American Resources Corp - FORM 8-K/A - EX-99.1 - UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS - October 6, 2017

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EXHIBIT 99.1

 

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

 

Quest Energy Inc, (the Company) acquired American Resources Corporation f/k/a NGFC Equities, Inc (NGFC) in a share exchange transaction (Merger). The Company exchanged its outstanding shares of 1,874 for newly issued preferred shares of NGFC totaling 4,817,792. The preferred shares carry a 33.33 to one voting right.

 

The Merger will be accounted for as a “reverse merger” and recapitalization since, immediately following the completion of the transaction, the holders of Quest’s stock will have effective control over NGFC. In addition, Quest will have control of the combined entity through control of the Board by designating all three board seats to be held by the existing board of Quest. Additionally, all of Quest’s officers will continue on as management of the combined entity after consummation of the Merger. For accounting purposes, Quest will be deemed to be the accounting acquirer in the transaction and, consequently, the transaction will be treated as a recapitalization of NGFC. Accordingly, Quest’s assets, liabilities and results of operations will become the historical financial statements of the registrant, and the Company’s assets, liabilities and results of operations will be consolidated with NGFC effective as of the date of the closing of the Merger. No step-up in basis or intangible assets or goodwill will be recorded in this transaction.

 

The following unaudited pro forma condensed combined financial statements are based on our historical consolidated financial statements and NGFC’s historical consolidated financial statements as adjusted to give effect to the Company’s acquisition of NGFC. The unaudited pro forma condensed combined statements of operations for the three months ended December 31, 2016 and the twelve months ending September 30, 2016 give effect to the transaction as if they had occurred on October 1, 2016 and October 1, 2015, respectively. The unaudited pro forma condensed combined balance sheet as of December 31, 2016 gives effect to the transaction as if it had occurred on December 31, 2016.

 

The assumptions and estimates underlying the unaudited adjustments to the pro forma condensed combined financial statements are described in the accompanying notes, which should be read together with the pro forma condensed combined financial statements.

 

The unaudited pro forma condensed combined financial statements should be read together with the Company’s historical financial statements, which are included in the Company’s Form 8 K/A filed September 25, 2017 and NGFC’s Form 10-Q filed February 6, 2017.

 

 
1
 
 

 

AMERICAN RESOURCES CORP. AND SUBSIDIARIES

 

Unaudited Condensed Combined Pro Forma Balance Sheets

 

December 31, 2016

 

 

American

Resources Corp.

f/k/a NGFC

Equities

 

 

Quest

Energy Inc.

 

 

Proforma

Adjustment

 

 

Notes

 

Proforma

Combined

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash

 

 $ 64,546

 

 

 $ 784,525

 

 

 $ (24,767 )

 

(e)

 

 $ 824,304

 

Accounts Receivable

 

 

 -

 

 

 

 2,753,199

 

 

 

 -

 

 

 

 

 

 2,753,199

 

Inventory

 

 

 6,288

 

 

 

 -

 

 

 

 (6,288 )

 

(e)

 

 

 -

 

Accounts Receivable - Other

 

 

 -

 

 

 

 199,701

 

 

 

 -

 

 

 

 

 

 199,701

 

Total Current Assets

 

 

 70,834

 

 

 

 3,737,425

 

 

 

 (31,055 )

 

 

 

 

 3,777,204

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash - restricted

 

 

 -

 

 

 

 141,102

 

 

 

 -

 

 

 

 

 

 141,102

 

Processing and rail facility

 

 

 -

 

 

 

 2,914,422

 

 

 

 -

 

 

 

 

 

 2,914,422

 

Underground equipment

 

 

 -

 

 

 

 7,500,512

 

 

 

 -

 

 

 

 

 

 7,500,512

 

Surface equipment

 

 

 -

 

 

 

 3,751,054

 

 

 

 -

 

 

 

 

 

 3,751,054

 

Less Accumulated Depreciation

 

 

 -

 

 

 

 (2,262,855 )

 

 

 -

 

 

 

 

 

 (2,262,855 )

Land

 

 

 -

 

 

 

 178,683

 

 

 

 -

 

 

 

 

 

 178,683

 

