Colorado
|
51-0541963
|
State or Incorporation
|
(IRS Employer ID
|
Larger accelerated filer ¨
|
Accelerated filer ¨
|
Non-accelerated filer ¨
(Do not check if a smaller reporting company)
|
Smaller reporting company þ
|
PART I - FINANCIAL INFORMATION
|
Page
|
Item 1. Financial Statements
|
|
Unaudited Condensed Consolidated Balance Sheets as of September 30, 2011and December 31, 2010
|
F-1
|
Unaudited Condensed Consolidated Statements of Operations for the nine and three months ended September 30, 2011 and 2010
and for the period from inception, December 1, 2008, to September 30, 2011
|
F-2
|
Unaudited Condensed Consolidated Statement of Shareholders' Equity for the nine months ended September 30, 2011
|
F-3
|
Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2011 and 2010
and for the period from inception, December 1, 2008, to September 30, 2011
|
F-4
|
Notes to Condensed Consolidated Financial Statements
|
F-5
|
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
|
3
|
Item 3. Quantitative and Qualitative Disclosures About Market Risk
|
5
|
Item 4. Controls and Procedures
|
5
|
PART II - OTHER INFORMATION
|
|
Item 1. Legal Proceedings
|
6
|
Item 1.A. Risk Factors
|
6
|
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
|
6
|
Item 3. Defaults Upon Senior Securities
|
6
|
Item 5. Other Information
|
6
|
Item 6. Exhibits
|
6
|
SIGNATURES
|
7
|
(A Development Stage Company)
|
|
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
|
|
September 30,
2011
|
December 31, 2010
|
|||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$ | 1,350,528 | $ | 1,069,473 | ||||
Accounts receivable
|
85,877 | - | ||||||
Short-term loan receivable
|
50,000 | - | ||||||
Related party receivables
|
100,544 | 29,413 | ||||||
Inventory
|
259,472 | - | ||||||
Prepaid royalties to related parties
|
640,986 | 622,986 | ||||||
Prepaid expenses and other
|
381,089 | 59,074 | ||||||
Total current assets
|
2,868,496 | 1,780,946 | ||||||
Property, plant and equipment, net of accumulated depreciation
|
11,018,926 | 918,047 | ||||||
Surface mining rights and royalty agreement
|
3,696,177 | 3,696,177 | ||||||
Intangible assets, net of accumulated amortization
|
130,985,831 | - | ||||||
Other assets
|
15,000 | 25,000 | ||||||
Total assets
|
$ | 148,584,430 | $ | 6,420,170 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY
|
||||||||
Current liabilities:
|
||||||||
Accounts payable, including amounts due to related parties
|
$ | 1,485,917 | $ | 757,879 | ||||
Accrued dividend payable
|
341,079 | 46,666 | ||||||
Accrued interest payable
|
363,507 | 323,653 | ||||||
Accrued liability to related party
|
639,310 | 276,000 | ||||||
Other current liabilities
|
200,759 | - | ||||||
Notes payable, net of unamortized discount of $952,385 at September 30, 2011
|
8,377,460 | 4,346,704 | ||||||
Notes payable to related parties
|
500,000 | 1,100,000 | ||||||
Total current liabilities
|
11,908,032 | 6,850,902 | ||||||
Shareholders' equity (deficit):
|
||||||||
Preferred stock, no par value, 1,000,000 shares authorized
|
||||||||
Class A convertible – 325,000 shares authorized, 247,138 and 123,462 shares
|
||||||||
issued and outstanding at September 30, 2011 and December 31, 2010, respectively
|
46,587,554 | 2,414,139 | ||||||
Class B convertible - 325,000 shares authorized, 248,675 and 125,000 shares
|
||||||||
issued and outstanding at September 30, 2011 and December 31, 2010,respectively
|
52,607,341 | 310,642 | ||||||
Common stock, no par value, 500,000,000 shares authorized, 73,271,581 and
|
||||||||
37,442,453 shares issued and outstanding at September 30, 2011 and
|
||||||||
December 31, 2010, respectively
|
74,550,403 | 13,884,175 | ||||||
Additional paid-in capital
|
7,648,363 | - | ||||||
Shareholder receivable
|
(8,782,141 | ) | - | |||||
Unissued common stock
|
100,000 | - | ||||||
Accumulated other comprehensive income (loss)
|
(25,824 | ) | - | |||||
Loss accumulated during the development stage
|
(44,270,831 | ) | (17,039,688 | ) | ||||
Total Hunt Global Resources, Inc. shareholders' equity (deficit)
|
128,414,865 | (430,732 | ) | |||||
Non-controlling interest
|
8,261,533 | - | ||||||
Total shareholders' equity (deficit)
|
136,676,398 | (430,732 | ) | |||||
Total liabilities and shareholders' equity (deficit)
|
$ | 148,584,430 | $ | 6,420,170 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
