Exhibit 99.3

 

TitanLiner, Inc.

Financial Report

December 31, 2017

 

			 		

----

 

CONTENTS

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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             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| Independent Auditor’s Report 1				
 

 

Financial Statements 
 

 

 

Balance Sheets 
						2

 

 

Statements of Operations 
						3

 

 

Statements of Changes in Stockholders’ Equity 
						4

 

 

Statements of Cash Flows 
						5

 

 

Notes to Financial Statements 6				
 

 

			 		

			 		

 

			 		

			 		

Independent Auditor’s Report

To the Board of Directors and Stockholders of

TitanLiner, Inc.

Fort Worth, Texas

We have audited the accompanying financial statements of TitanLiner, Inc. (a Nevada corporation), which comprise the balance sheets  as of December 31, 2017 and 2016, and the related statements of operations,  changes in stockholders’ equity and cash flows for each of the years in the three-year period ended December 31, 2017, and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audits.  We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of TitanLiner, Inc. as of December 31, 2017 and 2016, and the results of its operations and its cash flows for the each of the years in the three-year period ended December 31, 2017 in accordance with accounting principles generally accepted in the United States of America.

/s/ WEAVER AND TIDWELL, L.L.P.

Fort Worth, Texas

May 31, 2018

 

			 		

			 		

AN INDEPENDENT MEMBER OF

WEAVER AND TIDWELL, L.L.P.

2821 WEST SEVENTH STREET, SUITE 700, FORT WORTH, TX 76107

BAKER TILLY INTERNATIONAL

CERTIFIED PUBLIC ACCOUNTANTS AND ADVISORS

P: 817.332.7905    F: 817.429.5936

			 		

 

			 		

Financial Statements

 

			 		

			 		

 

			 		

TitanLiner, Inc.

Balance Sheets

December 31, 2017 and 2016

 

 

 

 

 

 

 

 

 

 

    

2017

    

2016

 

ASSETS

 

 

  

 

 

  

 

 

 

 

 

 

 

 

 

CURRENT ASSETS

 

 

  

 

 

  

 

Cash

 

$

1,382,463 

 

$

999,415 

 

Accounts receivable (net of allowance of $67,402 and $33,133, respectively)

 

 

5,397,404 

 

 

3,037,643 

 

Inventory

 

 

835,638 

 

 

483,618 

 

Prepaid expenses

 

 

117,832 

 

 

31,331 

 

Income tax receivable

 

 

— 

 

 

413,785 

 

Deferred income tax asset

 

 

47,669 

 

 

32,173 

 

Total current assets

 

 

7,781,006 

 

 

4,997,965 

 

 

 

 

 

 

 

 

 

PROPERTY AND EQUIPMENT, net 

 

 

3,191,639 

 

 

1,938,310 

 

 

 

 

 

 

 

 

 

OTHER ASSETS

 

 

  

 

 

  

 

Intangible assets, net

 

 

60,111 

 

 

69,292 

 

Deposits

 

 

39,816 

 

 

39,601 

 

Total other assets

 

 

99,927 

 

 

108,893 

 

TOTAL ASSETS

 

$

11,072,572 

 

$

7,045,168 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

  

 

 

  

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

  

 

 

  

 

Accounts payable 

 

$

819,063 

 

$

481,670 

 

Accrued liabilities

 

 

954,053 

 

 

352,666 

 

Income tax payable

 

 

348,516 

 

 

— 

 

Capital lease obligation, current portion

 

 

131,937 

 

 

137,369 

 

Long-term debt, current portion

 

 

26,787 

 

 

27,358 

 

Total current liabilities

 

 

2,280,356 

 

 

999,063 

 

 

 

 

 

 

 

 

 

LONG-TERM LIABILITIES

 

 

  

 

 

  

 

Line of credit

 

 

1,064,114 

 

 

1,064,114 

 

Capital lease obligation, net of current portion

 

 

26,424 

 

 

19,265 

 

Long-term debt, net of current portion

 

 

33,595 

 

 