Software, net

 

 

 5,745

 

 

 

 -

 

 

 

 -

 

 

 

 

 

 5,745

 

Accounts Receivable - Other

 

 

 -

 

 

 

 196,347

 

 

 

 -

 

 

 

 

 

 196,347

 

Note Receivable

 

 

 -

 

 

 

 4,117,139

 

 

 

 -

 

 

 

 

 

 4,117,139

 

Total Other Assets

 

 

 5,745

 

 

 

 16,536,404

 

 

 

 -

 

 

 

 

 

 16,542,149

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

 $ 76,579

 

 

 $ 20,273,829

 

 

 

 (31,055 )

 

 

 

 $ 20,319,353

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' DEFICIT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

 $ -

 

 

 $ 2,196,060

 

 

 $ -

 

 

 

 

 $ 2,196,060

 

Accrued expenses

 

 

 2,692

 

 

 

 -

 

 

 

 -

 

 

 

 

 

 2,692

 

Other payable

 

 

 14,158

 

 

 

 -

 

 

 

 (7,864 )

 

(e)

 

 

 6,294

 

Deferred revenue

 

 

 35,335

 

 

 

 -

 

 

 

 (35,335 )

 

(e)

 

 

 -

 

Accrued management fee - related party

 

 

 -

 

 

 

 17,840,615

 

 

 

 -

 

 

 

 

 

 17,840,615

 

Accrued interest

 

 

 -

 

 

 

 122,945

 

 

 

 -

 

 

 

 

 

 122,945

 

Funds held for others

 

 

 -

 

 

 

 24,987

 

 

 

 -

 

 

 

 

 

 24,987

 

Due to affiliate

 

 

 -

 

 

 

 74,000

 

 

 

 -

 

 

 

 

 

 74,000

 

Current portion of long term-debt

 

 

 50,000

 

 

 

 4,431,006

 

 

 

 -

 

 

 

 

 

 4,481,006

 

Total Current Liabilities

 

 

 102,185

 

 

 

 24,689,613

 

 

 

 (43,199 )

 

 

 

 

 24,748,599

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term portion of note payable (net of issuance costs $451,389)

 

 

 -

 

 

 

 4,964,941

 

 

 

 -

 

 

 

 

 

 4,964,941

 

Reclamation liability

 

 

 -

 

 

 

 18,126,873

 

 

 

 -

 

 

 

 

 

 18,126,873

 

Total Other Liabilities

 

 

 -

 

 

 

 23,091,814

 

 

 

 -

 

 

 

 

 

 23,091,814

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Liabilities

 

 

 102,185

 

 

 

 47,781,427

 

 

 

 (43,199 )

 

 

 

 

 47,840,413

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS' DEFICIT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quest - Common stock, $0 par value; 2,500 shares authorized;

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,874 issued and outstanding

 

 

 -

 

 

 

 -

 

 

 

 -

 

 

(b)

 

 

 -

 

AREC - Class A Common stock: $.0001 par value; 900,000,000 shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

authorized, 611,993 shares issued and outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

for the period end

 

 

 61

 

 

 

 -

 

 

 

 23

 

 

(a)

 

 

 84

 

AREC - Class B Common stock: $.0001 par value; 60,000,000 shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

authorized, 233,333 shares issued and outstanding for the period end

 

 

 23

 

 

 

 -

 

 

 

 (23 )

 

(a)

 

 

 -

 

AREC - Series A Preferred stock: $.0001 par value; 5,000,000 shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

authorized, 4,817,792 shares issued and outstanding (recapitalization)

 

 

 -

 

 

 

 -

 

 

 

 482

 

 

(b)

 

 

 482

 

AREC - Series B Preferred stock: $.0001 par value; 20,000,000 shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

authorized, -0- shares issued and outstanding (recapitalization)

 

 

 -

 

 

 

 -

 

 

 

 -

 

 

 

 

 

 -

 

AREC - Unclassified ("blank check") Preferred stock: 75,000,000 shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

authorized, no shares issued and outstanding (recapitalization)

 

 

 -

 

 

 

 -

 

 

 

 -

 

 

 

 

 

 -

 

Additional paid-in capital

 

