Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2017 | Nov. 06, 2017 | |
Document And Entity Information | ||
Entity Registrant Name | Black Ridge Oil & Gas, Inc. | |
Entity Central Index Key | 1,490,161 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 479,799,900 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,017 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 |
Current assets: | ||
Cash and cash equivalents | $ 4,721,876 | $ 66,269 |
Prepaid expenses | 40,120 | 86,892 |
Due from Black Ridge Holding Company, LLC | 0 | 765 |
Total current assets | 4,761,996 | 153,926 |
Property and equipment: | ||
Property and equipment | 128,155 | 140,547 |
Less accumulated depreciation | (114,901) | (112,128) |
Total property and equipment, net | 13,254 | 28,419 |
Deferred offering costs | 151,549 | 0 |
Investment in Blackridge Holding Company, LLC | 52,853 | 52,853 |
Total assets | 4,979,652 | 235,198 |
Current liabilities: | ||
Accounts payable | 71,651 | 21,563 |
Accrued expenses | 23,324 | 14,998 |
Total current liabilities | 94,975 | 36,561 |
Long term liabilities | 0 | 0 |
Total liabilities | 94,975 | 36,561 |
Commitments and contingencies (See note 18) | 0 | 0 |
Stockholders' equity | ||
Preferred stock, $0.001 par value, 20,000,000 shares authorized, no shares issued and outstanding | 0 | 0 |
Common stock, $0.001 par value, 500,000,000 shares authorized, 479,799,900 and 47,979,990 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively | 4,366,179 | 47,980 |
Additional paid-in capital | 36,108,545 | 34,902,016 |
Accumulated deficit | (35,590,047) | (34,751,359) |
Total stockholders' equity | 4,884,677 | 198,637 |
Total liabilities and stockholders' equity | $ 4,979,652 | $ 235,198 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares | Sep. 30, 2017 | Dec. 31, 2016 |
Stockholders' equity: | ||
Preferred stock, par value (in Dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 20,000,000 | 20,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value (in Dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 500,000,000 | 500,000,000 |
Common stock, shares issued | 479,799,900 | 47,979,990 |
Common stock, shares outstanding | 479,799,900 | 47,979,990 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS( Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Income Statement [Abstract] | ||||
Management fee income | $ 0 | $ 500,000 | $ 1,000,000 | $ 549,451 |
Total revenues | 0 | 500,000 | 1,000,000 | 549,451 |
General and administrative expenses: | ||||
Salaries and benefits | 331,284 | 316,486 | 1,006,712 | 985,406 |
Stock compensation | 154,069 | 157,824 | 473,053 | 473,472 |
Professional services | 11,783 | 17,657 | 108,519 | 117,802 |
Other general and administrative expenses | 72,071 | 108,050 | 228,686 | 322,906 |
Total general and administrative expenses | 569,207 | 600,017 | 1,816,970 | 1,899,586 |
Depreciation and amortization | 2,557 | 3,484 | 8,291 | 10,848 |
Total operating expenses | 571,764 | 603,501 | 1,825,261 | 1,910,434 |
Net operating loss | (571,764) | (103,501) | (825,261) | (1,360,983) |
Other income (expense): | ||||
Gain on debt restructuring | 0 | 0 | 0 | 41,621,150 |
Interest expense | (8,713) | 0 | (8,713) | 0 |
Loss on disposal of property and equipment | 0 | 0 | (4,714) | 0 |
Total other income (expense) | (8,713) | 0 | (13,427) | 41,621,150 |
Income (loss) before provision for income taxes | (580,477) | (103,501) | (838,688) | 40,260,167 |
Provision for income taxes | 0 | 0 | 0 | 0 |
Income (loss) from continuing operations, net of tax | (580,477) | (103,501) | (838,688) | 40,260,167 |
Loss from discontinued operations, net of tax | 0 | 0 | 0 | (10,197,374) |
Net income (loss) | $ (580,477) | $ (103,501) | $ (838,688) | $ 30,062,793 |
Weighted average common shares outstanding - basic | 64,438,566 | 47,979,990 | 53,526,470 | 47,979,990 |
Weighted average common shares outstanding - fully diluted | 64,438,566 | 47,979,990 | 53,526,470 | 48,055,112 |
Net loss per common share - basic | $ (0.01) | $ 0 | $ (0.02) | $ 0.63 |
Net loss per common share - fully diluted | $ (0.01) | $ 0 | $ (0.02) | $ 0.63 |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net income (loss) | $ (838,688) | $ 30,062,793 |
Loss from discontinued operations, net of income taxes | 0 | (10,197,374) |
Income (loss) from continuing operations | (838,688) | 40,260,167 |
Adjustments to reconcile net income (loss) from continuing operations to net cash provided by (used in) operating activities from continuing operations: | ||
Depreciation and amortization | 8,291 | 10,848 |
Loss on sale of property and equipment | 4,714 | 0 |
Gain on debt restructuring | 0 | (41,621,150) |
Common stock options issued to employees and directors | 473,053 | 473,472 |
Decrease (increase) in current assets: | ||
Due from Black Ridge Holdings Company LLC | 765 | 0 |
Prepaid expenses | 46,772 | (54,508) |
Increase (decrease) in current liabilities: | ||
Accounts payable | 50,088 | (3,049) |
Due to Black Ridge Holding Company, LLC | 0 | 23,674 |
Accrued expenses | 8,326 | 25,044 |
Net cash provided by (used in) operating activities from continuing operations | (246,679) | (885,502) |
Net cash provided by operating activities from discontinued operations | 0 | 3,829,723 |
Net cash provided by (used in) operating activities | (246,679) | 2,944,221 |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Purchase of equipment | 0 | (1,543) |
Proceeds from sale of property and equipment | 2,160 | 0 |
Net cash provided by investing activities from continuing operations | 2,160 | (1,543) |
Net cash used in investing activities of discontinued operations | 0 | (4,763,506) |
Net cash provided by (used in) investing activities | 2,160 | (4,765,049) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Proceeds from sale of stock, net | 2,965,555 | 0 |
Proceeds from sale of stock, related party, net | 2,086,120 | 0 |
Proceeds from promissory note | 500,000 | 0 |
Repayment of promissory note | (500,000) | 0 |
Payment of deferred offering costs | (151,549) | 0 |
Net cash used in financing activities from continuing operations | 4,900,126 | 0 |
Net cash provided by financing activities of discontinued operations | 0 | 1,650,000 |
Net cash provided by financing activities | 4,900,126 | 1,650,000 |
NET CHANGE IN CASH | 4,655,607 | (170,828) |
CASH AT BEGINNING OF PERIOD | 66,269 | 228,194 |
CASH AT END OF PERIOD | 4,721,876 | 57,366 |
SUPPLEMENTAL INFORMATION: | ||
Interest paid | 8,713 | 1,429,564 |
Income taxes paid | 0 | 0 |
NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||
Investment in Black Ridge Holding Company, LLC | 0 | (41,568,297) |
Net change in accounts payable for purchase of oil and gas properties | 0 | (3,744,487) |
Capitalized asset retirement costs, net of revision in estimate | $ 0 | $ 4,737 |
1. Organization and Nature of B
1. Organization and Nature of Business | 9 Months Ended |
Sep. 30, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization and Nature of Business | Effective April 2, 2012, Ante5, Inc. changed its corporate name to Black Ridge Oil & Gas, Inc., and continues to be quoted on the OTCQB under the trading symbol “ANFC”. Black Ridge Oil & Gas, Inc. (formerly Ante5, Inc.) (the “Company”) became an independent company in April 2010. We became a publicly traded company when our shares began trading on July 1, 2010. Since October 2010, we had been engaged in the business of acquiring oil and gas leases and participating in the drilling of wells in the Bakken and Three Forks trends in North Dakota and Montana. On June 21, 2016 we closed on a debt restructuring transaction with our secured lenders as described in Note 3 – Debt Restructuring. Through June 30, 2017 we had also been managing the oil and gas assets relinquished during the debt restructuring in which we continued to have an indirect minority interest. Our management services agreement related to those same oil and gas assets was terminated on April 3, 2017, effective June 30, 2017. The Company is focused on acquiring, investing in, and managing the oil and gas assets for our partners. We continue to pursue asset acquisitions in all major onshore unconventional shale formations that may be acquired with capital from our existing joint venture partners or other capital providers. On September 25, 2017, the Company finalized an equity raise utilizing a rights offering and backstop agreement, raising net proceeds of $5,051,675 and issuing 431,819,910 shares. The proceeds were used to sponsor the Company’s obligations in sponsoring a special purpose acquisition company, discussed below, with the remainder for general corporate purposes. On October 10, 2017, the Company’s sponsored special purpose acquisition company, Black Ridge Acquisition Corp. (“BRAC”), completed an initial public offering raising $138,000,000 of gross proceeds (including proceeds from the exercise of an over-allotment option by the underwriters on October 18, 2017). In addition, the Company purchased 445,000 BRAC units at $10.00 per unit in a private placement transaction for a total contribution of $4,450,000 in order to fulfill its obligations in sponsoring BRAC. BRAC is a blank check company formed for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities. BRAC’s efforts to identify a prospective target business will not be limited to a particular industry or geographic region although it intends to focus its search for target businesses in the energy or energy-related industries with an emphasis on opportunities in the upstream oil and gas industry in North America. Following the initial public offering and over-allotment, the Company owns 22% of the outstanding common stock of BRAC and manages BRAC’s operations via a management services agreement. |
2. Basis of Presentation and Su
2. Basis of Presentation and Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2017 | |
Accounting Policies [Abstract] | |
Basis of Presentation and Summary of Significant Accounting Policies | Effective April 2, 2012, Ante5, Inc. changed its corporate name to Black Ridge Oil & Gas, Inc., and continues to be quoted on the OTCQB under the trading symbol “ANFC”. Black Ridge Oil & Gas, Inc. (formerly Ante5, Inc.) (the “Company”) became an independent company in April 2010. We became a publicly traded company when our shares began trading on July 1, 2010. Since October 2010, we had been engaged in the business of acquiring oil and gas leases and participating in the drilling of wells in the Bakken and Three Forks trends in North Dakota and Montana. On June 21, 2016 we closed on a debt restructuring transaction with our secured lenders as described in Note 3 – Debt Restructuring. Through June 30, 2017 we had also been managing the oil and gas assets relinquished during the debt restructuring in which we continued to have an indirect minority interest. Our management services agreement related to those same oil and gas assets was terminated on April 3, 2017, effective June 30, 2017. The Company is focused on acquiring, investing in, and managing the oil and gas assets for our partners. We continue to pursue asset acquisitions in all major onshore unconventional shale formations that may be acquired with capital from our existing joint venture partners or other capital providers. On September 25, 2017, the Company finalized an equity raise utilizing a rights offering and backstop agreement, raising net proceeds of $5,051,675 and issuing 431,819,910 shares. The proceeds were used to sponsor the Company’s obligations in sponsoring a special purpose acquisition company, discussed below, with the remainder for general corporate purposes. On October 10, 2017, the Company’s sponsored special purpose acquisition company, Black Ridge Acquisition Corp. (“BRAC”), completed an initial public offering raising $138,000,000 of gross proceeds (including proceeds from the exercise of an over-allotment option by the underwriters on October 18, 2017). In addition, the Company purchased 445,000 BRAC units at $10.00 per unit in a private placement transaction for a total contribution of $4,450,000 in order to fulfill its obligations in sponsoring BRAC. BRAC is a blank check company formed for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities. BRAC’s efforts to identify a prospective target business will not be limited to a particular industry or geographic region although it intends to focus its search for target businesses in the energy or energy-related industries with an emphasis on opportunities in the upstream oil and gas industry in North America. Following the initial public offering and over-allotment, the Company owns 22% of the outstanding common stock of BRAC and manages BRAC’s operations via a management services agreement. Note 2 – Basis of Presentation and Significant Accounting Policies The interim condensed financial statements included herein, presented in accordance with United States generally accepted accounting principles and stated in US dollars, have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to not make the information presented misleading. These statements reflect all adjustments, which in the opinion of management, are necessary for fair presentation of the information contained therein. Except as otherwise disclosed, all such adjustments are of a normal recurring nature. It is suggested that these interim condensed financial statements be read in conjunction with the audited financial statements for the year ended December 31, 2016, which were included in our Annual Report on Form 10-K. The Company follows the same accounting policies in the preparation of interim reports. Principles of Consolidation The accompanying consolidated financial statements include the accounts of the following entities, all of which are under common control and ownership: Name of entity State of Incorporation Relationship Black Ridge Oil and Gas, Inc. Nevada Parent Black Ridge Acquisition Corp. Delaware Subsidiary (1) (1) The consolidated financial statements herein contain the operations of the wholly-owned subsidiary listed above. All significant inter-company transactions have been eliminated in the preparation of theses financial statements. The parent company, Black Ridge Oil & Gas, Inc. and subsidiary, Black Ridge Acquisition Corp. will be collectively referred to herein as the “Company” or “Black Ridge”. The Company’s headquarters is in Minneapolis, Minnesota and substantially all of its operations are in the United States. Reclassifications As discussed in Note 3 – Debt Restructuring, income, expense and cash flows from the restructured operations for the three and nine months ended September 30, 2016 have been reclassified as net loss and cash flows from discontinued operations. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. Environmental Liabilities The oil and gas industry is subject, by its nature, to environmental hazards and clean-up costs. At this time, management knows of no substantial losses from environmental accidents or events which would have a material effect on the Company. Cash and Cash Equivalents Cash equivalents include money market accounts which have maturities of three months or less. For the purpose of the statements of cash flows, all highly liquid investments with an original maturity of three months or less are considered to be cash equivalents. Cash equivalents are stated at cost plus accrued interest, which approximates market value. No cash equivalents were on hand at September 30, 2017 and December 31, 2016. Cash in Excess of FDIC Insured Limits The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. Accounts are guaranteed by the Federal Deposit Insurance Corporation (FDIC) and the Securities Investor Protection Corporation (SIPC) up to $250,000 and $500,000, respectively, under current regulations. The Company had approximately $4,460,346 and $-0- in excess of FDIC and SIPC insured limits at September 30, 2017 and December 31, 2016, respectively. As of September 30, 2017, the Company had not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts. Website Development Costs The Company accounts for website development costs in accordance with ASC 350-50, “Accounting for Website Development Costs” (“ASC 350-50”), wherein website development costs are segregated into three activities: 1) Initial stage (planning), whereby the related costs are expensed. 2) Development (web application, infrastructure, graphics), whereby the related costs are capitalized and amortized once the website is ready for use. Costs for development content of the website may be expensed or capitalized depending on the circumstances of the expenditures. 3) Post-implementation (after site is up and running: security, training, administration), whereby the related costs are expensed as incurred. Upgrades are usually expensed, unless they add additional functionality. We have capitalized a total of $56,660 of website development costs from inception through September 30, 2017. We depreciate our website development costs on a straight line basis over the estimated useful life of the assets, which is currently three years. We have recognized depreciation expense on these website costs of $-0- and $-0- for the nine months ended September 30, 2017 and 2016, respectively, as all website development costs have been fully depreciated. Income Taxes The Company recognizes deferred tax assets and liabilities based on differences between the financial reporting and tax basis of assets and liabilities using the enacted tax rates and laws that are expected to be in effect when the differences are expected to be recovered. The Company provides a valuation allowance for deferred tax assets for which it does not consider realization of such assets to be more likely than not. Basic and Diluted Loss Per Share The basic net loss per share is computed by dividing the net loss (the numerator) by the weighted average number of common shares outstanding for the period (the denominator). Diluted net loss per common share is computed by dividing the net loss by the weighted average number of common shares and potential common shares outstanding (if dilutive) during each period. Potential common shares include stock options, warrants and restricted stock. The number of potential common shares outstanding relating to stock options, warrants and restricted stock is computed using the treasury stock method. The reconciliation of the denominators used to calculate basic EPS and diluted EPS for the three and nine months ended September 30, 2017 and 2016 are as follows: Three Months Ended Nine Months Ended September 30, September 30, 2017 2016 2017 2016 Weighted average common shares outstanding – basic 64,438,566 47,979,990 53,526,470 47,979,990 Plus: Potentially dilutive common shares: Stock options and warrants – – – 75,122 Weighted average common shares outstanding – diluted 64,438,566 47,979,990 53,526,470 48,055,112 Stock options and warrants excluded from the calculation of diluted EPS because their effect was anti-dilutive were 11,380,000 and 7,043,500 for the three months ended September 30, 2017 and 2016, respectively, and 11,380,000 and 6,906,500 for the nine months ended September 30, 2017 and 2016, respectively. Fair Value of Financial Instruments Under FASB ASC 820-10-05, the Financial Accounting Standards Board establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. This Statement reaffirms that fair value is the relevant measurement attribute. The adoption of this standard did not have a material effect on the Company’s financial statements as reflected herein. The carrying amounts of cash, accounts payable and accrued expenses reported on the balance sheets are estimated by management to approximate fair value primarily due to the short term nature of the instruments. The Company had no items that required fair value measurement on a recurring basis. Property and Equipment Property and equipment that are not oil and gas properties are recorded at cost and depreciated using the straight-line method over their estimated useful lives of three to seven years. Expenditures for replacements, renewals, and betterments are capitalized. Maintenance and repairs are charged to operations as incurred. Long-lived assets, other than oil and gas properties, are evaluated for impairment to determine if current circumstances and market conditions indicate the carrying amount may not be recoverable. The Company has not recognized any impairment losses on non-oil and gas long-lived assets. Depreciation expense was $8,291 and $10,848 for the nine months ended September 30, 2017 and 2016, respectively. Revenue Recognition The Company recognizes management fee income as services are provided. The Company recognized oil and gas revenues from its former interests in producing wells when production was delivered to, and title was transferred to, the purchaser and to the extent the selling price is reasonably determinable. Oil and gas revenues are reflected as a component of discontinued operations on the statements of operations. Asset Retirement Obligations The Company records the fair value of a liability for an asset retirement obligation in the period in which the well is spud or the asset is acquired and a corresponding increase in the carrying amount of the related long-lived asset. The liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. If the liability is settled for an amount other than the recorded amount, a gain or loss is recognized. The expense related to accretion of the discount on the asset retirement liability is reflected as a component of discontinued operations on the statement of operations for the nine months ended September 30, 2016. Full Cost Method The Company followed the full cost method of accounting for oil and gas operations in 2016 whereby all costs related to the exploration and development of oil and gas properties were initially capitalized into a single cost center ("full cost pool"). The Company had no oil and gas operations in 2017 as they were disposed as part of the debt restructuring transaction on June 21, 2016 described in Note 3 – Debt Restructuring. Capitalized costs included land acquisition costs, geological and geophysical expenses, carrying charges on non-producing properties, costs of drilling directly related to acquisition, and exploration activities. Internal costs that were capitalized were directly attributable to acquisition, exploration and development activities and did not include costs related to the production, general corporate overhead or similar activities. Costs associated with production and general corporate activities were expensed in the period incurred. Capitalized costs for the nine month period ended September 30, 2016 are summarized as follows: Nine Months Ended September 30, 2016 Capitalized Certain Payroll and Other Internal Costs $ – Capitalized Interest Costs 7,219 Total $ 7,219 Proceeds from sales of proved properties were credited to the full cost pool, with no gain or loss recognized, unless such a sale would significantly alter the relationship between capitalized costs and the proved reserves attributable to these costs. A significant alteration would typically involve a sale of 20% or more of the proved reserves related to a single full cost pool. The Company assessed all items classified as unevaluated property on a quarterly basis for possible impairment or reduction in value. The assessment included consideration of the following factors, among others: intent to drill; remaining lease term; geological and geophysical evaluations; drilling results and activity; the assignment of proved reserves; and the economic viability of development if proved reserves are assigned. During any period in which these factors indicate an impairment, the cumulative drilling costs incurred to date for such property and all or a portion of the associated leasehold costs were transferred to the full cost pool and were then subject to amortization. Capitalized costs associated with impaired properties and properties having proved reserves, estimated future development costs, and asset retirement costs under FASB ASC 410-20-25 were depleted and amortized on the unit-of-production method based on the estimated gross proved reserves as determined by independent petroleum engineers. The costs of unproved properties were withheld from the depletion base until such time as they are either developed or abandoned. Capitalized costs of oil and gas properties (net of related deferred income taxes) could not exceed an amount equal to the present value, discounted at 10% per annum, of the estimated future net cash flows from proved oil and gas reserves plus the cost of unproved properties (adjusted for related income tax effects). When capitalized costs exceeded this ceiling, impairment was recognized. The present value of estimated future net cash flows was computed by applying the arithmetic average first day price of oil and natural gas for the preceding twelve months to estimated future production of proved oil and gas reserves as of the end of the period, less estimated future expenditures to be incurred in developing and producing the proved reserves and assuming continuation of existing economic conditions. Such present value of proved reserves' future net cash flows excludes future cash outflows associated with settling asset retirement obligations. When this comparison indicated an excess carrying value, the excess was charged to earnings as an impairment expense. The Company recognized an impairment loss of $5,219,000 during the nine months ended September 30, 2016. The impairment loss is reflected as a component of discontinued operations on the statement of operations for the period. Stock-Based Compensation The Company adopted FASB guidance on stock based compensation upon inception at April 9, 2010. Under FASB ASC 718-10-30-2, all share-based payments to employees, including grants of employee stock options, are recognized in the income statement based on their fair values. Expense related to common stock and stock options issued for services and compensation totaled $473,053 and $473,472 for the