Notes
to Unaudited Financial Statements
June
30, 2016
NOTE
1 – INTERIM FINANCIAL STATEMENTS
The
accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally
accepted in the US (US GAAP) for interim financial information, with the instructions to Form 10-Q, and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and notes required by US GAAP for complete financial statements.
The accompanying financial statements at June 30, 2016 and March 31, 2016 and for the three months ended June 30, 2016 and 2015
contain all normally recurring adjustments considered necessary for a fair presentation of our financial position, results of
operations, cash flows and shareholders’ equity for such periods. Operating results for the three months ended June 30,
2016 are not necessarily indicative of the results that may be expected for the year ending March 31, 2017. The unaudited consolidated
financial statements should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s
annual report for the year ended March 31, 2016.
NOTE
2 – GOING CONCERN
The
Company’s financial statements are prepared using generally accepted accounting principles in the United States of America
applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course
of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs, which
raises substantial doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue
as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable.
If the Company is unable to obtain adequate capital, it could be forced to cease operations.
In
order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s
plan is to obtain such resources for the Company by obtaining capital from management and significant shareholders sufficient
to meet its operating expenses and seeking equity and/or debt financing. However management cannot provide any assurances that
the Company will be successful in accomplishing any of its plans.
The
ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described
in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying
financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
NOTE
3 – SIGNIFICANT ACCOUNTING POLICIES
Estimates
The
preparation of financial statements in conformity with generally accepted accounting principles 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. Actual
results could differ from those estimates.
Cash
Cash
and cash equivalents include short-term, highly liquid investments with maturities of less than three months when acquired.
Income
taxes
The
Company accounts for income taxes under ASC 740
“Income Taxes”
which codified SFAS 109,
“Accounting
for Income Taxes”
and FIN 48
“Accounting for Uncertainty in Income Taxes – an Interpretation of FASB
Statement No.109.”
Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected
to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC
740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment
occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will
not realize tax assets through future operations.
Fair
Value of Financial Instruments
The
Company’s financial instruments as defined by FASB ASC 825-10-50 include cash, trade accounts receivable, and accounts payable
and accrued expenses. All instruments are accounted for on a historical cost basis, which, due to the short maturity of these
financial instruments, approximates fair value at June 30, 2016 and March 31, 2015.
FASB
ASC 820 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting
principles, and expands disclosures about fair value measurements. ASC 820 establishes a three-tier fair value hierarchy which
prioritizes the inputs used in measuring fair value as follows:
Level
1. Observable inputs such as quoted prices in active markets;
Level
2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
Level
3. Unobservable inputs in which there is little or no market data, which requires the reporting entity to develop its own assumptions.
The
Company does not have any assets or liabilities measured at fair value on a recurring or nonrecurring basis at June 30, 2016 or
March 31, 2016.
Impairment
of Long-Lived Assets
The
Company reviews its long-lived assets and certain identifiable intangibles for impairment when events or changes in circumstances
indicate that the carrying amount of the assets may not be recoverable. Recoverability of assets to be held and used is measured
by a comparison of the carrying amounts of the assets to future net cash flows expected to be generated by the assets. If such
assets are considered impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the
assets exceed the fair value of the assets based on estimated future cash flows.
Earnings
Per Share Information
FASB
ASC 260, “
Earnings Per Share”
provides for calculation of “basic” and “diluted” earnings
per share. Basic earnings per share includes no dilution and is computed by dividing net income (loss) available to common shareholders
by the weighted average common shares outstanding for the period. For purposes of the earnings per share calculation, we consider
shares to be issued as issued shares as of the date the shares are earned. Diluted earnings per share reflect the potential dilution
of securities that could share in the earnings of an entity similar to fully diluted earnings per share. Basic and diluted loss
per share were the same, at the reporting dates, as there were no common stock equivalents outstanding.
Share
Based Expenses
The
Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of ASC
505-50
“Equity - Based Payments to Non-Employees”
which codified SFAS 123 and the Emerging Issues Task Force
consensus in Issue No. 96-18 (“EITF 96-18”),
“Accounting for Equity Instruments that are Issued to Other
Than Employees for Acquiring or in Conjunction with Selling, Goods or Services”.
Measurement of share-based payment
transactions with non-employees shall be based on the fair value of whichever is more reliably measurable: (
a
) the goods
or services received; or (
b
) the equity instruments issued. The fair value of the share-based payment transaction should
be determined at the earlier of performance commitment date or performance completion date.
