UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q/A
Amendment No. 2
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended July 31, 2013
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _____________ to _____________
Commission File Number 000-54323
Independence Energy Corp.
(Exact name of registrant as specified in its charter)
Nevada 20-3866475
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
3020 Old Ranch Parkway, Suite 300, Seal Beach, CA 90740
(Address of principal executive offices) (Zip Code)
(562) 799-5588
(Registrant's telephone number, including area code)
N/A
(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. [X] YES [ ] 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 (ss.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). [X] YES [ ] NO
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a small reporting company. See
the definitions 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]
(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
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant has filed all documents and reports required to be
filed by Sections 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. [ ] YES [ ] NO
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
121,804,155 common shares issued and outstanding as of September 12, 2013.
EXPLANATORY NOTE
Our company is filing this Amendment No. 2 on Form 10-Q/A (the "Amendment") to
our Quarterly Report on Form 10-Q for the period ended July 31, 2013 (the "Form
10-K"), filed with the Securities and Exchange Commission on September 16, 2013
(the "Original Filing Date"), and amended on February 10, 2014 to include the
related certifications required pursuant to the rules promulgated under the
Exchange Act, as adopted pursuant to Section 302 and Section 906 of the
Sarbanes-Oxley Act of 2002. This Amendment speaks as of the Original Filing
Date, does not reflect events that may have occurred subsequent to the Original
Filing Date, and does not modify or update in any way any other disclosures made
in the Form 10-Q.
Pursuant to Rule 12b-15 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), the certifications required pursuant to the rules
promulgated under the Exchange Act, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002, which were included as exhibits to the Original
Report, have been amended, restated and re-executed as of the date of this
Amendment No. 2 and are included as Exhibits 31.1 and 32.1 hereto.
INDEPENDENCE ENERGY CORP.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 12
Item 3. Quantitative and Qualitative Disclosures About Market Risk 14
Item 4. Controls and Procedures 14
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 1A. Risk Factors 15
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Mine Safety Disclosures 15
Item 5. Other Information 15
Item 6. Exhibits 16
SIGNATURES 18
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Our financial statements are stated in United States Dollars (US$) and are
prepared in accordance with United States Generally Accepted Accounting
Principles.
3
Independence Energy Corp.
(An Exploration Stage Company)
July 31, 2013
Index
-----
Condensed Balance Sheets (unaudited)..................................... 5
Condensed Statements of Operations (unaudited)........................... 6
Condensed Statements of Cash Flows (unaudited)........................... 7
Notes to the Condensed Financial Statements (unaudited).................. 8
4
Independence Energy Corp.
(An Exploration Stage Company)
Condensed Balance Sheets
(expressed in U.S. dollars)
July 31, January 31,
2013 2013
---------- ----------
$ $
ASSETS
Current Assets
Cash 45,713 36,235
Prepaid expenses and deposits 10,473 12,600
---------- ----------
Total Current Assets 56,186 48,835
Oil & gas properties 558,242 538,425
---------- ----------
Total Assets 614,428 587,260
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued liabilities 80,772 60,133
Convertible debenture 57,000 --
Loans payable 156,697 156,697
---------- ----------
Total Current Liabilities 294,469 216,830
Convertible debenture, net of unamortized discount of $4,104 41,896 --
---------- ----------
Total Liabilities 336,365 216,830
---------- ----------
Stockholders' Equity
Preferred Stock
Authorized: 10,000,000 preferred shares, with a par value of $0.001 per share
Issued and outstanding: nil preferred shares -- --
Common Stock
Authorized: 375,000,000 common shares, with a par value of $0.001 per share
Issued and outstanding: 121,804,155 common shares 121,804 121,804
Additional paid-in capital 522,796 518,196
Deficit accumulated during the exploration stage (366,537) (269,570)
---------- ----------
Total Stockholders' Equity 278,063 370,430
---------- ----------
Total Liabilities and Stockholders' Equity 614,428 587,260
========== ==========
(The accompanying notes are an integral part of these financial statements)
5
Independence Energy Corp.
