Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2017 | Mar. 09, 2018 | |
Document and Entity Information: | ||
Entity Registrant Name | American Resources Corporation | |
Entity Central Index Key | 1,590,715 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Well-known Seasoned Issuer | No | |
Entity Voluntary Filers | No | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 892,044 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,017 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 |
CURRENT ASSETS | ||
Cash | $ 342,041 | $ 784,525 |
Accounts Receivable | 629,318 | 2,753,199 |
Related Party Note Receivable | 250,000 | |
Accounts Receivable - Other | 32,684 | 199,701 |
Total Current Assets | 1,254,043 | 3,737,425 |
OTHER ASSETS | ||
Cash - restricted | 189,012 | 141,102 |
Processing and rail facility | 2,914,422 | 2,914,422 |
Underground equipment | 8,164,359 | 7,500,512 |
Surface equipment | 4,491,304 | 3,751,054 |
Less Accumulated Depreciation | (4,119,297) | (2,262,855) |
Land | 178,683 | 178,683 |
Accounts Receivable - Other | 142,310 | 196,347 |
Note Receivable | 4,117,139 | 4,117,139 |
Total Other Assets | 16,077,932 | 16,536,404 |
TOTAL ASSETS | 17,331,975 | 20,273,829 |
CURRENT LIABILITIES | ||
Accounts payable | 4,765,441 | 2,196,060 |
Accrued management fee | 17,840,615 | 17,840,615 |
Accrued interest | 212,945 | 122,945 |
Funds held for others | 72,897 | 24,987 |
Due to affiliate | 124,000 | 74,000 |
Current portion of long term-debt (net of unamortized discount of $75,000 and $0) | 5,175,916 | 4,431,006 |
Current portion of Reclamation liability | 2,105,320 | 707,645 |
Total Current Liabilities | 30,297,134 | 25,397,258 |
OTHER LIABILITIES | ||
Long-term portion of note payable (net of issuance costs of $441,983 and $451,389) | 5,209,759 | 4,964,941 |
Reclamation liability | 16,775,383 | 17,419,228 |
Total Other Liabilities | 21,985,142 | 22,384,169 |
Total Liabilities | 52,282,276 | 47,781,427 |
STOCKHOLDERS' DEFICIT | ||
Additional paid-in capital | 1,347,254 | 88,193 |
Accumulated deficit | (36,663,151) | (27,651,030) |
Total American Resources Corporation's Shareholders' Equity | (35,314,476) | (27,562,355) |
Non controlling interest | 364,175 | 54,757 |
Total Stockholders' Deficit | (34,950,301) | (27,507,598) |
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | 17,331,975 | 20,273,829 |
Common Class A [Member] | ||
STOCKHOLDERS' DEFICIT | ||
Common stock, value | 89 | |
Series A Preferred Stock [Member] | ||
STOCKHOLDERS' DEFICIT | ||
Preferred stock, value | 482 | 482 |
Series B Preferred Stock [Member] | ||
STOCKHOLDERS' DEFICIT | ||
Preferred stock, value | $ 850 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 |
Current portion of long term-debt net of unamortized discount | $ 75,000 | $ 0 |
OTHER LIABILITIES | ||
Long-term portion of note payable net of issuance costs | $ 441,983 | $ 451,389 |
Common Class A [Member] | ||
STOCKHOLDERS' DEFICIT | ||
Common Stock, Par Value | $ .0001 | $ .0001 |
Common Stock, Shares Authorized | 230,000,000 | 230,000,000 |
Common Stock, Shares Issued | 892,044 | 0 |
Common Stock, Shares Outstanding | 892,044 | 0 |
Series A Preferred Stock [Member] | ||
STOCKHOLDERS' DEFICIT | ||
Preferred Stock, Par Value | $ .0001 | $ .0001 |
Preferred Stock, Shares Authorized | 4,817,792 | 4,817,792 |
Preferred Stock, Shares Issued | 4,817,792 | 4,817,792 |
Preferred Stock, Shares Outstanding | 4,817,792 | 4,817,792 |
Series B Preferred Stock [Member] | ||
STOCKHOLDERS' DEFICIT | ||
Preferred Stock, Par Value | $ .001 | $ .001 |
Preferred Stock, Shares Authorized | 20,000,000 | 20,000,000 |
Preferred Stock, Shares Issued | 850,000 | 0 |
Preferred Stock, Shares Outstanding | 850,000 | 0 |
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 | |
Condensed Consolidated Statements Of Operations | ||||
Coal Sales | $ 4,192,244 | $ 716,266 | $ 13,770,183 | $ 716,266 |
Processing Services Income | 159,724 | 120,119 | 1,563,864 | 1,008,162 |
Total Revenue | 4,351,968 | 836,385 | 15,334,047 | 1,724,428 |
Cost of Coal Sales and Processing | (2,797,140) | (2,955,654) | (12,307,399) | (5,098,821) |
Accretion Expense | (339,288) | (300,000) | (1,181,055) | (1,261,032) |
Loss on Reclamation Settlement | (30,055) | (281,907) | ||
Depreciation | (697,214) | (766,078) | (1,856,442) | (2,010,529) |
General and Administrative | (26,940) | (24,194) | (189,604) | (100,702) |
Professional Fees | (144,712) | (56,590) | (565,995) | (237,459) |
Consulting Fees - Related Party | (12,358,255) | |||
Production Taxes and Royalties | (865,950) | (104,545) | (3,464,611) | (230,739) |
Development Costs | (1,035,286) | (298,513) | (4,172,759) | (1,654,624) |
Total Expenses from Operations | (5,936,585) | (4,505,574) | (24,019,772) | (22,952,161) |
Net Loss from Operations | (1,584,617) | (3,669,189) | (8,685,725) | (21,227,733) |
Other Income | 67,844 | 309,418 | ||
Receipt of previously impaired receivable | 117,657 | 241,574 | ||
Interest | (342,683) | (48,999) | (567,970) | (140,141) |
Net Loss | (1,741,799) | (3,718,188) | (8,702,703) | (21,367,874) |
Less: Net income attributable to Non Controlling Interest | (67,844) | (309,418) | ||
Net loss attributable to American Resources Corporation Shareholders | $ (1,809,643) | $ (3,718,188) | $ (9,012,121) | $ (21,367,874) |
Net loss per share - basic and diluted | $ (2.03) | $ (11.87) | ||
Weighted average shares outstanding | 891,180 | 759,397 |
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 loss | $ (8,702,703) | $ (21,367,874) |
Adjustments to reconcile net income (loss) to net cash | ||
Depreciation | 1,856,442 | 2,010,529 |
Accretion expense | 1,181,055 | 1,261,032 |
Loss on reclamation settlements | 281,907 | |
Assumption of note payable in reverse merger | 50,000 | |
Amortization of debt discount | 284,406 | 6,720 |
Recovery of impaired account receivable | (241,574) | |
Stock compensation expense | 10,000 | 88,675 |
Change in current assets and liabilities: | ||
Accounts receivable | 2,123,881 | (716,268) |
Restricted cash used to pay interest expense | 9,199 | 14,535 |
Accounts payable | 2,574,285 | 2,932,711 |
Accrued expenses | 12,340,615 | |
Accrued interest | 90,000 | 90,000 |
Reclamation liability settlements | (709,132) | |
Cash used in operating activities | (1,192,234) | (3,339,325) |
Cash Flows from Investing activities: | ||
Note receivable | (4,117,139) | |
Increase in restricted cash | (1,393,587) | |
Restricted cash used to pay down debt | 51,855 | 43,665 |
Advances made in connection with management agreement | (75,000) | (1,525,000) |
Advance repayment in connection with management agreement | 469,645 | 450,000 |
Cash paid for PPE, net | (176,597) | 211,594 |
Cash received from acquisitions, net of $100 cash paid | 5,315,700 | |
Cash provided by (used in) investing activities | 269,903 | (1,014,767) |
Cash Flows from Financing activities: | ||
Principal payments on long term debt | (318,576) | (43,665) |
