UNITED STATES
 SECURITIES AND EXCHANGE COMMISSION
  Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

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

 

For the quarterly period ended May 31, 2019

 

or

 

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

 

For the transition period from __________ to __________

 

Commission File Number: 000-55873

 

INDIGENOUS ROOTS CORP.
  (Exact name of registrant as specified in its charter)

 

Nevada		20-5243308
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
41 Puget Drive, Steilacoom, Washington		98388
(Address of principal executive offices)		(Zip Code)

 

Registrant's telephone number including area code: (250) 681-1010

 

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 post such files). 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 (Do not check if a smaller reporting company)	☐	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 ☐ No x

 

Number of common shares outstanding at May 31, 2019: 14,977,618

 

 

 

INDIGENOUS ROOTS CORP.

Index

PART I: FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

Interim Consolidated Condensed Balance Sheets at May 31, 2019 and August 31, 2018			3
Interim Consolidated Condensed Statements of Operations for the nine months ended May 31, 2019 and 2018			4
Interim Consolidated Condensed Statements of Cash Flows for the nine months ended May 31, 2019 and 2018			5
Interim Consolidated Statement of Changes in Equity for the period ended May 31, 2019			6
Notes to the Consolidated Condensed Financial Statements		7-11

 

2

 

INDIGENOUS ROOTS CORP.

INTERIM CONSOLIDATED CONDENSED BALANCE SHEETS

(EXPRESSED IN US DOLLARS)

 

		May 31, 2019				August 31, 2018
		(unaudited)
ASSETS
Current Assets
Cash		$	46			$	-
Accounts receivable			64,414				-
			64,460
Fixed Asset (Note 4)			805,304				-
Total Assets		$	869,764			$	-
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current Liabilities
Bank overdraft		$	-			$	103
Accounts payable and accrued liabilities			48,994				62,712
Due to related parties (Note 5)			84,737				75,283
Current portion of loan payable (Note 6)			20,808				-
Convertible loan payable (Note 7)			-				1,708,588
			154,539				1,846,686
Long Term Liabilities
Loan payable (Note 6)			791,170				-
Total Liabilities			945,709				1,846,686
STOCKHOLDERS’ DEFICIT
Common stock
200,000,000 authorized shares, par value $0.001
14,977,618 and 8,237,618 shares issued and outstanding
as at May 31, 2019 and August 31, 2018 respectively (Note 8)			14,978				8,238
Shares to be issued (Note 8)			1,014				-
Additional paid-in-capital (Note 8)			4,485,957				4,430,261
Deficit			(4,577,894	)			(6,285,185	)
Total Stockholders’ Deficit			(75,945	)			(1,846,686	)
Total Liabilities and Stockholders’ Deficit		$	869,764			$	-

 

Subsequent event (Note 9)

 

The accompanying notes are an integral part of these interim consolidated condensed financial statements.

 

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INDIGENOUS ROOTS CORP.
INTERIM CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(EXPRESSED IN US DOLLARS)
(UNAUDITED)

 

		For the Three Months								For the Nine Months
		Ended May 31,								Ended May 31,
		2019				2018				2019				2018
REVENUE		$	964			$	-			$	964			$	-
EXPENSES
Operating expenses
General and administrative expenses		$	6,528			$	3,131			$	9,362			$	245,469
Legal and audit fees			-				9,283				-				28,573
Total operating expenses			6,528				12,414				9,362				274,042
Other (income) expenses
Gain on reversal of debt			-				-				(1,756,938	)			-
Foreign exchange			(13,774	)			(1,134	)			(13,775	)			(5,735	)
Interest expense			-				24,712				48,350				73,061
Depreciation			6,674				-				6,674				-
Total other (income) expenses			(7,100	)			23,578				(1,715,689	)			67,326
Net and comprehensive income (loss)		$	1,536			$	(35,992	)		$	1,707,291			$	(341,368	)
BASIC AND DILUTED GAIN (LOSS) PER COMMON SHARE		$	0.00			$	(0.01	)		$	0.18			$	(0.04	)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING – BASIC AND DILUTED			12,633,100				8,237,618				9,718,879				8,031,208

 

The accompanying notes are an integral part of these interim consolidated condensed financial statements.

 

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INDIGENOUS ROOTS CORP.