62,412 

 

Deferred income tax liability

 

 

374,024 

 

 

240,582 

 

Total long-term liabilities

 

 

1,498,157 

 

 

1,386,373 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS' EQUITY

 

 

  

 

 

  

 

Series A preferred stock, $0.001 stated par value, 370,664 shares authorized, issued, and outstanding at December 31, 2017 and 2016, respectively

 

 

371 

 

 

371 

 

Series B preferred stock, $0.001 stated par value, 1,299,173 shares authorized, issued, and outstanding at December 31, 2017 and 2016, respectively

 

 

1,299 

 

 

1,299 

 

Common stock, $0.001 stated par value, 5,000,000 shares authorized, 1,000,000 issued, and 765,031 and 749,300 outstanding at December 31, 2017 and 2016, respectively

 

 

1,000 

 

 

1,000 

 

Additional paid-in capital

 

 

8,297,502 

 

 

8,258,241 

 

Retained earnings

 

 

3,158,065 

 

 

562,999 

 

 

 

 

11,458,237 

 

 

8,823,910 

 

Treasury stock

 

 
(4,164,178)				
 

 
(4,164,178)				
 

Total stockholders' equity

 

 

7,294,059 

 

 

4,659,732 

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

 

$

11,072,572 

 

$

7,045,168 

 

 

 

 

			 		

			 		

						 

						 

						 

The Notes to Financial Statements arean integral part of these statements.

						 

						 

						 

2

						 

			 		

			 		

 

			 		

TitanLiner, Inc.

Statements of Operations

Years Ended December 31, 2017, 2016, and 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

    

2017

    

2016

    

2015

 

SALES, net

 

$

15,471,273 

 

$

8,023,883 

 

$

13,374,467 

 

 

 

 

 

 

 

 

 

 

 

 

COST OF SALES

 

 

7,761,967 

 

 

5,594,808 

 

 

8,425,226 

 

Gross profit

 

 

7,709,306 

 

 

2,429,075 

 

 

4,949,241 

 

 

 

 

 

 

 

 

 

 

 

 

SELLING, GENERAL AND ADMINISTRATIVE

 

 

 

 

 

 

 

 

 

 

Selling expenses

 

 

879,120 

 

 

755,302 

 

 

905,699 

 

General and administrative

 

 

3,093,263 

 

 

2,690,156 

 

 

3,046,816 

 

Total selling, general and administrative

 

 

3,972,383 

 

 

3,445,458 

 

 

3,952,515 

 

Operating income (loss)

 

 

3,736,923 

 

 
(1,016,383)				
 

 

996,726 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER INCOME (EXPENSE)

 

 

 

 

 

 

 

 

 

 

Miscellaneous income

 

 

5,667 

 

 

72,837 

 

 

27,993 

 

Gain (loss) on disposal of assets

 

 

13,644 

 

 
(189,792)				
 

 
(49,746)				
 

Interest expense

 

 
(56,167)				
 

 
(519,457)				
 

 
(623,553)				
 

Total other income (expense)

 

 
(36,856)				
 

 
(636,412)				
 

 
(645,306)				
 

 

 

 

 

 

 

 

 

 

 

 

INCOME (LOSS) BEFORE INCOME TAXES 

 

 

3,700,067 

 

 
(1,652,795)				
 

 

351,420 

 

INCOME TAX PROVISION (BENEFIT)

 

 

1,105,001 

 

 
(569,742)				
 

 

319,065 

 

NET INCOME (LOSS)

 

$

2,595,066 

 

$
(1,083,053)				
 

$

32,355 

 

 

 

 

			 		

			 		

						 

						 

						 

The Notes to Financial Statements arean integral part of these statements.

						 

						 

						 

3

						 

			 		

			 		

 

			 		

TitanLiner, Inc.

