Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2018 | Nov. 09, 2018 | |
Document And Entity Information | ||
Entity Registrant Name | Superior Drilling Products, Inc. | |
Entity Central Index Key | 1,600,422 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business Flag | true | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | false | |
Entity Common Stock, Shares Outstanding | 24,550,979 | |
Trading Symbol | SDPI | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,018 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Current assets | ||
Cash | $ 4,275,063 | $ 2,375,179 |
Accounts receivable, net | 2,628,892 | 2,667,042 |
Prepaid expenses | 224,833 | 111,530 |
Interest receivable | 275,614 | |
Inventories | 1,034,899 | 1,196,813 |
Other current assets | 161,996 | |
Total current assets | 8,601,297 | 6,350,564 |
Property, plant and equipment, net | 8,006,462 | 8,809,348 |
Intangible assets, net | 4,297,778 | 6,132,778 |
Related party note receivable | 7,367,212 | 7,367,212 |
Other noncurrent assets | 48,727 | 15,954 |
Total assets | 28,321,476 | 28,675,856 |
Current liabilities | ||
Accounts payable | 658,561 | 1,021,469 |
Accrued expenses | 725,151 | 543,758 |
Current portion of long-term debt, net of discounts | 8,443,430 | 6,101,678 |
Total current liabilities | 9,827,142 | 7,666,905 |
Long-term debt, less current portion, net of discounts | 2,521,021 | 6,706,375 |
Total liabilities | 12,348,163 | 14,373,280 |
Commitments and contingencies (Note 8) | ||
Shareholders' equity | ||
Common stock - $0.001 par value; 100,000,000 shares authorized; 24,550,979 and 24,535,155 shares respectively | 24,551 | 24,535 |
Additional paid-in-capital | 39,280,059 | 38,907,864 |
Accumulated deficit | (23,331,297) | (24,629,823) |
Total shareholders' equity | 15,973,313 | 14,302,576 |
Total liabilities and shareholders' equity | $ 28,321,476 | $ 28,675,856 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares | Sep. 30, 2018 | Dec. 31, 2017 |
Statement of Financial Position [Abstract] | ||
Common stock, par value per share | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares, issued | 24,550,979 | 24,535,155 |
Common stock, shares, outstanding | 24,550,979 | 24,535,155 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Income (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Income Statement [Abstract] | ||||
Revenue | $ 4,765,361 | $ 4,446,540 | $ 14,764,577 | $ 11,865,648 |
Operating costs and expenses | ||||
Cost of revenue | 1,665,774 | 1,716,740 | 5,407,389 | 4,388,860 |
Selling, general and administrative expenses | 1,866,833 | 1,102,373 | 4,991,481 | 3,837,218 |
Depreciation and amortization expense | 942,473 | 907,837 | 2,820,183 | 2,745,232 |
Total operating costs and expenses | 4,475,080 | 3,726,950 | 13,219,053 | 10,971,310 |
Operating income | 290,281 | 719,590 | 1,545,524 | 894,338 |
Other income (expense) | ||||
Interest income | 113,555 | 90,959 | 305,694 | 255,327 |
Interest expense | (178,642) | (224,510) | (552,692) | (698,638) |
Other income | 43,669 | |||
Loss on sale of assets | 12,167 | |||
Total other expense | (65,087) | (133,551) | (246,998) | (387,475) |
Net income | $ 225,194 | $ 586,039 | $ 1,298,526 | $ 506,863 |
Basic income earnings per common share | $ 0.01 | $ 0.02 | $ 0.05 | $ 0.02 |
Basic weighted average common shares outstanding | 24,542,551 | 24,261,272 | 24,537,647 | 24,218,477 |
Diluted income per common share | $ 0.01 | $ 0.02 | $ 0.05 | $ 0.02 |
Diluted weighted average common shares outstanding | 25,162,445 | 24,261,272 | 25,156,629 | 24,218,477 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Cash Flows From Operating Activities | ||
Net income | $ 1,298,526 | $ 506,863 |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization expense | 2,820,183 | 2,745,232 |
Amortization of debt discount | 43,459 | 59,766 |
Share based compensation expense | 372,211 | 498,384 |
Impairment of inventories | 41,396 | |
Gain on sale of assets | (12,167) | |
Changes in operating assets and liabilities: | ||
Accounts receivable | 38,150 | (1,493,995) |
Interest receivable | (275,614) | (251,600) |
Inventories | 121,484 | (9,220) |
Prepaid expenses and other assets | (308,072) | (64,245) |
Accounts payable and accrued expenses | (181,515) | (610,936) |
