Convertible notes payable consisted of the
following at March 31, 2016 and December 31, 2015:
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 Project, 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 March 31, 2016 and December 31, 2015 as the embedded conversion options in its convertible notes payable
do not have a fixed conversion price at the issuance date of the notes payable 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 condensed consolidated balance
sheets.
The convertible notes are collateralized by
the Beauport property acquired by ROI DEV.
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 $8,217 and $8,127 of the discount has been accreted as interest expense for the three months ended March 31, 2016
and 2015, respectively, resulting in an unamortized discount of $50,658 at March 31, 2016 which will be amortized over the next
19.5 months.
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 March 31,
2016 and December 31, 2015 was estimated to be $1,205,819, based on management’s estimates, of which, $151,165 is the pro
rata share of the Series A noteholders and was recorded as a discount to the notes. $13,800 and $12,424 of the discount has been
accreted as interest expense for the three months ended March 31, 2016 and 2015, respectively, resulting in an unamortized discount
of $76,210 at March 31, 2016 which will be amortized over the next 19.5 months.
The effective interest rate for the Series
A convertible notes was 21.9% for the three months ended March 31, 2016.
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.
The effective interest rate for the Series
B convertible notes was 12.6% for the three months ended March 31, 2016.
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 $17,452 and $17,260 of the discount has been accreted as interest expense for the three months ended March 31,
2016 and 2015, respectively, resulting in an unamortized discount of $107,589 at March 31, 2016 which will be amortized over the
next 19.5 months.
The effective interest rate for the Series
C convertible notes was 22.5% for the three months ended March 31, 2016.
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. During the three months ended March 31, 2016, the Company redeemed notes totaling $115,000 from two noteholders.
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 March 31, 2016 is estimated to be $1,205,819, based on management’s estimates, of which, $45,981 is the pro rata
share of the Series D noteholders and was recorded as a discount to the notes. $4,198 and $3,780 of the discount has been accreted
as interest expense for the three months ended March 31, 2016 and 2015, respectively, resulting in an unamortized discount of $23,181
at March 31, 2016 which will be amortized over the next 19.5 months.
The effective interest rate for the Series
D convertible notes was 26.1% for the three months ended March 31, 2016.
As a condition of the convertible note agreements,
the Company has placed 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 $108,043 and $65,784 was funded during the three months ended March 31, 2016 and 2015,
respectively. The escrow agent paid a total of $108,033 and $116,243 during the three months ended March 31, 2016 and 2015, respectively,
resulting in a balance of prepaid interest of $52,142 at March 31, 2016.
During the three months ended March 31, 2016
and 2015, $109,433 and $116,743 of interest was accrued and expensed on the notes and $108,033 and $116,243, respectively, was
paid by the escrow agent, resulting in a remaining accrual of $22,226 at March 31, 2016.
Issuance costs are amortized as interest
expense over the term of the notes. $56,903 and $106,736 has been amortized as interest expense during the three months ended
March 31, 2016 and 2015, respectively, resulting in a balance of debt issuance costs discount of $350,302 at March 31, 2016
which will be amortized over the next 19.5 months.
Note 4 – Convertible
Notes Payable and Notes Payable (Continued)
Notes Payable
Notes payable consisted of the following at
March 31, 2016 and December 31, 2015:
|
|
|
March 31, 2016
|
|
|
December 31, 2015
|
|
|
|
|
|
|
|
|
Issuance
|
|
|
|
|
|
|
|
|
|
|
Issuance
|
|
|
|
|
|
|
|
|
Principal
|
|
|
Costs
|
|
|
Net
|
|
|
Principal
|
|
|
Costs
|
|
|
Net
|
|
|
Note Series
|
|
Amount
|
|
|
Discount, net
|
|
|
Amount
|
|
|
Amount
|
|
|
Discount, net
|
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kitimat Series A
|
|
$
|
2,292,830
|
|
|
$
|
(150,098
|
)
|
|
$
|
2,142,732
|
|
|
$
|
2,442,830
|
|
|
$
|
(167,904
|
)
|
|
$
|
2,274,926
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kitimat Series B
|
|
|
473,117
|
|
|
|
–
|
|
|
|
473,117
|
|
|
|
473,117
|
|
|
|
–
|
|
|
|
473,117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terrace Series A
|
|
|
772,567
|
|
|
|
(34,751
|
)
|
|
|
737,816
|
|
|
|
722,178
|
|
|
|
(38,529
|
)
|
|
|
683,649
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,538,514
|
|
|
$
|
(184,849
|
)
|
|
|
3,353,665
|
|
|
$
|
3,638,125
|
|
|
$
|
(206,433
|
)
|
|
|
3,431,692
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less current portion
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes payable, net of discounts, noncurrent
|
|
$
|
3,353,665
|
|
|
|
|
|
|
|
|
|
|
$
|
3,431,692
|
|
The Kitimat and Terrace 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.