Proceeds from long term debt (net of issuance costs $0 and $460,795) | 1,670,000 | 4,688,152 |
Proceeds from related party | 50,000 | |
Payments on factoring agreement | (6,365,492) | |
Proceeds from factoring agreement | 4,843,915 | |
Proceeds from private placements | 600,000 | |
Cash provided by financing activities | 479,847 | 4,644,487 |
Increase (decrease) in cash | (442,484) | 290,395 |
Cash, beginning of year | 784,525 | |
Cash, end of year | 342,041 | 290,395 |
Supplemental Information Non-cash investing and financing activities | ||
Assumption of net assets and liabilities for asset acquisitions | 2,745,582 | |
Equipment for notes payable | 1,222,500 | 904,425 |
Purchase of related party note receivable in exchange for Series B Equity | 250,000 | |
Affiliate note for equipment | 63,000 | |
Conversion of note payable to common stock | 50,000 | |
Beneficial conversion feature on note payable | 50,000 | |
Relative fair value debt discount on warrant issue | 300,000 | |
Cash paid for interest | 193,564 | 50,141 |
Cash paid for income taxes |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2017 | |
Notes to Financial Statements | |
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | American Resources Corporation (ARC or the Company) which operates through subsidiaries that were acquired in 2016 and 2015 for the purpose of acquiring, rehabilitating and operating various natural resource assets including coal, oil and natural gas. Basis of Presentation and Consolidation: The consolidated financial statements include the accounts for the nine months ended September 30, 2017 and 2016 of the Company and its wholly owned subsidiaries Quest Energy Inc (QEI) Deane Mining, LLC (Deane), Quest Processing LLC (Quest Processing), ERC Mining Indiana Corp (ERC), McCoy Elkhorn Coal LLC (McCoy) and Knott County Coal LLC (KCC). All significant intercompany accounts and transactions have been eliminated. On January 5, 2017, QEI entered into a share exchange agreement with NGFC Equities, Inc (NGFC). Under the agreement, the shareholders of QEI exchanged 100% of its common stock to NGFC for 4,817,792 newly created Series A Preferred shares that is convertible into approximately 95% of outstanding common stock of NGFC. The previous NGFC shareholders retained 845,370 common shares as part of the agreement. The conditions to the agreement were fully satisfied on February 7, 2017, at which time the Company took full control of NGFC. NGFC has been renamed to American Resources Corporation ARC. The transaction was accounted for as a recapitalization. QEI was the accounting acquirer and ARC will continue the business operations of QEI, therefore, the historical financial statements presented are those of QEI and its subsidiaries. The equity and share information reflect the results of the recapitalization. On May 15, 2017 ARC initiated a one-for-thirty reverse stock split. The financial statements have been retrospectively restated to give effect to this split. On February 17, 2016, McCoy Elkhorn Coal LLC (McCoy) acquired certain assets in exchange for $100 and for assuming certain liabilities of Fortress Resources, LLC. The fair values of liabilities were determined to be $3,561,848 respectively. The liabilities assumed do not require fair value readjustments. The assets acquired of McCoy do not represent a business as defined in FASB AS 805-10-20. McCoy does not have an integrated set of activities and assets that is capable of being conducted and managed for the purpose of providing a return or other economic benefit to their investors, members or participants. Accordingly, the assets acquired are initially recognized at the consideration paid, which was the liabilities assumed, including direct acquisition costs, of which there were none. The cost is allocated to the group of assets acquired based on their relative fair value. The assets acquired and liabilities assumed of McCoy were as follows at the purchase date: Assets Cash $ 2,935,800 Underground Mining Equipment 531,249 Surface Mining Equipment 36,218 Coal Preparation and Loading Facilities 58,681 Liabilities Asset Retirement Obligation $ 3,561,848 On April 14, 2016, the Company acquired 100% of the membership interests of ICG Knott County, LLC, subsequently renamed Knott County Coal LLC. The fair values of liabilities were determined to be $4,499,434 respectively. The liabilities assumed do not require fair value readjustments. The assets acquired of ICG Knott County do not represent a business as defined in FASB AS 805-10-20. IGC Knott County does not have an integrated set of activities and assets that is capable of being conducted and managed for the purpose of providing a return or other economic benefit to their investors, members or participants. Accordingly, the assets acquired and liabilities assumed are initially recognized at the consideration paid, including direct acquisition costs. The cost is allocated to the group of assets acquired and liabilities assumed based on their relative fair value. The assets and liabilities assumed of ICG Knott County were as follows on the purchase date: Assets Cash $ 2,380,000 Underground Mining Equipment 1,533,937 Surface Mining Equipment 206,578 Land 178,683 Coal Preparation and Loading Facilities 200,236 Liabilities Asset Retirement Obligation $ 4,499,434 As a result of the KCC and McCoy acquisitions during 2016, $8,061,282 of ARO was assumed for net cash of $5,315,700 and property, equipment and land of $2,745,582. Interim Financial Information Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been omitted. In the opinion of management, these interim unaudited Consolidated Financial Statements reflect all normal and recurring adjustments necessary for a fair presentation of the results for the periods presented. Results of operations for the nine months ended September 30, 2017 and 2016 are not necessarily indicative of the results to be expected for the year ending December 31, 2017 or any other period. These financial statements should be read in conjunction with the Companys 2015 and 2016 audited financial statements and the notes thereto which were filed on form 8-K/A on September 25, 2017. Going Concern: Convertible Preferred Securities: Derivatives and Hedging Activities We also follow ASC 480-10, Distinguishing Liabilities from Equity Cash Restricted cash: Asset Retirement Obligations (ARO) Reclamation: We assess our ARO at least annually and reflect revisions for permit changes, change in our estimated reclamation costs and changes in the estimated timing of such costs. During the nine month periods ending September 30, 2017 and 2016, $281,907 and $0 were incurred for loss on settlement on ARO, respectively. The table below reflects the changes to our ARO: Balance at December 31, 2016 $ 18,126,873 Accretion nine months September 30, 2017 1,181,055 Reclamation work nine months September 30, 2017 (427,225 ) Balance at September 30, 2017 $ 18,880,703 Reclassifications: Allowance For Doubtful Accounts: Allowance for trade receivables as of September 30, 2017 and December 31, 2016 amounted to $0, for both periods. Allowance for other accounts receivables as of September 30, 2017 and December 31, 2016 amounted to $405,356 and $640,000, respectively. Trade and loan receivables are carried at amortized cost, net of allowance for losses. Amortized cost approximated book value as of September 30, 2017 and December 31, 2016. New Accounting Pronouncements: · Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers · ASU 2015-11, Simplifying the Measurement of Inventory · ASU 2015-17, Balance Sheet Classification of Deferred Taxes · ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities · ASU 2016-02, Leases · ASU 2016-18, Statement of Cash Flows: Restricted Cash, · ASU 2017-01, Business Combinations, · ASU 2017-11, Earnings Per Share, Management has elected to early adopt ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 9 Months Ended |
