UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K/A

(AMENDMENT NO. 2)

 

x

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended: December 31, 2015

 

OR

 

¨

TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ____________ to ____________

 

Commission File Number: 000-29219

 

VIKING INVESTMENTS GROUP, INC.

(Exact name of registrant as specified in its charter)

 

Nevada

98-0199508

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

 

1330 Avenue of the Americas, Suite 23 A

New York, NY 10019

 (Address of principal executive offices)

 

(212) 653 0946

(Registrant's telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act: Common Stock, par value $0.001

 

Name of each exchange on which registered: None

 

Securities registered pursuant to Section 12(g) of the Act: Common Stock

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ¨ No x

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No x

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "large accelerated filer, accelerated filer, and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer  ¨

Accelerated filer  ¨

Non-accelerated filer  ¨

Smaller reporting company  x

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No x

 

As of June 30, 2015, the aggregate market value of the shares of the Registrant's common equity held by non-affiliates was approximately $1,841,964, using the June 30, 2015 closing price of the Registrant's common stock of $0.254/share. Shares of the Registrant's common stock held by each executive officer and director and each by each person who owns 10 percent or more of the outstanding common stock have been excluded in that such persons may be deemed to be "affiliates" of the Registrant for purposes of the above calculation. This determination of affiliate status is not a conclusive determination for other purposes.

 

The number of shares of the Registrant's common stock outstanding as of December 8, 2016, was 51,986,940, which includes 284,090 shares that are issuable.

 

 

 
 
 

 

 

EXPLANATORY NOTE

 

This Amendment No. 2 of Form 10-K/A for the year ended December 31, 2015, amends in its entirety the Annual Report on Form 10-K/A that was originally filed on May 16, 2016 to reflect a restatement of the Company’s financial statements for the year ended December 31, 2015 (the “2015 Financial Statements”) to correct various account balances as summarized below, and because the Company’s new independent registered public accounting firm has recently completed its audit of the Company’s 2015 Financial Statements.

 

The restatements are being made in accordance with ASC 250, “Accounting Changes and Error Corrections.” The disclosure provision of ASC 250 requires a company that corrects an error to disclose that its previously issued financial statements have been restated, a description of the nature of the error, the effect of the correction on each financial statement line item and any per share amount affected for each prior period presented, and the cumulative effect on retained earnings (deficit) in the statement of financial position as of the beginning of each period presented.

 

The effects of the adjustments on the Company’s previously issued 2015 Financial Statements are summarized as follows:

 

 

Selected Consolidated Balance Sheets Information as of December 31, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Previously

 

 

Increase

 

 

 

 

 

 

Reported

 

 

(Decrease)

 

 

Restated

 

 

 

 

 

 

 

 

 

 

 

Petroleum and natural gas rights / oil and gas properties

 

 

818,230

 

 

 

(301,760)

 

 

516,470

 

Derivative liability

 

 

154,297

 

 

 

656,350

 

 

 

810,647

 

Additional paid in capital

 

 

7,864,085

 

 

 

96,287

 

 

 

7,960,372

 

Accumulated deficit

 

 

(7,979,257)

 

 

(985,184)

 

 

(8,964,441)

 

Selected Consolidated Statements of Operations and Comprehensive Loss for the year ended December 31, 2015

 

 

 

 

 

 

 

 

 

 

 

 

Previously

 

 

Increase

 

 

 

 

 

 

Reported

 

 

(Decrease)

 

 

Restated

 

 

 

 

 

 

 

 

 

 

 

Impairment of oil and gas properties

 

 

-

 

 

 

210,032

 

 

 

210,032

 

Derivative gain (loss) / change in fair value

 

 

(5,686)

 

 

272,064

 

 

 

266,378

 

Derivative expense

 

 

-

 

 

 

1,065,808

 

 

 

1,065,808

 

Loss from operations

 

 

(608,480)

 

 

(220,591)

 

 

(829,071)

Net loss

 

 

(911,990)

 

 

(985,184)

 

 

(1,897,174)

Net comprehensive loss

 

 

(892,962)

 

 

(985,184)

 

 

(1,878,146)

Basic and diluted loss per common share

 

 

(0.03)

 

 

(0.04)

 

 

(0.07)

 
 
2
 

 

Selected Consolidated Statements of Cash Flows for the year ended December 31, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Previously

 

 

Increase

 

 

 

 

 

 

Reported

 

 

(Decrease)

 

 

Restated

 

 

 

 

 

 

 

 

 

 

 

Net Loss

 

 

(911,990)

 

 

(985,184)

 

 

(1,897,174)

Derivative (gain) loss / change in fair value

 

 

5,686

 

 

 

793,744

 

 

 

799,430

 

Impairment of oil and gas properties

 

 

-

 

 

 

210,032

 

 

 

210,032

 

Stock based compensation

 

 

108,000

 

 

 

19,438

 

 

 

127,438

 

 

The Company uses the full cost method of accounting for its oil and gas properties, which requires a capitalized cost limitation test (“ceiling test”) at each report date. This analysis utilizes information included in an annual reserve report. The report originally used did not contemplate the pricing requirements for proved reserves promulgated by the Securities and Exchange Commission (“SEC”). The Company obtained a revised reserve report in October 2016, which met the SEC pricing requirements for proved reserves. Based on this report, the Company determined that an impairment of $210,032 should be recorded for the year ended December 31, 2015. The Company also reevaluated the methodology originally used to estimate the derivative liabilities associated with the conversion features of certain debt instruments, and the impact on additional paid in capital associated with these transactions. The Company determined that the original accounting for these transactions understated the derivative liability at December 31, 2015 by $656,350, and understated expense at inception of $1,065,808. The change in the estimated fair value of these derivatives resulted in a gain of $266,378 for the year ended December 31, 2015 as compared to originally recording a loss of $5,686.

 

NOTE REGARDING FORWARD LOOKING STATEMENTS

 

This Annual Report on Form 10-K contains statements that constitute "forward-looking statements." These forward-looking statements can be identified by the use of predictive, future-tense or forward-looking terminology like "believes," "anticipates," "expects," "estimates," "may," or similar terms. These statements appear in a number of places in this annual report and include statements regarding the Company's intent, belief or current expectations and those of its directors or officers with respect to, among other things:(i) trends affecting its financial condition or results of operations, (ii) its business and growth strategies, and (iii) its financing plans. You are cautioned that forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties, and that actual results may differ materially from those projected in the forward-looking statements as a result of various factors. Factors that could adversely affect actual results and performance include, among others, the Company's need for additional capital, its history of losses, the intense competition the Company faces in its business, the fact that its stock is a "penny stock" and the other material risks described under "Risk Factors". The accompanying information contained in this annual report, including, without limitation, the information set forth under the heading "Item 1. Business" identifies important additional factors that could materially adversely affect actual results and performance. You are urged to carefully consider these factors. All forward-looking statements attributable to us are expressly qualified in their entirety by the foregoing cautionary statement.

 

 
3
 

 

Table of Contents

 

Page

PART I

 

Item 1.

Business

5

Item 1A.

Risk Factors

6

Item 1B.

Unresolved Staff Comments

15

Item 2.

Properties

15

Item 3.

Legal Proceedings

16

Item 4.

Mine Safety Disclosures

16

PART II

 

Item 5.

Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

17

Item 6.

Selected Financial Data

19

Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations

19

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

24

Item 8.

Financial Statements and Supplementary Data

25

Item 9.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

26

Item 9A.

Controls and Procedures

26

 

PART III

 

Item 10.

Directors, Executive Officers and Corporate Governance

28

Item 11.

Executive Compensation

31

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

32

Item 13.

Certain Relationships and Related Transactions

33

Item 14.

Principal Accounting Fees and Services

34

 

PART IV

 

Item 15.

Exhibits, Financial Statement Schedules

35

SIGNATURES

36

 

 
4
 

 

PART I

 

Item 1.

Business

 

Viking Investments Group, Inc., is sometimes referred to hereinafter as "Viking Investments" or the "Company." The Company was incorporated under the laws of the State of Florida on May 3, 1989, and remained inactive until June 27, 1998. After several name changes, the Company merged with and into a wholly-owned subsidiary, SinoCubate, Inc., which was formed in the State of Nevada on September 11, 2008. The merger resulted in a change of name to SinoCubate, Inc., and a change in the state of incorporation of the Company to Nevada. On June 13, 2012, the Company changed its name to Viking Investments Group, Inc., and the Company's ticker symbol was changed to "VKIN."

 

The Company's business plan is to engage in the acquisition, exploration, development and production of oil and natural gas properties, both individually and through collaborative partnerships with other companies in this field of endeavor. On March 8, 2016, the Company incorporated a wholly owned subsidiary, Viking Oil & Gas (Canada) ULC, in Alberta, Canada, to hold its Canadian oil and gas interests. On August 30, 2016, the Company organized a wholly owned subsidiary, Mid-Con Petroleum, LLC, a Kansas limited liability company, to hold its oil and gas interests in the central United States.

 

Viking Investments is neither an underwriter as the term is defined in Section 2(a)(11) of the Securities Act of 1933, nor an investment company pursuant to the Investment Company Act of 1940. Viking Investments is not an investment adviser pursuant to the Investment Advisers Act of 1940. Viking Investments is not registered with FINRA or SIPC.

 

Other Information

 

Neither the Company nor any of its subsidiaries engaged in any research and development activities during 2015. The Company does not manufacture any products or engage in any activity that requires compliance with environmental laws, other than those pertaining to the oil and gas industry.

 

Employees

 

The Company does not currently have any employees, but instead retains outside consultants as needed, involved in business development, business analysis, financial consulting, web programming and designing, execution and support of the Company's business.

 

Reports to Securities Holders

 

The Company provides its annual report that includes its audited financial information to its shareholders upon written request. The Company also makes its financial information equally available to any interested parties or investors through compliance with the disclosure rules of the Exchange Act. The Company is subject to disclosure filing requirements including filing Form 10-K's annually and Form 10-Q's quarterly. In addition, the Company files Form 8-K and other proxy and information statements from time to time as required.

 

The public may read and copy any materials that the Company files with the SEC at the SEC's Public Reference Room at 100 F Street NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains a website (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

  

 
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Item 1A.

Risk Factors

 

The Company, as a smaller reporting company (as defined by Rule 12b-2 of the Exchange Act), is not required to furnish information required by this item. However, the following important factors among others, could cause our actual operating results to differ materially from those indicated or suggested by forward-looking statements made in this Form 10-K or presented elsewhere by management from time to time.

 

There are numerous and varied risks, known and unknown, that may prevent us from achieving our goals. If any of these risks actually occur, our business, financial condition or results of operation may be materially adversely affected. In such case, the trading price of our common stock could decline and investors could lose all or part of their investment.

 

There is doubt about our ability to continue as a going concern due to our operating history of net losses, negative working capital and insufficient cash flows, and lack of liquidity to pay our current obligations, all of which means that we may not be able to continue operations.

 

Our independent accounting firm has added an explanatory paragraph to their audit opinion issued in connection with the financial statements. We cannot provide our shareholders any assurance that we will be able to raise sufficient funding from the generation of revenue, the sale of our common stock, or through financing to sustain the Company over the next twelve months. We do not have enough cash on hand to meet our obligations over the next twelve months. As discussed in Note 1 to our financial statements for the years ended December 31, 2015 and 2014, the facts that we have generally had net losses and a working capital deficiency raise substantial doubt about our ability to continue as a going concern.

 

Oil and gas price fluctuations in the market may adversely affect the results of our operations.

 

Our profitability, cash flows and the carrying value of our oil and natural gas properties are highly dependent upon the market prices of oil and natural gas. Substantially all of our sales of oil and natural gas, if any, are made in the spot market, or pursuant to contracts based on spot market prices, and not pursuant to long-term, fixed-price contracts. Accordingly, the prices received for our oil and natural gas production are dependent upon numerous factors beyond our control. These factors include the level of consumer product demand, governmental regulations and taxes, the price and availability of alternative fuels, the level of foreign imports of oil and natural gas and the overall economic environment.

 

Historically, the oil and natural gas markets have proven cyclical and volatile as a result of factors that are beyond our control. Any additional declines in oil and natural gas prices or any other unfavorable market conditions could have a material adverse effect on our financial condition.

 

Actual quantities of recoverable oil and gas reserves and future cash flows from those reserves most likely will vary from our estimates.

 

Estimating accumulations of oil and gas is complex. The process relies on interpretations of available geological, geophysical, engineering and production data. The extent, quality and reliability of this data can vary. The process also requires certain economic assumptions, some of which are mandated by the SEC, such as oil and gas prices, drilling and operating expenses, capital expenditures, taxes and availability of funds. The accuracy of a reserve estimate is a function of:

 

·

the quality and quantity of available data;

·

the interpretation of that data;

·

the accuracy of various mandated economic assumptions; and

·

the judgment of the persons preparing the estimate.

 
 
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Estimates of proved reserves prepared by others might differ materially from our estimates. Actual quantities of recoverable oil and gas reserves, future production, oil and gas prices, revenues, taxes, development expenditures and operating expenses most likely will vary from our estimates. Any significant variance could materially affect the quantities and net present value of our reserves. In addition, we may adjust estimates of proved reserves to reflect production history, results of exploration and development and prevailing oil and gas prices. Our reserves also may be susceptible to drainage by operators on adjacent properties.

 

Our operations will require significant expenditures of capital that may not be recovered.

 

We require significant expenditures of capital to locate and develop producing properties and to drill exploratory and exploitation wells. In conducting exploration, exploitation and development activities for a particular well, the presence of unanticipated pressure or irregularities in formations, miscalculations or accidents may cause our exploration, exploitation, development and production activities to be unsuccessful, potentially resulting in abandonment of the well. This could result in a total loss of our investment. In addition, the cost and timing of drilling, completing and operating wells is difficult to predict.

 

Compliance with, or breach of, environmental laws can be costly and could limit our operations.

 

Our operations will be subject to numerous and frequently changing laws and regulations governing the discharge of materials into the environment or otherwise relating to environmental protection. Any properties we might own for the exploration and production of oil and gas and the wastes disposed on these properties may be subject to the Comprehensive Environmental Response, Compensation and Liability Act, the Oil Pollution Act of 1990, the Resource Conservation and Recovery Act, the Federal Water Pollution Control Act, similar state laws, and similar Canadian laws. Under such laws, we could be required to remove or remediate previously released wastes or property contamination. Laws and regulations protecting the environment have generally become more stringent and may, in some cases, impose "strict liability" for environmental damage. Strict liability means that we may be held liable for damage without regard to whether we were negligent or otherwise at fault. Environmental laws and regulations may expose us to liability for the conduct of or conditions caused by others or for acts that were in compliance with all applicable laws at the time they were performed. Failure to comply with these laws and regulations may result in the imposition of administrative, civil and criminal penalties.

 

Although we believe that our operations are in substantial compliance with existing requirements of governmental bodies, our ability to conduct continued operations is subject to satisfying applicable regulatory and permitting controls. Our current permits and authorizations and ability to get future permits and authorizations may be susceptible on a going forward basis, to increased scrutiny, greater complexity resulting in increased costs, or delays in receiving appropriate authorizations.

 

We are subject to changing laws and regulations and other governmental actions that can significantly and adversely affect our business.

 

Federal, state, local, territorial and foreign laws and regulations relating to tax increases and retroactive tax claims, disallowance of tax credits and deductions, expropriation or nationalization of property, mandatory government participation, cancellation or amendment of contract rights, and changes in import and export regulations, limitations on access to exploration and development opportunities, as well as other political developments may adversely affect our operations.

 

The oil and gas we produce may not be readily marketable at the time of production.

 

Crude oil, natural gas, condensate and other oil and gas products are generally sold to other oil and gas companies, government agencies and other industries. The availability of ready markets for oil and gas that we might discover and the prices obtained for such oil and gas depend on many factors beyond our control, including:

 

 

·

the extent of local production and imports of oil and gas,

 

·

the proximity and capacity of pipelines and other transportation facilities,

 

·

fluctuating demand for oil and gas,

 

·

the marketing of competitive fuels, and

 

·

the effects of governmental regulation of oil and gas production and sales.

 

Natural gas associated with oil production is often not marketable due to demand or transportation limitations and is often flared at the producing well site. Pipeline facilities do not exist in certain areas of exploration and, therefore, we intend on utilizing trucks to transport any oil that is discovered.

 

 
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The price of oil and natural gas has historically been volatile. If it were to decrease substantially, our projections, budgets and revenues would be adversely affected, potentially forcing us to make changes in our operations.

 

Our future financial condition, results of operations and the carrying value of any oil and natural gas interests we acquire will depend primarily upon the prices paid for oil and natural gas production. Oil and natural gas prices historically have been volatile and likely will continue to be volatile in the future, especially given current world geopolitical conditions. Our cash flows from operations are highly dependent on the prices that we receive for oil and natural gas. This price volatility also affects the amount of our cash flows available for capital expenditures and our ability to borrow money or raise additional capital. The prices for oil and natural gas are subject to a variety of additional factors that are beyond our control. These factors include:

 

 

·

the level of consumer demand for oil and natural gas;

 

·

the domestic and foreign supply of oil and natural gas;

 

·

the ability of the members of the Organization of Petroleum Exporting Countries ("OPEC") to agree to and maintain oil price and production controls;

 

·

the price of foreign oil and natural gas;

 

·

domestic governmental regulations and taxes;

 

·

the price and availability of alternative fuel sources;

 

·

weather conditions;

 

·

market uncertainty due to political conditions in oil and natural gas producing regions, including the Middle East; and

 

·

worldwide economic conditions.

 

These factors as well as the volatility of the energy markets generally make it extremely difficult to predict future oil and natural gas price movements with any certainty. Declines in oil and natural gas prices affect our revenues, and could reduce the amount of oil and natural gas that we can produce economically. Accordingly, such declines could have a material adverse effect on our financial condition, results of operations, oil and natural gas reserves and the carrying values of our oil and natural gas properties. If the oil and natural gas industry experiences significant price declines, we may be unable to make planned expenditures, among other things. If this were to happen, we may be forced to abandon or curtail our business operations, which would cause the value of an investment in us to decline in value, or become worthless.

 

Because of the inherent dangers involved in oil and gas operations, there is a risk that we may incur liability or damages as we conduct our business operations, which could force us to expend a substantial amount of money in connection with litigation and/or a settlement.

 

The oil and natural gas business involves a variety of operating hazards and risks such as well blowouts, pipe failures, casing collapse, explosions, uncontrollable flows of oil, natural gas or well fluids, fires, spills, pollution, releases of toxic gas and other environmental hazards and risks. These hazards and risks could result in substantial losses to us from, among other things, injury or loss of life, severe damage to or destruction of property, natural resources and equipment, pollution or other environmental damage, cleanup responsibilities, regulatory investigation and penalties and suspension of operations. In addition, we may be liable for environmental damages caused by previous owners of property purchased and leased by us. As a result, substantial liabilities to third parties or governmental entities may be incurred, the payment of which could reduce or eliminate the funds available for exploration, development or acquisitions or result in the loss of our properties and/or force us to expend substantial monies in connection with litigation or settlements. We currently have no insurance to cover such losses and liabilities, and even if insurance is obtained, there can be no assurance that it will be adequate to cover any losses or liabilities. We cannot predict the availability of insurance or the availability of insurance at premium levels that justify our purchase. The occurrence of a significant event not fully insured or indemnified against could materially and adversely affect our financial condition and operations. We may elect to self-insure if management believes that the cost of insurance, although available, is excessive relative to the risks presented. In addition, pollution and environmental risks generally are not fully insurable. The occurrence of an event not fully covered by insurance could have a material adverse effect on our financial condition and results of operations, which could lead to any investment in us becoming worthless.

 

 
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We may encounter operating hazards that may result in substantial losses.

 

We will be subject to operating hazards normally associated with the exploration and production of oil and gas, including hurricanes, blowouts, explosions, oil spills, cratering, pollution, earthquakes, labor disruptions and fires. The occurrence of any such operating hazards could result in substantial losses to us due to injury or loss of life and damage to or destruction of oil and gas wells, formations, production facilities or other properties. We do not maintain insurance coverage for matters that may adversely affect our operations, including war, terrorism, nuclear reactions, government fines, treatment of waste, blowout expenses, wind damage and business interruptions. Losses and liabilities arising from uninsured or underinsured events could reduce our revenues or increase our costs. There can be no assurance that any insurance we do obtain will be adequate to cover losses or liabilities associated with operational hazards. We cannot predict the continued availability of insurance, or its availability at premium levels that justify its purchase.

 

We face strong competition from larger oil and gas companies, which could result in adverse effects on our business.

 

The petroleum exploration and production business is highly competitive. Many of our competitors have substantially larger financial resources, staffs and facilities. Our competitors in the United States and Canada include numerous major oil and gas exploration and production companies. Additionally, other companies engaged in our line of business may compete with us from time to time in obtaining capital from investors. Competitors include larger companies which, in particular, may have access to greater resources, may be more successful in the recruitment and retention of qualified employees and may conduct their own refining and petroleum marketing operations, which may give them a competitive advantage. Actual or potential competitors may be strengthened through the acquisition of additional assets and interests. Additionally, there are numerous companies focusing their resources on creating fuels and/or materials which serve the same purpose as oil and gas, but are manufactured from renewable resources.

 

Our estimates of the volume of reserves could have flaws, or such reserves could turn out not to be commercially extractable. as a result, our future revenues and projections could be incorrect.

 

Estimates of reserves and of future net revenues prepared by different petroleum engineers may vary substantially depending, in part, on the assumptions made and may be subject to adjustment either up or down in the future. Our actual amounts of production, revenue, taxes, development expenditures, operating expenses, and quantities of recoverable oil and gas reserves may vary substantially from the estimates. Oil and gas reserve estimates are necessarily inexact and involve matters of subjective engineering judgment. In addition, any estimates of our future net revenues and the present value thereof are based on assumptions derived in part from historical price and cost information, which may not reflect current and future values, and/or other assumptions made by us that only represent our best estimates. If these estimates of quantities, prices and costs prove inaccurate, we may be unsuccessful in expanding our oil and gas reserves base with our acquisitions. Additionally, if declines in and instability of oil and gas prices occur, then write downs in the capitalized costs associated with any oil and gas assets we obtain may be required. Because of the nature of the estimates of our reserves and estimates in general, we can provide no assurance that reductions to our estimated proved oil and gas reserves and estimated future net revenues will not be required in the future, and/or that our estimated reserves will be present and/or commercially extractable. If our reserve estimates are incorrect, the value of our common stock could decrease and we may be forced to write down the capitalized costs of our oil and gas properties.

