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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Coil Tubing Technology Inc (CE) | USOTC:CTBG | OTCMarkets | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 0.0002 | 0.00 | 01:00:00 |
Page
|
|
Prospectus Summary
|
1 |
Summary of the Offering
|
5 |
Summary Financial Data
|
7 |
Forward-Looking Statements
|
10 |
Risk Factors
|
11 |
Use of Proceeds
|
25 |
Legal Proceedings
|
25 |
Directors, Executive Officers and Corporate Governance
|
25 |
Executive and Director Compensation
|
31 |
Security Ownership Of Certain Beneficial Owners And Management
|
35 |
Interest of Named Experts and Counsel
|
36 |
Experts
|
36 |
Indemnification of Directors and Officers
|
36 |
Description of Business
|
37 |
Description of Property
|
52 |
Management's Discussion and Analysis of Financial Condition and Results of Operations
|
52 |
Certain Relationships and Related Transactions
|
62 |
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
|
66 |
Descriptions of Capital Stock
|
67 |
Market for Common Equity and Related Stockholder Matters
|
68 |
Selling Stockholders
|
70 |
Shares Available For Future Sale
|
71 |
Plan of Distribution
|
72 |
Where You Can Find More Information
|
74 |
Legal Matters
|
75 |
Financial Statements
|
F-1
|
·
|
We had total revenue of $1,840,989 for the three months ended September 30, 2012, compared to total revenue of $1,789,309 for the three months ended September 30, 2011, an increase in total revenue of $51,680 or 3% from the prior period.
|
·
|
We had cost of products and rental revenues of $603,507 for the three months ended September 30, 2012, compared to cost of products and rental revenues of $565,415 for the three months ended September 30, 2011, an increase in cost of product and rental revenues of $38,092 or 7% from the prior period.
|
·
|
We had cost of revenue – depreciation of rental tools of $256,664 for the three months ended September 30, 2012, compared to $169,701 for the three months ended September 30, 2011, an increase of $86,963 or 51% from the prior period.
|
·
|
We had gross profit of $980,818 for the three months ended September 30, 2012, compared to gross profit of $1,054,193 for the three months ended September 30, 2011, a decrease in gross profit of $73,375 or 7% from the prior period.
|
·
|
We had total operating expenses of $823,223 for the three months ended September 30, 2012, compared to total operating expenses of $705,468 for the three months ended September 30, 2011, an increase in total operating expenses of $117,755 or 17% from the prior period.
|
·
|
We had net income of $153,929 for the three months ended September 30, 2012, compared to net income of $345,646 for the three months ended September 30, 2011, a decrease in net income of $191,717 or 55% from the prior period.
|
·
|
We had total revenue of $6,186,795 for the nine months ended September 30, 2012, compared to total revenue of $3,524,611 for the nine months ended September 30, 2011, an increase in total revenue of $2,662,184 or 76% from the prior period.
|
·
|
We had cost of products and rental revenue of $1,937,951 for the nine months ended September 30, 2012, compared to cost of products and rental revenue of $1,174,699 for the nine months ended September 30, 2011, an increase in cost of products and rental revenue of $763,252 or 65% from the prior period.
|
·
|
We had cost of revenue – depreciation of rental tools of $726,097 for the nine months ended September 30, 2012, compared to $335,140 for the nine months ended September 30, 2011, an increase of $390,957 or 117% from the prior period.
|
·
|
We had gross profit of $3,522,747 for the nine months ended September 30, 2012, compared to gross profit of $2,014,772 for the nine months ended September 30, 2011, an increase in gross profit of $1,507,975 or 75% from the prior period.
|
·
|
We had total operating expenses of $2,656,123 for the nine months ended September 30, 2012, compared to total operating expenses of $1,515,676 for the nine months ended September 30, 2011, an increase in total operating expenses of $1,140,447 or 75% from the prior period.
|
·
|
We had net income of $853,821 for the nine months ended September 30, 2012, compared to net income of $472,374 for the nine months ended September 30, 2011, an increase in net income of $381,447 or 81% from the prior period.
|
·
|
We had total revenue of $5,541,131 for the year ended December 31, 2011, compared to total revenue of $1,751,850 for the year ended December 31, 2010, an increase in total revenue of $3,789,281 or 216.3% from the prior period.
|
·
|
We had cost of revenue products and rental revenues of $1,681,857 for the year ended December 31, 2011, compared to cost of products and rental revenues of $1,291,701 for the year ended December 31, 2010, an increase in cost of product and rental revenues of $390,156 or 30.2% from the prior period.
|
·
|
We had cost of revenue – depreciation of rental tools of $544,013 for the year ended December 31, 2011, compared to $140,593 for the year ended December 31, 2010, a decrease of $403,420 or 286.9% from the prior period.
|
·
|
We had gross profit of $3,315,261 for the year ended December 31, 2011, compared to gross profit of $319,556 for the year ended December 31, 2010, an increase in gross profit of $2,995,705 or 937.5% from the prior period.
|
·
|
We had total operating expenses of $2,555,538 for the year ended December 31, 2011, compared to total operating expenses of $722,578 for the year ended December 31, 2010, an increase in total operating expenses of $1,832,960 or 253.7% from the prior period.
|
·
|
We had net income of $729,445 for the year ended December 31, 2011, compared to net loss of $457,590 for the year ended December 31, 2010, an increase in net income of $1,187,035 from the prior period.
|
•
|
the need for additional funding;
|
|
•
|
our status as a former “
shell
company
”;
|
|
•
|
our lack of a significant operating history;
|
|
•
|
our preferred stock and related rights;
|
|
•
|
the fact that our majority shareholder has control over our voting stock;
|
|
•
|
the loss of key personnel or failure to attract, integrate and retain additional personnel;
|
|
•
|
corporate governance risks;
|
|
•
|
the cost of the production of our products;
|
|
•
|
economic downturns;
|
|
•
|
our ability to innovate;
|
|
•
|
the level of competition in our industry and our ability to compete;
|
|
•
|
our ability to respond to changes in our industry;
|
|
•
|
our ability to protect our intellectual property and not infringe on others’ intellectual property;
|
|
•
|
our ability to scale our business;
|
|
•
|
our ability to maintain supplier relationships;
|
|
•
|
our ability to obtain and retain customers;
|
|
•
|
our ability to produce our products at competitive rates;
|
|
•
|
our ability to execute our business strategy in a very competitive environment;
|
|
•
|
trends in and the market for and the price of oil and gas and alternative energy sources;
|
|
•
|
lack of insurance policies;
|
|
•
|
dependence on a small number of customers;
|
|
•
|
changes in laws and regulations;
|
|
•
|
volatility and/or declines in oil and gas prices;
|
|
•
|
the volatile market for our common stock;
|
|
•
|
our ability to effectively manage our growth;
|
|
•
|
dilution to existing shareholders;
|
|
•
|
costs and expenses associated with being a public company;
|
|
•
|
economic downturns both in the United States and globally;
|
|
•
|
risk of increased regulation of our operations and products; and
|
|
•
|
other risk factors included under “
Risk
Factors
” below.
|
Common Stock Offered:
|
887,501 shares of common stock
|
Common Stock Outstanding Before The Offering:
|
15,651,827 shares
|
•
|
1,203,334 shares of our common stock issuable upon exercise of outstanding stock options as of January 28, 2013, at a weighted average exercise price of $1.02 per share;
|
•
|
warrants to purchase 1,925,000 shares of our common stock at a weighted average exercise price of $1.00 per share, as of January 28, 2013 (of which shares of common stock issuable upon exercise of 325,000 of such warrants are being registered herein); or
|
•
|
233,333 shares of common stock reserved for future issuance under our 2012 Stock Incentive Plan and 2010 Stock Incentive Plan, as of January 28, 2013.
|
Unless otherwise indicated, all information in this Prospectus reflects and assumes the following:
|
•
|
no exercise of options or warrants outstanding as of January 28, 2013.
