Except for historical information, the statements contained herein are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts. The words “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” ”should,” “plan,” “could,” “target,” “potential,” “is"believe," "may," "estimate," "continue," "anticipate," "intend," "should," "plan," "could," "target," "potential," "is likely,” “will,” “expect”" "will," "expect" and similar expressions, as they relate to the Company are intended to identify forward-looking statements within the meaning of the “safe harbor”"safe harbor" provisions of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. From time to time, the Company may publish or otherwise make available forward-looking statements of this nature. All such forward-looking statements are based on the expectations of management when made and are subject to, and are qualified by, risks and uncertainties that could cause actual results to differ materially from those expressed or implied by those statements. These risks and uncertainties include, but are not limited to, the following factors, among others, that could affect the outcome of the Company's forward-looking statements: general economic and market conditions; the inability to profitably run current operations sufficient to cover overhead; the inability to attract, hire and retain key personnel; the difficulty of integrating an acquired business; unforeseen litigation; unfavorable result of potential litigation; the ability to maintain sufficient liquidity in order to support operations; the ability to maintain satisfactory relationships with current and future suppliers; federal and/or state regulatory and legislative action; the ability to implement or adjust to new technologies and the ability to secure and maintain key contracts and relationships. New risk factors emerge from time to time and it is not possible to accurately predict all such risk factors, nor can we assess the impact of all such risk factors on our business or the extent to which any risk factor, or combination of risk factors, may cause results to differ materially from those contained in any forward-looking statements. Except as otherwise required by applicable law, we undertake no obligation to publicly update or revise any forward-looking statements or the risk factors described in this Quarterly Report or in the documents we incorporate by reference, whether as a result of new information, future events, changed circumstances or any other reason after the date of this Quarterly Report on Form 10-Q.
CONDENSED CONSOLIDATED BALANCE SHEETS | |
AS OF DECEMBER 31, 2016 AND JUNE 30, 2016 | |
| | | | | | |
| | December 31, 2016 | | | June 30, 2016 | |
ASSETS | | (unaudited) | | | | |
CURRENT ASSETS | | | | | | |
Cash and cash equivalents | | $ | 5,000 | | | $ | 139,600 | |
Accounts receivable - trade, net | | | 2,600 | | | | 3,900 | |
Other receivables - related party | | | - | | | | 2,800 | |
Assets held for sale | | | 1,653,500 | | | | 1,653,500 | |
Prepaid expenses and other current assets | | | 47,500 | | | | 47,300 | |
Total current assets | | | 1,708,600 | | | | 1,847,100 | |
| | | | | | | | |
LAND, PROPERTY AND EQUIPMENT, NET | | | 2,020,200 | | | | 2,111,000 | |
| | | | | | | | |
OTHER ASSETS | | | | | | | | |
Trust account - asset retirement obligation | | | 96,800 | | | | 86,100 | |
TOTAL ASSETS | | $ | 3,825,600 | | | $ | 4,044,200 | |
| | | | | | | | |
LIABILITIES AND SHAREHOLDERS' EQUITY | | | | | | | | |
CURRENT LIABILITIES | | | | | | | | |
Accounts payable | | $ | 225,900 | | | $ | 251,400 | |
Accrued expenses | | | 305,700 | | | | 146,200 | |
Total current liabilities | | | 531,600 | | | | 397,600 | |
| | | | | | | | |
LONG-TERM LIABILITIES | | | | | | | | |
Note payable | | | 640,000 | | | | 200,000 | |
