Attached files
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 October 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 December 23, 2013.
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)
October 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)
October 31, January 31,
2013 2013
---------- ----------
$ $
ASSETS
Current Assets
Cash 43,066 36,235
Prepaid expenses and deposits 7,583 12,600
---------- ----------
Total Current Assets 50,649 48,835
Deferred financing charge 2,083 --
Oil & gas properties 549,301 538,425
---------- ----------
Total Assets 602,033 587,260
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued liabilities 75,074 60,133
Convertible debenture 89,500 --
Loans payable 156,697 156,697
---------- ----------
Total Current Liabilities 321,271 216,830
Convertible debenture, net of unamortized discount of $3,718 42,282 --
---------- ----------
Total Liabilities 363,553 216,830
---------- ----------
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 (406,120) (269,570)
---------- ----------
Total Stockholders' Equity 238,480 370,430
---------- ----------
Total Liabilities and Stockholders' Equity 602,033 587,260
========== ==========
(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
Three Months Three Months Nine Months Nine Months November 30, 2005
Ended Ended Ended Ended (date of inception) to
October 31, October 31, October 31, October 31, October 31,
2013 2012 2013 2012 2013
------------ ------------ ------------ ------------ ------------
$ $ $ $ $
Revenue -- -- -- -- --
Operating Expenses
General and administrative 29,733 16,284 92,586 66,477 251,678
Professional fees 7,298 6,424 39,824 44,647 150,302
------------ ------------ ------------ ------------ ------------
Total Operating Expenses 37,031 22,708 132,410 111,124 401,980
------------ ------------ ------------ ------------ ------------
Net Loss for the Period (37,031) (22,708) (132,410) (111,124) (401,980)
Other Expense
Accretion and interest expense (2,552) -- (4,140) -- (4,140)
------------ ------------ ------------ ------------ ------------
Net Loss (39,583) (22,708) (136,550) (111,124) (406,120)
============ ============ ============ ============ ============
Net Loss Per Share, Basic and Diluted -- -- -- --
============ ============ ============ ============
Weighted Average Shares Outstanding 121,804,155 121,804,155 121,804,155 121,385,297
============ ============ ============ ============
(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
Nine Months Nine Months November 30, 2005
Ended Ended (date of inception) to
October 31, October 31, October 31,
2013 2012 2013
---------- ---------- ----------
$ $ $
Operating Activities
Net loss (136,550) (111,124) (406,120)
Adjustments to reconcile net loss to net
cash used in operating activities:
Amortization of discount on convertible debenture 882 -- 882
Deferred financing charge 417 -- 417
Changes in operating assets and liabilities:
Amounts receivable -- 1,607 --
Prepaid expense and deposits 5,017 12,082 (7,583)
Accounts payable and accrued liabilities 4,065 (6,049) 64,198
Due to a related party -- (675) --
---------- ---------- ----------
Net Cash Used in Operating Activities (126,169) (104,159) (348,206)
---------- ---------- ----------
Investing Activities
Oil and gas property expenditures -- (429,084) (538,425)
---------- ---------- ----------
Net Cash Used in Investing Activities -- (429,084) (538,425)
---------- ---------- ----------
Financing activities
Proceeds from issuance of common stock -- 580,000 640,000
Proceeds from issuance of convertible debenture 133,000 -- 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 133,000 580,000 929,697
---------- ---------- ----------
Increase in Cash 6,831 46,757 43,066
Cash, Beginning of Period 36,235 14,790 --
---------- ---------- ----------
Cash, End of Period 43,066 61,547 43,066
========== ========== ==========
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 October 31, 2013, the Company had a working capital deficit of
$270,622 and an accumulated deficit of $406, 120. 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 October 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 October 31, 2013, accrued interest of $1,588 (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 nine months ended October 31, 2013,
$882 (2012 - $nil) had been accreted, increasing the carrying value to
$42,282 (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 October
31, 2013, accrued interest of $1,349 (2012 - $nil) has been recorded
in accounts payable and accrued liabilities.
c) 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. As at October 31, 2013,
accrued interest of $321 (2012 - $nil) has been recorded in accounts
payable and accrued liabilities.
5. LOAN PAYABLE
As of October 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 October 31, 2013, the Company incurred $53,500 (2012 -
$25,500) to the President and CEO of the Company for management services. As of
October 31, 2013, the Company had $6,100 (January 31, 2013 - $10,500) in prepaid
expense for management fees paid to the President and CEO of the Company.
7. 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 October 31, 2013.
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 audited financial statements are stated in United States Dollars and are
prepared in accordance with United States Generally Accepted Accounting
Principles.
