Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2018 | May 11, 2018 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | EVO Transportation & Energy Services, Inc. | |
Entity Central Index Key | 728,447 | |
Trading Symbol | EVOA | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2018 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q1 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock Shares Outstanding | 2,067,120 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Mar. 31, 2018 | Dec. 31, 2017 |
Current assets | ||
Cash and cash equivalents | $ 1,466,889 | $ 83,867 |
Accounts receivable, net | 122,020 | 150,419 |
Alternative fuels tax credit receivable | 648,029 | 648,029 |
Inventory | 1,328 | 1,675 |
Prepaid | 80,000 | |
Total current assets | 2,318,266 | 883,990 |
Non-current assets | ||
Property, equipment and land, net | 7,618,895 | 7,740,423 |
Assets available for sale | 240,000 | 240,000 |
Intangibles | 303,179 | 345,284 |
Deposits and other long-term assets | 132,940 | 132,940 |
Total non-current assets | 8,295,014 | 8,458,647 |
Total assets | 10,613,280 | 9,342,637 |
Current liabilities | ||
Accounts payable | 606,642 | 1,784,049 |
Accounts payable - related party | 432,345 | 409,838 |
Advances from stockholder | 370,359 | 370,359 |
Accrued interest - related party | 874,966 | 927,421 |
Accrued expenses | 922,010 | 1,168,721 |
Derivative liability | 27,659 | 32,186 |
Subordinated convertible senior notes payable to stockholders | 1,421,556 | 1,421,556 |
Working capital notes - related party | 250,000 | 250,000 |
Current portion of long-term debt | 1,063,212 | 1,093,691 |
Total current liabilities | 5,968,749 | 7,457,821 |
Non-current liabilities | ||
Long term subordinated convertible notes payable to stockholders | 1,166,373 | 1,166,373 |
Convertible promissory notes - related parties less unamortized discount of $4,140,183 (March 31, 2018) and $4,257,358 (December 31, 2017) | 5,359,817 | 5,242,642 |
Convertible promissory notes - related party | 450,451 | 437,505 |
Senior promissory note - related party | 3,800,000 | 3,800,000 |
Promissory note - related party | 4,000,000 | 4,000,000 |
Deferred rent | 2,206 | |
Derivative liability, less current portion | 5,784 | 11,420 |
Total non-current liabilities | 14,782,425 | 14,660,146 |
Total liabilities | 20,751,174 | 22,117,967 |
Commitments and contingencies | ||
Stockholders' deficit | ||
Preferred stock, $.0001 par value; 10,000,000 shares authorized, no shares issued and outstanding | ||
Common stock, $.0001 par value; 100,000,000 shares authorized; 1,429,308 (March 31, 2018) and 429,308 (December 31, 2017) shares issued and outstanding | 143 | 43 |
Additional paid-in capital | 3,834,599 | 1,299,980 |
Accumulated deficit | (13,972,636) | (14,075,353) |
Total stockholders' deficit | (10,137,894) | (12,775,330) |
Total liabilities and stockholders' deficit | $ 10,613,280 | $ 9,342,637 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) | Mar. 31, 2018 | Dec. 31, 2017 |
Statement of Financial Position [Abstract] | ||
Unamortized discount | $ 4,140,183 | $ 4,257,358 |
Preferred stock, par value | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | ||
Preferred stock, shares outstanding | ||
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 1,429,308 | 429,308 |
Common stock, shares outstanding | 1,429,308 | 429,308 |
Consolidated Statements of Oper
Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Revenue | ||
CNG sales | $ 320,796 | $ 477,227 |
Total revenue | 320,796 | 477,227 |
CNG cost of sales | 206,394 | 269,836 |
Gross profit | 114,402 | 207,391 |
Operating expenses | ||
General and administrative | 262,888 | 560,589 |
Depreciation and amortization | 163,633 | 130,231 |
Total operating expenses | 426,521 | 690,820 |
Loss from operations | (312,119) | (483,429) |
Other income (expense) | ||
Interest expense | (369,342) | (198,665) |
Realized and unrealized gain on derivative liability, net | 4,068 | (28,007) |
Warrant expense | (34,719) | |
Gain on extinguishment of related party interest | 157,330 | |
Gain on extinguishment of liabilities | 657,499 | |
Total other income (expense) | 414,836 | (226,672) |
Net income (loss) | $ 102,717 | $ (710,101) |
Basic weighted average common shares outstanding | 440,419 | 330,385 |
Basic income (loss) per common share | $ 0.23 | $ (2.15) |
Diluted weighted average common shares outstanding | 440,419 | 330,385 |
Diluted income (loss) per common share | $ 0.23 | $ (2.15) |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Cash flows from operating activities | ||
Net income (loss) | $ 102,717 | $ (710,101) |
Adjustments to reconcile net income (loss) to net cash used in operating activities | ||
Depreciation and amortization | 163,633 | 130,231 |
Deferred rent | (2,206) | |
Allowance for doubtful accounts | (37,007) | |
Realized loss on derivative liability | 6,096 | 52 |
Gain on derivative liability | (16,259) | (28,059) |
Interest expense included in convertible promissory notes- related party | 12,946 | |
Accretion of debt discount | 117,175 | 17,684 |
Common stock issued for debt | 13,187 | |
Warrant expenses | 34,719 | |
Gain on extinguishment of related party interest | (157,330) | |
Gain on extinguishment of liabilities | (657,499) | |
Changes in assets and liabilities | ||
Accounts receivable | 65,406 | (360,934) |
Alternative fuels tax credit receivable | 15,214 | |
Inventory | 347 | (1,255) |
Prepaid | (80,000) | |
Other long-term assets | (11,691) | |
Accounts payable | (519,908) | 306,927 |
Accounts payable - related party | 22,507 | 43,778 |
Accrued expenses | (246,711) | 73,314 |
Accrued interest related party | 104,875 | 117,893 |
Adjustments to reconcile net loss to net cash used in operating activities, total | (1,189,216) | 316,341 |
Net cash used in operating activities | (1,086,499) | (393,760) |
Cash flows from investing activities | ||
Construction in progress | (144,828) | |
Net cash used in investing activities | (144,828) | |
Cash flows from financing activities | ||
Advances from stockholders | 482,325 | |
Payment of promissory note related party | (56,397) | |
Proceeds from subordinated convertible senior notes payable to stockholders | 400,000 | |
Payments of principal on long-term debt | (30,479) | (29,704) |
Proceeds from sale of common stock | 2,500,000 | |
Net cash provided by financing activities | 2,469,521 | 796,224 |
Net increase in cash and cash equivalents | 1,383,022 | 257,636 |
Cash and cash equivalents - beginning of period | 83,867 | 24,944 |
Cash and cash equivalents - end of period | $ 1,466,889 | $ 282,580 |
Consolidated Statements of Cas6
Consolidated Statements of Cash Flows (Unaudited) (Parenthetical) - USD ($) | 3 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Feb. 01, 2017 | |
Supplemental Cash Flow Information [Abstract] | |||
Cash paid for interest | $ 134,377 | $ 63,088 | |
Supplemental disclosure of non-cash activity: | |||
Favorable lease | $ 307,000 | ||
Construction in progress | $ 246,512 | ||
EVO [Member] | |||
Supplemental disclosure of non-cash activity: | |||
Prepaid assets | $ 32,118 | ||
Goodwill | 3,993,730 | ||
Customer list | 220,000 | ||
Trade mark | 86,000 | ||
Favorable lease | 307,000 | ||
Property and equipment | 8,154,667 | ||
Deposits and other long-term assets | 152,117 | ||
Derivative liability | (5,821) | ||
Derivative liability, less current portion | (76,811) | ||
Promissory notes - related party | (8,050,000) | ||
Convertible promissory note - related party | (9,500,000) | ||
Debt discount | $ 4,687,000 |
Basis of Presentation and Secur
Basis of Presentation and Securities Exchange | 3 Months Ended |
Mar. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation and Securities Exchange | Basis of Presentation and Securities Exchange These financial statements represent the consolidated financial statements of EVO Transportation & Energy Services, Inc., formerly Minn Shares Inc. (“EVO Inc.” or the “Company”), its wholly owned subsidiaries, Titan CNG LLC (“Titan”) and Environmental Alternative Fuels, LLC (“EAF”), Titan’s wholly-owned subsidiaries, Titan El Toro LLC (“El Toro”), Titan Diamond Bar LLC (“Diamond Bar”), and Titan Blaine, LLC (“Blaine”), and EAF’s wholly-owned subsidiary, EVO CNG, LLC (“EVO CNG”). Effective August 31, 2017, the Company amended its certificate of incorporation to change its name from “Minn Shares Inc.” to “EVO Transportation & Energy Services, Inc.” by the filing an amendment to the certificate of incorporation of the Company (the “Charter Amendment”). In connection with the name change, the Company changed its ticker symbol on the OTC Pink Marketplace from “MSHS” to “EVOA.” On February 1, 2017, EVO Inc., EAF, EVO CNG, and Danny R. Cuzick (“Danny Cuzick”), Damon R. Cuzick (“Damon Cuzick”), Theril H. Lund and Thomas J. Kiley (together with Danny Cuzick and Damon Cuzick, the “EAF Members”) consummated the transactions contemplated by that certain Agreement and Plan of Securities Exchange dated January 11, 2017 (the “EAF Exchange Agreement”). Pursuant to the EAF Exchange Agreement, EVO Inc. acquired all of the membership interests in EAF (the “EAF Interests”) from the EAF Members. EAF, together with EVO CNG, is a compressed natural gas fueling station company with six fueling stations in California, Texas, Arizona and Wisconsin. In determining the accounting acquirer in the transactions contemplated by the EAF Exchange Agreement, management considered the Financial Accounting Standards Board’s Accounting Standard Codification (“ASC”) 805—Business Combinations. Specifically, management considered the guidance in ASC 810-10, which generally provides that the acquirer in a business combination transaction is determined by identifying the existence of a controlling financial interest, which can typically be determined by the ownership of a majority voting interest. Because the EVO, Inc. stockholders continued to own all of the outstanding shares of Common Stock on completion of the transactions contemplated by the EAF Exchange Agreement, management determined that EVO Inc. was the accounting acquirer in the EAF transaction. However, because the Convertible Notes issued as consideration pursuant to the EAF Exchange Agreement could convert to a majority of the issued and outstanding Common Stock, management will continue to evaluate the accounting treatment for the EAF transaction. The Condensed Consolidated Statements of Income, Condensed Consolidated Balance Sheets and the Condensed Consolidated Statements of Cash Flows included in this report have been prepared by the Company. In our opinion, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position at March 31, 2018 and results of operations and cash flows for all periods have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). These Condensed Consolidated Financial Statements (Unaudited) should be read in conjunction with our financial statements and notes thereto included in our Annual Report on form 10-K for the year ended December 31, 2017. The results of operations for the period ended March 31, 2018 are not necessarily indicative of the operating results for the full year. On April 6, 2017, the Company effected a 50-for-1 reverse stock split of its Common Stock pursuant to which each 50 shares of issued and outstanding Common Stock became one share of Common Stock (the “Reverse Split”). No fractional shares were issued as a result of the Reverse Split. All references to numbers of shares of Common Stock and per share amounts give retroactive effect to the Reverse Split for all periods presented. Going Concern The Company is an early stage company in the process of acquiring several businesses in the transportation and vehicle fuels industry. As of March 31, 2018, the Company has a working capital deficit of approximately $3.7 million and negative equity of approximately $10.1 million. In addition, the Company is in violation of its bank covenants. Management anticipates rectifying with additional public and private offerings. Also, the Company is evaluating certain cash flow improvement measures. However, there can be no assurance that the Company will be successful in these efforts. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern; however, the above conditions raise doubt about the Company’s ability to do so. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern. To meet its current and future obligations the Company has taken the following steps to capitalize the business and successfully achieve its business plan during 2018: On March 2, 2018, the Company issued 1,000,000 Units (the “Units”) at a price of $2.50 per Unit for an aggregate purchase price of $2,500,000 pursuant to the terms of a subscription agreement between the Company and an investor. Each Unit consists of (i) one share of the Company’s common stock, par value $0.0001 per share (“Common Stock”), and (ii) a warrant to purchase one share of Common Stock at an exercise price of $2.50 per share exercisable for five years from the date of issuance. The Company did not pay any commissions in connection with the sale of these Units. During April 2018, the Company paid the working capital notes of $250,000 in full. On April 2, 2018, the Company and a related party note holder agreed to extend the maturity date of the $3,800,000 promissory note through July 2019. On April 13, 2018, the Company consummated the following transactions: The Company issued 275,583 common shares in exchange for certain Senior Bridge Notes in the aggregate principal amount of approximately $689,000, with the per share price for shares of common stock equal to $2.50. The Company issued 272,777 common shares in exchange for the Junior Bridge Notes in the aggregate principal amount of approximately $1,363,858, with the per share price for shares of common stock equal to $5.00. On May 14, 2018, the Company issued 93,400 common shares in exchange for accounts payable and related party accounts payable of approximately $280,200, with the per share price of shares of common stock equal to $3.00. |
Description of Business and Sum
Description of Business and Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2018 | |
Accounting Policies [Abstract] | |
