Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2015 | Nov. 13, 2015 | |
Document And Entity Information | ||
Entity Registrant Name | FRONTIER OILFIELD SERVICES INC | |
Entity Central Index Key | 1,108,645 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2015 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
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 | 11,537,276 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,015 |
CONSOLIDATED BALANCE SHEETS (UN
CONSOLIDATED BALANCE SHEETS (UNAUDITED) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Current Assets: | ||
Cash | $ 423,320 | $ 114,698 |
Restricted Cash | 77,614 | 77,614 |
Accounts receivable, net | 36,600 | 930,841 |
Inventory | 206,838 | |
Current portion of capitalized loan fees | 206,765 | 242,092 |
Total current assets | 744,299 | 1,572,083 |
Property and equipment, at cost | 9,166,929 | 17,875,469 |
Less: accumulated depreciation | (3,622,465) | (6,855,473) |
Property and equipment, net | 5,544,464 | 11,019,996 |
Intangibles, net | 500,000 | 3,084,698 |
Capitalized loan fees, net of current portion | 229,276 | 383,204 |
Deposits | 27,302 | 32,302 |
Total Assets | 7,045,341 | 16,092,283 |
Current Liabilities: | ||
Current maturities of long-term debt, primarily stockholders | 8,582,145 | 10,363,094 |
Accounts payable | 2,228,502 | 3,403,263 |
Accrued liabilities | 1,547,949 | 857,854 |
Total current liabilities | 12,358,596 | 14,624,211 |
Long-term debt, less current maturities | 76,405 | 1,594,795 |
Total Liabilities | $ 12,435,001 | $ 16,219,006 |
Commitments and Contingencies (Note 7) | ||
Stockholders' Deficit: | ||
Preferred stock to be issued | $ 450,000 | |
Preferred stock 2013 Series A- $.01 par value; authorized 10,000,000; 2,850,000 issued and outstanding as of December 31, 2014 | 28,500 | |
Common stock- $.01 par value; authorized 100,000,000 shares; 11,537,276 and 5,457,486 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively | $ 115,373 | 54,575 |
Additional paid-in capital | 32,692,723 | 32,142,717 |
Accumulated deficit | (38,197,756) | (32,802,515) |
Total stockholders' deficit | (5,389,660) | (126,723) |
Total Liabilities and Stockholders' Deficit | $ 7,045,341 | $ 16,092,283 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Sep. 30, 2015 | Dec. 31, 2014 |
Statement of Financial Position [Abstract] | ||
Preferred stock, par value | $ 0.01 | |
Preferred stock, shares authorized | 10,000,000 | |
Preferred stock, shares issued | 2,850,000 | |
Preferred stock, shares outstanding | 2,850,000 | |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 11,537,276 | 5,457,486 |
Common stock, shares outstanding | 11,537,276 | 5,457,486 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Income Statement [Abstract] | ||||
Revenues, net of discounts | $ 235,393 | $ 3,571,642 | $ 3,512,681 | $ 12,867,392 |
Costs and expenses: | ||||
Direct operating costs | 320,169 | 2,241,190 | 2,121,625 | 9,072,350 |
Indirect operating costs | 223,807 | 1,094,294 | 766,656 | 3,226,608 |
General and administrative | 185,105 | 240,548 | 512,780 | 1,161,040 |
Depreciation and amortization | $ 581,551 | $ 609,841 | 1,773,731 | $ 1,930,060 |
Write off of obsolete inventory | 155,735 | |||
Loss on impairment of property and equipment and intangible assets | $ 3,443,500 | 5,603,346 | ||
Total costs and expenses | 4,754,132 | $ 4,185,873 | 10,933,873 | $ 15,390,058 |
Operating loss | (4,518,739) | (614,231) | (7,421,192) | (2,522,666) |
Interest expense | 320,090 | 915,360 | 975,980 | 1,214,016 |
(Gain) loss on disposal of property and equipment | (497,486) | $ 871,300 | (489,749) | 893,933 |
(Gain) loss on extinguishment of debt | 851,492 | (2,562,470) | 4,453 | |
Loss before provision for income taxes | (5,192,835) | $ (2,400,891) | (5,344,953) | (4,635,068) |
Provision for state income taxes | 1,298 | 45,000 | 1,298 | 121,564 |
Net loss | $ (5,194,133) | $ (2,445,891) | $ (5,346,251) | $ (4,756,632) |
Net loss per common share - basic and diluted | $ (0.45) | $ (0.42) | $ (0.68) | $ (0.83) |
Weighted Average Common Shares Outstanding: | ||||
