The accompanying notes are an integral part of these consolidated financial statements.
3
INDIE GROWERS ASSOCIATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| | | | |
| | For the 6 Months Ended
|
| | September 30, 2015
| | September 30, 2014
|
| | | | |
OPERATING ACTIVITIES
| | | | |
Net income (loss)
| $
| 134,816
| $
| (83,180,850)
|
Adjustments to reconcile net loss to net cash used in operating activities:
| | | | |
Non-cash management fees
| | -
| | 31,072,222
|
Non-cash interest expense
| | 59,690
| | 392,279
|
Non-cash impairment of goodwill
| | -
| | 51,460,000
|
Depreciation
| | 4,908
| | 1,196
|
Investment loss
| | -
| | 156,212
|
Changes in operating assets and liabilities:
| | | | |
Accounts receivable
| | (252,500)
| | -
|
Deferred tenant inducement
| | (27,500)
| | -
|
Accounts payable and accrued liabilities
| | 15,657
| | 69,033
|
Deferred vendor incentive
| | (572)
| | (572)
|
Net cash used in operating activities
| | (65,500)
| | (30,480)
|
| | | | |
INVESTING ACTIVITIES
| | | | |
Investment in Indie Growers Union
| | -
| | (106,212)
|
Buildings and infrastructure
| | (796)
| | (288,072)
|
Net cash used in investing activities
| | (796)
| | (394,284)
|
| | | | |
FINANCING ACTIVITIES
| | | | |
Advances from related parties
| | 2,455
| | 44,609
|
Advances for convertible debt, net
| | 59,690
| | 392,279
|
Net cash provided by financing activities
| | 62,145
| | 436,888
|
Net change in cash
| | (4,151)
| | 12,124
|
CASH, BEGINNING OF PERIOD
| | 4,469
| | -
|
CASH, END OF PERIOD
| $
| 317
| $
| 12,124
|
The accompanying notes are an integral part of these consolidated financial statements.
4
INDIE GROWERS ASSOCIATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
September 30, 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 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 six months ended September 30, 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.
At September 30, 2015, the Company had a working capital deficit, stockholders’ deficit and operating losses for the past two years. These circumstances raise substantial doubt about the Company’s ability to continue as a going concern. While the Company is attempting to generate sufficient 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.
5
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.
6
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 6 months ended September 30, 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 September 30, 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
| | | |
September 30, 2015
| Cost
| Accumulated
Depreciation
| Net Book Value
|
Buildings and infrastructure
| $ 294,892
| $ (9,692)
| $ 285,200
|
7
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 62,500,000 shares of its common stock for $62,500 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 September 30, 2015, the company incurred land lease costs of $3,000 payable to our Chief Operating Officer.
7. RENTAL INCOME
During the 3 months ended September 30, 2015, the company earned $156,000 in rental income from a tenant who subleased one of our properties on May 1, 2015. However, lease payments have been deferred until the tenant is able to sell their crops.
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 months ended September 30, 2015, $1,500 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.
8
10. CONVERTIBLE PROMISSORY NOTES
As of September 30, 2015, the Company had accumulated $503,444 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 September 30, 2015, $17,380 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 $17,380. 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 $29,292 as of September 30, 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 503,444,000 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 as follows:
| | | | | |
Date
| Issued Shares Outstanding
| Potentially Dilutive Shares
| Days
| Weighting
| Weighted Average Shares
|
31-Mar-15
| 140,881,967
| 443,754,000
| 183
| 1.00
| 584,635,967
|
30-Apr-15
| | 785,000
| 153
| 0.84
| 656,311
|
28-May-15
| | 10,000,000
| 125
| 0.68
| 6,830,601
|
31-May-15
| | 2,595,000
| 122
| 0.67
| 1,730,000
|
17-Jun-15
| | 395,000
| 105
| 0.57
| 226,639
|
30-Jun-15
|
| 28,535,000
| 92
| 0.50
| 14,345,464
|
30-Jul-15
| | 10,000,000
| 62
| 0.34
| 3,387,978
|
31-Jul-15
| | 6,930,000
| 61
| 0.33
| 2,310,000
|
30-Sep-15
| | 450,000
| -
| -
| -
|
| 140,881,967
| 503,444,000
| | | 614,122,962
|
11. SUBSEQUENT EVENTS
In November 2015, the company secured an additional $7,500 of convertible debt financing.
