Joint Ventures | 12 Months Ended |
Dec. 31, 2014 |
Joint Ventures [Abstract] | |
Joint Ventures | 3 | Joint Ventures | | | | | | | | | | | |
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Dakota Petroleum Transport Solutions, LLC |
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On November 9, 2009, the Company entered into a joint venture with Petroleum Transport Solutions, LLC ("PTS"). The Company and PTS each owned 50% of the outstanding member units of DPTS until the Company purchased the 50% ownership interest of PTS, effective November 30, 2014. The joint venture was formed to engage in the acquisition, construction and operation of a petroleum transloading facility in New Town, North Dakota ("Transloading Facility"). |
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Each of the members of DPTS was required to make an initial capital contribution of $50,000. Each member received 1,000 member units for their initial capital contribution. |
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As part of the joint venture agreement, the Company owns the Transloading Facility and certain equipment acquired and leases the property to DPTS. |
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The operations of the Transloading Facility commenced in November 2009. Under provisions of the member control agreement the profits and losses of DPTS were split 50/50, pro rata based on the number of member units outstanding. The cash payments from the joint venture also were paid pro rata based on the number of member units outstanding. |
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On June 1, 2012, DPT entered into an amended and restated member control agreement with DPTS and PTS. The amended and restated member control agreement, among other things, incorporated all previous amendments and supplements, extended the initial term through December 31, 2021, and provided for the initial term to automatically extend in two-year intervals unless and until terminated. On August 30, 2012, the parties amended the amended and restated member control agreement to permit certain other ventures. On June 17, 2013, the parties further amended the amended and restated member control agreement to, among other things, extend the initial term through December 31, 2026. On December 31, 2013, the parties entered into the Second Amended and Restated Member Control Agreement ("Revised MCA") that, among other things, named DPT as the Facility Management Member. |
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As a result of the Revised MCA, the Company accounted for this joint venture using the equity method of accounting through the end of business on December 31, 2013, at which time it was consolidated. Beginning January 1, 2014, the Company began including the operations of DPTS in its consolidated statements of operations. The Company's share of income from the joint venture is included in other income on the consolidated statements of operations for periods ended December 31, 2013 and 2012. At December 31, 2013, the Company reflected the assets and liabilities of DPTS at carryover basis as summarized in the following table: |
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| | As of | | | | | | | | | |
31-Dec-13 | | | | | | | | |
Current Assets | | | | | | | | | | | | |
Cash and Cash Equivalents | | $ | 6,921,264 | | | | | | | | | |
Other Current Assets | | | 455,905 | | | | | | | | | |
Due From Related Party | | | 2,840,292 | | | | | | | | | |
Other Receivables | | | 68,896 | | | | | | | | | |
Total Current Assets | | | 10,286,357 | | | | | | | | | |
Property and Equipment | | | | | | | | | | | | |
Total Property and Equipment | | | 49,771,156 | | | | | | | | | |
Less – Accumulated Depreciation | | | 1,205,880 | | | | | | | | | |
Total Property and Equipment, net | | | 48,565,276 | | | | | | | | | |
Other Assets | | | 402 | | | | | | | | | |
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Total Assets | | $ | 58,852,035 | | | | | | | | | |
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Current Liabilities | | | | | | | | | | | | |
Accounts Payable | | $ | 7,998,082 | | | | | | | | | |
Accounts Payable – Related Parties | | | 722 | | | | | | | | | |
Total Current Liabilities | | | 7,998,804 | | | | | | | | | |
Total Liabilities | | $ | 7,998,804 | | | | | | | | | |
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Supplemental Agreement |
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In September 2010, the Company entered into a Supplemental Agreement to the DPTS member control agreement ("Supplemental Agreement"). The purpose of the Supplemental Agreement was to obtain access to site improvements and certain additional transloading equipment necessary to fulfill certain transloading contracts. Under this Supplemental Agreement the Company agreed to provide funds for the site improvements. The total costs incurred for these site improvements were $1,299,201. These costs have been capitalized as property and equipment in the accompanying consolidated balance sheets. |
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As part of the Supplemental Agreement, PTS was required to pay all costs for the acquisition of four new transloaders. The total cost of these transloaders was $658,012, with an estimated residual value of $131,602 at the end of the initial Agreement term for a net cost incurred of $526,410. |
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To reflect the economics of the $526,410 of costs incurred, the Company recognized rental income of $12,169 and $42,783 for the years ended December 31, 2013 and 2012, respectively. The rental income for the year ended December 31, 2014 was eliminated upon consolidation. No cash was received related to this rental income. The rental income recorded was treated as an increase in the Company's investment in the joint venture. |
