Exhibit 99.1

 

Report of Independent Registered Public Accounting Firm

 

To the Board of Directors of

JD Field Services Inc.:

 

We have audited the accompanying consolidated balance sheets of JD Field Services Inc., as of December 31, 2013 and 2012, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the two years ended December 31, 2013 and 2012. JD Field Services Inc.’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to in the first paragraph above present fairly, in all material respects, the consolidated financial position of JD Field Services Inc., as of December 31, 2013 and 2012, and its consolidated results of operations and cash flows for the two years ended December 31, 2013 and 2012, in conformity with generally accepted accounting principles in the United States.

 

/s/ Keeton CPA

 

Keeton CPA

Henderson, NV

 

June 10, 2014 (except for the restatement of the financial statements as disclosed under Note 3, as to which the date is June 1, 2015)

 

  

JD FIELD SERVICES, INC.

CONSOLIDATED BALANCE SHEETS

 

		DEC 31, 2013				DEC 31, 2012
		(restated)				(restated)
ASSETS
CURRENT ASSETS
Cash		$	4,182			$	157,852
Accounts receivable, net			2,771,567				3,002,796
Prepaid expenses			252,026				312,413
Total current assets			3,027,775				3,473,061
PROPERTY, PLANT AND EQUIPMENT, NET			15,219,702				19,513,683
DEFERRED FINANCING FEES, NET			29,402				41,238
TOTAL ASSETS		$	18,276,879			$	23,027,982
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities		$	2,301,047			$	3,587,503
Line of credit			181,163				499,805
Current portion of loans and capital leases			3,445,219				4,041,821
Current portion of related party			782,784				203,204
Total current liabilities			6,710,213				8,332,333
LONG TERM PORTION OF LOANS AND CAPITAL LEASES			8,349,001				10,560,349
LONG TERM PORTION OF RELATED PARTY			387,969				66,383
Total liabilities			15,447,183				18,959,065
STOCKHOLDERS’ EQUITY
Common stock $1.00 par value 50,000 authorized, 1,000 shares issued and outstanding			1,000				1,000
Additional paid in capital			689,540				689,540
Disbursements			(720,792	)			(720,792	)
Retained earnings			2,859,948				4,099,169
Total stockholders’ equity			2,829,696				4,068,917
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	18,276,879			$	23,027,982

 

The accompanying notes are an integral part of these consolidated financial statements.

  

JD FIELD SERVICES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

 

		YEAR ENDED DEC 31, 2013				YEAR ENDED  DEC 31, 2012
						(restated)
REVENUE		$	19,554,394			$	25,401,147
Less: returns and allowances			(140,000	)			(1,593,526	)
NET REVENUE			19,414,394				23,807,621
COST OF REVENUE			16,936,050				21,297,592
GROSS PROFIT			2,478,344				2,510,029
OPERATING EXPENSES
Selling, general and administrative expenses			1,714,958				1,680,702
Professional fees			63,843				208,930
TOTAL OPERATING EXPENSES			1,778,801				1,889,632
OPERATING INCOME			699,543				620,397
OTHER EXPENSE, non-operating
Interest expense, net			906,904				780,828
Loss on settlement of obligation			—				95,000
Loss on sale/disposal of fixed assets			1,213,285				34,000
Exit costs			—				491,266
Gain on debt extinguishment			(181,425	)			—
Gain on settlement			—				(571,351	)
TOTAL OTHER EXPENSE, non-operating			1,938,764				829,743
NET LOSS		$	(1,239,221	)		$	(209,346	)

 

The accompanying notes are an integral part of these consolidated financial statements.