nine months ended September 30, 2017 and 2016, respectively, using the Black-Scholes options pricing model and an effective term of 6 to 6.5 years based on the weighted average of the vesting periods and the stated term of the option grants and the discount rate on 5 to 7 year U.S. Treasury securities at the grant date. Uncertain Tax Positions Effective upon inception at April 9, 2010, the Company adopted standards for accounting for uncertainty in income taxes. These standards prescribe a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. These standards also provide guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. Various taxing authorities may periodically audit the Company’s income tax returns. These audits include questions regarding the Company’s tax filing positions, including the timing and amount of deductions and the allocation of income to various tax jurisdictions. In evaluating the exposures connected with these various tax filing positions, including state and local taxes, the Company records allowances for probable exposures. A number of years may elapse before a particular matter, for which an allowance has been established, is audited and fully resolved. Black Ridge Oil & Gas, Inc. has not yet undergone an examination by any taxing authorities. The assessment of the Company’s tax position relies on the judgment of management to estimate the exposures associated with the Company’s various filing positions. Derivative Instruments and Price Risk Management During the 2016 period, while the Company had oil and gas operations, the Company entered into derivative contracts, including price swaps, caps and floors, which required payments to (or receipts from) counterparties based on the differential between a fixed price and a variable price for a fixed quantity of crude oil without the exchange of underlying volumes. The notional amounts of these financial instruments were based on a portion of the expected production from existing wells. Any realized gains and losses were recorded to gain (loss) on settled derivatives and unrealized gains or losses as a result of mark-to market valuations were recorded to gain (loss) on the mark-to-market of derivatives and are included as a component of loss from discontinued operations on the statements of operations. Recent Accounting Pronouncements New accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) that are adopted by the Company as of the specified effective date. If not discussed below, management believes there have been no developments to recently issued accounting standards, including expected dates of adoption and estimated effects on our financial statements, from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2016. |
3. Debt Restructuring
3. Debt Restructuring | 9 Months Ended |
Sep. 30, 2017 | |
Restructuring and Related Activities [Abstract] | |
Debt Restructuring | On March 29, 2016, the Company entered into an Asset Contribution Agreement with Black Ridge Holding Company, LLC, a Delaware limited liability company (“BRHC”) which was formed by the Company to contribute and assign to BRHC, all of the Company's (i) oil and gas assets (including working capital and tangible and intangible assets) (the “Assets”), (ii) outstanding balances under that certain Credit Agreement between the Company, as borrower, and Cadence Bank, N.A. (“Cadence”), as lender (the “Cadence Credit Facility”) and the outstanding balances under that certain Credit Agreement between the Company, as borrower, and the several banks and other financial institutions or entities from time to time parties thereto (the “Chambers”), and Chambers, as administrative agent (the “Chambers Credit Facility”) and (iii) all current liabilities related to the Assets, in exchange for 5% of the issued and outstanding Class A Units (the “Class A Units”) in BRHC (the “Asset Contribution”). On March 29, 2016, affiliates of Chambers Energy Management, LP (“Chambers”) (specifically, Chambers Energy Capital II, LP and CEC II TE, LLC (collectively, the “Chambers Affiliates”)) entered into a Debt Contribution Agreement between BRHC and the Chambers Affiliates, pursuant to which BRHC issued a number of Class A Units representing 95% of the Class A Units of BRHC to the Chambers Affiliates in exchange for the release of BRHC's obligations under the Chambers Credit Facility (the “Satisfaction of Debt” and, together with the Asset Contribution, the “BRHC Transaction”). Concurrent with the Satisfaction of Debt, each warrant originally issued with the Chambers Credit Facility was automatically retired and cancelled. The closing of the BRHC Transaction was subject to the Company obtaining the approval of stockholders holding a majority of its outstanding capital stock and to the Company having assigned the Cadence Credit Agreement to BRHC with Cadence’s consent, and BRHC and Cadence entering into any applicable amendment agreements related to such assignment and waiver of financial covenant ratio compliance for the quarter ended December 31, 2015 and quarter ending March 31, 2016. On June 21, 2016, the Company satisfied all of these conditions and, for accounting purposes, the BRHC Transaction was closed. The parties agreed that the BRHC Transaction, the Asset Contribution and the Satisfaction of Debt were effective, for valuation purposes, as of April 1, 2016. The terms of the Class A Units of BRHC are set forth in the limited liability company agreement of BRHC (the “LLC Agreement”), which became effective upon the closing of the BRHC Transaction. All distributions by BRHC of cash or other property, and whether upon liquidation or otherwise, are to be made as follows: • First, 100% to the Class A Members, pro rata, until each Class A Member has received distributions in aggregate totaling the then Class A Preference, which is an amount equal to a 10.0% internal rate of return on the invested capital amount. • Second, 90% to the Class A Members, pro rata, and 10% to the Class B Members, pro rata, until such time as the aggregate distributions to Chambers equals 250% of the capital contribution of its Class A Units. • Third, 80% to the Class A Members, pro rata, and 20% to the Class B Members, pro rata. BRHC is managed by the BRHC Board, which is responsible for the conduct of the day-to-day business of BRHC and the management, oversight and disposition of the assets of BRHC. The initial BRHC Board is comprised of three managers, consisting of two managers appointed by Chambers and one member from the Company. In addition, under the LLC Agreement, Chambers committed to contribute up to $30 million cash (the “Chambers Investment Commitment”) to BRHC in exchange for Class A Units. At Closing, Chambers funded $10 million (the “Initial Chambers Investment”) of the Chambers Investment Commitment, the proceeds of which were used to reduce outstanding amounts owed by BRHC to Cadence under the Cadence Credit Facility and for general corporate purposes. The remaining $20 million (the “Subsequent Chambers Investment”), subject to certain conditions, could be called from time to time during the Investment Period by the board of managers of BRHC (the “BRHC Board”). The Initial Chambers Investment and any Subsequent Chambers Investment shall serve to proportionately reduce the Company's Class A Units percentage ownership in BRHC. The investment period is the lesser of three years or such time as the entire Chambers Investment Commitment has been called by the BRHC Board (the “Investment Period”). Any portion of Chambers Investment Commitment not called by the BRHC Board prior to the expiration of the Investment Period will be cancelled. In no event will Chambers be required to make a capital contribution in an amount in excess of its undrawn commitment. The Company was granted 1,000,000 Class B Units in BRHC at the Closing of the BRHC Transaction. At the discretion of the BRHC’s Board of Managers, the Company may be granted additional Class B Units in BRHC, and in turn, the Company may transfer such Class B Units to certain members of the Company's management. Subject to certain conditions, the Class B Units will entitle the holders to participate in any future distributions of BRHC after distributions equal to the capital contributions and preferred return have been made to the holders of Class A Units of BRHC. At the closing of the BRHC Transaction, the Company entered into a Management Services Agreement with BRHC. Under the Management Services Agreement, the Company provides services to BRHC with respect to the business operations of BRHC, including but not limited to locating, investigating and analyzing potential non-operator oil and gas projects and day-to-day operations related to such projects. The Company is paid a fee under the Management Services Agreement intended to cover the costs of providing such services and is reimbursed for certain third party expenses. The term of the Management Services Agreement commenced on the closing of the BRHC Transaction and continued indefinitely, until terminated, which required a three month notice by the terminating party. The management services agreement was terminated by BRHC on April 3, 2017, effective June 30, 2017. As a result of the transaction, the Company recorded a gain on debt restructuring of $41,621,150 calculated as the difference between our final ownership interest in BRHC, after conversion of debt to equity and the equity contribution of the Initial Chambers Investment within BRHC and the Company’s retention of a 3.88% ownership interest in BRHC at the date of the restructuring, and the net book value of the assets and labilities the Company transferred to BRHC. The income and expense associated with the operating activities contributed in the BRHC Transaction are reflected as “Loss from discontinued items, net of income taxes” on our condensed statement of operations for the nine months ended September 30, 2016. The items included in “Loss from discontinued operations, net of income taxes” are as follows: For the Nine Months Ended September 30, 2016 Oil and gas sales $ 5,539,613 Gain on settled derivatives 1,043,026 Gain (loss) on the mark-to-market of derivatives (4,288,736 ) Total revenues 2,293,903 Operating expenses: Production expenses 1,400,639 Production taxes 568,028 General and administrative expenses 476,461 Depletion of oil and gas properties 3,114,347 Impairment of oil and gas properties 5,219,000 Accretion of discount on asset retirement obligations 16,258 Total operating expenses 10,794,733 Net operating loss (8,500,830 ) Other income (expense): Interest expense (1,696,544 ) Total other income (expense) (1,696,544 ) Loss before provision for income taxes (10,197,374 ) Provision for income taxes – Net loss $ (10,197,374 ) |
4. Rights Offering and Formatio
4. Rights Offering and Formation of Black Ridge Acquisition Corp. | 9 Months Ended |
Sep. 30, 2017 | |
Rights Offering And Formation Of Black Ridge Acquisition Corp. | |
Rights Offering and Formation of Black Ridge Acquisition Corp. | The Company filed a Registration Statement on Form S-1 (the “Registration Statement”) with the Securities and Exchange Commission (the “SEC”) to register the 431,819,910 shares of common stock to be offered in the Rights Offering that was declared effective by the SEC on August 3, 2017. As such, the Company distributed, on a pro rata basis, one Right for each share of common stock owned by shareholders at 5:00 p.m., Central Time, on August 2, 2017 (the “Record Date”). Each Right permitted a shareholder to purchase up to nine shares of common stock at a subscription price of $0.012 per share. The Rights Offering expired at 5:00 p.m., Central Time, September 8, 2017 (the “Expiration Date”). In connection with the Rights Offering, the Company also entered into a Standby Purchase Agreement (the “Backstop Agreement”) with a consortium of investors, including members of the Company’s board of directors and our Chief Executive Officer (collectively, the “Backstop Purchasers”), who agree to purchase up to $2.9 million of the unsubscribed shares following the completion of the rights offering. On September 26, 2017, the Company completed the Rights Offering, raising gross proceeds of $5,181,839 and issued 431,819,910 shares in connection with the exercise of rights in connection with the Rights Offering and related Backstop Agreement. Under the Rights Offering the Company’s current shareholders exercised rights to purchase 199,811,421 shares of stock for a total of $2,397,737. Under the Backstop Agreement, the Backstop Purchasers purchased 232,008,489 shares of stock for a total of $2,784,102. Officers and directors of the Company purchased 173,843,308 shares between the Rights Offering and as participants of the Backstop Agreement for $2,086,120 and received 179,376 warrants to purchase shares of common stock at $0.01 per share for their participation in the Backstop Agreement. The warrants issued to related parties fair value was estimated to be $4,179 (see Note 16). The Company incurred $130,164 in costs associated with raising capital, which has been netted against stockholders’ equity. Additionally as part of Backstop agreement, the Company issued 435,000 warrants to purchase its common stock at $0.01 for participants in the Backstop Agreement. The warrants fair value was estimated to be $10,135 (see Note 16). Subsequent to September 30, 2017, the Company use the net proceeds of the Rights Offering to fulfill its obligation as sponsor of a special purpose acquisition company, proceeds from the Rights Offering following the sponsorship be used for general corporate purposes which may include other investments and acquisitions. BRAC had incurred costs of $151,549 related to its initial public offering through September 30, 2017, which have been classified on the balance sheet as deferred offering costs. The deferred offering costs were reclassified to additional paid-in capital upon the successful IPO on October 4, 2017. |
