UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

(Mark One)

x

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

 

For the quarterly period ended

April 30, 2015

 

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

000-54323

  

INDEPENDENCE ENERGY CORP.

(Exact name of registrant as specified in its charter)

 

Nevada		20-3866475
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

 

219 Chemin Metairie Road, Youngsville, Louisiana	70592
(Address of principal executive offices)	(Zip Code)

 

(337) 269-5933

(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 (§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	¨	(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      x  NO

  

Independence Energy Corp. had 360,094,082 shares of its common stock issued and outstanding as of June 12, 2015.

 

 

INDEPENDENCE ENERGY CORP.

 

TABLE OF CONTENTS

 

PART I - FINANCIAL INFORMATION		3
Item 1.	Financial Statements	3
Item 2.	Management's Discussion and Analysis or Plan of Operation	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	20
Item 4.	Controls and Procedures	20
PART II - OTHER INFORMATION		20
Item 1.	Legal Proceedings	20
Item 1A.	Risk Factors
Item 6.	Exhibits	21
SIGNATURES		22

 

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

 

Independence Energy Corp.

April 30, 2015

 

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

 

 

Independence Energy Corp.

Balance Sheets

 

		April 30,				January 31,
		2015				2015
		(unaudited)
ASSETS
Current Assets:
Cash		$	1,000			$	4,188
Accounts receivable			610				225
Inventory, at cost			9,756				10,080
Current assets of discontinued operations			57,628				57,628
Total Current Assets			68,994				72,121
Intangible asset, net of amortization of $74,536 and $57,220, respectively			245,895				263,211
Total Assets		$	314,889			$	335,332
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities		$	55,258			$	43,087
Due to related party			4,553				-
Loans payable			156,697				156,697
Current liabilities of discontinued operations			57,628				57,628
Total Liabilities			274,136				257,412
Commitments and Contingencies			-				-
Stockholders' Equity:
Common Stock, par value of $0.001 per share, 375,000,000 authorized shares and 360,094,082 issued and outstanding			360,094				360,094
Additional paid-in capital			927,826				927,826
Accumulated deficit			(1,247,167	)			(1,210,000	)
Total Stockholders' Equity			40,753				77,920
Total Liabilities and Stockholders' Equity		$	314,889			$	335,332

 

The accompanying notes are an integral part of these financial statements

 

 

Independence Energy Corp.

Statements of Operations

(unaudited)

 

		Three Months Ended April 30,
		2015				2014
Revenue		$	385			$	-
Cost of goods sold			151				-
Gross Profit			234				-
Operating Expenses:
Selling			173				-
Professional fees			19,444				24,965
Amortization of intangibles			17,316				-
General and administrative			468				37,069
Total Operating Expenses			37,401				62,034
Net Loss from Operations			(37,167	)			(62,034	)
Other Income (Expense):
Amortization of discount on convertible debentures			-				(74,166	)
Amortization of deferred financing charges			-				(1,264	)
Gain on change in fair value of derivative liability			-				24,029
Interest expense			-				(116	)
Total Other Expense, net			-				(51,517	)
Net Loss and Comprehensive Loss		$	(37,167	)		$	(113,551	)
Net Loss Per Share
Basic		$	-			$	-
Diluted		$	-			$	-
Weighted Average Shares Outstanding
Basic			360,094,082				164,643,741
Diluted			360,094,082				164,643,741

 

The accompanying notes are an integral part of these financial statements

 

 

Independence Energy Corp.

Statements of Cash Flows

(unaudited)

 

