UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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 April 30, 2014
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.
345,188,164 common shares issued and outstanding as of June 10, 2014.
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 15
Item 4. Controls and Procedures 15
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 1A. Risk Factors 16
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Mine Safety Disclosures 16
Item 5. Other Information 16
Item 6. Exhibits 17
SIGNATURES 19
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)
April 30, 2014
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)
April 30, January 31,
2014 2014
---------- ----------
$ $
(unaudited)
ASSETS
Current Assets
Cash 35,946 7,292
Prepaid expenses and deposits -- 3,100
Deferred financing charge -- 1,264
---------- ----------
Total Current Assets 35,946 11,656
Oil & gas properties 204,827 208,678
Intangible assets 320,431 --
---------- ----------
Total Assets 561,204 220,334
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts payable and accrued liabilities 84,629 72,957
Convertible debenture, net of unamortized discount of
$nil and $41,666, respectively -- 35,834
Loans payable 156,697 156,697
Derivative liability -- 97,237
Due to related party 8,601 --
---------- ----------
Total Liabilities 249,927 362,725
---------- ----------
Stockholders' Equity (Deficit)
Common Stock
Authorized: 375,000,000 common shares, with a par value of $0.001 per share
Issued and outstanding: 345,188,164 and 129,304,155 common shares, respectively 345,188 129,304
Additional paid-in capital 892,832 541,497
Deficit accumulated during the exploration stage (926,743) (813,192)
---------- ----------
Total Stockholders' Equity (Deficit) 311,277 (142,391)
---------- ----------
Total Liabilities and Stockholders' Equity (Deficit) 561,204 220,334
========== ==========
(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)
(unaudited)
Accumulated from
Three Months Three Months November 30, 2005
Ended Ended (date of inception) to
April 30, April 30, April 30,
2014 2013 2014
------------ ------------ ------------
$ $ $
Revenue -- -- --
Operating Expenses
General and administrative 37,069 37,172 324,556
Professional fees 24,965 18,785 182,314
------------ ------------ ------------
Total Operating Expenses 62,034 55,957 506,870
------------ ------------ ------------
Net Operating Loss (62,034) (55,957) (506,870)
Other Income (Expense)
Accretion expense (74,166) (305) (94,100)
Amortization of deferred financing charges (1,264) -- (2,500)
Gain on forgiveness of loan -- -- 48,284
Gain on change in fair value of derivative liability 24,029 -- (30,409)
Impairment of oil and gas property -- -- (335,284)
Interest expense (116) -- (5,864)
------------ ------------ ------------
Total Other Income (Expense) (51,517) (305) (419,873)
------------ ------------ ------------
Net Loss (113,551) (56,262) (926,743)
============ ============ ============
Net Loss Per Share, Basic and Diluted -- --
============ ============
Weighted Average Shares Outstanding 164,643,741 121,804,155
============ ============
(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)
(unaudited)
Accumulated from
Three Months Three Months November 30, 2005
Ended Ended (date of inception) to
April 30, April 30, April 30,
2014 2013 2014
---------- ---------- ----------
$ $ $
Operating Activities
Net loss (113,551) (56,262) (926,743)
Adjustments to reconcile net loss to net
cash used in operating activities:
Amortization of discount on convertible debenture 74,166 109 94,100
Amortization of deferred financing charges 1,264 -- 2,500
Gain on forgiveness of loan -- -- (48,284)
Gain on change in fair value of derivative liability (24,029) -- 30,409
Impairment of oil and gas property -- -- 335,284
Changes in operating assets and liabilities:
Prepaid expense and deposits 3,100 (3,863) --
Accounts payable and accrued liabilities 19,103 16,967 88,807
Due to a related party 8,601 -- 8,601
---------- ---------- ----------
Net Cash Used in Operating Activities (31,346) (43,049) (415,326)
---------- ---------- ----------
Investing Activities
Oil and gas property expenditures -- -- (538,425)
Proceeds from asset acquisition 60,000 -- 60,000
---------- ---------- ----------
Net Cash Provided by (Used in) Investing Activities 60,000 -- (478,425)
---------- ---------- ----------
Financing activities
Proceeds from issuance of common stock -- -- 640,000
Proceeds from issuance of convertible debenture -- 46,000 133,000
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 -- 46,000 929,697
---------- ---------- ----------
Increase in Cash 28,654 2,951 35,946
Cash, Beginning of Period 7,292 36,235 --
---------- ---------- ----------
Cash, End of Period 35,946 39,186 35,946
========== ========== ==========
Non-cash investing and financing activities:
Beneficial conversion feature of convertible debenture -- 4,600 18,801
Shares issued for acquisition of intangible assets 380,431 -- 593,412
========== ========== ==========
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)
(unaudited)
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 April 30, 2014, the Company had a working capital deficit of
$213,981 and an accumulated deficit of $926,743. 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 April 30, 2014, the Company had nil (2014 -
29,463,117) potentially dilutive shares.