|
September 30,
|
December 31,
|
|||||||
2012
|
2011
|
|||||||
Assets
|
(unaudited)
|
|||||||
Current Assets:
|
||||||||
Cash
|
$
|
1,244,391
|
$
|
225,750
|
||||
Accounts receivable, net
|
1,887,618
|
1,580,901
|
||||||
Other current assets
|
58,580
|
54,490
|
||||||
Total Current Assets
|
3,190,589
|
1,861,141
|
||||||
Rental tools, net
|
3,767,498
|
3,566,766
|
||||||
Property and equipment, net
|
502,002
|
500,696
|
||||||
Intangible assets, net
|
1,053,330
|
1,113,333
|
||||||
Total Assets
|
$
|
8,513,419
|
$
|
7,041,936
|
||||
Liabilities and Stockholders' Equity
|
||||||||
Current Liabilities:
|
||||||||
Accounts payable
|
$
|
387,821
|
$
|
1,146,736
|
||||
Accrued liabilities
|
304,100
|
276,820
|
||||||
Related party notes payable - current
|
155,556
|
155,556
|
||||||
Notes payable - current
|
55,275
|
73,818
|
||||||
Total Current Liabilities
|
902,752
|
1,652,930
|
||||||
Long Term Liabilities:
|
||||||||
Related party notes payable, net of current portion
|
285,184
|
401,851
|
||||||
Notes payable, net of current portion
|
148,700
|
203,593
|
||||||
Total Liabilities
|
1,336,636
|
2,258,374
|
||||||
Commitments and contingencies
|
||||||||
Stockholders' Equity:
|
||||||||
Preferred Stock, $.001 par value, 5,000,000 shares authorized
|
||||||||
Series A Preferred Stock, $.001 par value, 1,000,000 shares authorized;
|
||||||||
0 shares issued and outstanding
|
-
|
-
|
||||||
Series B Convertible Preferred Stock, $.001 par value, 1,000,000 shares
|
||||||||
authorized; 1,000,000 shares issued and outstanding
|
1,000
|
1,000
|
||||||
Common Stock, $.001 par value, 200,000,000 shares authorized;
|
||||||||
15,651,827 and 15,599,327 shares issued and outstanding, respectively
|
15,652
|
15,599
|
||||||
Subscription receivable
|
-
|
(1,400,000
|
)
|
|||||
Additional paid-in capital
|
9,252,435
|
9,113,088
|
||||||
Accumulated deficit
|
(2,092,304
|
)
|
(2,946,125
|
)
|
||||
Total Stockholders' Equity
|
7,176,783
|
4,783,562
|
||||||
Total Liabilities and Stockholders' Equity
|
$
|
8,513,419
|
$
|
7,041,936
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
2012
|
2011
|
2012
|
2011
|
|||||||||||||
Revenue:
|
|
|||||||||||||||
Product revenue
|
$ | 177,374 | $ | 110,793 | $ | 279,785 | $ | 548,031 | ||||||||
Rental revenue
|
1,663,615 | 1,678,516 | 5,907,010 | 2,976,580 | ||||||||||||
Total revenue
|
1,840,989 | 1,789,309 | 6,186,795 | 3,524,611 | ||||||||||||
Cost of revenue:
|
||||||||||||||||
Cost of products and rental revenue
|
603,507 | 565,415 | 1,937,951 | 1,174,699 | ||||||||||||
Cost of revenue - depreciation of rental tools
|
256,664 | 169,701 | 726,097 | 335,140 | ||||||||||||
Total cost of revenue
|
860,171 | 735,116 | 2,664,048 | 1,509,839 | ||||||||||||
Gross profit
|
980,818 | 1,054,193 | 3,522,747 | 2,014,772 | ||||||||||||
Operating Expenses:
|
||||||||||||||||
Selling and marketing
|
386,985 | 377,368 | 1,420,748 | 798,460 | ||||||||||||
General and administrative
|
375,465 | 282,844 | 1,056,415 | 595,115 | ||||||||||||
Depreciation and amortization
|
60,773 | 45,256 | 178,960 | 122,101 | ||||||||||||
Total operating expenses
|
823,223 | 705,468 | 2,656,123 | 1,515,676 | ||||||||||||
Income from operations
|
157,595 | 348,725 | 866,624 | 499,096 | ||||||||||||
Other expense:
|
||||||||||||||||
Interest expense
|
(3,666 | ) | (3,079 | ) | (12,803 | ) | (26,722 | ) | ||||||||
Total other expense
|
(3,666 | ) | (3,079 | ) | (12,803 | ) | (26,722 | ) | ||||||||
Net income
|
$ | 153,929 | $ | 345,646 | $ | 853,821 | $ | 472,374 | ||||||||
Net income per share :
|
||||||||||||||||
Basic earnings
|
$ | 0.01 | $ | 0.02 | 0.05 | $ | 0.06 | |||||||||
Diluted earnings
|
$ | 0.01 | $ | 0.02 | 0.04 | $ | 0.06 | |||||||||
Weighted average common shares outstanding:
|
||||||||||||||||
Basic
|
16,411,333 | 14,353,035 | 16,409,992 | 7,425,893 | ||||||||||||
Diluted
|
19,268,309 | 15,326,536 | 19,266,968 | 8,399,394 | ||||||||||||
•
|
the need for additional funding;
|
|
•
|
our status as a former “
shell company
”;
|
|
•
|
our lack of a significant operating history;
|
|
•
|
our preferred stock and related rights;
|
|
•
|
the fact that our majority shareholder has control over our voting stock;
|
|
•
|
the loss of key personnel or failure to attract, integrate and retain additional personnel;
|
|
•
|
corporate governance risks;
|
|
•
|
the cost of the production of our products;
|
|
•
|
economic downturns;
|
|
•
|
our ability to innovate;
|
|
•
|
the level of competition in our industry and our ability to compete;
|
|
•
|
our ability to respond to changes in our industry;
|
|
•
|
our ability to protect our intellectual property and not infringe on others’ intellectual property;
|
|
•
|
our ability to scale our business;
|
|
•
|
our ability to maintain supplier relationships;
|
|
•
|
our ability to obtain and retain customers;
|
|
•
|
our ability to produce our products at competitive rates;
|
|
•
|
our ability to execute our business strategy in a very competitive environment;
|
|
•
|
trends in and the market for and the price of oil and gas and alternative energy sources;
|
|
•
|
lack of insurance policies;
|
|
•
|
dependence on a small number of customers;
|
|
•
|
changes in laws and regulations;
|
|
•
|
volatility and/or declines in oil and gas prices;
|
|
•
|
the volatile market for our common stock;
|
|
•
|
our ability to effectively manage our growth;
|
|
•
|
dilution to existing shareholders;
|
|
•
|
costs and expenses associated with being a public company;
|
|
•
|
economic downturns both in the United States and globally;
|
|
•
|
risk of increased regulation of our operations and products; and
|
|
•
|
other risk factors included under “
Risk Factors
” below.
|
·
|
the difficulty of integrating acquired products, services or operations;
|
·
|
the potential disruption of the ongoing businesses and distraction of our management and the management of acquired companies;
|
·
|
difficulties in maintaining uniform standards, controls, procedures and policies;
|
·
|
the potential impairment of relationships with employees and customers as a result of any integration of new management personnel;
|
·
|
the potential inability or failure to achieve additional sales and enhance our customer base through cross-marketing of the products to new and existing customers;
|
·
|
the effect of any government regulations which relate to the business acquired;
|
·
|
potential unknown liabilities associated with acquired businesses or product lines, or the need to spend significant amounts to retool, reposition or modify the marketing and sales of acquired products or the defense of any litigation, whether or not successful, resulting from actions of the acquired company prior to our acquisition;
|
·
|
difficulties in disposing of the excess or idle facilities of an acquired company or business and expenses in maintaining such facilities; and
|
·
|
potential expenses under the labor, environmental and other laws of various jurisdictions.
|
•
|
supply of and demand for energy commodities, including any decreases in the production of oil and gas which could negatively affect the demand for oil and gas in general, and as a result the need for our coil tubing technology;
|
|
•
|
general economic conditions, including downturns in the United States, Canada or other economies which affect energy consumption particularly in which sales to industrial or large commercial customers which could negatively affect the demand for oil and gas in general, and as a result the need for our coil tubing technology; and
|
|
•
|
federal, state and foreign energy and environmental regulations and legislation, which could make oil and gas exploration more costly, which could in turn drive down demand for oil and gas, and which could in turn reduce the demand for our technology and cause our revenues to decrease.
|
(1)
|
actual or anticipated variations in our results of operations;
|
|
(2)
|
our ability or inability to generate new revenues;
|
|
(3)
|
increased competition; and
|
|
(4)
|
conditions and trends in the oil and gas industry and/or the market for coil tubing technology products and tools in general.
|
·
|
be exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that its independent registered public accounting firm provide an attestation report on the effectiveness of its internal control over financial reporting;
|
·
|
be exempt from the "
say on pay
” provisions (requiring a non-binding shareholder vote to approve compensation of certain executive officers) and the "say on golden parachute” provisions (requiring a non-binding shareholder vote to approve golden parachute arrangements for certain executive officers in connection with mergers and certain other business combinations) of The Dodd–Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) and certain disclosure requirements of the Dodd-Frank Act relating to compensation of Chief Executive Officers;
|
·
|
be permitted to omit the detailed compensation discussion and analysis from proxy statements and reports filed under the Securities Exchange Act of 1934, as amended and instead provide a reduced level of disclosure concerning executive compensation; and
|
·
|
be exempt from any rules that may be adopted by the PCAOB requiring mandatory audit firm rotation or a supplement to the auditor’s report on the financial statements.
|
NAME
|
AGE
|
POSITION
|
DATE FIRST APPOINTED AS DIRECTOR OR OFFICER
|
Jason Swinford
|
33
|
Chief Executive Officer
and Director
|
December 2011
|
Jerry Swinford
|
64
|
Executive Vice President,
Chairman, Secretary and Treasurer
|
August 2006
|
John N. Bingham
|
59 | Acting Chief Financial Officer | January 2013 |
Herbert C. Pohlmann
|
69
|
Director
|
January 2012
|
1.
