Operating expenses

 

$2,173,930

 

 

$377,153

 

 

$1,273,688

 

 

$236,000

 

 

$4,060,771

 

Net income (loss)

 

$102,520

 

 

$15,831

 

 

$(796,782)

 

$(236,000)

 

$(914,431)

Basic income (loss) per common share

 

$0.01

 

 

$0.16

 

 

$(1.20)

 

$

 

 

$(0.06)

Weighted average shares outstanding

 

 

13,455,013

 

 

 

100,000

 

 

 

666,667

 

 

 

 

 

 

 

14,221,680

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pro Forma, Unaudited

 

 

 

 

 

 

 

 

 

 

 

 

 

Proforma

 

 

 

 

 

Six months ended December 31, 2021

 

Grove, Inc.

 

 

VitaMedica

 

 

Interactive

 

 

Adjustments

 

 

Proforma

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$19,116,535

 

 

$384,391

 

 

$732,519

 

 

$

 

 

$20,233,445

 

Cost of sales

 

$7,023,734

 

 

$93,509

 

 

$-

 

 

$

 

 

$7,117,243

 

Operating expenses

 

$11,539,658

 

 

$255,286

 

 

$1,348,035

 

 

$166,917

 

 

$13,309,896

 

Net income (loss)

 

$576,544

 

 

$35,596

 

 

$(795,507)

 

$(166,917)

 

$350,284)

Basic income (loss) per common share

 

$0.04

 

 

$0.36

 

 

$(1.19)

 

$

 

 

$(0.02)

Weighted average shares outstanding

 

 

15,915,154

 

 

 

100,000

 

 

 

666,667

 

 

 

 

 

 

 

16,681,821

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pro Forma, Unaudited

 

 

 

 

 

 

 

 

 

 

 

 

 

Proforma

 

 

 

 

 

Six months ended December 31, 2020

 

Grove, Inc.

 

 

VitaMedica

 

 

Interactive

 

 

Adjustments

 

 

Proforma

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$7,102,336

 

 

$1,810,872

 

 

$1,329,523

 

 

$

 

 

$10,242,730

 

Cost of sales

 

$3,853,467

 

 

$522,962

 

 

$-

 

 

$

 

 

$4,376,429

 

Operating expenses

 

$4,252,250

 

 

$684,598

 

 

$1,816,464

 

 

$472,000

 

 

$7,225,312

 

Net income (loss)

 

$(706,553)

 

$90,527

 

 

$(376,987)

 

$(472,000)

 

$(1,465,013)

Basic income (loss) per common share

 

$(0.06)

 

$0.91

 

 

$

 

 

$

 

 

$(0.12)

Weighted average shares outstanding

 

 

11,830,013

 

 

 

100,000

 

 

 

666,667

 

 

 

 

 

 

 

12,596,680

 

 

The Company estimated the annual VitaMedica amortization expense at $413,000 annually and $34,417 monthly, based on managements’ preliminary allocation of the purchase price. For the six months ended December 31, 2021, the proforma adjustment included $34,417, one month of amortization expense. For the three and six months ended December 31, 2020, the proforma adjustment includes $103,250and $206,500, three and six months of amortization expense, respectively.

 

The Company’s condensed consolidated financial statements for the three and six months ended December 31, 2021, include the actual results of VitaMedica for the period August 1, 2021, to December 31, 2021. Revenue for VitaMedica included in the statements of operations for the three and six months ended December 31, 2021, was $1,296,404 and $2,177,977, respectively.  Net income for VitaMedica included in the statements of operations for the three and six months ended December 31, 2021, was ($78,288) and $40,849, respectively. This includes amortization of intangible assets of $103,250 and $172,085, respectively.

 

The Company estimated the annual Interactive amortization expense at $531,000 annually and $44,250 monthly, based on managements’ preliminary allocation of the purchase price. For the six months ended December 31, 2021, the proforma adjustment included $132,750, three months of amortization expense. For the three and six months ended December 31, 2020, the proforma adjustment includes $132,750and $265,500, three and six months of amortization expense, respectively.

 

The Company’s condensed consolidated financial statements for the three and six months ended December 31, 2021, include the actual results of Interactive for the period October 1, 2021, to December 31, 2021. Revenue and net loss for Interactive included in the statement of operations for the six months ended December 31, 2021, was $853,017and $97,300, respectively.  This includes amortization of intangible assets of $132,750.

 

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Table of Contents

 

Note 3. Inventory

 

Inventory consisted of the following:

 

 

 

December 31,

2021

 

 

June 30,

2021

 

Raw materials

 

$2,681,195

 

 

$1,680,471

 

Finished goods

 

 

1,000,233

 

 

 

414,481

 

 

 

$3,681,428

 

 

$2,094,952

 

 

The Company writes off the value of inventory deemed excessive or obsolete. During the three and six months ended December 31, 2021, the Company wrote off inventory valued at $90,000 and $140,000, respectively.  During the three and six months ended December 31, 2020, the Company wrote off inventory valued at $156,844 and $156,844, respectively.