Kitimat Series A Notes
On May 8, 2015, the Company issued $2,442,830
of its Series A notes payable to twenty-nine investors for cash. During the three months ended March 31, 2016, the Company redeemed
notes totaling $150,000 from two noteholders in exchange for 121,961 shares of its restricted common stock at a fair value on the
date of exchange of $1.23. 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 11.4% for the three months ended March 31, 2016.
Kitimat Series B Notes
On May 8, 2015, the Company issued $473,117
of its 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 three months ended March 31, 2016.
ROI LAND INVESTMENTS LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial
Statements
March 31, 2016
(unaudited)
Note 4 – Convertible
Notes Payable and Notes Payable (Continued)
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 12.3% for the three months ended March 31, 2016.
Interest on Kitimat and Terrace 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 $55,319 and $-0- was funded to the escrow agent during the quarters ended March 31, 2016
and 2015, respectively.
During the three months ended March 31, 2016,
$73,591 of interest was accrued and expensed on the notes and $70,770 was paid by the escrow agent, resulting in a remaining prepaid
interest of $11,189 at March 31, 2016.
Debt Issuance Costs on Kitimat and Terrace
Notes Payable
Issuance costs are amortized as
interest expense over the term of the notes. $21,584 and $-0- has been amortized as interest expense during the three months
ended March 31, 2016 and 2015, respectively, resulting in a balance of debt issuance costs discount of $184,849 at March 31,
2016 which will be amortized over the next 25 months.
ROI LAND INVESTMENTS LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial
Statements
March 31, 2016
(unaudited)
Note 4 – Convertible
Notes Payable and Notes Payable (Continued)
Land Loans
On June 8, 2015, in connection with the acquisition
of the Evans, Colorado property, 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. For the three months ended March 31, 2016,
$50,808 of interest has been accrued and $50,250 has been paid resulting in a balance of accrued interest of $15,050.
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. During the three months ended
March 31, 2016, the Company made a principal payment of $70,439 (CAD 169,605) resulting in a balance of $794,641 (CAD 1,030,395).
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
mortgages on the Company’s Kenney Street and Park Avenue properties and second mortgages on its Kitimat and Beauport properties
and is guaranteed by Sebastien Cliche, the Company’s COO and Co-President. The Company incurred and paid $46,269 (CAD 61,500)
of interest expense for the three months ended March 31, 2016.
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 December 30, 2016. $8,392 of interest expense has been accrued on the loans for the three months ended March 31, 2016.
Deposits on Notes Payable Subscriptions
To fund the development of the
Company’s projects, the Company has initialized a note offering and begun accepting subscriptions for up to a total of
$18,000,000 for new series of notes payable, to be described as “BC Series 2”, “Colorado”,
“Dubai” and “Dubai ASP”. As of March 31, 2016, 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 condensed consolidated balance
sheet. As of March 31, 2016 and December 31, 2015, the Company has received deposits of $5,038,413 and $3,741,821 net of
issuance costs of $294,385 and $284,673, respectively, for subscriptions for the future notes.
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 March 31, 2016, $1,000,000 has been received.
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.
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 Condensed Consolidated Financial
Statements
March 31, 2016
(unaudited)
Note 4 – Convertible
Notes Payable and Notes Payable (Continued)
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 March 31, 2016 and December 31, 2015 is estimated to be $1,205,819, based on management’s estimates, 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 March
31, 2016 and December 31, 2015, respectively.
Note 5 – Related Party
Transactions
The Company leased a corporate apartment from
Philippe Germain, the Company’s Co-President, on a month-to-month basis. Monthly rental was $675. The lease was terminated
effective April 1, 2016.
The Company leased a corporate apartment from
Louise Gagner on a month-to-month basis. Ms. Gagner is the mother of Philippe Germain. Monthly rental was $1,000. The lease was
terminated effective April 1, 2016.
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 Co-President, Philippe Germain, is a shareholder of CEG. The acquisition closed on January 12, 2016 and the
$112,187 is included in Investments in cost-method investees in the accompanying condensed consolidated balance sheet at March
31, 2016.
During the year ended December 31, 2015, the
Company entered into multiple loan agreements with LMM Group LTD. (“LMM”), a Swiss company, and had a balance due of
$98,168 as of December 31, 2015. The notes are unsecured, bear interest at 8% per annum and are due December 30, 2016. Philippe
Germain is the sole shareholder of LMM. During the three months ended March 31, 2016, the Company paid $38,560 on the loans resulting
in a remaining balance due of $62,969. During the three months ended March 31, 2016, the Company accrued $1,573 of interest on
the loans.