(An Exploration Stage Company)
Condensed Statements of Operations
(expressed in U.S. dollars)
Accumulated from
November 30, 2005
Three Months Three Months Six Months Six Months (date of
Ended Ended Ended Ended inception) to
July 31, July 31, July 31, July 31, July 31,
2013 2012 2013 2012 2013
------------ ------------ ------------ ------------ ------------
$ $ $ $ $
Revenue -- -- -- -- --
Operating Expenses
General and administrative 25,681 35,285 62,853 50,193 221,945
Professional fees 13,741 20,723 32,526 38,223 143,004
------------ ------------ ------------ ------------ ------------
Total Operating Expenses 39,422 56,008 95,379 88,416 364,949
------------ ------------ ------------ ------------ ------------
Net Loss for the Period (39,422) (56,008) (95,379) (88,416) (364,949)
Other Expense
Accretion and interest expense (1,283) -- (1,588) -- (1,588)
------------ ------------ ------------ ------------ ------------
Net Loss (40,705) (56,008) (96,967) (88,416) (366,537)
============ ============ ============ ============ ============
Net Loss Per Share, Basic and Diluted -- -- -- --
============ ============ ============ ============
Weighted Average Shares Outstanding 121,804,155 121,365,534 121,804,155 121,104,356
============ ============ ============ ============
(The accompanying notes are an integral part of these financial statements)
6
Independence Energy Corp.
(An Exploration Stage Company)
Condensed Statements of Cash Flows
(expressed in U.S. dollars)
Accumulated from
November 30, 2005
Six Months Six Months (date of
Ended Ended inception) to
July 31, July 31, July 31,
2013 2012 2013
---------- ---------- ----------
Operating Activities
Net loss (96,967) (88,416) (366,537)
Adjustments to reconcile net loss to net cash
used in operating activities:
Amortization of discount on convertible debenture 496 -- 496
Changes in operating assets and liabilities:
Amounts receivable -- 1,607 --
Prepaid expense and deposits 2,127 9,100 (10,473)
Accounts payable and accrued liabilities 822 7,315 60,955
Due to a related party -- (675) --
---------- ---------- ----------
Net Cash Used in Operating Activities (93,522) (71,069) (315,559)
---------- ---------- ----------
Investing Activities
Oil and gas property expenditures -- (438,077) (538,425)
---------- ---------- ----------
Net Cash Used in Investing Activities -- (438,077) (538,425)
---------- ---------- ----------
Financing activities
Proceeds from issuance of common stock -- 580,000 640,000
Proceeds from issuance of convertible debenture 103,000 -- 103,000
Proceeds from loans payable -- -- 156,697
Proceeds from loans payable to director -- -- 33,000
Repayment of loans payable to director -- -- (33,000)
---------- ---------- ----------
Net Cash Provided by Financing Activities 103,000 580,000 899,697
---------- ---------- ----------
Increase in Cash 9,478 70,854 45,713
Cash, Beginning of Period 36,235 14,790 --
---------- ---------- ----------
Cash, End of Period 45,713 85,644 45,713
========== ========== ==========
Non-cash investing and financing activities:
Beneficial conversion feature of convertible debenture 4,600 -- 4,600
========== ========== ==========
Supplemental Disclosures
Interest paid -- -- --
Income tax paid -- -- --
========== ========== ==========
(The accompanying notes are an integral part of these financial statements)
7
Independence Energy Corp.
(An Exploration Stage Company)
Notes to the Condensed Financial Statements
(expressed in U.S. dollars)
1. NATURE OF OPERATIONS AND CONTINUANCE OF BUSINESS
Independence Energy Corp. (the "Company") was incorporated in the State of
Nevada on November 30, 2005. The Company was organized to explore natural
resource properties in the United States. The Company is an exploration stage
company, as defined by Financial Accounting Standards Board ("FASB") Accounting
Standards Codification ("ASC") 915, DEVELOPMENT STAGE ENTITIES.