		Three Months Ended April 30,
		2015				2014
Operating Activities:
Net loss from continuing operations		$	(37,167	)		$	(113,551	)
Adjustments to reconcile net loss to net cash used in continuing operations:
Amortization of discount on convertible debentures			-				74,166
Amortization of intangibles			17,316				-
Amortization of deferred financing charges			-				1,264
Gain on change in fair value of derivative liability			-				(24,029	)
Changes in operating assets and liabilities:
Accounts receivable			(385	)			-
Inventory			324				-
Prepaid expense and deposits			-				3,100
Accounts payable and accrued liabilities			12,171				19,103
Due to related party			4,553				8,601
Net Cash Used in Operating Activities			(3,188	)			(31,346	)
Investing Activities:
Proceeds from asset acquisition			-				60,000
Net Cash Provided by Investing Activities			-				60,000
Increase (Decrease) in cash			(3,188	)			28,654
Cash, Beginning of Period			4,188				7,292
Cash, End of Period		$	1,000			$	35,946
Non-cash investing and financing activities:
Issuance of stock for intangible assets		$	-			$	380,431
Supplemental Disclosures:
Interest paid		$	-			$	-
Income tax paid		$	-			$	-

 

The accompanying notes are an integral part of these financial statements

 

 

Independence Energy Corp.

Notes to the Condensed Financial Statements 

(unaudited)

 

1. Nature of Operations and Continuance of Business

 

Independence Energy Corp. (the "Company") was incorporated in the State of Nevada on November 30, 2005.  The Company was organized to explore natural resource properties in the United States.  On March 31, 2014, the Company acquired the exclusive right to distribute certain medical products and has changed its focus to the medical products distribution business. The Company may explore additional lines of business in the future.

 

Going Concern

 

These financial statements have been prepared on a going concern basis, which implies that the Company will be able to continue as a going concern without further financing. Currently, the Company must continue to realize its assets to discharge its liabilities in the normal course of business. The Company has generated minimal revenues to date and has never paid any dividends and is unlikely to pay dividends or generate significant earnings in the immediate or foreseeable future.  As of April 30, 2015, the Company had a working capital deficit of $205,142 and an accumulated deficit of $1,247,167. 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 medical products distribution 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 (“GAAP”). The Company’s fiscal year-end is January 31.

 

b)

Use of Estimates

 

The financial statements and related notes are prepared in conformity with GAAP which 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 long-lived assets, 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.

 

 

Independence Energy Corp.

Notes to the Condensed Financial Statements 

(unaudited)

 

2. Summary of Significant Accounting Policies (continued)

 

c)

Basic and Diluted Net Loss Per Share

 

The Company computes net loss per share in accordance with Accounting Standard Codification (“ASC”) 260, Earnings Per Share, which requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing Diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. As of April 30, 2015, the Company had 7,452,959 potentially dilutive shares. There were no potentially dilutive shares outstanding at April 30, 2014.

 

d)

Oil and Gas Property Costs

 

The Company utilizes the full-cost method of accounting for oil and 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. If 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 and exploratory wells in progress 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 natural 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 could 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. During the year ended January 31, 2015, the Company decided to discontinue its oil and gas business and the relevant assets have been impaired.

 

 

Independence Energy Corp.

Notes to the Condensed Financial Statements 

(unaudited)

 

2. Summary of Significant Accounting Policies (continued)

 

e)

Asset Retirement Obligations

 

The Company accounts for asset retirement obligations in accordance with standards which require the Company to record the fair value of liabilities related to future asset retirement obligations in the period the obligation is incurred.  Generally, the amount of the asset retirement obligation and the costs capitalized will be equal to the estimated future cost to satisfy the abandonment obligation using current prices that are escalated by an assumed inflation factor after discounting the future cost back to the date that the abandonment obligation was incurred using an assumed cost of funds rate for the Company. After initially recording such amounts, these asset retirement obligations are accreted to their future estimated value using the same assumed cost of funds and the capitalized costs are depleted using the future gross revenue method over the productive lives of the Company’s oil and gas properties.  This is accounted for as a reduction of assets held for sale as these are directly related to the assets to be disposed.

 

f)

Inventory

 

Inventory consists of purchased thermometers held for resale and are stated at the lower of cost or market utilizing the first-in, first-out method.

  

g)

Beneficial Conversion Features

 

From time to time, the Company may issue convertible instruments that may contain an embedded beneficial conversion feature. A beneficial conversion feature exists on the date a convertible instrument is issued when the fair value of the underlying common stock into which the note is convertible is in excess of the remaining unallocated proceeds of the instrument after first considering the allocation of a portion of the proceeds to the fair value of the warrants, if related warrants have been granted. The intrinsic value of the beneficial conversion feature is recorded as a debt discount with a corresponding amount to additional paid in capital. The debt discount is amortized to interest expense over the life of the note using the effective interest method. There were no outstanding beneficial conversion features outstanding at April 30, 2105.

