Exhibit 99.4
5J TRUCKING, LLC
UNAUDITED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018
CONTENTS
| | Page |
| | |
| UNAUDITED FINANCIAL STATEMENTS | |
| | |
| Balance Sheets | 1 |
| | |
| Statements of Operations | 2 |
| | |
| Statements of Members’ Deficit | 3 |
| | |
| Statements of Cash Flows | 4 |
| | |
| Notes to Unaudited Financial Statements | 5-9 |
5J TRUCKING, LLC
BALANCE SHEETS
(UNAUDITED)
| | | September 30, | | | December 31, | |
| | | 2019 | | | 2018 | |
| ASSETS | | | | | | | | |
| | | | | | | | | |
| CURRENT ASSETS | | | | | | | | |
| Cash | | $ | - | | | $ | 187,098 | |
| Accounts receivable | | | | | | | | |
| Trade | | | - | | | | 52,616 | |
| Related party | | | 441,889 | | | | 348,501 | |
| Notes receivable - current portion | | | 423,277 | | | | 423,277 | |
| Prepaid expenses | | | 289,705 | | | | 278,447 | |
| TOTAL CURRENT ASSETS | | | 1,154,871 | | | | 1,289,939 | |
| | | | | | | | | |
| PROPERTY AND EQUIPMENT (at cost) | | | | | | | | |
| Buildings | | | 715,921 | | | | 715,921 | |
| Cranes | | | 10,536,569 | | | | 10,536,569 | |
| Trucks, trailers and winches | | | 33,173,251 | | | | 33,099,446 | |
| Machinery and equipment | | | 4,246,967 | | | | 4,246,967 | |
| Total property and equipment | | | 48,672,708 | | | | 48,598,903 | |
| Less accumulated depreciation | | | (33,753,205 | ) | | | (31,827,065 | ) |
| | | | | | | | | |
| TOTAL NET PROPERTY AND EQUIPMENT | | | 14,919,503 | | | | 16,771,838 | |
| | | | | | | | | |
| OTHER ASSETS | | | | | | | | |
| Notes receivable | | | 684,932 | | | | 669,478 | |
| TOTAL OTHER ASSETS | | | 684,932 | | | | 669,478 | |
| TOTAL ASSETS | | $ | 16,759,306 | | | $ | 18,731,255 | |
| | | | | | | | | |
| LIABILITIES AND MEMBERS' DEFICIT | | | | | | | | |
| CURRENT LIABILITIES | | | | | | | | |
| Accounts payable | | $ | 730,368 | | | $ | 694,835 | |
| Bank Overdraft | | | 40,074 | | | | - | |
| Accrued expenses | | | 43,771 | | | | 74,958 | |
| State income taxes payable | | | 103,375 | | | | 140,500 | |
| Current portion of long-term debt | | | 3,525,238 | | | | 3,707,721 | |
| TOTAL CURRENT LIABILITIES | | | 4,442,826 | | | | 4,618,014 | |
| | | | | | | | | |
| LONG-TERM DEBT, net of current portion | | | 17,609,930 | | | | 19,901,173 | |
| | | | | | | | | |
| TOTAL LIABILITIES | | | 22,052,756 | | | | 24,519,187 | |
| | | | | | | | | |
| MEMBERS' DEFICIT | | | (5,293,450 | ) | | | (5,787,932 | ) |
| TOTAL LIABILITIES AND MEMBERS' DEFICIT | | $ | 16,759,306 | | | $ | 18,731,255 | |
The accompanying notes are an integral part of these unaudited financial statements.