Description of Business and Summary of Significant Accounting Policies | Note 1 - Description of Business and Summary of Significant Accounting Policies The Company is a holding company based in Peoria, Arizona that owns two operating subsidiaries, Titan and EAF, that compete in the compressed natural gas (“CNG”) service business. Titan is the management company that oversees operations of the El Toro, Diamond Bar, and Blaine CNG service stations. As of June 30, 2017, El Toro ceased operations. Blaine and Diamond Bar were formed in 2015. In March 2016, Diamond Bar began operations of its CNG station under a lease agreement with the State of California South Coast Air Quality Management District (“SCAQMD”) in Diamond Bar, California. The Company discontinued construction of Blaine during the fourth quarter of 2017. EAF was originally organized on March 28, 2012 under the name “Clean-n-Green Alternative Fuels, LLC” in the State of Delaware. Effective May 1, 2012, EAF changed its name to “Environmental Alternative Fuels, LLC.” EVO, EAF’s wholly owned subsidiary, was originally organized in the State of Delaware on April 1, 2013 under the name “EVO Trillium, LLC” and subsequently changed its name to “EVO CNG, LLC” effective March 1, 2016. Together, EAF and EVO operate six compressed natural gas fueling stations located in California, Texas, Arizona and Wisconsin. Although the Company plans to continue to operate its existing CNG fueling stations, the Company also intends to expand its operations into servicing the interstate contract trucking routes operated for the United States Postal Service. The Company plans to accomplish its expansion into the trucking industry, which the Company views as complementary to its CNG fueling operations, by acquiring one or more existing trucking companies. The Company was incorporated in the State of Delaware on October 22, 2010. Principles of Consolidation The accompanying consolidated financial statements include the accounts of EVO Transportation & Energy Services, Inc and its subsidiaries, Titan and EAF, Titan’s wholly owned subsidiaries, El Toro, Diamond Bar and Blaine, and EAF’s wholly owned subsidiary, EVO CNG. All intercompany accounts and transactions have been eliminated in consolidation. Use of Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures 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. Actual results could differ from those estimates. The consolidated financial statements include some amounts that are based on management’s best estimates and judgments. The most significant estimates relate to revenue recognition, long-lived intangible asset valuations and impairment assessments, debt discount, and contingencies. These estimates may be adjusted as more current information becomes available, and any adjustment could be significant. 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 disclosures 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. Actual results could differ from those estimates. Federal Alternative Fuels Tax Credit receivable Federal Alternative Fuels Tax Credit (“AFTC”) (formerly known as Volumetric Excise Tax Credit) receivable are the excise tax refunds to be received from the Federal Government on CNG fuel sales. Concentrations of Credit Risk The Company grants credit in the normal course of business to customers in the United States. The Company periodically performs credit analysis and monitors the financial condition of its customers to reduce credit risk. As of March 31, 2018 and 2017, three and five customers accounted for 96% and 93% of the Company’s total accounts receivable, respectively, and one and five customers accounted for and 30% and 92% of the Company’s total revenues for the three months ended March 31, 2018 and 2017, respectively. Intangibles Intangible assets consist of finite lived and indefinite lived intangibles. The Company’s finite lived intangibles include favorable leases, customer relationships and the trade name. Finite lived intangibles are amortized over their estimated useful lives. For the Company’s lease related intangibles, the estimated useful life is based on the agreement of a one-time payment of $1 and the term of the mortgages, of the properties owned by the Company of approximately five years. For the Company’s trade names and customer list the estimated lives are based on life cycle of a customer of approximately 5 years, The Company evaluates the recoverability of the finite lived intangibles whenever an impairment indicator is present. For the year ended December 31, 2017 the test results indicated an impairment of $106,270 to customer lists. The Company’s evaluation of intangibles for the three months ended March 31, 2018 and 2017 resulted in no impairment. Assets Held for Sale The Company classifies assets as being held for sale when the following criteria are met: management has committed to a plan to sell the asset; the asset is available for immediate sale in its present condition; an active program to locate a buyer and other actions required to complete the plan to sell the asset have been initiated; the sale of the asset is highly probable, and transfer of the asset is expected to qualify for recognition as a completed sale, within one year; the asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. Long-Lived Assets The Company evaluates the recoverability of long-lived assets whenever events or changes in circumstances indicate that an asset’s carrying amount may not be recoverable. Such circumstances could include but are not limited to (1) a significant decrease in the market value of an asset, (2) a significant adverse change in the extent or manner in which an asset is used, or (3) an accumulation of costs significantly in excess of the amount originally expected for the acquisition of an asset. The Company measures the carrying amount of the asset against the estimated undiscounted future cash flows associated with it. Should the sum of the expected future net cash flows be less than the carrying value of the asset being evaluated, an impairment loss would be recognized. The impairment loss would be calculated as the amount by which the carrying value of the asset exceeds its fair value. The fair value is measured based on quoted market prices, if available. If quoted market prices are not available, the estimate of fair value is based on various valuation techniques, including the discounted value of estimated future cash flows. The evaluation of asset impairment requires the Company to make assumptions about future cash flows over the life of the asset being evaluated. These assumptions require significant judgment and actual results may differ from assumed and estimated amounts. The Company assesses the useful lives and possible impairment of the fixed assets when an event occurs that may trigger such review. Factors considered important which could trigger a review include: · Significant under performance of the stations relative to historical or projected future operating results; · Significant negative economic trends in the CNG industry; and · Identification of other impaired assets within a reporting unit. Determining whether a triggering event has occurred involves significant judgement by the Company There were no impairments of the Company’s long-lived assets for the three months ended March 31, 2018 or 2017. Hedging Activities The Company periodically enters into commodity derivative contracts to manage its exposure to gas price volatility. GAAP requires recognition of all derivative instruments on the balance sheets as either assets or liabilities measured at fair value. Subsequent changes in a derivative’s fair value are recognized currently in earnings unless specific hedge accounting criteria are met. Gains and losses on derivative hedging instruments must be recorded in either other comprehensive income or current earnings, depending on the nature and designation of the instrument. Management of the Company has determined that the administrative effort required to account for derivative instruments as cash flow hedges is greater than the financial statement presentation benefit. As a result, the Company marks its derivative instruments to fair value and records the changes in fair value as a component of other income and expense. Cash settlements from the Company’s price risk management activities are likewise shown as a component of other income and expense and as a component of operating cash flows on the statements of cash flows. Net Income (Loss) per Share of Common Stock Basic income (loss) per share is computed by dividing net income (loss) available to holders of the Company’s common stock by the weighted average number of shares of common stock outstanding for the period. Diluted loss per share reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock. For the three months ended March 31, 2018 and for the year ended December 31, 2017, potential dilutive securities had an anti-dilutive effect and were not included in the calculation of diluted net loss per common share. Adoption of the New Revenue Standard On January 1, 2018, the Company adopted Revenue from Contracts with Customers (Accounting Standards Codification Topic 606) ("Topic 606" or "new guidance") retrospectively. The adoption of Topic 606 did not have a material impact to our condensed consolidated financial statements. The adoption of the new guidance does not impact recognition revenue. The new guidance has no impact on the timing or classification of the Company’s cash flows as reported in the Consolidated Statement of Cash Flows and is not expected to have a significant impact on the Company’s Consolidated Statement of Operations in future periods. The Company did not record any adjustments applying Topic 606. Revenue Recognition The Company recognizes revenue when control of the promised goods is transferred to its customers, in an amount that reflects the consideration to which it expects to be entitled in exchange for the goods. The Company is generally the principal in its customer contracts as it has control over the goods prior to them being transferred to the customer, and as such, revenue is recognized on a gross basis. We disaggregate revenue by station, as we believe this best depicts the nature, amount, timing and uncertainty of our revenues and cash flows are affected by economic factors. A performance obligation is a promise in a contract to transfer a distinct good to the customer and is the unit of account in Topic 606. The performance obligations that comprise a majority of the Company's total revenue consist of sale of fuel to a customer. The primary method used to estimate the standalone selling price for fuel is observable standalone sales, and the primary method used to estimate the standalone selling. The Company’s CNG revenue is sold pursuant to contractual commitments. These contracts typically include a stand-ready obligation to supply natural gas daily. The Company recognizes revenue over time for the fuel sales because the customer receives and consumes the benefits provided by the Company's performance as the stand-ready obligations are being performed. Payment terms and conditions vary by contract type. For substantially all the Company's contracts under which it receives volume-related revenue, the timing of revenue recognition does not differ from the timing of invoicing; as a result the Company has determined these contracts generally do not include a significant financing component. There was no impairment loss recognized on any of the receivables arising from customer contracts for the three months ended March 31, 2018. Alternative Fuels Tax Credit For 2017 the AFTC credit was $0.50 per gasoline gallon equivalent of CNG that is sold as a vehicle fuel. This incentive originally expired on December 31, 2016, but was retroactively extended through December 31, 2017, with the Bipartisan Budget Act of 2018. Gain on Extinguishment of Liabilities and Interest Gain on extinguishment of liabilities consists of the gain the Company recognized on the extinguishment of accounts payable that were incurred for which the Company deemed the risk of collection to be remote or that management has negotiated a settlement. The Company recognized a gain on extinguishment of liabilities and interest of $657,499 and $157,330, respectively for the three months ended March 31, 2018. Advertising Costs The Company expenses advertising costs as incurred. Advertising expense for the three months ended March 31, 2018 and 2017 was de minimis. Income Taxes The Company recognizes deferred tax liabilities and assets based on the differences between the tax basis of assets and liabilities and their reported amounts in the financial statements that will result in taxable or deductible amounts in future years. The Company’s temporary differences result primarily from depreciation. The Company evaluates its tax positions taken or expected to be taken in the course of preparing the Company’s tax returns to determine whether the tax positions will more likely than not be sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold are not recorded as a tax benefit or expense in the current year. Interest and penalties, if applicable, are recorded in the period assessed as general and administrative expenses. However, no interest or penalties have been assessed for the three months ended March 31, 2018 or 2017. Tax years that remain subject to examination include 2014 through the current year for federal and state, respectively. Deferred income taxes are provided for temporary differences between the financial reporting and tax basis of assets and liabilities. Deferred taxes are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of the enactment. In evaluating the ultimate realization of deferred income tax assets, management considers whether it is more likely than not that the deferred income tax assets will be realized. Management establishes a valuation allowance if it is more likely than not that all or a portion of the deferred income tax assets will not be utilized. The ultimate realization of deferred income tax assets is dependent on the generation of future taxable income, which must occur prior to the expiration of the net operating loss carryforwards. The Tax Cuts and Jobs Act (“Tax Act”) was signed into law on December 22, 2017. The Tax Act includes significant changes to the U.S. corporate income tax system, including limitations on the deductibility of interest expense and executive compensation, eliminating the corporate alternative minimum tax (“AMT”) and changing how existing AMT credits can be realized, changing the rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after December 31, 2018, and the transition of U.S. international taxation from a worldwide tax system to a territorial tax system. The Company’s accounting for the following elements of the Tax Act is incomplete, and it is not yet able to make reasonable estimates of the effects. Therefore, no provisional adjustments were recorded. The Company must assess whether valuation allowances assessments are affected by various aspects of the Tax Act. Since, as discussed above, the Company has recorded no amounts related to certain portions of the Tax Act, any corresponding determination of the need for or change in a valuation allowance has not been completed and no changes to valuation allowances as a result of the Tax Act have been recorded. Recently Issued Accounting Pronouncements In July 2017, the Financial Accounting Standards Board (“FASB”) issued ASU 2017-11, “Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part 1) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Non-public Entities and Certain Mandatorily Redeemable Non-controlling Interests with a Scope Exception” (“ASU 2017-11”). Part I relates to the accounting for certain financial instruments with down round features in Subtopic 815-40, which is considered in determining whether an equity-linked financial instrument qualifies for a scope exception from derivative accounting. Down round features are features of certain equity-linked instruments (or embedded features) that result in the strike price being reduced based on the pricing of future equity offerings. An entity still is required to determine whether instruments would be classified as equity under the guidance in Subtopic 815-40 in determining whether they qualify for that scope exception. If they do qualify, freestanding instruments with down round features are no longer classified as liabilities. ASU 2017-11 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period. Early adoption is permitted, including in an interim period. The Company does not plan early adoption of this update and does not expect the adoption of the update to materially change its current accounting methods and therefore the Company does not expect the adoption to have a material impact on its consolidated financial statements. In March 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-09, “Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”), which simplifies several aspects of the accounting for share-based payment award transactions including accounting for income taxes and classification of excess tax benefits on the statement of cash flows, forfeitures and minimum statutory tax withholding requirements. For the Company, ASU 2016-09 is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company does not plan early adoption of this update and does not expect the adoption of the update to materially change its current accounting methods and therefore the Company does not expect the adoption to have a material impact on its consolidated financial statements. In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-04, Intangibles - Goodwill and Other (Topic 350) (“ASU 2017-04”), Simplifying the Test for Goodwill Impairment. To simplify the subsequent measurement of goodwill, the amendments eliminate Step 2 from the goodwill impairment test. The annual, or interim, goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. In addition, income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit should be considered when measuring the goodwill impairment loss, if applicable. The guidance is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019 and early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not plan early adoption of this update and does not expect the adoption of the update to materially change its current accounting methods and therefore the Company does not expect the adoption to have a material impact on its consolidated financial statements. In June 2016, FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) (“ASU 2016-13”), Measurement of Credit Losses on Financial Instruments. The standard significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The standard will replace today’s “incurred loss” approach with an “expected loss” model for instruments measured at amortized cost. For available-for-sale debt securities, entities will be required to record allowances rather than reduce the carrying amount, as they do today under the other-than-temporary impairment model. It also simplifies the accounting model for purchased credit-impaired debt securities and loans. This ASU is effective for annual periods beginning after December 15, 2019, and interim periods therein. Early adoption is permitted for annual periods beginning after December 15, 2018, and interim periods therein. The Company does not plan early adoption of this update and does not expect the adoption of the update to materially change its current accounting methods and therefore the Company does not expect the adoption to have a material impact on its consolidated financial statements. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). ASU 2014-09 amends the guidance for revenue recognition to replace numerous, industry-specific requirements and converges areas under this topic with those of the International Financial Reporting Standards. The ASU implements a five-step process for customer contract revenue recognition that focuses on transfer of control, as opposed to transfer of risk and rewards. The amendment also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenues and cash flows from contracts with customers. Other major provisions include the capitalization and amortization of certain contract costs, ensuring the time value of money is considered in the transaction price, and allowing estimates of variable consideration to be recognized before contingencies are resolved in certain circumstances. The amendments in this ASU are effective for reporting periods beginning after December 15, 2016; however, in July 2015, the FASB agreed to delay the effective date by one year. The proposed deferral may permit early adoption but would not allow adoption any earlier than the original effective date of the standard. On January 1, 2018 we adopted ASU 2014-09 using the full retrospective method. The Company completed its review of its material revenue streams and determined that there will be no impact to its consolidated financial statements, results of operations or liquidity. When comparing the Company’s current revenue recognition to the new applied revenue recognition under Accounting Standards Codification (“ASC”) 606, there was no change to the amount or timing of revenue recognized. Therefore, no quantitative adjustment was required to be made to the prior periods presented on the unaudited condensed consolidated financial statements after the adoption of ASC 606 In February 2016, the FASB issued ASU 2016-02, “Leases” (“ASU 2016-02”), which will require lessees to recognize a right-of-use asset and a lease liability for all leases that are not short-term in nature. For a lessor, the accounting applied is also largely unchanged from previous guidance. The new rules will be effective for the Company in the first quarter of 2019. The Company is in the process of evaluating the impact the amendment will have on its consolidated financial position or results of operations. |
Acquisition
Acquisition | 3 Months Ended |
Mar. 31, 2018 | |
Business Combinations [Abstract] | |
Acquisitions | Note 2 - Acquisition EAF On February 1, 2017, the Company entered into a securities exchange agreement (the “EAF Exchange Agreement”) with Environmental Alternative Fuels, LLC, a Delaware limited liability company (“EAF”), EVO CNG, LLC, a Delaware limited liability company and a wholly owned subsidiary of EAF (“EVO”), pursuant to which the Company acquired all of the membership interests in EAF (the “EAF Interests”) from the EAF Members. EAF, together with EVO, is a compressed natural gas fueling station company with six fueling stations in California, Texas, Arizona and Wisconsin. The EAF Exchange Agreement further aligns the Company’s business model to acquire existing CNG stations. The following table summarizes the fair value allocation of the assets acquired and liabilities assumed at the acquisition date which were based on the best information available at the time the financial statements were issued and is subject to change. Prepaid assets $ 32,118 Goodwill 3,993,730 Customer list 220,000 Trade mark 86,000 Favorable list 307,000 Property and equipment 8,154,667 Deposits and other long-term assets 152,117 Derivative liability (5,821 ) Derivative liability, less current portion (76,811 ) Promissory notes - related party (8,050,000 ) Convertible promissory note - related party (9,500,000 ) Debt discount 4,687,000 The Company has evaluated and expects the goodwill and other intangibles to be deductible for income tax purposes. The Company engaged a third-party valuation specialist to determine the fair value of the land, buildings, and equipment, and the EAF intangible assets. The Company incurred a total of approximately $250,000 in transaction closing costs, which were expensed as incurred as general and administrative expenses in the consolidated statement of operations, for the years ended December 31, 2017 and 2016. As consideration for the EAF Interests, the Company issued a promissory note to an EAF member in the principal amount of $3.8 million (the “Senior Promissory Note”) that bears interest at 7.5%, with a default interest rate of 12.5% per year and has a maturity date of the earlier of (a) the date that is ten days after the initial closing of a private offering of capital stock of the Company in an amount not less than $10 million (a “Private Offering”); (b) December 31, 2017 or a (c) declaration by the noteholder of an event of default under the Senior Promissory Note. During April 2018 the promissory note’s maturity was extended until July 2019. Also, as consideration for the EAF Interests, the Company issued convertible promissory notes to the EAF Members in the aggregate principal amount of $9.5 million (the “Convertible Notes”). The Convertible Notes bear interest at 1.5% per year and have a maturity date of February 1, 2026. The Convertible Notes are convertible into 1,400,000 shares (the “Transaction Shares”) of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), subject to adjustment for any stock splits, combinations or similar transactions, representing approximately 81.1% of the Company’s total outstanding shares of Common Stock on a post transaction basis. Accordingly, the conversion of the Convertible Notes will result in a change in control of the Company. The number of Transaction Shares will be increased to equal 70% of the issued and outstanding Common Stock if the issuance of Common Stock pursuant to a private offering of Common Stock of up to $2 million and the conversion of the Company’s subordinated notes payable to members and Senior Bridge Notes, convertible promissory notes, and certain accounts payable into Common Stock would otherwise cause the Transaction Shares to represent less than 70% of the issued and outstanding Common Stock. Pursuant to the terms of the Exchange Agreement, the EAF Members are entitled to demand registration rights and piggyback registration rights with respect to the Transaction Shares upon customary terms, limitations, exceptions and conditions. The Convertible Notes are secured by all of the assets of EAF and the EAF Interests, which the Company pledged to the EAF Members as security for the Convertible Notes. Each Convertible Note is convertible at the applicable holder’s option upon (1) consummation of a reorganization, merger or similar transaction where the Company is not the surviving or resulting entity or (2) the sale of all or substantially all of the Company’s assets, subject to customary restrictions. The Convertible Notes are also subject to mandatory conversion at the Company’s option beginning on the first anniversary of the date of issuance of the Convertible Notes if: (i) the closing price of the Common Stock is greater than (A) 150% of the price at which a share of Common Stock is sold in a Private Offering or (B) $10.00 if a Private Offering has not occurred by December 31, 2017 and (ii) the average daily trading volume of shares of Common Stock has equaled 100,000 or more for the 30 days prior to the applicable date. Upon a conversion of the Convertible Notes, accrued interest may also be converted at the greater of (i) the amount of interest to be converted divided by the exchange ratio of 0.1357, subject to adjustment for stock splits or combinations, or (ii) the amount of interest to be converted divided by the closing price of the Common Stock on the trading day preceding the conversion date. In connection with the closing of the Exchange Agreement, on February 1, 2017, the Company issued promissory notes to the EAF Members in the aggregate principal amount of $250,000 that bear interest at 6% per annum with a default rate of 11% per annum and a maturity date of the earlier of (a) the closing of a Private Offering; (b) 180 days from the date of the notes and (c) declaration by a holder of an event of default under the holder’s note (the “Working Capital Notes”). During April 2018 the notes were paid in full. In connection with the closing of the EAF Exchange Agreement, on February 1, 2017, the Company guaranteed a note from EAF to an EAF member dated January 30, 2017 in the principal amount of $4,000,000 (the “EAF Note”). The EAF Note is secured by all assets of EAF and is guaranteed by EAF. The EAF Note bears interest at 7.5% per annum with a default rate of 12.5% per annum and has a maturity date of the earlier of (a) February 1, 2020 and (b) declaration a declaration by the noteholder of an event of default under the EAF Note. |
Balance Sheet Disclosures
Balance Sheet Disclosures | 3 Months Ended |
Mar. 31, 2018 | |
Balance Sheet Disclosures [Abstract] | |
Balance Sheet Disclosures | Note 3 - Balance Sheet Disclosures Accounts receivable are summarized as follows: March 31, December 31, 2018 2017 Accounts receivable $ 122,020 $ 187,426 Allowance for doubtful accounts - (37,007 ) $ 122,020 $ 150,419 Property, equipment and land are summarized as follows: March 31, December 31 2018 2017 Equipment $ 3,919,589 $ 3,919,589 Buildings 3,259,179 3,259,179 Land 975,899 975,899 Computer equipment 37,627 37,627 Site development - - Leasehold improvements - - 8,192,294 8,192,294 Less accumulated depreciation (573,399 ) (451,871 ) $ 7,618,895 $ 7,740,423 Depreciation expense for the three months ended March 31, 2018 and 2017 was $121,528 and $130,231, respectively. Intangible assets consist of the following: March 31, December 31, 2018 2017 Goodwill $ 3,993,730 $ 3,993,730 Favorable lease 307,000 307,000 Customer relationships 113,730 113,730 Trade names 86,000 86,000 4,500,460 4,500,460 Less Impairment (4,100,000 ) (4,100,000 ) 400,460 400,460 Less Amortization (97,281 ) (55,176 ) $ 303,179 $ 345,284 Amortization expense for the three months ended March 31, 2018 and 2017 was $42,105 and $0, respectively. Future amortization expense will be approximately as follows: Year Ending December 31, At March 31, 2018 $ 75,900 2019 111,100 2020 106,000 2021 10,200 $ 303,200 Accrued expenses consist of the following: March 31, December 31, 2018 2017 Federal alternative fuels tax credit and other fuel taxes $ 533,460 $ 562,513 Professional fees 292,231 508,028 Compensation and related payroll taxes 72,420 72,420 Deferred rent 12,130 13,233 Credit cards 11,769 12,527 $ 922,010 $ 1,168,721 |
Related Party Transactions
Related Party Transactions | 3 Months Ended |
Mar. 31, 2018 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Note 4 - Related Party Transactions Accounts Payable - Related Party The Company’s accounts payables - related party consist of guaranteed payments and expense reimbursement to members. Accounts payable - related party was $432,345 and $409,838 as of March 31, 2018 and December 31, 2017, respectively. Advances Related Party During the year ended December 31, 2017, an EVO member advanced $332,859 to the Company. During the year ended December 31, 2016, a Titan member advanced $2,000 to the Company. During the year ended December 31, 2016 an El Toro member advanced $35,500 to the Company. Accrued Interest - Related Party The Company’s accrued interest - related party are the accrued interest payments on stockholders’ and related party debt. Accrued interest - related party was $874,966 and $927,421 as of March 31, 2018 and December 31, 2017, respectively. During April 2018 the Company converted Jr. and Sr Debt and related interest of $2,052,858 into 502,430 shares of common stock. As a result of the conversion the Company realized a gain on the extinguishment of accrued interest of $157,330, which was recognized the three months ended March 31, 2018. |
Long-Term Debt
Long-Term Debt | 3 Months Ended |
Mar. 31, 2018 | |
Debt Disclosure [Abstract] | |
Long-Term Debt | Note 5 - Long-Term Debt Long-term debt consists of: March 31, December 31, 2018 2017 $1,300,000 SBA note payable issued December 31, 2014, with interest at 5.50% for the first five years, then adjusted to the SBA LIBOR base rate, plus 2.35% for the remaining five years. The note required interest only payments for the first twelve months and commencing during January 2016 calls for monthly principle and interest payments of $15,288. The note matures March 2024, is secured by substantially all of the Company’s assets and is personally guaranteed by certain members. The note is a co-borrower arrangement between Titan and El Toro with the proceeds received by El Toro. The Company issued to members 35,491 units (equivalent to 31,203 common shares) in Titan as compensation for the guarantee. The Company was in violation of the note’s covenants as of March 31, 2018 and December 31, 2017. $ 1,063,212 $ 1,093,691 Six subordinated senior notes payable to stockholders (“Senior Bridge Notes”) with interest at 12%. In connection with the notes payable, the note holders were issued 25,541 Class A Membership Units (equivalent to 22,455 common shares). In the event of a default the Company is required to pay the holder a stated number of Class A Membership Units on the date of default and each 90-day interval thereafter until all amounts due have been paid in full. Effective July 2016, the maturity date of the Senior Bridge Notes was extended to September 30, 2016 and allowed for an interest rate increase from 12% to 16% effective March 14, 2016. The default interest rate was increased from 15% to 18%. As part of the first amendment, the note holders received 3,359 Class A Membership Units (equivalent to 2,953 common shares) in Titan. In September 2016, the Senior Bridge Notes were amended to extend the due date to April 30, 2017 and the Company paid a fee for the extension of 1% of the outstanding principal balance to the note holders. The Company subsequently extended the maturity date of the notes to October 31, 2017. The Company paid a fee of 1% of the outstanding principal balance on the notes on or around each of January 31, 2017, April 30, 2017, and July 31, 2017 to extend the maturity date of the notes. The notes are secured by a subordinate security interest on substantially all of the Company’s assets and are personally guaranteed by two members. The Senior Bridge Notes were not extended at the maturity. During April 2018, $621,556 of the Senior Bridge Notes and related interest of $67,444 were converted into 275,583 shares of common stock, with a write-off of interest of $73,741. 1,421,556 1,421,556 Nine subordinated notes payable to stockholders (“Junior Bridge Notes”) with interest at 12%, with maturity at December 2020, secured by a subordinate security interest on substantially all assets of the Company. During April 2018, $1,166,373 of the Junior Bridge Notes and related interest of $197,485 were converted into 272,777 shares of common stock, with a write-off of interest of $83,589 1,166,373 1,166,373 Three convertible promissory notes to stockholders (“Minn Shares Notes”) with interest at 12%, with maturity on or after November 2019. At the next equity financing the holder at their discretion may elect to convert the principal and interest at a conversion price equal to the price per security issued in such offering. These notes are also subject to mandatory conversion in the event that the Senior Bridge Notes and Junior Bridge Notes discussed above convert to equity, and any mandatory conversion will be on the same terms as those received by the holders of the Senior Bridge Notes and Junior Bridge Notes. The promissory notes are unsecured. 