 

h)

Derivative Liability

 

From time to time, the Company may issue equity instruments that may contain an embedded derivative instrument which may result in a derivative liability. A derivative liability exists on the date the equity instrument is issued when there is a contingent exercise provision. The derivative liability is recorded at its fair value calculated by using an option pricing model such as a multi-nominal lattice model. The fair value of the derivative liability is then calculated on each balance sheet date with the corresponding changes in the asset or liability recorded as derivative gains and losses in the consolidated statement of operations. There were no derivative liabilities at April 30, 2015.

 

i)

Income Taxes

 

Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company has adopted ASC 740, Income Taxes, as of its inception. Pursuant to ASC 740, the Company is required to compute tax asset benefits for net operating losses carried forward. The potential benefits of net operating losses have not been recognized in these financial statements because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense in the period they are incurred. The Company does not believe that it has any uncertain tax positions.

  

 

Independence Energy Corp.

Notes to the Condensed Financial Statements 

(unaudited)

 

2. Summary of Significant Accounting Policies (continued)

 

j)

Comprehensive Loss

 

ASC 220, Comprehensive Income, establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As of April 30, 2015, the Company had no items that represented comprehensive income (loss) and, therefore, did not include a schedule of comprehensive income (loss) in the financial statements.

   

k)

Financial Instruments

 

Pursuant to ASC 820, Fair Value Measurements and Disclosures, an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:

 

Level 1

 

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

 

Level 2

 

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

 

Level 3

 

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

 

The Company’s financial instruments consist principally of cash, accounts payable and accrued liabilities, and amounts due to related parties. Pursuant to ASC 820 and ASC 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.

 

 

Independence Energy Corp.

Notes to the Condensed Financial Statements 

(unaudited)

 

2. Summary of Significant Accounting Policies (continued)

 

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.

 

l)

Reclassifications

 

Certain financial statement items have been reclassified to conform to current period financial reporting requirements.

 

m)

Recent Accounting Pronouncements

 

Development Stage

 

The Company has limited operations and is considered to be in the development stage. In the period ended January 31, 2015, the Company elected to early adopt Accounting Standards Update (“ASU”) No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements. The adoption of this ASU allows the Company to remove the inception to date information and all references to development stage.

 

Revenue Recognition

 

In May 2014, the Financial Accounting Standards Board ("FASB") issued new guidance intended to change the criteria for recognition of revenue. The new guidance establishes a single revenue recognition model for all contracts with customers, eliminates industry specific requirements and expands disclosure requirements. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve this core principle, an entity should apply the following five steps: (1) identify contracts with customers, (2) identify the performance obligations in the contracts, (3) determine the transaction price, (4) allocate the transaction price to the performance obligation in the contract, and (5) recognize revenue as the entity satisfies performance obligations. The amendments are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. We are currently evaluating what impact adoption of this guidance would have on our financial position, results of operations, cash flows and disclosures.

 

Going Concern

 

In August 2014, the FASB issued guidance on disclosures of uncertainties about an entity's ability to continue as a going concern. The guidance requires management's evaluation of whether there are conditions or events that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date that the financial statements are issued. This assessment must be made in connection with preparing financial statements for each annual and interim reporting period. Management's evaluation should be based on the relevant conditions and events that are known and reasonably knowable at the date the financial statements are issued. If conditions or events raise substantial doubt about the entity's ability to continue as a going concern, but this doubt is alleviated by management's plans, the entity should disclose information that enables the reader to understand what the conditions or events are, management's evaluation of those conditions or events and management's plans that alleviate that substantial doubt. If conditions or events raise substantial doubt and the substantial doubt is not alleviated, the entity must disclose this in the footnotes. The entity must also disclose information that enables the reader to understand what the conditions or events are, management's evaluation of those conditions or events and management's plans that are intended to alleviate that substantial doubt. The amendments are effective for annual periods and interim periods within those annual periods beginning after December 15, 2016. We do not expect that adoption will have a material impact on our financial position, results of operations, cash flows or disclosures.