 

Note 4. Property and Equipment

 

Property and equipment consist of the following:

 

 

 

December 31,

2021

 

 

June 30,

2021

 

Furniture and fixtures

 

$23,385

 

 

$20,173

 

Computer equipment

 

 

113,182

 

 

 

62,430

 

Manufacturing equipment

 

 

1,834,999

 

 

 

1,867,509

 

Leasehold improvements

 

 

1,804,238

 

 

 

764,225

 

Building

 

 

4,060,004

 

 

 

-

 

Vehicles

 

 

98,859

 

 

 

98,859

 

Property and equipment, gross

 

 

7,934,667

 

 

 

2,813,196

 

Less accumulated depreciation

 

 

(762,569)

 

 

(515,990)

 

 

 

7,172,098

 

 

 

2,297,206

 

Deposits on equipment

 

 

268,234

 

 

 

535,194

 

Property and equipment, net

 

$7,440,332

 

 

$2,832,400

 

 

During the three and six months ended December 31, 2020, the Company sold manufacturing equipment with a carrying value of $70,292 for cash proceeds of $64,000 which resulted in a loss on the disposal of $6,292.

 

Depreciation expense for the three months ended December 31, 2021, and 2020 was $131,225 and $69,786, respectively.  Depreciation expense for the six months ended December 31, 2021, and 2020 was $246,579 and $139,815, respectively.

 

Note 5. Goodwill and Intangible Assets

 

Goodwill

 

The following table sets forth activity in goodwill from June 30, 2020, through December 31, 2021. See Note 2 for details of acquisitions that occurred during the six months ended December 31, 2021, and the year ended June 30, 2021.

 

Goodwill as of June 30, 2020

 

$493,095

 

Acquisition of Infusionz

 

 

1,920,718

 

Goodwill as of June 30, 2021

 

$2,413,813

 

Acquisition of VitaMedica

 

 

1,271,780

 

Acquisition of Interactive Offers

 

 

4,848,330

 

Goodwill as of December 31, 2021

 

$8,533,923

 

 

During the three and six months ended December 31, 2021 and 2020 the Company did not record any impairment of goodwill.

 

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Table of Contents

 

The acquisition of Infusionz LLC and VitaMedica provided the Company with additional expertise in the CBD industry and expanded our expertise in the Health and Wellness industry, expanded the branded product offerings of the Company, additional manufacturing resources, additional distribution resources and improved gross margin through synergies recognized with the consolidation of the company’s manufacturing and distribution locations. These are the factors of the goodwill recognized in the acquisitions.

 

The acquisition of Interactive provided the Company with a technology platform to expand the Company’s product marketing abilities and provided the Company with the expertise in marketing for both internal products and the ability to provide a new service to its current product customer base.  These are the factors of the goodwill recognized in the acquisition.

 

Intangible assets

 

Intangible assets as of December 31, 2021:

   

 

 

Cost

 

 

Accumulated

Amortization

 

 

Net

Book Value

 

 

 

 

 

 

 

 

 

 

 

Customer relationships

 

$4,187,348

 

 

$1,291,057

 

 

$2,896,291

 

Trade name

 

 

1,175,305

 

 

 

378,177

 

 

 

797,128

 

Non-compete agreements

 

 

176,592

 

 

 

74,110

 

 

 

102,482

 

Intellectual property

 

 

1,470,000

 

 

 

76,667

 

 

 

1,393,333

 

 

 

$7,009,245

 

 

$1,820,011

 

 

$5,189,234

 

 

Intangible assets as of June 30, 2021:

 

 

 

Cost

 

 

Accumulated

Amortization

 

 

Net

Book Value

 

 

 

 

 

 

 

 

 

 

 

Customer relationships

 

$2,075,347

 

 

$843,636

 

 

$1,231,711

 

Trade name

 

 

845,305

 

 

 

270,147

 

 

 

575,158

 

Non-compete agreements

 

 

76,592

 

 

 

38,295

 

 

 

38,297

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$2,997,244

 

 

$1,152,078

 

 

$1,845,166

 

 

For the three and six months ended December 31, 2021, the Company amortized $417,549 and $667,932, respectively, and for the three and six months ended December 31, 2020, the Company amortized $181,714 and $363,428, respectively, related to the customer list and trade name intangible asset. The customer list is being amortized on a straight-line basis over 4 years. The trade names and intellectual property are being amortized on a straight-line basis over 5 years. The employee contracts – non competes are being amortized on a straight-line basis over 2 years.

