ROI Land Investments Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2015
Note 1 – Business and Going Concern
Business
ROI Land Investments Ltd. was incorporated
in Nevada on December 13, 2007 under the name Conex MD, Inc.
ROI Land Investments Ltd. and Subsidiaries
specializes in land development opportunities in North America and internationally. The Company's business model consists of acquiring
attractive land free of zoning restrictions, obtaining the necessary permits, outsourcing developments of the infrastructure and
profiting from the sale of the subdivided land units to established residential and commercial building developers. Our business
model also consists of providing financing opportunities to qualified joint venture partners.
On November 15, 2013, the Company organized
ROI DEV Canada Inc. (“ROI DEV”), a Canada Chart corporation, as a wholly-owned subsidiary. ROI DEV was organized to
acquire and manage land acquisitions in North America.
On November 3, 2015, the Company organized
9497846 Canada Inc. (“9497846 Canada”), a Canada corporation, as a wholly-owned subsidiary. 9497846 Canada was organized
to provide management services to the Company’s operating companies. The subsidiary is currently inactive.
Going Concern
The Company has incurred net losses of $11,716,661
and $5,177,683 for the years ended December 31, 2015 and 2014, respectively, and has incurred cumulative losses since inception
of $17,016,869. The Company has a deficit in working capital of $10,813,988 as of December 31, 2015 and used cash in operations
of $14,474,680 for the year ended December 31, 2015. These conditions raise substantial doubt about the ability of the
Company to continue as a going concern.
The accompanying consolidated financial statements
have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”),
which contemplate continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities
in the normal course of business. The ability of the Company to continue its operations is dependent on the execution of management’s
plans, which include the raising of capital through the debt and/or equity markets, until such time that funds provided by operations
are sufficient to fund working capital requirements.
There can be no assurances that the Company
will be successful in generating additional cash from the equity/debt markets or other sources to be used for operations. The consolidated
financial statements do not include any adjustments relating to the recoverability of assets and classification of assets and liabilities
that might be necessary. Based on the Company’s current resources, the Company will not be able to continue to operate without
additional immediate funding. Should the Company not be successful in obtaining the necessary financing to fund its operations,
the Company would need to curtail certain or all operational activities and/or contemplate the sale of its assets, if necessary.
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements
have been prepared in accordance with U.S. GAAP and the rules and regulations of the Securities and Exchange Commission (“SEC”).
Principles of Consolidation
The consolidated financial statements include
the accounts of ROI Land Investments Ltd. and its wholly-owned Subsidiaries, ROI DEV Canada Inc. and 9497846 Canada Inc. All significant
inter-company balances and transactions have been eliminated in consolidation.
ROI Land Investments Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2015
Note 2 – Summary of Significant Accounting Policies (Continued)
Reclassifications
Certain items on the consolidated statement
of operations and comprehensive loss for the year ended December 31, 2014 have been reclassified to conform to the current period
presentation. These reclassifications have no impact on the previously reported net loss.
Use of Estimates
The preparation of financial statements in
conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities
and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses
during the reporting period.
Management bases its estimates on historical
experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.
The most significant estimates, among other things, are used in accounting for allowances for deferred income taxes, contingencies,
as well as the recording and presentation of its common stock and related stock option issuances. Estimates and assumptions are
periodically reviewed and the effects of any material revisions are reflected in the consolidated financial statements in the period
that they are determined to be necessary. Actual results could differ from those estimates and assumptions.
Cash and Cash Equivalents
The Company considers all highly liquid investments
with maturity of three months or less when purchased to be cash equivalents. At December 31, 2015 and 2014, the Company had no
cash equivalents.
Concentration of Credit Risk
The Company maintains cash in bank accounts,
which, at times, may exceed federally insured limits (Canada Deposit Insurance Corporation). The Company has not experienced any
losses in such accounts and periodically evaluates the credit worthiness of the financial institutions and has determined the credit
exposure to be negligible.
Other Assets, net
Other assets at December 31, 2015 consisted
of website setup costs and publicity campaign costs and are recorded at cost and construction in progress for leasehold improvements
while other assets at December 31, 2014 consisted solely of website setup costs and publicity campaign costs. Amortization expense
of $12,696 and $14,340 for the years ended December 31, 2015 and 2014, respectively, on these other assets is computed by the straight-line
method (after taking into account their respective estimated residual values) over the assets estimated useful lives as follows:
Website setup
|
5 years
|
Publicity campaign
|
3 years
|
Deposits on Land
Deposits and other acquisition and
investment pursuit costs related to deals in progress as of the reporting date are included in the consolidated balance sheets
as deposits on land. These costs will be capitalized as part of the original investment upon closing of the purchase of the
related investment or, to the extent that such costs have not been recovered, expensed at the time the decision is made not
to proceed with the investment.
Fair Value of Financial Instruments
The following provides an analysis of financial
instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to
which fair value is observable:
Level 1 - fair value measurements are those
derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 - fair value measurements are those
derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices); and
ROI Land Investments Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2015
Note 2 – Summary of Significant Accounting Policies (Continued)
Fair Value of Financial Instruments (Continued)
Level 3 - fair value measurements are those
derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable
inputs).
Fair value estimates discussed herein
are based upon certain market assumptions and pertinent information available to management as of December 31, 2015 and 2014.
The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the
short-term nature of these instruments. The Company applied the Financial Accounting Standards Board’s
(“FASB”) Accounting Standards Codification (“ASC”) ASC 820 “Fair Value Measurement” for
all non-financial assets and liabilities measured at fair value on a non-recurring basis.
Convertible Instruments
U.S. GAAP requires companies to bifurcate conversion
options from their host instruments and account for them as free standing derivative financial instruments according to certain
criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument
are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that
embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable
generally accepted accounting principles with changes in fair value reported in earnings as they occur, and (c) a separate instrument
with the same terms as the embedded derivative instrument would be considered a derivative instrument. An exception to this rule
is when the host instrument is deemed to be conventional, as that term is described under applicable U.S. GAAP. The Company has
no bifurcated derivative instruments at December 31, 2015 and 2014.
When the Company has determined that the embedded
conversion options should not be bifurcated from their host instruments, the Company records, when necessary, discounts to convertible
notes for the intrinsic value of the conversion options embedded in the debt instruments based upon the differences between the
fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded
in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption.
The Company has not recorded any beneficial conversion feature as of December 31, 2015 and 2014 as the embedded conversion options
in its notes payable do not meet the firm commitment criterion as described under applicable U.S. GAAP.
Impairment or Disposal of Long-Lived
Assets
The Company accounts for the impairment or
disposal of long-lived assets according to ASC 360 “Property, Plant and Equipment”. ASC 360 clarifies the accounting
for the impairment of long-lived assets and for long-lived assets to be disposed of, including the disposal of business segments
and major lines of business. Long-lived assets are reviewed when facts and circumstances indicate that the carrying value of the
asset may not be recoverable. When necessary, impaired assets are written down to estimated fair value based on the best information
available. Estimated fair value is generally based on either appraised value or measured by discounting estimated future cash flows.
Considerable management judgment is necessary to estimate discounted future cash flows. Accordingly, actual results could vary
significantly from such estimates. The Company has recorded no impairment during the years ended December 31, 2015 and 2014.
Stock Based Compensation
The Company accounts for Stock-Based Compensation
under ASC 718 “Compensation – Stock Compensation”, which addresses the accounting for transactions in which an
entity exchanges its equity instruments for goods or services, with a primary focus on transactions in which an entity obtains
employee services in share-based payment transactions. ASC 718-10 requires measurement of the cost of employee services received
in exchange for an award of equity instruments based on the grant-date fair value of the award. Incremental compensation costs
arising from subsequent modifications of awards after the grant date must be recognized. The Company treats stock-based transactions
with its non-employee directors as if they were employees.
ROI Land Investments Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2015
Note 2 – Summary of Significant Accounting Policies (Continued)
Stock Based Compensation (Continued)
The Company accounts for stock-based compensation
awards to non-employees in accordance with ASC 505-50, Equity-Based Payments to Non-Employees. Under ASC 505-50, the Company determines
the fair value of the warrants or stock-based compensation awards granted as either the fair value of the consideration received
or the fair value of the equity instruments issued, whichever is more reliably measurable. Any stock options or warrants issued
to non-employees are recorded in expense and additional paid-in capital in shareholders' equity (deficit) over the applicable service
periods using variable accounting through the vesting dates based on the fair value of the options or warrants at the end of each
period.
The Company issues common stock to consultants
for various services. The costs for these transactions are measured at the fair value of the consideration received or the fair
value of the equity instruments issued, whichever is more reliably measurable. The value of such common stock is measured at the
earlier of (i) the date at which a firm commitment for performance by the counterparty to earn the equity instruments is reached
or (ii) the date at which the counterparty's performance is complete. The Company recognized consulting expense and a corresponding
increase to additional paid-in-capital related to common stock issued for services.
Income Taxes
Income taxes are accounted for under the liability
method of accounting for income taxes. Under the liability method, future tax liabilities and assets are recognized
for the estimated future tax consequences attributable to differences between the amounts reported in the financial statement carrying
amounts of assets and liabilities and their respective tax bases. Future tax assets and liabilities are measured using
enacted or substantially enacted income tax rates expected to apply when the asset is realized or the liability settled. The
effect of a change in income tax rates on future income tax liabilities and assets is recognized in income in the period that the
change occurs. Future income tax assets are recognized to the extent that they are considered more likely than not to
be realized.
The Company adopted the provisions of ASC Topic
740 “Income Taxes”, which prescribes a recognition threshold and measurement process for financial statement recognition
and measurement of a tax position taken or expected to be taken in a tax return.
Management has evaluated and concluded that
there were no material uncertain tax positions requiring recognition in the Company’s consolidated financial statements as
of December 31, 2015 and 2014. The Company does not expect any significant changes in its unrecognized tax benefits within twelve
months of the reporting date.
The Company’s policy is to classify assessments,
if any, for tax related interest as interest expense and penalties as general and administrative expenses in the consolidated statements
of operations. The Company has not filed any federal tax returns since inception and may be subject to failure-to-file penalties.
