UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS

Transcription

1 UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS Walton Ontario Land L.P. 1 For the three months ended and NOTICE OF NO AUDITOR REVIEW OF CONDENSED INTERIM FINANCIAL STATEMENTS Section 4.3(3) of National Instrument , Continuous Disclosure Obligations, provides that if an auditor has not performed a review of the condensed interim financial statements, the condensed interim financial statements must be accompanied by a notice indicating that the condensed interim financial statements have not been reviewed by an auditor. The Partnership s external auditors have not performed a review of these condensed interim financial statements of Walton Ontario Land L.P. 1

2 Condensed Interim Statements of Financial Position As at and December 31, December 31, ASSETS Land (note 4) 15,325,161 15,322,808 Prepaid expenses 6,184 - GST recoverable 1, Accounts receivable 3, Due from related party, net of allowance for doubtful accounts (note 5) - 10,950 Cash (note 6) 670, ,475 TOTAL ASSETS 16,006,414 16,069,076 LIABILITIES Accounts payable and accrued liabilities 41,008 47,125 Due to related parties (note 5) 1,203,505 1,040,990 TOTAL LIABILITIES 1,244,513 1,088,115 PARTNERS EQUITY 14,761,901 14,980,961 TOTAL LIABILITIES AND EQUITY 16,006,414 16,069,076 Commitments (note 10) Going concern (note 1) The accompanying notes to the condensed interim financial statements are an integral part of these statements.

3 Condensed Interim Statements of Comprehensive Loss For the three months ended and REVENUE For the three months ended Interest income 1,487 1,795 Other revenue (note 4) 3,429 3,440 4,916 5,235 EXPENSES Management fees (note 5) 166, ,470 Director fees (note 5) 25,575 25,575 Professional fees 16,723 5,787 Bad debt expense 9,560 - Office and other 5,648 14, , ,771 NET LOSS AND COMPREHENSIVE LOSS (219,060) (207,536) Basic and diluted loss per unit (note 8) (0.11) (0.11) The accompanying notes to the condensed interim financial statements are an integral part of these statements.

4 Condensed Interim Statements of Changes in Partners Equity For the three months ended and March, 31 Limited Partnership Units General Partnership Unit Accumulated Deficit Total # of Units # of Units JANUARY 1, 1,961,840 33,294, (17,502,097) 15,791,953 Net and comprehensive loss for the period (207,536) (207,536) MARCH 31, 1,961,840 33,294, (17,709,633) 15,584,417 Net and comprehensive loss for the period (603,456) (603,456) DECEMBER 31, 1,961,840 33,294, (18,313,089) 14,980,961 Net and comprehensive loss for the period (219,060) (219,060) MARCH 31, 1,961,840 33,294, (18,532,149) 14,761,901 The accompanying notes to the condensed interim financial statements are an integral part of these statements.

5 Condensed Interim Statements of Cash Flows For the three months ended and CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES Net and comprehensive loss for the period (219,060) (207,536) Adjustment For: Interest income (1,487) (1,795) CHANGES IN NON-CASH WORKING CAPITAL ITEMS Increase in prepaid expenses (6,184) (2,734) Increase in GST recoverable (788) (567) Increase in accounts receivable (3,429) (3,440) Decrease in due from related party 10,950 - (Decrease)/increase in accounts payable and accrued liabilities (6,117) 6,336 Increase in due to related parties 166, ,726 Interest received 1,517 1,885 (58,502) (41,125) INVESTING ACTIVITIES Land improvements (5,934) (4,039) Decrease in cash (64,436) (45,164) Cash Beginning of period 734, ,950 Cash End of period 670, ,786 SUPPLEMENTAL INFORMATION Land improvements in due to related parties 1,728 4,608 The accompanying notes to the condensed interim financial statements are an integral part of these statements.

