Business context and reporting period
Filing identity differs from the request metadata: the supplied 10-Q is for Natural Gas Fueling and Conversion Inc., not American Resources Corp. It covers the quarter ended June 30, 2014 (noted in the filing as the quarterly period; no separate “Q3” period is identified). The company was newly formed, reported itself as a shell company, and had not begun revenue-generating operations.
Its proposed business was to acquire or build combined gasoline, diesel, and natural-gas fueling stations, convenience stores, and vehicle-conversion facilities, initially in the Miami area. It had no operating revenue through June 30, 2014.
Financial performance, cash flow, and liquidity
| Metric | Three months ended June 30, 2014 | Inception to June 30, 2014 |
|---|---|---|
| Revenue | None reported | None reported |
| Operating expenses | $28,529 | $70,831 |
| Operating loss | $28,529 | $70,831 |
| Other income, net | $718 | $718 |
| Net loss | $27,811 | $70,113 |
| Basic and diluted loss per share | $0.00 loss, rounded | $0.00 loss, rounded |
The filing provides no prior-year comparable results, so year-over-year changes cannot be assessed. Gross margin and operating margin are not meaningful because the company had no revenue.
- At June 30, 2014: cash was $75,850; available-for-sale marketable securities were $52,237; total assets were $128,087.
- Liabilities: current liabilities totaled $1,890, comprising $1,800 rent payable and a $90 unsecured, non-interest-bearing related-party note due on demand. Stockholders’ equity was $126,197; accumulated deficit was $70,113.
- Cash flows, inception to date: $68,971 used in operating activities, $51,579 used in investing activities, and $196,400 provided by financing activities, resulting in $75,850 ending cash. The filing does not give a separate quarter-only cash-flow figure.
- The company reported a monthly burn rate of approximately $8,000 and estimated that available resources could support development-stage operations for approximately 18 months. This estimate depends on assumptions and includes marketable securities that could lose value or be unavailable for immediate needs.
Material changes, outlook, and risks
- The company said it needed approximately $5.8 million per planned operational unit and approximately $17.4 million to build or acquire three units and add natural-gas fueling and conversion capabilities. It had not secured customer commitments or financing commitments for these plans.
- A registered public offering became effective June 12, 2014, but the company reported that it had raised no funds through it as of August 11, 2014. It expected to seek financing by selling registered shares but gave no assurance it would succeed. It had previously sold 6.5 million Class A shares privately for an aggregate $195,000.
- Management estimated that a unit could begin gasoline and diesel operations about 135 days after adequate capital became available, with a fully functioning unit taking about 345 days. These are estimates, not firm guidance; the company anticipated no natural-gas fueling or conversion operations until substantial capital was raised.
- Management projected that fuel and convenience-store sales might support operations after opening, but acknowledged there was no assurance of reaching expected sales or profitability. Further financing, potentially including dilutive equity issuance, might be needed; without sufficient funds, operations could be curtailed.
- The financial statements disclose substantial doubt about the company’s ability to continue as a going concern. Management’s plan depended on raising capital, and the filing states that failure to obtain adequate funding could force the company to cease operations.
- The company placed $80,000 into an investment and trading account managed by its CEO. The filing reported $2,010 in realized gains and $1,352 in unrealized losses; securities were classified as Level 1 fair value. Management warned that market losses could impair funds available for operating needs despite hedging.
- Class B shares carry 10 votes per share, compared with one vote per Class A share, concentrating voting power. On August 6, 2014, CFO Robert C. Sanford resigned; CEO I. Andrew Weeraratne assumed the CFO role as well.
- Management said disclosure controls and procedures were effective and reported no material change in internal control over financial reporting during the quarter. It reported no material litigation and no material changes to previously disclosed risk factors other than the investment-market risk discussed in the filing.
Most important facts for investors to verify
- Confirm the filing’s issuer and period: the supplied document is Natural Gas Fueling and Conversion Inc.’s 10-Q for the quarter ended June 30, 2014, not an American Resources Corp. filing.
- Verify whether the registered offering subsequently raised capital and whether the company obtained funding sufficient for its stated plans.
- Assess the going-concern warning, actual cash burn, and liquidity and market risk of the investment account.
- Verify whether proposed station, natural-gas conversion, and joint-venture plans advanced, and whether any customer demand or revenue materialized.
- Review the control implications of the CEO also serving as CFO and the voting concentration created by Class B shares.