(The accompanying notes are an integral part of
these condensed financial statements)
(The accompanying notes are an integral part of
these condensed financial statements)
(The accompanying notes are an integral part of
these condensed financial statements)
Notes to the Condensed Financial Statements
(expressed in U.S. dollars)
(unaudited)
1. NATURE OF OPERATIONS AND CONTINUANCE OF BUSINESS
Independence Energy Corp. (the "Company") was incorporated in the State of
Nevada on November 30, 2005. The Company was organized to explore natural
resource properties in the United States. On March 31, 2014, the Company
acquired the exclusive right to distribute certain medical products and has
re-focused its business to the medical products distribution.
GOING CONCERN
These financial statements have been prepared on a going concern basis, which
implies that the Company will continue to realize its assets and discharge its
liabilities in the normal course of business. The Company has generated no
revenues to date and has never paid any dividends and is unlikely to pay
dividends or generate significant earnings in the immediate or foreseeable
future. As of October 31, 2014, the Company had a working capital deficit of
$355,047 and an accumulated deficit of $1,215,991. The continuation of the
Company as a going concern is dependent upon the continued financial support
from its shareholders, the ability to raise equity or debt financing, and the
attainment of profitable operations from the Company's future business. These
factors raise substantial doubt regarding the Company's ability to continue as a
going concern. These financial statements do not include any adjustments to the
recoverability and classification of recorded asset amounts and classification
of liabilities that might be necessary should the Company be unable to continue
as a going concern.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Basis of Presentation
These financial statements and related notes are presented in accordance with
accounting principles generally accepted in the United States, and are expressed
in US dollars. The Company's fiscal year-end is January 31.
b) Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles in the United States and requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. The Company regularly evaluates estimates and
assumptions related to valuation and impairment of long-lived assets, asset
retirement obligations, fair value of share-based payments, and deferred income
tax asset valuation allowances. The Company bases its estimates and assumptions
on current facts, historical experience and various other factors that it
believes to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
and the accrual of costs and expenses that are not readily apparent from other
sources. The actual results experienced by the Company may differ materially and
adversely from the Company's estimates. To the extent there are material
differences between the estimates and the actual results, future results of
operations will be affected.
c) Interim Financial Statements
These interim unaudited financial statements have been prepared on the same
basis as the annual financial statements and in the opinion of management,
reflect all adjustments, which include only normal recurring adjustments,
necessary to present fairly the Company's financial position, results of
operations and cash flows for the periods shown. The results of operations for
such periods are not necessarily indicative of the results expected for a full
year or for any future period.
6
INDEPENDENCE ENERGY CORP.
Notes to the Condensed Financial Statements
(expressed in U.S. dollars)
(unaudited)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
d) Basic and Diluted Net Loss Per Share
The Company computes net loss per share in accordance with ASC 260, EARNINGS PER
SHARE, which requires presentation of both basic and diluted earnings per share
(EPS) on the face of the income statement. Basic EPS is computed by dividing net
loss available to common shareholders (numerator) by the weighted average number
of shares outstanding (denominator) during the period. Diluted EPS gives effect
to all dilutive potential common shares outstanding during the period using the
treasury stock method and convertible preferred stock using the if-converted
method. In computing Diluted EPS, the average stock price for the period is used
in determining the number of shares assumed to be purchased from the exercise of
stock options or warrants. Diluted EPS excludes all dilutive potential shares if
their effect is anti-dilutive. As of October 31, 2014, the Company had nil
(January 31, 2014 - 29,463,117) potentially dilutive shares.
e) Oil and Gas Property Costs
The Company utilizes the full-cost method of accounting for petroleum and
natural gas properties. Under this method, the Company capitalizes all costs
associated with acquisition, exploration, and development of oil and natural gas
reserves, including leasehold acquisition costs, geological and geophysical
expenditures, lease rentals on undeveloped properties and costs of drilling of
productive and non-productive wells into the full cost pool on a
country-by-country basis. When the Company obtains proven oil and gas reserves,
capitalized costs, including estimated future costs to develop the reserves
proved and estimated abandonment costs, net of salvage, will be depleted on the
units-of-production method using estimates of proved reserves. The costs of
unproved properties are not amortized until it is determined whether or not
proved reserves can be assigned to the properties. Until such determination is
made, the Company assesses annually whether impairment has occurred, and
includes in the amortization base drilling exploratory dry holes associated with
unproved properties.
