Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2017 | Jul. 27, 2017 | |
Document And Entity Information | ||
Entity Registrant Name | FRONTIER OILFIELD SERVICES INC | |
Entity Central Index Key | 1,108,645 | |
Document Type | 10-Q | |
Trading Symbol | FOSI | |
Document Period End Date | Mar. 31, 2017 | |
Amendment Flag | true | |
Amendment Description | none | |
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 | 11,855,276 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2,017 |
CONSOLIDATED BALANCE SHEETS (Un
CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) | Mar. 31, 2017 | Dec. 31, 2016 |
Current Assets: | ||
Cash | $ 21,616 | $ 20,253 |
Accounts receivable, net | 94,697 | 73,836 |
Advance to shareholder | 64,615 | 132,190 |
Total current assets | 180,928 | 226,279 |
Property and equipment, at cost | 8,481,948 | 8,481,948 |
Less: accumulated depreciation | (4,463,064) | (4,366,035) |
Property and equipment, net | 4,018,884 | 4,115,913 |
Intangibles, net | 390,244 | 408,537 |
Deposits | 2,302 | 2,302 |
Total other assets | 392,546 | 410,839 |
Total Assets | 4,592,358 | 4,753,031 |
Current Liabilities: | ||
Current maturities of long-term debt, primarily stockholders, net of deferred loan fees | 7,825,296 | 7,773,114 |
Accounts payable | 2,451,834 | 2,430,722 |
Accrued liabilities | 2,401,328 | 2,171,848 |
Total current liabilities | 12,678,458 | 12,375,684 |
Total Liabilities | 12,678,458 | 12,375,684 |
Commitments and Contingencies (Note 7) | ||
Stockholders' Deficit: | ||
Common stock- $.01 par value; authorized 100,000,000 shares; 11,855,276 shares issued and outstanding at March 31, 2017 and December 31, 2016 | 118,553 | 118,553 |
Additional paid-in capital | 32,925,243 | 32,925,243 |
Accumulated deficit | (41,129,896) | (40,666,449) |
Total stockholders' deficit | (8,086,100) | (7,622,653) |
Total Liabilities and Stockholders' Deficit | $ 4,592,358 | $ 4,753,031 |
CONSOLIDATED BALANCE SHEETS (U3
CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares | Mar. 31, 2017 | Dec. 31, 2016 |
Statement of Financial Position [Abstract] | ||
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 11,855,276 | 11,855,276 |
Common stock, shares outstanding | 11,855,276 | 11,855,276 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Income Statement [Abstract] | ||
Revenue, net of discounts | $ 320,791 | $ 344,042 |
Costs and expenses: | ||
Direct operating costs | 175,107 | 202,003 |
Indirect operating costs | 140,963 | 118,061 |
General and administrative | 75,349 | 221,213 |
Depreciation and amortization | 115,322 | 115,322 |
Total costs and expenses | 506,741 | 656,599 |
Operating loss | (185,950) | (312,557) |
Other (income) expense: | ||
Interest expense | 277,497 | 278,489 |
Loss before provision for income taxes | (463,447) | (591,046) |
Net loss | $ (463,447) | $ (591,046) |
Net loss per common share - basic (in dollars per share) | $ (0.04) | $ (0.05) |
Net loss per common share - diluted (in dollars per share) | $ (0.04) | $ (0.05) |
Weighted Average Common Shares Outstanding: | ||
Basic and Diluted (in shares) | 11,855,276 | 11,537,276 |
Diluted (in shares) | 11,855,276 | 11,537,276 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Cash Flows From Operating Activities: | ||
Net loss | $ (463,447) | $ (591,046) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||
Depreciation and amortization | 115,322 | 115,322 |
Amortization of capitalized loan fees | 52,182 | 53,164 |
(Increase) decrease in operating assets: | ||
Accounts receivable | (20,861) | 8,942 |
Increase (decrease) in operating liabilities: | ||
Accounts payable | 21,112 | 41,057 |
Accrued liabilities | 229,480 | 197,948 |
Net cash provided by (used in) operating activities of continuing operations | (66,212) | (174,613) |
Cash Flows From Investing Activities: | ||
Repayment of advance to shareholder | 67,575 | 166,308 |
Net cash provided by investing activities | 67,575 | 166,308 |
Cash Flows From Financing Activities: | ||
Payments and adjustments on debt | (10,756) | |
Net cash used in financing activities | (10,756) | |
Net increase (decrease) in cash | 1,363 | (19,061) |
Cash at beginning of period | 20,253 | 22,400 |
Cash at end of period | $ 21,616 | 3,339 |
Supplemental Cash Flow Disclosures | ||
Interest paid | $ 5,224 |
BASIS OF PRESENTATION
BASIS OF PRESENTATION | 3 Months Ended |
Mar. 31, 2017 | |
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, 2016 (including the notes thereto) set forth in Form 10-K. |
BUSINESS ACTIVITIES
BUSINESS ACTIVITIES | 3 Months Ended |
Mar. 31, 2017 | |