 

 

Independence Energy Corp.

Notes to the Condensed Financial Statements 

(unaudited)

 

2. Summary of Significant Accounting Policies (continued)

 

n)

New Accounting Pronouncements

 

The Company 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%. Currently, the Company owes $57,628 in operating expenses. Should the Company fail to pay such expenses the operator could foreclose on Quinlan. The Company is currently negotiating with the operator to assign its interest in Quinlan to the operator in exchange for the cancellation of all current and future lease obligations.

 

b)

On March 29, 2012, the Company acquired a 5% interest in a 70% net revenue interest in 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) for a discussion of the disposition of this property.

 

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) for a discussion of the disposition of this property.

 

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, in properties comprising an area of 2,421 acres in Coleman County, Texas.  Refer to Note 3(e) for a discussion of the disposition of this property.

 

e)

On February 28, 2013, the Company entered into a Compromise, Settlement and Property Exchange Agreement with MontCrest Energy Properties, Inc. and Black Strata, LLC. Pursuant to the terms of the agreement, the Company transferred all of its working interests in Coleman County with a book value of $335,284, in consideration of a 100% interest in approximately 1,400 acres of the Coleman County South Lease held by Black Strata, LLC.  During the year ended January 31, 2014, the Company elected not to renew the working interest in the Coleman County South leases and recorded a full impairment of the book value.

 

 

Independence Energy Corp.

Notes to the Condensed Financial Statements 

(unaudited)

 

4.

Intangible Asset

 

On March 31, 2014, the Company entered into an asset purchase agreement (the “Agreement”) with American Medical Distributors, LLC (“AMD”) pursuant to which the Company acquired a five year license dated November 27, 2013 for the exclusive territorial distribution rights to the Thermofinder non-contact thermometer from AMD in exchange for the issuance of 152,172,287 shares of the Company’s common stock with a fair value of $320,431 based on the fair value of such shares on the date of issuance. As a part of this asset acquisition and share issuance, the Company also received a payment of $60,000. The intangible asset is being amortized over the remaining life of the license agreement. Amortization expense is expected to be approximately $68,664 per year for the years ending 2016 through 2018 and approximately $57,219 in year 2019.

 

5.

Convertible Notes

 

a)

On July 15, 2013, the Company issued an unsecured convertible note in a principal amount of $57,000 bearing interest at 8% per annum and due on April 17, 2014 (the “April 2014 Note”). The April 2014 Note was convertible into shares of common stock 180 days after the date of issuance (or January 11, 2014) at a conversion rate of 58% of the average of the three lowest closing bid prices of the shares of the Company’s common stock for the ten trading days ending one trading day prior to the date the conversion notice was sent by the holder to the Company. During the year ended January 31, 2014, the Company issued 7,500,000 shares of its common stock upon the conversion of $12,000 of the principal amount of the April 2014 Note. During the three month period ended April 30, 2014, the Company issued an additional 35,545,055 shares of its common stock upon the conversion of the remaining $45,000 of the principal amount of the April 2014 Note plus $2,280 of accrued interest.

 

In accordance with ASC 470-20, “Debt with Conversion and Other Options”, the Company recognized the intrinsic value of the embedded beneficial conversion feature of the April 2014 Note equal to the principal amount of $57,000 and an equivalent discount which was charged to operations over the term of the April 2014 Note. During the three month period ended April 30, 2014, the Company had amortized the remaining $41,666 of the debt discount to interest expense. As of April 30, 2014, the April 2014 Note was no longer outstanding and the Company did not have a carrying value for such note.