|
any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
|
2.
|
any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
|
3.
|
being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or
|
4.
|
being found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.
|
i.
|
less than $2,000,000, no Bonus shall be due;
|
ii.
|
between $2,000,000 and $3,000,000, the Bonus shall be equal to 20% of the Prior Year’s Salary;
|
iii.
|
between $3,000,000 and $4,000,000, the Bonus shall be equal to 30% of the Prior Year’s Salary;
|
iv.
|
between $4,000,000 and $5,000,000, the Bonus shall be equal to 40% of the Prior Year’s Salary;
|
v.
|
between $5,000,000 and $6,000,000, the Bonus shall be equal to 50% of the Prior Year’s Salary;
|
vi.
|
between $6,000,000 and $7,000,000 the Bonus shall be equal to 75% of the Prior Year’s Salary; or
|
vii.
|
$7,000,000 or more, the Bonus shall be equal to 100% of the Prior Year’s Salary.
|
i.
|
If the total consideration received by the Company and the Company’s shareholders in such Bonus Transaction, including the assumption of any liabilities of the Company in such transaction and the value of any securities received by the Company or its shareholders in connection with such Bonus Transaction (collectively the “
Bonus Transaction Consideration
”), exceeds $75 million, but is less than $99,999,999.99, Mr. Swinford receives a Transaction Bonus of $2 million;
|
ii.
|
If the Bonus Transaction Consideration is between $100 million and $124,999,999.99 million, Mr. Swinford receives a Transaction Bonus of $3 million;
|
iii.
|
If the Bonus Transaction Consideration is between $125 million and $149,999,999.99, Mr. Swinford receives a Transaction Bonus of $4 million; and
|
iv.
|
If the Bonus Transaction Consideration is over $150 million, Mr. Swinford receives a Transaction Bonus of $5 million.
|
SUMMARY COMPENSATION TABLE*
|
|||||||
Name And
Principal Position
|
Fiscal Year Ended December 31
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
All Other
Compensation
($)
|
Total ($)
|
Jerry Swinford
Former President, Former CEO, Executive Vice President, Former Chief Financial Officer and Chairman (1)(2)
|
2012
|
114,000
|
108,000
|
-
|
100,000
(3)
|
18,145
(4)
|
340,145
|
2011
|
108,000
|
108,000
(5)
|
- |
16,000
(6)
|
22,630
(7)
|
254,630
|
|
Jason Swinford
CEO, Former Chief Operating Officer, and Director (1)
|
2012
|
200,000
|
200,000
|
-
|
100,000
(3)
|
21,886
(8)
|
521,886
|
2011
|
146,668
|
144,000
(5)
|
-
|
16,000
(6)
|
27,191
(9)
|
333,859
|
*
|
Does not include perquisites and other personal benefits, or property, unless the aggregate amount of such compensation is more than $10,000. No executive officer earned any non-equity incentive plan compensation or nonqualified deferred compensation during the periods reported above.
There have been no changes in the Company’s compensation policies since December 31, 2012.
|
(1)
|
Jason Swinford was appointed as Chief Operating Officer in November 2010 and as Chief Executive Officer in December 2011 upon the resignation of Jerry Swinford as Chief Executive Officer of the Company.
|
(2)
|
From January 2006 to January 2013, Mr. Swinford served as our Chief Financial Officer of the Company. Effective January 7, 2013, John N. Bingham was appointed as Acting Chief Financial Officer of the Company.
|
(3)
|
Represents the value of options to purchase 100,000 shares of the Company’s common stock at an exercise price of $1.00 per share, calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718.
|
(4)
|
Includes $10,800 ($900 per month for twelve months) paid as an automobile allowance to Mr. Swinford, which vehicle he drove for personal and work purposes and $7,345 in health insurance premiums for Mr. Swinford and his wife, which are paid for by the Company.
|
(5)
|
Accrued and paid in fiscal 2012.
|
(6)
|
Represents the value of options to purchase 100,000 shares of the Company’s common stock at an exercise price of $1.00 per share, calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718.
|
(7)
|
Includes $10,800 ($900 per month for twelve months) paid as an automobile allowance to Mr. Swinford, which vehicle he drove for personal and work purposes and $11,830 in health insurance premiums for Mr. Swinford and his wife, which are paid for by the Company.
|
(8)
|
Includes $10,800 ($900 per month for twelve months) paid as an automobile allowance to Mr. Swinford, which vehicle he drove for personal and work purposes and $11,086 in health insurance premiums for Mr. Swinford and his family, which were paid for by the Company.
|
(9)
|
Includes $10,800 ($900 per month for twelve months) paid as an automobile allowance to Mr. Swinford, which vehicle he drove for personal and work purposes and $16,391 in health insurance premiums for Mr. Swinford and his family, which were paid for by the Company.
|
Name
|
Fees Earned or Paid in Cash
($)
|
Stock Awards
($)
|
Option Awards
($)
|
Non-Equity Incentive Plan Compensation
($)
|
Nonqualified Deferred Compensation Earnings
($)
|
All Other Compensation
($)
|
Total
($)
|
||||||||||||||||||
John Callis
|
(a)
|
-
|
-
|
$
|
-
|
-
|
-
|
-
|
$
|
-
|
|||||||||||||||
Richard Connaughton
|
(b)
|
-
|
-
|
$
|
-
|
-
|
-
|
-
|
$
|
-
|
|||||||||||||||
Herbert C. Pohlmann
|
(c)
|
-
|
-
|
$
|
100,000 (d)
|
-
|
-
|
-
|
$
|
100,000
|
(a)
|
Mr. Callis was appointed to the Board of Directors effective January 30, 2012, and resigned effective June 20, 2012. Mr. Callis is the son-in-law of our Director and majority shareholder, Herbert C. Pohlmann.
|
(b)
|
Mr. Connaughton was appointed to the Board of Directors effective January 30, 2012, and resigned effective June 21, 2012.
|
(c)
|
Mr. Pohlmann was appointed to the Board of Directors effective January 30, 2012.
|
(d)
|
Represents the value of options to purchase 100,000 shares of the Company’s common stock at an exercise price of $1.00 per share, calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718.
|
Name
|
Number of securities underlying unexercised options (#)
Exercisable
|
Equity Incentive Plan Awards: Number of securities underlying unexercised options (#)
Unexercisable
|
Equity Incentive Plan Awards: Number of Securities underlying unexercised unearned options (#)
|
Option exercise price ($)
|
Option expiration date
|
Jerry Swinford, Executive Vice President and CFO
|
1,667
|
-
|
-
|
$7.50
|
11/30/20
|
100,000
|
-
|
-
|
$1.00
|
11/30/20
|
|
100,000
|
-
|
- |
$1.00
|
11/30/20
|
|
-
|
-
|
100,000
|
$1.00
|
11/30/20
|
|
-
|
-
|
100,000
|
$1.00
|
11/30/20
|
|
Jason Swinford
CEO
|
1,667
|
-
|
-
|
$7.50
|
11/30/20
|
100,000
|
-
|
-
|
$1.00
|
11/30/20
|
|
100,000
|
-
|
-
|
$1.00
|
11/30/20
|
|
-
|
-
|
100,000
|
$1.00
|
11/30/20
|
|
-
|
-
|
100,000
|
$1.00
|
11/30/20
|
|
(1)
|
Pursuant to the Executive Employment Agreements entered into in November 2010 and amended in December 2011, August 2012 and October 2012 (effective August 2012), with Jerry and Jason Swinford (as described above under “
Employment Agreements
”), the Company granted Jerry and Jason Swinford each options to purchase 401,667 shares of the Company’s common stock (the “
Option
”), with 1,667 options vesting upon the parties entry into the agreement (the “
Initial Option
”), with options to purchase the remaining amount of the Option vesting to Mr. Swinford as follows: 100,000 options on December 14, 2011 (the “
2011 Option
”); 100,000 options on December 31, 2012 (the “
2012 Option
”); 100,000 options on December 31, 2013 (the “
2013
Option
”); and 100,000 options on December 31, 2014 (the “
2014 Option
”), provided that the executives are still employed by the Company on such vesting date(s). The Initial Option has an exercise price of $7.50 per share, the 2011 Option, 2012 Option, 2013 Option and 2014 Option have an exercise price of $1.00 per share. While the 2014 Options were not outstanding as of December 31, 2011, as they were granted in August 2012, they have been included in the table above. Additionally, the exercise prices of the 2012 Option and 2013 Option were set in August 2012, and have been included in the table above. Finally, the term of the various options above was extended from five years to ten years in August 2012, and the current terms (as amended) have been included in the table above.
|
·
|
The Company believes that compensation is an integral component of its overall business and human resource strategies. The Company’s compensation plans strive to promote the hiring and retention of personnel necessary to execute the Company’s business strategies and achieve its business objectives.
|
·
|
The Company’s compensation is strategy-focused, and set up to recognize and reward individual and group contributions and results. The Company’s compensation plans strive to promote an alignment of the interests of employees with the interests of the shareholders by having a portion of compensation based on financial results and actions that generate future shareholder value.
