| Summary Of Significant Accounting Policies | 2. Summary of Significant Accounting Policies The financial information included herein is unaudited, except for the consolidated balance sheet as of December 31, 2015, which has been derived from the Company's audited consolidated financial statements for the year ended December 31, 2015. However, such information includes all adjustments (consisting of normal recurring adjustments and changes in accounting principles), which are, in the opinion of management, necessary for a fair presentation of the consolidated financial position, results of operations and cash flows for the interim period. The results of operations for interim periods are not necessarily indicative of the results to be expected for an entire year. Certain information, accounting policies, and footnote disclosures normally included in the consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been omitted in this Form 10-Q pursuant to certain rules and regulations of the Securities and Exchange Commission (the "SEC"). The condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2015.
New Accounting Pronouncements From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (the "FASB") that are adopted by the Company as of the specified effective date. If not discussed, management believes that the recently issued standards, which are not yet effective, will not have a material impact on the Company's consolidated financial statements upon adoption. In May 2014, the FASB issued Accounting Standards Update ("ASU") No. 2014-09, "Revenue from Contracts with Customers." The standard's core principle is that an entity shall recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard generally requires an entity to identify performance obligations in its contracts, estimate the amount of variable consideration to be received in the transaction price, allocate the transaction price to each separate performance obligation, and recognize revenue as obligations are satisfied. The standard will be effective for annual and interim periods beginning after December 15, 2017. The standard allows for either full retrospective adoption, meaning the standard is applied to all periods presented in the financial statements, or modified retrospective adoption, meaning the standard is applied only to the most current period presented. The Company is evaluating the impact of the provisions of ASU 2014-09; however, the standard is not expected to have a material effect on the Company's consolidated financial position, results of operations or cash flows. In November 2015, the FASB issued ASU 2015-17, "Balance Sheet Classifications of Deferred Taxes," which requires entities with a classified balance sheet to present all deferred tax assets and liabilities as non-current instead of separating them into current and non-current amounts. The standard will be effective for public companies for annual and interim periods beginning after December 15, 2016, with early adoption permitted. The Company is evaluating the impact of the provisions of ASU 2015-17; however, the standard is not expected to have a material effect on the Company's consolidated balance sheet. In February 2016, the FASB issued ASU 2016-02, "Leases," effective for annual periods and interim periods within those periods beginning after December 15, 2018. The new guidance requires recognition of leased assets and liabilities on the balance sheet and disclosing key information about leasing arrangements. The Company is evaluating the impact of this standard on its consolidated financial statements. In April 2016, the FASB issued ASU 2016-09, "Compensation – Stock Compensation (Topic 718) – Improvements to Employee Share-Based Payment Accounting," effective for annual periods and interim periods within those periods beginning after December 15, 2016. The new guidance simplifies key components of share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The Company is evaluating the impact of this standard on its consolidated financial statements. In April 2015, the FASB issued ASU 2015-03, "Interest – Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs." In August 2015, the FASB issued ASU 2015-15, "Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements." Under ASU 2015-03, debt issuance costs reported on the consolidated balance sheet will be reflected as a direct deduction from the related debt liability rather than as an asset. While ASU 2015-03 addresses costs related to term debt, ASU 2015-15 provides clarification regarding costs to secure revolving lines of credit, which are, at the outset, not associated with an outstanding borrowing. ASU 2015-15 provides commentary that the SEC staff will not object to an entity deferring and presenting costs associated with line of credit arrangements as an asset and subsequently amortizing them ratably over the term of the revolving debt arrangement. This new guidance was effective beginning January 1, 2016. As of January 1, 2016, the Company adopted ASU 2015-03 on a retrospective basis to all prior balance sheet periods presented. As a result of the adoption, the Company reclassified unamortized finance costs associated with its promissory notes, which totaled $ 2.3
Liquidity As of September 30, 2016, the Company had cash and cash equivalents and trade receivables of approximately $ 7.0 13.4 56.9 The Company is focused on increasing the throughput and reducing the expenses at the transloading facility, but the decline in crude oil prices and contraction of the price spread between Brent and WTI has materially reduced the revenues that the Company is able to generate from its transloading operations, which, in turn, has negatively affected the Company's working capital and income (loss) from operations. The potential for future crude oil prices to remain at their current low levels raises substantial doubt about the Company's ability to meet its obligations when they come due and continue as a going concern. As a result, the Company is considering whether to seek bankruptcy protection. Despite the decline in demand and pricing for its services, the Company continues to pursue several actions including (i) actively engaging in discussions with SunTrust Bank focused on restructuring the existing promissory notes, (ii) minimizing capital expenditures, (iii) reducing general and administrative expenses, (iv) managing the operating costs at the transloading facility and (v) considering bankruptcy protection. The Company has engaged an advisor to assist with recapitalizing or restructuring the Company. These efforts continue in earnest, but the Company can provide no assurance that (x) its efforts will result in sufficient liquidity to satisfy the Company's obligations as they come due or the ability to continue as a going concern or (y) it will not be forced to seek bankruptcy protection. The accompanying condensed consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded assets or the amounts and classification of liabilities that might result from the uncertainty associated with the ability to meet obligations as they come due.