5J TRUCKING, LLC
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018
(UNAUDITED)
| | | For the Nine Months Ended | |
| | | September 30, | |
| | | 2019 | | | 2018 | |
| OPERATING REVENUES | | $ | 19,299,200 | | | $ | 19,146,258 | |
| | | | | | | | | |
| OPERATING EXPENSES | | | 17,505,115 | | | | 17,264,934 | |
| | | | | | | | | |
| GROSS PROFIT | | | 1,794,085 | | | | 1,881,324 | |
| | | | | | | | | |
| GENERAL AND ADMINISTRATIVE | | | 1,079,351 | | | | 681,970 | |
| | | | | | | | | |
| INCOME FROM OPERATIONS | | | 714,734 | | | | 1,199,354 | |
| | | | | | | | | |
| OTHER INCOME (EXPENSE) | | | | | | | | |
| Gain on sale of fixed assets | | | 490,848 | | | | 2,409,043 | |
| Interest income | | | 55,151 | | | | 45,065 | |
| Interest expense | | | (662,876 | ) | | | (550,523 | ) |
| | | | | | | | | |
| NET OTHER INCOME (EXPENSE) | | | (116,877 | ) | | | 1,903,585 | |
| | | | | | | | | |
| INCOME BEFORE PROVISION FOR INCOME TAXES | | | 597,857 | | | | 3,102,939 | |
| | | | | | | | | |
| STATE INCOME TAX EXPENSE | | | 103,375 | | | | 92,000 | |
| | | | | | | | | |
| NET INCOME | | $ | 494,482 | | | $ | 3,010,939 | |
The accompanying notes are an integral part of these unaudited financial statements.
5J TRUCKING, LLC
STATEMENTS OF MEMBERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018
(UNAUDITED)
| | | 2019 | | | 2018 | |
| MEMBERS' EQUITY AT BEGINNING OF PERIOD | | $ | (5,787,932 | ) | | $ | (7,430,072 | ) |
| | | | | | | | | |
| Net income | | | 494,482 | | | | 3,010,939 | |
| | | | | | | | | |
| Contributions (distributions) to members | | | - | | | | (1,260,000 | ) |
| | | | | | | | | |
| MEMBERS' EQUITY AT END OF PERIOD | | $ | (5,293,450 | ) | | $ | (5,679,133 | ) |
The accompanying notes are an integral part of these unaudited financial statements.
5J TRUCKING, LLC
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018
(UNAUDITED)
| | | 2019 | | | 2018 | |
| CASH FLOW FROM OPERATING ACTIVITIES | | | | | | | | |
| Net income | | $ | 494,482 | | | $ | 3,010,939 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | |
| Depreciation | | | 2,767,007 | | | | 3,022,445 | |
| Gain on sale of fixed assets | | | (490,848 | ) | | | (1,546,828 | ) |
| Gain on distribution of property | | | - | | | | (862,215 | ) |
| Bad debt expense | | | 554,777 | | | | 200,334 | |
| Decrease (Increase) in accounts receivable | | | (595,549 | ) | | | (322,076 | ) |
| Decrease (Increase) in prepaid expenses | | | (11,258 | ) | | | (7,059 | ) |
| (Decrease) Increase in accounts payable | | | 35,533 | | | | (119,863 | ) |
| (Decrease) Increase in bank overdraft | | | 40,074 | | | | - | |
| (Decrease) Increase in accrued expenses | | | (31,187 | ) | | | (66,949 | ) |
| (Decrease) Increase in state income taxes payable | | | (37,125 | ) | | | (13,000 | ) |
| | | | | | | | | |
| NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES | | | 2,725,906 | | | | 3,295,728 | |
| | | | | | | | | |
| CASH FLOW FROM INVESTING ACTIVITIES | | | | | | | | |
| Purchases of property and equipment | | | (552,738 | ) | | | (779,953 | ) |
| Proceeds from disposal of equipment | | | - | | | | 276,051 | |
| Payments received from equipment sold on contract | | | 453,478 | | | | 313,970 | |
| | | | | | | | | |
| NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES | | | (99,260 | ) | | | (189,932 | ) |
| | | | | | | | | |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | | | |
| Reduction in long-term debt | | | (2,813,744 | ) | | | (3,058,032 | ) |
| Member contributions (distributions) | | | - | | | | (5,000 | ) |
| | | | | | | | | |
| NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES | | | (2,813,744 | ) | | | (3,063,032 | ) |
| | | | | | | | | |
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | | | (187,098 | ) | | | 42,764 | |
| | | | | | | | | |
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | | | 187,098 | | | | 193,758 | |
| | | | | | | | | |
| CASH AND CASH EQUIVALENTS (OVERDRAFT) AT END OF PERIOD | | $ | - | | | $ | 236,522 | |
| | | | | | | | | |
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | | | | | | | | |
| | | | | | | | | |
| Cash paid during the period for: | | | | | | | | |