Statements of Changes in Stockholders’ Equity

Years Ended December 31, 2017, 2016, and 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred Stock

 

 

 

Common

 

Additional

 

 

 

Treasury

 

 

 

 

 

 

 

   

Series A

   

Series A

   

Series B

   

Series B

   

Common

   

Stock

   

Paid-in

   

Treasury

   

Stock

   

Retained

   

    

 

 

Stock

 

Par Value

 

Stock

 

Par Value

 

Stock

 

Par Value

 

Capital

 

Stock

 

Amount

 

Earnings

 

Total

BALANCE, January 1, 2015

 

237,164 

 

$

237 

 

— 

 

$

— 

 

717,837 

 

$

1,000 

 

$

5,225,717 

 

282,163 

 

$
(4,164,178)				
 

$

1,613,697 

 

 

2,676,473 

Stock-based compensation

 

— 

 

 

— 

 

— 

 

 

— 

 

— 

 

 

— 

 

 

57,585 

 

— 

 

 

— 

 

 

— 

 

 

57,585 

Issuance of stock grants

 

— 

 

 

— 

 

— 

 

 

— 

 

11,831 

 

 

— 

 

 

— 

 
(11,831)				
 

 

— 

 

 

— 

 

 

— 

Exercise of Series A preferred stock warrants

 

122,239 

 

 

122 

 

— 

 

 

— 

 

— 

 

 

— 

 

 

1,100 

 

— 

 

 

— 

 

 

— 

 

 

1,222 

Net income

 

— 

 

 

— 

 

— 

 

 

— 

 

— 

 

 

— 

 

 

— 

 

— 

 

 

— 

 

 

32,355 

 

 

32,355 

BALANCE, December 31, 2015

 

359,403 

 

 

359 

 

— 

 

 

— 

 

729,668 

 

 

1,000 

 

 

5,284,402 

 

270,332 

 

 
(4,164,178)				
 

 

1,646,052 

 

 

2,767,635 

Stock-based compensation

 

— 

 

 

— 

 

— 

 

 

— 

 

— 

 

 

— 

 

 

63,693 

 

— 

 

 

— 

 

 

— 

 

 

63,693 

Issuance of stock grants

 

— 

 

 

— 

 

— 

 

 

— 

 

19,632 

 

 

— 

 

 

— 

 
(19,632)				
 

 

— 

 

 

— 

 

 

— 

Exercise of Series A preferred stock warrants

 

11,261 

 

 

12 

 

— 

 

 

— 

 

— 

 

 

— 

 

 

101 

 

— 

 

 

— 

 

 

— 

 

 

113 

Conversion of debt to Series B preferred stock

 

— 

 

 

— 

 

1,299,173 

 

 

1,299 

 

— 

 

 

— 

 

 

2,910,045 

 

— 

 

 

— 

 

 

— 

 

 

2,911,344 

Net loss

 

— 

 

 

— 

 

— 

 

 

— 

 

— 

 

 

— 

 

 

— 

 

— 

 

 

— 

 

 
(1,083,053)				
 

 
(1,083,053)				
BALANCE, December 31, 2016

 

370,664 

 

 

371 

 

1,299,173 

 

 

1,299 

 

749,300 

 

 

1,000 

 

 

8,258,241 

 

250,700 

 

 
(4,164,178)				
 

 

562,999 

 

 

4,659,732 

Stock-based compensation

 

— 

 

 

— 

 

— 

 

 

— 

 

— 

 

 

— 

 

 

39,261 

 

— 

 

 

— 

 

 

— 

 

 

39,261 

Issuance of stock grants

 

— 

 

 

— 

 

— 

 

 

— 

 

15,731 

 

 

— 

 

 

— 

 
(15,731)				
 

 

— 

 

 

— 

 

 

— 

Net income

 

— 

 

 

— 

 

— 

 

 

— 

 

— 

 

 

— 

 

 

— 

 

— 

 

 

— 

 

 

2,595,066 

 

 

2,595,066 

BALANCE, December 31, 2017

 

370,664 

 

$

371 

 

1,299,173 

 

$

1,299 

 

765,031 

 

$

1,000 

 

$

8,297,502 

 

234,969 

 

$
(4,164,178)				
 

$

3,158,065 

 

$

7,294,059 

 

 

 

			 		

			 		

						 

						 

						 

The Notes to Financial Statements arean integral part of these statements.