GOING CONCERN
These financial statements have been prepared on a going concern basis, which
implies that the Company will continue to realize its assets and discharge its
liabilities in the normal course of business. The Company has generated no
revenues to date and has never paid any dividends and is unlikely to pay
dividends or generate significant earnings in the immediate or foreseeable
future. As of July 31, 2013, the Company had a working capital deficit of
$238,283 and an accumulated deficit of $366,537. The continuation of the Company
as a going concern is dependent upon the continued financial support from its
shareholders, the ability to raise equity or debt financing, and the attainment
of profitable operations from the Company's future business. These factors raise
substantial doubt regarding the Company's ability to continue as a going
concern. These financial statements do not include any adjustments to the
recoverability and classification of recorded asset amounts and classification
of liabilities that might be necessary should the Company be unable to continue
as a going concern.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Basis of Presentation
These financial statements and related notes are presented in accordance
with accounting principles generally accepted in the United States, and are
expressed in US dollars. The Company's fiscal year-end is January 31.
b) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles in the United States and requires management
to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. The Company regularly
evaluates estimates and assumptions related to valuation and impairment of
oil and gas properties, asset retirement obligations, fair value of
share-based payments, and deferred income tax asset valuation allowances.
The Company bases its estimates and assumptions on current facts,
historical experience and various other factors that 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.
c) Interim Financial Statements
These interim unaudited financial statements have been prepared on the same
basis as the annual financial statements and in the opinion of management,
reflect all adjustments, which include only normal recurring adjustments,
necessary to present fairly the Company's financial position, results of
operations and cash flows for the periods shown. The results of operations
for such periods are not necessarily indicative of the results expected for
a full year or for any future period.
d) Basic and Diluted Net Loss Per Share
The Company computes net loss per share in accordance with ASC 260,
EARNINGS PER SHARE, which requires presentation of both basic and diluted
earnings per share (EPS) on the face of the income statement. Basic EPS is
computed by dividing net loss available to common shareholders (numerator)
by the weighted average number of shares outstanding (denominator) during
the period. Diluted EPS gives effect to all dilutive potential common
shares outstanding during the period using the treasury stock method and
convertible preferred stock using the if-converted method. In computing
Diluted EPS, the average stock price for the period is used in determining
the number of shares assumed to be purchased from the exercise of stock
options or warrants. Diluted EPS excludes all dilutive potential shares if
their effect is anti-dilutive. As of July 31, 2013 and January 31, 2013,
the Company had 4,600,000 (2012 - nil) potentially dilutive shares.
8
Independence Energy Corp.
(An Exploration Stage Company)
Notes to the Condensed Financial Statements
(expressed in U.S. dollars)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
e) Oil and Gas Property Costs
The Company utilizes the full-cost method of accounting for petroleum and
natural gas properties. Under this method, the Company capitalizes all
costs associated with acquisition, exploration, and development of oil and
natural gas reserves, including leasehold acquisition costs, geological and
geophysical expenditures, lease rentals on undeveloped properties and costs
of drilling of productive and non-productive wells into the full cost pool
on a country-by-country basis. When the Company obtains proven oil and gas
reserves, capitalized costs, including estimated future costs to develop
the reserves proved and estimated abandonment costs, net of salvage, will
be depleted on the units-of-production method using estimates of proved
reserves. The costs of unproved properties are not amortized until it is
determined whether or not proved reserves can be assigned to the
properties. Until such determination is made, the Company assesses annually
whether impairment has occurred, and includes in the amortization base
drilling exploratory dry holes associated with unproved properties.
The Company applies a ceiling test to the capitalized cost in the full cost
pool. The ceiling test limits such cost to the estimated present value,
using a ten percent discount rate, of the future net revenue from proved
reserves based on current economic and operating conditions. Specifically,
the Company computes the ceiling test so that capitalized cost, less
accumulated depletion and related deferred income tax, do not exceed an
amount (the ceiling) equal to the sum of: The present value of estimated
future net revenue computed by applying current prices of oil and gas
reserves (with consideration of price changes only to the extent provided
by contractual arrangements) to estimated future production of proved oil
and gas reserves as of the date of the latest balance sheet presented, less
estimated future expenditures (based on current cost) to be incurred in
developing and producing the proved reserves computed using a discount
factor of ten percent and assuming continuation of existing economic
conditions; plus the cost of property not being amortized; plus the lower
of cost or estimated fair value of unproven properties included in the
costs being amortized; less income tax effects related to differences
between the book and tax basis of the property. For unproven properties,
the Company excludes from capitalized costs subject to depletion, all costs
directly associated with the acquisition and evaluation of the unproved
property until it is determined whether or not proved reserves can be
assigned to the property. Until such a determination is made, the Company
assesses the property at least annually to ascertain whether impairment has
occurred. In assessing impairment the Company considers factors such as
historical experience and other data such as primary lease terms of the
property, average holding periods of unproved property, and geographic and
geologic data. The Company adds the amount of impairment assessed to the
cost to be amortized subject to the ceiling test.