Sep. 30, 2017 | |
Notes to Financial Statements | |
NOTE 2 - PROPERTY AND EQUIPMENT | At September 30, 2017 and December 31, 2016, property and equipment were comprised of the following: September 30, 2017 December 31, 2016 Processing and rail facility $ 2,914,422 $ 2,914,422 Underground equipment 8,164,359 7,500,512 Surface equipment 4,491,304 3,751,054 Land 178,683 178,683 Less: Accumulated depreciation (4,119,297 ) (2,262,855 ) Total Property and Equipment, Net $ 11,629,471 $ 12,081,816 Depreciation expense amounted to $697,214 and $766,078 for the three month periods September 30, 2017 and September 30, 2016, respectively. Depreciation expense amounted to $1,856,442 and $2,010,529 for the nine month periods September 30, 2017 and September 30, 2016, respectively. The estimated useful lives are as follows: Processing and Rail Facilities 20 years Surface Equipment 7 years Underground Equipment 5 years |
NOTES PAYABLE
NOTES PAYABLE | 9 Months Ended |
Sep. 30, 2017 | |
Notes to Financial Statements | |
NOTE 3 - NOTES PAYABLE | During the nine month period ended September 30, 2017 and 2016, principal payments on long term debt totaled $318,576 and $43,665, respectively. During the nine month period ended September 30, 2017 and 2016, new debt issuances totaled $2,892,500 and $5,592,577, respectively, primarily from $1,670,000 of working capital loans and $1,222,500 of equipment loans in 2017 and $4,688,152 from the Kentucky New Markets Development program and $904,425 in equipment loans in 2016. (See Note 5). During the nine month period ended September 30, 2017 and 2016, proceeds from our factoring agreement totaled $4,843,915 and $0, respectively and repayments according to the factoring agreement totaled $6,365,492 and $0, respectively. During the period the company received a working capital term loan from an unrelated entity in the amount of $200,000. During the period, the company received working capital advances of 1,470,000 from an unrelated entity The advances are secured by all of the Companys assets, carry a 7% interest rate and are due 4 months after issuance. The notes are in default. Along with the notes, the company issued warrants equal to 904,603 and 75,000 shares with an exercise price of $.01 and $7.20 and a two-year term, respectively. This note was restructured in October 2017. (See note 9) The fair value of the warrants granted was $452,302 which was obtained using the Black-Sholes Option Pricing Model. The relative fair value of the warrants was $300,000 and the relative fair value of the corresponding debt was $700,000. Allocation of proceeds resulted in a discount of the loan in the amount of $300,000. The loan discount is amortized over the life of the corresponding debt using the straight-line method, which approximates effective interest method. As of September 30, 2017, $75,000 remained as an unamortized discount. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 9 Months Ended |
Sep. 30, 2017 | |
Notes to Financial Statements | |
NOTE 4 - RELATED PARTY TRANSACTIONS | On June 12, 2015, the Company executed a consulting agreement with an entity with common ownership. During the three month period September 30, 2017 and 2016, the Company incurred fees totaling $0 and $0 relating to services rendered under this agreement. During the nine month period September 30, 2017 and September 30, 2016, the Company incurred fees totaling $0 and $12,358,255 relating to services rendered under this agreement. The amount outstanding and payable as of September 30, 2017 and December 31, 2016, was $17,840,615 and $17,840,615, respectively. The amount is due on demand and does not accrue interest. On April 30, 2017, the Company purchased $250,000 of secured debt that had been owed to a third party, by an operating subsidiary of a related party. (See Note 7) As a result of the transaction, the Company is now the creditor on the notes. The first note in the amount of $150,000 is dated March 13, 2013, carries an interest rate of 12% and was due on September 13, 2015. The second note in the amount of $100,000 is dated July 17, 2013, carries an interest rate of 12% and was due January 17, 2016. Both notes are in default. During July 2017, an officer of the Company advanced $50,000 to Quest. The advance is unsecured, non interest bearing and due on demand. |
KENTUCKY NEW MARKETS DEVELOPMEN
KENTUCKY NEW MARKETS DEVELOPMENT PROGRAM | 9 Months Ended |
Sep. 30, 2017 | |
Notes to Financial Statements | |
NOTE 5 - KENTUCKY NEW MARKETS DEVELOPMENT PROGRAM | On March 18, 2016, Quest Processing entered into two loans under the Kentucky New Markets Development Program for a total of $5,143,186. Quest Processing paid $460,795 of debt issuance costs resulting in net proceeds of $4,682,391. See note 3. The Company retains the right to call $5,143,186 of the loans in March 2023. State of Kentucky income tax credits were generated for the lender which the Company has guaranteed over their statutory life of seven years in the event the credits are recaptured or reduced. At the time of the transaction, the income tax credits were valued at $2,005,843. The Company has not established a liability in connection with the guarantee because it believes the likelihood of recapture or reduction is remote. On March 18, 2016, ERC Mining LLC, an entity consolidated as a VIE, lent $4,117,139 to an unaffiliated entity, as part of the Kentucky New Markets Development Program loans. The note bears interest at 4% and is due March 7, 2046. The balance as of September 30, 2017 and December 31, 2016 was $4,117,139, respectively. Payments of interest only are due quarterly until March 18, 2023 at which time quarterly principal and interest are due. |
MANAGEMENT AGREEMENT
MANAGEMENT AGREEMENT | 9 Months Ended |
Sep. 30, 2017 | |
Notes to Financial Statements | |