						 

						 

						 

4

						 

			 		

			 		

 

			 		

TitanLiner, Inc.

Statements of Cash Flows

Years Ended December 31, 2017, 2016, and 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

    

2017

    

2016

    

2015

 

CASH FLOW FROM OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

2,595,066 

 

$
(1,083,053)				
 

$

32,355 

 

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities

 

 

 

 

 

 

 

 

 

 

Provision for bad debt expense

 

 

67,402 

 

 

33,133 

 

 

— 

 

Depreciation and amortization expense

 

 

814,873 

 

 

835,955 

 

 

1,301,888 

 

Interest on warrants

 

 

— 

 

 

206,494 

 

 

208,737 

 

(Gain) loss on sale of assets

 

 
(13,644)				
 

 

189,792 

 

 

49,746 

 

Non-cash stock-based compensation

 

 

39,261 

 

 

63,693 

 

 

57,585 

 

Deferred tax

 

 

117,946 

 

 
(191,261)				
 

 

279,129 

 

Changes in operating assets and liabilities

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

 
(2,427,163)				
 

 
(150,133)				
 

 

1,073,583 

 

Inventory

 

 
(352,020)				
 

 

365,392 

 

 
(52,532)				
 

Prepaid expenses 

 

 
(86,501)				
 

 

59,929 

 

 

6,673 

 

Income tax receivable

 

 

413,785 

 

 
(28,037)				
 

 
(385,748)				
 

Intangible assets

 

 

— 

 

 

— 

 

 
(2,696)				
 

Deposits

 

 
(215)				
 

 

5,037 

 

 
(25,651)				
 

Accounts payable 

 

 

337,393 

 

 
(24,422)				
 

 
(344,574)				
 

Accrued liabilities

 

 

601,387 

 

 

91,094 

 

 
(2,630,060)				
 

Income tax payable

 

 

348,516 

 

 

— 

 

 

— 

 

Deferred revenue

 

 

— 

 

 
(6,500)				
 

 
(393,483)				
 

Net cash provided by (used in) operating activities

 

 

2,456,086 

 

 

367,113 

 

 
(825,048)				
 

 

 

 

 

 

 

 

 

 

 

 

CASH FLOW FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 
(1,983,188)				
 

 
(202,096)				
 

 
(760,400)				
 

Proceeds from sale of property and equipment

 

 

18,644 

 

 

1,004,266 

 

 

22,886 

 

Net cash provided by (used in) investing activities

 

 
(1,964,544)				
 

 

802,170 

 

 
(737,514)				
 

 

 

 

 

 

 

 

 

 

 

 

CASH FLOW FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

Exercise of preferred stock warrants

 

 

— 

 

 

113 

 

 

1,222 

 

Net payments on line of credit

 

 

— 

 

 
(617,591)				
 

 
(200,000)				
 

Payments on capital lease obligation

 

 
(79,106)				
 

 
(182,754)				
 

 
(176,507)				
 

Payments on long-term debt principal

 

 
(29,388)				
 

 
(254,013)				
 

 
(66,324)				
 

Net cash used in financing activities

 

 
(108,494)				
 

 
(1,054,245)				
 

 
(441,609)				
 

Change in cash

 

 

383,048 

 

 

115,038 

 

 
(2,004,171)				
 

CASH, beginning of year

 

 

999,415 

 

 

884,377 

 

 

2,888,548 

 

CASH, end of year

 

$

1,382,463 

 

$

999,415 

 

$

884,377 

 

 

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

 

 

 

 

 

 

 

 

 

 

Cash paid during the year for interest

 

$

56,230 

 

$

311,514 

 

$

683,171 

 

Cash paid for income taxes

 

$

500,000 

 

$

— 

 

$

— 

 

 

 

 

 

 

 

 

 

 

 

 

NON CASH INVESTING AND FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

Equipment purchased with financing

 

$

80,833 

 

$

— 

 

$

277,051 

 

Conversion of notes payable to Series B preferred stock

 

$

— 

 

$

2,911,344 

 

$

— 

 

 

 

 

			 		

			 		

						 

						 

						 

The Notes to Financial Statements arean integral part of these statements.