6 For the three months ended and March, NATURE OF BUSINESS, COMPANIES CREDITORS ARRANGEMENT ACT ( CCAA ) UPDATE, GOING CONCERN & BASIS OF PRESENTATION Nature of Business Walton Ontario Land L.P. 1 (the "Partnership") was formed on October 2, 2009, when the Certificate of limited partnership was filed under the Partnership Act (Alberta). The Partnership was formed to issue a maximum of 3,580,000 limited partnership units at 10 per unit to raise proceeds for the purchase of interests in properties comprised of approximately 155 acres of undeveloped land in Alliston, Ontario (the Alliston Property ) and approximately 300 acres of undeveloped land (the Ottawa Property ) located in the southwest quadrant of Ottawa, Ontario (collectively, the "Properties"), holding that interest as an investment, and eventually selling or otherwise disposing of that interest with a view to making a profit, and performing such other activities as may be incidental to, or arising from, the foregoing purposes as may be reasonably determined by Walton Ontario Land 1 Corporation ( General Partner ), including, without limitation, participating in concept planning with respect to the Properties. On October 12, 2012, the Alliston Property was sold. The Partnership owns 100% of the Ottawa Property as an investment and plans to eventually dispose of it prior to physical development. Should the partners of the Partnership determine that it would be appropriate for the Partnership to participate in the development of the Ottawa Property (other than pre-development concept planning), the activities of the Partnership may also include the partial or full development of the Ottawa Property prior to the sale there of. The net proceeds from the disposition of the Ottawa Property, after satisfaction of liabilities and payment of, or provision for, all fees and expenses, including any amounts that the General Partner reasonably considers necessary to retain in order to replenish the refundable expense reserve, will be distributed by the Partnership. Included in such fees and expenses is a performance fee payable to Walton International Group Inc. ( WIGI ), provided that the limited partners receive distributions equal to an amount equal to their purchase price allocation, plus an amount equal to an 8% annual cumulative return on contributed capital that has not been paid to the limited partners in respect of previous distributions. The address of the registered office is 25th Floor, 215-2nd Street SW, Calgary, Alberta, T2P 1M4. These financial statements were authorized for issue by the Board of Directors of the General Partner on May 29,. The Board of Directors has the power to amend the financial statements after they are issued. Companies Creditors Arrangement Act ( CCAA ) Announcement On April 28,, the General Partner of the Partnership, WIGI, and certain affiliates, (the CCAA Entities ), including the general partner of Walton Development and Management Development L.P ( WDM ) voluntarily filed and obtained creditor protection under the CCAA pursuant to an order (the Initial Order ) granted by the Court of Queen s Bench of Alberta (the Court ). The Initial Order authorized the CCAA Entities to begin a court-supervised restructuring and provides for a broad stay of proceedings against the CCAA Entities in order to provide the opportunity to finalize and present a CCAA plan to creditors for approval. While the Partnership is not a CCAA Entity, it is covered by the stay of proceedings. Under the terms of the Initial Order, Ernst & Young Inc. will serve as the Court-appointed monitor (the Monitor ) of the WIGI CCAA Entities. On May 9,, the Partnership obtained a Court Order (the Order ) for the implementation of a sale and investment solicitation process (the SISP ) to be conducted within the CCAA proceedings under the supervision of the Monitor, which - 1 -

7 For the three months ended and March, 31 will be used to identify one or more purchasers and/or investors in the Partnership s business and/or Ottawa Property or to identify potential alternative financing. The SISP is scheduled to commence on June 6,. The SISP sets forth the manner which potential purchasers/investors must submit bids, including the applicable deadlines for the submission bids. It is anticipated the SISP will be concluded by November 23,. The May 9, Order also granted three secured Charges (Administrative Charge, KERP Charge and Note holder Charge) over to the Partnership for an amount of approximately 221,466. At the hearing held on May 9 th,, the stay period was extended from May 26, until August 15, on the Partnership s assets and liabilities, as well as the other applicants assets and liabilities. At August 15,, the Partnership, its advisors, in consultation with the Monitor will provide an update on the SISP. If the stay period and any subsequent extensions, if granted, are not sufficient to complete the SISP, or if no bid under the SISP is accepted by the affected creditors and, the Partnership loses the protection of the stay of the proceedings, substantially all obligations, including amounts due to WIGI, will then be due and payable immediately, or subject to acceleration, creating an immediate liquidity crisis which would in all likelihood force the Partnership into receivership and require liquidation of the Partnership s assets. Going Concern These condensed interim financial statements, including comparatives, have been prepared on a going concern basis in conformity with International Accounting Standard ( IAS ) 34: Interim Financial Reporting and using accounting policies that are in full compliance with International Financial Reporting Standards ( IFRS ) as issued by the International Accounting Standards Board ( IASB ). They do not include all of the information required for full annual financial statements and should be read in conjunction with the Partnership s audited annual financial statements for the year-ended December 31,. The going concern basis of presentation assumes that the Partnership will continue to operate the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of business as they become due. For the three months ended, the Partnership reported net loss of 219,060 ( - 207,536), an accumulated deficit of 18,532,149 ( - 18,246,633), and negative operating cash flow of 58,502 ( - 41,125) as at that date. The Partnership has cash at of 670,039 remaining from the refundable expense reserve. The refundable expense reserve is sufficient to cover the entities expected operating costs and concept planning costs for the next 12 months. The management fees due to WIGI have been accruing since June 2015, when the amount set aside for management fees in the refundable expense reserve was depleted. The SISP is anticipated to launch on June 6, and be concluded by November 23,. As at April 28,, outstanding payables of 1,299,859, including 1,252,858 due to WIGI have been stayed. Amounts subsequent to April 28, incurred will be paid out of the remaining refundable expense reserve. Management believes the reserves are sufficient as at to cover the costs of the SISP, including the administrative charge and management fees payable to WIGI incurred after the stay date of April 28,. If the Partnership is unable to complete the SISP or future stays are not approved and WIGI was to demand repayment of the fees outstanding, the Partnership would be unable to pay the full amount owing to WIGI, as the cash balances at were 670,039 and are not sufficient to cover the management fees of 1,201,777 accrued at, and the Partnership would not have additional funds to continue operations. There is no assurance that these initiatives will be successful. These conditions lend significant doubt as to the ability of the Partnership to meet its obligations as they come due and, accordingly, the appropriateness of the use of the accounting principles applicable to a going concern. Future operations are dependent on the Partnership s ability to restructure its balance sheet to maintain existing operations; and discharge obligations as they come due. The risks and uncertainties associated with a potential asset sale, partnership sale, and/or implementation of a balance sheet restructuring, cast significant doubt about the Partnership s ability to continue as a going concern. These financial statements do not reflect the adjustments to the carrying values of assets and liabilities and the reported expenses that would be necessary if the Partnership were unable to realize its assets and settle its - 2 -

