ROII RiskOn International Inc (CE)

Note 2 – Notes and Mortgage Notes Receivable

Notes receivable and mortgage notes receivable consisted of the following at June 30, 2016 and December 31, 2015:

Note 3 – Real Estate Held for Development and Sale

Real estate held for development and sale consisted of the following at June 30, 2016 and December 31, 2015:

Note 4 – Notes and Loans Payable

Convertible Notes Payable

Convertible notes payable consisted of the following at June 30, 2016 and December 31, 2015:

Note 4 –Notes and Loans Payable (Continued)

Performance-Linked Notes Payable

Performance-linked notes payable consisted of the following at June 30, 2016 and December 31, 2015:

The Kitimat and Terrace series of the notes contain provisions that allow for a) pro rata prepayments of the notes by the Company in the event of sales of parcels of the respective project and b) a call option by the Company to prepay the note at any time prior to the six month anniversary of the closing date of the note. The Company also has the option to extend the maturity date of the notes up to a period of 18 months.

Kitimat Series A Notes

On May 8, 2015, the Company issued $2,442,830 of its Series A notes payable to twenty-nine investors for cash. During the six months ended June 30, 2016, the Company redeemed notes totaling $150,000 from two noteholders in exchange for 121,961 shares of its restricted common stock at a fair value on the date of exchange of $1.23. The notes bear interest at 8% per annum, are due May 8, 2018, and are collateralized by a secured interest in the Kitimat property. The Series A notes contain an option by the Company to prepay the notes on a pro rata basis in the event of sales of the Kitimat project in an amount equal to twenty-five percent (25%) of the net profits realized on such sales.

The effective interest rate for the Series A notes was 11.3% for the six months ended June 30, 2016.

Kitimat Series B Notes

On May 8, 2015, the Company issued $473,117 of its Series B notes payable to two investors for cash. The notes bear interest at 8% per annum, are due May 8, 2018, and are collateralized by a secured interest in the Kitimat property. The Series B notes contain an option by the Company to prepay the notes on a pro rata basis in the event of sales of the Kitimat project in an amount equal to fifty percent (50%) of the net profits realized on such sales.

The effective interest rate for the Series B notes was 8.0% for the six months ended June 30, 2016.

ROI LAND INVESTMENTS LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2016

(unaudited)

Note 4 –Notes and Loans Payable (Continued)

Terrace Series A Notes

On July 17, 2015, the Company issued $824,416 (CAD 1,001,774) of its Terrace Series A notes payable to six investors for cash. The notes bear interest at 8% per annum, are due July 17, 2018, and are collateralized by a secured interest in the Terrace property. The Series A notes contain an option by the Company to prepay the notes on a pro rata basis in the event of sales of the Terrace project in an amount equal to twenty-five percent (25%) of the net profits realized on such sales.

The effective interest rate for the Series B notes was 13.0% for the six months ended June 30, 2016.

Interest on Kitimat and Terrace Notes Payable

As a condition of the note agreements, the Company shall place the first year’s interest in escrow with an agent who will make monthly interest payments to the noteholders on the Company’s behalf. A total of $141,554 and $0 was funded to the escrow agent during the six months ended June 30, 2016 and 2015, respectively.

During the six months ended June 30, 2016, $144,337 of interest was incurred on the notes and $141,604 was paid by the escrow agent, resulting in a remaining prepaid interest of $11,277 at June 30, 2016.

Debt Issuance Costs on Kitimat and Terrace Notes Payable

Issuance costs are amortized as interest expense over the term of the notes. $43,168 and $0 has been amortized as interest expense during the three months ended June 30, 2016 and 2015, respectively, resulting in a balance of debt issuance costs discount of $163,265 at June 30, 2016 which will be amortized over the next 22 months.