						 

						 

						 

5

						 

			 		

			 		

 

TitanLiner, Inc.

Notes to Financial Statements

			 		

Note 1.   Organization and Nature of Operations

TitanLiner, Inc. (the Company) is a Nevada corporation which was originally organized as a Texas limited liability company (LLC) on April 15, 2010. The Company converted from  a LLC to a  Texas corporation on June 29, 2012. On November 2, 2012, the Company converted from a Texas corporation to a Nevada corporation.

Additionally, in the conversion,  the Company entered into an investment agreement (the Agreement) with Capital Southwest Corporation (CSC), K. Rick Turner Revocable Trust, Turner Family Partnership, MK Holdings, LP, Josh Hopkins, Tim Manning, Brannon Nash and Coy Taylor (collectively the Investors).  The Company sold and the Investors acquired the Company’s senior subordinated secured promissory notes in the aggregate principal of $3,000,000, 237,164 shares of Series A Convertible Preferred Stock for $3,500,000 and warrants to acquire an aggregate of 133,500 shares of Series A Convertible Preferred Stock. In December 2016, the Company and the Investors agreed to convert the outstanding notes payable totaling $2,911,344 net of the debt discount of $88,656 into 1,299,173 shares of Series B Convertible Preferred Stock.

The Company was organized to acquire and operate containment systems and related activities. The Company derives its revenue from building rigid secondary containment systems and renting portable containment systems in the oil and gas industry and providing coating services.

Note 2.   Summary of Significant Accounting Policies

Cash and Cash Equivalents

For purposes of the statements of cash flows, the Company considers all highly liquid instruments with an original maturity of three months or less to be cash equivalents.

Trade Receivables and Allowance for Doubtful Accounts

Accounts receivable are stated at the amounts management expects to collect from outstanding balances. The carrying amount of accounts receivable is reduced by an allowance for uncollectible accounts that reflects management’s best estimate of the amount that will not be collected. Management individually reviews all receivable balances and, based on an assessment of current creditworthiness, past experience, historical losses, and management’s evaluation of other pertinent factors, estimates the portion, if any, of the balance that will not be collected.

Management provides for probable uncollectible amounts through a charge to earnings and a credit to a valuation allowance, based on its assessment.

Balances that are still outstanding after management has used reasonable collection efforts are written off through a charge to the allowance and a credit to the respective receivable account.

Inventory

Inventory consists of tank bases, containment systems, and various chemical agents. Inventory is stated at the lower of cost or net realizable value. Cost is determined using the average cost method.

Prepaid Expenses

Prepaid expenses include the prepaid portion of insurance policies and building leases.

6

			 		

 

TitanLiner, Inc.

Notes to Financial Statements

			 		

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation.  Depreciation of property and equipment is provided using the straight-line method for financial reporting purposes at rates based on the following estimated useful lives:

 

 

 

 

Office equipment and furniture

    

5 years

 

Equipment

 

2  –  5 years

 

Autos, trucks and trailers

 

3 – 5 years

 

Building

 

40 years

 

Leasehold improvements

 

40 years

 

Rental equipment

 

2 years

 

 

Replacements, betterments, and additions to property and equipment are capitalized at cost. Expenditures for repairs and maintenance are expensed as incurred. The cost of assets disposed of and the related accumulated depreciation are eliminated from the accounts in the year of disposal. Gains or losses resulting from property disposals are credited or charged to operations.

Other Assets

Intangible assets include costs incurred for a patent for portable containment systems for hazardous or other materials and computer software.