INTERIM CONSOLIDSTED CONDENSED STATEMENT OF CASH FLOWS
(EXPRESSED IN US DOLLARS)
(UNAUDITED)

 

		For the Nine Months Ended May 31
		2019				2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)		$	1,707,291			$	(341,368	)
Non-cash items:
Accrued interest			48,350				73,061
Gain on reversal of debt			(1,756,938	)			-
Shares issued for services			-				210,000
Unrealized foreign exchange			(13,775	)
Depreciation expense			6,674				-
Change in operating assets and liabilities:
Accounts receivable			(964	)			-
Accounts payable and accrued liabilities			55				(3,203	)
Due to related parties			9,454				24,495
NET CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES			149				(32,015	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds received for share subscriptions			-				30,000
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES			-				30,000
Net change in cash			149				(2,015	)
CASH (BANK OVERDRAFT), BEGINNING OF THE PERIOD			(103	)			2,145
CASH, ENDING OF THE PERIOD		$	46			$	130

 

The accompanying notes are an integral part of these interim consolidated condensed financial statements

 

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INDIGENOUS ROOTS CORP.
INTERIM CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN EQUITY
(EXPRESSED IN US DOLLARS)
(UNAUDITED)

 

		Share								Shares to be				Additional paid in
		Number				Amount				Issued				capital				Deficit				Total
As at August 31, 2017			7,612,618				7,613				513,116				3,552,370				(5,859,798	)			(1,786,699	)
Share issued for cash			300,000				300				-				29,700				-				30,000
Shares issued for services			200,000				200				-				209,800				-				210,000
Shares issued for prior period			125,000				125				(476,191	)			476,066				-				-
Debt forgiven			-				-				-				125,400				-				125,400
Reversal of shares to be issued			-				-				(36,925	)			36,925				-				-
Net loss			-				-				-				-				(425,387	)			(425,387	)
As at August 31, 2018			8,237,618				8,238				-				4,430,261				(6,285,185	)			(1,846,686	)
Shares issued in exchange agreement (Note 3) 6)			6,739,739				6,740				1,014				55,696				-				63,450
Net gain			-				-				-				-				1,707,291				1,707,291
As at May 31, 2019			14,977,357			$	14,978			$	1,014			$	4,485,957			$	(4,577,894	)		$	(75,945	)

 

The accompanying notes are an integral part of these interim consolidated condensed financial statements

 

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Table of Content

 

INDIGENOUS ROOTS CORP.

NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
MAY 31, 2019
(Stated in U.S. Dollars)
(Unaudited)

 

 1. ORGANIZATION AND NATURE OF BUSINESS

 

Indigenous Roots Corp. (formerly American Paramount Gold Corp.) (the "Company") was incorporated in the State of Nevada on July 20, 2006 and is listed on the OTCQB under the symbol “IRCC”.   

 

On April 1, 2019, the Company acquired 100% of the issued and outstanding shares of Edison Power Company (‘Edison Power”), a Nevada corporation, in exchange for 6,849,239 common shares of the Company. Edison Power owns a 100% interest in Edison Delaware 2 LLC, a Delaware registered limited liability corporation that owns and operates a 140 kW/h solar power generating facility in Georgetown, Delaware. The facility was completed in March, 2019 and began generating power in April, 2019 (Note 3).

 

The unaudited interim financial statements included herein have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. They do not include all information and notes required by generally accepted accounting principles for complete financial statements. However, except as disclosed herein, there has been no material change in the information disclosed in the notes to the financial statements included in the Annual Report on Form 10-K of the Company for the year ended August 31, 2018. In the opinion of management, all adjustments (including normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine months ended May 31, 2019 are not necessarily indicative of the results that may be expected for the year ended August 31, 2019. For further information, these unaudited interim financial statements and the related notes should be read in conjunction with the Company’s audited financial statements for the year ended August 31, 2018, included in the Company’s report on Form 10-K.

 

Going concern

 

These consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has generated revenues of $964 since inception. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing to continue operations, and the attainment of profitable operations. As at May 31, 2019, the Company has a working capital deficiency of $90,079 and has an accumulated deficit of $4,577,894 since inception. 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. Management intends to obtain additional funding by borrowing funds from its directors and officers, issuing promissory notes and/or a private placement of common stock.

 

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 U.S. dollars.

 

(b) Principles of Consolidation

 

These financial statements include the accounts of the Company and its subsidiaries. Subsidiaries are all entities (including structured entities) which the Company controls. For accounting purposes, control is established by an investor when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. All inter-company balances and transactions are eliminated.

 

(c) Use of Estimates

 

The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses in the reporting period. The Company regularly evaluates estimates and assumptions related to deferred income tax asset valuation allowances.

