Filing summary
Important identification issue: The supplied filing is for NGFC Equities, Inc., not American Resources Corp. It reports the quarter ended June 30, 2015, and nine months ended June 30, 2015. NGFC’s fiscal year ends September 30, making June 30 its fiscal third-quarter end. Confirm the issuer and filing before relying on this summary.
Business context
NGFC changed its name from Natural Gas Fueling and Conversion Inc. in February 2015 and broadened its plans to three divisions: energy and retail, healthcare, and consulting. It acquired a 55% interest in medical-equipment services company ECI-LATAM (ECIL) in February 2015. It also formed Vanguard Energy, which had no major business activity by June 30, and NGFC Limited Partnership (NGLP), intended to raise capital for station acquisitions and invest in financial markets. NGFC reported that animal-health product testing was underway, with no sales to date.
Financial performance and position
| Metric | Quarter ended June 30, 2015 | Nine months ended June 30, 2015 | Comparable 2014 period |
|---|---|---|---|
| Revenue | $32,591 | $45,791 | $0 |
| Gross profit | $32,579 | $33,432 | $0 |
| Operating expenses | $176,162 | $230,643 | $28,529 quarter; $70,831 nine months |
| Loss from operations | $(143,583) | $(197,211) | $(28,529) quarter; $(70,831) nine months |
| Net loss attributable to NGFC shareholders | $(151,908) | $(203,928) | $(27,811) quarter; $(70,113) nine months |
| Basic and diluted loss per share | $(0.01) | $(0.01) | $(0.00) in both 2014 periods, as reported |
Gross margin was approximately 73% for the nine-month period and nearly 100% for the quarter, based on reported revenue and cost of goods sold. Consulting fees were $142,750 for the nine months, including $131,250 recorded for shares issued to consultants. Depreciation and amortization was $17,417.
At June 30, 2015, NGFC reported cash of $301,175, marketable securities of $36,935, total assets of $840,687, current liabilities of $21,854, and total equity of $818,833. Current liabilities included an $18,554 unsecured loan payable to an ECIL officer at 5% interest and $3,300 in accrued expenses. The balance sheet showed goodwill of $361,049 and a customer list of $133,333, arising from the ECIL acquisition. Cash included $137,926 belonging to NGLP; marketable securities included $1,770 belonging to NGLP.
For the nine months, operating cash flow was negative $51,225, investing cash flow was positive $14,895, and financing cash flow was positive $254,686. Cash increased by $218,356 to $301,175. Financing included $144,701 from stock sales and $110,000 from the sale of subsidiary ownership interests.
Material changes and outlook
- Revenue began during the 2015 period following the ECIL acquisition; the comparable 2014 periods reported no revenue. The filing says ECIL revenue through June 30 had come entirely from one major customer, and ECIL performed work for Getinge Group equipment.
- NGFC raised $144,701 through its registered stock offering, issuing 964,674 Class A shares at $0.15 per share; it also issued 875,000 shares valued at $131,250 for consulting services. The offering ended June 30. At filing, 17,289,674 Class A and 7,000,000 Class B shares were outstanding.
- NGLP had raised $110,000 from two limited partners at June 30 and $220,000 from four partners by the filing date. Its offering target was up to $1 million. Partners could elect to convert contributed capital into NGFC shares at $0.30 per share, subject to the stated terms.
- Management estimated approximately $5.8 million of capital per planned operating unit and said it had no commitments for the additional funding required. It estimated parent-company monthly operating burn at about $5,000 and stated that available resources could support operations for 24–30 months. Those estimates depend on assumptions and exclude the uncertainty of raising capital and executing the plans.
- Management projected that a station could begin operating about 135 days after financing and that a fully equipped unit could take about 345 days; these were estimates, not guidance. The filing gives no quantified revenue or earnings guidance.
Risks, contingencies, and unusual items
- NGFC had an accumulated deficit of $292,858 and anticipated further losses. Management warned that financing may not be available, additional equity could dilute existing shareholders, and operations could be curtailed if capital is insufficient.
- The proposed energy-station business remained at the planning and due-diligence stage; the company had no customer commitments for proposed stations. The animal-health product was still being tested, with no assurance of future sales.
- NGFC disclosed that its disclosure controls were not effective in assuring all necessary disclosures. Management said it was developing a checklist and planned to hire additional personnel as funds allowed.
- The filing reports no material litigation, defaults on senior securities, or required off-balance-sheet arrangements. It states that risk factors were not applicable.
- The statements and MD&A contain figures that warrant reconciliation: the statements report nine-month net loss attributable to NGFC shareholders of $203,928, while consolidated net loss is $197,712; the MD&A also describes $203,928 as “net operating losses.” The filing’s ECIL earnings statements should also be checked against the consolidated results.
Most important facts to verify
- Whether this NGFC Equities filing is the intended filing for American Resources Corp.
- The reconciliation of consolidated net loss, noncontrolling-interest attribution, and the MD&A’s loss description.
- ECIL’s reported revenue, earnings, customer concentration, and the period covered by its results.
- How much of reported cash and securities was available to the parent versus NGLP and subsidiaries.
- The terms, subsequent fundraising, and potential share dilution associated with NGLP’s conversion option.
- Whether NGFC secured the substantial capital needed for operating units and whether its stated cash runway assumptions proved achievable.