NOTE 6 - MANAGEMENT AGREEMENT | On April 13, 2015, ERC entered into a mining and management agreement with an unrelated entity, to operate a coal mining and processing facility in Jasonville, Indiana. Under the management agreement funds advanced for the nine month period ended September 30, 2017 and 2016 are $75,000 and $1,525,000, respectively and the amounts repaid totaled $469,645 and $450,000, respectively. Of the amounts received in 2017, $241,574 was the collection of a previously impaired amount. |
EQUITY TRANSACTIONS
EQUITY TRANSACTIONS | 9 Months Ended |
Sep. 30, 2017 | |
Notes to Financial Statements | |
NOTE 7 - EQUITY TRANSACTIONS | A new 2016 Stock Incentive Plan (2016 Plan) was approved by the Board during January 2016. The Company may grant up to 6,363,225 shares of Series A Preferred stock under the 2016 Plan. The 2016 Plan is administered by the Board of Directors, which has substantial discretion to determine persons, amounts, time, price, exercise terms, and restrictions of the grants, if any. The options issued under the 2016 Plan vest upon issuance. On January 1, 2016, the Company issued options amounting to 6,108,695 shares (which includes shares disclosed above) under an adopted stock option plan that were cashlessly exercised into 2,069,655 shares of Series A preferred stock resulting in an expense of $83,300. On September 5, 2016, the Company issued options amounting to 59,133 shares under an adopted stock option plan that were cashlessly exercised into 23,139 shares of Series A preferred stock resulting in an expense of $5,375. The Company had a note payable in the amount of $50,000 which was assumed as part of the share exchange agreement and accounted for as an expense in the recapitalization transaction. On February 22, 2017, the Company modified the note to add a conversion option with a price of $1.50. The conversion option was beneficial, therefore, the Company recognized $50,000 as a discount to the assumed note payable. The note was immediately converted, resulting in the issuance of 33,334 shares and the full amortization of the discount. On March 7, 2017, ARC closed a private placement whereby it issued an aggregate of 500,000 shares of ARCs Series B Preferred Stock at a purchase price of $1.00 per Series B Preferred share, and warrants to purchase an aggregate of 208,334 shares of the ARCs common stock (subject to certain adjustments), for proceeds to ARC of $500,000 (the March 2017 Private Placement). After deducting for fees and expenses, the aggregate net proceeds from the sale of the preferred series B shares and the warrants in the March 2017 Private Placement were approximately $500,000. The A warrants totaling 138,889 shares expire March 6, 2020 and hold an exercise price of $7.60 per share. The A-1 warrants totaling 69,445 shares expire March 6, 2020 and hold an exercise price of $.003 per share. On April 2, 2017, American Resources Corporation closed a private placement whereby it issued an aggregate of 100,000 shares of the ARCs Series B Preferred Stock at a purchase price of $1.00 per Series B Preferred share, and warrants to purchase an aggregate of 27,778 shares of the ARCs common stock (subject to certain adjustments), for proceeds to ARC of $100,000 (the April 2017 Private Placement). After deducting for fees and expenses, the aggregate net proceeds from the sale of the series B preferred shares and the warrants in the April 2017 Private Placement were approximately $100,000. The A warrants totaling 27,778 shares expire April 2, 2019 and hold an exercise price of $7.20 per share. On April 30, 2017, American Resources Corporation closed on a private placement agreement whereby it issued an aggregate of 250,000 shares of the ARCs Series B Preferred Stock and warrants amounting to 69,445 to an unrelated party for the purchase of $250,000 of secured debt that had been owed to that party, by an operating subsidiary of a related party. The A warrants totaling 69,445 shares expire April 29, 2019 and hold an exercise price of $7.20 per share. The Series B Preferred Stock converts into common stock of the Company at the holders discretion at a conversion price of $3.60 per common share (one share of Series B Preferred converts to common at a ratio of 0.27778). Furthermore, the Series B Preferred share purchase agreement provides for certain adjustments to the conversion value of the Series B Preferred to common shares of the Company that are based on the EBITDA (earning before interest, taxes, depreciation, and amortization) for the Company for the 12 months ended March 31, 2018. Those adjustments provide for a decrease in the conversion value based on the proportional miss of the Companys EBITDA, up to a maximum of 30.0% decrease in the conversion value of the Series B Preferred to common shares. The Series B Preferred share purchase agreement provides for an option for the investor to put the Series B Preferred investment to the Company at a premium to the Series B Preferred purchase price should the Company achieve certain hurdles, such as a secondary offering and an up-listing to a national stock exchange. Such put option expires after 20 days from notification of the Company to the Series B Preferred investor of the fulfillment of such qualifications. On July 5, 2017, the Company issued 13,333 common shares and warrants to purchase 33,333 shares to an unrelated consulting company. The warrants had an exercise price of $3.60 with a three-year term. The total compensation expense related to this award was $10,000 which was determined using the closing stock price at the date of the grant and the Black-Sholes Option Pricing Model. 2017 Expected Dividend Yield 0 % Expected volatility 13.73 % Risk-free rate 1.62 % Expected life of warrants 2-3 years Weighted Weighted Average Average Aggregate Number of Exercise Contractual Intrinsic Warrants Price Life in Years Value Outstanding - December 31, 2016 - - - - Exercisable - December 31, 2016 - - - - Granted 1,326,827 $ 1.810 2.186 $ 37,573 Forfeited or Expired - - - - Exercised - - - - Outstanding - September 30, 2017 1,326,827 $ 1.810 2.186 $ 37,573 Exercisable - September 30, 2017 1,326,827 $ 1.810 2.186 $ 37,573 |
CONTINGENCIES
CONTINGENCIES | 9 Months Ended |
Sep. 30, 2017 | |
Notes to Financial Statements | |
NOTE 8 - CONTINGENCIES | In the course of normal operations, the Company is involved in various claims and litigation that management intends to defend. The range of loss, if any, from potential claims cannot be reasonably estimated. However, management believes the ultimate resolution of matters will not have a material adverse impact on the Companys business or financial position. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 30, 2017 | |
Notes to Financial Statements | |
