UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q


 

(Mark one)

x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: September 30, 2013

March 31, 2014

Or

o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from:             to             

Commission File Number:0-30746

 

FRONTIER OILFIELD SERVICES, INC.

(Exact name of registrant as specified in its charter)

 

Texas75-2592165
Texas75-2592165

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

  
3030 LBJ Freeway, Suite 132075234
(Address of principal executive offices)(Zip Code)

(972) 234-2610

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    x  Yes    o  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    x  Yes    o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated FileroAccelerated Filero
    
Non-Accelerated Filer
o  (Do not check if smaller reporting company)
Smaller Reporting Companyx

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    o  Yes    x  No

As of November 14, 2013June 4, 2014 there were 21,987,2965,894,986 shares of common stock, par value $0.01 per share, outstanding.




FRONTIER OILFIELD SERVICES, INC.

Index

 Pg. No.
 
 
F-1 & F-2
F-3
F-4 & F-5
F-6
3
7
7
  
 
8
8
8
8
8
  
9

 9

PART 1 — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

FRONTIER OILFIELD SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)


  September 30,
2013
  December 31,
2012
 
       
ASSETS 
Current Assets:      
Cash $  $60,568 
Certificate of deposit  77,614   77,614 
Accounts receivable  1,441,300   2,892,481 
Inventory, primarily parts  274,024   299,384 
Prepaid expenses, primarily insurance  1,918,588   1,269,347 
Current assets of discontinued operations  181,808   1,190,631 
Deferred loan origination fees, current portion  300,970   336,297 
Total current assets  4,194,304   6,126,322 
Property and equipment:        
Property and equipment, at cost  16,473,931   16,350,008 
Less accumulated depreciation  (2,212,291)  (684,503)
Total property and equipment  14,261,640   15,665,505 
Other assets:        
Intangibles, net  3,593,164   3,898,245 
Assets held for sale (Note 11)  5,604,142   6,596,110 
Restricted cash     619,922 
Other assets of discontinued operations  10,620   25,960 
Deferred loan fees, net of current portion  693,178   913,539 
Deposits  13,417   14,892 
Total other assets  9,914,521   12,068,668 
Total Assets $28,370,465  $33,860,495 

  March 31,
2014
  December 31,
2013
 
       
ASSETS        
Current Assets:        
Cash $  $52,120 
Certificate of deposit  77,614   77,614 
Accounts receivable, net of allowance of doubtful accounts of $33,321  1,503,347   1,536,084 
Other receivable  287,076   287,076 
Inventory, primarily parts  164,905   214,969 
Prepaid expenses, primarily insurance  921,003   1,364,303 
Current assets of discontinued operations  73,792   126,059 
Deferred loan origination fees, current portion  289,194   289,194 
Total current assets  3,316,931   3,947,419 
Property and equipment:        
Property and equipment, at cost  16,332,181   16,624,281 
Less accumulated depreciation  (3,980,115)  (3,434,197)
Total property and equipment  12,352,066   13,190,084 
Other assets:        
Intangibles, net  3,389,778   3,491,472 
Assets held for sale  1,704,965   1,946,743 
Other assets of discontinued operations  10,493   10,620 
Deferred loan fees, net of current portion  548,582   625,296 
Deposits  13,417   13,417 
Total other assets  5,667,235   6,087,548 
Total Assets $21,336,232  $23,225,051 

The accompanying notes are an integral part of these condensed consolidated financial statements.

F-1

FRONTIER OILFIELD SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

  
September 30,
2013
  
December 31,
2012
 
       
LIABILITIES AND STOCKHOLDERS’ EQUITY 
       
Current Liabilities:      
Current portion of long-term debt $10,266,567  $12,643,199 
Bank overdraft  290,091    
Accounts payable  3,893,562   3,629,236 
Accrued liabilities  748,442   944,014 
Financed insurance premiums payable  1,785,599   820,499 
Current liabilities of discontinued operations  1,834,528   1,240,723 
Escrow liability     619,922 
Deferred consideration payable for acquisition of CTT  2,300,000   2,300,000 
Total current liabilities  21,118,789   22,197,593 
Long-term debt, less current maturities (Note 8)  2,216,714   2,055,096 
Non-current liabilities of discontinued operations  124,567   170,474 
Deferred consideration payable for acquisition of CTT     4,708,348 
Total Liabilities  23,460,070   29,131,511 
Commitments and Contingencies (Note 9)        
Stockholders’ Equity:        
Preferred stock- $.01 par value; authorized 10,000,000; 1,750,000 issued and outstanding at September 30, 2013  17,500    
Common stock- $.01 par value; authorized 100,000,000 shares;        
21,587,296 shares issued and outstanding at September 30, 2013        
18,116,357 shares issued and outstanding at December 31, 2012  215,873   181,163 
Additional paid-in capital  30,929,519   22,986,615 
Prepaid stock compensation  (161,000)   
Accumulated deficit  (26,091,497)  (18,438,794)
Total stockholders’ equity  4,910,395   4,728,984 
Total Liabilities and Stockholders’ Equity $28,370,465  $33,860,495 

  March 31,
2014
  December 31,
2013
 
       
LIABILITIES AND STOCKHOLDERS’ EQUITY        
Current Liabilities:        
Current portion of long-term debt $7,778,256  $8,756,472 
Bank overdraft  262,132    
Accounts payable  3,015,072   3,397,230 
Accrued liabilities  1,222,413   1,036,836 
Financed insurance premiums payable  641,429   1,119,213 
Current portion of loans from shareholder     1,596,000 
Current liabilities of discontinued operations  1,383,263   1,475,743 
Total current liabilities  14,302,565   17,381,494 
Loans from shareholder, less current maturities  2,793,000    
Long-term debt, less current maturities  1,432,235   1,656,231 
Total Liabilities  18,527,800   19,037,725 
Commitments and Contingencies (Note 9)        
Stockholders’ Equity:        
Preferred stock- $.01 par value; authorized 10,000,000; 1,750,000 issued or outstanding  17,500   17,500 
Common stock- $.01 par value; authorized 100,000,000 shares; 5,894,986 shares issued and outstanding at March 31, 2014 5,553,157 shares issued and outstanding at December 31, 2013  58,950   55,531 
Additional paid-in capital  31,709,342   31,659,261 
Prepaid stock compensation  (37,000)  (74,000)
Accumulated deficit  (28,940,360)  (27,470,966)
Total stockholders’ equity  2,808,432   4,187,326 
Total Liabilities and Stockholders’ Equity $21,336,232  $23,225,051 

The accompanying notes are an integral part of these condensed consolidated financial statements.

F-2


FRONTIER OILFIELD SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(UNAUDITED)
             
  For the Three Months Ended  For the Nine Months Ended 
  
September 30,
2013
  
September 30,
2012
  
September 30,
2013
  
September 30,
2012
 
             
Revenues, net of discounts $6,523,784  $7,202,034  $23,986,732  $7,203,943 
Costs and expenses:                
Direct operating costs  5,424,491   5,614,228   18,072,026   5,615,929 
Indirect operating costs  815,685   1,518,845   3,712,667   1,518,845 
General and administrative  1,348,828   1,173,407   5,048,561   2,501,249 
Depreciation and amortization  685,242   382,768   2,050,120   384,521 
Total costs and expenses  8,274,246   8,689,248   28,883,374   10,020,544 
Operating loss  (1,750,462)  (1,487,214)  (4,896,642)  (2,816,601)
Other (income) expense:                
Interest expense  417,784   358,163   1,262,851   358,163 
Gain on disposal of property and equipment  (648)     (56,504)   
Equity in loss of unconsolidated affiliated company           169,794 
Impairment loss on net profits interest in affiliate     284,900       284,900 
Loss before provision for income taxes  (2,167,598)  (2,130,277)  (6,102,989)  (3,629,458)
Provision for state income taxes           6,735 
Loss from continuing operations  (2,167,598)  (2,130,277)  (6,102,989)  (3,636,193)
Loss from discontinued operations, net of income taxes  (552,863)  (238,443)  (1,544,172)  (343,783)
Net loss  (2,720,461)  (2,368,720)  (7,647,161)  (3,979,976)
Less: loss attributable to noncontrolling interest     105,018      156,635 
Net loss attributable to Frontier Oilfield Services, Inc. $(2,720,461) $(2,263,702) $(7,647,161) $(3,823,341)
                 
Net loss per common share - basic and diluted:                
Continuing operations $(0.10) $(0.15) $(0.30) $(0.33)
Discontinued operations  (0.03)  (0.01)  (0.07)  (0.02)
Total $(0.13) $(0.16) $(0.37) $(0.35)
                 
Weighted Average Common Shares Outstanding:                
Basic and Diluted  21,424,253   14,401,495   20,674,599   11,026,591 

  For the Three Months Ended 
  March 31,
2014
  March 31,
2013
 
       
Revenues, net of discounts $4,869,012  $9,099,919 
Costs and expenses:        
Direct operating costs  3,977,597   6,567,270 
Indirect operating costs  836,682   1,471,171 
General and administrative  513,244   1,871,168 
Depreciation and amortization  711,614   717,459 
Total costs and expenses  6,039,137   10,627,068 
Operating loss  (1,170,125)  (1,527,149)
Other (income) expense:        
Interest expense  205,385   351,524 
(Gain) loss on disposal of property and equipment  (48,499)  8,660 
Loss on extinguishment of debt  4,453    
Loss before provision for income taxes  (1,331,464)  (1,887,333)
Provision for state income taxes  46,564    
Loss from continuing operations  (1,378,028)  (1,887,333)
Loss from discontinued operations, net of income taxes  (91,366)  (594,452)
Net loss attributable to Frontier Oilfield Services, Inc. $(1,469,394) $(2,481,785)
         
Net loss per common share - basic and diluted:        
Continuing operations $(0.25) $(0.37)
Discontinued operations  (0.01)  (0.12)
Total $(0.26) $(0.49)
         
Weighted Average Common Shares Outstanding:        
Basic and Diluted  5,608,303   5,042,035 

The accompanying notes are an integral part of these condensed consolidated financial statements.

