Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2018 | Nov. 14, 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, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Emerging Growth Company | true | |
Entity Small Business | true | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Common Stock, Shares Outstanding | 17,715,969 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,018 | |
Entity Ex Transition Period | false |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
CURRENT ASSETS | ||
Cash | $ 57,739 | $ 186,722 |
Accounts Receivable | 2,801,040 | 1,870,562 |
Inventory | 426,725 | 615,096 |
Prepaid fees | 147,826 | |
Accounts Receivable - Other | 102,994 | 30,021 |
Total Current Assets | 3,536,324 | 2,702,401 |
OTHER ASSETS | ||
Cash - restricted | 286,043 | 198,943 |
Processing and rail facility | 2,802,855 | 2,914,422 |
Underground equipment | 9,346,692 | 8,887,045 |
Surface equipment | 4,532,724 | 3,957,603 |
Mining rights (net of amortization of $181,385 and $0) | 2,036,567 | |
Less Accumulated Depreciation | (6,600,108) | (4,820,569) |
Land | 178,683 | |
Accounts Receivable - Other | 127,718 | |
Note Receivable | 4,117,139 | 4,117,139 |
Total Other Assets | 16,521,912 | 15,560,984 |
TOTAL ASSETS | 20,058,236 | 18,263,385 |
CURRENT LIABILITIES | ||
Accounts payable | 6,813,924 | 5,360,537 |
Accrued management fee | 17,840,615 | |
Accrued interest | 624,209 | 336,570 |
Accrued dividend on Series B | 104,157 | |
Funds held for others | 63,767 | 82,828 |
Due to affiliate | 636,378 | 124,000 |
Current portion of long term-debt (net of issuance costs and debt discount of $387,442 and $35,000) | 14,625,099 | 9,645,154 |
Current portion of reclamation liability | 2,275,848 | 2,033,862 |
Total Current Liabilities | 25,143,382 | 35,423,566 |
OTHER LIABILITIES | ||
Long-term portion of note payable (net of issuance costs of $420,293 and $440,333) | 5,072,493 | 5,081,688 |
Reclamation liability | 20,289,527 | 17,851,195 |
Total Other Liabilities | 25,362,020 | 22,932,883 |
Total Liabilities | 50,505,402 | 58,356,449 |
STOCKHOLDERS' DEFICIT | ||
Additional paid-in capital | 19,816,567 | 1,527,254 |
Accumulated deficit | (50,265,183) | (42,019,595) |
Total American Resources Corporation's Shareholders' Deficit | (30,447,166) | (40,490,920) |
Non controlling interest | 397,856 | |
Total Stockholders' Deficit | (30,447,166) | (40,093,064) |
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | 20,058,236 | 18,263,385 |
Class A Common stock [Member] | ||
STOCKHOLDERS' DEFICIT | ||
Common stock, value | 118 | 89 |
Series A Preferred Stock [Member] | ||
STOCKHOLDERS' DEFICIT | ||
Preferred stock, value | 482 | 482 |
Series B Preferred Stock [Member] | ||
STOCKHOLDERS' DEFICIT | ||
Preferred stock, value | $ 850 | $ 850 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
OTHER ASSETS | ||
Mining rights net of amortization | $ 181,385 | $ 0 |
CURRENT LIABILITIES | ||
Long term-debt net of issuance costs and debt discount | 387,442 | 35,000 |
OTHER LIABILITIES | ||
Note payable net of issuance costs | $ 420,293 | $ 440,333 |
Class A Common stock [Member] | ||
STOCKHOLDERS' DEFICIT | ||
Common Stock, Par Value | $ .0001 | $ .0001 |
Common Stock, Shares Authorized | 230,000,000 | 230,000,000 |
Common Stock, Shares Issued | 1,192,044 | 892,044 |
Common Stock, Shares Outstanding | 1,192,044 | 892,044 |
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 | 850,000 |
Preferred Stock, Shares Outstanding | 850,000 | 850,000 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Consolidated Statements Of Operations | ||||
Coal Sales | $ 8,890,322 | $ 4,192,244 | $ 23,219,222 | $ 13,770,183 |
Processing Services Income | 147,946 | 159,724 | 167,462 | 1,563,864 |
Total Revenue | 9,038,268 | 4,351,968 | 23,386,684 | 15,334,047 |
Cost of Coal Sales and Processing | (6,690,698) | (2,797,140) | (16,783,801) | (12,307,399) |
Accretion Expense | (539,771) | (339,288) | (1,435,295) | (1,181,055) |
Loss on settlement | (30,055) | (281,907) | ||
Depreciation | (649,983) | (697,214) | (1,779,539) | (1,856,442) |
Amortization of mining rights | (181,385) | (181,385) | ||
General and Administrative | (1,142,522) | (26,940) | (2,175,794) | (189,604) |
Professional Fees | (784,922) | (144,712) | (1,222,937) | (565,995) |
Production Taxes and Royalties | (1,041,667) | (865,950) | (2,769,584) | (3,464,611) |
Development Costs | (2,188,833) | (1,035,286) | (5,908,207) | (4,172,759) |
Total Expenses from Operations | (13,219,781) | (5,936,585) | (32,256,542) | (24,019,772) |
Net Loss from Operations | (4,181,513) | (1,584,617) | (8,869,858) | (8,685,725) |
Other Income | 875,942 | 67,844 | 1,295,065 | 309,418 |
Gain on cancelation of debt | 315,000 | |||
Receipt of previously impaired receivable | 117,657 | 92,573 | 241,574 | |
Interest Income | 41,171 | |||
Interest expense | (305,655) | (342,683) | (864,104) | (567,970) |
Net Loss | (3,611,226) | (1,741,799) | (7,990,153) | (8,702,703) |
Less: Series B dividend requirement | (17,000) | (104,157) | ||
Less: Net income attributable to Non Controlling Interest | (67,844) | (151,278) | (309,418) | |
Net loss attributable to American Resources Corporation Shareholders | $ (3,628,226) | $ (1,809,643) | $ (8,245,588) | $ (9,012,121) |
Net loss per share - basic and diluted | $ (2.49) | $ (2.03) | $ (8.76) | $ (11.87) |
Weighted average shares outstanding | 1,038,783 | 891,180 | 941,495 | 759,397 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Cash Flows from Operating activities: | ||
Net loss | $ (7,990,153) | $ (8,702,703) |
Adjustments to reconcile net income (loss) to net cash | ||
Depreciation | 1,779,539 | 1,856,442 |
Amortization of mining rights | 181,385 | |
Accretion expense | 1,435,295 | 1,181,055 |
Cancelation of debt | (315,000) | |
Loss on reclamation settlements | 281,907 | |
Assumption of note payable in reverse merger | 50,000 | |
Gain on disposition | (807,591) | |
Recovery of previously impaired receipts | (92,573) | (241,574) |
Amortization of debt discount | 420,134 | 284,406 |
Warrant expense | 234,067 | |
Option expense | 13,410 | |
Stock compensation expense | 201,250 | 10,000 |
