UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
Amendment No. 1
X. | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2014
Commission File Number: 333-139482
Indie Growers Association
(Exact name of registrant as specified in its charter)
Nevada | 98-0492900 |
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification Number) |
311 Division St. Carson City, NV 89703
(Address of principal executive offices)(Zip code)
888-648-0488
(Registrant’s telephone number, including area code)
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 files). Yes X. No .
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of "large accelerated filer", "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer . | Accelerated filer . | Non-accelerated filer . | Smaller reporting company X. |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes . No X.
Indicate the number of shares outstanding of the issuer’s classes of common stock, as of the latest practicable date.
140,881,967 common shares as of October 13, 2015
EXPLANATORY NOTE
Restatement of Previously Issued Quarterly Report
In this Quarterly Report on Form 10-Q/A, Amendment No. 1, we are restating our previously issued Quarterly Report on Form 10-Q for the 6 months ended September 30, 2014, which was filed with the Securities and Exchange Commission (the “SEC”) on November 14, 2014.
On March 20, 2015, we received a comment letter from the SEC advising us of a number of filing deficiencies. In particular, they stated that with the acquisition of River Ridge Sunshine Farms LLC we no longer met the criteria of Rule 3-11 of Regulation S-X. Therefore, we were required to have the interim financial statements included in the Forms 10-Q for the quarter ended September 30, 2014 reviewed by our independent accountant.
All amounts and disclosures in this Quarterly Report on Form 10-Q/A, Amendment No. 1, have been restated to correct any misstatements found by our independent accountant as a result of their review.
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
INDIE GROWERS ASSOCIATION
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
|
| September 30, 2014 |
| March 31, 2014 |
|
|
|
|
|
ASSETS |
|
|
|
|
Current Assets |
|
|
|
|
Cash | $ | 12,124 | $ | - |
Non-current assets |
|
|
|
|
Buildings and infrastructure, net |
| 286,876 |
| - |
Investments |
| - |
| 50,000 |
Total non-current assets |
| 286,876 |
| 50,000 |
TOTAL ASSETS | $ | 299,000 | $ | 50,000 |
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY |
|
|
|
|
Current Liabilities |
|
|
|
|
Accounts payable and accrued liabilities | $ | 92,719 | $ | 23,686 |
Convertible notes payable |
| 403,724 |
| 75,945 |
Due to related parties |
| 44,609 |
| - |
Total current liabilities |
| 541,053 |
| 99,631 |
Long Term Liabilities |
|
|
|
|
Deferred vendor incentive, net |
| 4,764 |
| 5,336 |
|
|
|
|
|
TOTAL LIABILITIES |
| 545,817 |
| 104,967 |
COMMITMENTS AND CONTINGENCIES |
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ DEFICIENCY |
|
|
|
|
Common stock 400,000,000 shares authorized, at $0.001 par value; 140,881,967 shares issued and outstanding (1,159,745 as at March 31, 2014) |
| 140,882 |
| 1,160 |
Additional paid-in capital |
| 113,905,775 |
| 31,056,496 |
Accumulated deficit |
| (114,293,473) |
| (31,112,623) |
Total stockholders’ deficiency |
| (246,817) |
| (54,967) |
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIENCY | $ | 299,000 | $ | 50,000 |
The accompanying notes are an integral part of these consolidated financial statements.
3
INDIE GROWERS ASSOCIATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
|
| For the 3 Months ended |
| For the 6 Months ended | ||||
|
| September 30, 2014 |
| September 30, 2013 |
| September 30, 2014 |
| September 30, 2013 |
REVENUE |
|
|
|
|
|
|
|
|
Rental income | $ | - | $ | - | $ | - | $ | - |
|
|
|
|
|
|
|
|
|
EXPENSES |
|
|
|
|
|
|
|
|
Management fees |
| 2,930 |
| 67,250 |
| 31,093,482 |
| 76,250 |
General and administrative |
| 26,900 |
| 1,700 |
| 34,309 |
| 3,350 |
Interest |
| 153,295 |
| 74 |
| 399,715 |
| 122 |
Professional fees |
| 6,570 |
| 8,422 |
| 14,935 |
| 13,422 |
TOTAL OPERATING EXPENSES |
| 189,695 |
| 77,446 |
| 31,542,441 |
| 93,144 |
NET INCOME (LOSS) FROM OPERATIONS |
| (189,695) |
| (77,446) |
| (31,542,441) |
| (93,144) |
OTHER EXPENSE |
|
|
|
|
|
|
|
|
Investment loss |
| - |
| - |
| (156,212) |
| - |
Impairment of goodwill |
| - |
| - |
| (51,482,198) |
| - |
TOTAL OTHER EXPENSE |
| - |
| - |
| (51,638,410) |
| - |
NET INCOME (LOSS) | $ | (189,695) | $ | (77,446) | $ | (83,180,850) | $ | (93,144) |
|
|
|
|
|
|
|
|
|
GAIN (LOSS) PER COMMON SHARE | $ | (0.00) | $ |
| $ | (0.24) | $ |
|
WEIGHTED AVERAGE OUTSTANDING SHARES Basic and diluted |
| 340,756,360 |
| 1,023,065 |
| 340,756,360 |
| 1,023,065 |
The accompanying notes are an integral part of these consolidated financial statements.
