Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended | |
Mar. 31, 2015 | 11-May-15 | |
Document And Entity Information | ||
Entity Registrant Name | FRONTIER OILFIELD SERVICES INC | |
Entity Central Index Key | 1108645 | |
Document Type | 10-Q | |
Document Period End Date | 31-Mar-15 | |
Amendment Flag | FALSE | |
Current Fiscal Year End Date | -19 | |
Entity a Well-known Seasoned Issuer | No | |
Entity a Voluntary Filer | No | |
Entity's Reporting Status Current | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 5,457,486 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2015 |
CONSOLIDATED_BALANCE_SHEETS_UN
CONSOLIDATED BALANCE SHEETS (UNAUDITED) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
Current Assets: | ||
Cash | $267,382 | $114,698 |
Restricted Cash | 77,614 | 77,614 |
Accounts receivable, net | 670,144 | 930,841 |
Other current assets | 155,735 | 206,838 |
Current portion of capitalized loan fees | 230,316 | 242,092 |
Total current assets | 1,401,191 | 1,572,083 |
Property and equipment, at cost | 17,875,469 | 17,875,469 |
Less: accumulated depreciation | -7,363,454 | -6,855,473 |
Property and equipment, net | 10,512,015 | 11,019,996 |
Intangibles, net | 2,983,004 | 3,084,698 |
Capitalized loan fees, net of current portion | 330,042 | 383,204 |
Deposits | 27,302 | 32,302 |
Total Assets | 15,253,554 | 16,092,283 |
Current Liabilities: | ||
Current maturities of long-term debt | 9,769,778 | 10,363,094 |
Accounts payable | 2,639,047 | 3,403,263 |
Accrued liabilities | 1,200,068 | 857,854 |
Total current liabilities | 13,608,893 | 14,624,211 |
Long-term debt, less current maturities | 91,829 | 1,594,795 |
Total Liabilities | 13,700,722 | 16,219,006 |
Commitments and Contingencies (Note 7) | ||
Stockholders' Equity (Deficit): | ||
Preferred stock to be issued | 450,000 | |
Preferred stock value | 39,750 | 28,500 |
Common stock- $.01 par value; authorized 100,000,000 shares; 5,457,486 shares issued and outstanding at March 31, 2015 and December 31, 2014 | 54,575 | 54,575 |
Additional paid-in capital | 32,581,467 | 32,142,717 |
Accumulated deficit | -31,122,960 | -32,802,515 |
Total stockholders' equity (deficit) | 1,552,832 | -126,723 |
Total Liabilities and Stockholders' Equity (Deficit) | 15,253,554 | 16,092,283 |
Preferred stock 2014 Series A [Member] | ||
Stockholders' Equity (Deficit): | ||
Preferred stock value | 11,250 | |
Preferred stock 2013 Series A [Member] | ||
Stockholders' Equity (Deficit): | ||
Preferred stock value | $28,500 | $28,500 |
CONSOLIDATED_BALANCE_SHEETS_Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
Common stock, par value | $0.01 | $0.01 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 5,457,486 | 5,457,486 |
Common stock, shares outstanding | 5,457,486 | 5,457,486 |
Preferred stock 2014 Series A [Member] | ||
Preferred stock, par value | $0.01 | $0.01 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | 1,125,000 | 1,125,000 |
Preferred stock, shares outstanding | 1,125,000 | 1,125,000 |
Preferred stock 2013 Series A [Member] | ||
Preferred stock, par value | $0.01 | $0.01 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | 2,850,000 | 2,850,000 |
Preferred stock, shares outstanding | 2,850,000 | 2,850,000 |
CONSOLIDATED_STATEMENTS_OF_OPE
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (USD $) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Income Statement [Abstract] | ||
Revenues, net of discounts | $2,730,546 | $4,926,029 |
Costs and expenses: | ||
Direct operating costs | 1,636,366 | 4,060,777 |
Indirect operating costs | 487,760 | 856,853 |
General and administrative | 38,045 | 513,244 |
Depreciation and amortization | 609,675 | 711,614 |
Total costs and expenses | 2,771,846 | 6,142,488 |
Operating loss | -41,300 | -1,216,459 |
Other (income) expense: | ||
Interest expense | 334,109 | 205,385 |
Gain on disposal of property and equipment | -3,467 | |
(Gain) loss on extinguishment of debt | -2,082,408 | 4,453 |
Income (loss) before provision for income taxes | 1,706,999 | -1,422,830 |
Provision for state income taxes | 46,564 | |
Net income (loss) | $1,706,999 | ($1,469,394) |
Net income (loss) per common share - basic: ( in per share) | $0.29 | ($0.27) |
Net income (loss) per common share - diluted: ( in per share) | $0.14 | ($0.27) |
Weighted Average Common Shares Outstanding: | ||
Basic (in shares) | 5,457,486 | 5,608,303 |
Diluted (in shares) | 11,374,736 | 5,608,303 |
CONSOLIDATED_STATEMENTS_OF_CAS
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Cash Flows From Operating Activities: | ||
Net income (loss) | $1,706,999 | ($1,469,394) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 609,675 | 711,614 |
Issuance of common stock for services | 37,000 | |