|
(A Development Stage Company)
|
|
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
For the Nine Months Ended
September 30,
|
For the Three Months Ended September 30,
|
Period From Inception to
|
||||||||||||||||||
2011
|
2010
|
2011
|
2010
|
2011
|
||||||||||||||||
Product sales
|
$
|
214,769
|
$
|
-
|
$
|
54,518
|
$
|
-
|
$
|
214,769
|
||||||||||
Cost of sales
|
557,730
|
-
|
198,034
|
-
|
557,730
|
|||||||||||||||
Gross profit
|
(342,961
|
)
|
-
|
(143,516
|
)
|
-
|
(342,961
|
)
|
||||||||||||
Operating expenses:
|
||||||||||||||||||||
Selling, general and administrative
|
8,902,495
|
2,659,045
|
2,729,192
|
876,914
|
21,045,426
|
|||||||||||||||
Depreciation and amortization
|
8,928,770
|
114,064
|
3,941,363
|
61,228
|
9,071,158
|
|||||||||||||||
Total operating expenses
|
17,831,265
|
2,773,109
|
6,670,555
|
938,142
|
30,116,584
|
|||||||||||||||
Loss from operations
|
(18,174,226
|
)
|
(2,773,109
|
)
|
(6,814,071
|
)
|
(938,142)
|
(30,459,545)
|
||||||||||||
Other income and (expenses):
|
||||||||||||||||||||
Interest income
|
33,239
|
8,045
|
1,349
|
3,009
|
47,449
|
|||||||||||||||
Interest expense
|
(2,829,744
|
)
|
(550,507)
|
(1,310,860
|
)
|
(168,460)
|
(5,279,176)
|
|||||||||||||
Loss on debt conversion
|
(3,976,305
|
)
|
-
|
-
|
-
|
(4,904,186)
|
||||||||||||||
Loss from settlement
|
(2,827,535
|
)
|
-
|
-
|
-
|
(2,827,535)
|
||||||||||||||
Equity in loss of Momentum
|
(41,250
|
)
|
-
|
(9,000
|
)
|
-
|
(259,921)
|
|||||||||||||
Gain on debt extinguishment
|
38,242
|
-
|
38,242
|
-
|
38,242
|
|||||||||||||||
Loss on investment
|
(25,427
|
)
|
-
|
-
|
-
|
(1,198,022)
|
||||||||||||||
Other income (expenses)
|
-
|
(9,332)
|
-
|
(9,332)
|
-
|
|||||||||||||||
Total other income (expenses)
|
(9,628,780
|
)
|
(551,794)
|
(1,280,269
|
)
|
(174,783)
|
(14,383,149)
|
|||||||||||||
Net loss
|
(27,803,006
|
)
|
(3,324,903)
|
(8,094,340
|
)
|
(1,112,925)
|
(44,842,694)
|
|||||||||||||
Less net loss attributable to non-controlling interests
|
(571,863
|
)
|
-
|
(142,984)
|
-
|
(571,863)
|
||||||||||||||
Net loss attributable to Hunt Global Resources, Inc
|
(27,231,143
|
)
|
(3,324,903)
|
(7,951,356
|
)
|
(1,112,925)
|
(44,270,831)
|
|||||||||||||
Preferred stock dividends
|
(371,602
|
)
|
(210,000
|
)
|
(139,258
|
)
|
(210,000
|
)
|
(511,354)
|
|||||||||||
Net loss attributable to common stock
|
$
|
(27,602,745
|
)
|
$
|
(3,534,903
|
)
|
$
|
(8,090,614
|
)
|
$
|
(1,322,925
|
)
|
$
|
(44,782,185
|
)
|
|||||
Net loss per common share –
Basic and diluted
|
$
|
(0.43
|
)
|
$
|
(0.10)
|
$
|
(0.11
|
)
|
$
|
(0.04)
|
||||||||||
Weighted average number of common shares outstanding -
|
||||||||||||||||||||
Basic and diluted
|
64,393,796
|
33,878,000
|
72,723,382
|
33,878,000
|
HUNT GLOBAL RESOURCES, INC.
|
||||||||||||||||||||||||||||||||||||||||
(A Development Stage Company)
|
||||||||||||||||||||||||||||||||||||||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
|
||||||||||||||||||||||||||||||||||||||||
Class A
Convertible
Preferred
Stock
|
Class B
Convertible
Preferred
Stock
|
Common
Stock
|
Additional
Paid-in
Capital
|
Shareholder
Receivable
|
Unissued Common Stock
|
Accumulated
Other
Comprehensive
Income (Loss)
|
Accumulated
During the
Development
Stage
|
Non-
Controlling
Interests
|
Total
Stockholders'
Equity
|
|||||||||||||||||||||||||||||||
Balance at December 31, 2010
|
$
|
2,414,139
|
$
|
310,642
|
$
|
13,884,175
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
(17,039,688
|
)
|
$
|
-
|
$
|
(430,732
|
)
|
||||||||||||||||||
Common stock issued for cash
|
-
|
-
|
1,894,986
|
- |
-
|
-
|
-
|
-
|
-
|
1,894,986
|
||||||||||||||||||||||||||||||
Cash received for stock that remains unissued at period end
|
-
|
-
|
-
|
-
|
-
|
100,000
|
-
|
-
|
-
|
100,000
|
||||||||||||||||||||||||||||||
Common stock issued for services and prepaid services
|
-
|
-
|
517,250
|
-
|
-
|
-
|
-
|
-
|
-
|
517,250
|
||||||||||||||||||||||||||||||
Warrants issued for services
|
-
|
-
|
-
|
573,653
|
-
|
-
|
-
|
-
|
-
|
573,653
|
||||||||||||||||||||||||||||||
Options issued for 9,245,000 shares to
vest over 29 months
|
-
|
-
|
-
|
2,774,975
|
-
|
-
|
-
|
-
|
-
|
2,774,975
|
||||||||||||||||||||||||||||||
Common stock issued upon exercise of stock options and warrants
|
-
|
-
|
165,000
|
-
|
-
|
-
|
-
|
-
|
-
|
165,000
|
||||||||||||||||||||||||||||||
Acquisition of Carbon Green NA, Inc.