5. Prepaid Expenses
5. Prepaid Expenses | 9 Months Ended |
Sep. 30, 2017 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Prepaid Expenses | Prepaid expenses consist of the following: September 30, December 31, 2017 2016 Prepaid insurance costs $ 9,827 $ 43,324 Prepaid employee benefits 12,781 11,844 Prepaid office and other costs 17,512 31,724 Total prepaid expenses $ 40,120 $ 86,892 |
6. Investment in Black Ridge Ho
6. Investment in Black Ridge Holding Company, LLC | 9 Months Ended |
Sep. 30, 2017 | |
Investments, All Other Investments [Abstract] | |
Investment in Black Ridge Holding Company, LLC | The investment in Black Ridge Holding Company, LLC (“BRHC”) represents our equity interest in BRHC following the debt restructuring and related activity as described in Note 3 – Debt Restructuring. We account for the investment using the cost method. Subsequent to September 30, 2017, on October 2, 2017, BRHC was liquidated and certain assets the Company received in the liquidation were sold to the Chambers Affiliates. Between cash and receivables the Company received directly in the liquidation, and the proceeds of the sale of assets to the Chambers Affiliates, $1,083,038, representing a gain on the sale of its investment in BRHC of $1,030,185. |
7. Property and Equipment
7. Property and Equipment | 9 Months Ended |
Sep. 30, 2017 | |
Property and equipment: | |
Property and Equipment | Property and equipment at September 30, 2017 and December 31, 2016, consisted of the following: September 30, December 31, 2017 2016 Property and equipment $ 128,155 $ 140,547 Less: Accumulated depreciation and amortization (114,901 ) (112,128 ) Total property and equipment, net $ 13,254 $ 28,419 During the nine months ended September 30, 2017 we sold certain assets with a net book value of $6,874 for proceeds of $2,160, resulting in a loss on disposal of $4,714. The following table shows depreciation, depletion, and amortization expense by type of asset: Nine Months Ended September 30, 2017 2016 Depletion of costs for evaluated oil and gas properties (1) $ – $ 3,114,347 Depreciation and amortization of other property and equipment 8,291 10,848 Total depreciation, amortization and depletion $ 8,291 $ 3,125,195 (1) Impairment of Oil and Gas Properties As a result of currently prevailing low commodity prices and their effect on the proved reserve values of properties in 2016, we recorded a non-cash ceiling test impairment of $5,219,000 for the nine months ended September 30, 2016. The expense associated with the impairment is presented as a component of loss from discontinued operations, net of income taxes as described in Note 3 – Debt Restructuring. The impairment charge affected our reported net income but did not reduce our cash flow. |
8. Oil and Gas Properties
8. Oil and Gas Properties | 9 Months Ended |
Sep. 30, 2017 | |
Oil and Gas Exploration and Production Industries Disclosures [Abstract] | |
Oil and Gas Properties | The following table summarizes gross and net productive oil wells by state at June 21, 2016 (prior to their disposition in our debt restructuring). A net well represents our percentage ownership of a gross well. The following table does not include wells in which our interest is limited to royalty and overriding royalty interests. The following table also does not include wells which were awaiting completion, in the process of completion or awaiting flow back subsequent to fracture stimulation. June 21, 2016 Gross Net North Dakota 352 10.64 Montana 5 0.37 Total 357 11.01 The Company’s oil and gas properties consisted of all acreage acquisition costs (including cash expenditures and the value of stock consideration), drilling costs and other associated capitalized costs. As of June 21, 2016 (prior to the their disposition through our debt restructuring) our principal oil and gas assets included approximately 7,016 net acres located in North Dakota and Montana and were disposed by the Company on June 21, 2016 as part of the debt restructuring transaction summarized in Note 3 – Debt Restructuring. The following table summarizes our capitalized costs for the purchase and development of our oil and gas properties for the nine months ended September 30, 2016: Nine Months Ended September 30, 2016 Purchases of oil and gas properties and development costs for cash $ 4,858,134 Purchase of oil and gas properties accrued at period-end 3,155,016 Purchase of oil and gas properties accrued at beginning of period (prior to disposition) (6,899,503 ) Capitalized asset retirement costs 4,737 Total purchase and development costs, oil and gas properties $ 1,118,384 2016 Acquisitions During the nine months ended September 30, 2016, we did not purchase any oil and gas properties. 2016 Divestitures During the nine months ended September 30, 2016, we sold approximately 14 net leasehold acres of oil and gas properties for total proceeds of $94,628. No gain or loss was recorded pursuant to the sales. 2016 Disposition in Debt Restructuring On June 21, 2016 we disposed of all of our oil and gas properties, with net carrying costs $24,498,638, as part of our debt restructuring as outlined in Note 3 – Debt Restructuring. |
9. Asset Retirement Obligation
9. Asset Retirement Obligation | 9 Months Ended |
Sep. 30, 2017 | |
Asset Retirement Obligation Disclosure [Abstract] | |
Asset Retirement Obligation | The Company had asset retirement obligations (ARO) associated with the future plugging and abandonment of proved properties and related facilities prior to the disposition of the Company’s oil and gas operations as part of its debt restructuring summarized in Note 3 – Debt Restructuring. Under the provisions of FASB ASC 410-20-25, the fair value of a liability for an asset retirement obligation is recorded in the period in which it is incurred and a corresponding increase in the carrying amount of the related long lived asset. The liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. If the liability is settled for an amount other than the recorded amount, a gain or loss is recognized. The Company has no assets that are legally restricted for purposes of settling ARO. The following table summarizes the Company’s asset retirement obligation transactions recorded in accordance with the provisions of FASB ASC 410-20-25 during the nine months ended September 30, 2016: Nine Months Ended September 30, 2016 Beginning ARO $ 368,089 Liabilities incurred for new wells placed in production 4,737 Accretion of discount on ARO (a component of loss from discontinued operations) 16,258 Liability relieved in debt restructuring (389,084 ) Ending ARO $ – |
10. Related Party
10. Related Party | 9 Months Ended |
Sep. 30, 2017 | |
Related Party Transactions [Abstract] | |
Related Party | Prior to July 1, 2016 the Company leased office space on a month to month basis where the lessor was an entity owned by our former CEO and current Chairman of the Board of Directors, Bradley Berman. Pursuant to the lease, we occupied approximately 2,813 square feet of office space. We terminated the lease concurrent with our move to another location on June 30, 2016. The lease had base rents of $2,110 per month, plus common area operations and maintenance charges, and monthly parking fees of $240 per month, for the period from November 15, 2013 to October 31, 2014, and was subject to increases of $117 per month beginning November 1, 2014 and for each of the subsequent annual periods. We paid a total of $36,183 to this entity during the nine months ended September 30, 2016. The Company sold 173,843,308 shares to officers and directors between the Rights Offering and as participants of the Backstop Agreement for $2,086,120 and issued 179,376 warrants to purchase shares of common stock at $0.01 per share to officers and directors for their participation in the Backstop Agreement. |
11. Derivative Instruments
11. Derivative Instruments | 9 Months Ended |
Sep. 30, 2017 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivative Instruments | The Company was required to recognize all derivative instruments on the balance sheet as either assets or liabilities measured at fair value. The Company did not designate its derivative instruments as cash flow hedges for accounting purposes and, as such, marked its derivative instruments to fair value and recognized the realized and unrealized changes in fair value in its statements of operations under the captions “Loss on settled derivatives” and “Loss on the mark-to-market of derivatives” as a component of loss from discontinued operations. The Company had utilized swap and collar derivative contracts. While the use of these derivative instruments limited the downside risk of adverse price movements, their use also limited the upside revenue potential of upward price movements. For a fixed price swap contract, the counterparty is required to make a payment to the Company if the settlement price for any settlement period is less than the swap price and the Company is required to make a payment to the counterparty if the settlement price for any period is greater than the swap price. For a collar contract, the counterparty is required to make a payment to the Company if the settlement price for any settlement period is below the floor price, the Company is required to make a payment to the counterparty if the settlement price for any settlement period is above the ceiling price and no payment is required by either party if the settlement price for any settlement period is between the floor price and the ceiling price. The Company’s derivative contracts were settled based on reported settlement prices on commodity exchanges, with crude oil derivative settlements based on NYMEX West Texas Intermediate (“WTI”) pricing. Derivative Gains and Losses The following table presents realized and unrealized gains and losses on derivative instruments for the periods presented: Nine Months Ended September 30, 2016 Realized gain (loss) on derivatives: Crude oil fixed price swaps $ 922,872 Crude oil collars 120,154 Realized loss on derivatives, net $ 1,043,026 Gain (loss) on the mark-to-market of derivatives: Crude oil fixed price swaps $ (4,157,491 ) Crude oil collars (131,245 ) Gain (loss) on the mark-to-market of derivatives, net $ (4,288,736 ) |
12. Fair Value of Financial Ins
12. Fair Value of Financial Instruments | 9 Months Ended |
Sep. 30, 2017 | |
Fair Value Disclosures [Abstract] | |
Fair Value of Financial Instruments | The Company adopted FASB ASC 820-10 upon inception at April 9, 2010. Under FASB ASC 820-10-5, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The standard outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. Under GAAP, certain assets and liabilities must be measured at fair value, and FASB ASC 820-10-50 details the disclosures that are required for items measured at fair value. The Company had revolving credit facilities that must be measured under the new fair value standard. The Company’s financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy. The three levels are as follows: Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. Level 2 - Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs). Level 3 - Unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing the asset or liability. The following schedule summarizes the valuation of financial instruments at fair value on a recurring basis in the balance sheets as of September 30, 2017 and December 31, 2016: Fair Value Measurements at September 30, 2017 Level 1 Level 2 Level 3 Assets Cash and cash equivalents $ 4,721,876 $ – $ – Total assets 4,721,876 – – Liabilities Total liabilities – – – $ 4,721,876 $ – $ – Fair Value Measurements at December 31, 2016 Level 1 Level 2 Level 3 Assets Cash and cash equivalents $ 66,269 $ – $ – Total assets 66,269 – – Liabilities Total liabilities – – – $ 66,269 $ – $ – There were no transfers of financial assets or liabilities between Level 1 and Level 2 inputs for the nine months ended September 30, 2017. |
13. Revolving Credit Facilities
13. Revolving Credit Facilities and Long Term Debt | 9 Months Ended |
Sep. 30, 2017 | |
Debt Disclosure [Abstract] | |