(Gain) loss on extinguishment of debt | -2,082,408 | 4,453 |
Gain on disposal of property and equipment | -3,467 | |
Amortization of capitalized loan fees | 64,938 | 76,714 |
Decrease (increase) in operating assets: | ||
Accounts receivable | 260,697 | 29,871 |
Other current assets | 51,103 | 493,364 |
Deposits | 5,000 | 127 |
Increase (decrease) in operating liabilities: | ||
Accounts payable | -764,216 | -407,917 |
Accrued liabilities | 314,770 | 161,627 |
Financed insurance premiums payable | -477,784 | |
Net cash provided by (used in) operating activities | 166,558 | -843,792 |
Cash Flows From Investing Activities: | ||
Proceeds of sale property and equipment | 164,473 | |
Net cash provided by investing activities | 164,473 | |
Cash Flows From Financing Activities: | ||
Net proceeds from stockholder loans | 1,197,000 | |
Net change in line of credit | -887,066 | |
Payments on long term debt | -13,874 | |
Increase in bank overdraft | 262,132 | |
Net cash provided by (used in) financing activities | -13,874 | 572,066 |
Net increase (decrease) in cash | 152,684 | -107,253 |
Cash at beginning of the year | 114,698 | 108,360 |
Cash at end of the year | 267,382 | 1,107 |
Supplemental Cash Flow Disclosures | ||
Interest paid | 269,171 | 97,291 |
Supplemental Schedule of Non-Cash Investing and Financing Activities | ||
Convertible notes conversion | 53,500 | |
Disposal of property and equipment paid directly to lenders | $308,870 |
BASIS_OF_PRESENTATION
BASIS OF PRESENTATION | 3 Months Ended | |
Mar. 31, 2015 | ||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
BASIS OF PRESENTATION | 1 | BASIS OF PRESENTATION |
The consolidated financial statements included herein have been prepared by Frontier Oilfield Services, Inc. (“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, 2014 (including the notes thereto) set forth in Form 10-K. |
BUSINESS_ACTIVITIES
BUSINESS ACTIVITIES | 3 Months Ended | ||
Mar. 31, 2015 | |||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||
BUSINESS ACTIVITIES | 2 | BUSINESS ACTIVITIES | |
Frontier Oilfield Services, Inc. is a Texas corporation (and collectively with its subsidiaries, “we”, “our”, “Frontier”, “FOSI”, or the “Company”) which was organized on March 24, 1995. The accompanying consolidated financial statements include the accounts of the Company as well as: | |||
- | Frontier Acquisition I, Inc., and its subsidiaries Chico Coffman Tank Trucks, Inc. (CTT) and Coffman Disposal, LLC; and | ||
- | Frontier Income and Growth, LLC (FIG) and its subsidiaries Trinity Disposal & Trucking, LLC and Trinity Disposal Wells, LLC. | ||
Frontier operates in the oilfield service industry and is primarily involved in the transportation and disposal of saltwater and other oilfield fluids in Texas. Frontier owns and operates eleven disposal wells in Texas. Six of these disposal wells are located in the Barnett Shale region in north central Texas and five of these wells are located in east Texas near the Louisiana border. | |||
Prior to March 31, 2015, the Company had one customer which represented approximately 70% and 48% of its revenue for the three months ended March 31, 2015 and March 31, 2014, respectively. As previously reported in the Company’s Annual Report on Form 10-K, the Company’s Master Services Agreement (“MSA”) with this customer expired on March 31, 2015 and the customer informed Frontier it was not renewing the MSA. As a result of the loss of this customer, the Company’s revenues will be significantly and negatively affected. Management is currently seeking additional business from new and existing customers to offset the loss of this significant customer’s volumes and revenues. In the near term, management is reducing employee headcount and other non-essential expenses to address the implications of the loss of this business volume. Management expects the near term operational and financial results to reflect significantly lower revenues, losses from operations and negative cash flows beginning in April 2015. If the Company is unable to replace this customer’s business or is unable to do so in a cost effective manner, the Company could explore other options, including the possible sale of certain assets, discontinuing certain lines of business altogether or entering into new lines of business. |
GOING_CONCERN
GOING CONCERN | 3 Months Ended | ||
Mar. 31, 2015 | |||
Going Concern | |||
GOING CONCERN | 3 | GOING CONCERN | |
The Company’s financial statements are prepared using U.S. 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, has an accumulated deficit and working capital deficiency. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. As a result, our auditors issued an audit opinion with respect to our 2014 annual financial statements which included a statement describing our going concern status. | |||