Deposits on Notes Payable

To fund the development of the Company’s projects, the Company has initialized a note offering and begun accepting subscriptions for up to a total of $18,000,000 for new series of notes payable, to be described as “BC Series 2”, “Colorado”, “Dubai” and “Dubai ASP”. As of June 30, 2016, the terms and provisions of the notes are yet to be determined and, as such, the deposits have been classified as current liabilities in the accompanying condensed consolidated balance sheets. As of June 30, 2016 and December 31, 2015, the Company has received deposits of $4,751,943 and $3,741,821 net of issuance costs of $479,699 and $284,673, respectively, for subscriptions for the future notes.

Profit Participation Liability

The Beauport Series A and Series D notes contain a premium payment to the noteholders on each sale of the Beauport project in an amount equal to fifty percent (50%) of the noteholder’s pro rata share of the total net profit on each parcel of the Beauport project sold. The potential profit in the Beauport project at June 30, 2016 is estimated to be approximately $1.2 million, based on management’s estimates, of which, $197,146 is the pro rata share of the Beauport Series A and D noteholders and is recorded as a profit participation liability as of June 30, 2016.

ROI LAND INVESTMENTS LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2016

(unaudited)

Note 5 – Related Party Transactions

The Company leases a corporate apartment for Sebastien Cliche the Company’s President, a month-to-month basis. Monthly rental is $1,906 and total rent paid for the six months ended June 30, 2016 was $5,719. This lease was cancelled on March 31, 2016.

During the six months ended June 30, 2016 and 2015, the Company incurred business related expenses for Philippe Germain, the Company’s former Co-President, totaling $2,080 and $-0-, respectively. The Company leased a corporate apartment for Philippe Germain on a month-to-month basis for which monthly rental was $675. This lease was cancelled on March 31, 2016.

During the six month ended June 30, 2016, the Company entered into two loan agreements with Philippe Germain totaling $103,488. The loans are unsecured, due in ninety days and bear interest at 8% per annum and proceeds were used for the Company’s general working capital purpose. $117,728 of loan principal was outstanding as of June 30, 2016.

The Company leases a corporate apartment for Louise Gagner on a month-to-month basis. Ms. Gagner is the mother of Philippe Germain. Monthly rental is $1,000 and total rent paid for the six months ended June 30, 2016 and 2015 was $3,000 and $-0-, respectively. This lease was cancelled as of March 31, 2016.

During the year ended December 31, 2015, the Company entered into multiple loan agreements with LMM Group Ltd. (“LMM”), a Swiss company, and received a total of $248,168. The loans are unsecured, bear interest at 8% per annum and are due at various dates beginning January 1, 2016. On December 10, 2015, $150,000 of the notes was assigned from LMM to 8010609 Canada Inc. The balance of the loans from LMM as of June 30, 2016 is $61,560 and the balance of accrued interest is $8,000. Philippe Germain is the sole shareholder of LMM.

On October 29, 2015, 8010609 Canada Inc. loaned the Company $36,475 which was repaid on November 20, 2015. Additionally, on December 10, 2015, the $150,000 note held by LMM was assigned to 8010609 Canada Inc. On the same date, the Company repaid $50,000 of the note. The notes are unsecured, bear interest at 8% per annum and are due on December 30, 2017. The balance of the loans from 8010609 Canada Inc. as of June 30, 2016 was $100,000 and interest was accrued on the loans for $4,711. The Company also incurred $50,000 of consulting fees to 8010609 Canada Inc. during the six months ended June 30, 2016 which remained outstanding as of June 30, 2016. Philippe Germain is also the sole shareholder of 8010609 Canada Inc.

On October 13, 2015, the Company assumed a second mortgage note due to 9202 4462 Quebec Inc. of $288,360 (CAD 400,000). 9202 4462 Quebec Inc. and the owner of 9202 4462 Quebec Inc. are shareholders of the Company. The loan is secured by a second rank mortgage on a property owned by CTC, bears interest at 6% per annum and was due April 13, 2016. As of June 30, 2016, the principal balance of the loan was $307,524 and accrued interest was $6,091. As of June 30, 2016, the note is in default but the Company is currently in negotiation with the note holder for an extension.

During the six months ended June 30, 2016, the Company incurred $11,387 for consulting services to Maxim Cliche, the brother of Sebastien Cliche.