Cash and Cash Equivalents The Company considers highly liquid investments with insignificant interest rate risk and original maturities of three months or less to be cash equivalents. Cash equivalents consist primarily of interest-bearing bank accounts and money market funds. The Company's cash positions represent assets held in checking and money market accounts. These assets are generally available to the Company on a daily or weekly basis and are highly liquid in nature. Due to the balances being greater than $ 250,000
Segments The Company has two one The Company has determined that there is only one reportable segment because the two segments discussed above have similar processes and purposes, customers, geographic locations and economic characteristics.
Accounts Receivable Accounts receivable are carried on a gross basis, with no discounting. The Company regularly reviews all aged accounts receivable for collectability and establishes an allowance as necessary for individual customer balances. At September 30, 2016, the allowance for doubtful accounts was $ 87,000 no The Company recorded bad debt expense of $1.4 million during the nine months ended September 30, 2016 that primarily related to the Settlement Agreement (see Note 11, Settlement Agreement). Bad debt expense is accounted for in transloading operating expenses on the statement of operations.
Property and Equipment Property and equipment are recorded at cost and depreciated using the straight-line method over their estimated useful lives.
Estimated useful lives are as follows: Site Development 15 Terminal 13 Machinery 5 13 Tanks 13 Other Property and Equipment 3 5 Land — Expenditures for leasehold improvements, replacements, renewals, and betterments are capitalized. Maintenance and repairs are charged to operations as incurred. Depreciation expense was $ 1.3 3.8 1.3 3.5
Impairment Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The determination of impairment is based upon expectations of undiscounted future cash flows, before interest, of the related asset. If the carrying value of the asset exceeds the undiscounted future cash flows, the impairment would be computed as the difference between the carrying value of the asset and the fair value. There was no
Environmental Accrual Accruals for estimated costs for environmental obligations generally are recognized no later than the date when the Company identifies what cleanup measures, if any, are likely to be required to address the environmental conditions. Included in such obligations are the estimated direct costs to investigate and address the conditions and the associated engineering, legal and consulting costs. In making these estimates, the Company considers information that is currently available, existing technology, enacted laws and regulations, and its estimates of the timing of the required remedial actions. Such accruals are initially measured on a discounted basis — and are adjusted as further information becomes available or circumstances change — and are accreted up over time. The Company has recorded no
Income Taxes Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Accounting standards require the consideration of a valuation allowance for deferred tax assets if it is "more likely than not" that some component or all of the benefits of deferred tax assets will not be realized. Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, which will result in taxable or deductible amounts in the future. In evaluating the Company's ability to recover its deferred tax assets, the Company considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies, and results of recent operations. In projecting future taxable income, the Company begins with historical results and incorporates assumptions about the amount of future state and federal pretax operating income adjusted for items that do not have tax consequences. The assumptions about future taxable income require significant judgment and are consistent with the plans and estimates the Company is using to manage the underlying businesses. The tax effects from an uncertain tax position can be recognized in the consolidated financial statements only if the position is more likely than not to be sustained if it were to be challenged by a taxing authority. The Company has examined the tax positions taken in its tax returns and determined that there are no uncertain tax positions. As a result, the Company has recorded no uncertain tax liabilities in its condensed consolidated balance sheet. For income tax purposes, the Company records Goodwill for the amount that the purchase price paid for an asset or group of assets exceeds the fair value of the assets acquired. Goodwill for income tax purposes is amortized over fifteen
Stock-Based Compensation The Company records expenses associated with the fair value of stock-based compensation. For fully vested, restricted stock and restricted stock unit grants, the Company calculates the stock-based compensation expense using the estimated fair value on the date of grant. For stock warrants and options, the Company uses the Black-Scholes option valuation model to calculate stock-based compensation at the date of grant. Option pricing models require the input of highly subjective assumptions, including the expected price volatility. Changes in these assumptions can materially affect the fair value estimate.