f) Financial Instruments
Pursuant to ASC 820, FAIR VALUE MEASUREMENTS AND DISCLOSURES, an entity is
required to maximize the use of observable inputs and minimize the use of
unobservable inputs when measuring fair value. ASC 820 establishes a fair
value hierarchy based on the level of independent, objective evidence
surrounding the inputs used to measure fair value. A financial instrument's
categorization within the fair value hierarchy is based upon the lowest
level of input that is significant to the fair value measurement. ASC 820
prioritizes the inputs into three levels that may be used to measure fair
value:
LEVEL 1
Level 1 applies to assets or liabilities for which there are quoted prices
in active markets for identical assets or liabilities.
LEVEL 2
Level 2 applies to assets or liabilities for which there are inputs other
than quoted prices that are observable for the asset or liability such as
quoted prices for similar assets or liabilities in active markets; quoted
prices for identical assets or liabilities in markets with insufficient
volume or infrequent transactions (less active markets); or model-derived
valuations in which significant inputs are observable or can be derived
principally from, or corroborated by, observable market data.
9
Independence Energy Corp.
(An Exploration Stage Company)
Notes to the Condensed Financial Statements
(expressed in U.S. dollars)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
f) Financial Instruments (continued)
LEVEL 3
Level 3 applies to assets or liabilities for which there are unobservable
inputs to the valuation methodology that are significant to the measurement
of the fair value of the assets or liabilities.
The Company's financial instruments consist principally of cash, accounts
payable and accrued liabilities, and amounts due to related parties.
Pursuant to ASC 820 and 825, the fair value of our cash is determined based
on "Level 1" inputs, which consist of quoted prices in active markets for
identical assets. We believe that the recorded values of all of our other
financial instruments approximate their current fair values because of
their nature and respective maturity dates or durations.
g) Recent Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in
effect and that may impact its financial statements and does not believe
that there are any other new accounting pronouncements that have been
issued that might have a material impact on its consolidated financial
statements.
3. OIL AND GAS PROPERTIES
a) On December 15, 2011, the Company acquired a 2.5% interest in four wells in
the Quinlan Lease ("Quinlan") from Wise Oil and Gas LLC ("Wise"), with the
option to increase the interest to 10%. On December 23, 2011, the Company
acquired an additional 2.5% interest in Quinlan. Quinlan is located in
Pottawatomie County, Oklahoma. On March 1, 2012, the Company acquired an
additional 5% interest in Quinlan in exchange for $78,080, bringing the
Company's total interest to 10%.
b) On March 29, 2012, the Company acquired a 5% interest in a 70% net revenue
interest of properties in Coleman County, Texas for $115,000. On June 28,
2012, the Company amended the original agreement to acquire a 7% interest
in a 75% net revenue interest in the properties for an additional payment
of $47,000, and replaced the terms of the original agreement. Refer to Note
3(e).
c) On May 29, 2012, the Company acquired a 2.5% interest in a 70% net revenue
interest in two oil and gas wells and approximately 20 acres of land
surrounding the area in Coleman County, Texas for $82,500. Refer to Note
3(e).
d) On June 8, 2012, the Company acquired a 12.5% interest, with an option to
acquire an additional 12.5% interest, for $90,785. The properties comprise
an area of 2,421 acres in Coleman County, Texas. Refer to Note 3(e).
e) On February 28, 2013, the Company entered into a Compromise, Settlement and
Property Exchange Agreement with MontCrest Energy, Inc. and Black Strata,
LLC. Pursuant to the terms of the agreement, the Company transferred its
working interests in Coleman County with a book value of $335,285, in
consideration of a 100% interest in approximately 1,400 acres of the
Coleman County South Lease held by Black Strata, LLC.
4. CONVERTIBLE DEBENTURES
a) On April 5, 2013, the Company entered into a convertible promissory note
agreement for $46,000. Pursuant to the agreement, the loan is unsecured,
bears interest at 6% per annum, and is due on April 5, 2016. The note is
convertible into common shares of the Company at any time at a conversion
price of $0.01 at the option of the note holder. As at July 31, 2013,
accrued interest of $892 (2012 - $nil) has been recorded in accounts
payable and accrued liabilities.