|
|
·
|
When determining compensation for officers, managers and consultants, the Company takes into account the employee’s (and/or consultant’s) knowledge, experience, past employment history and connections in the industry, including industry specific knowledge and experience, to the extent such knowledge and experience contributes to the Company’s ability to achieve its business objectives.
|
·
|
In order to reward financial performance over time, the Company’s compensation programs generally consist of: base compensation, and may also consist of short-term variable incentives and long-term variable incentives (such as those described above under “
Employment Agreements
,”), as appropriate.
|
·
|
The Company’s compensation plans are administered consistently and fairly to promote equal opportunities for the Company’s employees.
|
·
|
The Company reserves the right to adjust annual base salaries of employees and/or to award performance based bonuses if individual performance is at or above pre-established performance expectations.
|
(1)
|
Pursuant to the Executive Employment Agreements entered into in November 2010
and amended in December 2011, August 2012 and October 2012 (effective August 2012), with Jerry and Jason Swinford (as described above under “
Directors, Executive Officers And Corporate Governance
”, “
Employment Agreements
”), the Company granted Jerry and Jason Swinford each options to purchase 401,667 shares of the Company’s common stock (the “
Option
”), with 1,667 options vesting upon the parties entry into the agreement (the “
Initial Option
”), with options to purchase the remaining amount of the Option vesting to Mr. Swinford as follows: 100,000 options on December 14, 2011 (the “
2011 Option
”); 100,000 options on December 31, 2012 (the “
2012 Option
”), 100,000 options on December 31, 2013 (the “
2013 Option
”) and 100,000 options on December 31, 2014 (the “
2014 Option
”), provided that the executives are still employed by the Company on such vesting date(s). The Initial Option has an exercise price of $7.50 per share, the 2011 Option, 2012 Option, 2013 Option and 2014 Option have an exercise price of $1.00 per share.
The table above includes 201,667 options which are exercisable within 60 days of January 28, 2013.
|
(2)
|
Includes warrants to purchase 1,600,000 shares of the Company’s common stock which have an exercise price of $1.00 per share, and a term expiring on December 14, 2016 and options to purchase 100,000 shares of common stock at an exercise price of $1.00 per share which expire on August 28, 2022.
|
The “
Jet Motor
”
-
|
The Jet Motor is a tool that produces rotation and horsepower by pumping fluid or gas through the components of the tool. The power generated by the tool is then used to drill subterranean objects in an oil well or to deepen an existing well.
|
The “
Pulsator
”
-
|
The Pulsator is a tool much like an automobile shock absorber. The tool absorbs spike loads induced by the drilling application, which are often created by a Jet Motor or other similar tool.
|
The “
CTT H/H
”
-
|
The CTT H/H jar enables energy to be stored like a spring placed in tension. When released the energy accelerates and is released to an internal hammer and anvil creating impact force to strike an object in a well.
|
The CTT “
Amplidyne
” -
|
The CTT Amplidyne is used to store the energy released by the CTT H/H through a fluid spring. Upon release of the energy the Amplidyne allows acceleration of energy and magnifies the impact of the CTT H/H.
|
The CTT “
Oscillator
” -
|
The CTT Oscillator distributes fluid and pressure through coil tubing, up to a volume required by a customer’s hydraulic specifications inducing vibration of the pipe.
|
The “
Jet Hammer
”
-
|
The Jet Hammer is a tool that creates rotational horsepower and axial impact energy to remove objects from a wellbore. The tool works under the same principal as a jackhammer cycling to 2000 impacts per minute. The tool is used for the removal of scale, sand cement, barium and paraffin from production tubing and the tool is also effective in shattering glass and ceramic discs placed in the well. The tool can be powered by water, light drilling fluids, air, nitrogen or other acid media. The tool is easy to operate and can withstand temperatures of up to 500 degrees Fahrenheit. Bits for the Jet Hammer are designed to maximize the penetration rate of the tool by taking advantage of the tool’s unique combination of rotational and percussive impact forces.
|
The “
Rotating Tool
”
-
|
The Rotating Tool has been designed and developed specifically for use in our coiled tubing operations. Its purpose is to mechanically provide rotation to assist in connecting to a fish. The Rotating Tool can be also be used with CTT H/Hs in combination with an Amplidyne to remove a fish that remains stuck. The Rotating Tool currently generates more revenue for us than any other tool.
|
The “
CTT H/H
”
-
|
The CTT H/H as described in the drilling application above, can also be used in the fishing operations.
|
The CTT “
Amplidyne
”
-
|
The CTT Amplidyne, also discussed above, can also be used for fishing operations.
|
·
|
Oil Companies;
|
|
·
|
Coiled Tubing Operators; and
|
|
·
|
Service Companies.
|
·
|
Oil Companies;
|
|
·
|
Coiled Tubing Operators; and
|
|
·
|
Well Servicing Companies.
|
·
|
Build profitable year over year sales of existing proprietary products;
|
|
·
|
Accelerate development of new proprietary products for the oil and gas industry;
|
|
·
|
Accelerate growth of new distribution stockpoints worldwide;
|
|
·
|
Expand into other areas of drilling, such as conventional drilling tools; and
|
|
·
|
Accelerate growth through acquisitions.
|
·
|
Enhanced customer focus through a concerted sales and marketing effort in the future;
|
|
·
|
Increased investment in product lines; and
|
|
·
|
Accelerated growth of new product lines.
|
·
|
Industrial Bearing Services (IBS);
|
|
·
|
H.E. Halford Welding;
|
|
·
|
JCI Inspection;
|
|
·
|
McKee & Associates;
|
|
·
|
Triple J Coil Tubing Products, LLC; and
|
|
·
|
Precision Machining Specialties.
|
Type of Intellectual Property
|
Registered Number (or Provisional Number)
|
Expiration Date
|
|
Trademark - Registered Mark
|
Serial No. 3,355,177
|
The Trademark will continue as long as
it is used in the marketplace
|
|
Patent - Letters Patent Issued Subterranean Rotating Device & Method
|
No. 5584342
|
Expires June 6, 2015
(assuming payment of maintenance fees)
|
|
Patent - Jet Motor For Providing Rotation In a Downhole Tool
|
US - No. 7,686,102
Singapore – No. 146369
|
March 29, 2027
(assuming payment of maintenance fees)
|
|
Canada-Application
No. 2,646,326
|
National Entry September 23, 2008
(registration has not been finalized
as of the date of this filing)
|
|
Patent– Rotation Tool
|
US - No. 7,946,348
Canada-Application
No. 2,734,285
Indonesia-Application No.
W00201001371
|
December 4, 2029
(assuming payment of maintenance fees)
Examination Requested March 7, 2012[registration has not been finalized
as of the date of this filing]
National Entry April 28, 2010
[registration has not been finalized
as of the date of this filing]
|
Patent Application Filed – Drilling Jar
|
US - No. 8151910
Canada-Application
No. 2,723,420
Indonesia- IDP 0029982
|
May 7, 2029
[assuming payment of maintenance fees]
Examination Requested March 7, 2012[registration has not been finalized
as of the date of this filing]
November 26, 2030
|
Patent Application Filed –
Jet Hammer
|
US - No. 12/480,680
|
Filed June 8, 2009
[registration has not been finalized as of
the date of this filing]
|
Patent Application Filed –
Method and Apparatus for Washing Downhole Tubulars and Equipment
|
US - No. 13/046,662
Norway Application
No. 20120910
|
Filed March 11, 2011
[registration has not been finalized
as of the date of this filing]
National Entry August 15, 2012
[registration not finalized yet]
|
Provisional Patent Application Filed-Downhole Oscillator
|
US - 13/434,812
|
Non provisional filed on March 29, 2012
[registration not finalized yet]
|
PCT – Patent Application Filed –
|
UK Application
No. 1216072.7
|
National Entry September 10, 2012
[registration not finalized yet]
|
Patent – Jet Motor For Providing Rotation In a Downhole Tool
|
US - No. 8151908
|
December 4, 2029
(assuming payment of maintenance fees)
|
·
|
Exemptions for “
emerging growth companies
” from certain financial disclosure and governance requirements for up to five years and provides a new form of financing to small companies;
|
·
|
Amendments to certain provisions of the federal securities laws to simplify the sale of securities and increase the threshold number of record holders required to trigger the reporting requirements of the Securities Exchange Act of 1934, as amended;
|
·
|
Relaxation of the general solicitation and general advertising prohibition for Rule 506 offerings;
|
·
|
Adoption of a new exemption for public offerings of securities in amounts not exceeding $50 million; and
|
·
|
Exemption from registration by a non-reporting company of offers and sales of securities of up to $1,000,000 that comply with rules to be adopted by the SEC pursuant to Section 4(6) of the Securities Act and exemption of such sales from state law registration, documentation or offering requirements.
|
(i)
|
the completion of the fiscal year in which the company has total annual gross revenues of $1 billion or more,
|
||
(ii)
|
the completion of the fiscal year of the fifth anniversary of the company's IPO;
|
||
(iii)
|
the company's issuance of more than $1 billion in nonconvertible debt in the prior three-year period, or
|
||
(iv)
|
the company becoming a "
larger accelerated filer
" as defined under the Securities Exchange Act of 1934, as amended.