 

JD FIELD SERVICES, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

 

		Common Stock
		Shares				Amount				APIC				Distributions				Retained Earnings				Total
						$1.00 par value
Balance as of December 31, 2011 (restated)			1,000			$	1,000			$	—			$	—			$	4,308,515			$	4,309,515
Distributions			—				—				—				(720,792	)			—				(720,792	)
Redemption of NCI			—				—				689,540				—								689,540
Net loss (restated)																			(209,346	)			(209,346	)
Balance as of December 31, 2012 (restated)			1,000			$	1,000			$	689,540			$	(720,792	)		$	4,099,169			$	4,068,917
Net loss																			(1,239,221	)			(1,239,221	)
Balance as of December 31, 2013 (restated)			1,000			$	1,000			$	689,540			$	(720,792	)		$	2,859,948			$	2,829,696

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

JD FIELD SERVICES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

		YEAR ENDED DEC 31, 2013				YEAR ENDED DEC 31, 2012
						(restated)
Operating Activities
Net loss		$	(1,239,221	)		$	(209,346	)
Cash provided by operating activities
Depreciation and amortization			2,065,812				1,870,004
Returns and allowances			140,000				1,593,526
Loss on settlement of obligation			—				95,000
Loss on disposal/sale of assets			1,213,286				34,000
Gain on debt extinguishment			(181,425	)			—
Gain on settlement			—				(571,351	)
Changes in assets
Decrease (increase) in receivables			91,229				(1,002,963	)
Decrease in prepaid expenses			277,296				262,915
Changes in liabilities
(Decrease) increase in accounts payable and accrued liabilities			(1,133,304	)			1,162,505
Cash provided by operating activities			1,233,673				3,234,290
Investing Activities
Purchase of property, plant and equipment			(558,640	)			(4,753,513	)
Proceeds on sale of fixed assets			2,188,700				—
Cash provided (used) by investing activities			1,630,060				(4,753,513	)
Financing activities
Distributions			—				(210,500	)
Proceeds from note payable			—				2,756,677
Proceeds from related party			766,000				—
Proceeds from line of credit			5,123,519				499,805
Payments for note payable and capital leases			(3,394,762	)			(1,541,501	)
Payments to related party			(70,000	)			—
Payments for line of credit			(5,442,160	)			—
Cash (used) provided by financing activities			(3,017,403	)			1,504,481
Decrease in cash			(153,670	)			(14,742	)
Cash at beginning of year			157,852				172,594
Cash at end of year		$	4,182			$	157,852
SUPPLEMENTAL CASH FLOW
Cash paid for interest		$	498,617			$	412,380
Cash paid for income taxes		$	—			$	—
SUPPLEMENTAL NON CASH INVESTING & FINANCING TRANSACTIONS
Prepaid insurance		$	216,909			$	262,091
Fixed assets paid with debt		$	329,618			$	3,492,217
Expenses paid with debt		$	221,711			$	—
Expenses paid with related party debt		$	205,166			$	295,295
Settlement of debt obligation		$	—			$	2,650,000

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

JD FIELD SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (audited)

 

NOTE 1: Organization and basis of presentation

 

Basis of Financial Statement Presentation

 

The accompanying audited consolidated financial statements include the accounts of JD Field Services, Inc. and its subsidiary Five Star Rentals, Inc. (collectively referred herein as “JD” or the “Company”).

 

Business Overview

 

On March 23, 2001, JD Field Services Inc. registered as an S-Corporation in the state of Utah. JD provides services to the oil and gas industry primarily focused around those activities that are related to oilfield services. They are licensed in all states west of the Mississippi River including Alaska to do trucking, but are focused primarily in the Rocky Mountain Region. Oilfield services provided include heavy haul, water haul, and rig moving services as well as equipment, supplies and specialty long hauling services. The Company also provides oil and gas equipment rental services, hot shot, roustabout services and construction site development services, as well as operates a fabrication division that builds special-order oil and gas equipment and trucks for customers.

 

Use of Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Concentrations of Credit and Business Risk

 

Financial instruments that are potentially subject to a concentration of business risk consist of accounts receivable. Revenues in 2012 were derived from two (2) customers who comprised 55% of revenues, and in 2013 one (1) customer which comprised 32% of revenues. We generally do not require collateral, but in most cases can place liens against the property, plant or equipment constructed or terminate the contract if a material default occurs.

 

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash. The Company places its cash with high credit quality financial institutions and generally limits the amount of credit exposure to the amount in excess of the Federal Deposit Insurance Corporation coverage limit of $250,000. As of December 31, 2013 and 2012, the Company did not have cash in any one banking institution that exceeded this limit.

 

Cash

 

The Company considers all highly liquid instruments purchased with an original maturity of three months or less to be cash. The Company has only cash for the periods presented.

