UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
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x |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended June 30, 2014
or
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¨ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition
period from ______________ to ______________
INDIGO-ENERGY
INC.
(Exact name of registrant
as specified in its charter)
NEVADA |
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84-0871427 |
(State or other jurisdiction of |
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(I.R.S. Employer |
incorporation or organization) |
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Identification No.) |
74 N. Pecos Road, Suite D
Henderson, NV 89074
(Address of principal executive offices)
(702) 463-8528
(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 o
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). Yes x No o
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 “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer o Accelerated
filer o
Non-accelerated filer o Smaller reporting company x
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x
The number of shares of Common Stock, $0.001
par value, of the registrant outstanding at July 23, 2014 was 1,800,000,000.
TABLE OF CONTENTS
PART I – FINANCIAL INFORMATION |
Item 1. Financial Statements. |
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3 |
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CONDENSED BALANCE SHEETS (UNAUDITED) |
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3 |
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CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED) |
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4 |
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CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) |
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5 |
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NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) |
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6 |
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Item 2. Management’s Discussion and Analysis of Financial
Condition and Results of Operations. |
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10 |
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Item 3. Quantitative and Qualitative Disclosures About Market Risk |
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12 |
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Item 4. Controls and Procedures. |
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12 |
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PART II – OTHER INFORMATION |
Item 1. Legal Proceedings. |
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13 |
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. |
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13 |
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Item 3. Defaults Upon Senior Securities. |
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14 |
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Item 4. Mine Safety Disclosures. |
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14 |
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Item 5. Other Information. |
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14 |
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Item 6. Exhibits. |
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15 |
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Signatures |
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16 |
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Statement Regarding Forward-Looking Statements
Certain statements contained in this report
on Form 10-Q contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created
thereby. All statements, other than statements of historical facts, are forward-looking statements. Forward-looking statements
include statements about matters such as: future prices and sales of, and demand for, our products; future industry market conditions;
future changes in our activities, future operating and overhead costs; operational and management restructuring activities (including
implementation of methodologies and changes in the board of directors); future employment and contributions of personnel; tax and
interest rates; capital expenditures and their impact on us; nature and timing of restructuring charges and the impact thereof;
productivity, business process, rationalization, investment, acquisition, consulting, operational, tax, financial and capital projects
and initiatives; contingencies; environmental compliance and changes in the regulatory environment; and future working capital,
costs, revenues, business opportunities, debt levels, cash flows, margins, earnings and growth.
The words “believe,” “expect,”
“anticipate,” “estimate,” “project,” “plan,” “should,” “intend,”
“may,” “will,” “would,” “potential” and similar expressions identify forward-looking
statements, but are not the exclusive means of doing so] These statements are based on assumptions and assessments made by our
management in light of their experience and their perception of historical and current trends, current conditions, possible future
developments and other factors they believe to be appropriate. Forward-looking statements are not guarantees, representations or
warranties and are subject to risks and uncertainties that could cause actual results, developments and business decisions to differ
materially from those contemplated by such forward-looking statements. Some of those risks and uncertainties include
the risk factors set forth in this report and our Annual Report on Form 10-K for the fiscal year ended December 31, 2013, and the
following: current global economic and capital market uncertainties; potential dilution to our stockholders from our recapitalization
and balance sheet restructuring activities; potential inability to continue to comply with government regulations; adoption of
or changes in legislation or regulations adversely affecting our businesses; permitting constraints or delays, business opportunities
that may be presented to, or pursued by, us; changes in the United States or other monetary or fiscal policies or regulations;
changes in generally accepted accounting principles; geopolitical events; potential inability to implement our business strategies;
potential inability to grow revenues organically; potential inability to attract and retain key personnel; assertion of claims,
lawsuits and proceedings against us; potential inability to maintain an effective system of internal controls over financial reporting;
potential inability or failure to timely file periodic reports with the SEC; potential inability to list our securities on any
securities exchange or market; and work stoppages or other labor difficulties. Occurrence of such events or circumstances could
have a material adverse effect on our business, financial condition, results of operations or cash flows or the market price of
our securities. All subsequent written and oral forward-looking statements by or attributable to us or persons acting on our behalf
are expressly qualified in their entirety by these factors. We undertake no obligation to publicly update or revise any forward-looking
statement.
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
INDIGO-ENERGY, INC.
