| Basis of Presentation and Significant Accounting Policies | Note 2 Basis of Presentation and
Significant Accounting Policies The accompanying unaudited
condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the
United States (U.S. GAAP) for interim financial information. Accordingly, they do not include all of the information
and footnotes required by U.S. GAAP for complete financial statements. The December 31, 2015 consolidated balance sheet was derived
from audited financial statements, but does not include all the disclosures required by U.S. GAAP. However, the Company believes
that the disclosures are adequate to make the information presented not misleading. In the Companys opinion, all the adjustments
(consisting of normal recurring adjustments) considered necessary for fair presentation have been included. The results of operations
for the nine-month period ended September 30, 2016 are not necessarily indicative of the results that may be achieved for the full
fiscal year or for any future period. The unaudited condensed consolidated financial statements included herein should be read
in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2015, a copy of which
was filed with the Companys Annual Report on Form 10-K for the year ended December 31, 2015. Principles of Consolidation We consolidate all wholly-owned
subsidiaries, controlled joint ventures and variable interest entities where the Company has determined it is the primary beneficiary.
All material intercompany accounts and transactions have been eliminated in consolidation. Use of Estimates The preparation of financial
statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the
reported amounts of revenue and expenses during the reporting period. Estimates are used in, but are not limited to, determining
the following: allowance for doubtful accounts, recoverability of long-lived assets and intangibles, useful lives used in depreciation
and amortization, income taxes and stock-based compensation. The accounting estimates used in the preparation of the consolidated
financial statements may change as new events occur, as more experience is acquired, as additional information is obtained and
as the Companys operating environment changes. Cash and Cash Equivalents The Company considers
all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The Company maintains
deposits in several financial institutions, which may at times exceed amounts covered by insurance provided by the U.S. Federal
Deposit Insurance Corporation (FDIC). The Company has not experienced any losses related to amounts in excess of
FDIC limits. Revenue Recognition The Companys revenue
is heavily dependent on three major customers All revenue is recognized when persuasive evidence of an arrangement exists, the
price is fixed or determinable, and collection is reasonably assured as follows: Well Stimulation Revenue The Company provides well
stimulation services based on contractual arrangements, such as term contracts and pricing agreements, or on a spot market basis.
Revenue will be recognized and customers will be invoiced upon the completion of each job, which can consist of one or more stimulation
stages. Under term pricing agreement
arrangements, customers commit to targeted utilization levels at agreed-upon pricing, but without termination penalties or obligations
to pay for services not used by the customer. In addition, the agreed-upon pricing is typically subject to periodic review. Spot market basis arrangements
are based on an agreed-upon hourly spot market rate. The Company also charges fees for setup and mobilization of equipment depending
on the job, additional equipment used on the job, if any, and materials that are consumed during the well stimulation process.
Generally, these fees and other charges vary depending on the equipment and personnel required for the job and market conditions
in the region in which the services are performed. The Company also generates
revenues from chemicals and proppants that are consumed while performing well stimulation services. Coiled Tubing Revenue The Company began providing
coiled tubing and other well stimulation services in early 2015. Jobs for these services are typically short term in nature, lasting
anywhere from a few hours to multiple days. Revenue is recognized upon completion of each days work based upon a completed
field ticket. The Company charges the customer for mobilization, services performed, personnel on the job, equipment used on the
job, and miscellaneous consumables at agreed-upon spot market rates. Field Management Revenue The Company enters into
arrangements to provide field management services. Field management revenue relates primarily to geophysical predictions and production
monitoring, utilizing down-hole diagnostics tools. Revenue is recognized and customers are invoiced upon the completion of each
job. The service invoices are for a set amount, which includes charges for the mobilization of the equipment to the location, the
service performed, the personnel on the job, additional equipment used on the job, consumables used throughout the course of the
service, and processing and interpretation of data acquired via down-hole diagnostic tools. Fair Value of Financial Instruments The Companys financial
instruments consist of cash and cash equivalents, accounts receivable, other assets, accounts payable, accrued expenses, capital
lease obligations and notes payable. The recorded values of cash and cash equivalents, accounts receivable, other assets, accounts
payable, and accrued expenses approximate their fair values based on their short-term nature. The carrying value of capital lease
obligations and notes payable approximate their fair value, and the interest rates approximate market rates. Functional and Presentation Currency Items included in the
financial statements of each of the Companys entities are measured using the currency of the primary economic environment
in which the entity operates (the functional currency). The functional currency for the Norwegian and Argentine subsidiaries
is the U.S. Dollar. The consolidated financial statements are presented in U.S. Dollars, which is the Companys presentation
currency. Marketable Securities Investments in marketable