Amortization expense was $9,181 for each of the years ended December 31, 2017, 2016, and 2015 respectively. Estimated amortization expense for each of the next 5 years and thereafter are as follows:

 

 

 

 

 

Years ending December 31,

    

    

 

2018

 

$

9,181 

 

2019

 

 

9,181 

 

2020

 

 

9,181 

 

2021

 

 

9,181 

 

2022

 

 

9,181 

 

Thereafter

 

 

14,206 

 

 

 

$

60,111 

 

 

The Company applies Financial Accounting Standards Board (FASB) Accounting Standard Codification (ASC) Topic 350, Intangibles – Goodwill and Other (ASC Topic 350) which establishes a framework for capitalizing internally developed intangibles. ASC Topic 350 states an internally generated intangible (i.e. patent or trademark) may be capitalized if the following three conditions are satisfied; 1) the costs relate to an intangible asset that can be specifically identified; 2) the identifiable intangible has a determinable life, and 3) the intangible is not one that is inherent in a going concern (internally generated goodwill). The Company deems the patent mentioned above meets all three of these criteria.

Intangible assets are amortized over their estimated useful lives. Amortizable intangible assets are reviewed at least annually to determine whether events or circumstances warrant a revision to the remaining period of amortization.

Fair Values of Financial Instruments and Fair Value Measurements

The Company applies Financial Accounting Standards Board (FASB) Accounting Standard Codification (ASC) Topic 820, Fair Value Measurements and Disclosure (ASC Topic 820), which establishes a framework for measuring fair value under U.S. generally accepted accounting principles and enhances disclosures about the fair value of financial instruments.

Financial instruments of the Company consist of cash, trade accounts receivable, and trade accounts payable. The carrying value of these financial instruments approximates their fair value due to the short maturity of these instruments.

Revenue Recognition

The Company’s products and services are sold based upon purchase orders or field tickets with their customers. The Company recognizes revenue once the following four criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery of the product has occurred 

7

			 		

 

TitanLiner, Inc.

Notes to Financial Statements

			 		

or services have been rendered, (iii) the price of the product or service is fixed or determinable and (iv) collectability is reasonably assured. The Company also recognizes revenue as services are performed in accordance with the related field tickets.

Sales of products and services are recognized upon completion of a containment system at the customer site, upon completion of a coating service, or upon completion of a portable rental term.

Income Taxes

The Company was converted to a C-corporation on June 29, 2012. Items of income and loss attributable to a C-corporation are taxed at the corporate level. The Company is subject to federal income tax.

The deferred taxes represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. An asset and liability approach is used in accounting for income taxes. Deferred tax assets and deferred tax liabilities are classified as current or non-current based on the classification of the related asset or liability for financial reporting or according to the expected reversal date of temporary differences not related to an asset or liability for financial reporting. In addition, a valuation allowance is used, if necessary, to reduce deferred tax assets by the amount of any tax benefits that are not expected to be realized in the future based on available evidence.

The Company implemented the accounting guidance for uncertainty in income taxes using the provisions of ASC Topic 740.  Using that guidance, tax positions initially need to be recognized in the financial statements when it is more-likely-than-not the position will be sustained upon examination by the tax authorities. Such tax positions initially and subsequently need to be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts. The Company believes that it has appropriate support for the income tax positions taken and to be taken on its tax returns, and that its accruals for tax liabilities are adequate for all open tax years based on an assessment of many factors including experience and interpretations of tax laws applied to the facts of each matter. As of December 31, 2017, the Company’s tax years 2014 and thereafter remain subject to examination for federal tax purposes and tax years 2013 and thereafter remain subject to examination for state tax purposes.

The Company’s policy is to record any interest or penalties related to uncertain tax positions as a component of the related federal or state income tax expense.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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. Accordingly, actual results could differ from those estimates.

Economic Concentrations

The Company’s revenue is derived from customers involved in the oil and gas industry. Future operations could be affected by changes in economic or other conditions in the geographical areas in which they operate or by changes in the demand for such services.

Concentrations of Credit Risk

In the normal course of business, the Company maintains cash balances in excess of federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash or cash equivalents.

