| Note 2 - Summary of Significant Accounting Policies | a)
Basis of Presentation The
accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with generally accepted
accounting principles in the United States of America (“GAAP”) and the rules of the Securities and Exchange Commission
(“SEC”) and should be read in conjunction with the audited financial statements and notes thereto contained in Viking’s
latest Annual Report filed with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring
adjustments (unless otherwise indicated), necessary for a fair presentation of the financial position and the results of operations
for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily
indicative of the results to be expected for the full year. Accordingly, they do not include all of the information and footnotes
required by GAAP for complete financial statements. b)
Basis of Consolidation The
financial statements presented herein reflect the consolidated financial results of the Company and its wholly owned subsidiaries,
Viking Oil & Gas (Canada) ULC, a Canadian corporation formed on March 8, 2016, to provide a base of operations for properties
in Canada, Mid-Con Petroleum, LLC, formed on August 30, 2016, Mid-Con Drilling, LLC, formed on August 25, 2017, and Mid-Con Development,
LLC, formed on December 27, 2017, all to provide a base of operations for properties in the Central United States, and Petrodome
Energy, LLC, based in Houston, Texas to provide a base of operations to facilitate property acquisitions in Texas, Louisiana and
Mississippi, as well as Petrodome Energy, LLC’s subsidiaries in Texas, Louisiana and Mississippi. All significant intercompany
transactions and balances have been eliminated upon consolidation. c)
Use of Estimates in the Preparation of Financial Statements The
preparation of consolidated financial statements in conformity with 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, asset retirement obligations and impairment of long-lived
assets. 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 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 receivable – related party, accrued expenses and other current liabilities, accounts payable, derivative
liabilities, amount due to directors, and convertible notes each 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. Liabilities
measured at fair value as of June 30, 2018, are classified below based on the three-level 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 $ - $ - $ - $ -
Commodity
Derivative - - - -
$ - $ - $ - $ -
Financial
liabilities
Derivative
liabilities $ - $ - $ - $ -
Commodity
Derivative - 1,232,810 - (987,784 )
$ - $ 1,232,810 $ - $ (987,784 ) Assets
and liabilities measured at fair value as of December 31, 2017, are classified below based on the three-level 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 $ - $ - $ - $ 1,446
$ - $ - $ - $ 1,446
Financial
liabilities
Derivative
liabilities $ - $ - $ 807,762 $ 232,840
Commodity
Derivative - 245,026 - (183,965 )
$ - $ 245,026 $ 807,762 $ 48,875 The
Company’s long-term investment consisted of 1,437,500 common shares of Tanager Energy Inc., as of December 31, 2016, which
is traded on the TSX Venture Exchange (Toronto Stock Exchange). During the three months ended March 31, 2017, the Company sold
these shares. The change in the fair value of this investment that has been recognized as an unrealized gain in other comprehensive
income on the statement of operations and comprehensive loss was $1,446 for the three months ended March 31, 2017. The
Company had commodity financial derivatives in place at June 30, 2018. The Company does not designate its commodities derivative
instruments as hedges and therefore does not apply hedge accounting. Changes in fair value of derivative instruments subsequent
to the initial measurement are recorded as change in fair value on derivative liability, in other income (expense). The estimated
fair value amounts of the Company’s commodity derivative instruments have been determined at discrete points in time based
on relevant market information which resulted in the Company classifying such derivatives as Level 2. Although the Company’s
commodity derivative instruments are valued using public indices, the instruments themselves are traded with unrelated counterparties
and are not openly traded on an exchange. 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 assets and liabilities of the Company were $0 and $1,232,810 respectively as of June 30, 2018, and $0 and $1,052,788
respectively as of December 31, 2017, respectively. The change in the fair value of the derivative liabilities for the six months
ended June 30, 2018, consisted of an increase of $987,784 associated with commodity derivatives. The decrease in the derivative
liabilities associated with warrants and the conversion features of convertible debt in the amount of $807,762 are the result
of the Company adopting ASU 2017-11, Derivatives and Hedging (Topic 815) I. Accounting for Certain Instruments with Down Round
Features.