 

Prepaid Expenses

 

Amounts paid in advance for a benefit not yet received. This type of expense normally includes costs paid in one fiscal year (or period) that benefits a future year (or period).

 

Property, Plant and Equipment

 

Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which is generally ten/fifteen years for heavy machinery, five years for vehicles, two to three years for computer software/hardware and office equipment and three to seven years for furniture, fixtures and office equipment. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful lives. Upon the sale or retirement of property or equipment, the cost and related accumulated depreciation or amortization is removed from the Company’s balance sheet with the resulting gain or loss reflected in the Company’s results of operations. Maintenance costs are expensed as incurred. Due to the nature of the equipment, major repairs are capitalized as they reflect an adjustment to the overall value of the equipment and its useful life can be extended.

 

In evaluating the salvage value service equipment we use a standard of, Machinery and Equipment - Worth approximately 10 - 30% of purchase price after 10-15 years depending on the asset. Vehicles - Worth approximately 20% of purchase price after 10-15 years depending on the asset. These salvage values are based on industry averages for the type of machinery and equipment used in oilfield services.

 

 

Allowance for Doubtful Accounts

 

As required by the Receivables Topic of the Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”), the Company is required to use a predetermined method in calculating the current value for its bad debt on overall accounts receivable.

 

The Company estimates its accounts receivable risks to provide allowances for doubtful accounts accordingly. We believe that our credit risk for accounts receivable is limited because of the way in which we conduct business largely in the areas of contracts. Accounts receivable includes the accrual of work in process for project contracts and field service revenue. We recognize that there is a potential of not being paid in a 12 month period. Our evaluation includes the length of time receivables are past due, adverse situations that may affect a contract’s scope to be paid, and prevailing economic conditions. We assess each and every customer to conclude whether or not remaining balances outstanding need to be placed into allowance and then re-evaluated for write-off. We review all accounts to ensure that all efforts have been exhausted before noting that a customer will not pay for services rendered. The evaluation is inherently subjective and estimates may be revised as more information becomes available.

 

Revenue Recognition

 

As required by the Revenue Recognition Topic of FASB ASC, the Company is required to use predetermined contract methods in determining the current value for revenue.

 

Service Contracts Service revenue is recognized on a completed project basis - the Company invoices the client when it has completed the services, thereby, ensuring the client is legally liable to the Company for payment of the invoice. On service contracts, revenue is not recognized until the services have been performed.

 

In all cases, revenue is recognized as earned by the Company. As the client becomes liable to the Company for services provided, as defined in the agreement, the client is then invoiced and revenue is accordingly recognized and recorded.  The Company does not recognize or record any revenues for which it does not have a legal basis for invoicing or legally collecting.

 

Income Taxes

 

As of December 31, 2013, the Company, with consent of its shareholders elected under the Internal Revenue Code to be taxed as an S corporation. In lieu of corporation income taxes, the shareholders of an S corporation are taxed based on their proportionate share of the Company’s taxable income. As such, we have not provided for any deferred tax analysis.

 

Sales Taxes

 

The Company collects sales tax. The amount received is credited to a liability account as payments are received or invoices are generated. At any point in time, this account represents the net amount owed to the taxing authority for amounts collected but not yet remitted. Sales taxes are then remitted to the appropriate taxing jurisdictions.

 

Fair Value Accounting

 

As required by the Fair Value Measurements and Disclosures Topic of the FASB ASC, fair value is measured based on a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

 

The three levels of the fair value hierarchy are described below:

 

Level 1     Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

 

Level 2     Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability;

 

 

Level 3     Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

 

NOTE 2: Recently adopted and recently issued accounting guidance

 

Adopted

 

In May 2011, the FASB (“Financial Accounting Standards Board”) issued an accounting standard update that amends the accounting standard on fair value measurements. The accounting standard update provides for a consistent definition and measurement of fair value, as well as similar disclosure requirements between U.S. generally accepted accounting principles and International Financial Reporting Standards. The accounting standard update changes certain fair value measurement principles, clarifies the application of existing fair value measurement, and expands the fair value measurement disclosure requirements, particularly for Level 3 fair value measurements. The amendments in this accounting standard update are to be applied prospectively and are effective for interim and annual periods beginning after December 15, 2011. The adoption of this accounting standard update will become effective for the reporting period beginning January 1, 2012. The adoption of this guidance did not have a material impact on the Company’s financial position, results of operations or cash flows.