F-3

FRONTIER OILFIELD SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

       
  For the Nine Months Ended 
  September 30, 2013  September 30, 2012 
Cash Flows From Operating Activities:      
Net loss $(7,647,161) $(3,979,976)
Less: Loss from discontinued operations, net of taxes  (1,544,172)  (343,783)
Loss from continuing operations, net of taxes  (6,102,989)  (3,636,193)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:        
Depreciation and amortization  2,050,120   384,521 
Issuance of common stock for services  1,953,138   955,813 
Impairment loss on net profits interest in subsidiary     284,900 
Equity loss of unconsolidated affiliated company     169,794 
Gain on sale of property and equipment  (56,504)  (2,750)
Amortization of deferred loan fees  255,688   52,307 
Changes in operating assets and liabilities other than advances from affiliates:        
Decrease (increase) in operating assets:        
Accounts receivable  1,451,181   (135,782)
Inventory, primarily parts  25,360   27,074 
Prepaid expenses, primarily insurance  (649,241)  419,454 
Deposits  1,475   (2,996)
Increase in operating liabilities:        
Accounts payable and accrued liabilities  63,212   994,176 
Financed insurance premiums payable  965,100    
Net cash used in operating activities of continuing operations  (43,460)  (489,682)
Net cash provided by operating activities of discontinued operations  1,077,613   387,905 
Net cash provided by (used in) operating activities  1,034,153   (101,777)
         
Cash Flows From Investing Activities:        
Cash used for acquisition of subsidiaries net of cash received     (1,900,402)
Purchase of property and equipment  (381,199)  (287,783)
Proceeds from sale property and equipment  96,529   4,500 
Escrow liability  (619,922)   
Purchase of certificate of deposit     (77,614)
Payments to related party     (288,790)
Net cash used in investing activities of continuing operations  (904,592)  (2,550,089)
Net cash provided by investing activities of discontinued operations  5,306    
Net cash used in investing activities  (899,286)  (2,550,089)
         
Cash Flows From Financing Activities:        
Proceeds from preferred stock subscriptions  700,000   2,353,000 
Net change in line of credit  (1,102,414)   
Proceeds from notes payable  803,500   2,308,509 
Payments on notes payable  (1,843,865)  (226,102)
Payments from restricted cash account  619,922    
Common stock sales  400,393   90,000 
Deferred loan origination fees     (1,455,042)
Increase in bank overdraft  290,091    
Net cash provided by (used in) financing activities of continuing operations  (132,373)  3,070,365 
Net cash used in financing activities of discontinued operations  (63,062)  (7,306)
Net cash provided by (used in) financing activities  (195,435)  3,063,059 
         
Net increase (decrease) in cash  (60,568)  411,193 
Cash at beginning of period  60,568   5,050 
Cash at end of period $  $416,243 
F-4

  For the Three Months Ended 
  March 31,
2014
  March 31,
2013
 
Cash Flows From Operating Activities:        
Net loss $(1,469,394) $(2,481,785)
Less: Loss from discontinued operations, net of income taxes  (91,366)  (594,452)
Loss from continuing operations, net of taxes  (1,378,028)  (1,887,333)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:        
Depreciation and amortization  711,614   717,459 
Issuance of common stock for services  37,000   1,049,136 
Loss on extinguishment of debt  4,453    
Allocated and direct expenses to affiliates      
(Gain) loss on disposal of property and equipment  (48,499)  8,660 
Amortization of deferred loan fees  76,714   88,491 
Changes in operating assets and liabilities other than advances from affiliates:        
Decrease (increase) in operating assets:        
Accounts receivable  32,737   403,206 
Deposits & other     (5,000)
Inventory, primarily parts  50,064   8,219 
Prepaid expenses, primarily insurance  443,300   386,530 
Increase (decrease) in operating liabilities:        
Accounts payable and accrued liabilities  (196,581)  484,946 
Financed insurance premiums payable  (477,784)  (474,546)
Net cash provided by (used in) operating activities of continuing operations  (745,010)  779,768 
Net cash used in operating activities of discontinued operations  (43,649)  (162,277)
Net cash provided by (used in) operating activities  (788,659)  617,491 
         
Cash Flows From Investing Activities:        
Purchase of property and equipment     (571,048)
Proceeds from sale property and equipment  164,473   47,673 
Escrow liability     (378,272)
Net cash provided by (used in) investing activities of continuing operations  164,473   (901,647)
Net cash used in investing activities of discontinued operations     (31,721)
Net cash provided by (used in) investing activities  164,473   (933,368)

The accompanying notes are an integral part of these condensed consolidated financial statements.

FRONTIER OILFIELD SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


  For the Nine Months Ended 
  September 30, 2013  September 30, 2012 
       
Supplemental Cash Flow Disclosures 
Interest paid $1,007,163  $334,672 
         
Supplemental Schedule of Non-Cash Investing and Financing Activities 
Issuance of common stock and debt for acquisitions $  $25,361,102 
Term notes payable issued for property and equipment $  $570,035 
Preferred stock issued for investment in affiliate $  $147,000 
Reduction of deferred loan origination fees against notes payable $  $45,704 
Settlement of deferred consideration payable for acquisition of CTT $4,708,348  $ 
Fair value of common stock warrants issued with preferred stock $503,774     
Beneficial conversion features of Asher Note $72,235     
Cumulative dividend payable recorded in accrued liabilities $5,542  $ 
         
The accompanying notes are an integral part of these condensed consolidated financial statements. 
F-5

  For the Three Months Ended 
  March 31,
2014
  March 31,
2013
 
Cash Flows From Financing Activities:        
Loans from shareholder  1,197,000    
Net change in line of credit  (887,066)  45,624 
Payments on notes payable     (383,724)
Payments from restricted cash account     378,272 
Common stock sales     399,393 
Increase in bank overdraft  262,132    
Net cash provided by financing activities of continuing operations  572,066   439,565 
Net cash used in financing activities of discontinued operations     (14,111)
Net cash provided by financing activities  572,066   425,454 
         
Net increase (decrease) in cash  (52,120)  109,577 
Cash at beginning of period  52,120   60,568 
Cash at end of period $  $170,145 
         
Supplemental Cash Flow Disclosures        
Interest paid $97,291  $253,549 
         
Supplemental Schedule of Non-Cash Investing and Financing Activities        
Convertible notes conversion $53,500  $ 
Proceeds from sale of properties to pay term note and vendors $308,870  $ 

The accompanying notes are an integral part of these condensed consolidated financial statements.

FRONTIER OILFIELD SERVICES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2014

(Unaudited)

September 30, 2013
(Unaudited)

1.1.BASIS OF PRESENTATION:

The condensed financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been omitted. However, in the opinion of management, all adjustments (which include only normal recurring accruals) necessary to present fairly the financial position and results of operations for the periods presented have been made. The results for interim periods are not necessarily indicative of trends or of results to be expected for the full year. These financial statements should be read in conjunction with the financial statements of the Company for the year ended December 31, 20122013 (including the notes thereto) set forth in Form 10-K.

2.2.BUSINESS ACTIVITIES:

Frontier Oilfield Services, Inc. a Texas corporation (and collectively with its subsidiaries, “we”, “our”, “Frontier”, “FOSI”, or the “Company”), was organized on March 24, 1995. The accompanying condensed consolidated financial statements include the accounts of the Company and Frontier Acquisition I, Inc., and its subsidiary Chico Coffman Tank Trucks, Inc. and its subsidiary Coffman Disposal, LLC, and Frontier Income and Growth, LLC (FIG) and its subsidiaries Trinity Disposal & Trucking, LLC and Trinity Disposal Wells, LLC.

The Company’s current business, through its subsidiaries, is in the oil field servicesoilfield service industry, including the transportation and disposal of salt watersaltwater and other oil fieldoilfield fluids in Texas. The Company currently owns and operates thirteeneleven disposal wells in Texas. The Company’s customer base includes national, integrated, and independent oil and gas exploration companies.

Frontier previously was in the business of acquiring and developing oil and gas properties, providing contract services to an affiliate and sponsoring and managing joint venture oil and gas development partnerships.

3.3.GOING CONCERN:

The Company’s financial statements are prepared using generally accepted accounting principles applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business.  As of the date of this report, the Company has generated losses from operations, haveand has an accumulated deficit and a working capital deficiency. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern.

In order to continue as a going concern and achieve a profitable level of operations, the Company will need, among other things, additional capital resources and to develop a consistent source of revenues sufficient to meet ourits operating expenses.  The Company’s continuation as a going concern is dependent upon management’s ability to raise equity or debt financing, and the attainment of profitable operations from the Company’s planned business.

The Company’s ability to continue as a going concern is dependent upon management’s ability to successfully accomplish the plan described in the preceding paragraph and eventually attain profitable operations.  The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

4.4.SUMMARY OF SELECTED ACCOUNTING POLICIES:

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant inter-company transactions and balances have been eliminated in consolidation.

Business Combinations
The Company accounts for business combinations under the acquisition method of accounting in accordance with Accounting Standards Codification (ASC) Topic 805, Business Combinations. The acquisition method requires that assets acquired and liabilities assumed including contingencies be recorded at their fair values as of the acquisition date.

Reclassification of Discontinued Operations

In accordance with ASC Topic 205, regarding the presentation of discontinued operations the assets, liabilities and activity of FIG have been reclassified as discontinued operations for all periods presented.

Revenue Recognition

The Company recognizes revenues in accordance with (ASC 605), Revenue Recognition,when services are rendered, field tickets are signed and Staff Accounting Bulletin No 104,received, and accordingly all of the following criteria must be met for revenues to be recognized: persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price to the buyerwhen payment is fixed and determinable and collectability is reasonably

F-6

assured. The majority of the Company’s revenue results from agreements with customers and revenues are generated upon performance of contracted services. Transportation and disposal rates are generally based on a fixed fee per barrel of disposal water or, in certain circumstances transportation is based on an hourly rate. Revenue is recognized based on the number of barrels transported or disposed or at hourly rates for transportation. Rates for other services are based on negotiated rates with the Company’s customers and revenue is recognized when the services have been performed. The Company extends unsecured credit to its customers for amounts invoiced.