 

Future amortization of intangible assets are as follows:

 

 

 

 

 

 

 

June 30, 2022

 

$835,096

 

June 30, 2023

 

 

1,606,913

 

June 30, 2024

 

 

1,273,475

 

June 30, 2025

 

 

959,750

 

June 30, 2026

 

 

432,000

 

Thereafter

 

 

82,000

 

 

 

$5,189,234

 

  

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Note 6. Prepaid Expense and Other Current Assets

 

Prepaid and other assets consist of the following:

 

 

 

December 31,

2021

 

 

June 30,

2021

 

Insurance

 

$113,541

 

 

$100,307

 

Prepayment to vendors

 

 

87,662

 

 

 

118,283

 

Deposits on services

 

 

9,690

 

 

 

3,225

 

Prepaid monthly rent

 

 

77,999

 

 

 

66,551

 

Subscriptions and services being amortized over the service period

 

 

170,838

 

 

 

-

 

Other deposits

 

 

113,628

 

 

 

97,892

 

Total

 

$573,358

 

 

$386,258

 

 

Note 7. Operating Leases

 

The Company has operating leases for corporate offices, warehouses and office equipment that have remaining lease terms of 1 year to 3 years.

 

Effective October 1, 2021, the Company entered into a 3-year lease for a California warehouse. The Company recorded a right of use asset and corresponding lease liability of $295,305. The Company will use this leased facility for assembly and distribution of finished goods.

 

The table below reconciles the undiscounted future minimum lease payments (displayed by year and in the aggregate) under noncancelable operating leases with terms of more than one year to the total operating lease liabilities recognized in the condensed consolidated balance sheet as of December 31, 2021:

 

2022

 

 

136,937

 

2023

 

 

264,183

 

2024

 

 

245,697

 

2025

 

 

36,564

 

Total undiscounted future minimum lease payments

 

 

683,381

 

Less: Imputed interest

 

 

(39,724)

Present value of operating lease obligation

 

 

643,657

 

 

The Company’s weighted average remaining lease term and weighted average discount rate for operating leases as of December 31, 2021 are:

 

Weighted average remaining lease term

 

31 Months

 

Weighted average incremental borrowing rate

 

 

5.0%

 

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For the three and six months ended December 31, 2021, the components of lease expense, included in general and administrative expenses and interest expense in the condensed consolidated statements of operations income, are as follows:

 

 

 

Three Months Ended December 31, 2021

 

 

Six Months Ended December 31, 2021

 

Operating lease cost:

 

 

 

 

 

 

Operating lease cost

 

$48,771

 

 

$99,285

 

Amortization of ROU assets

 

$40,845

 

 

$87,406

 

Interest expense

 

 

8,099

 

 

 

11,880

 

Total lease cost

 

$97,715

 

 

$198,571

 

 

Note 8. Accrued Liabilities

 

Accrued liabilities consist of the following:

 

 

 

December 31,

2021

 

 

June 30,

2021

 

Accrued expenses for loyalty program

 

$61,410

 

 

$24,768

 

Accrued interest

 

 

24,986

 

 

 

9,817

 

Accrued federal and state tax

 

 

291,030

 

 

 

120,776

 

Accrued expenses on credit cards

 

 

358,275

 

 

 

111,700

 

Other accrued liabilities

 

 

137,884

 

 

 

28,960

 

 

 

$873,585

 

 

$296,021

 

 

Note 9. Convertible Promissory Notes and Notes Payable

 

Convertible promissory notes and notes payable outstanding as of December 31, 2021 are summarized below:

 

 

 

Maturity

Date

 

December 31,

2021

 

6% $500,000 Note Payable

 

January 31, 2022

 

$500,000

 

6% $500,000 Note Payable, convertible to common shares at $5.00 per share

 

August 1, 2022

 

 

500,000

 

5% $33,967 Note Payable

 

November 7, 2026

 

 

32,963

 

Total notes payable

 

 

 

 

1,032,963

 

Less current portion of notes payable

 

 

 

 

1,006,197

 

Notes payable, net of current portion

 

 

 

$26,766

 

 

Future payments on notes payable are as follows:

 

 

 

 

 

 

 

For the year ended June 30:

 

 

 

2022

 

$503,061

 

2023

 

 

506,350

 

2024

 

 

6,668

 

2025

 

 

7,001

 

2026

 

 

7,351

 

Thereafter

 

 

2,532

 

 

 

$1,032,963

 

 

During the three and six months ended December 31, 2021, the Company entered into a note payable in connection with the acquisition of VitaMedica for $500,000 and payable January 31, 2022, and interest at the rate of 6% per annum.  Subsequent to December 31, 2021, the Company repaid the note and related accrued interest.

 

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During the six months ended December 31, 2021, the Company entered into a convertible note payable in connection with the acquisition of VitaMedica for $500,000, convertible into the Company’s common shares at $5.00 per common share. The convertible note has an interest rate of 6% per annum and the principal and interest are payable on the maturity date of August 1, 2022. The Company cannot prepay the note and the principal and accrued interest is convertible at the holder’s option with notice that shall not be less than fifteen days prior to maturity.