8 For the three months ended and March, 31 liabilities as a going concern in the normal course of operations. If the Partnership were unable to operate in the normal course of operations, the adjustments required could be material. The balance sheet has been prepared using a liquidity based presentation because the operating cycle of the Partnership revolves around the sale of land, the timing of which is uncertain. As a result, presentation based on liquidity is considered by management to provide information that is more reliable and relevant to the users of the financial statements. Basis of Presentation The Partnership s condensed interim financial statements have been prepared on the historical cost basis, except for certain financial instruments which are initially measured at fair value, as explained in the accounting policies set out in note 3. The statements of financial position have been prepared using a liquidity based presentation because the operating cycle of the Partnership revolves around the sale of land, the timing of which is uncertain. As a result, presentation based on liquidity is considered by management to provide information that is more reliable and relevant to the users of the financial statements. With the exception of land (note 4) and accrued management fees included in due to related party (note 5), all assets and liabilities are current in nature and are expected to be settled in less than twelve months. 2. GENERAL PARTNER The General Partner was incorporated on October 1, 2009, under the laws of the Province of Alberta to act as the general partner and manage the affairs of the Partnership and is a subsidiary of Walton G.P. Holdco Ltd., a wholly owned subsidiary of WIGI. WIGI is a wholly owned subsidiary of Walton Global Investments Ltd. ( Walton Global ). 3. ACCOUNTING POLICIES, JUDGMENTS, AND ESTIMATES The accounting policies used in the preparation of these condensed interim financial statements are consistent with those which were disclosed in the Partnership s audited financial statements for the year ended December 31,. Use of Estimates and Judgments The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amount of assets, liabilities and equity at the date of the financial statements and the reported amount of revenue and expenses during the period. There have been no significant changes in accounting judgments, estimates and assumptions made by the Partnership in the preparation of these condensed interim financial statements from those judgments, estimates and assumptions disclosed in the Partnership s audited financial statements for the year ended December 31,. Future Changes in Accounting Policies Financial instruments IFRS 9 Financial Instruments ( IFRS 9 ) (July 2014) replaces earlier versions of IFRS 9 that had not yet been adopted by the Partnership and supersedes IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 introduces new models for classification and measurement of financial instruments, hedge accounting and impairment of financial assets and is - 3 -