Fair Value Measurements

The ASC Topic 820,Fair Value Measurements and Disclosures, Measurement,defines fair value, establishes a framework for measuring fair value in accordance with U.S. Generally Accepted Accounting Principles,generally accepted accounting principles, and requires certain disclosures about fair value measurements. In general, fair values of financial instruments are based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon internally developed models that primarily use, as inputs, observable market-based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments may include amounts to reflect counterparty credit quality and the customer’s creditworthiness, among other things, as well as unobservable parameters. Any such valuation adjustments are applied consistently over time. Impairment analyses will be made

Fair Value of all assets using future cash flow analysis. An impairment loss would be recognized when estimated future cash flows expected to result fromFinancial Instruments

In accordance with the usereporting requirements of ASC Topic 825,Financial Instruments, the asset and its eventual disposition is less than its carrying amount.

The previous owner of CTT was grantedCompany calculates the right to receive additional consideration based on specified earnings targets at the end of the contingency period, which is June 30, 2014 (Note 9), as specified in the stock purchase agreement. The fair value of its assets and liabilities which qualify as financial instruments under this standard and includes this additional information in the earnings based contingent liability isnotes to be determined based on the earnings as of future fiscal period-ends (See Note 9).
Thefinancial statements when the fair value measurementsis different than the carrying value of those financial instruments. The Company does not have any assets or liabilities measured at fair value on a recurring or a non-recurring basis, consequently, the Company’s contingentCompany did not have any fair value adjustments for assets and liabilities consistedmeasured at fair value at the balance sheet dates, nor gains or losses reported in the statements of operations that are attributable to the following:
             
  Level 1  Level 2  Level 3  Total 
Liabilities            
Earnings based deferred consideration liability related to the CTT acquisition        2,300,000   2,300,000 
There were no transfers betweenchange in unrealized gains or losses relating to those assets and liabilities still held during the three levels during the nine months ended September 30,March 31, 2014 and 2013.

Earnings Per Share (EPS)

Basic earnings per common share isare calculated by dividing net income or loss by the weighted average number of shares outstanding during the year. Diluted earnings per common share isare calculated by adjusting outstanding shares, assuming conversion of all potentially dilutive stock options.options and warrants. The computation of diluted EPS does not assume conversion, exercise, or contingent issuance of shares that would have an anti-dilutiveantidilutive effect on earnings per common share. Anti-dilution results from an increase in earnings per share or reduction in loss per share from the inclusion of potentially dilutive shares in EPS calculations.

Currently there are 300,000 stock options and 3,500,000 warrants outstanding that could potentially have a dilutive effect to the EPS 

Reverse Stock Split

On November 1, 2013 the Company affected a four-to-one reverse stock split. All information in these condensed financial statements relating to the number of shares, price per share and per share amounts gives retroactive effect to the four-to-one reverse stock split of our capital stock.

Property and Equipment

During the year ended March 31, 2014, the Company disposed of property and equipment with a cost of $292,000 and accumulated depreciation of $64,000. The Company received total proceeds of approximately $276,000 of which approximately $112,000 was paid directly to the lender and recognized a gain of $48,499 in the accompanying consolidated statements of operations. During the year ended March 31, 2013, the Company disposed of property and equipment with a cost of $65,000 and accumulated depreciation of $8,667. The Company received total proceeds of approximately $48,000 and recognized a loss of $8,660 in the accompanying consolidated statements of operations.

5.BUSINESS ACQUISITIONS:

Acquisition of Frontier Income and Growth, LLC

On June 4, 2012, the Company completed the 51% step acquisition of FIG. The Company acquired approximately 124 units of FIG which brought the total units owned by the Company to 1,168 and a 51% majority interest. The cash price paid was $5,080,000 less $1,203,000 borrowed from FIG that resulted in the fair value consideration for the 1,168 units of $3,877,000.

The acquisition date fair value of the Company’s equity interest in FIG held immediately before May 31, 2012 was $3,791,996. The Company’s fair value equity interest was determined by taking the fair value of the net assets acquired and deducting the majority interest ownership immediately before May 31, 2012. There was no gain or loss on re-measuring the investment.

The transaction has been accounted for using the acquisition method of accounting which requires that, among other things, assets acquired and liabilities assumed be recorded at their fair values as of the acquisition date. The Company has finalized the determination of the fair values of the assets acquired and liabilities assumed.

The following details the final fair value of the consideration transferred to effect the acquisition of FIG.
    
Fair value of consideration transferred
 $3,877,000 
The following is the final fair value of the net assets acquired by the Company in the acquisition, reconciled to the total fair value of the consideration transferred:
F-7

    
Cash
 $907,132 
Accounts receivable and accrued revenue
  1,794,260 
Inventory
  61,905 
Property and equipment (net)
  7,081,025 
Deposits
  25,960 
Other assets
  1,026,903 
Notes payable
  (2,346,973)
Accounts payable and accrued expenses
  (881,216)
Fair value of net assets acquired as of May 31, 2012  7,668,996 
Non-controlling interest adjustment
  (3,791,996)
Fair value of consideration transferred
 $3,877,000 

In September 2012, the Company acquired the remaining 49% ownership of FIG. The transaction was valued at $5,610,000. The following is the final fair value of the non-controlling interest acquired by the Company in the transaction reconciled to the total final fair value of the consideration transferred:

    
Fair value of 49% interest in FIG
 $3,635,361 
Decrease in additional paid-in capital on purchase of 49% interest in FIG  1,974,639 
Fair value of consideration transferred
 $5,610,000 

Acquisition of Chico Coffman Tank Trucks, Inc.

The Company through a wholly owned subsidiary, Frontier Acquisition I, Inc. completed the acquisition of Chico Coffman Tank Trucks, Inc. on July 31, 2012 by acquiring all of the issued and outstanding stock of Chico Coffman Tank Trucks, Inc. (“CTT”) inclusive of its wholly owned subsidiary, Coffman Disposal, LLC for the sum of $16,986,939.

$16,986,939 subject to possible future adjustments for earnings and share prices. The acquisition was facilitated by credit facilities loaned to the Company in the aggregate amount of $12,000,000 provided by Capital One and ICON (See below). Also, the Company established an escrow account from the seller’s cash proceeds to pay for potential liabilities arising from business activities prior to the purchase of CTT such as final net working capital adjustments. The escrow agent distributed $350,000 plus accrued interest less any pending unpaid claims to the seller on January 23, 2013. On May 20, 2013 the escrow agent distributed to the seller the remaining balance.

The transaction has been accounted for using the acquisition method of accounting which requires that, among other things, assets acquired and liabilities assumed be recorded at their fair values as of the acquisition date. The Company has finalized the determination of the fair values of the assets acquired and liabilities assumed.

The following details the final fair value2013 comparative information is retrospectively adjusted to increase depreciation expense of the consideration transferred to effect the acquisition$146,557 and a decrease in gain on disposal of CTT.
Cash and debt consideration $9,978,591    
Earnings based deferred compensation liability  2,300,000    
Share based deferred compensation liability  4,708,348    
        
Total fair value consideration     $16,986,939 
The following is the final fair valueequipment of the net assets acquired by the Company in the acquisition, reconciled to the total fair value of the consideration transferred:
Cash $78,135 
Accounts receivable  3,023,355 
Inventory  251,605 
Prepaid expenses  655,616 
Property and equipment  15,982,000 
Intangible assets  4,067,735 
Other assets  15,356 
Accounts payable and accrued expenses  (4,682,095)
Financed insurance premiums  (81,024)
Notes payable  (2,323,744)
Fair value of consideration transferred $16,986,939 
$56,333.

The share based deferred consideration liability was settled in May 2013 in which the company issued an additional 572,913143,228 shares of common stock in full satisfaction of the Company’s liability. A total of 1,750,000437,500 common shares were issued to settle the liability by increasing the amount of the equity by the same amount of the liability settlement with no gain or loss recognized for the liability settlement.

F-8

The Company’s operating results are substantially affected byprevious owner of CTT was granted the right to receive additional consideration based on specified earnings targets at the end of the contingency period, which is July 31, 2013, as specified in the CTT acquisition agreement. The fair value of the earnings based contingent liability was determined based on the earnings as of future fiscal period-ends. Based on CTT’s earnings through December 31, 2013 and 2012, the fair value of the earnings based contingent liability of $2,300,000 (recorded at the acquisition date) has changed as of CTT which can limit comparabilityDecember 31, 2013 and the additional consideration to be paid based upon specific earnings targets were not achieved and therefore the contingent liability of financial results$2,300,000 has been written off and included in other income (expense) for the nine months ended September 30, 2013 to 2012.

year.

6.5.INTANGIBLE ASSETS:

In connection with the acquisition of CTT, the Company acquired intangible assets consisting of disposal well permits, and customer relationships. The Company valued the disposal well permits using the build-out (Greenfield) valuation technique. The customer relationships were valued by the Company using the excess earnings valuation technique.

Disposal well permits and customer relationships are considered definite-life intangible assets which are amortizable over their estimated useful life.

The intangible assets, net of amortization as of September 30, 2013March 31, 2014 were as follows:

           
  September 30, 2013
    Accumulated    Weighted Average
  Gross Amortization  Net Useful Life
Intangible assets:          
Disposal well permits $2,093,867  $(244,285) $1,849,582 10 years
Customer relationships  1,973,867   (230,285)  1,743,582 10 years
  $4,067,734  $(474,570) $3,593,164  

  March 31, 2014 
     Accumulated     Weighted Average 
  Gross  Amortization  Net  Useful Life 
Intangible assets:                
Disposal well permits $2,093,867  $(348,978) $1,744,889  10 years 
Customer relationships  1,973,867   (328,978)  1,644,889  10 years 
  $4,067,734  $(677,956) $3,389,778     

Future amortization expense for definite-life intangible assets as of September 30, 2013March 31, 2014 is as follows:

Periods   
Ending   
September 30,   
2014 $406,776 
2015  406,776 
2016  406,776 
2017  406,776 
2018  406,776 
Thereafter  1,559,284 
  $3,593,164 

Periods Ending  March 31,    
2015  $406,776 
2016   406,776 
2017   406,776 
2018   406,776 
2019   406,776 
Thereafter   1,355,898 
   $3,389,778 

7.6.STOCK BASED COMPENSATION:

Under the terms of the Company’s employment agreements with its officers, certain officers receive a grant of 25,000 shares of the Company’s common stock per quarter and a grant of 5,000 shares of the Company’s common sharesstock times the number of years of completed service issued annually. In addition, certain officers receive options to purchase up to 15,000 of the Company’s common stock per calendar quarter at an exercise price equal to the ending bid price of the last market day prior to the date of the option award. The option exercise period for each option is up to two years from its date of issuance, at which time the option expires. Also, two officers who joined the Company in the first quarter of this year received a grant of certain restricted common stock shares as a sign-on bonus. The granted shares vest proportionally each quarter for the calendar year ended December 31, 2013.