9
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 September 30, 2015 Compared to the Three Months Ended June 30, 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.
Land Lease
The company leases our land from our Chief Operating Officer for $1,000 per month. For the three months ending September 30, 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 $2,500 in management fees in the three months ending September 30, 2015 compared to $2,930 for the same period in the prior year.
General and Administrative Expenses
General and administrative expenses (“G&A”) were $9,447 and $18,192 for the 3 months ended September 30, 2015 and 2014, respectively. The decrease in general and administrative expenses was due to a general reduction of spending across most categories.
For the quarter ended September 30, 2015, our G&A consisted of $1,778 of fees paid to our transfer agent, $2,500 for on-site security, $1,130 in filing fees, $805 in telephone expenses, $1,077 on insurance, and numerous other small administrative costs.
Interest Expense
During the three months ended September 30, 2015, we recorded interest expenses of $23,975 compared to $153,295 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.
Professional Fees
During the three months ended September 30, 2015, we incurred professional fees of $7,428 compared to $6,570 for the same period in prior year. We anticipate our costs will remain consistently at these levels each quarter.
10
Repairs and maintenance
During the three months ended September 30, 2015, we incurred repairs and maintenance costs of $90 compared to $4,512 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 were minimal.
Non-operating Expenses
For the three months ending September 30, 2015 and 2014, we had no non-operating expenses.
The Six Months Ended September 30, 2015 Compared to the Six Months Ended September 30, 2014
Revenues
The company has recorded rental income of $260,000 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.
Land Lease
The company leases our land from our Chief Operating Officer for $1,000 per month. For the six months ending September 30, 2015, the company had accrued 6 months of lease payments. For the six months ending September 30, 2104, the company had accrued 3 months of lease payments from July 1, 2014 to September 30, 2014.
Management Fees
The Company incurred $6,540 in management fees in the six months ending September 30, 2015 compared to $31,090,552 for the same period in the prior year. The management fees incurred during the 6 months ending September 30, 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 $15,227 and $25,048 for the 6 months ended September 30, 2015 and 2014, respectively. The decrease in general and administrative expenses was due to a general reduction of spending across most categories. Of particular note is the $5664 spent on advertising and promotion in 2014 which was not required in 2015.
For the six months ended September 30, 2015, our G&A consisted of $4,155 of fees paid to our transfer agent, $1,550 in automobile expenses, $2,025 in filing fees, $1,764 in telephone expenses, $2,672 for on-site security, $1,435 on insurance, and numerous other small administrative costs.
Interest Expense
During the six months ended September 30, 2015, we recorded interest expenses of $71,879 compared to $399,715 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.
Professional Fees
During the six months ended September 30, 2015, we incurred professional fees of $19,288 compared to $14,935 for the same period in prior year. This increase can be attributed to the Company addressing the filing deficiencies identified by the Securities and Exchange Commission.
11
Repairs and maintenance
During the six months ended September 30, 2015, we incurred repairs and maintenance costs of $1,341 compared to $5,065 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 six months ending September 30, 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 six months ended September 30, 2015, we generated a modest profit of $107,107 and 134,816, respectively, from our operating activities. However, as of September 30, 2015, we still had a working capital deficit of $340,093 and an accumulated deficit of $114,256,235. 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 6 months ended September 30, 2015 and 2014, was $65,500 and $30,480, 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 6 months ended September 30, 2015 and 2014, was $796 and $394,284, respectively. This decrease can be attributed to the completion of the first phase of the construction project by our subsidiary.
Net cash provided by financing activities for the six months ended September 30, 2015 and 2014, was $62,145 and $426,888, respectively. The decrease can be attributed to a reduction of our cash needs since the completion of the first phase of the construction project by our subsidiary.
During the next 6-12 months, we anticipate that we will spend a minimum of $1 million on the construction of greenhouses and other agricultural buildings. 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.
12
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 September 30, 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 September 30, 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 September 30, 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.
13
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the six months ended September 30, 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
None.
14
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.
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| INDIE GROWERS ASSOCIATION
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Date: December 14, 2015
| | /s/ Robert Coleridge
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| Robert Coleridge
Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer, and Director
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