 

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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

(c) Use of Estimates (continued)

 

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.

 

(d) Cash and Cash Equivalents

 

The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance and trust funds to be cash equivalents.

 

(e) Impairment of Long-Lived Assets

 

The Company evaluates the recoverability of its fixed assets and other assets in accordance with ASC 360-10-15, Impairment or Disposal of Long-Lived Assets. Impairment of long-lived assets is recognized when the net book value of such assets exceeds their expected cash flows, in which case the assets are written down to fair value, which is determined based on discounted future cash flows or appraised values.

 

(f) Related Party Transactions

 

The Company follows ASC 850, Related Party Disclosures, for the identification of related parties and disclosure of related party transactions. In accordance with ASC 850, the Company’s financial statements include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business, as well as transactions that are eliminated in the preparation of financial statements.

 

(g) Income Taxes

 

The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, “Income Taxes”. The asset and liability method provide that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.

 

(h) Foreign Currency Translation

 

The Company and its subsidiaries’ functional and reporting currency is the U.S. dollar. Transactions in foreign currencies are translated into the currency of measurement at the exchange rates in effect on the transaction date. Monetary balance sheet items expressed in foreign currencies are translated into U.S. dollars at the exchange rates in effect at the balance sheet date. The resulting exchange gains and losses are recognized in the statement of operations.

 

(i) Financial Instruments and Fair Value Measures

 

ASC 820, “Fair Value Measurements and Disclosures”, requires an entity 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:

 

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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

(i) Financial Instruments and Fair Value Measures (continued)

 

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 receivable, accounts payable, loans payable, amounts due to related parties and convertible loan payable. Pursuant to ASC 820, the fair value of cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

 

(j) Stock-based Compensation

 

The Company records stock-based compensation in accordance with ASC 718, “Compensation – Stock Compensation” and ASC 505, “Equity Based Payments to Non-Employees”, using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.

 

(k) Revenue

 

Pursuant to ASC 606, Revenue is derived from the generation of electricity utilizing the solar power genrating system.

 

(l) Leases

 

Pursuant to ASC 842, transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing transactions.  As of the date of this report, the Company has no material transactions to report.

 

(m) Loss Per Share

 

The Company computes earnings (loss) per share in accordance with ASC 260, “Earnings per Share”. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing earnings (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 at May 31, 2019 the Company does not have any potentially dilutive shares.

 

(n) Comprehensive Loss

 

ASC 220, “Comprehensive Income”, establishes standards for the reporting and display of comprehensive loss and its components in the financial statements.

 

(o) Recent Accounting Pronouncements

 

In July 2018, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases. The amendments in ASU 2018-10 provide additional clarification and implementation guidance on certain aspects of the previously issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”) and have the same effective and transition requirements as ASU 2016-02. Upon the effective date, ASU 2018-10 will supersede the current lease guidance in ASC Topic 840, Leases. Under the new guidance, lessees will be required to recognize for all leases, with the exception of short-term leases, a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis.

 

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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

(o) Recent Accounting Pronouncements (continued)

 

Concurrently, lessees will be required to recognize a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. ASU 2018-10 is effective for private companies and emerging growth public companies for interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted. The guidance is required to be applied using a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative periods presented in the financial statements. During the nine months ended May 31, 2019 the Company assessed the impact this guidance had on its financial statements and concluded that at present ASU No. 2018-10 has no impact on its financial statements.

 

3. ACQUISITION

 

On April 1, 2019, the Company acquired 100% of the issued and outstanding shares of Edison Power, a Nevada corporation, in exchange for 6,849,239 common shares of the Company. Edison Power owns a 100% interest in Edison Delaware 2 LLC, a Delaware registered limited liability corporation that owns and operates a 140 kW/h solar power generating facility in Georgetown, Delaware. The facility was completed in March, 2019 and began generating power in April, 2019. The transaction has been accounted for as an asset acquisition as Edison Power did not have inputs, processes and outputs in place that constituted a business under ASC 805 Business Combinations. The total consideration paid was allocated to the assets and liabilities acquired based on relative fair values:

 

Consideration:
Issuance of 6,739,739 common shares (Note 8)		$	62,436
109,500 common shares to be issued (Notes 8 and 9)			1,014
			63,450
Fair value of assets and liabilities acquired:
Accounts receivable			63,450
Solar power system (Note 4)			809,300
Loan payable (Note 6)			(809,300	)
		$	63,450

 

4. FIXED ASSETS

 

Fixed assets are recorded at cost reduced by accumulated depreciation. Depreciation expense is recognized over the assets’ estimated useful lives using the straight-line method. Estimated useful lives are periodically reviewed and, when appropriate, changes are made prospectively. When certain events or changes in operating conditions occur, asset lives may be adjusted and an impairment assessment may be performed on the recoverability of the carrying amounts.