Other long-term liabilities | (17,490) | |
Net Cash Provided by Operating Activities | 3,970,208 | 1,350,592 |
Cash Flows From Investing Activities | ||
Purchases of property, plant and equipment | (183,263) | (220,101) |
Proceeds from sale of fixed assets | 2,483,921 | |
Net Cash Provided by (Used in) Investing Activities | (183,263) | 2,263,820 |
Cash Flows From Financing Activities | ||
Principal payments on debt | (1,887,061) | (2,858,882) |
Principal payments on related party debt | (74,293) | |
Principal payments on capital lease obligations | (217,302) | |
Net Cash Used in Financing Activities | (1,887,061) | (3,150,477) |
Net increase in Cash | 1,899,884 | 463,935 |
Cash at Beginning of Period | 2,375,179 | 2,241,902 |
Cash at End of Period | 4,275,063 | 2,705,837 |
Supplemental information: | ||
Cash paid for Interest | 488,112 | 617,565 |
Non-cash payment of other long-term liability by offsetting related-party note receivable | 550,000 | |
Acquisition of equipment by issuance of note payable | 16,557 | |
Purchases of property, plant and equipment included in accrued expenses | $ 626,000 |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2018 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization and Nature of Operations Superior Drilling Products, Inc. (the “Company”, “SDPI”, “we”, “our” or “us”) is an innovative drilling and completion tool technology company providing cost saving solutions that drive production efficiencies for the oil and natural gas drilling industry. The Company innovates, designs, engineers, manufactures, sells, and repairs drilling and completion tools. Our subsidiaries include (a) Superior Drilling Solutions, LLC (previously known as Superior Drilling Products, LLC), a Utah limited liability company (“SDS”), together with its wholly owned subsidiary Superior Design and Fabrication, LLC, a Utah limited liability company (“SDF”), (b) Extreme Technologies, LLC, a Utah limited liability company (“ET”), (c) Meier Properties Series, LLC, a Utah limited liability company (“MPS”), (d) Meier Leasing, LLC, a Utah limited liability company (“ML”), and (e) Hard Rock Solutions, LLC (“HR” or “Hard Rock”). Basis of Presentation The Company’s consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The consolidated financial statements include the accounts of Superior Drilling Products Inc. and all of its wholly-owned subsidiaries. All significant intercompany accounts have been eliminated in consolidation. The Company does not have investments in any unconsolidated subsidiaries. In April 2012, the JOBS Act was enacted. Section 107 of the JOBS Act provides that an emerging growth company can utilize the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for implementing new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to nonissuers. We have elected to delay such adoption of new or revised accounting standards, and as a result, we may not implement new or revised accounting standards on the relevant dates on which adoption of such standards is required for other issuer companies. Subject to certain conditions set forth in the JOBS Act, as an emerging growth company, we intend to rely on certain of these exemptions, including without limitation, providing an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404 and implementing any requirement that may be adopted regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis). We will remain an emerging growth company until the earliest of (i) the end of the fiscal year in which the market value of our common stock that is held by exceeds $700.0 million as of June 30, (ii) the end of the fiscal year in which we have total annual gross revenues of $1.07 billion or more during such fiscal year, (iii) the date on which we issue more than $1.0 billion in debt in a three-year period or (iv) January 1, 2020. Revenue Recognition We are a drilling and completion tool technology company and we generate revenue from the manufacturing, repair, and sale of drilling and completion tools. Our manufactured products are produced in a standard manufacturing operation, even when produced to our customer’s specifications. We also earn royalty fees under certain arrangements for the tools