CONDENSED BALANCE SHEETS
(UNAUDITED)
| |
June 30, 2014 | | |
December 31, 2013 | |
ASSETS | |
| | | |
| | |
| |
| | | |
| | |
Current Assets | |
| | | |
| | |
Cash | |
$ | 12,700 | | |
$ | – | |
Short term notes receivable | |
| 200,556 | | |
| | |
Prepaid professional fees | |
| 21,000 | | |
| – | |
| |
| | | |
| | |
Total assets | |
$ | 234,256 | | |
$ | – | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | |
| | | |
| | |
| |
| | | |
| | |
Current Liabilities | |
| | | |
| | |
Accounts payable | |
$ | 56,062 | | |
$ | 55,076 | |
Related party accounts payable | |
| 210,562 | | |
| 59,009 | |
Accrued expenses | |
| 131,063 | | |
| 1,014,585 | |
Accrued interest | |
| – | | |
| 577,105 | |
Related party accrued interest | |
| – | | |
| 448,584 | |
Related party notes payable | |
| – | | |
| 9,026,740 | |
Promissory and other notes payable | |
| – | | |
| 1,140,000 | |
| |
| | | |
| | |
Total current liabilities | |
| 397,687 | | |
| 12,321,099 | |
| |
| | | |
| | |
Commitments and Contingencies | |
| – | | |
| – | |
| |
| | | |
| | |
Stockholders' Equity (Deficit) | |
| | | |
| | |
| |
| | | |
| | |
Preferred stock, $.001 par value, 100,000,000 shares authorized and no shares
issued and outstanding | |
$ | – | | |
$ | – | |
Common stock, $.001 par value, 2,000,000,000 shares authorized and 1,800,000,000 and
1,187,956,895 shares issued and outstanding at June 30, 2014 and December 31, 2013, respectively | |
| 1,800,000 | | |
| 1,187,956 | |
Additional paid in capital | |
| 97,010,155 | | |
| 83,552,962 | |
Deficit accumulated during development stage | |
| (2,472,557 | ) | |
| (560,988 | ) |
Accumulated deficit | |
| (96,501,029 | ) | |
| (96,501,029 | ) |
| |
| | | |
| | |
| |
| | | |
| | |
Total stockholders' equity (deficit) | |
| (163,431 | ) | |
| (12,321,099 | ) |
| |
| | | |
| | |
Total liabilities and stockholders' equity (deficit) | |
$ | 234,256 | | |
$ | – | |
The accompanying notes are an integral part of these unaudited
consolidated financial statements.
INDIGO-ENERGY, INC.
CONDENSED STATEMENTS
OF OPERATIONS
(UNAUDITED)
| |
For the Three Months Ended | | |
For the Six Months Ended | |
| |
June 30, | | |
June 30, | | |
June 30, | | |
June 30, | |
| |
2014 | | |
2013 | | |
2014 | | |
2013 | |
| |
| | | |
| | | |
| | | |
| | |
Revenue | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Net revenue | |
$ | – | | |
$ | – | | |
$ | – | | |
$ | – | |
| |
| | | |
| | | |
| | | |
| | |
Expenses | |
| | | |
| | | |
| | | |
| | |
Operating expenses | |
| – | | |
| – | | |
| – | | |
| – | |
General and administrative | |
| 485,201 | | |
| – | | |
| 485,510 | | |
| – | |
Professional fees | |
| 721,548 | | |
| – | | |
| 795,721 | | |
| – | |
| |
| | | |
| | | |
| | | |
| | |
Total operating expenses | |
| 1,206,749 | | |
| – | | |
| 1,281,231 | | |
| – | |
| |
| | | |
| | | |
| | | |
| | |
Gain (loss) from operations | |
| (1,206,749 | ) | |
| – | | |
| (1,281,231 | ) | |
| – | |
| |
| | | |
| | | |
| | | |
| | |
Other income (expense) | |
| | | |
| | | |
| | | |
| | |
Interest expense, net | |
| (614,682 | ) | |
| (609,727 | ) | |
| (888,450 | ) | |
| (1,201,219 | ) |
Gain (loss) on settlement of obligations | |
| 258,112 | | |
| – | | |
| 258,112 | | |
| – | |
| |
| | | |
| | | |
| | | |
| | |
Total other expenses | |
| (356,570 | ) | |
| (609,727 | ) | |
| (630,338 | ) | |
| (1,201,219 | ) |
| |
| | | |
| | | |
| | | |
| | |
Net loss | |
$ | (1,563,319 | ) | |
$ | (609,727 | ) | |
$ | (1,911,569 | ) | |
$ | (1,201,219 | ) |
| |
| | | |
| | | |
| | | |
| | |
Net loss per share - basic and diluted | |
$ | (0.00 | ) | |
$ | (0.00 | ) | |
$ | (0.00 | ) | |
$ | (0.00 | ) |
| |
| | | |
| | | |
| | | |
| | |
Weighted average shares outstanding | |
| 1,312,926,505 | | |
| 1,187,956,895 | | |
| 1,256,680,243 | | |
| 1,187,956,895 | |
The accompanying notes are an integral part of these unaudited
consolidated financial statements.
