UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, D.C.







FORM 10-Q





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


For the quarterly period ended January 31, 2011


OR


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


For the transition period from ____________ to _________________


Commission File Number 000-30563


PROGREEN PROPERTIES, INC.


(Exact name of registrant as specified in its charter)




DELAWARE

59-3087128(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)380 North Old Woodward Ave., Suite 300, Birmingham, MI

48009(Address of Principal Executive Offices)

(Zip Code)




(248) 530-0770





(Registrant’s Telephone Number, Including Area Code)







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




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


YES x NO  ̈


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


Yes  ̈      No  ̈


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


Large accelerated filer  ̈

Accelerated filer  ̈Non-accelerated filer  ̈

Smaller reporting company x





(Do not check if a smaller reporting company)


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).


 ̈ Yes    x No




The number of shares outstanding the issuer's common stock, par value $.0001 per share, was 103,929,703 as of March 11, 2011.





PROGREEN PROPERTIES, INC.




INDEX




PagePart I. Financial InformationItem 1. Financial Statements

1Condensed Consolidated Balance Sheets as of January 31, 2011 (unaudited) and as of April 30, 2010

2Condensed Consolidated Statements of Operations for the Three and Nine Months Ended January 31, 2011 and 2010 (unaudited)

3Condensed Consolidated Statements of Stockholders’ Equity (unaudited)

4Condensed Consolidated Statements of Cash Flows for the Three and Nine Months Ended January 31, 2011 and 2010 (unaudited)

5Notes to Unaudited Condensed Consolidated Financial Statements

6Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

12Item 4T.Controls and Procedures.

15Part II. Other Information

15Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

15Item 6. Exhibits.

16Signatures

16










ProGreen Properties, Inc.


(formerly Diversified Product Inspections, Inc.)





PART I. FINANCIAL INFORMATION


Item 1. Financial Statements




Certain information and footnote disclosures required under accounting principles generally accepted in the United States of America have been condensed or omitted from the following financial statements pursuant to the rules and regulations of the Securities and Exchange Commission. It is suggested that the following financial statements be read in conjunction with the year-end financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended April 30, 2010.




The results of operations for the three and nine months ended January 31, 2011 and 2010 are not necessarily indicative of the results for the entire fiscal year or for any other period.


1


ProGreen Properties, Inc.


(formerly Diversified Product Inspections, Inc.)





Condensed Consolidated Balance Sheets




January 31,

2011


April

30,2010(Unaudited)ASSETSRental property, net accumulated depreciation of $4,016 and $1,617

$
190,977


$
98,512Properties under development


379,824



104,508Cash


198,352



216,669Commissions receivable


-



1,375Note receivable


76,288Prepaid expenses


26,997



7,673Deposits


6,000



48,350Amount due from related party subscriber under subscription receivable


-



807,310Property and equipment:Equipment, furniture and fixtures, net of accumulated depreciation of $621 and $48


4,980



5,299Total assets

$
883,418


$
1,289,696LIABILITIES AND STOCKHOLDERS' EQUITYAccounts payable and accrued expenses

$
48,055


$
88,974Accrued interest


16,089



32,548Deferred revenue


-



3,000Tenant deposits


6,000



2,850Convertible debenture payable to related party (net of unamortizeddiscount of $54,698 and $86,706)


445,302



413,294Total liabilities


515,446



540,666Stockholders' equityPreferred stock, $.0001 par value, 10,000,000 shares authorized,no shares issued and outstanding


-



-Common stock, $.0001 par value, 250,000,000 authorized and103,929,703 outstanding at January 31, 2011; 250,000,000 sharesauthorized and 24,898,677 outstanding at April 30, 2010


10,393



2,490Common stock, $.0001 par value, 9,775,709 and 86,999,002subscribed not issued


978



8,700Additional paid-in capital


2,983,066



2,856,944Less: amount due from related party subscriber under subscriptionagreement


(107,361
)


(100,000
)Accumulated deficit


(2,519,104
)


(2,019,104
)Total stockholders' equity


367,972



749,030Total liabilities and stockholders' equity

$
883,418


$
1,289,696





See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.


2


ProGreen Properties, Inc.


(formerly Diversified Product Inspections, Inc.)