The Company applies a ceiling test to the capitalized cost in the full cost
pool. The ceiling test limits such cost to the estimated present value, using a
ten percent discount rate, of the future net revenue from proved reserves based
on current economic and operating conditions. Specifically, the Company computes
the ceiling test so that capitalized cost, less accumulated depletion and
related deferred income tax, do not exceed an amount (the ceiling) equal to the
sum of: The present value of estimated future net revenue computed by applying
current prices of oil and gas reserves (with consideration of price changes only
to the extent provided by contractual arrangements) to estimated future
production of proved oil and gas reserves as of the date of the latest balance
sheet presented, less estimated future expenditures (based on current cost) to
be incurred in developing and producing the proved reserves computed using a
discount factor of ten percent and assuming continuation of existing economic
conditions; plus the cost of property not being amortized; plus the lower of
cost or estimated fair value of unproven properties included in the costs being
amortized; less income tax effects related to differences between the book and
tax basis of the property. For unproven properties, the Company excludes from
capitalized costs subject to depletion, all costs directly associated with the
acquisition and evaluation of the unproved property until it is determined
whether or not proved reserves can be assigned to the property. Until such a
determination is made, the Company assesses the property at least annually to
ascertain whether impairment has occurred. In assessing impairment the Company
considers factors such as historical experience and other data such as primary
lease terms of the property, average holding periods of unproved property, and
geographic and geologic data. The Company adds the amount of impairment assessed
to the cost to be amortized subject to the ceiling test. During the period ended
July 31, 2014, the Company does not intend to continue its oil and gas business
and the relevant assets have been impaired.
7
INDEPENDENCE ENERGY CORP.
Notes to the Condensed Financial Statements
(expressed in U.S. dollars)
(unaudited)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
f) Beneficial Conversion Features
From time to time, the Company may issue convertible notes that may contain an
imbedded beneficial conversion feature. A beneficial conversion feature exists
on the date a convertible note is issued when the fair value of the underlying
common stock to which the note is convertible into is in excess of the remaining
unallocated proceeds of the note after first considering the allocation of a
portion of the note proceeds to the fair value of the warrants, if related
warrants have been granted. The intrinsic value of the beneficial conversion
feature is recorded as a debt discount with a corresponding amount to additional
paid in capital. The debt discount is amortized to interest expense over the
life of the note using the effective interest method.
g) Derivative Liability
From time to time, the Company may issue equity instruments that may contain an
embedded derivative instrument which may result in a derivative liability. A
derivative liability exists on the date the equity instrument is issued when
there is a contingent exercise provision. The derivative liability is records at
is fair value calculated by using an option pricing model such as a
multi-nominal lattice model. The fair value of the derivative liability is then
calculated on each balance sheet date with the corresponding gains and losses
recorded in the consolidated statement of operations.
h) Income Taxes
Potential benefits of income tax losses are not recognized in the accounts until
realization is more likely than not. The Company has adopted ASC 740, INCOME
TAXES, as of its inception. Pursuant to ASC 740, the Company is required to
compute tax asset benefits for net operating losses carried forward. The
potential benefits of net operating losses have not been recognized in these
financial statements because the Company cannot be assured it is more likely
than not it will utilize the net operating losses carried forward in future
years.
i) Comprehensive Loss
ASC 220, COMPREHENSIVE INCOME, establishes standards for the reporting and
display of comprehensive loss and its components in the financial statements. As
at October 31 and January 31, 2014, the Company has no items that represent
comprehensive loss and, therefore, has not included a schedule of comprehensive
loss in the financial statements.
j) Financial Instruments
Pursuant to ASC 820, FAIR VALUE MEASUREMENTS AND DISCLOSURES, an entity is
required to maximize the use of observable inputs and minimize the use of
unobservable inputs when measuring fair value. ASC 820 establishes a fair value
hierarchy based on the level of independent, objective evidence surrounding the
inputs used to measure fair value. A financial instrument's categorization
within the fair value hierarchy is based upon the lowest level of input that is
significant to the fair value measurement. ASC 820 prioritizes the inputs into
three levels that may be used to measure fair value:
LEVEL 1
Level 1 applies to assets or liabilities for which there are quoted prices in
active markets for identical assets or liabilities.
LEVEL 2
Level 2 applies to assets or liabilities for which there are inputs other than
quoted prices that are observable for the asset or liability such as quoted
prices for similar assets or liabilities in active markets; quoted prices for
identical assets or liabilities in markets with insufficient volume or
infrequent transactions (less active markets); or model-derived valuations in
which significant inputs are observable or can be derived principally from, or
corroborated by, observable market data.
8
INDEPENDENCE ENERGY CORP.