we sell. Unaudited Interim Financial Presentation These interim consolidated condensed financial statements for the three and nine months ended September 30, 2018 and 2017, and the related footnote disclosures included herein, are unaudited. However, in the opinion of management, these unaudited interim financial statements have been prepared on the same basis as the audited financial statements, and reflect all adjustments necessary to fairly state the results for such periods. The results of operations for the three and nine months ended September 30, 2018 are not necessarily indicative of the results of operations expected for the year ended December 31, 2018. These interim consolidated condensed financial statements should be read in conjunction with the audited consolidated financial statements of the Company for the years ended December 31, 2017 and 2016 and the notes thereto, which were included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, filed with the Securities and Exchange Commission (the “SEC”). Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. Actual results could differ from those estimates. Significant items subject to estimates and assumptions include the carrying amount and useful lives of property and equipment and intangible assets, impairment assessments, share-based compensation expense, and valuation allowances for accounts receivable, inventories, and deferred tax assets. Recently Issued Accounting Standards In May 2014, the Financial Accounting Standards Board (the “FASB”) issued an accounting standards update for “Revenue from Contracts with Customers,” which supersedes the revenue recognition requirements in “Topic 605, Revenue Recognition.” This accounting standard update provides new guidance concerning recognition and measurement of revenue and requires additional disclosures about the nature, timing and uncertainty of revenue and cash flows arising from contracts with customers. In August 2015, FASB delayed the effective date one year, which is now effective for the Company’s fiscal year beginning January 1, 2019. The Company is currently evaluating the impact the pronouncement will have on the consolidated financial statements and related disclosure and will adopt this standard on January 1, 2019. In February 2016, the FASB issued ASU No. 2016-02, “ Leases |
Liquidity
Liquidity | 9 Months Ended |
Sep. 30, 2018 | |
Liquidity | |
Liquidity | NOTE 2. LIQUIDITY At September 30, 2018, we had a working capital deficit of approximately $1,200,000. The Company’s manufacturing facility is financed by a commercial bank loan mortgage with principal of $4,200,000 due February 15, 2019 (see Note 7 – Long-Term Debt). The classification of this debt from long-term to short-term resulted in a working capital deficit at September 30, 2018. Our principal uses of cash are operating expenses, working capital requirements, capital expenditures and debt service payments. We continue to expect to be cash flow positive in 2018. If we are unable to manage our working capital requirements and successfully refinance our commercial bank loan that is collateralized by our property, we may not be able to, among other things, (i) maintain our current general and administrative spending levels; (ii) fund certain obligations as they become due; and (iii) respond to competitive pressures or unanticipated capital requirements. We cannot provide any assurance that financing will be available to us in the future on acceptable terms. |
Inventories
Inventories | 9 Months Ended |
Sep. 30, 2018 | |
Inventory Disclosure [Abstract] | |
Inventories | NOTE 3. INVENTORIES Inventories are comprised of the following: September 30, 2018 December 31, 2017 Raw material $ 778,570 $ 1,040,795 Work in progress 208,194 77,702 Finished goods 48,135 78,316 $ 1,034,899 $ 1,196,813 The Company recorded an impairment loss in the cost of sales of $41,396 in the first quarter of 2018 relating to steel inventory unrelated to the Company’s primary operations. During the second quarter of 2018, the Company sold this unrelated inventory to a third-party wholesaler for approximately $248,000. No gain or loss was recorded upon the sale. |
Property, Plant and Equipment
Property, Plant and Equipment | 9 Months Ended |