Basic and Diluted | 11,537,277 | 5,894,986 | 7,951,759 | 5,800,475 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | |
Cash Flows From Operating Activities: | ||
Net loss | $ (5,346,251) | $ (4,756,632) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||
Depreciation and amortization | 1,773,731 | $ 1,930,060 |
Write off of obsolete inventory | 155,735 | |
Loss on impairment of property and equipment | $ 5,603,346 | |
Issuance of common stock for services | $ 74,000 | |
(Gain) loss on extinguishment of debt | $ (2,562,470) | 4,453 |
Payment of expenses by stockholder in exchange for purchase of preferred stock | 223,743 | |
(Gain) loss on disposal of property and equipment | $ (489,749) | 893,933 |
Amortization of capitalized loan fees | 189,255 | 221,312 |
Decrease (increase) in operating assets: | ||
Accounts receivable | 894,241 | 930,826 |
Other current assets | $ 51,103 | 38,006 |
Prepaid expenses | 1,339,157 | |
Deposits | $ 5,000 | (3,265) |
Increase (decrease) in operating liabilities: | ||
Accounts payable | (694,698) | (505,115) |
Accrued liabilities | $ 773,409 | (349,338) |
Financed insurance premiums payable | (1,119,213) | |
Net cash provided by (used in) operating activities | $ 352,652 | (1,078,073) |
Cash Flows From Investing Activities: | ||
Proceeds from sale of property and equipment | 1,400 | 513,336 |
Net cash provided by investing activities | $ 1,400 | 513,336 |
Cash Flows From Financing Activities: | ||
Proceeds from preferred stock issuance | 216,257 | |
Net proceeds from stockholder loans | 1,294,484 | |
Net change in line of credit | (1,183,818) | |
Proceeds on long term debt | $ 420,527 | |
Payments on long term debt | $ (45,430) | |
Net cash provided by (used in) financing activities | (45,430) | $ 747,450 |
Net increase in cash | 308,622 | 182,713 |
Cash at beginning of the period | 114,698 | 108,360 |
Cash at end of the period | 423,320 | 291,073 |
Supplemental Cash Flow Disclosures | ||
Interest paid | $ 138,975 | 985,689 |
Supplemental Schedule of Non-Cash Investing and Financing Activities | ||
Convertible notes conversion | $ 53,500 | |
Conversion of preferred stock and dividend payable into common stock | $ 172,054 | |
Increase in dividend payable recorded in accrued liabilities | 48,990 | $ 25,896 |
Proceeds from disposal of property and equipment paid directly to lender | $ 1,171,501 | $ 308,870 |
BASIS OF PRESENTATION
BASIS OF PRESENTATION | 9 Months Ended |
Sep. 30, 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 adjustments, unless otherwise indicated) 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 | 9 Months Ended |
Sep. 30, 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 over 50% of its revenue. As previously reported in the Companys Annual Report on Form 10-K, the Companys 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 Companys revenues since March 31, 2015 have been significantly reduced. Management is currently seeking additional business from new and existing customers to offset the loss of this significant customers volumes and revenues. |
GOING CONCERN
GOING CONCERN | 9 Months Ended |
Sep. 30, 2015 | |
Going Concern | |
GOING CONCERN | 3. GOING CONCERN The Companys financial statements are prepared using U.S. generally accepted accounting principles (U.S. GAAP) 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 Companys 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 Companys ability to continue as a going concern will be dependent upon managements ability to successfully implement managements plans to pursue additional business volumes from new and existing customers, reduce indebtedness through sales of non-performing assets and conversions of debt to equity, and rationalize the Companys cost structure to 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 Companys 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 | 9 Months Ended |
Sep. 30, 2015 | |
Accounting Policies [Abstract] | |