In order to continue as a going concern and achieve a profitable level of operations, the Company will need, among other things, to increase its business volume and grow revenues, reduce its operating expenses, raise additional capital resources and develop new and stable sources of revenue sufficient to meet its operating expenses. | |||
The Company’s ability to continue as a going concern will be dependent upon management’s ability to successfully implement the steps described in the preceding paragraph and achieve 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. The Company’s continued existence will ultimately be dependent on its ability to generate sufficient cash flows to support its operations as well as provide sufficient resources to retire existing liabilities on a timely basis. The Company faces significant risk in implementing its business plan and there can be no assurance that financing for its operations and business plan will be available or, if available, such financing will be on satisfactory terms. |
SUMMARY_OF_SELECTED_ACCOUNTING
SUMMARY OF SELECTED ACCOUNTING POLICIES | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Accounting Policies [Abstract] | |||||||||
SUMMARY OF SELECTED ACCOUNTING POLICIES | 4 | SUMMARY OF SELECTED ACCOUNTING POLICIES | |||||||
New Accounting Pronouncements | |||||||||
In April 2015, the FASB issued an accounting pronouncement ASU 2015-3 related to the presentation of debt issuance costs (FASB ASC Subtopic 835-30). This standard will require debt issuance costs related to a recognized debt liability to be presented on the balance sheet as a direct deduction from the debt liability rather than as an asset. These costs will continue to be amortized to interest expense using the effective interest method. This pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015, and retrospective adoption is required. We will adopt this pronouncement for our fiscal year beginning January 1, 2016. We do not expect this pronouncement to have a material effect on our consolidated financial statements. | |||||||||
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. | |||||||||
Earnings Per Share (EPS) | |||||||||
Basic earnings per common share are calculated by dividing net income or loss by the weighted average number of shares outstanding during the period. Diluted earnings per common share are calculated by adjusting outstanding shares, assuming conversion of all potentially dilutive stock options and warrants. The computation of diluted EPS does not assume conversion, exercise, or contingent issuance of shares that would have an anti-dilutive 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. The table below sets forth the reconciliation for net loss and weighted average shares used for calculating basic and diluted earnings per share. | |||||||||
Three Months Ended March 31, | |||||||||
2015 | 2014 | ||||||||
Earnings (numerator) | |||||||||
Net income (loss) | $ | 1,706,999 | $ | (1,469,394 | ) | ||||
Preferred stock dividends | (110,654 | ) | (37,026 | ) | |||||
Net income (loss) available to common shareholders | $ | 1,596,345 | $ | (1,506,420 | ) | ||||
Shares (denominator) | |||||||||
Weighted average common shares outstanding (basic) | 5,457,486 | 5,608,303 | |||||||
Effect of employee stock options | 21,000 | — | |||||||
Effect of preferred stock issuance | 5,896,250 | — | |||||||
Weighted average number of common shares outstanding - assuming dilution | 11,374,736 | 5,608,303 | |||||||
Earnings (loss) per share from continuing operations | |||||||||
Basic | $ | 0.29 | $ | (0.27 | ) | ||||
Diluted | $ | 0.14 | $ | (0.27 | ) | ||||
Property and Equipment | |||||||||
During the three months ended March 31, 2014, the Company disposed of property and equipment with a cost of $548,000 and accumulated depreciation of $79,000. The Company received total proceeds of approximately $473,000 of which approximately $308,000 was paid directly to the lender which had financed the purchase of such property and equipment. The Company recognized a gain of $3,467 in the accompanyingconsolidated statements of operations as a result of such disposition. |
STOCK_BASED_COMPENSATION
STOCK BASED COMPENSATION | 3 Months Ended | ||||||||||||||||||
Mar. 31, 2015 | |||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||
STOCK BASED COMPENSATION | 5 | STOCK BASED COMPENSATION | |||||||||||||||||