Additionally, each Director, except for Mr. O’Donnell, is awarded 25,000 shares2014.

The board, with mutual agreement from the officers of the Company, elected to suspend all stock based compensation in 2014 as part of the Company’s common stock per calendar quarter (issued at the beginning of each quarter).

cost cutting and restructuring measures.

Summary Stock Compensation Table

The following table sets forth the Company’s paid or accrued stock compensation expense to its officers, directors and employees.

                
  
Stock
Awards
  
Stock
Options
Awards
  
Non-Vested
Stock
Awards (1)
  
Securities
Underlying
Non-Vested
Stock (1)
  Total 
Nine months ended September 30, 2013
 $1,131,636  $64,500  $554,500   605,000  $1,750,636 
                     
Nine months ended September 30, 2012
 $651,751  $69,750  $191,250   300,000  $912,751 
F-9

           Securities    
     Stock  Non-Vested  Underlying    
  Stock  Options  Stock  Non-Vested    
  Awards  Awards  Awards (1)  Stock (1)  Total 
                
Three months ended March 31, 2014 $  $  $37,000     $37,000 
                     
Three months ended March 31, 2013 $838,086  $42,300  $168,750   300,000  $1,049,136 

(1) As of September 30, 2013,March 31, 2014, the Company’s unrecognized compensation expense related to the nonvested stock grants was $161,000.

The Company executed a contract on January 12, 2012 for consulting and marketing services. Under the terms of the contract a portion of the fees to be paid are in the form of the Company’s common stock. For the nine months ended September 30, 2012 the Company recorded professional fees of $43,062 with an offsetting credit to stockholders’ equity. The Company executed a contract on May 10, 2013 for consulting and marketing services. Under the terms of the contract a portion of the fees to be paid are in the form of the Company’s common stock. For the nine months ended September 30, 2013 the Company recorded professional fees of $202,502 with an offsetting credit to stockholders’ equity.
$37,000.

A summary of the status of the Company’s option grants as of September 30, 2013March 31, 2014 and December 31, 20122013 and the changes during the periods then ended is presented below:

             
  Shares  
Weighted-Average
Exercise Price
  
Weighted Average
Remaining
Contractual Term
(in Years)
  
Aggregate
Intrinsic
Value
 
             
Outstanding December 31, 2012
  150,000  $1.54   1.64  $231,000 
Granted
  120,000  $1.28   1.72  $153,600 
Exercised
            
Forfeited
            
Outstanding September 30, 2013
  270,000  $1.43   1.67  $386,100 

        Weighted Average    
     Weighted Average  Remaining
Contractual
  Aggregate 
    Exercise  Term  Intrinsic 
  Shares  Price  (in Years)  Value 
Outstanding December 31, 2013  300,000  $1.58   1.11  $474,450 
Granted            
Exercised            
Forfeited  (30,000)  0.70       
Outstanding March 31, 2014  270,000  $1.68   0.96  $453,450 

The weighted average fair value at the grant date for options issued during the ninethree months ended September 30, 2013March 31, 2014 was estimated using the Black-Scholes option valuation model with the following inputs:

Average expected life in years
  2 
Average risk-free interest rate
  2.00%
Average volatility
  75%
Dividend yield
  0%

Risk-free interest rates for the options were taken from the Daily Federal Yield Curve Rates on the grant dates for the expected life of the options as published by the Federal Reserve. The expected volatility was based upon historical data and other relevant factors such as the Company’s changes in historical volatility, capital structure, and its daily trading volumes.

In calculating the expected life of stock options, the Company determines the amount of time from grant date to contractual term date for vested options. In developing the expected life assumption, all amounts of time are weighted by the number of underlying options.

A summary of the status of the Company’s vested and non-vested option grants at September 30, 2013March 31, 2014 and the weighted average grant date fair value is presented below:

          
  Shares  
Weighted Average
Grant Date
Fair Value per Share
  
Weighted Average
Grant Date
Fair Value
 
Vested
  270,000  $.63  $169,500 
Nonvested
         
Total
  270,000  $.63  $169,500 
The status of the Company’s non-vested stock grant at September 30, 2013 and the grant date value is presented below:
          
  Shares  
Weighted Average
Grant Date
Value per Share
  
Grant Date
Value
 
Nonvested
  175,000  $0.92  $161,000 
Forfeited
  100,000  $1.90  $190,000 
Total
  275,000  $1.28  $351,000 
F-10

   Shares  Weighted Average Grant Date Fair Value per Share  Weighted Average Grant Date Fair Value 
Vested   270,000  $0.71  $192,000 
Nonvested          
Total   270,000  $0.71  $192,000 

8.LONG-TERM DEBT:7.BORROWINGS:
Long-term debt

Borrowings as of September 30, 2013 wasMarch 31, 2014 were as follows:

    
Revolving credit facility and term loan (a)
 $4,470,489 
ICON term note (b)
  5,000,000 
Notes payable(1) 
  2,785,668 
Installment notes(1) 
  435,889 
Total debt
  12,692,046 
Less current portion
  (10,350,765)
Total long-term debt
 $2,341,281 
(1)$84,198 and $124,567 are classified as current liabilities and non-current liabilities of discontinued operations, respectively.

  March 31, 
  2014 
     
Revolving credit facility and term loan (a) $2,772,969 
ICON term note (b)  4,064,018 
Loans from shareholder (f)  2,793,000 
Notes payable (c)  2,082,407 
Installment notes (d)  199,421 
Convertible note (e)  91,676 
Total borrowings $12,003,491 

In connection with the acquisition of CTT, the Company and its subsidiaries entered into loan agreements effective July 23, 2012 with Capital One Leverage FinanceBusiness Credit Corp. (Capital One) and ICON Investments (ICON) the proceeds of which were primarily used for the cash portion of the acquisition. The Company subsequently fell into technical default and on May 24, 2013 the Company entered into a forbearance agreement with Capital One.

a.
Pursuant to the terms of the forbearance agreement, Capital One reduced its loan commitments from $15$9 million to $9$7.75 million consisting of a revolving loan commitment of $3$1.75 million and a term loan commitment of $6 million subject to the terms of the Credit Agreement. The Credit Agreement hashad a maturity date of July 23, 2017 and pursuant to the forbearance agreement, provides for a default interest rate which is the base rate plus the applicable margin plus 2% (6.75% and 7.75%, respectively as of September 30,December 31, 2013), in which all of the loans were converted into base rate borrowings, bearing default interest rates, at the expiration of the applicable interest period. All new loans shall be base rate borrowings, bearing default interest rates. As part of the forbearance agreement, the Company was required to raise $2 million in equity, pursue certain potential restructuring transactions and provide daily borrowing base certificates along with other financial reports as requested. The term loan portion of the Credit Agreement requires monthly payments of $100,000 plus interest with the balance of the loan plus unpaid interest was due on July 23, 2017. The Credit Agreement also provides for the payment of an unused commitment fee of .375% per annum. The loans are secured by all of the Company’s properties and assets except for its disposal wells wherein Capital One has a subordinated loan position to ICON. Pursuant to the terms of the Credit Agreement and the affirmative covenants, the Company is obligated to maintain all deposits with Capital One Bank, N.A.
Subsequent to September 30, 2013, the Company amended the forbearance agreement dated October 11, 2013. As part of the new forbearance agreement, Capital One reduced its loan commitments from $9 million to $7,750,000 consisting of revolving loan commitment of $1,750,000 and a term loan commitment of $6 million. In addition to the initial agreement, the Company has to raise $500,000 in equity and sell certain fixed assets of the Company (See Note 11).

As of February 4, 2014 the Credit Agreement and Forbearance Agreement were due on March 31, 2014 and was amended as follows: the Revolving Commitments shall be reduced (on a weekly basis) by $50,000 on February 17, 2014 and each week thereafter. In addition, on February 7, 2014, the Administrative Agent and Lenders will commence establishing intra-month reserves of $25,000 per week for the monthly principal installments of the Term Loan on the first day of each subsequent month. Unless otherwise agreed upon by the Administrative Agent and Lenders, no further loans will be made after March 31, 2014.

On April 11, 2014 an accredited investor, who is also a shareholder and affiliate of the Company purchased the Capital One Note from Capital One and assumed all the existing terms and conditions of the Credit Agreement and Forbearance Agreements including Capital One’s security interest on the Company’s assets. As of June 1, 2014, these balances are past due.

b.The Company and its subsidiaries entered into a Term Loan, Guaranty and Security Agreement on July 23, 2012 with ICON for the amount of $5 million. The Loan Agreement provides for a 14% annual interest rate and monthly interest only payments with repayment of the principal and accrued but unpaid interest on February 1, 2018. ICON has a senior secured position on the Company’s disposal wells and a subordinated position to Capital One on all other Company properties and assets. The covenants in the ICON Note are in all material respects the same as in the Capital One Credit Agreement. As of September 30, 2013,March 31, 2014, the Company was not in technical default resulting fromcompliance of its inability to maintain two financial ratios of the debt covenants and accordingly classified the entire note balance as a current liability. In addition, on February 10, 2014 the Company received a notice of payment default for interest owed. ICON also reserved all of its rights and remedies under the ICON Credit Agreement and common law by virtue of the Credit Parties default on their obligations.
 