SUMMARY OF SELECTED ACCOUNTING POLICIES | 4. SUMMARY OF SELECTED ACCOUNTING POLICIES New Accounting Pronouncements In May 2014, Financial Accounting Standards Board (FASB) issued new guidance ASU 2014-09, Revenue from Contracts with Customers (Topic 606)) to provide a framework that replaces the existing revenue recognition guidance. ASU 2014-09 is the result of a joint effort by the FASB and the International Accounting Standards Board intended to clarify the principles for recognizing revenue and to develop a common revenue standard for U.S. GAAP and International Financial Reporting Standards. ASU 2014-09 provides that an entity should recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 was originally intended to be effective for annual periods and interim periods within that reporting period beginning after December 15, 2016, for public business entities. In August 2015, FASB issued ASU 2015-14 to defer the effective date of ASU 2014-09 for all entities by one year. Public business entities will apply the guidance in ASU 2014-09 to annual reporting periods beginning after December 15, 2017 and interim periods within that reporting period. Early adoption of ASU 2014-09 is permitted after December 15, 2016. The Company is currently assessing the future impact of this ASU. In April 2015, 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 (Loss) 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. Currently there are 30,000 stock options, which have been excluded from EPS that could potentially have a dilutive effect on EPS in the future. 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 September 30, Nine Months Ended September 30, 2015 2014 2015 2014 Earnings (numerator) Net loss $ (5,194,133 ) $ (2,445,891 ) $ (5,346,251 ) $ (4,756,632 ) Preferred stock dividends (20,114 ) (48,990 ) (62,923 ) Net loss available to common shareholders $ (5,194,133 ) $ (2,466,005 ) $ (5,395,241 ) $ (4,819,555 ) Shares (denominator) Weighted average common shares outstanding 11,537,277 5,894,986 7,951,759 5,800,475 Earnings (loss) per share Basic and diluted $ (0.45 ) $ (0.42 ) $ (0.68 ) $ (0.83 ) Property and Equipment During the nine months ended September 30, 2015 and 2014, the Company disposed of property and equipment with a net book value of $683,000 and $1.5 million respectively. The Company received total proceeds of approximately $1.2 million and $625,000 in 2015 and 2014, of which approximately $1.2 million and $308,000 was paid in 2015 and 2014, respectively directly to the senior secured lenders. As a result of the dispositions of property and equipment the Company recognized a gain approximately $490,000 in the consolidated statement of operations for the nine months ended September 30, 2015 and a loss of $894,000 for the nine months ended September 30 2014. Impairment of Long-lived Assets When facts and circumstances indicate that the carrying value of long-lived assets may not be recoverable, the Company assesses the recoverability of the carrying value by estimating the future cash flows expected to result from the use of the asset and its eventual disposition. If this estimate is less than the carrying amount, the Company recognizes an impairment loss. The impairment loss recognized, if any, is the amount by which the carrying amount of the asset (or asset group) exceeds the fair value. For the nine months ended September 30, 2015, we determined the carrying value of our property and equipment and intangible assets was greater than their estimated fair value and recorded an impairment loss of $5,603,346. The Company estimated fair value of the fixed assets using the comparable sales method and fair value of the intangibles using discounted cash flow method. Revision of Prior Quarter Estimates Certain estimates in the prior quarter financial statements have been revised to conform to period to date actual. The Company realized a reduction in certain liabilities for accounts payable that resulted in an estimated one-time gain on extinguishment of debt of $1,331,554 for the six months ended June 30, 2015. This amount had been subsequently revised to $480,062 for the nine months ended September 30, 2015. Fair Value Measurements U.S. GAAP