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 June 30, 2018 and December 31, 2017, the Company has cash deposits in excess of FDIC insured limits in the amounts
of $4,559,541 and $5,372,818, respectively. Restricted
cash in the amount of $0 and $5,199,103 as of June 30, 2018 and December 31, 2017, respectively, represents cash provided through
funding for the Petrodome acquisition, restricted for drilling and exploration. f)
Accounts Receivable Accounts
receivable consist of oil and gas receivables. The Company has classified these as short-term assets in the balance sheet because
the Company expects repayment or recovery within the next 12 months. The Company evaluates these accounts receivable for collectability
and, when necessary, records allowances for expected unrecoverable amounts. The Company has recorded an allowance for doubtful
accounts of $87,957 at June 30, 2018. g)
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 and comprehensive loss over the life of the contract using the
straight-line method. At June 30, 2018 and December 31, 2017, the balances of the prepaid equity-based compensation were comprised
of the following:
June
30, 2018 December
31, 2017
In
February 2017, a one-year consulting agreement for services related to investor relations, market exposure and content development
for a total amount of $44,160. $ - $ 6,412
In
April 2017, a one-year consulting agreement comprised of four quarterly incremental installments for services related to analysis
of potential oil and gas acquisitions, for an initial quarterly amount of $40,250, a second installment of $28,000 in July
2017, and a third installment of $55,000 in January 2018. - 5,415
$ - $ 11,827 h)
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 in operations. 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 for
the three and six months ended June 30, 2018 and 2017, were as follows:
Oil
and Gas Properties by Geographical Cost Center
Three
months ended June
30, Six
months ended, June
30,
Cost
Center 2018 2017 2018 2017
Canada $ 10,649 $ 221 $ 21,387 $ 17,228
United
States 449,302 35,388 928,250 69,663
$ 459,951 $ 35,609 $ 949,637 $ 86,891 i)
Limitation on Capitalized Costs Under
the full-cost method of accounting, the Company is 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
its 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. j)
Oil and Gas Reserves 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. k)
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 June 30, 2018 and 2017, there were approximately 34,912,910 and 6,582,259 common stock equivalents respectively, that were
anti-dilutive. l)
Revenue Recognition On
January 1, 2018, the Company adopted ASU 2014-09, “Revenue from Contracts with Customers (ASC 606),” using the modified
retrospective method. Adoption of the new revenue standard had no impact on the Company’s consolidated balance sheet, results
of operations, equity or cash flows as of the adoption date, and the Company does not expect any further material impact to its
consolidated financial statements on an ongoing basis as a result of adopting the new revenue standard. Sales
of crude oil, natural gas, and natural gas liquids (NGLs) are included in revenue when production is sold to a customer in fulfillment
of performance obligations under the terms of agreed contracts. Performance obligations primarily comprise delivery of oil, gas,
or NGLs at a delivery point, as negotiated within each contract. Each barrel of oil, million BTU (MMBtu) of natural gas, or other
unit of measure is separately identifiable and represents a distinct performance obligation to which the transaction price is
allocated. Performance obligations are satisfied at a point in time once control of the product has been transferred to the customer.
The Company considers a variety of facts and circumstances in assessing the point of control transfer, including but not limited
to: whether the purchaser can direct the use of the hydrocarbons, the transfer of significant risks and rewards, the Company’s
right to payment, and transfer of legal title. In each case, the term between delivery and when payments are due is not significant. The
following table disaggregates the Company’s revenue by source for the three and six-month periods ended June 30, 2018 and
2017:
Three
Months Ended June 30, Six
Months Ended June 30,
2018 2017 2018 2017
Oil $ 2,248,725 151,386 $ 4,272,909 $ 358,249
Natural
gas and Natural gas liquids 69,897 9,044 207,660 9,044
$ 2,318,622 $ 160,430 $ 4,480,569 $ 367,293
m)
Comprehensive Loss ASC
Topic 220, “Comprehensive Income,” establishes standards for the reporting and presentation of comprehensive income
and its components in the consolidated financial statements. For the six months ended June 30, 2018 and 2017, comprehensive income
(loss) was $0 and $1,446 respectively and consisted primarily of unrealized gains and (losses) on available for sale securities. n)
Income Taxes The
Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets
and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements.
Under this method, the Company determines deferred tax assets and liabilities on the basis of the differences between the consolidated
financial statements and the tax basis of assets and liabilities by using estimated tax rates for the year in which the differences
are expected to reverse. The
Company recognizes deferred tax assets and liabilities to the extent that we believe that these assets and/or liabilities are
more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence,
including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies,
and results of recent operations. If we determine that the Company would be able to realize our deferred tax assets in the future
in excess of their net recorded amount, we would make an adjustment to the deferred tax asset valuation allowance, which would
reduce the provision for income taxes. In
assessing the realizability of its deferred tax assets and liabilities, management evaluated whether it is more likely than not
that some portion, or all of its deferred tax assets and liabilities, will be realized. As of December 31, 2017, based on all
the available evidence, management determined that it is more likely than not its deferred tax assets will be fully realized.
Accordingly, the Company recorded a deferred tax liability of $910,827. During the six months ended June 30, 2018, the Company
incurred a net loss, which created a decrease in its deferred tax liability with a corresponding income tax benefit in the amount
of $877,279.
o)
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. In accordance with guidance 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. During
the quarter ended June 30, 2018, the Company granted 7,472,284 warrants with the option to purchase common stock, of which 4,972,284,000
options vested immediately. The Company used the following Black-Scholes assumptions in arriving at the fair value of 3,000,000
warrants recorded as stock-based compensation expense of $599,353 and 1,972,284 warrants recorded as debt discount of $327,740
for the three months ended June 30, 2018.