Under the terms of the Company’s employment agreement with one of its officers, the officer is eligible to receive a grant of 6,250 shares of the Company’s common stock per quarter and a grant of 1,250 shares of the Company’s common stock times the number of years of completed service issued annually. In addition, certain officers are eligible to receive options to purchase up to 3,750 shares 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. | |||||||||||||||||||
The Board of Directors of the Company elected to suspend all stock based compensation in 2014 and 2015 as part of the Company’s cost cutting and restructuring measures. | |||||||||||||||||||
Summary Stock Compensation Table | |||||||||||||||||||
A summary of the status of the Company’s option grants as of March 31, 2015 and December 31, 2014 and the changes during the periods then ended is presented below: | |||||||||||||||||||
Shares | Weighted-Average | Weighted Average | Aggregate | ||||||||||||||||
Exercise Price | Remaining | Intrinsic | |||||||||||||||||
Contractual Term | Value | ||||||||||||||||||
(in Years) | |||||||||||||||||||
Outstanding December 31, 2014 | 150,000 | $ | 1.58 | 1.11 | $ | 242,850 | |||||||||||||
Granted | — | — | — | — | |||||||||||||||
Exercised | — | — | — | — | |||||||||||||||
Forfeited | (45,000 | ) | 2.25 | — | (101,250 | ) | |||||||||||||
Outstanding March 31, 2015 | 105,000 | $ | 1.35 | 0.47 | $ | 141,600 | |||||||||||||
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 stock option grants at March 31, 2015 and the weighted average grant date fair value is presented below: | |||||||||||||||||||
Weighted Average | Weighted Average | ||||||||||||||||||
Grant Date | Grant Date | ||||||||||||||||||
Shares | Fair Value per Share | Fair Value | |||||||||||||||||
Vested | 105,000 | $ | 0.56 | $ | 59,100 | ||||||||||||||
Nonvested | — | — | — | ||||||||||||||||
Total | 105,000 | $ | 0.56 | $ | 59,100 | ||||||||||||||
BORROWINGS
BORROWINGS | 3 Months Ended | ||||
Mar. 31, 2015 | |||||
Debt Disclosure [Abstract] | |||||
BORROWINGS | 6 | BORROWINGS | |||
Borrowings as of March 31, 2015 were as follows: | |||||
March 31, | |||||
2015 | |||||
Revolving credit facility and term loan (a) | $ | 2,510,963 | |||
ICON term note (b) | 4,330,820 | ||||
Loans from stockholder (c) (d) | 2,870,484 | ||||
Installment notes (e) | 149,340 | ||||
Total debt | 9,861,607 | ||||
Less current portion | (9,769,778 | ) | |||
Total long-term debt | $ | 91,829 | |||
In connection with the acquisition of CTT, the Company and its subsidiaries entered into loan agreements effective July 23, 2012 with Capital One Business Credit Corp. (the “Senior Loan Facility”) and ICON Investments (ICON) the proceeds of which were primarily used for the cash portion of the acquisition. On April 11, 2014 an accredited investor, who is also a significant stockholder in the Company, purchased the Senior Loan Facility and related collateral from Capital One and assumed all the existing terms and conditions of the Credit Agreement and Forbearance Agreements. On December 27, 2014 an affiliate of an accredited investor who is also a stockholder purchased the note payable to ICON. The accredited investor assumed the terms and conditions of the ICON note agreement. | |||||
On February 12, 2015, we executed a settlement agreement in connection with litigation which had been asserted against certain of our officers of the Company and for which we were obligated to indemnify such officers. The effect of the settlement agreement was the cancellation of two subordinated promissory notes totaling $3,665,263. The settlement resulted in the reduction of the Company’s indebtedness by $2,082,408. These promissory notes were owed to the former owners of CTT and related to the Company’s acquisition of CTT. The settlement resulted in a one-time gain on extinguishment of debt of $2,082,408 in the three months ended March 31, 2015. | |||||
a. | The Senior Loan Facility has a maturity date of July 23, 2017 and a default interest rate which is the base rate plus the applicable margin plus 2% (6.75% and 7.75%, respectively as of March 31, 2015). The term loan portion of the Senior Loan Facility requires monthly payments of $100,000 plus interest. The Senior Loan Facility 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 the Senior Loan Facility has a subordinated secured position to ICON. As of March 31, 2015, the Company was not in compliance with its debt covenants under the Senior Loan Facility and the lender had not exercised its rights under the Senior Loan Facility. The outstanding balance of the Senior Loan Facility is included in current liabilities at March 31, 2015 due to the fact that the Company was not in compliance with its debt covenants, including the timely payment of interest. | ||||