Reclassifications
and revision of prior period amounts
Certain
amounts in the June 30, 2015 financial statements have been reclassified to conform to the June 30, 2016 presentation. The Company
has revised prior period statement of operations to include deemed preferred stock dividends of $18,200.
Recent
accounting pronouncements
In
March 2016, the FASB issued Accounting Standards Update No. 2016-09: Compensation – Stock Compensation (Topic 718): Improvements
to Employee Share-Based Payment Accounting (ASU 2016-09). ASU 2016-09 is part of an initiative to reduce complexity in accounting
standards. The areas of simplification in ASU 2016-09 involve several aspects of accounting for share-based payment transactions,
including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement
of cash flows. For public entities, ASU 2016-09 is effective for consolidated financial statements issued for fiscal years beginning
after December 15, 2016, including interim periods within those fiscal years; early application is permitted. The provisions of
this accounting update did not have a material impact on the Company’s financial position, results of operations or cash
flows.
In
February 2016, the FASB issued Accounting Standards Update No. 2016-02: Leases (Topic 842) (ASU 2016-02). The main objective of
ASU 2016-02 is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities
on the balance sheet and disclosing key information about leasing arrangements. The main difference between previous GAAP and
Topic 842 is the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases.
ASU 2016-02 requires lessees to recognize assets and liabilities arising from leases on the balance sheet. In transition, lessees
and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective
approach. For public entities, ASU 2016-02 is effective for consolidated financial statements issued for fiscal years beginning
after December 15, 2018, including interim periods within those fiscal years; early application is permitted. The provisions of
this accounting update are not expected to have a material impact on the Company’s financial position, results of operations
or cash flows.
In
August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230), which is intended to reduce diversity in practice
in how certain transactions are classified in the statement of cash flows. The guidance addresses eight specific cash flow issues
for which current GAAP is either unclear or does not include specific guidance. The guidance is effective for annual periods beginning
after December 15, 2017 and interim periods within those annual periods. Early adoption is permitted, provided that all of the
amendments are adopted in the same period. This ASU must be adopted using a retrospective transition method. The Company plans
to adopt this guidance effective March 31, 2018. The Company has not identified any changes to this guidance that upon adoption
will have a material effect on its cash flows.
NOTE
4 – AGREEMENT TO PURCHASE OIL AND GAS PROPERTIES
Great
Northern Energy, Inc.
On
November 15, 2012, the Company entered into a Purchase and Sale Agreement (the “Agreement”) with Great Northern Energy,
Inc. (“GNE”) to acquire a substantial non-operating working interest in oil assets in East Texas. As of March 31,
2015, the Company had issued 7,400,000 shares of common stock to GNE towards the purchase of the oil and gas properties. Due to
the lack of any tangible results as contemplated in the Agreement, and to GNE’s failure to uphold certain of its obligations
under the Agreement, we determined it would be in our best interest to terminate the Agreement.
GNE
has returned the stock certificate for 7,400,000 shares, however, GNE did not submit an executed stock power which is required
to cancel the GNE shares. As such, these shares are considered issued and outstanding at June 30, 2016.
Black
Gold Kansas Production, LLC
On
June 1, 2015, the Company executed a Purchase and Sale Agreement (the “George PSA”) with Black Gold Kansas Production,
LLC, a Texas limited liability company (“BGKP”). Pursuant to the George PSA, the Company was to receive a 30% working
interest and a 26.25 % net revenue interest in and to the George Prospect and the 4 drilled and completed wells located in Kansas.
In addition, the Company was to acquire a 75% interest in and to approximately 3,000 acres of land within Bourbon and Allen Counties
that contained approximately 42 proved undeveloped (PUD) locations for drilling. Pursuant to the George PSA, the parties also
entered into a Joint Exploration Agreement. On July 23, 2015, the parties also entered into an amendment and extension to the
George PSA until October 1, 2015.
The
Company was entitled to conduct due diligence of the properties prior to closing. Subsequently, after assessing the Purchase and
Sale Agreements, we elected to not to close on the transactions due to litigation between Black Gold Kansas Production, LLC and
another working interest owner concerning the use of funds and operating control.
NOTE
5 –STOCKHOLDERS’ EQUITY
Series
A Convertible Preferred Stock
The
Company is authorized to issue 3,000,000 Shares of our Series “A” Convertible Preferred Stock, $0.001 par value per
share (the “Preferred Stock”). The Stated Value of the Preferred Stock is $5.00 per Share (the “Stated Value”).