|
(i)
|
audited financial statements required for only two fiscal years (provided that “
smaller reporting companies
” such as the Company are only required to provide two years of financial statements);
|
||
(ii)
|
selected financial data required for only the fiscal years that were audited (provided that “
smaller reporting companies
” such as the Company are not required to provide selected financial data as required by Item 301 of Regulation S-K); and
|
||
(iii)
|
executive compensation only needs to be presented in the limited format now required for “
smaller reporting companies
”.
|
|
Acquisitions
|
First Quarter of 2013
|
Second Through Fourth Quarters of 2013
|
2014
|
Total Planned Acquisition Cost During The Next 24 Months
|
||||||||||||
Inspection Company (1)
|
$
|
250,000
|
-
|
-
|
$
|
250,000
|
||||||||||
Capillary Tool Company (2)
|
$
|
500,000
|
-
|
-
|
$
|
500,000
|
||||||||||
Fishing Tool Company (3)
|
-
|
$
|
9,250,000
|
-
|
$
|
9,250,000
|
||||||||||
Drilling Tool Rental (4)
|
-
|
-
|
$
|
1,500,000
|
$
|
1,500,000
|
||||||||||
Totals
|
$
|
750,000
|
$
|
9,250,000
|
$
|
1,500,000
|
$
|
11,500,000
|
||||||||
·
|
In August 2010, the Company sold 33,333 shares of the Company’s common stock to Herbert C. Pohlmann, in consideration for $100,000 or $3.00 per share;
|
·
|
In September 2010, the Company sold 100,000 shares of the Company’s common stock to Mr. Pohlmann in consideration for $300,000 or $3.00 per share;
|
·
|
In October 2010, the Company sold 66,667 shares of the Company’s common stock to Mr. Pohlmann in consideration for $200,000 or $3.00 per share;
|
·
|
In November 2010, the Company sold 133,333 shares of the Company’s common stock to Mr. Pohlmann in consideration for $200,000 or $1.50 per share; and
|
·
|
In December 2010, the Company sold 133,333 shares of the Company’s common stock to Mr. Pohlmann in consideration for $200,000 or $1.50 per share.
|
·
|
In January 2011, the Company sold 666,667 shares of the Company’s common stock to Mr. Herbert C. Pohlmann for consideration of $1,000,000 or $1.50 per share;
|
·
|
In February 2011, the Company sold 333,333 shares of the Company’s common stock to Mr. Herbert C. Pohlmann for consideration of $500,000 or $1.50 per share;
|
·
|
In May 2011, the Company sold 166,667 shares of the Company’s common stock to Mr. Herbert C. Pohlmann for consideration of $250,000 or $1.50 per share;
|
·
|
In May 2011, the Company sold 233,333 shares of the Company’s common stock to Mr. Herbert C. Pohlmann for consideration of $350,000 or $1.50 per share;
|
·
|
In July 2011, the Company sold 333,334 shares of the Company’s common stock to Richard J. Connaughton, a former Director of the Company, for consideration of $500,000 or $1.50 per share; and
|
·
|
Effective in September 2011, the Company sold 166,667 shares of the Company’s common stock to John Callis, a former Director of the Company, in consideration for $200,000 or $1.20 per share.
|
o
|
Restricting dividends on the common stock;
|
o
|
Rights and preferences including dividend and dissolution rights, which are superior to our common stock;
|
o
|
Diluting the voting power of the common stock;
|
o
|
Impairing the liquidation rights of the common stock; or
|
o
|
Delaying or preventing a change in control of the Company without further action by the stockholders.
|
1.
|
We would not be able to pay our debts as they become due in the usual course of business, or;
|
2.
|
Our total assets would be less than the sum of our total liabilities plus the amount that would be needed to satisfy the rights of shareholders who have preferential rights superior to those receiving the distribution.
|
Plan Category
|
Number of securities to be issued upon exercise of outstanding options, warrants and rights
|
Weighted-average exercise price of outstanding options, warrants and rights
|
Number of securities available for future issuance under equity compensation plans (excluding those in first column)
*
|
|||
Equity compensation plans approved by the security holders
|
600,000
|
$1.04
|
233,333
|
|||
Equity compensation plans not approved by the security holders
|
875,834
|
$1.00
|
-
|
|||
Total
|
1,475,834
|
233,333
|
Selling Stockholder
|
Common Stock Beneficially Owned Before Resale
|
Amount Offered
|
Shares Beneficially Owned After Resale(1)
|
Percentage Owned After Offering
|
||
Charles Wayne Tynon (2)
|
10,000
|
10,000
|
-
|
-
|
||
John Callis (3)
|
439,167
|
(4)
|
439,167
|
(5)
|
-
|
-
|
Richard Connaughton (6)
|
438,334
|
(7)
|
438,334
|
(8)
|
-
|
-
|
TOTAL
|
887,501
|
887,501
|
||||
(1)
|
Assumes all shares offered herein are sold.
|
(2)
|
Former Chief Executive Officer and President of Holdings, the Company’s wholly-owned subsidiary, which position he held from June 1, 2009 to November 23, 2010. Mr. Tynon no longer holds any position with the Company or its subsidiaries and the consulting agreement the Company previously had with Mr. Tynon was terminated on March 31, 2012.
|
(3)
|
Former Director of the Company from February 1, 2012 to June 20, 2012. Mr. Callis no longer holds any position with the Company or its subsidiaries. Mr. Callis is the son-in-law of our Director and majority shareholder, Herbert C. Pohlmann.
|
(4)
|
Includes (a) warrants to purchase 220,000 shares of common stock of the Company which expire on August 28, 2013, with an exercise price of $1.00 per share; and (b) warrants to purchase 52,500 shares of common stock of the Company with a term expiring on January 5, 2017 and an exercise price of $1.00 per share.
|
(5)
|
Includes shares of common stock issuable upon exercise of the warrants described in footnote 4, above.
|
(6)
|
Former Director of the Company from February 1, 2012 to June 21, 2012. Mr. Connaughton no longer holds any position with the Company or its subsidiaries.
|
(7)
|
Includes warrants to purchase 52,500 shares of common stock of the Company with a term expiring on January 5, 2017 and an exercise price of $1.00 per share.
|
(8)
|
Includes shares of common stock issuable upon exercise of the warrants described in footnote 7, above.
|
·
|
ordinary brokerage transactions and transactions in which the broker-dealer solicits the purchaser;
|
·
|
block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;
|
·
|
purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
|
·
|
an exchange distribution in accordance with the rules of the applicable exchange;
|
·
|
privately-negotiated transactions;
|
·
|
broker-dealers may agree with the Selling Stockholders to sell a specified number of such shares at a stipulated price per share;
|
·
|
a combination of any such methods of sale; and
|
·
|
Any other method permitted pursuant to applicable law.
|
·
|
Not engage in any stabilization activities in connection with our common stock;
|
|
·
|
Furnish each broker or dealer through which common stock may be offered, such copies of this Prospectus from time to time, as may be required by such broker or dealer; and
|
|
·
|
Not bid for or purchase any of our securities or attempt to induce any person to purchase any of our securities permitted under the Exchange Act.