Condensed Consolidated Statements of Operations (Unaudited)




Three months ended


Nine months endedJanuary 31


January 312011


2010


2011


2010Revenues:Condominium sale

$
-


$
-


$
85,000


$
-Rental Revenue


8,255



1,800



20,276



2,910Commissions Revenue


-



-



6,255



-Total Revenue


8,255



1,800



111,531



2,910Expenses:Cost of condominium sale


(6,798
)


-



72,335



-Rental property operating costs


7,384



1,484



24,490



4,123Professional fees


34,500



42,998



154,378



95,838General & administrative


105,696



7,155



277,174



15,347Depreciation


998



412



2,972



842Total operating expenses


141,780



52,049



531,349



116,150Operating Loss


(133,525
)


(50,249
)


(419,818
)


(113,240
)Other expenses and income:Interest expense


(29,048
)


(27,030
)


(83,049
)


(27,030
)Interest income


1,719



-



2,867



-Loss before income taxes


(160,854
)


(77,279
)


(500,000
)


(140,270
)Deferred income tax expense


-



-



-



-Net loss

$
(160,854
)

$
(77,279
)

$
(500,000
)

$
(140,270
)Basic and diluted loss per share

$
(0.00
)

$
(0.00
)

$
(0.01
)

$
(0.01
)Weighted Average Shares Outstanding


103,611,220



24,871,503



90,738,866



20,633,113





See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.


3


ProGreen Properties, Inc.


(formerly Diversified Product Inspections, Inc.)


Condensed Consolidated Statements of Stockholders' Equity


(UNAUDITED)




Numberof











AmountShares





Common


Additional


DueUnder





NetIssuedand


Common


Stock


PaidIn


Subscription


Accumulated


Stockholders'Outstanding


Stock


Subscribed


Capital


Agreement


Deficit


EquityBalance at April 30, 2009


13,645,990


$
1,365


$
-


$
1,744,459


$
-


$
(1,745,824
)

$
-Stock issued under subscription agreement


10,752,687



1,075



-



108,925



-



-



110,000Stock issued in connection with debenture agreement


500,000



50



-



29,950



-



-



30,000Stock available under debenture conversion option


-



-



-



75,000



-



-



75,000Stock due under subscription agreement


-



-



8,700



898,610



-



-



907,310Amount due from subscriber under subscription agreement


-



-



-



-



(100,000
)


-



(100,000
)Net loss


-



-



-



-



-



(273,280
)


(273,280
)Balance at April 30, 2010


24,898,677


$
2,490


$
8,700


$
2,856,944


$
(100,000
)

$
(2,019,104
)

$
749,030Stock issued under subscription agreement


77,223,851



7,722



(7,722
)


1,442



-



-



1,442Stock issued under City Vac agreement


1,000,000



100



-



49,900











50,000Stock issued for debenture interest


807,175



81



-



67,419











67,500Amount due from subscriber under subscription agreement


-



-



-



7,361



(7,361
)


-



-Net loss


-



-



-



-



-



(500,000
)


(500,000
)Balance at January 31, 2011


103,929,703


$
10,393


$
978


$
2,983,066


$
(107,361
)

$
(2,519,104
)

$
367,972





See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.




4


ProGreen Properties, Inc.


(formerly Diversified Product Inspections, Inc.)


Condensed Consolidated Statements of Cash Flows (Unaudited)


Ninemonthsended

January312011


2010Operating activitiesNet loss

$
(500,000
)

$
(140,270
)Adjustments to reconcile net loss to net cash provided by operating activities:Depreciation and amortization


2,972



842Amortization of discounts on debentures to related party


32,008



10,941Investor relations expense


30,000



-Changes in operating assets and liabilities:Commission receivable


1,375



-Note receivable


212



-Prepaid expenses


676



(1,207
)Deposits


42,350



(9,000
)Accounts payable and accrued expenses


10,272



43,452Net cash used in operating activities


(380,135
)


(95,242
)Investing activitiesAcquisition and development of properties


(446,680
)


(49,500
)Purchase of furniture and equipment


(254
)


-Cash used in investing activities


(446,934
)


(49,500
)Financing activitiesProceeds from common stock through subscription agreement


808,752



110,000Proceeds from debenture issued


-



500,000Net cash provided by financing activities


808,752



610,000Net change in cash


(18,317
)


465,258Cash at beginning of period


216,669



-Cash at end of period

$
198,352


$
465,258Supplemental information:Non-cash transaction: Issuance of stock as commitment fee

$
-


$
30,000Non-cash transaction: Issuance of stock in payment of debenture interest

$
67,500


$
-Non-cash transaction: Issuance of stock in payment of investor relations services

$
50,000


$
-Cash paid for interest

$
-


$
-Cash paid for income taxes

$
-


$
-





See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.