 

Note 10. Related Party Transactions

 

During the three and six months ended December 31, 2020, the Company repaid a note from one of the members of management. The loan was $12,000 and was due upon demand.

 

Effective October 1, 2021, the Company entered into an Equity Interest Purchase Agreement (the “I/O Agreement”) with Gyprock Holdings LLC, a Delaware limited liability company, MFA Holdings Corp., a Florida corporation and Sherwood Ventures, LLC, a Texas limited liability company (each an “I/O Seller” and collectively the “I/O Sellers”). The I/O Sellers owned all the membership interests in Interactive Offers, LLC, a Delaware limited liability company (“Interactive”). The Company’s CEO and Chairman, Allan Marshall, is the controlling stockholder and the president of MFA Holdings Corp. MFA Holdings Corp. which owned 20% of the outstanding membership interests in Interactive.

 

The above related party transactions are not necessarily indicative of the amounts and terms that would have been incurred had comparable transactions been entered into with independent parties.

 

Note 11. Equity Transactions

 

Preferred Stock

 

The Company’s Board of Directors has authorized 1,000,000 shares of preferred stock with a par value of $0.001 and issued 500,000 shares of preferred stock. On February 2, 2021, the Company sold the 500,000 shares of Preferred Stock to Allan Marshall, CEO for net proceeds of $50,000. The preferred stock is convertible into the Company’s common stock at a ratio of 1.8 shares of preferred stock for a single share of the Company’s common stock at the holder’s option, has preferential liquidation rights and the preferred stock shall vote together with the common stock as a single class on all matters to which shareholders of the Company are entitled to vote at the rate of ten votes per share of preferred stock.

 

Common Stock

 

During the six months ended December 31, 2020, the Company issued 323,612 shares of common stock for the acquisition of Infusionz, the shares were valued at $495,125. In addition, the Company issued 83,334 shares of common stock valued at $127,500 for acquisition costs.

 

During the six months ended December 31, 2021, the Company issued 306,945 shares of common stock for the acquisition of Infusionz, the shares were valued at $1,764,876.

 

During the six months ended December 31, 2021, the Company issued 100,000 shares of common stock for the acquisition of VitaMedica, the shares were valued at $482,000.

 

During the six months ended December 31, 2021, the Company issued 7,000 shares of common stock as a finder’s fee, the shares were valued at $33,740.

 

During the six months ended December 31, 2021, the Company issued 35,000 shares of common stock for consulting services to be provided over 6 months. The shares were valued at $175,000.

 

During the six months ended December 31, 2021, the Company issued 666,667 shares of common stock for the acquisition of Interactive Offers, LLC, the shares were valued at $4,000,000.

 

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Trunano, Inc. Common Stock

 

Trunano, Inc. has 10,000,000 shares of common stock authorized with a par value of $0.001. As of June 30, 2020, Trunano, Inc, had 7,261,261 issued and outstanding shares of common stock, of which 5,770,270is owned by the Company. During the three months ended September 30, 2019, Trunano, Inc. issued 270,270 shares of common stock for cash proceeds of $300,000. Primarily due to the decline in CBD isolate price, there were no operations during the three and six months ended December 31, 2020 for Trunano, Inc.

 

On July 1, 2020 the noncontrolling shareholders of the Company’s subsidiary, Trunano Labs Inc., converted 1,761,261 shares of Trunano Labs, Inc. stock, representing all the outstanding stock by minority interest holders, into 1,277,778 shares of Company common stock, 10.8% of the then outstanding shares. As of July 1, 2020, Trunano Labs, Inc. is a wholly owned subsidiary of the Company.

 

Note 12. Stock Based Compensation

 

The Board of Directors of the Company may from time to time, in its discretion grant to directors, officers, consultants and employees of the Company, non-transferable options to purchase common shares. The options are exercisable for a period of up to 10 years from the date of the grant.

 

The following table reflects the continuity of stock options for the six months ended December 31, 2021:

 

A summary of stock option activity is as follows:

 

 

 

 

 

 

Weighted

 

 

Average

 

 

 

 

 

 

 

 

 

Average

 

 

Remaining

 

 

Aggregated

 

 

 

Options

 

 

Exercise

 

 

Contractual

 

 

Intrinsic

 

 

 

Outstanding

 

 

Price

 

 

Life (Years)

 

 

Value

 

Outstanding at June 30, 2021

 

 

2,088,333

 

 

$1.55

 

 

 

7.49

 

 

$9,689,865

 

Granted

 

 

1,900,000

 

 

 

4.18

 

 

 

10

 

 

 

-

 

Options outstanding at December 31, 2021

 

 

3,988,333

 

 

$2.79

 

 

 

8.21

 

 

$4,897,610

 

Options exercisable at December 31, 2021 (vested)

 

 

2,038,829

 

 

 

2.10

 

 

 

7.74

 

 

 

3,992,496

 

 

Stock-based compensation expense attributable to stock options was $677,455 and $134,125 for the three months ended December 31, 2021 and 2020, respectively.  Stock-based compensation expense attributable to stock options was $1,270,553 and $227,318 for the six months ended December 31, 2021 and 2020, respectively.  As of December 31, 2021, there was $3,943,664 of unrecognized compensation expense related to unvested stock options outstanding, and the weighted average vesting period for those options was approximately 2 years.