 
 
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Our business will suffer if we cannot obtain or maintain necessary licenses.

 

Our operations will require licenses, permits and in some cases renewals of licenses and permits from various governmental authorities. Our, or our partners', ability to obtain, sustain or renew such licenses and permits on acceptable terms is subject to change in regulations and policies and to the discretion of the applicable governments, among other factors. Our inability to obtain, or our loss of or denial of extension of, any of these licenses or permits could hamper our ability to produce revenues from our operations.

 

Our operations are subject to various litigation that could have an adverse effect on our business.

 

From time to time we may become a defendant in various litigation matters. The nature of our operations exposes us to further possible litigation claims in the future. There is risk that any matter in litigation could be adversely decided against us regardless of our belief, opinion and position, which could have a material adverse effect on our financial condition and results of operations. Litigation is highly costly and the costs associated with defending litigation could also have a material adverse effect on our financial condition.

 

We may be affected by global climate change or by legal, regulatory, or market responses to such change.

 

The growing political and scientific sentiment is that increased concentrations of carbon dioxide and other greenhouse gases in the atmosphere are influencing global weather patterns. Changing weather patterns, along with the increased frequency or duration of extreme weather conditions, could impact the availability or increase the cost to produce our products. Additionally, the sale of our products can be impacted by weather conditions.

 

Concern over climate change, including global warming, has led to legislative and regulatory initiatives directed at limiting the greenhouse gas emissions. For example, proposals that would impose mandatory requirements on greenhouse gas emissions continue to be considered by policy makers in the provinces, states or territories we operate in. Laws enacted that directly or indirectly affect our oil and gas production could impact our business and financial results.

 

If oil or natural gas prices decrease or drilling efforts are unsuccessful, we may be required to record writedowns of our oil and natural gas properties.

 

We could be required to write down the carrying value of certain of our oil and natural gas properties. Write-downs may occur when oil and natural gas prices are low, or if we have downward adjustments to our estimated proved reserves, increases in our estimates of operating or development costs, deterioration in drilling results or mechanical problems with wells where the cost to re-drill or repair is not supported by the expected economics.

 

Accounting rules require that the carrying value of oil and natural gas properties be periodically reviewed for possible impairment. Under the full cost method of accounting, capitalized oil and natural gas property costs less accumulated depletion, net of deferred income taxes, may not exceed a ceiling amount equal to the present value, discounted at 10%, of estimated future net revenues from proved oil and natural gas reserves plus the cost of unproved properties not subject to amortization (without regard to estimates of fair value), or estimated fair value, if lower, of unproved properties that are subject to amortization. Should capitalized costs exceed this ceiling, which is tested on a quarterly basis, an impairment is recognized. While an impairment charge reflects our long-term ability to recover an investment, reduces our reported earnings and increases our leverage ratios, it does not impact cash or cash flow from operating activities.

 
 
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Our future success depends on our ability to replace reserves that are produced.

 

Because the rate of production from oil and natural gas properties generally declines as reserves are depleted, our future success depends upon our ability to economically find or acquire and produce additional oil and natural gas reserves. Except to the extent that we acquire additional properties containing proved reserves, conduct successful exploration and development activities, or, through engineering studies, identify additional behind-pipe zones or secondary recovery reserves, our proved reserves will decline as our reserves are produced. Future oil and natural gas production, therefore, is highly dependent upon our level of success in acquiring or finding additional reserves that are economically recoverable. We cannot assure you that we will be able to find or acquire and develop additional reserves at an acceptable cost.

 

We may acquire significant amounts of unproved property to further our development efforts. Development and exploratory drilling and production activities are subject to many risks, including the risk that no commercially productive reservoirs will be discovered. We may acquire both proved and producing properties as well as undeveloped acreage that we believe will enhance growth potential and increase our earnings over time. However, we cannot assure you that all of these properties will contain economically viable reserves or that we will not abandon our initial investments. Additionally, we cannot assure you that unproved reserves or undeveloped acreage that we acquire will be profitably developed, that new wells drilled on our properties will be productive or that we will recover all or any portion of our investments in our properties and reserves.

 

Our lack of industry and geographical diversification may increase the risk of an investment in our company.

 

We operate in the oil and gas sector and our leases are in Alberta, Canada, Kansas, and Missouri. This lack of geographic diversification may make our holdings more sensitive to economic developments within a regional area, which may result in reduced rates of return or higher rates of default than might be incurred with a company that is more geographically diverse.

 

Our business depends on oil and natural gas transportation and processing facilities and other assets that are owned by third parties.

 

The marketability of our oil and natural gas depends in part on the availability, proximity and capacity of pipeline systems, processing facilities, oil trucking fleets and rail transportation assets owned by third parties. The lack of available capacity on these systems and facilities, whether as a result of proration, physical damage, scheduled maintenance or other reasons, could result in the delay or discontinuance of development plans for our properties. The curtailments arising from these and similar circumstances may last from a few days to several months.

 

Our leasehold acreage is subject to leases that will expire over the next several years unless production is established or maintained or the leases are extended.

 

Some of our acreage is currently held by production or held by operations, but some is not. Unless production in paying quantities is established or operations are commenced on units containing these latter leases during their terms, those leases may expire. Likewise, if we are unable to maintain production on acreage held by production or operations, those leases may expire. If our leases expire and we are unable to renew the leases, we will lose our right to develop or utilize the related properties.

 

Deficiencies of title to our leased interests could significantly affect our financial condition.

 

We, or our partners, often incur the expense of a title examination prior to acquiring oil and natural gas leases or undivided interests in oil and natural gas leases or other developed rights. If an examination of the title history of a property reveals that an oil or natural gas lease or other developed rights have been purchased in error from a person who is not the owner of the mineral interest desired, our interest would substantially decline in value or be eliminated. In such cases, the amount paid for such oil or natural gas lease or leases or other developed rights may be lost.

 
 
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We have not established an effective system of internal control over our financial reporting, and if we fail to maintain such internal control, we may not be able to accurately report our financial results, and current and potential stockholders may lose confidence in our financial reporting.

 

We have not established and maintained adequate and effective internal control over financial reporting that would provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles. We are, however, required to evaluate the effectiveness of our internal controls and to disclose any changes and material weaknesses in those internal controls.

 

Any failure to maintain adequate internal controls could adversely impact our ability to report our financial results on a timely and accurate basis. If our financial statements are not accurate, investors may not have a complete understanding of our operations. Likewise, if our financial statements are not filed on a timely basis as required by the SEC and the Capital Market, we could face severe consequences from those authorities. In either case, there could result a material adverse effect on our business. Ineffective internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock.

 

Need for Additional Financing

 

The Company currently has limited funds and the lack of additional funds may negatively impact the Company's ability to pursue its business strategy to conduct operations in the oil and gas industry and to acquire, invest in and/or provide professional advisory and consulting services to companies undergoing or anticipating periods of rapid growth. Even if the Company's funds prove to be sufficient to provide such services or to acquire an interest in, or complete a transaction with, an entity, the Company may not have enough capital to exploit the opportunity. The ultimate success of the Company may depend upon its ability to raise additional capital. The Company may investigate the availability, source, or terms that might govern the acquisition of additional capital but will not do so until it determines a need for additional financing. If additional capital is needed, there is no assurance that funds will be available from any source or, if available, that they can be obtained on terms acceptable to the Company. If not available, the Company's operations will be limited to those that can be financed with its modest capital.

 

Regulation of Penny Stocks

 

The Company's securities may be subject to a SEC rule that imposes special sales practice requirements upon broker-dealers who sell such securities to persons other than established customers or accredited investors. For purposes of the rule, the phrase "accredited investors" means, in general terms, institutions with assets in excess of $5,000,000, or individuals having a net worth, or joint net worth with spouse, in excess of $1,000,000 excluding the value of the person's primary residence or having an annual income that exceeds $200,000 (or that, when combined with a spouse's income, exceeds $300,000). For transactions covered by the rule, the broker-dealer must make a special suitability determination for the purchaser and receive the purchaser's written agreement to the transaction prior to the sale. Consequently, the rule may affect the ability of broker-dealers to sell the Company's securities and also may affect the ability of purchasers in an offering to sell their securities in any market that might develop.

 

In addition, the SEC has adopted a number of rules to regulate "penny stocks." Such rules include Rules 3a51-1, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6, 15g-7, and 15g-9 under the Securities Exchange Act of 1934, as amended or the Exchange Act. Because the securities of the Company may constitute "penny stocks" within the meaning of the rules, the rules would apply to the Company and to its securities. The rules may further affect the ability of owners of shares to sell the securities of the Company in any market that might develop for them.

 

Shareholders should be aware that, according to SEC, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include (i) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (ii) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (iii) "boiler room" practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (iv) excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and (v) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse of those prices and with consequent investor losses.

 
 
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Lack of Operating History

 

Due to the numerous risks inherent in the implementation of a new business emphasis and plan, the Company must be regarded as a new or start-up venture with all of the unforeseen costs, expenses, problems, and difficulties to which such ventures are subject.

 

No Assurance of Success or Profitability

 

There is no assurance that the Company will be able to successfully implement its business plan and provide the contemplated services to its client companies. Even if the Company is successful in providing its services to its client companies, there is a risk that it will not generate revenues or profits, or that the market price of the Company's common stock will increase.

 

Impracticality of Exhaustive Investigation

 

The Company has limited operating funds, and this makes it impracticable for the Company to conduct a complete and exhaustive investigation and analysis of its opportunities. Decisions will therefore likely be made without detailed geotechnical reports, feasibility studies, independent analysis, market surveys and the like, which, if the Company had more funds available to it, would be desirable. The Company will be particularly dependent in making decisions upon information provided by third parties with interests in the transaction. A significant portion of the Company's available funds could be expended for investigative expenses and other preliminary expenses, and potential profits could therefore be lessened.

 

Lack of Diversification

 

Because of the limited financial resources that the Company has, it is unlikely that the Company will be able to diversify its acquisitions or operations. The Company's probable inability to diversify its activities into multiple areas will subject the Company to economic fluctuations within a particular business or industry and therefore increase the risks associated with the Company's operations.

 

Reliance upon Financial Statements

 

The Company generally will require audited financial statements from companies with which it seeks to enter into a contractual arrangement. In cases where no audited financials are available, the Company will have to rely upon interim period unaudited information received from a prospective client company's management that has not been verified by outside auditors. The lack of the type of independent verification which audited financial statements would provide increases the risk that the Company, in evaluating a contractual arrangement with such a company, will not have the benefit of full and accurate information about the financial condition and recent interim operating history of that company. This risk increases the prospect that the contractual arrangement with such a company might prove to be an unfavorable one for the Company or the holders of the Company's securities.

 

Moreover, the Company will be subject to the reporting provisions of the Exchange Act, and thus will be required to furnish certain information about significant contractual arrangements, including audited financial statements for any business with which it enters into a contractual arrangement for control. Consequently, prospects that do not have, or are unable to provide reasonable assurances that they will be able to obtain, the required audited statements would not be considered by the Company to be appropriate clients so long as the reporting requirements of the Exchange Act are applicable. Should the Company, during the time it remains subject to the reporting provisions of the Exchange Act, complete into a contract for control of an entity for which audited financial statements prove to be unobtainable, the Company would be exposed to enforcement actions by the SEC and to corresponding administrative sanctions, including permanent injunctions against the Company and its management. The legal and other costs of defending an SEC enforcement action would have material, adverse consequences for the Company and its business. The imposition of administrative sanctions would subject the Company to further adverse consequences. In addition, the lack of audited financial statements would prevent the securities of the Company from becoming eligible for listing on NASDAQ, or on any existing stock exchange.

 

Moreover, the lack of such financial statements is likely to discourage broker-dealers from becoming or continuing to serve as market makers in the securities of the Company. Without audited financial statements, the Company would almost certainly be unable to offer securities under a registration statement pursuant to the Securities Act of 1933 or the Securities Act, and the ability of the Company to raise capital would be significantly limited until such financial statements were to become available.

 
 
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Other Regulation

 

A contractual arrangement for acquisition of equity ownership of or control may be of a company that is subject to rules and regulation by federal, state, local or foreign authorities. Compliance with such rules and regulations can be expected to be a time-consuming, expensive process and may limit other opportunities of the Company.

 

Limited Participation of Management

 

The Company is heavily dependent upon the skills, talents, and abilities of its management, who currently have other business interests and do not devote their full time to management of the Company.

 

Lack of Continuity in Management

 

The Company does not have any employment agreements with its Chief Executive Officer and President, Mr. Doris, and its Executive Chairman, Treasurer and former Chief Executive Officer, Mr. Simeo. As a result, there is no assurance that Mr. Doris or Mr. Simeo will continue to be associated with the Company in the future. In connection with future business opportunities, it is possible that Mr. Doris or Mr. Simeo may resign as an officer and director of the Company subject to compliance with Section 14f of the Exchange Act. A decision to resign will be based upon the identity of the business opportunity and the nature of the transaction and is likely to occur without the vote or consent of the stockholders of the Company.

 

No Independent Audit Committee

 

The Company does not have an independent Audit Committee of its Board of Directors. The entire Board of Directors functions as the Company's Audit Committee. The Sarbanes-Oxley Act of 2002, as amended or the SOX and rules and regulations adopted by the SEC to implement the SOX impose certain standards on listed companies relative to the maintenance and operations of Board of Directors Audit Committees, including but not limited to the requirement that Audit Committees be appointed, that membership of such committees comprise only independent directors, that a financial professional be among the membership of such committee and that such committee be afforded an adequate operating budget and be able to employ independent professional advisors. The SOX also requires that the Audit Committee oversee the work of a company's outside auditors and that the outside auditors be responsible to the Audit Committee. At this time, the Company is not in compliance with the requirements of the Sarbanes-Oxley Act as they relate to independent Board of Directors Audit Committees. The Company believes that under rules and regulations adopted by the SEC to implement these provisions of the SOX it is not required to comply with its requirements relating to the appointment of an Audit Committee of its Board of Directors and conforming with the enumerated standards and guidelines because the Company is not a "Listed Company" as defined therein. Notwithstanding, the Company may ultimately be determined not to be in compliance therewith and may therefore face penalties and restrictions on its operations until it comes into full compliance. Additionally, the Company's failure to comply with the provisions of the SOX could preclude it from being listed on NASDAQ or any other stock exchanges until it can show that it is in compliance. The Company's failure to be in compliance with the SOX could also present an impediment to a potential business combination where the target company intends that the Company apply for listing on NASDAQ or any other applicable stock exchanges.

 

Indemnification of Officers and Directors

 

Nevada law provides for the indemnification of the Company's directors, officers, employees, and agents, under certain circumstances, against attorney's fees and other expenses incurred by them in any litigation to which they become a party arising from their association with or activities on behalf of the Company. The Company will also bear the expenses of such litigation for any of its directors, officers, employees, or agents, upon such person's promise to repay the Company if it is ultimately determined that any such person shall not have been entitled to indemnification. This indemnification policy could result in substantial expenditures by the Company which it may be unable to recoup.

 

 
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Dependence upon Outside Advisors

 

To supplement the Company's officers, directors and principal shareholders, the Company may be required to employ accountants, technical experts, appraisers, attorneys, or other consultants or advisors. The selection of any such advisors will be made by the Company without any input from stockholders. Furthermore, it is anticipated that such persons may be engaged on an "as needed" basis without a continuing fiduciary or other obligation to the Company. In the event the Company considers it necessary to hire outside advisors, such persons may be affiliates of the Company, if they are able to provide the required services.

 

No Foreseeable Dividends

 

The Company has not paid dividends on its common stock and does not anticipate paying such dividends in the foreseeable future.

 

Loss of Control by Present Management and Shareholders

 

The Company may consider, as consideration for future business opportunities, an amount of the Company's authorized but unissued common stock that would, upon issuance, represent the great majority of the voting power and equity of the Company. The result would be that another company's stockholders and management would control the Company, and the Company's Board of Directors and management could be replaced by persons unknown at this time. Such a merger would result in a greatly reduced percentage of ownership of the Company by its current shareholders.

 

Rule 144 Sales

 

The majority of the outstanding shares of common stock held by present stockholders are "restricted securities" within the meaning of Rule 144 under the Securities Act. As restricted shares, these shares may be resold only pursuant to an effective registration statement or under the requirements of Rule 144 or other applicable exemptions from registration under the Securities Act and as required under applicable state securities laws. A sale under Rule 144 or under any exemption from the Securities Act, if available, or pursuant to subsequent registration of shares of common stock of present stockholders, may have a depressive effect upon the price of the Company's common stock.

 

Item 1B.

Unresolved Staff Comments

 

None.

 

Item 2.

Properties

 

The Company leases office space on a month-to-month basis at 1330 Avenue of the Americas, Suite 23 A, New York, New York, 10019.

 

On November 3, 2014, the Company entered into a Purchase and Sale, Petroleum and Natural Gas Conveyance Agreement (the "Agreement"), with Tanager Energy Inc., a Canadian corporation listed on the TSX Venture Exchange as a Tier 2 company and trading under the stock symbol "TAN" ("Tanager Energy"). Pursuant to the Agreement, the Company acquired a 50% working interest in the Joffre oil and gas property located in Alberta, Canada (the "Joffre Property"). On or about March 30, 2016, the working interest was registered in the name of the Company's wholly owned subsidiary, Viking Oil & Gas (Canada) ULC.

 

As of December 31, 2015, this property consists of one oil well producing from the Leduc Formation, three suspended oil wells, one abandoned oil well, and a suspended water injector.

 
 
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Information with regard to oil and gas producing activities follows:

 

1. Disclosure of Reserves

 

Reserves are estimated remaining quantities of oil and natural gas and related substances anticipated to be recoverable from known accumulations, as of a given date, based on: the analysis of drilling, geological, geophysical, and engineering data; the use of established technology; and specified economic conditions, which are generally accepted as being reasonable. Reserves are further classified in accordance with the level of certainty associated with the estimates.

 

Oil and Gas Reserves as of December 31, 2015

 

 

 

Oil

 

 

Natural Gas

 

 

Natural Gas Liquids

 

 

Barrels of Oil Equivalent

 

 

 

(Mbbl)

 

 

(MMcf)

 

 

(Mbbl)

 

 

(Mboe)

 

Proved

 

 

 

 

 

 

 

 

 

 

 

 

Developed - Producing

 

 

16.2

 

 

 

44.0

 

 

 

1.8

 

 

 

24.5

 

Developed - Non-Producing

 

 

198.4

 

 

 

858.2

 

 

 

35.6

 

 

 

362.4

 

Undeveloped

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Total Proved

 

 

214.6

 

 

 

902.2

 

 

 

37.4

 

 

 

386.9

 

Probable

 

 

198.0

 

 

 

848.1

 

 

 

35.2

 

 

 

360.10

 

Total Proved plus Probable

 

 

412.6

 

 

 

1,750.3

 

 

 

72.6

 

 

 

747.0

 

 

Mbbl = thousands of barrels

MMcf = millions of cubic feet

Mboe - thousands of barrels of oil equivalent

 

2. Disclosure of Oil and Gas Production, Sales and Average Prices

 

Oil and Gas Production and Sales by geographic area for the years ended December 31, 2015 and 2014

 

 

 

Geographic

 

Unit of

 

December 31,

 

 

 

Area

 

Measure

 

2015

 

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

Sales - Volume

 

 

 

 

 

 

 

 

 

 

Oil

 

Canada

 

Barrels

 

 

1,639

 

 

 

-

 

Natural Gas

 

Canada

 

Mcf

 

 

5,404

 

 

 

-

 

Natural Gas Liquids

 

Canada

 

Barrels

 

 

849

 

 

 

-

 

Sulphur

 

Canada

 

Tonnes

 

 

36

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales

 

 

 

 

 

 

 

 

 

 

 

 

Oil

 

Canada

 

Barrels

 

$76,619

 

 

$-

 

Natural Gas

 

Canada

 

Mcf

 

$12,340

 

 

$-

 

Natural Gas Liquids

 

Canada

 

Barrels

 

$5,646

 

 

$-

 

Sulphur

 

Canada

 

Tonnes

 

$1,319

 

 

$-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Sales Prices

 

 

 

 

 

 

 

 

 

 

 

 

Oil

 

Canada

 

Barrels

 

$46.75

 

 

$-

 

Natural Gas

 

Canada

 

Mcf

 

$2.28

 

 

$-

 

Natural Gas Liquids

 

Canada

 

Barrels

 

$6.65

 

 

$-

 

Sulphur

 

Canada

 

Tonnes

 

$36.64

 

 

$-

 

 

Mcf = thousands of cubic feet

Tonnes = Metric tons

 

Item 3.

Legal Proceedings

 

From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. As of December 31, 2015, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of our operations.

 

Item 4.

Mine Safety Disclosures

 

Not applicable.

 
 
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PART II

 

Item 5.

Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

 

Market Information

 

There is no "established trading market" for shares of the Company's common stock. As of December 31, 2015, the Company's common stock was quoted on OTC Markets Group's OTCQB under the symbol "VKIN." No assurance can be given that any "established trading market" for the Company's common stock will develop or be maintained.

 

The range of high and low closing bid quotations for the Company's common stock during each quarter of the calendar years ended December 31 2015 and 2014, is shown below, as quoted by http://finance.yahoo.com. Prices are inter-dealer quotations, without retail mark-up, markdown or commissions and may not represent actual transactions.

 

Stock Quotations

 

Quarter Ended

 

High

 

 

Low

 

March 31, 2014

 

 

0.20

 

 

 

0.05

 

June 30, 2014

 

 

0.60

 

 

 

0.19

 

September 30, 2014

 

 

0.51

 

 

 

0.15

 

December 31, 2014

 

 

0.40

 

 

 

0.03

 

March 31, 2015

 

 

0.40

 

 

 

0.06

 

June 30, 2015

 

 

0.40

 

 

 

0.06

 

September 30, 2015

 

 

0.28

 

 

 

0.06

 

December 31, 2015

 

 

0.23

 

 

 

0.06

 

 

The future sale of the Company's presently outstanding "unregistered" and "restricted" common stock by present members of management and persons who own more than five percent of the Company's outstanding voting securities may have an adverse effect on any "established trading market" that may develop in the shares of the Company's common stock.