450,451 437,505 A promissory note to a former EAF member with interest at 7.5%, with maturity during December 2017, ten days after the initial closing of a private offering of capital stock of the Company in an amount not less than $10 million or at discretion of the member. During April 2018 the promissory note’s maturity date was extended to July 2019. 3,800,000 3,800,000 A promissory note to a former EAF member with interest at 7.5%, with maturity during February 2020, the note is guaranteed by substantially all the assets of the Company. 4,000,000 4,000,000 Four promissory notes to former EAF members with interest at 6%, with maturity upon the earlier of July 2017 or the date of closing a private offering of at least $2 million. During April 2018, the notes were paid in full. 250,000 250,000 Four promissory notes to former EAF members with interest at 1.5%, with maturity during February 2026. The promissory notes are convertible into 1,400,000 shares. These convertible promissory notes are secured by substantially all of the assets of EAF. The Company imputed an interest rate of 5.1% on the promissory notes. The discount is accreted over the period from the date of issuance to the date the promissory notes are due using the effective interest rate method. See note 2 above for additional discussion regarding the conversion mechanics of these convertible notes. 9,500,000 9,500,000 21,651,592 21,669,125 Debt discount* (4,140,183 ) (4,257,358 ) 17,511,409 17,411,767 Less current portion (2,734,768 ) (2,765,247 ) $ 14,776,641 $ 14,646,520 * Of our total indebtedness of approximately $21,652,000 as of March 31, 2018, approximately $2,700,000 is classified as current debt with $850,000 either paid in full or converted to common stock during April 2018. We are in violation of the covenants related to the SBA loan. We have not received a waiver for current violations of these covenants as of March 31, 2018 and through the date of filing of this Form 10-Q. On February 1, 2017, pursuant to the EAF Exchange Agreement, EVO Inc. acquired all of the membership interests of EAF. As consideration for the membership interests, EVO Inc. issued convertible promissory notes to the former members of EAF in the aggregate principal amount of $9.5 million (the “Convertible Notes”). The Convertible Notes bear interest at 1.5% per year and have a maturity date of February 1, 2026. The Convertible Notes are convertible into 1,400,000 shares (the “Transaction Shares”) of EVO Inc. common stock, subject to adjustment for stock splits, combinations or similar transactions, which represents approximately 81.1% of EVO Inc.’s total outstanding shares of common stock on a post-transaction basis. Accordingly, the conversion of the Convertible Notes would result in a change in control of the Company. The number of Transaction Shares will be increased to equal 70% of the issued and outstanding shares of EVO Inc. common stock if the issuance of common stock pursuant to a private offering of common stock of up to $2 million and the conversion into common stock of EVO Inc.’s subordinated notes payable to members, Senior Bridge Notes, convertible promissory notes, and certain accounts payable would otherwise cause the Transaction Shares to represent less than 70% of the issued and outstanding common stock The Company engaged a third-party financial advisory firm to assist in the determination of the purchase price allocation under the guidance of ASC Topic 805. A third-party advisory firm calculated, with assistance and collaboration of management, the value of the $9.5 million-dollar debt to be $4,813,000, generating a debt discount $4,687,000; with accretion at March 31, 2018 the remaining discount is $4,140,183. Maturities of long-term obligations are as follows: Year Ending December 31, Related Party Notes Other Notes Total At March 31, 2018 2018 $ 1,671,556 $ 1,063,212 $ 2,734,768 2019 4,250,451 - 4,250,451 2020 5,166,373 - 5,166,373 2021 - - - 2022 - - - 2023 9,500,000 - 9,500,000 $ 20,588,380 $ 1,063,212 $ 21,651,592 |
Derivative Instruments
Derivative Instruments | 3 Months Ended |
Mar. 31, 2018 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivative Instruments | Note 6 - Derivative Instruments The Company periodically enters into various commodity hedging instruments to mitigate a portion of the effect of natural gas price fluctuations, as summarized in the table below. Open derivative positions are accounted for on a fair value basis at the consolidated balance sheet date, and any unrealized gain or loss is included in other expense on the consolidated statement of operations. Gains and losses from settled transactions are also recorded in other expense on the consolidated statement of operations. The Company does not have any derivative contracts designated as cash flow hedges. The realized loss and unrealized gain for the three months ended March 31, 2018 was $6,096 and ($10,164), respectively. The following table summarizes the fair value of the derivatives recorded in the consolidated balance sheets, by category. Fair Value at 2018 Current commodity derivative liability $ 27,659 Long-term commodity derivative liability 5,784 Total derivative liability $ 33,443 As of March 31, 2018, the Company was party to one open derivative positions outstanding summarized below: Type Term Volume Index Fixed Price ($/Dth) Swap March 2015 - February 2019 95,000 NYM-LDS $ 3.82 |
Fair Value Measurements
Fair Value Measurements | 3 Months Ended |
Mar. 31, 2018 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | Note 7 - Fair Value Measurements Authoritative guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The guidance establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions of what market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the reliability of the inputs as follows: Level 1: Quoted prices are available in active markets for identical assets or liabilities; Level 2: Quoted prices in active markets for similar assets and liabilities that are observable for the asset or liability; or Level 3: Unobservable pricing inputs that are generally less observable from objective sources, such as discounted cash flow models or valuations. The determination of where assets and liabilities fall within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The Company’s policy is to recognize transfers in and/or out of the fair value hierarchy as of the end of the reporting period in which the event or change in circumstances caused the transfer. The Company has consistently applied the valuation techniques discussed below in all periods presented. The following assets are measured at fair value on a recurring basis: Description Level 1 Level 2 Level 3 Total Derivative liability $ - $ 33,443 $ - $ 33,443 The fair value of these derivative swap contracts is based on market prices posted on the New York Mercantile Exchange for natural gas. The Company determines the fair value of its derivative instruments under the income approach using a discounted cash flow model. The valuation model requires a variety of inputs, including contractual terms, projected natural gas prices, discount rates, and credit risk adjustments, as appropriate. The Company’s estimates of fair value of derivatives include consideration of the counterparty’s creditworthiness, the Company’s creditworthiness, and the time value of money. The consideration of these factors results in an estimated exit price for each derivative asset or liability under a marketplace participant’s view. All of the significant inputs are observable, either directly or indirectly; therefore, the Company’s derivative instruments are included within the Level 2 fair value hierarchy. |
Stockholders' Equity
Stockholders' Equity | 3 Months Ended |
Mar. 31, 2018 | |
Equity [Abstract] | |
Stockholders' Equity | Note 8 - Stockholders’ Equity On March 2, 2018, the Company issued 1,000,000 Units (the “Units”) at a price of $2.50 per Unit for an aggregate purchase price of $2,500,000 pursuant to the terms of a subscription agreement between the Company and an investor. Each Unit consists of (i) one share of the Company’s common stock, par value $0.0001 per share (“Common Stock”), and (ii) a warrant to purchase one share of Common Stock at an exercise price of $2.50 per share exercisable for five years from the date of issuance. The Company did not pay any commissions in connection with the sale of these Units. During March 2018, the Company entered into a Share Escrow Agreement (the “Escrow Agreement”) with certain of the Company’s shareholders, including entities affiliated with a director of the Company, and the Company’s former president. Pursuant to the terms of the Escrow Agreement, the shareholders party to the agreement placed an aggregate of 240,000 shares of Common Stock in escrow, to be held by the Company until such time as one or more third parties offer to purchase the escrowed shares and the Company approves such purchase or purchases. 75% of the proceeds of the sale or sales of the escrowed shares will be paid to the Company and will be used by the Company first to repay any amounts outstanding under the SBA loan, and the remaining 25% of the proceeds will be paid pro rata to the shareholders party to the Escrow Agreement. In connection with the Escrow Agreement, the Company issued 240,000 warrants to purchase Common Stock to the shareholders party to the Escrow Agreement, which warrants have an exercise price of $6.11 per share and are exercisable for a period of five years. Warrants The fair value of the warrants is estimated on the date of issuance using the Black-Scholes option pricing model, which requires the input of subjective assumptions, including the expected 5-year term of the warrants, expected stock price volatility, and expected dividends. These estimates involve inherent uncertainties and the application of management’s judgment. Expected volatilities used in the valuation model are based on the average volatility of the Company’s stock. The risk-free rate for the expected term of the option is based on the United States Treasury yield curve in effect at the time of grant. The following table presents the activity for warrants outstanding: Weighted Number of Average Warrants Exercise Price Outstanding - December 31, 2016 - $ - Issued 103,334 3.00 Forfeited/canceled - - Exercised - - Outstanding - December 31, 2017 103,334 - Issued 1,240,000 3.20 Forfeited/canceled - - Exercised - - Outstanding - Mach 31, 2018 1,343,334 $ 3.18 All of the outstanding warrants are exercisable and have a weighted average remaining contractual life of 4.92. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Note 9 - Commitments and Contingencies Operating Leases The Company leased office space in Minnesota on a month to month basis with payments of $977 per month through June 2017. Titan entered into an operating lease agreement which expires in February 2019, with an option to extend to February 2024. In November 2014 the lease was amended to add El Toro, as a co-lessee. The monthly payments range from $10,000 to $11,604. The lease calls for rent increases over the term of the lease. The Company records rent expense on a straight-line basis using average rent for the term of the lease. The excess of the expense over cash rent paid is shown as deferred rent. Rent expense for the three months ended March 31, 2018 and 2017 was approximately $35,000. Future minimum lease payments under these leases are approximately as follows: Year Ending December 31, Three months ended March 31, 2018 2018 $ 104,000 2019 23,000 $ 127,000 Litigation In the normal course of business, the Company is party to litigation from time to time. The Company maintains insurance to cover certain actions and believes that resolution of such litigation will not have a material adverse effect on the Company. On January 22, 2018, certain holders of Senior Bridge Notes initiated a lawsuit in the District Court of Hennepin County, Minnesota against the Company, certain of its subsidiaries and certain stockholders. The complaint alleges breach of contract, breach of implied covenant of good faith and fair dealing, fraud/fraudulent misrepresentation, successor liability, unjust enrichment, and breach of fiduciary duty, and seeks money damages, interest, costs, disbursements, attorneys’ fees and other equitable relief. On March 19, 2018, the owners of the property leased by El Toro for the Company’s El Toro station, initiated a lawsuit in the Superior Court of Orange County, California, related to the lease agreement for the El Toro station. The complaint alleges breach of contract and seeks money damages, costs, attorneys’ fees and other appropriate relief. Grant Agreement In 2013, Titan was the recipient of two grants in the amount of $300,000 and $150,000 from the California Energy Commission (“CEC”) and SCAQMD. The grant funds were used to complete the construction of El Toro as contemplated in the grant agreements. The grant proceeds are subject to repayment if the Company does not satisfy certain operational metrics contained in the grant agreements, and the Company is not in compliance with those metrics. In addition, the use of Titan on the project could be construed as requiring amendments to the grant agreements or consent from the CEC or SCAQMD, neither of which has been obtained by the Company. During 2016, EVO was the recipient of a grant in the amount of $400,000 from the Texas Commission on Environmental Quality. The grant funds were used to complete the construction of the Company’s San Antonio facility as contemplated in the grant agreement. The grant proceeds are subject to repayment if the Company does not satisfy certain operational metrics contained in the grant agreements. The Company believes that it can satisfy these objectives, although it cannot provide assurance that such future events will occur. The grant agreement expires in August 2020. The Company records the grant proceeds as a reduction of the cost of the respective station. SCAQMD In December 2015, Diamond Bar entered into a transfer of ownership and lease arrangement with the SCAQMD. This property has an existing CNG station previously owned and operated by the SCAQMD. Thirty days after the date of the agreement, SCAQMD transferred to Diamond Bar, without charge, all of their rights and interests in the existing assets. The agreement also specifies that Diamond Bar lease the property for $1 and identifies certain commitments agreed to by the parties. Some of the more significant ones are as follows: ● Within 180 days from the contract execution, Diamond Bar, using its best efforts, shall sell any surplus assets and provide SCAQMD with 90% of the net proceeds, as defined. To date Diamond Bar has not had any surplus assets to sell. ● Diamond Bar is also required to comply with certain provisions in the agreement with regards to the operation and maintenance of the station. ● Diamond Bar, at their expense and upon written consent from SCAQMD, can remodel, redecorate or otherwise make improvements and replacements of and to all or any part of the leased premises. ● Diamond Bar is required to install specific station upgrades, as defined, and is responsible for the cost of these upgrades. All upgrades must be completed within eight months of the execution date. Any improvements made to the premises remain the property of Diamond Bar and can be removed by Diamond Bar. ● The fueling rate charged to the SCAQMD will be based on actual utility costs, taxes and a fee not to exceed $0.50 per GGE. Currently the rate charged is substantially equal to the market rate charged to all other customers. ● The contract ends December 31, 2020. SCAQMD can extend the contract for a period not to exceed five years starting January 1, 2021 at no additional cost. Either party may terminate the contract with sixty days’ notice. If the SCAQMD terminates without cause they will be required to either purchase the property necessary for the operation of the CNG station or reimburse Diamond Bar for the cost of removing the property. If Diamond Bar terminates the contract without cause, the SCAQMD shall have the option to either purchase the property necessary for the operation of the station or require Diamond Bar to remove the property at no cost to SCAQMD. During February 2018, the Company entered into a management agreement with a third-party to operate Diamond Bar. The Company is currently negotiating with the third party for the sale of the station. Long-Term Take-or-Pay Natural Gas Supply Contracts At March 31, 2018, the Company had commitments to purchase CNG on a take-or-pay basis of approximately $545,000. It is anticipated these are normal purchases that will be necessary for sales, and no cash settlements will be made related to the purchase commitments. |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Events | Note 10 - Subsequent Events On April 2, 2018, the Company and a related party note holder agreed to extend the maturity date of the $3,800,000 promissory note through July 2019. On April 12, 2018, the Company consummated the following transactions: ● The Company issued 275,583 common shares in exchange for certain Senior Bridge Notes in the aggregate principal and interest amounts of approximately $689,000, with the per share price for shares of common stock equal to $2.50. ● The Company issued 272,777 common shares in exchange for the Junior Bridge Notes in the aggregate principal and interest amounts of approximately $1,363,858, with the per share price for shares of common stock equal to $5.00. On May 14, 2018, the Company issued 93,400 common shares in exchange for accounts payable and related party accounts payable of approximately $280,200, with the per share price of shares of common stock equal to $3.00. The units and common stock described above were offered and sold as part of private placements pursuant to exemptions from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”) afforded by Section 4(a)(2) and Rule 506 of Regulation D promulgated thereunder. On April 13, 2018, the Company filed a Certificate of Designation of Rights and Preferences of Series A Preferred Stock (the “Certificate of Designation”) with the Secretary of State of the State of Delaware, which authorizes the Company to issue up to 100,000 shares of Series A Preferred Stock, par value $0.0001 per share (“Series A Preferred Stock”). The Series A Preferred Stock ranks senior in preference and priority to the Company’s common stock with respect to dividend and liquidation rights and, except as provided in the Certificate of Designation or otherwise required by law, will vote with the common stock on an as converted basis on all matters presented for a vote of the holders of common stock, including directors, and are entitled to fifteen votes for each share of Series A Preferred Stock held on the record date for the determination of the stockholders entitled to vote or, if no record date is established, on the date the vote is taken. The Series A Preferred Stock is convertible at any time at the option of the holder or the Company at an initial conversion ratio of one share of Common Stock for each share of Series A Preferred Stock. The initial conversion ratio shall be adjusted in the event of any stock splits, stock dividends and other recapitalizations. In addition, each share of Series A Preferred Stock will automatically convert to one share of Common Stock if the closing price on all domestic securities exchanges on which the Common Stock may at the time be listed exceeds six dollars ($6.00) per share for thirty (30) consecutive trading days and the daily trading volume of the Common Stock is at least twenty thousand (20,000) shares for that same period. The holders of the Series A Preferred Stock are entitled to a liquidation preference of $3.00 per share of Series A Preferred Stock plus any accrued but unpaid dividends upon the liquidation of the Company. The Series A Preferred Stock may be redeemed by the Company at any time at a redemption price equal to $3.00 plus all accrued but unpaid dividends, and each holder of Series A Preferred Stock may cause the Company to redeem the holder’s Series A Preferred Stock at any time after August 1, 2018 at a redemption price equal to $3.00 plus all accrued but unpaid dividends. The approval of the holders of at least a majority of the Series A Preferred Stock, voting together as a separate class, is required for the Company to amend the Certificate of Designation, including by merger or otherwise, to as to alter or repeal the preferences, rights, privileges or powers of the Series A Preferred Stock in a manner that would adversely affect the rights of the holders of the Series A Preferred Stock. On April 12, 2018, the Company approved the issuance of 100,000 shares of Series A Preferred to a member of the Company’s board of directors, as compensation for services rendered to the Company. On April 12, 2018, the Board approved, subject to subsequent shareholder approval, the adoption of the EVO Transportation & Energy Services, Inc. 2018 Stock Incentive Plan (the “Plan”), which provides for the grant of options to purchase up to 4,250,000 shares of the Company’s common stock. Pursuant to the terms and conditions of the Plan, the Board granted 4,000,000 stock options on April 12, 2018. The stock options have an exercise price equal to $2.50 per share, each option shall terminate ten years from the date issued. 25% of the options vested on the grant date, and the remaining options vest in equal annual installments on the first, second and third anniversary of the grant date. However, all unvested options vest immediately upon the Company’s closing on an aggregate of at least $30,000,000 in any combination of public and private equity and debt financings after the grant date. |
Description of Business and S18
Description of Business and Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2018 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | Principles of Consolidation The accompanying consolidated financial statements include the accounts of EVO Transportation & Energy Services, Inc and its subsidiaries, Titan and EAF, Titan’s wholly owned subsidiaries, El Toro, Diamond Bar and Blaine, and EAF’s wholly owned subsidiary, EVO CNG. All intercompany accounts and transactions have been eliminated in consolidation. |
Use of Estimates | Use of Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures 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. Actual results could differ from those estimates. The consolidated financial statements include some amounts that are based on management’s best estimates and judgments. The most significant estimates relate to revenue recognition, long-lived intangible asset valuations and impairment assessments, debt discount, and contingencies. These estimates may be adjusted as more current information becomes available, and any adjustment could be significant. 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 disclosures 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. Actual results could differ from those estimates. |
Federal Alternative Fuels Tax Credit receivable | Federal Alternative Fuels Tax Credit receivable Federal Alternative Fuels Tax Credit (“AFTC”) (formerly known as Volumetric Excise Tax Credit) receivable are the excise tax refunds to be received from the Federal Government on CNG fuel sales. |
Concentrations of Credit Risk | Concentrations of Credit Risk The Company grants credit in the normal course of business to customers in the United States. The Company periodically performs credit analysis and monitors the financial condition of its customers to reduce credit risk. As of March 31, 2018 and 2017, three and five customers accounted for 96% and 93% of the Company’s total accounts receivable, respectively, and one and five customers accounted for and 30% and 92% of the Company’s total revenues for the three months ended March 31, 2018 and 2017, respectively. |
Intangibles | Intangibles Intangible assets consist of finite lived and indefinite lived intangibles. The Company’s finite lived intangibles include favorable leases, customer relationships and the trade name. Finite lived intangibles are amortized over their estimated useful lives. For the Company’s lease related intangibles, the estimated useful life is based on the agreement of a one-time payment of $1 and the term of the mortgages, of the properties owned by the Company of approximately five years. For the Company’s trade names and customer list the estimated lives are based on life cycle of a customer of approximately 5 years, The Company evaluates the recoverability of the finite lived intangibles whenever an impairment indicator is present. For the year ended December 31, 2017 the test results indicated an impairment of $106,270 to customer lists. The Company’s evaluation of intangibles for the three months ended March 31, 2018 and 2017 resulted in no impairment. |
Assets Held for Sale | Assets Held for Sale The Company classifies assets as being held for sale when the following criteria are met: management has committed to a plan to sell the asset; the asset is available for immediate sale in its present condition; an active program to locate a buyer and other actions required to complete the plan to sell the asset have been initiated; the sale of the asset is highly probable, and transfer of the asset is expected to qualify for recognition as a completed sale, within one year; the asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. |
Long-Lived Assets | Long-Lived Assets The Company evaluates the recoverability of long-lived assets whenever events or changes in circumstances indicate that an asset’s carrying amount may not be recoverable. Such circumstances could include but are not limited to (1) a significant decrease in the market value of an asset, (2) a significant adverse change in the extent or manner in which an asset is used, or (3) an accumulation of costs significantly in excess of the amount originally expected for the acquisition of an asset. The Company measures the carrying amount of the asset against the estimated undiscounted future cash flows associated with it. Should the sum of the expected future net cash flows be less than the carrying value of the asset being evaluated, an impairment loss would be recognized. The impairment loss would be calculated as the amount by which the carrying value of the asset exceeds its fair value. The fair value is measured based on quoted market prices, if available. If quoted market prices are not available, the estimate of fair value is based on various valuation techniques, including the discounted value of estimated future cash flows. The evaluation of asset impairment requires the Company to make assumptions about future cash flows over the life of the asset being evaluated. These assumptions require significant judgment and actual results may differ from assumed and estimated amounts. The Company assesses the useful lives and possible impairment of the fixed assets when an event occurs that may trigger such review. Factors considered important which could trigger a review include: · Significant under performance of the stations relative to historical or projected future operating results; · Significant negative economic trends in the CNG industry; and · Identification of other impaired assets within a reporting unit. Determining whether a triggering event has occurred involves significant judgement by the Company There were no impairments of the Company’s long-lived assets for the three months ended March 31, 2018 or 2017. |
Hedging Activities | Hedging Activities The Company periodically enters into commodity derivative contracts to manage its exposure to gas price volatility. GAAP requires recognition of all derivative instruments on the balance sheets as either assets or liabilities measured at fair value. Subsequent changes in a derivative’s fair value are recognized currently in earnings unless specific hedge accounting criteria are met. Gains and losses on derivative hedging instruments must be recorded in either other comprehensive income or current earnings, depending on the nature and designation of the instrument. Management of the Company has determined that the administrative effort required to account for derivative instruments as cash flow hedges is greater than the financial statement presentation benefit. As a result, the Company marks its derivative instruments to fair value and records the changes in fair value as a component of other income and expense. Cash settlements from the Company’s price risk management activities are likewise shown as a component of other income and expense and as a component of operating cash flows on the statements of cash flows. |
Net Income (Loss) per Share of Common Stock | Net Income (Loss) per Share of Common Stock Basic income (loss) per share is computed by dividing net income (loss) available to holders of the Company’s common stock by the weighted average number of shares of common stock outstanding for the period. Diluted loss per share reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock. For the three months ended March 31, 2018 and for the year ended December 31, 2017, potential dilutive securities had an anti-dilutive effect and were not included in the calculation of diluted net loss per common share. |
Adoption of the New Revenue Standard | Adoption of the New Revenue Standard On January 1, 2018, the Company adopted Revenue from Contracts with Customers (Accounting Standards Codification Topic 606) ("Topic 606" or "new guidance") retrospectively. The adoption of Topic 606 did not have a material impact to our condensed consolidated financial statements. The adoption of the new guidance does not impact recognition revenue. The new guidance has no impact on the timing or classification of the Company’s cash flows as reported in the Consolidated Statement of Cash Flows and is not expected to have a significant impact on the Company’s Consolidated Statement of Operations in future periods. The Company did not record any adjustments applying Topic 606. Revenue Recognition The Company recognizes revenue when control of the promised goods is transferred to its customers, in an amount that reflects the consideration to which it expects to be entitled in exchange for the goods. The Company is generally the principal in its customer contracts as it has control over the goods prior to them being transferred to the customer, and as such, revenue is recognized on a gross basis. We disaggregate revenue by station, as we believe this best depicts the nature, amount, timing and uncertainty of our revenues and cash flows are affected by economic factors. A performance obligation is a promise in a contract to transfer a distinct good to the customer and is the unit of account in Topic 606. The performance obligations that comprise a majority of the Company's total revenue consist of sale of fuel to a customer. The primary method used to estimate the standalone selling price for fuel is observable standalone sales, and the primary method used to estimate the standalone selling. The Company’s CNG revenue is sold pursuant to contractual commitments. These contracts typically include a stand-ready obligation to supply natural gas daily. The Company recognizes revenue over time for the fuel sales because the customer receives and consumes the benefits provided by the Company's performance as the stand-ready obligations are being performed. Payment terms and conditions vary by contract type. For substantially all the Company's contracts under which it receives volume-related revenue, the timing of revenue recognition does not differ from the timing of invoicing; as a result the Company has determined these contracts generally do not include a significant financing component. There was no impairment loss recognized on any of the receivables arising from customer contracts for the three months ended March 31, 2018. |
Alternative Fuels Tax Credit | Alternative Fuels Tax Credit For 2017 the AFTC credit was $0.50 per gasoline gallon equivalent of CNG that is sold as a vehicle fuel. This incentive originally expired on December 31, 2016, but was retroactively extended through December 31, 2017, with the Bipartisan Budget Act of 2018. |
Gain on Extinguishment of Liabilities and Interest | Gain on Extinguishment of Liabilities and Interest Gain on extinguishment of liabilities consists of the gain the Company recognized on the extinguishment of accounts payable that were incurred for which the Company deemed the risk of collection to be remote or that management has negotiated a settlement. The Company recognized a gain on extinguishment of liabilities and interest of $657,499 and $157,330, respectively for the three months ended March 31, 2018. |
Advertising Costs | Advertising Costs The Company expenses advertising costs as incurred. Advertising expense for the three months ended March 31, 2018 and 2017 was de minimis. |