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In order to render fair and equitable the leases for the additional expenditures by the members relating to the site improvements and new equipment, the Supplemental Agreement included a provision that the Company would receive 75% of the cash distributions from DPTS until the Company had been reimbursed. The additional expenditures would also incur interest at an interest rate of 7% per annum until paid in full. After the Company was reimbursed and received the required interest, the cash distributions reverted back to the 50/50 split as per the original agreement. Only the cash distributions were changed under the Supplemental Agreement. The profit and loss allocations remained the same as the original member control agreement. As of December 31, 2014, the Company had been fully reimbursed for the additional expenditures related to the Supplemental Agreement. |
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In the first quarter of 2013, the Company settled an outstanding invoice related to the costs incurred as part of the Supplemental Agreement. The invoice was settled for $21,546 less than the original invoice amount. Based on this the total additional expenditures incurred by the Company were $772,791. |
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Rental income related to the Supplemental Agreement was $11,310 and $64,214 for the years ended December 31, 2013 and 2012, respectively. The rental income for the year ended December 31, 2014 was eliminated upon consolidation. |
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The Revised MCA, among other things, named DPT as the Facility Management Member. This assumption of control of the day-to-day operations resulted in a change in the Company's method of accounting for the joint venture. Effective December 31, 2013, the Company consolidated the accounts of DPTS into its consolidated balance sheet. Beginning January 1, 2014, the Company began including the operations of DPTS in its consolidated statements of operations. |
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Summarized financial information of DPTS when accounted for as an equity method investment is as follows: |
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| | Year Ended | | | | | | |
December 31, | | | | | |
| | 2013 | | 2012 | | | | | | |
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Sales | | $ | 17,475,294 | | $ | 15,884,822 | | | | | | |
Net Earnings | | | 7,926,044 | | | 6,491,033 | | | | | | |
Company's Share of Equity in Net Earnings | | | 3,963,022 | | | 3,245,516 | | | | | | |
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Total Assets | | | - | | | 13,652,679 | | | | | | |
Total Liabilities | | | - | | | 2,617,257 | | | | | | |
Share of Equity in Net Assets | | | - | | | 5,517,711 | | | | | | |
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The balance sheet information as of December 31, 2014 and 2013 and the statement of operations information for the year ended December 31, 2014 has been excluded as they are included in the consolidated financial statements of the Company. |
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Pro Forma Information |
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The assumption of the control of day-to-day management of the operations was effective end of business December 31, 2013. Therefore, the operating results of DPTS have not been included on the Company's consolidated statements of operations for the years ended December 31, 2013 and 2012. The following audited pro forma results of operations assume that the change in control of day-to-day management of the operations had been effective for the aforementioned periods. Such results are not necessarily indicative of the actual results of operations that would have been realized nor are they necessarily indicative of future results of operations. |
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These pro forma amounts have been calculated after adjusting for intercompany amounts. In addition, the equity earnings from the Company's former non-controlling interest in DPTS have been removed. |
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| | Year Ended | | | |
December 31, | | |
| | 2013 | | 2012 | | | | | | |
Revenues | | $ | 17,475,294 | | $ | 15,884,822 | | | | | | |
Net Income (Loss) | | | 735,658 | | | (79,153 | ) | | | | | |
Net Income Attributable to Non-Controlling Interest | | | 2,461,022 | | | 1,921,517 | | | | | | |
Net Loss Attributable to Shareholders of Dakota Plains Holdings, Inc. | | | (1,725,364 | ) | | (2,000,670 | ) | | | | | |
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DPTS Marketing LLC |
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The Company, through its wholly owned subsidiary Dakota Plains Marketing, LLC, entered into a joint venture with PTS. The Company and PTS each owned 50% of the outstanding member units of DPTSM until the Company purchased the 50% ownership interest of PTS, effective November 30, 2014. The joint venture was formed to engage in the purchase, sale, storage, transport and marketing of hydrocarbons produced within North Dakota to or from refineries and other end-users or persons and to conduct trading activities. |
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Each of the members of DPTSM was required to make an initial capital contribution of $100. Each member received 1,000 member units for their initial capital contribution. |