INDIGO-ENERGY, INC.
CONDENSED STATEMENTS
OF CASH FLOWS
(UNAUDITED)
| |
For the Six Months Ended | |
| |
June 30, | | |
June 30, | |
| |
2014 | | |
2013 | |
| |
| | | |
| | |
Cash Flows from Operating Activities | |
| | | |
| | |
| |
| | | |
| | |
Net loss | |
$ | (1,911,569 | ) | |
$ | (1,201,219 | ) |
| |
| | | |
| | |
Adjustments to reconcile net loss to net cash provided
by operating activities: | |
| | | |
| | |
Debt discount and deferred issuance cost amortization | |
| – | | |
| 551,353 | |
Non-cash interest | |
| 489,939 | | |
| – | |
Stock based compensation | |
| 1,095,875 | | |
| – | |
Change in interest receivable | |
| (556 | ) | |
| – | |
Change in accounts payable | |
| (3,497 | ) | |
| – | |
Change in accrued expenses | |
| (28,680 | ) | |
| | |
Change in related party accounts payable | |
| 151,553 | | |
| – | |
Gain on settlement of obligations | |
| (258,112 | ) | |
| | |
Change in accrued interest | |
| 399,067 | | |
| 649,866 | |
| |
| | | |
| | |
Net cash used in operating activities | |
| (65,980 | ) | |
| – | |
| |
| | | |
| | |
Cash Flows from Investing Activities | |
| | | |
| | |
Issuance of short term note receivable | |
| (200,000 | ) | |
| – | |
| |
| | | |
| | |
Net cash used in investing activities | |
| (200,000 | ) | |
| – | |
| |
| | | |
| | |
Cash Flows from Financing Activities | |
| | | |
| | |
Proceeds from issuance of common stock | |
| 278,680 | | |
| – | |
| |
| | | |
| | |
Net cash provided by financing activities | |
| 278,680 | | |
| – | |
| |
| | | |
| | |
Net increase in cash and cash equivalents | |
| 12,700 | | |
| – | |
| |
| | | |
| | |
Cash and cash equivalents at beginning of the period | |
| – | | |
| – | |
| |
| | | |
| | |
Cash and cash equivalents at end of the period | |
$ | 12,700 | | |
$ | – | |
| |
| | | |
| | |
Supplementary Disclosures of Cash Flow Information | |
| | | |
| | |
| |
| | | |
| | |
Cash paid for income taxes | |
$ | – | | |
$ | – | |
Cash paid for interest | |
$ | – | | |
$ | – | |
| |
| | | |
| | |
Non-Cash Investing and Financing Activities | |
| | | |
| | |
| |
| | | |
| | |
Common stock issued for settlement of promissory and other notes and accrued interest | |
$ | 11,591,496 | | |
$ | – | |
Common stock issued for settlement of previously accrued expenses | |
$ | 578,730 | | |
$ | – | |
The accompanying notes are an integral part of these unaudited
consolidated financial statements.
INDIGO-ENERY, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. Interim Financial Statements
Indigo-Energy, Inc. (the “Company”
or “Indigo” or “We”) was originally incorporated in 1981. As of the date of this report, the State of Nevada
has revoked the Company’s registration. The Company plans to reinstate its good standing with the State of Nevada as soon
as practicable which requires the filing of its delinquent lists of officers by annual period and the payment of the associated
annual fees with applicable penalties.
The Company’s objective is to seek the
acquisition of, or merger with, an existing operating company. The Company’s principal business objective for the next 12
months and beyond will be to achieve long-term growth potential through a combination with a business rather than immediate, short-term
earnings. On May 25, 2014, the Company entered into a Plan of Merger agreement with Fetopolis, Inc .
with the completion of the merger subject to various standard closing conditions, along with certain contingencies. For additional
detail surrounding the Plan of Merger, see the Company’s Current Report filing on Form 8-K filed on May 29, 2014.
The accompanying interim unaudited condensed
financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Article 8-03 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and six months ended June 30, 2014 are not necessarily indicative of the results
that may be expected for the year ending December 31, 2014. For further information, refer to the financial statements and footnotes
thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013.
