UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

  

FORM 10-Q

  

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

 

For the quarterly period ended December 31, 2015

 

 

Commission File Number: 333-139482

 

Indie Growers Association

(Exact name of registrant as specified in its charter)

 

311 Division St. Carson City, NV 89703

 (Address of principal executive offices)(Zip code)

 

888-648-0488

(Registrant’s telephone number, including area code)

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.   Yes  X .  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 files).  Yes  X .  No      .

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of "large accelerated filer", "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer      .	Accelerated filer      .	Non-accelerated filer      .	Smaller reporting company  X .

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes      .  No  X .

 

Indicate the number of shares outstanding of the issuer’s classes of common stock, as of the latest practicable date.

148,160,437 common shares as of March 16, 2016

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PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

INDIE GROWERS ASSOCIATION

CONSOLIDATED BALANCE SHEETS

		December 31, 2015		March 31, 2015
		(UNAUDITED)
ASSETS
Current Assets
Cash	$	153	$	4,469
Accounts Receivable, net of allowances		205,000		-
Current portion of deferred tenant inducement		6,000		-
Total current assets		211,153		4,469
Non-current assets
Buildings and infrastructure, net		282,746		289,312
Deferred tenant inducement		20,000		-
Total non-current assets		302,746		289,312
TOTAL ASSETS	$	513,899	$	293,780
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
Current Liabilities
Accounts payable and accrued liabilities	$	119,219	$	79,808
Convertible notes payable		511,849		443,754
Total current liabilities		631,068		523,562
Long Term Liabilities
Due to related parties		78,960		70,390
Deferred vendor incentive, net		3,335		4,192
Total long term liabilities		82,295		74,583
TOTAL LIABILITIES		713,363		598,145
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY (DEFICIENCY)
Common stock   400,000,000 shares authorized, at $0.001 par value;   140,382,659 shares issued and outstanding   (March 31, 2015: 140,881,967)		140,383		140,882
Additional paid-in capital		114,013,400		113,945,805
Accumulated deficit		(114,353,246)		(114,391,051)
Total stockholders’ equity (deficiency)		(199,465)		(304,365)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIENCY	$	513,899	$	293,780

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

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INDIE GROWERS ASSOCIATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

		For the 3 Months ended				For the 9  Months ended
		December 31, 2015		December 31, 2014		December 31, 2015		December 31, 2014
REVENUE
Rental income	$	156,000	$	-	$	416,000	$	-
EXPENSES
Land lease		3,000		3,000		9,000		6,000
Depreciation		2,454		1,196		7,362		2,392
Bad debt expense		68,333		-		205,000		-
Management fees		-		4,900		6,540		31,098,382
General and administrative		12,056		6,724		28,130		32,907
Interest		14,540		27,821		86,022		426,989
Professional fees		15,405		1,200		34,693		16,135
Repairs and maintenance		106		171		1,447		4,649
TOTAL OPERATING EXPENSES		115,894		45,013		378,195		31,587,453
NET INCOME (LOSS) FROM OPERATIONS		40,106		(45,013)		37,805		(31,587,453)
OTHER EXPENSE
Investment loss		-		-		-		(156,212)
Impairment of goodwill		-		-		-		(51,482,198)
TOTAL OTHER EXPENSE		-		-		-		(51,638,410)
NET INCOME (LOSS)	$	40,106	$	(45,013)	$	37,805	$	(83,225,863)
GAIN (LOSS) PER COMMON SHARE	$	0.00	$	(0.00)	$	0.00	$	(0.27)
WEIGHTED AVERAGE OUTSTANDING SHARES Basic and diluted		633,406,437		307,904,553		633,406,437		307,904,553

 

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

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INDIE GROWERS ASSOCIATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