b. | The Company and its subsidiaries entered into a Term Loan, Guaranty and Security Agreement on July 23, 2012 with ICON in the amount of $5 million (the “Loan Agreement”). The Loan Agreement provides for an annual interest rate of 14% with monthly payments of interest and with repayment of the principal and all accrued but unpaid interest due on February 1, 2018. The Loan Agreement provides the lender with a senior secured position on the Company’s disposal wells and a subordinated position to the Senior Loan Facility on all other Company properties and assets. On December 27, 2014 an affiliate of an accredited investor who is also a stockholder purchased the note payable under the Loan Agreement. The accredited investor assumed the terms and conditions of the Loan Agreement. As of March 31, 2015, the Company was not in compliance with its debt covenants under the Loan Agreement and the lender had not exercised its rights under the Loan Agreement. The outstanding balance of the note pursuant to the Loan Agreement is included in current liabilities at March 31, 2015 due to the fact that the Company was not in compliance with its debt covenants, including the timely payment of interest. | ||||
c. | On May 27, 2014 an accredited investor, who is also a stockholder in the Company, entered into a loan agreement with the Company for the amount of $2,783,484. The note bears interest at 9% per annum. The terms of the note requires the cash payment of one half of the interest cost monthly (4.5% per annum), and the remaining half is accrued as payment in kind interest. The note and all accrued interest are due and payable in November 2015. | ||||
d. | On March 21, 2014 the CEO of the Company, who is also a stockholder in the Company entered into a promissory note agreement whereby the CEO loaned the Company $87,000. The promissory note has an interest rate of 7% per annum. The note was to have been repaid in installments throughout the year ended December 31, 2014 with a portion of the repayment conditioned upon the sale of certain of the Company’s disposal wells. The principle and interest on the note payable to the CEO is past due according to its terms. | ||||
e. | The Company has an installment loan with a principal balance of approximately $149,340 which was used to acquire property and equipment for use in the Company’s operations. The loan matures in September 2017 and has an interest rate of 5.69% and monthly minimum payments of $5,377. |
COMMITMENTS_AND_CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended | ||
Mar. 31, 2015 | |||
Commitments and Contingencies Disclosure [Abstract] | |||
COMMITMENTS AND CONTINGENCIES | 7 | COMMITMENTS AND CONTINGENCIES | |
a. | The Company is obligated for $1,307,700 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, 2018 with one year renewal options. The aggregate monthly lease payment for the disposal well leases is $10,800. | ||
b. | The Company is a named defendant along with the previously named officers in certain litigation; Dynamic Technical Solutions Corp. and Ola Investments, LLC, V. Frontier Oilfield Services, Inc., Timothy Burroughs and Bernard R. “Dick” O’Donnell; CAUSE NO. CV14-04-234 in the 271st Judicial District Wise County, Texas wherein the Plaintiffs allege they have been damaged by the failure of the Company to complete a disposal well in a joint venture between the parties in the sum of $300,000. The Company is defending the lawsuit and believes that the lawsuit is without merit. | ||
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. |
SUMMARY_OF_SELECTED_ACCOUNTING1
SUMMARY OF SELECTED ACCOUNTING POLICIES (Policies) | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Accounting Policies [Abstract] | |||||||||
New Accounting Pronouncements | New Accounting Pronouncements | ||||||||
In April 2015, the FASB issued an accounting pronouncement ASU 2015-3 related to the presentation of debt issuance costs (FASB ASC Subtopic 835-30). This standard will require debt issuance costs related to a recognized debt liability to be presented on the balance sheet as a direct deduction from the debt liability rather than as an asset. These costs will continue to be amortized to interest expense using the effective interest method. This pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015, and retrospective adoption is required. We will adopt this pronouncement for our fiscal year beginning January 1, 2016. We do not expect this pronouncement to have a material effect on our consolidated financial statements. | |||||||||
Principles of Consolidation | 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. | |||||||||
Earnings Per Share (EPS) | Earnings Per Share (EPS) | ||||||||