Contingent payments, long-term | | | 682,000 | | | | 672,700 | |
Asset retirement obligation | | | 434,000 | | | | 434,000 | |
TOTAL LIABILITIES | | | 2,287,600 | | | | 1,704,300 | |
| | | | | | | | |
SHAREHOLDERS' EQUITY | | | | | | | | |
Preferred Stock - no shares issued or outstanding | | | - | | | | - | |
Common Stock | | | | | | | | |
Class A - 75,000,000 no par shares authorized, 4,982,400 | | | | | | | | |
shares issued and outstanding at December 31, 2016 | | | | | | | | |
and June 30, 2016 | | | 109,191,800 | | | | 109,188,200 | |
Accumulated Deficit | | | (107,653,800 | ) | | | (106,848,300 | ) |
Total shareholders' equity | | | 1,538,000 | | | | 2,339,900 | |
| | | | | | | | |
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | | $ | 3,825,600 | | | $ | 4,044,200 | |
| | | | | | | | |
See accompanying notes to the condensed consolidated financial statements | |
CONDENSED CONSOLIDATED BALANCE SHEETS |
AS OF DECEMBER 31, 2015 AND JUNE 30, 2015 |
| | | | | | |
| | | | December 31, 2015 | | June 30, 2015 |
ASSETS | | (unaudited) | | |
CURRENT ASSETS | | | | |
| Cash and cash equivalents | $ | 331,600 | $ | 788,900 |
| Accounts receivable - trade, net | | 22,100 | | 45,900 |
| Other receivables - related party | | 7,100 | | 4,200 |
| Note receivable, current - related party | | 60,000 | | 60,000 |
| Prepaid expenses and other current assets | | 27,500 | | 164,500 |
| | Total current assets | | 448,300 | | 1,063,500 |
| | | | | | |
LAND, PROPERTY AND EQUIPMENT, NET | | 3,853,500 | | 3,938,600 |
| | | | | | |
OTHER ASSETS | | | | |
| Note receivable, long-term - related party, net | | 190,400 | | 262,800 |
| Trust account - asset retirement obligation | | 76,800 | | 67,400 |
TOTAL ASSETS | $ | 4,569,000 | $ | 5,332,300 |
| | | | | | |
LIABILITIES AND SHAREHOLDERS' EQUITY | | | | |
CURRENT LIABILITIES | | | | |
| Accounts payable | $ | 136,800 | $ | 151,100 |
| Accrued expenses | | 153,700 | | 191,800 |
| Contingent payments, current | | 25,000 | | 50,000 |
| | Total current liabilities | | 315,500 | | 392,900 |
| | | | | | |
LONG-TERM LIABILITIES | | | | |
| Contingent payments, long-term | | 638,300 | | 603,900 |
| Asset retirement obligation | | 429,700 | | 429,700 |
TOTAL LIABILITIES | | 1,383,500 | | 1,426,500 |
| | | | | | |
SHAREHOLDERS' EQUITY | | | | |
| Preferred Stock - no shares issued or outstanding | | - | | - |
| Common Stock | | | | |
| | Class A - 75,000,000 no par shares authorized, 4,982,400 | | | | |
| | shares issued and outstanding at December 31, 2015 | | | | |
| | and June 30, 2015 | | 109,187,100 | | 109,159,300 |
| Accumulated Deficit | | (106,001,600) | | (105,253,500) |
| | Total shareholders' equity | | 3,185,500 | | 3,905,800 |
| | | | | | |
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 4,569,000 | $ | 5,332,300 |
| | | | | | |
See accompanying notes to the condensed consolidated financial statements |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
FOR THE THREE MONTHS ENDED DECEMBER 31, (unaudited) |
| | | | | | |
| | | | 2015 | | 2014 |
| | | | | | |
NET REVENUES | $ | 57,700 | $ | 218,200 |
| Cost of revenues | | 132,200 | | 192,200 |
GROSS PROFIT (LOSS) | | (74,500) | | 26,000 |
| | | | | | |
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES | | | | |
| Corporate expenses | | 107,500 | | 30,800 |
| Alanco Energy Services | | 156,200 | | 194,600 |
| Stock-based compensation | | 13,900 | | 45,400 |
| | | | 277,600 | | 270,800 |
| | | | | | |
OPERATING LOSS | | (352,100) | | (244,800) |
| | | | | | |
OTHER INCOME | | | | |
| Interest income | | 7,300 | | 11,600 |
| Gain on sale of marketable securities | | - | | 56,400 |
NET LOSS | | $ | (344,800) | $ | (176,800) |
| | | | | | |
NET LOSS PER SHARE - BASIC AND DILUTED | | | | |