As of December 31, 2015, the Company had an
outstanding loan with 8010609 Canada Inc. of $100,000. The note is unsecured, bears interest at 8% per annum and are due December
30, 2016. Philippe Germain is the sole shareholder of 8010609 Canada Inc. $2,022 of interest was accrued on the loan for the three
months ended March 31, 2016.
On October 13, 2015, the Company assumed a
second mortgage note due to 9202 4462 Quebec Inc. of $288,360 (CAD 400,000). The value of the loan at March 31, 2016 is $308,480
(CAD 400,000). The owner of 9202 4462 Quebec Inc. is a shareholder of the Company. The loan is secured by a second mortgage on
a property owned by CTC, bears interest at 6% per annum and was due April 13, 2016. The loan was not paid and is in default as
of April 13, 2016. $4,615 of interest was accrued on the loan and $21,005 of interest was paid during the three months ended March
31, 2016.
During the three months ended March 31, 2016,
the Company entered into two loan agreements with Philippe Germain for a total of $103,488. The note is unsecured, non-interest
bearing and is due on demand. $35,760 was repaid to Mr. Germain during the three months ended March 31, 2016, resulting in a balance
outstanding of $67,728 at March 31, 2016.
The aggregate amount above due to related parties
at March 31, 2016 and December 31, 2015 was $539,177 and $486,528, respectively.
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. During the three months ended March 31, 2016, the Company advanced an additional $100,014 to CEG resulting
in a balance of $285,075 at March 31, 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. However,
there can be no assurance that the transaction will close as contemplated or at all.
ROI LAND INVESTMENTS LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial
Statements
March 31, 2016
(unaudited)
Note 6 – Stockholders’ Equity
Authorized Capital
The Company has 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 three months ended March 31, 2016,
the Company received cash of $3,797,020, net of offering costs, for 3,636,540 shares of its common stock.
During the three months ended March 31, 2016,
the Company issued 43,333 shares of common stock for consulting services from two individuals. The shares were valued at an average
price of $1.23, based on the fair market value of the shares, for a total of $53,200, and have been charged to operations for the
three months ended March 31, 2016.
During the three months ended March 31, 2016,
the Company issued 121,961 shares of common stock in conversion of $150,000 of notes payable. The shares were valued at $1.23,
based on the fair market value of shares on the date of the conversion.
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. No awards are outstanding under the 2015 Plan at March 31, 2016.
Non Plan Options
During the three months ended March 31, 2016,
the Company issued certain stock options outside of the 2015 Plan. The following summarizes non-Plan option activity for the three
months ended March 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
Common Stock Options Outstanding
|
|
|
average
|
|
|
|
|
|
|
|
|
|
|
|
|
|
exercise
|
|
|
|
|
Employees
|
|
|
Non-employees
|
|
|
Total
|
|
|
price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2015
|
|
|
500,000
|
|
|
|
6,457,250
|
|
|
|
6,957,250
|
|
|
$
|
1.51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options granted
|
|
|
–
|
|
|
|
5,568,259
|
|
|
|
5,568,259
|
|
|
$
|
1.57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2016
|
|
|
500,000
|
|
|
|
12,025,509
|
|
|
|
12,525,509
|
|
|
$
|
1.54
|
|
ROI LAND INVESTMENTS LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial
Statements
March 31, 2016
(unaudited)
Note 6 – Stockholders’ Equity
(Continued)
Non Plan Options (Continued)
The following table summarizes information
with respect to stock options outstanding and exercisable by employees at March 31, 2016:
|
|
|
|
|
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
|
|
|
|
1.50
|
|
|
$
|
0.35
|
|
|
$
|
252,500
|
|
|
|
387,500
|
|
|
$
|
0.35
|
|
|
$
|
195,688
|
|
During the three months ended March 31, 2016, $1,649
was charged to operations and $597 of unrecognized compensation costs related to employee stock options. The Company expects to
recognize those costs over a weighted average period of 0.25 years as of March 31, 2016.