Basic earnings per common share are calculated by dividing net income or loss by the weighted average number of shares outstanding during the period. Diluted earnings per common share are calculated by adjusting outstanding shares, assuming conversion of all potentially dilutive stock options and warrants. The computation of diluted EPS does not assume conversion, exercise, or contingent issuance of shares that would have an anti-dilutive 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. The table below sets forth the reconciliation for net loss and weighted average shares used for calculating basic and diluted earnings per share. | |||||||||
Three Months Ended March 31, | |||||||||
2015 | 2014 | ||||||||
Earnings (numerator) | |||||||||
Net income (loss) | $ | 1,706,999 | $ | (1,469,394 | ) | ||||
Preferred stock dividends | (110,654 | ) | (37,026 | ) | |||||
Net income (loss) available to common shareholders | $ | 1,596,345 | $ | (1,506,420 | ) | ||||
Shares (denominator) | |||||||||
Weighted average common shares outstanding (basic) | 5,457,486 | 5,608,303 | |||||||
Effect of employee stock options | 21,000 | — | |||||||
Effect of preferred stock issuance | 5,896,250 | — | |||||||
Weighted average number of common shares outstanding - assuming dilution | 11,374,736 | 5,608,303 | |||||||
Earnings (loss) per share from continuing operations | |||||||||
Basic | $ | 0.29 | $ | (0.27 | ) | ||||
Diluted | $ | 0.14 | $ | (0.27 | ) | ||||
Property and Equipment | Property and Equipment | ||||||||
During the three months ended March 31, 2014, the Company disposed of property and equipment with a cost of $548,000 and accumulated depreciation of $79,000. The Company received total proceeds of approximately $473,000 of which approximately $308,000 was paid directly to the lender which had financed the purchase of such property and equipment. The Company recognized a gain of $3,467 in the accompanyingconsolidated statements of operations as a result of such disposition. |
SUMMARY_OF_SELECTED_ACCOUNTING2
SUMMARY OF SELECTED ACCOUNTING POLICIES (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Accounting Policies [Abstract] | |||||||||
Schedule of the reconciliation for net loss and weighted average shares used for calculating basic and diluted earnings per share | The table below sets forth the reconciliation for net loss and weighted average shares used for calculating basic and diluted earnings per share. | ||||||||
Three Months Ended March 31, | |||||||||
2015 | 2014 | ||||||||
Earnings (numerator) | |||||||||
Net income (loss) | $ | 1,706,999 | $ | (1,469,394 | ) | ||||
Preferred stock dividends | (110,654 | ) | (37,026 | ) | |||||
Net income (loss) available to common shareholders | $ | 1,596,345 | $ | (1,506,420 | ) | ||||
Shares (denominator) | |||||||||
Weighted average common shares outstanding (basic) | 5,457,486 | 5,608,303 | |||||||
Effect of employee stock options | 21,000 | — | |||||||
Effect of preferred stock issuance | 5,896,250 | — | |||||||
Weighted average number of common shares outstanding - assuming dilution | 11,374,736 | 5,608,303 | |||||||
Earnings (loss) per share from continuing operations | |||||||||
Basic | $ | 0.29 | $ | (0.27 | ) | ||||
Diluted | $ | 0.14 | $ | (0.27 | ) |
STOCK_BASED_COMPENSATION_Table
STOCK BASED COMPENSATION (Tables) | 3 Months Ended | ||||||||||||||||||
Mar. 31, 2015 | |||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||
Schedule of status of the Company's option grants | A summary of the status of the Company’s option grants as of March 31, 2015 and December 31, 2014 and the changes during the periods then ended is presented below: | ||||||||||||||||||
Shares | Weighted-Average | Weighted Average | Aggregate | ||||||||||||||||
Exercise Price | Remaining | Intrinsic | |||||||||||||||||
Contractual Term | Value | ||||||||||||||||||
(in Years) | |||||||||||||||||||
Outstanding December 31, 2014 | 150,000 | $ | 1.58 | 1.11 | $ | 242,850 | |||||||||||||
Granted | — | — | — | — | |||||||||||||||
Exercised | — | — | — | — | |||||||||||||||
Forfeited | (45,000 | ) | 2.25 | — | (101,250 | ) | |||||||||||||
Outstanding March 31, 2015 | 105,000 | $ | 1.35 | 0.47 | $ | 141,600 | |||||||||||||
Schedule of vested and nonvested option grants | A summary of the status of the Company’s vested and non-vested stock option grants at March 31, 2015 and the weighted average grant date fair value is presented below: | ||||||||||||||||||
Weighted Average | Weighted Average | ||||||||||||||||||
Grant Date | Grant Date | ||||||||||||||||||
Shares | Fair Value per Share | Fair Value | |||||||||||||||||
Vested | 105,000 | $ | 0.56 | $ | 59,100 | ||||||||||||||
Nonvested | — | — | — | ||||||||||||||||