NOTE 9 - SUBSEQUENT EVENTS | Loans On October 4, 2017, ARC entered into a consolidated loan agreement with an unaffiliated entity. $5,444,632 has been advanced under the note. $3,770,000 of the note was advanced after September 30, 2017. The agreement calls for interest of 7% and with all outstanding amounts due on demand. The note is secured by all assets of Quest and subsidiaries. In conjunction with the loan, a warrants for up to 5,017,006 common shares were issued at an exercise price ranging from $.01 to $11.44 per share and with an expiration date of October 2, 2020. On October 19, 2017, Quest entered into an equipment financing agreement with an unaffiliated entity to purchase certain surface equipment for $90,400. The agreement calls for monthly payments until maturity of October 19, 2019 and interest of 9.95%. On October 20, 2017, Quest entered into an equipment financing agreement with an unaffiliated entity to purchase certain surface equipment for $50,250. The agreement calls for monthly payments until maturity of October 20, 2019 and interest of 10.60%. On December 7, 2017, Quest entered into an equipment financing agreement with an unaffiliated entity to purchase certain surface equipment for $56,900. The agreement calls for monthly payments until maturity of January 7, 2021. On January 25, 2018, Quest entered into an equipment financing agreement with an unaffiliated entity to purchase certain surface equipment for $346,660. The agreement calls for monthly payments until maturity of December 25, 2020. |
SUMMARY OF SIGNIFICANT ACCOUN15
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2017 | |
Summary Of Significant Accounting Policies Policies | |
Basis of Presentation and Consolidation | The consolidated financial statements include the accounts for the nine months ended September 30, 2017 and 2016 of the Company and its wholly owned subsidiaries Quest Energy Inc (QEI) Deane Mining, LLC (Deane), Quest Processing LLC (Quest Processing), ERC Mining Indiana Corp (ERC), McCoy Elkhorn Coal LLC (McCoy) and Knott County Coal LLC (KCC). All significant intercompany accounts and transactions have been eliminated. On January 5, 2017, QEI entered into a share exchange agreement with NGFC Equities, Inc (NGFC). Under the agreement, the shareholders of QEI exchanged 100% of its common stock to NGFC for 4,817,792 newly created Series A Preferred shares that is convertible into approximately 95% of outstanding common stock of NGFC. The previous NGFC shareholders retained 845,370 common shares as part of the agreement. The conditions to the agreement were fully satisfied on February 7, 2017, at which time the Company took full control of NGFC. NGFC has been renamed to American Resources Corporation ARC. The transaction was accounted for as a recapitalization. QEI was the accounting acquirer and ARC will continue the business operations of QEI, therefore, the historical financial statements presented are those of QEI and its subsidiaries. The equity and share information reflect the results of the recapitalization. On May 15, 2017 ARC initiated a one-for-thirty reverse stock split. The financial statements have been retrospectively restated to give effect to this split. On February 17, 2016, McCoy Elkhorn Coal LLC (McCoy) acquired certain assets in exchange for $100 and for assuming certain liabilities of Fortress Resources, LLC. The fair values of liabilities were determined to be $3,561,848 respectively. The liabilities assumed do not require fair value readjustments. The assets acquired of McCoy do not represent a business as defined in FASB AS 805-10-20. McCoy does not have an integrated set of activities and assets that is capable of being conducted and managed for the purpose of providing a return or other economic benefit to their investors, members or participants. Accordingly, the assets acquired are initially recognized at the consideration paid, which was the liabilities assumed, including direct acquisition costs, of which there were none. The cost is allocated to the group of assets acquired based on their relative fair value. The assets acquired and liabilities assumed of McCoy were as follows at the purchase date: Assets Cash $ 2,935,800 Underground Mining Equipment 531,249 Surface Mining Equipment 36,218 Coal Preparation and Loading Facilities 58,681 Liabilities Asset Retirement Obligation $ 3,561,848 On April 14, 2016, the Company acquired 100% of the membership interests of ICG Knott County, LLC, subsequently renamed Knott County Coal LLC. The fair values of liabilities were determined to be $4,499,434 respectively. The liabilities assumed do not require fair value readjustments. The assets acquired of ICG Knott County do not represent a business as defined in FASB AS 805-10-20. IGC Knott County does not have an integrated set of activities and assets that is capable of being conducted and managed for the purpose of providing a return or other economic benefit to their investors, members or participants. Accordingly, the assets acquired and liabilities assumed are initially recognized at the consideration paid, including direct acquisition costs. The cost is allocated to the group of assets acquired and liabilities assumed based on their relative fair value. The assets and liabilities assumed of ICG Knott County were as follows on the purchase date: Assets Cash $ 2,380,000 Underground Mining Equipment 1,533,937 Surface Mining Equipment 206,578 Land 178,683 Coal Preparation and Loading Facilities 200,236 Liabilities Asset Retirement Obligation $ 4,499,434 As a result of the KCC and McCoy acquisitions during 2016, $8,061,282 of ARO was assumed for net cash of $5,315,700 and property, equipment and land of $2,745,582. |
Interim Financial Information | Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been omitted. In the opinion of management, these interim unaudited Consolidated Financial Statements reflect all normal and recurring adjustments necessary for a fair presentation of the results for the periods presented. Results of operations for the nine months ended September 30, 2017 and 2016 are not necessarily indicative of the results to be expected for the year ending December 31, 2017 or any other period. These financial statements should be read in conjunction with the Companys 2015 and 2016 audited financial statements and the notes thereto which were filed on form 8-K/A on September 25, 2017. |
Going Concern | The Company has suffered recurring losses from operations and currently has a working capital deficit. These conditions raise substantial doubt about the Companys ability to continue as a going concern. We plan to generate profits by expanding current coal operations as well as developing new coal operations. However, we will need to raise the funds required to do so through sale of our securities or through loans from third parties. We do not have any commitments or arrangements from any person to provide us with any additional capital. If additional financing is not available when needed, we may need to cease operations. We may not be successful in raising the capital needed to expand or develop operations. Management believes that actions presently being taken to obtain additional funding provide the opportunity for the Company to continue as a going concern. The accompanying financial statements have been prepared assuming the Company will continue as a going concern; no adjustments to the financial statements have been made to account for this uncertainty. |