 

Holders

 

As of December 31, 2015, the Company had 76 shareholders of record of common stock, including shares held by brokerage clearing houses, depositories or otherwise in unregistered form. The Company does not know the beneficial owners of such shares.

 

Dividend Distributions

 

We have not historically distributed dividends to stockholders, nor do we intend to do so in the foreseeable future.

 

Securities authorized for issuance under equity compensation plans

 

The Company does not have any securities authorized for issuance under equity compensation plans.

 
 
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Penny Stock

 

Our common stock is considered "penny stock" under the rules the Securities and Exchange Commission (the "SEC") under the Securities Exchange Act of 1934. The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ Stock Market System, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or quotation system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the Commission, that:

 

·

contains a description of the nature and level of risks in the market for penny stocks in both public offerings and secondary trading;

·

contains a description of the broker's or dealer's duties to the customer and of the rights and remedies available to the customer with respect to a violation to such duties or other requirements of Securities' laws; contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price;

·

contains a toll-free telephone number for inquiries on disciplinary actions;

·

defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and

·

contains such other information and is in such form, including language, type, size and format, as the Commission shall require by rule or regulation.

 

The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with:

 

·

bid and offer quotations for the penny stock;

·

the compensation of the broker-dealer and its salesperson in the transaction;

·

the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the marker for such stock; and

·

monthly account statements showing the market value of each penny stock held in the customer's account.

 

In addition, the penny stock rules that require that prior to a transaction in a penny stock not otherwise exempt from those rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written acknowledgement of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a written suitably statement.

 

These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our stock.

 

Related Stockholder Matters

 

None.

 

Purchase of Equity Securities

 

None.

 

 
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Item 6.

Selected Financial Data

 

The Company, as a smaller reporting company (as defined by Rule 12b-2 of the Exchange Act), is not required to furnish information required by this item.

 

Item 7. 

Management's Discussion and Analysis of Financial Condition and Results of Operations.

 

You should read the following discussion and analysis in conjunction with the audited consolidated financial statements and notes thereto appearing elsewhere in this annual report on Form 10-K.

 

In preparing the management's discussion and analysis, the registrant presumes that you have read or have access to the discussion and analysis for the preceding fiscal year.

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This document includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, as amended or the Reform Act. All statements other than statements of historical fact are "forward-looking statements" for purposes of federal and state securities laws, including, but not limited to, any projections of earning, revenue or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions of performance; and statements of belief; and any statements of assumptions underlying any of the foregoing. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the 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. Such factors include, among others, the following: the Company's ability to raise capital and the terms thereof; and other factors referenced in the Form 10-K.

 

The use in this Form 10-K of such words as "believes", "plans", "anticipates", "expects", "intends", and similar expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements. These forward-looking statements present the Company's estimates and assumptions only as of the date of this report. Except for the Company's ongoing obligation to disclose material information as required by the federal securities laws, the Company does not intend, and undertakes no obligation, to update any forward-looking statements.

 

Although the Company believes that the expectations reflected in any of the forward-looking statements are reasonable, actual results could differ materially from those projected or assumed or any of the Company's forward-looking statements. The Company's future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties.

 

PLAN OF OPERATIONS

 

Overview

 

The Company's business plan is to engage in the acquisition, exploration, development and production of oil and natural gas properties, both individually and through collaborative partnerships with other companies in this field of endeavor. In November of 2014, the Company entered its first contract of this kind as explained in Note 4. On March 8, 2016, the Company incorporated a wholly owned subsidiary, Viking Oil & Gas (Canada) ULC, in Alberta, Canada, to hold its Canadian oil and gas interests. On August 30, 2016, the Company organized a wholly owned subsidiary, Mid-Con Petroleum, LLC, a Kansas limited liability company, to hold its oil and gas interests in the central United States.

 

Viking Investments is neither an underwriter as the term is defined in Section 2(a)(11) of the Securities Act of 1933, nor an investment company pursuant to the Investment Company Act of 1940. Viking Investments is not an investment adviser pursuant to the Investment Advisers Act of 1940. Viking Investments is not registered with FINRA or SIPC.

 

 
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Going Concern Qualification

 

The Company's ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management has no formal plan in place to address this concern but considers that the Company will be able to obtain additional funds by equity financing and/or related party advances; however, there is no assurance of additional funding being available.

 

RESULTS OF CONTINUING OPERATIONS

 

The following discussion of the consolidated financial condition and results of operation of the Company should be read in conjunction with the consolidated financial statements and the related Notes included elsewhere in this Report.

 

Liquidity and Capital Resources

 

Working Capital:

 

December 31,

 

 

 

2015

 

 

2014

 

 

 

 

 

 

 

 

Current Assets

 

$184,462

 

 

$1,345

 

Current Liabilities

 

$1,642,757

 

 

$481,902

 

Asset retirement obligation

 

$416,246

 

 

$-

 

Working Capital (deficit)

 

$(1,458,295)

 

$(480,557)

 

Cash Flows:

 

Years Ended December 31,

 

 

 

2015

 

 

2014

 

 

 

 

 

 

 

 

Net Cash Provided by (Used in) Operating Activities

 

$(151,307)

 

$(370,800)

Net Cash Provided by (Used in) Investing Activities

 

$-

 

 

$(549,811)

Net Cash Provided by (Used in) Financing Activities

 

$180,547

 

 

$909,666

 

Increase (Decrease) in Cash during the Period

 

$29,240

 

 

$(10,894)

Cash and Cash Equivalents, End of Period

 

$30,585

 

 

$1345

 

 

The Company had current assets of $184,462 as of December 31, 2015, as compared to $1,345 in the comparable period in 2014. The Company had current liabilities of $1,642,757 as of December 31, 2015, as compared to $481,902 in the comparable period in 2014. The increase in current liabilities is mainly due to an increase in amounts due to directors, new convertible debt, and a corresponding derivative liability. The Company had a working capital deficit of $1,458,295 as a consequence of these increased liabilities as of December 31, 2015, compared to a working capital deficit in December 31, 2014, of $480,557.

 

Cash used in operating activities decreased to ($151,307) during the fiscal year ended December 31, 2015, as compared to ($370,800) in the comparable period in 2014. The decrease was mostly due expenses being paid directly by directors.

 

Cash from financing activities decreased to $180,547 during the fiscal year ended December 31, 2015 as compared to 909,666 in the comparable period in 2014. The decrease was mostly due to the Company not issuing units during 2015 and generating less cash through convertible debt, as well as the borrowings from directors.

 

 
20
Table of Contents

 

Cash used in investing activities decreased to zero during the fiscal year ended December 31, 2015, as compared to ($549,811) in the comparable period in 2014. The decrease is a result of the Company having accomplished the purchase of 1,256,593 and 2,187,500 units of Tanager Energy Inc. ("Tanager"), a Canadian mining company listed on the Canadian TSX Venture Exchange as a Tier 2 company and trading under the stock symbol "TAN," at a price of C$0.08 per unit during 2014. On November 3, 2014, the Company entered into a Purchase and Sale, Petroleum and Natural Gas Conveyance Agreement (the "Agreement"), with Tanager Energy. Pursuant to the Agreement, the Company is entitled to receive a 50% working interest in the Joffre oil and gas property located in Alberta, Canada (the "Joffre Property"). On November 4, 2014, the Company closed the transaction by paying Tanager US$302,367, with US$52,801 (C$60,000) payable as of December 31, 2014, which was paid in January of 2015.

 

Tanager owns the remaining 50% working interest in the Joffre Property and operates and manages the property in accordance with an operating agreement pursuant to the Canadian Association of Petroleum Landman Operating Procedure. The proceeds were to be used by Tanager to complete and place on production the first of four suspended Devonian oil wells in the Joffre D-3 B oil pool (the "Joffre Project"). In April 2015, the Company advanced to Tanager, an additional $153,877 (C$190,000) as an investment in the second well in the Joffre D-3 oil pool. On or about March 30, 2016, the working interest was registered in the name of the Company's wholly owned subsidiary, Viking Oil & Gas (Canada) ULC.

 

Revenue

 

The Company had gross revenues of $95,924 for the year ended December 31, 2015, representing its share of revenue from its 50% working interest in the Joffre Property. This revenue comes from the first two oil wells in the Joffre Project which began producing during April of 2015. The Company did not have any revenue for the year ended December 31, 2014.

 

Expenses

 

The Company's operating expenses increased by $358,344 to $924,995 for the year ended December 31, 2015, from $566,651 for the year ended December 31, 2014. This increase is mainly attributable to the Company's portion of the operational costs of processing, gathering and administering the oil wells in the Joffre Project of $49,965, an impairment loss of $210,032, accretion expense of $10,031 and depreciation, depletion and amortization expense of $34,881.

 

Loss from Operations

 

The Company incurred a loss from operations of $829,071 for the year ended December 31, 2015, as compared to a loss from operations of $566,651 for the year ended December 31, 2014. The increase in loss from operations was mainly due to the items referred to in the analysis of expenses.

 

Off Balance Sheet Arrangements

 

The Company does not have any off balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity or capital expenditures or capital resources that is material to an investor in the Company's securities.

 

Seasonality

 

The Company' operating results are not affected by seasonality.

 

Inflation

 

The Company's business and operating results are not affected in any material way by inflation.

 
 
21
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Subsequent Events

 

On January 12, 2016, the Company issued 300,926 common shares upon the conversion of convertible debt in the amount of $10,111.

 

On February 23, 2016, the Company closed on the acquisition of working interests (Net Revenue Interests from 80 to 87%) in four leases with access to the mineral rights (oil and gas) concerning approximately 281 acres of property in Miami and Franklin Counties in eastern Kansas. This project produces oil from the Cherokee formation at a depth of approximately 600 feet. These leases offer the potential for several future drilling locations. The purchase includes an undivided interest in all oil and gas wells, equipment, fixtures and other personal property located upon the leased properties and used in connection with oil and gas operations upon the leases attributable to the working interests purchased by the Company. The effective date of the acquisitions is February 1, 2016, so the Company was entitled to net revenues from its share of production as of such date.

 

As consideration for this transaction, the Company made a cash payment of $1,305,000 at closing to the vendors and a cash payment in March of 2016 in the amount of $45,000. The Company also agreed to issue the vendors 4,500,000 shares of common stock.

 

Immediately prior to the above-noted acquisition, the Company also purchased a 100% working interest (Net Revenue Interest of 83%) in: (i) three leases with access to the mineral rights (oil and gas) concerning approximately 270 acres of property in Miami and Franklin Counties in eastern Kansas; and (ii) 31 leases with access to the mineral rights (oil and gas) concerning approximately 5,500 acres of property in Cass and Bates Counties in Missouri. The purchase includes an undivided interest in all oil and gas wells, equipment, fixtures and other personal property located upon the leased properties and used in connection with oil and gas operations upon the leases attributable to the working interests purchased by Viking. As consideration for this transaction, Viking agreed to issue the vendors 5,150,000 shares of common stock of Viking.

 

To facilitate these acquisitions, the Company borrowed $1,450,000 from private lenders pursuant to a 15% Senior Secured Convertible Promissory Note (the "Note"), arranged through a licensed broker/dealer, with the primary terms of the loan being as follows: (i) Term – 6 months; (ii) Rate – 15% per annum; (iii) Security – 1st ranking charge against company assets pursuant to a Security and Pledge Agreement (the "Security Agreement"); (iv) Conversion – the lenders have a right to convert all or part of the note into common stock of Viking at a price of $0.15 per share, subject to certain ownership restrictions; and (v) Warrants – the lenders were given an option to purchase, within the next 5 years, 3,750,000 shares of common stock of Viking at an exercise price of $0.20 per share pursuant to a Common Stock Purchase Warrant. Viking's CEO and director, James Doris, also personally guaranteed repayment of the loan and granted the lenders a security interest in his assets.

 

The foregoing descriptions of the terms of the Note, Security Agreement and Warrant are qualified in their entirety by the full text of such agreements, the form of which Note, Security Agreement and Warrant are incorporated by reference in and to Exhibits 99.3, 99.4, and 99.5 hereto.

 

As of February 1, 2016, the Company issued 9,650,000 common shares as part of the consideration for the acquisition of the oil and gas investment made at that time.

 

On March 16, 2016, the Company issued 1,000,000 common shares for services, valued at $102,500.

 

On March 21, 2016, the Company executed two one-year consulting agreements requiring the issuance of 2,000,000 common shares for each contract. Both of these contracts were terminated, the shares were returned to the Company, and were cancelled in August 2016.

 

On March 21, 2016, the Company executed a one-year advisory services agreement requiring the issuance of 1,000,000 common shares for the contract. The shares are to be issued as 375,002 upon execution of the contract, with 56,818 shares being issued at the beginning of each month for the remaining eleven months.

 

As of April 29, 2016, the Company issued a total of $375,000 of 10% Secured Subordinated promissory notes with a term expiring January 12, 2017 (the “Maturity Date”), and an original issue discount of fifty percent (50%). Interest is payable on the outstanding principal of these notes at 10% per annum on the Maturity Date.

 

As of April 29, 2016, the Company, pursuant to a securities purchase agreement, sold 1,250,000 shares of its common stock at $0.15 per share.

 

 
22
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On September 28, 2016, the Company issued 2,400,000 common shares, at the current market value of $288,000 as a portion of the purchase price of additional oil and gas properties acquired on October 4, 2016.

 

During September 2016, the Company negotiated the payment of certain convertible notes, and committed to the issuance of 375,000 common shares at the current market value of $52,500 as additional interest.

 

As of September 30, 2016, the Company, pursuant to a securities purchase agreement, sold $1,337,500 shares of its common stock at $0.15 per share.

 

As of October 2016, the Company issued a total of $610,000 of 10% Secured promissory notes with a term expiring April 3, 2017 (the “Maturity Date”), and an original issue discount of thirty seven and one half percent (37.5%). Interest is payable on the outstanding principal of these notes at 10% per annum on the Maturity Date.

 

On October 4, 2016, the Company closed on the purchase of working interests in various oil and gas leases in Eastern Kansas. Simultaneously, to facilitate the purchase, the Company closed on its initial funding from Crossfirst Bank under the September 30, 2016 Revolver Agreement in the amount of $1,800,000. Additionally, on October 4, 2016, the Company committed to the issuance of 2,752,021 common shares as a part of the consideration for the acquisition of this oil and gas investment. The shares were issued in December 2016.

 

During November 2016, the Company issued 1,400,000 common shares as part of a negotiated settlement on convertible notes.

 

During November, 2016, the Company issued 187,500 common shares pursuant to a securities purchase agreement. 

 

Critical Accounting Policies

 

We prepare our financial statements in conformity with GAAP, which requires management to make certain estimates and assumptions and apply judgments. We base our estimates and judgments on historical experience, current trends and other factors that management believes to be important at the time the financial statements are prepared and actual results could differ from our estimates and such differences could be material. Due to the need to make estimates about the effect of matters that are inherently uncertain, materially different amounts could be reported under different conditions or using different assumptions. On a regular basis, we review our critical accounting policies and how they are applied in the preparation of our financial statements, as well as the sufficiency of the disclosures pertaining to our accounting policies in the footnotes accompanying our financial statements. Described below are the most significant policies we apply in preparing our consolidated financial statements, some of which are subject to alternative treatments under GAAP. We also describe the most significant estimates and assumptions we make in applying these policies. See “Note 3 - Summary of Significant Accounting Policies” to our consolidated financial statements.

 

 Oil and Gas Property Accounting

 

The Company uses the full cost method of accounting for its investment in oil and natural gas properties. Under this method of accounting, all costs of acquisition, exploration and development of oil and natural gas properties (including such costs as leasehold acquisition costs, geological expenditures, dry hole costs, tangible and intangible development costs and direct internal costs) are capitalized as the cost of oil and natural gas properties when incurred.

 

The full cost method requires the Company to calculate quarterly, by cost center, a "ceiling," or limitation on the amount of properties that can be capitalized on the balance sheet. To the extent capitalized costs of oil and natural gas properties, less accumulated depletion and related deferred taxes exceed the sum of the discounted future net revenues of proved oil and natural gas reserves, the lower of cost or estimated fair value of unproved properties subject to amortization, the cost of properties not being amortized, and the related tax amounts, such excess capitalized costs are charged to expense.

 

Proved Reserves

 

Estimates of our proved reserves included in this report are prepared in accordance with U.S. SEC guidelines for reporting corporate reserves and future net revenue. The accuracy of a reserve estimate is a function of: 

 

i.

the quality and quantity of available data; 

 

ii.

the interpretation of that data; 

 

iii.

the accuracy of various mandated economic assumptions; and 

 

iv.

the judgment of the persons preparing the estimate.

 
 
23
Table of Contents

 

Our proved reserve information included in this report was predominately based on estimates. Because these estimates depend on many assumptions, all of which may substantially differ from future actual results, reserve estimates will be different from the quantities of oil and gas that are ultimately recovered. In addition, results of drilling, testing and production after the date of an estimate may justify material revisions to the estimate. 

 

In accordance with SEC requirements, we based the estimated discounted future net cash flows from proved reserves on the unweighted arithmetic average of the prior 12-month commodity prices as of the first day of each of the months constituting the period and costs on the date of the estimate.

 

The estimates of proved reserves materially impact depreciation, depletion, amortization and accretion (“DD&A”) expense. If the estimates of proved reserves decline, the rate at which we record DD&A expense will increase, reducing future net income. Such a decline may result from lower market prices, which may make it uneconomic to drill for and produce from higher-cost fields. 

 

Asset Retirement Obligation

 

Asset retirement obligations (“ARO”) primarily represent the estimated present value of the amount we will incur to plug, abandon and remediate our producing properties at the projected end of their productive lives, in accordance with applicable federal, state and local laws. We determined our ARO by calculating the present value of estimated cash flows related to the obligation. The retirement obligation is recorded as a liability at its estimated present value as of the obligation’s inception, with an offsetting increase to proved properties. Periodic accretion of discount of the estimated liability is recorded as accretion expense in the accompanying consolidated statements of operations and comprehensive income.

 

ARO liability is determined using significant assumptions, including current estimates of plugging and abandonment costs, annual inflation of these costs, the productive lives of wells and a risk-adjusted interest rate. Changes in any of these assumptions can result in significant revisions to the estimated ARO.

 

Revenues from oil and gas properties are recognized under the entitlements method of accounting, whereby revenue is recognized on the amount the Company is entitled to, based on its interest in the property after all costs associated with exploration, gathering, marketing and sales relative to the volumes of product sold.

 

The Company has updated its accounting for net operating losses to reflect accumulated deficits.

 

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk.

 

The Company, as a smaller reporting company (as defined by Rule 12b-2 of the Exchange Act), is not required to furnish information required by this item.

 
 
24
Table of Contents

 

Item 8.

Financial Statements and Supplementary Data

 

Report of Independent Registered Public Accounting Firm

F-1

 

Report of Independent Registered Public Accounting Firm

F-2

 

Consolidated Balance Sheets as at December 31, 2015 and 2014

F-3

 

Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2015 and 2014

F-4

Consolidated Statements of Cash Flows for the years ended December 31, 2015 and 2014

F-5

Consolidated Statements of Changes in Stockholders' Deficit

F-6

Notes to Consolidated Financial Statements

F-7

 

 

25

 

  

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

Board of Directors and Stockholders

Viking Investments Group, Inc.

 

We have audited the accompanying consolidated balance sheet of Viking Investments Group, Inc. and its subsidiary (the “Company”) as of December 31, 2015, and the related consolidated statements of operations and comprehensive loss, changes in stockholders’ deficit and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

 

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Viking Investments Group, Inc. and its subsidiary as of December 31, 2015, the results of their consolidated operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has suffered recurring losses from operations since inception and has a working capital deficiency both of which raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

/s/ Turner, Stone & Company, L.L.P.

 

Dallas, Texas

December 13, 2016

  

 
F-1
Table of Contents

  

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

The Board of Directors and Stockholders

Viking Investments Group, Inc.

 

We have audited the accompanying balance sheet of Viking Investments Group, Inc. as of December 31, 2014, and the related statement of operations, stockholders’ deficiency, and cash flows for the years ended  December 31, 2014. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

 

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Viking Investments Group, Inc. as of December 31, 2014, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the accompanying financial statements, the Company has significant net losses and cash flow deficiencies. Those conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans regarding those matters are described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

/s/ Green & Company, CPAs

 

Green & Company, CPAs

Temple Terrace, Florida

March 27, 2015

 

 
F-2
Table of Contents

 

VIKING INVESTMENTS GROUP, INC. 

Consolidated Balance Sheets

As at December 31, 2015 and 2014

(Amounts expressed in US dollars)

 

 

 

December 31

 

 

 

2015

 

 

2014

 

 

 

(restated)

 

 

 

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash

 

$30,585

 

 

$1,345

 

Other receivable – related party

 

 

153,877

 

 

 

-

 

Total current assets

 

 

184,462

 

 

 

1,345

 

 

 

 

 

 

 

 

 

 

Oil and gas properties, full cost method

 

 

 

 

 

 

 

 

Proved developed producing oil and gas properties, net

 

 

30,989

 

 

 

21,310

 

Undeveloped and non-producing oil and gas properties, net

 

 

485,481

 

 

 

333,858

 

Total Oil and gas properties, net

 

 

516,470

 

 

 

355,168

 

 

 

 

 

 

 

 

 

 

Long term investment

 

 

87,156

 

 

 

68,128

 

TOTAL ASSETS

 

$788,088

 

 

$424,641

 

LIABILITIES AND STOCKHOLDERS' DEFICIT

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accrued expenses and other current liabilities

 

$95,575

 

 

$116,149

 

Accounts payable

 

 

104,774

 

 

 

39,314

 

Derivative liability

 

 

810,647

 

 

 

-

 

Amount due to directors

 

 

614,991

 

 

 

326,439

 

Convertible notes – current, net of debt discount

 

 

16,770

 

 

 

-

 

Total current liabilities

 

 

1,642,757

 

 

 

481,902

 

Convertible notes - net of current portion and debt discount

 

 

6,778

 

 

 

-

 

Asset retirement obligation

 

 

416,246

 

 

 

-

 

TOTAL LIABILITIES

 

 

2,065,781

 

 

 

481,902

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 9)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS' DEFICIT

 

 

 

 

 

 

 

 

Capital Stock

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value, 5,000,000 shares authorized, 28,092 Shares issued and outstanding as of December 31, 2015 and 2014

 

 

28

 

 

 

28

 

Common stock, $0.001 par value, 100,000,000 shares authorized, 30,333,993 and 24,094,551 shares issued and outstanding as of December 31, 2015 and 2014

 

 

30,334

 

 

 

24,095

 

Shares to be issued

 

 

-

 

 

 

675

 

Additional Paid-In Capital

 

 

7,960,372

 

 

 

7,162,660

 

Prepaid equity-based compensation

 

 

(145,562)

 

 

-

 

Accumulated other comprehensive loss

 

 

(158,424)

 

 

(177,452)

Accumulated Deficit

 

 

(8,964,441)

 

 

(7,067,267)

TOTAL STOCKHOLDERS' DEFICIT

 

 

(1,277,693)

 

 

(57,261)

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT

 

$788,088

 

 

$424,641

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 
F-3
Table of Contents

 

VIKING INVESTMENTS GROUP, INC.