Total | 105,000 | $ | 0.56 | $ | 59,100 | ||||||||||||||
BORROWINGS_Tables
BORROWINGS (Tables) | 3 Months Ended | ||||
Mar. 31, 2015 | |||||
Debt Disclosure [Abstract] | |||||
Schedule of borrowings | Borrowings as of March 31, 2015 were as follows: | ||||
March 31, | |||||
2015 | |||||
Revolving credit facility and term loan (a) | $ | 2,510,963 | |||
ICON term note (b) | 4,330,820 | ||||
Loans from stockholder (c) (d) | 2,870,484 | ||||
Installment notes (e) | 149,340 | ||||
Total debt | 9,861,607 | ||||
Less current portion | (9,769,778 | ) | |||
Total long-term debt | $ | 91,829 |
SUMMARY_OF_SELECTED_ACCOUNTING3
SUMMARY OF SELECTED ACCOUNTING POLICIES (Details Narative) (USD $) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Accounting Policies [Abstract] | ||
Disposals of property and equipment | $548,000 | |
Accumulated depreciation related to property and equipment disposed | 79,000 | |
Total proceeds from sale of property and equipment | 473,000 | |
Payments to lender from disposal | 308,000 | |
Gain on disposal of property and equipment | $3,467 |
SUMMARY_OF_SELECTED_ACCOUNTING4
SUMMARY OF SELECTED ACCOUNTING POLICIES (Details) (USD $) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Earnings (numerator) | ||
Net income (loss) | $1,706,999 | ($1,469,394) |
Preferred stock dividends | -110,654 | -37,026 |
Net income (loss) available to common shareholders from continuing operations | $1,596,345 | ($1,506,420) |
Shares (denominator) | ||
Weighted average common shares outstanding (basic) | 5,457,486 | 5,608,303 |
Effect of employee stock options | 21,000 | |
Effect of preferred stock issuance | 5,896,250 | |
Weighted average number of common shares outstanding - assuming dilution | 11,374,736 | 5,608,303 |
Earnings (loss) per share from continuing operations | ||
Basic (in per shares) | $0.29 | ($0.27) |
Diluted (in shares) | $0.14 | ($0.27) |
STOCK_BASED_COMPENSATION_Detai
STOCK BASED COMPENSATION (Details Narrative) | 3 Months Ended |
Mar. 31, 2015 | |
Share based compensation arrangement by share based payment award options exercise | 5 months 19 days |
Officer [Member] | |
Quarterly stock grants | 6,250 |
Additional annual stock grants, per year of service | 1,250 |
Right to purchase common stock | 3,750 |
Share based compensation arrangement by share based payment award options exercise | 2 years |
STOCK_BASED_COMPENSATION_Detai1
STOCK BASED COMPENSATION (Details 1) (USD $) | 3 Months Ended |
Mar. 31, 2015 | |
Number of shares | |
Beginning balance | 150,000 |
Forfeited | -45,000 |
Ending balance | 105,000 |
Weighted Average Exercise Price | |
Beginning balance | $1.58 |
Forfeited | $2.25 |
Ending balance | $1.35 |
Weighted Average Remaining Contractual Term | |
Beginning Balance | 1 year 1 month 9 days |
Ending Balance | 5 months 19 days |
Aggregate Intrinsic Value | |
Beginning Balance | $242,850 |
Forfeited | -101,250 |
Ending Balance | $141,600 |
STOCK_BASED_COMPENSATION_Detai2
STOCK BASED COMPENSATION (Details 2) (USD $) | 3 Months Ended |
Mar. 31, 2015 | |
Granted, Shares | 105,000 |
Weighted Average Grant Date Fair Value per Share | $0.56 |
Weighted Average Grant Date Fair Value | $59,100 |
Vested Option [Member] | |
Granted, Shares | 105,000 |
Weighted Average Grant Date Fair Value per Share | $0.56 |
Weighted Average Grant Date Fair Value | $59,100 |
BORROWINGS_Details
BORROWINGS (Details) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 | |
Long-term debt, net | |||
Total debt | $9,861,607 | ||
Less current portion | -9,769,778 | -10,363,094 | |
Total long-term debt | 91,829 | 1,594,795 | |
Revolving Credit Facility And Term Loan [Member] | |||
Long-term debt, net | |||
Total debt | 2,510,963 | [1] | |
Icon Term Note [Member] | |||
Long-term debt, net | |||
Total debt | 4,330,820 | [2] | |
Loans From Shareholder [Member] | |||
Long-term debt, net | |||
Total debt | 2,870,484 | [3],[4] | |
Installment Notes [Member] | |||
Long-term debt, net | |||
Total debt | $149,340 | [5] | |
[1] | The Senior Loan Facility has a maturity date of July 23, 2017 and a default interest rate which is the base rate plus the applicable margin plus 2% (6.75% and 7.75%, respectively as of March 31, 2015). The term loan portion of the Senior Loan Facility requires monthly payments of $100,000 plus interest. The Senior Loan Facility 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 the Senior Loan Facility has a subordinated secured position to ICON. As of March 31, 2015, the Company was not in compliance with its debt covenants under the Senior Loan Facility and the lender had not exercised its rights under the Senior Loan Facility. The outstanding balance of the Senior Loan Facility is included in current liabilities at March 31, 2015 due to the fact that the Company was not in compliance with its debt covenants, including the timely payment of interest. | ||