Income Taxes | Income Taxes The Company recognizes deferred tax liabilities and assets based on the differences between the tax basis of assets and liabilities and their reported amounts in the financial statements that will result in taxable or deductible amounts in future years. The Company’s temporary differences result primarily from depreciation. The Company evaluates its tax positions taken or expected to be taken in the course of preparing the Company’s tax returns to determine whether the tax positions will more likely than not be sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold are not recorded as a tax benefit or expense in the current year. Interest and penalties, if applicable, are recorded in the period assessed as general and administrative expenses. However, no interest or penalties have been assessed for the three months ended March 31, 2018 or 2017. Tax years that remain subject to examination include 2014 through the current year for federal and state, respectively. Deferred income taxes are provided for temporary differences between the financial reporting and tax basis of assets and liabilities. Deferred taxes are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of the enactment. In evaluating the ultimate realization of deferred income tax assets, management considers whether it is more likely than not that the deferred income tax assets will be realized. Management establishes a valuation allowance if it is more likely than not that all or a portion of the deferred income tax assets will not be utilized. The ultimate realization of deferred income tax assets is dependent on the generation of future taxable income, which must occur prior to the expiration of the net operating loss carryforwards. The Tax Cuts and Jobs Act (“Tax Act”) was signed into law on December 22, 2017. The Tax Act includes significant changes to the U.S. corporate income tax system, including limitations on the deductibility of interest expense and executive compensation, eliminating the corporate alternative minimum tax (“AMT”) and changing how existing AMT credits can be realized, changing the rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after December 31, 2018, and the transition of U.S. international taxation from a worldwide tax system to a territorial tax system. The Company’s accounting for the following elements of the Tax Act is incomplete, and it is not yet able to make reasonable estimates of the effects. Therefore, no provisional adjustments were recorded. The Company must assess whether valuation allowances assessments are affected by various aspects of the Tax Act. Since, as discussed above, the Company has recorded no amounts related to certain portions of the Tax Act, any corresponding determination of the need for or change in a valuation allowance has not been completed and no changes to valuation allowances as a result of the Tax Act have been recorded. |
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements In July 2017, the Financial Accounting Standards Board (“FASB”) issued ASU 2017-11, “Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part 1) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Non-public Entities and Certain Mandatorily Redeemable Non-controlling Interests with a Scope Exception” (“ASU 2017-11”). Part I relates to the accounting for certain financial instruments with down round features in Subtopic 815-40, which is considered in determining whether an equity-linked financial instrument qualifies for a scope exception from derivative accounting. Down round features are features of certain equity-linked instruments (or embedded features) that result in the strike price being reduced based on the pricing of future equity offerings. An entity still is required to determine whether instruments would be classified as equity under the guidance in Subtopic 815-40 in determining whether they qualify for that scope exception. If they do qualify, freestanding instruments with down round features are no longer classified as liabilities. ASU 2017-11 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period. Early adoption is permitted, including in an interim period. The Company does not plan early adoption of this update and does not expect the adoption of the update to materially change its current accounting methods and therefore the Company does not expect the adoption to have a material impact on its consolidated financial statements. In March 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-09, “Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”), which simplifies several aspects of the accounting for share-based payment award transactions including accounting for income taxes and classification of excess tax benefits on the statement of cash flows, forfeitures and minimum statutory tax withholding requirements. For the Company, ASU 2016-09 is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company does not plan early adoption of this update and does not expect the adoption of the update to materially change its current accounting methods and therefore the Company does not expect the adoption to have a material impact on its consolidated financial statements. In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-04, Intangibles - Goodwill and Other (Topic 350) (“ASU 2017-04”), Simplifying the Test for Goodwill Impairment. To simplify the subsequent measurement of goodwill, the amendments eliminate Step 2 from the goodwill impairment test. The annual, or interim, goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. In addition, income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit should be considered when measuring the goodwill impairment loss, if applicable. The guidance is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019 and early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not plan early adoption of this update and does not expect the adoption of the update to materially change its current accounting methods and therefore the Company does not expect the adoption to have a material impact on its consolidated financial statements. In June 2016, FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) (“ASU 2016-13”), Measurement of Credit Losses on Financial Instruments. The standard significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The standard will replace today’s “incurred loss” approach with an “expected loss” model for instruments measured at amortized cost. For available-for-sale debt securities, entities will be required to record allowances rather than reduce the carrying amount, as they do today under the other-than-temporary impairment model. It also simplifies the accounting model for purchased credit-impaired debt securities and loans. This ASU is effective for annual periods beginning after December 15, 2019, and interim periods therein. Early adoption is permitted for annual periods beginning after December 15, 2018, and interim periods therein. The Company does not plan early adoption of this update and does not expect the adoption of the update to materially change its current accounting methods and therefore the Company does not expect the adoption to have a material impact on its consolidated financial statements. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). ASU 2014-09 amends the guidance for revenue recognition to replace numerous, industry-specific requirements and converges areas under this topic with those of the International Financial Reporting Standards. The ASU implements a five-step process for customer contract revenue recognition that focuses on transfer of control, as opposed to transfer of risk and rewards. The amendment also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenues and cash flows from contracts with customers. Other major provisions include the capitalization and amortization of certain contract costs, ensuring the time value of money is considered in the transaction price, and allowing estimates of variable consideration to be recognized before contingencies are resolved in certain circumstances. The amendments in this ASU are effective for reporting periods beginning after December 15, 2016; however, in July 2015, the FASB agreed to delay the effective date by one year. The proposed deferral may permit early adoption but would not allow adoption any earlier than the original effective date of the standard. On January 1, 2018 we adopted ASU 2014-09 using the full retrospective method. The Company completed its review of its material revenue streams and determined that there will be no impact to its consolidated financial statements, results of operations or liquidity. When comparing the Company’s current revenue recognition to the new applied revenue recognition under Accounting Standards Codification (“ASC”) 606, there was no change to the amount or timing of revenue recognized. Therefore, no quantitative adjustment was required to be made to the prior periods presented on the unaudited condensed consolidated financial statements after the adoption of ASC 606 In February 2016, the FASB issued ASU 2016-02, “Leases” (“ASU 2016-02”), which will require lessees to recognize a right-of-use asset and a lease liability for all leases that are not short-term in nature. For a lessor, the accounting applied is also largely unchanged from previous guidance. The new rules will be effective for the Company in the first quarter of 2019. The Company is in the process of evaluating the impact the amendment will have on its consolidated financial position or results of operations. |
Acquisition (Tables)
Acquisition (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Business Combinations [Abstract] | |
Schedule of fair value allocation of assets acquired and liabilities assumed at the acquisition date | Prepaid assets $ 32,118 Goodwill 3,993,730 Customer list 220,000 Trade mark 86,000 Favorable list 307,000 Property and equipment 8,154,667 Deposits and other long-term assets 152,117 Derivative liability (5,821 ) Derivative liability, less current portion (76,811 ) Promissory notes - related party (8,050,000 ) Convertible promissory note - related party (9,500,000 ) Debt discount 4,687,000 |
Balance Sheet Disclosures (Tabl
Balance Sheet Disclosures (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Balance Sheet Disclosures [Abstract] | |
Schedule of accounts receivable | March 31, December 31, 2018 2017 Accounts receivable $ 122,020 $ 187,426 Allowance for doubtful accounts - (37,007 ) $ 122,020 $ 150,419 |
Schedule of property, equipment and land | March 31, December 31 2018 2017 Equipment $ 3,919,589 $ 3,919,589 Buildings 3,259,179 3,259,179 Land 975,899 975,899 Computer equipment 37,627 37,627 Site development - - Leasehold improvements - - 8,192,294 8,192,294 Less accumulated depreciation (573,399 ) (451,871 ) $ 7,618,895 $ 7,740,423 |
Schedule of intangible assets | March 31, December 31, 2018 2017 Goodwill $ 3,993,730 $ 3,993,730 Favorable lease 307,000 307,000 Customer relationships 113,730 113,730 Trade names 86,000 86,000 4,500,460 4,500,460 Less Impairment (4,100,000 ) (4,100,000 ) 400,460 400,460 Less Amortization (97,281 ) (55,176 ) $ 303,179 $ 345,284 |
Schedule of future amortization expense | Year Ending December 31, At March 31, 2018 $ 75,900 2019 111,100 2020 106,000 2021 10,200 $ 303,200 |
Schedule of accrued expenses | March 31, December 31, 2018 2017 Federal alternative fuels tax credit and other fuel taxes $ 533,460 $ 562,513 Professional fees 292,231 508,028 Compensation and related payroll taxes 72,420 72,420 Deferred rent 12,130 13,233 Credit cards 11,769 12,527 $ 922,010 $ 1,168,721 |
Long-Term Debt (Tables)
Long-Term Debt (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Debt Disclosure [Abstract] | |
Schedule of long-term debt | March 31, December 31, 2018 2017 $1,300,000 SBA note payable issued December 31, 2014, with interest at 5.50% for the first five years, then adjusted to the SBA LIBOR base rate, plus 2.35% for the remaining five years. The note required interest only payments for the first twelve months and commencing during January 2016 calls for monthly principle and interest payments of $15,288. The note matures March 2024, is secured by substantially all of the Company’s assets and is personally guaranteed by certain members. The note is a co-borrower arrangement between Titan and El Toro with the proceeds received by El Toro. The Company issued to members 35,491 units (equivalent to 31,203 common shares) in Titan as compensation for the guarantee. The Company was in violation of the note’s covenants as of March 31, 2018 and December 31, 2017. $ 1,063,212 $ 1,093,691 Six subordinated senior notes payable to stockholders (“Senior Bridge Notes”) with interest at 12%. In connection with the notes payable, the note holders were issued 25,541 Class A Membership Units (equivalent to 22,455 common shares). In the event of a default the Company is required to pay the holder a stated number of Class A Membership Units on the date of default and each 90-day interval thereafter until all amounts due have been paid in full. Effective July 2016, the maturity date of the Senior Bridge Notes was extended to September 30, 2016 and allowed for an interest rate increase from 12% to 16% effective March 14, 2016. The default interest rate was increased from 15% to 18%. As part of the first amendment, the note holders received 3,359 Class A Membership Units (equivalent to 2,953 common shares) in Titan. In September 2016, the Senior Bridge Notes were amended to extend the due date to April 30, 2017 and the Company paid a fee for the extension of 1% of the outstanding principal balance to the note holders. The Company subsequently extended the maturity date of the notes to October 31, 2017. The Company paid a fee of 1% of the outstanding principal balance on the notes on or around each of January 31, 2017, April 30, 2017, and July 31, 2017 to extend the maturity date of the notes. The notes are secured by a subordinate security interest on substantially all of the Company’s assets and are personally guaranteed by two members. The Senior Bridge Notes were not extended at the maturity. During April 2018, $621,556 of the Senior Bridge Notes and related interest of $67,444 were converted into 275,583 shares of common stock, with a write-off of interest of $73,741. 1,421,556 1,421,556 Nine subordinated notes payable to stockholders (“Junior Bridge Notes”) with interest at 12%, with maturity at December 2020, secured by a subordinate security interest on substantially all assets of the Company. During April 2018, $1,166,373 of the Junior Bridge Notes and related interest of $197,485 were converted into 272,777 shares of common stock, with a write-off of interest of $83,589 1,166,373 1,166,373 Three convertible promissory notes to stockholders (“Minn Shares Notes”) with interest at 12%, with maturity on or after November 2019. At the next equity financing the holder at their discretion may elect to convert the principal and interest at a conversion price equal to the price per security issued in such offering. These notes are also subject to mandatory conversion in the event that the Senior Bridge Notes and Junior Bridge Notes discussed above convert to equity, and any mandatory conversion will be on the same terms as those received by the holders of the Senior Bridge Notes and Junior Bridge Notes. The promissory notes are unsecured. 450,451 437,505 A promissory note to a former EAF member with interest at 7.5%, with maturity during December 2017, ten days after the initial closing of a private offering of capital stock of the Company in an amount not less than $10 million or at discretion of the member. During April 2018 the promissory note’s maturity date was extended to July 2019. 3,800,000 3,800,000 A promissory note to a former EAF member with interest at 7.5%, with maturity during February 2020, the note is guaranteed by substantially all the assets of the Company. 4,000,000 4,000,000 Four promissory notes to former EAF members with interest at 6%, with maturity upon the earlier of July 2017 or the date of closing a private offering of at least $2 million. During April 2018, the notes were paid in full. 250,000 250,000 Four promissory notes to former EAF members with interest at 1.5%, with maturity during February 2026. The promissory notes are convertible into 1,400,000 shares. These convertible promissory notes are secured by substantially all of the assets of EAF. The Company imputed an interest rate of 5.1% on the promissory notes. The discount is accreted over the period from the date of issuance to the date the promissory notes are due using the effective interest rate method. See note 2 above for additional discussion regarding the conversion mechanics of these convertible notes. 9,500,000 9,500,000 21,651,592 21,669,125 Debt discount* (4,140,183 ) (4,257,358 ) 17,511,409 17,411,767 Less current portion (2,734,768 ) (2,765,247 ) $ 14,776,641 $ 14,646,520 * Of our total indebtedness of approximately $21,652,000 as of March 31, 2018, approximately $2,700,000 is classified as current debt with $850,000 either paid in full or converted to common stock during April 2018. We are in violation of the covenants related to the SBA loan. We have not received a waiver for current violations of these covenants as of March 31, 2018 and through the date of filing of this Form 10-Q. On February 1, 2017, pursuant to the EAF Exchange Agreement, EVO Inc. acquired all of the membership interests of EAF. As consideration for the membership interests, EVO Inc. issued convertible promissory notes to the former members of EAF in the aggregate principal amount of $9.5 million (the “Convertible Notes”). The Convertible Notes bear interest at 1.5% per year and have a maturity date of February 1, 2026. The Convertible Notes are convertible into 1,400,000 shares (the “Transaction Shares”) of EVO Inc. common stock, subject to adjustment for stock splits, combinations or similar transactions, which represents approximately 81.1% of EVO Inc.’s total outstanding shares of common stock on a post-transaction basis. Accordingly, the conversion of the Convertible Notes would result in a change in control of the Company. The number of Transaction Shares will be increased to equal 70% of the issued and outstanding shares of EVO Inc. common stock if the issuance of common stock pursuant to a private offering of common stock of up to $2 million and the conversion into common stock of EVO Inc.’s subordinated notes payable to members, Senior Bridge Notes, convertible promissory notes, and certain accounts payable would otherwise cause the Transaction Shares to represent less than 70% of the issued and outstanding common stock |