|
44,173,415
|
52,668,301
|
51,943,389
|
- |
(8,782,141
|
)
|
-
|
-
|
-
|
8,833,396
|
148,836,360
|
|||||||||||||||||||||||||||||
Common stock issued in debt conversion
|
-
|
-
|
3,318,068
|
-
|
-
|
-
|
-
|
-
|
-
|
3,318,068
|
||||||||||||||||||||||||||||||
Warrants issued in debt conversion
|
-
|
-
|
- |
1,349,905
|
-
|
-
|
-
|
-
|
-
|
1,349,905
|
||||||||||||||||||||||||||||||
Warrants issued in connection with convertible debt
|
-
|
-
|
-
|
628,739
|
-
|
-
|
-
|
-
|
-
|
628,739
|
||||||||||||||||||||||||||||||
Value of beneficial conversion feature associated with convertible debt
|
-
|
-
|
-
|
2,321,091
|
-
|
-
|
-
|
-
|
-
|
2,321,091
|
||||||||||||||||||||||||||||||
Common stock issued under settlement agreement
|
-
|
-
|
2,827,535
|
-
|
-
|
-
|
-
|
-
|
-
|
2,827,535
|
||||||||||||||||||||||||||||||
Preferred stock dividends
|
-
|
(371,602
|
)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(371,602
|
)
|
||||||||||||||||||||||||||||
Comprehensive income:
|
||||||||||||||||||||||||||||||||||||||||
Net loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(27,231,143
|
)
|
(571,863
|
)
|
(27,803,006
|
)
|
|||||||||||||||||||||||||||
Foreign currency translation adjustment
|
-
|
-
|
-
|
-
|
-
|
-
|
(25,824)
|
-
|
-
|
(25,824)
|
||||||||||||||||||||||||||||||
Total comprehensive income
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(27,828,830
|
)
|
|||||||||||||||||||||||||||||
Balance at Sept 30, 2011
|
$
|
46,587,554
|
$
|
52,607,341
|
$
|
74,550,403
|
$
|
7,648,363
|
$
|
(8,782,141)
|
$
|
100,000
|
$
|
(25,824)
|
$
|
(44,270,831)
|
$
|
8,261,533
|
$
|
136,676,398
|
(A Development Stage Company)
|
||||||||||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
||||||||||||
Period From
|
||||||||||||
For the Nine Months Ended
September 30,
|
Inception to September 30,
|
|||||||||||
2011
|
2010
|
2011
|
||||||||||
Cash flows from operating activities:
|
||||||||||||
Net loss
|
$
|
(27,803,006)
|
$
|
(3,324,903
|
) |
(44,842,694)
|
||||||
Adjustments to reconcile net loss to
|
||||||||||||
net cash used in operating activities:
|
||||||||||||
Depreciation and amortization
|
8,928,770
|
114,064
|
9,071,158
|
|||||||||
Common stock and options issued for services
|
3,759,878
|
-
|
10,236,594
|
|||||||||
Loss on investment
|
25,427
|
-
|
1,198,022
|
|||||||||
Loss on debt conversion
|
3,976,305
|
-
|
4,904,186
|
|||||||||
Loss on settlement agreement
|
2,827,535
|
-
|
2,827,535
|
|||||||||
Equity in losses of Momentum
|
41,250
|
-
|
259,921
|
|||||||||
Common stock issued for payment of accrued interest
|
-
|
-
|
888,941
|
|||||||||
Accretion of debt discount on convertible debt
|
2,035,687
|
-
|
2,035,687
|
|||||||||
Gain on extinguishment of debt
|
(38,242)
|
-
|
(38,242)
|
|||||||||
Investment exchanged for services
|
-
|
-
|
10,000
|
|||||||||
Issuance of note payable for consulting
|
-
|
-
|
500,000
|
|||||||||
Changes in operating assets and liabilities,
|
||||||||||||
net of acquisitions:
|
||||||||||||
Accounts receivable
|
110,338
|
-
|
110,338
|
|||||||||
Related party receivables
|
(71,131)
|
(280,844)
|
(100,545)
|
|||||||||
Inventory
|
(1,872)
|
-
|
(1,872)
|
|||||||||
Prepaid expenses and other assets
|
(57,688)
|
(321,981)
|
(739,748)
|
|||||||||
Accounts payable and accrued liabilities
|
(260,762)
|
1,293,123
|
1,786,115
|
|||||||||
Net cash used in operating activities
|
(6,527,511)
|
(2,520,541)
|
(11,894,604)
|
|||||||||
Cash flows from investing activities:
|
||||||||||||
Purchases of property and equipment
|
(110,301)
|
(47,463
|
) |
(160,736)
|
||||||||
Investment in Momentum
|
(41,250)
|
-
|
(229,921)
|
|||||||||
Other investments
|
10,000
|
(38,908)
|
(15,000)
|
|||||||||
Investment in Reserve Oil Technologies
|
-
|
-
|
(46,416)
|
|||||||||
Proceeds from the sale of Reserve Oil Technologies
|
-
|
586,265
|
536,265
|
|||||||||
Cash received in acquisition of Carbon Green NA, Inc.
|
295,824
|
-
|
295,824
|
|||||||||
Net cash provided by investing activities
|
154,273
|
499,894
|
380,016
|
|||||||||
Cash flows from financing activities:
|
||||||||||||
Proceeds from issuances of common stock
|
2,159,986
|
1,927,028
|
8,101,985
|
|||||||||
Proceeds from notes payable
|
5,935,000
|
146,442
|
6,416,699
|
|||||||||
Proceeds from bank loan
|
146,514
|
-
|
146,514
|
|||||||||
Payment of dividends on preferred stock
|
(77,190)
|
-
|
(77,190)
|
|||||||||
Payments on capital leases
|
-
|
-
|
-
|
|||||||||
Payments on notes payable
|
(1,502,360)
|
-
|
(1,717,311)
|
|||||||||
Net cash provided by (used in) financing activities
|
6,661,950
|
2,073,470
|
12,870,697
|
|||||||||
Effect of exchange rate changes on cash and cash equivalents
|
( 7,657)
|
-
|
(5,581)
|
|||||||||
Increase (decrease) in cash and cash equivalents
|
281,055
|
52,823
|
1,350,528
|
|||||||||
Cash and cash equivalents, beginning of period
|
1,069,473
|
5,766
|
-
|
|||||||||
Cash and cash equivalents, end of period
|
$
|
1,350,528
|
$
|
58,589
|
$
|
1,350,528
|
||||||
Supplemental disclosure of cash flow information:
|
||||||||||||
Interest paid
|
$
|
591,309
|
$
|
-
|
$
|
1,227,795
|
||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
|
Useful life
|
||||
Building
|
25 | |||
Office equipment
|
10 | |||
Manufacturing equipment, vehicles, computers
|
5 |
|
|
|||||||||||||||
Intangible Assets
|
Estimated
Useful Life |
Cost
|
Accumulated
Amortization |