[2] | The Company and its subsidiaries entered into a Term Loan, Guaranty and Security Agreement on July 23, 2012 with ICON in the amount of $5 million (the "Loan Agreement"). The Loan Agreement provides for an annual interest rate of 14% with monthly payments of interest and with repayment of the principal and all accrued but unpaid interest due on February 1, 2018. The Loan Agreement provides the lender with a senior secured position on the Company's disposal wells and a subordinated position to the Senior Loan Facility on all other Company properties and assets. On December 27, 2014 an affiliate of an accredited investor who is also a stockholder purchased the note payable under the Loan Agreement. The accredited investor assumed the terms and conditions of the Loan Agreement. As of March 31, 2015, the Company was not in compliance with its debt covenants under the Loan Agreement and the lender had not exercised its rights under the Loan Agreement. The outstanding balance of the note pursuant to the Loan Agreement is included in current liabilities at March 31, 2015 due to the fact that the Company was not in compliance with its debt covenants, including the timely payment of interest. | ||
[3] | On May 27, 2014 an accredited investor, who is also a stockholder in the Company, entered into a loan agreement with the Company for the amount of $2,783,484. The note bears interest at 9% per annum. The terms of the note requires the cash payment of one half of the interest cost monthly (4.5% per annum), and the remaining half is accrued as payment in kind interest. The note and all accrued interest are due and payable in November 2015. | ||
[4] | On March 21, 2014 the CEO of the Company, who is also a stockholder in the Company entered into a promissory note agreement whereby the CEO loaned the Company $87,000. The promissory note has an interest rate of 7% per annum. The note was to have been repaid in installments throughout the year ended December 31, 2014 with a portion of the repayment conditioned upon the sale of certain of the Company's disposal wells. The principle and interest on the note payable to the CEO is past due according to its terms. | ||
[5] | The Company has an installment loan with a principal balance of approximately $149,340 which was used to acquire property and equipment for use in the Company's operations. The loan matures in September 2017 and has an interest rate of 5.69% and monthly minimum payments of $5,377. |
BORROWINGS_Details_Narrative
BORROWINGS (Details Narrative) (USD $) | 0 Months Ended | 3 Months Ended | |
Feb. 12, 2015 | Mar. 31, 2015 | Jul. 23, 2012 | |
Icon Term Note [Member] | |||
Debt face amount | $5,000,000 | ||
Debt Interest Rate | 14.00% | ||
Total Notes Payable [Member] | Chico Coffman Tank Trucks [Member] | |||
Repayments of debt | 3,665,263 | ||
Reduction indebtedness | 2,082,408 | ||
Installment Notes [Member] | |||
Loan payment amount | 5,377 | ||
Loan payment frequency | Monthly | ||
Debt face amount | 149,340 | ||
Debt Interest Rate | 5.69% | ||
Revolving Credit Facility And Term Loan [Member] | |||
Maturity Date | 23-Jul-17 | ||
Interest rate description | Base Rate Plus Applicable Margin Plus 2% | ||
Spread on variable rate basis | 2.00% | ||
Loan payment frequency | Monthly | ||
Unused commitment fee | 0.38% | ||
Revolving Credit Facility [Member] | |||
Debt Interest Rate | 6.75% | ||
Term Loan [Member] | |||
Debt Interest Rate | 7.75% | ||
TermLoanMember | |||
Loan payment amount - principal | 100,000 | ||
Accredited Investor Loan [Member] | |||
Debt face amount | 2,783,484 | ||
Debt Interest Rate | 9.00% | ||
Debt oustanding | 2,783,484 | ||
Interest rate terms | The terms of the note requires the cash payment of one half of the interest cost monthly (4.5% per annum), and the remaining half is accrued as payment in kind interest. | ||
Promissory Note Agreement With CEO [Member] | |||
Debt face amount | $87,000 | ||
Debt Interest Rate | 7.00% |
COMMITMENTS_AND_CONTINGENCIES_
COMMITMENTS AND CONTINGENCIES (Details Narrative) (USD $) | 3 Months Ended |
Mar. 31, 2015 | |
Number | |
Use of Land Leases [Member] | |
Total lease obligation | $1,307,700 |
Number of disposal wells in land lease | 7 |
Number of leases with extensions for period of time | 3 |
Number of options to renew leases | 2 |
Monthly lease payment for disposal wells leases | 10,800 |
Use of Land Lease #1 [Member] | |
Lease renewal term | 10 years |
Use of Land Lease #3 [Member] | |
Lease renewal term | 1 year |
Case1 [Member] | |
Estimate of possible loss | $300,000 |