Sep. 30, 2018 | |
Property, Plant and Equipment [Abstract] | |
Property, Plant and Equipment | NOTE 4. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are comprised of the following: September 30, 2018 December 31, 2017 Land $ 880,416 $ 880,416 Buildings 4,847,778 4,847,778 Building improvements 719,619 717,232 Machinery and equipment 8,341,098 8,216,237 Furniture and fixtures 510,181 507,557 Transportation assets 811,378 811,378 16,110,470 15,980,598 Accumulated depreciation (8,104,008 ) (7,171,250 ) $ 8,006,462 $ 8,809,348 Depreciation expense related to property, plant and equipment for the three and nine months ended September 30, 2018 was $330,806 and $985,183, respectively, and for the three and nine months ended September 30, 2017 was $296,170 and $910,232, respectively. |
Intangible Assets
Intangible Assets | 9 Months Ended |
Sep. 30, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Assets | NOTE 5. INTANGIBLE ASSETS Intangible assets are comprised of the following: September 30, 2018 December 31, 2017 Developed technology $ 7,000,000 $ 7,000,000 Customer contracts 6,400,000 6,400,000 Trademarks 1,500,000 1,500,000 14,900,000 14,900,000 Accumulated amortization (10,602,222 ) (8,767,222 ) $ 4,297,778 $ 6,132,778 Amortization expense related to intangible assets for the three and nine months ended September 30, 2018 and September 30, 2017, was $611,667 and $1,835,000, respectively. Annually, and more often as necessary, we will perform an evaluation of our intangible assets for indications of impairment. If indications exist, we will perform an evaluation of the fair value of the intangible assets and, if necessary, record an impairment charge. As of September 30, 2018, the Company reviewed the net balance of the intangible assets and determined no impairment was needed. |
Related Party Note Receivable
Related Party Note Receivable | 9 Months Ended |
Sep. 30, 2018 | |
Receivables [Abstract] | |
Related Party Note Receivable | NOTE 6. RELATED PARTY NOTE RECEIVABLE In January 2014, we entered into a Note Purchase and Sale Agreement under which we agreed to purchase a loan made to Tronco Energy Corporation (“Tronco”), a party related to us through common control, in order to take over the legal position as Tronco’s senior secured lender. That agreement provided that, upon our full repayment of the Tronco loan from the proceeds of the Offering, the lender would assign to us all of its rights under the Tronco loan, including all of the collateral documents. On May 30, 2014, we closed our purchase of the Tronco loan for a total payoff of $8.3 million, which included principal, interest, and early termination fees. As a result of that purchase, we became Tronco’s senior secured lender, and as a result are entitled to receive all proceeds from sales of the Tronco-owned collateral, as discussed below. The interest rate on the note is 5.25%. We earned interest of $97,489 and $275,614 for the three and nine months ending September 30, 2018, respectively, and interest of $87,867 and $251,000 for the three and nine months ended September 30, 2017, respectively. On August 8, 2017, the Board of Directors agreed to extend the terms of the Tronco loan to interest only payments due December 31, 2018, 2019, 2020, and 2021, with a balloon payment of all unpaid interest and principal due upon full maturity on December 31, 2022. We have the direct legal right to enforce the collateral and guaranty agreements entered into in connection with the Tronco loan and to collect Tronco’s collateral sales proceeds, in order to recover the loan purchase amount. The Tronco loan continues to be secured by the first position liens on all of Tronco assets, as well as by the guarantees of Troy and Annette Meier (the “Meier Guaranties”), which are directly payable to and legally enforceable by us. In addition, the Meiers have provided us with stock pledges in which they pledge all of their shares of our common stock held by their family entities (the “Meier Stock Pledge”), as collateral for the Meiers guaranties until full repayment of Tronco loan. The pledged shares, which are subject to insider timing requirements and volume limitations under Rule 144 of the Securities Act and required periodic black-out periods, are being held in third-party escrow until full repayment of the Tronco loan, the balance of which is $7,367,212. The Company holds 8,267,860 shares as collateral for the Tronco note as of September 30, 2018. On April 27, 2018, the Company released the 530,725 restricted stock units we previously held as additional collateral for the Tronco note. The Company believes the market value of the 8,267,860 shares is sufficient collateral for the note. |