ROI LAND INVESTMENTS LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2016

(unaudited)

Note 5 – Related Party Transactions (continued)

The Company has $182,750 of accrued compensation and expenses due to Martin Scholz, the Company’s Chief Executive Officer, as of June 30, 2016.

On September 10, 2015, the Company entered into an agreement to acquire 14,400 shares of Capital Evolution Groupe SAS (“CEG”), a French limited liability company, for $112,187 (EUR 100,000). The Company’s Co-President, Philippe Germain, is a shareholder of CEG. As of December 31, 2015, $112,187 was paid for the investment and was classified as an acquisition deposit in the accompanying condensed consolidated balance sheets. On April 5, 2016, the Company agreed to acquire an additional 144,459 shares of CEG for $1,575,686 (EUR 1,444,590) from Philippe Germain, subject to completion of due diligence by the Company and official registration of the shares in France. The shares to be acquired will bring the Company’s interest in CEG to 58% once the transaction was consummated. On April 5, 2016, the total consideration for the shares was adjusted to $551,490 (EUR 505,607) by mutual agreement between the parties. During fiscal year 2016, the Company and the shareholders of CEG agreed to rescind the share purchase agreement, to reverse all past investments, expenditures and payables related to CEG and to reimburse all outstanding balances to the Company. For the six months ended June 30, 2016, the Company recorded a net loss from investment in CEG of $25,180 as a result of the rescission of this acquisition and had no outstanding balances between CEG as of June 30, 2016.

During the six months ended June 30, 2016, the Company incurred $107,385 to Acadian for debt issuance costs. The Company had outstanding balances due from Acadian of $97,852 as of June 30, 2016. During the six months ended June 30, 2015, the Company paid $130,902 to Acadian for professional fees and additionally accrued $34,969 owed to Acadian and is obligated to issue 169,011 shares of its common stock valued at $126,758 of issuance costs as of June 30, 2015 on the Company’s bond and equity raising efforts.

During the year ended December 31, 2015, the Company paid $156,286 and has accrued 58,949 shares of its Series A common stock valued at $45,218 to be issued, to Rome Finance Investissement (“Rome”) for equity and debt issuance costs. Rome is a subsidiary of CEG. There are no transactions between the Company and Rome during the six months ended June 30, 2016.

On January 19, 2016, the Company entered into a three-year Consulting Agreement (the “Consulting Agreement”) with SF International Consulting Limited (“SF”), to obtain the services of Slim Feriani. Pursuant to the terms of the Consulting Agreement, SF or Slim Feriani shall be paid a $100,000 signing bonus, and $50,000 a month for the duration of the Consulting Agreement. In addition, SF or Slim Feriani shall receive 23,333 shares of the Company’s Series A common stock and a five-year stock option to purchase 750,000 shares of the Company’s Series A common stock at the price of $1.50 a share. Such option will vest annually at 250,000 shares a year. In addition, SF or Slim Feriani will receive each quarter during the term of the Consulting Agreement a five-year option to purchase 250,000 shares of the Company’s common shares at a price which is 110% of the last subscription price. Each such option will vest annually in equal amounts of 83,333 shares (83,334 shares on the third anniversary). $382,750 of compensation was accrued for during the six months ended June 30, 2016 and remained outstanding as of June 30, 2016. In August 2016, in connection with Slim Feriani’s resignation as the Company’s Chief Financial Officer, the Company also canceled its options issued to SF in accordance with the terms of the Consulting Agreement.

On January 19, 2016, the Company entered into a three-year Mutual Engagement Agreement with Gulf Central Agency Assets Management Ltd. (“GCA”), pursuant to which GCA will provide the Company with advice on a non-exclusive basis on securing financing of ROI’s foreign real estate ventures. GCA will be paid GBP 25,000 per month, payable quarterly, and a success fee equal to 4% of the principal amount of any investments which GCA arranges with foreign investors. The Company’s former Chief Financial Officer, Slim Feriani, is the Chairman of GCA. The Company incurred $240,142 of consulting fees to GCA during the six months ended June 30, 2016 of which $113,052 was outstanding as of June 30, 2016. In August 2016, in connection with Slim Feriani’s resignation as the Company’s Chief Financial Officer, the Company also canceled its agreement with GCA.