Convertible Preferred Securities | We account for hybrid contracts that feature conversion options in accordance with generally accepted accounting principles in the United States. ASC 815, Derivatives and Hedging Activities We also follow ASC 480-10, Distinguishing Liabilities from Equity |
Cash | Cash |
Restricted cash | As part of the Kentucky New Markets Development Program (See Note 3) an asset management fee reserve was set up in the amount of $116,115. The funds are held to pay annual asset management fees to an unrelated party through 2021. The balance as of September 30, 2017 and December 31, 2016 was $116,115, respectively. The total balance of restricted cash also includes amounts held under the management agreement. See note 6. |
Asset Retirement Obligations (ARO) - Reclamation | At the time they are incurred, legal obligations associated with the retirement of long-lived assets are reflected at their estimated fair value, with a corresponding charge to mine development. Obligations are typically incurred when we commence development of underground and surface mines, and include reclamation of support facilities, refuse areas and slurry ponds or through acquisitions. Obligations are reflected at the present value of their future cash flows. We reflect accretion of the obligations for the period from the date they incurred through the date they are extinguished. The asset retirement obligation assets are amortized using the units-of-production method over estimated recoverable (proved and probable) reserves. We are using a discount rate of 10%. Federal and State laws require that mines be reclaimed in accordance with specific standards and approved reclamation plans, as outlined in mining permits. Activities include reclamation of pit and support acreage at surface mines, sealing portals at underground mines, and reclamation of refuse areas and slurry ponds. We assess our ARO at least annually and reflect revisions for permit changes, change in our estimated reclamation costs and changes in the estimated timing of such costs. During the nine month periods ending September 30, 2017 and 2016, $281,907 and $0 were incurred for loss on settlement on ARO, respectively. The table below reflects the changes to our ARO: Balance at December 31, 2016 $ 18,126,873 Accretion nine months September 30, 2017 1,181,055 Reclamation work nine months September 30, 2017 (427,225 ) Balance at September 30, 2017 $ 18,880,703 |
Reclassifications | Reclassifications have been made to conform with current year presentation. |
Allowance For Doubtful Accounts | The Company recognizes an allowance for losses on trade and other accounts receivable in an amount equal to the estimated probable losses net of recoveries. The allowance is based on an analysis of historical bad debt experience, current receivables aging and expected future write-offs, as well as an assessment of specific identifiable amounts considered at risk or uncollectible. Allowance for trade receivables as of September 30, 2017 and December 31, 2016 amounted to $0, for both periods. Allowance for other accounts receivables as of September 30, 2017 and December 31, 2016 amounted to $405,356 and $640,000, respectively. Trade and loan receivables are carried at amortized cost, net of allowance for losses. Amortized cost approximated book value as of September 30, 2017 and December 31, 2016. |
New Accounting Pronouncements | Management has determined that the impact of the following recent FASB pronouncements will not have a material impact on the financial statements. · Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers · ASU 2015-11, Simplifying the Measurement of Inventory · ASU 2015-17, Balance Sheet Classification of Deferred Taxes · ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities · ASU 2016-02, Leases · ASU 2016-18, Statement of Cash Flows: Restricted Cash, · ASU 2017-01, Business Combinations, · ASU 2017-11, Earnings Per Share, Management has elected to early adopt ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business |
SUMMARY OF SIGNIFICANT ACCOUN16
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Schedule of Asset Retirement Obligations | Balance at December 31, 2016 $ 18,126,873 Accretion nine months September 30, 2017 1,181,055 Reclamation work nine months September 30, 2017 (427,225 ) Balance at September 30, 2017 $ 18,880,703 |
McCoy [Member] | |
Schedule of assets acquired and liabilities assumed | Assets Cash $ 2,935,800 Underground Mining Equipment 531,249 Surface Mining Equipment 36,218 Coal Preparation and Loading Facilities 58,681 Liabilities Asset Retirement Obligation $ 3,561,848 |
ICG Knott County [Member] | |
Schedule of assets acquired and liabilities assumed | Assets Cash $ 2,380,000 Underground Mining Equipment 1,533,937 Surface Mining Equipment 206,578 Land 178,683 Coal Preparation and Loading Facilities 200,236 Liabilities Asset Retirement Obligation $ 4,499,434 |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Property And Equipment Tables | |
Property, Plant and Equipment | September 30, 2017 December 31, 2016 Processing and rail facility $ 2,914,422 $ 2,914,422 Underground equipment 8,164,359 7,500,512 Surface equipment 4,491,304 3,751,054 Land 178,683 178,683 Less: Accumulated depreciation (4,119,297 ) (2,262,855 ) Total Property and Equipment, Net $ 11,629,471 $ 12,081,816 |
Property, Plant and Equipment, Estimated Useful Lives | Processing and Rail Facilities 20 years Surface Equipment 7 years Underground Equipment 5 years |
EQUITY TRANSACTIONS (Table)
EQUITY TRANSACTIONS (Table) | 9 Months Ended |
Sep. 30, 2017 | |
Equity Transactions Table | |
Schedule of Stockholders' Equity Note, Warrants | 2017 Expected Dividend Yield 0 % Expected volatility 13.73 % Risk-free rate 1.62 % Expected life of warrants 2-3 years Weighted Weighted Average Average Aggregate Number of Exercise Contractual Intrinsic Warrants Price Life in Years Value Outstanding - December 31, 2016 - - - - Exercisable - December 31, 2016 - - - - Granted 1,326,827 $ 1.810 2.186 $ 37,573 Forfeited or Expired - - - - Exercised - - - - Outstanding - September 30, 2017 1,326,827 $ 1.810 2.186 $ 37,573 Exercisable - September 30, 2017 1,326,827 $ 1.810 2.186 $ 37,573 |
SUMMARY OF SIGNIFICANT ACCOUN19
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 |
Assets | ||
Underground Mining Equipment | $ 8,164,359 | $ 7,500,512 |
McCoy [Member] | ||
Assets | ||
Cash | 2,935,800 | |
Underground Mining Equipment | 531,249 | |
Surface Mining Equipment | 36,218 | |
Coal Preparation and Loading Facilities | 58,681 | |
Liabilities | ||