| Interest | | $ | 856,634 | | | $ | 743,820 | |
| State income taxes | | $ | 140,500 | | | $ | 105,000 | |
| | | | | | | | | |
| Noncash investing and financing transactions: | | | | | | | | |
| Acquisition of property and equipment: | | | | | | | | |
| Cost of property and equipment | | | 340,018 | | | | 2,356,891 | |
| Property and equipment loans | | | (340,018 | ) | | | (2,276,891 | ) |
| Cash down payments | | $ | - | | | $ | 80,000 | |
| | | | | | | | | |
| Sale of property and equipment: | | | | | | | | |
| Equipment sold on contract | | $ | 632,767 | | | $ | 1,353,000 | |
| | | | | | | | | |
| Property distributions: | | | | | | | | |
| Fair value of property distributed | | $ | - | | | $ | 1,170,000 | |
| Cost basis | | | - | | | | (307,785 | ) |
| Gain on distribution | | $ | - | | | $ | 862,215 | |
The accompanying notes are an integral part of these unaudited financial statements.
5J TRUCKING, LLC
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018
ORGANIZATION
5J Trucking, LLC (the Company) is a limited liability company organized under the laws of the State of Texas on January 20, 2004, and headquartered in Palestine, Texas.
NATURE OF OPERATIONS
The Company provides rig mobilization, heavy hauling, compressor and production hauling and hotshot services to the oil and gas industry. Substantially all of these services are provided through 5J Oilfield Services, LLC, a related party.
SIGNIFICANT ACCOUNTING POLICIES
The summary of significant accounting policies is presented to assist in the understanding of the Company’s financial statements. The financial statements and notes are representations of the Company’s management who is responsible for the integrity and objectivity of the financial statements.
Use of Estimates. The preparation of financial statements 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. Actual results could differ from those estimates.
Concentration of Credit Risk. Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and accounts receivable. As of September 30, 2019 and December 31, 2018, the Company had no deposits in excess of federally insured limits at financial institutions. Substantially all (96%) of accounts receivable at September 30, 2019 and (86%) at December 31, 2018 was due from 5J Oilfield Services, LLC. Credit risk with respect to the accounts receivable is derived from 5J Oilfield Services, LLC granting credit to customers located throughout the United States.
Accounts Receivable. Accounts receivable are recorded net of the allowance for doubtful accounts of $1,175,005 at September 30, 2019 and $618,864 at December 31, 2018. The allowance for doubtful accounts is based on historical experience and an evaluation of the outstanding receivables at year end. Bad debt expense for the nine months ended September 30, 2019 and 2018, was $554,777 and $200,334, respectively.
Property and Equipment. Property and equipment are recorded at cost. Depreciation is computed using the straight-line method over the estimated useful life of each class as follows:
| Buildings | 7-39 years |
| Cranes | 10 years |
| Trucks, trailers and winches | 7 years |
| Machinery and equipment | 5-7 years |
Maintenance and repairs are charged to expense as incurred and expenditures for major renewals and betterments are capitalized.
When items of property or equipment are sold or retired, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the results of operations.
Depreciation expense for the nine months ended September 30, 2019 and 2018, was $2,767,007 and $3,022,445, respectively.
Cash and Cash Equivalents. For purposes of the statement of cash flows, the Company considers all demand deposits, money market funds and cash on hand to be cash equivalents.
Income Taxes. The Company is a disregarded entity for Federal income tax purposes. Therefore, no provision for Federal income tax has been included in the financial statements.
The Company is subject to various state income taxes and a state income tax provision of $103,375 and $92,000, has been recorded for the nine months ended September 30, 2019 and 2018, respectively.