In accordance with ASC 470-20, the Company recognized the intrinsic value
of the embedded beneficial conversion feature of $4,600 as additional
paid-in capital and an equivalent discount which will be charged to
operations over the term of the convertible note up to its face value of
$46,000. For the six months ended July 31, 2013, $496 (2012 - $nil) had
been accreted, increasing the carrying value to $41,896 (January 31, 2013 -
$nil).
10
Independence Energy Corp.
(An Exploration Stage Company)
Notes to the Condensed Financial Statements
(expressed in U.S. dollars)
4. CONVERTIBLE DEBENTURES (continued)
b) On July 15, 2013, the Company issued a $57,000 convertible note which is
unsecured, bears interest at 8% per annum and due on April 17, 2014. The
note is convertible into shares of common stock 180 days after the date of
issuance (January 11, 2014) at a conversion rate of 58% of the average of
the three lowest closing bid prices of the Company's common stock for the
ten trading days ending one trading day prior to the date the conversion
notice is sent by the holder to the Company. Upon an event of default, the
entire principal balance and accrued interest outstanding is due
immediately, and interest shall accrue on the unpaid principal balance at
22% per annum. As at July 31, 2013, accrued interest of $200 (2012 - $nil)
has been recorded in accounts payable and accrued liabilities.
5. LOAN PAYABLE
As of July 31, 2013, the Company had loan payable of $156,697 (January 31, 2013
- $156,697) owing to an unrelated third party. The amount owing is non-interest
bearing, unsecured and due on demand.
6. RELATED PARTY TRANSACTIONS
During the period ended July 31, 2013, the Company incurred $34,500 (2012 -
$15,000) to the President and CEO of the Company for management services. As of
July 31, 2013, the Company had $6,000 (January 31, 2013 - $10,500) in prepaid
expense for management fees paid to the President and CEO of the Company.
7. SUBSEQUENT EVENTS
On September 1, 2013, the Company entered into a consulting agreement with the
CEO of the Company and agreed to pay $7,500 per month for a period of two years.
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
This Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements that involve known and unknown
risks, significant uncertainties and other factors that may cause our actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed, or implied, by those forward-looking statements. You can
identify forward-looking statements by the use of the words may, will, should,
could, expects, plans, anticipates, believes, estimates, predicts, intends,
potential, proposed, or continue or the negative of those terms. These
statements are only predictions. In evaluating these statements, you should
consider various factors which may cause our actual results to differ materially
from any forward-looking statements. Although we believe that the exceptions
reflected in the forward-looking statements are reasonable, we cannot guarantee
future results, levels of activity, performance or achievements. Therefore,
actual results may differ materially and adversely from those expressed in any
forward-looking statements. We undertake no obligation to revise or update
publicly any forward-looking statements for any reason.
Our financial statements are stated in United States Dollars and are prepared in
accordance with United States Generally Accepted Accounting Principles.
WORKING CAPITAL
July 31, January 31,
2013 2013
---------- ----------
$ $
Current Assets 56,186 48,835
Current Liabilities 294,469 216,830
Working Capital (Deficit) (238,283) (167,995)
CASH FLOWS
Six months Six months
ended ended
July 31, July 31,
2013 2012
---------- ----------
$ $
Cash Flows from (used in) Operating Activities $ (93,522) $ (71,069)
Cash Flows from (used in) Investing Activities -- (438,077)
Cash Flows from (used in) Financing Activities 103,000 580,000
Net Increase (decrease) in Cash During Period 9,478 70,854
OPERATING REVENUES
For the period from November 30, 2005 (date of inception) to July 31, 2013, our
company did not earn any operating revenues.
OPERATING EXPENSES AND NET LOSS
Operating expenses for the six months ended July 31, 2013 were $95,379 compared
with $88,416 for the six months ended July 31, 2012. The increase of $6,963 was
due to an increase of $12,660 in general and administrative costs relating to
$12,000 bonus to management, and an overall increase in day-to-day expenditures,
offset by a decrease of $5,697 in professional fees.
