Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Mar. 31, 2019 | May 15, 2019 | |
Document And Entity Information | ||
Entity Registrant Name | Freestone Resources, Inc. | |
Entity Central Index Key | 0001089319 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2019 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --06-30 | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Small Business | true | |
Entity Common Stock, Shares Outstanding | 98,288,177 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2019 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Mar. 31, 2019 | Jun. 30, 2018 |
Current Assets | ||
Cash | $ 317 | $ 2,966 |
Accounts receivable, net of allowance for doubtful accounts of $4,000 and $4,000 | 108,558 | 139,772 |
Inventory | 28,858 | 30,391 |
Prepaid and Other Assets | 66,425 | 67,065 |
Total Current Assets | 204,158 | 240,194 |
Property, plant and equipment, net of accumulated depreciation of $448,867 and $349,373 | 1,647,828 | 1,359,972 |
TOTAL ASSETS | 1,851,986 | 1,600,166 |
Current Liabilities | ||
Accounts payable | 94,568 | 91,286 |
Accrued liabilities | 865,091 | 580,124 |
Environmental liability | 400,000 | 400,000 |
Convertible notes payable - related parties | 1,695,393 | 1,579,919 |
Current portion of capital lease obligations | 127,267 | 12,484 |
Current portion of long-term debt | 348,109 | 339,858 |
Total Current Liabilities | 3,530,428 | 3,003,926 |
Capital lease obligation, less current portion | 276,381 | 13,124 |
Long-term debt, less current portion | 604,310 | 715,131 |
Notes payable – related party, less current portion | 94,456 | 0 |
TOTAL LIABILITIES | 4,505,575 | 2,731,926 |
Stockholders' Equity: | ||
Preferred Stock, 10,000,000 shares authorized, 0 shares issued and outstanding | 0 | 0 |
Common stock, $.001 par value, 600,000,000 shares authorized 98,288,177 and 91,988,177 shares issued and outstanding as of March 31, 2019 and June 30, 2018, respectively | 98,288 | 91,988 |
Additional paid in capital | 21,166,578 | 20,858,878 |
Accumulated deficit | (24,769,260) | (23,829,238) |
Total Freestone Resources, Inc. stockholders' deficit | (3,504,394) | (2,878,372) |
Non-Controlling Interest | 850,805 | 746,612 |
Total equity (deficit) | (2,653,589) | (2,131,760) |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY/(DEFICIT) | $ 1,851,986 | $ 1,600,166 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) | Mar. 31, 2019 | Jun. 30, 2018 |
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts | $ 4,000 | $ 4,000 |
Accumulated depreciation | $ 448,867 | $ 349,373 |
Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 600,000,000 | 100,000,000 |
Common stock, shares issued | 98,288,177 | 91,988,177 |
Common stock, shares outstanding | 98,288,177 | 91,988,177 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2019 | Mar. 31, 2018 | Mar. 31, 2019 | Mar. 31, 2018 | |
Revenue | ||||
Tipping Fee Revenue | $ 135,344 | $ 140,502 | $ 502,954 | $ 467,810 |
Tire Repair Revenue | 67,642 | 78,939 | 248,114 | 283,975 |
Used Tire Sales | 7,289 | 25,525 | 38,188 | 85,250 |
Scrap Material Sales | 8,462 | 13,841 | 37,071 | 43,830 |
Total Revenue | 218,737 | 258,907 | 826,327 | 880,865 |
Costs of Revenue | ||||
Tipping Fee Operations | 63,508 | 74,711 | 193,380 | 209,603 |
Tire Repair | 34,826 | 37,288 | 107,679 | 112,202 |
Used Tire Sales | 282 | 1,742 | 3,435 | 9,350 |
Tire Disposal | 127,478 | 121,051 | 251,917 | 293,117 |
Scrap and Other Costs | 0 | 0 | 0 | 8,912 |
Total Cost of Revenue | 226,094 | 234,792 | 553,411 | 633,184 |
GROSS PROFIT | (7,357) | 24,015 | 272,916 | 247,681 |
Operating Expenses | ||||
Joint Venture Start Up Costs | 50,690 | 54,213 | 144,946 | 156,803 |
Selling | 29,930 | 31,535 | 91,022 | 92,563 |
General and Administrative | 175,815 | 172,771 | 731,019 | 552,727 |
Depreciation and Amortization | 40,338 | 31,843 | 99,494 | 94,469 |
Total Operating Expenses | 296,873 | 290,362 | 1,066,481 | 896,562 |
INCOME (LOSS) FROM OPERATIONS | (304,230) | (266,347) | (793,734) | (648,881) |
OTHER INCOME (EXPENSES) | ||||
Interest Expense, net | (64,280) | (54,610) | (193,734) | (163,857) |
Total Other Income (Expense) | (64,280) | (54,610) | (193,734) | (163,857) |
NET INCOME (LOSS) | (368,510) | (320,957) | (987,299) | (812,738) |
Loss Attributable to Non-Controlling Interest | 16,468 | 17,537 | 47,277 | 50,869 |
NET INCOME (LOSS) ATTRIBUTABLE TO FREESTONE | $ (352,042) | $ (303,420) | $ (940,022) | $ (761,869) |
Basic and diluted income (loss) per share | ||||
Net income (loss) per share | $ 0 | $ 0 | $ (0.01) | $ (0.01) |
Weighted average shares outstanding, basic and diluted | 98,238,773 | 91,864,536 | 97,106,973 | 91,738,633 |
Statement - Consolidated Statem
Statement - Consolidated Statements of Shareholders Equity/(Deficit) - USD ($) | Common Stock | Paid-In Capital | Accumulated Deficit | Noncontrolling Interest | Total |
Begining balance, shares at Jun. 30, 2017 | 91,613,177 | ||||
Begining balance, amount at Jun. 30, 2017 | $ 91,613 | $ 20,840,503 | $ (20,691,106) | $ 566,548 | $ 1,192,442 |
Common Stock Issued for Note Conversion, amount | 0 | ||||
Common Stock Issued for Services, shares | 375,000 | ||||