Notes to the Condensed Financial Statements
(expressed in U.S. dollars)
(unaudited)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
j) Financial Instruments (continued)
LEVEL 3
Level 3 applies to assets or liabilities for which there are unobservable inputs
to the valuation methodology that are significant to the measurement of the fair
value of the assets or liabilities.
The Company's financial instruments consist principally of cash, accounts
payable and accrued liabilities, and amounts due to related parties. Pursuant to
ASC 820 and 825, the fair value of our cash is determined based on "Level 1"
inputs, which consist of quoted prices in active markets for identical assets.
We believe that the recorded values of all of our other financial instruments
approximate their current fair values because of their nature and respective
maturity dates or durations.
k) Reclassifications
Certain financial statement items have been reclassified to conform to current
period financial reporting requirements.
l) Recent Accounting Pronouncements
The Company has limited operations and is considered to be in the development
stage. In the period ended July 31, 2014, the Company has elected to early adopt
Accounting Standards Update No. 2014-10, DEVELOPMENT STAGE ENTITIES (TOPIC 915):
ELIMINATION OF CERTAIN FINANCIAL REPORTING REQUIREMENTS. The adoption of this
ASU allows the Company to remove the inception to date information and all
references to development stage.
The Company has implemented all new accounting pronouncements that are in effect
and that may impact its financial statements and does not believe that there are
any other new accounting pronouncements that have been issued that might have a
material impact on its consolidated financial statements.
3. OIL AND GAS PROPERTIES
a) On December 15, 2011, the Company acquired a 2.5% interest in four wells in
the Quinlan Lease ("Quinlan") from Wise Oil and Gas LLC ("Wise"), with the
option to increase the interest to 10%. On December 23, 2011, the Company
acquired an additional 2.5% interest in Quinlan. Quinlan is located in
Pottawatomie County, Oklahoma. On March 1, 2012, the Company acquired an
additional 5% interest in Quinlan in exchange for $78,080, bringing the
Company's total interest to 10%.
During the period ended July 31, 2014, the Company decided to discontinue their
interest in the Quinlan properties. As a result, the Company recognized an
impairment of $147,739 to reflect the net liabilities owed on oil and gas
production.
b) On March 29, 2012, the Company acquired a 5% interest in a 70% net revenue
interest of properties in Coleman County, Texas for $115,000. On June 28, 2012,
the Company amended the original agreement to acquire a 7% interest in a 75% net
revenue interest in the properties for an additional payment of $47,000, and
replaced the terms of the original agreement. Refer to Note 3(e).
c) On May 29, 2012, the Company acquired a 2.5% interest in a 70% net revenue
interest in two oil and gas wells and approximately 20 acres of land surrounding
the area in Coleman County, Texas for $82,500. Refer to Note 3(e).
d) On June 8, 2012, the Company acquired a 12.5% interest, with an option to
acquire an additional 12.5% interest, for $90,785. The properties comprise an
area of 2,421 acres in Coleman County, Texas. Refer to Note 3(e).
9
INDEPENDENCE ENERGY CORP.
Notes to the Condensed Financial Statements
(expressed in U.S. dollars)
(unaudited)
3. OIL AND GAS PROPERTIES (continued)
e) On February 28, 2013, the Company entered into a Compromise, Settlement and
Property Exchange Agreement with MontCrest Energy, Inc. and Black Strata, LLC.
Pursuant to the terms of the agreement, the Company transferred its working
interests in Coleman County with a book value of $335,285, in consideration of a
100% interest in approximately 1,400 acres of the Coleman County South Lease
held by Black Strata, LLC. During the year ended January 31, 2014, the Company
elected not to renew the working interest and recorded a full impairment of the
book value.
4. INTANGIBLE ASSET
On March 31, 2014, the Company entered into an asset purchase agreement (the
"Agreement") with American Medical Distributors, LLC ("AMD") where the Company
acquired the intangible assets of AMD in exchange for the issuance of
152,172,287 common shares of the Company with a fair value of $320,431 based on
the fair value of the Company's common shares on the date of issuance. As a part
of this asset acquisition, the Company received $60,000 of cash.
5. CONVERTIBLE DEBENTURES
a) On July 15, 2013, the Company issued a $57,000 convertible note which is
unsecured, bears interest at 8% per annum and due on April 17, 2014. The note is
convertible into shares of common stock 180 days after the date of issuance
(January 11, 2014) at a conversion rate of 58% of the average of the three
lowest closing bid prices of the Company's common stock for the ten trading days
ending one trading day prior to the date the conversion notice is sent by the
holder to the Company. Upon an event of default, the entire principal balance
and accrued interest outstanding is due immediately, and interest shall accrue
on the unpaid principal balance at 22% per annum. During the year ended January
31, 2014, the Company issued 7,500,000 shares of common stock for the conversion
of $12,000. During the period ended July 31, 2014, the Company issued 35,545,055
shares of common stock for the conversion of $45,000 of principal and $2,280 of
accrued interest.