Stock Issuance The Company records the stock-based compensation awards issued to non-employees and other external entities for goods and services at either the fair market value of the goods received or services rendered or the instruments issued in exchange for such services, whichever is more readily determinable on the related measurement date.
Revenue Recognition DPTS and DPTS Sand, LLC recognize revenues when the related services are performed, the sales price is fixed or determinable and collectability is reasonably assured. DPTS records transloading revenues for fuel-related services when the transloading of petroleum-related products is complete and records other revenues related to the Pioneer Terminal as they are earned based on agreements with customers. DPTS Sand, LLC records revenues for sand transloading services when the transloading of sand-related products is complete.
Concentration of Risk The three largest customers of DPTS accounted for approximately 100 94 89 97 For the three and nine months ended September 30, 2016 and 2015, UNIMIN Corporation was the sole customer of DPTS Sand, LLC and accounted for 100 The loss of any one of these customers could have a material adverse impact on the Company.
Earnings Per Share Basic earnings per share ("EPS") excludes dilution and is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted EPS reflects the potential dilution that could occur if common stock equivalents were exercised or converted to common stock. The dilutive effect of common stock equivalents is calculated using the treasury stock method. When a loss from continuing operations exists, all potentially dilutive securities are anti-dilutive and therefore excluded from the computation of diluted EPS. As the Company had losses for the three and nine month periods ended September 30, 2015, the potentially dilutive shares are anti-dilutive and thus excluded from the diluted EPS calculation. The reconciliation of the denominators used to calculate basic EPS and diluted EPS for the three and nine months ended September 30, 2016 and 2015 are as follows:
Three Months Ended Nine Months Ended September 30, September 30, 2016 2015 2016 2015 Weighted Average Common Shares Outstanding - Basic 54,803,454 54,317,463 54,767,046 54,196,842 Plus: Potentially Dilutive Common Shares, Stock Warrants, Restricted Stock, and Restricted Stock Units 222,176 — 391,464 — Weighted Average Common Shares Outstanding - Diluted 55,025,630 54,317,463 55,158,510 54,196,842 Stock Warrants, Restricted Stock and Restricted Stock Units Excluded from EPS due to the Anti-Dilutive Effect 3,098,531 1,106,567 3,376,002 1,919,784 The following warrants, restricted stock and restricted stock units represented potentially dilutive shares as of September 30, 2016 and 2015:
September 30, 2016 2015 Restricted Stock 127,241 756,149 Restricted Stock Units 456,570 1,624,121 Stock Warrants 2,071,000 2,771,000 Total Potentially Dilutive Shares 2,654,811 5,151,270
Fair Value Measures The Company measures fair value using a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, essentially an exit price, based on the highest and best use of the asset or liability. The levels of the fair value hierarchy are as follows:
Level 1 Level 2 Level 3
Use of Estimates The preparation of consolidated financial statements in conformity with 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Such significant estimates include recoverability of property and equipment, depreciable lives for property and equipment, fair value of the Operational Override liability, inputs in the valuation of certain equity transactions, and accounting for income taxes. Actual results may differ from those estimates.
Principles of Consolidation The accompanying condensed consolidated financial statements include the accounts of Dakota Plains Holdings, Inc. and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. |