Long-Term Debt
Long-Term Debt | 9 Months Ended |
Sep. 30, 2018 | |
Debt Disclosure [Abstract] | |
Long-Term Debt | NOTE 7. LONG-TERM DEBT Long-term debt is comprised of the following: September 30, 2018 December 31, 2017 Real estate loans $ 4,313,510 $ 4,518,424 Hard Rock Note, net of discount 5,965,818 7,422,912 Machinery loans 374,955 513,317 Transportation loans 310,168 353,400 10,964,451 12,808,053 Current portion of long-term debt (8,443,430 ) (6,101,678 ) Long-term debt, less current portion $ 2,521,021 $ 6,706,375 Real Estate Loans Our manufacturing facility is financed by a commercial bank loan requiring monthly payments of approximately $43,000, including principal and interest. On August 1, 2018, we entered into an agreement with our lender to extend the due date of the commercial real estate loan from August 15, 2018 to February 15, 2019. The interest rate for the loan extension is 7.1%. Hard Rock Note In 2014, the Company purchased all of the interests of Hard Rock Solutions, LLC (“Hard Rock”). Consideration consisted of $12.5 million paid in cash at closing and a $12.5 million seller’s note (the “Hard Rock Note”). The Hard Rock Note and subsequent amendments are secured by all of the patents, patents pending, other patent rights, and trademarks transferred to Hard Rock. At issuance, the fair value of the Hard Rock Note was determined to be $11,144,000, which is less than the face value due to a below-market interest rate. The resulting discount of $1,356,000 will be amortized to interest expense using the effective interest method, totaling $12,178 and $43,459 for the three and nine months ended September 30, 2018, respectively, and $19,657 and $59,766 for the three and nine months ended September 30, 2017, respectively. On August 10, 2016, certain of our subsidiaries entered into an amended and restated note with the seller in our acquisition of Hard Rock. As amended and restated, the Hard Rock Note accrues interest at 5.75% per annum and matures on January 15, 2020. We have made all the required principal and accrued interest payments related to the note for 2018. For 2019, we are required to pay $1,000,000 in principal plus accrued interest on each of January 15, March 15, May 15 and July 15, 2019. The remaining $2,000,000 balance of principal plus accrued interest on the Hard Rock Note is due on January 15, 2020. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | NOTE 8. COMMITMENTS AND CONTINGENCIES We are subject to litigation that arises from time to time in the ordinary course of our business activities. We are not currently involved in any litigation which management believes could have a material effect on our financial position or results of operations. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2018 | |
Accounting Policies [Abstract] | |
Organization and Nature of Operations | Organization and Nature of Operations Superior Drilling Products, Inc. (the “Company”, “SDPI”, “we”, “our” or “us”) is an innovative drilling and completion tool technology company providing cost saving solutions that drive production efficiencies for the oil and natural gas drilling industry. The Company innovates, designs, engineers, manufactures, sells, and repairs drilling and completion tools. Our subsidiaries include (a) Superior Drilling Solutions, LLC (previously known as Superior Drilling Products, LLC), a Utah limited liability company (“SDS”), together with its wholly owned subsidiary Superior Design and Fabrication, LLC, a Utah limited liability company (“SDF”), (b) Extreme Technologies, LLC, a Utah limited liability company (“ET”), (c) Meier Properties Series, LLC, a Utah limited liability company (“MPS”), (d) Meier Leasing, LLC, a Utah limited liability company (“ML”), and (e) Hard Rock Solutions, LLC (“HR” or “Hard Rock”). |