Consolidated Statements of Operations and Comprehensive Loss

For the Years Ended December 31, 2015 and 2014

(Amounts expressed in US dollars)

 

 

 

For the Years Ended

December 31,

 

 

 

2015

 

 

2014

 

 

 

(restated)

 

 

 

 

Revenue

 

 

 

 

 

 

 

Oil and gas sales

 

$95,924

 

 

$-

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

Lease operating costs

 

 

49,965

 

 

 

-

 

Impairment of oil and gas properties

 

 

210,032

 

 

 

-

 

General and administrative

 

 

492,647

 

 

 

377,484

 

Stock based compensation

 

 

127,438

 

 

 

189,167

 

Accretion – ARO

 

 

10,032

 

 

 

-

 

Depreciation, depletion & amortization

 

 

34,881

 

 

 

-

 

Total operating expenses

 

 

924,995

 

 

 

566,651

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

 

(829,071)

 

 

(566,651)

 

 

 

 

 

 

 

 

 

Other income (expenses)

 

 

 

 

 

 

 

 

Interest expense

 

 

(288,281)

 

 

-

 

Change in fair value of derivative liability

 

 

266,378

 

 

 

(96,748)

Derivative expense

 

 

(1,065,808)

 

 

-

 

Gain on settlement of debt

 

 

19,608

 

 

 

9,485

 

Other income

 

 

-

 

 

 

2,440

 

Total other income (expenses)

 

 

(1,068,103)

 

 

(84,823)

 

 

 

 

 

 

 

 

 

Net loss

 

 

(1,897,174)

 

 

(651,474)

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

Unrealized gain (loss) on securities available-for-sale

 

 

19,028

 

 

 

(179,316)

Foreign currency translation adjustment

 

 

-

 

 

 

53

 

 

 

 

 

 

 

 

 

 

Net Comprehensive loss

 

$(1,878,146)

 

$(830,737)

 

 

 

 

 

 

 

 

 

Loss per weighted average number of common shares outstanding – basic and diluted

 

$(0.07)

 

$(0.03)

Weighted average number of common

 

 

 

 

 

 

 

 

shares outstanding – basic and diluted

 

 

27,283,026

 

 

 

24,094,551

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 
F-4
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VIKING INVESTMENTS GROUP, INC.

Consolidated Statements Of Cash Flows

(Amounts expressed in US dollars)

 

 

 

For the Years Ended December 31,

 

 

 

 

2015

 

 

2014

 

 

 

 

(restated) 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net loss

 

$(1,897,174)

 

$(651,474)

Adjustments to reconcile net loss to cash used in operating activities:

 

 

 

 

 

 

 

 

Change in fair value of derivative liability

 

 

(266,378)

 

 

96,748

 

Derivative expense

 

 

1,065,808

 

 

 

-

 

Gain on settlement of debt

 

 

(19,608)

 

 

(9,485)

Stock based compensation

 

 

127,438

 

 

 

189,167

 

Depreciation, depletion and amortization

 

 

34,881

 

 

 

5,053

 

Impairment of oil and gas properties

 

 

210,032

 

 

 

-

 

Accretion - Asset retirement obligation

 

 

10,032

 

 

 

-

 

Amortization of debt discount

 

 

183,548

 

 

 

-

 

Changes in operating assets and liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

 

86,459

 

 

 

(123,734)

Accrued expenses and other current liabilities

 

 

79,885

 

 

 

113,284

 

Prepaid expenses and deposits

 

 

-

 

 

 

9,641

 

Amounts due to directors

 

 

233,770

 

 

 

-

 

Net cash used in operating activities

 

 

(151,307)

 

 

(370,800)

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Investment in Tanager Energy

 

 

-

 

 

 

(247,444)

Investment in oil and gas properties

 

 

-

 

 

 

(302,367)

Net cash used in investing activities

 

 

-

 

 

 

(549,811)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from amount due to directors

 

 

11,692

 

 

 

248,724

 

Repayment of amount due to directors

 

 

(115,145)

 

 

-

 

Proceeds from issuance of units

 

 

-

 

 

 

607,942

 

Proceeds from convertible notes

 

 

348,000

 

 

 

53,000

 

Repayment of convertible notes

 

 

(64,000)

 

 

-

 

Net cash provided by financing activities

 

 

180,547

 

 

 

909,666

 

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash

 

 

-

 

 

 

51

 

 

 

 

 

 

 

 

 

 

Net increase (decrease) in cash

 

 

29,240

 

 

 

(10,894)

Cash at beginning of year

 

 

1,345

 

 

 

12,239

 

Cash at end of year

 

$30,585

 

 

$1,345

 

Supplemental Cash Flow Information:

 

 

 

 

 

 

 

 

Cash paid for:

 

 

 

 

 

 

 

 

Interest

 

$-

 

 

$-

 

Income taxes

 

$-

 

 

$-

 

Supplemental Disclosure of Non-Cash Investing and Financing Activities:

 

 

 

 

 

 

 

 

Issuances of shares for convertible debt and accrued expenses

 

$252,101

 

 

$188,007

 

Recognition of asset retirement obligation

 

$406,214

 

 

$-

 

Settlement and reacquisition of derivative liabilities

 

$278,175

 

 

$-

 

Convertible notes paid through advances from directors

 

$205,459

 

 

$-

 

Payments to vendors from debt proceeds

 

$21,000

 

 

$-

 

Loan to Tanager advanced from directors

 

$153,877

 

 

$-

 

Debt discount on convertible debt

 

$337,278

 

 

$-

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 
F-5
Table of Contents

 

VIKING INVESTMENTS GROUP, INC.

Consolidated Statement of Changes in Stockholders' Deficit

(Amounts expressed in US dollars)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

Prepaid

 

Other

 

 

 

Stockholders'

 

 

Common Stock

Shares to be Issued

 

Preferred Stock

 

Paid-in

 

Equity-Based

 

Comprehensive

 

Accumulated  

 

Equity

 

 

Number

 

Amount

Number

 

Amount

 

Number

 

Amount

 

Capital

 

Compensation

 

Loss

 

Deficit

 

(Deficiency)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2013

 

18,758,657

 

$18,760

 

-

 

$-

 

28,092

 

$28

 

$6,116,054

 

$-

 

$1,811

 

$(6,415,793)$(279,140)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued for legal services

 

1,406,331

 

 

1,406

 

 

 

 

 

 

 

 

 

 

 

 

187,761

 

 

 

 

 

 

 

 

 

 

 

189,167

 

Shares issued to investors

 

2,330,534

 

 

2,331

 

 

 

 

 

 

 

 

 

 

 

 

605,611

 

 

 

 

 

 

 

 

 

 

 

607,942

 

Shares issued for convertible debt

 

1,599,029

 

 

1,598

 

 

 

 

 

 

 

 

 

 

 

 

186,409

 

 

 

 

 

 

 

 

 

 

 

188,007

 

Shares to be issued to investors

 

 

 

 

 

 

675,000

 

 

675

 

 

 

 

 

 

 

66,825

 

 

 

 

 

 

 

 

 

 

 

67,500

 

Unrealized gain (loss) on securities held for sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(179,316)

 

 

 

 

(179,316)

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

53

 

 

 

 

 

53

 

Net loss for the year ended December 31, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(651,474)

 

(651,474)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2014

 

24,094,551

 

$24,095

 

675,000

 

$675

 

28,092

 

$28

 

$7,162,660

 

$-

 

$(177,452)$(7,067,267)$(57,261)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued to investors

 

675,000

 

 

675

 

(675,000)

 

(675)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

 

Shares issued for consulting services

 

720,000

 

 

720

 

 

 

 

 

 

 

 

 

 

 

 

107,280

 

 

 

 

 

 

 

 

 

 

 

108,000

 

Shares issued in satisfaction of debt

 

421,571

 

 

421

 

 

 

 

 

 

 

 

 

 

 

 

29,579

 

 

 

 

 

 

 

 

 

 

 

30,000

 

Shares issued in satisfaction of debt

 

2,872,871

 

 

2,873

 

 

 

 

 

 

 

 

 

 

 

 

198,228

 

 

 

 

 

 

 

 

 

 

 

201,101

 

Shares issued for convertible debt

 

550,000

 

 

550

 

 

 

 

 

 

 

 

 

 

 

 

20,450

 

 

 

 

 

 

 

 

 

 

 

21,000

 

Shares issued as prepaid equity-based compensation

 

1,000,000

 

 

1,000

 

 

 

 

 

 

 

 

 

 

 

 

164,000

 

 

(165,000)

 

 

 

 

 

 

 

-

 

Derivative liability adjustment - satisfaction of convertible debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

278,175

 

 

 

 

 

 

 

 

 

 

 

278,175

 

Unrealized gain (loss) on securities held for sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

19,028

 

 

 

 

 

19,028

 

Amortization of prepaid equity-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

19,438

 

 

 

 

 

 

 

 

19,438

 

Net loss for the year ended December 31, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,897,174)

 

(1,897,174)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2015

 

30,333,993

 

$30,334

 

-

 

$-

 

28,092

 

$28

 

$7,960,372

 

$(145,562)$(158,424)$(8,964,441)$(1,277,693)

 

The accompanying notes are an integral part of these consolidated financial statements. 

 

 
F-6
Table of Contents

 

VIKING INVESTMENTS GROUP, INC.

Notes to Consolidated Financial Statements

(Amounts expressed in US dollars)

 

 

Note 1

Nature of Business and Going Concern

 

The Company was incorporated under the laws of the State of Florida on May 3, 1989, as Sparta Ventures Corp. and remained inactive until June 27, 1998. After several name changes, the Company merged with and into a wholly-owned subsidiary, SinoCubate, Inc., which remained the surviving entity of the merger. SinoCubate, Inc. was formed in the State of Nevada on September 11, 2008. The merger resulted in a change of name of the Company from Synthenol Inc. to SinoCubate, Inc., and a change in the state of incorporation of the Company from Florida to Nevada. On June 13, 2012, the Company changed its name to Viking Investments Group, Inc., and the Company's ticker symbol was changed to "VKIN."

 

The Company's business plan is to engage in the acquisition, exploration, development and production of oil and natural gas properties, both individually and through collaborative partnerships with other companies in this field of endeavor. On March 8, 2016, the Company incorporated a wholly owned subsidiary, Viking Oil & Gas (Canada) ULC, in Alberta, Canada, to hold its Canadian oil and gas interests. In November of 2014, the Company entered its first contract of this kind as explained in Note 4.

 

These consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company had a net loss of $1,897,174 and $651,474 for the years ended December 31, 2015 and December 31, 2014, respectively. The Company had a working capital deficiency in the amount of $1,458,295 as of December 31, 2015. The Company had accumulated a stockholders’ deficit of $1,277,693 as of December 31, 2015, as compared to a stockholder’' deficit of $57,261 as of December 31, 2014. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The Company's ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management has no formal plan in place to address this concern but believes that the Company will be able to obtain additional funds by equity financing and/or related party advances; however, there is no assurance of additional funding being available. These consolidated financial statements do not include any adjustments to the recorded assets or liabilities that might be necessary should the Company have to curtail operations or be unable to continue in existence.

 

Note 2

Restatement and Reclassification

 

Restatement of Financial Statements for the year ended December 31, 2015

 

The Company is restating its financial statements for the year ended December 31, 2015 (the “2015 Financial Statements”) to correct various account balances as summarized below, and because the Company’s new independent registered public accounting firm has recently completed its audit of the Company’s 2015 Financial Statements.

 

The restatements are being made in accordance with ASC 250, “Accounting Changes and Error Corrections.” The disclosure provision of ASC 250 requires a company that corrects an error to disclose that its previously issued financial statements have been restated, a description of the nature of the error, the effect of the correction on each financial statement line item and any per share amount affected for each prior period presented, and the cumulative effect on retained earnings (deficit) in the statement of financial position as of the beginning of each period presented.

 

The effects of the adjustments on the Company’s previously issued 2015 Financial Statements are summarized as follows:

 

 

Selected Consolidated Balance Sheets Information as of December 31, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Previously

 

 

Increase

 

 

 

 

 

 

Reported

 

 

(Decrease)

 

 

Restated

 

 

 

 

 

 

 

 

 

 

 

Petroleum and natural gas rights / oil and gas properties

 

 

818,230

 

 

 

(301,760)

 

 

516,470

 

Derivative liability

 

 

154,297

 

 

 

656,350

 

 

 

810,647

 

Additional paid in capital

 

 

7,864,085

 

 

 

96,287

 

 

 

7,960,372

 

Accumulated deficit

 

 

(7,979,257)

 

 

(985,184)

 

 

(8,964,441)

 
 
F-7
Table of Contents

 

VIKING INVESTMENTS GROUP, INC.

Notes to Consolidated Financial Statements

(Amounts expressed in US dollars)

 

 

Selected Consolidated Statements of Operations and Comprehensive Loss for the year ended December 31, 2015

 

 

 

 

 

 

 

 

 

 

 

 

Previously

 

 

Increase

 

 

 

 

 

 

Reported

 

 

(Decrease)

 

 

Restated

 

 

 

 

 

 

 

 

 

 

 

Impairment of oil and gas properties

 

 

-

 

 

 

210,032

 

 

 

210,032

 

Derivative gain (loss) / change in fair value

 

 

(5,686)

 

 

272,064

 

 

 

266,378

 

Derivative expense

 

 

-

 

 

 

1,065,808

 

 

 

1,065,808

 

Loss from operations

 

 

(608,480)

 

 

(220,591)

 

 

(829,071)

Net loss

 

 

(911,990)

 

 

(985,184)

 

 

(1,897,174)

Net comprehensive loss

 

 

(892,962)

 

 

(985,184)

 

 

(1,878,146)

Basic and diluted loss per common share

 

 

(0.03)

 

 

(0.04)

 

 

(0.07)

 

Selected Consolidated Statements of Cash Flows for the year ended December 31, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Previously

 

 

Increase

 

 

 

 

 

 

Reported

 

 

(Decrease)

 

 

Restated

 

 

 

 

 

 

 

 

 

 

 

Net Loss

 

 

(911,990)

 

 

(985,184)

 

 

(1,897,174)

Derivative (gain) loss / change in fair value

 

 

5,686

 

 

 

793,744

 

 

 

799,430

 

Impairment of oil and gas properties

 

 

-

 

 

 

210,032

 

 

 

210,032

 

Stock based compensation

 

 

108,000

 

 

 

19,438

 

 

 

127,438

 

 

The Company uses the full cost method of accounting for its oil and gas properties, which requires a capitalized cost limitation test (“ceiling test”) at each report date. This analysis utilizes information included in an annual reserve report. The report originally used did not contemplate the pricing requirements for proved reserves promulgated by the Securities and Exchange Commission (“SEC”). The Company obtained a revised reserve report in October 2016, which met the SEC pricing requirements for proved reserves. Based on this report, the Company determined that an impairment of $210,032 should be recorded for the year ended December 31, 2015. The Company also reevaluated the methodology originally used to estimate the derivative liabilities associated with the conversion features of certain debt instruments, and the impact on additional paid in capital associated with these transactions. The Company determined that the original accounting for these transactions understated the derivative liability at December 31, 2015 by $656,350, and understated expense at inception of $1,065,808. The change in the estimated fair value of these derivatives resulted in a gain of $266,378 for the year ended December 31, 2015 as compared to originally recording a loss of $5.686.

 

Reclassification of Prior Year Presentation

 

Certain prior year amounts have been reclassified for consistency with the current period presentation. These reclassifications had no effect on the reported results of operations.

 

 
F-8
Table of Contents

 

VIKING INVESTMENTS GROUP, INC.

Notes to Consolidated Financial Statements

(Amounts expressed in US dollars)

 

 

Note 3

Summary of Significant Accounting Policies

 

a)

Basis of Presentation

 

The consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States ("US GAAP") and are expressed in U.S. dollars. The Company's fiscal year-end is December 31.

 

The foregoing audited consolidated financial statements have been prepared in accordance with ("U.S. GAAP") for consolidated financial information and with the instructions to Form 10-K as promulgated by the Securities and Exchange Commission (the "SEC"). Accordingly, these consolidated financial statements include all of the disclosures required by generally accepted accounting principles for complete consolidated financial statements.

 

b)

Basis of Consolidation

 

The financial statements presented herein reflect the consolidated financial results of the Company and its wholly owned subsidiary, Viking Investments Group LLC, a Delaware limited liability company through December 2, 2015, when the Company sold for $1, all of its ownership interest to its member interest in Viking Investments Group LLC to Tom Simeo, the Company's Chairman. Viking Investments Group, LLC was never an operational entity, did not have any assets, liabilities, or operations, and therefore is not presented as a discontinued operation.

 

c)

Use of Estimates in the Preparation of Financial Statements

 

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts and timing of revenues and expenses, the reported amounts and classification of assets and liabilities, and disclosure of contingent assets and liabilities. The Company's actual results could vary materially from management's estimates and assumptions. Significant areas requiring the use of management estimates relate to the determination of expected tax rates for future income tax recoveries, stock-based compensation, embedded derivative assets and liabilities, asset retirement obligations and impairment of long-term investment.

 

The estimates of proved, probable and possible oil and gas reserves are used as significant inputs in determining the depletion of oil and gas properties and the impairment of proved and unproved oil and gas properties. There are numerous uncertainties inherent in the estimation of quantities of proved, probable and possible reserves and in the projection of future rates of production and the timing of development expenditures. Similarly, evaluations for impairment of proved and unproved oil and gas properties are subject to numerous uncertainties including, among others, estimates of future recoverable reserves and commodity price outlooks.

 

Actual results could differ from the estimates and assumptions utilized.

 

d)

Financial Instruments

 

ASC Topic 820-10, "Fair Value Measurement" requires disclosure of the fair value of financial instruments held by the Company. ASC Topic 820-10, "Financial Instruments," defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the consolidated balance sheets for other receivables – related party, accrued expenses and other current liabilities, accounts payable, derivative liabilities, amount due to directors, and convertible notes qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:

 

·

Level 1: inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

 

·

Level 2: inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

 

·

Level 3: inputs to the valuation methodology are unobservable and significant to the fair value measurement.

 
 
F-9
Table of Contents

 

VIKING INVESTMENTS GROUP, INC.

Notes to Consolidated Financial Statements

(Amounts expressed in US dollars)

 

 

Assets and liabilities measured at fair value as of December 31, 2015 are classified below based on the three fair value hierarchy described above:

 

Description

 

Quoted Prices
in Active
Markets for Identical
Assets

(Level 1)

 

 

Significant
Other
Observable
Inputs

(Level 2)

 

 

Significant Unobservable

Inputs

(Level 3)

 

 

Total Gains

(Losses)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial Assets

 

 

 

 

 

 

 

 

 

 

 

 

Long term investment

 

$87,156

 

 

$-

 

 

$-

 

 

$19,028

 

 

 

$87,156

 

 

$-

 

 

$-

 

 

$19,028

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities

 

$-

 

 

$-

 

 

$810,647

 

 

$266,378

 

 

 

$-

 

 

$-

 

 

$810,647

 

 

$266,378

 

 

Assets and liabilities measured at fair value as of December 31, 2014 are classified below based on the three fair value hierarchy described above:

 

Description

 

Quoted
Prices in
Active
Markets for Identical Assets

(Level 1)

 

 

Significant
Other
Observable
Inputs

(Level 2)

 

 

Significant Unobservable
Inputs

(Level 3)

 

 

Total Gains
(Losses)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial Assets

 

 

 

 

 

 

 

 

 

 

 

 

Long term investment

 

$68,128

 

 

$-

 

 

$-

 

 

$(179,316)

 

 

$68,128

 

 

$-

 

 

$-

 

 

$(179,316)

 

The Company’s long term investment consists of 3,437,500 common shares of Tanager Energy, Inc., which is traded on the TSX Venture Exchange (Toronto Stock Exchange). The change in the fair value of this investment recognized as an unrealized gain (loss) in other comprehensive income on the statement of operations and comprehensive loss was $19,028 and ($179,316) for the years ended December 31, 2015 and 2014, respectively. 

 

The Company uses the Black-Scholes model to value its derivative liabilities. This model takes into account inputs such as contract terms, including maturity and market parameters, including assumptions associated with interest rates, volatility and credit worthiness. The derivative liabilities of the Company were $0 and $810,647 as of December 31, 2015 and 2014 respectively.

 

 
F-10
Table of Contents

  

VIKING INVESTMENTS GROUP, INC.

Notes to Consolidated Financial Statements

(Amounts expressed in US dollars)

 

 

e)

Cash and Cash Equivalents

 

Cash and cash equivalents include cash in banks and highly liquid investment securities that have original maturities of three months or less. At December 31, 2015, the Company does not have any cash deposits in excess of FDIC insured limits.

  

f)

Prepaid equity-based compensation

  

Prepaid equity-based expenses represent amounts paid in advance through the issuance of restricted shares of stock, for future contractual benefits to be received. These expenses paid in advance are recorded as prepaid equity-based compensation as a component of “Stockholders’ Equity” and then amortized to the statements of operations over the life of the contract using the straight-line method. At December 31, 2015 and December 31, 2014, the balances of the prepaid equity-based compensation were comprised of the following:

 

 

 

December 31, 2015

 

 

December 31, 2014

 

 

 

 

In November, 2015, a one-year consulting agreement with an unrelated party for services related to the petroleum industry in the amount of $165,000.