Operating expenses for the three months ended July 31, 2013 were $39,422
compared with $56,008 for the three months ended July 31, 2012. The decrease of
$16,586 during 2013 resulted from an incidental decrease in operating activity
during the three months ended July 31, 2013, marked by a corresponding reduction
in professional fees and general and administrative expense.
12
For the three months ended July 31, 2013, our company incurred a net loss of
$40,705 or $nil per share compared with $56,008 or $nil per share for the three
months ended July 31, 2012. For the six months ended July 31, 2013, our company
incurred a net loss of $96,967 or $nil per share compared with $88,416 or $nil
per share for the six months ended July 31, 2012. In addition to operating
expenses, our company incurred accretion and interest expense of $1,588 during
the three and six months ended July 31, 2013 relating to the $46,000 convertible
note debenture which is unsecured, bears interest at 6% per annum, and due on
April 5, 2016 and the $57,000 convertible note debenture, which is unsecured,
bears interest at 8% per annum, and due on April 17, 2014. The $46,000 note is
convertible into common shares of our company at a rate of $0.01 per share, at
the option of the note holder at any time. The $57,000 note is convertible into
shares of common stock 180 days after the date of issuance (January 11, 2014) at
a conversion rate of 58% of the average of the three lowest closing bid prices
of our company's common stock for the ten trading days ending one trading day
prior to the date the conversion notice is sent by the holder to our company.
LIQUIDITY AND CAPITAL RESOURCES
As at July 31, 2013, our company had cash of $45,713 compared with $36,235 at
January 31, 2013. The increase in cash was attributed to the fact that our
company obtained additional financing of $103,000 from the issuance of
convertible debentures, net costs paid for the general expenditures incurred by
our company for our operations.
Our company had total assets at July 31, 2013 of $614,428 compared with $587,260
at January 31, 2012. Overall, cash increased by $9,478 and oil and gas
properties increased by $19,817, offset by a decrease in prepaid expenses and
deposits of $2,127.
At July 31, 2013, our company had total liabilities of 336,365 compared with
$216,830 at January 31, 2013. The increase in total liabilities was attributed
to an increase in accounts payable and accrued liabilities of $20,639, and
$98,896 for the net liability of the convertible debenture net of unamortized
discount of $4,104.
During the period ended July 31, 2013, our company did not have any equity or
capital transactions.
CASHFLOW FROM OPERATING ACTIVITIES
During the six months ended July 31, 2013, our company used cash of $93,522 for
operating activities compared with $71,069 during the six months ended July 31,
2012. The increase in cash used for operating activities was attributed to
proceeds received from the convertible debentures which were used to repay
outstanding obligations incurred in day-to-day operations of our company.
CASHFLOW FROM INVESTING ACTIVITIES
During the six months ended July 31, 2013, our company did not have any
investing activities compared with the use of $438,077 during the six months
ended July 31, 2012 for the acquisition of oil and gas properties.
CASHFLOW FROM FINANCING ACTIVITIES
During the six months ended July 31, 2013, our company received $46,000 in
financing from the issuance of a convertible debenture which is unsecured, bears
interest at 6% per annum, and due on April 5, 2016 and $57,000 from the issuance
of a convertible debenture which is unsecured, bears interest at 8% per annum,
and due on April 17, 2014. Conversely, our company received $580,000 during the
period ended July 31, 2012 from the issuance of common shares.
GOING CONCERN
We have not attained profitable operations and are dependent upon obtaining
financing to pursue any extensive acquisitions and activities. For these
reasons, our auditors stated in their report on our audited financial statements
that they have substantial doubt that we will be able to continue as a going
concern without further financing.
13
OFF-BALANCE SHEET ARRANGEMENTS
We have no significant off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources that are material to
stockholders.
FUTURE FINANCINGS
We will continue to rely on equity sales of our common shares in order to
continue to fund our business operations. Issuances of additional shares will
result in dilution to existing stockholders. There is no assurance that we will
achieve any additional sales of the equity securities or arrange for debt or
other financing to fund our operations and other activities.
CRITICAL ACCOUNTING POLICIES
Our financial statements and accompanying notes have been prepared in accordance
with United States generally accepted accounting principles applied on a
consistent basis. The preparation of financial statements in conformity with
U.S. generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting periods.