securities are classified as trading, available-for-sale or held-to-maturity. Our marketable equity investments are classified
as trading and their cost basis is determined by the specific identification method. Realized and unrealized gains and losses on
trading securities are included in net loss. During the nine months
ended September 30, 2015, the Company purchased and sold Argentine bonds to capitalize its subsidiary in Argentina. This resulted
in a gain on the sale of trading securities of $2,415,607 for the nine months ended September 30, 2015. This increase was primarily
due to the Company taking advantage of the favorable spread in exchange rates between the U.S. Dollar and Argentine Peso. No trading
securities transactions occurred during the nine months ended September 30, 2016. Net Loss per Common Share For the nine months ended
September 30, 2016 and 2015, the weighted average shares outstanding excluded certain stock options and potential shares from convertible
debt of 4,472,632 and 4,133,131, respectively, from the calculation of diluted earnings per share because these shares would be
anti-dilutive. Anti-dilutive warrants of 100,000 for each of the nine months ended September 30, 2016 and 2015 were also excluded
from the calculation. Reclassifications Certain prior year amounts
have been reclassified to conform to the 2015 presentation. Accounts Receivable Accounts receivable are
stated at amounts management expects to collect from outstanding balances both billed and unbilled (unbilled accounts receivable
represent amounts recognized as revenue for which invoices have not yet been sent to clients). Management provides for probable
uncollectible amounts through a charge to earnings and a credit to a valuation allowance based on its assessment of the current
status of individual accounts. To date, the Company has not recognized any losses due to uncollectible accounts. Balances still
outstanding after management has used reasonable collection efforts are written off through a charge to the valuation allowance
and a credit to accounts receivable. The Company evaluated all accounts receivable and determined that no reserve for doubtful
accounts was necessary at September 30, 2016. At September 30, 2015, the Company had an allowance for doubtful accounts of $72,600. Included in
the Accounts Receivable balance are certain unbilled receivables with a significant customer that relate to work performed
before the Company entered into its rotational on-call contract in March 2016. Under this prior arrangement, the Company was
required to go through an arduous process to collect the outstanding amounts and while the Company has a track record of
collecting amounts billed under this prior arrangement, it has proven to take a long period of time. At September 30, 2016,
there were approximately $1,300,000 in outstanding unbilled amounts due under this prior arrangement. Further, amounts billed
to this significant customer under the rotational on-call contracts signed earlier this year have been collected within a
more normal timeframe. Prepaids Prepaid expenses are primarily
comprised of Argentinian value added tax and prepaid insurance. The prepaid value added tax will be reduced as the Company continues
to invoice customers in Argentina. Inventory Inventories are stated
at the lower of cost or market (net realizable value) using the average method and appropriate consideration is given to deterioration,
obsolescence and other factors in evaluating net realizable value. Property, Plant and Equipment Property, Plant
and Equipment (PPE) is stated at historical cost less depreciation. Historical cost includes expenditures that are
directly attributable to the acquisition of the items. Depreciation is
computed using the straight-line method over the estimated useful lives of the assets for financial reporting purposes. Expenditures
for major renewals and betterments that extend the useful lives are capitalized. Expenditures for normal maintenance and repairs
are expensed as incurred. The cost of assets sold or abandoned and the related accumulated depreciation are eliminated from the
accounts and any gains or losses are reflected in the accompanying consolidated statements of operations for the respective period. The estimated useful
lives of our major classes of PPE are as follows:
Major Classes of PPE Estimated Useful Lives
Machinery and equipment 2-7 years
Vehicles 5 years
Leasehold improvements 5 years (or the life of the lease)
Furniture and office equipment 3-5 years Leases The Company leases
certain equipment under lease agreements. The Company evaluates each lease to determine its appropriate classification as an operating
or capital lease for financial reporting purposes. Any lease that does not meet the criteria for a capital lease is accounted for
as an operating lease. The assets and liabilities under capital leases are recorded at the lower of the present value of the minimum
lease payments or the fair market value of the related assets. Assets under capital leases are amortized using the straight-line
method over the lease term. Amortization of assets under capital leases is included in depreciation expense. Stock-Based Compensation The Company accounts
for its stock options, warrants, and restricted stock grants under the fair value recognition provisions of the Financial Accounting
Standards Board (FASB) Accounting Standards Codification (ASC) Topic 718. The Company currently uses
the straight-line amortization method for recognizing stock option and restricted stock compensation costs. The measurement and
recognition of compensation expense for all share-based payment awards made to our employees, directors or outside service providers
are based on the estimated fair value of the awards on the grant dates. The grant date fair value is estimated using either an
option-pricing model which is consistent with the terms of the award or a market observed price, if such a price exists. Such cost
is recognized over the period during which an employee, director or outside service provider is required to provide service in
exchange for the award, i.e., the requisite service period (which is usually the vesting period). The Company also