c.The Company assumed two notes payable in connection with the acquisition of CTT. The notes relate to CTT’s purchase of common stock shares from two former stockholders. The primary note payable in the original amount of $3,445,708 dated June 1, 2007 bears interest at 4.79% and its subsidiaries entered into a consulting agreement with Great American Group (GA)is payable in monthly installments of $33,003 including interest, maturing December 1, 2018. The Company’s secondary note payable in the original amount of $219,555 dated June 1, 2007 bears interest at 4.79% and is payable in monthly installments of $2,488 including interest, maturing December 1, 2018. Both notes are subordinated to sell allthe Capital One and ICON notes. Payments of principal and interest have been suspended based upon defaults in the Capital One and ICON credit agreements. The suspension of the truckspayments does not constitute a default in accordance with the subordinated agreement.
d.The Company’s installment loan with principal balances of approximately $199,000 for property and trailers owned by Trinity Disposal & Trucking, LLC. As part of the sale of the assets, GA guaranteed the saleequipment used in the amountCompany’s operations. At March 31, 2014, the loan matures in September 2017 with interest rates of $1,305,0005.69% and advanced the Company $650,000. The advance will be paid after GA completes the salemonthly minimum payments of the assets.$5,377.
 d.
e.The Company entered into a convertible note agreement with Asher Enterprises, Inc. in the amount of $153,500.$153,500 with a stated interest rate of 8% per annum and effective interest rate of 70% per annum. The note, due in May 19, 2014, is convertible into shares of the Company’s common stock, at the discretion of the holder commencing 180 days following the date of the debenture at a conversion price per share equal to a discount of 35% from the average of the lowest three closing prices for the Company’s stock during the ten days prior to conversion date. The Company evaluated the note and determined that the conversion option does not constitute a derivative liability for financial reporting purposes. The beneficial conversion feature discount resulting from the conversion price of $0.34, below the market price on August 15, 2013 of $0.53, resulted in a discount of $72,235 of which $11,996$23,470 was amortized during the nine monthsperiod ended March 31, 2014. In 2014, the Company issued 341,372 shares to Asher Enterprises, Inc. in partial payment of the convertible note. This conversion resulted in a principal reduction of $53,500 in convertible note balance of the Company. The conversion resulted in loss on extinguishment of debt of $4,453.
f.On September 30, 2013.2013 an accredited investor, which is a shareholder of the Company, advanced the Company funds for operations. Total principal advances under this facility totaled $2,706,000 as of March 31, 2014. These advances are due on demand with interest rate of 0%. On May 27, 2014 in consideration of these advances the Company issued a note in the principal amount of $2,783,484 with interest at 9% for a term of 18 months.
g.On March 21, 2014 another accredited investor, which is a shareholder of the Company loaned the Company in the amount of $87,000. The loan has an interest rate of 7% with payment term as follows:
F-11

1.$5,000 by March 25, 2014 plus accrued interest
2.$32,000 by March 28, 2014 plus accrued interest
3.$12,500 by April 10, 2014 plus accrued interest
4.$12,500 by May 10, 2014 plus accrued interest
5.$25,000 on and before the sale of the next Trinity Disposal Well plus accrued interest

9.COMMITMENTS AND CONTINGENCIES:

a.During the year ended December 31, 2012 a complaint was filed with the Texas Railroad Commission (RRC) regarding the operation of one of Trinity Disposal Wells, LLC’s wells in East Texas. The complaint requested that the RRC terminate the well injection permit on the basis that the Company violated the terms of the permit by failing to confine injection fluids to the permitted interval and that the escape of such fluids is causing waste and poses a threat to fresh water. The Company answered the complaint and presented expert testimony contradicting the claim. On May 24, 2013, the RRC dismissed the complaint and ruled in favor of the Company.
b.A share based deferred consideration liability was recorded as part of the CTT purchase consideration based on the Stock Purchase Agreement dated June 29, 2012. The previous owner of CTT received $4,708,348 in consideration in the form of common shares with a right to receive additional common shares if the share price of the company falls below $4.00 per share at the end of the measurement period, which is January 25, 2014, as specified in the stock purchase agreement. The share based deferred compensation liability was settled on May 1, 2013 in which the company issued an additional 572,913 shares of common stock in full satisfaction of the Company’s liability. A total of 1,750,000 common shares were issued to settle the liability.
c.An earnings based deferred consideration liability was recorded as part of the CTT purchase consideration based on the Stock Purchase Agreement dated June 29, 2012 which was amended on May 1, 2013. The previous owner of CTT was granted the right to receive additional consideration based on specified earnings targets at the end of the measurement period, which ends on June 30, 2014, as specified in the amended agreement dated May 1, 2013. Because the fair value of the earnings based contingent liability will largely be determined based on the earnings as of future fiscal period-ends, it is not possible to determine a probable range of possible outcomes of the valuation of the earnings based contingent liability at this time. Accordingly, there was no change in the fair value from the acquisition date through September 30, 2013. Future gains and losses on the re-measurement of the earnings based contingent liability will be included in other income (expense). As of September 30, 2013, the value of the earnings based liability was $2,300,000.
d.The Company is obligated for $1,529,500$1,435,300 under long-term leases for the use of land where seven of its disposal wells are located. Three of the leases are for extended periods of time. The first lease expires on February 7, 2023 (with two options to renew for an additional 10 years each). The.The second lease expires on December 1, 2034 with no option to renew and the third lease expires on May 31, 20222018 with no option to renew.one year renewal options. The monthly lease payment for the disposal well leases is $10,300. The Company is also obligated for $107,010 under an operating lease agreement for rent of its office space in Dallas, Texas. The term of the lease is from March 1, 2011 through May 31, 2014. The average monthly base lease payment over the remaining term of the lease is $7,644.

The Company’s operating lease agreement, as amended as of March 6, 2014, expires May 31, 2014 and now requires a base monthly rent payment of $2,500 for its office space located in Dallas, Texas. In addition in consideration for deferment in rental payments the Company executed a $20,000 10% promissory note payable with the following terms: estimated minimum $5,000 per month due and payable on the first day of each month and the entire unpaid principal balance of the promissory note, plus all accrued but unpaid interest, if any, shall be due and payable on or before September 1, 2014.

e.b.On July 26, 2013, the Company entered into an employee termination agreement (the “Termination Agreement”) with the Company’s President and Chief Executive Officer, pursuant to which his employment with the Company terminated on July 26, 2013. Pursuant to the Termination Agreement, the Company is required to pay for a period of six months a gross monthly salary and consulting fee for a total of $12,500 per month and any accrued vacations In addition, the Company agreed to pay a structured success fee for any future acquisitions by the Company’s acquisitionsCompany that were originated by Mr. Burroughs.

f.c.From time to time, the Company is a party to various legal actions arising in the ordinary course of business. The Company accrues costs and legal costs associated with these matters when they become probable and the amount can be reasonably estimated. The Company’s management does not expect any liability from the disposition of such claims and litigation individually or in the aggregate would have a material adverse impact on the Company’s consolidated financial position, results of operations and cash flows.

10.PREFERRED STOCK AND WARRANTS:EQUITY TRANSACTIONS:
During the nine months ended September 30,

a.During the year ended December 31, 2013, the Company issued 1,750,000 shares of cumulative convertible preferred stock and 3,500,000 warrants for $700,000. The preferred stock features a 7% cumulative dividend, payable quarterly, with payment at the option of the Company to be made in kind or in shares of common stock based on a per share valuation set at a 25% discount to the 5 day average closing bid price of the market price. The amount of dividend in arrears was $37,026. The warrant features provide that 2 warrants may be exercised to purchase one share of common stock at a strike price of $0.20 per share with a term of 12-24 months from the date of issuance. The weighted average fair value for the warrants was estimated using the Black-Scholes option valuation model. The value of the warrants was calculated to be $503,774 that was recorded to additional paid-in capital. The Black-Scholes option valuation model inputs used are as follows:

Average expected life in years1
Average risk-free interest rate4.00%
Average volatility75%
Dividend yield7%

b.On February 24, 2014 and March 21, 2014, the Company issued a total of 341,372 shares to Asher Enterprises, Inc. in partial payment of the convertible note. This conversion resulted in a principal reduction of $53,500 in convertible note balance of the Company. The conversion resulted in loss on extinguishment of debt of $4,453.

11.DISCONTINUED OPERATIONS:

On July 24, 2013, the Company approved the plan to sell certain assets and to discontinue the operations of Frontier Income and Growth, LLC (FIG) and its subsidiaries Trinity Disposal & Trucking, LLC and Trinity Disposal Wells, LLC. The effective date of the discontinuation of operations was June 1, 2013. The Company expects to sell all of FIG’s assets and winding down its operations in the next three months. During that period, FIG will continue to generate minimal activities related to its salt-water disposal operations.

The fixed assets of FIG are classified as assets held for sale in the consolidated balance sheets as of March 31, 2014 and December 31, 2013 in accordance with (ASC 205-20),Presentation of Financial Statements - Discontinued Operations. FIG’s net losses of $91,366 and $594,452 for the three months ended March 31, 2014 and 2013, are included in discontinued operations.

During three months ended March 31, 2014, the Company sold a disposal well of FIG for proceeds of $230,000 of which approximately $197,000 were paid directly to the Company’s lender at closing, resulting in a net loss of $45,032 which is included in discontinued operations for the period ended March 31, 2014. The proceeds paid directly to the Company’s lenders were included as a non-cash financing activity in the accompanying consolidated statement of cash flows.

FIG’s revenue and net loss before income tax are summarized as follows:

  For The Three Months Ended 
  March 31, 2014  March 31, 2013 
       
Revenues $57,017  $1,891,865 
         
Loss from discontinued operations, net of income taxes $(91,366) $(594,452)
         

Assets and liabilities classified as discontinued operations are as follows:

  March 31, 2014  December 31, 2013 
         
Cash $1,107  $56,240 
Accounts receivable  72,685   69,819 
Inventory, primarily parts      
Prepaid expenses, primarily insurance      
Deposits  10,493   10,620 
Total assets $84,285  $136,679 
         
Current portion of long-term debt $  $ 
Accounts payable  1,272,406   1,340,936 
Accrued liabilities  110,857   134,807 
Long-term debt, less current maturities      
Total liabilities $1,383,263  $1,475,743 

12.SUBSEQUENT EVENT:

Subsequent to March 31, 2014, the Company issued 1,100,000 shares of cumulative convertible preferred stock and 3,500,0002,200,000 warrants for $700,000.$440,000. The preferred stock features a 7% cumulative dividends,dividend, payable quarterly, with payment at the option of the Company to be made in kind or in shares of common stock based on a per share valuation set at a 25% discount to the 5 day average closing bid price of the market price. The warrant features provide that 2 warrants may be exercised to purchase one share of common stock at a strike price of $0.20 per share with a term of 12-24 months from the date of issuance. The weighted average fair value for the warrants was estimated using the Black-Scholes option valuation model. The value of the warrants was calculated to be $503,774 that was recorded to additional paid-in capital. The Black-Scholes option valuation model inputs used are as follows:

Average expected life in years
1
Average risk-free interest rate
4.00%
Average volatility
75%
Dividend yield
7%
F-12

11.DISCONTINUED OPERATIONS:
On July 24, 2013, the Company approved the plan to sell certain assets and to discontinue the operations of Frontier Income and Growth, LLC (FIG) and its subsidiaries Trinity Disposal & Trucking, LLC and Trinity Disposal Wells, LLC. The effective date of the discontinuation of operations is June 1, 2013.
The fixed assets of FIG are classified as assets held for sale in the consolidated balance sheets as ofwhich expires on September 30, 2013 in accordance with (ASC 205-20), Presentation of Financial Statements - Discontinued Operations. FIG’s net losses of $552,863 and $1,544,172 for the three months ended September 30, 2013 and nine months ended September 30, 2013 are included in discontinued operations.
The carrying amounts of the fixed assets, net of accumulated depreciation as of September 30, 2013 were $5,604,142. FIG’s revenue and net loss before income tax are summarized as follows:
  For the Three Months Ended  For the Nine Months Ended 
  September 30,  September 30,  September  September 
  2013  2012   30, 2013   30, 2012 
               
Revenues $759,509  $2,649,804  $4,648,825  $3,512,469 
                 
Net loss before income tax $(552,863) $(238,443) $(1,544,172) $(343,783)
Assets and liabilities classified as discontinued operations are as follows:
  September 30,  December 31, 
  2013  2012 
       
Cash $23,941  $7,256 
Accounts receivable  157,867   1,027,527 
Inventory, primarily parts     21,347 
Prepaid expenses, primarily insurance     134,501 
Deposits  10,620   25,960 
Total assets $192,428  $1,216,591 
         
Current portion of long-term debt $84,198  $84,668 
Accounts payable  1,642,515   1,036,382 
Accrued liabilities  107,815   119,673 
Long-term debt, less current maturities  124,567   170,474 
Total liabilities $1,959,095  $1,411,197 
12.SUBSEQUENT EVENT:
Subsequent to September 30, 2013, an investor invested approximately $1 million for general working capital needs of the Company. The Company completed the sale of a portion of FIG’s assets subsequent to September 30, 2013 and received proceeds approximately $2.6 million. The proceeds were used to pay down the debt and as a working capital of the Company.
Subsequent to September 30, 2013, the Company granted 200,000 shares to each of the two officers of the Company for a total of 400,000 shares to be vested at the rate of 50,000 shares every 3 months beginning October 1, 2013.
F-13

20, 2014.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CAUTIONARY STATEMENT

Statements in this report which are not purely historical facts, including statements regarding the Company’s anticipations, beliefs, expectations, hopes, intentions or strategies for the future, may be forward-looking statements within the meaning of Section 21E of the Securities Act of 1934, as amended. All forward-looking statements in this report are based upon information available to us on the date of the report. Any forward-looking statements involve risks and uncertainties that could cause actual results or events to differ materially from events or results described in the forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements.

DESCRIPTION OF PROPERTIES

Our principal executive offices are located in an office building located at 3030 LBJ Freeway, Dallas, Texas, 75234. The lease on the office space runs through May 31, 2014 with the option to renew the lease for an additional five years. The average base lease payment over the remaining term of the lease is $7,644$2,500 per month.

The Company owns 10 acres of vacant land in Johnson County and 7.055 acres in Chico, Texas on which it has 5 buildings used for its water disposal operations in that area. The Company also owns 7.49 acres in Harrison County, Texas on which three of its disposal wells are located along with a small manufactured office and repair shop. In addition, the Company is obligated under long-term leases for the use of land where seven of its disposal wells are located. Three of the leases are for extended periods of time. The first lease expires on February 7, 2023 (with two options to renew for an additional 10 years each). The second lease expires on December 1, 2034 with no option to renew and the third lease expires on May 31, 20222018 with no option to renew. The monthly lease payment for the disposal well leases is $10,300.

SIGNIFICANT ACCOUNTING POLICIES

A summary of significant accounting policies is included in Note 2 to the audited consolidated financial statements included on Form 10-K for the year ended December 31, 20122013 as filed with the United States Securities and Exchange Commission. Management believes that the application of these policies on a consistent basis enables the Company to provide useful and reliable financial information about our operating results and financial condition.

The preparation of financial statements in conformity with U.S.US Generally Accepted Accounting Principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates.

RESULTS OF OPERATIONS

For the quarter ended September 30, 2013March 31, 2014 we reported a net loss from continuing operations of $2,167,598$1,378,028 as compared to a net loss from continuing operations of $2,130,277$1,887,333 for the quarter ended September 30, 2012.March 31, 2013. The components of these results are explained below.

Revenue- Revenues by subsidiaries are as follows:

  Three Months Ended  Nine Months Ended 
  September 30, 2013  September 30, 2012  September 30, 2013  September 30, 2012 
             
Chico Coffman Tank Trucks, Inc. $6,523,784  $7,202,034  $23,986,732  $7,202,034 
                 
Frontier Income and Growth, LLC. (discontinued operations)
            
                 
Frontier Oilfield Services, Inc.           1,909 
                 
Total revenue $6,523,784  $7,202,034  $23,986,732  $7,203,943 
                 
Revenue from discontinued operations $759,509  $2,649,804  $4,648,825  $3,512,469 
The increase in net revenue for the nine months is attributable to our recent acquisitions of Chico Coffman Tank Trucks (“CTT”) and Frontier Income and Growth (“FIG”).

  Three Months Ended 
  March 31, 2014  March 31, 2013 
       
Chico Coffman Tank Trucks, Inc. (“CTT”) $4,868,867  $9,099,919 
         
Frontier Oilfield Services, Inc. (“FOSI”)  145    
         
Total revenue $4,869,012  $9,099,919 

The decrease in net revenue for the three months is attributable to a reduced number of loads transported resulting in management’s decision to change direction with its customers by focusing only on customers where the discontinued operationsmajority of

3

FIG and change the loads will be disposed of in Company owned wells as opposed to third party wells where either the overall customer baseCompany has to pay to dispose in these types of CTT including discontinuation of a business linefacilities and/or the Company does not benefit from skim oil that ledis collected to a decrease in revenue customer base of CTT.
sell.

Expenses-The components of our costs and expenses for the three months ended March 31, 2014 and nine months ended September 30, 2013 and 2012 are as follows:

  Nine Months Ended September 30, 2013  Nine Months Ended September 30, 2012 
  CTT  FIG  FOSI  Total  CTT  FIG  FOSI  Total 
Costs and expenses:                        
Direct costs $18,072,026  $  $  $18,072,026  $5,614,176  $  $1,753  $5,615,929 
Indirect costs  3,712,667         3,712,667   1,518,845         1,518,845 
General and administrative        5,048,561   5,048,561         2,501,249   2,501,249 
Depreciation and amortization  2,041,189      8,931   2,050,120   381,209      3,312   384,521 
                                 
Total costs and expenses $23,825,882  $  $5,057,492  $28,883,374  $7,514,230  $  $2,506,314  $10,020,544 
                                 
Costs and expenses from discontinued operations             $6,192,997              $3,856,252 
                                 
  Three Months Ended September 30, 2013  Three Months Ended September 30, 2012 
  CTT  FIG  FOSI  Total  CTT  FIG  FOSI  Total 
Costs and expenses:                                
Direct costs $5,424,491  $  $  $5,424,491  $5,614,176  $  $52  $5,614,228 
Indirect costs  815,685         815,685   1,518,845         1,518,845 
General and administrative        1,348,828   1,348,828         1,173,407   1,173,407 
Depreciation and amortization  679,256      5,986   685,242   381,209      1,560   382,769 
                                 
Total costs and expenses $6,919,432  $  $1,354,814  $8,274,246  $7,514,230  $  $1,175,018  $8,689,248 
                                 
Costs and expenses from discontinued operations             $1,312,372              $2,888,247 
The increase in direct costs for the nine months is attributable to our recent acquisitions of Chico Coffman Tank Trucks (“CTT”) and Frontier Income and Growth (“FIG”).

  Three Months Ended March 31, 2014 
  CTT  FOSI  Total 
Costs and expenses:            
Direct costs $3,977,597  $  $3,977,597 
Indirect costs  836,682      836,682 
General and administrative     513,244   513,244 
Depreciation and amortization  706,377   5,237   711,614 
             
Total costs and expenses $5,520,656  $518,481  $6,039,137 

  Three Months Ended March 31, 2013 
  CTT  FOSI  Total 
Costs and expenses:            
Direct costs $6,567,270  $  $6,567,270 
Indirect costs  1,471,171      1,471,171 
General and administrative     1,871,168   1,871,168 
Depreciation and amortization  714,503   2,956   717,459 
             
Total costs and expenses $8,752,944  $1,874,124  $10,627,068 

The decrease in direct costs for the three months is attributable to the discontinued operations of FIG and discontinuation of a business line that led tooverall reduction in headcountsalaries and other variable expenses including fuel and repairs and maintenance as a result of CTT.

The increase in indirect costs for the nine months is attributable to our recent acquisitions of Chico Coffman Tank Trucks (“CTT”) and Frontier Income and Growth (“FIG”). planned volume decreases with specific customers.

The decrease in indirect costs for the three months is attributable to the discontinued operationsresult of FIG and discontinuationoverall reduction of a business line that led to reduction in headcount and expenses of CTT.

administrative salaries positions combined with tighter expense controls.

The increasedecrease in general and administrative expensescosts for the ninethree months is attributablefor FOSI were specifically related to acquisition costs that have been eliminated as a result of management’s focus internally on operations and customer relationships. In addition, management reduced professional fees to $242,000 for the three months ended March 31, 2014 compared to $360,000 for the three months ended March 31, 2013. In addition stock compensation costs of $840,000, salaries and wages of $309,000, legal and professional fees of $1,180,000 and expenses in all other categories totaling $218,000. The increase in stock compensation cost is mostly attributablewas $37,000 for the three months ended March 31, 2014 compared to an increase in number of shares awarded and a change in$1,049,000 for the method of determining the date for issuing common stock shares to executives for years of service. The employment contracts for two executives were modified January 1, 2013 which changed the date for awarding shares from annually to the anniversary date of the executive’s years of service. The increase in legal and professional fees is attributable to the costs associated with the purchase of CTT and FIG, including pursuing other acquisition targets inthree months ended March 31, 2013. The increase in salaries and wages is attributable to increase in management head count position in anticipation of the increase of acquisition efforts in 2013.