The Company estimates that the amount of penalties, if any, will not have a material effect on its results of operations, cash
flows or financial position. No provisions have been made in the financial statements for such penalties, if any.
The Company intends to prepare and file overdue
federal tax returns for 2007 through 2015, which are anticipated to be completed and filed by the end of fiscal 2016.
Revenue Recognition
The development time of our properties is generally
more than one year from when development of the property begins, although some properties may take less than one year to complete.
Revenues and cost of revenues from these property sales are recorded at the time each property parcel is delivered and title and
possession are transferred to the buyer.
ROI Land Investments Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2015
Note 2 – Summary of Significant Accounting Policies (Continued)
Revenue Recognition (Continued)
Income from the sales of mortgage notes receivable
are recognized at the date ownership of the note is transferred and includes agreed upon profit participation, if any.
Interest income on notes and mortgage notes
receivable are recognized when earned per the terms of the applicable note agreements.
Real Estate-Related Debt Investments
Real estate-related debt investments will be
considered impaired when, based on current information and events, it is probable that the Company will not be able to collect
principal and interest amounts due according to the contractual terms. Management will assess the credit quality of the portfolio
and adequacy of loan loss reserves on a quarterly basis, or more frequently as necessary. Significant judgment of management will
be required in this analysis. We will consider the estimated net recoverable value of the debt investment as well as other factors,
including but not limited to the fair value of any collateral, the amount and the status of any senior debt, the quality and financial
condition of the borrower and the competitive situation of the area where the underlying collateral is located. Because this determination
may be based on projections of future economic events, which are inherently subjective, the amount ultimately realized may differ
materially from the carrying value as of the balance sheet date. If upon completion of the assessment, the estimated fair value
of the underlying collateral is less than the net carrying value of the debt investment, a loan loss reserve will be recorded with
a corresponding charge to provision for loan losses. The loan loss reserve for each debt investment will be maintained at a level
that is determined to be adequate by management to absorb probable losses.
Income recognition will be suspended for a
debt investment at the earlier of the date at which payments become past due or when, in the opinion of management, a full recovery
of income and principal becomes doubtful. When the ultimate collectability of the principal of an impaired debt investment is in
doubt, all payments will be applied to principal under the cost recovery method. When the ultimate collectability of the principal
of an impaired debt investment is not in doubt, contractual interest will be recorded as interest income when received, under the
cash basis method, until an accrual is resumed when the debt investment becomes contractually current and performance is demonstrated
to be resumed. A debt investment will be written off when it is no longer realizable or is legally discharged.
Foreign Currency Translation and Transactions
The U.S. Dollar is the functional currency
of the Company while the Canadian Dollar is the functional currency of the Company’s two subsidiaries. Assets and liabilities
are translated based on the exchange rates at the balance sheet date, while revenue and expense accounts are translated at the
average exchange rates prevailing during the year. Equity accounts are translated at historical exchange rates. The resulting translation
gain and loss adjustments are accumulated as a component of stockholders’ equity and other comprehensive income.
Foreign currency transaction gains of $77,754
and $2,960 resulting from transactions denominated in foreign currencies are included in results of operations for the years ended
December 31, 2015 and 2014, respectively.
Comprehensive Income (Loss)
The Company reports comprehensive income (loss)
and its components in its consolidated financial statements. Comprehensive income (loss) consists of net loss and foreign currency
translation adjustments affecting stockholders’ equity that, under U.S. GAAP, are excluded from net loss. As of December
31, 2015, the exchange rate between U.S. Dollars and Canadian Dollar was U.S. $1.00 = CAD 1.3872, and the weighted average exchange
rate for the year then ended was U.S. $1.00 = CAD 1.3389. As of December 31, 2014, the exchange rate between U.S. Dollars and Canadian
Dollar was U.S. $1.00 = CAD 1.1630, and the weighted average exchange rate for the year then ended was U.S. $1.00 = CAD 1.0870.
ROI Land Investments Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2015
Note 2 – Summary of Significant Accounting Policies (Continued)
Basic and Diluted Loss Per Share
The Company computes income (loss) per share
in accordance with ASC 260, "Earnings per Share", which requires presentation of both basic and diluted earnings per
share (“EPS”) on the face of the statement of operations. Basic EPS is computed by dividing income (loss) available
to common shareholders by the weighted average number of shares outstanding during the period. Diluted EPS gives effect to all
dilutive potential shares of common stock outstanding during the period using the treasury stock method and convertible preferred
stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the
number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential
shares if their effect is anti-dilutive.
As of December 31, 2015 and 2014, there were
$4,860,479 and $5,339,497 of convertible notes payable which are convertible at a 10% discount to the market price of our common
stock and convertible into approximately 4,084,000 and 3,490,000 shares, respectively. At December 31, 2015, there were 6,957,250
stock options outstanding. However, these potentially dilutive shares are considered to be anti-dilutive and are therefore not
included in the calculation of loss per share.
Note 3 – Recently Issued Accounting
Pronouncements
In January 2016, the Financial Accounting Standards
Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-01, “Financial Instruments
– Overall (Subtopic 825-10) (“ASU 2016-01”)”, which updates certain aspects of recognition, measurement,
presentation and disclosure of financial instruments. The new guidance is effective for public companies for fiscal years beginning
after December 15, 2017, including interim periods within those fiscal years. The adoption of this standard is not expected to
have a material impact on the Company’s consolidated financial position and results of operations.
The FASB has issued ASU No. 2015-17, Income
Taxes (Topic 740): “Balance Sheet Classification of Deferred Taxes”, which changes how deferred taxes are classified
on organizations’ balance sheets. The ASU eliminates the current requirement for organizations to present deferred tax liabilities
and assets as current and noncurrent in a classified balance sheet. Instead, organizations will be required to classify all deferred
tax assets and liabilities as noncurrent. The amendments apply to all organizations that present a classified balance sheet. For
public companies, the amendments are effective for financial statements issued for annual periods beginning after December 15,
2016, and interim periods within those annual periods. The adoption of this standard is expected to have no impact
on the Company’s consolidated financial position and results of operations.
In April 2015, the FASB issued ASU
No. 2015-03 (ASU 2015-03), “Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of
Debt Issuance Costs”. This standard amends the existing guidance to require that debt issuance costs be presented in
the balance sheet as a deduction from the carrying amount of the related debt liability instead of as a deferred charge. ASU
2015-03 is effective on a retrospective basis for annual and interim reporting periods beginning after December 15,
2015, but early adoption is permitted. The Company adopted ASU 2015-03 in 2015 and it did not have a material effect on its
consolidated financial statements.
In February 2015, the FASB issued ASU 2015-02,
“Consolidation (Topic 810): Amendments to the Consolidation Analysis”, which provides guidance in evaluating entities
for inclusion in consolidations. ASU 2015-02 is effective for fiscal years beginning after December 15, 2016. The adoption of ASU
2015-02 is not expected to have a material effect on its consolidated financial statements.
ROI Land Investments Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2015
Note 3 – Recently Issued Accounting
Pronouncements (Continued)
In August 2014, the Financial Accounting Standards
Board (FASB) issued Accounting Standards Update (ASU) No. 2014-15, “Disclosure of Uncertainties about an Entities Ability
to Continue as a Going Concern, which is included in Accounting Standards Codification (ASC) 205, Presentation of Financial Statements”.
This update provides an explicit requirement for management to assess an entity's ability to continue as a going concern, and to
provide related footnote disclosure in certain circumstances. The amendments are effective for annual periods ending after December
15, 2016, and interim periods within annual periods beginning after December 15, 2016. Early application is permitted for annual
or interim reporting periods for which the financial statements have not previously been issued. The Company has adopted ASU 2014-15
for its fiscal year ended December 31, 2015. The adoption of ASU 2014-15 did not have a material effect on its consolidated financial
statements.
Note 4 – Notes Receivable
On June 17, 2014, ROI DEV entered into a
Framework Agreement with Coast to Coast Holdings, Inc. (“CTC”), a Canadian Construction corporation. Under the
terms of the agreement, ROI DEV will provide funding to CTC in the form of notes payable and mortgage notes payable for
property development projects, and provide financial and real estate advisory services, for a period of up to ten years. ROI
DEV has the right to make the loan or not and each individual loan will be evidenced by its own promissory note with terms
agreed upon by the parties. The Framework Agreement was terminated as of December 31, 2014.
Mortgage notes receivable and notes receivable
due from CTC consisted of the following at December 31, 2015 and 2014:
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December 31, 2015
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|
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December 31, 2014
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|
|
Note
|
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Reserve for
|
|
|
|
|
|
|
Note
|
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Reserve for
|
|
|
|
|
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Notes
|
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Face Vale
|
|
|
Loan Loss
|
|
|
Note, net
|
|
|
Face Vale
|
|
|
Loan Loss
|
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|
Note, net
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|
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Mortgage Notes:
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3320 Kenney St., BC
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$
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443,354
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$
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–
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|
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$
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443,354
|
|
|
$
|
184,879
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$
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–
|
|
|
$
|
184,879
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|
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Unsecured Notes:
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1015-1050 Nalabila Blvd, BC
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$
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1,012,237
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|
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$
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(1,012,237
|
)
|
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$
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–
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|
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$
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–
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$
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–
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$
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–
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3320 Kenney St., BC
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630,788
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|
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|
(630,788
|
)
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–
|
|
|
|
752,413
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|
|
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–
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|
|
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752,413
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$
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1,643,025
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$
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(1,643,025
|
)
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$
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–
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|
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$
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752,413
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|
|
$
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–
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|
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$
|
752,413
|
|
Mortgage Notes
At
December 31, 2015 and 2014, the Company had a mortgage note receivable outstanding with CTC for $154,994 and $184,879, respectively,
(CAD 215,000). The note bears interest at 8% per annum and was due on the earlier of (i) December 30, 2015 or (ii) the date upon
which the subject property is sold by CTC. The mortgage note is in default at December 31, 2015; however, it is collateralized
by a mortgage on the property. As of December 31, 2015 and 2014, $18,759 and $3,809 of interest receivable was accrued on the
loan.
During the year ended December 31, 2015, the
Company assumed a second mortgage note due to a related party by CTC and CTC agreed to reimburse the Company for the full amount
of the mortgage and accrued interest due thereon. The loan bears interest at 6% per annum and is due April 13, 2016. The amount
of the mortgage loan due from CTC at December 31, 2015 is $288,360 (CAD 400,000). As of December 31, 2015, $16,718 of interest
receivable was accrued on the loan.