Schedule of maturities of long-term obligations | Year Ending December 31, Related Party Notes Other Notes Total At March 31, 2018 2018 $ 1,671,556 $ 1,063,212 $ 2,734,768 2019 4,250,451 - 4,250,451 2020 5,166,373 - 5,166,373 2021 - - - 2022 - - - 2023 9,500,000 - 9,500,000 $ 20,588,380 $ 1,063,212 $ 21,651,592 |
Derivative Instruments (Tables)
Derivative Instruments (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Summary of fair value derivatives recorded in the consolidated balance sheets | Fair Value at 2018 Current commodity derivative liability $ 27,659 Long-term commodity derivative liability 5,784 Total derivative liability $ 33,443 |
Summary of open derivative positions outstanding | Type Term Volume Index Fixed Price ($/Dth) Swap March 2015 - February 2019 95,000 NYM-LDS $ 3.82 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Fair Value Disclosures [Abstract] | |
Schedule of assets are measured at fair value on a recurring basis | Description Level 1 Level 2 Level 3 Total Derivative liability $ - $ 33,443 $ - $ 33,443 |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Equity [Abstract] | |
Schedule of activity for warrants outstanding | Weighted Number of Average Warrants Exercise Price Outstanding - December 31, 2016 - $ - Issued 103,334 3.00 Forfeited/canceled - - Exercised - - Outstanding - December 31, 2017 103,334 - Issued 1,240,000 3.20 Forfeited/canceled - - Exercised - - Outstanding - Mach 31, 2018 1,343,334 $ 3.18 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of future minimum lease payments | Year Ending December 31, Three months ended March 31, 2018 2018 $ 104,000 2019 23,000 $ 127,000 |
Basis of Presentation and Sec26
Basis of Presentation and Securities Exchange (Details) - USD ($) | Apr. 13, 2018 | Apr. 12, 2018 | Apr. 02, 2018 | Mar. 02, 2018 | Apr. 06, 2017 | Apr. 30, 2018 | Mar. 31, 2018 |
Basis of Presentation and Securities Exchange (Textual) | |||||||
Working capital deficit | $ 3,700,000 | ||||||
Negative working capital | $ 10,100,000 | ||||||
Issue of common shares | 1,000,000 | ||||||
Aggregate principal amount | $ 2,500,000 | ||||||
Share price | $ 2.50 | ||||||
Subscription agreement, description | Each Unit consists of (i) one share of the Company’s common stock, par value $0.0001 per share (“Common Stock”), and (ii) a warrant to purchase one share of Common Stock at an exercise price of $2.50 per share exercisable for five years from the date of issuance. | ||||||
Subsequent Events [Member] | |||||||
Basis of Presentation and Securities Exchange (Textual) | |||||||
Repayment of working capital | $ 250,000 | ||||||
Promissory note, value | $ 3,800,000 | ||||||
Promissory note, maturity date | Jul. 31, 2019 | ||||||
Aggregate principal amount | $ 2,052,858 | ||||||
Subsequent Events [Member] | Senior Bridge Notes [Member] | |||||||
Basis of Presentation and Securities Exchange (Textual) | |||||||
Issue of common shares | 275,583 | 275,583 | |||||
Aggregate principal amount | $ 689,000 | $ 689,000 | |||||
Share price | $ 2.50 | $ 2.50 | |||||
Subsequent Events [Member] | Junior Bridge Notes [Member] | |||||||
Basis of Presentation and Securities Exchange (Textual) | |||||||
Issue of common shares | 272,777 | 272,777 | |||||
Aggregate principal amount | $ 1,363,858 | $ 1,363,858 | |||||
Share price | $ 5 | $ 5 | |||||
Common Stock | |||||||
Basis of Presentation and Securities Exchange (Textual) | |||||||
Stockholders equity reverse stock split, description | The Company effected a 50-for-1 reverse stock split of its common stock pursuant to which each 50 shares of issued and outstanding common stock became one share of common stock (the "Reverse Split"). No fractional shares were issued as a result of the Reverse Split. |
Description of Business and S27
Description of Business and Summary of Significant Accounting Policies (Details) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2018USD ($)Customers | Mar. 31, 2017USD ($)Customers | Dec. 31, 2017USD ($) | |
Description of Business and Summary of Significant Accounting Policies (Textual) | |||
Alternative fuels tax credit sales, description | The AFTC credit was $0.50 per gasoline gallon equivalent of CNG that is sold as a vehicle fuel. | ||
Estimated lives of customer lists | 5 years | ||
One-time payment | $ 1 | ||
Impairment of customer lists | $ 106,270 | ||
Gain on extinguishment of liabilities | $ 657,499 | ||
Gain on extinguishment of Interest | $ 157,330 | ||
Sales Revenue, Net [Member] | |||
Description of Business and Summary of Significant Accounting Policies (Textual) | |||
Percentage of concentrations of credit risk | 30.00% | 92.00% | |
Number of customers | Customers | 1 | 5 | |
Accounts Receivable [Member] | |||
Description of Business and Summary of Significant Accounting Policies (Textual) | |||
Percentage of concentrations of credit risk | 96.00% | 93.00% | |
Number of customers | Customers | 3 | 5 |
Acquisition (Details)
Acquisition (Details) - USD ($) | Mar. 31, 2018 | Dec. 31, 2017 | Feb. 01, 2017 |
Business Acquisition [Line Items] | |||
Favorable list | $ 307,000 | $ 307,000 | |
EAF [Member] | |||
Business Acquisition [Line Items] | |||
Prepaid assets | $ 32,118 | ||
Goodwill | 3,993,730 | ||
Customer list | 220,000 | ||
Trade mark | 86,000 | ||
Favorable list | 307,000 | ||
Property and equipment | 8,154,667 | ||
Deposits and other long-term assets | 152,117 | ||
Derivative liability | (5,821) | ||
Derivative liability, less current portion | (76,811) | ||
Promissory notes - related party | (8,050,000) | ||
Convertible promissory note - related party | (9,500,000) | ||
Debt discount | $ 4,687,000 |
Acquisition (Details Textual)
Acquisition (Details Textual) - USD ($) | Jan. 30, 2017 | Feb. 01, 2017 | Mar. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Acquisitions (Textual) | |||||
Interest rate | 7.50% | ||||
Default interest rate | 12.50% | ||||
Debt instrument maturity, description | (a) the date that is ten days after the initial closing of a private offering of capital stock of the Company in an amount not less than $10 million (a “Private Offering”); (b) December 31, 2017 or a (c) declaration by the noteholder of an event of default under the Senior Promissory Note. | ||||
Aggregate principal amount | $ 9,500,000 | ||||
Common stock, par value | $ 0.0001 | $ 0.0001 | $ 0.0001 | ||
Convertible notes bearing interest rate | 1.50% | ||||
Convertible notes, maturity date | Feb. 1, 2026 | ||||
Convertible shares | 1,400,000 | ||||
Debt conversion, description | The Convertible Notes are also subject to mandatory conversion at the Company’s option beginning on the first anniversary of the date of issuance of the Convertible Notes if: (i) the closing price of the Common Stock is greater than (A) 150% of the price at which a share of Common Stock is sold in a Private Offering or (B) $10.00 if a Private Offering has not occurred by December 31, 2017 and (ii) the average daily trading volume of shares of Common Stock has equaled 100,000 or more for the 30 days prior to the applicable date. Upon a conversion of the Convertible Notes, accrued interest may also be converted at the greater of (i) the amount of interest to be converted divided by the exchange ratio of 0.1357, subject to adjustment for stock splits or combinations, or (ii) the amount of interest to be converted divided by the closing price of the Common Stock on the trading day preceding the conversion date. | ||||
Conversion ratio | 0.1357 | ||||
Debt instrument, description | The number of Transaction Shares will be increased to equal 70% of the issued and outstanding Common Stock if the issuance of Common Stock pursuant to a private offering of Common Stock of up to $2 million and the conversion of the Company’s subordinated notes payable to members and Senior Bridge Notes, convertible promissory notes, and certain accounts payable into Common Stock would otherwise cause the Transaction Shares to represent less than 70% of the issued and outstanding Common Stock. | ||||
Percentage of outstanding common stock | 81.10% | ||||
Total transaction closing costs | $ 250,000 | $ 250,000 | |||
Evo Inc [Member] | |||||
Acquisitions (Textual) | |||||
Interest rate | 81.10% | ||||
Default interest rate | 70.00% | ||||
Agreement [Member] | |||||
Acquisitions (Textual) | |||||
Principal amount | $ 4,000,000 | ||||
Interest rate | 7.50% | 6.00% | |||
Default interest rate | 12.50% | 11.00% | |||
Debt instrument maturity, description | Maturity date of the earlier of (a) February 1, 2020 and (b) declaration a declaration by the noteholder of an event of default under the EAF Note. | (a) The closing of a Private Offering; (b) 180 days from the date of the notes and (c) declaration by a holder of an event of default under the holder's note (the "Working Capital Notes"). | |||
Aggregate principal amount | $ 250,000 |
Balance Sheet Disclosures (Deta
Balance Sheet Disclosures (Details) - USD ($) | Mar. 31, 2018 | Dec. 31, 2017 |
Balance Sheet Disclosures [Abstract] | ||
Accounts receivable | $ 122,020 | $ 187,426 |
Allowance for doubtful accounts | (37,007) | |
Accounts receivable, net | $ 122,020 | $ 150,419 |
Balance Sheet Disclosures (De31
Balance Sheet Disclosures (Details 1) - USD ($) | Mar. 31, 2018 | Dec. 31, 2017 |
Property and equipment | ||
Property and equipment, gross | $ 8,192,294 | $ 8,192,294 |
Less accumulated depreciation | (573,399) | (451,871) |
Property and equipment | 7,618,895 | 7,740,423 |
Equipment [Member] | ||
Property and equipment | ||
Property and equipment, gross | 3,919,589 | 3,919,589 |
Buildings [Member] | ||
Property and equipment | ||
Property and equipment, gross | 3,259,179 | 3,259,179 |
Land [Member] | ||
Property and equipment | ||
Property and equipment, gross | 975,899 | 975,899 |
Computer equipment [Member] | ||
Property and equipment | ||
Property and equipment, gross | 37,627 | 37,627 |
Site development [Member] | ||
Property and equipment | ||
Property and equipment, gross | ||
Leasehold improvements [Member] | ||
Property and equipment | ||
Property and equipment, gross |
Balance Sheet Disclosures (De32
Balance Sheet Disclosures (Details 2) - USD ($) | Mar. 31, 2018 | Dec. 31, 2017 |
Intangible assets | ||
Goodwill | $ 3,993,730 | $ 3,993,730 |
Favorable lease | 307,000 | 307,000 |
Customer relationships | 113,730 | 113,730 |
Trade names | 86,000 | 86,000 |
Intangible assets impairment before gross | 4,500,460 | 4,500,460 |
Less Impairment | (4,100,000) | (4,100,000) |
Intangible assets gross | 400,460 | 400,460 |
Less Amortization | (97,281) | (55,176) |
Intangible assets total | $ 303,179 | $ 345,284 |
Balance Sheet Disclosures (De33
Balance Sheet Disclosures (Details 3) - USD ($) | Mar. 31, 2018 | Dec. 31, 2017 |
Future amortization expense | ||
2,018 | $ 75,900 | |
2,019 | 111,100 | |
2,020 | 106,000 | |
2,021 | 10,200 | |
Total | $ 303,179 | $ 345,284 |
Balance Sheet Disclosures (De34
Balance Sheet Disclosures (Details 4) - USD ($) | Mar. 31, 2018 | Dec. 31, 2017 |
Accrued expenses | ||
Federal alternative fuels tax credit and other fuel taxes | $ 533,460 | $ 562,513 |
Professional fees | 292,231 | 508,028 |
Compensation and related payroll taxes | 72,420 | 72,420 |
Deferred rent | 12,130 | 13,233 |
Credit cards | 11,769 | 12,527 |
Accrued expenses | $ 922,010 | $ 1,168,721 |
Balance Sheet Disclosures (De35
Balance Sheet Disclosures (Details Textual) - USD ($) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Balance Sheet Disclosures (Textual) | ||
Depreciation expense | $ 121,528 | $ 130,231 |
Amortization expense | $ 42,105 | $ 0 |
Related Party Transactions (Det
Related Party Transactions (Details) - USD ($) | Mar. 02, 2018 | Apr. 30, 2018 | Feb. 01, 2017 | Mar. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Related Party Transactions (Textual) | ||||||
Accounts payable - related party | $ 432,345 | $ 409,838 | ||||
Accrued interest - related party | 874,966 | 927,421 | ||||
Jr. and Sr. Debt converted | $ 2,500,000 | |||||
Gain on write-off of accrued interest | $ 157,330 | |||||
Debt conversion shares issued | 1,400,000 | |||||
Subsequent Event [Member] | ||||||
Related Party Transactions (Textual) | ||||||
Jr. and Sr. Debt converted | $ 2,052,858 | |||||
Debt conversion shares issued | 502,430 | |||||
EVO [Member] | ||||||
Related Party Transactions (Textual) | ||||||
Advanced from related party | $ 332,859 | |||||
Titan [Member] | ||||||
Related Party Transactions (Textual) | ||||||
Advanced from related party | $ 2,000 | |||||
El Toro [Member] | ||||||
Related Party Transactions (Textual) | ||||||
Advanced from related party | $ 35,500 |
Long-Term Debt (Details)
Long-Term Debt (Details) - USD ($) | Mar. 31, 2018 | Dec. 31, 2017 | |
Extinguishment of Debt [Line Items] | |||
Long term debt, Gross | $ 21,651,592 | $ 21,669,125 | |
Debt discount | [1] | (4,140,183) | (4,257,358) |
Long term debt, Net | 17,511,409 | 17,411,767 | |
Less current portion | (1,063,212) | (1,093,691) | |
Long-term debt | 14,776,641 | 14,646,520 | |
Long-term Debt [Member] | Small Business Administration Note [Member] | |||
Extinguishment of Debt [Line Items] | |||
Long term debt, Gross | 1,063,212 | 1,093,691 | |
Long-term Debt [Member] | Six subordinated senior notes payable [Member] | |||
Extinguishment of Debt [Line Items] | |||
Long term debt, Gross | 1,421,556 | 1,421,556 | |
Long-term Debt [Member] | Nine subordinated notes payable [Member] | |||
Extinguishment of Debt [Line Items] | |||
Long term debt, Gross | 1,166,373 | 1,166,373 | |
Long-term Debt [Member] | Three convertible promissory notes [Member] | |||
Extinguishment of Debt [Line Items] | |||
Long term debt, Gross | 450,451 | 437,505 | |
Long-term Debt [Member] | Promissory Note [Member] | |||
Extinguishment of Debt [Line Items] | |||
Long term debt, Gross | 3,800,000 | 3,800,000 | |
Long-term Debt [Member] | Promissory Note One [Member] | |||
Extinguishment of Debt [Line Items] | |||
Long term debt, Gross | 4,000,000 | 4,000,000 | |
Long-term Debt [Member] | Four Promissory Notes [Member] | |||
Extinguishment of Debt [Line Items] | |||
Long term debt, Gross | 250,000 | 250,000 | |
Long-term Debt [Member] | Four Promissory Notes One [Member] | |||
Extinguishment of Debt [Line Items] | |||
Long term debt, Gross | $ 9,500,000 | $ 9,500,000 | |