8
Independence Energy Corp.
(An Exploration Stage Company)
Notes to the Condensed Financial Statements
(expressed in U.S. dollars)
(unaudited)
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) Beneficial Conversion Features
From time to time, the Company may issue convertible notes that may contain an
imbedded beneficial conversion feature. A beneficial conversion feature exists
on the date a convertible note is issued when the fair value of the underlying
common stock to which the note is convertible into is in excess of the remaining
unallocated proceeds of the note after first considering the allocation of a
portion of the note proceeds to the fair value of the warrants, if related
warrants have been granted. The intrinsic value of the beneficial conversion
feature is recorded as a debt discount with a corresponding amount to additional
paid in capital. The debt discount is amortized to interest expense over the
life of the note using the effective interest method.
l) Derivative Liability
From time to time, the Company may issue equity instruments that may contain an
embedded derivative instrument which may result in a derivative liability. A
derivative liability exists on the date the equity instrument is issued when
there is a contingent exercise provision. The derivative liability is records at
is fair value calculated by using an option pricing model such as a
multi-nominal lattice model. The fair value of the derivative liability is then
calculated on each balance sheet date with the corresponding gains and losses
recorded in the consolidated statement of operations.
g) Income Taxes
Potential benefits of income tax losses are not recognized in the accounts until
realization is more likely than not. The Company has adopted ASC 740, INCOME
TAXES, as of its inception. Pursuant to ASC 740, the Company is required to
compute tax asset benefits for net operating losses carried forward. The
potential benefits of net operating losses have not been recognized in these
financial statements because the Company cannot be assured it is more likely
than not it will utilize the net operating losses carried forward in future
years.
9
Independence Energy Corp.
(An Exploration Stage Company)
Notes to the Condensed Financial Statements
(expressed in U.S. dollars)
(unaudited)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
h) Comprehensive Loss
ASC 220, COMPREHENSIVE INCOME, establishes standards for the reporting and
display of comprehensive loss and its components in the financial statements. As
at April 30, 2014 and January 31, 2014, the Company has no items that represent
comprehensive loss and, therefore, has not included a schedule of comprehensive
loss in the financial statements.
i) 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.
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.
j) 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).
10
Independence Energy Corp.
(An Exploration Stage Company)
Notes to the Condensed Financial Statements
(expressed in U.S. dollars)
(unaudited)
3. OIL AND GAS PROPERTIES (continued)
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. During the year ended January 31, 2014, the Company
elected not to renew the working interest and recorded a full impairment of the
book value.
4. INTANGIBLE ASSET
On March 31, 2014, the Company entered into an asset purchase agreement (the
"Agreement") with American Medical Distributors, LLC ("AMD") where the Company
acquired the intangible assets of AMD in exchange for the issuance of
152,172,287 common shares of the Company with a fair value of $320,431 based on
the fair value of the Company's common shares on the date of issuance. As a part
of this asset acquisition, the Company received $60,000 of cash.