|
Unaudited Financial Statements
|
|
Consolidated Balance Sheets as of September 30, 2012 (unaudited) and December 31, 2011
|
F-2
|
Consolidated Statements of Operations (unaudited) for the three and nine months ended September 30, 2012 and 2011
|
F-3
|
Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2012 and 2011
|
F-4
|
Notes to Consolidated Financial Statements (unaudited)
|
F-5
|
Audited Financial Statements
|
|
Report of Independent Registered Public Accounting Firm
|
F-12 |
Consolidated Balance Sheets as of December 31, 2011 and 2010
|
F-13 |
Consolidated Statements of Operations for the Years Ended December 31, 2011 and 2010
|
F-14 |
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2011 and 2010
|
F-15 |
Consolidated Statements of Cash Flows for the Years ended December 31, 2011 and 2010
|
F-16 |
Notes to Consolidated Financial Statements
|
F-17 |
September 30,
|
December 31,
|
|||||||
2012
|
2011
|
|||||||
Assets
|
(Unaudited)
|
|||||||
Current Assets:
|
||||||||
Cash
|
$ | 1,244,391 | $ | 225,750 | ||||
Accounts receivable, net
|
1,887,618 | 1,580,901 | ||||||
Other current assets
|
58,580 | 54,490 | ||||||
Total Current Assets
|
3,190,589 | 1,861,141 | ||||||
Rental tools, net
|
3,767,498 | 3,566,766 | ||||||
Property and equipment, net
|
502,002 | 500,696 | ||||||
Intangible assets, net
|
1,053,330 | 1,113,333 | ||||||
Total Assets
|
$ | 8,513,419 | $ | 7,041,936 | ||||
Liabilities and Stockholders' Equity
|
||||||||
Current Liabilities:
|
||||||||
Accounts payable
|
$ | 387,821 | $ | 1,146,736 | ||||
Accrued liabilities
|
304,100 | 276,820 | ||||||
Related party notes payable - current
|
155,556 | 155,556 | ||||||
Notes payable - current
|
55,275 | 73,818 | ||||||
Total Current Liabilities
|
902,752 | 1,652,930 | ||||||
Long Term Liabilities:
|
||||||||
Related party notes payable, net of current portion
|
285,184 | 401,851 | ||||||
Notes payable, net of current portion
|
148,700 | 203,593 | ||||||
Total Liabilities
|
1,336,636 | 2,258,374 | ||||||
Commitments and contingencies
|
||||||||
Stockholders' Equity:
|
||||||||
Preferred Stock, $.001 par value, 5,000,000 shares authorized
|
||||||||
Series A Preferred Stock, $.001 par value, 1,000,000 shares
|
||||||||
authorized; -0- shares issued and outstanding
|
- | - | ||||||
Series B Convertible Preferred Stock, $.001 par value, 1,000,000
|
||||||||
shares authorized; 1,000,000 shares issued and outstanding
|
1,000 | 1,000 | ||||||
Common Stock, $.001 par value, 200,000,000 shares authorized;
|
||||||||
15,651,827 and 15,599,327 shares issued and outstanding
|
15,652 | 15,599 | ||||||
Subscription receivable
|
- | (1,400,000 | ) | |||||
Additional paid-in capital
|
9,252,435 | 9,113,088 | ||||||
Accumulated deficit
|
(2,092,304 | ) | (2,946,125 | ) | ||||
Total Stockholders' Equity
|
7,176,783 | 4,783,562 | ||||||
Total Liabilities and Stockholders' Equity
|
$ | 8,513,419 | $ | 7,041,936 | ||||
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
2012
|
2011
|
2012
|
2011
|
|||||||||||||
Revenue:
|
|
|||||||||||||||
Product revenue
|
$ | 177,374 | $ | 110,793 | $ | 279,785 | $ | 548,031 | ||||||||
Rental revenue
|
1,663,615 | 1,678,516 | 5,907,010 | 2,976,580 | ||||||||||||
Total revenue
|
1,840,989 | 1,789,309 | 6,186,795 | 3,524,611 | ||||||||||||
Cost of revenue:
|
||||||||||||||||
Cost of products and rental revenue
|
603,507 | 565,415 | 1,937,951 | 1,174,699 | ||||||||||||
Cost of revenue - depreciation of rental tools
|
256,664 | 169,701 | 726,097 | 335,140 | ||||||||||||
Total cost of revenue
|
860,171 | 735,116 | 2,664,048 | 1,509,839 | ||||||||||||
Gross profit
|
980,818 | 1,054,193 | 3,522,747 | 2,014,772 | ||||||||||||
Operating Expenses:
|
||||||||||||||||
Selling and marketing
|
386,985 | 377,368 | 1,420,748 | 798,460 | ||||||||||||
General and administrative
|
375,465 | 282,844 | 1,056,415 | 595,115 | ||||||||||||
Depreciation and amortization
|
60,773 | 45,256 | 178,960 | 122,101 | ||||||||||||
Total operating expenses
|
823,223 | 705,468 | 2,656,123 | 1,515,676 | ||||||||||||
Income from operations
|
157,595 | 348,725 | 866,624 | 499,096 | ||||||||||||
Other expense:
|
||||||||||||||||
Interest expense
|
(3,666 | ) | (3,079 | ) | (12,803 | ) | (26,722 | ) | ||||||||
Total other expense
|
(3,666 | ) | (3,079 | ) | (12,803 | ) | (26,722 | ) | ||||||||
Net income
|
$ | 153,929 | $ | 345,646 | $ | 853,821 | $ | 472,374 | ||||||||
Net income per share :
|
||||||||||||||||
Basic earnings
|
$ | 0.01 | $ | 0.02 | $ | 0.05 | $ | 0.06 | ||||||||
Diluted earnings
|
$ | 0.01 | $ | 0.02 | $ | 0.04 | $ | 0.06 | ||||||||
Weighted average common shares outstanding:
|
||||||||||||||||
Basic
|
16,411,333 | 14,353,035 | 16,409,992 | 7,425,893 | ||||||||||||
Diluted
|
19,268,309 | 15,326,536 | 19,266,968 | 8,399,394 | ||||||||||||
September 30,
|
September 30,
|
|||||||
2012
|
2011
|
|||||||
Cash Flows From Operating Activities:
|
||||||||
Net income
|
$ | 853,821 | $ | 472,374 | ||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||
Stock based compensation
|
86,900 | - | ||||||
Depreciation and amortization
|
905,057 | 457,241 | ||||||
Bad debt expense
|
30,540 | - | ||||||
Loss on sale of property and equipment
|
- | 19,571 | ||||||
Changes in:
|
||||||||
Accounts receivable
|
(498,907 | ) | (1,203,901 | ) | ||||
Other current assets
|
(4,090 | ) | (12,321 | ) | ||||
Accounts payable
|
(758,914 | ) | 1,140,631 | |||||
Accrued liabilities
|
27,279 | 864 | ||||||
Net provided by operating activities
|
641,686 | 874,459 | ||||||
Cash Flows From Investing Activities:
|
||||||||
Purchase of rental tools
|
(926,829 | ) | (3,188,883 | ) | ||||
Purchase of machinery and equipment
|
(120,263 | ) | (331,884 | ) | ||||
Proceeds from disposal of assets | 161,650 | 118,120 | ||||||
Proceeds from sale of machinery and equipment
|
- | 14,500 | ||||||
Net cash used in investing activities
|
(885,442 | ) | (3,388,147 | ) | ||||
Cash Flows From Financing Activities:
|
||||||||
Payments on notes payable
|
(73,436 | ) | (35,851 | ) | ||||
Proceeds from notes payable, net
|
- | 221,435 | ||||||
Payments on related party notes payable
|
(116,667 | ) | (578,704 | ) | ||||
Proceeds from sale of common stock and warrants
|
1,452,500 | 2,800,000 | ||||||
Net cash provided by financing activities
|
1,262,397 | 2,406,880 | ||||||
Net increase in cash
|
1,018,641 | (106,808 | ) | |||||
Cash at beginning of period
|
225,750 | 330,313 | ||||||
Cash at end of period
|
$ | 1,244,391 | $ | 223,505 | ||||
Supplemental disclosure of cash flow information:
|
||||||||
Cash paid for:
|
||||||||
Interest
|
$ | 12,803 | $ | 13,181 | ||||
Income taxes
|
$ | - | $ | - | ||||
Supplemental non-cash investing and financing activities:
|
||||||||
Common stock issued for satisfaction of notes payable - related party
|
$ | - | $ | 534,958 | ||||
|
·
|
1,667 options vested on November 30, 2011 with a fair value of $267 expensed in 2011;
|
|
·
|
100,000 options vested on December 14, 2011 with a fair value of $15,999 expensed in 2011;
|
|
·
|
100,000 options vesting on December 31, 2012 with a fair value of $100,000 to be expensed over the service period. During the period ended September 30, 2012, $26,984 was expensed; and
|
|
·
|
100,000 options vesting on December 31, 2013 with a fair value of $100,000 to be expensed over the service period. During the period ended September 30, 2012, $6,925 was expensed.
|
|
·
|
1,667 options vested on November 30, 2011 with a fair value of $267 expensed in 2011;
|
|
·
|
100,000 options vested on December 14, 2011 with a fair value of $15,999 expensed in 2011;
|
|
·
|
100,000 options vesting on December 31, 2012 with a fair value of $100,000 to be expensed over the service period. During the period ended September 30, 2012, $26,984 was expensed; and
|
|
·
|
100,000 options vesting on December 31, 2013 with a fair value of $100,000 to be expensed over the service period. During the period ended September 30, 2012, $6,925 was expensed.