[1] | Of our total indebtedness of approximately $21,652,000 as of March 31, 2018, approximately $2,700,000 is classified as current debt with $850,000 either paid in full or converted to common stock during April 2018. We are in violation of the covenants related to the SBA loan. We have not received a waiver for current violations of these covenants as of March 31, 2018 and through the date of filing of this Form 10-Q. On February 1, 2017, pursuant to the EAF Exchange Agreement, EVO Inc. acquired all of the membership interests of EAF. As consideration for the membership interests, EVO Inc. issued convertible promissory notes to the former members of EAF in the aggregate principal amount of $9.5 million (the ?Convertible Notes?). The Convertible Notes bear interest at 1.5% per year and have a maturity date of February 1, 2026. The Convertible Notes are convertible into 1,400,000 shares (the ?Transaction Shares?) of EVO Inc. common stock, subject to adjustment for stock splits, combinations or similar transactions, which represents approximately 81.1% of EVO Inc.?s total outstanding shares of common stock on a post-transaction basis. Accordingly, the conversion of the Convertible Notes would result in a change in control of the Company. The number of Transaction Shares will be increased to equal 70% of the issued and outstanding shares of EVO Inc. common stock if the issuance of common stock pursuant to a private offering of common stock of up to $2 million and the conversion into common stock of EVO Inc.?s subordinated notes payable to members, Senior Bridge Notes, convertible promissory notes, and certain accounts payable would otherwise cause the Transaction Shares to represent less than 70% of the issued and outstanding common stock |
Long-Term Debt (Details 1)
Long-Term Debt (Details 1) - USD ($) | Mar. 31, 2018 | Dec. 31, 2017 |
Maturities of long-term obligations | ||
2,018 | $ 2,734,768 | |
2,019 | 4,250,451 | |
2,020 | 5,166,373 | |
2,021 | ||
2,022 | ||
2,023 | 9,500,000 | |
Long-term debt | 21,651,592 | $ 21,669,125 |
Related Party Notes [Member] | ||
Maturities of long-term obligations | ||
2,018 | 1,671,556 | |
2,019 | 4,250,451 | |
2,020 | 5,166,373 | |
2,021 | ||
2,022 | ||
2,023 | 9,500,000 | |
Long-term debt | 20,588,380 | |
Other Notes [Member] | ||
Maturities of long-term obligations | ||
2,018 | 1,063,212 | |
2,019 | ||
2,020 | ||
2,021 | ||
2,022 | ||
2,023 | ||
Long-term debt | $ 1,063,212 |
Long-Term Debt (Details Textual
Long-Term Debt (Details Textual) - USD ($) | 1 Months Ended | 3 Months Ended | |||
Feb. 01, 2017 | Jan. 31, 2016 | Mar. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2014 | |
Long-Term Debt (Textual) | |||||
Long term subordinated convertible notes payable to stockholders | $ 1,166,373 | $ 1,166,373 | |||
Note payable, description | Total indebtedness of approximately $21,652,000 as of March 31, 2018, approximately $2,700,000 is classified as current debt with $850,000 either paid in full or converted to common stock during April 2018. | ||||
Interest rate | 7.50% | ||||
Note payable maturity, description | (a) the date that is ten days after the initial closing of a private offering of capital stock of the Company in an amount not less than $10 million (a “Private Offering”); (b) December 31, 2017 or a (c) declaration by the noteholder of an event of default under the Senior Promissory Note. | ||||
Interest rate on promissory notes | 12.50% | ||||
Notes convert in to shares | 1,400,000 | ||||
Percentage of outstanding common stock | 70.00% | ||||
Convertible debt | $ 9,500,000 | ||||
Debt discount | 4,687,000 | ||||
Accretion Discount | 4,140,183 | ||||
Long-term Debt [Member] | |||||
Long-Term Debt (Textual) | |||||
Long term subordinated convertible notes payable to stockholders | $ 1,166,373 | ||||
Convertible debt | 9,500,000 | ||||
Debt discount | $ 4,687 | ||||
Promissory note One [Member] | |||||
Long-Term Debt (Textual) | |||||
Maturity date | Feb. 29, 2020 | ||||
Interest rate | 7.50% | ||||
Convertible Debt [Member] | |||||
Long-Term Debt (Textual) | |||||
Maturity date | Feb. 1, 2016 | Dec. 31, 2017 | |||
Interest rate | 7.50% | ||||
Note payable maturity, description | Ten days after the initial closing of a private offering of capital stock of the Company in an amount not less than $10 million or at discretion of the member. During April 2018 the promissory note’s maturity date was extended to July 2019. | ||||
Interest rate on promissory notes | 1.50% | ||||
Principal amount | $ 9,500,000 | ||||
Convertible debt | $ 4,813,000 | ||||
Convertible Notes Payable [Member] | |||||
Long-Term Debt (Textual) | |||||
Maturity date | Nov. 30, 2019 | ||||
Interest rate | 12.00% | ||||
Four Convertible Promissory Notes [Member] | |||||
Long-Term Debt (Textual) | |||||
Interest rate on promissory notes | 6.00% | ||||
Conversion of common stock | $ 2,000,000 | ||||
EVO Inc. [Member] | |||||
Long-Term Debt (Textual) | |||||
Interest rate | 81.10% | ||||
Interest rate on promissory notes | 70.00% | ||||
Convertible note shares | 1,400,000 | ||||
EAF [Member] | |||||
Long-Term Debt (Textual) | |||||
Maturity date | Feb. 28, 2026 | ||||
Number of units equivalent to common shares | 1,400,000 | ||||
Interest rate | 1.50% | ||||
Description of interest rate | The Company imputed an interest rate of 5.1% on the promissory notes. | ||||
Small Business Administration Note [Member] | |||||
Long-Term Debt (Textual) | |||||
Long term subordinated convertible notes payable to stockholders | $ 1,300,000 | ||||
Note payable, description | $1,300,000 SBA note payable issued December 31, 2014, with interest at 5.50% for the first five years, then adjusted to the SBA LIBOR base rate, plus 2.35% for the remaining five years. | ||||
Maturity date | Mar. 31, 2024 | ||||
Issued in units | 35,491 | ||||
Number of units equivalent to common shares | 31,203 | ||||
Principle and interest payments | $ 15,288 | ||||
Nine subordinated notes payable [Member] | |||||
Long-Term Debt (Textual) | |||||
Maturity date | Dec. 31, 2020 | ||||
Interest rate | 12.00% | ||||
Nine subordinated notes payable [Member] | April 2018 [Member] | |||||
Long-Term Debt (Textual) | |||||
Convertible note shares | 272,777 | ||||
Conversion of common stock | $ 1,166,373 | ||||
Write-off of interest | 83,589 | ||||
Debt interest amount | $ 197,485 | ||||
Six subordinated senior notes payable [Member] | |||||
Long-Term Debt (Textual) | |||||
Note payable, description | The Company subsequently extended the maturity date of the notes to October 31, 2017. The Company paid a fee of 1% of the outstanding principal balance on the notes on or around each of January 31, 2017, April 30, 2017, and July 31, 2017 to extend the maturity date of the notes. The notes are secured by a subordinate security interest on substantially all of the Company’s assets and are personally guaranteed by two members. | ||||
Issued in units | 25,541 | ||||
Number of units equivalent to common shares | 22,455 | ||||
Interest rate | 12.00% | ||||
Description of interest rate | Effective July 2016, the maturity date of the Senior Bridge Notes was extended to September 30, 2016 and allowed for an interest rate increase from 12% to 16% effective March 14, 2016. The default interest rate was increased from 15% to 18%. As part of the first amendment, the note holders received 3,359 Class A Membership Units (equivalent to 2,953 common shares) in Titan. In September 2016, the Senior Bridge Notes were amended to extend the due date to April 30, 2017 and the Company paid a fee for the extension of 1% of the outstanding principal balance to the note holders. | ||||
Six subordinated senior notes payable [Member] | Class A Membership [Member] | |||||
Long-Term Debt (Textual) | |||||
Issued in units | 3,359 | ||||
Number of units equivalent to common shares | 2,953 | ||||
Six subordinated senior notes payable [Member] | April 2018 [Member] | |||||
Long-Term Debt (Textual) | |||||
Convertible note shares | 275,583 | ||||
Conversion of common stock | $ 621,556 | ||||
Write-off of interest | 73,741 | ||||
Debt interest amount | $ 67,444 |
Derivative Instruments (Details
Derivative Instruments (Details) - USD ($) | Mar. 31, 2018 | Dec. 31, 2017 |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||
Current commodity derivative liability | $ 27,659 | $ 32,186 |
Long-term commodity derivative liability | 5,784 | $ 11,420 |
Total derivative liability | $ 33,443 |
Derivative Instruments (Detai41
Derivative Instruments (Details 1) | 3 Months Ended |
Mar. 31, 2018USD ($)$ / shares | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivative instruments, Type | Swap |
Derivative instruments, Term | March 2015 - February 2019 |
Derivative instruments, Volume Hedged (Dth) | $ | $ 95,000 |
Derivative instruments, Index | NYM-LDS |
Derivative instruments, Fixed Price ($/Dth) | $ / shares | $ 3.82 |
Derivative Instruments (Detai42
Derivative Instruments (Details Textual) - USD ($) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||
Realized loss | $ 6,096 | $ 52 |
Unrealized gain | $ (10,164) |
Fair Value Measurements (Detail
Fair Value Measurements (Details) | Mar. 31, 2018USD ($) |
Fair value on a recurring basis | |
Derivative liability | $ 33,443 |
Level 1 [Member] | |
Fair value on a recurring basis | |
Derivative liability | |
Level 2 [Member] | |
Fair value on a recurring basis | |
Derivative liability | 33,443 |
Level 3 [Member] | |
Fair value on a recurring basis | |
Derivative liability |
Stockholders' Equity (Details)
Stockholders' Equity (Details) - Warrants [Member] - $ / shares | 3 Months Ended | 12 Months Ended |
Mar. 31, 2018 | Dec. 31, 2017 | |
Number of Warrants, Outstanding, Beginning balance | 103,334 | |
Number of Warrants, Issued | 1,240,000 | 103,334 |
Number of Warrants, Forfeited/canceled | ||
Number of Warrants, Exercised | ||
Number of Warrants, Outstanding, Ending balance | 1,343,334 | 103,334 |
Weighted Average Exercise Price, Outstanding, Beginning balance | ||
Weighted Average Exercise Price, Issued | 3.20 | 3 |
Weighted Average Exercise Price, Forfeited/canceled | ||
Weighted Average Exercise Price, Exercised | ||
Weighted Average Exercise Price, Outstanding, Ending balance | $ 3.18 |
Stockholders' Equity (Details T
Stockholders' Equity (Details Textual) - USD ($) | Mar. 02, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Stockholders Equity (Textual) | ||||
Common stock shares issued | 1,000,000 | |||
Common stock, per share | $ 2.50 | |||
Aggregate principal amount | $ 2,500,000 | |||
Description of equity | Each Unit consists of (i) one share of the Company’s common stock, par value $0.0001 per share (“Common Stock”), and (ii) a warrant to purchase one share of Common Stock at an exercise price of $2.50 per share exercisable for five years from the date of issuance. The Company did not pay any commissions in connection with the sale of these Units. | |||
Escrow Agreement [Member] | ||||
Stockholders Equity (Textual) | ||||
Common stock shares issued | 240,000 | |||
Expected term of the warrants | 5 years | |||
Proceeds of sale or sales of escrowed shares, percentage | 75.00% | |||
Proceeds to paid shareholders party, percentage | 25.00% | |||
Warrants issued | 240,000 | |||
Warrants, exercise price | $ 6.11 | |||
Warrants [Member] | ||||
Stockholders Equity (Textual) | ||||
Weighted average remaining contractual life | 4 years 11 months 1 day | |||
Expected term of the warrants | 5 years | |||
Warrants issued | 1,343,334 | 103,334 |
Commitments and Contingencies46
Commitments and Contingencies (Details) | Mar. 31, 2018USD ($) |
Future minimum lease payments | |
2,018 | $ 104,000 |
2,019 | 23,000 |
Total | $ 127,000 |
Commitments and Contingencies47
Commitments and Contingencies (Details Textual) - USD ($) | 1 Months Ended | 3 Months Ended | 12 Months Ended | ||||||
Jun. 30, 2017 | Feb. 01, 2017 | Nov. 30, 2014 | Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2015 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2013 | |
Commitments and Contingencies (Textual) | |||||||||
Rent expense | $ 35,000 | $ 35,000 | |||||||
CNG purchase | $ 545,000 | ||||||||
Operating lease, description | Titan entered into an operating lease agreement which expires in February 2019, with an option to extend to February 2024. | ||||||||
Percentage of note bears interest | 12.50% | ||||||||
Promissory note One [Member] | |||||||||
Commitments and Contingencies (Textual) | |||||||||
Maturity date | Feb. 29, 2020 | ||||||||
Four Convertible Promissory Notes [Member] | |||||||||
Commitments and Contingencies (Textual) | |||||||||
Percentage of note bears interest | 6.00% | ||||||||
Senior Promissory Note [Member] | |||||||||
Commitments and Contingencies (Textual) | |||||||||
Amount of lease property | $ 3,800,000 | ||||||||
Promissory Note [Member] | |||||||||
Commitments and Contingencies (Textual) | |||||||||
Amount of lease property | $ 4,000,000 | ||||||||
Convertible Debt [Member] | |||||||||
Commitments and Contingencies (Textual) | |||||||||
Maturity date | Feb. 1, 2016 | Dec. 31, 2017 | |||||||
Percentage of note bears interest | 1.50% | ||||||||
Evo Inc [Member] | |||||||||
Commitments and Contingencies (Textual) | |||||||||
Percentage of note bears interest | 70.00% | ||||||||
EAF [Member] | |||||||||
Commitments and Contingencies (Textual) | |||||||||
Maturity date | Feb. 28, 2026 | ||||||||
Minnesota [Member] | |||||||||
Commitments and Contingencies (Textual) | |||||||||
Monthly rental payments | $ 977 | ||||||||
Titan [Member] | |||||||||
Commitments and Contingencies (Textual) | |||||||||
Monthly rental payments range, description | The monthly payments range from $10,000 to $11,604. | ||||||||
SCAQMD Agreement [Member] | |||||||||
Commitments and Contingencies (Textual) | |||||||||
Grant amount | $ 150,000 | ||||||||
Maturity date | Aug. 31, 2020 | ||||||||
Amount of lease property | $ 1 | ||||||||
Operating lease, description | Within 180 days from the contract execution, Diamond Bar, using its best efforts, shall sell any surplus assets and provide SCAQMD with 90% of the net proceeds, as defined. To date Diamond Bar has not had any surplus assets to sell. | ||||||||
Lease contract term, description | The contract ends December 31, 2020. SCAQMD can extend the contract for a period not to exceed five years starting January 1, 2021 at no additional cost. Either party may terminate the contract with sixty days' notice. | ||||||||
Texas Commission [Member] | |||||||||
Commitments and Contingencies (Textual) | |||||||||
Grant amount | $ 400,000 | ||||||||
California Energy Commission [Member] | |||||||||
Commitments and Contingencies (Textual) | |||||||||
Grant amount | $ 300,000 |
Subsequent Events (Details)
Subsequent Events (Details) - USD ($) | May 14, 2018 | Apr. 13, 2018 | Apr. 12, 2018 | Apr. 12, 2018 | Mar. 02, 2018 | Apr. 30, 2018 | Apr. 02, 2018 | Mar. 31, 2018 | Dec. 31, 2017 |
Issue of Series A Preferred stock | |||||||||
Preferred stock, par value | $ 0.0001 | $ 0.0001 | |||||||
Issue of common shares | 1,000,000 | ||||||||
Aggregate principal amount | $ 2,500,000 | ||||||||
Share price | $ 2.50 | ||||||||
Subsequent Events [Member] | |||||||||
Promissory note | $ 3,800,000 | ||||||||
Issue of Series A Preferred stock | 100,000 | 100,000 | |||||||
Warrants or options issued to purchase common stock | 4,250,000 | 4,250,000 | |||||||
Stock options exercise price | $ 2.50 | $ 2.50 | |||||||
Stock options exercisable, percentage | 25.00% | ||||||||
Equity and debt financing | $ 30,000,000 | $ 30,000,000 | |||||||
Stock options granted | 4,000,000 | 4,000,000 | |||||||
Conversion of common stock, description | Each option shall terminate ten years from the date issued. | ||||||||
Aggregate principal amount | $ 2,052,858 | ||||||||
Subsequent Events [Member] | Series A Preferred Stock [Member] | |||||||||
Issue of Series A Preferred stock | 100,000 | ||||||||
Preferred stock, par value | $ 0.0001 | ||||||||
Conversion of common stock, description | T he Common Stock may at the time be listed exceeds six dollars ($6.00) per share for thirty (30) consecutive trading days and the daily trading volume of the Common Stock is at least twenty thousand (20,000) shares for that same period. | ||||||||
Liquidation preference price per share | $ 3 | ||||||||
Preferred stock redemption price per share | $ 3 | ||||||||
Subsequent Events [Member] | Senior bridge notes [Member] | |||||||||
Issue of common shares | 275,583 | 275,583 | |||||||
Aggregate principal amount | $ 689,000 | $ 689,000 | |||||||
Share price | $ 2.50 | $ 2.50 | $ 2.50 | ||||||
Subsequent Events [Member] | Junior Notes [Member] | |||||||||
Issue of common shares | 272,777 | 272,777 | |||||||
Aggregate principal amount | $ 1,363,858 | $ 1,363,858 | |||||||
Share price | $ 5 | $ 5 | $ 5 | ||||||
Subsequent Events [Member] | Accounts payable and related party [Member] | |||||||||
Issue of common shares | 93,400 | ||||||||
Aggregate principal amount | $ 280,200 | ||||||||
Share price | $ 3 |