ROI Land Investments Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2015
Note 4 – Notes Receivable (Continued)
Unsecured Notes
On December 31, 2015 and 2014, the Company
had an unsecured note receivable outstanding with CTC for $630,788 and $752,413, respectively, (CAD 875,000). The note bears interest
at 8%, was due December 30, 2015 and is in default as of December 31, 2015. The funding from the note was used for the development
and construction on the property for which the Company has two mortgage notes receivable. As CTC has not responded to requests
for payment on the notes and has not provided any evidence of the use of funds, the Company has fully reserved against this note
for loan loss, as well as $52,986 (CAD 73,500) of accrued interest, as of December 31, 2015.
During the year ended December 31, 2015, the
Company loaned CTC $1,012,237 (CAD 1,404,130) in the form of unsecured notes for the development of one of its properties. The
notes bear interest at 8% per annum and were due December 30, 2015. The notes are in default at December 31, 2015. As CTC has not
responded to requests for payment on the notes and has not provided any evidence of the use of funds, the Company has fully reserved
against these notes for loan loss, as well as $56,162 (CAD 67,314) of accrued interest, as of December 31, 2015.
Note 5 – Acquisition Deposit, Related
Party
On September 10, 2015, the Company
agreed to acquire 14,400 shares of Capital Evolution Groupe SAS (“CEG”), a French limited liability company,
for $112,187 (€100,000). The Company’s President, Philippe Germain, is a shareholder of CEG. The acquisition
closed on January 12, 2016. As of December 31, 2015, the $112,187 paid for the investment was classified as an acquisition
deposit in the accompanying consolidated balance sheet.
Note 6 – Land and Development Costs
Land and development costs consist of the following
projects at December 31, 2015 and 2014:
|
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December 31, 2015
|
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|
December 31, 2014
|
|
Property
/ Project
|
|
USD
|
|
|
CAD
|
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|
USD
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CAD
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Beauport, BC
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$
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4,567,218
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$
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6,335,438
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$
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5,431,448
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$
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6,316,372
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840 Graham Avenue, Terrace, BC
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233,275
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323,589
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266,569
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310,000
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|
|
3304 Kenney Street, Terrace, BC
|
|
|
727,711
|
|
|
|
1,009,448
|
|
|
|
842,541
|
|
|
|
979,812
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4922 Park Avenue, Terrace, BC
|
|
|
570,808
|
|
|
|
791,799
|
|
|
|
665,266
|
|
|
|
773,655
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1015-1050 Nalabila Blvd, Kitimat, BC
|
|
|
1,529,141
|
|
|
|
2,121,155
|
|
|
|
1,757,139
|
|
|
|
2,043,423
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Evans, Colorado
|
|
|
7,169,847
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
14,798,000
|
|
|
|
|
|
|
$
|
8,962,963
|
|
|
|
|
|
On March 24, 2014, the Company’s wholly-owned
Subsidiaries, ROI DEV, executed a Definitive Agreement for the purchase of land from 9284-0784 Québec Inc. The land consists
of 1,971,000 square feet in suburban Quebec and is known as the “Beauport Project”. Per the terms of the Agreement,
the total cost of the purchase was $5,085,210 (CAD 5,913,723), of which $257,970 (CAD 300,000) was tendered upon execution as a
firm initial deposit, with the remaining balance of $4,827,240 (CAD 5,613,723) was to be paid on or before June 1, 2014. As
the balances were not paid by June 1, 2014, the Company and 9284-0784 Quebec Inc. agreed to extend the due date and the Company
paid additional deposits totaling $730,915 (CAD 850,000) and fees to extend the payment date of the transaction of $201,827 (CAD
234,709), which have been capitalized as part of the cost of the project. The Company’s CEO, Sebastien Cliche, owns 16.67%
of 9284-0784 Quebec Inc.
ROI Land Investments Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2015
Note 6 – Land and Development Costs
(Continued)
On October 14, 2014, ROI DEV closed on the
purchase of the land. The total cost of the purchase was $5,287,037 (CAD 6,148,432). From October 14, 2014 through December 31,
2014, the Company has incurred an additional $144,411 (CAD 167,940) of project development costs and has been capitalized as a
part of the project resulting in a balance in the project of $5,431,448 (CAD 6,316,372) at December 31, 2014. During the year ended
December 31, 2015, $13,745 (CAD 19,066) was incurred and capitalized to the project resulting in a balance in the project of $4,567,218
(CAD 6,335,438) at December 31, 2015.
On June 14, 2014, ROI DEV agreed to fund CTC
a total of $266,569 (CAD 310,000) for a property development project known as 840 Graham Street, Terrace, BC under the Framework
Agreement between the parties. On December 31, 2014, the Company and CTC entered into a Purchase and Sale Agreement whereby the
Company has received the title interest in the property acquired by CTC and had relieved CTC from any further obligation of the
mortgage note receivable and the Framework Agreement was terminated. During the year ended December 31, 2015, $9,796 (CAD 13,589)
was incurred and capitalized to the project resulting in a balance in the project of $233,275 (CAD 323,589) at December 31, 2015.
On August 15, 2014, ROI DEV agreed to fund
CTC a total of $842,541 (CAD 979,812) for a property development project known as 3304 Kenney Street, Terrace, BC under the Framework
Agreement between the parties. On December 31, 2014, the Company and CTC entered into a Purchase and Sale Agreement whereby the
Company has received the title interest in the property acquired by CTC and had relieved CTC from any further obligation of the
mortgage note receivable and the Framework Agreement was terminated. During the year ended December 31, 2015, $21,365 (CAD 29,636)
was incurred and capitalized to the project resulting in a balance in the project of $727,711 (CAD 1,009,448) at December 31, 2015.
On September 15, 2014, ROI DEV agreed to fund
CTC a total of $665,266 (CAD 773,655) for a property development project known as 4922 Park Avenue, Terrace, BC under the Framework
Agreement between the parties. On December 31, 2014, the Company and CTC entered into a Purchase and Sale Agreement whereby the
Company has received the title interest in the property acquired by CTC and had relieved CTC from any further obligation of the
mortgage note receivable and the Framework Agreement was terminated. During the year ended December 31, 2015, $13,080 (CAD 18,144)
was incurred and capitalized to the project resulting in a balance in the project of $570,808 (CAD 791,799) at December 31, 2015.
During the year ended December 31, 2015, ROI
DEV agreed to fund CTC a total of $596,274 (CAD 693,423) on a property development project known as 1015-1050 Nalabila Blvd, Kitimat,
BC under the Framework Agreement between the parties. On December 31, 2014, the Company and CTC entered into a Purchase and Sale
Agreement whereby the Company has received the title interest in the property acquired by CTC and had relieved CTC from any further
obligation of the note receivable and the Framework Agreement was terminated. Additionally, the Company has agreed to assume the
additional purchase liability for the property of $1,160,865 (CAD 1,350,000), for a total project cost of $1,757,139 (CAD 2,043,423)
at December 31, 2014. The purchase liability was paid on April 22, 2015. During the year ended December 31, 2015, $56,037 (CAD
77,732) was incurred and capitalized to the project resulting in a balance in the project of $1,529,141 (CAD 2,121,155) at December
31, 2015.
On May 21, 2015, the Company entered into an
agreement to acquire approximately 250 acres of land in Montgomery, Texas for $8,300,000, subject to due diligence and final acceptance
within 120 days from the date of the agreement by the Company. A deposit of $84,000 was paid on May 21, 2015 and the Company incurred
additional costs of $33,314 during the year ended December 31, 2015. As of December 31, 2015, the Company’s management decided
to not pursue the land acquisition and wrote off $117,314 abandoned land acquisition costs.
On June 9, 2015, the Company closed on the
purchase of 220 acres of land in Evans, Colorado for a purchase price of $6,700,000. During the period from June 9, 2015 to December
31, 2015, the Company incurred $17,876 of closing costs and $451,971 of development costs on the property, resulting in a balance
of $7,169,847 at December 31, 2015. See Note 8 -- Notes and Loans Payable.
ROI Land Investments Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2015
Note 6 – Land and Development Costs
(Continued)
On July 9, 2015, the Company entered into
a memorandum of understanding with PNC Investments LLC, a UAE corporation, for the potential purchase of 433,000 square feet of
land in the Sobha Hartland district of Dubai, United Arab Emirates. The total acquisition price is $29,488,000 (AED 108,281,250).
During the year ended December 31, 2015, the Company paid a total of $2,801,205 (AED 10,286,305) in nonrefundable deposits to
PNC Investments LLC and incurred evaluation and design costs of $346,827 (AED 1,273,583) for a total balance of $3,148,032 at
December 31, 2015 and is included in the accompanying consolidated balance sheet as deposits on land. The acquisition is subject
to customary closing conditions, including the Company’s ability to obtain financing. As a result, there can be no assurance
that the acquisition will occur as contemplated or at all.
On September 3, 2015, the Company
entered into an agreement to acquire an additional approximately 16 acres of land in Evans, Colorado for $2,250,000, subject
to due diligence and final acceptance within 21 days from the date of the agreement by the Company and to be closed within 75
days from the date of the agreement. The seller and the Company entered into an extension of the agreement until November 30,
2015. Deposits of $233,869 were paid by Company during the year ended December 31, 2015. As of November 30, 2015,
the Company’s management decided to not pursue the land acquisition and wrote off $233,869 as abandoned land
acquisition costs.
Note 7 – Investment in Cost-Method
Investee
On August 1, 2014, the Company acquired a 2%
interest in Society Louisette Memories SARL for $60,750 (EUR 50,000). Society Louisette Memories SARL owns a land development project
in Louisette (Paca), France. The land consists of 226,000 square feet to be sub-divided into 30 residential properties. The Company
is a co-investor with Rome Finance Group and Capital Evolution Group SAS. The balance of the investment at December 31, 2015 is
$56,080 (EUR 50,000).