Expected
Life in Years 5.0
Risk-free
Interest Rates 2.55%
to 2.73%
Volatility 295.90%
Dividend
Yield 0% At
June 30, 2018, there was approximately $499,500 of unrecognized compensation cost related to share-based payments which is expected
to be recognized in the future. The
following table represents stock warrant activity as of and for the six months ended June 30, 2018:
Number
of Shares Weighted
Average Exercise Price Weighted
Average Remaining Contractual Life Aggregate
Intrinsic Value
Warrants
Outstanding – December 31, 2017 27,440,626 0.27 8.2 years -
Granted 7,472,284 0.20 5.2 years -
Exercised (402,084 ) - - -
Forfeited/expired/cancelled - - -
Warrants
Outstanding – June 30, 2018 34,510,826 $ 0.27 7.1 years $ -
Outstanding
Exercisable – December 31, 2017 27,440,626 $ 0.27 8.2 years $ -
Outstanding
Exercisable – June 30, 2018 32,010,826 $ 0.27 7.1 years $ -
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 is no impairment of long-lived assets during the six months ended June 30, 2018 and 2017.
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. The functional currency of the parent company is the U.S. Dollar. The reporting currency of the
Company is the U.S. Dollar. The Company has oil and gas operations in Alberta, Canada in which the Canadian Dollar (“CAD”
or “CS” herein) 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 in Canada are prepared using the
CAD, and are translated into the Company's reporting currency, the U.S. Dollar. Revenue and expenses applicable to the oil and
gas operations in Alberta, Canada are translated using average rates prevailing during each reporting period. Gains or losses
resulting from the settlement of foreign currency transactions are recorded as a separate component of accumulated other comprehensive
loss in stockholders' deficit when realized. There have been no settlement transactions that resulted in the recognition of a
foreign currency exchange gain or loss during the six months ended June 30, 2018 and 2017. 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. The
Company has evaluated the terms and conditions of its convertible notes 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.
On January 1, 2018, the Company adopted ASU 2017-11, Derivatives and Hedging (Topic 815), and increased beginning retained earnings
in the amount of $807,762. 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 the Company will incur
to plug, abandon and remediate its producing properties at the projected end of their productive lives, in accordance with applicable
federal, state and local laws. The Company determined its 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. The
following table describes the changes in the Company’s asset retirement obligations for the six months ended June 30, 2018,
and the year ended December 31, 2017:
Six
months ended June
30, 2018 Year
ended December 31, 2017
Asset
retirement obligation – beginning $ 3,096,263 $ 833,017
Oil
and gas purchases 231,053 2,205,171
Gain
on ARO Settlement (58,041 ) -
Accretion
expense 97,777 58,075
Asset
retirement obligation – ending $ 3,367,052 $ 3,096,263 u)
Undistributed Revenues and Royalties The
Company records a liability for cash collected from oil and gas sales that have not been distributed. The amounts get distributed
in accordance with the working interests of the respective owners. v)
Recent Accounting Pronouncements As
of June 30, 2018, and through the date of this filing, there were several new accounting pronouncements issued by the Financial
Accounting Standards Board. Each of these pronouncements, as applicable, has been or will be adopted by the Company. Management
does not believe the adoption of any of these accounting pronouncements has had or will have a material impact on the Company’s
consolidated financial statements. The Company will monitor these emerging issues to assess any potential future impact on its
financial statements. ASU
Update 2014-09, “Revenue from Contracts with Customers (Topic 606),” issued May 28, 2014, by FASB and IASB converged
guidance on recognizing revenue in contracts with customers on an effective date after December 31, 2017. The ASU outlines a single
comprehensive model for entities to use in accounting for revenue arising from contracts with customers which supersedes current
revenue recognition guidance, including most industry-specific guidance. The guidance provides that an entity recognize revenue
when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects
to be entitled in exchange for those goods or services. This guidance also requires additional disclosure about the nature, amount,
timing, and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes
in judgments, and assets recognized from costs incurred to obtain or fulfill a contract. We adopted Topic 606 as of January 1,
2018, using the modified retrospective transition method. Under the modified retrospective method, the Company would recognize
the cumulative effect of initially applying the standard as an adjustment to opening retained earnings at the date of initial
application; however, we did not have any material adjustments as of the date of the adoption. The comparative periods have not
been restated. In
February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” This standard requires all leases that have
a term of over 12 months to be recognized on the balance sheet with the liability for lease payments and the corresponding right-of-use
asset initially measured at the present value of amounts expected to be paid over the term. Recognition of the costs of these
leases on the income statement will be dependent upon their classification as either an operating or a financing lease. Costs
of an operating lease will continue to be recognized as a single operating expense on a straight-line basis over the lease term.
Costs for a financing lease will be disaggregated and recognized as both an operating expense (for the amortization of the right-of-use
asset) and interest expense (for interest on the lease liability). This standard will be effective for our interim and annual
periods beginning January 1, 2019, and must be applied on a modified retrospective basis to leases existing at, or entered into
after, the beginning of the earliest comparative period presented in the financial statements. Early adoption is permitted. We
are currently evaluating the timing of adoption and the potential impact of this standard on our financial position, but we do
not expect it to have a material impact on our results of operations. In
July 2017, the Financial Accounting Standards Board (“FASB”) issued ASU 2017-11, “Earnings Per Share (Topic
260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part 1) Accounting for Certain
Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial
Instruments of Certain Non-public |