Each Share of Preferred Stock bears an eight percent (8%) cumulative dividend (the “Dividend”), due and payable quarterly
as of July 31, October 31, January 31 and April 30. The Company records cumulative dividends whether or not declared. Each share
may be converted by the holder thereof, at any time, into one share of the Company’s common stock, par value $0.001per share
(the “Common Stock”) and one warrant exercisable at $6.50 per share into one share of the Company’s common stock
(the “Warrant”). The Company may force conversion to common stock and one warrant if the Company’s common stock
trades over $7.00 for forty-five consecutive trading days.
During
the three months ended June 30, 2016 and 2015, the Company had dividends of $18,200 and $18,200. Accumulated dividends in arrears
as of June 30, 2016 were $139,666.
Common
stock
The
authorized common stock of the Company consists of 75,000,000 shares with par value of $0.001.
The
Company accounts for common stock earned but not issued as common stock payable in Shareholders’ Equity. As of June 30,
2016 and March 31, 2016 certain individuals and consultants were due $600,000 and $320,000 for services rendered. At the date
these balances are paid the resulting effect on Common Stock and Paid in Capital would be an increase in outstanding common stock
of 826,777 common shares as of June 30, 2016 and 234,818 common shares as of March 31, 2016. These shares were not included in
the computation of earnings per share as the effect is immaterial at both reporting periods.
During
the three months ended June 30, 2016, consulting services totaling approximately $280,000 were accrued to common stock payable
and are included in professional fees and professional fees-related party in the consolidated statement of operations.
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Included
in consulting services above, the Company accrued to common stock payable $20,000 related to Fidare for consulting services
(see Note 7).
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●
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Included
in consulting services above, the Company accrued to common stock payable $180,000 related to Delaney for investment banking
services.
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●
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Included
in consulting services above, the Company accrued to common stock payable $20,000 related to Richardson for services (see
Note 7).
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Included
in consulting services above, the Company accrued to common stock payable $40,000 related to Thomas Lindholm for services.
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Included
in consulting services above, the Company accrued to common stock payable $10,000 related to Marc Duncan for services.
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Included
in consulting services above, the Company accrued to common stock payable $10,000 related to Milton Bernos for services.
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During
the three months ended June 30, 2016, the Company issued 29,703 common shares for consulting services totaling approximately $30,000
which are included in professional fees in the consolidated statement of operations.
During
the quarter ended June 30, 2015, in accordance with the terms of the agreement with Mr. Richardson, the Company committed to issue
28,413 shares of common stock to Mr. Richardson valued at $60,000 for services (see Note 7).
Net
loss per common share
Net
loss per share is computed using the basic and diluted weighted average number of common shares outstanding during the period.
The weighted-average number of common shares outstanding during each period is used to compute basic loss per share. Potential
dilutive securities (stock options and warrants) have not been considered when their effect would be anti dilutive. The potentially
dilutive shares, including both stock options and warrants would have been 428,000 quarter ended June 30, 2016.
Options
On
April 28, 2014, the Company granted 308,000 options to purchase the Company’s common stock with a three year term and an
exercise price of $1 for 108,000 options and $3 for 200,000 options, pursuant to the terms of the board of director’s agreement.
The options were immediately vested and had a fair value of $1,179,395 as the grant date. The options were outstanding for the
period ended June 30, 2016.
The
fair value of each option granted is estimated on the date of grant using the Black-Scholes option valuation model that uses the
assumptions noted in the following table. Expected volatilities were based on volatilities from similar companies given our limited
trading history.
The
expected term of options granted is estimated at the contractual term as noted in the individual option agreements and represents
the period of time that options granted are expected to be outstanding. The risk-free rate for the periods within the contractual
life of the option is based on the U.S. Treasury bill rate in effect at the time of grant for treasury bills with maturity dates
at the estimated term of the options. A summary of option activity as of March 31, 2016 and 2015, and changes during the year
then ended are presented below:
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Options
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Number of Options
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Weighted Average Exercise
Price
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Weighted Average Remaining Contractual Term
(in years)
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Aggregate Intrinsic
Value
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Outstanding March 31, 2015
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308,000
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$
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2.299
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2.3
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$
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-
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Granted, exercised, expired
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-
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$
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-
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-
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|
-
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|
|
Outstanding and exercisable March 31, 2016
|
|
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308,000
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|
|
$
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2.299
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1.08
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$
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-
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Granted, exercised, expired
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-
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$
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-
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|
-
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|
|
|
-
|
|
|
Outstanding and exercisable June 30, 2016
|
|
|
308,000
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$
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2.299
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0.08
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$
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-
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No
option expense was recognized during the three months ended June 30, 2016 and 2015.