We regularly evaluate the accounting policies and estimates that we use to
prepare our financial statements. A complete summary of these policies is
included in the notes to our financial statements. In general, management's
estimates are based on historical experience, on information from third party
professionals, and on various other assumptions that are believed to be
reasonable under the facts and circumstances. Actual results could differ from
those estimates made by management.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Our company has implemented all new accounting pronouncements that are in
effect. These pronouncements did not have any material impact on the financial
statements unless otherwise disclosed, and our company does not believe that
there are any other new accounting pronouncements that have been issued that
might have a material impact on its financial position or results of operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company we are not required to provide the information
under this Item.
ITEM 4. CONTROLS AND PROCEDURES
MANAGEMENT'S REPORT ON DISCLOSURE CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in our reports filed under the Securities
Exchange Act of 1934, as amended, is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commission's rules and forms, and that such information is accumulated and
communicated to our management, including our chief executive officer and chief
financial officer (our principal executive officer, principal financial officer
and principal accounting officer) to allow for timely decisions regarding
required disclosure.
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As of the end of our quarter covered by this report, we carried out an
evaluation, under the supervision and with the participation of our chief
executive officer and chief financial officer (our principal executive officer,
principal financial officer and principal accounting officer), of the
effectiveness of the design and operation of our disclosure controls and
procedures. Based on the foregoing, our chief executive officer and chief
financial officer (our principal executive officer, principal financial officer
and principal accounting officer) concluded that our disclosure controls and
procedures were not effective as of the end of the period covered by this
quarterly report.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
During the period covered by this report there were no changes in our internal
control over financial reporting that materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We know of no material, existing or pending legal proceedings against our
company, nor are we involved as a plaintiff in any material proceeding or
pending litigation. There are no proceedings in which our director, officer or
any affiliates, or any registered or beneficial shareholder, is an adverse party
or has a material interest adverse to our interest.
ITEM 1A. RISK FACTORS
As a smaller reporting company we are not required to provide the information
under this Item.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Effective July 22, 2013, we entered into and closed a securities purchase
agreement with Asher Enterprises, Inc. Under the terms of the agreement, our
company issued an 8% convertible promissory note, in the principal amount of
$57,000, which matures on April 17, 2014 and may be converted into shares of our
company's common stock at a rate of 58% of the market price on any conversion
date, any time after 180 days from July 15, 2013, subject to adjustments as
further set out in the note. Our company has the right to prepay the note
together with all accrued interest within 180 days of July 15, 2013 subject to a
prepayment penalty equal to 15% during the first 30 days of the prepayment
period and increasing by 5% during each subsequent 30 day period. Following the
maturity date of April 17, 2014, the note shall bear interest at the rate of
22%.
The note was issued to Asher Enterprises pursuant to Rule 506 of Regulation D of
the Securities Act of 1933 on the basis that they represented to our company
that they were an "accredited investor" as such term is defined in Rule 501(a)
of Regulation D.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
On September 1, 2013, we entered into a consulting agreement with our sole
officer and director Gregory Rotelli regarding the provision of Mr. Rotelli's
management services to our company as Chief Executive Officer.
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Pursuant to the agreement, we have agreed to pay to Mr. Rotelli monthly
compensation of $7,500 payable at Mr. Rotelli's option in cash or in shares of
our common stock. Compensation paid in common shares will be based on an
conversion price equal to the weighted average trading price of our common
shares for the 5 trading days immediately preceding the date upon which
compensation becomes due. Mr. Rotelli will also be entitled to receive basic
health insurance coverage or an in kind allowance. The term of the Agreement
will be 24 months beginning on September 1, 2013 and will renew automatically
for an additional 24 months unless earlier terminated. The agreement may be
terminated by either party without cause by giving 30 days notice. If terminated
without cause by the Company, Mr. Rotelli will be entitled to severance equal to
6 months compensation under the Agreement and shall be entitled to exercise any
vested options or warrants for a period of twelve months from termination.