4
INDIE GROWERS ASSOCIATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
| For the 6 Months Ended | ||
|
| September 30, 2014 |
| September 30, 2013 |
|
|
|
|
|
OPERATING ACTIVITIES |
|
|
|
|
Net income (loss) | $ | (83,180,850) | $ | (93,144) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
Non-cash management fees |
| 31,072,222 |
| 76,250 |
Non-cash interest expense |
| 392,279 |
| - |
Non-cash impairment of goodwill |
| 51,460,000 |
| - |
Depreciation |
| 1,196 |
| - |
Investment loss |
| 156,212 |
| - |
Changes in operating assets and liabilities: |
|
|
|
|
Accounts payable and accrued liabilities |
| 69,033 |
| 11,489 |
Deferred vendor incentive |
| (572) |
| - |
Net cash provided by (used in) operating activities |
| (30,480) |
| (5,405) |
|
|
|
|
|
INVESTING ACTIVITIES |
|
|
|
|
Investment in Indie Growers Union |
| (106,212) |
| - |
Buildings and infrastructure |
| (288,072) |
| - |
Net cash used in investing activities |
| (394,284) |
| - |
|
|
|
|
|
FINANCING ACTIVITIES |
|
|
|
|
Advances from related parties |
| 44,609 |
| - |
Advances for convertible debt, net |
| 392,279 |
| 5,405 |
Net cash provided by financing activities |
| 436,888 |
| 5,405 |
Net change in cash |
| 12,124 |
| - |
CASH, BEGINNING OF PERIOD |
| - |
| - |
CASH, END OF PERIOD | $ | 12,124 | $ | - |
The accompanying notes are an integral part of these consolidated financial statements.
5
INDIE GROWERS ASSOCIATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
September 30, 2014
1. ORGANIZATION
The company, Viking Minerals Inc., was incorporated under the laws of the state of Nevada on March 24, 2006 with 75,000,000 authorized common shares, par value of $0.001 per share. In January 2011, the company filed an amendment with the state of Nevada to increase the authorized shares to 400,000,000 common shares, par value of $0.001 per share.
On April 14, 2014 the Company changed its name to Indie Growers Association and completed a 1:200 reverse stock consolidation. All share amounts in these consolidated financial statements have been restated to reflect this stock consolidation.
The company was originally organized for the purpose of acquiring and developing mineral claims (SIC Code: 1000). On June 30, 2014, the company acquired River Ridge Sunshine Farms LLC, a Washington State corporation, and in so doing, changed its business to that of real estate development for the purpose of leasing land and agricultural buildings to licensed cannabis producers (SIC Code: 5319).
These financial statements are presented on the basis that we will continue as a going concern. The going concern concept contemplates the realization of assets and satisfaction of liabilities in the normal course of business.
At September 30, 2014, the Company had a working capital deficit, stockholders’ deficit and operating losses for the past two years. These circumstances raise substantial doubt about the Company’s ability to continue as a going concern. While the Company is attempting to generate sufficient revenues, the Company’s cash position may not be enough to support the Company’s daily operations. Management intends to raise additional funds by way of a public or private offering. Management believes that the actions presently being taken to further implement its business plan and generate sufficient revenues provide the opportunity for the Company to continue as a going concern. While the Company believes in the viability of its strategy to increase revenues and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate sufficient revenues.
The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
6
2. RESTATEMENT OF PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS
We are restating our previously issued consolidated financial statements for the 3 and 6 months ended September 30, 2014 (the “Original Statements”).
On March 20, 2015, we received a comment letter from the SEC advising us of a number of filing deficiencies. In particular, they stated that with the acquisition of River Ridge Sunshine Farms LLC we no longer met the criteria of Rule 3-11 of Regulation S-X. Therefore, we were required to have the interim financial statements included in the Forms 10-Q for the quarter ended September 30, 2014 reviewed by our independent accountant.
All amounts and disclosures in this Quarterly Report on Form 10-Q/A, Amendment No. 1, have been restated to correct any misstatements found by our independent accountant as a result of their review.
The effect of the restatement to the Original Statements is set forth in this footnote.
