Quarterly report pursuant to Section 13 or 15(d)

Stock-Based Compensation

v3.10.0.1
Stock-Based Compensation
9 Months Ended
Sep. 30, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock-Based Compensation

6 – Commitments and Contingencies

 

Capital Lease Obligations

 

The Company leases certain equipment from a third party with certain prepayments being made securing the final six months of payments on the lease. Lease payments are $81,439 per month, with the final three months of prepaid payments being shown as other non-current assets in the consolidated balance sheets with a balance of $244,317. The minimum present value of the lease payments is $0.7 million with terms of sixty months and implied interest of 14%.

 

The Company also leases certain other equipment through an equipment lease purchase agreement with a third party. Lease payments range between $261,240 per month to $1,077,615 per month based on the agreement. The minimum present value of the lease payment is $3.3 million with an initial term of six months and implied interest rate of 8%. We continue to accrue interest for the unpaid balance at 8% per annum.

 

The next five years of lease payments are:

 

    Principal     Interest    

Total Capital Lease

Payments

 
2018   $ 3,535,865     $ 51,103     $ 3,586,968  
2019                    
Total future payments     3,535,865       51,103       3,586,968  
Less debt discount due to warrants                     (17,543 )
Less amount representing interest                     (51,102 )
                         
Less current portion of capital lease obligations                     (3,518,323 )
Capital lease obligations, excluding current installments                   $  

 

Operating Leases

 

The Company’s operating leases correspond to equipment facilities and office space in Argentina and the U.S. The operating leases also correspond to operational equipment utilized by the Company’s U.S. operations. The combined future minimum lease payments as of September 30, 2018 are as follows:

 

    Operating Leases  
2018   $ 105,240  
2019     69,000  
Thereafter      
Total   $ 174,240  

 

Commitments

 

Historically, in the course of operations, we entered into certain long-term raw material supply agreements for the supply of proppant to be used in hydraulic well stimulation in our U.S. operations. As part of these agreements, we are subject to minimum tonnage purchase requirements and may pay penalties in the event of any shortfall. Additionally, we have entered into certain long-term transportation agreements for the transportation of raw material from the vendors’ point of delivery to the well site to support our U.S. operations. Per the agreements with these vendors, we are subject to certain minimum commitments under the long-term transportation agreements.

 

In September 2018, we completed work under our pressure pumping contract with our primary U.S. customer. Given the current weakness of the U.S. well stimulation market, in September 2018 we elected to suspend our U.S. well stimulation operations and significantly reduce our U.S. workforce in alignment with potential near-term opportunities, including pump down and miscellaneous pumping services. With this decision, we believe it is probable that we will not fulfill our commitments within the requirements under U.S. GAAP Contingencies (Topic 450) regarding certain of the above noted supply and transportation agreements. As such, we have recorded accruals related to what we believe to be reasonable estimates related to the future settlements of these contingencies of $2.0 million recorded in Accrued expenses in our Consolidated Financial Statements. We intend to seek to negotiate with the counterparties to these agreements and therefore, the amount of ultimate settlement may be higher or lower than what we have recorded, with the maximum aggregate potential liability estimated by us to be approximately $5.5 million, including estimated litigation expenses. Payment terms would also be established upon settlement with these counterparties.

 

Legal Proceedings

 

From time to time, we may be a party or otherwise subject to legal or regulatory proceedings or other claims incidental to or arising in the ordinary course of our business. While the ultimate outcome of these matters cannot be predicted at this time, we do not expect that the resolution of these matters will have a material adverse effect on our consolidated financial position, results of operations or cash flows.

 

On May 1, 2018, a collective action lawsuit was filed against Eco-Stim Energy Solutions, Inc. and certain of its subsidiaries by a former employee in the United States District Court for the Southern District of Texas (Houston Division) alleging that we failed to pay a class of workers in compliance with the Fair Labor Standards Act and seeking recovery of such wages, attorney’s fees, costs, interest and other related damages. In September 2018, this case was stayed pending resolution through arbitration proceedings among the parties. We dispute the allegations and intend to vigorously contest the matter. We are currently not able to predict the outcome of this matter or whether it will have a material impact on our financial position, results of operations or cash flows.

 

In addition, four of our vendors have filed lawsuits against us in four separate Texas state court actions seeking to collect an aggregate of approximately $2.4 million of damages for amounts alleged to be owed by us for various goods, equipment or services alleged to have been provided by such vendors, as well as pre-judgment and post-judgment interest and attorney’s fees. In addition, certain of our vendors have filed, or have threatened to file, liens against certain assets of our former customers with respect to amounts alleged to be owed by us for various goods, equipment or services alleged to have been provided by such vendors in an aggregate amount of approximately $3.8 million. We intend to vigorously contest these matters or seek mutually agreeable settlements of the claimed amounts, and we may incur material expenses in connection with the resolution of these lawsuits and claims.