 

Fixed assets consist of the following:

 

		Useful Life		Balance at August 31, 2018 $				Additions $				Accumulated Depreciation $				Balance at May 31, 2019 $
Solar Power System		20 years			-				811,978				(6,674	)			805,304
					-				811,978				(6,674	)			805,304

 

On April 1, 2019, the Company acquired the solar power system through the acquisition of Edison Power at a fair value of $809,300 (Note 3). From acquisition to May 31, 2019, the Company capitalized accrued interest on the loan payable of $2,678 to the solar power system (Note 6).

 

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5. RELATED PARTY TRANSACTIONS

 

As at May 31, 2019, the Company owed $58,914 (August 31, 2018 - $53,960) to a former President of the Company for cash advances made to the Company.

 

As at May 31, 2019, the Company owed $25,823 (August 31, 2018 - $21,323) to the Controller of the Company for cash and services provided to the Company.

 

During the nine months ended May 31, 2019, the Company paid $4,500 (August 31, 2018 - $Nil) in accounting fees to the Controller of the Company.

 

6. LOAN PAYABLE

 

On June 15, 2018, the Company issued a promissory note to Sustainable Energy Utility Inc. (“SEU”) in the amount of $981,500.  The promissory note bears an interest rate of 2% per annum and is payable in monthly installments of $4,161 including principle and interest for 240 months commencing February 1, 2020.  The funds were advanced to the Company for the construction of a solar power electricity generating system. The loan is secured by a promissory note, a first priority security interest on the system and an assignment of a Power Purchase Agreement.

 

As at May 31, 2019, $809,300 has been advanced to the Company.  During the nine months ended May 31, 2019, interest of $2,678 was accrued and capitalized to the solar power system (Note 4).

 

7. CONVERTIBLE LOAN

 

On April 22, 2010, and as amended December 17, 2010, the Company entered into an agreement with Monaco Capital Inc. (“the Lender”), a majority shareholder at the time, for a principal amount of up to $5,000,000. The loan is unsecured and bears interest at the rate of 10% per annum calculated on the principal balance. The Company may at any time during the term of the loan prepay any sum up to the full amount of the loan and accrued interest then outstanding at any time for the sum plus an additional 10% of such amount. The loan (including accrued interest) is convertible into securities of the Company at a conversion price calculated as the mean volume weighted average price for the Company’s common stock during the ten (10) trading day period ending on the latest complete trading day prior to the conversion date. At any time after the advancement date, if the Company has not paid the loan and accrued interest in full, the Lender may, by providing written notice to the Company, exercise its rights of conversion in respect of either a portion of the total outstanding amount of the loan as of that date into shares of the Company. The amounts advanced plus accrued interest are due one year following the date advanced.

 

On February 28, 2019, the obligation to repay the debt reached the Statute of Limitations, the Company reversed the debt and the corresponding accrued interest of $1,756,938.

 

8. STOCKHOLDERS’ DEFICIT

 

Share Issuances

 

The Company issued 6,739,739 common shares on April 1, 2019 and 109,500 on July 3, 2019 pursuant to the terms of a Share Exchange Agreement with the shareholders of Edison Power (Note 3).

 

9. SUBSEQUENT EVENTS

 

The Company issued 109,500 on July 3, 2019 pursuant to the terms of a Share Exchange Agreement with the shareholders of Edison Power (Note 3).

 

On December 1, 2019, the Company acquired all of the issued and outstanding shares of Edison Power Corporation (“EPC”) in exchange for cash of $10. EPC was federally incorporated in Canada on April 13, 2015. EPC has no assets or liabilities and has not generated any revenue since inception.

 

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

 

FORWARD-LOOKING STATEMENTS

 

This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled "Risk Factors" that may cause our or our industry's 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 these forward-looking statements.

 

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

 

Our unaudited interim financial statements are stated in United States dollars and are prepared in accordance with United States generally accepted accounting principles. The following discussion should be read in conjunction with our company's audited financial statements and 10-K for the year ended August 31, 2018 and unaudited interim financial statements and the related notes that appear elsewhere in this quarterly report.

 

In this quarterly report, unless otherwise specified, all references to "common stock" refer to common shares in the capital of our company and the terms "we", "us" and "our" mean Indigenous Roots Corp.