Asset Retirement Obligation | $ 3,561,848 |
SUMMARY OF SIGNIFICANT ACCOUN20
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1) - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 |
Assets | ||
Underground Mining Equipment | $ 8,164,359 | $ 7,500,512 |
Land | 178,683 | $ 178,683 |
ICG Knott County [Member] | ||
Assets | ||
Cash | 2,380,000 | |
Underground Mining Equipment | 1,533,937 | |
Surface Mining Equipment | 206,578 | |
Land | 178,683 | |
Coal Preparation and Loading Facilities | 200,236 | |
Liabilities | ||
Asset Retirement Obligation | $ 4,499,434 |
SUMMARY OF SIGNIFICANT ACCOUN21
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 2) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Summary Of Significant Accounting Policies Details 2 | ||||
Beginning Balance | $ 18,126,873 | |||
Accretion | $ 339,288 | $ 300,000 | 1,181,055 | $ 1,261,032 |
Reclamation work | (427,225) | |||
Ending Balance | $ 18,880,703 | $ 18,880,703 |
SUMMARY OF SIGNIFICANT ACCOUN22
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | May 15, 2017 | Jan. 05, 2017 | Apr. 14, 2016 | Feb. 17, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 |
Date of incorporation | Jun. 30, 2015 | ||||||
Asset management fee | $ 116,115 | $ 116,115 | |||||
Loss on reclamation settlements | 281,907 | $ 0 | |||||
Allowance for trade receivables | 0 | 0 | |||||
Allowance for other accounts receivables | $ 405,356 | 640,000 | |||||
Discount rate | 10.00% | ||||||
Cash received from acquisitions | $ 5,315,700 | 5,315,700 | |||||
Assumption of net property, equipment and land | 2,745,582 | ||||||
Total acquisition | $ 8,061,282 | ||||||
ARC [Member] | |||||||
Reverse stock split | one-for-thirty | ||||||
McCoy Elkhorn Coal LLC [Member] | |||||||
Fair value exchange assets acquired | $ 100 | ||||||
Fair values of liabilities | $ 3,561,848 | ||||||
NGFC Equities [Member] | |||||||
Description of shares exchange agreement | Under the agreement, the shareholders of QEI exchanged 100% of its common stock to NGFC for 4,817,792 newly created Series A Preferred shares that is convertible into approximately 95% of outstanding common stock of NGFC. The previous NGFC shareholders retained 845,370 common shares as part of the agreement. The conditions to the agreement were fully satisfied on February 7, 2017, at which time the Company took full control of NGFC. | ||||||
ICG Knott County [Member] | |||||||
Fair values of liabilities | $ 4,499,434 | ||||||
Equity acquired ownership Percentage | 100.00% |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details) - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 |
Less: Accumulated depreciation | $ (4,119,297) | $ (2,262,855) |
Total Property and Equipment, Net | 11,629,471 | 12,081,816 |
Underground equipment [Member] | ||
Property and equipment | 8,164,359 | 7,500,512 |
Surface equipment [Member] | ||
Property and equipment | 4,491,304 | 3,751,054 |
Processing and rail facility [Member] | ||
Property and equipment | 2,914,422 | 2,914,422 |
Land [Member] | ||
Property and equipment | $ 178,683 | $ 178,683 |
PROPERTY AND EQUIPMENT (Detai24
PROPERTY AND EQUIPMENT (Details 1) | 9 Months Ended |
Sep. 30, 2017 | |
Processing and rail facility [Member] | |
Estimated useful lives | 20 years |
Surface equipment [Member] | |
Estimated useful lives | 7 years |
Underground equipment [Member] | |
Estimated useful lives | 5 years |
PROPERTY AND EQUIPMENT (Detai25
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 Details Narrative | ||||
Depreciation expense | $ 697,214 | $ 766,078 | $ 1,856,442 | $ 2,010,529 |
NOTES PAYABLE (Details Narrativ
NOTES PAYABLE (Details Narrative) - USD ($) | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Notes Payable Details Narrative | |||
Principal payments on long term debt | $ 318,576 | $ 43,665 | |
Proceeds from long term debt | 2,892,500 | 5,592,577 | |
Proceeds from long term debt | 1,670,000 | 4,688,152 | |
Equipment for notes payable | 1,222,500 | 904,425 | |
Cash proceeds | 200,000 | ||
Proceeds from the factoring agreement | 4,843,915 | ||
Payments on factoring agreement | $ 6,365,492 | ||
Issuance of working capital in advance | 1,470,000 | ||
Interest rate | 7.00% | ||
Issuance of working captial due date | 4 months | ||
Issue of warrant | 904,603 | 75,000 | |
Exercise price | $ 0.01 | $ 7.20 | |
Expected life of warrants | 2 years | ||
Fair value of warrants granted | $ 452,302 | ||
Relative fair value of warrants | 300,000 | ||
Corresponding debt | 700,000 | ||
Unamortized discount | 75,000 | ||
Discounted loan | $ 300,000 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) | Mar. 13, 2013 | Apr. 30, 2017 | Jul. 17, 2013 | Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 |
Consulting fees - related party | $ 12,358,255 | |||||||
Accrued related party management fee | 17,840,615 | 17,840,615 | $ 17,840,615 | |||||
Advances given by an officer | $ 50,000 | $ 50,000 | ||||||
Secured Debt [Member] | ||||||||
Purchase of related party note receivable in exchange for Equity | $ 250,000 | |||||||
Second Note [Member] | ||||||||
Line of credit amount | $ 100,000 | |||||||
Interst rate | 12.00% | |||||||
Secuured debt due date | Jan. 17, 2016 | |||||||
First Note [Member] | ||||||||
Line of credit amount | $ 150,000 | |||||||
Interst rate | 12.00% | |||||||
Secuured debt due date | Sep. 13, 2015 |
KENTUCKY NEW MARKETS DEVELOPM28
KENTUCKY NEW MARKETS DEVELOPMENT PROGRAM (Details Narrative) - USD ($) | 1 Months Ended | ||
Mar. 18, 2016 | Sep. 30, 2017 | Dec. 31, 2016 | |
Note Receivable | $ 4,117,139 | $ 4,117,139 | |
ERC Mining LLC [Member] | |||
Note Receivable | $ 4,117,139 | ||
Interest on note receivable | 4.00% | ||
Note receviable due date | Mar. 7, 2046 | ||
Payments of interest quterly due date | Mar. 18, 2023 | ||
Quest Processing [Member] | |||
Total loan amount | $ 5,143,186 | ||
Payment of debt issuance | 460,795 | ||
Net proceeds for loan cost | $ 4,682,391 | ||
Description for company rights | The Company retains the right to call $5,143,186 of the loans in March 2023. | ||
Income tax credits value | $ 2,005,843 |
MANAGEMENT AGREEMENT (Details N
MANAGEMENT AGREEMENT (Details Narrative) - USD ($) | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Management Agreement Details Narrative | ||
Advances made in connection with management agreement | $ 75,000 | $ 1,525,000 |
Advance repayment in connection with management agreement | 469,645 | $ 450,000 |
Received of previously impaired amount | $ 241,574 |
EQUITY TRANSACTIONS (Details)
EQUITY TRANSACTIONS (Details) | 9 Months Ended |
Sep. 30, 2017 | |
Expected Dividend Yeild | 0.00% |
Expected volatility | 13.73% |
Risk-free rate | 1.62% |
Minimum [Member] | |
Expected life of warrants | 2 years |
Maximum [Member] | |
Expected life of warrants | 3 years |
EQUITY TRANSACTIONS (Details 1)
EQUITY TRANSACTIONS (Details 1) | 9 Months Ended |
Sep. 30, 2017USD ($)$ / sharesshares | |
Equity Transactions Details 1 | |
