Annual report pursuant to Section 13 and 15(d)

Equity

v3.19.1
Equity
12 Months Ended
Dec. 31, 2018
Equity [Abstract]  
Equity

9. Equity

 

Stockholders’ Equity

 

The Company has implemented a reverse stock split to reduce the number of shareholders of record to allow the Company to deregister the common stock and reduce ongoing expenses with respect to filings under the Exchange Act. Share amounts reflected in the consolidated financial statements and this note are on a post-stock split basis and give effect to the 4:1 reverse stock split effected by the Company in February 2019, except as indicated otherwise. After the filing of this Annual Report on Form 10-K for the fiscal year ended December 31, 2018, and the filing of a Form 15 to terminate the Company’s reporting obligations under Sections 12(b) and 12(g) of the Exchange Act and suspend the Company’s reporting obligations under Section 15(d) of the Exchange Act, the Company will no longer be subject to certain provisions of the Exchange Act. In particular, the Company’s obligations to publicly file periodic and current reports with the SEC will be suspended.

 

The Company has 50,000,000 shares of preferred stock authorized at $0.001 par value, 30,000 of which have been designated as Series A Convertible Preferred Stock (“Series A Preferred”). At December 31, 2018 and 2017, the Company had 10,600 shares of Series A Preferred and 0 shares of preferred stock issued and outstanding and none issued or outstanding, respectively. The Company has 200,000,000 shares of Common Stock authorized at $0.001 par value per share, of which 18,849,935 shares were issued and 18,844,472 shares were outstanding as of December 31, 2018 and of which 18,649,937 shares issued and 18,644,474 shares outstanding as of December 31, 2017.

 

As disclosed previously in Form 8-K filed February 14, 2019, the Company has implemented a reverse stock split. The reverse stock split reduced the number of shareholders of record and allows the Company to deregister the common stock and reduce ongoing expenses with respect to filings under the Exchange Act. Those shareholders who, immediately following the reverse stock split, held only a fraction of a share of the Company’s common stock were paid, in lieu thereof, an amount in cash equal to $0.08 (on a post-split basis) times such fraction of a share and are no longer shareholders of the Company. After the filing of this Annual Report on Form 10-K for the fiscal year ended December 31, 2018, and the filing of a Form 15 to suspend the Company’s reporting obligations under Section 15(d) of the Exchange Act, the Company will no longer be subject to certain provisions of the Exchange Act. In particular, the Company’s obligations to publicly file periodic and current reports with the SEC under Section 15(d) of the Exchange Act will be suspended.

 

Common Stock and Issuances

 

On July 6, 2017, the Company closed a private placement of shares of the Company’s common stock providing gross proceeds of $15.0 million, and net of costs proceeds of $14.9 million. As part of the offering, the Company issued 10,000,000 shares (pre-split) of its common stock for $1.50 per share to certain existing shareholders. The proceeds from the offering were used to finance capital expenditures to support existing contracts the Company has in both Oklahoma and Argentina, for working capital and for other general corporate purposes.

 

On August 8, 2017, the Company closed on a private placement of shares of the Company’s common stock providing gross proceeds of $28 million, with net of costs proceeds of $26.7 million. As part of the offering, the Company issued an aggregate of 19,580,420 shares (pre-split) of its common stock for $1.43 per share to two existing stockholders and several new institutional investors. The proceeds from this offering were used to finance capital expenditures to support the Company’s most recent customer contract in Oklahoma, for working capital and for other general corporate purposes.

 

Preferred Stock and Issuance

 

On March 29, 2018, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with Fir Tree, its majority stockholder, pursuant to which Fir Tree agreed to purchase 10,000 shares of the Company’s newly-designated Series A Preferred, at a price of $1,000 per share. An initial closing was conducted on April 2, 2018 providing $10.0 million of gross proceeds and $9.7 million of net proceeds after expenses to the Company.