		For the 9 Months Ended
		December 31, 2015		December 31, 2014
OPERATING ACTIVITIES
Net income (loss)	$	37,805	$	(83,225,863)
Adjustments to reconcile net loss to net cash used in operating activities:
Non-cash management fees		-		31,072,222
Non-cash interest expense		67,595		414,824
Non-cash impairment of goodwill		-		51,460,000
Depreciation		7,362		2,392
Investment loss		-		156,212
Changes in operating assets and liabilities:
Accounts receivable		(205,000)		-
Deferred tenant inducement		(26,000)		-
Accounts payable and accrued liabilities		39,411		44,455
Deferred vendor incentive		(858)		(858)
Net cash used in operating activities		(79,685)		(76,616)
INVESTING ACTIVITIES
Investment in Indie Growers Union		-		(106,212)
Buildings and infrastructure		(796)		(290,043)
Net cash used in investing activities		(796)		(396,255)
FINANCING ACTIVITIES
Advances from related parties		8,570		59,786
Advances for convertible debt, net		67,595		414,824
Net cash provided by financing activities		76,165		474,610
Net change in cash		(4,316)		1,739
CASH, BEGINNING OF PERIOD		4,469		-
CASH, END OF PERIOD	$	153	$	1,739

 

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

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INDIE GROWERS ASSOCIATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

December 31, 2015

1. ORGANIZATION

The company, Viking Minerals Inc., was incorporated under the laws of the state of Nevada on March 24, 2006 with 75,000,000 authorized common shares, par value of $0.001 per share. In January 2011, the company filed an amendment with the state of Nevada to increase the authorized shares to 400,000,000 common shares, par value of $0.001 per share.

On April 14, 2014 the Company changed its name to Indie Growers Association and completed a 1:200 reverse stock consolidation. All share amounts in these consolidated financial statements have been restated to reflect this stock consolidation.

The company was originally organized for the purpose of acquiring and developing mineral claims (SIC Code: 1000).  On June 30, 2014, the company acquired River Ridge Sunshine Farms LLC, a Washington State corporation, and in so doing, changed its business to that of  real estate development for the purpose of leasing land and agricultural buildings to licensed cannabis producers (SIC Code: 5319).

The consolidated financial statements 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. 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/A of the Company for the year ended March 31, 2015. In the opinion of management, all adjustments (including normal recurring accruals) considered necessary for a fair presentation have been included.  Operating results for the three and nine months ended December31, 2015 are not necessarily indicative of the results that may be expected for the year ending March 31, 2016. For further information, these unaudited financial statements and the related notes should be read in conjunction with the Company’s audited financial statements for the year ended March 31, 2015 included in the Company’s report on Form 10-K/A.

At December 31, 2015, the Company had a working capital deficit and stockholders’ deficit. The company has started to generate income although it has not yet collected on receivables. These circumstances raise substantial doubt about the Company’s ability to continue as a going concern.   While the Company is generating revenues, the Company’s cash position may not be enough to support the Company’s daily operations. Management intends to raise additional funds by way of a public or private offering. Management believes that the actions presently being taken to further implement its business plan and generate sufficient revenues provide the opportunity for the Company to continue as a going concern. While the Company believes in the viability of its strategy to increase revenues and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate sufficient revenues.

These financial statements are presented on the basis that we will continue as a going concern. The going concern concept contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basic and Diluted Net Loss Per Share

 

Basic net loss per share amounts are computed based on the weighted average number of shares outstanding. Diluted net loss per share amounts are computed using the weighted average number of common and common equivalent shares outstanding as if shares had been issued on the exercise of the common share rights unless the exercise becomes anti-dilutive and then the basic and diluted per share amounts are the same.

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Estimates and Assumptions

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain of the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the year. The Company regularly evaluates estimates and assumptions. The Company bases its estimates and assumptions on current facts, historical experience and various other factors 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. The most significant estimates with regard to these financial statements relate to the carrying values of unproven mineral properties, expected lives of equipment, determination of fair values of stock based transactions and valuation of deferred income taxes.

 

Capital Assets

A Capital Asset is defined as a unit of tangible property that: (1) has an economic useful life of more than 12 months; and (2) was acquired or produced for a cost of more than $500, including acquisition and installation costs on the same invoice.

Capital Assets are stated at historical cost less accumulated depreciation and accumulated impairment losses.  Subsequent costs are included in the asset's carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. All repairs and maintenance are charged to the statement of operations during the financial period in which they are incurred.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognized in the statement of operations.

Depreciation of capital assets is computed as follows:

Furniture and fixtures	7 year straight line
Computer equipment	5 year straight line
Buildings and infrastructure	30 year straight line
Leasehold Improvements	Straight line over the term of lease

Impairment of Long-lived Assets

 

The Company reviews and evaluates long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable.  The assets are subject to impairment consideration under ASC 360-10-35-17 if events or circumstances indicate that their carrying amounts might not be recoverable.   When the Company determines that an impairment analysis should be done, the analysis will be performed using rules of ASC 930-360-35, Asset Impairment, and 360-10-15-3 through 15-5, Impairment or Disposal of Long-Lived Assets.

