Item 8.01 Other Events
On October 15, 2021, a majority of the shareholders of the Company consented in
writing to effectuate a spin-off of Edison Power Corp. ("EPC"), the Company's
wholly-owned subsidiary.
Once effectuated, the Spin-Off of EPC would result in the Company's Common
stockholders, on October 22, 2021 (the "Record Date"), owning one half share of
the Common Stock of EPC for each one share owned of the Common Stock of the
Company.
The Board of Directors believes that it is in the best interests of the Company
to implement the spin-off in order to change the business direction of the
Company and to make application for EPC to seek a listing on the OTC Markets and
to become a fully reporting issuer on its own.
RISK FACTORS
There can be no assurance that the total projected market capitalization of
Indigenous Roots Corp.'s Common Stock after the proposed Spin-Off will be equal
to or greater than the total projected market capitalization before the proposed
Spin-Off, or that the price per share of Indigenous Roots Corp.'s Common Stock
following the Spin-Off will either exceed or remain higher than the current
anticipated per share.
There can be no assurance that the market price per share of Indigenous Roots
Corp.'s Common Stock after the Spin-Off will rise or remain constant.
Accordingly, the total market capitalization of Indigenous Roots Corp.'s common
stock after the proposed Spin-Off may be lower than the total market
capitalization before the proposed Spin-Off and, in the future, the market price
of Indigenous Roots Corp.'s Common Stock following the Spin-Off may be lower
than the market price before the Spin-Off.
There can be no assurance that the Spin-Off will result in a per share price
that will attract investors, and decline in the market price for Indigenous
Roots Corp.'s Common Stock after the Spin-Off may result in a greater percentage
decline than would occur in the absence of a Spin-Off, and the liquidity of
Indigenous Roots Corp.'s common stock could be adversely affected following a
Spin-Off.
The market price of Indigenous Roots Corp.'s Common Stock will also be based on
Indigenous Roots Corp.'s performance and other factors, some of which are
unrelated to the number of shares outstanding. If the Spin-Off is effected and
the market price of Indigenous Roots Corp.'s Common Stock declines, the
percentage decline as an absolute number and as a percentage of Indigenous Roots
Corp.'s overall market capitalization may be greater than would occur in the
absence of a Spin-Off. In many cases, both the total market capitalization of a
company and the market price of a share of such company's common stock following
a Spin-Off are lower than they were before the Spin-Off. Furthermore, the
liquidity of Indigenous Roots Corp.'s Common Stock could be adversely affected
by the reduced number of shares that would be outstanding after the Spin-Off.
Indigenous Roots Corp.'s Common Stock trades as a "penny stock" classification
which limits the liquidity for Indigenous Roots Corp.'s Common Stock.
Indigenous Roots Corp.'s stock is subject to "penny stock" rules as defined in
Rule 3a51-1, promulgated pursuant to the Securities Exchange Act of 1934, as
amended. The SEC has adopted rules that regulate broker-dealer practices in
connection with transactions in penny stocks. Indigenous Roots Corp.'s common
stock is subject to these penny stock rules. Transaction costs associated with
purchase and sale of penny stocks are likely to be higher than those for other
securities. Penny stocks generally are equity securities with a price of less
than U.S. $5.00 (other than securities registered on certain securities exchange
or quoted on the NASDAQ system, provided that current price and volume
information with respect to transactions in such securities is provided by the
exchange or system).
As a result, all brokers or dealers involved in a transaction in which
Indigenous Roots Corp.'s shares are sold to any buyer, other than an established
customer or "accredited investor," must make a special written determination.
These Exchange Act rules may limit the ability or willingness of brokers and
other market participants to make a market in our shares and may limit the
ability of Indigenous Roots Corp.'s stockholders to sell in the secondary
market, through brokers, dealers or otherwise. Indigenous Roots Corp. also
understands that many brokerage firms will discourage their customers from
trading in shares falling within the "penny stock" definition due to the added
regulatory and disclosure burdens imposed by these Exchange Act rules. These
disclosure requirements may have the effect of reducing the level of trading
activity in the secondary market for the common shares in the United States and
stockholders may find it more difficult to sell their shares. An orderly market
is not assured or implied as to Indigenous Roots Corp.'s common stock. Nor are
there any assurances as to the existence of market makers or broker/dealers for
Indigenous Roots Corp.'s common stock.
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Principal Effects of the Spin-Off
In addition to those risk factors note above, the Spin-Off will have the
following effects:
General Corporate Changes - Indigenous Roots Corp.'s Common Stock total issued
and outstanding shares of Common Stock will not be increased, nor will the
number of Edison Power Company's total issued and outstanding shares of Common
increase.
The Spin-Off will be effected simultaneously, through a distribution of all of
the issued and outstanding shares of Common Stock of EPC, for all of the
Indigenous Roots Corp.'s issued and outstanding shares common stock
The Spin-Off does not materially affect the proportionate equity interest in
Indigenous Roots Corp. of any holder of Common Stock or the relative rights,
preferences, privileges or priorities of any such stockholder with respect to
the stockholder's shares in Indigenous Roots Corp.
Fractional Shares - Any fractional shares of Common Stock of EPC resulting from
the Spin-Off will "round up" to the nearest whole number. No cash will be paid
to any Indigenous Roots Corp. stockholders that would, but for the "round up,"
receive fractional interests in EPC shares of Common Stock.
Authorized Shares - The Spin-Off will not change the number of authorized shares
of Common Stock of Indigenous Roots Corp., as stated in Indigenous Roots Corp.'s
Article of Incorporation, as amended. The Spin-Off will also not change the
number of authorized shares of Common Stock of Edison Power Company.
Accounting Matters - The Spin-Off will not affect the par value of Indigenous
Roots Corp.'s common stock. As a result of the effective time of the Spin-Off,
the stated capital on Indigenous Roots Corp.'s balance sheet attributable to
Indigenous Roots Corp.'s common stock will not be increased or decreased.
On October 26, 2021, the Company filed a Schedule 14C, Information Statement
relating to the proposed spin-off. A copy of the Schedule 14C is furnished
herewith as Exhibit 99.1.
Safe Harbor for Forward-Looking Statements
Any statements contained in this communication that do not describe historical
facts may constitute forward-looking statements as that term is defined in the
Private Securities Litigation Reform Act of 1995. Such forward looking
statements may include statements with respect to the Company's potential
separation of EPC from the Company and the distribution of EPC shares to the
Company's shareholders, the expected financial and operational results of the
Company and EPC after the separation and distribution, and potential changes to
the Company's management. Any forward-looking statements contained herein are
based on Company management's current beliefs and expectations, but are subject
to a number of risks, uncertainties and changes in circumstances, which may
cause actual results or company actions to differ materially from what is
expressed or implied by these statements. Such risks, uncertainties and changes
in circumstances include, but are not limited to: uncertainties as to the timing
of the spin-off or whether it will be completed, the failure to satisfy any
conditions to complete the spin-off, the expected tax treatment of the spin-off,
and the impact of the spin-off on the businesses of the Company. Economic,
competitive, governmental, technological and other factors and risks that may
affect the Company's operations or financial results are discussed in the
Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2020,
and in subsequent filings with the U.S. Securities and Exchange Commission. The
Company disclaims any obligation to update these forward-looking statements
other than as required by law.
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Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
Exhibit Description
99.1* Schedule 14C, Information Statement accepted for filing by the
Securities and Exchange Commission on October 27, 2021
* Incorporated by reference
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