Common Stock Issued for Services, amount | $ 375 | 18,375 | 18,750 | ||
Members Contributions to LLC | 183,852 | 183,852 | |||
Net Loss | (761,869) | (761,869) | |||
Loss Attributable to Non-Controlling Interest | (50,869) | (50,869) | |||
Ending balance, shares at Mar. 31, 2018 | 91,988,177 | ||||
Ending balance, amount at Mar. 31, 2018 | $ 91,988 | 20,858,878 | (23,452,975) | 699,531 | (1,802,578) |
Begining balance, shares at Jun. 30, 2018 | 91,988,177 | ||||
Begining balance, amount at Jun. 30, 2018 | $ 91,988 | 20,858,878 | (23,829,238) | 746,612 | (2,131,760) |
Common Stock Issued for Note Conversion, shares | 2,500,000 | ||||
Common Stock Issued for Note Conversion, amount | $ 2,500 | 122,500 | 125,000 | ||
Common Stock Issued for Services, shares | 3,800,000 | ||||
Common Stock Issued for Services, amount | $ 3,800 | 185,200 | 189,000 | ||
Members Contributions to LLC | 151,470 | 151,470 | |||
Net Loss | (940,022) | (940,022) | |||
Loss Attributable to Non-Controlling Interest | (47,277) | (47,277) | |||
Ending balance, shares at Mar. 31, 2019 | 98,288,177 | ||||
Ending balance, amount at Mar. 31, 2019 | $ 98,288 | $ 21,166,578 | $ (24,769,260) | $ 850,805 | $ (2,653,589) |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 9 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Cash Flows From Operating Activities | ||
Net Income (Loss) | $ (987,299) | $ (812,738) |
Adjustments to reconcile net income (loss) to net cash used in operating activities | ||
Depreciation | 99,494 | 94,469 |
Shares Issued for Services | 189,000 | 18,750 |
Changes in operating assets and liabilities | ||
(Increase) Decrease in Accounts Receivable | 31,214 | 9,624 |
(Increase) Decrease in Inventory | 1,533 | 10,195 |
(Increase) Decrease in Prepaid Expenses | 640 | (26,422) |
Increase (Decrease) in Accounts Payable | 3,282 | 13,437 |
Increase (Decrease) in Accrued Liabilities | 284,967 | 216,220 |
Net Cash Used in Operating Activities | (377,169) | (476,395) |
Cash Flows From Investing Activities | ||
Purchase of Fixed Assets | 0 | (6,700) |
Net Cash Provided by (Used in) Investing Activities | 0 | (6,700) |
Cash Flows From Financing Activities | ||
Contributions to LLC by Holders of Non-Controlling Interest in FDEP | 151,470 | 183,852 |
Proceeds from Convertible Notes Payable - Related party | 240,474 | 640,292 |
Capital Lease Payments | (9,310) | (8,886) |
Repayment of Long-Term Debt | (8,114) | (331,947) |
Net Cash Provided by Financing Activities | 374,520 | 483,311 |
Net Increase (Decrease) in Cash | (2,649) | 216 |
Cash at Begining of Period | 2,966 | 4,109 |
Cash at End of Period | 317 | 4,325 |
Cash Transactions | ||
Interest paid | 109,330 | 118,905 |
Income taxes paid | 0 | 0 |
Non Cash financing and Investing Activities | ||
Capital Lease Obligation Incurred | 387,350 | 0 |
Conversion of Convertible Related Party Note to Common Stock | $ 125,000 | $ 0 |
1. NATURE OF ACTIVITIES AND SIG
1. NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Mar. 31, 2019 | |
Nature Of Activities And Significant Accounting Policies | |
NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES | Nature of Activities, History and Organization Freestone Resources, Inc. and subsidiaries (“Freestone” or collectively the “Company”) are an oil and gas technology development company. The Company is located in Ennis, Texas and is incorporated under the laws of the State of Nevada. The Company’s subsidiaries consist of C.C. Crawford Retreading Company, Inc., Freestone Technologies, LLC and Freestone Dynamis Energy Products, LLC. The Company’s primary business is the development of new technologies that allow for the utilization of oil and gas resources in an environmentally responsible and cost effective way. C.C. Crawford Retreading Company, Inc. (“CTR”) is an Off-The-Road (“OTR”) tire company located in Ennis, Texas and incorporated under the laws of the State of Texas. CTR’s primary business is to repair, recycle, dispose of and sell OTR tires, which are used on large, industrial equipment. Freestone Dynamis Energy Products, LLC (“FDEP”) is a joint venture between Dynamis Energy, LLC and the Company. FDEP was established to pursue the production and marketing of Petrozene™. FDEP’s initial operations will utilize a specialized pyrolysis technology in order to process CTR’s feedstock, and begin large scale production of Petrozene™. Freestone owns 70% of FDEP. Freestone Technology, LLC. is an inactive subsidiary. Unaudited Interim Financial Statements: The accompanying unaudited interim condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission. These financial statements are unaudited and, in the opinion of management, include all adjustments (consisting of normal recurring accruals) necessary to present fairly the balance sheet, statement of operations, and statement of cash flows for the periods presented in accordance with accounting principles generally accepted in the United States. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to SEC rules and regulations. It is presumed that users of this interim financial information have read or have access to the audited financial statements and footnote disclosure for the preceding fiscal year contained in the Company’s Annual Report on Form 10-K. The results of operations for the period ended March 31, 2019 are not necessarily indicative of the results of operations for the full year or any other interim period. The information included in this Form 10-Q should be read in conjunction with Management's Discussion and Analysis and Financial Statements and notes thereto included in the Company’s June 30, 2019 Form 10-K. Recently Adopted Accounting Pronouncements: Revenue: Revenue from Contracts with Customers: In May 2014, ASC 606 was issued related to revenue from contracts with customers. This updated guidance supersedes the current revenue recognition guidance, including industry-specific guidance. The updated guidance introduces a five-step model to achieve its core principal of the entity recognizing revenue to depict the transfer of goods or services to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard’s stated core principle is that an entity should recognize revenue to depict the transfer of 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. To achieve this core principle, ASU 2014-09 includes provisions within its five-step model that includes identifying the contract with a customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations, and recognizing revenue when, or as, an entity satisfies a performance obligation. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The standard became effective for the Company beginning July 1, 2018 and permits two methods of adoption: the full retrospective method, which requires the standard to be applied to each prior period presented, or the modified retrospective method, which requires the cumulative effect of adoption to be recognized as an adjustment to opening retained earnings in the period of adoption. The Company adopted the standard using the modified retrospective method. There was no effect for any adjustments to retained earnings upon adoption of the standard on July 1, 2018. Recently Issued Accounting Pronouncements: Leases In February 2016, FASB issued ASU 2016-02— Leases (Topic 842). The update is intended to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The amendments in this update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application of the amendments in this update is permitted. As such, The Company is required to adopt these provisions as of the fiscal year beginning on July 1, 2019. The Company is currently evaluating the impact of FASB ASU 2016-02 and expects the adoption thereof will have a material effect on the Company’s presentation of balance sheet assets and liabilities based on the present value of future lease payments, but does not expect a material effect on the presentation of expenses and cash flows. |
2. INVENTORY
2. INVENTORY | 9 Months Ended |
Mar. 31, 2019 | |
Inventory Disclosure [Abstract] | |
INVENTORY | Inventory of the Company is carried at lower of cost or market. The Company’s inventory consists of processed rubber from disposed tires carried at cost of processing, used tires for sale carried at the cost of repairs and tire oil produced from the Company’s pyrolysis operations. As of March 31, 2019 and June 30, 2018 inventory consisted of: 3/31/19 6/30/18 Used Tires for Resale $ 9,904 $ 11,648 Petrozene and Tire Oil 18,954 18,743 $ 28,858 $ 30,391 |
3. PROPERTY, PLANT AND EQUIPMEN
3. PROPERTY, PLANT AND EQUIPMENT | 9 Months Ended |
Mar. 31, 2019 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY, PLANT AND EQUIPMENT | At March 31, 2019 and June 30, 2018 Property, Plant and Equipment was as follows: 3/31/19 6/30/18 Land $ 360,000 $ 360,000 Buildings and Improvements 706,700 706,700 Automotive Equipment 78,100 78,100 Machinery and Equipment 507,807 507,807 Capital Lease Assets 444,088 56,738 2,096,695 1,709,345 Less Accumulated Depreciation 448,867 349,373 $ 1,647,828 $ 1,359,972 For the nine months ended March 31, 2019 and March 31, 2018 depreciation expense was $99,494 and $94,469, respectively. |
4. ENVIRONMENTAL LIABILITY
4. ENVIRONMENTAL LIABILITY | 9 Months Ended |
Mar. 31, 2019 | |
Environmental Liability | |
ENVIRONMENTAL LIABILITY | The Company’s tire recycling permit requires the Company to ultimately dispose of all tires accepted for recycling. Tire disposal occurs in the normal course of business however the Company always has tires stored at its facility that have not yet been disposed of. The environmental liability was calculated by estimating the costs associated with the various disposal costs that would be necessary to remove the tires from the CTR permitted facility. CTR plans to convert the majority of the tires into crum rubber and sell it to FDEP as a feedstock for its specialized pyrolysis operations. Although CTR still plans to convert the majority of the tires in crum rubber for use by FDEP the liability was recorded as part of the plan submitted to the TCEQ to cure potential violations regarding it processing permit. Since the plan requires CTR to significantly reduce the numbers of tires on hand within the next year and to date FDEP has not been able to demonstrate the capacity to use the number of tires on hand. The liability is considered short-term and the balance at March 31, 2019 and June 30, 2018 was $400,000. |