| | Net loss per share attributable to common shareholders | $ | (0.07) | $ | (0.04) |
| | | | | | |
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING | | 4,982,400 | | 5,006,800 |
| | | | | | |
See accompanying notes to the condensed consolidated financial statements |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |
FOR THE THREE MONTHS ENDED DECEMBER 31, (unaudited) | |
| | | | | | |
| | 2016 | | | 2015 | |
| | | | | | |
NET REVENUES | | $ | 5,800 | | | $ | 57,700 | |
Cost of revenues | | | 84,900 | | | | 132,200 | |
GROSS LOSS | | | (79,100 | ) | | | (74,500 | ) |
| | | | | | | | |
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES | | | | | | | | |
Corporate expenses | | | 103,400 | | | | 107,500 | |
Alanco Energy Services | | | 125,700 | | | | 156,200 | |
Stock-based compensation | | | - | | | | 13,900 | |
| | | 229,100 | | | | 277,600 | |
| | | | | | | | |
OPERATING LOSS | | | (308,200 | ) | | | (352,100 | ) |
| | | | | | | | |
OTHER INCOME AND (EXPENSE) | | | | | | | | |
Interest income | | | - | | | | 7,300 | |
Interst expense | | | (17,700 | ) | | | - | |
NET LOSS | | $ | (325,900 | ) | | $ | (344,800 | ) |
| | | | | | | | |
LOSS PER SHARE - BASIC AND DILUTED | | | | | | | | |
Net loss per share | | $ | (0.07 | ) | | $ | (0.07 | ) |
| | | | | | | | |
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - BASIC AND DILUTED | | | 4,982,400 | | | | 4,982,400 | |
| | | | | | | | |
See accompanying notes to the condensed consolidated financial statements | |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
FOR THE SIX MONTHS ENDED DECEMBER 31, (unaudited) |
| | | | | | |
| | | | 2015 | | 2014 |
| | | | | | |
NET REVENUES | $ | 172,000 | $ | 443,500 |
| Cost of revenues | | 392,600 | | 378,500 |
GROSS PROFIT (LOSS) | | (220,600) | | 65,000 |
| | | | | | |
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES | | | | |
| Corporate expenses | | 201,200 | | 106,900 |
| Alanco Energy Services | | 313,200 | | 394,100 |
| Stock-based compensation | | 27,800 | | 45,400 |
| | | | 542,200 | | 546,400 |
| | | | | | |
OPERATING LOSS | | (762,800) | | (481,400) |
| | | | | | |
OTHER INCOME | | | | |
| Interest income | | 14,700 | | 23,100 |
| Gain on sale of marketable securities | | - | | 103,200 |
| Other income | | - | | 200 |
NET LOSS | | $ | (748,100) | $ | (354,900) |
| | | | | | |
NET LOSS PER SHARE - BASIC AND DILUTED | | | | |
| | Net loss per share attributable to common shareholders | $ | (0.15) | $ | (0.07) |
| | | | | | |
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING | | 4,982,400 | | 4,984,500 |
| | | | | | |
See accompanying notes to the condensed consolidated financial statements |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |
FOR THE SIX MONTHS ENDED DECEMBER 31, (unaudited) | |
| | | | | | |
| | 2016 | | | 2015 | |
| | | | | | |
NET REVENUES | | $ | 9,700 | | | $ | 172,000 | |
Cost of revenues | | | 175,400 | | | | 392,600 | |
GROSS LOSS | | | (165,700 | ) | | | (220,600 | ) |
| | | | | | | | |
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES | | | | | | | | |
Corporate expenses | | | 177,000 | | | | 201,200 | |
Alanco Energy Services | | | 265,200 | | | | 313,200 | |
Stock-based compensation | | | - | | | | 27,800 | |
| | | 442,200 | | | | 542,200 | |
| | | | | | | | |
OPERATING LOSS | | | (607,900 | ) | | | (762,800 | ) |
| | | | | | | | |
OTHER INCOME AND (EXPENSE) | | | | | | | | |
Interest income | | | 4,800 | | | | 14,700 | |
Interest expense | | | (26,400 | ) | | | - | |
LOSS FROM CONTINUING OPERATIONS | | | (629,500 | ) | | | (748,100 | ) |
| | | | | | | | |
DISCONTINUED OPERATIONS | | | | | | | | |
Loss from discontinued operations | | | (176,000 | ) | | | - | |
LOSS FROM DISCONTINUED OPERATIONS | | | (176,000 | ) | | | - | |
| | | | | | | | |