9 For the three months ended and March, 31 mandatorily effective for periods beginning on or after January 1, The Partnership continues to review the standard as it is updated and monitor its impact on the Partnership s financial statements. Revenue IFRS 15 Revenue from Contracts with Customers ( IFRS 15 ) was issued in May 2014 by the IASB and supersedes IAS 18 Revenue, IAS 11 Construction Contracts and other interpretive guidance associated with revenue recognition. IFRS 15 provides a single model to determine how and when an entity should recognize revenue, as well as requiring entities to provide more informative, relevant disclosures in respect of its revenue recognition criteria. IFRS 15 is to be applied retrospectively or through the recognition of the cumulative effect to opening retained earnings and is effective for annual periods beginning on or after January 1, 2018, with earlier application permitted. The Partnership is currently evaluating the impact that IFRS 15 may have on the financial statements. 4. LAND The carrying amount of land is comprised of the following: December 31, BALANCE BEGINNING OF PERIOD 15,322,808 15,303,448 Land improvements 2,353 19,360 BALANCE END OF PERIOD 15,325,161 15,322,808 The current fair value is based on conditions existing at the statements of financial position date. Overall, the valuation is considered to fall into level 3 of the fair value hierarchy because of unobservable adjustments reflecting the condition and location of the Partnership s land. At least once every two years the valuation of the Property is performed by a qualified third party valuator. The last third party appraisal was completed as at December 31, 2015 and no independent appraisal was obtained for the year-ended December 31,. Management of the General Partner are responsible for determining the fair value of the Property, including verifying all major inputs included in the determination of the fair value of the Property. As part of management s assessment, management identifies whether there are any comparable market transactions or other risks such as changes in zoning requirements that may impact the fair value of the Property that have occurred during the year. As part of this assessment management did not identify any changes in market conditions, or other risks, which would indicate a significant change in the underlying inputs and assumptions used to determine fair value of the Property as at December 31, In applying this valuation method, the fair value of the remaining Ottawa Property as at December 31,, has not changed from December 31, 2015, and was estimated to be approximately 25,750,000. In determining the fair value of the Partnership s investment property, judgment is required in assessing the highest and best use as required under IFRS 13, Fair Value measurement. As at, and December 31,, the fair value of land exceeded its carrying value, and as a result, an impairment has not been recognized in the carrying value of the land. On May 9,, the SISP was approved by the Court, in which bids for the purchase of the assets or the Partnership will be requested. The SISP may result in material adjustments being required on the fair value disclosed or on the carrying value of the investment property. No adjustments to the fair value or the carrying value have been made at the date of these financial statements

10 For the three months ended and March, 31 The total rental income earned by the Partnership on the Ottawa Property during the three months ended was 3,429 ( - 3,440) and has been included in other revenue. 5. RELATED PARTY TRANSACTIONS WIGI, WDM, and the General Partner are related to the Partnership by virtue of the fact that they are controlled by Walton Global. As noted under note 1, on April 28,, the General Partner, WIGI and WDM applied for and received CCAA protection from the Court. The balance due from related party is outlined in the table below. December 31, Walton International Group Inc. - 10,950-10,950 For the three months ended Other expenses incurred (1,390) - Allowance for doubtful accounts (9,560) As at April 28,, the balance due from WIGI was 9,560. As WIGI filed and received creditor protection under CCAA, all amounts owed from WIGI as of April 28, are stayed. Amounts incurred subsequent to April 28, will be paid using the proceeds from the refundable expense reserve. The balances due to related parties are outlined in the table below. December 31, Walton International Group Inc. 1,201,777 1,035,307 Walton Development and Management LP 1,728 5,309 Walton Global Investments Ltd ,203,505 1,040,

11 For the three months ended and March, 31 Walton International Group Inc. For the three months ended Management fees charged 166, ,470 Other expenses incurred No performance fees or disposition fees were incurred by the Partnership during the three months, or the period ended, because the 10 per unit amount and the cumulative priority return have not been received by the limited partners. The balance payable to WIGI as at, is in respect to management fees. As the Court provided a stay on the Partnership s assets and liabilities, the amounts of 1,252,858 due to WIGI as at April 28, are stayed. Under the stay, WIGI is required to continue to provide services as manager of the Partnership. For management services provided subsequent to April 28,, WIGI will be paid with funds from the refundable expense reserves. Walton Development and Management LP For the three months ended Services Fees charged 1,874 1,874 Managed Services charged Other expenses incurred 435 2,486 GST & HST charged Payments made (5,989) (4,039) Services Fees and Managed Services of the Ottawa Property, as well as other expenses related to services in accordance with the Concept Planning Services Agreement incurred and initially funded by WDM, have been capitalized as part of land (note 5). As at April 28,, the balance outstanding to WDM was 2,311 and under the Court order is stayed. Services provided subsequent to April 28, will be paid out of the refundable expense reserve

12 For the three months ended and March, 31 Walton Global Investments Ltd. The other expenses incurred by the Partnership were for costs initially funded by Walton Global on the Partnership s behalf. For the three months ended Other expenses incurred Other expenses paid (748) - Key Management Compensation Key management personnel are comprised of the Partnership s directors and executive officers. Total compensation expense incurred by the Partnership related to its independent directors during the period was as follows: For the three months ended Directors fees 25,575 25,575 All services performed for the Partnership by the executive officers and the non-independent directors, are governed by the Management Services and Fee Agreement. The quarterly management fee that WIGI receives under the Management Services and Fee Agreement has been disclosed above. The compensation of key management does not include the remuneration paid to individuals who are paid directly by Walton Global and WIGI. The officers of the Partnership are also officers and directors of numerous entities controlled or managed by Walton Global and it is not practicable to make a reasonable apportionment of their compensation in respect of each of those entities