Investments

Investments in companies that are not consolidated, but over which the Company exercises significant influence, are accounted for under the equity method of accounting. Whether or not the Company exercises significant influence with respect to an investee depends on an evaluation of several factors, including, among others, ownership level. Under the equity method of accounting, an investee company’s accounts are not reflected within the Company’s Balance Sheets and Statements of Operations; however, the Company’s share of the earnings or losses of the investee company is reflected in the Company’s statements of operations and the Company’s carrying value in an equity method investee company is reflected in the Company’s balance sheets. The Company evaluates these investments for other-than-temporary declines in value each quarterly period. Any impairment found to be other than temporary would be recorded through a charge to earnings.

Revenue Recognition

 

Revenue is recognized when all applicable recognition criteria have been met, which generally include (a) persuasive evidence of an existing arrangement; (b) fixed or determinable price; (c) delivery has occurred or service has been rendered; and (d) collectability is reasonably assured.

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Fair Value of Financial Instruments

 

The estimated fair values for financial instruments are determined at discrete points in time based on relevant market information. These estimates involve uncertainties and cannot be determined with precision. The estimated fair value of cash, trade payables, and loans approximates their carrying value due to their short-term nature.

Income Taxes

 

The Company utilizes the liability method of accounting for income taxes. Under the liability method deferred tax assets and liabilities are determined based on differences between financial reporting and the tax bases of the assets and liabilities and are measured using the enacted tax rates and laws that will be in effect, when the differences are expected to be reversed. An allowance against deferred tax assets is recorded, when it is more likely than not, that such tax benefits will not be realized.

 

Recent Accounting Pronouncements

 

On June 10, 2014, The Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, consolidation, which removes all incremental financial reporting requirements from GAAP for development stage entities, including the removal of Topic 915 from the FASB Accounting Standards Codification. For the first annual period beginning after December 15, 2014, the presentation and disclosure requirements in Topic 915 will no longer be required for the public business entities. The revised consolidation standards are effective one year later, in annual periods beginning after December 15, 2015. Early adoption is permitted. The Company has adopted the amendment as of 3 and 9 months ended December 31, 2015.

There are several new accounting pronouncements issued by the Financial Accounting Standards Board (“FASB”) which are not yet effective. Each of these pronouncements, as applicable, has been or will be adopted by the Company. As of December 31, 2015, none of these pronouncements is expected to have a material effect on the financial position, results of operations or cash flows of the Company.

3. ACQUISITION OF A PROPERTY

On April 8, 2014, the Company entered into a share exchange agreement with the unit holders of Indie Growers Union LLC of Washington state wherein the Company would issue a total of 87,500,000 shares of common stock and $185,000 cash in exchange for all of the outstanding member units and assets of Indie Growers Union LLC.   The company advanced $185,000 but cancelled the agreement prior to issuing the shares.  The company recovered $28,788 of the $185,000 cash and has recorded an investment loss of $(156,212) in the consolidated statement of operations.

On June 30, 2014, the Company acquired River Ridge Sunshine Farms LLC, a Washington state corporation in exchange for 62,000,000 shares.  The market value of the Company’s shares on the July 15, 2014, the date the shares were issued, was $0.68 per share thereby valuing the acquisition at $42,160,000.  River Ridge Sunshine Farms LLC holds a 10 year lease on a 40 acre property which will be subleased to licensed cannabis producers.  However, no revenue was generated from leases in the year ended March 31, 2014 so the company determined that the value of this acquisition should be fully impaired.  An impairment of goodwill has been recorded in the consolidated statement of operations effective as of the date of acquisition.  

4. ASSET DEPRECIATION

 

December 31, 2015	Cost	Accumulated Depreciation	Net Book Value
Buildings and infrastructure	$ 294,892	$ (12,146)	$ 282,746

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5. CAPITAL STOCK

On May 2, 2014, the company issued 21,000,000 shares of its common stock for services to two of our directors. The market value of the Company’s shares on the May 2, 2014, the date the shares were issued, was $2.35 per share thereby valuing the management fees at $49,350,000.  However, on December 28, 2014, one of the directors resigned and relinquished his title to 7,777,778 of the shares. The net effect of $31,072,222 has been recorded as management fees in the consolidated statements of operations for this transaction.