Business Activities | |
BUSINESS ACTIVITIES | 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 consolidated financial statements include the accounts of the Company and Frontier Acquisition I, Inc., and its subsidiary Chico Coffman Tank Trucks, Inc. (CTT) 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. Frontier operates its business in the oilfield service industry and is primarily involved in the disposal of saltwater and other oilfield fluids in Texas. The Company currently owns and operates nine disposal wells in Texas, six within the Barnett Shale in North Texas and three in east Texas near the Louisiana state line. The Company’s customers include national, integrated, and independent oil and gas exploration companies. |
GOING CONCERN
GOING CONCERN | 3 Months Ended |
Mar. 31, 2017 | |
Going Concern | |
GOING CONCERN | 3. GOING CONCERN The Company’s 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 the financial statements, 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. 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 management’s 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 Company’s 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 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, 2017 | |
Accounting Policies [Abstract] | |
SUMMARY OF SELECTED ACCOUNTING POLICIES | 4. SUMMARY OF SELECTED ACCOUNTING POLICIES Recently Adopted Accounting Standards 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 have adopted 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. New Accounting Pronouncements In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities In February 2016, the FASB issued ASU 2016-02, Leases, In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting 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. Fair Value of Financial Instruments In accordance with the reporting requirements of ASC Topic 825, Financial Instruments 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 no stock options in 2017 or 2016 which have been excluded from EPS that could potentially have a dilutive effect on EPS in the future. |
STOCK BASED COMPENSATION
STOCK BASED COMPENSATION | 3 Months Ended |
Mar. 31, 2017 | |
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 as part of the Company’s cost cutting and restructuring measures. In April 2016, the Board of Directors of the Company approved the issuance of an aggregate of 54,000 shares of common stock to the members of the Board of Directors. The three members of the Board of Directors received 18,000 shares each. |
BORROWINGS
BORROWINGS | 3 Months Ended |
Mar. 31, 2017 | |
Debt Disclosure [Abstract] | |
BORROWINGS | 6. BORROWINGS Borrowings as of March 31, 2017 and December 31, 2016 were as follows: March 31, December 31, 2017 2016 Revolving credit facility and term loan (a) $ 747,757 $ 747,757 Term note (b) 4,330,820 4,330,820 Loans from stockholders (c) (d) 2,870,484 2,870,484 Installment notes (e) 11,941 11,941 Deferred loan fees (f) (135,706 ) (187,888 ) Total debt 7,825,296 7,773,114 Less current portion (7,825,296 ) (7,773,114 ) Total long-term debt $ — $ — a. The Revolving Credit Facility and Term Loan (Senior Loan Facility) have 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 September 30, 2016, and December 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. 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. In September 2016, the holder of the Senior Loan Facility foreclosed on certain land and buildings owned by the Company in settlement of a portion of the outstanding amount of principal on the Senior Loan Facility. Consequently, the Company charged off the net book value of the land and buildings totaling $591,705 against the outstanding principal on the Senior Loan Facility, leaving a principal balance of $747,757 remaining. The Board is considering issuing stock for the deficiency balance of this loan and the related accrued interest. b. The Company and its subsidiaries entered a Term Loan, Guaranty and Security Agreement on July 23, 2012 with ICON in the amount of $5 million (the “Loan Agreement”). 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. 