 

In September 2011, the FASB issued an accounting standard update that amends the accounting guidance on goodwill impairment testing. The amendments in this accounting standard update are intended to reduce complexity and costs by allowing an entity the option to make a qualitative evaluation about the likelihood of goodwill impairment to determine whether it should calculate the fair value of a reporting unit. The amendments also improve previous guidance by expanding upon the examples of events and circumstances that an entity should consider between annual impairment tests in determining whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The amendments in this accounting standard update are effective for interim and annual goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The adoption of this accounting standard update will become effective for the reporting period beginning January 1, 2012. The adoption of this guidance did not have a material impact on the Company’s financial position, result of operations or cash flows.

 

Issued

 

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the SEC did not, or are not believed by management to, have a material impact on the Company's present or future financial position, results of operations or cash flows.

 

NOTE 3: Restatement of financials

 

The Accounting Changes and Errors Corrections Topic of the FASB ASC, requires management to review the financial statements for any accounting changes or error corrections in accordance with the generally accepted accounting principles. Subsequent to the issuance of the Company’s audited consolidated financial statements for the years ended December 31, 2013 and December 31, 2012, the Company determined that certain adjustments were required to be made for errors in its previously issued audited financial statements. These changes related to the scope limitations notated within the Report of Independent Registered Public Accounting Firm in which the Company was unable to obtain documentation of property and equipment acquired through a purchase in 2011 in exchange for common stock. The restatement allows for the appropriate valuation of equity as of December 31, 2013 and December 31, 2012 respectively.

 

Management revalued the fair value of the property and equipment held by the investor at the time of his initial equity purchase and provided adjustments necessary to correct the original assessment of equity value. The adjustments allows for appropriate valuation of equity. With this adjustment we have revalued the equity as of December 31, 2013 and December 31, 2012, respectively.

 

These errors require the Company to restate previously reported financial results contained in this report. The effects of these prior period errors in the consolidated financial statements are as follows:

 

 

 

CONSOLIDATED BALANCE SHEETS

 

		As stated								Restated
		DEC 31, 2013				Adjustment				DEC 31, 2013
ASSETS
TOTAL ASSETS		$	18,276,879			$	—			$	18,276,879
LIABILITIES AND STOCKHOLDERS’ EQUITY
TOTAL LIABILITIES		$	15,447,183			$	—			$	15,447,183
STOCKHOLDERS’ EQUITY
Common stock $1.00 par value 50,000 authorized, 1,000 shares issued and outstanding			1,000				—				1,000
Additional paid in capital			—				689,540	(1)			689,540
Disbursements			(720,792	)			—				(720,792	)
Retained earnings			3,549,488				(689,540	)(1)			2,859,948
Total stockholders’ equity			2,829,696				—				2,829,696
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	18,276,879			$	—			$	18,276,879

 ⁽¹⁾ Changes to the assessment of the value of equity held in 2011, which resulted in an equity gain to the remaining owners upon settlement in 2012.

 

CONSOLIDATED BALANCE SHEETS

 

		As stated								Restated
		DEC 31, 2012				Adjustment				DEC 31, 2012
ASSETS
TOTAL ASSETS		$	23,027,982			$	—			$	23,027,982
LIABILITIES AND STOCKHOLDERS’ EQUITY
TOTAL LIABILITIES		$	18,959,065			$	—			$	18,959,065
STOCKHOLDERS’ EQUITY
Common stock $1.00 par value 50,000 authorized, 1,000 shares issued and outstanding			1,000				—				1,000
Additional paid in capital			—				689,540	(2)			689,540
Disbursements			(720,792	)			—				(720,792	)
Retained earnings			5,839,892				(1,531,377	)(3)			4,308,515
Net loss			(1,051,183	)			841,837	(4)			(209,346	)
Total stockholders’ equity			4,068,917				—				4,068,917
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	23,027,982			$	—			$	23,027,982

⁽²⁾ Changes to the assessment of the value of equity held in 2011, which resulted in an equity gain to the remaining owners upon settlement in 2012.