Note 8 – Notes and Loans Payable
Convertible Notes Payable
Convertible notes payable consist of the following
at December 31, 2015 and 2014:
|
|
December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
|
|
|
Profit
|
|
|
|
|
|
|
|
Principal
|
|
|
Debt
|
|
|
Costs
|
|
|
Participation
|
|
|
Net
|
|
Beauport Note Series
|
|
Amount
|
|
|
Discount, net
|
|
|
Discount, net
|
|
|
Discount, net
|
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A Convertible
|
|
$
|
1,200,000
|
|
|
$
|
(58,875
|
)
|
|
$
|
(98,757
|
)
|
|
$
|
(90,010
|
)
|
|
$
|
952,358
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series B Convertible
|
|
|
2,421,479
|
|
|
|
–
|
|
|
|
(206,457
|
)
|
|
|
–
|
|
|
|
2,215,022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series C Convertible
|
|
|
874,000
|
|
|
|
(125,041
|
)
|
|
|
(71,934
|
)
|
|
|
–
|
|
|
|
677,025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series D Convertible
|
|
|
365,000
|
|
|
|
–
|
|
|
|
(30,057
|
)
|
|
|
(27,379
|
)
|
|
|
307,564
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,860,479
|
|
|
$
|
(183,916
|
)
|
|
$
|
(407,205
|
)
|
|
$
|
(117,389
|
)
|
|
|
4,151,969
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less current portion, net of discounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,259,922
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible notes payable, net of discounts, noncurrent
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,892,047
|
|
ROI Land Investments Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2015
Note 8 – Notes and Loans Payable (Continued)
|
|
December 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
|
|
|
Profit
|
|
|
|
|
|
|
|
Principal
|
|
|
Debt
|
|
|
Costs
|
|
|
Participation
|
|
|
Net
|
|
Beauport Note Series
|
|
Amount
|
|
|
Discount, net
|
|
|
Discount, net
|
|
|
Discount, net
|
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A Convertible
|
|
$
|
1,200,000
|
|
|
$
|
(91,833
|
)
|
|
$
|
(156,121
|
)
|
|
$
|
(140,398
|
)
|
|
$
|
811,648
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series B Convertible
|
|
|
2,900,497
|
|
|
|
–
|
|
|
|
(377,320
|
)
|
|
|
–
|
|
|
|
2,523,177
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series C Convertible
|
|
|
874,000
|
|
|
|
(195,041
|
)
|
|
|
(113,719
|
)
|
|
|
–
|
|
|
|
565,240
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series D Convertible
|
|
|
365,000
|
|
|
|
–
|
|
|
|
(47,516
|
)
|
|
|
(42,705
|
)
|
|
|
274,779
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,339,497
|
|
|
$
|
(286,874
|
)
|
|
$
|
(694,676
|
)
|
|
$
|
(183,103
|
)
|
|
$
|
4,174,844
|
|
All series of the notes contain provisions
that allow for a) pro rata prepayments of the notes by the Company in the event of sales of parcels of the Beauport Property, b)
a call option by the Company to prepay the note at any time prior to the six month anniversary of the closing date of the note
which includes a 15% premium in the form of the Company’s common stock, and c) an option of the noteholder to convert the
note into shares of the Company’s common stock at a 10% discount to the average market price of the Company’s common
stock during the thirty days’ trading period preceding the date of conversion. The Company has not recorded any beneficial
conversion feature as of December 31, 2015 as the embedded conversion options in its notes payable do not meet the firm commitment
criterion as described under applicable U.S. GAAP. The Company has the option to extend the maturity date of the notes up to a
period of 18 months.
For the Series A and Series D notes only, the
noteholders have an option to call for immediate redemption in full or in part by the Company at a price which the Company shall
reasonably determine as being the “fair market value” of the applicable note. As these notes can be immediately redeemable
at the option of the noteholder, they have been classified as current liabilities in the accompanying consolidated balance sheets
at December 31, 2015.
The convertible notes are collateralized by
the Beauport property acquired by ROI DEV.
The convertible notes contain certain
financial and other covenants. As of December 31, 2014 and as a result of the Company's going concern disclosure, the Company was
unable to remain in compliance with a covenant arising under all of its convertible note agreements. The total of $5,339,497
of long-term debt was subject to accelerated maturity and, as such, the creditors may, at their option, give notice to the
Company that amounts owed are immediately due and payable. As a result, the full amount of the related long-term debt has
been classified as a current liability in the accompanying consolidated balance sheet at December 31, 2014. On April 27,
2015, the Company received written consent of waiver of the default from the required noteholders (greater than 50% of the
noteholders in principal amount pari passu) and the applicable covenant was removed to ensure it will not be triggered in the
future. As such, the amount representing the long-term portion of the notes payable, $2,892,047, net of discounts, has been
classified as noncurrent liabilities as of December 31, 2015.
Beauport Series A Convertible Notes
On October 14, 2014, the Company issued $1,200,000
of its Series A convertible notes payable to three investors for cash. The notes bear interest at 10% per annum and are due October
14, 2017. A total of 282,500 shares of the Company’s common stock were issued in conjunction with the notes to the noteholders
at a fair value of $98,875 ($0.35 per share) based on the price of shares sold to investors. The $98,875 was recorded as a discount
to the notes and $7,042 and $32,958 of the discount has been accreted as interest expense for the years ended December 31, 2014
and 2015, respectively, resulting in an unamortized discount of $58,875 at December 31, 2015 which will be amortized over the next
22.5 months.
ROI Land Investments Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2015
Note 8 – Notes and Loans Payable (Continued)
Beauport Series A Convertible Notes (Continued)
The notes contain a premium payment to the
noteholder on each sale of the Beauport project in an amount equal to fifty percent (50%) of the noteholder’s pro rata share
of the total net profit on each parcel of the Beauport project sold. The potential profit in the Beauport project at December 31,
2015 and 2014 was estimated to be $1,127,172 and $1,345,244, respectively, based on management’s estimates as of December
31, 2015 and a third-party valuation as of December 31, 2014, of which, $151,165 is the pro rata share of the Series A noteholders
and was recorded as a discount to the notes. $10,767 and $50,388 of the discount has been accreted as interest expense for the
years ended December 31, 2014 and 2015, respectively, resulting in an unamortized discount of $90,010 at December 31, 2015 which
will be amortized over the next 22.5 months.
The effective interest rate for the Series
A convertible notes was 21.6% and 21.4% for the years ended December 31, 2015 and 2014, respectively.
Beauport Series B Convertible Notes
On October 14, 2014, the Company issued $2,900,497
of its Series B convertible notes payable to thirty-three investors for cash. The notes bear interest at 8% per annum and are due
October 14, 2017. During the year ended December 31, 2015, the Company redeemed notes totaling $479,018 note from two noteholders,
under a pre-existing agreement with the noteholder, for 360,000 Euro ($395,569), resulting in a gain from the extinguishment of
the debt of $83,449.
The effective interest rate for the Series
B convertible notes was 13.8% and 12.5% for the years ended December 31, 2015 and 2014, respectively.
Beauport Series C Convertible Notes
On October 14, 2014, the Company issued $874,000
of its Series C convertible notes payable to an investor for cash. The note bears interest at 10% per annum and is due October
14, 2017. A total of 600,000 shares of the Company’s common stock were issued in conjunction with the note to the noteholder
at a fair value of $210,000 ($0.35 per share) based on the price of shares sold to investors. The $210,000 was recorded as a discount
to the note and $14,959 and $70,000 of the discount has been accreted as interest expense for the years ended December 31, 2014
and 2015, respectively, resulting in an unamortized discount of $125,041 at December 31, 2015 which will be amortized over the
next 22.5 months.
The effective interest rate for the Series
C convertible notes was 22.6% and 22.4% for the years ended December 31, 2015 and 2014, respectively.
Beauport Series D Convertible Notes
On October 14, 2014, the Company issued $365,000
of its Series D convertible notes payable to five investors for cash. The notes bear interest at 10% per annum and are due October
14, 2017.
The notes contain a premium payment to the
noteholder on each sale of the Beauport project in an amount equal to fifty percent (50%) of the noteholder’s pro rata share
of the total net profit on each parcel of the Beauport project sold. The potential profit in the Beauport project at December 31,
2014 and 2015 was estimated to be $1,127,172 and $1,345,244, respectively based on management’s estimates as of December
31, 2015 and a third-party valuation as of December 31, 2014, of which, $45,981 is the pro rata share of the Series D noteholders
and was recorded as a discount to the notes. $3,276 and $15,326 of the discount has been accreted as interest expense for the years
ended December 31, 2014 and 2015, respectively, resulting in an unamortized discount of $27,379 at December 31, 2015 which will
be amortized over the next 22.5 months.
The effective interest rate for the Series
D convertible notes was 18.9% and 18.7% for the years ended December 31, 2015 and 2014, respectively.
ROI Land Investments Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2015
Note 8 – Notes and Loans Payable (Continued)
Interest on Beauport Convertible Notes
Payable
As a condition of the convertible note agreements,
the Company has placed the first year’s interest in escrow with an agent who made monthly interest payments to the noteholders
on the Company’s behalf. A total of $410,135 was funded to the escrow agent during the year ended December 31, 2014 and an
additional amount of $173,827 was funded during the year ended December 31, 2015. The escrow agent paid a total of $85,739 to noteholders
during the year ended December 31, 2014 and $446,091 during the year ended December 31, 2015, resulting in a balance of prepaid
interest of $52,132 at December 31, 2015.
During the years ended December 31, 2014 and
2015, $103,121 and $449,535, respectively, of interest was accrued and expensed on the notes and $85,739 and $446,091, respectively,
was paid by the escrow agent, resulting in a remaining accrual of $17,382 and $20,826 at December 31, 2014 and 2015.
Debt Issuance Costs on Beauport Convertible
Notes Payable
During the year ended December 31, 2014, the
Company paid cash of $570,543, issued 258,111 shares of its common stock at a fair value of $90,339 ($0.35 per share) based on
the price of shares sold to investors, and had recorded 246,683 shares of common stock to be issued as a liability at a fair value
of $86,338 ($0.35 per share) based on the price of shares sold to investors, for a total of $747,220 of debt issuance costs recorded
as a debt discount to the convertible notes. $52,544 and $287,471 has been amortized as interest expense during the years ended
December 31, 2014 and 2015, respectively, resulting in a balance of debt issuance costs discount of $694,676 and $407,205 at December
31, 2014 and 2015, respectively, which will be amortized over the next 22.5 months.