Comparison of restated financial statements to financial statements as originally issued
UNAUDITED CONSOLIDATED BALANCE SHEET
|
| September 30, 2014 (Original) |
| Adjustments |
| September 30, 2014 (Restated) |
ASSETS |
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
Cash | $ | 12,124 | $ | - | $ | 12,124 |
Accounts receivable |
| 29,245 |
| (29,245) |
| - |
Notes receivable |
| 8,849 |
| (8,849) |
| - |
Total current assets |
| 50,218 |
| (38,094 |
| 12,124 |
Non-current assets |
|
|
|
|
|
|
Acquisition of subsidiary |
| 46,500,000 |
| (46,500,000) |
| - |
Buildings and infrastructure, net |
| 284,871 |
| 2,005 |
| 286,876 |
Total non-current assets |
| 46,784,871 |
| (46,497,005) |
| 286,876 |
TOTAL ASSETS | $ | 46,835,089 | $ | (46,536,089) | $ | 299,000 |
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY |
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
Accounts payable and accrued liabilities | $ | 75,176 | $ | 17,543 | $ | 92,719 |
Convertible notes payable |
| 409,327 |
| (5,603) |
| 403,724 |
Due to related parties |
| 51,459 |
| (6,850) |
| 44,609 |
Total current liabilities |
| 535,962 |
| 5,090 |
| 541,053 |
Long Term Liabilities |
|
|
|
|
|
|
Deferred vendor incentive, net |
| - |
| 4,764 |
| 4,764 |
|
|
|
|
|
|
|
TOTAL LIABILITIES |
| 535,962 |
| 9,854 |
| 545,817 |
COMMITMENTS AND CONTINGENCIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ DEFICIENCY |
|
|
|
|
|
|
Common Stock |
| 148,660 |
| (7,778) |
| 140,882 |
Additional paid-in capital |
| 190,476,920 |
| (76,571,145) |
| 113,905,775 |
Accumulated deficit |
| (144,326,453) |
| 30,032,980 |
| (114,293,473) |
Total stockholders’ deficiency |
| 46,299,127 |
| (46,545,943) |
| (246,817) |
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIENCY | $ | 46,835,089 | $ | (46,536,089) | $ | 299,000 |
7
UNAUDITED CONSOLIDATED INCOME STATEMENTS
|
| For the Three Months Ended | ||||
|
| September 30, 2014 (Original) |
| Adjustments |
| September 30, 2014 (Restated) |
|
|
|
|
|
|
|
REVENUE | $ | 29,245 | $ | (29,245) | $ | - |
|
|
|
|
|
|
|
EXPENSES |
|
|
|
|
|
|
Management fees |
| - |
| 2,930 |
| 2,930 |
General and administrative |
| 18,218 |
| 8,682 |
| 26,900 |
Interest |
| - |
| 153,295 |
| 153,295 |
Professional fees |
| 7,700 |
| (1,130) |
| 6,570 |
TOTAL OPERATING EXPENSES |
| 25,918 |
| 163,777 |
| 189,695 |
NET INCOME (LOSS) FROM OPERATIONS |
| 3,327 |
| (193,022) |
| (189,695) |
OTHER EXPENSE |
|
|
|
|
|
|
Investment loss |
| - |
| - |
| - |
Loss on extinguishment of debt |
| (61,812,500) |
| 61,812,500 |
| - |
Impairment of goodwill |
| - |
| - |
| - |
TOTAL OTHER EXPENSE |
| (61,812,500) |
| 61,812,500 |
| - |
NET INCOME (LOSS) | $ | (61,809,173) | $ | 61,619,478 | $ | (189,695) |
|
|
|
|
|
|
|
GAIN (LOSS) PER COMMON SHARE | $ | (0.46) |
|
| $ | (0.00) |
WEIGHTED AVERAGE OUTSTANDING SHARES Basic and diluted |
| 134,923,472 |
|
|
| 340,756,360 |
UNAUDITED CONSOLIDATED INCOME STATEMENTS
|
| For the Six Months Ended | ||||
|
| September 30, 2014 (Original) |
| Adjustments |
| September 30, 2014 (Restated) |
|
|
|
|
|
|
|
REVENUE | $ | 29 ,245 | $ | (29,245) | $ | - |
|
|
|
|
|
|
|
EXPENSES |
|
|
|
|
|
|
Management fees |
| 48,200,000 |
| (17,106,518) |
| 31,093,482 |
General and administrative |
| 30,573 |
| 3,736 |
| 34,309 |
Interest |
| - |
| 399,715 |
| 399,715 |
Professional fees |
| 58,120 |
| (43,185) |
| 14,935 |
TOTAL OPERATING EXPENSES |
| 48,288,693 |
| (16,746,252) |
| 31,542,441 |
NET INCOME (LOSS) FROM OPERATIONS |
| (48,259,448) |
| 16,717,007 |
| (31,542,441) |
OTHER EXPENSES |
|
|
|
|
|
|
Investment loss |
| (156,212) |
| - |
| (156,212) |
Loss on extinguishment of debt |
| (64,850,500) |
| 64,850,500 |
| - |
Impairment of goodwill |
| - |
| (51,482,198) |
| (51,482,198) |
TOTAL OTHER EXPENSES |
| (65,006,712) |
| 13,368,302 |
| (51,638,410) |
NET INCOME (LOSS) | $ | (113,266,159) | $ | 30,085,309 | $ | (81,180,850) |
|
|
|
|
|
|
|
GAIN (LOSS) PER COMMON SHARE | $ | (2.05) |
|
| $ | (0.24) |
WEIGHTED AVERAGE OUTSTANDING SHARES Basic and diluted |
| 55,381,868 |
|
|
| 340,756,360 |
8
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOW
|
| For the Six Months Ended | ||||
|
| September 30, 2014 (Original) |
| Adjustments |
| September 30, 2014 (Restated) |
|
|
|
|
|
|
|
OPERATING ACTIVITIES |