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Each of the members of DPTSM was also required to make an initial Member Preferred Contribution of $10 million to support the trading activities of the joint venture. The Member Preferred Contributions made entitled the member to receive a cumulative preferred return of 5% per annum. At December 31, 2013, the Company reported a preferred dividend receivable of $252,057 on its consolidated balance sheet. In September 2013, the Company received a payment of $1.1 million related to the cumulative preferred return. This payment was for the cumulative preferred return from the date of the initial $10 million contribution through September 30, 2013. The cumulative preferred return for the period from October 1, 2013 through November 30, 2014 and the initial $10 million contribution were distributed to the Company as part of the Company's purchase of the 50% ownership interest of PTS that was effective on November 30, 2014. |
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The operations of DPTSM commenced in May 2011. Under the member control agreement, the profits and losses of DPTSM were split 50/50, pro rata based on the number of member units outstanding. The cash payments from the joint venture were also paid pro rata based on the number of member units outstanding. The Company received its only priority cash distribution payments in April and June 2013. |
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On June 1, 2012, DPM entered into an amended and restated member control agreement with DPTSM and PTS. The amended and restated member control agreement, among other things, incorporated all previous amendment and supplements, extended the initial term through December 31, 2021, and provided for the initial term to automatically extend in two-year intervals unless and until terminated. On August 30, 2012, the parties amended the amended and restated member control agreement to permit certain other ventures. On June 17, 2013, the parties further amended the amended and restated member control agreement to extend the initial term through December 31, 2026. On December 31, 2013, the parties entered into the Second Amended and Restated Member Control Agreement that, among other things, increased the operating and accounting fees paid to the member who performs and is solely responsible for purchasing, selling, storing, transporting, marketing and transacting trades in North Dakota crude oil, and entering into related agreements and conducting related activities on behalf of DPTSM ("Trading Member") and amended the limitations on its trading activities. |
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The Company accounted for this joint venture using the equity method of accounting until the date it purchased the 50% ownership interest of PTS. The Company's share of the income or loss from the joint venture is included in other income on the consolidated statements of operations, and the Company recorded an investment in DPTSM on its consolidated balance sheet as of December 31, 2013. |
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Summarized financial statements of DPTSM when accounted for as an equity method investment is as follows: |
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| | Period Ended | | Year Ended | | | |
November 30, | December 31, | | |
| | 2014 | | 2013 | | 2012 | | | |
Sales | | $ | 56,193,717 | | $ | 55,729,970 | | $ | 79,008,731 | | | |
Net Earnings (Loss) | | | (710,529 | ) | | 5,923,344 | | | 20,821,192 | | | |
Company's Share of Equity in Net Earnings (Loss) | | | (355,265 | ) | | 2,961,672 | | | 10,410,596 | | | |
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Total Assets | | | | | | 33,523,175 | | | 49,399,386 | | | |
Total Liabilities | | | | | | 10,605,497 | | | 5,587,792 | | | |
Share of Equity in Net Assets | | | | | | 11,458,839 | | | 21,905,797 | | | |
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The balance sheet information as of December 31, 2014 has been excluded as it has been included in the consolidated financial statements of the Company. |
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The Company has included $2,840,292 in due from related party on its consolidated balance sheet as of December 31, 2013 related to amounts due from DPTSM for transloading services provided in November and December 2013. Effective November 30, 2014, the Company acquired the remaining ownership interest in DPTSM from PTS and immediately discontinued the purchase and sale of crude oil. We plan to maintain the current fleet of rail cars with the intent to sublease the cars and/or charge a throughput fee for utilizing the tank cars to transport crude oil. |
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Pro Forma Information |
The Company accounted for this joint venture using the equity method of accounting until the date it purchased the 50% ownership interest of PTS. The Company's share of the equity method income or loss from the joint venture is included in other income on the consolidated statements of operations, and the Company recorded an investment in DPTSM on its consolidated balance sheet as of December 31, 2013. |
These pro forma amounts have been calculated after adjusting for intercompany amounts. In addition, the equity earnings from the Company's former non-controlling interest in DPTSM have been removed. |
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| | Year Ended |
December 31, |
| | 2014 | | 2013 | | 2012 |
Revenues | | $ | 70,619,811 | | | $ | 56,079,342 | | | $ | 79,275,214 | |
Net Income | | | 1,901,413 | | | | 1,236,307 | | | | 8,409,926 | |
Net Income Attributable to Non-Controlling Interest | | | 5,165,487 | | | | 2,961,671 | | | | 10,410,596 | |