On May 14, 2014, the company issued 2,000,000 shares of its common stock for $2,000 of convertible debt. The stock was valued at par value in accordance with the convertible debt agreement.

On July 15, 2014, the Company issued 62,000,000 shares to the managing member of River Ridge Sunshine Farms LLC for the acquisition of River Ridge Sunshine Farms LLC.  The market value of the Company’s shares on July 15, 2014, the date the shares were issued, was $0.68 per share thereby valuing the acquisition at $42,160,000. The managing member is now our Chief Operating Officer.  The shares are subject to a lock-up agreement until July 1, 2016.

On August 14, 2014, the company issued 62,000,000 shares of its common stock for $62,000 of convertible debt. The stock was valued at par value in accordance with the convertible debt agreement.

6. SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES

During the 3 months ended December 31, 2015, the company incurred land lease costs of $3,000 payable to our Chief Operating Officer.

 

7. RENTAL INCOME

During the 3 and 9 months ended December 31, 2015, the company recorded $156,000 and $416,000, respectively, in rental income from a tenant who subleased one of our properties on May 1, 2015. However, lease payments were deferred until the tenant was able to sell their crops.   This was originally expected to take place in Q1 of 2016.

 

However, there is an over-supply of cannabis in Washington State resulting in a significant drop in prices which will likely result in a further delay in receiving payment until late Q2 or Q3 when prices are expected to recover.  Furthermore, the Company anticipates it will have to renegotiate the terms of the lease to account for lower prices and apply it retroactively to the amounts owed by the tenant. Therefore, the company has allowed for a 50% discount ($68,333 and $205,000 for the three and nine months ending December 31, 2015, respectively) off the current accounts receivable and applied it to Bad Debt Expense.

The outstanding lease payments are unsecured as the Company is unable, under State regulations, to take possession or sell the inventory of cannabis.

Under the sublease agreement with the tenant, the Company was required to build approximately 21,000 square feet of greenhouses so the tenant could produce year round.  The Company was unable to meet this obligation thereby allowing the tenant to terminate the lease after December 31, 2015 without penalty.  

8. TENANT INDUCEMENTS

As an inducement for our current tenant to sublease one of our properties, we purchased $30,000 of agricultural materials and provided them free of charge to the tenant. This has been recorded as a deferred vendor inducement on the consolidated balance sheet. It has been amortized on a straight line basis over the contract term of 5 years such that each quarter’s portion of the inducement will be offset against rental income in the consolidated statement of operations.  For the 3 and 9 months ended December 31, 2015, $1,500 and $4,500, respectively, was offset against rental income.

9. VENDOR INCENTIVE

In December 2013, the Company’s current transfer agent paid off the outstanding balance of $5,717 owed to the former transfer agent. This has been recorded as a deferred vendor incentive on the consolidated balance sheet. It has been amortized on a straight line basis over the contract term of 5 years such that each year’s portion of the incentive will be offset against transfer agent fees in the consolidated statement of operations.

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10. CONVERTIBLE PROMISSORY NOTES

 

As of December 31, 2015, the Company had accumulated $443,754 in convertible promissory notes. The notes are due on demand, bear interest at 5%, are unsecured, and are convertible at $0.001.

During the three months ended December 31, 2015, $7,905 of convertible notes were issued which had beneficial conversion features with intrinsic values in excess of the principal balance. As a result, the Company recorded debt discounts of $7,905. In addition, as these promissory notes are payable on demand, the debt discounts were fully amortized to interest expense during the period.

 

The amount of accrued interest payable on these notes was $35,927 as of December 31, 2015 and is included in Accounts Payable and Accrued Liabilities.

If the balance outstanding was converted into common shares, the amount of shares to be issued would be 511,849,000 common shares.  The weighted average number of shares outstanding has been computed as if these shares were issued on the date the funds were advanced to the Company.

11. SUBSEQUENT EVENTS

 

On January 13, 2016, the Company issued 7,777,778 restricted shares to its Director, Robert Coleridge, for payment of management fees for 2016. The market value of the Company’s shares on January 13, 2106 was $0.03per share, thereby valuing the management fees at $233,333.