The accompanying condensed financial statements
have been prepared in conformity with accounting principles generally accepted in the United States of America which contemplate
continuation of the Company as a going concern.
Use of Estimates
In preparing financial statements in conformity
with generally accepted accounting principles, the Company is required to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements
and revenues and expenditures during the reported periods. Actual results could differ materially from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid instruments
with an original maturity of 90 days or less at the time of purchase to be cash equivalents. The Company did not have any cash
equivalents at June 30, 2014 or December 31, 2013.
Recently Issued 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. The presentation and disclosure requirements in Topic 915 will no longer be
required for the first annual period beginning after December 15, 2014. The revised consolidation standards are effective one year
later, in annual periods beginning after December 15, 2015. Early adoption is permitted. We adopted ASU No. 2014-10 effective as
April 1, 2014. As a result we have revised our consolidated statements of operations and cash flows to exclude reporting for the
period from date of inception through June 30, 2014.
There have been no other recently issued accounting
pronouncements through the date of this report that the Company believes will have a material impact on the financial position,
results of operations, or cash flows.
2. Going Concern
The Company does not currently have any business
operations, and has not generated any revenue.
Since the Company does not have any source
of recurring revenue, has suffered recurring losses from operations, and has negative working capital, there is a substantial doubt
about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
The Company believes that continued advances
from related parties will continue to support its current level of business activities, however, these related parties have no
firm commitment to do so.
3. Notes Payable
Notes payable consist of the following:
| |
June 30, | | |
December 31, | |
| |
2014 | | |
2013 | |
Convertible notes payable, issued in 2010, interest rate of 12%, due on demand and convertible at a rate of $0.04 to $0.05 per share | |
$ | – | | |
$ | 500,000 | |
| |
| | | |
| | |
Notes payable, issued in 2007 and 2008, interest rate of 10%, due on demand | |
| – | | |
| 565,000 | |
| |
| | | |
| | |
Notes payable - related party, issued in 2010 and revised in 2013, interest rate of 10%, due on demand | |
| – | | |
| 8,750,000 | |
| |
| | | |
| | |
Notes payable, issued in 2008, interest rate of 10%, due on demand | |
| – | | |
| 75,000 | |
| |
| | | |
| | |
Notes payable - related party, issued in 2011, nominal interest rate of 10%, due on demand | |
| – | | |
| 255,000 | |
| |
| | | |
| | |
Notes payable - related party, issued in 2012, interest rate of 10%, due on demand | |
| – | | |
| 21,740 | |
| |
| | | |
| | |
Total notes payable | |
$ | – | | |
$ | 10,166,740 | |
| |
| | | |
| | |
Accrued interest | |
$ | – | | |
$ | 1,025,689 | |
During the three and six months ended June 30, 2014 the Company
recognized total interest expense (exclusive of interest income of $556 for both periods) of $615,238 and $889,006, respectively.
Interest expense for the three and six months ended June 30, 2013 was $609,727 and $1,201,219, respectively.
During the three months ended June 30, 2014, the Company issued
97,987,895 shares of restricted common stock for consideration totaling $489,939, included in interest expense in the condensed
statements of operations, as an inducement to related parties to convert all of their previously outstanding notes payable and
accrued interest totaling $315,388 into shares of restricted common stock.
During the six months ended June 30, 2014, the Company settled notes
payable with a principal balance totaling $10,166,740 and accrued interest totaling $1,424,756 via the issuance of 220,666,540
shares of common stock, exclusive of the inducement shares described above.
4. Related Party Transactions
During the six months ended June 30, 2014,
the Company received total working capital advances from a related party of $151,553. As of June 30, 2014 and December 31, 2013,
the Company had accounts payable of $210,562 and $59,009 due to a related party, respectively.
For the six months ended June 30, 2014 and
2013, the Company recognized interest expense of $842,848 and $1,129,494, respectively, associated with notes payable due to related
parties. In addition, during the six months ended June 30, 2014, the Company settled related party notes payable with a principal
balance of $9,026,740 and accrued interest of $801,494 by issuing 292,858,075 shares of common stock, inclusive of the inducement
shares as described in Note 3.
5. Equity Transactions
On February 28, 2014, the Company entered into
settlement agreements with three previous service providers in which a total of $578,730 of previously accrued expenses was converted
to 11,574,600 shares of common stock.
On March 4, 2014, the Company entered into
settlement agreements with note holders with a total principal balance of $1,141,740 and accrued interest of $558,168 via the issuance
of 22,834,800 shares of common stock.