The following table summarizes information
with respect to stock options outstanding and exercisable by non-employees at March 31, 2016:
|
|
|
|
|
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
|
|
|
|
1.50
|
|
|
$
|
0.35
|
|
|
$
|
12,625
|
|
|
|
25,000
|
|
|
$
|
0.35
|
|
|
$
|
12,625
|
|
|
$
|
0.75
|
|
|
|
300,000
|
|
|
|
3.92
|
|
|
$
|
0.75
|
|
|
$
|
31,500
|
|
|
|
80,000
|
|
|
$
|
0.75
|
|
|
$
|
8,400
|
|
|
$
|
0.86
|
|
|
|
15,000
|
|
|
|
3.00
|
|
|
$
|
0.86
|
|
|
$
|
–
|
|
|
|
–
|
|
|
$
|
0.86
|
|
|
$
|
–
|
|
|
$
|
1.50
|
|
|
|
2,880,509
|
|
|
|
3.23
|
|
|
$
|
1.50
|
|
|
$
|
–
|
|
|
|
2,570,509
|
|
|
$
|
1.50
|
|
|
$
|
–
|
|
|
$
|
1.65
|
|
|
|
8,805,000
|
|
|
|
7.74
|
|
|
$
|
1.65
|
|
|
$
|
–
|
|
|
|
2,012,500
|
|
|
$
|
1.65
|
|
|
$
|
–
|
|
|
|
|
|
|
|
12,025,509
|
|
|
|
|
|
|
$
|
1.59
|
|
|
$
|
44,125
|
|
|
|
4,688,009
|
|
|
$
|
1.55
|
|
|
$
|
21,025
|
|
During the three months ended March 31, 2016,
the Company issued options to purchase a total of 5,568,259 shares of the Company’s common stock to various consultants and
investors. These options have contractual lives of six months to five years and were valued at an average grant date fair value
of $0.179 per option, or $997,053, using the Black-Scholes Option Pricing Model with the following assumptions:
|
Stock Price
|
|
$0.86 - $1.50
|
|
Expected term
|
|
.5 to 5 years
|
|
Expected volatility
|
|
18.0% to 22.3%
|
|
Risk-free interest rate
|
|
0.51% to 1.73%
|
|
Dividend yield
|
|
0.00
|
The stock price was based on the fair market
value of the shares on the date of grant and volatility was based on comparable volatility of other companies since the Company
had no significant historical volatility. As of March 31, 2016, $1,166,489 was charged to operations and $2,468,842 of unrecognized
compensation costs related to non-employee stock options. The Company expects to recognize those costs over a weighted average
period of 2.31 years as of March 31, 2016.
ROI LAND INVESTMENTS LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial
Statements
March 31, 2016
(unaudited)
Note 7 – 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 13% in common stock of the amounts received
by the Company.
The 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 property at March
31, 2016 is estimated to be $672,622 based on a management’s estimates, of which, $197,146 is the pro rata share of the Series
A and D noteholders and was recorded as a profit participation liability and as discounts to the convertible notes payable as of
March 31, 2016. The potential profit is re-measured on a quarterly basis and adjusted. There was no adjustment in the potential
profit for the three months ended March 31, 2016.
On December 31, 2014, the Company and Coast
To Coast (“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 purchase
and sale agreement, the Company is obligated to pay CTC a fee for financial and real estate advisory services equal to a percentage
of the net profits earned on the sale of the properties, as defined.
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
can be no assurance that the first phase will be completed by December 31, 2016.
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 $29,484,984 (AED 108,281,250). As of March 31, 2016, the
Company has made a total of $4,201,205 (AED 15,422,402) in non-refundable payments to PNC Investments LLC (“PNC”) leaving
a balance of $25,283,779 (AED 92,858,848). On May 15, 2016, the Company received a Termination Letter from PNC terminating the
Agreement as the Company failed to cure the default (See Note 3 – Land and Development Costs).
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.
Legal Matters
Certain conditions may exist as of the date
the condensed 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.
ROI LAND INVESTMENTS LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial
Statements
March 31, 2016
(unaudited)
Note 7 – Commitments and Contingencies
(Continued)
Legal Matters (Continued)
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 condensed 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.
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. The Plaintiff filed a lien on the Company’s Canadian properties in the amount
of $207,638. On May 17, 2016, CTC was successful to set aside the default judgment; therefore as soon as it pays the applicable
costs, the default judgment will be set aside and correspondingly the judgments filed against the Canadian properties will be removed.
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 it validly retracted it prior to
any signature by Mr. Shaw personally. Mr. Shaw believes that the agreement is valid and in effect. The Company also believes that
Seth Shaw failed to perform under said agreement, even if it were in effect.
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 condensed consolidated balance sheet at March 31, 2016 and December
31, 2015. The Company intends to vigorously defend itself from any claims by Mr. Shaw for such shares.
Note 8 – Subsequent Events
From April 1, 2016 through May 23, 2016, the
Company issued 33,333 shares of its common stock to an investor for $50,000 received in cash.
From April 1, 2016 through May 23, 2016, the
Company received $267,310 as deposits for its Colorado Series notes payable.
On April 3, 2016, ASP advanced $500,000 to
the Company under the Memorandum of Agreement (“MOA”) by a direct payment to Artizan for payment under the Client Representative
Consultancy Agreement with Artizan.