5. CAPITAL LEASE OBLIGATIONS
5. CAPITAL LEASE OBLIGATIONS | 9 Months Ended |
Mar. 31, 2019 | |
Capital Lease Obligations [Abstract] | |
CAPITAL LEASE OBLIGATIONS | Capital lease assets of $444,088 and $56,738 and accumulated amortization of $50,827 and $31,556 are included in property, plant and equipment on the balance sheet at March 31, 2019 and June 30, 2018, respectively. For the nine months ended March 31, 2019 and March 31, 2018 amortization expense was $19,270 and $8,511, respectively. At March 31, 2019 and June 30, 2018 capital lease obligations were as follows: 3/31/19 6/30/18 Lease payable bearing interest at 4.95% with monthly payments of $315 maturing August 2019. The lease is secured by equipment $ 1,557 $ 4,281 Lease payable bearing interest at 3.95% with monthly payments of $309 maturing December 2020. The lease is secured by equipment. 6,216 8,725 Lease payable bearing interest at 4.78% with monthly payments of $489 maturing September 2020. The lease is secured by equipment. 8,525 12,602 Lease payable bearing interest at 1.8% with monthly payments of $14,000 maturing December 2022. The lease is secured by equipment. 387,350 – 403,648 25,608 Less current maturities (127,267 ) (12,484 ) $ 270,381 $ 13,124 At March 31, 2019 future maturities of capital lease obligations were as follows: Year Ending March 31: 2020 $ 127,267 2021 135,266 2022 141,115 $ 403,648 |
6. NOTES PAYABLE
6. NOTES PAYABLE | 9 Months Ended |
Mar. 31, 2019 | |
Notes Payable [Abstract] | |
NOTES PAYABLE | At March 31, 2019 and June 30, 2018 notes payable were as follows: 3/31/19 6/30/18 Note payable to bank bearing interest at 7.0% with monthly payment of $3,718 maturing June, 2020. The note is secured by accounts receivable. $ 49,923 $ 79,826 Note payable to seller in connection with purchase of CTR bearing interest at 12% maturing May, 2021. Note amended to add $360,065 of accrued interest and penalties to principal in February, 2017. Interest only payable until August, 2019. Monthly payment of $45,904 thereafter. Secured by the common stock and assets of CTR. 902,496 975,163 952,419 (91,054,989 ) Less current maturities (348,109 ) (339,858 ) Long Term Debt, Less Current Maturities $ 604,310 $ 715,131 At March 31, 2019 future maturities of long term debt were as follows: Year Ending March 31: 2019 $ 348,109 2020 $ 513,860 2021 $ 90,450 $ 952,419 |
7. CONVERTIBLE NOTES PAYABLE -
7. CONVERTIBLE NOTES PAYABLE - RELATED PARTIES | 9 Months Ended |
Mar. 31, 2019 | |
Convertible Notes Payable - Related Parties | |
CONVERTIBLE NOTES PAYABLE - RELATED PARTIES | At March 31, 2019 and June 30, 2018 notes payable to officers and shareholders were as follows: 3/31/19 6/30/18 Note payable to officer bearing interest at 6.5% due December, 2018. The note is convertible into common stock at $.05 a share at maturity. The note is unsecured. At March 31, 2019 the note was in default. 50,000 50,000 Note payable to stockholder bearing interest at 6.5% due December, 2018. The note is convertible into common stock at $.05 a share at maturity. The note is unsecured. At March 31, 2018 the note was in default. 20,000 20,000 Note payable to stockholder bearing interest at 6.5% due December, 2018. The note is convertible into common stock at $.05 a share at maturity. The note is unsecured. At March 31, 2019 the note is in default. (1) 1,516,875 1,509,919 Line of credit for a maximum of $150,000 from stockholder bearing interest at 10% with a 5% origination fee. In August 2019 the note coverts to a 24 month term note with payments of $7,525. The note is unsecured. 121,784 — Line of credit for a maximum of $100,000 from stockholder bearing interest at 10% with a 5% origination fee. In August 2019 the note coverts to a 24 month term note with payments of $5,023. The note is unsecured. 81,190 — 1,789,849 1,579,919 Less current maturities (1,695,393 ) (1,679,919 ) $ 94,456 $ — At March 31, 2019 future maturities of Notes Payable – Related Parties were as follows: Year Ending March 31: 2020 $ 1,695,393 2021 94,456 $ 1,789,849 (1) On August 15, 2018 the noteholder converted $125,000 of debt into common stock at $.05 a share in accordance with the note agreement. See Note 8 below. |
8. EQUITY
8. EQUITY | 9 Months Ended |
Mar. 31, 2019 | |
Equity [Abstract] | |
EQUITY | The Company is authorized to issue 600,000,000 common shares at a par value of $0.001 per share. These shares have full voting rights. At March 31, 2019 and June 30, 2018 there were 98,288,177 and 91,988,177 common shares outstanding, respectively. On September 30, 2017, the Company issued 125,000 shares of common stock to its Chief Financial Officer for services rendered under his employment contract valued at $0.06 per share which was the fair market value. On October 9, 2018 the Company filed a Pre 14C Form with the SEC notifying stockholders regarding a resolution to file with the Nevada Secretary of State a Certificate of Change: (i) increasing our authorized shares of common stock from one hundred million (100,000,000) shares having a par value of one mill ($0.001) per