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American Resources (AREC) Risk Analysis
Risk Overview Q3, 2016
Risk Change Over Time
No filing history is available.
Risk Highlights Q3, 2016
Risk Word Cloud
Risk Factors Full Breakdown - Total Risks 29
- Share Price & Shareholder Rights - Risk 1Our common stock is a "penny stock." trading of our common stock may be restricted by the sec's penny stock regulations, which may limit a stockholder's ability to buy and sell our common stock.
Our stock is a penny stock. The "SEC" has adopted Rule 15g-9, which generally defines "penny stock" to be any equity security that has a market price (as defined in Rule 15g-9) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and "accredited investors." The term "accredited investor" refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000(excluding the value of a primary residence) or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC, which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer's account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer's confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our Common Stock.
- Share Price & Shareholder Rights - Risk 2Our articles of incorporation provide super voting rights and other privileges to our class b shareholders including a stipulation that certain actions by the company won't be permitted without the prior written consent of the holders of at least a majority of the voting power of the then outstanding class b common stock, providing class b common stock shareholders with significant influence over the company's operations, which may be detrimental to the other shareholders and potential investors.
The Company's Articles of Incorporation provide that so long as any shares of Class B common stock are outstanding, the Company may not take any of the following actions without the prior written consent of the holders of at least a majority of the voting power of the then outstanding shares of Class B common stock: - sell, convey or otherwise dispose of or encumber all or substantially all of our assets, or merger with or consolidate with another corporation, other than our wholly-owned subsidiary, or effect any transaction or series of transactions in which more than 50% of the voting power of our Company is transferred or disposed of;- alter or change any of the rights of the Class B common stock or increase or decrease the number of shares authorized;- authorize or obligate our company to authorize any other equity security or security which is convertible or exercisable into an equity security of our Company which has rights, preferences or privileges which are superior to, on a parity with or similar to the Class B common stock;- redeem or repurchase any of our securities;- amend our articles of incorporation; or - change the authorized number of our board of directors. This stipulation may discourage certain major investors from investing in our Company and thus may have a negative effect on our results of operations.
- Share Price & Shareholder Rights - Risk 3Our majority stockholder owns 4,000,000 shares of our class a common stock and 7,000,000 shares of our class b common stock. Because of the voting preference granted to holders of series b common stock, the majority shareholder currently holds voting rights equal to holding 74,000,000 shares of class a common stock, which represents approximately 83.75% of the current outstanding voting stock of the company. The majority shareholder's interests may differ from yours and he will be able to exert significant influence over our corporate decisions, including a change of control.
As of the reporting date, Mr. I. Andrew Weeraratne, our Chief Executive Officer, held 4,000,000 shares of Common Stock and 7,000,000 shares of Class B common stock, which gives him voting rights equal to 74,000,000 shares of Common Stock because of the 10:1 voting preference granted to the series of Class B common stock. That gives him 83.75% of the voting right in the Company. As a result, he will be able to influence or control matters requiring approval by our stockholders, including the election of directors and the approval of mergers, acquisitions or other extraordinary transactions. Mr. Weeraratne may have interests that differ from yours and may vote in a way with which you disagree and that may be adverse to your interests. This concentration of ownership may have the effect of delaying, preventing or deterring a change of control of our Company, could deprive our stockholders of an opportunity to receive a premium for their stock as part of a sale of our Company and may affect the potential market price of our stock. Conversely, this concentration may facilitate a change in control at a time when you and other investors may prefer not to sell.
- Share Price & Shareholder Rights - Risk 4The price of the shares of common stock at which we made our equity line offering was determined by the last price at which our stock was sold in an illiquid market, and therefore should not be used as an indicator of the future market price of the common stock. Therefore, the current price at which it trades may not bear any relationship to the actual value of the company, and may make our shares difficult to sell.
As stated elsewhere in this filing we have an equity line arrangement with Southridge to sell $3,000,000 worth of our stock. The price at which Southridge would buy our shares is established by the market price on the date the purchase price is calculated. Since our shares do not have liquidity the price at which we have established our offering cannot be depended on to be the price at which our stock will sell in the future and as such cannot be considered a good indicator as to the real value of our stock.
- Share Price & Shareholder Rights - Risk 5We have elected the opt-in right for emerging growth companies that allows for exemptions from certain reporting standards and as a result, our financial statements may not be comparable with other companies in our industry that comply with such standards.
We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(2) of the Jobs Act, which allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, our financial statements may not be comparable to companies that currently comply with the new standards.
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