5. CONVERTIBLE DEBENTURES
a) 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. During the year ended January
31, 2014, the Company issued 7,500,000 shares of common stock for the conversion
of $12,000. During the period ended April 30, 2014, the Company issued
35,545,055 shares of common stock for the conversion of $45,000 of principal and
$2,280 of accrued interest.
In accordance with ASC 470-20, "Debt with Conversion and Other Options", the
Company recognized the intrinsic value of the embedded beneficial conversion
feature of $57,000 and an equivalent discount which will be charged to
operations over the term of the convertible note. During the period ended April
30, 2014, the Company had amortized $41,666 (2013 - $nil) of the debt discount
to interest expense. As at April 30, 2014, the carrying value of the debenture
was $nil (January 31, 2014 - $3,334).
b) On September 17, 2013, the Company issued a $32,500 convertible note which is
unsecured, bears interest at 8% per annum and due on June 19, 2014. The Company
received $30,000, net of issuance fee of $2,500. The note is convertible into
shares of common stock 180 days after the date of issuance (March 16, 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. During the period ended April 30, 2014, the Company issued
28,166,667 shares of common stock for the conversion of $32,500 of principal and
$1,300 of accrued interest.
In accordance with ASC 470-20, "Debt with Conversion and Other Options", the
Company recognized the intrinsic value of the embedded beneficial conversion
feature of $32,500 and an equivalent discount which will be charged to
operations over the term of the convertible note. During the period ended April
30, 2014, the Company had amortized $32,500 (2013 - $nil) of the debt discount
to interest expense. As at April 30, 2014, the carrying value of the debenture
was $nil (January 31, 2014 - $32,500).
6. LOAN PAYABLE
As of April 30, 2014, the Company had loan payable of $156,697 (January 31, 2014
- $156,697) owing to an unrelated third party. The amount owing is non-interest
bearing, unsecured and due on demand.
11
Independence Energy Corp.
(An Exploration Stage Company)
Notes to the Condensed Financial Statements
(expressed in U.S. dollars)
(unaudited)
7. RELATED PARTY TRANSACTIONS
During the period ended April 30, 2014, the Company incurred $22,500 (2013 -
$22,500) to the President of the Company for management services. As of April
30, 2014, the Company had $nil (January 31, 2014 - $3,100) in prepaid expense
for management fees paid and owed $8,601 (January 31, 2014 - $nil) to the
President of the Company.
During the period ended April 30, 2014, the Company incurred $5,000 (2013 -
$nil) to the CEO of the Company for consulting services.
8. SUBSEQUENT EVENTS
We have evaluated subsequent events through the date of issuance of the
financial statements, and did not have any material recognizable subsequent
events after April 30, 2014.
12
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 unaudited financial statements are stated in United States Dollars and
are prepared in accordance with United States Generally Accepted Accounting
Principles.
WORKING CAPITAL
April 30, January 31,
2014 2014
-------- --------
$ $
Current Assets 35,946 11,656
Current Liabilities 249,927 362,725
Working Capital (Deficit) (213,981) (351,069)
CASH FLOWS
Three months Three months
ended ended
April 30, April 30,
2014 2013
-------- --------
$ $
Cash Flows from (used in) Operating Activities (31,346) (43,049)
Cash Flows from (used in) Investing Activities 60,000 --
Cash Flows from (used in) Financing Activities -- 46.000
Net Increase (decrease) in Cash During Period 28,654 2,951
OPERATING REVENUES
For the period from November 30, 2005 (date of inception) to April 30,
2014, our company did not earn any operating revenues.
OPERATING EXPENSES AND NET LOSS
Operating expenses for the three months ended April 30, 2014 was $62,034
compared with $55,957 for the three months ended April 30, 2013. The increase of
$6,077 was due to an increase of $6,180 in professional fees relating to an
overall increase in legal services.
13
For the three months ended April 30, 2014, our company incurred a net loss
of $113,551 or $nil per share compared with $56,262 or $nil per share for the
three months ended April 30, 2013. In addition to operating expenses, our
company incurred accretion and interest expense of $74,166 relating to the
amortization of the discount on the convertible notes, of which all were
converted during the period. As at April 30, 2014, our company has no
outstanding convertible notes. The accretion expense was offset by a $24,029
gain on the change in fair value of the derivative liability related to the
change in the fair value of the conversion feature on the convertible notes.