 

GENERAL OVERVIEW

 

Corporate Overview

 

Our principal executive offices are located at 41 Puget Drive, Steilacoom, WA. Our telephone number is (250) 681-1010.

 

Our common stock is quoted on the OTC Pink under the symbol “IRCC.

 

Corporate History

 

We were incorporated under the laws of the State of Nevada on July 20, 2006 under the name “Zebra Resources Incorporated” (aka “Zebra Resources Inc.”). At inception, we were an exploration stage company engaged in the acquisition, exploration and development of mineral properties. 

 

We are investigating several business opportunities to enhance shareholder value.

 

Effective March 17, 2010, we effected a one (1) old for two (2) new forward stock split of our issued and outstanding common stock. As a result, our authorized capital increased from 75,000,000 to 150,000,000 shares of common stock and our issued and outstanding increased from 32,000,000 shares of common stock to 64,000,000 shares of common stock, all with a par value of $0.001.

 

12

 

Also effective March 17, 2010, we changed our name from "Zebra Resources Incorporated" to "American Paramount Gold Corp.", by way of a merger with our wholly owned subsidiary American Paramount Gold Corp., which was formed solely for the change of name.

 

The name change and forward stock split became effective with the Over-the-Counter Bulletin Board at the opening for trading on April 12, 2010 under the new stock symbol "APGA".

 

On July 30, 2010, our directors approved the adoption of the 2010 Stock Option Plan (“2010 Plan”) which permits our company to issue up to 6,500,000 shares of our common stock to directors, officers, employees and consultants of our company upon the exercise of stock options granted under the 2010 Plan. As at May 31, 2019, there are no outstanding stock options.

 

On November 16, 2011, our Company’s board of directors approved a forty (40) for one (1) reverse stock split of our authorized and issued and outstanding common shares.

 

On November 28, 2011, the Nevada Secretary of State accepted for filing a Certificate of Change, wherein we effected an amendment to our Articles of Incorporation to decrease the authorized number of shares of our common stock from 150,000,000 to 3,750,000 shares of common stock, par value of $0.001. On November 29, 2011 the Nevada Secretary of State accepted for filing a Certificate of Correction, wherein we effected an amendment to our Articles of Incorporation to correct the Certificate of Change filed on November 28, 2011 to state that no fractional shares shall be issued and that fractional shares shall be rounded up rather than rounded down.

 

The reverse split became effective with the Over-the-Counter Bulletin Board at the opening of trading on January 26, 2012 under the new symbol APGA. The CUSIP number was changed to 02882T 204.

 

Effective January 8, 2018, we changed our name to Indigenous Roots Corp.

 

The name change became effective with the Over-the-Counter Bulletin Board at the opening for trading on February 9, 2018 under the stock symbol "IRCC". Our CUSIP number is 455685107.

 

On April 1, 2019, the Company acquired 100% of the issued and outstanding shares of Edison Power Company (‘Edison Power”), a Nevada corporation, in exchange for 6,849,239 common shares of the Company. Edison Power owns a 100% interest in Edison Delaware 2 LLC, a Delaware registered limited liability corporation that owns and operates a 140 kW/h solar power generating facility in Georgetown, Delaware. The facility was completed in March, 2019 and began generating power in April, 2019.

  

Our Current Business

 

We are currently seeking acquisitions of projects in the Renewable Energy sector.

 

Subsidiaries

 

The Company owns 100% of the issued and outstanding shares of Edison Power Company, a Nevada corporation and 100% of the issued and outstanding shares of Edison Power Corporation, a Canadian registered corporation.

 

13

 

Research and Development Expenditures

 

We have incurred $nil in research and development expenditures over the last two fiscal years.

 

Employees

 

Currently we do not have any employees. Additionally, we have not entered into any consulting or employment agreements with our president, chief executive officer, treasurer, secretary or chief financial officer. Our directors, executive officers and certain contracted individuals play an important role in the running of our company. We do not expect any material changes in the number of employees over the next twelve-month period. We do and will continue to outsource contract employment as needed. 