On April 15, 2016, the Company received
a notice of termination from PNC Investments of the Agreement entered into February 7, 2016 for non-payment of the amounts
due under the agreement. The notice grants a thirty (30) day period for the Company to remedy the default. On May 15, 2016,
the Company received a Termination Letter from PNC terminating the Agreement as the Company failed to cure the default. As
a result, the Company forfeited the $4,201,205 of deposits. A total of $4,548,032, including $346,827 of closing
and development costs, has been charged to operations for the three months ended March 31, 2016 as terminated deal costs. The
Company is currently negotiating to acquire a reduced size and price of the land it had agreed to under the Agreement
by two-thirds and apply the deposits to this potential transaction. Negotiations are under way, but the likelihood that the
company will be successful in reaching a satisfactory agreement is dependent on its ability to pay at least a portion of the
new price. As a result, there can be no assurance that the acquisition will occur as contemplated or at all.
ROI LAND INVESTMENTS LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial
Statements
March 31, 2016
(unaudited)
Note 8 – Subsequent Events (Continued)
On May 3, 2016, the Company issued 100,000
shares of Series A preferred stock, par value $0.0001 per share to each of Sami Chaouch and Sebastien Cliche against receipt from
each of them of 100,000 shares of Class A Common Stock held by them. No additional consideration was provided to the Company for
the Series A Preferred Stock. The Series A Preferred Stock is identical to the Class A Common Stock of the Company, except that
each share of the 200,000 Series A Preferred Stock has 150 votes per share instead of the one vote per share of the Class A Common
Stock.
The Company has evaluated subsequent events
through the date the condensed consolidated financial statements were issued and filed with the SEC. The Company has determined
that there are no other events that warrant disclosure or recognition in the condensed consolidated financial statements.
Item 2. Management’s
Discussion and Analysis of Financial Condition and Results of Operations.
SPECIAL NOTE CONCERNING FORWARD-LOOKING STATEMENTS
Certain statements made in this Form 10-Q
are "forward-looking statements" (within the meaning of the Private Securities Litigation Reform Act of 1995) regarding
the plans and objectives of management for future operations. Such statements involve known and unknown risks, uncertainties and
other factors that may cause actual results, performance or achievements of the Company to be materially different from any future
results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included
herein are based on current expectations that involve numerous risks and uncertainties. The Company's plans and objectives are
based, in part, on assumptions involving the continued expansion of business. Assumptions relating to the foregoing involve judgments
with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which
are difficult or impossible to predict accurately and many of which are beyond the control of the Company. Although the Company
believes its assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove to be inaccurate
and, therefore, there can be no assurance the forward-looking statements included in this report will prove to be accurate. In
light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information
should not be regarded as a representation by the Company or any other person that the objectives and plans of the Company will
be achieved.
The forward-looking statements included
in this Form 10-Q and referred to elsewhere are related to future events or our strategies or future financial performance. In
some cases, you can identify forward-looking statements by terminology such as "may," "should," "believe,"
"anticipate," "future," "potential," "estimate," "encourage," "opportunity,"
"growth," "leader," "expect," "intend," "plan," "expand," "focus,"
"through," "strategy," "provide," "offer," "allow," commitment," "implement,"
"result," "increase," "establish," "perform," "make," "continue," "can,"
"ongoing," "include" or the negative of such terms or comparable terminology. All forward-looking statements
included in this Form 10-Q are based on information available to us as of the filing date of this report, and the Company assumes
no obligation to update any such forward-looking statements, except as required by law. Our actual results could differ materially
from the forward-looking statements.
The following discussion of our results
of operations should be read together with our financial statements and related notes included elsewhere in this report.
Company Overview
We operate in the land development sub-sector
niche of the real estate industry, where its main activity consists of acquiring, zoning and converting raw land into a construction-ready
site. The land development process implemented by ROI consists of four phases:
|
|
·
|
Land acquisition
- Purchasing land ready for development, in a strategic location and without any prohibited zoning restrictions
|
|
|
·
|
Permits applications
- Executed within the local municipalities to effectuate the legal right for current and future infrastructures development.
|
|
|
·
|
Infrastructures
- Outsourcing to qualified experts of the necessary technical and construction work
|
|
|
·
|
Profit taking
- Final Sale of the licensed, zoned and (by now) subdivided and construction-ready land unit to large regional residential developers
|
Our mission is to acquire, fund and service
land development opportunities. We strive to become a leader in green land development by maintaining the utmost respect of the
environment, particularly by emphasizing and preserving more green spaces than the local laws require. Additionally, the Company
from time to time, reserves its right to participate on the construction of the properties.
Business
We specialize in land development. Our business
model consist 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.
Plan of Operation
We are a Land Development Company that owns
and operates businesses in the land development industry. 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 mission is to maximize our
return on investment within the land development sector in North America as well as internationally. These investments and/or acquisitions
may be directly acquired by our Company’s or via qualified Joint Venture Partners. Alternatively, our Company’s for
practical purposes functions as a land investment banking firm. We strive to maintain the utmost respect of the environment, particularly
by emphasizing and preserving more green spaces than the local laws require.