 

 1,149,462

 

 

 

 88,675

 

 

 

 (1,252,216 )

 

(b)/(c)

 

 

 (14,079 )

Accumulated deficit

 

 

 (1,251,734 )

 

 

 (27,651,030 )

 

 

 1,263,878

 

 

(c)/(e)

 

 

 (27,638,886 )

Non controlling interest

 

 

 76,582

 

 

 

 54,757

 

 

 

 -

 

 

 

 

 

 131,339

 

Total Stockholders' Deficit

 

 

 (25,606 )

 

 

 (27,507,598 )

 

 

 12,144

 

 

 

 

 

 (27,521,060 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT

 

 $ 76,579

 

 

 $ 20,273,829

 

 

 $ (31,055 )

 

 

 

 $ 20,319,353

 

 

The accompanying notes are an integral part of the unaudited pro forma condensed combined financial statements.

 

 
2
 
 

 

AMERICAN RESOURCES CORP. AND SUBSIDIARIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unaudited Condensed Combined Pro Forma Statements of Operations

 

For the Three Months Ended December 31, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

American

Resources Corp.

f/k/a NGFC

Equities

 

 

Quest

Energy Inc.

 

 

Proforma

Adjustment

 

 

Notes

 

Total

 

Total Revenue

 

 $ 56,129

 

 

 $ 5,876,765

 

 

 $ (56,129 )

 

(e)

 

 

 5,876,765

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Expenses from Operations

 

 

 (72,692 )

 

 

 (2,324,322 )

 

 

 44,367

 

 

(e)

 

 

 (2,352,647 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss from Operations

 

 

 (16,563 )

 

 

 3,552,443

 

 

 

 (11,762 )

 

 

 

 

 3,524,118

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Income

 

 

 1,284

 

 

 

 54,757

 

 

 

 -

 

 

 

 

 

 56,041

 

Amortization

 

 

 -

 

 

 

 (9,406 )

 

 

 -

 

 

 

 

 

 (9,406 )

Loss on reclamation settlement

 

 

 -

 

 

 

 (71,245 )

 

 

 -

 

 

 

 

 

 (71,245 )

Interest

 

 

 -

 

 

 

 (271,408 )

 

 

 -

 

 

 

 

 

 (271,408 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income (Loss)

 

 

 (15,279 )

 

 

 3,255,141

 

 

 

 (11,762 )

 

 

 

 

 3,228,100

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: Net income attributable to Non Controlling Interest

 

 

 (5,293 )

 

 

 (54,757 )

 

 

 -

 

 

 

 

 

 (60,050 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income (loss) attributable to Controlling Shareholders

 

 $ (20,572 )

 

 $ 3,200,384

 

 

 $ (11,762 )

 

 

 

 $ 3,168,050

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income (loss) per share - basic and diluted

 

 $ (0.02 )

 

 $ 1,738

 

 

 $ -

 

 

(d)

 

 $ 3.76

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding - basic and diluted

 

 

 843,553

 

 

 

 1,841

 

 

 

 (1,841 )

 

(d)

 

 

 843,553

 

 

The accompanying notes are an integral part of the unaudited pro forma condensed combined financial statements.

 

 
3
 
 

 

AMERICAN RESOURCES CORP. AND SUBSIDIARIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unaudited Condensed Combined Pro Forma Statements of Operations

 

For the Twelve Months Ended September, 2016

 

 

 

 

 

 

 

 

 

 

 

 

American

Resources Corp.

f/k/a NGFC

Equities

 

 

Quest

Energy Inc.