 

$145,562

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

$145,562

 

 

$-

 

  

g)

Oil and Gas Properties

  

The Company uses the full cost method of accounting for its investment in oil and natural gas properties. Under this method of accounting, all costs associated with acquisition, exploration and development of oil and gas reserves, including directly related overhead costs, are capitalized. General and administrative costs related to production and general overhead are expensed as incurred.

 

All capitalized costs of oil and gas properties, including the estimated future costs to develop proved reserves, are amortized on the unit of production method using estimates of proved reserves. Disposition of oil and gas properties are accounted for as a reduction of capitalized costs, with no gain or loss recognized unless such adjustment would significantly alter the relationship between capitalized costs and proved reserves of oil and gas, in which case the gain or loss is recognized to income. Investment in unproved properties and major development projects are not amortized until proved reserves associated with the projects can be determined or until impairment occurs. If the results of an assessment indicate that the properties are impaired, the amount of the impairment is included in loss from continuing operations before income taxes and the adjusted carrying amount of the unproved properties is amortized on the unit-of-production method.

 

Depreciation, depletion and amortization expense utilizing the unit-of-production method for the Company’s oil and gas properties in Canada for the years ended December 31, 2015 and 2014 were as follows:

 

Oil and Gas Properties by Geographical Cost Center

 

 

Years ended,

 

 

 

December 31,

 

Cost Center

 

2015

 

 

2014

 

 

 

 

 

 

 

 

Canada

 

$34,881

 

 

$-

 

 

 

 

 

 

 

 

 

 

 

 

$34,881

 

 

$-

 

 
 
F-11
Table of Contents

 

VIKING INVESTMENTS GROUP, INC.

Notes to Consolidated Financial Statements

(Amounts expressed in US dollars)

 

  

h)

Limitation on Capitalized Costs

  

Under the full-cost method of accounting, we are required, at the end of each reporting date, to perform a test to determine the limit on the book value of our oil and natural gas properties (the “Ceiling” test). If the capitalized costs of our oil and natural gas properties, net of accumulated amortization and related deferred income taxes, exceed the Ceiling, this excess or impairment is charged to expense. The expense may not be reversed in future periods, even though higher oil and natural gas prices may subsequently increase the Ceiling. The Ceiling is defined as the sum of:

 

 

(a)the present value, discounted at 10 percent, and assuming continuation of existing economic conditions, of 1) estimated future gross revenues from proved reserves, which is computed using oil and natural gas prices determined as the unweighted arithmetic average of the first-day-of-the-month price for each month within the 12-month hedging arrangements pursuant to SAB 103, less 2) estimated future expenditures (based on current costs) to be incurred in developing and producing the proved reserves, plus

 

 

 

 

(b)the cost of properties not being amortized; plus

 

 

 

 

(c)the lower of cost or estimated fair value of unproven properties included in the costs being amortized, net of

 

 

 

 

(d)the related tax effects related to the difference between the book and tax basis of our oil and natural gas properties.

 

i)

Oil and Gas Reserves

  

Our proved oil and gas reserves are estimated by independent petroleum engineers. Reserve engineering is a subjective process that is dependent upon the quality of available data and the interpretation thereof, including evaluations and extrapolations of well flow rates and reservoir pressure. Estimates by different engineers often vary sometimes significantly. In addition, physical factors such as the results of drilling, testing and production subsequent to the date of an estimate, as well as economic factors such as changes in product prices, may justify revision of such estimates. Because proved reserves are required to be estimated using recent prices of the evaluation, estimated reserve quantities can be significantly impacted by changes in product prices.

 

The standardized measure of discounted future net cash flows and changes in such cash flows are prepared using assumptions required by the Financial Accounting Standards Board and the Securities and Exchange Commission. Such assumptions include using a 10% discount rate. Changes in any of these assumptions could have a significant impact on the standardized measure. Accordingly, the standardized measure does not represent management’s estimated current market value of proved reserves. At December 31, 2015, the Company’s net book value of oil and natural gas properties exceeded the ceiling amount, and the Company has recognized an impairment of oil and gas properties of $210,032 for the year ended December 31, 2015. The Company did not recognize an impairment loss for the year ended December 31, 2014.

 

j)

Loss per Share

 

Basic net loss per share is computed by dividing the net loss by the weighted-average number of common shares outstanding during the period. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of common shares and, adjusted by any effects of warrants and options outstanding, if dilutive, that may add to the number of common shares during the period. At December 31, 2015 there were approximately 6,059,537 common stock equivalents that were anti-dilutive and were not included in the calculation.

 

k)

Revenue Recognition

 

All revenue is recognized when persuasive evidence of an arrangement exists, the service or sale is complete, the price is fixed or determinable and collectability is reasonably assured. Revenue is derived from the sale of crude oil and natural gas. Revenue from crude oil and natural gas sales is recognized when the product is delivered to the purchaser and collectability is reasonably assured. The Company follows the “sales method” of accounting for oil and natural gas revenue, so it recognizes revenue on all natural gas or crude oil sold to purchasers.

 

 
F-12
Table of Contents

 

VIKING INVESTMENTS GROUP, INC.

Notes to Consolidated Financial Statements

(Amounts expressed in US dollars)

 

 

l)

Comprehensive Loss

 

FASB ASC 220 "Comprehensive Income," establishes standards for the reporting and display of comprehensive income and its components in the consolidated statement of operations and comprehensive loss. For the fiscal years ended December 31, 2015 and 2014, comprehensive income (loss) was $19,028 and ($179,263) respectively, and consisted primarily of unrealized gains and (losses) on available for sale securities.

 

m)

Income Taxes

 

The Company accounts for income taxes under FASB Codification Topic 740-10-25 ("ASC 740-10-25"). Under ASC 740-10-25, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740-10-25, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company provides a valuation allowance for deferred tax assets for which it does not consider realization of such assets likely. The Company did not incur any material impact to its financial condition or results of operations due to the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Company is subject to U.S federal jurisdiction income tax examinations for the tax years 2007 through 2015. In addition, the Company is subject to state and local income tax examinations for the tax years 2007 through 2015.

 

n)

Stock-Based Compensation

 

The Company may issue stock options to employees and stock options or warrants to non-employees in non-capital raising transactions for services and for financing costs. The Company has adopted ASC Topic 718, "Stock based Compensation", which establishes a fair value method of accounting for stock-based compensation plans. In accordance with guidance now incorporated in ASC Topic 718, the cost of stock options and warrants issued to employees and non-employees is measured on the grant date based on the fair value. The fair value is determined using the Black-Scholes option pricing model. The resulting amount is charged to expense on the straight-line basis over the period in which the Company expects to receive the benefit, which is generally the vesting period.

 

The fair value of stock warrants was determined at the date of grant using the Black-Scholes option pricing model. The Black-Scholes option model requires management to make various estimates and assumptions, including expected term, expected volatility, risk-free rate, and dividend yield. The expected term represents the period of time that stock-based compensation awards granted are expected to be outstanding and is estimated based on considerations including the vesting period, contractual term and anticipated employee exercise patterns. Expected volatility is based on the historical volatility of the Company's stock. The risk-free rate is based on the U.S. Treasury yield curve in relation to the contractual life of stock-based compensation instrument. The dividend yield assumption is based on historical patterns and future expectations for the Company dividends.

 

o)

Long-term Investment

 

Management determines the appropriate classification of investment securities at the time of purchase. Securities are classified held-to-maturity when the Company has both the positive intent and ability to hold the securities to maturity. Held-to-maturity securities are stated at amortized cost. Securities that are bought and held principally for the purpose of selling in the near term are classified as trading securities and reported at fair value, with unrealized gains and losses included in earnings. Securities not classified as held-to-maturity or trading are classified as available-for-sale. Available-for-sale securities are stated at fair value, the changes in the market value of available-for-sale securities, excluding other-than-temporary impairments, are reflected in Other Comprehensive Loss, with the impairment losses, net of income taxes, charged to loss in the period in which it occurs.

 

The fair value of securities is based on quoted market prices. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities. A decline in the market value of any available-for-sale or held-for-maturity security below cost that is deemed to be other-then-temporary results in a reduction in carrying amount to fair value.

 

Impairments that are considered other-than-temporary are recognized as a loss in the consolidated statements of operations and comprehensive loss. The Company considers various factors in reviewing impairments, including the length of time and extent to which fair value has been less than the Company's cost basis, the financial condition and near-term prospects of the issuer, and the Company's intent and ability to hold the investments for a period of time sufficient to allow for any anticipated recovery in market value.

 

 
F-13
Table of Contents

 

VIKING INVESTMENTS GROUP, INC.

Notes to Consolidated Financial Statements

(Amounts expressed in US dollars)

 

 

As at December 31, 2015 and 2014, the Company had no trading or held-to-maturity securities.

 

On September 9, 2014, the Company subscribed for 1,250,000 units of Tanager Energy Inc. ("Tanager"), a Canadian mining company listed on the Canadian TSX Venture Exchange as a Tier 2 company and trading under the stock symbol "TAN," at a price of C$0.08 per unit. Each unit consists of one share of Tanager's common stock and one warrant. Each warrant entitles the Company to subscribe for one additional Common Share at a price of C$0.15 at any time until October 5, 2016. The Warrants expired without exercise on October 5, 2016. The total price for the units subscribed is C$101,247.47. The Company paid US$92,000, which was equivalent to C$101,247.47 on September 11, 2014.

 

On October 6, 2014, the Company subscribed for an additional 2,187,500 units of Tanager at a price of C$0.08 per unit. Each unit consists of one share of Tanager's common stock and one warrant. Each warrant entitles the Company to subscribe for one additional Common Share at a price of $ 0.15 at any time until October 5, 2016. The Warrants expire on October 5, 2016. The total price for the units subscribed is C$175,000. The Company paid US$155,444, which was equivalent to C$175,000 on October 17, 2014.

 

The Company's investment in Tanager is considered as "available-for-sale" securities, and an unrealized gain of $19,028 was recorded in other comprehensive income for the year ended December 31, 2015. An unrealized loss of $179,316 was recorded in other comprehensive loss for the year ended December 31, 2014.

 

p)

Impairment of long-lived assets

 

In accordance with ASC 360, "Accounting for the Impairment or Disposal of Long-Lived Assets", the Company is required to review its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the assets. Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value.

 

Assets are grouped and evaluated at the lowest level for their identifiable cash flows that are largely independent of the cash flows of other groups of assets. The Company considers historical performance and future estimated results in its evaluation of potential impairment and then compares the carrying amount of the asset to the future estimated cash flows expected to result from the use of the asset. If the carrying amount of the asset exceeds estimated expected undiscounted future cash flows, the Company measures the amount of impairment by comparing the carrying amount of the asset to its fair value. The estimation of fair value is generally determined by using the asset's expected future discounted cash flows or market value. The Company estimates fair value of the assets based on certain assumptions such as budgets, internal projections, and other available information as considered necessary. There was no impairment of long-lived assets recorded during the years ended December 31, 2015 and 2014, except oil and gas properties.

 

q)

Foreign Currency Exchange

 

An entity's functional currency is the currency of the primary economic environment in which it operates, normally that is the currency of the environment in which the entity primarily generates and expends cash. Management's judgment is essential to determine the functional currency by assessing various indicators, such as cash flows, sales price and market, expenses, financing and inter-company transactions and arrangements. Functional currency of the parent company is the U.S. Dollar. The reporting currency of the Company is the U.S. Dollar, and the functional currency of its oil and gas operations is the Canadian Dollar ("CAD" or "C$" herein). The oil and gas operations of the Company are located in Alberta, Canada, in which the CAD is the primary economic environment. The reporting currency of these consolidated financial statements is the U.S. Dollar.

 

For financial reporting purposes, the operational results of the Company's oil and gas operations are prepared using the CAD, and are translated into the Company's reporting currency, the U.S. Dollar. Assets and liabilities are translated using the exchange rate at each balance sheet date. Revenue and expenses are translated using average rates prevailing during each reporting period, and stockholders’ deficit is translated at historical exchange rates. 

 

r)

Convertible Notes Payable

 

The Company accounts for conversion options embedded in convertible notes in accordance with ASC 815. ASC 815 generally requires companies to bifurcate conversion options embedded in convertible notes from their host instruments and to account for them as free standing derivative financial instruments.

 

 
F-14
Table of Contents

 

VIKING INVESTMENTS GROUP, INC.

Notes to Consolidated Financial Statements

(Amounts expressed in US dollars)

 

 

The Company has evaluated the terms and conditions of the convertible note under the guidance of ASC 815. The conversion feature did not meet the definition of "indexed to a company's own stock" provided for in ASC 815 due to the down round protection feature. Therefore, the conversion feature requires bifurcation and liability classification. Additionally, the default put requires bifurcation because it is indexed to risks that are not associated with credit or interest risk. As a result, the compound embedded derivative comprises of (i) the embedded conversion feature and (i) the default put. Rather than bifurcating and recording the compound embedded derivative as a derivative liability, the Company elected to initially and subsequently measure the convertible note in its entirety at fair value, with changes in fair value recognized in earnings in accordance with ASC 815-15-25-4.

 

s)

Derivative Liability

 

We review the terms of convertible debt issues to determine whether there are embedded derivative instruments, including embedded conversion options, which are required to be bifurcated and accounted for separately as derivative financial instruments. In circumstances where the host instrument contains more than one embedded derivative instrument, including the conversion option, that is required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument.

 

Bifurcated embedded derivatives are initially recorded at fair value and are then revalued at each reporting date with changes in the fair value reported as non-operating income or expense. When the equity or convertible debt instruments contain embedded derivative instruments that are to be bifurcated and accounted for as liabilities, the total proceeds received are first allocated to the fair value of all the bifurcated derivative instruments. The remaining proceeds, if any, are then allocated to the host instruments themselves, usually resulting in those instruments being recorded at a discount from their face value. The discount from the face value of the convertible debt, together with the stated interest on the instrument, is amortized over the life of the instrument through periodic charges to interest expense. 

 

t)

Accounting for Asset Retirement Obligations

 

Asset retirement obligations (“ARO”) primarily represent the estimated present value of the amount we will incur to plug, abandon and remediate our producing properties at the projected end of their productive lives, in accordance with applicable federal, state and local laws. We determined our ARO by calculating the present value of estimated cash flows related to the obligation. The retirement obligation is recorded as a liability at its estimated present value as of the obligation’s inception, with an offsetting increase to proved properties.

 

On July 1, 2015, the Company recorded an asset retirement obligation and a related asset retirement cost in the amount of $406,214. This asset retirement cost was determined and discounted to present value using a credit-adjusted risk-free rate. After its initial recording, the liability is increased for the passage of time, with the increase being reflected as accretion expense in the consolidated statement of operations and comprehensive loss. Subsequent adjustments in the cost estimate are reflected in the liability and the amounts continue to be amortized over the useful life of the related long-lived asset.

 

The following table describes the changes in the Company's asset retirement obligations for the year ended December 31, 2015:

 

Asset retirement obligation at December 31, 2014

 

$-

 

Additions

 

 

406,214

 

Accretion expense

 

 

10,032

 

 

 

 

 

 

Asset retirement obligation at December 31, 2015

 

$416,246

 

 

 
F-15
Table of Contents

 

VIKING INVESTMENTS GROUP, INC.

Notes to Consolidated Financial Statements

(Amounts expressed in US dollars)

 

 

u)

Reclassification of Prior Year Presentation

 

Certain prior year amounts have been reclassified for consistency with the current period presentation. These reclassifications had no effect on the reported results of operations.

 

v)

Recently Adopted Accounting Pronouncements

 

The Financial Accounting Standards Board and other entities issued new or modifications to, or interpretations of, existing accounting guidance during 2015. Management has carefully considered the new pronouncements that altered generally accepted accounting principles and does not believe that any other new or modified principles will have a material impact on the Company's reported financial position or operations in the near term.

 

w)

Subsequent Events

 

The Company has evaluated all transactions through the date of filing of this Form 10-K/A for disclosure consideration.

 

Note 4.

Related Party Transactions

 

During April 2015, the Company made an advance to Tanager Energy Inc., in conjunction with a joint investment in the second oil well of the Joffre Project (as defined and described in Note 4). As of December 31, 2015, the balance owed by Tanager to the Company is $153,877, which is shown as "Other receivable – related party" on the balance sheet.

 

On June 5, 2015, the Company authorized and approved the issuance of 2,000,000 and 872,871 restricted shares of common stock in settlement and cancellation of a total of $201,101 of amounts owed to directors, at a cost basis of $0.07 per share.

 

During the year ended December 31, 2015, the Company's Executive Chairman and Director, Tom Simeo, accrued payroll and made advances to the Company in the amount of $56,692 in order to provide the Company with funds to carry on its operations. These accruals and advances do not bear interest, are unsecured and have no specific terms of repayment. As of December 31, 2015, the net amount due to Mr. Simeo for accrued payroll and expenses paid on behalf of the Company is $37,159. The Company has not imputed interest as the amount is deemed immaterial.

 

During the year ended December 31, 2015, the Company's CEO and Director, James Doris, incurred expenses on behalf of, and made net advances to the Company in the amount of $128,770 in order to provide the Company with funds to carry on its operations. These advances do not bear interest, are unsecured and have no specific terms of repayment. The Company has not imputed interest as the amount is deemed immaterial. Additionally, Mr. Doris made several loans to the Company totaling $359,336, all accruing interest at 12%, and payable on demand. As of December 31, 2015, the total amount due to Mr. Doris for advances and expenses paid on behalf of the Company and loans is $577,832. Accrued interest of $20,401 is included in other payables at December 31, 2015.

 

As at December 31, 2014, the net amount due to Mr. Simeo for accrued payroll and payment of certain expenses on behalf of the Company was $236,713. The balance is non-interest bearing, has no fixed term of repayment and is payable on demand.

 

As at December 31, 2014, the amount due to Mr. Doris for the expenses paid on behalf of the Company was $89,726. The balance is non-interest bearing, has no fixed term of repayment and is payable on demand.

 

The following table reflects the balances of related- parties' transactions as of December 31, 2015 and 2014:

 

 

 

Years ended

 

 

 

December 31,

 

 

 

2015

 

 

2014

 

Due to Mr. Tom Simeo

 

$37,159

 

 

$236,713

 

Due to Mr. James A. Doris – advances

 

 

218,496

 

 

 

89,726

 

Due to Mr. James A. Doris – demand loans

 

 

359,336

 

 

 

-

 

 

 

$614,991

 

 

$326,439

 

 

 
F-16
Table of Contents

 

VIKING INVESTMENTS GROUP, INC.

Notes to Consolidated Financial Statements

(Amounts expressed in US dollars)

 

 

Note 5.

Oil and Gas Properties

 

The following table summarizes the Company’s oil and gas activities by classification and geographical cost center for the year ended December 31, 2015:

 

 

 

December 31, 2014

 

 

 

 

 

 

 

 

December 31, 2015

 

 

 

Additions

 

 

Impairments

 

 

 

Proved developed producing oil and gas properties

 

 

 

 

 

 

 

 

 

 

 

 

Canada cost center

 

$21,310

 

 

$24,374

 

 

$(12,602)

 

$33,082

 

Accumulated depreciation, depletion and amortization

 

 

-

 

 

 

(2,093)

 

 

-

 

 

 

(2,093)

Proved developed producing oil and gas properties, net

 

$21,310

 

 

$22,281

 

 

$(12,602)

 

$30,989

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Undeveloped and non-producing oil and gas properties

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Canada cost center

 

$333,858

 

 

$381,841

 

 

$(197,430)

 

$518,269

 

Accumulated depreciation, depletion and amortization

 

 

-

 

 

 

(32,788)

 

 

-

 

 

 

(32,788)

Undeveloped and non-producing oil and gas properties, net

 

$333,858

 

 

$349,053

 

 

$(197,430

 

 

$485,481

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Oil and Gas Properties, Net

 

$355,168

 

 

$371,334

 

 

$(210,032)

 

$516,470

 

 

On November 3, 2014, the Company entered into a Purchase and Sale, Petroleum and Natural Gas Conveyance Agreement (the "Agreement"), with Tanager Energy Inc., a Canadian corporation listed on the TSX Venture Exchange as a Tier 2 company and trading under the stock symbol "TAN" ("Tanager Energy"). Pursuant to the Agreement, the Company was to receive a 50% working interest in the Joffre oil and gas property located in Alberta, Canada (the "Joffre Property"), and the Company was obligated to pay Tanager C$400,000 for the interest in the Joffre Property, with C$340,000 payable at closing.

 

On November 4, 2014, the Company closed the transaction by paying Tanager $302,367, with the balance of $52,801 (C$60,000) paid in January of 2015. Tanager owns the remaining 50% working interest in the property and operates and manages the property in accordance with an operating agreement pursuant to the Canadian Association of Petroleum Landman Operating Procedure. The Company's (and Tanager's) working interest in the Joffre Property will generally terminate when future production, if any, ceases (or in the case of the water disposal well on the Joffre Property, on the date that production ceases after 5 years have elapsed).

 

Note 6.

Income Tax

 

The Company accounts for income taxes under ASC 740. Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Accounting standards require the consideration of a valuation allowance for deferred tax assets if it is "more likely than not" that some component or all of the benefits of deferred tax assets will not be realized.

 

The Company has estimated net operating losses of $7,979,257 and $7,067,267 as of December 31, 2015 and 2014 respectively. The potential benefit of these net operating losses have not been recognized in these financial statements because the Company cannot be assured it is more likely than not that it will utilize the net operating losses carried forward in future years. The tax returns have not been filed; hence the taxation years of 2012, 2013 and 2014 are open for audit by both federal and state taxing authorities.

 

The components of the net deferred tax asset at December 31, 2015 and December 31, 2014 and the statutory tax rate, the effective tax rate and the elected amount of the valuation allowance are indicated below:

 

 

December 31,

 

December 31,

 

2015

 

2014

 

Net Operating Losses

 

$

8,964,441

 

$

7,067,267

 

Statutory Tax Rate

 

35

%

 

35

%

Effective Tax Rate

 

-

 

-

 

Deferred Tax Asset

 

3,137,554

 

2,473,543

 

Valuation Allowance

 

(3,137,554

)

 

(2,473,543

)

Net Deferred Tax Asset

 

$

-

 

$

-

 

 
F-17
Table of Contents

 

VIKING INVESTMENTS GROUP, INC.