share to six hundred million (600,000,000) shares and retaining the par value of $0.001 per share (the “Common Stock Resolution”); and (ii) increasing our authorized shares of preferred stock from five million (5,000,000) shares having a par value of l ($0.001) per share to ten million (10,000,000) shares and retaining the par value of $0.001 per share (the “Preferred Stock Resolution”). Under Nevada law the increase can be implemented by a joint resolution passed by the board of directors approved by a simple majority of the outstanding shares. The joint resolution included in the Form 14C filing included the approval of ten shareholders representing 51.36% of the outstanding common shares. On December 3, 2018 the Certificate of changed was filed with the Nevada Secretary of State. On August 15, 2018 the Company issued a total of 2,500,000 shares of common stock to a note holder for conversion of $125,000 of convertible debt at $.05 a share in accordance with the note agreement. On August 21, 2018 the Company issued 3,750,000 shares of common stock valued at $.05 a share to its Officers as compensation. On March 31, 2019 the Company issued 10,000,000 shares of common stock valued at $.03 a share to a consultant for services. The Company is authorized to issue 5,000,000 shares of preferred stock. As of March 31, 2019 and June 30, 2018 there were no shares issued and outstanding. |
9. MERGER AGREEMENT
9. MERGER AGREEMENT | 9 Months Ended |
Mar. 31, 2019 | |
Merger Agreement | |
MERGER AGREEMENT | On November 2, 2017 the Company formed Freestone Dynamis Acquisition, LLC an Idaho limited liability Company. On November 2, 2017, Freestone entered into an Agreement and Plan of Merger (the “Plan”) with Freestone Dynamis Acquisition, LLC, an Idaho limited liability company and wholly owned subsidiary of the Company (“Merger Sub”), and Dynamis Energy, LLC, an Idaho limited liability company (“Dynamis”). Pursuant to the terms of the Plan, at the Effective Time (as defined in the Plan) thereof: (i) Merger Sub will be merged with and into Dynamis, with the separate existence of Merger Sub to cease and with Dynamis to continue as the surviving entity and as a wholly owned subsidiary of the Company; and (ii) all Units of Dynamis will be exchanged for shares of the Company’s common stock to be paid in accordance with Article II of the Plan (the “Merger”). At the closing of the Merger, it is expected that the members and warrant holders of Dynamis will collectively own or have the right to purchase (through exercising a warrant to purchase Dynamis Units, which the Company will have the right to exchange shares of its common stock in exchange for such Dynamis Units) shares of the Company’s common stock, representing approximately seventy five percent (75%) of the Company’s issued and outstanding shares. The Merger contemplated by the Plan, together with the Rights Offering (as defined below), is intended to qualify as a nontaxable exchange pursuant to Section 351 of the Internal Revenue Code of 1986, as amended. The closing of the Merger is subject to numerous conditions including, but not limited to, the following: At or one week prior to the Effective Time, the Company shall have commenced a rights offering to its stockholders on the terms set forth in the Plan (the “Rights Offering”), which Rights Offering shall remain open for a period of 90 days; The approval by the Company’s stockholders and the filing with the Nevada Secretary of State of an amendment to the Company’s Articles of Incorporation to increase the number of the Company’s authorized shares of common stock in an amount sufficient to consummate the Merger, the Rights Offering, the Company’s new equity incentive plan and the other transactions contemplated by the Plan; The effectiveness of the Company’s to-be-filed: (i) Registration Statement on Form S-3 relating to the registration under the Securities Act, of the shares of Company common stock to be issued in its Rights Offering; and (ii) Registration Statement on Form S-4 relating to the authorization and the registration under the Securities Act of the shares of Company common stock to be issued in the Merger; Dynamis members, together with Company stockholders participating in the Rights Offering, shall collectively hold at least 80 percent of the total issued and outstanding shares of the Company’s stock (other than stock subject to vesting restrictions); and The Company’s stockholders shall have approved the Company’s new equity incentive plan that is contemplated by the Plan. In addition, either party may terminate the Plan at any time prior to closing on certain terms and conditions As of March 31, 2019, the two Companies continue to work toward completing the merger. Dynamis Energy has encountered delays in completing the required audited financial statements to comply with SEC requirements. Freestone remains committed to completing the merger once these issues are resolved. However, the Company is reviewing all options and seeking additional capital investment. |
10. COMMITMENTS AND CONTINGENCI
10. COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Mar. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | Freestone has royalty and commission agreements with certain consultants related to the sale of Petrozene™ for their work in the re-launch of the Petrozene™ product line. These royalty and commission agreements range from 2.5% to 7.5% of the net income the Company receives from Petrozene™ sales, and the agreements also have special royalty provisions for certain customers that expire on April 14, 2030. One of the contracts is with the brother of the former CEO of the Company. In case of change of control of the Company the agreement is voided. |
11. GOING CONCERN
11. GOING CONCERN | 9 Months Ended |
Mar. 31, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
GOING CONCERN | There is substantial doubt regarding the Company’s ability to continue as a going concern as we have not generated sufficient cash flows to fund our business operations and loan commitments. Our future success and viability, therefore, are dependent upon our ability to generate capital financing. The failure to generate sufficient revenues or raise additional capital may have a material and adverse effect upon the Company and our shareholders. The Company formed FDEP in order to vertically integrate its Petrozene™ product line, and utilize a specialized pyrolysis process in order to produce other byproducts of value that will generate revenue for FDEP. In turn, the ability of FDEP to process large quantities of OTR tires will allow the Company to increase the amount of OTR tires it can dispose of and process, which will generate additional revenue of the Company. Additionally, the Company intends to raise equity or debt financing that will allow the Company to expand its current operations. |
12. SUBSEQUENT EVENTS
12. SUBSEQUENT EVENTS | 9 Months Ended |
Mar. 31, 2019 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | The Company has evaluated events from March 31, 2019, through the date whereupon the financial statements were issued and has determined that there are no additional items to disclose. |
1. NATURE OF ACTIVITIES AND S_2
1. NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Mar. 31, 2019 | |
Accounting Policies [Abstract] | |
Nature of Activities, History and Organization | Freestone Resources, Inc. and subsidiaries (“Freestone” or collectively the “Company”) are an oil and gas technology development company. The Company is located in Ennis, Texas and is incorporated under the laws of the State of Nevada. The Company’s subsidiaries consist of C.C. Crawford Retreading Company, Inc., Freestone Technologies, LLC and Freestone Dynamis Energy Products, LLC. The Company’s primary business is the development of new technologies that allow for the utilization of oil and gas resources in an environmentally responsible and cost effective way. C.C. Crawford Retreading Company, Inc. (“CTR”) is an Off-The-Road (“OTR”) tire company located in Ennis, Texas and incorporated under the laws of the State of Texas. CTR’s primary business is to repair, recycle, dispose of and sell OTR tires, which are used on large, industrial equipment. Freestone Dynamis Energy Products, LLC (“FDEP”) is a joint venture between Dynamis Energy, LLC and the Company. FDEP was established to pursue the production and marketing of Petrozene™. FDEP’s initial operations will utilize a specialized pyrolysis technology in order to process CTR’s feedstock, and begin large scale production of Petrozene™. Freestone owns 70% of FDEP. Freestone Technology, LLC. is an inactive subsidiary. |
Unaudited Interim Financial Statements | The accompanying unaudited interim condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission. These financial statements are unaudited and, in the opinion of management, include all adjustments (consisting of normal recurring accruals) necessary to present fairly the balance sheet, statement of operations, and statement of cash flows for the periods presented in accordance with accounting principles generally accepted in the United States. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to SEC rules and regulations. It is presumed that users of this interim financial information have read or have access to the audited financial statements and footnote disclosure for the preceding fiscal year contained in the Company’s Annual Report on Form 10-K. The results of operations for the period ended March 31, 2019 are not necessarily indicative of the results of operations for the full year or any other interim period. The information included in this Form 10-Q should be read in conjunction with Management's Discussion and Analysis and Financial Statements and notes thereto included in the Company’s June 30, 2019 Form 10-K. |