|
Number of Shares
|
Weighted Average Exercise Price
|
Weighted Average Remaining Contract Term (in years)
|
||||||||||
Outstanding at January 1, 2012
|
603,334 | $ | 1.04 | 9.3 | ||||||||
Granted
|
600,000 | 1.00 | 9.9 | |||||||||
Exercised
|
- | - | ||||||||||
Forfeited and canceled
|
- | - | ||||||||||
Outstanding at September 30, 2012
|
1,203,334 | $ | 1.02 | 9.6 | ||||||||
Exercisable at September 30, 2012
|
203,334 | $ | 1.11 | 8.2 |
Number of Shares
|
Weighted Average Exercise Price
|
Weighted Average Remaining Contract Term (# years)
|
||||||||||
Outstanding at January 1, 2012
|
1,600,000 | $ | 1.00 | 4.21 | ||||||||
Granted
|
325,000 | 1.00 | 1.99 | |||||||||
Exercised
|
- | - | ||||||||||
Forfeited and canceled
|
- | - | ||||||||||
Outstanding at September 30, 2012
|
1,925,000 | $ | 1.00 | 3.84 | ||||||||
Exercisable at September 30, 2012
|
1,925,000 | $ | 1.00 | 3.84 |
2011
|
2010
|
|||||||
Assets
|
||||||||
Current Assets:
|
||||||||
Cash
|
$
|
225,750
|
$
|
330,313
|
||||
Accounts receivable, net
|
1,580,901
|
280,353
|
||||||
Other current assets
|
54,490
|
3,795
|
||||||
Total Current Assets
|
1,861,141
|
614,461
|
||||||
Rental tools, net
|
3,566,766
|
463,439
|
||||||
Property and equipment, net
|
500,696
|
114,983
|
||||||
Intangible assets, net
|
1,113,333
|
1,193,333
|
||||||
Total Assets
|
$
|
7,041,936
|
$
|
2,386,216
|
||||
Liabilities and Stockholders' Equity
|
||||||||
Current Liabilities:
|
||||||||
Accounts payable
|
$
|
1,146,736
|
$
|
386,993
|
||||
Accrued liabilities
|
276,820
|
65,109
|
||||||
Related party notes payable - current
|
155,556
|
617,593
|
||||||
Notes payable - current
|
73,818
|
-
|
||||||
Total Current Liabilities
|
1,652,930
|
1,069,695
|
||||||
Long Term Liabilities:
|
||||||||
Related party notes payable, net of current portion
|
401,851
|
557,407
|
||||||
Related party convertible notes payable
|
-
|
471,951
|
||||||
Notes payable, net of current portion
|
203,593
|
-
|
||||||
Total Liabilities
|
2,258,374
|
2,099,053
|
||||||
Commitments and contingencies
|
||||||||
Stockholders' Equity:
|
||||||||
Preferred Stock, $.001 par value, 5,000,000 shares authorized
|
||||||||
Series A Preferred Stock, $.001 par value, 1,000,000 shares authorized;
|
||||||||
0 shares issued and outstanding
|
-
|
-
|
||||||
Series B Convertible Preferred Stock, $.001 par value, 1,000,000 shares
|
||||||||
authorized; 1,000,000 shares issued and outstanding
|
1,000
|
1,000
|
||||||
Common Stock, $.001 par value, 200,000,000 shares authorized;
|
||||||||
15,599,327 and 985,518 shares issued and outstanding
|
15,599
|
986
|
||||||
Subscription receivable
|
(1,400,000
|
)
|
-
|
|||||
Additional paid-in capital
|
9,113,088
|
3,960,747
|
||||||
Accumulated deficit
|
(2,946,125
|
)
|
(3,675,570
|
)
|
||||
Total Stockholders' Equity
|
4,783,562
|
287,163
|
||||||
Total Liabilities and Stockholders' Equity
|
$
|
7,041,936
|
$
|
2,386,216
|
2011
|
2010
|
|||||||
Revenue:
|
||||||||
Product revenue
|
$
|
281,697
|
$
|
533,026
|
||||
Rental revenue
|
5,259,434
|
1,218,824
|
||||||
Total revenue
|
5,541,131
|
1,751,850
|
||||||
Cost of revenue:
|
||||||||
Cost of products and rental revenue
|
1,681,857
|
1,291,701
|
||||||
Cost of revenue - depreciation of rental tools
|
544,013
|
140,593
|
||||||
Total cost of revenue
|
2,225,870
|
1,432,294
|
||||||
Gross profit
|
3,315,261
|
319,556
|
||||||
Operating Expenses:
|
||||||||
General and administrative
|
2,384,787
|
678,181
|
||||||
Depreciation and amortization
|
170,751
|
44,397
|
||||||
Total operating expenses
|
2,555,538
|
722,578
|
||||||
Income (loss) from operations
|
759,723
|
(403,022
|
)
|
|||||
Other expense:
|
||||||||
Interest expense
|
(30,278
|
)
|
(54,568
|
)
|
||||
Total other expense
|
(30,278
|
)
|
(54,568
|
)
|
||||
Net income/(loss)
|
729,445
|
(457,590
|
)
|
|||||
Net income (loss) per share :
|
||||||||
Basic income (loss)
|
$
|
0.08
|
$
|
(0.34
|
)
|
|||
Diluted income (loss)
|
$
|
0.07
|
$
|
(0.34
|
)
|
|||
Weighted average common shares outstanding:
|
||||||||
Basic
|
9,310,359
|
1,347,307
|
||||||
Diluted
|
9,767,502
|
1,347,307
|
||||||
Preferred Stock
|
Common Stock
|
Subscription
|
Paid-In
|
Accumulated
|
Noncontrolling
|
|||||||||||||||||||||||||||||||||||||||
Series A
|
Amount
|
Series B
|
Amount
|
Shares
|
Amount
|
Receivable
|
Capital
|
Deficit
|
Interests
|
Totals
|
||||||||||||||||||||||||||||||||||
Balances at December 31, 2009
|
1,000,000
|
1,000
|
1,000,000
|
1,000
|
498,851
|
499
|
-
|
2,902,510
|
(3,217,220
|
)
|
31,964
|
(280,247
|
)
|
|||||||||||||||||||||||||||||||
Issuance of common stock for cash
|
-
|
-
|
-
|
-
|
466,667
|
467
|
-
|
999,533
|
-
|
-
|
1,000,000
|
|||||||||||||||||||||||||||||||||
Stock dividend in connection with Depository
|
||||||||||||||||||||||||||||||||||||||||||||
Trust and Clearing Corporation
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
760
|
(760
|
)
|
-
|
-
|
||||||||||||||||||||||||||||||||
Issuance of common stock and cancellation of Series A Preferred Stock
|
(1,000,000
|
)
|
(1,000
|
)
|
-
|
-
|
10,000
|
10
|
-
|
16,972
|
-
|
(15,982
|
)
|
-
|
||||||||||||||||||||||||||||||
Issuance of common stock in connection with the cancellation of Coil Tubing Technology Holdings, Inc. common stock
|
-
|
-
|
-
|
-
|
10,000
|
10
|
-
|
15,972
|
-
|
(15,982
|
)
|
-
|
||||||||||||||||||||||||||||||||
Option expense
|
25,000
|
-
|
-
|
25,000
|
||||||||||||||||||||||||||||||||||||||||
Net loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(457,590
|
)
|
-
|
(457,590
|
)
|
|||||||||||||||||||||||||||||||
Balances at December 31, 2010
|
-
|
-
|
1,000,000
|
1,000
|
985,518
|
986
|
-
|
3,960,747
|
(3,675,570
|
)
|
-
|
287,163
|
||||||||||||||||||||||||||||||||
Issuance of common stock and warrants for cash
|
-
|
-
|
-
|
-
|
11,339,737
|
11,340
|
(1,400,000
|
)
|
4,588,660
|
-
|
-
|
3,200,000
|
||||||||||||||||||||||||||||||||
Issuance of common stock for conversion of related party notes payable and accrued interest
|
-
|
-
|
-
|
-
|
2,512,665
|
2,513
|
-
|
532,446
|
-
|
-
|
534,959
|
|||||||||||||||||||||||||||||||||
Issuance of common stock in connection with DTC settlement
|
-
|
-
|
-
|
-
|
761,408
|
761
|
-
|
(761
|
)
|
-
|
-
|
-
|
||||||||||||||||||||||||||||||||
Option expense
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
31,996
|
-
|
-
|
31,996
|
|||||||||||||||||||||||||||||||||
Net income
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
729,445
|
-
|
729,445
|
|||||||||||||||||||||||||||||||||
Balances at December 31, 2011
|
-
|
-
|
1,000,000
|
$
|
1,000
|
15,599,327
|
$
|
15,599
|
$
|
(1,400,000
|
)
|
$
|
9,113,088
|
$
|
(2,946,125
|
)
|
-
|
$
|
4,783,562
|
|||||||||||||||||||||||||
2011
|
2010
|
|||||||
Cash Flows From Operating Activities:
|
||||||||
Net income (loss)
|
$
|
729,445
|
$
|
(457,590
|
)
|
|||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
|
||||||||
Stock based compensation
|
31,996
|
25,000
|
||||||
Depreciation and amortization
|
714,764
|
184,990
|
||||||
Bad debt expense
|
1,150
|
-
|
||||||
Loss on sale of property and equipment
|
11,908
|
1,900
|
||||||
Changes in:
|
||||||||
Accounts receivable
|
(1,458,248 |
)
|
(140,557
|
)
|
||||
Other assets
|
(50,695
|
)
|
(3,283
|
)
|
||||
Accounts payable
|
822,750
|
(91,854
|
)
|
|||||
Accrued liabilities
|
211,711
|
(44,267
|
)
|
|||||
Net provided by (used in) operating activities
|
1,014,781
|
(525,661
|
)
|
|||||
Cash Flows From Investing Activities:
|
||||||||
Purchase of rental tools
|
(3,662,876
|
)
|
(225,120
|
)
|
||||
Purchase of machinery and equipment
|
(495,635
|
)
|
(52,073
|
)
|
||||
Proceeds from disposal of assets
|
156,550 | 33,671 | ||||||
Purchase of intangible assets
|
-
|
(25,000
|
)
|
|||||
Proceeds from sale of machinery and equipment
|
22,798
|
7,800
|
||||||
Net cash used in investing activities
|
(3,979,163
|
)
|
(260,722
|
)
|
||||
Cash Flows From Financing Activities:
|
||||||||
Payments on notes payable
|
(52,301
|
)
|
-
|
|||||
Proceeds from notes payable
|
329,713
|
-
|
||||||
(Payments on) related party advances
|
(617,593
|
)
|
(7,000
|
)
|
||||
Proceeds from related party notes payable
|
-
|
310,712
|
||||||
Proceeds from sale of common stock and warrants
|
3,200,000
|
1,000,000
|
||||||
Proceeds (payment) from line of credit, net
|
-
|
(187,255
|
)
|
|||||
Net cash provided by financing activities
|
2,859,819
|
1,116,457
|
||||||
Net change in cash
|
(104,563
|
)
|
330,074
|
|||||
Cash at beginning of period
|
330,313
|
239
|
||||||
Cash at end of period
|
$
|
225,750
|
$
|
330,313
|
||||
Supplemental disclosure of cash flow information:
|
||||||||
Cash paid for:
|
||||||||
Interest
|
$
|
13,181
|
$
|
10,286
|
||||
Income taxes
|
$
|
-
|
$
|
-
|
||||
Supplemental non-cash investing and financing activities:
|
||||||||
Cancellation of Series A Preferred Stock
|
$
|
-
|
$
|
1,000
|
||||
Issuance of common stock for non-controlling interest
|
$
|
-
|
$
|
31,964
|
||||
Issuance of common stock for satisfaction of related party notes payable
|
$
|
534,959
|
$
|
-
|
||||
Reclassification of related party advances to convertible notes
|
$
|
-
|
$
|
471,951
|
||||
Issuance of notes payable for intangible assets
|
$
|
-
|
$
|
1,175,000
|
||||
See accompanying notes to consolidated financial statements.