13 For the three months ended and March, REFUNDABLE EXPENSE RESERVE Included in the table below is a reconciliation of the movement in the refundable expense reserve on a cash basis. This differs from the statements of cash flow, which have been prepared on an accrual basis, using the indirect method. Three months ended Year ended December 31, REFUNDABLE EXPENSE RESERVE BEGINNING OF PERIOD 734, ,950 Add income received (cash basis): Interest 1,517 7,013 GST recovered 416 4,048 Other revenue - 3,429 Deferred servicing fees - 3,986 1,933 18,476 Less expenses paid (cash basis): Directors fees (note 6) 25, ,302 Land improvements 5,934 18,090 Property taxes 6,839 13,677 Office and other expense 2,318 23,743 Professional fees 24,498 23,746 GST paid 1,205 5,393 66, ,951 REFUNDABLE EXPENSE RESERVE END OF PERIOD 670, ,

14 For the three months ended and March, FINANCIAL INSTRUMENTS The Partnership s financial instruments consist of cash, accounts receivable, due from related party, accounts payable and accrued liabilities and amounts due to related parties. The following tables set out the Partnership s classification and carrying amount of the financial instruments along with the fair value as at, and December 31,. MARCH 31, Fair Value Amortized Cost Totals Through profit and loss Loans and receivables Other financial liabilities Carrying amount Asset (liability): Fair Value Accounts receivable - 3,965-3,965 3,965 Cash - 670, , ,039 Accounts payable and accrued liabilities - - (41,008) (41,008) (41,008) Due to related parties - - (1,203,505) (1,203,505) (1,203,505) - 674,004 (1,244,513) (570,509) (570,509) DECEMBER 31, Fair Value Amortized Cost Totals Through profit and loss Loans and receivables Other financial liabilities Carrying amount Asset (liability): Fair Value Accounts receivable Cash - 734, , ,475 Due from related party - 10,950-10,950 10,950 Accounts payable and accrued liabilities - - (47,125) (47,125) (47,125) Due to related parties - - (1,040,990) (1,040,990) (1,040,990) - 745,991 (1,088,115) (342,124) (342,124) - 9 -

15 For the three months ended and March, 31 The future undiscounted obligations of the Partnership are as follows: Less than 90 days Maturity Analysis of liabilities - As at Between 91 days and 1 year Greater than 1 year Accounts payable and accrued liabilities () 8,094 32,914 - Due to related parties () 1,728 1,201,777 - Total () 9,822 1,234,691 - Less than 90 days Maturity Analysis of liabilities As at December 31, Between 91 days and 1 year Greater than 1 year Accounts payable and accrued liabilities () 19,940 9,101 18,084 Due to related parties () 5,683-1,035,307 Total () 25,623 9,101 1,053, PARTNERS CAPITAL Basic and diluted net loss per unit is calculated by dividing the Partnership s net loss by the weighted average number of limited partnership units outstanding during the period. The weighted average number of limited partnership units outstanding for the three months ended and were adjusted to reflect the consolidation of 1,618,160 units on November 15, The weighted average number of limited partnership units outstanding as at, was 1,961,840 ( - 1,961,840). The weighted average number of limited partnership units outstanding excludes the general partner unit issued. Based on the terms of the Limited Partnership Agreement, the holder of the general partner unit does not share equally in the income/loss of the Partnership but instead receives 0.001% of the net income/loss. The Partnership does not issue debt or equity instruments which could result in the issuance of additional Partnership units. As a result, the weighted average units outstanding are equal to the weighted average diluted units outstanding

16 For the three months ended and March, COMMITMENTS The following table presents future commitments of the Partnership under the Management Services and Fee Agreement (note 6) and the Concept Planning Services Agreement (note 6). It does not include any potential performance fee or disposition fee under the Management Services and Fee Agreement. The amount of any performance fee payable by the Partnership is determined at the time when distributions occur. The amount of the disposition fee is determined at the time land sales are completed. Management fee WDM Services Total 499,410 5, , ,880 7, , ,880 7, , ,880 7, ,377 Thereafter 665, , ,377 3,162,930 35,611 3,198,541 1 Commitments for WDM Services will extend for the length of the project. 2 The management fees will continue until the Partnership is dissolved. If the SISP is successful, and if under the SISP, the Ottawa Property is sold in the current year, the Partnership would likely be dissolved in the current year or in 2018, and no further management fees or WDM Services fees would be required