 

CASH REQUIREMENTS

 

We estimate our operating expenses and working capital requirements for the next twelve-month period to be as follows:

 

ESTIMATED EXPENSES FOR THE NEXT TWELVE-MONTH PERIOD

 

General, administrative, and corporate expenses		$	20,000
Operating expenses			20,000
Identification of properties of merit			50,000
TOTAL		$	90,000

 

At present, our cash requirements for the next 12 months outweigh the funds available. Of the $90,000 that we require for the next 12 months, we had $46 in cash as of May 31, 2019. In order to improve our liquidity, we intend to pursue additional equity financing from private investors or possibly a registered public offering. Other than as set out below, we currently do not have any arrangements in place for the completion of any further private placement financings and there is no assurance that we will be successful in completing any further private placement financings. If we are unable to achieve the necessary additional financing, then we plan to reduce the amounts that we spend on our business activities and administrative expenses in order to be within the amount of capital resources that are available to us.

 

RESULTS OF OPERATIONS - NINE MONTHS ENDED MAY, 2019 AND 2018

 

The following summary of our results of operations should be read in conjunction with our financial statements for the nine months ended May 31, 2019 and 2018 which are included herein.

  

14

 

Our operating results for the nine months ended May 31, 2019 and 2018 are summarized as follows:

 

		Nine Months				Nine Months
		Ended				Ended
		May 31,				May 31,
		2019				2018
Revenue		$	(964	)		$	-
General and administrative			9,362				245,469
Legal and audit			-				28,573
Gain on reversal of debt			(1,756,938	)			-
Foreign exchange			(13,775	)			(5,735	)
Depreciation			6,674				-
Interest expense			48,350				73,061
Net loss from operations		$	(1,707,291	)		$	(341,368	)

 

REVENUES

 

We have generated revenue of $964 since inception.

 

EXPENSES

 

Consulting and management fees were $Nil during the nine months ended May 31, 2019 and $Nil during the nine months ended May 31, 2018.

 

General and administrative expenses decreased by $236,107 during the nine months ended May 31, 2019 as compared to the nine months ended May 31, 2018.

 

Legal and audit expenses decreased by $28,573 during the nine months ended May 31, 2019 as compared to the nine months ended May 31, 2018.

 

LIQUIDITY AND FINANCIAL CONDITION

 

WORKING CAPITAL

 

		May 31,				August 31,
		2019				2018
Current assets		$	64,460			$	-
Current liabilities			154,539				1,846,686
Working capital (deficit)		$	(90,079	)		$	(1,846,686	)

 

15

 

OPERATING ACTIVITIES

 

Cash provided in operating activities was $149 for the nine months ended May 31, 2019.

 

FINANCING ACTIVITIES

 

Cash provided by financing activities was $Nil for the nine months ended May 31, 2019.

 

CONTRACTUAL OBLIGATIONS

 

As a "smaller reporting company", we are not required to provide tabular disclosure obligations.

   

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.

 

APPLICATION OF CRITICAL ACCOUNTING POLICIES

 

USE OF ESTIMATES

 

The preparation of the financial statements in conformity with generally accepted accounting principles 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 amount of revenue and expenses during the reporting period. Actual results could differ from those estimates.

 

NET LOSS PER COMMON SHARE

 

Our Company computes net loss per share in accordance with ASC 260, "Earnings per Share” and SEC Staff Accounting Bulletin No. 98 (SAB 98). Under the provisions of ASC 260 and SAB 98, basic net loss per share is computed by dividing the net loss available to common stockholders for the period by the weighted average number of shares of common stock outstanding during the period. The calculation of diluted net loss per share gives effect to common stock equivalents; however, potential common shares are excluded if their effect is anti-dilutive. As at May 31, 2019, our company had no potentially dilutive securities.

 

STOCK-BASED COMPENSATION

 

The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with FASB ASC 505-10. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment or completion of performance by the provider of goods or services as defined by FASB ASC 505-10.

 

16

 

GOING CONCERN

 

Our company has incurred a net gain $1,707,291 for the nine months ended May 31, 2019 and at May 31, 2019 had a deficit accumulated of $4,577,894.  Our company has commenced limited operations, raising substantial doubt about our company's ability to continue as a going concern. Our company will seek additional sources of capital through the issuance of debt or equity financing, but there can be no assurance our company will be successful in accomplishing its objectives.

 

The ability of our company to continue as a going concern is dependent on additional sources of capital and the success of our company's plan. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might result from the outcome of this uncertainty.

 

At this time, we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common stock or through a loan from our directors, shareholders or investors to meet our obligations over the next twelve months. Other than a convertible loan agreement with Monaco Capital Inc. and a loan payable to SEU, we do not have any further arrangements in place for any future debt or equity financing.

 

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 president (also our principal executive officer) and our principal financial officer (also our principal financial officer and principal accounting officer), to allow for timely decisions regarding required disclosure.