Change in current assets and liabilities: | ||
Accounts receivable | (930,478) | 2,123,881 |
Inventory | 188,371 | |
Prepaid expenses and other assets | (147,826) | |
Accounts payable | 973,057 | 2,824,351 |
Funds held for others | (19,061) | |
Due to affiliates | 512,378 | |
Accrued interest | 287,639 | 90,000 |
Reclamation liability settlements | (709,132) | |
Cash used in operating activities | (4,076,157) | (951,367) |
Cash Flows from Investing activities: | ||
Advances made in connection with management agreement | (99,582) | (75,000) |
Advance repayment in connection with management agreement | 222,304 | 469,645 |
Cash paid for PPE, net | (127,957) | (176,597) |
Cash (used in) provided by investing activities | (5,235) | 218,048 |
Cash Flows from Financing activities: | ||
Principal payments on long term debt | (2,064,902) | (318,576) |
Proceeds from long term debt | 5,316,977 | 1,670,000 |
Proceeds from related party | 50,000 | |
Net proceeds from (payments to) factoring agreement | 787,434 | (1,521,577) |
Proceeds from sale of series B preferred equity | 600,000 | |
Cash provided by financing activities | 4,039,509 | 479,847 |
Decrease in cash and restricted cash | (41,883) | (253,472) |
Cash and restricted cash, beginning of period | 385,665 | 784,525 |
Cash and restricted cash, end of period | 343,782 | 531,053 |
Non-cash investing and financing activities | ||
Assumption of net assets and liabilities for asset acquisitions | 2,217,952 | |
Equipment for notes payable | 906,660 | 1,222,500 |
Purchase of related party note receivable in exchange for Series B Equity | 250,000 | |
Preferred Series B Dividends | 104,157 | |
Conversion of note payable to common stock | 50,000 | |
Beneficial conversion feature on note payable | 50,000 | |
Forgiveness of accrued management fee | 17,840,615 | |
Relative fair value debt discount on warrant issue | 300,000 | |
Cash paid for interest | 156,331 | 193,564 |
Cash paid for income taxes |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2018 | |
Notes to Financial Statements | |
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | American Resources Corporation (ARC or the Company) 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, 2018 and 2017 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. As of July 1, 2018, the accounts of Land Resources & Royalties, LLC have been deconsolidated from the financial statements based upon the ongoing review of its status as a variable interest entity. On August 23, 2018, KCC disposed of certain non-operating assets totaling $111,567 and the corresponding asset retirement obligation totaling $919,158 which resulted in a gain of $807,591. The accompanying Consolidated Financial Statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) 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 three and nine months ended September 30, 2018 are not necessarily indicative of the results to be expected for the year ending December 31, 2018 or any other period. These financial statements should be read in conjunction with the Company’s 2017 audited financial statements and notes thereto which were filed on Form 10K on April 23, 2018. Going Concern: Convertible Preferred Securities: Derivatives and Hedging Activities We also follow ASC 480-10, Distinguishing Liabilities from Equity Cash Restricted cash: The balance as of September 30, 2018 and December 31, 2017 was $286,043 and $198,943, respectively. The following table sets forth a reconciliation of cash, cash equivalents, and restricted cash reported in the consolidated balance sheet that agrees to the total of those amounts as presented in the consolidated statement of cash flows for the nine months ended September 30, 2018 and September 30, 2017. September 30, 2018 September 30, 2017 Cash $ 57,739 $ 342,041 Restricted Cash 286,043 189,012 Total cash and restricted cash presented in the consolidated statement of cash flows $ 343,782 $ 531,053 Asset Acquisitions: On April 21, 2018, McCoy acquired certain assets known as the Point Rock Mine (Point Rock) in exchange for assuming certain liabilities of the seller. The fair values of the liabilities assumed were $53,771 for prior vendors and $2,098,052 for asset retirement obligation totaling $2,151,823. The liabilities assumed do not require fair value readjustments. In addition, McCoy entered into a surface and mineral sub-lease in the amount of up to $4,000,000 to be paid only upon coal extraction at $2 per extracted ton of coal. McCoy will also pay a portion of the sales price as a royalty with an annual minimum payment of $60,000 starting in January 2019. The acquired assets have an anticipated life of 5 years. Capitalized mining rights will be amortized based on productive activities over the anticipated life of 5 years. Amortization expense for the 3 months ended September 30, 2018 and 2017 amounted to $179,318 and $0, respectively. The assets will be measured for impairment when an event occurs that questions the realization of the recorded value. The assets acquired of Point Rock do not represent a business as defined in FASB AS 805-10-20 due to their classification as a single asset. 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 Point Rock were as follows at the purchase date: Assets Mining Rights $ 2,151,823 Liabilities Vendor Payables $ 53,771 Asset Retirement Obligation $ 2,098,052 On May 10, 2018, KCC acquired certain assets known as the Wayland Surface Mine (Wayland) in exchange for assuming certain liabilities of the seller. The fair values of the liabilities assumed were $66,129 for asset retirement obligation. The liabilities assumed do not require fair value readjustments. In addition, KCC entered into a royalty agreement with the seller to be paid only upon coal extraction in the amount of $1.50 per extracted ton of coal. The acquired assets have an anticipated life of 7 years. Capitalized mining rights will be amortized based on productive activities over the anticipated life of 7 years. Amortization expense for the 3 months ended September 30, 2018 and 2017 amounted to $2,067 and $0, respectively. The assets will be measured for impairment when an event occurs that questions the realization of the recorded value. The assets acquired of Wayland do not represent a business as defined in FASB AS 805-10-20 due to their classification as a single asset. 