Revolving Credit Facilities and Long Term Debt | Promissory Note On July 7, 2017 the Company entered into a $500,000 Promissory Note (the Note) issued to Cadence Bank, N.A. (Cadence) and a Security Agreement by the Company in favor of Cadence. The Note bore interest at 4.5% per annum payable monthly and was due on October 7, 2017. The Note was repaid in full on September 14, 2017. The Note was secured by the Company’s deposit account at Cadence and all of the Company’s rights, title and interests in and to the contractual rights of the Company to receive payment from Chambers Energy Management for the purchase of the Company’s interest in Black Ridge Holding Company, LLC. The Company incurred and paid $4,313 in interest on the Note and paid $4,400 in origination fees and other set up costs that are included in interest expense on the statement of operations. Former Senior Credit Agreement The Company, as borrower, entered into a Credit Agreement dated August 8, 2013 and amendments thereto dated December 13, 2013, March 24, 2014, April 21, 2014, September 11, 2014, March 30, 2015 and August 10, 2015 (as amended, the “Senior Credit Agreement ” Availability under the Senior Credit Facility was at all times subject to the then-applicable borrowing base, determined by Cadence in a manner consistent with the normal and customary oil and gas lending practices of Cadence. Availability was initially set at $7 million and was subject to periodic redeterminations. Subject to availability under the borrowing base, the Company could borrow, repay and re-borrow funds in amounts of $250,000 or more. At the Company’s election, the unpaid principal balance of any borrowings under the Senior Credit Facility may bear interest at either (i) the Base Rate, as defined in the Senior Credit Facility, plus the applicable margin, which varies from 1.00% to 1.50% or (ii) the LIBOR rate, as defined in the Senior Credit Facility, plus the applicable margin, which varies from 3.00% to 3.50%. Interest was payable for Base Rate loans on the last business day of the month and for LIBOR loans on the last LIBOR business day of each LIBOR interest period. The Company was also required to pay a quarterly fee of 0.50% on any unused portion of the borrowing base, as well as a facility fee of 0.90% of the initial and any subsequent additions to the borrowing base. The Senior Credit Facility’s maturity date of August 8, 2016, was subsequently amended to January 15, 2017 pursuant to the amendment on March 30, 2015. The Company could prepay the entire amount of Base Rate loans at any time, and could prepay the entire amount of LIBOR loans upon at least three business days’ notice to Cadence. The Senior Credit Facility was secured by first priority interests in mortgages on substantially all of the Company’s assets, including but not limited to the Company’s mineral interests in North Dakota and Montana. As part of the debt restructuring outline in Note 3 – Debt Restructuring, the Company transferred the obligation with a balance outstanding of $29,400,000 under the Senior Credit Facility to BRHC on June 21, 2016. Former Subordinated Credit Facility The Company, as borrower, entered into a Second Lien Credit Agreement dated August 8, 2013 and amendments thereto dated December 13, 2013, March 24, 2014, April 21, 2014, September 11, 2014, March 30, 2015, and August 10, 2015 (as amended, the “Subordinated Credit Agreement”) by and among the Company, as borrower, Chambers Energy Management, LP, as administrative agent (“Chambers”), and the several other lenders named therein (the “Subordinated Credit Facility”). Under the Subordinated Credit Facility, term loans in the aggregate principal amount of up to $75 million were available from time to time (i) to repay the Previous Credit Facility, (ii) for fees and closing costs in connection with both the Senior Credit Facility and the Subordinated Credit Facility (together, the “Credit Facilities”), and (iii) general corporate purposes. The Subordinated Credit Agreement provided initial commitment availability of $25 million, which was subsequently amended to $30 million, with the remaining commitments subject to the approval of Chambers and other customary conditions. The Company could borrow the available commitments in amounts of $5 million or more and could not request borrowings of such loans more than once a month, provided that the initial draw was at least $15 million. Loans under the Subordinated Credit Facility were funded net of a 2% OID. The unpaid principal balance of borrowings under the Subordinated Credit Facility bore interest at the Cash Interest Rate plus the PIK Interest Rate. The Cash Interest Rate was 9.00% per annum plus a rate per annum equal to the greater of (i) 1.00% and (ii) the offered rate for three-month deposits in U.S. dollars that appears on Reuters Screen LIBOR 01 as of 11:00 a.m. (London time) on the second full LIBOR business day preceding the first day of each calendar quarter. The PIK Interest Rate was equal to 4.00% per annum. Interest was payable on the last day of each month. The Company was also required to pay an annual nonrefundable administration fee of $50,000 and a monthly availability fee computed at a rate of 0.50% per annum on the average daily amount of any unused portion of the available amount under the commitment. The Subordinated Credit Facility was to mature on June 30, 2017. Upon at least three business days’ written notice, the Company could prepay the entire amount under the loans, together with accrued interest. Each prepayment made prior to the second anniversary of the funding date, as defined in the Subordinated Credit Facility, would be accompanied by a make-whole amount, as defined in the Subordinated Credit Agreement. Prepayments made on or after the second anniversary of the funding date were accompanied by an applicable premium, as set forth in the Subordinated Credit Agreement. The Subordinated Credit Facility was secured by second priority interests on substantially all of the Company’s assets, including but not limited to second priority mortgages on the Company’s mineral interests in North Dakota and Montana. The first funding from the Subordinated Credit Facility occurred on September 9, 2013 at which time we drew $14,700,000, net of a $300,000 original issue discount, from the Subordinated Credit Agreement and used $10,226,057 of those proceeds to repay and terminate a previously outstanding revolving credit facility. We had drawn an additional $14,700,000, net of $300,000 original issue discounts, through June 21, 2016. The Company had borrowings of $30.0 million outstanding under the Subordinated Credit Facility as of June 21, 2016. The obligations under the Subordinated Credit Facility, $30.0 million of principal and $2,931,369 of PIK interest payable, were transferred to BRHC and converted to equity in BRHC as part of the debt restructuring outlined in Note 3 - Debt Restructuring on June 21, 2016. Intercreditor Agreements and Covenants Cadence and Chambers had entered into an Intercreditor Agreement dated August 8, 2013 (the “Intercreditor Agreement”). The Intercreditor Agreement provided that any liens on the assets of the Company securing indebtedness under the Subordinated Credit Facility were subordinate to liens on the assets securing indebtedness under the Senior Credit Facility and set forth the respective rights, obligations and remedies of the lenders under the Senior Credit Facility with respect to their first priority liens and the lenders under the Subordinated Credit Facility with respect to their second priority liens. The Credit Facilities, as amended, required customary affirmative and negative covenants for credit facilities of the respective types and sizes for companies operating in the oil and gas industry, as well as customary events of default. Furthermore, the Credit Facilities contain financial covenants that required the Company to satisfy certain specified financial ratios. The Senior Credit Agreement required the Company to maintain, as of the last day of each fiscal quarter of the Company, (i) a collateral coverage ratio (reserve value plus consolidated working capital to adjusted indebtedness) of at least 0.65 to 1.00 through the quarter ending June 30, 2014, 0.70 to 1.00 for the quarters ending September 30, 2014 and December 31, 2014, was waived for the quarters ending March 31, 2015 and June 30, 2015, and 0.70 to 1.00 for the quarter ending September 30, 2015, and 0.80 to 1.00 for the quarter ending December 31, 2015 and thereafter, (ii) a ratio of current assets, including debt facility available to be drawn, to current liabilities of a minimum of 1.0 to 1.0, except for the quarter ending June 30, 2014, which was waived, (iii) a net debt to EBITDAX, as defined in the Senior Credit Agreement, ratio of 3.75 to 1.00 for the quarter ended March 31, 2014, 4.25 to 1.00 for the quarters ended June 30, 2014 and September 30, 2014, 4.00 to 1.00 for the quarter ended December 31, 2014, was waived for the quarters ended March 31, 2015 and June 30, 2015, and 3.50 to 1.00 for the quarter ending September 30, 2015, and 3.65 to 1.00 for the quarter ending December 31, 2015, and 3.50 to 1.00 for the quarter ending March 31, 2016 and thereafter, in each case calculated on a modified trailing four quarter basis, (iv) a maximum senior leverage ratio of not more than 2.5 to 1.0 calculated on a modified trailing four quarter basis, and (v) a minimum interest coverage ratio of not less than 3.0 to 1.0. The Subordinated Credit Agreement required the Company to maintain, as of the last day of each fiscal quarter of the Company, (i) a collateral coverage ratio (reserve value plus consolidated working capital to adjusted indebtedness) of at least 0.65 to 1.00 through the quarter ending June 30, 2014, 0.70 to 1.00 for the quarters ending September 30, 2014 and December 31, 2014, was waived for the quarters ending March 31, 2015 and June 30, 2015, and 0.70 to 1.00 for the quarter ending September 30, 2015, and 0.80 to 1.00 for the quarter ending December 31, 2015 and thereafter, (ii) a consolidated net leverage ratio (adjusted total indebtedness less the amount of unrestricted cash equivalents to consolidated EBITDA) of no more than 3.75 to 1.00 for the quarter ending March 31, 2014, 4.25 to 1.00 for the quarters ending June 30, 2014 and September 30, 2014, 4.00 to 1.00 for the quarter ending December 31, 2014, was waived for the quarters ending March 31, 2015 and June 30, 2015, and 3.50 to 1.00 for the quarter ending September 30, 2015, and 3.65 to 1.00 for the quarter ending December 31, 2015, and 3.50 to 1.00 for the quarter ending March 31, 2016 and thereafter, calculated on a modified trailing four quarter basis, (iii) a consolidated cash interest coverage ratio (consolidated EBITDA to consolidated cash interest expense) of no less than 2.5 to 1.0, calculated on a modified trailing four quarter basis and (iv) a ratio of consolidated current assets to consolidated current liabilities of at least 1.0 to 1.0, except for the quarter ending June 30, 2015 when the covenant was waived. In addition, each of the Credit Facilities required that the Company enter into hedging agreements based on anticipated oil production from currently producing wells as agreed to by the lenders. Covenant Violations The Company was out of compliance with the collateral coverage ratio covenant as of March 31, 2016 and December 31, 2015 and the current ratio covenant as defined by the Subordinated Credit Facility as of March 31, 2016. Additionally, the audit report the Company received with respect to its financial statements as of December 31, 2015 contains an explanatory paragraph expressing uncertainty as to the Company’s ability to continue as a going concern, the delivery of which constituted a default under both its Senior Credit Facility and Subordinated Credit Facility. The Company received a waiver for all debt covenants as of December 31, 2015 and March 31, 2016 as part of the debt restructuring outlined in Note 3 – Debt Restructuring. The following presents components of interest expense which is presented as a component of loss from discontinued operations, net of tax, on the Company’s statement of operations for the nine months ended September 30, 2016: Nine Months Ended September 30, 2017 2016 Accrued PIK interest $ – $ 330,740 Interest and fees 8,713 1,373,023 Less interest capitalized to the full cost pool of our proved oil & gas properties – (7,219 ) $ 8,713 $ 1,696,544 |
14. Changes in Stockholders' Eq
14. Changes in Stockholders' Equity | 9 Months Ended |
Sep. 30, 2017 | |
Equity [Abstract] | |
Stockholders' Equity | Preferred Stock The Company has 20,000,000 authorized shares of $0.001 par value preferred stock. No shares have been issued to date. Common Stock The Company has 500,000,000 authorized shares of $0.001 par value common stock. As discussed in Note 4, the Company issued 431,819,910 shares of common stock for gross proceeds of $5,181,839 as part of its Rights Offering and associated Backstop Agreement. The Company incurred $130,164 in costs associated with the offering. |