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. As of March 31, 2017 and December 31, 2016, 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, 2017 and December 31, 2016 because 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 a loan agreement with the Company for $2,783,484. As of March 31, 2017 and December 31, 2016 the principal balance of the note was $2,783,484. The note bears interest at 9% per annum. The terms of the note require 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 were due and payable in November 27, 2015. The principal and interest on the note payable is past due pursuant to its terms. d. On March 21, 2014 the CEO of the Company, who is also a stockholder in the Company entered 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 principal and interest on the note payable to the CEO is past due pursuant to its terms. e. The Company has an installment loan with an outstanding principal balance of approximately $11,941 which was used to acquire property and equipment for use in the Company’s operations. The collateral for the loan was no longer in use in the Company’s operations and was returned to the lender May 2016. The reduction in principal from the surrender of the collateral was less than the total balance owed. The remaining principal balance of the loan has been classified as a short-term liability. f. Unamortized debt issuance costs are amortized as interest expense over the terms of the related notes payable using the effective interest method and are classified as a discount to the related recorded debt balance. Total interest expense on debt discount for the three months ended March 31, 2017 and 2016 was $52,182 and $53,164, respectively. On June 30, 2017, an affiliate of an accredited investor who is also a principal stockholder agreed to exchange approximately $2.0 million in accounts payable and accrued liabilities for 2,013,546 shares of common stock of the Company. The Board approved the exchange and issuance of the shares on June 30, 2017. The liabilities exchanged for common stock included the affiliates full interest in the accrued interest payable to the stockholder associated with the Term Loan Agreement and the Senior Loan Facility. The 2,013,546 shares of common stock were not issued as of June 30, 2017. Such shares will be issued by August 31, 2017. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Mar. 31, 2017 | |
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 $11,080. b. The Company was a named defendant along with the previously named officers in certain litigation in the 271st Judicial District Wise County, Texas wherein the Plaintiffs alleged they had been damaged by the failure of the Company to complete a disposal well in a joint venture between the parties. On April 23, 2016, the litigation was settled by agreement of the parties. Under the terms of the settlement, the plaintiffs returned to the Company 53,000 shares of restricted and unregistered stock of the Company issued to them in 2013. The Company issued 317,000 shares of restricted and unregistered shares of stock in the Company to the plaintiffs. The Company will have exclusive trading authority over the shares issued to the plaintiffs and will have the right of first refusal to purchase the shares upon any planned sale by the plaintiffs. The Company will also have a call option on the shares which will entitle the Company to purchase the shares at $1.25 per share at any time. The settlement agreement resulted in the termination of the litigation. As of December 31, 2015, the Company recorded expense of $206,000 associated with the settlement of this litigation. 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 SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Mar. 31, 2017 | |
Accounting Policies [Abstract] | |
Recently Adopted Accounting Standards and New Accounting Pronouncements | Recently Adopted Accounting Standards 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 have adopted 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. New Accounting Pronouncements In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities In February 2016, the FASB issued ASU 2016-02, Leases, In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting |
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. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments In accordance with the reporting requirements of ASC Topic 825, Financial Instruments |
Earnings (Loss) 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 no stock options in 2017 or 2016 which have been excluded from EPS that could potentially have a dilutive effect on EPS in the future. |
BORROWINGS (Tables)
BORROWINGS (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Debt Disclosure [Abstract] | |