Warrants
The
fair value of each warrant granted was estimated on the date of grant using the Black-Scholes option valuation. Expected volatilities
are based on volatilities from the historical trading ranges of the Company’s stock. The expected term of warrants granted
is estimated at the contractual term and represents the period of time that warrants are expected to be outstanding. The risk-free
rate for the periods within the contractual life of the option is based on the U.S. Treasury bill rate in effect at the time of
grant for bonds with maturity dates at the estimated term of the options. No warrants were issued during the three months ended
June 30, 2016.
There
were no warrants outstanding as of June 30, 2016, as 120,000 warrants expired in accordance with their terms.
NOTE
6 - INCOME TAXES
We
did not provide any current or deferred U.S. Federal income tax provision or benefit for any of the periods presented because
we have experienced operating losses since inception. Under ACS 740
“Income Taxes,”
when it is more likely
than not that a tax asset cannot be realized through future income the Company must allow for this future tax benefit. We provided
a full valuation allowance on the net deferred tax asset, consisting of net operating loss carryforwards, because management has
determined that it is more likely than not that we will not earn income sufficient to realize the deferred tax assets during the
carryforward period.
The
Company has not taken a tax position that, if challenged, would have a material effect on the financial statements for the three
months ended June 30, 2016 and 2015, applicable under ACS 740.
NOTE
7 –RELATED PARTY TRANSACTIONS
Advances
and Note Payable
On
November 28, 2012, the CE McMillan Family Trust (the “CE Trust”) advanced the Company $100 to facilitate the opening
of a new bank account in Irving, Texas. The trustee of the C.E. McMillan Family Trust is also the managing member of Cicerone
Corporate Development, LLC (“Cicerone”). The advance had not been repaid as of June 30, 2016.
On
September 4, 2013, we received a $750,000 Revolving Credit Note (the “Revolving Note”) from Cicerone for operating
expenses. The Revolving Note matured on February 1, 2015 and was extended to February 1, 2017 on the same terms and conditions
and was reclassified to non-current liabilities. The note bears interest at the rate of LIBOR plus 2.75% per annum. As of June
30, 2016, the balance due was $656,338, with related accrued interest of $49,491. Interest expense related to this debt was $6,029
and $4,658 during the three months ended June 30, 2016 and 2015, respectively.
Professional
Services
On
September 26, 2013, the Company entered into a new Consulting Agreement (the “Fidare Consulting Agreement”) with Fidare
to provide consulting services relating to corporate governance, accounting procedures and control and strategic planning. The
managing member of Fidare is the C.E. McMillan Family Trust. Harry McMillan is trustee of the C.E. McMillan Family Trust.
On
July 1, 2014, the Fidare Consulting Agreement was amended so Fidare would receive only monthly compensation shares of common stock
valued at $20,000 based on the price at the close on the last trading day of each month. Effective April 1, 2015, Fidare agreed
to waive all monthly compensation under the Fidare Agreement until further notice.
The
Company has a consulting agreement with Fidare to provide consulting services relating to corporate governance, accounting procedures
and control and strategic planning. The managing member of Fidare is the C.E. McMillan Family Trust. Harry McMillan is trustee
of the C.E. McMillan Family Trust. Fidare receives monthly compensation of shares of common stock valued at $10,000 based on the
price at the close on the last trading day of each month. For the three month period ended June 30, 2016, the Company recognized
$20,000 under the Fidare Agreement.
As
of June 30, 2016, $20,000 was due in 22,048 shares of common stock which is included in Common Shares Payable.
For
the three month period ended June 30, 2015, the Company did not recognize any expenses under the Fidare Agreement due to the waiver
discussed above.
As
of June 30, 2016, the Company is obligated to issue Fidare 28,605 shares of the Company’s common stock that were earned
prior to April 1, 2015.
Chief
executive officer compensation agreement
Effective
May 1, 2016, the Company replaced Mr. Richardson as executive consultant with an employee Mr. Lindholm as CEO.
The
Company had a consulting agreement with Mr. Colin Richardson to serve as our chief executive officer. Mr. Richardson, payable
by $10,000 in cash, and a number of shares of the Company’s common stock valued at $20,000 based on its price at the close
on the last trading day of each month. Prior to July 1, 2015, Mr. Richardson also received warrants.