15. Options
15. Options | 9 Months Ended |
Sep. 30, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Options | Options Granted No options were granted during the nine months ended September 30, 2017 and 2016. The Company recognized a total of $473,053 and $473,472 of compensation expense during the nine months ended September 30, 2017 and 2016, respectively, related to common stock options issued to Employees and Directors that are being amortized over the implied service term, or vesting period, of the options. The remaining unamortized balance of these options is $549,336 as of September 30, 2017. Options Exercised No options were exercised during the nine months ended September 30, 2017 and 2016. Options Forfeited During the nine months ended September 30, 2017, 12,000 options expired. No options were forfeited during the nine months ended September 30, 2016. |
16. Warrants
16. Warrants | 9 Months Ended |
Sep. 30, 2017 | |
Warrants and Rights Note Disclosure [Abstract] | |
Warrants | Warrants Granted The Company issued 435,000 warrants to purchase shares at $0.01 per share to participants of the Backstop Agreement on September 22, 2017. The Company accounted for the warrants as an expense of the Rights Offering which resulted in a charge directly to stockholders’ equity. The Company estimated the fair value of these warrants to be approximately $10,135 (or $.0233 per warrant) using the Black-Scholes option-pricing model. The fair value of the warrants was estimated as of the date of grant using the following assumptions: (1) expected volatility of 388%, (2) risk-free interest rate of 1.89% and (3) expected life of five years. Warrants Exercised No warrants were exercised during the nine months ended September 30, 2017 and 2016. During 2016, all remaining warrants either expired or were forfeited pursuant to our debt restructuring as described in Note 3- Debt Restructuring. The Company has no outstanding warrants as of September 30, 2017. |
17. Income Taxes
17. Income Taxes | 9 Months Ended |
Sep. 30, 2017 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | The Company accounts for income taxes under ASC Topic 740, Income Taxes, We currently estimate that our effective tax rate for the year ending December 31, 2017 will be 0%. Losses incurred during the period from April 9, 2011 (inception) to September 30, 2017 could be used to offset future tax liabilities. Accounting standards require the consideration of a valuation allowance for deferred tax assets if it is “more likely than not” that some component or all of the benefits of deferred tax assets will not be realized. As of September 30, 2017, net deferred tax assets were $13,033,057, primarily related to net operating loss carryforwards. A valuation allowance of $13,033,057 was applied to the net deferred tax assets. The tax benefit for the nine months ended September 30, 2017 of $-0- was primarily driven by the Company’s loss before provision for income taxes and offset by the valuation allowance on the resulting deferred tax asset. In accordance with FASB ASC 740, the Company has evaluated its tax positions and determined there are no significant uncertain tax positions as of any date on, or before September 30, 2017. |
18. Commitments and Contingenci
18. Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | The Company from time to time may be involved in various inquiries, administrative proceedings and litigation relating to matters arising in the normal course of business. The Company is not aware of any inquiries or administrative proceedings and is not currently a defendant in any material litigation and is not aware of any threatened litigation that could have a material effect on the Company. |
19. Subsequent Events
19. Subsequent Events | 9 Months Ended |
Sep. 30, 2017 | |
Subsequent Events [Abstract] | |
Subsequent Events | The Company evaluates subsequent events and transactions that occur after the balance sheet date up to the date that the financial statements were issued. Based upon this review, other than as described below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements. BRAC IPO As discussed in Note 4, On October 10, 2017, the Company’s sponsored special purpose acquisition company, Black Ridge Acquisition Corp. (“BRAC”), completed an IPO raising $138,000,000 of gross proceeds (including proceeds from the exercise of an over-allotment option by the underwriters on October 18, 2017). Dissolution of BRHC As discussed in Note 5, the Company, Chambers Energy Capital II, LP and CEC II TE, LLC (together with Chambers Energy Capital II, LP the “Chambers Affiliates”) as the members of Black Ridge Holding Company, LLC (“BRHC”) agreed to dissolve and wind up BRHC and filed a Certificate of Cancellation under the Delaware Limited Liability Company Act as of October 3, 2017. On October 2, 2017, the Company entered into an agreement with the Chambers Affiliates whereby certain assets distributed to the Company upon the dissolution and winding up of BRHC on October 1, 2017, were sold to the Assignees in exchange for cash consideration of $1,078,394. Additionally, cash and receivables totaling to $4,645 in value, were distributed directly to the Company from BRHC. |
2. Summary of Significant Accou
2. Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2017 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | Principles of Consolidation The accompanying consolidated financial statements include the accounts of the following entities, all of which are under common control and ownership: Name of entity State of Incorporation Relationship Black Ridge Oil and Gas, Inc. Nevada Parent Black Ridge Acquisition Corp. Delaware Subsidiary (1) (1) The consolidated financial statements herein contain the operations of the wholly-owned subsidiary listed above. All significant inter-company transactions have been eliminated in the preparation of theses financial statements. The parent company, Black Ridge Oil & Gas, Inc. and subsidiary, Black Ridge Acquisition Corp. will be collectively referred to herein as the “Company” or “Black Ridge”. The Company’s headquarters is in Minneapolis, Minnesota and substantially all of its operations are in the United States. |
Reclassifications | Reclassifications As discussed in Note 3 – Debt Restructuring, income, expense and cash flows from the restructured operations for the three and nine months ended September 30, 2016 have been reclassified as net loss and cash flows from discontinued operations. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
Environmental Liabilities | Environmental Liabilities The oil and gas industry is subject, by its nature, to environmental hazards and clean-up costs. At this time, management knows of no substantial losses from environmental accidents or events which would have a material effect on the Company. |
Cash and Cash Equivalents | Cash and Cash Equivalents Cash equivalents include money market accounts which have maturities of three months or less. For the purpose of the statements of cash flows, all highly liquid investments with an original maturity of three months or less are considered to be cash equivalents. Cash equivalents are stated at cost plus accrued interest, which approximates market value. No cash equivalents were on hand at September 30, 2017 and December 31, 2016. |
Cash in Excess of FDIC Insured Limits | Cash in Excess of FDIC Insured Limits The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. Accounts are guaranteed by the Federal Deposit Insurance Corporation (FDIC) and the Securities Investor Protection Corporation (SIPC) up to $250,000 and $500,000, respectively, under current regulations. The Company had approximately $4,460,346 and $-0- in excess of FDIC and SIPC insured limits at September 30, 2017 and December 31, 2016, respectively. As of September 30, 2017, the Company had not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts. |
Website Development Costs | Website Development Costs The Company accounts for website development costs in accordance with ASC 350-50, “Accounting for Website Development Costs” (“ASC 350-50”), wherein website development costs are segregated into three activities: 1) Initial stage (planning), whereby the related costs are expensed. 2) Development (web application, infrastructure, graphics), whereby the related costs are capitalized and amortized once the website is ready for use. Costs for development content of the website may be expensed or capitalized depending on the circumstances of the expenditures. 3) Post-implementation (after site is up and running: security, training, administration), whereby the related costs are expensed as incurred. Upgrades are usually expensed, unless they add additional functionality. We have capitalized a total of $56,660 of website development costs from inception through September 30, 2017. We depreciate our website development costs on a straight line basis over the estimated useful life of the assets, which is currently three years. We have recognized depreciation expense on these website costs of $-0- and $-0- for the nine months ended September 30, 2017 and 2016, respectively, as all website development costs have been fully depreciated. |
Income Taxes | Income Taxes The Company recognizes deferred tax assets and liabilities based on differences between the financial reporting and tax basis of assets and liabilities using the enacted tax rates and laws that are expected to be in effect when the differences are expected to be recovered. The Company provides a valuation allowance for deferred tax assets for which it does not consider realization of such assets to be more likely than not. |
Basic and Diluted Loss Per Share | Basic and Diluted Loss Per Share The basic net loss per share is computed by dividing the net loss (the numerator) by the weighted average number of common shares outstanding for the period (the denominator). Diluted net loss per common share is computed by dividing the net loss by the weighted average number of common shares and potential common shares outstanding (if dilutive) during each period. Potential common shares include stock options, warrants and restricted stock. The number of potential common shares outstanding relating to stock options, warrants and restricted stock is computed using the treasury stock method. The reconciliation of the denominators used to calculate basic EPS and diluted EPS for the three and nine months ended September 30, 2017 and 2016 are as follows: Three Months Ended Nine Months Ended September 30, September 30, 2017 2016 2017 2016 Weighted average common shares outstanding – basic 64,438,566 47,979,990 53,526,470 47,979,990 Plus: Potentially dilutive common shares: Stock options and warrants – – – 75,122 Weighted average common shares outstanding – diluted 64,438,566 47,979,990 53,526,470 48,055,112 Stock options and warrants excluded from the calculation of diluted EPS because their effect was anti-dilutive were 11,380,000 and 7,043,500 for the three months ended September 30, 2017 and 2016, respectively, and 11,380,000 and 6,906,500 for the nine months ended September 30, 2017 and 2016, respectively. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments Under FASB ASC 820-10-05, the Financial Accounting Standards Board establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. This Statement reaffirms that fair value is the relevant measurement attribute. The adoption of this standard did not have a material effect on the Company’s financial statements as reflected herein. The carrying amounts of cash, accounts payable and accrued expenses reported on the balance sheets are estimated by management to approximate fair value primarily due to the short term nature of the instruments. The Company had no items that required fair value measurement on a recurring basis. |
Property and Equipment | Property and Equipment Property and equipment that are not oil and gas properties are recorded at cost and depreciated using the straight-line method over their estimated useful lives of three to seven years. Expenditures for replacements, renewals, and betterments are capitalized. Maintenance and repairs are charged to operations as incurred. Long-lived assets, other than oil and gas properties, are evaluated for impairment to determine if current circumstances and market conditions indicate the carrying amount may not be recoverable. The Company has not recognized any impairment losses on non-oil and gas long-lived assets. Depreciation expense was $8,291 and $10,848 for the nine months ended September 30, 2017 and 2016, respectively. |
Revenue Recognition | Revenue Recognition The Company recognizes management fee income as services are provided. The Company recognized oil and gas revenues from its former interests in producing wells when production was delivered to, and title was transferred to, the purchaser and to the extent the selling price is reasonably determinable. Oil and gas revenues are reflected as a component of discontinued operations on the statements of operations. |