Carrying Value
|
||||||||||||
Licenses
|
10
|
$
|
48,963,200
|
$
|
2,856,187
|
46,107,013
|
||||||||||
Intellectual property
|
10
|
90,136,800
|
5,257,982
|
84,878,818
|
||||||||||||
Surface mining rights
|
*
|
3,696,177
|
-
|
3,696,177
|
||||||||||||
$
|
142,796,177
|
$
|
8,114,169
|
134,682,008
|
Description
|
Allocated Purchase Price
|
|||
Assets acquired:
|
||||
Current assets
|
$
|
1,002,394
|
||
Property, plant and equipment
|
10,935,427
|
|||
Intangible assets
|
||||
Licenses
|
48,963,200
|
|||
Intellectual property
|
90,136,800
|
|||
Liabilities assumed
|
(2,201,461)
|
|||
Non-controlling interests
|
(8,833,396)
|
|||
Total purchase price
|
$
|
140,002,964
|
Balance Sheet Data
|
Balance at
September 30, 2011
|
|||
Current assets
|
$ | 849,195 | ||
Property, plant and equipment, net
|
10.168,484 | |||
Intangible assets, net
|
130,985,831 | |||
Current liabilities
|
(2,636,957 | ) | ||
From March 2, 2011
|
||||
(Acquisition Date) to
|
||||
Statement of Operations Data
|
September 30, 2011
|
|||
Revenues
|
$ | 214,769 | ||
Cost of sales
|
(557,730 | ) | ||
Gross profit
|
(342,961 | ) | ||
General and administrative expenses
|
223,562 | |||
Depreciation and amortization
|
8,844,688 | |||
Loss from operations
|
(9,411,211 | ) | ||
Other expenses
|
33,775 | |||
Net loss
|
$ | (9,444,986 | ) |
Description
|
September 30,
2011
|
December 31,
2010
|
||||||
Plant
|
$
|
5,817,517
|
$
|
998,000
|
||||
Manufacturing equipment
|
5,999,218
|
12,000
|
||||||
Vehicles
|
93,597
|
25,000
|
||||||
Office equipment
|
38,207
|
2,972
|
||||||
Computer hardware
|
27,377
|
22,464
|
||||||
Total
|
11,975,916
|
1,060,436
|
||||||
Less: accumulated depreciation
|
(956,990)
|
(142,389
|
)
|
|||||
Property, plant and equipment, net
|
$
|
11,018,926
|
$
|
918,047
|
Expected volatility of underlying stock
|
58.38
|
%
|
||
Risk-free interest rate
|
0.45
|
%
|
||
Dividend yield
|
0.00
|
%
|
||
Expected life of warrants
|
2 years
|
|||
Weighted-average fair value of warrants
|
$
|
0.95
|
Description
|
Amount
|
||
Proceeds received on issuance of new notes in 2011
|
$
|
3,935,000
|
|
Repayment of loan
|
(800,000)
|
||
Discount allocated to warrants
|
(628,739)
|
||
Discount allocated to beneficial conversion feature
|
(2,329,903)
|
||
Convertible notes after discount
|
176,358
|
||
Accretion of discount to interest expense
|
2,006,257
|
||
Conversion through issuance of common stock
|
(200,000)
|
||
Convertible notes at September 30, 2011
|
1,982,615
|
||
Unamortized discount at September 30, 2011
|
952,385
|
||
Total allocated to additional paid-in capital
|
2,958,642
|
||
Total shares of common stock to be issued, if-converted
|
2,945,583
|
||
Aggregate value of shares, if-converted at September 30, 2011
|
2,268,099
|
||
Contractual interest expense for nine months ended September 30, 2011
|
102,963
|
||
Effective interest rate on convertible notes
|
Greater than 100%
|
2011 Share Issuances
|
Shares Issued
|
Per Share Value
|
Total Value
|
|||
Issuance of common stock/warrants in units on conversion of debt
|
(1)
|
980,000
|
$
|
$3.18
|
$
|
3,116,400
|
Issuance of common stock in settlement with investors
|
(2)
|
897,630
|
$3.15
|
2,827,536
|
||
Sale of common stock/warrants in units in a private placement
|
(3)
|
2,539,987
|
$0.79
|
1,994,986
|
||
Issuance of common stock upon exercise of warrants
|
(3)
|
548,436
|
$0.00 – $0.55
|
165,000
|
||
Issuance of common stock upon exercise of options
|
(4)
|
128,846
|
-
|
-
|
||
Issuance of common stock for services
|
(5)
|
200,000
|
$2.12
|
424,000
|
||
Issuance of common stock as compensation
|
(6)
|
31,305
|
$1.03
|
32,050
|
||
Issuance of common stock/warrants in units on conversion of debt
|
(7)
|
201,668
|
$1.00
|
201,668
|
||
Issuance of common stock as compensation
|
(8)
|
52,000
|
$1.18
|
61,200
|
||
Issuance of common stock upon acquisition of CGNA
|
(9)
|
30,249,256
|
$1.72
|
51,943,389
|
(1) Shares were issued upon conversion of $490,000 of principal due under a note payable. Four note holders with a balance due of $110,000 have elected not to convert. The value of the shares issued was based on the market price at the date of conversion. The Company recognized a loss on debt conversion of $2,626,400 related to this share and warrant issuance.
|
(2) Shares were issued to three investors in settlement of anti-dilution provisions. The value of the shares issued is based on the market price at the date of the settlement. The Company recognized a loss from the settlement of $2,827,535.
|
(3) Shares were valued based on actual cash proceeds received.
|
(4) Shares for cashless exercise of options.
|
(5) Shares were issued as prepayment for services through December 31, 2011 pursuant to a contract. The value of the shares issued is based on the market price at the date services commenced. The total value of the services was recognized as a prepaid expense and amortized equally over the period covered by the contract.
|
(6) Shares were issued as severance to former employees. The value of the shares issued was based on cash sales at date of issue.
|
(7) Shares were issued upon conversion of a short-term convertible note. The value of the shares issued was based on the conversion price of $1.00 per share. |
(8) Shares were issued to consultants. The value of the shares issued was based on recent cash sales at date of issue.