Notes to Consolidated Financial Statements

(Amounts expressed in US dollars)

 

 

Note 7.

Capital Stock and Additional Paid-in Capital

 

 

December 31, 2015

Number of shares

 

December 31, 2014

Number of shares

 

Authorized

 

Outstanding

 

Amount

 

Authorized

 

Outstanding

 

Amount

Capital Stock

 

$

 

$

 

Preferred stock, $0.001 par value

 

5,000,000

 

28,092

 

28

 

5,000,000

 

28,092

 

28

 

Common stock, $0.001 par value

 

100,000,000

 

30,333,993

 

30,334

 

100,000,000

 

24,094,551

 

24,095

 

Common shares to be issued

 

-

 

-

 

675,000

 

675

 

Additional Paid-in Capital

 

7,960,372

 

7,162,660

 

(a)

Preferred Stock

 

The Company is authorized to issue 5,000,000 shares of Series C Preferred Stock, par value $0.001 per share (the "Preferred Stock").

 

Each share of Series C Preferred Stock shall entitle the holder thereof to two thousand (2,000) votes on all matters submitted to a vote of the stockholders of the Corporation. In the event the Corporation shall at any time on or after the date that Preferred Stock has been issued ("Distribution Date) declare or pay any dividend on common stock payable in shares of common stock, or effect a subdivision or combination or consolidation of the outstanding shares of common stock (by reclassification or otherwise than by payment of a dividend in shares of common stock) into a greater or lesser number of shares of common stock, then in each such case the number of votes per share to which holders of shares of Series C Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction of the numerator of which is the number of shares of common stock outstanding immediately after such event and the denominator of which is the number of shares of common stock that were outstanding immediately prior to such event.

 

Each share of Series C Preferred Stock shall be convertible, at the option of the holder thereof, at any time after the date of issuance of such share, at the office of the Corporation or any transfer agent for such stock, into one share of fully paid and non-assessable common stock (the "Conversion Rate").

 

On October 3, 2012, the Company issued 28,092 shares of Series C Preferred Stock to Tom Simeo in exchange for the return of the equal amount of shares of common stock, owned by Tom Simeo, deposited in a brokerage account, to the Company for cancellation. On or about September 1, 2015, Tom Simeo instructed the Company's Stock Transfer Agent, VStock Transfer LLC, to cancel stock certificate number 3032, representing 28,092 shares of common stock, in consideration for the missing 28,092 shares of common stock. Neither the common stock, nor the preferred stock, were assessed any value.

 

On July 16, 2015, Tom Simeo, Executive Chairman, and a director of the Company, who owned 28,092 shares of the Company's Series C Preferred Stock (the "Shares"), transferred 50% (14,046) of the Shares to James A. Doris, President, CEO and a director of the Company in consideration of the purchase price of $10,000, paid from the personal funds of Mr. Doris. Mr. Simeo retained 14,046 shares of the Company's Series C Preferred Stock, and no other shares of Series C Preferred Stock are issued or outstanding. Since each of the preferred shares entitles the holder to 2,000 votes per share, Mr. Simeo and Mr. Doris effectively control the Company jointly, neither of them solely controls the Company, and the transfer of the preferred shares constituted a change of control of the Company.

 

(b)

Common Stock

 

The Company is authorized to issue 100,000,000 shares of common stock, par value $0.001 per share.

 

On February 20, 2014, a convertible note holder elected to convert $25,000 of the principal amount of the convertible note dated May 21, 2013, into 615,764 shares of the Company's common stock at a fair value of $0.11 per share in accordance with the convertible note agreement. These shares were issued on March 5, 2014.

 

 
F-18
Table of Contents

 

VIKING INVESTMENTS GROUP, INC.

Notes to Consolidated Financial Statements

(Amounts expressed in US dollars)

 

 

On March 12, 2014, a convertible note holder elected to convert $21,000 of the principal amount of the convertible note dated May 21, 2013, into 532,454 shares of the Company's common stock at a fair value of $0.10 per share in accordance with the convertible note agreement. These shares were issued on March 20, 2014.

 

On May 5, 2014, a convertible note holder elected to convert $16,000 of the principal amount of the convertible note dated October 28, 2013, into 235,294 shares of the Company's common stock at a fair value of $0.21 per share in accordance with the convertible note agreement. These shares were issued on June 9, 2014.

 

On September 8, 2014, the Company sold 300,000 units to Talem Investments, LLC ("Talem") at a purchase price of $0.50 per unit. Each unit consisted of one share of the Company's common stock, $0.001 par value per share, and one warrant. Each warrant entitled the holder to purchase one share of the Company's common shares at an exercise price of $0.50 per share, was exercisable immediately, and had a term of exercise through June 30, 2015. The Company estimated that the fair value of the warrants was approximately $60,674 ($0.20 per unit) using a Black-Scholes option pricing model at the time of issuance. The total proceeds of $150,000 were paid by Talem in September 2014. The Company approved the issuance of 300,000 shares of the Company's common stock to Talem on November 5, 2014.

 

On October 16, 2014, the Company sold 518,348 units to Sackville Holdings, LLC ("Sackville") at a purchase price of $0.30 per unit. Each unit consisted of one share of the Company's common stock, $0.001 par value per share, and one warrant. Each warrant entitles the holder to purchase one share of the Company's common shares at an exercise price of $0.30 per share, was exercisable immediately, and has a term of exercise through October 15, 2015. The total proceeds of $155,515 were paid by Sackville on October 16, 2014. The Company approved the issuance of 518,348 restricted shares of the Company's common stock to Sackville on November 5, 2014.

 

On October 30, 2014, the Company sold 622,665 units to Diana Dodge ("Dodge") at a purchase price of $0.20 per unit. Each unit consisted of one share of the Company's common stock, $0.001 par value per share, and one warrant. Each warrant entitled the holder to purchase one share of the Company's common shares at an exercise price of $0.20 per share, was exercisable immediately, and has a term of exercise through October 30, 2015. The total proceeds of $124,533 were paid by on October 30, 2014. The Company approved the issuance of 622,665 restricted shares of the Company's common stock to Dodge on November 5, 2014.

 

On October 30, 2014, the Company sold 889,521 units to L.A. Knapp Inc. ("Knapp") at a purchase price of $0.20 per unit. Each unit consisted of one share of the Company's common stock, $0.001 par value per share, and one warrant. Each warrant entitled the holder to purchase one share of the Company's common shares at an exercise price of $0.20 per share, was exercisable immediately, and has a term of exercise through October 30, 2015. The total proceeds of $177,904 were paid by Knapp on October 30, 2014. The Company approved the issuance of 889,521 restricted shares of the Company's common stock to Knapp on November 5, 2014.

 

On September 18, 2014, the Company authorized and approved the issuance of 540,000 shares of common stock to the Company's lawyer for the provision of $66,668 in legal services rendered to the Company, at a cost basis of $0.1235 per share.

 

During the year ended December 31, 2014, the Company authorized and approved the issuance of 44,118, 59,055, 81,591, and 31,597 restricted shares of common stock in June, July, September and October, respectively, to one of the Company's consultants for the provision of $149,784 in consulting services rendered to the Company, at a cost basis of $0.34, $0.254, $0.3677 and $0.475 per share, respectively.

 

During the year ended December 31, 2014, the Company authorized and approved the issuance of 500,000 and 150,000 shares of common stock in September and November, respectively, to one of the Company's consultants for the provision of $47,500 in consulting services rendered to the Company, at a cost basis of $0.05 and $0.15 per share, respectively.

 

In May 2015, the Company authorized and approved the issuance of 720,000 shares of its common stock in conjunction with a six-month consulting agreement, at a cost basis of $0.15 per share, the current fair market value at the time of the agreement.

 

On August 3, 2015, the Company issued 421,571 restricted shares of common stock in settlement and cancellation of $30,000 of accrued payroll, and 2,000,000 and 872,871 restricted shares of common stock in settlement and cancellation of a total of $201,101 of amounts owed to directors, at a cost basis of $0.07 per share.

 

 
F-19
Table of Contents

 

VIKING INVESTMENTS GROUP, INC.

Notes to Consolidated Financial Statements

(Amounts expressed in US dollars)

 

 

On November 18, 2015, the Company issued 1,000,000 restricted shares of its common stock in conjunction with a one year consulting agreement, at a cost of $0.165 per share, the current fair market value at the time of agreement..

 

On November 23, 2015, a convertible note holder elected to convert $4,200 of the principal amount of the convertible note dated May 22, 2015, into 100,000 shares of the Company's common stock in accordance with the convertible note agreement.

 

On December 1, 2015, a convertible note holder elected to convert $8,400 of the principal amount of the convertible note dated May 22, 2015, into 200,000 shares of the Company's common stock in accordance with the convertible note agreement.

 

On December 24, 2015, a convertible note holder elected to convert $8,400 of the principal amount of the convertible note dated May 22, 2015, into 250,000 shares of the Company's common stock in accordance with the convertible note agreement.

 

Note 8. Convertible Notes

 

Convertible notes payable at December 31, 2015 and 2014 as detailed below, is summarized as follows:

 

 

December 31,

 

December 31,

 

2015

 

2014

 

(h) - JMJ Financial

 

$

6,778

 

$

-

 

(i) - LG Capital

 

63,000

 

-

 

(j) - GW Holdings

 

30,000

 

-

 

(k) - EMA Financial

 

50,000

 

-

 

(l) - JDF Capital

 

27,500

 

-

 

177,278

 

-

 

Net of unamortized debt discount

 

(153,730

)

 

-

 

$

23,548

 

$

-

 

Less current portion

(16,770

)

-

$

6,778

$

-

 

(a)

May 21, 2013 Convertible Note

 

On May 21, 2013, the Company issued a $58,000, 8% convertible note with a term expiring on February 28, 2014 (the "Maturity Date"). The principal amount of the note and interest is payable on the maturity date. The note is convertible into common stock beginning 180 days after the issuance date, at the holder's option, at a 42% discount to the average of the five lowest closing bid prices of the common stock during the ten trading day period prior to conversion. In the event the Company prepays the note in full, the Company is required to pay off all principal, interest and any other amounts owing multiplied by (i) 110% if prepaid during the period commencing on the closing date through 30 days thereafter, (ii) 115% if prepaid 31 days following the closing through 60 days following the closing, (iii) 120% if prepaid 61 days following the closing through 90 days following the closing, (iv) 125% if prepaid 91 days following the closing through 120 days following the closing, (v) 130% if prepaid 121 days following the closing through the 150 days following the closing, (vi) 135% if prepaid 151 days following the closing through the 180 days following the closing, and (vii) the Company shall have no right of prepayment after the expiration of 180 days following the closing. The terms of the convertible note provide for certain redemption features which include features indexed to equity risks. In the event of default, the amount of principal and interest not paid when due bear interest at the rate of 22% per annum and the note becomes immediately due and payable.

 

 
F-20
Table of Contents

 

VIKING INVESTMENTS GROUP, INC.

Notes to Consolidated Financial Statements

(Amounts expressed in US dollars)

 

 

The Company has evaluated the terms and conditions of the convertible note under the guidance of ASC 815. The conversion feature did not meet the definition of "indexed to a company's own stock" provided for in ASC 815 due to the down round protection feature. Therefore, the conversion feature requires bifurcation and liability classification. Additionally, the default put requires bifurcation because it is indexed to risks that are not associated with credit or interest risk. As a result, the compound embedded derivative comprises of (i) the embedded conversion feature and (i) the default put. Rather than bifurcating and recording the compound embedded derivative as a derivative liability, the Company elected to initially and subsequently measure the convertible note in its entirety at fair value, with changes in fair value recognized in earnings in accordance with ASC 815-15-25-4.

 

The following table reflects the allocation of the purchase on the inception date:

 

Convertible Note, Face Value

 

$

58,000

 

Convertible promissory note, Fair Value

 

106,522

 

Day-one derivative loss

 

(48,522

)

 

On December 5, 2013, the note holder elected to convert $12,000 of the principal amount of the convertible note dated May 21, 2013, into 159,151 shares of the Company's common stock at a fair value of $0.13 per share in accordance with the agreement. These shares were issued on December 17, 2013. A gain of $422 was recorded on the extinguishment of the debt.

 

On February 20, 2014, a convertible note holder elected to convert $25,000 of the principal amount of the convertible note dated May 21, 2013, into 615,764 shares of the Company's common stock at a fair value of $0.11 per share in accordance with the convertible note agreement. These shares were issued on March 5, 2014. A gain of $138 was recorded on the extinguishment of the debt.

 

On March 12, 2014, a convertible note holder elected to convert $21,000 of the principal amount of the convertible note dated May 21, 2013, into 532,454 shares of the Company's common stock at a fair value of $0.10 per share in accordance with the convertible note agreement. These shares were issued on March 20, 2014.

 

As of December 31, 2014, this convertible note had been fully converted. A loss of $47,940 associated with the changes in the fair value of convertible note was recorded for the year ended December 31, 2014.

 

(b)

October 28, 2013 Convertible Note

 

On October 28, 2013, the Company issued a $16,000, 8% convertible note with a term expiring on July 30, 2014 (the "Maturity Date"). The principal amount of the note and interest is payable on the maturity date. The note is convertible into common stock beginning 180 days after the issuance date, at the holder's option, at a 60% discount to the average of the three lowest closing bid prices of the common stock during the ten trading day period prior to conversion. The terms of the convertible note provide for certain redemption features which include features indexed to equity risks. In the event of default, the amount of principal and interest not paid when due bear interest at the rate of 22% per annum and the note becomes immediately due and payable.

 

 
F-21
Table of Contents

 

VIKING INVESTMENTS GROUP, INC.

Notes to Consolidated Financial Statements

(Amounts expressed in US dollars)

 

 

The Company has evaluated the terms and conditions of the convertible note under the guidance of ASC 815. The conversion feature did not meet the definition of "indexed to a company's own stock" provided for in ASC 815 due to the down round protection feature. Therefore, the conversion feature requires bifurcation and liability classification. Additionally, the default put requires bifurcation because it is indexed to risks that are not associated with credit or interest risk. As a result, the compound embedded derivative comprises of (i) the embedded conversion feature and (i) the default put. Rather than bifurcating and recording the compound embedded derivative as a derivative liability, the Company elected to initially and subsequently measure the convertible note in its entirety at fair value, with changes in fair value recognized in earnings in accordance with ASC 815-15-25-4.

 

The following table reflects the allocation of the purchase on the inception date:

 

Convertible Note, Face Value

 

$16,000

 

Convertible promissory note, Fair Value

 

 

44,410

 

 

 

 

 

 

Day-one derivative loss

 

 

(28,410)

 

On May 5, 2014, a convertible note holder elected to convert $16,000 of the principal amount of the convertible note dated October 28, 2013, into 235,294 shares of the Company's common stock at a fair value of $0.10 per share in accordance with the convertible note agreement. These shares were issued on June 9, 2014. A gain of $1,094 was recorded on the extinguishment of the debt.

 

As of December 31, 2014, this convertible note had been fully converted. A loss of $8,437 associated with the changes in the fair value of convertible note was recorded for the year ended December 31, 2014.

 

(c)

April 8, 2014 Convertible Note

 

On April 8, 2014, the Company issued a $53,000, 8% convertible note with a term expiring on January 14, 2015 (the "Maturity Date"). The principal amount of the note and interest is payable on the maturity date. The note is convertible into common stock beginning 180 days after the issuance date, at the holder's option, at a 42% discount to the average of the five lowest closing bid prices of the common stock during the twelve trading day period prior to conversion. The terms of the convertible note provide for certain redemption features which include features indexed to equity risks. In the event of default, the amount of principal and interest not paid when due bear interest at the rate of 22% per annum and the note becomes immediately due and payable.

 

The Company has evaluated the terms and conditions of the convertible note under the guidance of ASC 815. The conversion feature did not meet the definition of "indexed to a company's own stock" provided for in ASC 815 due to the down round protection feature. Therefore, the conversion feature requires bifurcation and liability classification. Additionally, the default put requires bifurcation because it is indexed to risks that are not associated with credit or interest risk. As a result, the compound embedded derivative comprises of (i) the embedded conversion feature and (i) the default put. Rather than bifurcating and recording the compound embedded derivative as a derivative liability, the Company elected to initially and subsequently measure the convertible note in its entirety at fair value, with changes in fair value recognized in earnings in accordance with ASC 815-15-25-4.

 

The following table reflects the allocation of the purchase on the inception date:

 

Convertible Note, Face Value

 

$

53,000

 

Convertible promissory note, Fair Value

 

102,414

 

Day-one derivative loss

 

(49,414

)

 

On November 7, 2014, a convertible note holder elected to convert $10,000 of the principal amount of the convertible note dated April 8, 2014, into 215,517 shares of the Company's common stock at a fair value of $0.046 per share in accordance with the convertible note agreement. These shares were issued on November 25, 2014.

 

On November 20, 2014, Talem paid $67,500 to the convertible note holder on behalf the Company as the settlement of the remaining principal balance of $43,000. In consideration for the $67,000 paid by Talem, the Company shall issue 675,000 units to Talem with each unit consists of one share of the Company's common stock, $0.001 par value per share, and one warrant. Each warrant will entitle the holder to purchase one share of the Company's common shares at an exercise price of $0.10 per share, be exercisable immediately, and have a term of exercise through January 2, 2016. The agreement was signed between Talem and the Company on January 2, 2015.

 

As of December 31, 2014, this convertible note had been fully settled. A loss of $40,371 associated with the changes in the fair value of convertible note, and a gain of $8,253 due to extinguishment of the debt were recorded for the year ended December 31, 2014.

 

 
F-22
Table of Contents

 

VIKING INVESTMENTS GROUP, INC.

Notes to Consolidated Financial Statements

(Amounts expressed in US dollars)

 

  

(d)

March 11, 2015 Convertible Note

 

On March 11, 2015, the Company issued a $50,000 8% convertible note with a term expiring on March 11, 2016 (the "Maturity Date"). The principal amount of the note and interest is payable on the maturity date. The note is convertible into common stock at any time, at the holder's option, at a price equal to 58% of the lowest trading price of the common stock for the fifteen prior trading days including the day upon which a Notice of Conversion is received by the Company. In the event the Company prepays the note in full, the Company is required to pay off all principal, interest and any other amounts owing multiplied by (i) 115% if prepaid during the period commencing on the closing date through 30 days thereafter, (ii) 121% if prepaid 31 days following the closing through 60 days following the closing, (iii) 127% if prepaid 61 days following the closing through 90 days following the closing, (iv) 133% if prepaid 91 days following the closing through 120 days following the closing, (v) 139% if prepaid 121 days following the closing through the 150 days following the closing, (vi) 145% if prepaid 151 days following the closing through the 180 days following the closing, and (vii) the Company shall have no right of prepayment after the expiration of 180 days following the closing. This note was paid in full on September 8, 2015.

 

(e)

March 12, 2015 Convertible Note

 

On March 12, 2015, the Company issued a $25,000 8% convertible note with a term expiring on March 12, 2016 (the "Maturity Date"). The principal amount of the note and interest is payable on the maturity date. The note is convertible into common stock at any time, at the holder's option, at a price equal to 58% of the lowest trading price of the common stock for the fifteen prior trading days including the day upon which a Notice of Conversion is received by the Company. In the event the Company prepays the note in full, the Company is required to pay off all principal, interest and any other amounts owing multiplied by (i) 115% if prepaid during the period commencing on the closing date through 30 days thereafter, (ii) 121% if prepaid 31 days following the closing through 60 days following the closing, (iii) 127% if prepaid 61 days following the closing through 90 days following the closing, (iv) 133% if prepaid 91 days following the closing through 120 days following the closing, (v) 139% if prepaid 121 days following the closing through the 150 days following the closing, (vi) 145% if prepaid 151 days following the closing through the 180 days following the closing, and (vii) the Company shall have no right of prepayment after the expiration of 180 days following the closing. This note was paid in full on September 8, 2015.

 

(f)

March 12, 2015 Convertible Note

 

On March 12, 2015, the Company issued a $25,000 8% convertible note with a term expiring on March 12, 2016 (the "Maturity Date"). The principal amount of the note and interest is payable on the maturity date. The note is convertible into common stock at any time, at the holder's option, at a price equal to 58% of the lowest trading price of the common stock for the fifteen prior trading days including the day upon which a Notice of Conversion is received by the Company. In the event the Company prepays the note in full, the Company is required to pay off all principal, interest and any other amounts owing multiplied by (i) 115% if prepaid during the period commencing on the closing date through 30 days thereafter, (ii) 121% if prepaid 31 days following the closing through 60 days following the closing, (iii) 127% if prepaid 61 days following the closing through 90 days following the closing, (iv) 133% if prepaid 91 days following the closing through 120 days following the closing, (v) 139% if prepaid 121 days following the closing through the 150 days following the closing, (vi) 145% if prepaid 151 days following the closing through the 180 days following the closing, and (vii) the Company shall have no right of prepayment after the expiration of 180 days following the closing. This note was paid in full on September 8, 2015.

 

(g)

March 25, 2015 Convertible Note

 

On March 25, 2015, the Company issued a $35,000 12% convertible note with a term expiring on March 24, 2016 (the "Maturity Date"), and which was funded on April 23 2015. The principal amount of the note and interest is payable on the maturity date. The note is convertible into common stock at any time, at the holder's option, at a price equal to 58% of the lowest trading price of the common stock for the fifteen prior trading days including the day upon which a Notice of Conversion is received by the Company. This note was paid in full on October 22, 2015.

 

(h)

May 22, 2015 Convertible Note

 

On May 22, 2015, the Company issued a convertible promissory note with a cap of $50,000 with a 0% interest rate for the first three months. The terms of the note include a $5,000 Original Issue Discount, providing for a maximum funding of $45,000. The amount of the note funded as of December 31, 2015 was $25,000. The Company may repay this Note at any time on or before 90 days from the effective date. If the Company does not make a payment on or before 90 days from the notes effective date, a one-time interest charge of 12%shall be applied to the principal sum. The maturity date of the note is two years from the effective date of the note. The investor has the right, at any time after the Effective Date, at its election, to convert all of part of the outstanding and unpaid Principal Sum and accrued interest. The conversion price is the lesser of $0.10 or 60% of the lowest trade price in the 25 trading days previous to the conversion. As of December 31, 2015, $21,000 of this note had been converted to common shares. The principal balance of $6,778 is accounted for as a non - current liability due to being satisfied through the issuance of equity in January 2016.