On April 1, 2014, the Company entered into a settlement agreement
with a note holder with a principal balance of $25,000 and accrued interest of $24,523 via the issuance of 990,460 shares of common
stock.
On May 13, 2014, the Company issued 250,000 shares of common stock
for consulting fees valued at $25,000.
On May 15, 2014, the Company entered into a settlement agreement
with a related party holding a note payable with a principal balance of $8,750,000 and accrued interest of $716,769 via the issuance
of 189,335,380 shares of common stock.
On May 29, 2014, the Company issued 5,735,840 shares of common stock
for cash totaling $28,680.
On May 31, 2014, the Company entered into a settlement agreement
with a note holder with a principal balance of $250,000 and accrued interest of $125,295 via the issuance of 7,505,900 shares of
common stock.
On June 6, 2014, the Company issued 50,000,000 shares of common
stock for cash totaling $250,000.
On June 13, 2014, the Company issued a total of 100,691,195 shares
of common stock for consulting fees valued at $13,517 and conversion inducement consideration of $489,939.
On June 25, 2014, the Company issued a total of 123,000,000 shares
of common stock for consulting fees valued at $615,000. On the same date, the Company issued 95,374,930 shares of common stock
to its sole officer and Director for compensation totaling $476,875. The Company also issued, on June 25, 2014, 5,000,000 shares
of common stock for prepaid legal fees totaling $25,000.
6. Contingent Plan of Merger
On May 25, 2014, the Company entered into an agreement and plan
of merger with Fetopolis, Inc. and Fetopolis Acquisition Corporation., pursuant to which the Company agreed to acquire all of Fetopolis’
issued and outstanding common shares in exchange for the issuance of ninety-five percent of the Company’s outstanding common
stock immediately after the effectiveness of the merger. In connection with this transaction, the Company agreed to effect a reverse
stock split prior to the closing of the merger, such that the merger consideration issued to the holders of Fetopolis common shares
will be approximately 712,500,000 shares of common stock, on a post-reverse split basis.
As of the date of this report, the Company anticipates that
the transaction contemplated with Fetopolis may instead be completed on substantially similar economic terms with a separate entity,
such as HDIMAX Limited, an Irish limited company. Fetopolis and HDIMAX are each individually controlled by Mr. Rajinder Brar. As
of the date of this report, the Company believes that such a change would likely be accomplished through terminating the agreement of merger with Fetopolis and entering into a new acquisition agreement. In the event of any such change, the Company will
file a Form 8-K with further information and copies of any related definitive agreements.
In June of 2014 the Company issued a short
term note receivable for $200,000 to the counter-party in the Company’s contingent plan of merger. The note carries a 5%
interest rate per annum and is payable within 60 days of the closing of the contingent plan of merger.
The Company anticipates that the completion of any such transaction
would involve a reverse stock split, similar to that envisioned by the Fetopolis merger agreement, and would be subject to various
standard closing conditions, and also contingent upon the completion of (i) the audit of the financial statements of the operating
company and the pro forma financial statements of the combined company, and (ii) the satisfaction of applicable regulatory requirements.
There is a risk that such a transaction may not be completed in a timely manner or at all, and if such a transaction is not completed,
the Company would face the risks set forth under Item 1A, Risk Factors.
Item 2. Management’s
Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion provides information
that we believe is relevant to an assessment and understanding of the results of operations and financial condition of the Company
as of and for the period ended June 30, 2014, as well as our future results. It should be read in conjunction with the condensed
financial statements and accompanying notes also included in this 10-Q and our Annual Report on Form 10-K as of and for the fiscal
year ended December 31, 2013.
Overview
Since December 31, 2013, the Company has been
engaged in organizational efforts, seeking to settle outstanding obligations on the best terms possible, and re-establishing its
regulatory compliance. Subsequent to the Company’s re-entrance into the development stage, as defined by accounting principles
generally accepted in the United States (“US GAAP”), on August 1, 2013, the Company’s primary objective is to
seek the acquisition of, or merger with, an existing operating company.
The Company’s principal business objective
for the next 12 months and beyond will be to achieve long-term growth potential through a combination with a business rather than
immediate, short-term earnings.