On January 25, 2016, the Company entered into a agreement to acquire 100% of the outstanding shares of Teascom UK Limited, the patent holder of a new generation of data encryption algorithms. The acquisition is expected to close on or before April 15, 2016.

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

Overview

Indie Growers Association ("Indie Growers" or the "Company") was organized under the laws of the State of Nevada on March 24, 2006 to explore mineral properties in North America on April 14, 2014 the Company completed its name change from Viking Minerals Inc. to Indie Growers Association.

The company was originally organized for the purpose of acquiring and developing mineral claims (SIC Code: 1000).  On June 30, 2014, the company acquired River Ridge Sunshine Farms LLC, a Washington State corporation, and in so doing, changed its business to that of  real estate development for the purpose of leasing land and agricultural buildings to licensed cannabis producers (SIC Code: 5319).

Results of Operations

 

The Three Months Ended December 31, 2015 Compared to the Three Months Ended December 31, 2014

Revenues

The company has recorded rental income of $156,000 from a tenant who entered into a 5 year lease commencing May 1, 2015 compared to $nil rental income during the same period in the prior year.  Payment of the lease has been deferred until the tenant is able to sell its crops. This was originally expected to take place in Q1 of 2016.  However, there is an over-supply of cannabis in Washington State resulting in a significant drop in prices which will likely result in a further delay in receiving payment until late Q2 or Q3 when prices are expected to recover.

Bad Debts

To account for the over-supply of cannabis and the resulting drop in prices, the Company anticipates it will have to renegotiate the terms of the lease and apply it retroactively to the amounts owed by the tenant.  Therefore, the company has allowed for a discount of 50% off the current accounts receivable and applied $68,333 to Bad Debt Expense.

Land Lease

The company leases our land from our Chief Operating Officer for $1,000 per month. For the three months ending December 31, 2015 and 2014, the company had accrued 3 months of lease payments.  These lease payments are accruing and recorded in Accounts Payable and Accrued Liabilities.

Management Fees

The Company incurred $nil in management fees in the three months ending December 31, 2015 compared to $4,900 for the same period in the prior year.

General and Administrative Expenses

General and administrative expenses (“G&A”) were $12,056 and $6,724 for the 3 months ended December 31, 2015 and 2014, respectively. The increase in general and administrative expenses was to an increase in security costs related to having an active tenant on the property as well as an increase in SEC filing fees for restating our financials.

For the quarter ended December 31, 2015, our G&A consisted of $1,178 of fees paid to our transfer agent, $3,737 for on-site security, $3,735 in filing fees, and numerous other small administrative costs.

Interest Expense

During the three months ended December 31, 2015, we recorded interest expenses of $14,540 compared to $86,022 in the same period in the prior year. This decrease is attributable entirely to the decrease in convertible debt financing received by the company and the beneficial conversion factor of these financings.

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Professional Fees

During the three months ended December 31, 2015, we incurred professional fees of $15,405 compared to $1,200 for the same period in prior year.  This increase resulted from accounting fees required to review and restate our financials.

Non-operating Expenses

For the three months ending December 31, 2015 and 2014, we had no non-operating expenses.

The Nine Months Ended December 31, 2015 Compared to the Nine Months Ended December 31, 2014

Revenues

The company has recorded rental income of $416,000 from a tenant who entered into a 5 year lease commencing May 1, 2015 compared to $nil rental income during the same period in the prior year.  Payment of the lease has been deferred until the tenant is able to sell its crops. This was originally expected to take place in Q1 of 2016.  However, there is an over-supply of cannabis in Washington State resulting in a significant drop in prices which will likely result in a further delay in receiving payment until late Q2 or Q3 when prices are expected to recover.

Bad Debts

To account for the over-supply of cannabis and the resulting drop in prices, the Company anticipates it will have to renegotiate the terms of the lease and apply it retroactively to the amounts owed by the tenant.  Therefore, the company has allowed for a discount of 50% off the current accounts receivable and applied $205,000 to Bad Debt Expense.

Land Lease

The company leases our land from our Chief Operating Officer for $1,000 per month. For the nine months ending December 31, 2015, the company had accrued 9 months of lease payments. For the nine months ending December 31, 2104, the company had accrued 6 months of lease payments from July 1, 2014 to December 31, 2014.