Recently Issued Accounting Pronouncements | Revenue: Revenue from Contracts with Customers: In May 2014, ASC 606 was issued related to revenue from contracts with customers. This updated guidance supersedes the current revenue recognition guidance, including industry-specific guidance. The updated guidance introduces a five-step model to achieve its core principal of the entity recognizing revenue to depict the transfer of goods or services to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard’s stated core principle is that an entity should recognize revenue to depict the transfer of 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. To achieve this core principle, ASU 2014-09 includes provisions within its five-step model that includes identifying the contract with a customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations, and recognizing revenue when, or as, an entity satisfies a performance obligation. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The standard became effective for the Company beginning July 1, 2018 and permits two methods of adoption: the full retrospective method, which requires the standard to be applied to each prior period presented, or the modified retrospective method, which requires the cumulative effect of adoption to be recognized as an adjustment to opening retained earnings in the period of adoption. The Company adopted the standard using the modified retrospective method. There was no effect for any adjustments to retained earnings upon adoption of the standard on July 1, 2018. Recently Issued Accounting Pronouncements: Leases In February 2016, FASB issued ASU 2016-02— Leases (Topic 842). The update is intended to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The amendments in this update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application of the amendments in this update is permitted. As such, The Company is required to adopt these provisions as of the fiscal year beginning on July 1, 2019. The Company is currently evaluating the impact of FASB ASU 2016-02 and expects the adoption thereof will have a material effect on the Company’s presentation of balance sheet assets and liabilities based on the present value of future lease payments, but does not expect a material effect on the presentation of expenses and cash flows. |
2. INVENTORY (Tables)
2. INVENTORY (Tables) | 9 Months Ended |
Mar. 31, 2019 | |
Inventory Disclosure [Abstract] | |
Schedule of Inventory | 3/31/19 6/30/18 Used Tires for Resale $ 9,904 $ 11,648 Petrozene and Tire Oil 18,954 18,743 $ 28,858 $ 30,391 |
3. PROPERTY, PLANT AND EQUIPM_2
3. PROPERTY, PLANT AND EQUIPMENT (Tables) | 9 Months Ended |
Mar. 31, 2019 | |
Property Plant And Equipment | |
Property, Plant and Equipment | At March 31, 2019 and June 30, 2018 Property, Plant and Equipment was as follows: 3/31/19 6/30/18 Land $ 360,000 $ 360,000 Buildings and Improvements 706,700 706,700 Automotive Equipment 78,100 78,100 Machinery and Equipment 507,807 507,807 Capital Lease Assets 444,088 56,738 2,096,695 1,709,345 Less Accumulated Depreciation 448,867 349,373 $ 1,647,828 $ 1,359,972 |
5. CAPITAL LEASE OBLIGATIONS (T
5. CAPITAL LEASE OBLIGATIONS (Tables) | 9 Months Ended |
Mar. 31, 2019 | |
Capital Lease Obligations | |
Capital lease obligations | 3/31/19 6/30/18 Lease payable bearing interest at 4.95% with monthly payments of $315 maturing August 2019. The lease is secured by equipment $ 1,557 $ 4,281 Lease payable bearing interest at 3.95% with monthly payments of $309 maturing December 2020. The lease is secured by equipment. 6,216 8,725 Lease payable bearing interest at 4.78% with monthly payments of $489 maturing September 2020. The lease is secured by equipment. 8,525 12,602 Lease payable bearing interest at 1.8% with monthly payments of $14,000 maturing December 2022. The lease is secured by equipment. 387,350 – 403,648 25,608 Less current maturities (127,267 ) (12,484 ) $ 270,381 $ 13,124 |
Future maturities of capital lease obligations | Year Ending March 31: 2020 $ 127,267 2021 135,266 2022 141,115 $ 403,648 |
6. NOTES PAYABLE (Tables)
6. NOTES PAYABLE (Tables) | 9 Months Ended |
Mar. 31, 2019 | |
Notes Payable | |
Schedule of Notes Payable | At March 31, 2019 and June 30, 2018 notes payable were as follows: 3/31/19 6/30/18 Note payable to bank bearing interest at 7.0% with monthly payment of $3,718 maturing June, 2020. The note is secured by accounts receivable. $ 49,923 $ 79,826 Note payable to seller in connection with purchase of CTR bearing interest at 12% maturing May, 2021. Note amended to add $360,065 of accrued interest and penalties to principal in February, 2017. Interest only payable until August, 2019. Monthly payment of $45,904 thereafter. Secured by the common stock and assets of CTR. 902,496 975,163 952,419 (91,054,989 ) Less current maturities (348,109 ) (339,858 ) Long Term Debt, Less Current Maturities $ 604,310 $ 715,131 |
Future Maturities of Long-Term Debt | At March 31, 2019 future maturities of long term debt were as follows: Year Ending March 31: 2019 $ 348,109 2020 $ 513,860 2021 $ 90,450 $ 952,419 |
7. CONVERTIBLE NOTES PAYABLE _2
7. CONVERTIBLE NOTES PAYABLE - RELATED PARTIES (Tables) | 9 Months Ended |
Mar. 31, 2019 | |
Convertible Notes Payable Related Parties Tables Abstract | |