 

 

b)

On September 17, 2013, the Company issued an unsecured convertible note in a principal amount of $32,500 bearing interest at 8% per annum and due on June 19, 2014 (the “June 2014 Note”). The Company received $30,000, net of an issuance fee of $2,500. The June 2014 Note was convertible into shares of common stock 180 days after the date of issuance (or March 16, 2014) at a conversion rate of 58% of the average of the three lowest closing bid prices of the shares of the Company’s common stock for the ten trading days ending one trading day prior to the date the conversion notice was sent by the holder to the Company. During the three month period ended April 30, 2014, the Company issued 28,166,667 shares of its common stock upon the conversion of the full $32,500 of the principal of the June 2014 Note plus $1,300 of accrued interest.

 

In accordance with ASC 470-20, “Debt with Conversion and Other Options”, the Company recognized the intrinsic value of the embedded beneficial conversion feature of the June 2014 Note equal to the principal amount of $32,500 and an equivalent discount which was charged to operations over the term of the June 2014 Note. During the three month period ended April 30, 2014, the Company had amortized the full $32,500 of the debt discount to interest expense. As of April 30, 2014, the June 2014 Note was no longer outstanding and the Company did not have a carrying value for such note.

 

 

Independence Energy Corp.

Notes to the Condensed Financial Statements 

(unaudited)

  

6.

Loan Payable

 

In December 2011, the Company received a loan in the amount of $156,697 from an unrelated third party. The loan is non-interest bearing, unsecured and due on demand.

 

8.

Related Party Transactions

 

During the three month period ended April 30, 2015, the Company incurred $0 of management fees (compared to $47,649 for the three month period ended April 30, 2014) to the former President and former CEO of the Company. During the quarter ended April 30, 2015, a shareholder advanced the Company $4,553 to pay certain operating expenses.

 

9.

Discontinued Operations

 

On June 23, 2014, the Company impaired its remaining oil and natural gas properties and changed its focus to the medical products distribution business. The Company’s oil and gas properties have been classified as held for sale and are reflected at the estimated fair value expected to be realized by the Company. As a result of the Company’s impairment of its oil and gas properties and change in direction for the Company’s business, all expenses related to the oil and natural gas operations have been classified as discontinued operations.

 

The results of discontinued operations are summarized as follows:

 

		For the Year Ended January 31,
		2015				2014
Operating Expenses		$	-			$	-
Impairment of oil and natural gas property			147,739				335,284
Total Operating Expenses			147,739				335,284
Net Loss from Discontinued Operations		$	(147,739	)		$	(335,284	)

 

There was no income or loss from discontinued operations for the three month periods ended April 30, 2015 and April 30, 2014.

 

 

Independence Energy Corp.

Notes to the Condensed Financial Statements 

(unaudited)

 

10.  Income Taxes

 

The Company has $986,035 of net operating losses carried forward to offset taxable income in future years which expire commencing in fiscal 2026.  The income tax benefit differs from the amount computed by applying the US federal income tax rate of 34% to net loss before income taxes. As at April 30, 2015, the Company had no uncertain tax positions.

 

		For the Year Ended January 31,
		2015				2014
Net loss before taxes		$	(396,808	)		$	(543,622	)
Statutory rate			34	%			34	%
Computed expected tax recovery		$	(134,915	)		$	(184,831	)
Valuation allowance			134,915				184,831
Income tax provision		$	–			$	–

 

As of January 31, 2015, the Company has net operating losses carry forwards, which are available to offset future years’ taxable income. These losses expire as follows: 

 

2026		$	8
2027			14,302
2028			16,032
2029			24,790
2030			13,583
2031			13,719
2032			51,417
2033			135,719
2034			182,249
2035			534,216
		$	986,035

 

The Company accounts for interest and penalties relating to uncertain tax provisions in the current period statement of income, as necessary. The Company has never filed a tax return. In order to utilize the available net operating loss carryforwards, the Company will need to prepare and file all tax returns since its inception. The Company’s tax years from inception are subject to examination.

 

Due to the uncertainty surrounding the realization of the deferred tax assets in future years, management has determined that it is more than likely than not that the deferred tax assets will be not realized in future periods. Accordingly, the Company has recorded a valuation allowance against its net deferred tax assets. At January 31, 2015, the Company had a cumulative net operating loss carryforward of approximately $986,035 for federal income tax purposes which will begin to expire in 2026. For the year ended January 31, 2015, the valuation allowance increased by approximately $134,915.