|
|
|
|
|
|
Net income (loss) | $ | (113,266,159) | $ | 30,085,159 | $ | (83,180,150) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
Non-cash management fees |
| 48,200,000 |
| (17,127,778) |
| 31,072,222 |
Non-cash interest expense |
| - |
| 392,279 |
| 392,279 |
Non-cash impairment of goodwill |
| - |
| - |
| 51,460,000 |
Depreciation |
| - |
| 1,196 |
| 1,196 |
Investment loss |
| 156,212 |
| - |
| 156,212 |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
Accounts payable and accrued liabilities |
| 48,738 |
| 20,295 |
| 69,033 |
Accounts receivable |
| (29,245) |
| 29,245 |
| - |
Note receivable |
| (8,849) |
| 8,849 |
| - |
Shares issued in debt conversion |
| 64,850,500 |
| (64,850,500) |
| - |
Deferred vendor incentive |
| - |
| (572) |
| (572) |
Net cash used in operating activities |
| (48,803) |
| 18,323 |
| (30,480) |
|
|
|
|
|
|
|
INVESTING ACTIVITIES |
|
|
|
|
|
|
Investment in Indie Growers Union |
| - |
| (106,212) |
| (106,212) |
Buildings and infrastructure |
| (284,871) |
| (3,201) |
| (288,072) |
Net cash used in investing activities |
| (284,871) |
| (109,413) |
| (394,284) |
|
|
|
|
|
|
|
FINANCING ACTIVITIES |
|
|
|
|
|
|
Advances from (payments to) related parties |
| 13,209 |
| 31,400 |
| 44,609 |
Advances for convertible debt, net |
| 295,270 |
| 97,009 |
| 392,279 |
Net cash provided by financing activities |
| 308,479 |
| 128,409 |
| 436,888 |
Net change in cash |
| (25,195) |
| 37,319 |
| 12,124 |
CASH, BEGINNING OF PERIOD |
| 37,319 |
| (37,319) |
| - |
CASH, END OF PERIOD | $ | 12,124 | $ | - | $ | 12,124 |
9
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basic and Diluted Net Loss Per Share
Basic net loss per share amounts are computed based on the weighted average number of shares outstanding. Diluted net loss per share amounts are computed using the weighted average number of common and common equivalent shares outstanding as if shares had been issued on the exercise of the common share rights unless the exercise becomes anti-dilutive and then the basic and diluted per share amounts are the same.
Estimates and Assumptions
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain of the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the year. The Company regularly evaluates estimates and assumptions. The Company bases its estimates and assumptions on current facts, historical experience and various other factors it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company's estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. The most significant estimates with regard to these financial statements relate to the carrying values of unproven mineral properties, expected lives of equipment, determination of fair values of stock based transactions and valuation of deferred income taxes.
Capital Assets
A Capital Asset is defined as a unit of tangible property that: (1) has an economic useful life of more than 12 months; and (2) was acquired or produced for a cost of more than $500, including acquisition and installation costs on the same invoice.
Capital Assets are stated at historical cost less accumulated depreciation and accumulated impairment losses. Subsequent costs are included in the asset's carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. All repairs and maintenance are charged to the statement of operations during the financial period in which they are incurred.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognized in the statement of operations.
Depreciation of capital assets is computed as follows:
Furniture and fixtures | 7 year straight line |
Computer equipment | 5 year straight line |
Buildings and infrastructure | 30 year straight line |
Leasehold Improvements | Straight line over the term of lease |
Impairment of Long-lived Assets
The Company reviews and evaluates long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. The assets are subject to impairment consideration under ASC 360-10-35-17 if events or circumstances indicate that their carrying amounts might not be recoverable. When the Company determines that an impairment analysis should be done, the analysis will be performed using rules of ASC 930-360-35, Asset Impairment, and 360-10-15-3 through 15-5, Impairment or Disposal of Long-Lived Assets.
