The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
December 31, 2015
1. ORGANIZATION
The company, Viking Minerals Inc., was incorporated under the laws of the state of Nevada on March 24, 2006 with 75,000,000 authorized common shares, par value of $0.001 per share. In January 2011, the company filed an amendment with the state of Nevada to increase the authorized shares to 400,000,000 common shares, par value of $0.001 per share.
On April 14, 2014 the Company changed its name to Indie Growers Association and completed a 1:200 reverse stock consolidation. All share amounts in these consolidated financial statements have been restated to reflect this stock consolidation.
The company was originally organized for the purpose of acquiring and developing mineral claims (SIC Code: 1000). On June 30, 2014, the company acquired River Ridge Sunshine Farms LLC, a Washington State corporation, and in so doing, changed its business to that of real estate development for the purpose of leasing land and agricultural buildings to licensed cannabis producers (SIC Code: 5319).
The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. They do not include all information and notes required by generally accepted accounting principles for complete financial statements. Except as disclosed herein, there has been no material change in the information disclosed in the notes to the financial statements included in the Annual Report on Form 10-K/A of the Company for the year ended March 31, 2015. In the opinion of management, all adjustments (including normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended December31, 2015 are not necessarily indicative of the results that may be expected for the year ending March 31, 2016. For further information, these unaudited financial statements and the related notes should be read in conjunction with the Companys audited financial statements for the year ended March 31, 2015 included in the Companys report on Form 10-K/A.
At December 31, 2015, the Company had a working capital deficit and stockholders deficit. The company has started to generate income although it has not yet collected on receivables. These circumstances raise substantial doubt about the Companys ability to continue as a going concern. While the Company is generating revenues, the Companys cash position may not be enough to support the Companys 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 Companys ability to further implement its business plan and generate sufficient revenues.
These financial statements are presented on the basis that we will continue as a going concern. The going concern concept contemplates the realization of assets and satisfaction of liabilities in the normal course of business.
The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basic and Diluted Net Loss Per Share
Basic net loss per share amounts are computed based on the weighted average number of shares outstanding. Diluted net loss per share amounts are computed using the weighted average number of common and common equivalent shares outstanding as if shares had been issued on the exercise of the common share rights unless the exercise becomes anti-dilutive and then the basic and diluted per share amounts are the same.
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Estimates and Assumptions
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain of the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the year. The Company regularly evaluates estimates and assumptions. The Company bases its estimates and assumptions on current facts, historical experience and various other factors it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company's estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. The most significant estimates with regard to these financial statements relate to the carrying values of unproven mineral properties, expected lives of equipment, determination of fair values of stock based transactions and valuation of deferred income taxes.
Capital Assets
A Capital Asset is defined as a unit of tangible property that: (1) has an economic useful life of more than 12 months; and (2) was acquired or produced for a cost of more than $500, including acquisition and installation costs on the same invoice.
Capital Assets are stated at historical cost less accumulated depreciation and accumulated impairment losses. Subsequent costs are included in the asset's carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. All repairs and maintenance are charged to the statement of operations during the financial period in which they are incurred.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognized in the statement of operations.
Depreciation of capital assets is computed as follows:
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Furniture and fixtures
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7 year straight line
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Computer equipment
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5 year straight line
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Buildings and infrastructure
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30 year straight line
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Leasehold Improvements
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Straight line over the term of lease
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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 companys accounts are not reflected within the Companys Balance Sheets and Statements of Operations; however, the Companys share of the earnings or losses of the investee company is reflected in the Companys statements of operations and the Companys carrying value in an equity method investee company is reflected in the Companys balance sheets. The Company evaluates these investments for other-than-temporary declines in value each quarterly period. Any impairment found to be other than temporary would be recorded through a charge to earnings.
Revenue Recognition
Revenue is recognized when all applicable recognition criteria have been met, which generally include (a) persuasive evidence of an existing arrangement; (b) fixed or determinable price; (c) delivery has occurred or service has been rendered; and (d) collectability is reasonably assured.
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Fair Value of Financial Instruments
The estimated fair values for financial instruments are determined at discrete points in time based on relevant market information. These estimates involve uncertainties and cannot be determined with precision. The estimated fair value of cash, trade payables, and loans approximates their carrying value due to their short-term nature.
Income Taxes
The Company utilizes the liability method of accounting for income taxes. Under the liability method deferred tax assets and liabilities are determined based on differences between financial reporting and the tax bases of the assets and liabilities and are measured using the enacted tax rates and laws that will be in effect, when the differences are expected to be reversed. An allowance against deferred tax assets is recorded, when it is more likely than not, that such tax benefits will not be realized.
Recent Accounting Pronouncements
On June 10, 2014, The Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, consolidation, which removes all incremental financial reporting requirements from GAAP for development stage entities, including the removal of Topic 915 from the FASB Accounting Standards Codification. For the first annual period beginning after December 15, 2014, the presentation and disclosure requirements in Topic 915 will no longer be required for the public business entities. The revised consolidation standards are effective one year later, in annual periods beginning after December 15, 2015. Early adoption is permitted. The Company has adopted the amendment as of 3 and 9 months ended December 31, 2015.
There are several new accounting pronouncements issued by the Financial Accounting Standards Board (FASB) which are not yet effective. Each of these pronouncements, as applicable, has been or will be adopted by the Company. As of December 31, 2015, none of these pronouncements is expected to have a material effect on the financial position, results of operations or cash flows of the Company.