On May 25, 2014, the Company entered into an
agreement and plan of merger with Fetopolis, Inc. and Fetopolis Acquisition Corporation., pursuant to which the Company agreed
to acquire all of Fetopolis’ issued and outstanding common shares in exchange for the issuance of ninety-five percent of
the Company’s outstanding common stock immediately after the effectiveness of the merger. In connection with this transaction,
the Company agreed to effect a reverse stock split prior to the closing of the merger, such that the merger consideration issued
to the holders of Fetopolis common shares will be approximately 712,500,000 shares of common stock, on a post-reverse split basis.
As of the date of this report, the Company anticipates that
the transaction contemplated with Fetopolis may instead be completed on substantially similar economic terms with a separate entity,
such as HDIMAX Limited, an Irish limited company. Fetopolis and HDIMAX are each individually controlled by Mr. Rajinder Brar. As
of the date of this report, the Company believes that such a change would likely be accomplished through terminating the agreement of merger with Fetopolis and entering into a new acquisition agreement. In the event of any such change, the Company will
file a Form 8-K with further information and copies of any related definitive agreements.
The Company anticipates that the completion of any such transaction
would involve a reverse stock split, similar to that envisioned by the Fetopolis merger agreement, and would be subject to various
standard closing conditions, and also contingent upon the completion of (i) the audit of the financial statements of the operating
company and the pro forma financial statements of the combined company, and (ii) the satisfaction of applicable regulatory requirements.
There is a risk that such a transaction may not be completed in a timely manner or at all, and if such a transaction is not completed,
the Company would face the risks set forth under Item 1A, Risk Factors.
Results of Operations
During the three and six months ended June
30, 2014, we incurred total operating expenses of $1,206,749 and $1,281,231, respectively, compared to no operating expenses incurred
in the prior comparable periods. Included in our operating expenses for the three and six months ended June 30, 2014 is general
and administrative expenses of $485,201 and $485,510, respectively, which primarily consisted of $476,875 (for both periods) of
officer compensation paid to our sole officer and Director via the issuance of 95,374,930 shares of common stock. We expect this
payment to our sole officer and Director to be non-recurring based on our current business activities, and unless we complete
our proposed plan of merger, our general and administrative expenses will likely decline the remainder of the fiscal year. Our
remaining operating expenses for the three and six months ended June 30, 2014 consisted of professional fees of $721,548 and $795,721
respectively. These professional fees were incurred for the services of third party legal, accounting, and other consultants for
the preparation of our previously delinquent 1934 Act periodic reports, and document preparation and other due diligence associated
with our proposed plan of merger. Of the professional fees incurred during the six months ended June 30, 2014, we successfully
settled a total obligations of $619,000 via the issuance of shares of common stock. We expect our operating expenses to remain
at their current levels or decline on a quarterly basis over the next twelve months unless we successfully complete our proposed
plan of merger or enter into a different strategic business combination.
We recognized interest expense of $615,238
and $889,006 (exclusive of interest income of $556 for both periods in 2014) during the three and six months ended June 30, 2014
as compared to $609,727 and $1,201,219 for the respective periods in the prior year. Approximately $490,000 of the current period
interest expense relates to non-recurring conversion inducement shares issued to related parties. As the Company has successfully
settled all its previously outstanding principal and interest obligations via the issuance of common stock, no further interest
expense is expected to be recognized for the next several periods.
Liquidity and Capital Resources
During the six months ended June 30, 2014,
the Company used operating cash of $265,980; inclusive of the settlement of previously accrued professional fees at a discount
resulting in the recognition of a gain of $258,112 and the settlement of accrued professional fees. We expect to continue to accrue
expenses, primarily professional fees, some of which are paid by related parties until the successful completion of a business
combination, if any.
We expect to meet our on-going obligations
at their current levels through continued related party advances in the near-term, however, there are no guarantees these related
parties will continue to make advances, nor is there any contractual obligation for them to do so. These related parties have informally
agreed to defer repayment of these obligations until we commence revenue generating operating activities, if any. We have also
successfully settled significant portions of our operating expenses via the issuance of shares of common stock, however, we may
not be able to do so in the future.
In June of 2014 the Company issued a short
term note receivable for $200,000 to the counter-party in the Company’s contingent plan of merger. The note carries a 5%
interest rate per annum and is payable within 60 days of the closing of the contingent plan of merger.
At June 30, 2014, we had current obligations
totaling approximately $400,000, a reduction of approximately $11.9 million, the majority of which was settled via the issuance
of our common stock.