The increase in depreciation and amortization expense is attributable to purchase price allocation due to our recent acquisitions of CTT and FIG.

Other (Income) Expenses-The components of our costs and expenses for the three months ended March 31, 2014 and nine months ended September 30, 2013 and 2012 are as follows:


  Three Months Ended  Nine Months Ended 
  September 30, 2013  September 30, 2012  September 30, 2013  September 30, 2012 
             
Interest expense $417,784  $358,163  $1,265,759  $358,163 
                 
Gain on disposal of property and equipment  (648)     (56,504)   
                 
Equity in loss of unconsolidated affiliated company           169,794 
                 
Impairment loss on net profits interest in affiliate     284,900      284,900 
                 
Total other (income) expenses $417,136  $643,063  $1,209,255  $812,857 
4

  Three Months Ended 
  March 31, 2014  March 31, 2013 
       
Interest expense $205,385  $351,524 
         
(Gain) loss on disposal of property and equipment  (48,499)  8,660 
         
Loss on extinguishment of debt  4,453    
         
Total other (income) expenses $161,339  $360,184 

The increasedecrease in interest expense is attributable to the newdecreasing principal balance of the Capital One and ICON Notes. Due to our non-compliance with the debt covenants, we paid the higher default interest rate for the Capital One and ICON notes.

We have not recorded any federal income taxes for the ninethree months ended September 30,March 31, 2014 and 2013 and 2012 because of our accumulated losses. Also, since there is continued uncertainty as to the realization of a tax asset, we have not recorded any tax benefit. In addition we have not recorded a$46,564 in provision for state income taxes due to the operating loss sustained this quarter.

taxes.

Net loss –The components of our net loss by subsidiariessubsidiary are as follows:


  Three Months Ended  Nine Months Ended 
  September 30, 2013  September 30, 2012  September 30, 2013  September 30, 2012 
             
Chico Coffman Tank Trucks, Inc. $(404,596) $(332,504) $154,950  $(332,504)
                 
Frontier Income and Growth, LLC. (discontinued operations)
  (552,863)  (238,443)  (1,544,172)  (343,783)
                 
Frontier Oilfield Services, Inc.  (1,763,002)  (1,692,755)  (6,257,939)  (3,147,054)
                 
Total net loss $(2,720,461) $(2,263,702) $(7,647,161) $(3,823,341)

  Three Months Ended 
  March 31, 2014  March 31, 2013 
       
Chico Coffman Tank Trucks, Inc. (“CTT”) $(649,863) $317,345 
         
Frontier Income and Growth, LLC. and its subsidiaries, Trinity Disposal & Trucking, LLC and Trinity Disposal Wells, LLC. (“FIG”)  (91,366)  (594,452)
         
Frontier Oilfield Services, Inc. (“FOSI”)  (728,165)  (2,204,678)
         
Total net loss $(1,469,394) $(2,481,785)

Discontinued operations -On July 24, 2013, management and the Board of Directors of the Company elected to discontinue the operations and sell the fixed assets of Frontier Income and Growth, LLC (FIG) and its subsidiaries Trinity Disposal & Trucking, LLC and Trinity Disposal Wells, LLC. The effective date of the discontinuation of operations was June 1, 2013. The fixed assets of FIG are classified as assets held for sale in the consolidated balance sheets as of September 30, 2013.  FIG’s net losses of $647,760 from June 1, 2013 to September 30, 2013 are included in discontinued operations.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flows and Liquidity

As of September 30, 2013March 31, 2014 we had total current assets of $4.17$3.3 million. Our total current liabilities as of September 30, 2013March 31, 2014 were $21.09$14.3 million. Thus, we had a working capital deficit of $16.92$11 million as of September 30, 2013.

Based upon our currentMarch 31, 2014.

Our primary focus is to secure additional capital through business alliances with third parties or other debt or equity financing arrangements to stabilize and improve the financial condition of the Company and lower our cost of borrowing. Any such additional funding will be done on an “as needed” basis and will only be done in those instances in which we do not have sufficient cashbelieve such additional financings will accomplish these goals. However, actual results may differ from management’s plan and the amount may be material.

Our ability to operate oursecure additional capital through business at the current level for the next twelve months. We have negative working capital and rely on proceeds from equity and loans to fund our operations.  We intend to fund operations through increased sales andalliances with third parties or other debt and/or equity financing arrangements which may be insufficientwill allow the Company to fund expendituresfurther operate in the water disposal segment of the oilfield services industry is strictly contingent upon our ability to locate adequate debt or other cash requirements.equity financing There can be no assurance that we will be successful in raising additional funding. If we are not able to secure additional funding, the implementation of our business plan will be impaired. There can be no assuranceobtain debt or equity financing at terms that such additional financing will be availableare acceptable to us on acceptable terms or at all.

us.

The following table summarizes our sources and uses of cash for the ninethree months ended September 30, 2013March 31, 2014 and 2012:


  For the Nine Months Ended 
  September 30, 2013  September 30, 2012 
       
Net cash used in operating activities of continuing operations $(43,460) $(489,682)
Net cash provided by operating activities of discontinued operations  1,077,613   387,905 
Net cash provided by (used in) operating activities  1,034,153   (101,777)
         
Net cash used in investing activities of continuing operations  (904,592)  (2,550,089)
Net cash provided by investing activities of discontinued operations  5,306    
Net cash used in investing activities  (899,286)  (2,550,089)
         
Net cash provided by (used in) financing activities of continuing operations  (132,373)  3,070,365 
Net cash used in financing activities of discontinued operations  (63,062)  (7,306)
Net cash provided by (used in) financing activities  (195,435)  3,063,059 
         
Net increase (decrease) in cash $(60,568) $411,193 
2013:

  For the Three Months Ended 
  March 31, 2014  March 31, 2013 
       
Net cash provided by (used in) operating activities of continuing operations $(745,010) $779,768 
Net cash used in operating activities of discontinued operations  (43,649)  (162,277)
Net cash provided by (used in) operating activities  (788,659)  617,491 
         
Net cash provided by (used in) investing activities of continuing operations  164,473   (901,647)
Net cash used in investing activities of discontinued operations     (31,721)
Net cash provided by (used in) investing activities  164,473   (933,368)
         
Net cash provided by financing activities of continuing operations  572,066   439,565 
Net cash used in financing activities of discontinued operations     (14,111)
Net cash provided by financing activities  572,066   425,454 
         
Net increase (decrease) in cash $(52,120) $109,577 

As of September 30, 2013,March 31, 2014, we had noapproximately $262,000 in cash and cash equivalents,deficit, a decrease of $68,000approximately $314,000 from December 31, 2012 as2013 due to our improvednegative cash flow from operationsoperations. This was offset by capital expenditures, escrow funds paymentcash flows from investing and reductionsfinancing activities.

Net cash used in outstanding indebtedness. Currently we are focusing on paying down our existing indebtedness with our lender withoperating activities was approximately $789,000 for the proceedsthree months ended March 31, 2014, consisted of the saleapproximately $745,000 of FIG’s assets.

5

net cash used for operating activities in addition to approximately $44,000 net cash used in operating activities of discontinued operations. Net cash provided by operating activities was $1.03 millionapproximately $617,000 for the nine monththree months ended September 30,March 31, 2013, consisted of $1.08 millionapproximately $780,000 of net cash provided by operating activities of discontinued operations, add-back of non cash items and other adjustments of $4.2 million (of which $2.05 million was depreciation and amortization) and a $1.86 million change in net operating assets and liabilities offset by aapproximately $162,000 net loss of $7.65 million. The increase in net operating activities resulted from improvements in the Company’s trade cycle, including collections of accounts receivable.
Net cash used in operating activities was $102,000 for the nine month ended September 30, 2012, consisted of $388,000 netdiscontinued operations.

Net cash provided by operatinginvesting activities of discontinued operations, add-back of non cash items and other adjustments of $1.84 million (of which $385,000 was depreciation and amortization) and a $1.3 million change in net operating assets and liabilities offset by a net loss of $3.98 million. The decrease in net operating activities mainly resulted fromapproximately $164,000 for the acquisitions of CTT and FIG.

three months ended March 31, 2014 related to proceeds for certain asset sales. Net cash used in investing activities was $899,000approximately $933,000 for the ninethree months ended September 30,March 31, 2013 which consisted primarily of $381,000approximately $32,000 net cash used by investing activities of capital expenditures and $619,000discontinued operations, approximately $378,000 related to release of the escrow funds related to JD Coffman.
the CTT purchase, and approximately $571,000 used for capital expenditures.

Net cash used in investing activities was $2.55 million for the nine months ended September 30, 2012 which consisted primarily of $1.9 million of cash used for acquisition of CTT and FIG, $288,000 for capital expenditures and $$289,000 payments to related party.

Net cash used inprovided by financing activities was $207,000approximately $572,000 for the ninethree months ended September 30,March 31, 2014 which consisted of approximately $1.2 million cash received from borrowings and approximately $887,000 in debt repayments, in which none was related to discontinued operations. Net cash provided by financing activities was approximately $425,000 for the three months ended March 31, 2013 which consisted primarily of $46,000approximately $399,000 cash received from common stock sales, approximately $378,000 for the escrow funds release to the CTT purchase and approximately $384,000 in debt repayments offset by approximately $14,000 net cash used in financing activities of discontinued operations.

The oil and gas industry is subject to various trends including the availability of capital for drilling new wells, prices received for crude oil and natural gas, sources of crude oil outside our area of operations, $1.1 million cash received from preferredinterest rates, and common stock sales, $620,000 cash receipts from escrow funds, $806,000 in borrowingsthe overall health of the economy. We are not aware of any specific trends that are unusual to our Company, as compared to the rest of the oil and $1.86 million in debt payments.

Net cash provided by financing activities was $3.06 million for the nine months ended September 30, 2012 which consisted primarily of $2.44 million cash received from preferred and common stock sales, $1.46 million payment of loan origination fees, $2.31 in borrowings and $233,000 in debt payments.
gas industry.