⁽³⁾ Net changes due to the valuation of equity interest held in 2011

⁽⁴⁾ Net changes due to the valuation of equity which resulted in an accounting adjustment to properly account for the equity value in the settlement in 2012.

 

CONSOLIDATED STATEMENTS OF OPERATIONS

 

		As stated DEC 31, 2012				Adjustment				Restated DEC 31, 2012
GROSS PROFIT		$	2,510,029			$	—			$	2,510,029
OPERATING INCOME			620,397				—				620,397
OTHER EXPENSE, non-operating
Interest expense, net			780,828				—				780,828
Loss on settlement of obligation			936,837				(841,837	)(5)			95,000
Loss on sale/disposal of fixed assets			34,000				—				34,000
Exit costs			491,266				—				491,266
Gain on debt extinguishment			—				—				—
Gain on settlement			(571,351	)			—				(571,351	)
TOTAL OTHER EXPENSE, non-operating			1,671,580								829,743
NET LOSS		$	(1,051,183	)		$	841,837	(5)		$	(209,346	)

⁽⁵⁾ Net changes which resulted in an accounting adjustment to properly account for the equity value in the settlement in 2012.

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

		As stated DEC 31, 2012				Adjustment				Restated DEC 31, 2012
										(restated)
Operating Activities
Net loss		$	(1,051,183	)		$	841,837	(6)		$	(209,346	)
Cash provided by operating activities
Depreciation and amortization			1,870,004								1,870,004
Returns and allowances			1,593,526								1,593,526
Loss on settlement of obligation			936,837				(841,837	)(6)			95,000
Loss on disposal/sale of assets			34,000								34,000
Gain on debt extinguishment			—								—
Gain on settlement			(571,351	)							(571,351	)
Changes in assets
Increase in receivables			(1,002,963	)							(1,002,963	)
Decrease in prepaid expenses			262,915								262,915
Changes in liabilities
(Decrease) increase in accounts payable and accrued liabilities			1,162,505								1,162,505
Cash provided by operating activities		$	3,234,290			$	—			$	3,234,290

⁽⁶⁾ Net changes which resulted in an accounting adjustment to properly account for the equity value in the settlement in 2012.

 

  

NOTE 4: Accounts receivable, net

 

		Year Ended December 31,
		2013				2012
Accounts receivable		$	4,760,782			$	4,852,011
Less: allowance for doubtful accounts			(1,989,215	)			(1,849,215	)
Total		$	2,771,567			$	3,002,796

 

Returns and allowance expense for the year ended December 31, 2013 and 2012 was $140,000 and $1,593,526.

 

NOTE 5: Property, plant and equipment

 

Property, plant and equipment consist of the following (audited):

 

		Year Ended December 31,
		2013				2012
Leasehold improvements		$	137,186			$	137,186
Vehicles			10,262,795				11,984,681
Furniture and fixtures			131,412				110,871
Machinery and equipment			10,731,948				12,888,358
Total			21,263,341				25,121,096
Less: Accumulated depreciation			(6,043,639	)			(5,607,413	)
Total		$	15,219,702			$	19,513,683

 

Depreciation expense for the year ended December 31, 2013 was $2,053,978 and for the year ended December 31, 2012 was $1,870,004.

 

As of December 31, 2013 and 2012, the Company had a loss on sale of fixed assets in the amount of $1,213,285 and $34,000, respectively.

 

  

NOTE 6: Loans, Capital lease

 

The following tables represent the outstanding balance of loans for the Company as of December 31, 2013, and 2012.