NET LOSS | | $ | (805,500 | ) | | $ | (748,100 | ) |
| | | | | | | | |
NET LOSS PER SHARE - BASIC AND DILUTED | | | | | | | | |
Continuing operations | | $ | (0.12 | ) | | $ | (0.15 | ) |
Discontinued operations | | $ | (0.04 | ) | | $ | - | |
Net loss per share | | $ | (0.16 | ) | | $ | (0.15 | ) |
| | | | | | | | |
| | | | | | | | |
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - BASIC AND DILUTED | | | 4,982,400 | | | | 4,982,400 | |
| | | | | | | | |
See accompanying notes to the condensed consolidated financial statements | |
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY | |
FOR THE SIX MONTHS ENDED DECEMBER 31, 2016 (unaudited) | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | COMMON STOCK | | | | | | ACCUMULATED | | | | |
| | SHARES | | | AMOUNT | | | DEFICIT | | | TOTAL | |
Balances, June 30, 2016 | | | 4,982,400 | | | $ | 109,188,200 | | | $ | (106,848,300 | ) | | $ | 2,339,900 | |
Value of warrants | | | - | | | | 3,600 | | | | - | | | | 3,600 | |
Net loss | | | - | | | | - | | | | (805,500 | ) | | | (805,500 | ) |
Balances, December 31, 2016 | | | 4,982,400 | | | $ | 109,191,800 | | | $ | (107,653,800 | ) | | $ | 1,538,000 | |
| | | | | | | | | | | | | | | | |
See accompanying notes to the condensed consolidated financial statements | |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |
FOR THE SIX MONTHS ENDED DECEMBER 31, (unaudited) | |
| | | | | | |
| | 2016 | | | 2015 | |
CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | |
Net loss | | $ | (805,500 | ) | | $ | (748,100 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: | | | | | | | | |
Depreciation and amortization | | | 91,800 | | | | 91,900 | |
Accretion of fair value - contingent payments | | | 9,300 | | | | 9,400 | |
Stock-based compensation for options | | | - | | | | 27,800 | |
Exercisable warrants issued under note payable to Anderson Family Trust | | | 3,600 | | | | - | |
Reserve recorded for American Citizenship Center, LLC note receivable | | | - | | | | 50,000 | |
Changes in operating assets and liabilities: | | | | | | | | |
Accounts receivable - trade | | | 1,300 | | | | 23,800 | |
Other receivables - related party | | | 2,800 | | | | (2,900 | ) |
Prepaid expenses and other current assets | | | (200 | ) | | | 137,000 | |
Trust account - asset retirement obligation | | | (10,700 | ) | | | (9,400 | ) |
Accounts payable and accrued expenses | | | 134,000 | | | | (52,400 | ) |
Net cash used in operating activities | | | (573,600 | ) | | | (472,900 | ) |
| | | | | | | | |
CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | | | |
Proceeds from repayment of American Citizenship Center, LLC note receivable | | | - | | | | 22,400 | |
Purchase of land, property, and equipment | | | (1,000 | ) | | | (6,800 | ) |
Net cash (used) provided by investing activities | | | (1,000 | ) | | | 15,600 | |
| | | | | | | | |
CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | | | |
Proceeds from note payable to Anderson Family Trust | | | 440,000 | | | | - | |
Net cash provided by financing activities | | | 440,000 | | | | - | |
| | | | | | | | |
NET DECREASE IN CASH AND CASH EQUIVALENTS | | | (134,600 | ) | | | (457,300 | ) |
| | | | | | | | |
CASH AND CASH EQUIVALENTS, beginning of period | | | 139,600 | | | | 788,900 | |
| | | | | | | | |
CASH AND CASH EQUIVALENTS, end of period | | $ | 5,000 | | | $ | 331,600 | |
| | | | | | | | |
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION | | | | | | | | |
Non-cash investing & financing activities: | | | | | | | | |
Value of exercisable warrants issued under note payable to Anderson Family Trust | | $ | 3,600 | | | $ | - | |
Value of stock-based compensation for options | | $ | - | | | $ | 27,800 | |
| | | | | | | | |
See accompanying notes to the condensed consolidated financial statements | |