ROI LAND INVESTMENTS LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2016

(unaudited)

Note 6 – Stockholders’ Equity

Authorized Capital

The Company has 160,000,000 authorized shares of Series A Common Stock at $0.0001 par value, 40,000,000 authorized shares of Series B Common Stock at $0.0001 par value, and 50,000,000 authorized shares of Preferred Stock at par value of $0.0001 per share. Series A common shares have equal voting rights, are non-assessable and have one vote per share while Series B common shares have no voting rights. Voting rights are not cumulative and, therefore, the holders of more than 50% of the common stock could, if they choose to do so, elect all of the directors of the Company.

Preferred Stock

Series A Preferred Stock

On May 9, 2016, the Company issued 100,000 shares each of Series A Preferred Stock, par value $0.0001 per share, to two directors, in exchange for their 100,000 shares each of the Company’s Series A common stock. No additional consideration was provided to the Company for the Series A Preferred Stock. The Series A Preferred Stock is identical to the common stock of the Company, except that each share of the 200,000 Series A Preferred Stock has 150 votes per share instead of the one vote per share of the Series A Common Stock.

Series B Preferred Stock

The Series B Preferred Stock is identical to the common stock of ROI, except that each share of the Series B Preferred Stock has the following features:

(1)       The Series B Preferred Shares shall not be convertible into the Company’s common stock unless and until (i) a class of the Company's capital stock commences trading upon the U.S. NASDAQ trading system (the "NASDAQ Uplisting"), or (ii) the Company notifies the holders of the Series B Preferred Shares that their shares may be converted into common stock (whether or not the NASDAQ Uplisting has then yet occurred); after which time the Series B Preferred Shares shall be convertible as and to the extent set forth below.

(2)       When any shares of Series B Preferred Shares are converted into common stock, they shall be converted at the rate of three (3) shares of common stock for the "Effective Value" (defined below) of each of the Series B Preferred Shares.

(3)       The Series B Preferred Shares shall accumulate dividends at the rate of 8% per annum, prorated for partial years, such that, at the time of its conversion, every share of Series B Preferred Shares shall convert at a rate (the "Effective Value") computed by adding to it the cumulative value of its accumulated dividends. For example, if ten shares of the Series B Preferred Shares have been held for two years and six months, when they are converted into common stock they each will have an Effective Value of 1.20 shares, and collectively an Effective Value of 12 shares. Since each share of Series B Preferred Shares converts into three shares of common stock, all ten shares will convert into 36 shares of common stock. Upon conversion, no fractional shares of common stock shall be issued, but rather fractional common stock shares shall be settled in cash.

(4)       If the purchaser of Series B Preferred Shares is an existing holder of the common stock, then the Company may at its discretion extend to any such purchaser the option to pay for some or all of the purchase price of the Series B Preferred Shares by means of submitting to the Company to be held in treasury some of such holder's shares of common stock, at a valuation to be determined by the Company's Board of Directors in their sole but reasonable discretion. 

The cash received from the sale of the Series B Preferred Stock will be used for working capital purposes and the Company’s common stock received will be held in treasury and used for future option exercises or upon conversion of the Series B Preferred Stock.

For the six months ended June 30, 2016, the Company received a total of $402,324 in deposits from investors which shall be exchanged for 1,800,612 shares of Series B preferred stock to be newly issued. These shares were not yet issued by the Company as of June 30, 2016.

ROI LAND INVESTMENTS LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2016

(unaudited)

Note 6 – Stockholders’ Equity (continued)

Common Stock

During the six months ended June 30, 2016, the Company received cash of $4,050,238, net of cash issuance costs, for 5,280,381 shares of its Series A common stock.

During the six months ended June 30, 2016, the Company issued 43,333 shares of Series A common stock for consulting services from certain individuals and entities. The shares were valued at an average price of $1.23, for a total of $53,200 and have been charged to consulting fee expense for the six months ended June 30, 2016.