LIQUIDITY AND CAPITAL RESOURCES
As at April 30, 2014, our company had cash of $35,946 compared with $7,292
at January 31, 2014. The increase in cash was attributed to the fact that our
company obtained additional financing of $60,000 from the acquisition of
intangible assets from a non-related company, of which a significant portion
remained unspent as at April 30, 2014.
Our company had total assets at April 30, 2014 of $561,204 compared with
$220,334 at January 31, 2014. Overall, cash increased by $28,654 and intangible
assets increased by $320,431 offset by a decrease in oil and gas properties of
$3,851 and prepaid expenses and deposits of $3,100.
At April 30, 2014, our company had total liabilities of $249,927 compared
with $362,275 at January 31, 2014. The decrease in total liabilities due to the
conversion of $35,834 in convertible debentures during the period, which also
included the elimination of $97,237 of derivative liability relating to the
convertible debentures. The decrease was offset by an increase in accounts
payable and accrued liabilities of $11,672 due to the timing of payments
relating to day-to-day operations, and an increase of $8,601 in amounts due to
related parties.
During the period ended April 30, 2014, our company issued 63,711,722
common shares for the conversion of all outstanding convertible note debentures
and issued 152,172,287 common shares for the acquisition of the intangible
assets.
CASHFLOW FROM OPERATING ACTIVITIES
During the three months ended April 30, 2014, our company used cash of
$31,346 for operating activities compared with $43,049 during the three months
ended April 30, 2013. The increase in cash used for operating activities was
attributed to proceeds received from the acquisition of the intangible assets,
which was used to repay outstanding obligations incurred in day-to-day
operations of our company.
CASHFLOW FROM INVESTING ACTIVITIES
During the three months ended April 30, 2014, our company received $60,000
as part of the financing from the acquisition of the intangible assets. Our
company did not have any investing activities during the three months ended
April 30, 2013.
CASHFLOW FROM FINANCING ACTIVITIES
During the three months ended April 30, 2014, our company did not have any
financing activities compared with proceeds of $46,000 from the issuance of
convertible notes during the three months ended April 30, 2013.
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.
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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
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
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ITEM 6. EXHIBITS
Exhibit
Number Description 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)
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 dated September 1, 2013 between our company and
Gregory Rotelli (incorporated by reference to our Quarterly Report on
Form 10-Q filed on September 16, 2013)
10.11 Asset Purchase Agreement dated March 31, 2014 between our company and
with American Medical Distributors (incorporated by reference to our
Current Report on Form 8-K filed on April 2, 2014)
10.12 Assignment Agreement dated March 18, 2014 between our company, American
Medical Distributors, Inc. and HuBDIC Co. Ltd. (incorporated by
reference to our Current Report on Form 8-K filed on April 2, 2014)
17
Exhibit
Number Description of Exhibit
------ ----------------------
10.13 Distribution Agreement dated November 27, 2013 between HuBDIC Co. Ltd.
and American Medical Distributors, Inc. (incorporated by reference to
our Current Report on Form 8-K filed on April 2, 2014)
(14) CODE OF ETHICS
14.1 Code of Ethics (incorporated by reference to our Annual Report on Form
10-K filed on May 15, 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
31.2* Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
of the 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
32.2* Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
of the Principal Financial Officer and Principal Accounting Officer.
101 INTERACTIVE DATA FILE
101** Interactive Data File (Form 10-Q for the quarter ended April 30, 2014
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: June 10, 2014 /s/ Howard J. Taylor
-------------------------------------------------
Howard J. Taylor
Chief Executive Officer and Director
(Principal Executive Officer)
Dated: June 10, 2014 /s/ Gregory Rotelli
-------------------------------------------------
Gregory Rotelli
President, Chief Financial Officer, Treasurer,
Secretary and Director
(Principal Financial Officer and
Principal Accounting Officer)
19