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 Wayland were as follows at the purchase date: Assets Mining Rights $ 66,129 Liabilities Asset Retirement Obligation $ 66,129 Asset Retirement Obligations (ARO) – Reclamation: 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 periods ending September 30, 2018 and 2017, $0 and $281,907 were incurred for loss on settlement on ARO, respectively. The table below reflects the changes to our ARO: Balance at December 31, 2017 $ 19,885,057 Accretion – nine months September 30, 2018 1,435,295 Reclamation work – nine months September 30, 2018 (0 ) Asset disposition (919,158 ) Point Rock Acquisition 2,098,052 Wayland Acquisition 66,129 Balance at September 30, 2018 $ 22,565,375 Allowance For Doubtful Accounts: Allowance for trade receivables as of September 30, 2018 and December 31, 2017 amounted to $0, for both periods. Allowance for other accounts receivables as of September 30, 2018 and December 31, 2017 amounted to $0 and $92,573, respectively. Trade and loan receivables are carried at amortized cost, net of allowance for losses. Amortized cost approximated book value as of September 30, 2018 and December 31, 2017. Reclassifications: New Accounting Pronouncements: - ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities - ASU 2016-02, Leases - ASU 2017-09, Compensation – Stock Compensation, - ASU 2017-11, Earnings Per Share, - ASU 2018-05, Income Taxes, - ASU 2018-07, Compensation-Stock Compensation (Topic 718), Management has elected to early adopt ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business ASU 2016-18, Statement of Cash Flows: Restricted Cash (Topic 230). ASU 2014-09, Revenue from Contracts with Customers (Topic 606). |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 9 Months Ended |
Sep. 30, 2018 | |
Notes to Financial Statements | |
NOTE 2 - PROPERTY AND EQUIPMENT | At September 30, 2018 and December 31, 2017, property and equipment were comprised of the following: September 30, 2018 December 31, 2017 Processing and rail facility $ 2,802,855 $ 2,914,422 Underground equipment 9,346,692 8,887,045 Surface equipment 4,532,724 3,957,603 Mining rights (Less: accumulated amortization of $181,385) 2,036,567 - Land - 178,683 Less: Accumulated depreciation (6,600,108 ) (4,820,569 ) Total Property and Equipment, Net $ 12,118,730 $ 11,117,184 Depreciation expense amounted to $649,983 and $697,214 for the three month periods September 30, 2018 and September 30, 2017, respectively. Depreciation expense amounted to $1,779,539 and $1,856,442 for the nine month periods September 30, 2018 and September 30, 2017, respectively. The estimated useful lives are as follows: Processing and Rail Facilities 20 years Surface Equipment 7 years Underground Equipment 5 years Mining Rights 5 years |
NOTES PAYABLE
NOTES PAYABLE | 9 Months Ended |
Sep. 30, 2018 | |
Notes to Financial Statements | |
NOTE 3 - NOTES PAYABLE | The net increase in debt includes the following: Total debt balance as of December 31, 2017 $ 14,726,842 During the nine-month period ended September 30, 2018, $2,450 ,000 was drawn from the ARC business loan which carries annual interest at 7%, is due within two months of advancement and is secure by all company assets. On June 4, 2018, $30,000 and September 28, 2018, $75,000 of this note was repaid. 2,450,000 On January 25, 2018, QEI entered into an equipment loan agreement with an unrelated party in the amount of $346,660. The agreement calls for monthly payments of $11,360 until maturity date of December 24, 2020 and carries an interest rate of 9%. The loan is secured by the underlying surface equipment purchased by the loan. Loan proceeds were used directly to purchase equipment. 346,660 On March 28, 2018, QEI entered into an equipment loan agreement with an unrelated party in the amount of $135,000. The agreement called for payments of $75,000 and $60,000 are due on April 6, 2018 and April 13, 2018, respectively, at which date the note was repaid in full. Loan proceeds were used directly to purchase equipment. 135,000 On May 9, 2018, QEI entered into a loan agreement with an unrelated party in the amount of $1,000,000 with a maturity date of September 24, 2018 with monthly payments of $250,000 due beginning June 15, 2018. The note is secured by the assets and equity of the company and carries an interest rate of 0%. Proceeds of the note were split between receipt of $575,000 cash and $425,000 payment for new equipment. No payments have been made on the note which is in default. 1,000,000 During May 2018, the company entered into a financing arrangement with two unrelated parties. The notes totaled $2,859,500, carried an original issue discount of $752,535, interest rate of 33% and have a maturity date of January 2019 and are secured by future receivables as well as personal guarantees of two officers of the company. 2,963,958 During the nine-month period ended September 30, 2018 net additions to the factoring agreement totaled $787,435. 787,435 Total increases to debt 7,683,053 Less cash payments (2,064,902 ) In May 2018, an unrelated party forgave $315,000 of the $540,000 equipment loan agreement dated September 30, 2016. (315,000 ) Issuance discount (752,535 ) Amortization of issuance cost and loan discounts 420,134 Ending debt balance at September 30, 2018 $ 19,697,592 Less current portion: $ 14,625,099 Total long term debt at September 30, 2018 $ 5,072,493 |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 9 Months Ended |
Sep. 30, 2018 | |