5


ProGreen Properties, Inc.


(formerly Diversified Product Inspections, Inc.)


Notes to Unaudited Condensed Consolidated Financial Statements


January 31, 2011





Note 1. Financial statement presentation




The summary of significant accounting policies is presented to assist in the understanding of the financial statements. The financial statements and notes are the representations of management. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements.




History and nature of business




ProGreen Properties, Inc. (formerly Diversified Products Inspections, Inc.), a Delaware corporation, and its wholly owned subsidiaries (collectively, the “Company”) own and manage residential real estate rental property in the Oakland County, Michigan area.




On April 30, 2009, the Company (formerly known as Diversified Product Inspections, Inc.) ceased previous operations and settled an outstanding lawsuit which resulted in a change of ownership and management. Following the settlement on April 30, 2009, the Company had no assets, no liabilities, and had 13,645,990 shares of common stock outstanding.




On July 21, 2009, the Company formed ProGreen Properties, Inc. as a wholly-owned subsidiary and merged ProGreen Properties, Inc. into the Company, which was the surviving corporation in the merger. In connection with the merger, the Company changed its name from Diversified Product Inspections, Inc. to ProGreen Properties, Inc. The change of the Company’s name to ProGreen Properties, Inc. became effective on September 11, 2009 with approval by the Financial Industry Regulatory Authority as effective for trading purposes in the OTC Bulletin Board market under the new symbol PGEI.




In December 2009, ProGreen Realty LLC (“ProGreen Realty”) was formed as a wholly owned subsidiary of the Company. ProGreen Realty is the real estate broker for the Company and will facilitate the acquisition of real properties. All assets, liabilities, revenues and expenses are included in the financial statements of the Company.




In addition to ProGreen Realty, the Company has established separate LLC’s for each of the ten properties owned. The Company is the sole member of the LLC.




SIGNIFICANT ACCOUNTING POLICIES




Basis of consolidation




The consolidated financial statements include the accounts and records of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated.




Estimates




The preparation of financial statements in conformity with the accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Actual results could differ from those estimates.




Property and real estate costs




Property and real estate costs are recorded at cost from expenditures relating to the acquisition, development, construction, and other costs that enhance the value or extend the life of rental properties are capitalized. All other expenditures necessary to maintain the properties are expensed as incurred.


6


ProGreen Properties, Inc.


(formerly Diversified Product Inspections, Inc.)


Notes to Unaudited Condensed Consolidated Financial Statements


January 31, 2011





Depreciation is computed using the straight-line method over the estimated useful life of the property, as follows:




Lives

MethodCondominium
27.5 years

Straight lineFurniture
10 years

Straight lineEquipment
5 years

Straight line





Revenue recognition




Real estate properties are leased under operating leases with terms of twelve to eighteen months. Rental income from these leases is recognized on a straight-line basis over the term of each lease.




Advertising costs




Advertising costs are expensed as incurred and are included in general and administrative expenses. Total advertising expenditures for the nine months ended January 31, 2011 and 2010 were approximately $77,447 and $0, respectively.




Tenant deposits




The Company requires tenants to pay a deposit at the beginning of each lease. This deposit may be used for unpaid lease obligations or repair of damages based on the Company’s determination. If the tenant has not defaulted on the lease, the Company will return the deposit to the tenant at the end of the lease.




Deferred revenue




The Company may require tenants to prepay rent. The prepaid rent is amortized over the term of the lease using the straight-line method.




Income taxes




The Company accounts for income taxes using an asset and liability approach under which deferred income taxes are recognized by applying enacted tax rates applicable to future years to the differences between the financial statement carrying amounts and the tax bases of reported assets and liabilities.




Fair Value Measurements




The Company did not have any assets or liabilities measured on a recurring or nonrecurring basis.




Reclassifications




Certain amounts in previous periods have been reclassified to conform to 2011 classifications.


7


ProGreen Properties, Inc.


(formerly Diversified Product Inspections, Inc.)