Schedule of borrowings | Borrowings as of March 31, 2017 and December 31, 2016 were as follows: March 31, December 31, 2017 2016 Revolving credit facility and term loan (a) $ 747,757 $ 747,757 Term note (b) 4,330,820 4,330,820 Loans from stockholders (c) (d) 2,870,484 2,870,484 Installment notes (e) 11,941 11,941 Deferred loan fees (f) (135,706 ) (187,888 ) Total debt 7,825,296 7,773,114 Less current portion (7,825,296 ) (7,773,114 ) Total long-term debt $ — $ — a. The Revolving Credit Facility and Term Loan (Senior Loan Facility) have 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 September 30, 2016, and December 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. 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. In September 2016, the holder of the Senior Loan Facility foreclosed on certain land and buildings owned by the Company in settlement of a portion of the outstanding amount of principal on the Senior Loan Facility. Consequently, the Company charged off the net book value of the land and buildings totaling $591,705 against the outstanding principal on the Senior Loan Facility, leaving a principal balance of $747,757 remaining. The Board is considering issuing stock for the deficiency balance of this loan and the related accrued interest. b. The Company and its subsidiaries entered a Term Loan, Guaranty and Security Agreement on July 23, 2012 with ICON in the amount of $5 million (the “Loan Agreement”). 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. 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. As of March 31, 2017 and December 31, 2016, 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, 2017 and December 31, 2016 because 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 a loan agreement with the Company for $2,783,484. As of March 31, 2017 and December 31, 2016 the principal balance of the note was $2,783,484. The note bears interest at 9% per annum. The terms of the note require 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 were due and payable in November 27, 2015. The principal and interest on the note payable is past due pursuant to its terms. d. On March 21, 2014 the CEO of the Company, who is also a stockholder in the Company entered 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 principal and interest on the note payable to the CEO is past due pursuant to its terms. e. The Company has an installment loan with an outstanding principal balance of approximately $11,941 which was used to acquire property and equipment for use in the Company’s operations. The collateral for the loan was no longer in use in the Company’s operations and was returned to the lender May 2016. The reduction in principal from the surrender of the collateral was less than the total balance owed. The remaining principal balance of the loan has been classified as a short-term liability. f. Unamortized debt issuance costs are amortized as interest expense over the terms of the related notes payable using the effective interest method and are classified as a discount to the related recorded debt balance. Total interest expense on debt discount for the three months ended March 31, 2017 and 2016 was $52,182 and $53,164, respectively. On June 30, 2017, an affiliate of an accredited investor who is also a principal stockholder agreed to exchange approximately $2.0 million in accounts payable and accrued liabilities for 2,013,546 shares of common stock of the Company. The Board approved the exchange and issuance of the shares on June 30, 2017. The liabilities exchanged for common stock included the affiliates full interest in the accrued interest payable to the stockholder associated with the Term Loan Agreement and the Senior Loan Facility. The 2,013,546 shares of common stock were not issued as of June 30, 2017. Such shares will be issued by August 31, 2017. |
STOCK BASED COMPENSATION (Detai
STOCK BASED COMPENSATION (Details Narrative) | 1 Months Ended |
Apr. 30, 2016Numbershares | |
Board of Directors Members [Member] | |
Number of directors received stock | Number | 3 |
Directors stock grant, quarterly | 54,000 |
Board of Directors Members (Each) [Member] | |
Directors stock grant, quarterly | 18,000 |
BORROWINGS (Details Narrative)
BORROWINGS (Details Narrative) - USD ($) | Aug. 31, 2017 | Sep. 30, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | Jun. 30, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | May 27, 2014 | Mar. 21, 2014 | Jul. 23, 2012 | |||
Long-term debt | $ 7,825,296 | $ 7,773,114 | |||||||||||
Amortization of capitalized loan fees | 52,182 | $ 53,164 | |||||||||||
Accounts payable and accrued liabilities | 2,451,834 | 2,430,722 | |||||||||||
Subsequent Event [Member] | |||||||||||||
Issuance of common stock for accounts payable and accrued liabilities | 2,013,546 | ||||||||||||