For federal and state income tax purposes, the tax returns essentially remain open for possible examination for a period of three years after the respective filing deadlines of those returns.
Members’ Liability. As a limited liability company, each member’s liability is limited to amounts reflected in their respective member equity accounts in accordance with the Operating Agreement.
Subsequent Events. Management has evaluated subsequent events through May 8, 2020, the date the financial statements were available to be issued.
NOTES PAYABLE
Notes payable as of September 30, 2019 and December 31, 2018 consisted of the following:
| | | | | Date of | | Maturity | | Interest | | Original | | | Monthly | | | Payment | | Balance | | | 2019 | | | 2019 | | | Balance | |
| Notes Payable | | Collateral | | Inception | | Date | | Rate | | Amount | | | Payment | | | Method | | 12/31/2018 | | | Additions | | | Reductions | | | 9/30/2019 | |
| Equify | | (4) Manitowoc cranes | | Aug-15 | | Dec-18 | | 6.00% | | $ | 1,353,514 | | | | - | | | Monthly | | $ | 181,620 | | | $ | - | | | $ | 181,620 | | | $ | - | |
| 5J Oilfield Services, LLC | | Miscellaneous Loan Fd Cash Acc. | | Dec-13 | | Dec-26 | | 2.00% | | | 13,887,658 | | | | 33,333 | | | Quarterly | | | 12,137,658 | | | | - | | | | 200,000 | | | | 11,937,658 | |
| Citizens National Bank | | 2017 Holden & 2007 Aspen trailers | | Nov-16 | | Nov-19 | | 5.00% | | | 92,100 | | | | 2,763 | | | Monthly | | | 29,588 | | | | - | | | | 24,158 | | | | 5,430 | |
| Scott Financial | | 2014 Kobelco Crane | | Apr-16 | | Apr-20 | | 5.75% | | | 516,127 | | | | 12,798 | | | Monthly | | | 196,771 | | | | - | | | | 108,649 | | | | 88,122 | |
| Scott Financial | | 2006 Manitowoc Crane | | Apr-16 | | Jan-20 | | 5.75% | | | 335,246 | | | | 8,313 | | | Monthly | | | 104,610 | | | | - | | | | 71,612 | | | | 32,998 | |
| Scott Financial | | 2013 Kobelco Crane | | Apr-16 | | Apr-20 | | 5.75% | | | 531,500 | | | | 13,179 | | | Monthly | | | 202,554 | | | | - | | | | 111,885 | | | | 90,669 | |
| ALLY | | 2017 GMC Truck | | Mar-17 | | Mar-20 | | 4.69% | | | 28,443 | | | | 850 | | | Monthly | | | 12,305 | | | | - | | | | 7,332 | | | | 4,973 | |
| ALLY | | 2017 GMC Truck | | Mar-17 | | Mar-20 | | 4.76% | | | 30,368 | | | | 909 | | | Monthly | | | 13,145 | | | | - | | | | 7,832 | | | | 5,313 | |
| ALLY | | 2017 GMC Truck | | Apr-17 | | Apr-20 | | 4.59% | | | 33,665 | | | | 1,005 | | | Monthly | | | 15,498 | | | | - | | | | 8,640 | | | | 6,858 | |
| ALLY | | 2017 GMC Truck | | Apr-17 | | Apr-20 | | 4.59% | | | 42,762 | | | | 1,276 | | | Monthly | | | 19,685 | | | | - | | | | 10,973 | | | | 8,712 | |
| ALLY | | 2017 GMC Truck | | Jun-17 | | Jun-20 | | 4.59% | | | 26,148 | | | | 780 | | | Monthly | | | 14,222 | | | | - | | | | 6,633 | | | | 7,589 | |
| ALLY | | 2017 GMC Truck | | Jul-17 | | Jul-20 | | 3.39% | | | 18,380 | | | | 538 | | | Monthly | | | 9,920 | | | | - | | | | 4,644 | | | | 5,276 | |