ITEM 6. EXHIBITS
Exhibit NumberDescription of Exhibit
(3) ARTICLES OF INCORPORATION AND BYLAWS
3.01 Articles of Incorporation (incorporated by reference to our
Registration Statement on Form SB-2 filed on March 7, 2006)
3.02 Bylaws (incorporated by reference to our Registration Statement on Form
SB-2 filed on March 7, 2006)
3.03 Certificate of Amendment filed on July 23, 2008 (incorporated by
reference to our Current Report on Form 8-K filed on August 14, 2008)
3.04 Certificate of Change filed on July 23, 2008 (incorporated by reference
to our Current Report on Form 8-K filed on August 14, 2008)
3.05 Certificate of Change filed on June 14, 2012 (incorporated by reference
to our Current Report on Form 8-K filed on June 16, 2012)
(10) MATERIAL CONTRACTS
10.1 Share Purchase agreement between Gregory Rotelli and Bruce Thomson
dated January 24, 2012 (incorporated by reference to our Current Report
on Form 8-K filed on January 30, 2012)
10.2 Form of Financing Agreement dated May 24, 2012 (incorporated by
reference to our Current Report on Form 8-K filed on May 24, 2012)
10.3 Purchase Agreement and Bill of Sale dated May 29, 2012 between our
company and MontCrest Energy, Inc. (incorporated by reference to our
Current Report on Form 8-K filed on June 1, 2012)
10.4 Joint Development and Operating Agreement dated June 8, 2012 between
our company and MontCrest Energy Properties, Inc., MontCrest Energy,
Inc., and Black Strata, LLC (incorporated by reference to our Current
Report on Form 8-K filed on June 12, 2012)
10.5 Purchaser Agreement and Bill of Sale dated June 18, 2012 between our
company and MontCrest Energy, Inc. (incorporated by reference to our
Current Report on Form 8-K filed on June 19, 2012)
10.6 Compromise, Settlement and Property Exchange Agreement dated February
25, 2013 between our company and MontCrest Energy, Inc. and Black
Strata, LLC (incorporated by reference to our Current Report on Form
8-K filed on March 7, 2013)
10.7 Form of Convertible Debenture dated for reference April 5,2012 issued
to Europa Capital AG (incorporated by reference to our Current Report
on Form 8-K filed on April 9, 2013)
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10.8 Form of Securities Purchase Agreement dated July 15, 2013 with Asher
Enterprises, Inc. (incorporated by reference to our Current Report on
Form 8-K filed on July 29, 2013)
10.9 Form of Convertible Promissory Note dated July 15, 2013 with Asher
Enterprises, Inc. (incorporated by reference to our Current Report on
Form 8-K filed on July 29, 2013)
10.10* Consulting Agreement with Gregory Rotelli dated September 1, 2013
(incorporated by reference to our Interim Report on Form 10-Q filed on
September 16, 2014)
(14) CODE OF ETHICS
14.1 Code of Ethics (incorporated by reference to Interim Report on Form
10-Q filed on June 19, 2012)
(31) RULE 13A-14(A) / 15D-14(A) CERTIFICATIONS
31.1* Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
of the Principal Executive Officer, Principal Financial Officer and
Principal Accounting Officer.
(32) SECTION 1350 CERTIFICATIONS
32.1* Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
of the Principal Executive Officer, Principal Financial Officer and
Principal Accounting Officer.
101 INTERACTIVE DATA FILE
101** Interactive Data File (Form 10-Q for the quarter ended July 31, 2013
furnished in XBRL).
101.INS XBRL Instance Document
101.SCH XBRL Taxonomy Extension Schema Document
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
101.LAB XBRL Taxonomy Extension Label Linkbase Document
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
----------
* Filed herewith.
** Furnished herewith. Pursuant to Rule 406T of Regulation S-T, the
Interactive Data Files on Exhibit 101 hereto are deemed not filed or part
of a registration statement or prospectus for purposes of Sections 11 or 12
of the Securities Act of 1933, are deemed not filed for purposes of Section
18 of the Securities and Exchange Act of 1934, and otherwise are not
subject to liability under these sections.
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SIGNATURES
In accordance with Section 13 or 15(d) of the Securities and Exchange Act of
1934, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
INDEPENDENCE ENERGY, CORP.
(Registrant)
Dated: May 13, 2014 /s/ Gregory Rotelli
-------------------------------------------------
Gregory Rotelli
Chief Executive Officer, Chief Financial Officer,
Secretary, Treasurer and Director
(Principal Executive Officer, Principal Financial
Officer and Principal Accounting Officer)
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