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. No fees or repayments have occurred during the nine-month period September 30, 2018 and 2017, respectively. The amount outstanding and payable as of September 30, 2018 and December 31, 2017, was $0 and $17,840,615, respectively. The amount was due on demand and did not accrue interest. The amounts under the agreement were cancelled and forgiven on May 31, 2018. The forgiveness was accounted for as an increase in additional paid in capital. 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. 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 and have been fully impaired due to collectability uncertainty. During the three month period ended September 30, 2018, the Company incurred royalty expense in the amount of $64,537 to a related entity formally consolidated as a variable interest entity. As of September 30, 2018 the company owed the related entity a total of $512,378 for unpaid royalties and advances. |
MANAGEMENT AGREEMENT
MANAGEMENT AGREEMENT | 9 Months Ended |
Sep. 30, 2018 | |
Notes to Financial Statements | |
NOTE 5 - 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, net funds advanced for the nine-month period ended September 30, 2018 and 2017 are $99,582 and $75,000, respectively and the amounts repaid totaled $127,957 and $394,645, respectively. During the nine-month period ended September 30, 2018 and 2017, fees paid under the agreement amounted $313,114 and $0, respectively which has been recorded in other income. |
EQUITY TRANSACTIONS
EQUITY TRANSACTIONS | 9 Months Ended |
Sep. 30, 2018 | |
Notes to Financial Statements | |
NOTE 6 - EQUITY TRANSACTIONS | On July 18, 2018, we issued 150,000 common shares valued at $165,000 to Sylva International LLC for an agreement to provide digital marketing services to the Company. The agreement was subsequently terminated by the Company for breach of contract. The Company fully recognized $165,000 of stock based compensation for the nine months September 30, 2018. On September 12, 2018, pursuant to the Company’s Employee Incentive Stock Option Plan, we issued a total of 636,830 options to certain employees. The options have an expiration date of September 10, 2025 and have an exercise price of $1.00 per share. Of the total options issued, 25,000 vested immediately, with the balance of 611,830 options vesting equally over the course of three years, subject to restrictions regarding the employee’s continued employment by the Company. The fair value of the options is $482,751. The Company recognized $13,410 as option expense for the nine months September 30, 2018. The unamortized expense at September 30, 2018 is $469,342. On September 14, 2018, we issued 105,000 common shares valued at $152,250 and 175,000 warrants to Redstone Communications LLC and 45,000 common shares valued at $65,250 and 75,000 warrants to Mr. Marlin Molinaro as compensation for the first six months of an agreement to provide for public relations with existing shareholders, broker dealers, and other investment professionals for the Company. The warrants fair value was determined to be $234,067. The warrants granted are non-refundable and vest immediately and have an expiration date of September 14, 2023. Stock based compensation of $36,205 for the common shares issued and $234,067 for the warrant granted was expensed during the nine months September 30, 2018. As of September 30, 2018 the unamortized expense for the common shares issued is $181,250. Total preferred dividend requirement for the nine-month period ending September 30, 2018 and 2017 amounted to $104,157 and $0, respectively. Total stock, warrant and option compensation expense for the nine-month period ending September 30, 2018 and 2017 amounted to $448,727 and $0, respectively. The price of the above stock, warrants and options were determined using the closing stock price at the date of the grant and the Black-Sholes Option Pricing Model. 9/30/2018 Expected Dividend Yield 0% Expected volatility 120% Risk-free rate 1.4% Expected life of warrants 3-7 Years Weighted Weighted Average Average Aggregate Number of Exercise Contractual Intrinsic Warrants Price Life in Years Value Outstanding - December 31, 2017 5,364,230 $ 2.638 2.835 $ 138,069 Exercisable - December 31, 2017 5,364,230 $ 2.638 2.835 $ 138,069 Granted 886,830 $ 1.000 6.388 $ 5,386,975 Forfeited or Expired - - - - Exercised - $ - - - Outstanding - September 30, 2018 6,251,060 $ 2.432 2.474 $ 31,556,641 Exercisable - September 30, 2018 5,639,230 $ 2.590 1.982 $ 27,836,687 |
CONTINGENCIES
CONTINGENCIES | 9 Months Ended |
Sep. 30, 2018 | |
Notes to Financial Statements | |
NOTE 7 - 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 Company’s business or financial position. Under the agreement with Redstone Communications LLC and Mr. Marlin Molinaro, the Company is obligated to pay a monthly fee of $25,000 and a quarterly stock fee of 150,000 shares of common stock over the agreement’s one year term. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 30, 2018 | |
Notes to Financial Statements | |
NOTE 8 - SUBSEQUENT EVENTS | During October 2018, an officer of the company advanced an additional $13,500. The advance is non-interest bearing, non-secured and due on demand. On October 25, 2018, Wyoming County Coal LLC was formed as a wholly owned subsidiary of Quest Energy Inc. On November 7, 2018, Wyoming County Coal LLC, acquired 5 permits, coal processing and loading facilities, surface ownership, mineral ownership, and coal refuse storage facilities from unrelated entities. Consideration for the acquired assets was the assumption of reclamation bonds totaling $234,240, 1,727,273 shares of common stock of the company, a seller note of $350,000 and a seller note of $250,000. Management is still gathering the information needed to complete the allocation of the purchase price to the assets acquired and liabilities assumed. On October 24, 2018, options totaling 69,420 common shares of the company were exercised by a non-affiliated shareholder. The exercise was a cashless exercise. On November 5, 2018, 4,336,012 Series A preferred shares were converted into 14,453,373 common shares of the company in a cashless conversion under the terms of the agreement. On November 7, 2018, 964,290 Series B preferred shares were converted into 267,859 common shares of the company in a cashless conversion. On November 7, 2018, $36,000 worth of trade payables were settled with 6,000 common shares of the company. On November 13, 2018, $300,000 was advanced under the ARC business loan which carries annual interest at 7%, is due within two months of advancement and is secure by all company assets. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2018 | |