 

Each share of Series A Preferred ranks senior to the Company’s common stock with respect to dividend rights and rights upon the liquidation, winding-up or dissolution of the Company and has a stated value of $1,000 per share (the “Stated Value”). In the event the Company is liquidated, wound up or dissolved, or if the Company effects any Deemed Liquidation Event (as defined below), the holders of Series A Preferred are entitled to receive in respect thereof the greater of (i) the Stated Value plus any accrued and unpaid dividends thereon, (ii) the amount the holder thereof would receive if such shares of Series A Preferred were converted into common stock immediately prior to such liquidation, dissolution, winding up or Deemed Liquidation Event or (iii) a liquidating distribution equal to 1.5 times the Stated Value. A “Deemed Liquidation Event” includes certain merger or consolidation transactions, a sale of all or substantially all of the Company’s assets, a change of control transaction or similar event.

 

Holders of Series A Preferred are entitled to vote with holders of the Company’s common stock and are entitled to one vote per share of common stock into which a share of Series A Preferred is then-convertible on any matter on which holders of the capital stock of the Company are entitled to vote. Each share of Series A Preferred was initially and as of December 31, 2018 convertible, at the option of the holder at any time, into a number of shares of common stock determined by dividing the Stated Value plus any dividends accrued but unpaid thereon by the conversion price of $1.15 (subject to adjustment for stock splits, combinations, certain distributions or similar events). In addition, for so long as shares of Series A Preferred are outstanding, the affirmative vote or consent of holders of a majority of the outstanding shares of Series A Preferred, voting together as a separate class, is necessary before taking certain actions, including but not limited to (i) amending the articles of incorporation, the bylaws or the Certificate of Designation for the Series A Preferred in a manner that would materially and adversely or disproportionately affect the powers, preferences or rights of the Series A Preferred, (ii) liquidating, dissolving or winding up the Company or entering into a Deemed Liquidation Event, (iii) creating or issuing any class of capital stock unless it ranks junior to the Series A Preferred with respect to the distribution of assets on the liquidation, dissolution or winding up of the Company or any Deemed Liquidation Event, payment of dividends and rights of redemption, (iv) reclassifying, altering or amending any existing security that is pari passu or junior to the Series A Preferred with respect to the distribution of assets on the liquidation, dissolution or winding up of the Company or any Deemed Liquidation Event, payment of dividends and rights of redemption if such reclassification, alteration or amendment would render such other security senior or pari passu with the Series A Preferred in respect of any such right, preference or privilege, (v) subject to certain exceptions, purchasing or redeeming any shares of capital stock or paying any dividend or making any distribution thereon and (vi) issuing any shares of Series A Preferred to anyone other than the original holders of the Series A Preferred. Holders of Series A Preferred are entitled to cumulative dividends payable semi-annually in arrears at a rate of (i) 10% per year, if paid in cash, or (ii) 12% per year, if, at the election of the Company, paid through the issuance of additional shares of Series A Preferred. In addition to the dividend rights described above, holders of Series A Preferred are entitled to receive dividends or distributions declared or paid on common stock on an as-converted basis. Following the end of the third quarter of 2018, the Company paid the initial preferred dividend on all outstanding shares of Series A Preferred through the issuance of 600 additional shares of Series A Preferred.

  

The Company may redeem shares of Series A Preferred at any time in cash at a price per share equal to the greater of (i) the Stated Value plus any accrued and unpaid dividends thereon and (ii) the product of 1.5 times the Stated Value.

 

Treasury Stock

 

On December 15, 2015, the Board authorized the Company to repurchase, from time to time during the period from December 16, 2015 through December 16, 2017, up to $5 million in shares of its outstanding common stock. As of December 31, 2017, the Company had purchased 21,850 shares at a cost of $57,469 under the buy-back program. No shares were repurchased during 2018.

 

Warrants

 

In the fourth quarter of 2013, the Company executed a sale-leaseback transaction with a third party that included an inducement payment of 25,000 common stock warrants. The exercise price per share of the common stock under the agreement is $7.00. The agreement expires five years after the date of issuance. The warrants can be exercised on a one for one basis starting July 1, 2014.

 

The estimated fair value of the warrants at issuance was approximately $0.3 million and was calculated using the Black-Scholes method with the following weighted average assumptions being used.

 

Volatility     75 %
Expected lives years     2.88  
Expected dividend yield      
Risk free rates     0.12 %