In accordance with ASC 470-20, "Debt with Conversion and Other Options", the
Company recognized the intrinsic value of the embedded beneficial conversion
feature of $57,000 and an equivalent discount which will be charged to
operations over the term of the convertible note. During the period ended July
31, 2014, the Company had amortized $41,666 (2013 - $nil) of the debt discount
to interest expense. As at July 31, 2014, the carrying value of the debenture
was $nil (January 31, 2014 - $3,334).
b) On September 17, 2013, the Company issued a $32,500 convertible note which is
unsecured, bears interest at 8% per annum and due on June 19, 2014. The Company
received $30,000, net of issuance fee of $2,500. The note is convertible into
shares of common stock 180 days after the date of issuance (March 16, 2014) at a
conversion rate of 58% of the average of the three lowest closing bid prices of
the Company's common stock for the ten trading days ending one trading day prior
to the date the conversion notice is sent by the holder to the Company. Upon an
event of default, the entire principal balance and accrued interest outstanding
is due immediately, and interest shall accrue on the unpaid principal balance at
22% per annum. During the period ended July 31, 2014, the Company issued
28,166,667 shares of common stock for the conversion of $32,500 of principal and
$1,300 of accrued interest.
In accordance with ASC 470-20, "Debt with Conversion and Other Options", the
Company recognized the intrinsic value of the embedded beneficial conversion
feature of $32,500 and an equivalent discount which will be charged to
operations over the term of the convertible note. During the period ended July
31, 2014, the Company had amortized $32,500 (2013 - $nil) of the debt discount
to interest expense. As at July 31, 2014, the carrying value of the debenture
was $nil (January 31, 2014 - $32,500).
10
INDEPENDENCE ENERGY CORP.
Notes to the Condensed Financial Statements
(expressed in U.S. dollars)
(unaudited)
6. LOAN PAYABLE
a) As of October 31, 2014, the Company had loan payable of $156,697 (January 31,
2014 - $156,697) owing to an unrelated third party. The amount owing is
non-interest bearing, unsecured and due on demand.
b) On August 5, 2014, the Company received a $15,100 loan from shareholders of
the Company pursuant to a promissory note. The loan bears interest of 7% per
annum, is unsecured, and due on demand.
7. RELATED PARTY TRANSACTIONS
a) During the period ended October 31, 2014, the Company incurred $22,500 (2013
- $22,500) to a director of the Company for management and consulting services.
As of October 31, 2014, the Company had $nil (January 31, 2014 - $3,100) in
prepaid expense for management fees paid and owed $41,851 (January 31, 2014 -
$nil) to the President of the Company.
b) During the period ended October 31, 2014, the Company incurred $30,000 (2013
- $nil) to the CEO of the Company for consulting services. As of October 31,
2014, the Company owed $50,000 (January 31, 2014 - $nil) to the CEO of the
Company.
c) On August 5, 2014, the Company received a $15,100 loan from shareholders of
the Company pursuant to a promissory note. The loan bears interest of 7% per
annum, is unsecured, and due on demand.
8. DISCONTINUED OPERATIONS
On June 23, 2014, the Company impaired its oil and gas properties and re-focused
its business to the medical products distribution. As a result, the Company's
impairment of its oil and gas properties and change in direction for the
Company's business, all expenses related to the oil and gas operations have been
classified as discontinued operations.
The results of discontinued operations are summarized as follows:
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
October 31, October 31, October 31, October 31,
2014 2013 2014 2013
-------- -------- -------- --------
$ $ $ $
Operating Expenses
Impairment of oil and gas property -- -- 147,739 --
-------- -------- -------- --------
Total Operating Expenses -- -- 147,739 --
-------- -------- -------- --------
Net Loss From Discontinued Operations -- -- (147,739) --
======== ======== ======== ========
|
9. SUBSEQUENT EVENTS
We have evaluated subsequent events through the date of issuance of the
financial statements, and did not have any material recognizable subsequent
events after October 31, 2014, excepting the following:
On November 12, 2014, the Company entered into a securities purchase agreement
with two accredited investors. Under the terms of the agreement, the Company
issued 14,905,918 common shares and warrants to purchase up to 7,452,959 common
shares for consideration of $50,000. The warrants entitle the holder to purchase
common shares of the Company at an exercise price of $0.005 per share for a
period of two years from the date of issuance.
11