10
Investments
Investments in companies that are not consolidated, but over which the Company exercises significant influence, are accounted for under the equity method of accounting. Whether or not the Company exercises significant influence with respect to an investee depends on an evaluation of several factors, including, among others, ownership level. Under the equity method of accounting, an investee company’s accounts are not reflected within the Company’s Balance Sheets and Statements of Operations; however, the Company’s share of the earnings or losses of the investee company is reflected in the Company’s statements of operations and the Company’s carrying value in an equity method investee company is reflected in the Company’s balance sheets. The Company evaluates these investments for other-than-temporary declines in value each quarterly period. Any impairment found to be other than temporary would be recorded through a charge to earnings.
Revenue Recognition
Revenue is recognized when all applicable recognition criteria have been met, which generally include (a) persuasive evidence of an existing arrangement; (b) fixed or determinable price; (c) delivery has occurred or service has been rendered; and (d) collectability is reasonably assured.
Fair Value of Financial Instruments
The estimated fair values for financial instruments are determined at discrete points in time based on relevant market information. These estimates involve uncertainties and cannot be determined with precision. The estimated fair value of cash, trade payables, and loans approximates their carrying value due to their short-term nature.
Income Taxes
The Company utilizes the liability method of accounting for income taxes. Under the liability method deferred tax assets and liabilities are determined based on differences between financial reporting and the tax bases of the assets and liabilities and are measured using the enacted tax rates and laws that will be in effect, when the differences are expected to be reversed. An allowance against deferred tax assets is recorded, when it is more likely than not, that such tax benefits will not be realized.
Recent Accounting Pronouncements
On June 10, 2014, The Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, consolidation, which removes all incremental financial reporting requirements from GAAP for development stage entities, including the removal of Topic 915 from the FASB Accounting Standards Codification. For the first annual period beginning after December 15, 2014, the presentation and disclosure requirements in Topic 915 will no longer be required for the public business entities. The revised consolidation standards are effective one year later, in annual periods beginning after December 15, 2015. Early adoption is permitted. The Company has adopted the amendment as of 3 and 6 months ended September 30, 2014.
There are several new accounting pronouncements issued by the Financial Accounting Standards Board (“FASB”) which are not yet effective. Each of these pronouncements, as applicable, has been or will be adopted by the Company. As of September 30, 2014, none of these pronouncements is expected to have a material effect on the financial position, results of operations or cash flows of the Company.
11
4. ACQUISITION OF A PROPERTY
On April 8, 2014, the Company entered into a share exchange agreement with the unit holders of Indie Growers Union LLC of Washington state wherein the Company would issue a total of 87,500,000 shares of common stock and $185,000 cash in exchange for all of the outstanding member units and assets of Indie Growers Union LLC. The company advanced $185,000 but cancelled the agreement prior to issuing the shares. The company recovered $28,788 of the $185,000 cash and has recorded an investment loss of $(156,212) in the consolidated statement of operations.
On June 30, 2014, the Company acquired River Ridge Sunshine Farms LLC, a Washington state corporation in exchange for 62,000,000 shares. The market value of the Company’s shares on the acquisition date was $0.83 per share thereby valuing the shares at $51,460,000. River Ridge Sunshine Farms LLC holds a 10 year lease on a 40 acre property which has been subleased to licensed cannabis producers. The Net Book Value of the acquired assets and liabilities at June 30, 2014 was (22,198) therefore the transaction has been recorded as an acquisition of goodwill where goodwill is in excess of the purchase price as follows:
Share Value | 51,460,000 |
Net book value of acquired assets | 22,198 |
Goodwill | 51,482,198 |
However, no revenue was generated from leases in the year ended March 31, 2015 so the company has determined that the value of this acquisition should be fully impaired. An impairment of goodwill has been recorded in the consolidated statement of operations effective as of the date of acquisition.
5. CAPITAL STOCK
On May 2, 2014, the company issued 21,000,000 shares of its common stock for services to two of our directors. The market value of the Company’s shares on the May 2, 2014, the date the shares were issued, was $2.35 per share thereby valuing the management fees at $49,350,000. However, on December 28, 2014, one of the directors resigned and relinquished his title to 7,777,778 of the shares. The net effect of $31,072,222 has been recorded as management fees in the consolidated statements of operations for this transaction.
On May 14, 2014, the company issued 2,000,000 shares of its common stock for $2,000 of convertible debt. The stock was valued at par value in accordance with the convertible debt agreement.
On June 30, 2014, the company acquired River Ridge Sunshine Farms LLC and subsequently issued 62,000,000 shares to the managing member of River Ridge Sunshine Farms LLC. The market value of the Company’s shares on June 30, 2014 was $0.83 per share thereby valuing the shares at $51,460,000. The managing member is now our Chief Operating Officer. The shares are subject to a lock-up agreement until July 1, 2016.
On July 21, 2014, the company issued 62,500,000 shares of its common stock for $62,500 of convertible debt. The stock was valued at par value in accordance with a convertible debt agreement.
6. SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES
During the period ended September 30, 2014, the company had repaid a portion of the debt owing to its Chief Financial Officer. The balance remaining at September 30, 2104 was $44,609. The advance has no set repayment terms and does not bear interest.
During the period ended September 30, 2014, we accrued $3000 in lease fees on the property owned by our Chief Financial Officer.
7. VENDOR INCENTIVE
In December 2013, the Company’s current transfer agent paid off the outstanding balance of $5,717 owed to the former transfer agent. This has been recorded as a deferred vendor incentive on the consolidated balance sheet. It has been amortized on a straight line basis over the contract term of 5 years such that each year’s portion of the incentive will be offset against transfer agent fees in the consolidated statement of operations. The balance as of September 30, 2014 is $4,764.
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8. CONVERTIBLE PROMISSORY NOTES
As of September 30, 2014, the Company had accumulated $403,724 in convertible promissory notes. The notes are due on demand, bear interest at 5%, are unsecured, and are convertible at $0.001. The Company assessed the conversion option and determined that during the period the note had a beneficial conversion feature with intrinsic values in excess of the debt. Therefore, the Company fully amortized a conversion benefit of $392,279 for the current period and recorded it as an interest expense as of September 30, 2014. The amount of accrued interest payable on these notes was $7,436 as of September 30, 2014 and is included in Accounts Payable and Accrued Liabilities.
If the balance outstanding was converted into common shares, the amount of shares to be issued would be 403,724,000 common shares. The weighted average number of shares outstanding has been computed as if these shares were issued on the date the funds were advanced to the Company as follows:
Date | Issued Shares Outstanding | Potentially Dilutive Shares | Days | Weighting | Weighted Average Shares |
31-Mar-14 | 1,159,745 | 75,945,000 | 183 | 1.00 | 77,104,745 |
30-Apr-14 |
| 138,820,000 | 153 | 0.84 | 116,062,623 |
02-May-14 | 13,222,222 |
| 151 | 0.83 | 10,910,139 |
14-May-14 | 2,000,000 | (2,000,000) | 139 | 0.76 | - |
31-May-14 |
| 35,960,000 | 122 | 0.67 | 23,973,333 |
11-Jun-14 |
| 35,000,000 | 111 | 0.61 | 21,229,508 |
20-Jun-14 |
| 18,500,000 | 102 | 0.56 | 10,311,475 |
30-Jun-14 |
| 15,705,000 | 92 | 0.50 | 7,895,410 |
30-Jun-14 | 62,000,000 |
| 92 | 0.50 | 31,169,399 |
01-Jul-14 |
| 15,000,000 | 91 | 0.50 | 7,459,016 |
21-Jul-14 | 62,500,000 | (62,500,000) | 71 | 0.39 | - |
30-Jul-14 |
| 94,415,000 | 62 | 0.34 | 31,987,596 |
31-Aug-14 |
| 16,184,000 | 30 | 0.16 | 2,653,115 |
30-Sep-14 |
| 22,695,000 | 0 | 0.00 | - |
| 140,881,967 | 403,724,000 |
|
| 340,756,360 |
9. INCOME TAXES
As of September 30, 2014, the Company has not generated any revenue. Therefore, the company has not made any allowance for income taxes during this period.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Overview
Indie Growers Association ("Indie Growers" or the "Company") was organized under the laws of the State of Nevada on March 24, 2006 to explore mineral properties in North America(SIC Code: 1000).
On April 14, 2014 the Company completed a name change from Viking Minerals Inc. to Indie Growers Association and on June 30, 2014 acquired River Ridge Sunshine Farms LLC, a Washington State corporation. In so doing, the Company changed its business to that of real estate development for the purpose of leasing land and agricultural buildings to licensed cannabis producers (SIC Code: 5319).
Results of Operations
The Three Months Ended September 30, 2014 Compared to the Three Months Ended September 30, 2013
Revenues
The company has earned no income in either quarter.
Management Fees
The Company incurred $2,930 in management fees in the three months ending September 30, 2014 compared to $67,250 for the same period in the prior year. Management fees for the current quarter were in cash whereas the management fees in the same period the prior year were stock based so market price was used to value the compensation as follows:
# of shares issued | Issue date | Market price per share | Value |
11,208,333 | 8/7/2013 | $0.006 | $ 67,250 |
General and Administrative Expenses
General and administrative expenses (“G&A”) were $26,900 and $1,700 for the 3 months ended September 30, 2014 and 2013, respectively. The increase in general and administrative expenses was due to the additional expenses related to the acquisition of River Ridge Sunshine Farms LLC and our change in business.
For the three months ended September 30, 2014, our G&A consisted of $2,123 of fees paid to our transfer agent, $1,560 to DTCC, $7,500 in payments to OTC Markets, $3,000 in lease payments, $4,512 in repairs & maintenance, $2,142 in automobile expenses, and other small administrative costs.