 

 

Proforma

Adjustment

 

 

Notes

 

Total

 

Total Revenue

 

 $ 147,282

 

 

 $ 1,724,429

 

 

 $ (147,282 )

 

(e)

 

 $ 1,724,429

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Expenses from Operations

 

 

 (902,188 )

 

 

 (27,056,696 )

 

 

 150,594

 

 

(e)

 

 

 (27,808,290 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss from Operations

 

 

 (754,906 )

 

 

 (25,332,267 )

 

 

 3,312

 

 

 

 

 

 (26,083,861 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long term capital loss

 

 

 (550 )

 

 

 -

 

 

 

 -

 

 

 

 

 

 (550 )

Realized gain on marketable securities

 

 

 25,608

 

 

 

 -

 

 

 

 -

 

 

 

 

 

 25,608

 

Unrealized loss on marketable securities

 

 

 9,796

 

 

 

 -

 

 

 

 -

 

 

 

 

 

 9,796

 

Dividends received

 

 

 889

 

 

 

 -

 

 

 

 -

 

 

 

 

 

 889

 

Interest

 

 

 -

 

 

 

 (12,156 )

 

 

 -

 

 

 

 

 

 (12,156 )

Income from discontinued operations

 

 

 75,790

 

 

 

 -

 

 

 

 -

 

 

 

 

 

 75,790

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss

 

 

 (643,373 )

 

 

 (25,344,423 )

 

 

 3,312

 

 

 

 

 

 (25,984,484 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: Net income attributable to Non Controlling Interest

 

 

 (74,300 )

 

 

 -

 

 

 

 -

 

 

 

 

 

 (74,300 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss attributable to Controlling Shareholders

 

 $ (717,673 )

 

 $ (25,344,423 )

 

 $ 3,312

 

 

 

 

 $ (26,058,784 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share - basic and diluted

 

 $ (0.86 )

 

 $ (13,819 )

 

 $ -

 

 

(d)

 

 $ (31.15 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding - basic and diluted

 

 

 836,637

 

 

 

 1,834

 

 

 

 (1,834 )

 

(d)

 

 

 836,637

 

 

The accompanying notes are an integral part of the unaudited pro forma condensed combined financial statements.

 

 
4
 
 

 

AMERICAN RESOURCES CORPORATION

 

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

December 31, 2016

 

NOTE 1 – Basis of Presentation

 

The historical consolidated financial statements have been adjusted in the pro forma condensed combined financial statements to give effect to pro forma events that are (1) directly attributable to the recapitalization (2) factually supportable and (3) with respect to the pro forma condensed combined statements of operations, expected to have a continuing impact on the combined results following the business combination.

 

The pro forma combined financial statements do not necessarily reflect what the combined company’s financial condition or results of operations would have been had the acquisition occurred on the dates indicated. They also may not be useful in predicting the future financial condition and results of operations of the combined company. the actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors.

 

The combined pro forma financial information does not reflect the realization of any expected cost savings or other synergies from the acquisition of NGFC as a result of restructuring activities and other planned cost savings initiatives following the completion of the business combination.

 

The combined pro forma financial statements been retroactively restated to reflect the impact of authorization of up to 1,000,000,000 of which 900,000,000 shares are designated as Class A Common Stock, par value $.0001 per share; and 100,000,000 shares authorized as “blank check” preferred stock with 5,000,000 shares designated as Series A Convertible Preferred Stock with 1,000 (33.3 post reverse split) votes per share and 20,000,000 shares designated as Series B Convertible with one vote per share. In addition, the authorized Class B Common Stock class was eliminated by this action. The amendment was completed on March 31, 2017.

 

The combined pro forma financial statements have been retroactively restated to reflect the impact of the one-for-thirty stock split that was completed on May 23, 2017.

 

The company completed the acquisition of NGFC in a share exchange transaction. The company exchanged its outstanding shares of 1,874 for newly issued Series A Preferred shares of NGFC totaling 4,817,792.

 

NOTE 2– Pro forma Adjustments

 

The following adjustments have been reflected in the unaudited pro forma condensed combined financial information:

 

 

 (a) Represents the conversion of Class B Common stock of NGFC to Class A Common stock of the NGFC.

 

 

 

 

 (b) Represents the exchange of newly authorized Series A Preferred stock of NGFC with previously issued Common stock of the acquirer.

 

 

 

 

 (c) Represents the elimination of NGFC’s accumulated deficit

 

 

 

 

 (d) Represents change in earnings per share and weighted average shares outstanding due to the transaction

 

 

 

 

 (e) Represents the planned disposal of ECI Latam Inc. as outlined in the share exchange agreement. ECI Latam Inc. is a subsidiary of NGFC.

 

 

5

 

American Resources Corp Reports