Notes to Unaudited Condensed Consolidated Financial Statements


January 31, 2011




Note 2. Real Estate Properties




The Company owns ten condominiums at January 31, 2011 as follows:




Condominiums - rental properties

$
194,993Less accumulated depreciation


4,016$
190,977Condominiums under development

$
379,824





Note 3. Residential Leases




The Company has entered into leases on four renovated properties. Lease terms range from twelve to eighteen months with lease payments ranging from $900 - $1,150 per month.




Note 4. Note Receivable




On August 3, 2010, the Company entered into a land contract to sell one of the properties renovated during the quarter.




Note 5. Related Party Secured Convertible Debenture Agreement




On November 5, 2009, the Company entered into a Secured Convertible Debenture with Rupes Futura AB (“RF”), an investment company controlled by Henrik Sellmann, a director of the Company, providing for a loan to the Company of $500,000. The Company issued to RF a 13.5% Secured Convertible Debenture, due November 2014, together with 500,000 shares of Common Stock of the Company as a Commitment Fee. The value of the Common Stock at the time of issuance was $30,000 and is recorded as debt discount. The Commitment Fee will be amortized over five years, the term of the Debenture, using the effective interest method. The proceeds of the sale of this Debenture and other Debentures in this series, the terms of which are described below, will primarily be used for the purchase, refurbishment and upgrade of
residential real estate in Michigan.




Each Debenture is secured by a first lien on the property to be purchased by ProGreen Realty. Interest is payable at an annual rate of 13.5%, payable annually in arrears in shares of Common Stock of the Company, valued at the Conversion Price (defined below) as of the due date of the interest payment. The Debentures may be prepaid at any time after two years from the Closing Date, without penalty, by the Company. Any accrued unpaid interest due at such time will be paid in shares of Common Stock valued at the Conversion Price as of the date of the prepayment. RF has the right to choose to convert the Debentures in lieu of cash prepayment.




Debentures are convertible in whole or in part into Common Stock at the option of RF at the Conversion Price at any time following the date that is two years from the Closing Date. If RF elects to convert any unpaid principal amount of a Debenture it shall be entitled to receive shares of Common Stock on conversion equal in value, at the Conversion Price, to 115% of the unpaid principal amount of the Debenture. The conversion price ("Conversion Price") of the Debentures is the price equal to the average closing price (the mean average between bid and ask price) of the Common Stock during the period of twenty (20) consecutive Trading Days, ending on the Trading Day immediately prior to the due date of the interest payment, the prepayment date, or the date of RF’s giving the conversion notice, as the case may
be, subject to equitable adjustment for any stock splits, stock dividends, reclassifications or similar events during such period. The conversion feature has intrinsic value of $75,000 that is recorded as debt discount and amortized over two years, the required holding period for RF, using the effective interest method. The effective interest rate on the Debenture as a result of the debt discounts noted above was 13.5%.


8


ProGreen Properties, Inc.


(formerly Diversified Product Inspections, Inc.)


Notes to Unaudited Condensed Consolidated Financial Statements


January 31, 2011





Note 6. Related Party Subscription Agreement




On July 21, 2009, the Company entered into a Subscription Agreement with EIG Venture Capital, Ltd. (“EIG”), an investment company controlled by Jan Telander, the Company’s Chief Executive Officer and controlling stockholder for the sale by the Company to EIG of an aggregate of 97,751,710 shares of the Company’s Common Stock, par value $0.0001 per share (the “Common Stock”), at a fixed price of $0.01023 per share, in three tranches. The Phase I tranche consisted of 5,767,350 shares of Common Stock for a total purchase price of $59,000, to be purchased by EIG on or before July 16, 2009. The Phase II tranche consists of 43,108,504 shares of Common Stock for a total purchase price of $441,000, to be purchased by EIG on or before December 31, 2009; and the Phase III tranche consists of
48,875,855 shares of Common Stock for a total purchase price of $500,000, to be purchased by EIG on or before July 16, 2010. The shares comprising each of the tranches in Phases I through III may be purchased in one or more installments by the EIG; provided, that the number of shares required to be purchased in each tranche is purchased in its entirety by the final purchase date specified for the entire tranche.