Interest Expense
During the three months ended September 30, 2014, we recorded interest expenses of $153,295 compared to $74 in the same period in the prior year. This increase is attributable entirely to the increase in interest owed on convertible debt financing received by the company and the beneficial conversion factor of these financings.
Professional Fees
During the three months ended September 30, 2014, we incurred professional fees of $6,570 compared to $8,422 for the same period in prior year.
Non-operating Expenses
There were no non-operating expenses during the 3 months ended September 30, 2014 and 2013.
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The Six Months Ended September 30, 2014 Compared to the Six Months Ended September 30, 2013
Revenues
The company has earned no income in either quarter.
Management Fees
The Company incurred $31,093,482 in management fees in the six months ending September 30, 2014 compared to $76,250 for the same period in the prior year. Although there was some cash component, the majority of the management fees incurred during both periods were primarily stock based so market price was used to value the compensation as follows:
# of shares issued | Issue date | Market price per share | Value |
13,222,222 | 5/2/2014 | $ 2.35 | $31,072,222 |
11,208,333 | 8/7/2013 | $0.006 | $ 67,250 |
General and Administrative Expenses
General and administrative expenses (“G&A”) were $34,309 and $3,350 for the 6 months ended September 30, 2014 and 2013, respectively. The increase in general and administrative expenses was due to the additional expenses related to the acquisition of River Ridge Sunshine Farms LLC and our change in business.
For the six months ended September 30, 2014, our G&A consisted of $4,155 of fees paid to our transfer agent, $5,000 in advertising and promotion, $7,500 in payments to OTC Markets, $3,000 in lease payments, $5,065 in repairs & maintenance, $2,142 in automobile expenses, and other small administrative costs.
Interest Expense
During the six months ended September 30, 2014, we recorded interest expenses of $399,715 compared to $122 in the same period in the prior year. This increase is attributable entirely to the increase in interest owed on convertible debt financing received by the company and the beneficial conversion factor of these financings.
Professional Fees
During the six months ended September 30, 2014, we incurred professional fees of $14,935 compared to $13,422 for the same period in prior year. This increase is attributable to increased legal costs associated with the acquisition of River Ridge Sunshine Farms LLC.
Non-operating Expenses
For the six months ending September 30, 2014, we had non-operating expenses of $51,638,410 compared to $nil for the same period in the prior year. This included $156,212 of a $185,000 investment in Indie Growers Union LLC of which we were only able to recover $28,778 of the funds we had advanced once we cancelled the acquisition. In addition, we determined that the goodwill of $51,482,198 from our acquisition of our subsidiary should be fully impaired because the subsidiary failed to generate any revenue during the year ended March 31, 2015.
Liquidity and Capital Resources
Our consolidated financial statements have been prepared on a going concern basis which assumes we will be able to realize our assets and discharge our liabilities in the normal course of business for the foreseeable future. As of September 30, 2014, we had a working capital deficit of $528,929 and an accumulated deficit of $114,293,473. Our ability to continue as a going concern is dependent upon our ability to generate profitable operations in the future and/or obtaining the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. There is no assurance that these events will be satisfactorily completed.
Net cash used in operating activities for the 6 months ended September 30, 2014 and 2013 was $30,480 and $5,405, respectively. This increase can be attributable to the increase costs associated with the acquisition of River Ridge Sunshine Farms.
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Net cash used in investing activities for the 6 months ended September 30, 2014 and 2013, was $394,284 and $nil, respectively. This increase can be attributed to construction on the property we are leasing through our subsidiary, River Ridge Sunshine Farms LLC.
Net cash provided by financing activities for the three months ended September 30, 2014 and 2013, was $436,888 and $5,405, respectively. The increase can be attributed to securing additional funds from our investor, Lexington Ridge Holdings Inc. (“Lexington”), and our Chief Operating Officer for the construction on the land we have leased through River Ridge Sunshine Farms as well as general operating expenses. At September 30, 2014, the balance owing to Lexington is $403,724. This note accrues interest at a rate of 5% per annum and can be converted at the option of the debt holder at any time into common shares of the Company at a rate of $0.001 per share. This means with a current convertible debt of $403,724, Lexington could potentially convert this debt into 403,724,000 common shares of the company. As of September 30, 2014, Lexington had not converted any debt into shares. However, during the 6 months ended September 30, 2014, Lexington had assigned $64,500 of the debt to others who elected to convert their debt into 64,500,000 common shares of the Company.
During the next 12 months, we anticipate that we will spend a minimum of $1 million on the construction of greenhouses and other agricultural buildings. We also plan to incur significant sales and marketing expenses during the next 12 months in order to attract new tenants to our property. However, we must obtain additional financing to do so and so far we have been unable to obtain sufficient funding on terms that are favorable to us. Furthermore, we may not be able to generate adequate revenues to operate profitably in the future. These conditions raise substantial doubt about our ability to continue as a going concern.