Basis of Presentation | Basis of Presentation The Company’s consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The consolidated financial statements include the accounts of Superior Drilling Products Inc. and all of its wholly-owned subsidiaries. All significant intercompany accounts have been eliminated in consolidation. The Company does not have investments in any unconsolidated subsidiaries. In April 2012, the JOBS Act was enacted. Section 107 of the JOBS Act provides that an emerging growth company can utilize the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for implementing new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to nonissuers. We have elected to delay such adoption of new or revised accounting standards, and as a result, we may not implement new or revised accounting standards on the relevant dates on which adoption of such standards is required for other issuer companies. Subject to certain conditions set forth in the JOBS Act, as an emerging growth company, we intend to rely on certain of these exemptions, including without limitation, providing an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404 and implementing any requirement that may be adopted regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis). We will remain an emerging growth company until the earliest of (i) the end of the fiscal year in which the market value of our common stock that is held by exceeds $700.0 million as of June 30, (ii) the end of the fiscal year in which we have total annual gross revenues of $1.07 billion or more during such fiscal year, (iii) the date on which we issue more than $1.0 billion in debt in a three-year period or (iv) January 1, 2020. |
Revenue Recognition | Revenue Recognition We are a drilling and completion tool technology company and we generate revenue from the manufacturing, repair, and sale of drilling and completion tools. Our manufactured products are produced in a standard manufacturing operation, even when produced to our customer’s specifications. We also earn royalty fees under certain arrangements for the tools we sell. |
Unaudited Interim Financial Presentation | Unaudited Interim Financial Presentation These interim consolidated condensed financial statements for the three and nine months ended September 30, 2018 and 2017, and the related footnote disclosures included herein, are unaudited. However, in the opinion of management, these unaudited interim financial statements have been prepared on the same basis as the audited financial statements, and reflect all adjustments necessary to fairly state the results for such periods. The results of operations for the three and nine months ended September 30, 2018 are not necessarily indicative of the results of operations expected for the year ended December 31, 2018. These interim consolidated condensed financial statements should be read in conjunction with the audited consolidated financial statements of the Company for the years ended December 31, 2017 and 2016 and the notes thereto, which were included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, filed with the Securities and Exchange Commission (the “SEC”). |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. Actual results could differ from those estimates. Significant items subject to estimates and assumptions include the carrying amount and useful lives of property and equipment and intangible assets, impairment assessments, share-based compensation expense, and valuation allowances for accounts receivable, inventories, and deferred tax assets. |
Recently Issued Accounting Standards | Recently Issued Accounting Standards In May 2014, the Financial Accounting Standards Board (the “FASB”) issued an accounting standards update for “Revenue from Contracts with Customers,” which supersedes the revenue recognition requirements in “Topic 605, Revenue Recognition.” This accounting standard update provides new guidance concerning recognition and measurement of revenue and requires additional disclosures about the nature, timing and uncertainty of revenue and cash flows arising from contracts with customers. In August 2015, FASB delayed the effective date one year, which is now effective for the Company’s fiscal year beginning January 1, 2019. The Company is currently evaluating the impact the pronouncement will have on the consolidated financial statements and related disclosure and will adopt this standard on January 1, 2019. In February 2016, the FASB issued ASU No. 2016-02, “ Leases |