During the six months ended June 30, 2014
we raised cash totaling $278,680 via the issuance of shares of our common stock. The cash proceeds were used to pay our on-going
operating expenses and to provide short-term liquidity to our proposed merger target. We are actively pursuing several financing
options; however, these activities are severely hampered by the lack of liquidity in our equity instruments, partially caused by
not being in full compliance with our 1934 Act filing requirements. As of the date of this report, we do not have any firm funding
commitments. Any funding arrangements entered into in the next twelve months, if any, will likely not be at terms favorable to
the Company based on its current risk profile.
Any potential future business operations
are dependent upon the ability of the Company raise additional capital. As of the date of this report, the Company does not have
any firm funding commitments.
Critical Accounting Policies And Estimates
There have not been any material changes to
the critical accounting policies and estimates previously disclosed in our Annual Report on Form 10-K for the year ended December
31, 2013.
Off- Balance Sheet Arrangements
None.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
Not applicable for smaller reporting companies.
ITEM 4. CONTROLS AND PROCEDURES.
A. Disclosure
Evaluation of Disclosure Controls and
Procedures
As of the end of the period covered by this
Quarterly Report on Form 10-Q, management performed, with the participation of our Principal Executive Officer (who also serves
as our Principal Accounting Officer), an evaluation of the effectiveness of our disclosure controls and procedures as defined in
Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (“Exchange Act”). Our disclosure controls and
procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange
Act is recorded, processed, summarized, and reported within the time periods specified in the Exchange Act and SEC’s rules,
and that such information is accumulated and communicated to our management, including our Principal Executive, to allow timely
decisions regarding required disclosures. There are inherent limitations to the effectiveness of any system of disclosure controls
and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly,
even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.
Our Principal Executive Officer concluded that, as of June 30, 2014, our disclosure controls and procedures were not effective.
B. Internal Control over Financial
Reporting
No change in our internal control over financial
reporting, as such term is defined in Exchange Act Rule 13(a)-15 occurred during the fiscal quarter ended June 30, 2014, that materially
affected or is reasonably likely to materially affect our internal control over financial reporting.
PART II –
OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 1A. Risk Factors
Our Annual Report on Form 10-K for the year ended December
31, 2013 includes a detailed discussion of risk factors associated with risks related to our business and an investment in our
common stock.
The risks presented below update and supplement the risks
identified in our latest Annual Report.
Failure to complete our planned merger with Fetopolis Inc. could
negatively impact our future business and the stock price of our common stock.
Completion of the planned merger with Fetopolis is subject to satisfaction
of a number of conditions, including completion of an audit of Fetopolis’ financial statements and the preparation of pro
forma financial statements. In addition, we would need to file an information statement with the SEC containing extensive disclosures
related to the reverse stock split in our common stock contemplated by the merger. There is a risk that the merger with Fetopolis
may not be completed as planned, in a timely manner, or at all. If the merger is not completed, we may be adversely affected and
be subject to a number of risks, including the following:
| · | We will be required to pay certain costs relating to the planned merger,
such as legal, accounting, and financial advisor fees, whether or not the merger is completed; |
| · | Matters relating to the merger (including integration planning) require
substantial commitments of time and resources by Indigo’s management, which could otherwise have been devoted to other opportunities
that may have been beneficial to the Company; |
| · | We will not have realized any of the intended benefits of having completed
the merger, including the acquisition of an operating business and the prospect of revenue generation; and |
| · | The stock price of our common stock, which trades over the counter,
may be adversely affected. |
If the Merger is not completed substantially as planned,
in a timely manner, the above risks may materialize and may adversely affect Indigo-Energy’s financial results and stock
price.
If the merger with Fetopolis is completed, the Company would
issue a significant number of shares as consideration in the merger, which would result in substantial dilution.
On May 25, 2014, the Company entered into an agreement and plan
of merger with Fetopolis, Inc., pursuant to which the Company agreed to acquire all of Fetopolis’ issued and outstanding
common shares in exchange for the issuance of ninety-five percent of the Company’s outstanding common stock immediately after
the effectiveness of the merger. In connection with this transaction, the Company agreed to effect a reverse stock split prior
to the closing of the merger, such that the merger consideration issued to the holders of Fetopolis common shares will be approximately
712,500,000 shares of common stock, on a post-reverse split basis. The issuance of these securities as merger consideration would
result in substantial dilution in the percentage of Common Stock held by the then existing stockholders, who would collectively
hold five percent of the combined company’s common stock.
Item 2. Unregistered Sales of Equity Securities and
Use of Proceeds.
On April 1, 2014, the Company entered into a settlement agreement
with a note holder with a principal balance of $25,000 and accrued interest of $24,523 via the issuance of 990,460 shares of common
stock.