Results of Operations
For the three months ended March 31, 2016 compared to the
three months ended March 31, 2015
Revenues
Revenues were $7,727 for the three months ended
March 31, 2016 compared to $18,995 for the three months ended March 31, 2015. The revenues consisted of interest income earned
on notes receivable.
Operating Expenses and Other Income (Expense)
For the three months ended March 31,
2016, our total operating expenses were $8,650,551 compared to $2,383,934 for the three months ended March 31, 2015 resulting
in an increase of $6,266,617. The increase is primarily attributable to increases in professional and consulting fees and
travel expenses due to our growth and continuing efforts in executing our business model and the write-off of terminated
deal costs. The increase in total operating expenses is attributable to Compensation costs
of $177,482 in 2016 (2015: $20,111); Consulting fees of $2,849,718 in 2016, of which $1,221,335 was stock-based
(2015: $2,109,266 of which $1,944,746 was stock-based); Professional fees of $416,842 in 2016 (2015: $72,229); Travel
expenses of $367,882 in 2016 (2015: $109,394); Terminated deal costs of $4,548,032 (2015: $-0-); and general and
administrative expenses of $290,595 in 2016 (2015: $72,934).
Other income and expenses
consisted of interest expense of $472,711 in 2016 (2015: $265,070) and currency exchange loss of $135,919 in 2016 (2015: $66,670
loss), offset by a gain on extinguishment of debt of $-0- in 2016 (2015: $74,091).
As a result, net loss
was $9,251,454 for the three months ended March 31, 2016 compared to $2,622,588 for the three months ended March 31, 2015.
Liquidity and Capital Resources
Overview
Historically, we have financed our cash flow
and operations from the sale of common stock and issuance of notes payable. Our principal use of funds during the three
months ended March 31, 2016 and 2015 was for the acquisition of properties, the funding of notes receivable for property projects
and development, and general corporate expenses.
Liquidity and Capital Resources during
the three months ended March 31, 2016 compared to the three months ended March 31, 2015
At March 31, 2016, we had cash of
$344,347 and a deficit in working capital of $12,167,666. We used cash in operations of $4,927,929 for the three months
ended March 31, 2016 compared to negative cash flow from operations of $1,804,763 for the three months ended March 31, 2015.
The negative cash flow from operating activities for the three months ended March 31, 2016 is attributable to the Company's
net loss from operations of $9,251,454, offset by amortization of other assets of $3,143, stock-based consulting fees of
$1,221,335, amortization of debt issuance costs of $78,487, accretion of debt discount of $25,669, and amortization of profit
participation discount of $17,998, terminated deal costs of $4,548,032, and increased by changes in
operating assets and liabilities of $1,571,139. Cash used in operations for the three months ended March 31, 2015 is
attributable to the Company's net loss from operations of $2,622,588, offset by amortization of other assets of $3,447,
stock-based consulting fees of $1,944,746, amortization of debt issuance costs of $106,736, accretion of debt discount of
$25,387, and amortization of profit participation discount of $16,204, and increased by a gain on the extinguishment of debt
of $74,091 and changes in operating assets and liabilities of $1,204,604.
Cash used in investing activities consisted
of an advance to a related party of $100,014 for the three months ended March 31, 2016. We did not use any cash for investing activities
for the three months ended March 31, 2015.
Net cash provided by financing activities for
the three months ended March 31, 2016 consisted of $1,209,714 for deposits received for notes payable, $3,797,019 for the sale of common stock, net of offering costs of $203,208, proceeds from loan from related party
of $103,488, offset by the payment of $115,000 on convertible notes payable, payments on loans to related parties of $38,560, and the payments on mortgage note payable of $130,800. Net cash provided by financing activities
for the three months ended March 31, 2015 consisted of $1,044,150 for the sale of common stock, net of issuance costs, $968,000
for deposits received for notes payable, offset by payments on convertible notes payable of $329,797.
We will require additional funds to fully implement
our plans. These funds may be raised through equity financing, debt financing, or other sources, which may result in the dilution
in the equity ownership of our shares. We currently do not have any guaranteed arrangements for additional financing and we may
not be able to obtain financing when required. Our future is dependent upon our ability to obtain financing, a successful marketing
and promotion program and, further in the future, achieving a profitable level of operations. The issuance of additional equity
securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial
loans, assuming those loans would be available, or issuing additional notes payable, will increase our liabilities and future cash
commitments.
We currently anticipate issuing notes payable
of up to $13,000,000 and up to $7,500,000 in equity to fund land acquisitions and development. From April 1, 2016 through May 16,
2016, we have received additional deposits of $267,318 for the notes payable. Also from April 1, 2016 through May 16, 2016, we
have received $50,000 from the sale of common stock.