 

We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13(a)15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective, as of May 31, 2019.

 

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

 

There have been no changes in our internal controls over financial reporting that occurred during the quarter ended May 31, 2019 that have materially or are reasonably likely to materially affect, our internal controls over financial reporting.

 

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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 any of our directors, executive officers or affiliates, or any registered or beneficial stockholder, is an adverse party or has a material interest adverse to our interest.

 

ITEM 1A. RISK FACTORS

 

Much of the information included in this quarterly report includes or is based upon estimates, projections or other "forward-looking statements". Such forward-looking statements include any projections or estimates made by us and our management in connection with our business operations. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions, or other future performance suggested herein. We undertake no obligation to update forward-looking statements to reflect events or circumstances occurring after the date of such statements.

 

Such estimates, projections or other "forward-looking statements" involve various risks and uncertainties as outlined below. We caution readers of this quarterly report that important factors in some cases have affected and, in the future, could materially affect actual results and cause actual results to differ materially from the results expressed in any such estimates, projections or other "forward-looking statements". In evaluating us, our business and any investment in our business, readers should carefully consider the following factors.

   

RISKS RELATED TO OUR COMPANY

 

THE FACT THAT WE HAVE NOT EARNED ANY OPERATING REVENUES SINCE OUR INCORPORATION RAISES SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE TO EXPLORE THE MINERAL PROPERTIES AS A GOING CONCERN.

 

We have not generated any revenue from operations since our incorporation and we anticipate that we will continue to incur operating expenses without revenues unless and until we are able to identify a mineral resource in a commercially exploitable quantity on the mineral property and we build and operate a mine. We had cash in the amount of $46 as of May 31, 2019. At May 31, 2019, we had a working capital deficit of $90,079. We earned net income of $1,707,291 for the nine months ended May 31, 2019. We estimate our average monthly operating expenses to be approximately $12,500.  We have traditionally raised our operating capital from sales of equity securities, but there can be no assurance that we will continue to be able to do so. If we cannot raise the money that we need to continue exploration of the mineral property, we may be forced to delay, scale back, or eliminate our exploration activities. If any of these were to occur, there is a substantial risk that our business would fail.

 

Management has plans to seek additional capital through a private placement of its capital stock. These conditions raise substantial doubt about our company's ability to continue as a going concern. Although there are no assurances that management's plans will be realized, management believes that our company will be able to continue operations in the future. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event our company cannot continue in existence. We continue to experience net operating losses.

 

18

 

RISKS ASSOCIATED WITH OUR COMMON STOCK

 

TRADING ON THE OTC BULLETIN BOARD MAY BE VOLATILE AND SPORADIC, WHICH COULD DEPRESS THE MARKET PRICE OF OUR COMMON STOCK AND MAKE IT DIFFICULT FOR OUR STOCKHOLDERS TO RESELL THEIR SHARES.

 

Our common stock is quoted on the OTC Pink Sheet service of the Financial Industry Regulatory Authority. Trading in stock quoted on the OTC Pink Sheet is often thin and characterized by wide fluctuations in trading prices, due to many factors that may have little to do with our operations or business prospects. This volatility could depress the market price of our common stock for reasons unrelated to operating performance. Moreover, the OTC Bulletin Board is not a stock exchange, and trading of securities on the OTC Bulletin Board is often more sporadic than the trading of securities listed on a quotation system like NASDAQ or a stock exchange like NYSE Amex. Accordingly, shareholders may have difficulty reselling any of their shares.

 

OUR STOCK IS A PENNY STOCK. TRADING OF OUR STOCK MAY BE RESTRICTED BY THE SEC'S PENNY STOCK REGULATIONS AND FINRA'S SALES PRACTICE REQUIREMENTS, WHICH MAY LIMIT A STOCKHOLDER'S ABILITY TO BUY AND SELL OUR STOCK.

 

Our stock is a penny stock. The Securities and Exchange Commission has adopted Rule 15g-9 which generally defines "penny stock" to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and "accredited investors". The term "accredited investor" refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer's account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer's confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in, and limit the marketability of, our common stock.

  

In addition to the "penny stock" rules promulgated by the Securities and Exchange Commission, the Financial Industry Regulatory Authority has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information. Under interpretations of these rules, the Financial Industry Regulatory Authority believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. The Financial Industry Regulatory Authority's requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock.