 

 
F-23
Table of Contents

 

VIKING INVESTMENTS GROUP, INC.

Notes to Consolidated Financial Statements

(Amounts expressed in US dollars)

 

 

(i)

November 3, 2015 Convertible Note

 

On November 3, 2015, the Company issued a $63,000 8% convertible note with a term expiring on November 3, 2016 (the "Maturity Date"). The principal amount of the note and interest is payable on the maturity date. The note is convertible into common stock at any time, at the holder's option, at a price equal to 58% of the lowest trading price of the common stock for the fifteen prior trading days including the day upon which a Notice of Conversion is received by the Company.

 

(j)

November 20, 2015 Convertible Note

 

On November 20, 2015, the Company issued a $30,000 12% convertible note with a term expiring on November 20, 2016 (the "Maturity Date"). The principal amount of the note and interest is payable on the maturity date. The note is convertible into common stock at any time, at the holder's option, at a price equal to 52% of the lowest trading price of the common stock for the twenty prior trading days including the day upon which a Notice of Conversion is received by the Company.

 

(k)

November 19, 2015 Convertible Note

 

On November 19, 2015, the Company issued a $50,000 12% convertible note with a term expiring on November 19, 2016 (the "Maturity Date"). The principal amount of the note and interest is payable on the maturity date. The note is convertible into common stock at any time, at the holder's option, at a price equal to 52% of the lowest trading price of the common stock for the twenty prior trading days including the day upon which a Notice of Conversion is received by the Company.

 

(l)

November 25, 2015 Convertible Note

 

On November 25, 2015, the Company issued a $27,500 8% convertible note with a term expiring on November 25, 2016 (the "Maturity Date"). The principal amount of the note and interest is payable on the maturity date. The note is convertible into common stock at any time, at the holder's option, at a price equal to 42% of the lowest trading price of the common stock for the twenty-five prior trading days including the day upon which a Notice of Conversion is received by the Company.

 

Note 9.

Commitments and contingencies

 

From time to time the Company may be a party to litigation matters involving claims against the Company. Management believes that there are no current matters that would have a material effect on the Company’s financial position or results of operations.

 

Note 10.

Risk Management

 

The Company is exposed to financial risks due to the nature of its business and the financial assets it holds. A summary of the Company's risk exposures as it relates to financial instruments are reflected below:

 

(a)

Market risk

 

Market risk is the risk that the fair value from a financial instrument will fluctuate because of changes in market prices. The Company will be exposed to potential losses if the price of the long-term investment it hold decreases.

 

(b)

Liquidity risk

 

The Company manages liquidity risk by maintaining sufficient cash balances to meet operation expense requirement in additional to expenses assumed by majority shareholders.

 

(c)

Credit Risk

 

Credit risk also arises from cash and deposits with banks and financial institutions. To minimize the credit risk the Company places these instruments with a high credit quality financial institution.

 

 
F-24
Table of Contents

 

VIKING INVESTMENTS GROUP, INC.

Notes to Consolidated Financial Statements

(Amounts expressed in US dollars)

 

 

Note 11.

Subsequent Events

 

The Company has evaluated subsequent events from December 31, 2015 through the date of filing this report, and determined there are no other items to disclose other than those disclosed below:

 

On January 12, 2016 the Company issued 300,926 common shares for convertible debt.

 

On February 23, 2016, the Company closed on the acquisition of working interests (Net Revenue Interests from 80 to 87%) in four leases with access to the mineral rights (oil and gas) concerning approximately 281 acres of property in Miami and Franklin Counties in eastern Kansas. This project produces oil from the Cherokee formation at a depth of approximately 600 feet. These leases offer the potential for several future drilling locations. The purchase includes an undivided interest in all oil and gas wells, equipment, fixtures and other personal property located upon the leased properties and used in connection with oil and gas operations upon the leases attributable to the working interests purchased by the Company. The effective date of the acquisitions is February 1, 2016, so the Company was entitled to net revenues from its share of production as of such date.

 

As consideration for this transaction, the Company made a cash payment of $1,305,000 at closing to the vendors and issued a promissory note in the amount of $45,000. The note was paid in full on or about March 11, 2016. The note bears interest at a rate of 0% per annum and was due at the end of February. The Company also agreed to issue the vendors 4,500,000 shares of common stock.

 

Immediately prior to the above-noted acquisition, the Company also purchased a 100% working interest (Net Revenue Interest of 83%) in: (i) three leases with access to the mineral rights (oil and gas) concerning approximately 270 acres of property in Miami and Franklin Counties in eastern Kansas; and (ii) 31 leases with access to the mineral rights (oil and gas) concerning approximately 5,500 acres of property in Cass and Bates Counties in Missouri. The purchase includes an undivided interest in all oil and gas wells, equipment, fixtures and other personal property located upon the leased properties and used in connection with oil and gas operations upon the leases attributable to the working interests purchased by Viking. As consideration for this transaction, Viking agreed to issue the vendors 5,150,000 shares of common stock of Viking.

 

To facilitate these acquisitions, the Company borrowed $1,450,000 from private lenders pursuant to a 15% Senior Secured Convertible Promissory Note (the "Note"), arranged through a licensed broker/dealer, with the primary terms of the loan being as follows: (i) Term – 6 months; (ii) Rate – 15% per annum; (iii) Security – 1st ranking charge against company assets pursuant to a Security and Pledge Agreement (the "Security Agreement"); (iv) Conversion – the lenders have a right to convert all or part of the note into common stock of Viking at a price of $0.15 per share, subject to certain ownership restrictions; and (v) Warrants – the lenders were given an option to purchase, within the next 5 years, 3,750,000 shares of common stock of Viking at an exercise price of $0.20 per share pursuant to a Common Stock Purchase Warrant. Viking's CEO and director, James Doris, also personally guaranteed repayment of the loan and granted the lenders a security interest in his assets.

 

As of February 1, 2016, the Company issued 9,650,000 common shares as part of the consideration for the acquisition of the oil and gas investment made at that time.

 

On March 16, 2016, the Company issued 1,000,000 common shares for services, valued at $102,500.

 

On March 21, 2016, the Company executed two one-year consulting agreements requiring the issuance of 2,000,000 common shares for each contract. Both of these contracts were terminated, the shares were returned to the Company, and were cancelled in August 2016.

 

On March 21, 2016, the Company executed a one-year advisory services agreement requiring the issuance of 1,000,000 common shares for the contract. The shares are to be issued as 375,002 upon execution of the contract, with 56,818 shares being issued at the beginning of each month for the remaining eleven months.

 

As of April 29, 2016, the Company issued a total of $375,000 of 10% Secured Subordinated promissory notes with a term expiring January 12, 2017 (the “Maturity Date”), and an original issue discount of fifty percent (50%). Interest is payable on the outstanding principal of these notes at 10% per annum on the Maturity Date.

 

As of April 29, 2016, the Company, pursuant to a securities purchase agreement, sold 1,250,000 shares of its common stock at $0.15 per share.

 

On September 28, 2016, the Company issued 2,400,000 common shares, at the current market value of $288,000 as a portion of the purchase price of additional oil and gas properties acquired on October 4, 2016.

 

 
F-25
Table of Contents

 

VIKING INVESTMENTS GROUP, INC.

Notes to Consolidated Financial Statements

(Amounts expressed in US dollars)

 

 

During September 2016, the Company negotiated the payment of certain convertible notes, and committed to the issuance of 375,000 common shares at the current market value of $52,500 as additional interest.

 

As of September 30, 2016, the Company, pursuant to a securities purchase agreement, sold $1,337,500 shares of its common stock at $0.15 per share.

 

As of October 2016, the Company issued a total of $610,000 of 10% Secured promissory notes with a term expiring April 3, 2017 (the “Maturity Date”), and an original issue discount of thirty seven and one half percent (37.5%). Interest is payable on the outstanding principal of these notes at 10% per annum on the Maturity Date.

 

On October 4, 2016, the Company closed on the purchase of working interests in various oil and gas leases in Eastern Kansas. Simultaneously, to facilitate the purchase, the Company closed on its initial funding from Crossfirst Bank under the September 30, 2016 Revolver Agreement in the amount of $1,800,000. Additionally, on October 4, 2016, the Company committed to the issuance of 2,752,021 common shares as a part of the consideration for the acquisition of this oil and gas investment. The shares were issued in December 2016.

 

During November 2016, the Company issued 1,400,000 common shares as part of a negotiated settlement on convertible notes.

 

During November, 2016, the Company issued 187,500 common shares pursuant to a securities purchase agreement.

 

SUPPLEMENTAL INFORMATION - PETROLEUM AND NATURAL GAS PRODUCTION – (unaudited)

 

Results of Operations

 

The results of operations for petroleum and natural gas production as of December 31, 2015 consist exclusively of the Company's 50% working interest in the Joffre oil and gas property located in Alberta, Canada as follows;

 

 

Canada

 

2015

 

2014

 

Results of Operations

 

Revenue

 

$

95,924

 

$

-

 

Production costs

 

49,965

 

-

 

$

45,959

 

$

-

 

 
F-26
Table of Contents

 

VIKING INVESTMENTS GROUP, INC.

Notes to Consolidated Financial Statements

(Amounts expressed in US dollars)

 

 

Oil and Gas Production and Sales by geographic area for the years ended December 31, 2015 and 2014:

 

 

Geographic

 

Unit of

 

December 31,

 

Area

 

Measure

 

2015

 

2014

 

Sales - Volumes

 

Oil

 

Canada

 

Barrels

 

1,639

 

-

 

Natural Gas

 

Canada

 

Mcf

 

5,404

 

-

 

Natural Gas Liquids

 

Canada

 

Barrels

 

849

 

-

 

Sulphur

 

Canada

 

Tonnes

 

36

 

-

 

Sales

 

Oil

 

Canada

 

Barrels

 

$

76,619

 

$

-

 

Natural Gas

 

Canada

 

Mcf

 

$

12,340

 

$

-

 

Natural Gas Liquids

 

Canada

 

Barrels

 

$

5,646

 

$

-

 

Sulphur

 

Canada

 

Tonnes

 

$

1,319

 

$

-

 

Average Sales Prices

 

Oil

 

Canada

 

Barrels

 

$

46.75

 

$

-

 

Natural Gas

 

Canada

 

Mcf

 

$

2.28

 

$

-

 

Natural Gas Liquids

 

Canada

 

Barrels

 

$

6.65

 

$

-

 

Sulphur

 

Canada

 

Tonnes

 

$

36.69

 

$

-

 

Mcf = thousands of cubic feet

 

Tonnes = Metric tons

 

Petroleum and Natural Gas Reserves

 

Reserves are estimated remaining quantities of oil and natural gas and related substances, which by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible – from a given date forward, from known reservoirs, and under existing economic conditions, operating methods and government regulations – prior to the time at which contracts providing the right to operate expire. The reserve information disclosed herein is representative of the one producing well, and the re-activation of the three suspended wells expected to begin production in 2016.

 

 
F-27
Table of Contents

 

VIKING INVESTMENTS GROUP, INC.

Notes to Consolidated Financial Statements

(Amounts expressed in US dollars)

 

 

Reserves Reconciliation Summary

 

The following table is a reconciliation of reserve balances for the year ended December 31, 2015:

 

 

 

Joffre Project - Canada

 

 

 

Proved

 

 

Probable

 

 

 

Oil
(Mbbl)

 

 

Natural
Gas
(MMcf)

 

 

Natural
Gas
Liquids
(Mbbl)

 

 

Barrels
of Oil
Equivalent (Mboe)

 

 

Oil
(Mbbl)

 

 

Natural
Gas
(MMcf)

 

 

Natural
Gas
Liquids
(Mbbl)

 

 

Barrels
of Oil
Equivalent (Mboe)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Opening Balance

 

 

216.2

 

 

 

907.6

 

 

 

38.2

 

 

 

390.2

 

 

 

198.0

 

 

 

848.1

 

 

 

35.2

 

 

 

374.6

 

Production

 

 

(1.6)

 

 

(5.4)

 

 

(0.8)

 

 

(3.3)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Closing Balance

 

 

214.6

 

 

 

902.2

 

 

 

37.4

 

 

 

386.9

 

 

 

198.0

 

 

 

848.1

 

 

 

35.2

 

 

 

374.6

 

 

Reserves Summary

 

 

Oil

 

Natural
Gas

 

Natural Gas
Liquids

 

Barrels of Oil Equivalent

 

(Mbbl)

 

(MMcf)

 

(Mbbl)

 

(Mboe)

 

Proved

 

Developed - Producing

 

16.2

 

44.0

 

1.8

 

24.5

 

Developed - Non-Producing

 

198.4

 

858.2

 

35.6

 

362.4

 

Undeveloped

 

-

 

-

 

-

 

-

 

Total Proved

 

214.6

 

902.2

 

37.4

 

386.9

 

Probable

 

198.0

 

848.1

 

35.2

 

360.1

 

Total Proved plus Probable

 

412.60

 

1,750.3

 

72.6

 

747.0

 

Mbbl = thousands of barrels

 

MMcf = millions of cubic feet

 

Mboe - thousands of barrels of oil equivalent

 

Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Reserves

 

The standardized measure of discounted future net cash flows relating to proved oil and natural gas reserves and the changes in standardized measure of discounted future net cash flows relating to proved oil and natural gas reserves were prepared in accordance with provisions of ASC 932 - Extractive Activities - Oil and Gas. Future cash inflows at December 31, 2015 were computed by applying the unweighted, arithmetic average of the closing price on the first day of each month for the 12-month period prior to December 31, 2015 to estimated future production. Future production and development costs are computed by estimating the expenditures to be incurred in developing and producing the proved oil and natural gas reserves at year-end, based on year-end costs and assuming continuation of existing economic conditions.

 

 
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VIKING INVESTMENTS GROUP, INC.

Notes to Consolidated Financial Statements

(Amounts expressed in US dollars)

 

 

Future income tax expenses are calculated by applying appropriate year-end tax rates to future pretax net cash flows relating to proved oil and natural gas reserves, less the tax basis of properties involved. Future income tax expenses give effect to permanent differences, tax credits and loss carry forwards relating to the proved oil and natural gas reserves. Future net cash flows are discounted at a rate of 10% annually to derive the standardized measure of discounted future net cash flows. This calculation procedure does not necessarily result in an estimate of the fair market value of the Company’s oil and natural gas properties.

 

The standardized measure of discounted future net cash flows relating to proved oil and natural gas reserves for the year ended December 31, 2015 are as follows:

 

Future cash inflows

 

$6,096,432

 

Future production costs

 

 

(5,019,577)

Future development costs

 

 

(870,645)

Future income tax expense

 

 

-

 

 

 

 

 

 

Future net cash flows

 

 

206,210

 

10% annual discount for estimated timing of cash flows

 

 

-

 

 

 

 

 

 

Standardized measure of DFNCF

 

$206,210

 

 

There was no production activity for the year ended December 31, 2014.

 

Changes in Standardized Measure of Discounted Future Net Cash Flows

 

The changes in the standardized measure of discounted future net cash flows relating to proved oil and natural gas reserves for the year ended December 31, 2015 are as follows:

 

Balance at January 1, 2015

 

$175,671

 

Net changes in prices and production costs

 

 

-

 

Net changes in future development costs

 

 

-

 

Sales of oil and gas produced, net

 

 

(45,959)

Extensions, discoveries and improved recovery

 

 

-

 

Purchases of reserves

 

 

-

 

Sales of reserves

 

 

-

 

Revisions of previous quantity estimates

 

 

-

 

Previously estimated development costs incurred

 

 

-

 

Net change in income taxes

 

 

4,022

 

Accretion of discount

 

 

6,146

 

Other

 

 

(6,145)

 

 

 

 

 

Balance at December 31, 2015

 

$133,735

 

 

There was no production activity for the year ended December 31, 2014.

 

In accordance with SEC requirements, the pricing used in the Company’s standardized measure of future net revenues is based on the 12-month un-weighted arithmetic average of the first-day-of-the-month price for the period January through December for each period presented and adjusted by lease for transportation fees and regional price differentials. The use of SEC pricing rules may not be indicative of actual prices realized by the Company in the future.

 

 
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Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

 

On September 2, the Company received notice that its independent registered public accounting firm, Green & Company, CPAs (the “Former Accountant”) resigned. In that correspondence, the Company was notified that the Former Accountant was withdrawing its audit report for the year ended December 31, 2015, as further described in the Company’s Current Report on Form 8-K/A filed on November 18, 2016 (which is incorporated by reference herein). As disclosed in the Company’s Current Reports on Form 8-K filed on November 14, 2016, and November 15, 2016 (both of which are incorporated by reference herein), on October 28, 2016, we engaged Mohle Adams, LLP as the Company’s independent registered public accounting firm, and on November 9, 2016, the Company engaged Turner, Stone & Company, L.L.P. as the Company’s new independent registered public accounting firm.

 

Item 9A.

Controls and Procedures.

 

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. Management must evaluate its internal controls over financial reporting, as required by Sarbanes-Oxley Act Section 404 (a). The Company's internal control over financial reporting is a process designed under the supervision of the Company's Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company's financial statements for external purposes in accordance with U.S. generally accepted accounting principles or GAAP.

 

As of December 31, 2015, management assessed the effectiveness of the Company's internal control over financial reporting based on the criteria for effective internal control over financial reporting established in the 2013 Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and SEC guidance on conducting such assessments. Based on that evaluation, they concluded that, during the period covered by this report, such internal controls and procedures were not effective to detect the inappropriate application of GAAP rules as more fully described below. This was due to deficiencies that existed in the design or operation of the Company's internal controls over financial reporting that adversely affected its internal controls and that may be considered to be material weaknesses.

 

The matters involving internal controls and procedures that the Company's management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: (1) lack of a functioning audit committee and lack of a majority of outside directors on the Company's board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; (2) inadequate segregation of duties consistent with control objectives; (3) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of GAAP and SEC disclosure requirements; and (4) ineffective controls over period end financial disclosure and reporting processes. The aforementioned material weaknesses were identified by the Company's chief financial officer in connection with the audit of the Company's financial statements as of December 31, 2014 and communicated the matters to the Company's management.

 

Management believes that the material weaknesses set forth in items (2), (3) and (4) above did not have an effect on the Company's financial results. However, management believes that the lack of outside directors on the Company's board of directors can resulting in oversight in the establishing and monitoring of required internal controls and procedures which can affect the process of preparing Company's financial statements.

 

Management believes that the appointment of one or more outside directors, who shall be appointed to a fully functioning audit committee, will remedy the lack of a functioning audit committee and a lack of a majority of outside directors on the Company's Board. In addition, management believes that preparing and implementing sufficient written policies and checklists will remedy the following material weaknesses (i) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of GAAP and SEC disclosure requirements; and (ii) ineffective controls over period end financial close and reporting processes. Further, management believes that the hiring of additional personnel who have the technical expertise and knowledge will result in proper segregation of duties and provide more checks and balances within the financial reporting department. Additional personnel will also provide the cross training needed to support the Company if personnel turn over issues within the financial reporting department occur. This coupled with the appointment of additional outside directors will greatly decrease any control and procedure issues the Company may encounter in the future.

 

Management will continue to monitor and evaluate the effectiveness of its internal controls and procedures and its internal controls over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.

 

 
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(a)

Disclosure Controls and Procedures; Changes in Internal Control Over Financial Reporting

 

Management has evaluated 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 (the "Exchange Act")) as of December 31, 2014. Based on this evaluation, Management concluded that the Company's disclosure controls and procedures were not effective as of December 31, 2015.

 

(b)

Management Report on Internal Control Over Financial Reporting

 

Management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and Rule 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

 

Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

 

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

 

Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2015. Based on this assessment, management concluded that, as of December 31, 2015, the Company's internal control over financial reporting was not effective based on those criteria.

 

To remediate our internal control weaknesses, management intends to implement the following measures:

 

The Company will add sufficient number of independent directors to the board and appoint an audit committee.

The Company will add sufficient knowledgeable accounting personnel to properly segregate duties and to effect a timely, accurate preparation of the financial statements.

Upon the hiring of additional accounting personnel, the Company will develop and maintain adequate written accounting policies and procedures.

 

The additional hiring is contingent upon the Company's efforts to obtain additional funding through equity or debt for its continued operational activities and corporate expenses. Management expects to secure funds in the coming fiscal year but provides no assurances that it will be able to do so.

 

We understand that remediation of material weaknesses and deficiencies in internal controls are a continuing work in progress due to the issuance of new standards and promulgations. However, remediation of any known deficiency is among our highest priorities. Our management will periodically assess the progress and sufficiency of our ongoing initiatives and make adjustments as and when necessary.

 

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant rules of the SEC that permit us to provide only management's report in this annual report. On July 21, 2010, President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act. Included in the Act is a provision that permanently exempts smaller public companies that qualify as either a Non-Accelerated Filer or Smaller Reporting Company from the auditor attestation requirement of Section 404(b) of the Sarbanes-Oxley Act of 2002.

 

There was no change in our internal control over financial reporting during the quarter ended December 31, 2015 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

Item 9B.

Other Information.

 

None.

 

 
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PART III

 

Item 10.

Directors, Executive Officers and Corporate Governance.

 

Identification of Directors and Executive Officers

 

The name of the officers and directors of the Company as of December 9, 2016, as well as certain information about them, are set forth below:

 

Name

Age

Position

James A. Doris

41

Director/CEO/President

Tom Simeo

59

Director/Executive Chairman/CFO

John Squarek

73

Vice President of Energy (resigned July 2016)

Guangfang Yang

37

Director/former CFO (resigned July 2016)

Townsend Tang

36

Director (resigned December 2016)

 

Background of Officers and Directors

 

James A. Doris

 

Mr. Doris has been a member of the Board of Directors of the Company since June 28, 2014, and its President and CEO since December 12, 2014. Mr. Doris has owned his own law practice, known as DLO Lawyers ("DLO") since 2006. DLO is a full-service law firm and represents domestic and foreign clients regarding their business and investment activities in Canada. Mr. Doris' practice areas include Mergers and Acquisitions, Private Equity Investments, Joint Ventures, Corporate Finance, Corporate Governance, Dispute Resolution, Real Estate and Estates. DLO has 4 offices in Eastern Ontario, Ottawa, Prescott, Brockville and Perth. Mr. Doris manages all aspects of the organization, including with respect to Business Development, Human Resources, Finance and Strategic Planning. Prior to starting his own firm, Mr. Doris served as Executive Vice President and In-House Counsel for PineLake Group, a real estate investment and development company in Toronto, Canada, and prior to working for PineLake, Mr. Doris was an associate lawyer at McMillan LLP, one of Canada's leading business law firms. Mr. Doris graduated (cum laude) from the University of Ottawa in 2001 and was called to the Bar of Ontario in 2002.