Notes Payable
Notes payable consisted of the following at
December 31, 2015:
|
|
December 31, 2015
|
|
|
|
|
|
|
|
Issuance
|
|
|
|
|
|
|
|
Principal
|
|
|
Costs
|
|
|
Net
|
|
Note Series
|
|
Amount
|
|
|
Discount, net
|
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kitimat Series A
|
|
$
|
2,442,830
|
|
|
$
|
(167,904
|
)
|
|
$
|
2,274,926
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kitimat Series B
|
|
|
473,117
|
|
|
|
–
|
|
|
|
473,117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terrace Series A
|
|
|
722,178
|
|
|
|
(38,529
|
)
|
|
|
683,649
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,638,125
|
|
|
$
|
(206,433
|
)
|
|
|
3,431,692
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less current portion
|
|
|
|
|
|
|
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes payable, net of discounts, noncurrent
|
|
|
|
|
|
|
|
|
|
$
|
3,431,692
|
|
There were no notes payable at December 31,
2014.
All series of the notes contain provisions
that allow for a) pro rata prepayments of the notes by the Company in the event of sales of parcels of the respective project and
b) a call option by the Company to prepay the note at any time prior to the six month anniversary of the closing date of the note.
The Company also has the option to extend the maturity date of the notes up to a period of 18 months.
ROI Land Investments Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2015
Note 8 – Notes and Loans Payable (Continued)
Kitimat Series A Notes
On May 8, 2015, the Company issued $2,442,830
of its Kitimat Series A notes payable to twenty-nine investors for cash. The notes bear interest at 8% per annum, are due May 8,
2018, and are collateralized by a secured interest in the Kitimat property. The Series A notes contain an option by the Company
to prepay the notes on a pro rata basis in the event of sales of the Kitimat project in an amount equal to twenty-five percent
(25%) of the net profits realized on such sales.
The effective interest rate for the Series
A notes was 10.9% for the year ended December 31, 2015.
Kitimat Series B Notes
On May 8, 2015, the Company issued $473,117
of its Kitimat Series B notes payable to two investors for cash. The notes bear interest at 8% per annum, are due May 8, 2018,
and are collateralized by a secured interest in the Kitimat property. The Series B notes contain an option by the Company to prepay
the notes on a pro rata basis in the event of sales of the Kitimat project in an amount equal to fifty percent (50%) of the net
profits realized on such sales.
The effective interest rate for the Series
B notes was 8.0% for the year ended December 31, 2015.
Terrace Series A Notes
On July 17, 2015, the Company issued $824,416
(CAD 1,001,774) of its Terrace Series A notes payable to six investors for cash. The notes bear interest at 8% per annum, are due
July 17, 2018, and are collateralized by a secured interest in the Terrace property. The Series A notes contain an option by the
Company to prepay the notes on a pro rata basis in the event of sales of the Terrace project in an amount equal to twenty-five
percent (25%) of the net profits realized on such sales.
The effective interest rate for the Series
B notes was 9.3% for the year ended December 31, 2015.
Interest on Notes Payable
As a condition of the note agreements, the
Company shall place the first year’s interest in escrow with an agent who will make monthly interest payments to the noteholders
on the Company’s behalf. A total of $194,416 was funded to the escrow agent during the year ended December 31, 2015.
During the year ended December 31, 2015, $180,372
of interest was accrued and expensed on the notes and $194,382 was paid by the escrow agent, resulting in a remaining accrual of
$(14,010) at December 31, 2015.
Debt Issuance Costs on Notes Payable
During the year ended December 31, 2015, the
Company paid cash of $169,737 and has recorded 117,921 shares of common stock to be issued as a liability at a fair value of $90,009
($0.76 per share) based on the price of shares sold to investors, for a total of $259,746 of debt issuance costs recorded as a
debt discount to the notes. $53,313 has been amortized as interest expense during the year ended December 31, 2015 resulting in
a balance of debt issuance costs discount of $206,433 at December 31, 2015 which will be amortized over the next 28 months.
Land Loans
At December 31, 2014, the Company agreed to
assume CTC’s land loan on the Kitimat property in the amount of $1,160,865 (CAD 1,350,000). The loan was fully paid on April
22, 2015.
On June 8, 2015, in connection with the acquisition
of the Evans, Colorado property (see Note 6 – Land and Development Costs), the Company issued a promissory note in the amount
of $3,350,000 to the seller. The note is due June 5, 2016, is collateralized by the property and bears interest at 6% per annum.
At December 31, 2015, $115,017 of interest has been accrued and $100,525 has been paid resulting in a balance of accrued interest
of $14,492.
ROI Land Investments Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2015
Note 8 – Notes and Loans Payable (Continued)
Mortgage Note Payable
On October 9, 2015, the Company entered into
a mortgage loan agreement for $937,170 (CAD 1,300,000). At closing, the Company returned $72,090 (CAD 100,000) to the lender as
a reduction of the principal resulting in a balance of $865,080 (CAD 1,200,000) at December 31, 2015. The loan bears interest at
20% per annum and was due December 9, 2015. On December 29, the Company and the lender entered into an extension agreement on the
loan of three months until March 13, 2016 for a fee of $21,870 (CAD 30,000) and on March 15, 2016 the Company and lender entered
into a second extension agreement of an additional three months until June 13, 2016 for a fee of $7,930 (CAD 11,000). The loan
is collateralized by first rank mortgages on the Company’s Kenney Street and Park Avenue properties and second rank mortgages
on its Kitimat and Beauport properties and is guaranteed by the Company’s CEO and President. The Company incurred and paid
$31,785 (CAD 43,333) of interest expense for the year ended December 31, 2015.
Loans Payable
During the year ended December 31, 2015, the
Company borrowed a total of $415,000 from Valescore Ltd., a Swiss company. The loans are unsecured, bear interest at 8% per annum
and are due at various dates beginning January 1, 2016. On April 2, 2016, the due dates of all of the notes were extended to December
30, 2016 by the lender. $5,150 of interest expense has been accrued on the loans for the year ended December 31, 2015.
Deposits on Notes Payable Subscriptions
To fund the development of the Company’s
projects, the Company is seeking subscriptions for up to a total of $13,000,000 for new
series of notes payable, to be described as “BC Series 2”, “Colorado”, and “Dubai”. As of December
31, 2015, the terms and provisions of the notes are yet to be determined and, as such, the deposits have been classified as current
liabilities in the accompanying consolidated balance sheet. As of December 31, 2015 and 2014, the Company has received deposits
of $3,741,821 and $567,617 net of issuance costs of $284,673 and $-0-, respectively, for subscriptions for the future notes.
Profit Participation Liability
The Beauport Series A and Series D notes contain
a premium payment to the noteholders on each sale of the Beauport project in an amount equal to fifty percent (50%) of the noteholder’s
pro rata share of the total net profit on each parcel of the Beauport project sold. The potential profit in the Beauport project
at December 31, 2015 and 2014 is estimated to be $1,127,172 and $1,345,244, based on a third-party valuation as of December 31,
2014 and management’s estimates as of December 31, 2015, of which, $197,146 is the pro rata share of the Beauport Series
A and D noteholders and is recorded as a profit participation liability as of December 31, 2015 and 2014, respectively.
Debt Maturities
Future debt maturities are as follows:
December 31,
|
|
|
|
|
|
2016
|
|
|
$
|
5,116,608
|
|
2017
|
|
|
|
4,860,479
|
|
2018
|
|
|
|
3,638,125
|
|
|
|
|
|
|
|
|
Total
|
|
|
$
|
13,615,212
|
|
ROI Land Investments Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2015
Note 9 – Related Party Transactions
The Company leases a corporate apartment from
Philippe Germain, the Company’s Co-President, on a month-to-month basis. Monthly rental is $675 and total rent paid for the
year ended December 31, 2015 was $8,100.
The Company leases a corporate apartment from
Louise Gagner on a month-to-month basis. Ms. Gagner is the mother of Philippe Germain. Monthly rental is $1,000 and total rent
paid for the year ended December 31, 2015 was $12,000.
During the year ended December 31, 2015, the
Company entered into multiple loan agreements with LMM Group LTD. (“LMM”), a Swiss company, and received a total of
$248,168. The notes are unsecured, bear interest at 8% per annum and are due at various dates beginning January 1, 2016. Philippe
Germain is the sole shareholder of LMM. On December 10, 2015, $150,000 of the notes was assigned to 8010609 Canada Inc. Philippe
Germain is also the sole shareholder of 8010609 Canada Inc. The balance of the loans from LMM at December 31, 2015 is $98,168.
$6,150 of interest was accrued on the loans at December 31, 2015.
On December 10, 2015, LMM assigned
$150,000 of their notes to 8010609 Canada Inc. On the same date, the Company paid $50,000 of the note. On October 29, 2015,
8010609 Canada Inc. loaned the Company an additional $36,475 which was repaid on November 20, 2015. The notes are unsecured,
bear interest at 8% per annum and are due on December 30, 2016. The balance of the loans from 8010609 Canada Inc. at
December 31, 2015 is $100,000. $667 of interest was accrued on the loans at December 31, 2015.
On October 13, 2015, the Company assumed a
second mortgage note due to 9202 4462 Quebec Inc. of $288,360 (CAD 400,000). The owner of 9202 4462 Quebec Inc. is a shareholder
of the Company. The loan is secured by a second rank mortgage on a property owned by CTC, bears interest at 6% per annum and is
due April 13, 2016. $3,745 of interest was accrued on the loan at December 31, 2015.
The aggregate amount above due to related
parties at December 31, 2015 was $486,528.
During the year ended December 31, 2015, the
Company advanced a total of $185,061 to CEG. Philippe Germain is a shareholder
of CEG. The advances are unsecured, non-interest bearing and due on demand. On September 10, 2015, the Company agreed to acquire
14,400 shares of CEG for $112,187 (€ 100,000). The acquisition closed on January 12, 2016.