Management Fees

The Company incurred $6,540 in management fees in the nine months ending December 31, 2015 compared to $31,098,382 for the same period in the prior year.  The management fees incurred during the 9 months ending December 31, 2014 were primarily stock based so market price was used to value the compensation as follows:

# of shares issued	Issue date	Market price per share	Value
13,222,222	5/2/2014	$ 2.35	$31,072,222

General and Administrative Expenses

General and administrative expenses (“G&A”) were $28,130 and $32,907 for the 9 months ended December 31, 2015 and 2014, respectively. The decrease in general and administrative expenses was due to a decrease in filing and other office expenses during this period.

For the nine months ended December 31, 2015, our G&A consisted of $4,234 of fees paid to our transfer agent, $2,053 in automobile expenses, $5,760 in filing fees, $2,410 in telephone expenses, $6,408 for on-site security, $2,127 on insurance, and numerous other small administrative costs.

Interest Expense

During the nine months ended December 31, 2015, we recorded interest expenses of $86,022 compared to $426,989 in the same period in the prior year. This decrease is attributable entirely to the decrease in convertible debt financing received by the company and the beneficial conversion factor of these financings.

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Professional Fees

During the nine months ended December 31, 2015, we incurred professional fees of $33,393 compared to $14,935 for the same period in prior year. This increase can be attributed to the Company addressing filing deficiencies identified by the Securities and Exchange Commission.

 

Repairs and maintenance

During the nine months ended December 31, 2015, we incurred repairs and maintenance costs of $1,447 compared to $4,649 for the same period in the prior year. Many of the costs in the prior year were as a result of the construction project we had undertaken.  With that phase of construction completed, repair & maintenance costs have dropped significantly.

Non-operating Expenses

For the nine months ending December 31, 2015, we had no non-operating expenses compared to $51,638,410 for the same period in the prior year.  In 2014, we wrote off $156,212 of a $185,000 investment in Indie Growers Union LLC as we were only able to recover $28,778 of the funds we had advanced once we cancelled the acquisition.  In addition, we determined that our acquisition of our subsidiary should be fully impaired because the acquisition failed to generate any revenue during that year.

Liquidity and Capital Resources

Our consolidated financial statements have been prepared on a going concern basis which assumes we will be able to realize our assets and discharge our liabilities in the normal course of business for the foreseeable future. During the three and nine months ended December 31, 2015, we generated a modest profit of $40,106 and 37,805, respectively, from our operating activities. However, as of December 31, 2015, we still had a working capital deficit of $419,915 and an accumulated deficit of $114,353,246.  Our ability to continue as a going concern is dependent upon our ability to continue to generate profitable operations in the future and/or obtaining the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. There is no assurance that these events will be satisfactorily completed.

 

Net cash used in operating activities for the 9 months ended December 31, 2015 and 2014, was $79,685 and $76,616, respectively. We expect this to improve significantly once our tenant is able to make payments on their lease.

 

Net cash used in investing activities for the 9 months ended December 31, 2015 and 2014, was $796 and $396,255, respectively. This decrease can be attributed to the completion of the construction project by our subsidiary.

Net cash provided by financing activities for the 9 months ended December 31, 2015 and 2014, was $76,165 and $474,610, respectively. The decrease can be attributed to a reduction of our cash needs since the completion of the construction project by our subsidiary.

It is our intent to start a new phase of construction in the next 12 months. However, we must obtain additional financing to do so and so far we have been unable to obtain sufficient funding on terms that are favorable to us. Furthermore, we may not be able to generate adequate revenues to operate profitably in the future. These conditions raise substantial doubt about our ability to continue as a going concern.

Off-Balance Sheet Arrangements

 

We have not entered into any off-balance sheet arrangements.

Critical Accounting Estimates

The preparation of consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires us to make judgments, assumptions, and estimates that affect the amounts reported. Note 2 - Summary of Significant Accounting Policies of our consolidated financial statements describes the significant accounting policies used in the preparation of our consolidated financial statements.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

None.

Item4. Controls and Procedures

Disclosure Controls and Procedures

Disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports filed or submitted under the Securities Exchange Act is recorded, processed, summarized and reported, within the time period specified in the SEC rules and forms, and that such information is accumulated and communicated to management, as appropriate, to allow timely decisions regarding required disclosures. Our management necessarily applied its judgment in assessing the costs and benefits of such controls and procedures, which, by their nature, can provide only reasonable assurance regarding management's control objectives.

Our management evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Annual Report. Based upon this evaluation, our management concluded that our disclosure controls and procedures were not effective as of December 31, 2015, because of the identification of a material weakness in our internal control over financial reporting which is described below. We intend to continue to review and document our disclosure controls and procedures, including our internal controls over financial reporting, and may from time to time make changes aimed at enhancing their effectiveness and to ensure that our systems evolve with our business.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Rule 13a-15(f). Our internal control over financial reporting is a process designed to provide reasonable assurance to our management regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with U.S. GAAP.

Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with  U.S. GAAP and our receipts and expenditures are being made only in accordance with authorizations of our management; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on our consolidated financial statements.

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2015. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in their Internal Control-Integrated Framework. Based on this evaluation, our management concluded that that our internal control over financial reporting was not effective as of December 31, 2015.

Our CEO concluded we have a material weakness due to: (i) lack of a functioning audit committee; (ii) lack of outside directors on our board of directors; (iii) ineffective oversight in the establishment and monitoring of required internal controls and procedures; (iv) inadequate segregation of duties because of lack of staff; and (v) ineffective controls over period end financial disclosure and reporting processes. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

While we would like to segregate duties as much as practicable, there is an insufficient resources at this point in time to justify accounting staff. We believe that this is typical in many start-up companies. We may not be able to fully remediate our material weaknesses until we increase our operations at which time we would expect to hire more staff and consider increasing the number of directors on our board. We will continue to monitor and assess the costs and benefits of additional staffing.

Notwithstanding the identified material weaknesses, our management believes these consolidated financial statements fairly represent in all material respects our financial condition, results of operations and cash flows at and for the periods presented in accordance with U.S. GAAP.

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Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the nine months ended December 31, 2015, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Controls and Procedures

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. All internal control systems, no matter how well designed, have inherent limitations, including the possibility of human error and the circumvention of overriding controls. Accordingly, even effective internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

 

We are not aware of any pending or threatened legal actions to which we are a party or of which our property is the subject that would, if determined adversely to us, have a material adverse effect on our business and operations.

We have from time to time been involved in disputes and proceedings arising in the ordinary course of business. In addition, as a public company, we are also potentially susceptible to litigation, such as claims asserting violations of securities laws. Any such claims, with or without merit, if not resolved, could be time-consuming and result in costly litigation. There can be no assurance that an adverse result in any future proceeding would not have a potentially material adverse effect on our business, results of operations or financial condition.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

N/A

Item 4. Mine Safety Procedures

N/A

Item 5. Other Information

Change of Control of the Registrant

As reported by the Company on Form 8-K filed on March 1, 2016, the Company entered into a agreement to acquire 100% of the outstanding shares of Teascom UK Limited (“Teascom”), the patent holder of a new generation of data encryption algorithms.

If the transaction closes as expected on April 15, 2016, the Company will issue 50,000,000 shares of the Company to the shareholders of Teascom and appoint two new members to the Board of Directors.  This would result in a change of control of the Company.

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Item 6. Exhibits

Exhibit Number	Description
3(i)	Articles of Incorporation*
3(ii)	Bylaws*
10-1	Share Exchange Agreement dated June 30, 2014 between Ricardo Esparza and Indie Growers Association (incorporated by reference to Form 8-K filed July 2, 2014)
10-2	Lease Agreement dated May 1, 2015 between Ricardo Esparza, Lismar Properties LLC and River Ridge Sunshine Farms LLC**
10-3	Sublease Agreement dated May 1, 2015 between River Ridge Sunshine Farms LLC and Fourdub LLC with Addendum**
10-4	Convertible Debt Agreement dated April 1, 2014 between Indie Growers Association and Lexington Ridge Holdings Inc.**
21	Subsidiaries of the Registrant
31	Sec. 302 Certification of Chief Executive Officer and Chief Financial Officer
32	Sec. 906 Certification of Chief Executive Officer and Chief Financial Officer

*   Incorporated by reference to an exhibit on our Form SB-1 Registration Statement filed December 19, 2006.

** Incorporated by reference to Form 10-K/A, Amendment 2, filed November 16, 2015

 

SIGNATURES

 

Pursuant to the requirements 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.

	INDIE GROWERS ASSOCIATION
Date:  March 21, 2016		/s/ Robert Coleridge
		Robert Coleridge Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer, and Director

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