Summary Of Significant Accounting Policies | |
Basis of Presentation and Consolidation | The consolidated financial statements include the accounts for the nine months ended September 30, 2018 and 2017 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. As of July 1, 2018, the accounts of Land Resources & Royalties, LLC have been deconsolidated from the financial statements based upon the ongoing review of its status as a variable interest entity. On August 23, 2018, KCC disposed of certain non-operating assets totaling $111,567 and the corresponding asset retirement obligation totaling $919,158 which resulted in a gain of $807,591. The accompanying Consolidated Financial Statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) |
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 three and nine months ended September 30, 2018 are not necessarily indicative of the results to be expected for the year ending December 31, 2018 or any other period. These financial statements should be read in conjunction with the Company’s 2017 audited financial statements and notes thereto which were filed on Form 10K on April 23, 2018. |
Going Concern | The Company has suffered recurring losses from operations and currently has a working capital deficit. These conditions raise substantial doubt about the Company’s 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 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, 2018 and December 31, 2017 was $73,730 and $116,115, respectively. A lender of the Company also required a reserve account to be established. The balance as of September 30, 2018 and December 31, 2017 was $148,546 and $0, respectively. The total balance of restricted cash also includes amounts held under the management agreement in the amount of $63,767 and $82,828, respectively. See note 5 for terms of the management agreement. The balance as of September 30, 2018 and December 31, 2017 was $286,043 and $198,943, respectively. The following table sets forth a reconciliation of cash, cash equivalents, and restricted cash reported in the consolidated balance sheet that agrees to the total of those amounts as presented in the consolidated statement of cash flows for the nine months ended September 30, 2018 and September 30, 2017. September 30, 2018 September 30, 2017 Cash $ 57,739 $ 342,041 Restricted Cash 286,043 189,012 Total cash and restricted cash presented in the consolidated statement of cash flows $ 343,782 $ 531,053 |
Asset Acquisitions | On April 21, 2018, McCoy acquired certain assets known as the Point Rock Mine (Point Rock) in exchange for assuming certain liabilities of the seller. The fair values of the liabilities assumed were $53,771 for prior vendors and $2,098,052 for asset retirement obligation totaling $2,151,823. The liabilities assumed do not require fair value readjustments. In addition, McCoy entered into a surface and mineral sub-lease in the amount of up to $4,000,000 to be paid only upon coal extraction at $2 per extracted ton of coal. McCoy will also pay a portion of the sales price as a royalty with an annual minimum payment of $60,000 starting in January 2019. The acquired assets have an anticipated life of 5 years. Capitalized mining rights will be amortized based on productive activities over the anticipated life of 5 years. Amortization expense for the 3 months ended September 30, 2018 and 2017 amounted to $179,318 and $0, respectively. The assets will be measured for impairment when an event occurs that questions the realization of the recorded value. The assets acquired of Point Rock do not represent a business as defined in FASB AS 805-10-20 due to their classification as a single asset. 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 Point Rock were as follows at the purchase date: Assets Mining Rights $ 2,151,823 Liabilities Vendor Payables $ 53,771 Asset Retirement Obligation $ 2,098,052 On May 10, 2018, KCC acquired certain assets known as the Wayland Surface Mine (Wayland) in exchange for assuming certain liabilities of the seller. The fair values of the liabilities assumed were $66,129 for asset retirement obligation. The liabilities assumed do not require fair value readjustments. In addition, KCC entered into a royalty agreement with the seller to be paid only upon coal extraction in the amount of $1.50 per extracted ton of coal. The acquired assets have an anticipated life of 7 years. Capitalized mining rights will be amortized based on productive activities over the anticipated life of 7 years. Amortization expense for the 3 months ended September 30, 2018 and 2017 amounted to $2,067 and $0, respectively. The assets will be measured for impairment when an event occurs that questions the realization of the recorded value. The assets acquired of Wayland do not represent a business as defined in FASB AS 805-10-20 due to their classification as a single asset. 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 Wayland were as follows at the purchase date: Assets Mining Rights $ 66,129 Liabilities Asset Retirement Obligation $ 66,129 |
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 periods ending September 30, 2018 and 2017, $0 and $281,907 were incurred for loss on settlement on ARO, respectively. The table below reflects the changes to our ARO: Balance at December 31, 2017 $ 19,885,057 Accretion – nine months September 30, 2018 1,435,295 Reclamation work – nine months September 30, 2018 (0 ) Asset disposition (919,158 ) Point Rock Acquisition 2,098,052 Wayland Acquisition 66,129 Balance at September 30, 2018 $ 22,565,375 |
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, 2018 and December 31, 2017 amounted to $0, for both periods. Allowance for other accounts receivables as of September 30, 2018 and December 31, 2017 amounted to $0 and $92,573, respectively. Trade and loan receivables are carried at amortized cost, net of allowance for losses. Amortized cost approximated book value as of September 30, 2018 and December 31, 2017. |