|
Description
|
Life
|
2011
|
2010
|
|||||||
Furniture
|
7 years
|
$
|
-
|
$
|
1,879
|
|||||
Office equipment
|
5 years
|
11,751
|
25,767
|
|||||||
Shop Equipment
|
5 years
|
171,591
|
55,727
|
|||||||
Vehicle
|
4 Years
|
381,838
|
28,630
|
|||||||
Leasehold improvements
|
10 years
|
95,699
|
95,699
|
|||||||
$
|
660,879
|
$
|
207,702
|
|||||||
Less: accumulated depreciation
|
(160,183
|
)
|
(92,719
|
)
|
||||||
$
|
500,696
|
$
|
114,983
|
Description
|
Life
|
2011
|
2010
|
|||||||
Issued patents
|
15 years
|
$
|
550,000
|
$
|
550,000
|
|||||
Pending patents
|
15 years
|
650,000
|
650,000
|
|||||||
Total intangible assets
|
1,200,000
|
1,200,000
|
||||||||
Less: accumulated amortization
|
(86,667
|
)
|
(6,667
|
)
|
||||||
Intangible assets, net
|
$
|
1,113,333
|
$
|
1,193,333
|
2011
|
2010
|
|||||||
Federal income tax provision
|
||||||||
attributable to current operations
|
$
|
250,000
|
$
|
(150,000
|
)
|
|||
Less change in valuation allowance
|
(250,000
|
)
|
150,000
|
|||||
Net refundable amount
|
$
|
-
|
$
|
-
|
||||
2011
|
2010
|
|||||||
Deferred tax asset attributable to:
|
||||||||
Net operating loss carryover
|
$
|
1,000,000
|
$
|
1,250,000
|
||||
Less, valuation allowance
|
(1,000,000
|
)
|
(1,250,000
|
)
|
||||
Net deferred tax asset
|
$
|
-
|
$
|
-
|
·
|
In January 2011, the Company sold 666,667 shares of the Company’s common stock to Mr. Herbert C. Pohlmann for consideration of $1,000,000 or $1.50 per share.
|
·
|
In February 2011, the Company sold 333,333 shares of the Company’s common stock to Mr. Herbert C. Pohlmann for consideration of $500,000 or $1.50 per share.
|
·
|
In May 2011, the Company sold 166,667 shares of the Company’s common stock to Mr. Herbert C. Pohlmann for consideration of $250,000 or $1.50 per share.
|
·
|
In May 2011, the Company sold 233,333 shares of the Company’s common stock to Mr. Herbert C. Pohlmann for consideration of $350,000 or $1.50 per share.
|
·
|
In May 2011, the Company issued 2,512,664 shares of the Company’s common stock to Mr. Herbert C. Pohlmann in connection with the conversion of the Convertible Promissory Notes (and accrued interest thereon) as described in Note 8, below.
|
·
|
In May 2011, the Company issued 761,408 shares of common stock to shareholders of Grifco and the Company as described in Note 8, below.
|
·
|
In May 2011, the Company issued 7,673,070 shares of the Company’s common stock to Mr. Herbert C. Pohlmann in connection with an Anti-Dilution and Make Whole Agreement, which was subsequently amended in June 2011 (as amended, the “Make Whole Agreement”). In connection with the Make Whole Agreement, we agreed to adjust the purchase price of certain of Mr. Herbert C. Pohlmann’s common stock purchases and to provide Mr. Herbert C. Pohlmann anti-dilutive rights in connection with the 761,408 shares of common stock issuable to shareholders of Grifco and the Company as described in Note 8, below, and to adjust the conversion price of his Convertible Promissory Notes. The Company accounted for this transaction in accordance with ASC 470-50-15 and ASC 470-50-40.
|
·
|
In July 2011, the Company sold 333,333 shares of the Company’s common stock to a third party for consideration of $500,000 or $1.50 per share.
|
·
|
In October 2011, the Company sold 166,667 shares of the Company’s common stock to a third party for consideration of $200,000 or $1.20 per share.
|
·
|
In October 2011, the Company sold 166,667 shares of the Company’s common stock to Mr. Pohlmann for consideration of $200,000 or $1.20 per share.
|
·
|
In December 2011, the Company sold
an aggregate of 1,600,000 units to Mr. Pohlmann, each consisting of (a) one share of common stock and (b) one common stock purchase warrant to purchase one share of common stock with a five year term and an exercise price of $1.00 per share (collectively the “Units”) for an aggregate of $1,600,000 or $1.00 per Unit. A total of $200,000 of the amount due in connection with the purchase of the Units was due prior to December 31, 2011 (amount was received as of 12/31/11); a total of $200,000 was due prior to January 25, 2012 (amount has been received as of the filing date of this report); a total of $100,000 was due prior to February 28, 2012 (amount has been received as of the filing date of this report); a total of $1,000,000 is due prior to April 30, 2012; and a total of $100,000 is due prior to May 31, 2012, with any and all unpaid amounts treated for all purposes as an outstanding promissory note due to the Company from Mr. Pohlmann, which notes shall not accrue interest until due. These shares have not been issued as of December 31, 2011.
|
Exercise Price
|
Weighted Average Remaining Life (years)
|
Number of Options Outstanding
|
Number of Options Exercisable
|
||||||||||
$
|
7.50
|
4.9
|
3,334
|
1,667
|
|||||||||
$
|
1.00
|
5.0
|
200,000
|
-
|
|||||||||
*
|
6.0
|
200,000
|
-
|
||||||||||
*
|
7.0
|
200,000
|
-
|
||||||||||
$
|
1.00 to $7.50
|
6.0
|
603,334
|
1,667
|
* Exercise price will be determined on December 31, 2012 and 2013, and will equal the mean between the highest and lowest quoted selling prices of the Company’s common stock on the OTC Pink market.
|
Exercise Price
|
Weighted Average Remaining Life (years)
|
Number of Warrants Outstanding
|
Number of Warrants Exercisable
|
||||||||||
$
|
1.00
|
4.96
|
1,600,000
|
1,600,000
|
|||||||||
$
|
1.00
|
4.96
|
1,600,000
|
1,600,000
|
2011
|
2010
|
|||||||
Promissory note - Herbert Pohlmann
|
$
|
-
|
$
|
471,951
|
||||
Promissory note - Jerry Swinford
|
-
|
475,000
|
||||||
Promissory note - Jerry Swinford
|
557,407
|
700,000
|
||||||
Total debt
|
557,407
|
1,646,951
|
||||||
Less current portion
|
155,556
|
617,593
|
||||||
Long-term debt
|
$
|
401,851
|
$
|
1,029,358
|
Year Ending December 31,
|
Amount
|
|||
2012
|
$
|
155,556
|
||
2013
|
155,556
|
|||
2014
|
155,556
|
|||
2015
|
90,739
|
|||
Total
|
$
|
557,407
|
Years Ending December 31,
|
Amount
|
|||
2012
|
$
|
19,706
|
||
2013
|
1,331
|
|||
Total
|
$
|
21,037
|
1 Year Coil Tubing Technology (CE) Chart |
1 Month Coil Tubing Technology (CE) Chart |
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