|
Expected stock price volatility
|
48.0
|
%
|
||
Risk-free interest rate
|
1.1
|
%
|
||
Dividend yield
|
0.0
|
%
|
||
Expected life of warrants
|
2.8 years
|
|||
Weighted-average fair value
|
$
|
1.99
|
Shares
|
Weighted-
|
Weighted Average
|
|
Underlying
|
Average
|
Remaining Contractual
|
|
Description
|
Warrants
|
Exercise Price
|
Term (in years)
|
Outstanding at December 31, 2010
|
11,270,000
|
$0.94
|
1.2
|
Issued in debt settlement
|
490,000
|
0.50
|
4.4
|
Issued in private placement
|
100,000
|
1.00
|
1.5
|
Issued for services rendered
|
275,000
|
1.00
|
1.7
|
Issued for conversion of note
|
200,000
|
1.00
|
1.4
|
Issued upon note issuance
|
973,334
|
1.50
|
1.6
|
Exercised
|
(450,000)
|
0.55
|
-
|
Expired
|
(40,000)
|
1.00
|
-
|
Outstanding at September 30, 2011
|
12,818,334
|
$0.97
|
1.4
|
Description
|
Shares Underlying Options
|
Weighted Average Exercise Price
|
Weighted Average Remaining Term (in years)
|
Outstanding at December 31, 2010
|
956,666
|
$0.76
|
0.9
|
Granted
|
9,245,000
|
1.00
|
1.9
|
Exercised
|
(153,846)
|
0.65
|
-
|
Outstanding at September 30, 2011
|
10,047,820
|
$0.99
|
1.8
|
Exercisable at September 30, 2011
|
802,820
|
$0.78
|
0.9
|
Year Ended December 31,
|
Amount
|
|||
2011
|
$
|
18,044
|
||
2012
|
108,261
|
|||
2013
|
111,399
|
|||
2014
|
117,675
|
|||
2015
|
117,675
|
|||
2016
|
98,063
|
|||
Total future minimum rental payments
|
571,117
|
● |
The Company issued 980,000 shares of common stock with a value of $3,116,400 and warrants for the purchase of 490,000 shares of common stock with a value of $1,349,905 to settle $490,000 of notes payable, resulting in a loss of $3,976,305.
|
|
●
|
The Company issued 897,630 shares of common stock with a value of $2,827,535 to settle claims against the company for anti-dilution privileges related to debt previously retired.
|
|
● |
The Company issued short-term convertible notes containing beneficial conversion features and warrants resulting in the debt being discounted by $2,958,642. The debt discount is being accreted through a charge to interest over the remaining terms of the convertible notes. The charge to interest expense related to the debt discounts totaled $2,006,257 during the nine months ended September 30, 2011.
|
Date: November 14, 2011
/s/ George T. Sharp
George T. Sharp, Chief Executive Officer,
Principal Executive Officer and Director
|
Date: November 14, 2011
/s/ George T. Sharp
George T. Sharp, Chief Executive Officer,
Principal Executive Officer and Director
|
Date: November 14, 2011
/s/ Michael P. Horne
Michael P. Horne, Chief Financial Officer, Principal Financial Officer, Principal Accounting Officer and Director
|
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | Sep. 30, 2011 | Dec. 31, 2010 |
---|---|---|
Notes payable, unamortized discount | $ 952,385 | |
Preferred stock, no par value | ||
Preferred stock, shares authorized | 1,000,000 | 1,000,000 |
Common stock, no par value | ||
Common stock, shares authorized | 500,000,000 | 500,000,000 |
Common stock, shares outstanding | 73,271,581 | 37,442,453 |
Class A Convertible Preferred Stock [Member] | ||
Preferred stock, no par value | ||
Preferred stock, shares authorized | 325,000 | 325,000 |
Preferred stock, shares issued | 247,138 | 123,462 |
Preferred stock, shares outstanding | 247,138 | 123,462 |
Class B Convertible Preferred Stock [Member] | ||
Preferred stock, no par value | ||
Preferred stock, shares authorized | 325,000 | 325,000 |
Preferred stock, shares issued | 248,675 | 125,000 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) | 3 Months Ended | 9 Months Ended | 34 Months Ended | ||
---|---|---|---|---|---|
Sep. 30, 2011 | Sep. 30, 2010 | Sep. 30, 2011 | Sep. 30, 2010 | Sep. 30, 2011 | |
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS [Abstract] | |||||
Product Sales | $ 54,518 | $ 214,769 | $ 214,769 | ||
Cost of sales | 198,034 | 557,730 | 557,730 | ||
Gross profit | (143,516) | (342,961) | (342,961) | ||
Operating expenses: | |||||
Selling, general and administrative | 2,729,192 | 876,914 | 8,902,495 | 2,659,045 | 21,045,426 |
Depreciation and amortization | 3,941,363 | 61,228 | 8,928,770 | 114,064 | 9,071,158 |
Total operating expenses | 6,670,555 | 938,142 | 17,831,265 | 2,773,109 | 30,116,584 |
Loss from operations | (6,814,071) | (938,142) | (18,174,226) | (2,773,109) | (30,459,545) |
Other income and (expenses): | |||||
Interest income | 1,349 | 3,009 | 33,239 | 8,045 | 47,449 |
Interest expense | (1,310,860) | (168,460) | (2,829,744) | (550,507) | (5,279,176) |
Loss on debt conversion | (3,976,305) | (4,904,186) | |||
Loss from settlement | (2,827,535) | (2,827,535) | |||
Equity in loss of Momentum | (9,000) | (41,250) | (259,921) | ||
Gain on debt extinguishment | 38,242 | 38,242 | 38,242 | ||
Loss on investment | (25,427) | (1,198,022) | |||
Other income (expenses) | (9,332) | (9,332) | |||
Total other income (expenses) | (1,280,269) | (174,783) | (9,628,780) | (551,794) | (14,383,149) |
Net loss | (8,094,340) | (1,112,925) | (27,803,006) | (3,324,903) | (44,842,694) |
Less net loss attributable to non-controlling interests | (142,984) | (571,863) | (571,863) | ||
Net loss attributable to Hunt Global Resources, Inc. | (7,951,356) | (1,112,925) | (27,231,143) | (3,324,903) | (44,270,831) |
Preferred stock dividends | (139,258) | (210,000) | (371,602) | (210,000) | (511,354) |
Net loss attributable to common stock | $ (8,090,614) | $ (1,322,925) | $ (27,602,745) | $ (3,534,903) | $ (44,782,185) |
Net loss per common share - basic and diluted | $ (0.11) | $ (0.04) | $ (0.43) | $ (0.1) | |
Weighted average number of common shares outstanding - basic and diluted | 72,723,382 | 33,878,000 | 64,393,796 | 33,878,000 |
Document and Entity Information | 9 Months Ended | |
---|---|---|
Sep. 30, 2011 | Nov. 14, 2011 | |
Document and Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2011 | |
Entity Registrant Name | HUNT GLOBAL RESOURCES, INC. | |
Entity Central Index Key | 0001377318 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2011 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 78,617,868 |
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Shareholders' Equity | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shareholders' Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shareholders' Equity |
Note 6: Shareholders' Equity Common Stock In January 2011, we increased the authorized shares of common stock from 100,000,000 to 500,000,000. Presented below is an analysis of common stock activity during the nine months ended September 30, 2011:
Preferred Stock Other than the preferred shares issued in the CGNA transaction per Note 3, approximately 51,000 shares of which were reacquired on October 13, 2011, no preferred shares have been issued during 2011. Warrants The Company recognizes expenses related to share-based payments in accordance with ASC 505, Equity-Based Payments to Non-Employees, for share-based payments to non-employees and ASC 718, Compensation - Stock Compensation , for share-based payments to employees. The Company measures the expense for warrants issued during the nine months ended September 30, 2011 based on the estimated fair value of the warrant on the date issued and recognizes expense over the period the service is provided. The weighted average fair values were calculated using the Black Scholes-Merton option pricing model. The following assumptions were used to determine the fair value of the warrants issued during the nine months ended September 30, 2011:
A summary of warrant activity for the nine months ended September 30, 2011 follows:
On October 13, 2011, the Company issued warrants to purchase an additional 8,152,900 shares of Hunt Common Stock at an exercise price of $1.00 per share. Stock Options In addition to the options issued in the CGNA transaction, in March 2011, we issued 153,846 shares of common stock to one investor upon his cashless exercise of options. A summary of option activity for the nine months ended September 30, 2011 is as follows:
|
Reverse Merger | 9 Months Ended |
---|---|
Sep. 30, 2011 | |
Reverse Merger [Abstract] | |
Reverse Merger |
Note 2: Reverse Merger On October 29, 2010, the Company acquired Tombstone Technologies, Inc. ("Tombstone"), a Colorado corporation. Although Tombstone was the surviving legal entity; Hunt remained the financial reporting entity and the merger was treated as a recapitalization. The transaction was considered a recapitalization because, prior to the transaction, Tombstone was a public company with limited assets or operations and, upon completion of the transaction, Hunt shareholders emerged with a controlling 94.6% interest in the merged Company. Subsequent to the transaction, Tombstone changed its name to Hunt Global Resources, Inc. |
Commitments and Contingencies | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2011 | |||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies |
Note 8. Commitments and Contingencies Operating Leases The Company leases office space in The Woodlands, Texas. The lease term is for a period of five years and two months, through October 31, 2016. Approximate amounts of future minimum rental payments under this operating lease are:
Rent expense charged to operating expenses totaled $5,629 and $74,133 for the three months and nine months ended September 30, 2011. From the period from inception through September 30, 2011, rent expenses charged to operating expenses totaled 1,225,865. |
Subsequent Events | 9 Months Ended |
---|---|
Sep. 30, 2011 | |
Subsequent Events [Abstract] | |
Subsequent Events |
Note 9. Subsequent Events Completion of the Carbon Green N.A., Inc. Acquisition On October 13, 2011, the Company completed the acquisition of CGNA. The terms of the transaction are disclosed in the footnotes above. Additional Issuances of Common Stock The Company issued 10,000 shares of common stock to a consultant on October 13, 2011 and an additional 10,000 shares on November 13, 2011. These shares were issued in lieu of payment for services and are valued based on the fair market value on the date of issue. |
Related Parties | 9 Months Ended |
---|---|
Sep. 30, 2011 | |
Related Parties [Abstract] | |
Related Parties |
Note 7. Related Parties On May 29, 2011 the Company entered into an agreement with Thunderlight International LTD to provide Hunt with a 180 day promissory note for $2,000,000, bearing 10% interest.. The proceeds are to be used for the due diligence and permitting costs relating to the proposed agreement for the Minnesota frac-sand operation discussed in Footnote 3. Thunderlight was a party to the Share Purchase Agreement between Hunt Global & Carbon Green NA, dated March 2, 2011. Its principal owner is one of the largest stockholders of Hunt. |
Acquisitions | 9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2011 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisitions [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisitions |
Note 3: Acquisitions Carbon Green N.A., Inc. (CGNA) Acquisition On March 2, 2011, the Company entered into an acquisition agreement (the "Acquisition Agreement") to acquire substantially all of the equity of CGNA in exchange for the issuance of 30,249,256 shares of the Company's common stock, 123,675 shares of the Company's Class A Preferred Stock, 123,675 shares of the Company's Class B Preferred stock, 24,000 warrants to acquire shares of the Company's Class A Preferred Stock at an exercise price of $208 a share expiring on March 2, 2016, and 38,285 warrants to purchase shares of the Company's Class B Preferred Stock at an exercise price of $248 a share expiring on March 2, 2016. The Company obtained a valuation of CGNA provided by a valuation expert. It was concluded that the intangible assets of CGNA had a value of $139.1 million. The remainder of the purchase price was allocated to the other assets and liabilities based on book values which approximated fair values at March 2, 2011. Using the market price of Hunt common stock as of the March 2, 2011 acquisition date, the purchase price of the acquisition of Carbon Green would have been in excess of $300,000,000. Hunt concluded that using the fair value of the assets and liabilities assumed was a more accurate calculation of the value of CGNA versus the market price of the Hunt common stock on the date of the acquisition. The revised allocation of the purchase price is as follows:
Summarized financial information for CGNA assuming 100% ownership, is as follows:
On October 13, 2011, the Company acquired the remaining shares of CGNA common and preferred stock on the same basis as above. The purpose of the additional acquisition of CGNA shares was to allow the Company to acquire the remaining equity interests in CGNA, resulting in CGNA becoming the Company's wholly-owned subsidiary. We issued to certain new stockholders (stockholders in Carbon Green, Inc, the predecessor entity to CGNA) 7,975,087 shares of the Company's common stock and warrants to purchase 8,152,900 shares of the Company's common stock. In addition, CGNA's largest stockholder returned 2,630,800 shares of the Company's common stock, 24,440 shares of the Company's Class A preferred stock and 26,440 shares of the Company's Class B preferred stock. The Acquisition Agreement also includes provisions for the Company to issue certain directors, employees, advisers, vendors and consultants of CGNA stock options to purchase up to 10,000,000 shares of our common stock, 9,245,000 of which have been designated at an exercise price of $1.00 per share, expiring on March 2, 2014. These options that have been designated will not begin vesting until September 1, 2011 and will then vest in equal portions over eight quarters. The acquisition of Carbon Green under the Acquisition Agreement was intended to qualify as a tax-free reorganization under the provisions of Section 368 of the Internal Revenue Code of 1986, as amended, and to be accounted for on a purchase basis. Minnesota Frac-Sand Operation On May 25, 2011, the Company entered into a proposed agreement to obtain a 30 year lease of mining rights to over 900 acres of land containing an estimated 100-million tons of Northern White frac-sand. The transaction is expected to be closed once due diligence that includes approvals by regulatory agencies, further testing of the sand deposits and final negotiations of the terms of the lease has been completed. On May 29, 2011, the Company issued a 180 day promissory note for $2,000,000, bearing interest at 10% per year, with principal and interest due at maturity. The proceeds of this note are being used to fund the required due diligence. To date the Company has incurred $1,100,000 in related expenses. |