 

The value of each grant is estimated at the grant date using the Black-Scholes option model with the following assumptions for options granted during the six months ended December 31, 2021:

 

 

 

December 31,

2021

 

Dividend rate

 

 

-

 

Risk free interest rate

 

 

0.69%

Expected term

 

 

5

 

Expected volatility

 

 

69%

Grant date stock price

 

$4.18

 

 

The basis for the above assumptions are as follows: the dividend rate is based upon the Company’s history of dividends; the risk-free interest rate for periods within the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant; the expected term was calculated based on the Company’s historical pattern of options granted and the period of time they are expected to be outstanding; and expected volatility was calculated based upon historical trends in Charlotte’s Web Holdings, Inc. (CWBHF) stock prices for periods prior to the date the Company’s trading information was available. Management selected Charlotte’s Web Holdings, Inc. for it length of time as a publicly trading company and the similarities of the business and industry.

 

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Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Based on historical experience of forfeitures, the Company estimated forfeitures at 0% for each of the six months ended December 31, 2021, and 2020, respectively.

 

Note 13. Income Taxes

 

The Company computed the year-to-date income tax provision by applying the estimated annual effective tax rate to the year-to-date pre-tax income and adjusted for discrete tax items in the period. The Company’s income tax expense was $26,162 and $235,033 for the three and six months ended December 31, 2021, and no expense or benefit for the three and six months ended December 31, 2020.

 

The income tax expense for the three and six months ended December 31, 2021, was primarily attributable to federal and, state income taxes and nondeductible expenses for an effective tax rate of approximately 29%. For the three and six months ended December 31, 2021, the difference between the U.S. statutory rate and the Company’s effective tax rate is due to the full valuation allowance on the Company’s deferred tax assets.

 

Future realization of the tax benefits of existing temporary differences and net operating loss carryforwards ultimately depends on the existence of sufficient taxable income within the carryforward period. The Company periodically evaluates the realizability of its net deferred tax assets based on all available evidence, both positive and negative. The Company also considered whether there was any currently available information about future years. The Company determined that it is more likely than not that the Company will have future taxable income to fully realize the Company’s deferred tax asset.

 

As of December 31, 2021, there was approximately $1,919,202 of losses available to reduce federal taxable income in future years and can be carried forward indefinitely.

 

Note 14. Risks and Uncertainties

 

There is substantial uncertainty and different interpretations among federal, state and local regulatory agencies, legislators, academics and businesses as to the scope of operation of Farm Bill-compliant hemp programs relative to the emerging regulation of cannabinoids. These different opinions include, but are not limited to, the regulation of cannabinoids by the U.S. Drug Enforcement Administration, or DEA, and/or the FDA and the extent to which manufacturers of products containing Farm Bill-compliant cultivators and processors may engage in interstate commerce. The uncertainties cannot be resolved without further federal, and perhaps even state-level, legislation, regulation or a definitive judicial interpretation of existing legislation and rules. If these uncertainties continue, they may have an adverse effect upon the introduction of our products in different markets.

 

In December 2019, a novel strain of coronavirus (COVID-19) surfaced. The spread of COVID-19 around the world has caused significant volatility in U.S. and international markets. There is significant uncertainty around the breadth and duration of business disruptions related to COVID-19, as well as its impact on the U.S. and international economies and, as such, the Company has transition to a combination of work from home and social distancing operations and there has been minimal impact to our internal operations from the transition. The Company is unable to determine if there will be a material future impact to its customers’ operations and ultimately an impact to the Company’s overall revenues.

 

Note 15. Subsequent Events

 

On January 31, 2022, the Company paid $515,188 to the VitaMedica sellers for the principal and interest on the six month note.

 

After December 31, 2021, the Company repurchased 103,750 shares of common stock for $453,118 or an average of $4.37 per common share.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition or Plan of Operation

 

General Overview

 

As used in this current report and unless otherwise indicated, the terms “we”, “us” and “our” mean Grove, Inc.

 

Grove, Inc. (the “Company”) is a Nevada Corporation and has nine wholly owned subsidiaries, Trunano Labs, Inc., a Nevada corporation, Cresco Management, a California corporation, Steam Distribution, LLC, a California limited liability company; One Hit Wonder, Inc., a California corporation; Havz, LLC, d/b/a Steam Wholesale, a California limited liability company, Grove Acquisition Subsidiary, Inc, d/b/a VitaMedica a Nevada corporation, One Hit Wonder Holdings, LLC a California corporation, Infusionz LLC, a Colorado corporation and SWCH, a Delaware corporation.

