Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. Continental Resources Group, Inc. (1430975) 10-Q published on Nov 14, 2012 at 1:43 pm
Reporting Period: Sep 29, 2012
In January 2012, the Company’s former subsidiary, Pershing, received 10 million restricted shares pursuant to an option agreement (see Note 15). Pershing accounted for such transaction pursuant to ASC 845-10 “Nonmonetary Transactions” and related subtopics for an exchange of a nonmonetary asset for a non controlling ownership interest in a second entity. Since Pershing received cash in the exchange of its nonmonetary assets and the cash received was greater than 25% of the fair value of the assets exchanged, the transaction was considered a monetary exchange and full or partial gain recognition is required. The fair value of the uranium mining claims exchanged approximates Pershing’s carrying value which amounted to $0. Pershing has no actual or implied commitment, financial or otherwise, to support the operations of the new entity in any manner and Pershing plans to liquidate its investment in Amicor. Consequently, Pershing treated its investment in Amicor as marketable securities - available for sale with an initial basis of zero.
Between October 2011 and December 2011, Pershing sold $1,830,000 of Units pursuant to subscription agreements for an aggregate sale of 4,575,000 Units (the “Units”). Additionally, on November 29, 2011, the holder of Pershing’s 6% note payable converted $611,750 principal balance of the note into an aggregate of 1,529,375 of Units (see Note 10). Each Unit was sold for a purchase price of $0.40 per Unit and consists of: (i) one share of Pershing’s common stock and (ii) a two-year warrant to purchase fifty percent of the number of shares of Pershing’s common stock (3,052,188 warrants) purchased at an exercise price of $0.60 per share, subject to adjustment upon the occurrence of certain events. The Warrants may be exercised at any time on a cashless basis at 100% of the closing price of the common stock of Pershing on the business day immediately prior to the date of exercise.
A majority of the stockholders of the Company approved the Agreement by written consent on or about July 21, 2011. There can be no assurance that the transaction will be tax free to any particular stockholder or the ability or timing of receipt of all approvals necessary to liquidate. The Agreement constitutes a plan of reorganization within the meaning of Treasury Regulations Section 1.368-2(g) and constitutes a plan of liquidation of the Company. The Company was expected to liquidate on or prior to July 1, 2012 however, the registration statement filed by Pershing has not been declared effective and as a result, the Company was unable to liquidate prior to July 2012. On August 15, 2012, the Company entered into an Amendment No. 1 to Asset Purchase Agreement with Pershing and Acquisition Sub whereby the parties agreed to amend the Asset Purchase Agreement dated as of July 22, 2011, to remove the liquidated damages provision associated with the registration rights obligations by Pershing. Once Pershing’s registration statement is declared effective, the Company will distribute the registered shares to our shareholders as part of its liquidation.
Net cash flows used in operating activities for the nine months ended September 30, 2011 amounted to $7,939,047 and was primarily attributable to our net loss attributable to Continental Resources Group, Inc. of $18,106,605, offset by depreciation of $100,602, amortization of prepaid expenses of $733,813, amortization of prepaid expense in connection with the issuance of warrants issued for prepaid services of $1,972,824, amortization of prepaid expense in connection with the issuance of common stock issued for prepaid services of $1,186,500, stock based compensation on options granted of $1,198,751, impairment of goodwill of $3,065,014, settlement expense of $4,761,500, amortization of debt discounts and deferred financing cost of $1,536,625, derivative expense of $5,198,206, impairment of mineral rights of $459,200, and add-back of total changes in assets and liabilities of $910,466 and non-controlling interest of $6,414,176, gain from disposal of discounted operations of $1,033,230, change in fair value of derivative liability of $1,687,605. This change in assets and liabilities is primarily attributable to an increase in restricted cash of $4,122,701, an increase in other receivable of $3,333, an increase in prepaid expenses – current portion of $307,029, a decrease in assets of discontinued operations – current portion of $2,024,646, a decrease in deposits – current portion of $15,000, a decrease in prepaid expenses – long term portion of $417, a decrease in assets of discontinued operations – long term portion of $2,094, an increase in accounts payable and accrued liabilities of $331,491, an increase in liabilities of discontinued operation of $1,148,949.
Net cash used in investing activities for the nine months ended September 30, 2011 was $9,683,289 and represented the acquisition of mineral rights of $15,000, investment in marketable securities available for sale of $100,000, increase in reclamation bond deposit of $1,715,629, cash used in acquisition of Gold Acquisition of $12,000,000, acquisition of Secure Energy LLC (cash portion) of $59,959, purchase of office equipment and vehicle of $23,136, offset by cash and restricted cash acquired in connection with the asset purchase agreement entered into with former subsidiary of $4,230,435.