 

Tom Simeo

 

Mr. Simeo has been the Company's Chief Executive Officer, director and Chairman of the Board since August 15, 2008, when Viking Investments Group, LLC (a Nevis limited liability company) acquired control of the Company. On December 12, 2014, Mr. Simeo resigned as the Company's CEO, and was appointed the Company's Executive Chairman. Upon the resignation of Ms. Yang, Mr. Simeo accepted the position as the Company’s interim CFO as of July 5, 2016. Mr. Simeo, a corporate lawyer and investment banker, is the founder and managing partner of Viking Investments Group, LLC, the Company's subsidiary and a Delaware limited liability company established in 1993. Between 1990 and 1993, Mr. Simeo advised on the financing and private acquisition of state-owned companies in former Soviet Bloc countries. During the years of 1993 through 2004, Mr. Simeo initiated, advised and helped structure investments in the United States to foreign private and publicly listed companies. From the early 1980's through 1990, Mr. Simeo was a practicing lawyer in Sweden. Mr. Simeo is a graduate Jur. kand. (American LLM equivalent) from the University of Lund, Sweden. Mr. Simeo also studied law at Stockholm University and International Economy at Uppsala University in Sweden. Mr. Simeo is not a director of any other public company.

 

John Squarek

 

On February 12, 2015, Mr. Squarek was appointed as Vice President of Energy for the Company. Mr. Squarek, P. Eng., MBA, has been the President, CEO and a director of Tanager Energy Inc., a publicly listed oil and gas exploration and development company (symbol TAN) on the Toronto Stock Venture Exchange, since June of 2012. From 1999 to 2013, he was also the President and CEO of Oasis Energy Inc., a privately held company through which Mr. Squarek has provided management and energy consulting services to the oil and gas industry. Mr. Squarek is also the past President, CEO and a director of Bellevue Resource Inc., and First Star Energy Ltd., both TSX listed companies, and is the Past Chairman of the Small Explorers and Producers Association of Canada. Mr. Squarek is a Member of the Association of Professional Engineers Geological and Geophysicists of Alberta and a Member of the Legion of Honor of the Society of Professional Engineers. He has 49 years' experience in the oil, gas and mineral industry, has a B. Sc. in Petroleum Engineering from the University of Oklahoma (1966), and has a Master's Degree in Business Administration from Adelaide University in Adelaide, South Australia (1996).

 

Mr Squarek resigned from his positions with the Company on July 10, 2016.

 

 
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Guangfang "Cecile" Yang

 

On February 7, 2013, Ms. Yang was appointed as the chief financial officer of the Company and was appointed to the Board of Directors of the Company.

 

Ms. Yang brings to the Company 15 years of general accounting and auditing experience, auditing private and publicly held companies in China, the United Kingdom and the United States.

 

Most recently before joining the Company, Ms. Yang was from 2009, director of finance and administration for the Grassroots Community Association where she was the financial controller for 5 major projects and the executive body of the association, responsible for cash flow forecast and management and budget control. Ms. Yang was also in charge of overseeing the fund-raising process and managing sponsor relationships. From 2007- 2009, Ms. Yang was a Senior Manager for Acquisition Audits with Moores Rowland CEC, where she among other things, led the acquisition audit team for Sinolog Logistic Group, a company consisting of six entities headquartered in Singapore. Ms. Yang was also an annual auditor for Acer during that time.

 

From 1998-2006, Ms. Yang was with KPMG where she held various positions, from auditor to manager. While Ms. Yang initially held a position as an auditor, she later led a field audit with multiple team members and later became an audit team member for middle- to large-size audit projects. She coordinated auditing for the Sinopec IPO, and worked in various capacities on the China Mobil IPO and annual audit as well as the China Constructional Bank and CITIC Bank IPO's.

 

Ms. Yang graduated from Hult International Business School, UK, London, from the MBA Executive Track Program. Ms. Yang also graduated from Fudan University, Shanghai, China with a bachelor degree, major in International Finance.

 

Ms. Yang resigned from her positions with the Company as of July 5, 2016.

 

Townsend Tang

 

On July 10, 2012, Mr. Townsend Tang was appointed to the Board of Directors of the Company. Mr. Townsend Tang, a seasoned executive and entrepreneur, has more than 10 years of experience in the finance industry in China, including Venture Capital, Private Equity, Mergers and Acquisitions, Initial Public Offerings and Private Investments in Public Equity, and various forms of debt financing. Before joining the Company, Mr. Tang was from 2007, a partner and managing director with Beijing Capital Fund Management Co., Ltd, Beijing, where he was instrumental in raising RMB100 million, plus additional debt and equity financings for a number of the firm's clients. Between the years of 2001 to 2006, Mr. Tang owned and managed Ou Shang Investments, Co., Ltd., a financing consultant firm focused on assisting various domestic Chinese and South East Asian companies to obtain debt and equity financing, ranging from RMB10 million to RMB100 million to a total of 13 clients, of which three clients obtained a listing in A Market, Shanghai.

 

Mr. Tang graduated from Nanjing Industry University where he received an MBA. Mr. Tang also holds a Chinese securities business qualification certificate.

 

Mr. Tang resigned from his position as a member of the Board of Directors as of December 6, 2016.

 

Family Relationships

 

There are no family relationships between any of the Company's officers and directors.

 

Audit Committee and Audit Committee Financial Expert

 

The Company does not currently have an audit committee financial expert, nor does it have an audit committee. The Company's entire board of directors handles the functions that would otherwise be handled by an audit committee. The Company does not currently have the capital resources to pay director fees to a qualified independent expert who would be willing to serve on its board and who would be willing to act as an audit committee financial expert. As its business expands and as it appoints others to its board of directors, the Company expects that it will seek a qualified independent expert to become a member of its board of directors. Before retaining any such expert the Company's board would make a determination as to whether such person is independent.

 

 
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Code of Ethics

 

The Company has not yet formally adopted a written code of ethics to be applied to the Company's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. Based on its small size, limited financial and human resources, the Company has not adopted written code of ethics. 

 

Involvement in Certain Legal Proceedings

 

To the best of the registrant's knowledge, during the past five years, no director, executive officer, promoter or control person of the Company:

 

(1)

has filed a petition under the federal bankruptcy laws or any state insolvency law, nor had a receiver, fiscal agent or similar officer appointed by a court for the business or present of such a person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer within two years before the time of such filing;

 

(2)

were convicted in a criminal proceeding or named subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);

 

(3)

were the subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of the following activities:

 

(i)

acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, associated person of any of the foregoing, or as an investment advisor, underwriter, broker or dealer in securities, or as an affiliated person, director of any investment company, or engaging in or continuing any conduct or practice in connection with such activity;

 

(ii)

engaging in any type of business practice;

 

(iii)

engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of federal or state securities laws or federal commodity laws.

 

(4)

were the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any federal or state authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described above under this Item, or to be associated with persons engaged in any such activity;

 

(5)

were found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission to have violated any federal or state securities law and the judgment in such civil finding or find by the Securities and Exchange Commission has not been subsequently reversed, suspended or vacated;

 

(6)

were found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated.

 

Compliance with Section 16(A) of the Exchange Act

 

To the best of the knowledge of the Company, persons who beneficially owned more than ten percent of the Company's common stock filed timely reports in compliance with Section 16(a).

 

 
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Table of Contents

  

Item 11.

Executive Compensation

 

Summary Compensation Table— Fiscal Years Ended December 31, 2015 and 2014

 

The following table sets forth information concerning all cash and non-cash compensation awarded to, earned by or paid to the named persons for services rendered in all capacities during the noted periods. No other executive officers received total annual salary and bonus compensation in excess of $100,000. 

 

Name and Principal Position

 

Year

 

Salary
($)
 

 

Bonus

($)

 

Stock

Awards

($)

 

Option

Awards

($)

 

Non-Equity

Incentive Plan

Compensation
Earnings

($)

 

Non-Qualified
Deferred

Compensation

Earnings
($)

 

All Other

Compensation

($)

 

Total

Tom Simeo

 

2015

 

45,000

 

0

 

0

 

0

 

0

 

0

 

0

 

45,000

 

Executive Chairman 

 

2014

 

180,000

 

0

 

0

 

0

 

0

 

0

 

0

 

180,000

 

Guangfang Yang (1)

 

2015

 

0

 

0

 

0

 

0

 

0

 

0

 

0

 

0

 

CFO

 

2014

 

0

 

0

 

3,914

 

0

 

0

 

0

 

0

 

3,914

 

James A. Doris (2)

 

2015

 

0

 

0

 

0

 

0

 

0

 

0

 

0

 

0

 

CEO & President

 

2014

 

0

 

0

 

0

 

0

 

0

 

0

 

0

 

0

 

John Squarek

 

2015

 

0

 

0

 

0

 

0

 

0

 

0

 

0

 

0

 

Vice President of Energy

 

2014

 

0

 

0

 

0

 

0

 

0

 

0

 

0

 

0

 

Narrative to Summary Compensation Table

 

1.

On February 7, 2013, Ms. Guangfang "Cecile" Yang was appointed as the Company's Chief Financial Officer and a director and received 25,000 shares of stock during the fiscal year ended December 31, 2014, valued at $3,914.

2.

On June 28, 2014, Mr. Doris was appointed as a director, and on December 12, 2014, as the CEO and President of the Company.

 

Outstanding Equity Awards at Fiscal Year End

 

As of December 31, 2015, the Company did not maintain an equity incentive plan or other plan, including but not limited to bonus, deferred compensation or retirement plan under which the Company's securities may be issued to its named executive officers as compensation.

 

Employment Agreements

 

The Company employs four people and has retained the services of four outside consultants. At December 31, 2015, the Company had no formal compensation arrangements with any of its employees. Commencing January 1, 2016 the Company is compensating each of Tom Simeo and James Doris, $10,000 per month plus equity for their services.

 

Compensation of Directors

 

The directors and former directors of the Company were compensated as such during the fiscal years ended December 31, 2015, and December 31, 2014, respectively, as follows:

 

Name

 

2015

Compensation

 

 

2014

Compensation

 

 

 

 

 

 

 

 

James A. Doris

 

$0

 

 

$N/A

 

Tom Simeo (1)

 

$45,000

 

 

$180,000

 

Guangfang Yang (2)

 

$0

 

 

$3,914

 

Townsend Tang

 

$0

 

 

$0

 

 

1.

In his capacity as an officer (not for director services).

2.

The value of 25,000 shares of common stock.

 

Directors of the Company may be reimbursed for any out-of-pocket expenses incurred by them for each regular or special meeting attendance. The Company presently has no pension, health, annuity, insurance or profit sharing plans.

 

 
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Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

The following table sets forth information regarding beneficial ownership of the Company's common stock (and preferred stock) as of December 31, 2015, (i) by each person who is known by us to beneficially own more than 5% of the Company's common stock; (ii) by each of our officers and directors as of such date; and (iii) by all of our officers and directors as a group.

 

Unless otherwise specified, the address of each of the persons set forth below is in care of the Company at 1330 Avenue of the Americas, Suite 23 A, New York, NY 10019

 

Title of Class

 

Name & Address of Beneficial Owners

 

Amount & Nature

of Beneficial Ownership (1)

 

Percent of

Class (2)

 

Common Stock, $0.001 par value

 

Tom Simeo (3)

C/O 1330 Avenue of the Americas, Suite 23A

New York, NY 10019

 

4,501,894

 

14.8

%

 

 

 

 

 

 

 

 

 

 

 

Common Stock, $0.001 par value

 

Rutgeford Imperial Holdings LLC (4)

3rd Floor North Wing Flagship Building,

Harbour Drive, Grand Cayman, Cayman Island

 

2,940,949

 

9.7

%

 

 

 

 

 

 

 

 

 

 

 

Common Stock, $0.001 par value

 

Sackville Holdings LLC (5)

Hunkins Plaza, Suite 21

Main Street, Charleston,

Nevis, West Indies

 

2,537,399

 

8.4

%

 

 

 

 

 

 

 

 

 

 

 

Common Stock, $0.001 par value

 

Simjac Investments LLC (6)

Hunkins Plaza, Suite 22-D

Main Street, Charleston,

Nevis, West Indies

 

1,662,763

 

5.5

%

 

 

 

 

 

 

 

 

 

 

 

Common Stock, $0.001 par value

 

Talem Investments LLC (7)

Hunkins Plaza, Suite 22-D

Main Street, Charleston,

Nevis, West Indies

 

1,623,232

 

5.4

%

 

 

 

 

 

 

 

 

 

 

 

Common Stock, $0.001 par value

 

James A. Doris

C/O 1330 Avenue of the Americas, Suite 23A

New York, NY 10019

 

2,000,000

 

6.6

%

 

 

 

 

 

 

 

 

 

 

 

Common Stock, $0.001 par value

 

Townsend Tang

C/O 1330 Avenue of the Americas, Suite 23A

New York, NY 10019

 

25,000

 

0.1

%

 

 

 

 

 

 

 

 

 

 

 

Common Stock, $0.001 par value

 

All officers and directors as a Group

 

6,526,894

 

21.5

%

 

 

 

 

 

 

 

 

 

 

 

Series C Preferred Stock, $0.001 par value

 

Tom Simeo

C/O 1330 Avenue of the Americas, Suite 23A

New York, NY 10019

 

14,046

 

50.0

%

 

 

 

 

 

 

 

 

 

 

 

Series C Preferred Stock, $0.001 par value

 

James A. Doris

C/O 1330 Avenue of the Americas, Suite 23A

New York, NY 10019

 

14,046

 

50.0

%

 

 

 

 

 

 

 

 

 

 

 

Series C Preferred Stock, $0.001 par value

 

All officers and directors as a Group

 

28,092

 

100.0

%

 _______________

*Less than 1%

 

 
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1.

Beneficial Ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Each of the beneficial owners listed above has direct ownership of and sole voting power and investment power with respect to the shares of the Company's common stock.

 

2.

As of December 31, 2015, a total of 30,333,993 shares of the Company's common stock, and 28,092 shares of the Company's preferred stock, are considered to be outstanding pursuant to SEC Rule 13d-3(d)(1). For each Beneficial Owner above, any options exercisable within 60 days have been included for purposes of calculating the relevant percentage.

 

3.

Tom Simeo has sole voting power over 944,981 shares owned by Viking Investments Group, LLC (Nevis), and hence is deemed to be the beneficial owner of shares held in its name as well as the shares held in his own name.

4.

Upon information and belief, Andrew Williams is the beneficial owner of the shares held in the name of this entity as the Company believes that he has voting power over such shares.

5.

Upon information and belief, Braden Wyatt is the beneficial owner of the shares held in the name of this entity as the Company believes that he has voting power over such shares.

6.

Upon information and belief, Elridge Glasford is the beneficial owner of the shares held in the name of this entity as the Company believes that he has voting power over such shares.

7.

Upon information and belief, Holly Roode is the beneficial owner of the shares held in the name of this entity as the Company believes that she has voting power over such shares.

   

Item 13.

Certain Relationships and Related Transactions

 

Related Transactions

 

During April 2015, the Company made an advance to Tanager Energy Inc., in conjunction with a joint investment in the second oil well of the Joffre Project. As of December 31, 2015, the balance owed by Tanager to the Company was $76,719, which was shown as "Other receivable – joint venture" on the balance sheet.

 

On June 5, 2015, the Company authorized and approved the issuance of 2,000,000 and 872,871 restricted shares of common stock in settlement and cancellation of a total of $201,101 of amounts owed to directors at a cost basis of $0.07 per share.

 

During the year ended December 31, 2015, the Company's Executive Chairman and Director, Tom Simeo, accrued payroll and made advances to the Company in the amount of $56,692 in order to provide the Company with funds to carry on its operations. These accruals and advances do not bear interest, are unsecured and have no specific terms of repayment. As of December 31, 2015, the net amount due to Mr. Simeo for accrued payroll and expenses paid on behalf of the Company is $37,159. The Company has not imputed interest as the amount is deemed immaterial.

 

During the year ended December 31, 2015, the Company's CEO and Director, James Doris, incurred expenses on behalf of, and made advances to the Company in the amount of $188,769 in order to provide the Company with funds to carry on its operations. These advances do not bear interest, are unsecured and have no specific terms of repayment. The Company has not imputed interest as the amount is deemed immaterial. Additionally, Mr. Doris made several loans to the Company totaling $359,336, all accruing interest at 12%, and payable on demand. As of December 31, 2015, the total amount due to Mr. Doris for advances and expenses paid on behalf of the Company and loans is $577,832. Accrued interest of $20,401 is included in other payables at December 31, 2015.

 

As at December 31, 2014, the net amount due to Mr. Simeo for accrued payroll and payment of certain expenses on behalf of the Company was $236,713. The balance was non-interest bearing, had no fixed term of repayment and was payable on demand.

 

As at December 31, 2014, the amount due to Mr. Doris for the expenses paid on behalf of the Company was $89,726. The balance was non-interest bearing, had no fixed term of repayment, and was payable on demand.

  

 
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The following table reflects the balances of related parties' transactions as of December 31, 2015 and 2014:

 

 

Years ended

 

December 31,

 

2015

 

2014

 

Due to Mr. Tom Simeo

 

$

37,159

 

$

236,713

 

Due to Mr. James A. Doris – advances

 

218,496

 

89,726

 

Due to Mr. James A. Doris – demand loans

 

359,336

 

-

 

$

614,991

 

$

326,439

 

Other than as disclosed, there were no material transactions, series of similar transaction, current transactions, or series of similar transactions, to which the Company or any of its subsidiaries was or is to be a party, in which the amount involved exceeded $120,000 or 1% of the Company's total assets as of December 31, 2015, and in which any director or executive officer, or any security holder who is known to the Company to own of record or beneficially more than five percent of the Company's common stock, or any member of the immediate family of any of the foregoing persons, had a material interest.

 

Item 14.

Principal Accounting Fees and Services

 

The following table sets forth the fees billed by our former principal independent accounting firm, Schwartz Levitsky Feldman LLP, and our former principal independent accounting firm, DKM Certified Public Accountants and Green & Company CPA's, and our current independent accounting firm of Turner, Stone & Company, LLP, for each of our last two fiscal years for the categories of services indicated.

 

 

Years Ended December 31,

 

Category

 

2015

 

2014

 

Audit Fees

 

$

75,000

 

$

75,000

 

Audit Related Fees

 

-

 

-

 

Tax Fees

 

-

 

-

 

All Other Fees

 

-

 

-

 

Total

 

$

75,000

 

$

75,000

 

Audit fees. Consists of fees billed for the audit of our annual financial statements and review of our interim financial information and services that are normally provided by the accountant in connection with year-end and quarter-end statutory and regulatory filings or engagements.

 

Audit-related fees. Consists of fees billed for services relating to review of other regulatory filings including registration statements, periodic reports and audit related consulting.

 

Tax fees. Consists of professional services rendered by our principal accountant for tax compliance, tax advice and tax planning.

 

Other fees. Other services provided by our accountants.

 

 
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PART IV

 

Item 15.

Exhibits, Financial Statement Schedules.

 

Number

Description

3.1

Articles of Incorporation (incorporated by reference to our Definitive Information Statement on Schedule 14C filed on October 14, 2008)

3.2

Bylaws (incorporated by reference to our Definitive Information Statement on Schedule 14C filed on October 14, 2008)

3.3

Certificate of Amendment to Articles of Incorporation (incorporated by reference to our Definitive Information Statement on Schedule 14C filed on May 23, 2012)

10.1

Purchase and Sale, Petroleum and Natural Gas Conveyance Agreement with Tanager Energy Inc. dated November 3, 2014 (incorporated by reference to our Current Report on Form 8-K filed on November 10, 2014)

10.2

Purchase, Sale and Capital Contribution Agreement effective February 1, 2016(incorporated by reference to our Annual Report on Form 10-K/A filed on May 16, 2016)

31.1

Certification of Principal Executive Officer required by Rule 13a-14(1) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification of Principal Financial Officer required by Rule 13a-14(1) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1

Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Section 1350 of 18 U.S.C. 63

32.2

Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Section 1350 of 18 U.S.C. 63

99.1

Guaranty and Repurchase Agreement dated April 11, 2012 (incorporated by reference to our Annual Report on Form 10-K filed on April 18, 2013)

99.2

Repurchase Agreement dated April 15, 2013 (incorporated by reference to our Annual Report on Form 10-K filed on April 18, 2013)

99.3

Form of Note (incorporated by reference to Exhibit 99.1 to our Current Report on Form 8-K filed on March 1, 2016)

99.4

Form of Security Agreement (incorporated by reference to Exhibit 99.2 to our Current Report on Form 8-K filed on March 1, 2016)

99.5

Form of Warrant (incorporated by reference to Exhibit 99.3 to our Current Report on Form 8-K filed on March 1, 2016)

101.INS**

XBRL Instance Document

101.SCH**

XBRL Taxonomy Extension Schema Document

101.CAL**

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF**

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB**

XBRL Taxonomy Extension Label Linkbase Document

101.PRE**

XBRL Taxonomy Extension Presentation Linkbase Document

 _________
** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 

 
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SIGNATURES

 

In accordance with the requirements of Section 13 or 15(d) of the Securities Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

VIKING INVESTMENTS GROUP, INC.

(Registrant)

Date: December 14, 2016

By:

/s/ James Doris

James Doris

Principal Executive Officer

 

In accordance with the Securities Exchange Act this report has been signed below by the following person(s) on behalf of the registrant and in the capacities and on the dates indicated.

 

Date: December 14, 2016

By:

/s/ Tom Simeo

Tom Simeo

Principal Financial and Accounting Officer

 

 

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