On December 1, 2009, the Company entered into an Amendment to the Subscription Agreement with EIG. The amendment provides that, in the event EIG does not complete payment of the full Phase II or Phase III purchase price for the shares of Common Stock required to be purchased within the time period provided in the Agreement for the particular Phase, as an additional purchase price for the shares to be purchased in that particular Phase, EIG shall pay a penalty interest rate of 13.5% per annum on the unpaid balance as of the final purchase date from that date to the date the shares are purchased.




As of January 31, 2011 all of the Phase I and Phase II shares have been purchased and 39,100,684 shares of the Phase III tranche.




On June 1, 2010, the Company received $400,000 of the Phase III tranche and issued 39,100,684 shares to EIG. As of March 11, 2011, the remainder of Phase III and interest has not been paid. These amounts are reflected as amount due from related party subscriber under subscription receivable in the accompanying balance sheet. The remaining balance of $100,000 had not been received prior to the issuance of the financial statements and has been included in stockholders’ equity as amount due from subscriber under subscription agreement.




Note 7. Corporate Lease Agreement




On March 24, 2010, the Company entered into a lease agreement for office space for a period of sixty-six (66) months. The Company does not have a lease payment for the first 9 months of the lease agreement, and subsequent payments are as follows:




Yearended

RentalApril30,

Amount2011

$
4,7362012


28,4412013


28,6912014


28,7142015


28,9642016


12,069


In addition to the base monthly rent the Company is responsible for a pro-rata share of operating expenses and real estate taxes as determined by the lessor. At the beginning of the lease the Company paid a security deposit of $5,000, which is reflected as deposits on the January 31, 2011 balance sheet. Rent expense is recognized on a straight line basis over the term of the lease. The excess of rent expense over required rental payments is recorded as a liability.


9


ProGreen Properties, Inc.


(formerly Diversified Product Inspections, Inc.)


Notes to Unaudited Condensed Consolidated Financial Statements


January 31, 2011





During the nine months ended January 31, 2011, the Company recorded $18,109 in rental expense as a result of the lease.




Note 8. Stock Agreement




On August 10, 2010 the Company set forth an agreement between themselves and CityVac IR Services (“CityVac”), an investor relations company, whereas (“CityVac”) will provide services in exchange for payment in the form of restricted shares. 400,000 restricted shares were issued on August 12, 2010 and 200,000 restricted shares were issued on November 12, 2010, and the remaining 400,000 restricted shares were issued on December 9, 2010 under the CityVac agreement for the balance of the first year term of the agreement. If this agreement is canceled on 30-day’s notice, (“CityVac”) will retain all payments made prior to the notification as full payment for services rendered.




Note 9. Income Taxes




The Company has not recorded any income tax benefit for the three or nine months ended January 31, 2011 and 2010. The Company has recorded an income tax valuation allowance equal to the benefit of its income tax carry forward because of the uncertainty relating to the Company’s ability to utilize the NOL carry forward.




Note 10. Earnings (loss) per Share




Basic earnings (loss) per share assumes no dilution and is computed by dividing net income available to common stockholders by the weighted average number of common stock outstanding during each period. Diluted earnings per share reflects, in periods in which they have a dilutive effect, the effect of common shares issuable upon the exercise of stock options or warrants, using the treasury stock method of computing such effects and contingent shares, or conversion of convertible debt.




Note 11. Going Concern




The Company’s financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As described in Note 1, on April 30, 2009, the Company disposed of its then existing operating business. The Company made acquisitions of residential property and has entered into four leases with tenants to occupy four of those properties. Also, as more fully discussed in Note 5, the Company issued a $500,000 Secured Debenture the proceeds of which will primarily be used for the purchase, refurbishment and upgrade of revenue producing residential real estate.




The Company’s primary plan and objective going forward is to acquire additional revenue producing property to generate rental cash flow and, over time, sell the properties to realize capital appreciation in order to increase profits and provide shareholdervalue. There is no assurance that the Company will acquire favorable business opportunities through such transactions. In addition, there is no assurance that these business opportunities will generate revenues or profits, or that the market price of the Company’s common stock will be increased thereby.




The Company will continue to incur costs that are necessary for it to remain an active public company. As with future acquisition, these ongoing costs are expected to be funded through the subscription agreements or through sale of renovated properties.




The financial statements do not include any adjustments relating to the recoverability of assets and the classification of liabilities that might be necessary should the Company be unable to continue as a going concern.




Note 12. Commitments




The Company has no pending offers to purchase additional properties as of January 31, 2011.