On December 20, 2015, the Company agreed to
acquire 144,459 shares of CEG for $1,575,686 (€ 1,444,590) from Philippe Germain, subject to completion of due diligence by
the Company and official registration of the shares in France. The shares to be acquired will bring the Company’s interest
in CEG to 58% once the transaction is final. On April 5, 2016, the total consideration for the shares was adjusted to $551,490
(€ 505,607) by mutual agreement between the parties. The acquisition is expected to close in the second quarter of 2016.
During the year ended December 31, 2015, the
Company paid $257,573 and issued 149,004 shares of its common stock valued at $150,484, to Acadian Advisors and Associates (“Acadian”)
for equity and debt issuance costs. Acadian is a subsidiary of CEG. In addition, the Company owes $148,271 to Acadian as of December
31, 2015. There are no offset provisions with the amounts due from CEG.
During the year ended December 31, 2015, the
Company paid $156,286 and has accrued 58,949 shares of its common stock valued at $45,218 to be issued, to Rome Finance Investissement
(“Rome”) for equity and debt issuance costs. Rome is a subsidiary of CEG.
During the year ended December 31, 2015,
the Company paid $30,000 to Maxim Cliche, the brother of Sebastien Cliche, the Co-President and COO of the Company, for
consulting services.
During the year ended December 31, 2014, the
Company paid $86,983 to Cliche Investments LLC for consulting services. Sebastien Cliche is the sole member of Cliche Investments
LLC.
During the year ended December 31, 2014, the
Company paid $45,500 to 8010609 Canada Inc. for consulting services.
ROI Land Investments Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2015
Note 9 – Related Party Transactions
(Continued)
On May 14, 2014, the Company issued 1,500,000
shares to Sebastien Cliche. The shares were valued at $525,000, or $0.35 per share, based on the price of the Company’s common
stock sold to investors.
On May 14, 2014, the Company issued 1,500,000
shares to Philippe Germain. The shares were valued at $525,000, or $0.35 per share, based on the price of the Company’s common
stock sold to investors.
On July 24, 2014, the Company issued 1,000,000
shares as a severance payment to its former director, Patrick Bragoli. The shares were valued at $350,000 or $0.35 per share, based
on historical sales of the company’s restricted common stock to investors.
On December 3, 2014, the Company issued 100,000
shares to its Director, Dr. Sami Chaouch. The shares were valued at $35,000 or $0.35 per share, based on historical sales of the
Company’s restricted common stock to investors.
On December 3, 2014, the Company issued 100,000
shares to its former Director, Robert Boisjoli. The shares were valued at $35,000 or $0.35 per share, based on historical sales
of the Company’s restricted common stock to investors.
Note 10 – Stockholders’ Equity
Authorized Capital
On November 12, 2015, the Company filed an
amendment to its articles of incorporation to increase its authorized capital to 160,000,000 authorized shares of Series A Common
Stock at $0.0001 par value, 40,000,000 authorized shares of Series B Common Stock at $0.0001 par value, and 50,000,000 authorized
shares of Preferred Stock at par value of $0.0001 per share. Series A common shares have equal voting rights, are non-assessable
and have one vote per share while Series B common shares have no voting rights. Voting rights are not cumulative and, therefore,
the holders of more than 50% of the common stock could, if they choose to do so, elect all of the directors of the Company.
Common Stock
During the year ended December 31, 2015, the
Company received cash of $7,666,949, net of cash issuance costs, for 7,393,580 shares of its common stock. During the year ended
December 31, 2014, the Company received cash of $5,400,487, net of cash issuance costs, for 17,683,638 shares of its common stock
of which 575,715 shares were issued subsequent to December 31, 2014.
During the year ended December 31, 2015, the
Company issued 2,186,745 shares of common stock for consulting services from twelve individuals or entities. The shares were valued
at an average price of $0.75, based on the price of shares sold to investors, for a total of $1,648,878 and have been charged to
operations for the year ended December 31, 2015. During the year ended December 31, 2014, the Company issued 9,370,000 shares of
common stock for consulting services from seventeen individuals or entities. The shares were valued at $0.35, based on the price
of shares sold to investors, for a total of $3,279,500 and have been charged to operations for the year ended December 31, 2014.
During the year ended December 31, 2015, the
Company issued 1,224,242 shares of common stock to consultants for accrued consulting services at December 31, 2014. The shares
were valued at $0.35, based on the price of shares sold to investors, for a total of $428,328.
During the year ended December 31, 2015, the
Company issued 527,006 shares of common stock for commissions to multiple parties for equity issuance costs. The shares issued
were valued at an average price of $0.74, based on the price of shares sold to investors, for a total of $392,254. In addition,
the Company paid cash of $253,351 for issuance costs, for a total of $645,605, which has been charged to additional paid in capital
as of December 31, 2015.
ROI Land Investments Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2015
Note 10 – Stockholders’
Equity (Continued)
Common Stock (Continued)
During the year ended December 31, 2014, the
Company issued 1,173,755 shares of common stock ($410,814), and had 981,609 shares issuable ($343,563), for commissions to multiple
parties for equity issuance costs. The shares issued and issuable were valued at $0.35, based on the price of shares sold to investors,
for a total of $754,377. In addition, the Company paid cash of $1,122,148 for issuance costs, for a total of $1,876,525, which
has been charged to additional paid in capital as of December 31, 2014.
During the year ended December 31, 2015, the
Company issued 164,605 shares of common stock for commissions to multiple parties for debt issuance costs. The shares issued were
valued at an average price of $1.23, based on the price of shares sold to investors, for a total of $203,240.
During the year ended December 31, 2014, the
Company issued 258,111 shares of common stock, or $90,339, and had 246,683 shares issuable, or $86,339, for commissions to multiple
parties for debt issuance costs. The shares issued and issuable were valued at $0.35, based on the price of shares sold to investors,
for a total of $176,678. The issuable shares are included in accounts payable and accrued expenses on the December 31, 2014 balance
sheet.
On November 9, 2015, the Company cancelled
500,000 shares previously issued to a consultant for non-performance by the consultant under the consulting agreement.
During the year ended December 31, 2014, the
Company issued 1,200,000 shares of common stock to officers and directors for services. The shares were valued at $0.35, based
on the price of shares sold to investors, for a total of $420,000 and has been charged to operations.
During the year ended December 31, 2014, the
Company issued 882,500 shares of common stock in conjunction with notes payable. The shares issued were valued at $0.35, based
on the price of shares sold to investors, for a total of $308,875 and were recorded as a discount to the notes payable.
During the year ended December 31, 2014, a
shareholder contributed cash of $379,015 to the Company as a capital contribution.
2015 Equity Incentive Plan
On September 8, 2015, the Company’s board
of directors approved and adopted the ROI Land Investments Ltd. 2015 Equity Incentive Plan (the “2015 Plan”). The 2015
Plan was approved by a majority of stockholders of the Company on November 9, 2015. The 2015 Plan provides for the grant of incentive
stock options, non-qualified stock options, stock appreciation rights, restricted awards, performance share awards and performance
compensation awards. The following summarizes activity under the 2015 Plan for the year ended December 31, 2015:
Shares approved for issuance at plan inception
|
|
|
20,000,000
|
|
|
|
|
|
|
Options granted in 2015
|
|
|
(695,000
|
)
|
|
|
|
|
|
Options cancelled in 2015
|
|
|
695,000
|
|
|
|
|
|
|
Balance at December 31, 2015
|
|
|
20,000,000
|
|
ROI Land Investments Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2015
Note 10 – Stockholders’ Equity
(Continued)
2015 Equity Incentive Plan (Continued)
During the year ended December 31, 2015, the
Company issued options to purchase a total of 695,000 shares of the Company’s common stock to four employees. The options
were cancelled on November 16, 2015 as the related employment agreements were cancelled. The options vested immediately, had contractual
lives of three years and were valued at an average grant date fair value of $0.14 per option, or $97,300, using the Black-Scholes
Option Pricing Model with the following assumptions:
Expected term
|
1.5 years
|
Expected volatility
|
17.5%
|
Risk-free interest rate
|
.92% - 1.06%
|
Dividend yield
|
0.00
|
The stock price was based on the price of shares
sold to investors and volatility was based on comparable volatility of other companies since the Company had no significant historical
volatility. As of December 31, 2015, $97,300 was charged to operations.
Non Plan Options
During the year ended December 31, 2015, the
Company issued certain stock options outside of the 2015 Plan. The following summarizes non-Plan option activity for the year ended
December 31, 2015:
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
Common Stock Options Outstanding
|
|
|
average
|
|
|
|
Employees and
|
|
|
|
|
|
|
|
|
exercise
|
|
|
|
Directors
|
|
|
Non-employees
|
|
|
Total
|
|
|
price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options granted
|
|
|
500,000
|
|
|
|
6,457,250
|
|
|
|
6,957,250
|
|
|
$
|
1.51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2015
|
|
|
500,000
|
|
|
|
6,457,250
|
|
|
|
6,957,250
|
|
|
$
|
1.51
|
|
The following table summarizes information
with respect to stock options outstanding and exercisable by employees and directors at December 31, 2015:
|
|
|
|
Options outstanding
|
|
|
|
Options vested and exercisable
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
average
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
remaining
|
|
|
average
|
|
|
Aggregate
|
|
|
|
|
|
|
average
|
|
|
Aggregate
|
|
|
|
|
|
Number
|
|
|
contractual
|
|
|
exercise
|
|
|
intrinsic
|
|
|
Number
|
|
|
exercise
|
|
|
intrinsic
|
|
Exercise price
|
|
|
outstanding
|
|
|
life (years)
|
|
|
price
|
|
|
value
|
|
|
vested
|
|
|
price
|
|
|
value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.35
|
|
|
|
500,000
|
|
|
|
1.75
|
|
|
$
|
0.35
|
|
|
$
|
575,000
|
|
|
|
350,000
|
|
|
$
|
0.35
|
|
|
$
|
402,500
|
|
The Company issued options to purchase a total
of 500,000 shares of the Company’s common stock to an employee. These options have contractual lives of three years and
were valued at an average grant date fair value of $0.04 per option, or $20,000, using the Black-Scholes Option Pricing Model
with the following assumptions:
Stock Price
|
$0.35
|
Expected term
|
2.25 years
|
Expected volatility
|
17.5%
|
Risk-free interest rate
|
1.00%
|
Dividend yield
|
0.00
|
ROI Land Investments Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2015
Note 10 – Stockholders’ Equity
(Continued)
Non Plan Options (Continued)
The stock price was based on the price of shares
sold to investors and volatility was based on comparable volatility of other companies since the Company had no significant historical
volatility. As of December 31, 2015, $17,754 was charged to operations and $2,246 of unrecognized compensation costs related to
stock options. The Company expects to recognize those costs over a weighted average period of 0.4 years as of December 31, 2015.