  

 

Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations

 

This Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements. Forward-looking statements are all statements other than statements of historical facts. The words “may,” “can,” “will” “should,” “plans,” “believes,” “estimates,” “expects,” “projects,” “targets,” “intends,” “potential,” “proposed,” and any similar expressions are intended to identify those assertions as forward-looking statements. Investors are cautioned that forward-looking statements are predictions and are inherently uncertain. Actual performance and results may differ materially from that projected or suggested herein due to certain risks and uncertainties. In evaluating forward-looking statements, you should consider the various factors which may cause actual results to differ materially from any forward-looking statements including the risks below and those listed in the “Risk Factors” section of our latest 10-K report:

 

·

Changes in the effects of the significant level of competition that exists in the medical device distribution industry, or our inability to attract customers for other reasons.

 

·

The unexpected cost of regulation applicable to our industry, and the possibility of future additional regulation.

 

·

Our lack of insurance coverage in the event we incur an unexpected liability.

 

·

Our lack of a proven operating history and the possibility of future losses that are greater than we currently anticipate.

 

·

The possibility that we may not be able to generate revenues or access other financing sources necessary to operate our business.

 

·

Our inability to attract necessary personnel to run and market our business.

 

·

The volatility of our stock price.

 

·

Changes in the market prices for our products, or our failure to perform or renew the distribution agreement for our products.

 

·

Our failure to execute our growth strategy or enter into other lines of business that we may identify as potentially profitable for our company.

 

·

Changes in economic and business conditions.

 

·

Changes in accounting policies and practices we may voluntarily adopt or that we may be required to adopt under generally accepted accounting principles in the United States.

 

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. We undertake no obligation to revise or update any forward-looking statements.

 

Working Capital

 

		April 30,				January 31,
		2015				2015
Current Assets		$	68,994			$	72,121
Current Liabilities		$	274,136			$	257,412
Working Capital (Deficit)		$	(205,142	)		$	(185,291	)

 

 

Cash Flows

 

		Three months ended April 30,
		2015				2014
Cash Flows used in Operating Activities		$	(3,188	)		$	(31,346	)
Cash Flows provided by Investing Activities		$	-			$	60,000
Net Increase (decrease) in Cash During Period		$	(3,188	)		$	28,654

 

Operating Revenues

 

For the period from November 30, 2005 (date of inception) to April 30, 2015, our company has earned only minimal operating revenues.

 

Operating Expenses and Loss from Continuing Operations

 

Operating expenses for the three months ended April 30, 2015 were $37,167 compared with $62,034 for the three months ended April 30, 2014. The decrease of $24,867 was due principally to a $22,500 reduction in the management and consulting fees for the Company’s former Chief Executive Officer and President, $5,521 in lower professional fees and $14,101 in lower general and administrative expenses. These decreases were partially offset by a $17,316 increase in amortization expense in the three month period ended April 30, 2015 relating to the intangible assets acquired from AMD.

 

For the three months ended April 30, 2015, we incurred a $37,167 loss from continuing operations or $nil per share compared with a loss from continuing operations of $113,551 or $nil per share for the three months ended April 30, 2014. In addition to operating expenses, we incurred $74,166 of expense relating to the amortization of the discount on the convertible notes during the three month period ended April 30, 2014. In addition to the amortization of the debt discount, during the three month period ended April 30, 2014, a $24,029 gain resulted from the change in fair value of the derivative liability due to the change in the fair value of the conversion feature on the convertible notes. During the same three month period during 2014, amortization of deferred financing cost and interest expense totaled only $1,380.

 

Discontinued Operations and Net Loss

 

This was due primarily to our decision to not renew our interest in the oil and gas leases in Coleman County, Texas. As a result, the Company recognized an impairment of $335,284 for the year ended January 31, 2014. For the three month period ended April 30, 2015, we reported a net loss from continuing operations of $37,167, or $nil per share. This compares to a net loss from continuing operations of $113,551 or $nil per share, for the same three month period ended in 2014.