Beginning Outstanding | |
Beginning Exercisable | |
Granted | 1,326,827 |
Forfeited or Expired | |
Exercised | |
Ending Outstanding | 1,326,827 |
Ending Exercisable | 1,326,827 |
Weighted Average Exercise Price | |
Beginning Outstanding | $ / shares | |
Beginning Exercisable | $ / shares | |
Granted | $ / shares | 1.810 |
Ending Outstanding | $ / shares | 1.810 |
Ending Exercisable | $ / shares | $ 1.810 |
Weighted Average Contractual Life in Years | |
Weighted average remaining contractual terms of share granted | 2 years 22 months 10 days |
Weighted average remaining contractual terms of share Outstanding | 2 years 22 months 10 days |
Weighted average remaining contractual terms of share exercisable | 2 years 22 months 10 days |
Aggregate Intrinsic Value | |
Beginning Outstanding | $ | |
Beginning Exercisable | $ | |
Granted | $ | 37,573 |
Ending Outstanding | $ | 37,573 |
Ending Exercisable | $ | $ 37,573 |
EQUITY TRANSACTIONS (Details Na
EQUITY TRANSACTIONS (Details Narrative) - USD ($) | Jul. 05, 2017 | Apr. 02, 2017 | Mar. 07, 2017 | Apr. 30, 2017 | Mar. 31, 2017 | Sep. 30, 2017 | Sep. 30, 2016 | Jun. 30, 2017 | Feb. 22, 2017 | Dec. 31, 2016 | Jan. 31, 2016 |
Stock compensation expense | $ 10,000 | $ 88,675 | |||||||||
Expected life of warrants | 2 years | ||||||||||
Common stock, for proceeds | $ 500,000 | ||||||||||
Equity, Description | Such put option expires after 20 days from notification | ||||||||||
Terms of conversion feature | The Series B Preferred Stock converts into common stock of the Company at the holders discretion at a conversion price of $3.60 per common share (one share of Series B Preferred converts to common at a ratio of 0.27778). Furthermore, the Series B Preferred share purchase agreement provides for certain adjustments to the conversion value of the Series B Preferred to common shares of the Company that are based on the EBITDA (earning before interest, taxes, depreciation, and amortization) for the Company for the 12 months ended March 31, 2018. Those adjustments provide for a decrease in the conversion value based on the proportional miss of the Companys EBITDA, up to a maximum of 30.0% decrease in the conversion value of the Series B Preferred to common shares. | ||||||||||
Conversion option [Member] | |||||||||||
Issuance of shares | 33,334 | ||||||||||
Note payable | $ 50,000 | ||||||||||
Conversion price | $ 1.50 | ||||||||||
Discount on note payable | $ 50,000 | ||||||||||
Private placement agreement [Member] | |||||||||||
Amount of secured debt purchased from unrelated debt holder of related party | $ 250,000 | ||||||||||
Series A Preferred Stock [Member] | |||||||||||
Preferred stock shares issued | 4,817,792 | 4,817,792 | |||||||||
Series A Preferred Stock [Member] | Options [Member] | On September 5, 2016 [Member] | |||||||||||
Issuance of shares | 59,133 | ||||||||||
Cashlessly shares exercised | 23,139 | ||||||||||
Stock or Unit Option Plan Expense | $ 5,375 | ||||||||||
Series A Preferred Stock [Member] | Options [Member] | On January 1, 2016 [Member] | |||||||||||
Issuance of shares | 6,108,695 | ||||||||||
Cashlessly shares exercised | 2,069,655 | ||||||||||
Stock or Unit Option Plan Expense | $ 83,300 | ||||||||||
Series A Preferred Stock [Member] | 2016 Plan [Member] | |||||||||||
Issuance of shares | 6,363,225 | ||||||||||
Series B Preferred Stock [Member] | |||||||||||
Preferred stock shares issued | 850,000 | 0 | |||||||||
Series B Preferred Stock [Member] | Private placement agreement [Member] | ARC [Member] | |||||||||||
Common stock shares issuable upon exercise of warrants or rights | 69,445 | ||||||||||
Preferred stock shares issued | 250,000 | ||||||||||
April 2017 Private Placement [Member] | ARC [Member] | |||||||||||
Purchase price per share | $ 1 | ||||||||||
Proceeds from the sale of the preferred stock | $ 100,000 | ||||||||||
April 2017 Private Placement [Member] | Series B Preferred Stock [Member] | |||||||||||
Proceeds from the sale of the preferred stock | $ 500,000 | ||||||||||
April 2017 Private Placement [Member] | Series B Preferred Stock [Member] | ARC [Member] | |||||||||||
Issuance of shares | 500,000 | ||||||||||
Purchase price per share | $ 1 | ||||||||||
Common stock shares issuable upon exercise of warrants or rights | 27,778 | 208,334 | |||||||||
Preferred stock shares issued | 100,000 | ||||||||||
Common stock, for proceeds | $ 500,000 | ||||||||||
April 2017 Private Placement [Member] | Series B Preferred Stock [Member] | April 29, 2019 [Member] | |||||||||||
Warrants | $ 69,445 | ||||||||||
Exercise price | $ 7.20 | ||||||||||
April 2017 Private Placement [Member] | Series B Preferred Stock [Member] | April 2, 2019 [Member] | |||||||||||
Warrants | $ 27,778 | ||||||||||
Exercise price | $ 7.20 | ||||||||||
April 2017 Private Placement [Member] | Series B Preferred Stock [Member] | A Expire March 6, 2020 [Member] | |||||||||||
Warrants | $ 138,889 | ||||||||||
Exercise price | $ 7.60 | ||||||||||
April 2017 Private Placement [Member] | Series B Preferred Stock [Member] | A-1 Expire March 6, 2020 [Member] | |||||||||||
Warrants | $ 69,445 | ||||||||||
Exercise price | $ 0.003 | ||||||||||
Warrant [Member] | |||||||||||
Class of warrants or rights issued | 33,333 | ||||||||||
Common stock shares issued | 13,333 | ||||||||||
Stock compensation expense | $ 10,000 | ||||||||||
Expected life of warrants | 3 years | ||||||||||
Exercise price | $ 3.60 |
SUBSEQUENT EVENTS (Details Narr
SUBSEQUENT EVENTS (Details Narrative) - USD ($) | Dec. 07, 2017 | Oct. 04, 2017 | Jan. 25, 2018 | Oct. 20, 2017 | Oct. 19, 2017 | Sep. 30, 2017 | Dec. 31, 2016 |
Exercise price | $ 0.01 | $ 7.20 | |||||
Quest [Member] | Surface equipment [Member] | Subsequent Event [Member] | |||||||
Credit facility maximum borrowing capacity | $ 56,900 | $ 346,660 | $ 50,250 | $ 90,400 | |||
Interest rate | 10.60% | 9.95% | |||||
Maturity date | Jan. 7, 2021 | Dec. 25, 2020 | Oct. 20, 2019 | Oct. 19, 2019 | |||
Unaffiliated entity [Member] | Subsequent Event [Member] | Consolidated loan agreement [Member] | |||||||
Interest rate | 7.00% | ||||||
Notes and loans payable | $ 5,444,632 | ||||||
Unaffiliated entity [Member] | Subsequent Event [Member] | Consolidated loan agreement [Member] | After March 31, 2017 [Member] | |||||||
Amount receivable under agreement | $ 3,770,000 | ||||||
Unaffiliated entity [Member] | Subsequent Event [Member] | Consolidated loan agreement [Member] | Warrant [Member] | |||||||
Common stock shares issuable upon exercise of warrants or rights | 5,017,006 | ||||||
Expiration date of contract | Oct. 2, 2020 | ||||||
Unaffiliated entity [Member] | Subsequent Event [Member] | Consolidated loan agreement [Member] | Warrant [Member] | Minimum [Member] | |||||||
Exercise price | $ 0.01 | ||||||
Unaffiliated entity [Member] | Subsequent Event [Member] | Consolidated loan agreement [Member] | Warrant [Member] | Maximum [Member] | |||||||
Exercise price | $ 11.44 |