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. We expect such funding to begin in the second quarter of 2016.
There is no assurance that any such funding will be realized.
Going Concern
The Company has incurred a net loss of $9,251,454
for the three months ended March 31, 2016 and has incurred cumulative losses since inception of $26,268,323. The Company has a
deficit in working capital of $12,167,666 as of March 31, 2016 and used cash in operations of $4,927,929 for the three months ended
March 31, 2016. These conditions raise substantial doubt about the ability of the Company to continue as a going concern.
The accompanying condensed consolidated financial
statements have been prepared in conformity with 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 condensed
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.
Off-Balance Sheet Arrangements
We currently have no off-balance sheet arrangements
that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Critical Accounting Policies
The preparation of financial statements in
conformity with accounting principles generally accepted in the United States of America requires us to make a number of estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements. Such estimates and assumptions affect the reported amounts of revenues and expenses during
the reporting period. We base our estimates on historical experiences and on various other assumptions that we believe to be reasonable
under the circumstances. Actual results may differ materially from these estimates under different assumptions and conditions.
We continue to monitor significant estimates made during the preparation of our financial statements. On an ongoing basis, we evaluate
estimates and assumptions based upon historical experience and various other factors and circumstances. We believe our estimates
and assumptions are reasonable in the circumstances; however, actual results may differ from these estimates under different future
conditions.
See Item 7, “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” and Note 2, “Summary of Significant Accounting Policies”
in our audited financial statements as of and for the year ended December 31, 2015, included in our Annual Report on Form 10-K
filed with the U.S. Securities and Exchange Commission (“SEC”) on April 13, 2016.
Item 3. Quantitative and
Qualitative Disclosures About Market Risk.
The disclosure required under this item is
not required to be reported by smaller reporting companies.
Item 4. Controls and
Procedures.
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(a)
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Evaluation of Disclosure Controls and Procedures
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In connection with the preparation of this
quarterly Report on Form 10-Q, an evaluation was carried out by the Company's management, with the participation of the principal
executive officer and the principal financial officer, of the effectiveness of the Company's disclosure controls and procedures
(as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 ("Exchange Act")) as of March
31, 2016. Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed
or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities
and Exchange Commission's rules and forms, and that such information is accumulated and communicated to management, including the
chief executive officer and the chief financial officer, to allow timely decisions regarding required disclosures.
Based on that evaluation, the Company's management
concluded, as of the end of the period covered by this report, that the Company's disclosure controls and procedures were not effective
in recording, processing, summarizing, and reporting information required to be disclosed, within the time periods specified in
the Commission's rules and forms, and that such information was not accumulated and communicated to management, including the principal
executive officer and the principal financial officer, to allow timely decisions regarding required disclosures.
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(b)
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Changes in Internal Control over Financial Reporting
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There were no changes in our internal control
over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
During the course of business, litigation commonly
occurs. From time to time the Company may be a party to litigation matters involving claims against the Company. The Company operates
in a highly regulated industry and employs personnel which may inherently lend itself to legal matters. Management is aware that
litigation has associated costs and that results of adverse litigation verdicts could have a material effect on the Company's financial
position or results of operations. Management, in consultation with legal counsel, has addressed known assertions and predicted
unasserted claims below.
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. The Plaintiff filed a lien on the Company’s Canadian
properties in the amount of $207,638. On May 17, 2016, CTC was successful to set aside the default judgment; therefore as soon
as it pays the applicable costs, the default judgment will be set aside and correspondingly the judgments filed against the Canadian
properties will be removed. 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.
Item 1A. Risk Factors.
The disclosure required under this item is
not required to be reported by smaller reporting companies.
Item 2. Unregistered Sales
of Equity Securities and Use of Proceeds.
On March 1, 2016, the Company issued 2,201,385
shares of its Class A common stock to thirty accredited investors for $2,111,704 in cash. The proceeds were used for working capital.
On March 1, 2016, the Company issued 43,333
shares of its Class A common stock to two consultants for services rendered under their consulting agreements. The services were
valued by the Company at $53,200.
On March 1, 2016, the Company issued 121,961
shares of its Class A common stock to two accredited investors upon conversion of $150,000 of notes then held by such investors.
During the period from January 1, 2016 through
March 31, 2016, the Company received cash of $1,888,524 for subscriptions for 1,435,155 shares of its Class A common stock from
eighteen accredited investors. The shares have not been issued as of March 31, 2016. The proceeds will be used for working capital.
During the period from January 1, 2016 through
March 31, 2016, the Company received from five accredited investors subscriptions to purchase notes of the Company for $219,426
in cash. The terms of the notes have not yet been finalized. When completed, the proceeds will be used to fund the Company’s
projects and for working capital.