Reclassifications | Reclassifications of prior periods have been made to conform with current year presentation. |
New Accounting Pronouncements | - ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities - ASU 2016-02, Leases - ASU 2017-09, Compensation – Stock Compensation, - ASU 2017-11, Earnings Per Share, - ASU 2018-05, Income Taxes, - ASU 2018-07, Compensation-Stock Compensation (Topic 718), Management has elected to early adopt ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business ASU 2016-18, Statement of Cash Flows: Restricted Cash (Topic 230). ASU 2014-09, Revenue from Contracts with Customers (Topic 606). |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Schedule of restricted cash and cash equivalents | September 30, 2018 September 30, 2017 Cash $ 57,739 $ 342,041 Restricted Cash 286,043 189,012 Total cash and restricted cash presented in the consolidated statement of cash flows $ 343,782 $ 531,053 |
Schedule of Asset Retirement Obligations | Balance at December 31, 2017 $ 19,885,057 Accretion – nine months September 30, 2018 1,435,295 Reclamation work – nine months September 30, 2018 (0 ) Asset disposition (919,158 ) Point Rock Acquisition 2,098,052 Wayland Acquisition 66,129 Balance at September 30, 2018 $ 22,565,375 |
Point Rock [Member] | |
Schedule of assets acquired and liabilities assumed | Assets Mining Rights $ 2,151,823 Liabilities Vendor Payables $ 53,771 Asset Retirement Obligation $ 2,098,052 |
Wayland [Member] | |
Schedule of assets acquired and liabilities assumed | Assets Mining Rights $ 66,129 Liabilities Asset Retirement Obligation $ 66,129 |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Property And Equipment | |
Property, Plant and Equipment | September 30, 2018 December 31, 2017 Processing and rail facility $ 2,802,855 $ 2,914,422 Underground equipment 9,346,692 8,887,045 Surface equipment 4,532,724 3,957,603 Mining rights (Less: accumulated amortization of $181,385) 2,036,567 - Land - 178,683 Less: Accumulated depreciation (6,600,108 ) (4,820,569 ) Total Property and Equipment, Net $ 12,118,730 $ 11,117,184 |
Property, Plant and Equipment, Estimated Useful Lives | Processing and Rail Facilities 20 years Surface Equipment 7 years Underground Equipment 5 years Mining Rights 5 years |
NOTES PAYABLE (Tables)
NOTES PAYABLE (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Notes Payable | |
Schedule of note payable | Total debt balance as of December 31, 2017 $ 14,726,842 During the nine-month period ended September 30, 2018, $2,450 ,000 was drawn from the ARC business loan which carries annual interest at 7%, is due within two months of advancement and is secure by all company assets. On June 4, 2018, $30,000 and September 28, 2018, $75,000 of this note was repaid. 2,450,000 On January 25, 2018, QEI entered into an equipment loan agreement with an unrelated party in the amount of $346,660. The agreement calls for monthly payments of $11,360 until maturity date of December 24, 2020 and carries an interest rate of 9%. The loan is secured by the underlying surface equipment purchased by the loan. Loan proceeds were used directly to purchase equipment. 346,660 On March 28, 2018, QEI entered into an equipment loan agreement with an unrelated party in the amount of $135,000. The agreement called for payments of $75,000 and $60,000 are due on April 6, 2018 and April 13, 2018, respectively, at which date the note was repaid in full. Loan proceeds were used directly to purchase equipment. 135,000 On May 9, 2018, QEI entered into a loan agreement with an unrelated party in the amount of $1,000,000 with a maturity date of September 24, 2018 with monthly payments of $250,000 due beginning June 15, 2018. The note is secured by the assets and equity of the company and carries an interest rate of 0%. Proceeds of the note were split between receipt of $575,000 cash and $425,000 payment for new equipment. No payments have been made on the note which is in default. 1,000,000 During May 2018, the company entered into a financing arrangement with two unrelated parties. The notes totaled $2,859,500, carried an original issue discount of $752,535, interest rate of 33% and have a maturity date of January 2019 and are secured by future receivables as well as personal guarantees of two officers of the company. 2,963,958 During the nine-month period ended September 30, 2018 net additions to the factoring agreement totaled $787,435. 787,435 Total increases to debt 7,683,053 Less cash payments (2,064,902 ) In May 2018, an unrelated party forgave $315,000 of the $540,000 equipment loan agreement dated September 30, 2016. (315,000 ) Issuance discount (752,535 ) Amortization of issuance cost and loan discounts 420,134 Ending debt balance at September 30, 2018 $ 19,697,592 Less current portion: $ 14,625,099 Total long term debt at September 30, 2018 $ 5,072,493 |
EQUITY TRANSACTIONS (Tables)
EQUITY TRANSACTIONS (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Equity Transactions | |
Schedule of Stockholders' Equity Note, Warrants | 9/30/2018 Expected Dividend Yield 0% Expected volatility 120% Risk-free rate 1.4% Expected life of warrants 3-5 Years Weighted Weighted Average Average Aggregate Number of Exercise Contractual Intrinsic Warrants Price Life in Years Value Outstanding - December 31, 2017 5,364,230 $ 2.638 2.835 $ 138,069 Exercisable - December 31, 2017 5,364,230 $ 2.638 2.835 $ 138,069 Granted 886,830 $ 1.000 6.388 $ 5,386,975 Forfeited or Expired - - - - Exercised - $ - - - Outstanding - September 30, 2018 6,251,060 $ 2.432 2.474 $ 31,556,641 Exercisable - September 30, 2018 5,639,230 $ 2.590 1.982 $ 27,836,687 |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 | Sep. 30, 2017 |
Summary Of Significant Accounting Policies Details Abstract | |||
Cash | $ 57,739 | $ 186,722 | $ 342,041 |
Restricted Cash | 286,043 | $ 198,943 | 189,012 |
Total cash and restricted cash presented in the consolidated statement of cash flows | $ 343,782 | $ 531,053 |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1) - Point Rock [Member] | Sep. 30, 2018USD ($) |
Assets | |
Mining Rights | $ 2,151,823 |