The following table summarizes information
with respect to stock options outstanding and exercisable by non-employees at December 31, 2015:
|
|
|
|
Options outstanding
|
|
|
Options vested and exercisable
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
average
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
remaining
|
|
|
average
|
|
|
Aggregate
|
|
|
|
|
|
|
average
|
|
|
Aggregate
|
|
|
|
|
|
Number
|
|
|
contractual
|
|
|
exercise
|
|
|
intrinsic
|
|
|
Number
|
|
|
exercise
|
|
|
intrinsic
|
|
Exercise price
|
|
|
outstanding
|
|
|
life (years)
|
|
|
price
|
|
|
value
|
|
|
vested
|
|
|
price
|
|
|
value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.35
|
|
|
|
25,000
|
|
|
|
1.75
|
|
|
$
|
0.35
|
|
|
$
|
28,750
|
|
|
|
25,000
|
|
|
$
|
0.35
|
|
|
$
|
28,750
|
|
$
|
0.75
|
|
|
|
300,000
|
|
|
|
4.17
|
|
|
$
|
0.75
|
|
|
$
|
225,000
|
|
|
|
60,000
|
|
|
$
|
0.75
|
|
|
$
|
45,000
|
|
$
|
1.50
|
|
|
|
122,250
|
|
|
|
0.48
|
|
|
$
|
1.50
|
|
|
$
|
–
|
|
|
|
122,250
|
|
|
$
|
1.50
|
|
|
$
|
–
|
|
$
|
1.65
|
|
|
|
6,010,000
|
|
|
|
9.86
|
|
|
$
|
1.65
|
|
|
$
|
–
|
|
|
|
–
|
|
|
$
|
1.65
|
|
|
$
|
–
|
|
|
|
|
|
|
6,457,250
|
|
|
|
|
|
|
$
|
1.60
|
|
|
$
|
253,750
|
|
|
|
207,250
|
|
|
$
|
1.14
|
|
|
$
|
73,750
|
|
During the year ended December 31, 2015, the
Company issued options to purchase a total of 6,457,250 shares of the Company’s common stock to various consultants and investors.
These options have contractual lives of six months to ten years and were valued at an average grant date fair value of $0.44 per
option, or $2,831,530, using the Black-Scholes Option Pricing Model with the following assumptions:
Stock Price
|
$0.35 to $1.50
|
Expected term
|
.5 to 10 years
|
Expected volatility
|
17.3% to 21.1%
|
Risk-free interest rate
|
0.64% to 2.36%
|
Dividend yield
|
0.00
|
The stock price was based on the price of shares
sold to investors and volatility was based on comparable volatility of other companies since the Company had no significant historical
volatility. As of December 31, 2015, $193,256 was charged to operations and $2,637,624 of unrecognized compensation costs related
to stock options. The Company expects to recognize those costs over a weighted average period of 2.81 years as of December 31,
2015.
Warrants
During the year ended December 31, 2015, the
Company issued warrants to purchase a total of 1,325,000 shares of the Company’s common stock at exercise prices ranging
from $0.35 to $0.75 to four individuals for consulting services. $477,250 was charged to operations for the year ended December
31, 2015. On September 30, 2015, all of the warrants were cancelled by mutual agreement between the parties. Accordingly, no future
expense will be recognized.
ROI Land Investments Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2015
Note 11 – Income Taxes
No provision was made for income taxes for
the years ended December 31, 2015 and 2014 as the Company had cumulative operating losses.
The income tax expense (benefit) differs from
the amount computed by applying the United States Statutory corporate income tax rate as follows:
|
|
For the Year Ended December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
United States statutory corporate income tax rate
|
|
|
34.0%
|
|
|
|
34.0%
|
|
Effect of Canadian income tax rates
|
|
|
-2.2%
|
|
|
|
-0.2%
|
|
Permanent differences
|
|
|
0.1%
|
|
|
|
0.0%
|
|
Change in valuation allowance
|
|
|
-31.9%
|
|
|
|
-33.8%
|
|
|
|
|
|
|
|
|
|
|
Provision for income tax
|
|
|
-%
|
|
|
|
-%
|
|
Deferred income taxes reflect the tax effect
of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts
used for tax purposes. The components of the net deferred income tax assets are approximately as follows:
|
|
December 31,
|
|
|
|
2015
|
|
|
2014
|
|
Deferred income tax assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating loss carry forwards
|
|
$
|
4,827,780
|
|
|
$
|
1,772,080
|
|
Stock based compensation
|
|
|
668,600
|
|
|
|
(1,900
|
)
|
Valuation allowance
|
|
|
(5,496,380
|
)
|
|
|
(1,770,180
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred income tax assets
|
|
$
|
–
|
|
|
$
|
–
|
|
The Company has established a full valuation
allowance on its deferred tax asset because of a lack of sufficient positive evidence to support its realization. The valuation
allowance increased by $3,726,200 and $1,751,800 for the years ended December 31, 2015 and 2014, respectively.
At December 31, 2015, the Company has net operating
loss carry forwards of approximately $11,468,000 in the United States, which expire commencing 2033. The potential tax benefit
of these losses may be limited due to certain change in ownership provisions under Section 382 of the Internal Revenue Code (“IRS”)
and similar state provisions. The Company also has a net operating loss carry forward in Canada of $3,388,000 which expire commencing
2021.
IRS Section 382 places limitations (the “Section
382 Limitation”) on the amount of taxable income which can be offset by net operating loss carry forwards after a change
in control (generally greater than 50% change in ownership) of a loss corporation. Generally, after a change in control, a loss
corporation cannot deduct operating loss carry forwards in excess of the Section 382 Limitation. Due to these “change in
ownership” provisions, utilization of the net operating loss and tax credit carry forwards may be subject to an annual limitation
regarding their utilization against taxable income in future periods. The Company has not concluded its analysis of Section 382
through December 31, 2015, but believes the provisions will not limit the availability of losses to offset future income.
The Company is subject to income taxes in the
U.S. federal jurisdiction and Canada. The tax regulations within each jurisdiction are subject to interpretation of related tax
laws and regulations and require significant judgment to apply.
ROI Land Investments Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2015
Note 12 – Commitments and Contingencies
The Company has entered into certain consulting
agreements which call for introduction fees to be paid to the consultants for capital received by the Company from investors introduced
by the consultants. The fees range from i) 2% in common stock to ii) 13% in cash and 10% in common stock of the amounts received
by the Company.
The Company’s Series A and Series D convertible
notes payable contain a premium payment to the noteholder on each sale of the Beauport property in an amount equal to fifty percent
(50%) of the noteholder’s pro rata share of the total net profit on each parcel of the Beauport property sold. Based on management’s
estimates as of December 31, 2015, the potential profit in the property at December 31, 2015 is estimated to be $1,127,172, of
which, $197,146 is the pro rata share of the Series A and D noteholders and is recorded as a profit participation liability and
as discounts to the convertible notes payable as of December 31, 2015. The potential profit will be re-measured on a quarterly
basis and adjusted.
On December 31, 2014, the Company and CTC entered
into a Purchase and Sale Agreement whereby the Company has received the title interest in four properties acquired by CTC and had
relieved CTC from any further obligation of notes receivable from CTC. Under the agreement, the Company is obligated to pay CTC
a commission equal to 50% of the net profits earned on the sale of the properties. Under the terms of the agreement, CTC has committed
to purchase the properties within thirty-six months from the date of the agreement at specified prices.
On March 11, 2015, the Company entered into
an agreement with Artizan Interior design (“Artizan”), a UAE corporation, whereby Artizan will provide project management
and technical coordination services for its project in the Sobha Hartland district of Dubai, United Arab Emirates. The services
of Artizan began October 1, 2015 at a monthly fee of $85,000 for a term of the development stage of the project until the handover
of the project to the developer
On May 13, 2015, the Company and LNG Canada
Development Inc. (“LNG Canada”) have entered into an agreement for the Company to develop apartment and townhouse units
in Kitimat, British Columbia. LNG Canada will lease the units. The agreement is for five years and calls for the Company to construct
housing for LNG Canada’s workforce in a phased approach. In the first phase of the housing project, the Company is expected
to build 35 apartments and 9 townhouses in Kitimat, and the first phase is projected to be completed by December 31, 2016. There
is no assurance that the first phase of the project will be completed by December 31, 2016 if required funding is not obtained.
On July 9, 2015, the Company entered into
a memorandum of understanding with PNC Investments LLC, a UAE corporation, for the potential purchase of approximately 433,000
square feet of land in the Sobha Hartland district of Dubai, United Arab Emirates. The total acquisition price is $29,488,000
(AED 108,281,250). As of April 12, 2016, the Company has made a total of $3,701,205 (AED 13,591,200) in non-refundable payments
to PNC Investments LLC leaving a balance of $25,786,795 (AED 94,690,050) . The acquisition is subject to customary closing conditions,
including the Company’s ability to obtain financing. As a result, there can be no assurance that the acquisition will occur
as contemplated or at all.
Legal Matters
Certain conditions may exist as of the date
the consolidated financial statements are issued, which may result in a loss to the Company, but which will only be resolved when
one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently
involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company,
or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or
unasserted claims, as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates
that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated
liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potentially
material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature
of the contingent liability and an estimate of the range of possible losses, if determinable and material, would be disclosed.
ROI Land Investments Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2015
Note 12 – Commitments and Contingencies
(Continued)
Legal Matters (Continued)
On August 6, 2015, Mrs. Gloria Julie Couillard
and Tekno Forme (“Plaintiffs”) filed a complaint naming CTC, its President, ROI DEV Canada (the Company’s wholly-owned
subsidiary), Philippe Germain and Sebastian Cliché as co-defendants claiming unpaid fees of $207,638. On September 2, 2015,
a default judgement was served against CTC. CTC and its President are applying to set aside the default judgement against them
and the Company is opposing the Plaintiff’s notice of Application. The Plaintiff has filed a lien on the Company’s
Canadian properties in the amount of $207,638. Because of the uncertainties as to outcome of the matter, no amounts have been recorded
by the Company.