Inventories (Tables)
Inventories (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Inventory Disclosure [Abstract] | |
Schedule of Inventories | Inventories are comprised of the following: September 30, 2018 December 31, 2017 Raw material $ 778,570 $ 1,040,795 Work in progress 208,194 77,702 Finished goods 48,135 78,316 $ 1,034,899 $ 1,196,813 |
Property, Plant and Equipment (
Property, Plant and Equipment (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Property, Plant and Equipment | Property, plant and equipment are comprised of the following: September 30, 2018 December 31, 2017 Land $ 880,416 $ 880,416 Buildings 4,847,778 4,847,778 Building improvements 719,619 717,232 Machinery and equipment 8,341,098 8,216,237 Furniture and fixtures 510,181 507,557 Transportation assets 811,378 811,378 16,110,470 15,980,598 Accumulated depreciation (8,104,008 ) (7,171,250 ) $ 8,006,462 $ 8,809,348 |
Intangible Assets (Tables)
Intangible Assets (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Intangible Assets | Intangible assets are comprised of the following: September 30, 2018 December 31, 2017 Developed technology $ 7,000,000 $ 7,000,000 Customer contracts 6,400,000 6,400,000 Trademarks 1,500,000 1,500,000 14,900,000 14,900,000 Accumulated amortization (10,602,222 ) (8,767,222 ) $ 4,297,778 $ 6,132,778 |
Long-Term Debt (Tables)
Long-Term Debt (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Debt Disclosure [Abstract] | |
Schedule of Long-term Debt Instruments | Long-term debt is comprised of the following: September 30, 2018 December 31, 2017 Real estate loans $ 4,313,510 $ 4,518,424 Hard Rock Note, net of discount 5,965,818 7,422,912 Machinery loans 374,955 513,317 Transportation loans 310,168 353,400 10,964,451 12,808,053 Current portion of long-term debt (8,443,430 ) (6,101,678 ) Long-term debt, less current portion $ 2,521,021 $ 6,706,375 |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 9 Months Ended | |
Sep. 30, 2018 | Jun. 30, 2018 | |
Annual gross revenues | $ 1,070,000,000 | |
Non-convertible debt | $ 1,000,000,000 | |
Debt term | 3 years | |
Debt maturity date | Jan. 1, 2020 | |
Maximum [Member] | Non-affiliates [Member] | ||
Market value of common stock | $ 700,000,000 |
Liquidity (Details Narrative)
Liquidity (Details Narrative) | 9 Months Ended |
Sep. 30, 2018USD ($) | |
Working capital deficit | $ 1,200,000 |
Debt maturity date | Jan. 1, 2020 |
Real Estate Loan [Member] | |
Commercial bank loan mortgage with principal amount | $ 4,200,000 |
Debt maturity date | Feb. 15, 2019 |
Inventories (Details Narrative)
Inventories (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | 9 Months Ended | |
Mar. 31, 2018 | Jun. 30, 2018 | Sep. 30, 2018 | Sep. 30, 2017 | |
Impairment of inventories | $ 41,396 | $ 41,396 | ||
Third Party [Member] | ||||
Proceeds from sale of unrelated inventory | $ 248,000 |
Inventories - Schedule of Inven
Inventories - Schedule of Inventories (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Inventory Disclosure [Abstract] | ||
Raw material | $ 778,570 | $ 1,040,795 |
Work in progress | 208,194 | 77,702 |
Finished goods | 48,135 | 78,316 |
Inventory, Net | $ 1,034,899 | $ 1,196,813 |
Property, Plant and Equipment_2
Property, Plant and Equipment (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Property, Plant and Equipment [Abstract] | ||||
Depreciation expense related to property, plant and equipment | $ 330,806 | $ 296,170 | $ 985,183 | $ 910,232 |
Property, Plant and Equipment -
Property, Plant and Equipment - Schedule of Property, Plant and Equipment (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Property, Plant and Equipment [Abstract] | ||
Land | $ 880,416 | $ 880,416 |
Buildings | 4,847,778 | 4,847,778 |
Building improvements | 719,619 | 717,232 |
Machinery and equipment | 8,341,098 | 8,216,237 |
Furniture and fixtures | 510,181 | 507,557 |
Transportation assets | 811,378 | 811,378 |