Note 13. Amendments to Certificate of Incorporation




On July 8, 2009, the Company filed a Certificate of Amendment to its Certificate of Incorporation increasing the number of authorized shares of common stock from 50,000,000, par value $.01 per share to 250,000,000, par value $.0001 per share. The Certificate of Amendment also authorized the issuance of 10,000,000 shares of a new class of preferred stock, par value $.0001 per share, with such rights, preferences and limitations as the Board of Directors may designate.


10


ProGreen Properties, Inc.


(formerly Diversified Product Inspections, Inc.)


Notes to Unaudited Condensed Consolidated Financial Statements


January 31, 2011





Note 14. Standby Equity Agreement




Effective August 25, 2010, the Company entered into a Standby Equity Purchase Agreement (the “SEP Agreement”), with LeadDog Capital LP (“LDC”), under which LDC agreed to provide an equity line of credit of up to $2,500,000 to purchase the Company’s common stock. The funding will not take place until an agreed upon date in the future. Under the SEP Agreement, the Company will issue to LDC a commitment fee of 300,000 shares of its common stock, and has agreed to issue to an affiliate of LDC a structuring and due diligence fee of 100,000 shares of common stock. We amended the SEP Agreement as of March 1, 2011 so that it provides for the filing by the Company of a registration statement under the Securities Act of 1933, as amended, on or before September 1, 2011, subject to further
extension by agreement of the parties, to register the common stock to be issued under the SEP Agreement. We plan to include in such registration statement 24,000,000 shares of our common stock for this equity line financing. Upon the terms and conditions set forth in the SEP Agreement, during its two year term, the Company may issue and sell (or “put”) to LDC, and LDC shall purchase from the Company, up to that number of shares of common stock having an aggregate purchase price of $6,000,000, the maximum amount that LDC is required to purchase pursuant to any one put notice under the SEP Agreement being $500,000. The purchase price for the shares purchased by LDC shall be equal to 92% of the market price, which is defined in the SEP Agreement to be equal to the lowest daily volume weighted average price of the Company’s common stock during the ten consecutive trading days after the date of the related put notice.




Note 15. Subsequent Events




The Company has entered into an agreement to sell one condominium unit for $117,000, which is expected to close on or before April 15, 2011.


11




ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS




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




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




GENERAL




ProGreen Properties, Inc., formerly Diversified Product Inspections, Inc. (“we”, “us”, or the “Company”) was incorporated in Florida on April 23, 1998 and reincorporated in Delaware on December 12, 2008. Effective September 11, 2009, we changed our name from Diversified Product Inspections, Inc. to ProGreen Properties, Inc. to reflect the change in our business operations from the conduct of investigations and laboratory analyses to the purchase of income producing real estate assets.




The Company had maintained its conduct of investigations and laboratory analyses operations until the April 30, 2009 closing of a Settlement and Asset Purchase Agreement (the “Agreement”). On April 30, 2009, we ceased our investigations and laboratory analyses operations and closed the Agreement pursuant to which $230,000 was paid to a plaintiff to settle material litigation, and our remaining assets and liabilities were transferred to a separate entity owned by the previous executive officers of the Company The Company is now controlled by the former plaintiffs in the now settled litigation.




Our Business




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




Our plan is to purchase residential real estate, condominiums and houses where we believe favorable investment opportunities exist based on market conditions at the time of the investment. We are initially concentrating on the Michigan market, and on July 28, 2009, purchased our initial property a condominium located in Oakland County, Michigan. The Company remodels and upgrades properties with an emphasis on using environmentally friendly materials. As of January 31, 2011, we have purchased eleven properties, leased four, sold one and are renovating or have completed renovation of six.




Our primary expenses relate to our reporting obligations under the Securities Exchange Act of 1934 (“Exchange Act”), and any costs relating to maintaining our current condominium investment including taxes and insurance and expenses related to the future acquisition of additional properties.




We currently have one employee. Our management expects to confer with consultants, attorneys and accountants as necessary.


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FINANCIAL CONDITION




At January 31, 2011, we had total assets of $883,418, compared to total assets of $1,289,696 at April 30, 2010. The decrease in total assets was primarily due to net operating losses.




At January 31, 2011, we had stockholders’ equity of $367,972 compared to $749,030 as of April 30, 2010. The decrease in stockholders’ equity was due to net operating losses.