3. ACQUISITION OF A PROPERTY
On April 8, 2014, the Company entered into a share exchange agreement with the unit holders of Indie Growers Union LLC of Washington state wherein the Company would issue a total of 87,500,000 shares of common stock and $185,000 cash in exchange for all of the outstanding member units and assets of Indie Growers Union LLC. The company advanced $185,000 but cancelled the agreement prior to issuing the shares. The company recovered $28,788 of the $185,000 cash and has recorded an investment loss of $(156,212) in the consolidated statement of operations.
On June 30, 2014, the Company acquired River Ridge Sunshine Farms LLC, a Washington state corporation in exchange for 62,000,000 shares. The market value of the Companys shares on the July 15, 2014, the date the shares were issued, was $0.68 per share thereby valuing the acquisition at $42,160,000. River Ridge Sunshine Farms LLC holds a 10 year lease on a 40 acre property which will be subleased to licensed cannabis producers. However, no revenue was generated from leases in the year ended March 31, 2014 so the company determined that the value of this acquisition should be fully impaired. An impairment of goodwill has been recorded in the consolidated statement of operations effective as of the date of acquisition.
4. ASSET DEPRECIATION
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December 31, 2015
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Cost
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Accumulated
Depreciation
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Net Book Value
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Buildings and infrastructure
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$ 294,892
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$ (12,146)
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$ 282,746
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5. CAPITAL STOCK
On May 2, 2014, the company issued 21,000,000 shares of its common stock for services to two of our directors. The market value of the Companys 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 Companys shares on July 15, 2014, the date the shares were issued, was $0.68 per share thereby valuing the acquisition at $42,160,000. The managing member is now our Chief Operating Officer. The shares are subject to a lock-up agreement until July 1, 2016.
On August 14, 2014, the company issued 62,000,000 shares of its common stock for $62,000 of convertible debt. The stock was valued at par value in accordance with the convertible debt agreement.
6. SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES
During the 3 months ended December 31, 2015, the company incurred land lease costs of $3,000 payable to our Chief Operating Officer.
7. RENTAL INCOME
During the 3 and 9 months ended December 31, 2015, the company recorded $156,000 and $416,000, respectively, in rental income from a tenant who subleased one of our properties on May 1, 2015. However, lease payments were deferred until the tenant was able to sell their crops. This was originally expected to take place in Q1 of 2016.
However, there is an over-supply of cannabis in Washington State resulting in a significant drop in prices which will likely result in a further delay in receiving payment until late Q2 or Q3 when prices are expected to recover. Furthermore, the Company anticipates it will have to renegotiate the terms of the lease to account for lower prices and apply it retroactively to the amounts owed by the tenant. Therefore, the company has allowed for a 50% discount ($68,333 and $205,000 for the three and nine months ending December 31, 2015, respectively) off the current accounts receivable and applied it to Bad Debt Expense.
The outstanding lease payments are unsecured as the Company is unable, under State regulations, to take possession or sell the inventory of cannabis.
Under the sublease agreement with the tenant, the Company was required to build approximately 21,000 square feet of greenhouses so the tenant could produce year round. The Company was unable to meet this obligation thereby allowing the tenant to terminate the lease after December 31, 2015 without penalty.
8. TENANT INDUCEMENTS
As an inducement for our current tenant to sublease one of our properties, we purchased $30,000 of agricultural materials and provided them free of charge to the tenant. This has been recorded as a deferred vendor inducement on the consolidated balance sheet. It has been amortized on a straight line basis over the contract term of 5 years such that each quarters portion of the inducement will be offset against rental income in the consolidated statement of operations. For the 3 and 9 months ended December 31, 2015, $1,500 and $4,500, respectively, was offset against rental income.
9. VENDOR INCENTIVE
In December 2013, the Companys 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 years portion of the incentive will be offset against transfer agent fees in the consolidated statement of operations.
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10. CONVERTIBLE PROMISSORY NOTES
As of December 31, 2015, the Company had accumulated $443,754 in convertible promissory notes. The notes are due on demand, bear interest at 5%, are unsecured, and are convertible at $0.001.
During the three months ended December 31, 2015, $7,905 of convertible notes were issued which had beneficial conversion features with intrinsic values in excess of the principal balance. As a result, the Company recorded debt discounts of $7,905. In addition, as these promissory notes are payable on demand, the debt discounts were fully amortized to interest expense during the period.
The amount of accrued interest payable on these notes was $35,927 as of December 31, 2015 and is included in Accounts Payable and Accrued Liabilities.
If the balance outstanding was converted into common shares, the amount of shares to be issued would be 511,849,000 common shares. The weighted average number of shares outstanding has been computed as if these shares were issued on the date the funds were advanced to the Company.
11. SUBSEQUENT EVENTS
On January 13, 2016, the Company issued 7,777,778 restricted shares to its Director, Robert Coleridge, for payment of management fees for 2016. The market value of the Companys shares on January 13, 2106 was $0.03per share, thereby valuing the management fees at $233,333.
On January 25, 2016, the Company entered into a agreement to acquire 100% of the outstanding shares of Teascom UK Limited, the patent holder of a new generation of data encryption algorithms. The acquisition is expected to close on or before April 15, 2016.
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