Liabilities | |
Vendor Payables | 53,771 |
Asset Retirement Obligation | $ 2,098,052 |
SUMMARY OF SIGNIFICANT ACCOUN_6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 2) - Wayland [Member] | Sep. 30, 2018USD ($) |
Assets | |
Mining Rights | $ 66,129 |
Liabilities | |
Asset Retirement Obligation | $ 66,129 |
SUMMARY OF SIGNIFICANT ACCOUN_7
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 3) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Summary Of Significant Accounting Policies Details 2Abstract | ||||
Beginning Balance | $ 19,885,057 | |||
Accretion Expense | $ 539,771 | $ 339,288 | 1,435,295 | $ 1,181,055 |
Reclamation work | 0 | |||
Asset disposition | (919,158) | |||
Point Rock Acquisition | 2,098,052 | |||
Wayland Acquisition | 66,129 | |||
Ending Balance | $ 22,565,375 | $ 22,565,375 |
SUMMARY OF SIGNIFICANT ACCOUN_8
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | May 10, 2018 | Aug. 23, 2018 | Apr. 21, 2018 | Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 |
Gain on disposition | $ (807,591) | |||||||
Cash - restricted | $ 286,043 | $ 189,012 | 286,043 | 189,012 | $ 198,943 | |||
Asset management fee | 116,115 | |||||||
Annual asset management fees | 73,730 | 73,730 | 116,115 | |||||
Lender reserve | 148,546 | 148,546 | 0 | |||||
Funds held for others | 63,767 | 63,767 | 82,828 | |||||
Loss on settlement | (30,055) | $ (281,907) | ||||||
Allowance for trade receivables | 0 | 0 | 0 | |||||
Allowance for other accounts receivables | $ 0 | $ 0 | $ 92,573 | |||||
Discount rate | 10.00% | 10.00% | ||||||
Amortization expense | $ 179,318 | 0 | ||||||
KCC [Member] | ||||||||
Gain on disposition | $ 807,591 | |||||||
Disposed of non-operating assets | 111,567 | |||||||
Asset retirement obligation | $ 919,158 | |||||||
KCC [Member] | Asset Acquisitions [Member] | ||||||||
Asset retirement obligation | $ 66,129 | |||||||
Commitment contingences description | <font style="font: 10pt Times New Roman, Times, Serif">In addition, KCC entered into a royalty agreement with the seller to be paid only upon coal extraction in the amount of $1.50 per extracted ton of coal.</font></p>" id="sjs-B19"><p style="margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">In addition, KCC entered into a royalty agreement with the seller to be paid only upon coal extraction in the amount of $1.50 per extracted ton of coal.</font></p> | |||||||
Acquired assets anticipated life years | 7 years | |||||||
Capitalized mining rights amortized life years | 7 years | |||||||
Amortization expense | $ 2,067 | $ 0 | ||||||
McCoy [Member] | Asset Acquisitions [Member] | ||||||||
Mining Rights | $ 2,151,823 | |||||||
Vendor Payables | 53,771 | |||||||
Asset retirement obligation | $ 2,098,052 | |||||||
Commitment contingences description | <font style="font: 10pt Times New Roman, Times, Serif">In addition, McCoy entered into a surface and mineral sub-lease in the amount of up to $4,000,000 to be paid only upon coal extraction at $2 per extracted ton of coal.</font></p>" id="sjs-D27"><p style="margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">In addition, McCoy entered into a surface and mineral sub-lease in the amount of up to $4,000,000 to be paid only upon coal extraction at $2 per extracted ton of coal.</font></p> | |||||||
Acquired assets anticipated life years | 5 years | |||||||
Capitalized mining rights amortized life years | 5 years | |||||||
Annual royalty payable | $ 60,000 | |||||||
Description for royalty payments | McCoy will also pay a portion of the sales price as royalty with an annual minimum payment of $60,000 starting in January 2019 |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Less: Accumulated depreciation | $ (6,600,108) | $ (4,820,569) |
Total Property and Equipment, Net | 12,118,730 | 11,117,184 |
Underground Equipment [Member] | ||
Property and equipment | 9,346,692 | 8,887,045 |
Surface Equipment [Member] | ||
Property and equipment | 4,532,724 | 3,957,603 |
Mining Rights [Member] | ||
Property and equipment | 2,036,567 | |
Processing and Rail Facilities [Member] | ||
Property and equipment | 2,802,855 | 2,914,422 |
Land [Member] | ||
Property and equipment | $ 178,683 |
PROPERTY AND EQUIPMENT (Detai_2
PROPERTY AND EQUIPMENT (Details 1) | 9 Months Ended |
Sep. 30, 2018 | |
Processing and Rail Facilities [Member] | |
Estimated useful lives | 20 years |
Surface Equipment [Member] | |
Estimated useful lives | 7 years |
Underground Equipment [Member] | |
Estimated useful lives | 5 years |
Mining Rights [Member] | |
Estimated useful lives | 5 years |
PROPERTY AND EQUIPMENT (Detai_3
PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Depreciation expense | $ (649,983) | $ (697,214) | $ (1,779,539) | $ (1,856,442) |
Mining Rights [Member] | ||||
Depreciation expense | $ 181,385 |
NOTES PAYABLE (Details)
NOTES PAYABLE (Details) | 9 Months Ended |
Sep. 30, 2018USD ($) | |
Debt Beginning Balance | $ 14,726,842 |
During the nine-month period ended September 30, 2018 net repayments to the factoring agreement totaled $787,435. | 787,435 |
Total increases to debt | 7,683,053 |
Less cash payments | (2,064,902) |
In May 2018, an unrelated party forgave $315,000 of the $540,000 equipment loan agreement dated September 30, 2016. | (315,000) |
Issuance discount | (752,535) |
Amortization of issuance cost and loan discounts | 420,134 |
Debt Ending Balance | 19,697,592 |
Less current portion | 14,625,099 |
Total long-term debt at September 30, 2018 | 5,072,493 |
Notes Payable One [Member] | ARC Business Loan [Member] | |
Total increases to debt | 2,450,000 |
Notes Payable Two [Member] | Equipment Loan [Member] | |
Total increases to debt | 346,660 |
Notes Payable Three [Member] | Equipment Loan [Member] | |
Total increases to debt | 135,000 |
Notes Payable Four [Member] | Loan Agreement [Member] | |
Total increases to debt | 1,000,000 |
Notes Payable Five [Member] | Financing Arrangement [Member] | |
Total increases to debt | $ 2,963,958 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) | Mar. 13, 2013 | Apr. 30, 2017 | Jul. 17, 2013 | Sep. 30, 2018 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 |