 

We are in the business of developing, producing, marketing, and selling raw materials, white label products and end consumer products containing the hemp plant extract, Cannabidiol (“CBD”) and health and wellness products not containing CBD. We sell to numerous consumer markets including the nutraceutical, beauty care, pet care and functional food sectors. We seek to take advantage of an emerging worldwide trend to re-energize the production of industrial hemp and to foster its many uses for consumers. CBD is derived from hemp stalk and seed.

 

In addition, we are an operator of an annual tradeshow in the United States related to the CBD industry. The trade show scheduled for November 2020 has been postponed and the Company has not rescheduled this trade show as of the date of this report.

 

In December 2019, a novel strain of coronavirus (COVID-19) surfaced. The spread of COVID-19 around the world in 2020 and 2021 has caused significant volatility in U.S. and international markets. There is significant uncertainty around the breadth and duration of business disruptions related to COVID-19, as well as its impact on the U.S. and international economies and, as such, the Company has transition to a combination of work from home and social distancing operations and there has been minimal impact to our internal operations from the transition. The Company is unable to determine if there will be a material future impact to its customers’ operations and ultimately an impact to the Company’s overall revenues.

 

Our Growth Strategy

 

Results of Operations

 

The following summary of the Company’s operations should be read in conjunction with its unaudited condensed consolidated financial statements for the three and six months ended December 31, 2021 and 2020, which are included herein.

 

Three Months Ended December 31, 2021 Compared to Three Months Ended December 31, 2020

 

 

 

December 31,

 

 

 

 

 

2021

 

 

2020

 

 

Change

 

Revenue

 

$10,666,781

 

 

$4,164,894

 

 

$6,501,887

 

Cost of revenue

 

 

3,956,358

 

 

 

2,234,259

 

 

 

1,722,099

 

Operating expenses

 

 

6,592,823

 

 

 

2,173,930

 

 

 

4,418,893

 

Other expenses (income)

 

 

26,605

 

 

 

(345,815 )

 

 

(372,420 )
Net income

 

$64,833

 

 

$102,520

 

 

$(37,687 )

 

Revenues increased by $6,501,887 or 156% compared with the same period last year. $2,149,421 was from the two acquisitions and $4,352,466 was from the increase of direct to consumer, white label and private label CBD product sales.  The Company continues to add manufacturing machinery and a newly purchased building in Florida to expand production capabilities. 

 

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Cost of revenue increased by $1,722,099 or 77% compared with the same period last year. $615,308 was the cost of revenue from the two acquisitions and $1,106,791 was from the increase in revenue.  Gross margin improved by approximately 16.55% for the three months ended December 31, 2021.  This improved gross margin was from the increase in sales using more of the Company’s manufacturing capacity, the increased use of machines in the manufacturing and packaging process and the higher margins in direct-to-consumer sales. 

 

Operating expenses increased by $4,418,893 or 203% compared with the same period last year. $1,841,880 of the increase was related to the two acquisitions.  The Company had approximately $589,100 of increased sales and marketing expenses, $407,500 increased payroll expense, $711,746 increased stock compensation expense, $273,000 increased travel and entertainment expenses, $172,900 increased professional fees, $131,822 increased insurance expense, $75,400 increased facilities costs and other increased general and administrative expenses related to the management of the increased revenue. 

 

During the three months ended December 31, 2021, the Company incurred interest expense of $26,605.  During the three months ended December 31, 2020, there was a gain on the settlement of a cancelled lease of $387,860 and offset by $42,049 of interest expense.

 

The Company had net income of $64,833 and $102,520 for the three months ended December 31, 2021, and 2020, respectively. The decrease in net income is primarily related to the above mentioned changes.

 

Six Months Ended December 31, 2021 Compared to Six Months Ended December 31, 2020

 

 

 

December 31,

 

 

 

 

 

2021

 

 

2020

 

 

Change

 

Revenue

 

$19,116,535

 

 

$7,102,336

 

 

$12,014,199

 

Cost of revenue

 

 

7,023,734

 

 

 

3,853,467

 

 

 

3,170,267

 

Operating expenses

 

 

11,539,658

 

 

 

4,252,250

 

 

 

7,287,408

 

Other expenses (income)

 

 

(258,434 )

 

 

(296,828 )

 

 

(38,394 )

Net income (loss)

 

$576,544

 

 

$(706,553 )

 

$1,283,097

 

 

Revenues increased by $12,014,199 or 169% compared with the same period last year. $3,030,994 was from the two acquisitions and $8,983,205 was from the increase of direct to consumer, white label and private label CBD product sales.  The Company continues to add manufacturing machinery and a newly purchased building in Florida to expand production capabilities. 