 

				Maturity		Original				Interest				Balance as of December 31,
Description		Loan date		date		amount of loan				rate				2013				2012
Ally		01/24/2011		01/08/2014		$	44,428				0.00	%		$	2,468			$	17,093
Ally		07/07/2011		07/07/2014			58,038				0.00	%			8,061				28,938
Ally		04/01/2011		04/14/2014			34,635				0.00	%			3,849				15,297
Ally		03/10/2013		02/10/2019			43,395				4.00	%			38,044				—
Cat Financial		12/09/2012		11/09/2016			186,549				5.95	%			140,825				183,762
CMI Teco		90/20/2012		07/20/2013			525,328				0.00	%			—				437,412
G Rasmussen		01/23/2012		07/16/2013			253,748				7.00	%			—				42,867
Peoples United Bank		01/20/2012		01/29/2016			734,640				10.10	%			294,066				416,114
Phil Timothy		11/17/2012		03/28/2023			2,650,000				6.00	%			2,484,608				2,650,000
Ford Credit		04/16/2012		03/16/2016			23,700				4.34	%			16,023				20,204
Ford Credit		10/28/2011		09/28/2015			28,700				6.39	%			18,015				23,200
Ford Credit		10/28/2011		09/28/2016			44,576				3.74	%			18,189				29,038
Ford Credit		03/05/2011		06/05/2016			88,575				7.89	%			59,286				73,930
Ford Credit		03/30/2011		02/28/2015			56,372				6.49	%			24,761				34,717
Ford Credit		12/15/2011		03/29/2017			73,005				7.89	%			52,100				61,596
Ford Credit		11/29/2011		10/29/2015			36,700				6.54	%			16,584				25,325
Ford Credit		11/29/2011		10/29/2015			34,400				6.54	%			15,545				23,734
Ford Credit		06/15/2011		09/30/2015			94,000				5.74	%			35,312				48,812
Ford Credit		06/04/2012		09/19/2016			45,994				8.29	%			34,218				41,135
GE Capital		11/10/2012		10/10/2018			189,151				6.42	%			157,890				184,827
GE Capital		08/01/2012		07/01/2018			153,944				7.24	%			124,130				146,176
John Deere Financial		10/26/2012		09/26/2017			262,350				4.00	%			205,736				254,427
Mack Financial Services		04/12/2011		03/12/2016			326,746				0.00	%			166,590				230,141
Mack Financial Services		12/09/2011		11/09/2016			347,520				0.00	%			216,748				281,805
Mack Financial Services		02/18/2012		01/18/2017			275,770				0.00	%			181,252				232,141
Mack Financial Services		02/24/2013		01/24/2018			244,684				6.00	%			205,128				—
MACU		11/26/2013		10/26/2018			41,540				2.99	%			40,897				—
Zion’s Bank		10/12/2011		10/15/2026			150,000				4.86	%			133,006				141,197
Zion’s Bank		11/10/2011		10/10/2016			101,091				4.57	%			52,701				72,504
Zion’s Bank		10/30/2012		09/30/2017			7,680,000				4.57	%			6,091,893				7,489,342
Zion’s Bank		06/13/2008		09/15/2013			800,000				7.52	%			—				—
Zion’s Bank		02/16/2011		02/16/2016			1,500,000				5.50	%			—				—
Zion’s Bank		05/19/2011		05/19/2016			250,000				6.04	%			—				—
Zion’s Bank		06/15/2010		06/15/2013			250,000				5.84	%			—				—
Zion’s Bank		02/07/2012		05/07/2017			2,500,000				5.01	%			—				—
Zion’s Bank		02/07/2012		02/07/2013			500,000				4.52	%			—				—
H&E – Capital lease		10/22/2011		10/22/2015			105,800				12.00	%			65,548				71,500
H&E – Capital lease		10/22/2011		07/01/2015			105,000				12.00	%			65,860				78,150
H&E – Capital lease		10/22/2011		07/01/2015			106,000				12.00	%			63,390				71,700
H&E – Capital lease		10/22/2011		07/01/2015			102,000				12.00	%			57,735				72,600
H&E – Capital lease		10/18/2011		07/01/2015			95,500				12.00	%			57,755				61,200
H&E – Capital lease		12/01/2012		01/17/2014			95,000				12.00	%			43,734				77,850
H&E – Capital lease		12/01/2012		01/17/2014			105,000				12.00	%			53,922				98,600
H&E – Capital lease		12/15/2012		01/15/2014			107,550				12.00	%			24,168				56,950
H&E – Capital lease		12/20/2012		01/20/2014			95,000				12.00	%			43,697				77,850
H&E – Capital lease		12/20/2012		01/20/2014			95,000				12.00	%			41,247				77,850
H&E – Capital lease		03/01/2010		06/30/2013			97,000				12.00	%			—				44,658
H&E – Capital lease		10/18/2011		06/30/2013			28,300				12.00	%			—				21,700
H&E – Capital lease		03/01/2011		06/30/2013			119,500				12.00	%			—				74,909
H&E – Capital lease		12/01/2011		06/30/2013			74,800				12.00	%			—				55,797
H&E – Capital lease		10/18/2012		06/30/2013			25,675				12.00	%			—				2,125
H&E – Capital lease		06/01/2012		06/30/2013			27,640				12.00	%			—				4,090
H&E – Capital lease		08/01/2011		06/30/2013			57,000				12.00	%			—				21,750
H&E – Capital lease		07/01/2011		06/30/2013			76,945				12.00	%			—				35,745
H&E – Capital lease		10/18/2011		06/30/2013			49,000				12.00	%			—				14,700
H&E – Capital lease		01/01/2012		06/30/2013			47,000				12.00	%			—				32,447
H&E – Capital lease		07/01/2011		06/30/2013			62,700				12.00	%			—				23,500
H&E – Capital lease		09/01/2011		06/30/2013			61,000				12.00	%			—				26,700
H&E – Capital lease		12/01/2010		06/30/2013			68,500				12.00	%			—				14,450
H&E – Capital lease		02/12/2012		06/30/2013			38,000				12.00	%			—				17,520
Premium Capital Ins.		—		—			—				—				619				262,095
National Insurance		—		—			—				—				216,909				—
American Express		—		—			—				—				221,711				—
Total debt liabilities														$	11,794,220			$	14,602,170
Less: Current portion															3,445,219				4,041,821
Total long-term liabilities														$	8,349,001			$	10,560,349