| ALLY | | 2017 Chevrolet Truck | | Sep-17 | | Sep-20 | | 4.40% | | | 30,996 | | | | 922 | | | Monthly | | | 18,550 | | | | - | | | | 7,803 | | | | 10,747 | |
| ALLY | | 2018 Chevrolet Truck | | Oct-17 | | Oct-20 | | 4.59% | | | 29,318 | | | | 875 | | | Monthly | | | 18,369 | | | | - | | | | 7,351 | | | | 11,018 | |
| Citizens National Bank | | 13 Trailers | | Aug-17 | | Aug-22 | | 5.50% | | | 448,000 | | | | 8,464 | | | Monthly | | | 336,132 | | | | - | | | | 63,277 | | | | 272,855 | |
| Scott Financial | | Kobelco crane | | Aug-17 | | Aug-21 | | 5.75% | | | 550,500 | | | | 13,950 | | | Monthly | | | 368,860 | | | | - | | | | 101,817 | | | | 267,043 | |
| Scott Financial | | 2017 Kobelco crane | | Dec-17 | | Dec-22 | | 5.75% | | | 784,877 | | | | 15,113 | | | Monthly | | | 645,520 | | | | - | | | | 109,816 | | | | 535,704 | |
| Triumph | | 9 Trucks and 3 Trailers | | Oct-17 | | Oct-20 | | 5.50% | | | 1,162,749 | | | | 35,207 | | | Monthly | | | 650,341 | | | | - | | | | 332,864 | | | | 317,477 | |
| De Lage Landen | | 2017 Grove Crane | | Dec-17 | | Jan-24 | | 5.48% | | | 3,447,067 | | | | 56,286 | | | Monthly | | | 2,991,144 | | | | - | | | | 435,447 | | | | 2,555,697 | |
| Citizens Bank of Crockett | | 2 Trailers | | Jan-18 | | Jan-21 | | 6.5% floating | | | 144,810 | | | | 4,476 | | | Monthly | | | 103,665 | | | | - | | | | 35,472 | | | | 68,193 | |
| Mercedes-Benz | | 1 Western Star truck | | Feb-18 | | Jul-21 | | 6.15% | | | 100,000 | | | | 2,640 | | | Monthly | | | 77,939 | | | | - | | | | 20,559 | | | | 57,380 | |
| Citizens National Bank | | 2 Kenworths | | Jun-18 | | May-22 | | 5.75% | | | 319,120 | | | | 7,471 | | | Monthly | | | 283,041 | | | | - | | | | 56,097 | | | | 226,944 | |
| Citizens National Bank | | 2 Trailers | | Jul-18 | | Jul-22 | | 5.49% | | | 368,000 | | | | 8,571 | | | Monthly | | | 333,246 | | | | - | | | | 64,593 | | | | 268,653 | |
| Mercedes-Benz | | 8 Western Star trucks | | Aug-18 | | Sep-23 | | 5.50% | | | 1,344,961 | | | | 25,747 | | | Monthly | | | 1,288,963 | | | | - | | | | 181,828 | | | | 1,107,135 | |
| Volvo Fin | | 4 Volvo Trucks | | Oct-18 | | Oct-22 | | 5.50% | | | 596,565 | | | | 13,874 | | | Monthly | | | 574,234 | | | | - | | | | 103,053 | | | | 471,181 | |
| Volvo Fin | | 2 Volvo Trucks | | Dec-18 | | Nov-22 | | 5.50% | | | 309,993 | | | | 7,209 | | | Monthly | | | 304,204 | | | | - | | | | 53,305 | | | | 250,899 | |
| Mercedes-Benz | | 2 Western Star trucks | | Dec-18 | | Dec-23 | | 5.84% | | | 334,047 | | | | 6,433 | | | Monthly | | | 334,047 | | | | - | | | | 43,563 | | | | 290,484 | |
| Triumph | | 5 Kenworth Trucks | | Nov-18 | | Jan-22 | | 6.00% | | | 1,000,750 | | | | 30,770 | | | Monthly | | | 1,000,750 | | | | - | | | | 200,090 | | | | 800,660 | |
| Citizens National Bank | | 2018 Cat Crane | | Dec-18 | | Dec-22 | | 6.00% | | | 900,000 | | | | 21,171 | | | Monthly | | | 900,000 | | | | - | | | | 153,071 | | | | 746,929 | |