As
of June 30, 2016, Mr. Richardson was entitled to 222,949 shares of common stock valued at approximately $300,000 and was due cash
compensation of approximately $398,000.
Director’s
fees
In
exchange for his services as a member of the Board of Directors, Mr. Mike Farmer is entitled to receive $2,000 per month payable
in cash. In addition, during the three month period ended September 30, 2015, Mr. Farmer was awarded options to purchase 108,000
of common stock at $1.00 per share and options to purchase 200,000 shares of our common stock at $3.00 per share. The options
were fully vested at the date of issuance of the award. As of June 30, 2016, Mr. Farmer was due the cash portion of his compensation
totaling $60,000.
NOTE
8 – SUBSEQUENT EVENTS
In
December 2016, the Company issued a $20,000 8% Senior note with 40,000 warrants exercisable at $.50 per share. The note matures
on December 9, 2017, and accrued interest was $491 for the year ended March 31, 2017. The fair value of the warrants was $9,514,
and was reported as a debt discount with amortization of $2,303 for the year ended March 31, 2017. The note payable balance net
of the discount as of March 31, 2017 was $12,789. The note was converted to common stock in January 2018.
During
the year ended March 31, 2017, the Company issued 95,538 and agreed to issue 265,000 shares of common stock valued at $345,000,
based on the price at close on the last trading day of each month which services were rendered for compensation and services.
During
the year ended March 31, 2017, a related party converted advances totaling $115,000 to common stock at $1 per share, which was
equivalent of the stock value on the date of conversion.
During
the year ended March 31, 2017, the Company issued 200,000 for common stock payable of $180,000.
During
the year ended March 31, 2017, the Company accrued common stock payable of $102,000 in exchange for accrued compensation of $102,000.
As
of March 31, 2017, the Company has $787,000 in common stock payable, which is payable in 1,017,151 shares of common stock.
During
the years ended March 31, 2017 and 2016, 120,000 and 180,000 warrants expired.
Effective
July 1, 2017, the Company entered into a new Consulting Agreement with Fidare to provide consulting services relating to corporate
governance, accounting procedures and control and strategic planning. The managing member of Fidare is the C.E. McMillan Family
Trust. Harry McMillan is trustee of the C.E. McMillan Family Trust. Fidare receives monthly compensation of shares of common stock
valued at $10,000 based on the price at the close on the last trading day of each month.
On
October 20, 2017, the Company received $30,000 for the purchase of 200,000 restricted common shares at $.15 per share and 100,000
warrants at $.50 per share exercise price with a three-year term.
On
February 6, 2018, management signed a repayment agreement with a creditor related to its court approved judgment and bank account
lien in the amount of $16,026. As of June 30, 2018, the Company has paid $15,434.
During
March 2018, the Company received $50,000 from subscription agreements for the purchase of 333,335 restricted common shares and
250,000 warrants with a $.50/share exercise price and three year maturity.
During
March 2017, the Company entered into a settlement agreement with a prior officer. As of June 30, 2016, the Company had recorded
accounts payable of approximately $398,000 and stock payable of $300,000. In March 2017, the Company issued a promissory note
for $205,000 and 422,719 common shares to be issued.
During
April 2018, the Company issued 422,000 shares in settlement of executive consulting expenses incurred during prior years.
For
the year ended March 31, 2018, the Company issued 1,215,641 shares for compensation expenses, and 832,988 shares for consulting
expenses.
On
August 10, 2018 the Company was notified the government convicted Mr. Loftis, former executive of Great Northern Energy, to a
forfeiture order of $1,662,749. Chief Judge Christensen further ordered Loftis to pay $7,931,667 in restitution to the victims
of his crimes. Rangeford Resources had filed a Victim Impact Statement “United States v. Joseph Brent Loftis CR-15-11-BU-DLC
for restitution for its $700,000 cash investment and 7,400,000 shares of Rangeford Resources, Inc. Common stock was issued at
a market price of $5.00/shares (contract date November 15, 2012) valued at $37,000,000.
On
August 14, 2018, Rangeford Resources’ board of directors unanimously approved to retire 7,400,000 shares of common stock
(stock certificate #1044 dated January 30, 2013) issued to Great Northern Energy, Inc. Great Northern Energy surrendered the stock
certificate to the transfer agent on September 1, 2013 and wrote letters to the SEC and FINRA confirming the release of the stock
certificate. However, management elected not retire the stock certificate at the request of federal law enforcement official pending
the conviction and sentencing of Great North Energy’s Joseph Brent Loftis.