Off-Balance Sheet Arrangements
We have not entered into any off-balance sheet arrangements.
Critical Accounting Estimates
The preparation of consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires us to make judgments, assumptions, and estimates that affect the amounts reported. Note 2 -Summary of Significant Accounting Policies of our consolidated financial statements describes the significant accounting policies used in the preparation of our consolidated financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
None.
Item4. Controls and Procedures
Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports filed or submitted under the Securities Exchange Act is recorded, processed, summarized and reported, within the time period specified in the SEC rules and forms, and that such information is accumulated and communicated to management, as appropriate, to allow timely decisions regarding required disclosures. Our management necessarily applied its judgment in assessing the costs and benefits of such controls and procedures, which, by their nature, can provide only reasonable assurance regarding management's control objectives.
Our management evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report. Based upon this evaluation, our management concluded that our disclosure controls and procedures were not effective as of September 30, 2014 because of the identification of a material weakness in our internal control over financial reporting which is described below. We intend to continue to review and document our disclosure controls and procedures, including our internal controls over financial reporting, and may from time to time make changes aimed at enhancing their effectiveness and to ensure that our systems evolve with our business.
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Management’s Report on Internal Control Over Financial Reporting
Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Exchange Act Rules 13a-15(f). The Company’s internal control over financial reporting is a process affected by the Company’s management to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external purposes in accordance with U.S. generally accepted accounting principles.
In designing and evaluating our internal controls and procedures, our management recognized that internal controls and procedures, no matter how well conceived and operated, can provide only a reasonable, not absolute, assurance that the objectives of the internal controls and procedures are met.
The Company’s management assessed the effectiveness of its internal control over financial reporting as of September 30, 2014. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission’s 2013 Internal Control—Integrated Framework. Based on its assessment, management identified deficiencies in both the design and operating effectiveness of the Company’s internal control over financial reporting, which when aggregated, represent a material weakness in internal control. The most significant of these are:(1) lack of segregation of duties; (2) lack of accounting expertise; (3) lack of timely closing of books; and (4) inability to get accounting information and schedules to our auditors in a timely manner. These weaknesses have lead to the restatement of our financial statements contained in this quarterly report as well as the already completed restatement of the company’s quarterly report ended June 30, 2014. These restatements were necessary to correct a number of reporting errors including proper accounting for the acquisition of our subsidiary. We will also assess our quarterly report for the period ended December 31, 2014 to determine what restatement may be required for that period.
A material weakness is a deficiency or a combination of deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. The material weaknesses identified above result from insufficient qualified personnel in our finance department. This results in an inability to provide effective oversight and review of financial transactions with regard to accumulating and compiling financial data in the preparation of financial statements. The lack of sufficient personnel also results in a lack of segregation of duties and the accounting technical expertise necessary for an effective system of internal control. As soon as our finances allow, we plan on hiring additional finance staff and, where necessary, utilizing competent outside consultants to provide a layer of review and technical expertise that is currently lacking in our internal controls over financial reporting.
As a result of these material weaknesses, management concluded that the Company did not maintain effective control over financial reporting as of September 30, 2014.
This quarterly report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to an exemption for smaller reporting companies under Section 989G of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Rule 13a-15(f). Our internal control over financial reporting is a process designed to provide reasonable assurance to our management regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with U.S. GAAP.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the three and six months ended September 30, 2014, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Limitations on Controls and Procedures
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. All internal control systems, no matter how well designed, have inherent limitations, including the possibility of human error and the circumvention of overriding controls. Accordingly, even effective internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
We are not aware of any pending or threatened legal actions to which we are a party or of which our property is the subject that would, if determined adversely to us, have a material adverse effect on our business and operations.
We have from time to time been involved in disputes and proceedings arising in the ordinary course of business. In addition, as a public company, we are also potentially susceptible to litigation, such as claims asserting violations of securities laws. Any such claims, with or without merit, if not resolved, could be time-consuming and result in costly litigation. There can be no assurance that an adverse result in any future proceeding would not have a potentially material adverse effect on our business, results of operations or financial condition.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
N/A
Item 4. Mine Safety Procedures
N/A
Item 5. Other Information
None.
Item 6. Exhibits
Exhibit Number
Description
3(i)
Articles of Incorporation*
3(ii)
Bylaws*
21
Subsidiaries of the Registrant
31
Sec. 302 Certification of Chief Executive Officer and Chief Financial Officer
32
Sec. 906 Certification of Chief Executive Officer and Chief Financial Officer
* Incorporated by reference to an exhibit on our Form SB-1 Registration Statement filed December 19, 2006.
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| INDIE GROWERS ASSOCIATION | |
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Date: October 13, 2015 |
| /s/ Robert Coleridge |
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| Robert Coleridge President |
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