defines fair value as the price that would be received for an asset or paid to transfer a liability (exit price) in an orderly transaction between market participants in the principal or most advantageous market for the asset or liability. U.S. GAAP also classifies the inputs used to measure fair value into the following hierarchy: Level 1: Quoted prices in active markets for identical assets or liabilities. Level 2: Quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability. Level 3: Unobservable inputs for the asset or liability. The following table sets forth the non-financial items measured at fair value on a non-recurring basis as of September 30, 2015. All items were categorized as Level 3 within the fair value hierarchy. Description Balance Sheet Location September 30, 2015 Categorization Well permits Intangibles, net $ 500,000 Level 3 Disposal wells Property and equipment, net $ 5,000,000 Level 3 |
STOCK BASED COMPENSATION
STOCK BASED COMPENSATION | 9 Months Ended |
Sep. 30, 2015 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
STOCK BASED COMPENSATION | 5. STOCK BASED COMPENSATION The Board of Directors of the Company elected to suspend all stock based compensation in 2015 and 2014 as part of the Companys cost cutting and restructuring measures. Summary Stock Compensation Table A summary of the status of the Companys option grants as of September 30, 2015 and December 31, 2014 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, 2014 150,000 $ 1.58 1.11 $ 242,850 Granted Exercised Forfeited (120,000 ) 1.28 (154,050 ) Outstanding September 30, 2015 30,000 $ 2.96 0.25 $ 88,800 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 Companys vested and non-vested stock option grants at September 30, 2015 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 30,000 $ 1.23 $ 36,900 Nonvested Total 30,000 $ 1.23 $ 36,900 |
BORROWINGS
BORROWINGS | 9 Months Ended |
Sep. 30, 2015 | |
Debt Disclosure [Abstract] | |
BORROWINGS | 6. BORROWINGS Borrowings as of September 30, 2015 were as follows: September 30, 2015 Senior loan facility and term loan (a) $ 1,339,462 Senior term note (b) 4,330,820 Loans from stockholder (c) (d) 2,870,484 Installment notes (e) 117,784 Total debt 8,658,550 Less current portion (8,582,145 ) Total long-term debt $ 76,405 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 Companys indebtedness by $2,082,408. These promissory notes were owed to the former owners of CTT and related to the Companys acquisition of CTT. The settlement resulted in a one-time gain on extinguishment of debt of $2,082,408 in the nine months ended September 30, 2015. The Company realized a reduction in certain liabilities for accounts payable with certain vendors through a combination of settlements and write offs of dormant accounts. This activity resulted in a one-time gain on extinguishment of debt of $480,062 in the nine months ended September 30, 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 September 30, 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 Companys properties and assets except for its disposal wells wherein the Senior Loan Facility has a subordinated secured position an accredited investor. 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 Bank N.A. and assumed all the existing terms and conditions of the Credit Agreement and Forbearance Agreements. As of September 30, 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 September 30, 2015 due to the fact that the Company was not in compliance with its debt covenants, including the timely payment of interest and principal. 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 Companys 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. c. On May 27, 2014 an accredited investor, who is also a stockholder in the Company, entered into a loan agreement with the Company in 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 27, 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 Companys disposal wells. All of the principal and accrued 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 $117,784 which was used to acquire property and equipment for use in the Companys 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 | 9 Months Ended |