Asset Retirement Obligations | Asset Retirement Obligations The Company records the fair value of a liability for an asset retirement obligation in the period in which the well is spud or the asset is acquired and a corresponding increase in the carrying amount of the related long-lived asset. The liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. If the liability is settled for an amount other than the recorded amount, a gain or loss is recognized. The expense related to accretion of the discount on the asset retirement liability is reflected as a component of discontinued operations on the statement of operations for the nine months ended September 30, 2016. |
Full Cost Method | Full Cost Method The Company followed the full cost method of accounting for oil and gas operations in 2016 whereby all costs related to the exploration and development of oil and gas properties were initially capitalized into a single cost center ("full cost pool"). The Company had no oil and gas operations in 2017 as they were disposed as part of the debt restructuring transaction on June 21, 2016 described in Note 3 – Debt Restructuring. Capitalized costs included land acquisition costs, geological and geophysical expenses, carrying charges on non-producing properties, costs of drilling directly related to acquisition, and exploration activities. Internal costs that were capitalized were directly attributable to acquisition, exploration and development activities and did not include costs related to the production, general corporate overhead or similar activities. Costs associated with production and general corporate activities were expensed in the period incurred. Capitalized costs for the nine month period ended September 30, 2016 are summarized as follows: Nine Months Ended September 30, 2016 Capitalized Certain Payroll and Other Internal Costs $ – Capitalized Interest Costs 7,219 Total $ 7,219 Proceeds from sales of proved properties were credited to the full cost pool, with no gain or loss recognized, unless such a sale would significantly alter the relationship between capitalized costs and the proved reserves attributable to these costs. A significant alteration would typically involve a sale of 20% or more of the proved reserves related to a single full cost pool. The Company assessed all items classified as unevaluated property on a quarterly basis for possible impairment or reduction in value. The assessment included consideration of the following factors, among others: intent to drill; remaining lease term; geological and geophysical evaluations; drilling results and activity; the assignment of proved reserves; and the economic viability of development if proved reserves are assigned. During any period in which these factors indicate an impairment, the cumulative drilling costs incurred to date for such property and all or a portion of the associated leasehold costs were transferred to the full cost pool and were then subject to amortization. Capitalized costs associated with impaired properties and properties having proved reserves, estimated future development costs, and asset retirement costs under FASB ASC 410-20-25 were depleted and amortized on the unit-of-production method based on the estimated gross proved reserves as determined by independent petroleum engineers. The costs of unproved properties were withheld from the depletion base until such time as they are either developed or abandoned. Capitalized costs of oil and gas properties (net of related deferred income taxes) could not exceed an amount equal to the present value, discounted at 10% per annum, of the estimated future net cash flows from proved oil and gas reserves plus the cost of unproved properties (adjusted for related income tax effects). When capitalized costs exceeded this ceiling, impairment was recognized. The present value of estimated future net cash flows was computed by applying the arithmetic average first day price of oil and natural gas for the preceding twelve months to estimated future production of proved oil and gas reserves as of the end of the period, less estimated future expenditures to be incurred in developing and producing the proved reserves and assuming continuation of existing economic conditions. Such present value of proved reserves' future net cash flows excludes future cash outflows associated with settling asset retirement obligations. When this comparison indicated an excess carrying value, the excess was charged to earnings as an impairment expense. The Company recognized an impairment loss of $5,219,000 during the nine months ended September 30, 2016. The impairment loss is reflected as a component of discontinued operations on the statement of operations for the period. |
Stock-Based Compensation | Stock-Based Compensation The Company adopted FASB guidance on stock based compensation upon inception at April 9, 2010. Under FASB ASC 718-10-30-2, all share-based payments to employees, including grants of employee stock options, are recognized in the income statement based on their fair values. Expense related to common stock and stock options issued for services and compensation totaled $473,053 and $473,472 for the nine months ended September 30, 2017 and 2016, respectively, using the Black-Scholes options pricing model and an effective term of 6 to 6.5 years based on the weighted average of the vesting periods and the stated term of the option grants and the discount rate on 5 to 7 year U.S. Treasury securities at the grant date. |
Uncertain Tax Positions | Uncertain Tax Positions Effective upon inception at April 9, 2010, the Company adopted standards for accounting for uncertainty in income taxes. These standards prescribe a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. These standards also provide guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. Various taxing authorities may periodically audit the Company’s income tax returns. These audits include questions regarding the Company’s tax filing positions, including the timing and amount of deductions and the allocation of income to various tax jurisdictions. In evaluating the exposures connected with these various tax filing positions, including state and local taxes, the Company records allowances for probable exposures. A number of years may elapse before a particular matter, for which an allowance has been established, is audited and fully resolved. Black Ridge Oil & Gas, Inc. has not yet undergone an examination by any taxing authorities. The assessment of the Company’s tax position relies on the judgment of management to estimate the exposures associated with the Company’s various filing positions. |
Derivative Instruments and Price Risk Management | Derivative Instruments and Price Risk Management During the 2016 period, while the Company had oil and gas operations, the Company entered into derivative contracts, including price swaps, caps and floors, which required payments to (or receipts from) counterparties based on the differential between a fixed price and a variable price for a fixed quantity of crude oil without the exchange of underlying volumes. The notional amounts of these financial instruments were based on a portion of the expected production from existing wells. Any realized gains and losses were recorded to gain (loss) on settled derivatives and unrealized gains or losses as a result of mark-to market valuations were recorded to gain (loss) on the mark-to-market of derivatives and are included as a component of loss from discontinued operations on the statements of operations. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements New accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) that are adopted by the Company as of the specified effective date. If not discussed below, management believes there have been no developments to recently issued accounting standards, including expected dates of adoption and estimated effects on our financial statements, from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2016. |
2. Summary of Significant Acc26
2. Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Accounting Policies [Abstract] | |
Reconciliation of denominators used to calculate EPS | Three Months Ended Nine Months Ended September 30, September 30, 2017 2016 2017 2016 Weighted average common shares outstanding – basic 64,438,566 47,979,990 53,526,470 47,979,990 Plus: Potentially dilutive common shares: Stock options and warrants – – – 75,122 Weighted average common shares outstanding – diluted 64,438,566 47,979,990 53,526,470 48,055,112 |
Schedule of Capitalized Costs | Nine Months Ended September 30, 2016 Capitalized Certain Payroll and Other Internal Costs $ – Capitalized Interest Costs 7,219 Total $ 7,219 |
3. Debt Restructuring (Tables)
3. Debt Restructuring (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Restructuring and Related Activities [Abstract] | |
Loss from discontinued operations, net of income taxes | For the Nine Months Ended September 30, 2016 Oil and gas sales $ 5,539,613 Gain on settled derivatives 1,043,026 Gain (loss) on the mark-to-market of derivatives (4,288,736 ) Total revenues 2,293,903 Operating expenses: Production expenses 1,400,639 Production taxes 568,028 General and administrative expenses 476,461 Depletion of oil and gas properties 3,114,347 Impairment of oil and gas properties 5,219,000 Accretion of discount on asset retirement obligations 16,258 Total operating expenses 10,794,733 Net operating loss (8,500,830 ) Other income (expense): Interest expense (1,696,544 ) Total other income (expense) (1,696,544 ) Loss before provision for income taxes (10,197,374 ) Provision for income taxes – Net loss $ (10,197,374 ) |
5. Prepaid Expenses (Tables)
5. Prepaid Expenses (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Schedule of prepaid expenses | September 30, December 31, 2017 2016 Prepaid insurance costs $ 9,827 $ 43,324 Prepaid employee benefits 12,781 11,844 Prepaid office and other costs 17,512 31,724 Total prepaid expenses $ 40,120 $ 86,892 |
7. Property and Equipment (Tabl
7. Property and Equipment (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Property and equipment: | |
Property and equipment | September 30, December 31, 2017 2016 Property and equipment $ 128,155 $ 140,547 Less: Accumulated depreciation and amortization (114,901 ) (112,128 ) Total property and equipment, net $ 13,254 $ 28,419 |
Depreciation, depletion, and amortization expense | Nine Months Ended September 30, 2017 2016 Depletion of costs for evaluated oil and gas properties (1) $ – $ 3,114,347 Depreciation and amortization of other property and equipment 8,291 10,848 Total depreciation, amortization and depletion $ 8,291 $ 3,125,195 |
8. Oil and Gas Properties (Tabl
8. Oil and Gas Properties (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Oil and Gas Exploration and Production Industries Disclosures [Abstract] | |
Gross and net productive oil wells | June 21, 2016 Gross Net North Dakota 352 10.64 Montana 5 0.37 Total 357 11.01 |
Capitalized costs for oil and gas properties | Nine Months Ended September 30, 2016 Purchases of oil and gas properties and development costs for cash $ 4,858,134 Purchase of oil and gas properties accrued at period-end 3,155,016 Purchase of oil and gas properties accrued at beginning of period (prior to disposition) (6,899,503 ) Capitalized asset retirement costs 4,737 Total purchase and development costs, oil and gas properties $ 1,118,384 |
9. Asset Retirement Obligation
9. Asset Retirement Obligation (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Asset Retirement Obligation Disclosure [Abstract] | |
Asset retirement obligation | Nine Months Ended September 30, 2016 Beginning ARO $ 368,089 Liabilities incurred for new wells placed in production 4,737 Accretion of discount on ARO (a component of loss from discontinued operations) 16,258 Liability relieved in debt restructuring (389,084 ) Ending ARO $ – |
11. Derivative Instruments (Tab
11. Derivative Instruments (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Realized and unrealized gains and losses on derivative instruments | Nine Months Ended September 30, 2016 Realized gain (loss) on derivatives: Crude oil fixed price swaps $ 922,872 Crude oil collars 120,154 Realized loss on derivatives, net $ 1,043,026 Gain (loss) on the mark-to-market of derivatives: Crude oil fixed price swaps $ (4,157,491 ) Crude oil collars (131,245 ) Gain (loss) on the mark-to-market of derivatives, net $ (4,288,736 ) |
12. Fair Value of Financial I33
12. Fair Value of Financial Instruments (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Fair Value Disclosures [Abstract] | |
Valuation of financial instruments at fair value | Fair Value Measurements at September 30, 2017 Level 1 Level 2 Level 3 Assets Cash and cash equivalents $ 4,721,876 $ – $ – Total assets 4,721,876 – – Liabilities Total liabilities – – – $ 4,721,876 $ – $ – Fair Value Measurements at December 31, 2016 Level 1 Level 2 Level 3 Assets Cash and cash equivalents $ 66,269 $ – $ – Total assets 66,269 – – Liabilities Total liabilities – – – $ 66,269 $ – $ – |