| Volvo Fin | | 3 Volvo Trucks | | Dec-18 | | Dec-22 | | 5.50% | | | 442,313 | | | | 10,287 | | | Monthly | | | 442,313 | | | | - | | | | 75,712 | | | | 366,601 | |
| Mercedes-Benz | | 2 Western Star trucks | | May-19 | | Apr-24 | | 5.65% | | | 340,018 | | | | 6,534 | | | Monthly | | | - | | | | 340,018 | | | | 24,048 | | | | 315,970 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Totals | | | | | | | | $ | 29,549,995 | | | | | | | | | $ | 23,608,894 | | | $ | 340,018 | | | $ | 2,813,744 | | | $ | 21,135,168 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | Total Long-Term Debt | | | $ | 21,135,168 | |
| | | | | | | | | | | | | | | | | | | Less current portion | | | | | 3,525,238 | |
| | | | | | | | | | | | | | | | | | | Total Long-Term Debt, net of current portion | | | $ | 17,609,930 | |
COMMITMENTS AND CONTINGENCIES
The Company has guaranteed 5J Oilfield Services, LLC’s Line of Credit with VeraBank with a balance of $6,254,734 as of September 30, 2019. The line of credit matures on October 4, 2019, and has a maximum borrowing amount of $8,000,000. The Company would be obligated to perform under the guarantee if the related entity failed to pay principal and interest payments to the lender when due. As of September 30, 2019, the related party is current with its debt payments.
The Company has guaranteed two of Certified Crane and Rigging Services, LLC’s notes payable due to Equify Financial, LLC with balances of $2,336,368 and $2,003,788 as of September 30, 2019. Payments on the debts are due monthly with final payments due during the year ending December 31, 2022. The Company would be obligated to perform under the guarantee if the related entity failed to pay principal and interest payments to the lender when due. At September 30, 2019, including accrued interest, the maximum potential amount of future payments under the guarantees would be $4,810,043. As of September 30, 2019, the related party is current with its debt payments.
The Company has also guaranteed a Line of Credit for Certified Crane and Rigging Services, LLC with a balance of $1,469,040 as of September 30, 2019. The line of credit matures on February 16, 2020, and has a maximum borrowing amount of $2,020,000. The Company would be obligated to perform under the guarantee if the related entity failed to pay principal and interest payments to the lender when due. As of September 30, 2019, the related party is current with its debt payments.
The Company is contingently liable in respect to lawsuits and other claims arising from the ordinary course of its operations. The Company believes that either there are meritorious defenses to substantially all such actions or that any liability that may finally be determined, net of insurance, should not have a material affect on the Company’s financial position.