All of the foregoing securities were issued
in reliance upon the exemption from registration provided by (a) Section 4(a)(2) of the Securities Act of 1933, as amended, (b)
Regulation D or (c) Regulation S depending on the various residences of the accredited investors.
Item 3. Defaults Upon
Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
Item 2 of Part II above describes sales of the Company’s securities
which should have been reported on a Form 8-K during the first quarter of 2016.
Item 6. Exhibits
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Exhibit 3.1
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Amended and Restated Articles and Incorporation (1)
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Exhibit 3.2
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Bylaws of the Registrant (2)
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Exhibit 10.1
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Real Property Purchase Contract between ROI DEV Canada Inc. and 9284-0784 Quebec Inc., dated March 24, 2014 (3)
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Exhibit 10.2
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Lease Agreement between ROI DEV Canada Inc. and LNG Canada Development Inc., dated March 15, 2015 (4)
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Exhibit 10.3
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Bill of Sale, Warranty Deed and Promissory Note between ROI Dev Canada Inc. and Great Northern Properties, LLLP, dated June 4, 2015 (5)
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Exhibit 10.4
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Property Contract between ROI Land Investments Ltd. and 4 S Inv., J. Randall Steele and Sheri Steele Lathrop, dated October 20, 2015 (6)
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Exhibit 10.5
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Consulting Agreement between ROI Land Investments Ltd. and SF International Consulting Limited, dated January 19, 2016 (7)
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Exhibit 10.6
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Mutual Agreement between ROI Land Investments Ltd. and Gulf Central Agency Assets Management, dated January 19, 2016 (7)
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Exhibit 10.7
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Binding Memorandum of Agreement between ROI Land Investments Ltd. and Alternative Strategy Partners Ptd. Ltd, dated February 25, 2016 (8)
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Exhibit 10.8
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Form of Consulting Agreement between the Company and each of Sebastien Cliche, Philippe Germain and Dr. Sami Chaouch. (9)
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Exhibit 31.1
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Rule 13a-14(a) Certification by the Principal Executive Officer *
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Exhibit 31.2
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Rule 13a-14(a) Certification by the Principal Financial Officer *
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Exhibit 32.1
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Certification by the Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
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Exhibit 32.2
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Certification by the Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
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Exhibit 101.INS
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XBRL Instance Document*
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Exhibit 101.SCH
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XBRL Schema Document *
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Exhibit 101.CAL
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XBRL Calculation Linkbase Document *
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Exhibit 101.DEF
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XBRL Definition Linkbase Document *
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Exhibit 101.LAB
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XBRL Label Linkbase Document *
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Exhibit 101.PRE
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XBRL Presentation Linkbase Document *
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Exhibit 31.1
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Rule 13a-14(a) Certification by the Principal Executive Officer **
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Exhibit 31.2
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Rule 13a-14(a) Certification by the Principal Financial Officer **
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Exhibit 32.1
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Certification by the Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 **
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Exhibit 32.2
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Certification by the Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 **
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Exhibit 101.INS
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XBRL Instance Document
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Exhibit 101.SCH
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XBRL Schema Document
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Exhibit 101.CAL
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XBRL Calculation Linkbase Document
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Exhibit 101.DEF
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XBRL Definition Linkbase Document
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Exhibit 101.LAB
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XBRL Label Linkbase Document
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Exhibit 101.PRE
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XBRL Presentation Linkbase Document
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(1) Incorporated by reference to the Company’s
report on Form 10-Q filed on November 18, 2015 and Form 8-K filed May 9, 2016.
(2) Incorporated by reference to the Company’s
Registration Statement on Form S-1, filed on January 27, 2011.
(3) Incorporated by reference to the Company’s
Report on Form 8-K, filed on March 31, 2014.
(4) Incorporated by reference to the Company’s
Report on Form 8-K, filed on May 21, 2015.
(5) Incorporated by reference to the Company’s
Report on Form 8-K, filed on June 15, 2015.
(6) Incorporated by reference to the Company’s
Report on Form 8-K, filed on October 26, 2015.
(7) Incorporated by reference to the Company’s
Report on Form 8-K, filed on January 26, 2016.
(8) Incorporated by reference to the Company’s
Report on Form 8-K, filed on March 2, 2016.
(9) Incorporated by reference to the Company’s
Definitive Proxy Statement filed on October 20, 2015 (attached as Appendix C thereto).
* Filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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ROI LAND INVESTMENTS LTD.
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Date: May 23,
2016
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By:
/s/ Sami Chaouch
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Sami Chaouch
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Chief Executive Officer
(Principal Executive Officer)
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Date: May 23,
2016
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By:
/s/ Slim Feriani
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Slim Feriani
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Chief Financial Officer
(Principal Financial Officer)
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