Sep. 30, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | 7. COMMITMENTS AND CONTINGENCIES a. The Company is obligated for approximately $1.3 million 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 $10,890. 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 ODonnell; 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 Companys 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 Companys consolidated financial position, results of operations and cash flows. |
EQUITY TRANSACTIONS
EQUITY TRANSACTIONS | 9 Months Ended |
Sep. 30, 2015 | |
Equity [Abstract] | |
EQUITY TRANSACTIONS | 8. EQUITY TRANSACTIONS a. On June 10, 2015, the Company converted 2,850,000 shares of 2013 Series A Convertible Preferred Stock and 1,125,000 shares of 2014 Series A 7% Preferred Stock, including all accrued and unpaid dividends into common stock. Total common stock issued was 6,079,790 shares. |
SUMMARY OF SELECTED ACCOUNTIN14
SUMMARY OF SELECTED ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2015 | |
Accounting Policies [Abstract] | |
New Accounting Pronouncements | New Accounting Pronouncements In May 2014, Financial Accounting Standards Board (FASB) issued new guidance ASU 2014-09, Revenue from Contracts with Customers (Topic 606)) to provide a framework that replaces the existing revenue recognition guidance. ASU 2014-09 is the result of a joint effort by the FASB and the International Accounting Standards Board intended to clarify the principles for recognizing revenue and to develop a common revenue standard for U.S. GAAP and International Financial Reporting Standards. ASU 2014-09 provides that an entity should recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 was originally intended to be effective for annual periods and interim periods within that reporting period beginning after December 15, 2016, for public business entities. In August 2015, FASB issued ASU 2015-14 to defer the effective date of ASU 2014-09 for all entities by one year. Public business entities will apply the guidance in ASU 2014-09 to annual reporting periods beginning after December 15, 2017 and interim periods within that reporting period. Early adoption of ASU 2014-09 is permitted after December 15, 2016. The Company is currently assessing the future impact of this ASU. In April 2015, 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 (Loss) 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. Currently there are 30,000 stock options, which have been excluded from EPS that could potentially have a dilutive effect on EPS in the future. 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 September 30, Nine Months Ended September 30, 2015 2014 2015 2014 Earnings (numerator) Net loss $ (5,194,133 ) $ (2,445,891 ) $ (5,346,251 ) $ (4,756,632 ) Preferred stock dividends (20,114 ) (48,990 ) (62,923 ) Net loss available to common shareholders $ (5,194,133 ) $ (2,466,005 ) $ (5,395,241 ) $ (4,819,555 ) Shares (denominator) Weighted average common shares outstanding 11,537,277 5,894,986 7,951,759 5,800,475 Earnings (loss) per share Basic and diluted $ (0.45 ) $ (0.42 ) $ (0.68 ) $ (0.83 ) |
Property and Equipment | Property and Equipment During the nine months ended September 30, 2015 and 2014, the Company disposed of property and equipment with a net book value of $683,000 and $1.5 million respectively. The Company received total proceeds of approximately $1.2 million and $625,000 in 2015 and 2014, of which approximately $1.2 million and $308,000 was paid in 2015 and 2014, respectively directly to the senior secured lenders. As a result of the dispositions of property and equipment the Company recognized a gain approximately $490,000 in the consolidated statement of operations for the nine months ended September 30, 2015 and a loss of $894,000 for the nine months ended September 30 2014. |