On September 14, 2015, the Company received
a notification from the American Arbitration Association (“AAA”) of a Request for Mediation, dated September 8, 2015,
filed by Seth Shaw, pursuant to a mediation and arbitration clause contained in a Consulting Agreement allegedly entered into between
the Company and Seth Shaw on May 1, 2014. The Company executed such agreement but believes that that Seth Shaw failed to perform
under said agreement. Mr. Shaw believes that the agreement is valid and in effect. The Company and Mr. Shaw met in mediation on
February 22, 2016 with no resolution achieved. The parties are awaiting a date for arbitration.
The matter under dispute is 500,000 shares
of the Company’s Common Stock which were to be issued to Mr. Shaw pursuant to such agreement. A certificate for such shares
was issued but never delivered to Mr. Shaw, because the Company cancelled the Agreement for failure to perform. In mid-October,
attorneys for Mr. Shaw unilaterally attempted to induce the Company’s transfer agent to issue a replacement certificate.
However, the transfer agent reported this to the Company, and the Company has instructed the transfer agent not to comply with
Mr. Shaw’s wishes. The Company has cancelled the shares and recorded a liability for the value of the shares of $175,000
and is included in accounts payable and accrued expenses in the consolidated balance sheet at December 31, 2015. The Company intends
to vigorously defend itself from any claims by Mr. Shaw for such shares.
Note 13 – Subsequent Events
From January 1, 2016 through April 12, 2016,
the Company issued 2,201,385 shares of its common stock for cash received of $2,111,704.
From January 1, 2016 through April 12, 2016,
the Company issued 43,333 shares of its common stock for consulting services from two individuals or entities. The shares were
valued at $1.19, based on the closing market price as quoted by OTC Markets, Inc. on the date of issuance, for a total of $51,566.
From January 1, 2016 through April 12, 2016,
the Company received $67,260 as deposits for its Colorado Series A notes payable. The terms of the notes and the commitment date
have not yet been established as of April 12, 2016.
From January 1, 2016 through April 12, 2016,
the Company received $54,450 as deposits for its Colorado Series B notes payable. The terms of the notes and the commitment date
have not yet been established as of April 12, 2016.
From January 1, 2016 to April 12, 2016, the
Company entered into two loan agreements with Philippe Germain, its president totaling $135,760. The loans are unsecured, due in
ninety days and bear interest at 8% per annum. The funds were used for working capital purposes.
From February 11, 2016 to April 12, 2016, the
Company received $1,761,774 for 1,174,516 shares of its common stock yet to be issued at April 12, 2016.
On March 1, 2016, the Company issued 121,961
shares of its common stock in conversion of $150,000 of its Kitimat Series A notes payable. The shares were valued at $1.23, based
on the closing market price as quoted by OTC Markets, Inc. on the date of conversion.
On September 10, 2015, the Company agreed to
acquire 14,400 shares of CEG for $112,187 (€ 100,000). The acquisition closed on January 12, 2016.
ROI Land Investments Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2015
Note 13 – Subsequent Events (Continued)
On January 15, 2016, the Company entered into
a Client Representative Consultancy Agreement for Consultancy and Site Supervision Services with Artizan Interior Design LLC (“Artizan”),
a UAE corporation, whereby Artizan will provide two separate services. The agreement contains a $5,000,000 contract for the architectural
design of the project. Payment terms for the architectural design are 25% upon the commencement of work, 25% upon the Dubai Municipality
initial approval, 25% upon the Dubai municipality final approval, and 25% upon receiving required work permits from the Dubai Municipality.
The agreement also includes $4,000,000 site supervision services. Payment terms for the site supervision services are 10% upon
commencement of work and the remainder in equal payment over 30 months.
On January 19, 2016, the Company entered into
a three-year Consulting Agreement (the “Consulting Agreement”) with SF International Consulting Limited (“SF”),
to obtain the services of Dr. Slim Feriani (“Dr. Feriani”), who the Company then named as its Chief Investment Officer
(“CIO”). Pursuant to the terms of the Consulting Agreement, SF or Dr. Feriani will be paid a $100,000 signing bonus,
and $50,000 a month for the duration of the Consulting Agreement. In addition, SF or Dr. Feriani will receive 23,333 shares of
ROI common stock and a five-year stock option to purchase 750,000 shares of the Company’s common stock at the price of $1.50
a share. Such option will vest annually at 250,000 shares a year. In addition, SF or Dr. Feriani will receive each quarter during
the term of the Consulting Agreement a five-year option to purchase 250,000 shares of the Company’s common shares at a price
which is 110% of the last subscription price. Each such option will vest annually in equal amounts of 83,333 shares (83,334 shares
on the third anniversary).
On January 19, 2016, the Company entered into
a three-year Mutual Engagement Agreement with Gulf Central Agency Assets Management Ltd. (“GCA”), pursuant to which
GCA will provide the Company with advice on a non-exclusive basis on securing financing of ROI’s foreign real estate ventures.
GCA will be paid £25,000 per month, payable quarterly, and a success fee equal to 4% of the principal amount of any investments
which GCA arranges with foreign investors. Dr. Feriani is the Chairman of GCA.
On January 24, 2016, the company organized
ROI Land Investments FZ (“ROI FZ”), a UAE corporation as a wholly-owned subsidiary. ROI FZ was organized to acquire
and manage land acquisitions and development in Dubai.
Effective February 7, 2016, the Company’s
wholly-owned subsidiary, ROI Land Investments FZ entered into a Development Sale and Purchase Agreement (the “Agreement”)
with PNC Investments LLC, a UAE corporation, for the purchase of approximately 433,000 square feet of land in the Sobha Hartland
district of Dubai, United Arab Emirates. The total acquisition price is $29,488,000 (AED 108,281,250). As of April 12, 2016, the
Company has made a total of $3,701,205 (AED 13,591,200) in non-refundable payments to PNC Investments LLC leaving a balance of
$25,786,795 (AED 94,690,050). The acquisition is subject to customary closing conditions, including the Company’s ability
to obtain financing. As a result, there can be no assurance that the acquisition will occur as contemplated or at all.
On February 24, 2016, the Company entered into
a Memorandum of Agreement (“MOA”) with Alternative Strategy Partners Pte. Ltd., a Singapore limited company (“ASP”),
pursuant to which ASP is willing to invest at least $3.5 million, and at ASP’s discretion up to $5 million, in ROI’s
Dubai Sobha Hartland Acquisition and Development Project (the “Project”), in exchange for an issuance of bonds designed
for ASP (the “Bonds”). The Bonds shall be a special series designed for ASP, shall mature three years from the date
of issuance and shall bear interest at 8% per annum, and will be secured by a lien upon the First Plot, subordinated to loans from
banks or other institutional lenders, and other bonds upon the Project, if such a lien is determined to be valid and enforceable
under Dubai law; otherwise, the Bonds shall be secured by a lien, similarly subordinated, upon all of the stock of the ROI Land
Investments Ltd. which is the beneficial owner of the Project. Through April 12, 2016, $1,500,000 has been received.
In the event that, by May 24, 2016, the Closing
Documents have not been agreed upon and executed, and the Bonds issued to ASP, then ASP may, at its sole discretion, either (a)
extend that deadline as it sees fit, or (b) convert all or a part of the Initial Investment and Second Investment hereunder to
Common Stock of ROI, at a rate of one share per One U.S. Dollar ($1.00), or (c) have all or a part of the Second Investment (but
not the Initial Investment) refunded to ASP by the escrow agent in cash wired to a designated bank account specified by ASP.
ROI Land Investments Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2015
Note 13 – Subsequent Events (Continued)
In addition, the holders of the Bonds shall
be entitled to receive a Profits Participation of the first of the three plots comprising the Project which the ROI shall designate
for initial development (the “First Plot”). The Profits Participation shall equal all net profits upon sale of the
First Plot, after all costs of acquisition, development and ongoing costs and expenses of maintenance and the sale itself (collectively,
the “Project Costs”), computed in accordance with International Financial Reporting Standards, multiplied by the Profits
Percentage between 35% and 50% depending upon the final level of investment in the Bonds.
The Company has agreed to pay ASP, at the time
of the release from escrow of the Second Investment, cash commissions equal to Four Percent (4%) on the funds invested by ASP in
the Initial Investment and Second Investment, and also shall issue to ASP shares of ROI’s Common Stock at a rate of one share
per $1.50 for every Four Percent (4%) of the funds invested by ASP in the Initial Investment and Second Investment.
On March 2, 2016, the Company entered into
a Client Representative Consultancy Agreement with Artizan Design Consultancy FZ (“Artizan”), a UAE corporation, whereby
Artizan will provide construction and engineering design services for its project in the Sobha Hartland district of Dubai, United
Arab Emirates. The services of Artizan began in March 2016 for a total fee of $1,200,000 in payments of 50% upon the commencement
of work, 25% upon the approval of the design package from relevant authorities, and 25% upon the completion of all design services
as agreed and approved by the Company.
On March 17, 2016, the company organized ROI
Land Investments Swiss AG (“ROI Swiss”), a Swiss corporation as a wholly-owned subsidiary. ROI Swiss was organized
to provide investor relations services to the Company’s investors and potential investors in Europe.
On March 18, 2016, the Board of Directors
appointed Dr. Slim Feriani as Chief Financial Officer and appointed Dr. Feriani and Martin Scholz as directors.
On March 23, 2016, the company organized ROI
Securitisation SA, a Luxembourg corporation as a wholly-owned subsidiary. ROI Securitisation SA was organized to sell debt securities
in Europe to fund the Company’s land and real estate projects.
On April 5, 2016, the Board of Directors
appointed Dr. Sami Chaouch as Chief Executive Officer, Sebastien Cliche as Co-President and Chief Operating Officer and
Philippe Germain as Co-President.
The Company has evaluated subsequent events
through the date the financial statements were issued and filed with the SEC. The Company has determined that there are no other
significant events that warrant disclosure or recognition in the consolidated financial statements.