estimates the number of instruments that will ultimately be earned, rather than accounting for forfeitures as they occur. Impairment of Long-Lived Assets The Company reviews
its long-lived assets for impairment when changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
ASC Topic 360 requires the Company to review long-lived assets for impairment whenever events or changes in circumstances indicate
the carrying amount of an asset or group of assets may not be recoverable. The impairment review includes a comparison of future
cash flows expected to be generated by the asset or group of assets with their associated carrying value. If the carrying value
of the asset or group of assets exceeds expected cash flows (undiscounted and without interest charges), an impairment loss is
recognized to the extent that the carrying value exceeds the fair value. If estimated future cash flows are not achieved with respect
to long-lived assets, additional write-downs may be required. The Company evaluated its long-lived assets for impairment at September
30, 2016 and has determined no impairment is necessary. Major Customers and Concentration of
Credit Risk The majority of the Companys
business is conducted with major and independent oil and gas companies in Argentina. The Company evaluates the financial strength
of its customers and provides allowances for probable credit losses when deemed necessary. The Company derives a large amount of
revenue from a small number of major and independent oil and gas companies. We derive a significant
portion of our revenue from a limited number of major clients. For the nine months ended September 30, 2016 and September 30, 2015
three major customers accounted for approximately 83.63% and 71.25% of our services revenue, respectively. Our accounts receivable,
at September 30, 2016 and September 30, 2015 were concentrated, with major customers representing 82.94% and 90.50% respectively. Income Taxes Deferred income taxes
are determined using the asset and liability method in accordance with ASC Topic 740. Deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred income taxes are measured using enacted tax rates expected to apply to
taxable income in years in which such temporary differences are expected to be recovered or settled. The effect of a change in
tax rates on deferred income taxes is recognized in the consolidated statement of operations of the period that includes the enactment
date. In addition, a valuation allowance is established to reduce any deferred tax asset for which it is determined that it is
more likely than not that some portion of the deferred tax asset will not be realized. The Company is subject
to U.S. federal and foreign income taxes along with state income taxes in Texas. When tax returns are filed, it is highly certain
that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty
about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position
is recognized in the financial statements in the period during which, based on all available evidence, management believes it is
more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes,
if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not
recognition threshold are measured as the largest amount of tax benefit that is more than 50% likely of being realized upon settlement
with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured
as described above is reflected as a liability for unrecognized tax benefits in the accompanying consolidated balance sheets along
with any associated interest and penalties that would be payable to the taxing authorities upon examination. Recent Accounting Pronouncements In April 2015, the FASB
issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, which amends the current presentation of
debt issuance costs in the financial statements. ASU 2015-03 requires that debt issuance costs related to a recognized debt liability
be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts,
instead of as an asset. The amendments are to be applied retrospectively and are effective for public business entities for fiscal
years, and for interim periods within those fiscal years, beginning after December 15, 2015, but early adoption is permitted. We
adopted ASU 2015-03 during the quarter ended March 31, 2016 resulting in reclassification of short-term debt issuance cost of $185,362
and $185,362 as of September 30, 2016 and December 31, 2015 respectively; and long-term debt issuance cost of $123,575 and $262,597
as of September 30, 2016 and December 31, 2015 respectively. In March 2016, the FASB
issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting. This ASU simplifies several aspects of accounting
for share-based payment transactions including the accounting for income taxes, forfeitures, statutory tax withholding requirements
and classification on the statement of cash flows. Under this ASU, all excess tax benefits or deficiencies are recognized as income
tax expense or benefit in the income statement and the pool of windfall tax benefits as a component of additional paid-in capital
is eliminated. In regards to forfeitures, companies may make a one-time policy election to use forfeitures applies only to instruments
with service conditions; the requirement to estimate the probability of achieving performance conditions remains. For statutory
tax withholding requirements, this ASU allows for net settlement up to the employers maximum statutory tax withholding
requirement. Formerly, only the minimum statutory tax withholding requirement was allowed to be met through net settlement while
retaining equity classification. This ASU is effective for annual periods, and interim periods within those annual periods beginning
after December 15, 2016. Earlier adoption is permitted in any interim or annual period for which financial statements have not
yet been issued. The application of this ASU in regards to the accounting for income taxes, forfeitures and statutory tax withholding
requirements should be applied using a modified retrospective application with a cumulative effect adjustment to additional paid-in
capital as of the beginning of the period of adoption. The presentation of employee taxes paid on the statement of cash flows
should be applied retrospectively. |