Impairment of Long-lived Assets | Impairment of Long-lived Assets When facts and circumstances indicate that the carrying value of long-lived assets may not be recoverable, the Company assesses the recoverability of the carrying value by estimating the future cash flows expected to result from the use of the asset and its eventual disposition. If this estimate is less than the carrying amount, the Company recognizes an impairment loss. The impairment loss recognized, if any, is the amount by which the carrying amount of the asset (or asset group) exceeds the fair value. For the nine months ended September 30, 2015, we determined the carrying value of our property and equipment and intangible assets was greater than their estimated fair value and recorded an impairment loss of $5,603,346. The Company estimated fair value of the fixed assets using the comparable sales method and fair value of the intangibles using discounted cash flow method. |
Fair Value of Financial Instruments | Fair Value Measurements U.S. GAAP defines fair value as the price that would be received for an asset or paid to transfer a liability (exit price) in an orderly transaction between market participants in the principal or most advantageous market for the asset or liability. U.S. GAAP also classifies the inputs used to measure fair value into the following hierarchy: Level 1: Quoted prices in active markets for identical assets or liabilities. Level 2: Quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability. Level 3: Unobservable inputs for the asset or liability. The following table sets forth the non-financial items measured at fair value on a non-recurring basis as of September 30, 2015. All items were categorized as Level 3 within the fair value hierarchy. Description Balance Sheet Location September 30, 2015 Categorization Well permits Intangibles, net $ 500,000 Level 3 Disposal wells Property and equipment, net $ 5,000,000 Level 3 |
SUMMARY OF SELECTED ACCOUNTIN15
SUMMARY OF SELECTED ACCOUNTING POLICIES (Tables) | 9 Months Ended |
Sep. 30, 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 September 30, Nine Months Ended September 30, 2015 2014 2015 2014 Earnings (numerator) Net loss $ (5,194,133 ) $ (2,445,891 ) $ (5,346,251 ) $ (4,756,632 ) Preferred stock dividends (20,114 ) (48,990 ) (62,923 ) Net loss available to common shareholders $ (5,194,133 ) $ (2,466,005 ) $ (5,395,241 ) $ (4,819,555 ) Shares (denominator) Weighted average common shares outstanding 11,537,277 5,894,986 7,951,759 5,800,475 Earnings (loss) per share Basic and diluted $ (0.45 ) $ (0.42 ) $ (0.68 ) $ (0.83 ) |
Schedule of fair value on a non-recurring basis | The following table sets forth the non-financial items measured at fair value on a non-recurring basis during as of September 30, 2015. All items were categorized as Level 3 within the fair value hierarchy. Description Balance Sheet Location September 30, 2015 Categorization Well permits Intangibles, net $ 500,000 Level 3 Disposal wells Property and equipment, net $ 5,000,000 Level 3 |
STOCK BASED COMPENSATION (Table
STOCK BASED COMPENSATION (Tables) | 9 Months Ended |
Sep. 30, 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 Companys option grants as of September 30, 2015 and December 31, 2014 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, 2014 150,000 $ 1.58 1.11 $ 242,850 Granted Exercised Forfeited (120,000 ) 1.28 (154,050 ) Outstanding September 30, 2015 30,000 $ 2.96 0.25 $ 88,800 |
Schedule of vested and nonvested option grants | A summary of the status of the Companys vested and non-vested stock option grants at September 30, 2015 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 30,000 $ 1.23 $ 36,900 Nonvested Total 30,000 $ 1.23 $ 36,900 |
BORROWINGS (Tables)
BORROWINGS (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Debt Disclosure [Abstract] | |
Schedule of borrowings | Borrowings as of September 30, 2015 were as follows: September 30, 2015 Senior loan facility and term loan (a) $ 1,339,462 Senior term note (b) 4,330,820 Loans from stockholder (c) (d) 2,870,484 Installment notes (e) 117,784 Total debt 8,658,550 Less current portion (8,582,145 ) Total long-term debt $ 76,405 |
BUSINESS ACTIVITIES (Details Na