13. Revolving Credit Faciliti34
13. Revolving Credit Facilities and Long Term Debt (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Debt Disclosure [Abstract] | |
Components of interest expense | Nine Months Ended September 30, 2017 2016 Accrued PIK interest $ – $ 330,740 Interest and fees 8,713 1,373,023 Less interest capitalized to the full cost pool of our proved oil & gas properties – (7,219 ) $ 8,713 $ 1,696,544 |
2. Summary of Significant Acc35
2. Summary of Significant Accounting Policies (Details - Antidilutive shares) - shares | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Accounting Policies [Abstract] | ||||
Weighted average common shares outstanding - basic | 64,438,566 | 47,979,990 | 53,526,470 | 47,979,990 |
Plus: Potentially dilutive common shares: | ||||
Stock options and warrants | 0 | 0 | 0 | 75,122 |
Weighted average common shares outstanding - diluted | 64,438,566 | 47,979,990 | 53,526,470 | 48,055,112 |
2. Summary of Significant Acc36
2. Summary of Significant Accounting Policies (Details-Capitalized Costs) | 9 Months Ended |
Sep. 30, 2016USD ($) | |
Total capitalized costs | $ 7,219 |
Certain Payroll and Other Internal Costs [Member] | |
Total capitalized costs | 0 |
Interest Costs [Member] | |
Total capitalized costs | $ 7,219 |
2. Summary of Significant Acc37
2. Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Cash equivalents | $ 0 | $ 0 | $ 0 | ||
Cash Uninsured Amount in Federal Deposit Insurance Corporation | 4,460,346 | 4,460,346 | 0 | ||
Unamortized balance of debt issuance costs | 0 | 0 | $ 0 | ||
Website development costs capitalized from inception | $ 56,660 | $ 56,660 | |||
Antilutive shares | 11,380,000 | 7,043,500 | 11,380,000 | 6,906,500 | |
Impairments on oil and gas properties | $ 0 | $ 0 | $ 0 | $ 5,219,000 | |
Share based compensation | $ 154,069 | $ 157,824 | 473,053 | 473,472 | |
Non-Oil and Gas Property and Equipment [Member] | |||||
Depreciation expense | 8,291 | 10,848 | |||
Website Development Costs [Member] | |||||
Depreciation expense | $ 0 | $ 0 |
3. Debt Restructuring (Details)
3. Debt Restructuring (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Operating expenses: | ||||
Impairment of oil and gas properties | $ 0 | $ 0 | $ 0 | $ 5,219,000 |
Other income (expense): | ||||
Net loss | $ (580,477) | $ (103,501) | $ (838,688) | 30,062,793 |
Discontinued Operations [Member] | ||||
Loss from discontinued items, net of income taxes | ||||
Oil and gas sales | 5,539,613 | |||
Gain on settled derivatives | 1,043,026 | |||
Gain (loss) on the mark-to-market of derivatives | (4,288,736) | |||
Total revenues | 2,293,903 | |||
Operating expenses: | ||||
Production expenses | 1,400,639 | |||
Production taxes | 568,028 | |||
General and administrative expenses | 476,461 | |||
Depletion of oil and gas properties | 3,114,347 | |||
Impairment of oil and gas properties | 5,219,000 | |||
Accretion of discount on asset retirement obligations | 16,258 | |||
Total operating expenses | 10,794,733 | |||
Net operating loss | (8,500,830) | |||
Other income (expense): | ||||
Interest expense | (1,696,544) | |||
Total other income (expense) | (1,696,544) | |||
Loss before provision for income taxes | (10,197,374) | |||
Provision for income taxes | 0 | |||
Net loss | $ (10,197,374) |
3. Debt Restructuring (Details
3. Debt Restructuring (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Gain on debt restructuring | $ 0 | $ 0 | $ 0 | $ 41,621,150 |
Black Ridge Holding Company [Member] | ||||
Gain on debt restructuring | $ 41,621,150 | |||
Ownership percentage | 3.88% | 3.88% |
4. Rights Offering and Format40
4. Rights Offering and Formation of Black Ridge Acquisition Corp. (Details) - USD ($) | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Warrants issued | 0 | 0 | |
Deferred offering costs | $ 151,549 | $ 0 | |
Offering costs netted against equity | 130,164 | ||
BRAC Public Offering [Member] | |||
Deferred offering costs | 151,549 | ||
Warrants issued [Member] | |||
Warrants issued fair value | 4,179 | ||
Officers and Directors [Member] | |||
Proceeds from sale of stock | $ 2,086,120 | ||
Stock issued in rights offering | 173,843,308 | ||
Warrants issued | 179,376 | ||
Rights Offering [Member] | |||
Proceeds from sale of stock | $ 5,181,839 | ||
Stock issued in rights offering | 431,819,910 | ||
Rights Offering [Member] | Current Shareholders [Member] | |||
Proceeds from sale of stock | $ 2,397,737 | ||
Stock issued in rights offering | 199,811,421 | ||
Backstop Agreement [Member] | |||
Proceeds from sale of stock | $ 2,784,102 | ||
Stock issued in rights offering | 232,008,489 | ||
Warrants issued | 435,000 | ||
Warrants issued fair value | $ 10,135 |
5. Prepaid Expenses (Details)
5. Prepaid Expenses (Details) - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Prepaid insurance | $ 9,827 | $ 43,324 |
Prepaid employee benefits | 12,781 | 11,844 |
Prepaid office and other costs | 17,512 | 31,724 |
Total prepaid expenses | $ 40,120 | $ 86,892 |
6. Investment in Black Ridge 42
6. Investment in Black Ridge Holding Company, LLC (Details Narrative) | Oct. 02, 2017USD ($) |
BRHC Liquidiation [Member] | |
Gain on sale of investment | $ 1,030,185 |
7. Property and Equipment (Deta
7. Property and Equipment (Details-Property and equipment) - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 |
Property and equipment: | ||
Property and equipment | $ 128,155 | $ 140,547 |
Less: Accumulated depreciation, amortization, depletion and impairments | (114,901) | (112,128) |
Total property and equipment, net | $ 13,254 | $ 28,419 |
7. Property and Equipment (De44
7. Property and Equipment (Details-Depreciation) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | ||
Property and equipment: | |||||
Depletion of costs for evaluated oil and gas properties | [1] | $ 0 | $ 3,114,347 | ||
Depreciation and amortization of other property and equipment | $ 2,557 | $ 3,484 | 8,291 | 10,848 | |
Total depreciation, amortization and depletion | $ 8,291 | $ 3,125,195 | |||
[1] | Presented as a component of loss from discontinued operations, net of income taxes. |
7. Property and Equipment (De45
7. Property and Equipment (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Property and equipment: | ||||
Proceeds from sale of Property and Equipment | $ 2,160 | $ 0 | ||
Loss on disposal | 4,714 | 0 | ||
Impairment of oil and gas properties | $ 0 | $ 0 | $ 0 | $ 5,219,000 |
8. Oil and Gas Properties (Deta
8. Oil and Gas Properties (Details-Gross and Net Wells) | Sep. 30, 2016NumberOfWells / pureNetNumberOfWells / pure |
Productive oil wells, gross | 357 |
Productive oil wells, net | 11.01 |
NORTH DAKOTA | |
Productive oil wells, gross | 352 |
Productive oil wells, net | 10.64 |
MT | |
Productive oil wells, gross | 5 |
Productive oil wells, net | 0.37 |
8. Oil and Gas Properties (De47
8. Oil and Gas Properties (Details-Capitalized Costs) - USD ($) | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Oil and Gas Exploration and Production Industries Disclosures [Abstract] | ||
Purchases of oil and gas properties and development costs for cash | $ 4,858,134 | |
Purchase of oil and gas properties accrued at period-end | 3,155,016 | |
Purchase of oil and gas properties accrued at the beginning of the period | (6,899,503) | |
Capitalized asset retirement obligations | $ 0 | 4,737 |
Total purchase and development costs, oil and gas properties | $ 1,118,384 |
8. Oil and Gas Properties (De48
8. Oil and Gas Properties (Details Narrative) | 9 Months Ended | |
Sep. 30, 2016USD ($)a | Sep. 30, 2017a | |
Oil and Gas Exploration and Production Industries Disclosures [Abstract] | ||
Oil and gas assets, net acres | a | 7,016 | 0 |
Oil and gas properties acquired | $ 0 | |
Oil and gas properties divested | $ 94,628 | |
Oil and gas acres divested | a | 14 | |
Oil and gas properties divested, cost | $ (24,498,638) |
9. Asset Retirement Obligatio49
9. Asset Retirement Obligation (Details) | 9 Months Ended |
Sep. 30, 2016USD ($) | |
Asset Retirement Obligation Disclosure [Abstract] | |
Beginning Asset Retirement Obligation | $ 368,089 |
Liabilities incurred for new wells placed in production | 4,737 |
Accretion of discount on asset retirement obligations (a component of loss from discontinued operations) | 16,258 |
Liability relieved in debt restructuring | (389,084) |
Ending asset retirement obligation | $ 0 |
10. Related Party (Details Narr
10. Related Party (Details Narrative) | 9 Months Ended |
Sep. 30, 2016USD ($) | |
Related Party Transactions [Abstract] | |
Rent expense | $ 36,183 |
11. Derivative Instruments (Det
11. Derivative Instruments (Details-Derivative Gains and Losses) | 9 Months Ended |
Sep. 30, 2016USD ($) | |
Realized gain (loss) on derivatives, net | $ 1,043,026 |
Gain (loss) on the mark-to-market of derivatives, net | (4,288,736) |
Crude Oil Fixed Price Swap [Member] | |
Realized gain (loss) on derivatives, net | 922,872 |
Gain (loss) on the mark-to-market of derivatives, net | (4,157,491) |
Crude Oil Collars [Member] | |
Realized gain (loss) on derivatives, net | 120,154 |
Gain (loss) on the mark-to-market of derivatives, net | $ (131,245) |
12. Fair Value of Financial I52
12. Fair Value of Financial Instruments (Details) - Fair Value, Measurements, Recurring [Member] - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 |
Level 1 [Member] | ||
Assets | ||
Cash and cash equivalents | $ 4,721,876 | $ 66,269 |
Total assets | 4,721,876 | 66,269 |
Liabilities | ||
Total Liabilities | 0 | 0 |
Total Assets and Liablilties | 4,721,876 | 66,269 |
Level 2 [Member] | ||
Assets | ||
Cash and cash equivalents | 0 | 0 |
Total assets | 0 | 0 |
Liabilities | ||
Total Liabilities | 0 | 0 |
Total Assets and Liablilties | 0 | 0 |
Level 3 [Member] | ||
Assets | ||
Cash and cash equivalents | 0 | 0 |
Total assets | 0 | 0 |
Liabilities | ||
Total Liabilities | 0 | 0 |
Total Assets and Liablilties | $ 0 | $ 0 |
13. Revolving Credit Faciliti53
13. Revolving Credit Facilities and Long Term Debt (Details-Interest expense) - USD ($) | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Revolving Credit Facilities, interest | $ 8,713 | $ 1,696,544 |
Accrued PIK interest [Member] | ||
Revolving Credit Facilities, interest | 0 | 330,740 |
Interest and commitment fees [Member] | ||
Revolving Credit Facilities, interest | 8,713 | 1,373,023 |
Capitalized interest [Member] | ||
Revolving Credit Facilities, interest | $ 0 | $ (7,219) |
13. Revolving Credit Faciliti54
13. Revolving Credit Facilities and Long Term Debt (Details Narrative) - USD ($) | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Jun. 21, 2016 | |
Line of Credit [Member] | Senior Credit Facility [Member] | Black Ridge Holding Company [Member] | |||
Line of credit outstanding | $ 0 | ||
Line of credit balance transferred to BRHC | 29,400,000 | ||
Line of Credit [Member] | Subordinated Credit Facility [Member] | |||
Line of credit outstanding | $ 0 | ||
Line of Credit [Member] | Subordinated Credit Facility [Member] | Black Ridge Holding Company [Member] | |||
Line of credit outstanding | 0 | ||
Line of credit balance transferred to BRHC | 30,000,000 | ||
Accrued interest transferred to BRHC | $ 2,931,369 | ||
Promissory Note [Member] | Cadence Bank [Member] | |||
Debt issuance date | Jul. 7, 2017 | ||
Debt face value | $ 500,000 | ||
Debt stated interest rate | 4.50% | ||
Debt maturity date | Oct. 7, 2017 | ||
Debt interest expense | $ 4,313 | ||
Loan origination fees | 4,400 | ||
Loan balance | $ 0 | ||
Line of credit maturity date | Oct. 7, 2017 |
14. Stockholders' Equity (Detai
14. Stockholders' Equity (Details Narrative) - USD ($) | 9 Months Ended | |
Sep. 30, 2017 | Dec. 31, 2016 | |
Preferred stock, par value (in Dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 20,000,000 | 20,000,000 |
Common stock, par value (in Dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 500,000,000 | 500,000,000 |
Rights Offering [Member] | ||
Proceeds from sale of stock | $ 5,181,839 | |
Stock issued in rights offering | 431,819,910 | |
Payment of offering costs | $ 130,164 |
15. Options (Details Narrative)
15. Options (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Share based compensation | $ 154,069 | $ 157,824 | $ 473,053 | $ 473,472 |
Unvested unamortized share based compensation | $ 549,336 | $ 549,336 | ||
Options [Member] | ||||
Options Granted | 0 | 0 | ||
Share based compensation | $ 473,053 | $ 473,472 | ||
Options exercised | 0 | 0 | ||
Options forfeited | 12,000 | 0 |
16. Warrants (Details Narrative
16. Warrants (Details Narrative) - USD ($) | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Warrants granted | 0 | 0 |
Warrants exercised | 0 | 0 |
Backstop Agreement [Member] | ||
Warrants granted | 435,000 | |
Warrants issued fair value | $ 10,135 |
17. Income Taxes (Details Narra
17. Income Taxes (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Income Tax Disclosure [Abstract] | ||||
Net deferred tax assets | $ 13,033,057 | $ 13,033,057 | ||
Valuation allowance | 13,033,057 | 13,033,057 | ||
Deferred tax liabilities | 0 | 0 | ||
Tax benefit | $ 0 | $ 0 | $ 0 | $ 0 |