Schedule of Convertible Notes Payable | At March 31, 2019 and June 30, 2018 notes payable to officers and shareholders were as follows: 3/31/19 6/30/18 Note payable to officer bearing interest at 6.5% due December, 2018. The note is convertible into common stock at $.05 a share at maturity. The note is unsecured. At March 31, 2019 the note was in default. 50,000 50,000 Note payable to stockholder bearing interest at 6.5% due December, 2018. The note is convertible into common stock at $.05 a share at maturity. The note is unsecured. At March 31, 2018 the note was in default. 20,000 20,000 Note payable to stockholder bearing interest at 6.5% due December, 2018. The note is convertible into common stock at $.05 a share at maturity. The note is unsecured. At March 31, 2019 the note is in default. (1) 1,516,875 1,509,919 Line of credit for a maximum of $150,000 from stockholder bearing interest at 10% with a 5% origination fee. In August 2019 the note coverts to a 24 month term note with payments of $7,525. The note is unsecured. 121,784 — Line of credit for a maximum of $100,000 from stockholder bearing interest at 10% with a 5% origination fee. In August 2019 the note coverts to a 24 month term note with payments of $5,023. The note is unsecured. 81,190 — 1,789,849 1,579,919 Less current maturities (1,695,393 ) (1,679,919 ) $ 94,456 $ — |
Future maturities of Notes Payable | At March 31, 2019 future maturities of Notes Payable – Related Parties were as follows: Year Ending March 31: 2020 $ 1,695,393 2021 94,456 $ 1,789,849 |
2. INVENTORY (Details)
2. INVENTORY (Details) - USD ($) | Mar. 31, 2019 | Jun. 30, 2018 |
Inventory | $ 28,858 | $ 30,391 |
Used Tire for Resale | ||
Inventory | 9,904 | 11,648 |
Petrozene and Tire Oil | ||
Inventory | $ 18,954 | $ 18,743 |
3. PROPERTY, PLANT AND EQUIPM_3
3. PROPERTY, PLANT AND EQUIPMENT (Details) - USD ($) | Mar. 31, 2019 | Jun. 30, 2018 |
Property Plant And Equipment Details Abstract | ||
Land | $ 360,000 | $ 360,000 |
Buildings and Improvements | 706,700 | 706,700 |
Automotive Equipment | 78,100 | 78,100 |
Machinery and Equipment | 507,807 | 507,807 |
Capital Lease Assets | 444,088 | 56,738 |
Property, plant and equipment, gross | 2,096,695 | 1,709,345 |
Less Accumulated Depreciation | 448,867 | 349,373 |
Property, plant and equipment, net | $ 1,647,828 | $ 1,359,972 |
3. PROPERTY, PLANT AND EQUIPM_4
3. PROPERTY, PLANT AND EQUIPMENT (Details Narrative) - USD ($) | 9 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Property Plant And Equipment Details Narrative Abstract | ||
Depreciation expense | $ 99,494 | $ 94,469 |
5. CAPITAL LEASE OBLIGATIONS (D
5. CAPITAL LEASE OBLIGATIONS (Details) - USD ($) | Mar. 31, 2019 | Jun. 30, 2018 |
Capital lease obligations | $ 403,648 | $ 25,608 |
Less current maturities | (127,267) | (12,484) |
Long tem capital lease obligations | 270,381 | 13,124 |
Capital Lease Obligations 1 | ||
Capital lease obligations | 1,557 | 4,281 |
Capital Lease Obligations 2 | ||
Capital lease obligations | 6,216 | 8,725 |
Capital Lease Obligations 3 | ||
Capital lease obligations | 8,525 | 12,602 |
Capital Lease Obligations 3 | ||
Capital lease obligations | $ 387,350 | $ 0 |
5. CAPITAL LEASE OBLIGATIONS _2
5. CAPITAL LEASE OBLIGATIONS (Details 1) | Mar. 31, 2019USD ($) |
Capital Lease Obligations Details 1Abstract | |
2019 | $ 127,267 |
2020 | 135,266 |
2021 | 141,115 |
Total | $ 403,648 |
6. NOTES PAYABLE (Details)
6. NOTES PAYABLE (Details) - USD ($) | Mar. 31, 2019 | Jun. 30, 2018 |
Notes payable | $ 952,419 | $ 1,054,973 |
Less current maturities | (348,109) | (339,842) |
Long term notes payable | 604,310 | 715,131 |
Notes Payable 1 | ||
Notes payable | 49,923 | 79,810 |
Notes Payable 2 | ||
Notes payable | $ 902,496 | $ 975,163 |
6. NOTES PAYABLE (Details 1)
6. NOTES PAYABLE (Details 1) - USD ($) | Mar. 31, 2019 | Jun. 30, 2018 |
Notes Payable Details 1Abstract | ||
2019 | $ 348,109 | |
2020 | 513,860 | |
2021 | 90,450 | |
Total | $ 952,419 | $ 1,054,973 |
7. CONVERTIBLE NOTES PAYABLE _3
7. CONVERTIBLE NOTES PAYABLE - RELATED PARTIES (Details) - USD ($) | Mar. 31, 2019 | Jun. 30, 2018 | |
Convertible notes payable | $ 1,789,849 | $ 1,579,919 | |
Less current maturities | (1,695,393) | (1,579,919) | |
Long term convertible notes payable | 94,456 | 0 | |
Convertible Notes Payable 1 | |||
Convertible notes payable | 50,000 | 50,000 | |
Convertible Notes Payable 2 | |||
Convertible notes payable | 20,000 | 20,000 | |
Convertible Notes Payable 3 | |||
Convertible notes payable | [1] | 1,516,875 | 1,509,919 |
Convertible Notes Payable 4 | |||
Convertible notes payable | 121,784 | 0 | |
Convertible Notes Payable 5 | |||
Convertible notes payable | $ 81,190 | $ 0 | |
[1] | On August 15, 2018 the noteholder converted $125,000 of debt into common stock at $.05 a share in accordance with the note agreement. See Note 8 below. |
7. CONVERTIBLE NOTES PAYABLE _4
7. CONVERTIBLE NOTES PAYABLE - RELATED PARTIES (Details 1) - USD ($) | Mar. 31, 2019 | Jun. 30, 2018 |
Convertible Notes Payable Related Parties Details 1Abstract | ||
2020 | $ 1,695,393 | |
2021 | 94,456 | |
Total | $ 1,789,849 | $ 1,579,919 |
8. EQUITY (Details Narrative)
8. EQUITY (Details Narrative) - $ / shares | Mar. 31, 2019 | Jun. 30, 2018 |
Equity | ||
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 600,000,000 | 100,000,000 |
Common stock, shares outstanding | 98,288,177 | 91,988,177 |
Common stock, shares issued | 98,288,177 | 91,988,177 |
Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |