10-K: Groovy Company, Inc. (SANP) Files 10-K: Focus on Cannabis Industry Platform and Blockchain Technology

Groovy Company, Inc. (formerly Santo Mining Corp.) reports its annual results on Form 10-K, highlighting its shift towards a blockchain-based platform for the cannabis industry and its challenges as a going concern.

Summary

• Groovy Company, Inc., formerly Santo Mining Corp., filed its annual report on Form 10-K for the fiscal year ended December 31, 2024.
• The company has shifted its focus to developing a blockchain-based Platform as a Service (PaaS) for the cannabis industry, utilizing NFT-based QR codes for product authentication and traceability.
• The Groovy platform aims to provide transparency, security, and efficiency throughout the cannabis supply chain, benefiting growers, manufacturers, retailers, and consumers.
• The company's revenue for the year ended December 31, 2024, was $3,600, generated from a single customer for technical support.
• Operating expenses totaled $699,791, including contractor costs, professional fees, selling, general, and administrative expenses, rent, and depreciation.
• The company reported a net loss from operations of $2,099,230 for the year ended December 31, 2024, compared to a loss of $1,408,727 in 2023.
• As of December 31, 2024, the company had $2,184 in cash and cash equivalents and an accumulated deficit of $11,339,099.
• The company's ability to continue as a going concern is dependent on obtaining additional funding and achieving profitability.
• The company anticipates needing a minimum of $350,000 in funding to sustain operations for the next 12 months.
• The company is involved in a legal proceeding related to a default judgment in favor of a former employee, George Kuper, for $521,256, plus attorneys' fees and costs.
• The company faces competition from companies with greater financial resources and longer operating histories.
• The company's largest stockholders, Franjose Yglesias, Marc Williams, and Kevin Jodrey, have significant control over the company.
• The company's common stock is qualified for quotation on the OTC Markets-OTC Pink under the symbol SANP.
• The company does not anticipate paying any dividends on its common stock in the foreseeable future.

Sentiment

Score: 3

Explanation: The document presents a concerning financial picture with minimal revenue, significant losses, and substantial doubt about the company's ability to continue as a going concern. While the company is focused on a growing market segment and is developing intellectual property, the financial risks outweigh the potential opportunities.

Positives

• The company is focused on a growing market segment with its blockchain-based platform for the cannabis industry.
• The Groovy platform offers a range of features and benefits for all stakeholders in the cannabis industry.
• The company is developing intellectual property, including its proprietary centralized Hyperledger Fabric layer-1 blockchain software and QR-NFT system, which are in the final stages of application for a utility patent with the USPTO.

Negatives

• The company has a limited operating history and has generated minimal revenues.
• The company has sustained significant losses and has an accumulated deficit of $11,339,099 as of December 31, 2024.
• The company's ability to continue as a going concern is dependent on obtaining additional funding and achieving profitability.
• The company is involved in a legal proceeding related to a default judgment in favor of a former employee for $521,256, plus attorneys' fees and costs.
• The company's largest stockholders have significant control over the company, which could lead to conflicts of interest.
• The company's common stock is subject to penny stock regulations, which could limit its market liquidity.

Risks

• The company has a limited operating history and may not be able to realize its business plan.
• The company's financial statements disclose a significant concentration of voting power, with approximately 70% held by the following Directors; Franjose Yglesias (30%), Marc Williams (30%), and Kevin Jodrey (10%).
• The cannabis industry is subject to legal and regulatory risks, including conflicts between federal and state laws.
• The company may face banking difficulties due to the federal illegality of cannabis.
• The company is dependent on management, key personnel, and consultants to execute its business plan.
• The company is subject to income taxes and non-income-based taxes.
• The company's ability to adopt technology in response to changing security needs or trends poses a challenge to the safekeeping of its digital assets.
• The company is not subject to Sarbanes-Oxley regulations and lacks the financial controls and safeguards required of public companies.
• The company's indebtedness could adversely affect its financial condition or operations.
• The technology underlying cryptocurrency and blockchain technology is subject to a number of industry-wide challenges and risks relating to consumer acceptance of blockchain technology.
• The company's risk management efforts may not be effective to prevent fraudulent activities by third-party providers or other parties.
• The company is susceptible to changes in employment laws and regulations or to changes in employment classifications by government agencies.
• The company depends on third-party providers for internet, other communication infrastructures and data management systems upon which its operations critically rely.
• The company's operations could be adversely affected by events outside of its control, such as natural disasters, wars, or health epidemics.
• The company may fail to develop, maintain, and enhance its brand and reputation, which could adversely affect its business, operating results, and financial condition.
• The company may not realize the anticipated benefits of past or future acquisitions, and integration of these acquisitions may disrupt its business and management.
• The company's platform may be exploited to facilitate illegal activity such as fraud, money laundering, gambling, tax evasion, and scams.
• The trading price of the company's common stock is likely to continue to be volatile.
• The company may fail to meet its publicly announced guidance or other expectations about its business, which could cause its stock price to decline.
• Transactions relating to the company's convertible notes may dilute the ownership interest of existing stockholders or may otherwise depress the price of its common stock.
• The company does not anticipate paying any dividends on its common stock.
• Unanticipated changes in the company's tax provisions, the adoption of a new U.S. tax legislation, or exposure to additional income tax liabilities could affect its profitability.
• The company faces a significant risk related to the September 30, 2024, SEC charges against Olayinka Oyebola and their accounting firm for alleged aiding and abetting fraud by a client, Mmobuosi Odogwu Banye.

Future Outlook

The company anticipates requiring a minimum of $350,000 in funding to sustain operations for the next 12 months and is focused on raising capital to implement its strategy.

Management Comments

• At Groovy, our mission is to Save Lives using our Groovy (PaaS) and it extends beyond mere product verification.
• We are driven by a profound commitment to safeguarding consumers well-being and fostering trust within the cannabis industry.
• By ensuring the authenticity and traceability of cannabis products, we empower consumers to make informed decisions about their health and wellness.

Industry Context

The company is operating in the rapidly growing cannabis industry and is leveraging blockchain technology to address key challenges such as product authentication, supply chain transparency, and regulatory compliance.

Comparison to Industry Standards

• The company's focus on blockchain technology in the cannabis industry aligns with a growing trend of using technology to improve transparency and efficiency in the supply chain.
• Comparable companies in the blockchain and cannabis space include those offering seed-to-sale tracking solutions, supply chain management platforms, and digital identity verification services.
• However, the company's limited revenue and significant losses raise concerns about its ability to compete with larger, more established players in the industry.
• The company's reliance on external funding and its going concern status also differentiate it from more financially stable companies in the sector.

Legal Proceedings

• On May 14, 2021, George Kuper, a former employee of the Company, filed a complaint against TransferLedger Co. in the Circuit Court of the Eleventh Judicial Circuit in and for Miami-Dade County, Florida (Case No. 2021-011579-CA-01).
• The complaint alleged breaches of contract related to Mr. Kupers employment with the Company.
• The Company did not file a timely response to the complaint, and on July 18, 2023, the Court entered a default judgment in favor of Mr. Kuper in the amount of $521,256, plus attorneys fees and costs.
• The judgment remains unsatisfied as of the date of this filing.
• Management is currently evaluating options regarding this judgment, including potential challenges to the judgment based on the statute of limitations for oral agreements, settlement negotiations, or payment plan arrangements with the plaintiff.

Related Party Transactions

• On October 1, 2023, the Company executed employment and board of director agreements with its key employees, the controlling shareholders, who are its officers and directors of the Company.
• Mr. Franjose Yglesias, Employment Agreement: Ten (10) year contract, annual salary of $150,000.
• Mr. Kevin Jodrey, Employment Agreement: Ten (10) year contract, annual salary of $150,000.
• Mr. Marc Williams, Employment Agreement: Ten (10) year contract, annual salary of $150,000.
• On October 1, 2023 Mr. Franjose Yglesias agreed to accept the Companys common stock for the forgiveness of $480,800 in accrued compensation.
• In support of the Companys efforts and cash requirements, it has relied on advances from the Chief Executive Officers until such time that the Company can support its operations or attains adequate financing through sales of its equity or traditional debt financing.

Stakeholder Impact

• Shareholders face the risk of losing their investment due to the company's financial difficulties and going concern status.
• Employees face uncertainty about their job security due to the company's financial challenges.
• Customers may be impacted by the company's ability to provide its services and maintain its platform.
• Suppliers and creditors face the risk of not being paid due to the company's financial difficulties.

Next Steps

• The company plans to raise capital to implement its strategy.
• The company will continue to develop and enhance the Groovy platform.
• The company will seek strategic partnerships to expand its reach and impact.
• The company will monitor and adapt to evolving regulations in the cannabis industry.

Key Dates

Keywords

blockchain, cannabis, NFT, platform as a service, cryptocurrency, Groovy Company, Santo Mining Corp, financial results, 10-K, annual report