The Company continued to seek additional properties during the quarter, purchasing two properties and evaluating other properties. The company incurred significant costs in renovating properties to make available to rent. Costs incurred in the renovation of the properties that enhance the value or extend the life of the properties are capitalized. The Company also incurred professional fees in implementing its business plan and preparing to sell properties in the future.




Cash decreased approximately $251,000 for the quarter ended January 31, 2011. The Company invested approximately $146,000 in properties and expended approximately $105,000 to fund operations. The Company expects to fulfill cash needs to the coming quarter through the sale of renovated condominiums, as well as through purchase of remaining shares under the subscription agreement.




RESULTS OF OPERATIONS




Three Months Ended January 31, 2011 Compared to Three Months Ended January 31, 2010




During the three months ended January 31, 2011, we incurred a net loss of $160,854 compared to $77,279 for the three months ended January 31, 2010. The increase in our loss from operations for the three months ended January 31, 2011 over the comparable period of the prior year is primarily due to an increase in general and administrative expense. General and administrative expenses increased to $105,696 for the three months ended January 31, 2011 up from $7,155 for the same period in 2010. Advertising and investor relations are large components of general and administrative expenses. Advertising expenses totaled approximately $22,000 in the current quarter and the company incurred no advertising expenses during the same period in 2010. The company incurred no expenses related to investor relations in the three
months ended January 31, 2010 compared to $10,000 in the current quarter end. Professional expenses continue to be significant due to the compliance cost associated with being a public company.




The company completed the purchase of two properties and began renovation, as well as continued renovation of six of the properties during the quarter. The company signed two leases in the current quarter bringing the total number of properties under lease to four as of January 31, 2011. In addition, renovation is complete on another four condominiums, which are available for sale or lease as of January 31, 2011. Management executed a purchase agreement on one such property subsequent to January 31st and anticipates closing on or before April 15, 2011.




Nine Months Ended January 31, 2011 Compared to Nine Months Ended January 31, 2010




During the nine months ended January 31, 2011, we incurred a net loss of $500,000 compared to a net loss of $140,270 for the nine months ended January 31, 2010. The increase in our loss from continuing operations for the nine months ended January 31, 2011 over the comparable period of the prior year is primarily due to an increase in property selling and maintenance expenses of $96,825 in the nine months ended January 31, 2011, from $4,123 in the prior period, an increase in general and administrative expense from $15,347 to $277,174 for the nine months ended January 31, 2011. Current year, general and administrative costs include advertising expense and investor relations expense of $77,446 and $30,000, respectively. The Company incurred no advertising or investor relations expense in the nine months ended January
31, 2010. Professional fees for the nine months ended January 31, 2011 increased to $154,378 up from $95,838 for the comparable prior period. Interest expense on the debenture increased to $83,049 in the nine months ended January 31, 2011 up from $27,030 for the comparable prior period. All other expenses increased due to our increasing efforts to find and renovate condominiums that will contribute to our rental revenue stream. Revenues also increased for the nine months ended January 31, 2011 from $2,910 for the nine months ended January 31, 2010 to $111,531 for the first nine months of the current fiscal year. The Company sold one condominium for $85,000 on land contract in the second quarter of the current fiscal year. Rental revenue increased to $20,276 for the nine months ended January 31, 2011 up from $2,910 in the same period of the prior year. The Company also earned $6,255 in brokerage commissions in the first nine months of the current fiscal year. No brokerage commissions
were earned in the comparable prior period.