Net Income (Loss) Attributable to Shareholders of Dakota Plains Holdings, Inc. | | | (3,264,074 | ) | | | (1,725,364 | ) | | | (2,000,670 | ) |
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Dakota Plains Services, LLC |
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The Company, through its wholly owned subsidiary Dakota Plains Trucking, LLC, entered into a joint venture with JPND II, LLC ("JPND"). The Company and JPND each owned 50% of the outstanding member units of DPS until the Company sold its 50% ownership to JPND on November 24, 2014. The joint venture was formed to engage in the transportation by road of hydrocarbons and materials used or produced in the extraction of hydrocarbons to or from refineries and other end-users or persons, wherever located, and any other lawful activities as the board of governors determined from time to time. |
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JPND made an initial capital contribution of $650,000 to DPS. The Company was not required to make a capital contribution. Each member received 1,000 member units in DPS. |
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The member control agreement of DPS included a provision that JPND would receive all distributions from the joint venture until the aggregate amount of distributions received was equal to their initial capital contribution. The Company received no distributions during the year ended December 31, 2014. |
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The operations of DPS commenced in September 2012. Under provisions of the member control agreement the profits and losses of DPS were split 50/50, pro rata based on the number of member units outstanding. |
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The initial term of the joint venture was until December 31, 2022. |
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Prior to selling its ownership interest, the Company accounted for this joint venture using the equity method of accounting. The income or loss from the joint venture is included in other income on the consolidated statements of operations, and the Company recorded an investment in Dakota Plains Services, LLC on its consolidated balance sheet as of December 31, 2013. As required by GAAP, the Company recognized its pro rata share of the net income from DPS for the year ended December 31, 2014 and 2013, less the unrecognized losses from the period ended December 31, 2012. The Company did not recognize its share of the loss from DPS for the period ended December 31, 2012 in its consolidated statement of operations for the year ended December 31, 2012. |
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The unaudited financial statements of DPS are summarized as follows: |
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| | Period Ended | | Year Ended | | | |
November 24, | December 31, | | |
| | 2014 | | 2013 | | 2012 | | | |
Sales | | $ | 17,607,524 | | $ | 15,420,096 | | $ | 1,336,482 | | | |
Net Earnings (Loss) | | | 1,213,954 | | | 452,761 | | | (192,151 | ) | | |
Company's Share of Equity in Net Earnings (Loss) | | | 606,977 | | | 130,305 | | | - | | | |
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Total Assets | | | - | | | 9,945,720 | | | 3,136,159 | | | |
Total Liabilities | | | - | | | 9,126,495 | | | 2,469,833 | | | |
Share of Equity in Net Assets | | | - | | | 70,399 | | | - | | | |
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The balance sheet information as of December 31, 2014, has been excluded as the Company sold its ownership interest in DPS effective November 24, 2014. |
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Effective November 24, 2014, the Company sold its ownership interest in DPS for $1,150,000. The Company recorded a gain of $472,624 on the sale of its DPS ownership interest. The gain is included in other income (expense) on the consolidated statement of operations. |
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DPTS Sand, LLC |
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The Company, through its wholly owned subsidiary Dakota Plains Sand, LLC, entered into a joint venture with PTS. The Company and PTS each owned 50% of the outstanding member units of DPTS Sand, LLC until the date it purchased the 50% ownership interest of PTS. The joint venture was formed to engage in the operation of a sand transloading facility near New Town, North Dakota and any other lawful activities as the board of governors may determine from time to time. |
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Each of the members of DPTS Sand, LLC was required to make an initial capital contribution of $1,000. Each member received 1,000 member units for their initial capital contribution. |
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The operations of DPTS Sand, LLC commenced in June 2014. Under the member control agreement, the profits and losses of DPTS Sand, LLC were split 50/50, pro rata based on the number of member units outstanding. The cash payments from the joint venture were also paid pro rata based on the number of member units outstanding. |
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The initial term of the joint venture was until December 31, 2026. |
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As part of the member control agreement, the Company was the Facility Management Member of DPTS Sand, LLC. As the Facility Management Member, the Company was responsible for the day-to-day operations of DPTS Sand, LLC. Accordingly, the Company has consolidated the accounts of DPTS Sand, LLC with and into its consolidated financial statements since the inception of DPTS Sand, LLC. |
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