On May 13, 2014, the Company issued 250,000 shares of common stock
for consulting fees valued at $25,000.
On May 15, 2014, the Company entered into a settlement agreement
with a related party holding a note payable with a principal balance of $8,750,000 and accrued interest of $716,769 via the issuance
of 189,335,380 shares of common stock.
On May 29, 2014, the Company issued 5,735,840 shares of common stock
for cash totaling $28,680.
On May 31, 2014, the Company entered into a settlement agreement
with a note holder with a principal balance of $250,000 and accrued interest of $125,295 via the issuance of 7,505,900 shares of
common stock.
On June 6, 2014, the Company issued 50,000,000 shares of common
stock for cash totaling $250,000.
On June 13, 2014, the Company issued a total of 100,691,195 shares
of common stock for consulting fees valued at $13,517 and conversion inducement consideration of $489,939.
On June 25, 2014, the Company issued a total of 123,000,000 shares
of common stock for consulting fees valued at $615,000. On the same date, the Company issued 95,374,930 shares of common stock
to its sole officer and Director for compensation totaling $476,875. The Company also issued, on June 25, 2014, 5,000,000 shares
of common stock for prepaid legal fees totaling $25,000.
Unless otherwise noted above, all issuances
and sales of common stock referenced above were made in reliance upon Section 4(a)(2) of the Securities Act of 1933, as amended.
No repurchases of the Company’s equity
securities were made by the Company or “affiliated purchasers” during the three months ended June 30, 2014.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosure.
Not applicable.
Item 5. Other Information.
None.
Item 6. Exhibits.
(a) The following documents are filed
as part of this Report:
(2) Exhibits filed as part of this Report:
Exhibit
Number |
|
Exhibit |
|
|
|
10.1 |
|
Agreement and Plan of Merger dated
May 25, 2014, by and among Indigo-Energy, Inc., a Nevada corporation; Fetopolis Inc., a corporation formed under the Canada Business
Corporations Act in the Province of Ontario, Canada; and Fetopolis Acquisition Corporation, Inc., a Nevada corporation (incorporated
by reference to Exhibit 10.1 filed with Form 8-K on May 29, 2014). |
|
|
|
10.2 |
|
Settlement Agreements with New Hope
Partners, LLC dated May 16, 2014 regarding settlement of Principal. |
|
|
|
10.3 |
|
Settlement Agreements with New Hope
Partners, LLC dated May 16, 2014 regarding settlement of Interest. |
|
|
|
10.4 |
|
Promissory Note Issued by Fetopolis
Inc. dated June 10, 2014. |
|
|
|
31 |
|
Certification of Principal Executive Officer and Principal Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as amended. |
|
|
|
32 |
|
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|
|
|
101.INS |
|
XBRL Instance Document |
|
|
|
101.SCH |
|
XBRL Schema Document |
|
|
|
101.CAL |
|
XBRL Calculation Linkbase Document |
|
|
|
101.DEF |
|
XBRL Definition Linkbase Document |
|
|
|
101.LAB |
|
XBRL Label Linkbase Document |
|
|
|
101.PRE |
|
XBRL Presentation Linkbase Document |
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.
|
INDIGO-ENERGY, INC. |
|
(Registrant) |
|
|
Date: August 19, 2014 |
By: |
/s/ James C. Walter, Sr. |
|
|
Name: James C. Walter Sr. |
|
|
Title: Principal Executive Officer and Principal Financial Officer |
EXHIBIT 31
CERTIFICATION
I, James C. Walter, Sr., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Indigo-Energy,
Inc.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in this report;
4. I am responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the
period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or
caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures,
as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal
quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's
internal control over financial reporting; and
5. I have disclosed, based on my most recent evaluation of internal
control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or
persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: August 19, 2014
/s/ James C. Walter Sr. |
|
James C. Walter Sr. |
Principal Executive Officer and Principal Financial Officer |
EXHIBIT 32
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF
2002
In connection with the Quarterly Report of Indigo-Energy, Inc (the
“Company”) on Form 10-Q for the fiscal quarter ended June 30, 2014, as filed with the Securities and Exchange Commission
on the date hereof (the “Report”), I, James C. Walter, Sr. Principal Executive and Financial Officer of the Company,
certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of
section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C 78m(a) or 78o(d)); and
(2) The information contained in the Report fairly presents,
in all material respects, the financial condition and result of operations of the Company.
Date: August 19, 2014
/s/ James C. Walter, Sr. |
|
James C. Walter, Sr. |
Principal Executive Officer and Principal Financial Officer |