During the six months ended June 30, 2016, the Company issued 121,961 shares of Series A common stock in conversion of $150,000 of notes payable. The shares were valued at $1.23, based on the fair market value of shares on the date of the conversion.

During the six months ended June 30, 2016, the Company paid cash of $203,208 for equity issuance costs.

During the six months ended June 30, 2016, 1,843,841 shares of Series A common stock were received by the Company to be held in treasury. These shares held in treasury will be used for future option exercises or for future conversion of the Series B Preferred Stock. 

2015 Equity Incentive Plan

On September 8, 2015, the Company’s board of directors approved and adopted the ROI Land Investments Ltd. 2015 Equity Incentive Plan (the “2015 Plan”). The 2015 Plan was approved by a majority of stockholders of the Company on November 9, 2015. The 2015 Plan provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted awards, performance share awards and performance compensation awards. No awards are outstanding under the 2015 Plan at June 30, 2016.

ROI LAND INVESTMENTS LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2016

(unaudited)

During the six months ended June 30, 2016, the Company issued stock options to its employees to purchase a total of 50,000 shares. These options have contractual lives of three years and were valued at an average grant date fair value of $0.76 per option, or $37,841, using the Black-Scholes Option Pricing Model with the following assumptions: 

The stock price was based on the most recent traded stock price as of the grant date and volatility was based on the Company’s historical volatility. During the six months ended June 30, 2016, $38,897 was recorded as compensation expense and $193 of unrecognized compensation costs related to employee stock options. The Company expects to recognize those costs over a weighted average period of 0.13 years as of June 30, 2016.

ROI LAND INVESTMENTS LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2016

(unaudited)

During the six months ended June 30, 2016, the Company issued options to purchase a total of 4,348,259 shares of Series A common stock to various consultants and investors. The fair value of the services provided by consultants is not reliably estimable as these services are traditionally transacted based on a percentage of transaction volume, making measurement of such services impractical. These options have contractual lives of six months to five years and were valued using the Black-Scholes Option Pricing Model at an weighted average grant date fair value of $0.59 per option, or $2,583,987, for the six months ended June 30, 2016, with the following assumptions:

The stock price was based on the most recent traded stock price as of the grant date and volatility was based on the Company’s historical volatility. As of June 30, 2016, $2,013,410 was charged to consulting fee expense and $3,202,153 of unrecognized compensation costs related to non-employee stock options. The Company expects to recognize those costs over a weighted average period of 2.04 years as of June 30, 2016.

A total of 122,250 options were either expired or canceled during the six months ended June 30, 2016.

ROI LAND INVESTMENTS LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2016

(unaudited)

Note 7 – Commitments and Contingencies

The Company has entered into certain consulting agreements which call for introduction fees to be paid to the consultants for capital received by the Company from investors introduced by the consultants. The fees range from i) 2% in Series A common stock to ii) 13% in cash and 10% in Series A common stock of the amounts received by the Company.

On March 11, 2015, the Company entered into an agreement with Artizan Interior design (“Artizan”), a UAE corporation, whereby Artizan will provide project management and technical coordination services for its project in the Sobha Hartland district of Dubai, United Arab Emirates. The services of Artizan began October 1, 2015 at a monthly fee of $85,000 for a term of the development stage of the project until the handover of the project to the developer. On March 2, 2016, the Company entered into a Client Representative Consultancy Agreement with Artizan, whereby Artizan will provide construction and engineering design services for its project in the Sobha Hartland district of Dubai, United Arab Emirates. The services of Artizan began in March 2016 for a total fee of $1,200,000 in payments of 50% upon the commencement of work, 25% upon the approval of the design package from relevant authorities, and 25% upon the completion of all design services as agreed and approved by the Company. Upon receipt of a termination letter from PNC terminating the agreement related to the Sobha Hartland, Dubai project, the Company terminated its agreement between Artizan and $127,500 of payables is due to Artizan as of June 30, 2016.