Accrued related party management fee | $ 17,840,615 | ||||||
Royalty expense | $ 64,537 | ||||||
Due to affiliates | $ 512,378 | ||||||
Secured Debt [Member] | |||||||
Purchase of related party note receivable in exchange for Equity | $ 250,000 | ||||||
Second Note [Member] | |||||||
Line of credit amount | $ 100,000 | ||||||
Interest rate | 12.00% | ||||||
Secuured debt due date | Jan. 17, 2016 | ||||||
First Note [Member] | |||||||
Line of credit amount | $ 150,000 | ||||||
Interest rate | 12.00% | ||||||
Secuured debt due date | Sep. 13, 2015 |
MANAGEMENT AGREEMENT (Details N
MANAGEMENT AGREEMENT (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Advances made in connection with management agreement | $ 99,582 | $ 75,000 | ||
Receipt of previously impaired receivable | $ 117,657 | 92,573 | 241,574 | |
Management Agreement [Member] | ||||
Advances made in connection with management agreement | 99,582 | 75,000 | ||
Receipt of previously impaired receivable | 127,957 | 394,645 | ||
Amount receivable under agreement | $ 313,114 | $ 0 |
EQUITY TRANSACTIONS (Details)
EQUITY TRANSACTIONS (Details) | 9 Months Ended |
Sep. 30, 2018 | |
Expected Dividend Yeild | 0.00% |
Expected volatility | 120.00% |
Risk-free rate | 1.40% |
Minimum [Member] | |
Expected life of warrants | 3 years |
Maximum [Member] | |
Expected life of warrants | 7 years |
EQUITY TRANSACTIONS (Details 1)
EQUITY TRANSACTIONS (Details 1) | 9 Months Ended |
Sep. 30, 2018USD ($)$ / sharesshares | |
Equity Transactions Details 1 | |
Beginning Outstanding | shares | 5,364,230 |
Beginning Exercisable | shares | 5,364,230 |
Granted | shares | 886,830 |
Forfeited or Expired | shares | |
Exercised | shares | |
Ending Outstanding | shares | 6,251,060 |
Ending Exercisable | shares | 5,639,230 |
Weighted Average Exercise Price | |
Beginning Outstanding | $ / shares | $ 2.638 |
Beginning Exercisable | $ / shares | 2.638 |
Granted | $ / shares | 1 |
Forfeited or Expired | $ / shares | |
Exercised | $ / shares | |
Ending Outstanding | $ / shares | 2.432 |
Ending Exercisable | $ / shares | $ 2.590 |
Weighted Average Contractual Life in Years | |
Weighted average remaining contractual terms of share beginning outstanding | 2 years 9 months 29 days |
Weighted average remaining contractual terms of share beginning exercisable | 2 years 9 months 29 days |
Weighted average remaining contractual terms of share granted | 6 years 4 months 17 days |
Weighted average remaining contractual terms of forfeited or Expired | 0 years |
Weighted average remaining contractual terms of share Exercised | 0 years |
Weighted average remaining contractual terms of share outstanding | 2 years 5 months 20 days |
Weighted average remaining contractual terms of share exercisable | 1 year 11 months 23 days |
Aggregate Intrinsic Value | |
Beginning Outstanding | $ | $ 138,069 |
Beginning Exercisable | $ | 138,069 |
Granted | $ | 5,386,975 |
Forfeited or Expired | $ | |
Exercised | $ | |
Ending Outstanding | $ | 31,556,641 |
Ending Exercisable | $ | $ 27,836,687 |
EQUITY TRANSACTIONS (Details Na
EQUITY TRANSACTIONS (Details Narrative) - USD ($) | Sep. 14, 2018 | Sep. 12, 2018 | Jul. 18, 2018 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 |
Accrued dividend on Series B | $ 104,157 | |||||
Warrant and option compensation expense | 448,727 | |||||
Stock based compensation | 201,250 | 10,000 | ||||
Option expenses | 13,410 | |||||
Employee Incentive Stock Option Plan [Member] | ||||||
Stock option issued | 636,830 | |||||
Option expiration date | Sep. 10, 2025 | |||||
Option exercise price | $ 1 | |||||
Option vested | 25,000 | |||||
Option outstanding | 611,830 | |||||
Fair value of stock option and warrants | 482,751 | |||||
Option expenses | 13,410 | |||||
Unamortized expense | 469,342 | |||||
Redstone Communications LLC [Member] | ||||||
Stock issued during period, shares | 105,000 | |||||
Stock issued during period, value | $ 152,250 | |||||
Sylva International LLC [Member] | ||||||
Stock issued during period, shares | 150,000 | |||||
Stock issued during period, value | $ 165,000 | |||||
Stock based compensation | $ 165,000 | |||||
Warrant [Member] | Redstone Communications LLC [Member] | ||||||
Stock option issued | 175,000 | |||||
Mr. Marlin Molinaro [Member] | ||||||
Stock issued during period, shares | 45,000 | |||||
Stock issued during period, value | $ 62,250 | |||||
Mr. Marlin Molinaro [Member] | Warrant [Member] | ||||||
Stock option issued | 75,000 | |||||
Option expiration date | Sep. 14, 2023 | |||||
Warrant and option compensation expense | $ 234,067 | |||||
Stock based compensation | 36,205 | |||||
Unamortized expense | 181,250 | |||||
Warrant granted | $ 234,067 |
CONTINGENCIES (Details Narrativ
CONTINGENCIES (Details Narrative) - Redstone Communications LLC [Member] - Mr. Marlin Molinaro [Member] | Sep. 14, 2018USD ($)shares |
Monthly fee | $ | $ 25,000 |
Quarterly stock fee | shares | 150,000 |
SUBSEQUENT EVENTS (Details Narr
SUBSEQUENT EVENTS (Details Narrative) - USD ($) | Nov. 13, 2018 | Nov. 07, 2018 | Nov. 05, 2018 | Oct. 24, 2018 | Sep. 30, 2018 | Oct. 30, 2018 |
Option exercised | ||||||
Subsequent Event [Member] | ||||||
Option exercised | 69,420 | |||||
Debt due amount | $ 300,000 | |||||
Debt due rate of interest | 7.00% | |||||
Subsequent Event [Member] | Officer [Member] | ||||||
Due from related party | $ 13,500 | |||||
Subsequent Event [Member] | Wyoming County Coal LLC [Member] | ||||||
Consideration for acquired assets in, reclamation bonds | $ 234,240 | |||||
Consideration for acquired assets in, common stock | 1,727,273 | |||||
Consideration for acquired assets in, seller note | $ 350,000 | |||||
Consideration for acquired assets in, seller note one | $ 250,000 | |||||
Subsequent Event [Member] | CommonStock [Member] | ||||||
Trade payables conversion shares issued, shares | 6,000 | |||||
Trade payables conversion shares issued, value | $ 36,000 | |||||
Subsequent Event [Member] | Series B Preferred Stock [Member] | ||||||
Conversion of stock, shares converted | 267,859 | |||||
Subsequent Event [Member] | Series A Preferred Stock [Member] | ||||||
Conversion of stock, shares converted | 4,336,012 |