Subsequent Event [Member] | Principal Owner [Member] | |||||||||||||
Accounts payable and accrued liabilities | $ 2,000,000 | ||||||||||||
Term Note [Member] | |||||||||||||
Long-term debt | [1] | 4,330,820 | 4,330,820 | ||||||||||
Debt face amount | $ 5,000,000 | ||||||||||||
Debt Interest Rate | 14.00% | ||||||||||||
Installment Notes [Member] | |||||||||||||
Long-term debt | [2] | $ 11,941 | 11,941 | ||||||||||
Revolving Credit 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% | ||||||||||||
Default interest rate | 6.75% | 7.75% | |||||||||||
Loan payment amount - principal | $ 100,000 | ||||||||||||
Loan payment frequency | Monthly | ||||||||||||
Unused commitment fee | 0.375% | ||||||||||||
Charge off of net book value of land and buildings | $ 591,705 | ||||||||||||
Long-term debt | $ 747,757 | $ 747,757 | [3] | 745,757 | [3] | ||||||||
Accredited Investor Loan [Member] | |||||||||||||
Maturity Date | Nov. 27, 2015 | ||||||||||||
Loan payment percent | 4.50% | ||||||||||||
Loan payment frequency | Monthly | ||||||||||||
Debt face amount | $ 2,783,484 | ||||||||||||
Principal amount | $ 2,783,484 | $ 2,783,484 | |||||||||||
Debt Interest Rate | 9.00% | ||||||||||||
Interest rate terms | The terms of the note require 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% | ||||||||||||
[1] | The Company and its subsidiaries entered a Term Loan, Guaranty and Security Agreement on July 23, 2012 with ICON in the amount of $5 million (the ?Loan Agreement?). 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. 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. As of March 31, 2017 and December 31, 2016, 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, 2017 and December 31, 2016 because the Company was not in compliance with its debt covenants, including the timely payment of interest. | ||||||||||||
[2] | The Company has an installment loan with an outstanding principal balance of approximately $11,941 which was used to acquire property and equipment for use in the Company?s operations. The collateral for the loan was no longer in use in the Company?s operations and was returned to the lender May 2016. The reduction in principal from the surrender of the collateral was less than the total balance owed. The remaining principal balance of the loan has been classified as a short-term liability. | ||||||||||||
[3] | The Revolving Credit Facility and Term Loan (Senior Loan Facility) have 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 September 30, 2016, and December 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. 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. In September 2016, the holder of the Senior Loan Facility foreclosed on certain land and buildings owned by the Company in settlement of a portion of the outstanding amount of principal on the Senior Loan Facility. Consequently, the Company charged off the net book value of the land and buildings totaling $591,705 against the outstanding principal on the Senior Loan Facility, leaving a principal balance of $747,757 remaining. The Board is considering issuing stock for the deficiency balance of this loan and the related accrued interest. |
BORROWINGS (Details)
BORROWINGS (Details) - USD ($) | Mar. 31, 2017 | Dec. 31, 2016 | Sep. 30, 2016 | |||
Long-term debt, net | ||||||
Total debt | $ 7,825,296 | $ 7,773,114 | ||||
Deferred loan fees | [1] | (135,706) | (187,888) | |||
Less current portion | (7,825,296) | (7,773,114) | ||||
Term Note [Member] | ||||||
Long-term debt, net | ||||||
Total debt | [2] | 4,330,820 | 4,330,820 | |||
Loans From Stockholders [Member] | ||||||
Long-term debt, net | ||||||
Total debt | [3],[4] | 2,870,484 | 2,870,484 | |||
Installment Notes [Member] | ||||||
Long-term debt, net | ||||||
Total debt | [5] | 11,941 | 11,941 | |||
Revolving Credit Facility And Term Loan [Member] | ||||||
Long-term debt, net | ||||||
Total debt | $ 747,757 | [6] | $ 745,757 | [6] | $ 747,757 | |
[1] | Unamortized debt issuance costs are amortized as interest expense over the terms of the related notes payable using the effective interest method and are classified as a discount to the related recorded debt balance. Total interest expense on debt discount for the three months ended March 31, 2017 and 2016 was $52,182 and $53,164, respectively. On June 30, 2017, an affiliate of an accredited investor who is also a principal stockholder agreed to exchange approximately $2.0 million in accounts payable and accrued liabilities for 2,013,546 shares of common stock of the Company. The Board approved the exchange and issuance of the shares on June 30, 2017. The liabilities exchanged for common stock included the affiliates full interest in the accrued interest payable to the stockholder associated with the Term Loan Agreement and the Senior Loan Facility. The 2,013,546 shares of common stock were not issued as of June 30, 2017. Such shares will be issued by August 31, 2017. | |||||