RELATED PARTY TRANSACTIONS
During 2019 and 2018, the Company had transactions with 5J Oilfield Services, LLC (Oilfield Services), 5J Properties, LLC (Properties), Certified Crane and Rigging Services, LLC (Certified Crane), 903 Industries, and Schwab Trucking, LLC (Schwab) related through common ownership and management. The Company rents a crane to Certified Crane under a cancelable five year lease. The lease requires Certified Crane to pay the Company rent for the use of the equipment. The following is a description of the transactions with these entities for the nine months ended September 30, 2019 and 2018:
5J Oilfield Services, LLC
| - | The Company rents a substantial portion of its trucks, cranes and other equipment to Oilfield Services under cancelable five year leases. The leases require Oilfield Services to pay the Company rent for the use of the equipment, equivalent to a percentage of the revenue generated by the equipment. In addition, the rent will be reduced by: |
| · | the gross amount paid by or on behalf of Oilfield Services to any driver of the leased equipment for wages |
| · | a percentage of the driver’s gross wages to cover payroll taxes and operations and administrative expenses |
| · | other miscellaneous expenses such as driver physicals, drug and alcohol screens, fines, etc. |
| - | The Company also receives revenue from Oilfield Services for the use of its terminal facilities and from commissions related to job performance. |
| - | Accounts receivable includes $425,121 and $346,331 due from Oilfield Services as of September 30, 2019 and December 31, 2018, respectively. |
| - | Long-Term Debt includes $11,937,658 and $12,137,658 due to Oilfield Services as of September 30, 2019 and December 31, 2018, respectively. Interest expense incurred on the debt was $183,829 and $188,539 during the nine months ended September 30, 2019 and 2018. See the long-term debt information on page 11 for more details. |
| - | The Company reported gross revenue of $18,518,179 reduced by $8,413,934 of expenses during the nine months ended September 30, 2019 and gross revenue of $18,364,569 reduced by $8,100,246 of expenses during the nine months ended September 30, 2018 from Oilfield Services. |
The Company’s transactions with other related parties are summarized below:
| | | September 30, | | | September 30, | |
| | | 2019 | | | 2018 | |
| Operating revenue from Certified Crane | | $ | 556,283 | | | | 589,957 | |
| Operating revenue from Schwab | | | 82,946 | | | | 57,817 | |
| Operating revenue from 903 Industries | | | 19,532 | | | | 26,400 | |
| | | | | | | | | |
| Contract service expense to Certified Crane | | | - | | | | - | |
| Rental expense to 5J Properties | | | 76,500 | | | | 76,500 | |
| Truck expense to 903 Industries | | | - | | | | - | |
| | | | | | | | | |
| Bad debt expense from Certified Crane (included in General and Administrative expense) | | | 556,266 | | | | 150,000 | |
| | | | | | | | | |
| Gain on distribution of fixed assets to CCR | | | - | | | | 862,215 | |
NOTES RECEIVABLE
Notes receivable consisted of the following at September 20, 2019 and December 31, 2018:
| | | September 30, | | | December 31, | |
| | | 2019 | | | 2018 | |
| Matthew Solt, with interest at 8% | | $ | 139,245 | | | $ | 165,643 | |
| Antero M. Zulueta, with interest at 8% | | | - | | | | 160,645 | |
| A-Starr Logistics, LLC, with interest at 8.5% | | | 116,156 | | | | 148,861 | |
| Banks Heavy Haul, with interest at 8% | | | 108,100 | | | | 131,811 | |
| Boyd Farner Jr., with interest at 8% | | | - | | | | 93,651 | |
| PCN Transportation, with interest at 7.5% | | | 51,967 | | | | 86,407 | |
| 2J Trucking, LLC, with interest at 8% | | | - | | | | 78,263 | |
| PCN Transportation, with interest at 8% | | | 40,928 | | | | 59,448 | |
| Donna K. Slinker, with interest at 7.5% | | | - | | | | 58,250 | |
| Danny DelAngel, with interest 8% | | | - | | | | 55,833 | |
| William Corley, with interest at 7.5% | | | - | | | | 53,943 | |
| William Corley, with interest at 7.5% | | | 150,274 | | | | - | |
| Thomas Wright, with interest at 8.5% | | | 119,200 | | | | - | |
| Andy Rivers, with interest at 8% | | | 155,703 | | | | - | |
| Matthew Solt, with interest at 8.5% | | | 152,482 | | | | - | |
| Matthew Solt, with interest at 8.5% | | | 74,154 | | | | - | |
| | | | | | | | | |
| Notes receivable | | $ | 1,108,209 | | | $ | 1,092,755 | |
| Less current portion | | | (423,277 | ) | | | (423,277 | ) |
| | | | | | | | | |
| Notes receivable - non-current portion | | $ | 684,932 | | | $ | 669,478 | |
SUBSEQUENT EVENTS
On February 27, 2020, SMG Industries, Inc. (“SMG”) purchased 100% of the outstanding membership interests of the Company and 5J Trucking for total consideration of $16,000,000, including notes payable of $3,000,000 and preferred stock issued by SMG with a face value of $6,000,000. The transaction closed on February 27, 2020, at which time each 5J company became a wholly-owned subsidiaries of SMG.