WORKING CAPITAL
October 31, January 31,
2013 2012
---------- ----------
$ $
Current Assets 50,649 48,835
Current Liabilities 321,271 216,830
Working Capital (Deficit) (270,622) (167,995)
CASH FLOWS
Nine months Nine months
ended ended
October 31, October 31,
2013 2012
---------- ----------
$ $
Cash Flows from (used in) Operating Activities (126,169) (71,069)
Cash Flows from (used in) Investing Activities -- (438,077)
Cash Flows from (used in) Financing Activities 133,000 580,000
Net Increase (decrease) in Cash During Period 6,831 70,854
OPERATING REVENUES
For the period from November 30, 2005 (date of inception) to October 31, 2013,
our company did not earn any operating revenues.
OPERATING EXPENSES AND NET LOSS
Operating expenses for the nine months ended October 31, 2013 was $132,410
compared with $111,124 for the nine months ended October 31, 2012. The increase
of $21,286 was due to an increase in general and administrative costs relating
to a $17,500 increase in management fees, and an overall increase in day-to-day
expenditures, offset by a decrease of $2,740 in professional fees.
For the nine months ended October 31, 2013, the Company incurred a net loss of
$136,550 or $nil per share compared with $111,124 or $nil per share for the nine
months ended October 31, 2012. In addition to operating expenses, the Company
incurred accretion and interest expense of $4,140 relating to the $46,000
12
convertible note debenture which is unsecured, bears interest at 6% per annum,
and due on April 5, 2016, the $57,000 convertible note debenture, which is
unsecured, bears interest at 8% per annum, and due on April 17, 2014, and the
$32,500 convertible note debenture, which is unsecured, bears interest at 8% per
annum and is due on June 19, 2014. The $46,000 note is convertible into common
shares of the 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 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. The $32,500 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.
LIQUIDITY AND CAPITAL RESOURCES
As at October 31, 2013, our company had cash of $43,066 compared with $36,235 at
January 31, 2013. The increase in cash was attributed to the fact that our
company obtained additional financing from the issuance of convertible
debentures, net costs paid for the general expenditures incurred by the Company
for its operations.
The Company had total assets at October 31, 2013 of $602,033 compared with
$587,260 at January 31, 2012. Overall, cash increased by $6,831 and oil and gas
properties increased by $10,876, offset by a decrease in prepaid expenses and
deposits of $5,017.
At October 31, 2013, our company had total liabilities of $363,553 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 $14,941, and
$131,782 for the liability relating to the convertible debentures, net of
unamortized discount of $3,718.
During the period ended October 31, 2013, the Company did not have any
equity or capital transactions.
CASHFLOW FROM OPERATING ACTIVITIES
During the nine months ended October 31, 2013, the Company used cash of $126,169
for operating activities compared with $104,159 during the nine months ended
October 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 the
Company.
CASHFLOW FROM INVESTING ACTIVITIES
During the nine months ended October 13, 2013, the Company did not have any
investing activities compared with the use of $429,084 during the nine months
ended October 31, 2012 for the acquisition of oil and gas properties.
CASHFLOW FROM FINANCING ACTIVITIES
During the nine months ended October 13, 2013, the Company received $133,000 in
financing from the issuance of convertible debentures. The Company received
proceeds from convertible debentures for $46,000 which is unsecured, bears
interest at 6% per annum, and due on April 5, 2016, $57,000 from the issuance of
a convertible debenture which is unsecured, bears interest at 8% per annum, and
due on April 17, 2014, and $32,500 from the issuance of a convertible debenture
which is unsecured, bears interest at 8% per annum, and due on June 19, 2014,
less financing fees which were deducted from the proceeds before being disbursed
to the Company. The Company received $580,000 during the period ended October
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
13
that they have substantial doubt that we will be able to continue as a going
concern without further financing.
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.
14
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
On September 23, 2013, we closed a securities purchase agreement dated September
17, 2013 with Asher Enterprises, Inc. Under the terms of the agreement, our
company issued an 8% convertible promissory note, in the principal amount of
$32,500, which matures on June 19, 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 June 19, 2014, 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 September 17, 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 June 19, 2014, the note shall bear interest at the rate of 22%.
The note was issued to Asher Enterprises, Inc. 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
None.
15
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 with Gregory Rotelli dated September 1, 2013
(incorporated by reference to our Quarterly Report on Form 10-Q filed
on September 16, 2013)
(14) CODE OF ETHICS
14.1 Code of Ethics (incorporated by reference to our Quarterly Report on
Form 10-Q filed on June 19, 2012)
16
Exhibit
Number Description of Exhibit
------ ----------------------
(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 October 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.
17
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: December 23, 2013 /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)
1