BUSINESS ACTIVITIES (Details Narrative) | 3 Months Ended |
Mar. 30, 2015 | |
Business Activities Details Narrative | |
Percenatge of one customer revenue | 50.00% |
SUMMARY OF SELECTED ACCOUNTIN19
SUMMARY OF SELECTED ACCOUNTING POLICIES (Details Narative) - USD ($) | 3 Months Ended | 6 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Jun. 30, 2015 | Sep. 30, 2015 | Sep. 30, 2014 | |
Disposals of property and equipment | $ 683,000 | $ 1,500,000 | |||
Total proceeds from sale of property and equipment | 1,200,000 | 625,000 | |||
Payments to lender from disposal | 1,200,000 | 308,000 | |||
Gain on disposal of property and equipment | $ 497,486 | $ (871,300) | 489,749 | $ (893,933) | |
Impairment loss of Property and equipment | 3,443,500 | 5,603,346 | |||
Extinguishment of debt | $ (851,492) | 2,562,470 | $ (4,453) | ||
Scenario, Previously Reported [Member] | |||||
Extinguishment of debt | $ 1,331,554 | ||||
Restatement Adjustment [Member] | |||||
Extinguishment of debt | $ 480,062 | ||||
Stock Options [Member] | |||||
Potentially dilutive shares excluded from EPS | 30,000 |
SUMMARY OF SELECTED ACCOUNTIN20
SUMMARY OF SELECTED ACCOUNTING POLICIES (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Earnings (numerator) | ||||
Net income (loss) | $ (5,194,133) | $ (2,445,891) | $ (5,346,251) | $ (4,756,632) |
Preferred stock dividends | (20,114) | (48,990) | (62,923) | |
Net income (loss) available to common shareholders | $ (5,194,133) | $ (2,466,005) | $ (5,395,241) | $ (4,819,555) |
Shares (denominator) | ||||
Weighted average common shares outstanding | 11,537,277 | 5,894,986 | 7,951,759 | 5,800,475 |
Earnings (loss) per share | ||||
Basic and diluted (in dollars per shares) | $ (0.45) | $ (0.42) | $ (0.68) | $ (0.83) |
SUMMARY OF SELECTED ACCOUNTIN21
SUMMARY OF SELECTED ACCOUNTING POLICIES (Details 1) - Nonrecurring [Member] - Level 3 [Member] | Sep. 30, 2015USD ($) |
Diposal Wells [Member] | |
Property and equipment, net | $ 5,000,000 |
Well Permits [Member] | |
Intangible assets, net | $ 500,000 |
STOCK BASED COMPENSATION (Detai
STOCK BASED COMPENSATION (Details) | 9 Months Ended |
Sep. 30, 2015USD ($)$ / sharesshares | |
Number of shares | |
Beginning balance | shares | 150,000 |
Granted | shares | |
Exercised | shares | |
Forfeited | shares | (120,000) |
Ending balance | shares | 30,000 |
Weighted Average Exercise Price | |
Beginning balance | $ 1.58 |
Granted | |
Exercised | |
Forfeited | $ 1.28 |
Ending balance | $ 2.96 |
Weighted Average Remaining Contractual Term | |
Beginning Balance | 1 year 1 month 9 days |
Ending Balance | 2 months 30 days |
Aggregate Intrinsic Value | |
Beginning Balance | $ | $ 242,850 |
Granted | $ | |
Forfeited | $ | $ (154,050) |
Ending Balance | $ | $ 88,800 |
STOCK BASED COMPENSATION (Det23
STOCK BASED COMPENSATION (Details 1) | 9 Months Ended |
Sep. 30, 2015USD ($)$ / sharesshares | |
Granted, Shares | shares | 30,000 |
Weighted Average Grant Date Fair Value per Share | $ 1.23 |
Weighted Average Grant Date Fair Value | $ | $ 36,900 |
Vested Option [Member] | |
Granted, Shares | shares | 30,000 |
Weighted Average Grant Date Fair Value per Share | $ 1.23 |
Weighted Average Grant Date Fair Value | $ | $ 36,900 |
BORROWINGS (Details Narrative)
BORROWINGS (Details Narrative) - USD ($) | Feb. 12, 2015 | Sep. 30, 2015 | Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Feb. 11, 2015 | Jul. 23, 2012 |
Gain on extinguishment of debt | $ (851,492) | $ 2,562,470 | $ (4,453) | |||||
Total Notes Payable [Member] | Chico Coffman Tank Trucks [Member] | ||||||||
Debt face amount | $ 3,665,263 | |||||||
Reduction indebtedness | $ 2,082,408 | |||||||
Gain on extinguishment of debt | $ 2,082,408 | |||||||
Icon Term Note [Member] | ||||||||
Debt face amount | $ 5,000,000 | |||||||
Debt Interest Rate | 14.00% | |||||||
Installment Notes [Member] | ||||||||
Loan payment amount | $ 5,377 | |||||||
Loan payment frequency | Monthly | |||||||
Debt face amount | $ 117,784 | $ 117,784 | $ 117,784 | |||||
Debt Interest Rate | 5.69% | 5.69% | 5.69% | |||||
Various Accounts Payable Vendors [Member] | ||||||||