Capital Expenditures

Capital expenditures for ninethree months ended September 30,March 31, 2013 and 2012 of $381,000 and $288,000, respectively,$571,000, were mainly related to the improvements of our disposal wells and our fleet of vehicles.wells. We currently are not anticipating any major expendituresexpenditure for the remainder of 2013.

2014.

Indebtedness

In connection with the acquisition of CTT, the Company and its subsidiaries entered into loan agreements effective July 23, 2012 with Capital One Leverage Finance Corp. (Capital One) and ICON Investments (ICON) the proceeds of which were primarily used for the cash portion of the acquisition. Due to the Company’s technical default, on May 24, 2013, the Company entered into a forbearance agreement with Capital One.

Pursuant to the terms of the forbearance agreement, Capital One reduced its loan commitments from $15$9 million to $9$7.75 million consisting of a revolving loan commitment of $3$1.75 million and a term loan commitment of $6 million subject to the terms of the Credit Agreement. The Credit Agreement hashad a maturity date of July 23, 2017 and pursuant to the forbearance agreement, provides for a default interest rate which is the base rate plus the applicable margin plus 2% (6.75% and 7.75%, respectively as of September 30,December 31, 2013), in which all of the loans were converted into base rate borrowings, bearing the default interest rate,rates, at the expiration of the applicable interest period. All new loans shall be base rate borrowings, bearing default interest rates. As part of the forbearance agreement, the Company was required to raise $2 million in equity, pursue certain potential restructuring transactions and provide daily borrowing base certificates along with other financial reports as requested. The term loan portion of the Credit Agreement requires monthly payments of $100,000 plus interest with the balance of the loan plus unpaid interest was due on July 23, 2017. The Credit Agreement also provides for the payment of an unused commitment fee of .375% per annum. The loans are secured by all of the Company’s properties and assets except for its disposal wells wherein Capital One has a subordinated loan position to ICON. Pursuant to the terms of the Credit Agreement and the affirmative covenants, the Company is obligated to maintain all deposits with Capital One Bank, N.A.

Subsequent to September 30, 2013,

As of February 4, 2014 the CompanyCredit Agreement and Forbearance Agreement were due on March 31, 2014 and was amended as follows: the forbearance agreement dated October 11, 2013. As partRevolving Commitments shall be reduced (on a weekly basis) by $50,000 on February 17, 2014 and each week thereafter. In addition, on February 7, 2014, the Administrative Agent and Lenders will commence establishing intra-month reserves of $25,000 per week for the monthly principal installments of the new forbearance agreement, Capital One reduced its loan commitments from $9 million to $7,750,000 consisting of revolving loan commitment of $1,750,000 and a term loan commitment of $6 million. In addition to the initial agreement, the Company is required to raise $500,000 in equity and sell certain fixed assets of the company.

The Credit Agreement contains certain restrictive debt covenants that require the Company to maintain a certain ratio and restrictions commencing with the month ending December 31, 2012. The major requirements are that the Company must maintain a monthly Fixed Charge Coverage Ratio each month that cannot be less than 1.0 to 1.0, a rolling twelve month Leverage Ratio determinedTerm Loan on the lastfirst day of each month that cannotsubsequent month. Unless otherwise agreed upon by the Administrative Agent and Lenders, no further loans will be greater the 4.50 to 1.0made after March 31, 2014.

On April 11, 2014 an accredited investor, who is also a shareholder and affiliate of the Company cannot incur capital expenditures that exceeds $3 million in any fiscal year.purchased the Capital One Note from Capital One and assumed all the existing terms and conditions of the Credit Agreement and Forbearance Agreements including Capital One’s security interest on the Company’s assets. As of September 30, 2013, the Company was in technical default resulting from its inability to maintain two financial ratios of the debt covenants.

6

June 1, 2014, these balances are past due.

The Company and its subsidiaries entered into a Term Loan, Guaranty and Security Agreement on July 23, 2012 with ICON for the amount of $5 million. The Loan Agreement provides for a 14% annual interest rate and monthly interest only payments with repayment of the principal and accrued but unpaid interest on February 1, 2018. ICON has a senior secured position on the Company’s disposal wells and a subordinated position to Capital One on all other Company properties and assets. The covenants in the ICON Note are in all material respects the same as in the Capital One Credit Agreement. As of September 30, 2013,March 31, 2014, the Company was not in technicalcompliance of its debt covenants and accordingly classified the entire note balance as a current liability. In addition, on February 10, 2014 the Company received a notice of payment default resulting fromfor interest owed. ICON also reserved all of its inability to maintain two financial ratiosrights and remedies under the ICON Credit Agreement and common law by virtue of the debt covenants.

Credit Parties default on their obligations.

Outlook

In response to the recent losses, the Company is reviewing various aspects of its operations to reduce costs. In connection with its review, the Company has elected to discontinue the operations of Frontier Income and Growth, LLC (FIG) and its subsidiaries Trinity Disposal & Trucking, LLC and Trinity Disposal Wells, LLC. The discontinuation may include the sale of certainadditional non-core assets of Trinity Disposal & Trucking, LLC and Trinity Disposal Wells, LLC, but there can be no assurance that we will receive sufficient value in any sale to cover our losses or that if we cease operations in any service area that the assets will be profitably employed elsewhere.

Due to our recent losses we are attempting to acquireobtain additional equity and debt financing to increase our available cash so that we might pay downare able to reduce our accounts payable and pare back our outstanding indebtedness. Our ability to secure additional capital through business alliances with third parties or other debt/equity financing arrangements will also allow us to acquire companies and/or assets to further increase our operations in the water disposal segment of the oilfield services industry. There can be no assurance that we will be able to obtain the additional equity or debt financing or take advantage of any opportunity to buy companies and/or assets that are suitable for our investment or that we may be able to obtain financing or equity to pay for the costs of these additional companies and/or assets at terms that are acceptable to us. The oil and gas industry which the Company tracks closely is subject to various trends including the availability of capital for drilling new wells, prices received for crude oil and natural gas, sources of crude oil outside our area of operations, interest rates, and the overall health of the economy. We are not aware of any specific trends that are unusual to our company,Company, as compared to the rest of the oil and gas industry.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not required for smaller reporting companies.

ITEM 4T.4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Our management evaluated, with the participation of our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of the end of the quarter covered by this quarterly report on Form 10-Q. In making this assessment, the Company used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) inInternal Control-Integrated Framework. Based on that evaluation, the Company’s management, including the CEO and CFO, concluded that the Company’s internal controls over financial reporting were not effective in that there was a material weakness as of September 30, 2013.

March 31, 2014.

A material weakness is a deficiency or combination of deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis by the Company’s internal controls.

The Company’s management has identified a material weakness in the effectiveness of internal control over financial reporting related to a shortage of resources in the accounting department required to assure appropriate segregation of duties with employees having appropriate accounting qualifications related to the Company’s unique industry accounting and disclosure rules. Management has outsourced certain financial functions to mitigate the material weakness in internal control over financial reporting. The Company is reviewing its finance and accounting staffing requirements.

Internal Control Over Financial Reporting

There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. As a result, no corrective actions were required or undertaken.

Limitations on the Effectiveness of Controls.

Our management, including the CEO and CFO, does not expect that its disclosure controls or its internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control

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system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple errors or mistakes. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

PART II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

None

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the nine months ended September 30, 2013,

Subsequent to March 31, 2014, the Company issued 1,750,0001,100,000 shares of cumulative convertible preferred stock and 3,500,0002,200,000 warrants for $700,000 to an accredited investor. The sale was accomplished as an exempt sale under Section 4(5) of the Securities Act of 1933, as amended.$440,000. The preferred stock features a 7% cumulative dividends,dividend, payable quarterly, with payment at the option of the Company to be made in kind or in shares of common stock based on a per share valuation set at a 25% discount to the 5 day average closing bid price of the market price. The warrant features provide that 2 warrants may be exercised to purchase one share of common stock at a strike price of $0.20 per share with a term of 12-24 months from the date of issuance. The weighted average fair value for the warrants was estimated using the Black-Scholes option valuation model. The proceeds of the sale of the preferred stock were used by the company as working capital.

Subsequent towhich expires on September 30, 2013, the Company granted 200,000 shares to each of the two officers of the Company for a total of 400,000 shares to be vested at the rate of 50,000 shares every 3 months beginning October 1, 2013.
20, 2014.

Item 3. DEFAULTS UPON SENIOR SECURITIES

None

Item 5. OTHER INFORMATION

On May 1, 2013, the Company entered into an agreement with the former owner of CTT to amend the Stock Purchase Agreement dated June 29, 2012. Under the terms of the new agreement, the section relating to the deferred earn-out consideration which at June 30, 2012 was $2,300,000 was deleted in its entirety. It was further agreed that prior to July 1, 2013, the Company and the seller will replace the earn-out provisions previously set forth and replace it with a revised earn-out provision covering the period from July 1, 2013 to June 30, 2014.
The revised earn-out will be earned each quarter during the new measurement period where CTT exceeds its targeted earnings before interest, taxes, depreciation and amortization threshold for such quarter and, if there is such excess, then the earn-out payment to be made to the seller for such quarter will be an agreed-upon percentage of such excess. Since the targeted earnings and percentage have not been agreed to at this time it is not feasible to determine the effect, if any, on the deferred earn-out consideration liability recorded at September 30, 2013.
In addition, the section of the Agreement pertaining to the deferred stock consideration was amended wherein the Company agreed to issue an additional 572,913 of common stock shares in full satisfaction of the Company’s obligation to issue additional shares under the previous provisions of the Agreement. The amendment did not change the value of the deferred consideration; rather, it settles the Company’s share obligation portion to the seller. The total number of shares issued under the Amended Agreement is 1,750,000.

None

Item 6. EXHIBITS

(a)EXHIBITS:
 101101.INS XBRL Instance Document
   
  101.SCH XBRL Taxonomy Schema
   
  101.CAL XBRL Taxonomy Calculation Linkbase
   
  101.LAB XBRL Taxonomy Label Linkbase
   
  101.PRE XBRL Taxonomy Presentation Linkbase
   
  101.DEF XBRL Taxonomy Definition Linkbase
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SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the November 14, 2013

June 4, 2014

FRONTIER OILFIELD SERVICES, INC.

SIGNATURE:  
SIGNATURE:
/s/ Donald Ray Lawhorne
 
 Donald Ray Lawhorne,

Chief Executive Officer
 


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