 

Cost of revenue increased by $3,170,267 or 82% compared with the same period last year. $913,681 was the cost of revenue from the two acquisitions and 2,256,586 was from the increase in revenue.  Gross margin improved by approximately 17.51% for the six months ended December 31, 2021.  This improved gross margin was from the increase in sales using more of the Company’s manufacturing capacity, the increased use of machines in the manufacturing and packaging process and the higher margins in direct-to-consumer sales. 

 

Operating expenses increased by $7,287,408 or 171% compared with the same period last year. $2,306,184 of the increase was related to the two acquisitions.  The Company had approximately $1,480,664 of increased sales and marketing expenses, $1,065,374 increased payroll expense, $1,251,976 increased stock compensation expense, $329,370 increased travel and entertainment expenses, $202,014 increased professional fees, $216,622 increased insurance expense, $130,309 increased facilities costs, offset by $73,716 lower acquisition costs and other changes in general and administrative expenses related to the management of the increased revenue. 

 

During the six months ended December 31, 2021, there was a gain on the extinguishment of the SBA PPP loan of $300,995 and offset by $42,561 of interest expense.  During the six months ended December 31, 2020, there was a gain on the settlement of a cancelled lease of $387,860 partially offset by $84,740 of interest expense.

 

The Company had net income of $576,544 and a net loss of $706,553 for the six months ended December 31, 2021, and 2020, respectively.

 

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Liquidity and Capital Resources

 

Working Capital

 

 

 

As of

December 31,

2021

 

 

As of

June 30,

2021

 

Current assets

 

$12,097,966

 

 

$18,293,083

 

Current liabilities

 

$5,262,529

 

 

$5,819,161

 

Working capital

 

$6,835,437

 

 

$12,473,922

 

 

Cash Flows

 

 

 

Six Months Ended December 31,

 

 

 

2021

 

 

2020

 

Cash flows provided by (used in) operating activities

 

$1,212,609

 

 

$(669,321 )

Cash flows (used in) provided by investing activities

 

 

(8,999,854 )

 

 

241,785

 

Cash flows (used in) financing activities

 

 

(151,004 )

 

 

738,000

 

Net (decrease) increase in cash during period

 

$(7,938,249 )

 

$310,464

 

 

At December 31, 2021, the Company had cash of $6,595,962 or a decrease of $7,938,249 from June 30, 2021.

 

Operating activities increased cash from net income and non-cash expenses of $2,233,809 and offset by $1,597,744 in changes in assets and liabilities.

 

Net cash (used in) provided by investing activities for the six months ended December 31, 2021, and 2020 was ($8,999,854) and $241,785, respectively. For the period ended December 31, 2021, the use of cash was primarily due to the $2,074,589 paid for the acquisition of VitaMedica, $1,854,193 paid for the acquisition of Interactive Offers LLC and $5,071,072 in building and equipment purchases. In the prior year the cash provided by investing activities was from the net cash acquired in the purchase of Infusionz and the sale of fixed assets.

 

Net cash flows used by financing activities for the six months ended December 31, 2021, was $151,004 compared to $738,000 provided during the six months ended December 31, 2020.  The use of cash in both periods was due to the repayment of notes payable.  In addition, during the six months ended December 31, 2020, the Company issued a note payable for $750,000 cash.

 

Related to the acquisition of VitaMedica, the Company issued two notes for a total of $1,000,000.  On January 31, 2022, the Company paid $515,188 to the VitaMedica for the principal and interest of the six month note.  The remaining note payable to VitaMedica will be paid on or before August 1, 2022.

 

On October 19, 2021, the Company made a $2,100,000 cash payment for the acquisition of Interactive Offers and committed to an additional $600,000 cash payment in the form of an earnout payment based on certain revenue milestones in accordance with and subject to the terms and conditions of the I/O Agreement within the next 12 months.

 

After December 31, 2021, the Company repurchased 103,750 shares of common stock for $453,119 or an average of $4.37 per common share.

 

We estimate that we will have sufficient working capital to fund our operations over the twelve months following the date of the issuance of these condensed consolidated financial statements and meet all of our debt obligations.

 

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In December 2019, a novel strain of coronavirus (COVID-19) surfaced. The spread of COVID-19 around the world has caused significant volatility in U.S. and international markets. There is significant uncertainty around the breadth and duration of business disruptions related to COVID-19, as well as its impact on the U.S. and international economies and, as such, the Company has transition to a combination of work from home and social distancing operations and there has been minimal impact to our internal operations from the transition. The Company is unable to determine if there will be a material future impact to its customers’ operations and ultimately an impact to the Company’s overall revenues.

 

Off-Balance Sheet Arrangements

 

There are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

Not applicable.

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

Under the supervision and with the participation of our senior management, including our chief executive officer and chief financial officer, we 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 Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of December 31, 2021 (the “Evaluation Date”). Based on this evaluation, our principal executive officer and principal financial and accounting officer concluded as of the Evaluation Date that our disclosure controls and procedures were not effective such that the information relating to us required to be disclosed in our Securities and Exchange Commission (“SEC”) reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to our management, including our principal executive officer and principal financial and accounting officer, as appropriate to allow timely decisions regarding required disclosure. This conclusion is based on findings that constituted material weaknesses. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s interim financial statements will not be prevented or detected on a timely basis.