Gain on extinguishment of debt | $ 480,062 | |||||||
Senior Loan Facility And Term Loan [Member] | ||||||||
Maturity Date | Jul. 23, 2017 | |||||||
Interest rate description | Base Rate Plus Applicable Margin Plus 2% | |||||||
Spread on variable rate basis | 2.00% | |||||||
Loan payment amount - principal | $ 100,000 | |||||||
Loan payment frequency | Monthly | |||||||
Unused commitment fee | 0.375% | |||||||
Debt Interest Rate, Mininum | 6.75% | |||||||
Debt Interest Rate, Maximum | 7.75% | |||||||
Accredited Investor Loan [Member] | ||||||||
Loan payment frequency | Monthly | |||||||
Debt face amount | $ 2,783,484 | $ 2,783,484 | $ 2,783,484 | |||||
Debt Interest Rate | 9.00% | 9.00% | 9.00% | |||||
Debt Interest Rate, monthly | 4.50% | |||||||
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 | $ 87,000 | $ 87,000 | |||||
Debt Interest Rate | 7.00% | 7.00% | 7.00% |
BORROWINGS (Details)
BORROWINGS (Details) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 | |
Long-term debt, net | |||
Total debt | $ 8,658,550 | ||
Less current portion | (8,582,145) | $ (10,363,094) | |
Total long-term debt | 76,405 | $ 1,594,795 | |
Senior Loan Facility And Term Loan [Member] | |||
Long-term debt, net | |||
Total debt | [1] | 1,339,462 | |
Senior Term Note [Member] | |||
Long-term debt, net | |||
Total debt | [2] | 4,330,820 | |
Loans From Stockholder [Member] | |||
Long-term debt, net | |||
Total debt | [3],[4] | 2,870,484 | |
Installment Notes [Member] | |||
Long-term debt, net | |||
Total debt | [5] | $ 117,784 | |
[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 September 30, 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 an accredited investor. 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 Bank N.A. and assumed all the existing terms and conditions of the Credit Agreement and Forbearance Agreements. As of September 30, 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 September 30, 2015 due to the fact that the Company was not in compliance with its debt covenants, including the timely payment of interest and principal. | ||
[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 September 30, 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 September 30, 2015 due to the fact that the Company was not in compliance with its debt covenants, including the timely payment of interest. | ||
[3] | 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. All of the principal and accrued interest on the note payable to the CEO is past due according to its terms. | ||
[4] | On May 27, 2014 an accredited investor, who is also a stockholder in the Company, entered into a loan agreement with the Company in 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 27, 2015. | ||
[5] | The Company has an installment loan with a principal balance of approximately $117,784 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 $5,377. |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details Narrative) | 9 Months Ended |
Sep. 30, 2015USD ($)Number | |
Use of Land Leases [Member] | |
Total lease obligation | $ 1,300,000 |
Number of disposal wells in land lease | Number | 7 |
Number of leases with extensions for period of time | Number | 3 |
Number of options to renew leases | Number | 2 |
Monthly lease payment for disposal wells leases | $ 10,890 |
Use of Land Lease 1 [Member] | |
Lease renewal term | 10 years |
Lease expiration date | Feb. 7, 2023 |
Use of Land Lease 2 [Member] | |
Lease expiration date | Dec. 1, 2034 |
Use of Land Lease 3 [Member] | |
Lease renewal term | 1 year |
Lease expiration date | May 31, 2018 |
Case1 [Member] | |
Estimate of possible loss | $ 300,000 |
EQUITY TRANSACTIONS (Details Na
EQUITY TRANSACTIONS (Details Narrative) | Jun. 10, 2015shares |
Preferred stock 2013 Series A [Member] | |
Number of shares convesion | 2,850,000 |
Preferred stock 2014 Series A [Member] | |
Number of shares convesion | 1,125,000 |
2013 Series A Preferred Stock & 2014 7% Series A Preferred Stock | |
Number of shares converted to common stock | 6,079,790 |
Preferred stock rate | 7.00% |