 

For the three month period ended April 30, 2015, we reported a net loss of $37,167, or $nil per share. There were no losses from discontinued operations reported during the three month period ended April 30, 2014 as a result of our decision during the quarter ended April 30, 2014 not to renew the oil and gas leases in Coleman County, Texas. As a result, we reported a net loss of $113,551, or $nil per share, for the comparable three month period ended April 30, 2014.

 

Liquidity and Capital Resources

 

As of April 30, 2015, we had cash of $1,000 compared with $4,188 at January 31, 2015. During the three month period ended April 30, 2015 we focused on reducing cash outlays by reducing operating costs including management, consulting and professional fees.

 

We had total assets at April 30, 2015 of $314,889 compared with $335,332 at January 31, 2015. The decrease in overall assets was due primarily to the $17,316 non-cash charge for amortization on intangibles.

 

At April 30, 2015, we had total liabilities of $274,136 compared with $257,412 at January 31, 2015. The increase in total liabilities was due an increase in our accounts payable.

 

 

Cash Flow from Operating Activities

 

During the three months ended April 30, 2015, we used cash of $3,188 for operating activities compared with $31,346 used during the same three month period ended April 30, 2014. For the 2015 three month period, an $18,432 increase in accounts payable and a $17,316 non-cash intangible amortization charge partially offset the $37,167 net loss for the period.

 

The decrease in cash used for operating activities was attributed a significant reduction in day-to-day general and administrative expenses for our Company which was partially offset by our payables and amounts due to a related party.

 

Cash Flow from Investing Activities

 

During the three months ended April 30, 2014, we received $60,000 as part of the financing in connection with the acquisition of the intangible assets from AMD.

   

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 Independent Registered Public Accounting firm stated in their report on our audited financial statements as of January 31, 2015 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 financial support from our stockholders and our ability to raise equity capital or debt financing 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 GAAP applied on a consistent basis. The preparation of financial statements in conformity with GAAP 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

 

We have 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 we do not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on our 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

 

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s 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 the Company’s management, including its chief executive officer and chief financial officer to allow for timely decisions regarding required disclosure.

 

As of the end of the quarter covered by this report, we carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on the foregoing, the chief executive officer and chief financial officer concluded in light of material weaknesses in our internal controls that the Company’s 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 the Company’s internal control over financial reporting that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

PART II - OTHER INFORMATION

 

Item 1.

Legal Proceedings

 

We know of no material, existing or pending legal proceedings against us, 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 a party adverse to us or has a material interest adverse to our interest.

 

 

 

Item 6.

Exhibits

 

Exhibit Number		Description of Exhibit
(3)		Articles of Incorporation and Bylaws
3.01		Articles of Incorporation (incorporated by reference to Exhibit 3.1 to our Registration Statement on Form SB-2 filed on March 7, 2006)
3.02		Bylaws (incorporated by reference to Exhibit 3.2 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 Exhibit 3.02 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 Exhibit 3.01 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 Exhibit 3.1 to our Current Report on Form 8-K filed on June 15, 2012)
(31)		Rule 13a-14(a) / 15d-14(a) Certifications
31.1*		Certification pursuant to Section 302 of the  Sarbanes-Oxley Act of 2002 of the Principal Executive Officer
31.2*		Certification pursuant to Section 302 of the  Sarbanes-Oxley Act of 2002 of the Principal Financial Officer and Principal Accounting Officer.
(32)		Section 1350 Certifications
32.1*		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of the Principal Executive Officer
32.2*		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of the Principal Financial Officer and Principal Accounting Officer.
101		Interactive Data File
101*		Interactive Data File (Form 10-Q for the quarter ended April 30, 2015 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.

  

 

SIGNATURES

 

In accordance with Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	INDEPENDENCE ENERGY CORP.
	(Registrant)
Dated:  June 15, 2015	/s/ Daniel J. Schreiber
	Daniel J. Schreiber
	Chief Executive Officer and Director
	(Principal Executive Officer)
Dated:  June 15, 2015	/s/ G. Darcy Klug
	G. Darcy Klug
	Chief Financial Officer
	(Principal Financial Officer and Principal Accounting Officer)