Property, Plant and Equipment | 9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment |
Note 4: Property, Plant and Equipment Property, plant and equipment consist of the following as of September 30, 2011 (unaudited) and December 31, 2010:
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Convertible Notes | 9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Convertible Notes [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Convertible Notes |
Note 5: Convertible Notes In May 2011, the Company issued two 60 day convertible promissory notes totaling $930,000, bearing interest at 10% per year, with principal and interest due at maturity. The notes, including unpaid interest, are convertible at maturity, at the holders' option, into shares of the Company at a conversion price of $1.50 per share. Under the terms of the convertible notes, the holders received 973,334 detachable warrants to purchase shares of the Company's common stock at an exercise price of $1.50 per share expiring in two years. In March 2011, the Company issued a 60 day convertible promissory note in the amount of $200,000, bearing interest at 5% per year, with principal and interest due at maturity. The note, including unpaid interest, is convertible at maturity, at the holder's option, into shares of the Company at a conversion price of $1.00 per share. Under the terms of the convertible note, the holder received 200,000 detachable warrants to purchase shares of the Company's common stock at an exercise price of $1.50 per share expiring in two years. In accordance with ASC 470-20, Debt with Conversion and Other Options , the proceeds received from the convertible notes were allocated between the convertible notes and the detachable warrants based on the relative fair value of the convertible notes without the warrants and the warrants. The portion of the proceeds allocated to the warrants was recognized as additional paid-in capital and a debt discount. In addition, the convertible notes contained a beneficial conversion feature at issuance equal to the intrinsic value of the market price of the underlying shares and the effective conversion price of the underlying shares. The beneficial conversion feature was recognized as additional paid-in capital, limited to the amount of proceeds received, and a debt discount. The debt discount related to warrants and the beneficial conversion feature is accreted into interest expense through maturity of the notes. In June 2011, the Company issued six 180 day convertible promissory notes totaling $2,400,000, bearing interest at 10% with principal and interest due at maturity. The notes, including unpaid interest, are convertible at maturity, at the holders' option, into stock units of one share and one warrant at a conversion price of $1.00 per unit. The non-detachable warrants contain an exercise price of $1.50 per share and expire in two years. In July 2011, the Company issued five 180 day convertible promissory notes totaling $455,000, bearing interest at 10% per year, with principal and interest due at maturity. The notes, including unpaid interest, are convertible at maturity, at the holders' option, into stock units of one share and one warrant at a conversion price of $1.00 per share. The non-detachable warrants contain an exercise price of $1.00 per share, expiring in two years. In August 2011, the Company issued a 180 day convertible promissory note for $100,000, bearing interest at 10% per year, with principal and interest due at maturity. The note, including unpaid interest, is convertible at maturity, at the holders' option, into stock units of one share and one-half warrant at a conversion price of $1.00 per share. The 50,000 non-detachable warrants contain an exercise price of $1.00 per share. These warrants expire in two years. Also in August 2011, the Company issued a 180 day convertible promissory note for $50,000, bearing interest at 10% per year, with principal and interest due at maturity. The note, including unpaid interest, is convertible at maturity, at the holders' option, into shares of the Company at a conversion price of $1.00 per share. The convertible notes contained a beneficial conversion feature at issuance equal to the intrinsic value of the market price of the underlying shares plus the fair value of the warrants and the conversion price of the convertible debt instrument. The beneficial conversion feature was recognized as additional paid-in capital, limited to the amount of proceeds received, and a corresponding debt discount to be accreted into interest expense through maturity of the notes. The weighted-average fair values of the detachable and non-detachable warrants were calculated using the Black Scholes-Merton pricing model using the following assumptions:
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CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (USD $) | Total | Class A Convertible Preferred Stock [Member] | Class B Convertible Preferred Stock [Member] | Common Stock [Member] | Additional Paid-in Capital [Member] | Shareholder Receivable [Member] | Unissued Common Stock [Member] | Accumulated Other Comprehensive Income (Loss) [Member] | Accumulated During the Development Stage [Member] | Non-Controlling Interest [Member] |
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Balance at Dec. 31, 2010 | $ (430,732) | $ 2,414,139 | $ 310,642 | $ 13,884,175 | $ (17,039,688) | |||||
Common stock issued for cash | 1,894,986 | 1,894,986 | ||||||||
Cash received for stock that remains unissued at period end | 100,000 | 100,000 | ||||||||
Common stock issued for services and prepaid services | 517,250 | 517,250 | ||||||||
Warrants issued for services | 573,653 | 573,653 | ||||||||
Options issued for 9,245,000 shares to vest over 29 months | 2,774,975 | 2,774,975 | ||||||||
Common stock issued upon exercise of stock options and warrants | 165,000 | 165,000 | ||||||||
Acquisition of Carbon Green NA, Inc. | 148,836,360 | 44,173,415 | 52,668,301 | 51,943,389 | (8,782,141) | 8,833,396 | ||||
Common stock issued in debt conversion | 3,318,068 | 3,318,068 | ||||||||
Warrants issued in debt conversion | 1,349,905 | 1,349,905 | ||||||||
Warrants issued in connection with convertible debt | 628,739 | 628,739 | ||||||||
Value of beneficial conversion feature associated with convertible debt | 2,321,091 | 2,321,091 | ||||||||
Common stock issued under settlement agreement | 2,827,535 | 2,827,535 | ||||||||
Preferred stock dividends | (371,602) | (371,602) | ||||||||
Comprehensive income: | ||||||||||
Net loss | (27,803,006) | (27,231,143) | (571,863) | |||||||
Foreign currency translation adjustment | (25,824) | (25,824) | ||||||||
Total comprehensive income | (27,828,830) | |||||||||
Balance at Sep. 30, 2011 | $ 136,676,398 | $ 46,587,554 | $ 52,607,341 | $ 74,550,403 | $ 7,648,363 | $ (8,782,141) | $ 100,000 | $ (25,824) | $ (44,270,831) | $ 8,261,533 |