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LIQUIDITY




We have limited working capital. EIG Venture Capital Ltd. (“EIG”), a company controlled by our Chief Executive Officer, Jan Telander, agreed to invest $1,000,000 through the purchase of 97,751,710 shares of common stock for $0.01023 per share in three tranches. The first two tranches were due in July 2009 and December 31, 2009, and the third tranche is due July 16, 2010. On December 1, 2009, we entered into an Amendment to the Subscription Agreement with EIG. The amendment provides that, in the event EIG did not complete payment of the full Phase II or Phase III purchase price for the shares of Common Stock required to be purchased within the time period provided in the Agreement for the particular Phase, as an additional purchase price for the shares to be purchased in that particular Phase, EIG would
pay a penalty interest rate of 13.5% per annum on the unpaid balance as of the final purchase date from that date to the date the shares were purchased. As of April 30, 2010 EIG had purchased all the required shares in Phase I and 4,985,337 shares in Phase II; 38,123,167 shares in Phase II were subject to penalty interest of $12,838 as of that date. On May 11, 2010, EIG completed its purchase of the Phase II tranche of 43,108,504 shares of Common Stock for a total purchase price of $441,000, by the payment to the Company of $390,000 for 38,123,167 shares of Common Stock with, pursuant to a December 1, 2009 Amendment to the Agreement, penalty interest in the amount of $18,752, representing interest at the rate of 13.5% per annum on the unpaid balance of the Phase II subscription from December 31, 2009 (the date by which the Phase II tranche was required to be completed under the Agreement) to May 11, 2010. On June 1, 2010, EIG purchased 39,100,684 shares of the Phase III final tranche
under the Agreement for $400,000. The Phase III tranche consists of 48,875,855 shares of Common Stock for a total purchase price of $500,000 to be purchased by EIG on or before July 16, 2010, leaving a balance of 9,755,171 shares to be purchased under the Agreement for a purchase price of $100,000.




Effective August 25, 2010, the Company entered into a Standby Equity Purchase Agreement (the “SEP Agreement”), with LeadDog Capital LP (“LDC”), under which LDC agreed to provide an equity line of credit of up to $2,500,000 to purchase the Company’s common stock. The funding will not take place until an agreed upon date in the future. The Company agreed to issue to LDC in connection with the execution of the SEP Agreement a commitment fee of 300,000 shares of its common stock, and has agreed to issue to an affiliate of LDC a structuring and due diligence fee of 100,000 shares of common stock. We amended the SEP Agreement as of March 1, 2011 so that it provides for the filing by the Company of a registration statement under the Securities Act of 1933, as amended, on or before
September 1, 2011, subject to further extension by agreement of the parties, to register the common stock to be issued under the SEP Agreement for an equity line of credit of up to $6,000,000. We plan to include in such registration statement 24,000,000 shares of our common stock for this equity line financing.




In the coming quarter, management expects to satisfy liquidity needs of the Company through sale of renovated condominiums and purchase of remaining shares under the subscription agreement described above.




Critical Accounting Policies




The summary of critical accounting policies below should be read in conjunction with the discussion of the Company’s accounting policies included in the Company’s Annual Report on Form 10-K for the year ended April 30, 2010. We consider the following accounting policies to be the most critical going forward:


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Revenue Recognition - Rental income is recognized on a straight-line basis over the term of each lease. Sale of home income is recognized when the closing on the property occurs.




Property and Equipment - Our property and equipment, including rental property, is recorded at cost and depreciation is computed using the straight-line method over the estimated useful lives of the assets. We charge repairs and maintenance to expense as it is incurred.




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




ITEM 3.        QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.




Not applicable.




ITEM 4T.   CONTROLS AND PROCEDURES





a. Disclosure controls and procedures.


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





b. Changes in internal controls over financial reporting.


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




PART II—OTHER INFORMATION




ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.





The table below shows the Company’s sales of unregistered securities for the Company’s fiscal quarter ended October 31, 2010 (and amends the sales of unregistered securities as reported in the Company’s Quarterly Report on Form 10-Q filed December 14, 2010 for that quarter) and for the fiscal quarter ended January 31, 2011.




Principal

Total Offering Price/Date

Title and Amount

Purchaser

Underwriter

Underwriting DiscountsAugust 13, 2010

400,000 shares of common stock.

Consultant

NA

$0.05 per share/NANovember 15, 2010

807,175 shares of common stock issued as interest on convertible debenture held by director of Company.

Director of the Company

NA

$0.0836 per share/NA


November 15, 2010

200,000 shares of common stock.

Consultant

NA

$0.05 per share/NADecember 9, 2010

400,000 shares of common stock.

Consultant

NA

$0.05 per share/NA




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The Company believes that the above transactions are exempt from registration under the Securities Act of 1933, as amended (“Securities Act”), pursuant to the provisions of Regulations S, promulgated by the Securities and Exchange Commission under the Securities Act.





ITEM 6. EXHIBITS.




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


SIGNATURES




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




PROGREEN PROPERTIES, INC.BY:
/s/ Jan TelanderJan TelanderPresident and Chief Executive Officer





Dated: March 17, 2011


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EXHIBIT INDEX




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




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