 

In performing the above-referenced assessment, our management identified the following material weaknesses:

 

 

(i)

inadequate segregation of duties consistent with control objectives.

 

 

 

 

(ii)

lack of multiple levels of supervision and review.

 

We believe the weaknesses and their related risks are not uncommon in a company of our size because of the limitations in the size and number of staff. Due to our size and nature, segregation of all conflicting duties has not always been possible and may not be economically feasible.  However, we plan to take steps to enhance and improve the design of our internal control over financial reporting. During the period covered by this quarterly report on Form 10-Q, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we plan to implement the following changes by the end of the end of 2022 fiscal year as resources allow:

 

(i)

Appoint additional qualified personnel to address inadequate segregation of duties and implement modifications to our financial controls to address such inadequacies; and

 

(ii)

We will attempt to implement the remediation efforts set out herein by the end of the 2022 fiscal year.

 

Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Management believes that despite our material weaknesses set forth above, our financial statements for the quarter ended December 31, 2021, are fairly stated, in all material respects, in accordance with U.S. GAAP.

 

Changes in Internal Control Over Financial Reporting

 

There have been no changes in our internal controls over financial reporting (as defined in Rules 12a-15(f) and 15d-15(f) under Exchange Act) that occurred during the quarter ended December 31, 2021, that have materially or are reasonably likely to materially affect, our internal controls over financial reporting. We believe that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within any company have been detected.

 

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PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings

 

From time to time, the Company may become involved in litigation relating to claims arising out of its operations in the normal course of business. The Company is not involved in any pending legal proceeding or litigation, and, to the best of its knowledge, no governmental authority is contemplating any proceeding to which we are a party or to which any of its properties is subject, which would reasonably be likely to have a material adverse effect on the Company.

 

Item 1A. Risk Factors

 

As a “smaller reporting company”, the Company is not required to provide the information required by this Item.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

During the six months ended December 31, 2021, the Company issued 306,945 shares of common stock for the acquisition of Infusionz. The shares were valued at $1,764,876 or $5.75 per share, as this was the remaining acquisition liability for the Infusionz purchase.

 

During the six months ended December 31, 2021, the Company issued 100,000 shares of common stock for the acquisition of VitaMedica and 7,000 shares of common stock as a finder’s fee for the completion of the transaction. The shares were valued at $515,740 or $4.82 per share, as this was the closing price of the stock on August 4, 2021.

 

During the six months ended December 31, 2021, the Company issued 35,000 shares of common stock for a consulting agreement. The shares were valued at $175,000 or $5.00 per share, based on the price of the services to be rendered.

 

During the six months ended December 31, 2021, the Company issued 666,667 shares of common stock for the acquisition of Interactive Offers, LLC, the shares were valued at $4,000,000.

  

All of the securities issued by the Company as described above were issued pursuant to the exemption for transactions by an issuer not involved in any public offering under Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder and corresponding state securities laws.

 

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

None.

 

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Item 6. Exhibits

 

Exhibit

Number

 

Description

2.1

 

Asset Purchase Agreement (Included as exhibit to our Current Report on Form 8-K filed August 6, 2021)

3.1

 

Articles of Incorporation (Included as exhibit to our Registration Statement on Form S-1 filed May 21, 2021)

3.2

 

Bylaws (Included as exhibit to our Registration Statement on Form S-1 filed May 21, 2021)

10.1

Note Conversion Agreement (Included as exhibit to our Current Report on Form 8-K filed July 2, 2021)

31.1*

 

Certification of Principal Executive Officer, pursuant to Rule 13a-14 and 15-d-15 of the Securities Exchange Act of 1934

31.2*

Certification of Principal Financial Officer, pursuant to Rule 13a-14 and 15-d-15 of the Securities Exchange Act of 1934

32.1*

 

Certification of Principal Executive Officer, pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2*

Certification of Principal Financial Officer, pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101**

 

Interactive Data File

101.INS

 

Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)

101.SCH

 

Inline XBRL Taxonomy Extension Schema Document

101.CAL

 

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

 

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

 

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

 

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

 

Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

__________ 

*

Filed herewith.

**

Furnished herewith.

 

 
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SIGNATURES

 

Pursuant to the requirements of Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

GROVE, INC.

 

 

 

 

Dated: February 14, 2022

 

/s/ Allan Marshall

 

 

 

Allan Marshall

 

 

 

President, Chief Executive Officer, and Director

 

 

 

(Principal Executive Officer)

 

 

Dated: February 14, 2022

 

/s/ Andrew J. Norstrud

 

 

 

Andrew J. Norstrud

 

 

 

Chief Financial Officer

 

 

 

(Principal Financial Officer and Principal Accounting Officer)

 

 

 

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