 

In October 2012, the Company entered into a debt agreement with Zion’s bank in the amount of $7,680,000. The proceeds of this loan were used to restructure the Company’s obligations on other loans for Zion’s bank, the refinancing of these loans paid off outstanding balances and brought all the loans under one payment and interest rate.

 

Interest expense for the year ended December 31, 2013 was $906,904 and for the year ended December 31, 2012 was $780,828.

  

The aggregate maturities of long-term debt for the next five (5) years ending December 31 are as follows:

 

2014				2015				2016				2017				2018				Total
$	3,445,219			$	2,376,597			$	2,280,407			$	2,010,576			$	1,681,421			$	11,794,220

 Line of credit

 

The Company has a $500,000 unsecured line of credit with Zion’s First National Bank. At December 31, 2013, interest was charged at LIBOR + 3.85%. The line of credit is scheduled for renewal November 16, 2015. The line of credit balance as of December 31, 2013 and 2012 was $181,163 and $499,805, respectively.

 

NOTE 7: Commitment and contingencies

 

Settlement of judgment

 

On June 5, 2012, the Company entered into a judgment with one of its customers over a past due balance. The period in which the revenue was recognized was in the fiscal year of 2008. The judgment outlines the facts: (1) the customer stopped payments to the Company even upon assurance that it was going to make good on its balance owed, (2) the Company did extend the terms of collecting the funds out past its normal billing cycle, (3) The Company stopped its services when it was clear that the balance owed was not going to be paid. These facts were entered into court proceedings and the court ruled in favor of the Company to be awarded a settlement in the amount of $572,174, which included attorney fees. This settlement amount paid the outstanding balance owed to the Company.

 

Debt restructuring

 

Fifteen (15) capitalized leases were settled at a lower payment, resulting in a gain on debt extinguishment which was recognized in 2013 in the amount of $181,425.

 

NOTE 8: Related party transactions

 

The following tables represent the outstanding balance of related party debt for the Company as of December 31, 2013, and 2012.

 

		Year Ended December 31,
		2013				2012
Jason Jensen		$	616,932			$	269,587
David Gurr			553,821				—
Total related party debt			1,170,753				269,587
Less: Current portion			782,784				203,204
Total long term related party		$	387,969			$	66,383

 

On December 31, 2012, the Company entered into a promissory note with an officer of the Company, for $269,587. The term of the loan was to repay the loan in the amount of $269,587 with a 6% annual interest to start as of December 31, 2012. Both principle and interest are to be repaid in a “balloon” payment at the end of the note term of January 31, 2016. As of December 31, 2013, the note was increased from $269,587 to $616,932 as additional assets were purchased by the officer on behalf of the Company. As of December 31, 2013, we owed $616,932 plus accrued interest in the amount of $16,175.