[2] | The Company and its subsidiaries entered a Term Loan, Guaranty and Security Agreement on July 23, 2012 with ICON in the amount of $5 million (the ?Loan Agreement?). 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. 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. As of March 31, 2017 and December 31, 2016, 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, 2017 and December 31, 2016 because 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 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 principal and interest on the note payable to the CEO is past due pursuant to its terms. | |||||
[4] | On May 27, 2014 an accredited investor, who is also a stockholder in the Company, entered a loan agreement with the Company for $2,783,484. As of March 31, 2017 and December 31, 2016 the principal balance of the note was $2,783,484. The note bears interest at 9% per annum. The terms of the note require 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 were due and payable in November 27, 2015. The principal and interest on the note payable is past due pursuant to its terms. | |||||
[5] | The Company has an installment loan with an outstanding principal balance of approximately $11,941 which was used to acquire property and equipment for use in the Company?s operations. The collateral for the loan was no longer in use in the Company?s operations and was returned to the lender May 2016. The reduction in principal from the surrender of the collateral was less than the total balance owed. The remaining principal balance of the loan has been classified as a short-term liability. | |||||
[6] | The Revolving Credit Facility and Term Loan (Senior Loan Facility) have 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 September 30, 2016, and December 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. 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. In September 2016, the holder of the Senior Loan Facility foreclosed on certain land and buildings owned by the Company in settlement of a portion of the outstanding amount of principal on the Senior Loan Facility. Consequently, the Company charged off the net book value of the land and buildings totaling $591,705 against the outstanding principal on the Senior Loan Facility, leaving a principal balance of $747,757 remaining. The Board is considering issuing stock for the deficiency balance of this loan and the related accrued interest. |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details Narrative) | Apr. 23, 2016$ / sharesshares | Mar. 31, 2017USD ($)Number | Dec. 31, 2016USD ($) |
Texas Litigation [Member] | |||
Description of litigation | The Company was a named defendant along with the previously named officers in certain litigation in the 271st Judicial District Wise County, Texas wherein the Plaintiffs alleged they had been damaged by the failure of the Company to complete a disposal well in a joint venture between the parties. | ||
Settlement date | April 23, 2016 | ||
Settlement Terms Description | Under the terms of the settlement, the plaintiffs returned to the Company 53,000 shares of restricted and unregistered stock of the Company issued to them in 2013. The Company issued 317,000 shares of restricted and unregistered shares of stock in the Company to the plaintiffs. The Company will have exclusive trading authority over the shares issued to the plaintiffs and will have the right of first refusal to purchase the shares upon any planned sale by the plaintiffs. The Company will also have a call option on the shares which will entitle the Company to purchase the shares at $1.25 per share at any time. | ||
Texas Litigation [Member] | Restricted And Unregistered Shares [Member] | |||
Number of shares issued to plaintiff | shares | 317,000 | ||
Settlement expense | $ | $ 206,000 | ||
Share price | $ / shares | $ 1.25 | ||
Use of Land Leases [Member] | |||
Total lease obligation | $ | $ 1,300,000 | ||
Monthly lease payment for leases | $ | $ 11,080 | ||
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 | ||
Use of Land Leases #2 [Member] | |||
Lease renewal term | 10 years | ||
Use of Land Leases 1 [Member] | |||
Lease renewal term | 1 year |