Basis of Presentation | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Presentation [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Presentation |
Note 1: Basis of Presentation The accompanying unaudited condensed financial statements of Hunt Global Resources, Inc. ("Hunt" or the "Company") have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Regulation S-K. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of the Company, the accompanying unaudited condensed financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position as of September 30, 2011, the results of operations for the nine and three months ended September 30, 2011, and the shareholders' equity and cash flows for the nine months ended September 30, 2011. These financial statements should be read in conjunction with the audited financial statements and notes thereto contained in the Company's annual report on Form 10-K for the year ended December 31, 2010. There have been no updates or changes to our audited financial statements for the year ended December 31, 2010. The results of operations for the nine and three months ended September 30, 2011 are not necessarily indicative of the results to be expected for the full year. The Company has established the following accounting policies: Inventory - All inventory is stated at the lower of cost and net realizable values. Cost is determined using the weighted average method. Net realizable value is the estimated selling price in the ordinary course of business, less the costs to completion and selling expenses. Inventory consists of raw materials and finished goods inventory. Property, Plant and Equipment - Property, plant and equipment are stated at cost less accumulated depreciation and any impairment losses. Expenditures for new facilities or equipment and expenditures that extend the useful lives of existing facilities or equipment are capitalized and depreciated using the straight-line method at rates sufficient to depreciate such costs over the estimated productive lives. The Company's depreciation rates on fixed assets are as follows (in years):
Gains and losses on the disposal of property, plant and equipment are determined by comparing proceeds with the carrying amount and are included in the consolidated statement of operations. Intangible Assets - Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is the fair value as at their date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and any accumulated impairment losses. Internally generated intangible assets are not capitalized and expenditure is recognized in the consolidated statement of operations in the year in which the expenditure is incurred. Intangible assets consist of licenses, intellectual property and surface mining rights. Intangible assets related to licenses and intellectual property were measured on initial recognition at fair value, and are being amortized over 10 years. Intangible assets related to surface mining rights were valued based on the historical cost of the underlying property to the Company's primary shareholders, including the debt assumed by the Company. Surface mining rights will be amortized using a unit-of-production method based on estimated recoverable units once production commences. The following table presents the cost, accumulated amortization and carrying value of intangible assets as of September 30, 2011:
*Amortized using units-of-production method. Amortization expense related to intangible assets held by the Company for the nine months ended September 30, 2011 and 2010 was $8,114,169 and $0, respectively. The estimated amortization expense to be recognized during the three months ended December 31, 2011 is approximately $3,477,500. Estimated amortization expense for each of the next five fiscal years ending December 31, is approximately $13,910,000. These estimates do not include amortization of the surface mining rights, as they will be amortized using the units-of-production method based on estimated recoverable units and the timing of production that cannot be reasonably estimated at this time. Impairment of long-lived assets - We review long-lived assets including property, plant and equipment and intangible assets with definite lives for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset. When assets are determined to be held for sale, they are separately presented in the appropriate asset and liability sections of the balance sheet and reported at the lower of the carrying amount or fair value less cost to sell, and are no longer depreciated. Revenue Recognition - The Company recognizes revenue, net of any taxes, when persuasive evidence of a customer or distributor arrangement exists or acceptance occurs, receipt of goods by the customer occurs, the price is fixed or determinable, and the sales revenues are considered collectible. Subject to these criteria, the Company generally recognizes revenue at the time of shipment or delivery to the customer, and when the customer takes ownership and assumes risk of loss based on shipping terms. Going Concern - The Company's financial statements for the nine months ended September 30, 2011 have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities in the normal course of business. The Company reported an accumulated deficit of $44,270,831 as of September 30, 2011. The Company recognized losses of $18,174,226 from its operational activities during the nine months ended September 30, 2011. These factors raise doubt about the Company's ability to continue as a going concern. Recent Accounting Pronouncements - In June 2011, the FASB issued ASU 2011-05, "Presentation of Comprehensive Income" which was issued to enhance comparability between entities that report under U.S. GAAP and IFRS, and to provide a more consistent method of presenting non-owner transactions that affect an entity's equity. ASU 2011-05 eliminates the option to report other comprehensive income and its components in the statement of changes in stockholders' equity and requires an entity to present the total of comprehensive income, the components of net income and the components of other comprehensive income either in a single continuous statement or in two separate but consecutive statements. This pronouncement is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. Early adoption of the new guidance is permitted and full retrospective application is required. The Company does not expect the adoption of ASU 2011-05 to have a significant impact on our financial position or results of operations as it affects presentation of comprehensive income only. In September 2011, the FASB issued ASU No. 2011-08, "Intangibles - Goodwill and Other (Topic 350): Testing Goodwill for Impairment." ASU No. 2011-08 permits an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. The more likely than not threshold is defined as having a likelihood of more than 50 percent. Under ASU No. 2011-08, an entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount. ASU No. 2011-08 is effective for annual periods beginning after December 15, 2011. We do not expect the adoption of ASU No. 2011-08 to have a significant impact on our financial position or result of operations as it is a change in application of the goodwill impairment test only. |