 

19

 

OTHER RISKS

 

TRENDS, RISKS AND UNCERTAINTIES

 

We have sought to identify what we believe to be the most significant risks to our business, but we cannot predict whether, or to what extent, any of such risks may be realized nor can we guarantee that we have identified all possible risks that might arise. Investors should carefully consider all such risk factors before making an investment decision with respect to our common stock.

 

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

 

The Company issued 6,739,739 common shares on April 1, 2019 and 109,500 on July 3, 2019 pursuant to the terms of a Share Exchange Agreement with the shareholders of Edison Power Company.

 

ITEM 3. DEFAULT UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

None

 

ITEM 5. OTHER INFORMATION

 

None.

 

20

 

ITEM 6. EXHIBITS

 

Exhibit No.		Description
(3)		ARTICLES OF INCORPORATION AND BYLAWS
3.1		Articles of Incorporation (incorporated by reference from our Registration Statement on Form SB-2 filed on October 23, 2006).
3.2		By-laws (incorporated by reference from our Registration Statement on Form SB-2 filed on October 23, 2006).
3.3		Articles of Merger (incorporated by reference from our Current Report on Form 8-K filed on April 12, 2010).
3.4		Certificate of Change (incorporated by reference from our Current Report on Form 8-K filed on April 12, 2010).
(10)		MATERIAL CONTRACTS
10.1		Mineral Lease Agreement between Royce L. Hackworth and Belva L. Tomany and our company dated April 16, 2012. (incorporated by reference from our Current Report on Form 8-K filed on April 19, 2010).
10.2		Consulting agreement with Vista Partners LLC dated January 29, 2010
10.3		Convertible Loan Agreement between our company and Monaco Capital Inc. dated December 17, 2010.
(31)		RULE 13A-14(A)/15D-14(A) CERTIFICATIONS
31.1*		Section 302 Certification of the Principal Executive Officer under Sarbanes-Oxley Act of 2002
31.2*		Section 302 Certification of the Principal Financial Officer and Principal Accounting Officer under Sarbanes-Oxley Act of 2002
(32)		SECTION 1350 CERTIFICATIONS
32.1*		Section 906 Certification of the Principal Executive Officer under Sarbanes-Oxley Act of 2002
32.2*		Section 906 Certification of the Principal Financial Officer and Principal Accounting Officer under Sarbanes-Oxley Act of 2002
(101)*		Interactive Data File
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

 

21

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

	INDIGENOUS ROOTS CORP.
	(Registrant)
Date: April 24, 2020	By:	/s/ Larry Faulk
		Larry Faulk
		President, Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer and Director
		(Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)

 

Indigenous Roots Corp. Reports 11/18/2009 - 10-K 11/29/2010 - 10-K 06/11/2012 - 10-K 10/23/2015 - 10-K 12/08/2015 - 10-K 02/28/2017 - 10-K 04/25/2017 - 10-K 07/06/2017 - 10-K 12/14/2017 - 10-K 06/26/2020 - 10-K 12/07/2020 - 10-K 01/12/2010 - 10-Q 04/14/2010 - 10-Q 07/15/2010 - 10-Q 01/14/2011 - 10-Q 04/14/2011 - 10-Q 07/15/2011 - 10-Q 04/14/2015 - 10-Q 06/22/2015 - 10-Q 06/22/2015 - 10-Q 11/17/2015 - 10-Q 11/17/2015 - 10-Q 11/17/2015 - 10-Q 12/17/2015 - 10-Q 12/17/2015 - 10-Q 12/17/2015 - 10-Q 04/06/2017 - 10-Q 04/06/2017 - 10-Q 04/06/2017 - 10-Q 06/20/2017 - 10-Q 06/20/2017 - 10-Q 06/20/2017 - 10-Q 10/02/2017 - 10-Q 10/02/2017 - 10-Q 10/02/2017 - 10-Q 02/07/2018 - 10-Q 04/13/2018 - 10-Q 02/10/2020 - 10-Q 04/24/2020 - 10-Q 07/13/2020 - 10-Q 07/29/2020 - 10-Q 08/26/2020 - 10-Q 02/23/2021 - 10-Q 04/08/2021 - 10-Q 07/19/2021 - 10-Q Also read Hudson pacific properties, inc. - 8-k, other events financial statements and exhibits Netfin acquisition corp. - 8-k, regulation fd disclosure financial statements and exhibits China xd plastics co ltd - 8-k, results of operations and financial condition regulation fd disclosure financial statements and exhibits Cellular biomedicine group, inc. - 8-k, submission of matters to a vote of security holders regulation fd disclosure financial statements and exhibits Mastermind, inc. - 10-q, quarterly report