 

On January 31, 2013, the Company entered into a promissory note with an officer of the Company, for $80,000, and on March 15, 2013, the Company entered into another note agreement with the same officer in the amount of $500,000, with a maturity date of January 1, 2016. During the fiscal year the Company repaid $70,000 of the outstanding principle. The terms of the loan are to make interest payments only on the principle balance of $510,000 with a 7.05% annual interest starting December 31, 2013. As of December 31, 2013, we owed $553,821 plus accrued interest in the amount of $0.

 

NOTE 9: Exit costs

 

As a part of operations growth strategies, the Company expanded operations into Belfield, North Dakota in 2012. The expansion plans included the building of a facility for the Company to serve customers in the North Dakota region. In the third quarter of 2012, it was determined by management to forego the implementation of this expansion due to reasons out of the control of management. The Company closed down all activity, turned over its facility, and relocated its assets to other operational sites. The Company expensed all costs associated with this expansion including costs attributable to management’s efforts. This resulted in an exit cost loss of $491,266 as of December 31, 2012.

 

 

NOTE 10: Income taxes

 

As of December 31, 2013, the Company, with consent of its shareholders, elected under the Internal Revenue Code to be taxed as an S corporation. In lieu of corporation income taxes, the shareholders of an S corporation are taxed based on their proportionate share of the Company’s taxable income. As such, we have not provided for any deferred tax analysis.

 

The Company files income tax returns in the United States federal jurisdiction and certain state jurisdictions. With a few exceptions, the Company is no longer subject to U.S. federal or state income tax examination by tax authorities on tax returns filed before December 31, 2005. The Company will file its U.S. federal return for the year ended December 31, 2013. The federal and state filing payments have not been made for 2013 as of the date of this filing. The U.S. federal returns are considered open tax years for years 2007 - 2013. There are currently no corporate tax filings under examination by IRS tax authorities.

 

NOTE 11: Equity

 

Common stock

 

The Company has authorized 50,000 shares common stock at $1.00 par value. As of December 31, 2013 and 2012, 1,000 shares are issued and outstanding. The principle owners of the Company own 100% of the total outstanding common stock.

 

In 2012, the principles of the Company issued disbursements from the Company’s proceeds in the amount of $720,792. For the year ended December 31, 2013, the principles have not issued any additional disbursements.

 

NOTE 12: Acquisitions, subsequent events

 

Acquisition of JD Field Services

 

On February 24, 2014, the Company entered into a purchase and sale agreement with National Automation Services, Inc. (referred herein as “NAS” or the “buyer”). JD provides services to the oil and gas industry primarily focused around those activities that are related to oilfield services. On March 21, 2014, the Company amended its purchase and sale agreement to NAS as the original PSA left a 6 month “unwinding” provision should NAS not be able to achieve its benchmarks in uplifting and repayment of JD debt in the course of 270 days. We have amended this position to the following, (1) NAS shall pay or assume all outstanding debt of JD. Payment on debt held by JD where the Sellers have executed personal guarantees shall be given priority over other non-priority debts, and payments on such personally guaranteed debt will be accelerated if NAS or JD profits are sufficient to do so. (2) Each Seller of JD shall receive six percent (6%) of the outstanding common stock of NAS, constituting approximately six percent (6%) each of the total equity of NAS, but not requiring any fractional shares, or approximately two hundred ninety five thousand (295,000) shares each. (3) NAS shall provide to JD a Power of Attorney representing voting rights and control over approximately eighteen percent (18%) of the equity interests in NAS; holding in reserve, seven hundred and sixty thousand (760,000) shares of NAS Common Stock to be representative of this Interest. (4) NAS shall pay any broker's commission associated with the purchase of JD interests, up to five hundred thousand dollars ($500,000). NAS shall pay any remaining broker's commissions.