Property, plant and equipment, gross | 16,110,470 | 15,980,598 |
Accumulated depreciation | (8,104,008) | (7,171,250) |
Property, plant and equipment, net | $ 8,006,462 | $ 8,809,348 |
Intangible Assets (Details Narr
Intangible Assets (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||||
Amortization of intangible assets | $ 611,667 | $ 1,835,000 | $ 611,667 | $ 1,835,000 |
Impairment of intangible assets |
Intangible Assets - Schedule of
Intangible Assets - Schedule of Intangible Assets (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, gross | $ 14,900,000 | $ 14,900,000 |
Accumulated amortization | (10,602,222) | (8,767,222) |
Finite-lived intangible assets, net | 4,297,778 | 6,132,778 |
Developed Technology [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, gross | 7,000,000 | 7,000,000 |
Customer Contracts [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, gross | 6,400,000 | 6,400,000 |
Trademarks [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, gross | $ 1,500,000 | $ 1,500,000 |
Related Party Note Receivable (
Related Party Note Receivable (Details Narrative) - USD ($) | Apr. 27, 2018 | Aug. 08, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | May 30, 2014 |
Interest income | $ 97,489 | $ 87,867 | $ 275,614 | $ 251,000 | ||||
Debt maturity date | Jan. 1, 2020 | |||||||
Related party note receivable | $ 7,367,212 | $ 7,367,212 | $ 7,367,212 | |||||
Number of collateral shares | 8,267,860 | |||||||
Restricted Stock Units (RSUs) [Member] | Tronco Note [Member] | ||||||||
Number of restricted stock units released as collateral | 530,725 | |||||||
Tronco Energy Corporation [Member] | ||||||||
Notes receivable | $ 8,300,000 | |||||||
Debt interest rate | 5.25% | 5.25% | ||||||
Debt maturity date | Dec. 31, 2022 | |||||||
Maturity date description | On August 8, 2017, the Board of Directors agreed to extend the terms of the Tronco loan to interest only payments due December 31, 2018, 2019, 2020, and 2021, with a balloon payment of all unpaid interest and principal due upon full maturity on December 31, 2022. |
Long-Term Debt (Details Narrati
Long-Term Debt (Details Narrative) - USD ($) | Aug. 01, 2018 | Aug. 10, 2016 | Dec. 31, 2014 | Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 |
Amortization of debt discount | $ 12,178 | $ 19,657 | $ 43,459 | $ 59,766 | |||
Debt maturity date | Jan. 1, 2020 | ||||||
Real Estate Loans [Member] | |||||||
Debt instrument, periodic payment | $ 43,000 | ||||||
Debt extension date description | Extend the due date of the commercial real estate loan from August 15, 2018 to February 15, 2019 | ||||||
Debt instrument, interest rate | 7.10% | ||||||
Hard Rock Note [Member] | |||||||
Debt instrument, periodic payment | $ 2,000,000 | ||||||
Debt instrument, interest rate | 5.75% | ||||||
Business combination, consideration transferred, liabilities incurred | $ 12,500,000 | ||||||
Payments to acquire businesses, gross | 12,500,000 | ||||||
Debt instrument, fair value disclosure | 11,144,000 | ||||||
Amortization of debt discount | $ 1,356,000 | ||||||
Debt maturity date | Jan. 15, 2020 | ||||||
Hard Rock Note [Member] | January 15, 2019 [Member] | |||||||
Debt instrument, periodic payment, interest | $ 1,000,000 | ||||||
Hard Rock Note [Member] | March 15, 2019 [Member] | |||||||
Debt instrument, periodic payment, interest | 1,000,000 | ||||||
Hard Rock Note [Member] | May 15, 2019 [Member] | |||||||
Debt instrument, periodic payment, interest | 1,000,000 | ||||||
Hard Rock Note [Member] | July 15, 2019 [Member] | |||||||
Debt instrument, periodic payment, interest | $ 1,000,000 |
Long-Term Debt - Schedule of Lo
Long-Term Debt - Schedule of Long-term Debt Instruments (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Long term debt, Total | $ 10,964,451 | $ 12,808,053 |
Current portion of long-term debt | (8,443,430) | (6,101,678) |
Long-term debt, less current portion | 2,521,021 | 6,706,375 |
Real Estate Loans [Member] | ||
Long term debt, Total | 4,313,510 | 4,518,424 |
Hard Rock Note [Member] | ||
Long term debt, Total | 5,965,818 | 7,422,912 |
Machinery Loans [Member] | ||
Long term debt, Total | 374,955 | 513,317 |
Transportation Loans [Member] | ||
Long term debt, Total | $ 310,168 | $ 353,400 |