On February 7, 2016, the Company entered into a Development Sale and Purchase Agreement with PNC. During the six months ended June 30, 2016, the Company made an additional payment of $1,900,000 (AED 6,980,144) in non-refundable deposits to PNC leaving a balance of $24,786,795 (AED 91,014,801). On May 15, 2016, the Company received a termination letter from PNC terminating the agreement dated February 7, 2016 for non-payment of the amounts due under the agreement. As a result, the Company forfeited the $4,701,205 (AED 17,271,099) of deposits. A total of $5,048,032 (AED 18,545,258), including $346,827 (AED 1,273,583) of closing and development costs, has been charged to operating expenses for the six months ended June 30, 2016 as abandoned project costs. However, the Company is still in negotiations with PNC to acquire a reduced size and price of the land it had agreed to under the agreement dated February 7, 2016 and apply the deposits to this restructured arrangement. Negotiations are under way, but the likelihood that the Company will be successful in reaching a satisfactory agreement is dependent on its ability to pay at least a portion of the new acquisition price. As a result, there can be no assurance that the acquisition will occur as contemplated or at all.

The Company has two office lease agreements (Canada and Germany) with lease commitments totaling $158,693. The Company is contracted to make the following annual payments: not later than one year totaling $38,033; later than one year but not later than two years totaling $41,823; later than two years but not later than three years totaling $41,956; later than three years but not later than four years totaling $33,091; later than four years but not later than five years totaling $3,790; and no amounts later than five years.

Legal Matters

Certain conditions may exist as of the date the condensed consolidated financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company, or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims, as well as the perceived merits of the amount of relief sought or expected to be sought therein.

ROI LAND INVESTMENTS LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2016

(unaudited)

Note 7 – Commitments and Contingencies (Continued)

Legal Matters (Continued)

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s condensed consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability and an estimate of the range of possible losses, if determinable and material, would be disclosed.

On August 6, 2015, Mrs. Gloria Julie Couillard and Tekno Forme (“Plaintiffs”) filed a complaint naming CTC, its President, ROI DEV, Philippe Germain and Sebastian Cliche as co-defendants claiming unpaid fees of $207,638. On September 2, 2015, a default judgement was served against CTC. CTC and its President are applying to set aside the default judgement against them and the Company is opposing the Plaintiff’s notice of Application. On October 9, 2015, the Plaintiff registered a lien on the Company’s Canadian properties in the amount of $207,638. On March 17, 2017, the Plaintiff agreed to release its judgment filed against the Company’s Canadian properties and removed its lien, in its entirety, registered on the these properties.

On September 14, 2015, the Company received a notification from the American Arbitration Association (“AAA”) of a Request for Mediation, dated September 8, 2015, filed by Mr. Seth Shaw, pursuant to a mediation and arbitration clause contained in a Consulting Agreement allegedly entered into between the Company and Mr. Shaw on May 1, 2014. The Company executed such agreement but believes that Seth Shaw failed to perform under said agreement. Mr. Shaw believes that the agreement is valid and in effect. The matter under dispute is 500,000 shares of the Company’s Series A common stock which were to be issued to Mr. Shaw pursuant to such agreement. A certificate for such shares was issued but never delivered to Mr. Shaw, because the Company cancelled the Agreement for failure to perform. The Company cancelled the shares and recorded a liability for the then value of the shares of $175,000 which was included in accounts payable and accrued expenses in the consolidated balance sheet as of December 31, 2015. The Company and Mr. Shaw met in mediation on February 22, 2016 with no resolution achieved. The parties then attended an arbitration evidentiary hearing on January 20, 2017 whereby a final arbitration award was issued on March 30, 2017 and subsequently a judgment was delivered by the United States District Court of Nevada on March 1, 2018 ruling that Mr. Shaw was entitled to recover $755,125 from the Company for breach of contract claim, $103,110 of legal fees and $3,625 in costs. The Company intends to vigorously take necessary actions to defend itself from these claims by Mr. Shaw and has not revised the recorded liability of $250,000 in accounts payable and accrued expenses in the consolidated balance sheet as of June 30, 2016, as it still represents the best estimate of the possible outflows to settle this case.