The Company’s customer base consists primarily of oil and natural gas producers. This concentration of customers may impact the Company’s overall credit risk, either positively or negatively, in that these entities may be similarly affected by changes in economic or other conditions. Collateral is not required for credit extended to the Company’s customers in the form of accounts receivable. The Company believes the individual customer credit risk is generally mitigated by the size, reputation and nature of its customers.

In the normal course of business, the Company grants credit to its customers based on credit evaluations of their financial condition and generally requires no collateral or other security. Major customers are defined as those individually comprising more than 10% of the 

8

			 		

 

TitanLiner, Inc.

Notes to Financial Statements

			 		

Company’s accounts receivable. At December 31, 2017 and 2016, the Company had three  major customers representing 38% and 56% of accounts receivable, respectively.

Major customers are defined as those individually comprising more than 10% of the Company’s sales.  For the year ended December 31, 2017, the Company had two major customers representing 27% of the Company’s sales. For the year ended December 31, 2016,  the Company had one major customer representing 35% of the Company’s sales. For the year ended December 31, 2015, the Company had three major customers representing 43% of the Company’s sales.

Advertising

Advertising costs are expensed as incurred. Advertising costs for the years ended December 31, 2017, 2016 , and 2015 were $72,202,  $45,748, and $65,745, respectively.

Recent Accounting Pronouncements

In November 2015, the FASB issued ASU 2015‐17, “Income Taxes”, which requires all deferred tax assets and liabilities to be classified as non-current on the balance sheet instead of separating deferred taxes into current and non-current amounts. The guidance is effective for annual and interim periods beginning after December 15, 2017, and may be adopted on either a prospective or retrospective basis.

In February 2016, the FASB issued ASU 2016‐02, “Leases”, a comprehensive new standard that amends various aspects of existing accounting guidance for leases, including the recognition of a right of use asset and a lease liability for leases with a duration greater than one year. The guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. The Company has not completed a review of the new guidance; however, the Company anticipates that upon adoption of the standard the Company will recognize additional assets and corresponding liabilities related to leases on the Company’s balance sheet.

In May 2014, the FASB issued ASU No. 2014‐09, which amends ASC Topic 606, “Revenue from Contracts with Customers”. The amendments in this ASU are intended to provide a more robust framework for addressing revenue issues, improve comparability of revenue recognition practices and improve disclosure requirements. The amendments in this accounting standard update are effective for interim and annual reporting periods beginning after December 15, 2017 and December 15, 2018 for public and private entities, respectively. This ASU can be adopted either retrospectively or as a cumulative effect adjustment as of the date of adoption. The Company has not completed a review of the new guidance and its impact on operations.

Subsequent Events

Management has evaluated all events or transactions that occurred after December 31, 2017 through May 31, 2018, the date the financial statements were available to be issued. During this period, the Company had no material recognizable subsequent events.

Note 3.   Property and Equipment

Property and equipment consisted of the following at December 31:

 

 

 

 

 

 

 

 

 

    

2017

    

2016

 

Office equipment and furniture

 

$

29,008 

 

$

86,029 

 

Equipment

 

 

641,893 

 

 

643,785 

 

Autos, trucks and trailers

 

 

1,906,715 

 

 

1,726,938 

 

Building

 

 

1,299,510 

 

 

1,244,830 

 

Leasehold improvements

 

 

49,535 

 

 

49,535 

 

Land

 

 

97,151 

 

 

97,151 

 

Rental equipment

 

 

3,058,360 

 

 

1,489,582 

 

 

 

 

7,082,172 

 

 

5,337,850 

 

Accumulated depreciation

 

 
(3,890,533)				
 

 
(3,399,540)				
 

Total property and equipment, net

 

$

3,191,639 

 

$

1,938,310 

 

 

Depreciation expense for the years ended December 31, 2017, 2016, and 2015 was $805,692, $826,774, and $1,292,707 respectively.

9

			 		

 

TitanLiner, Inc.

Notes to Financial Statements

			 		

Note 4.   Line of Credit

The loan agreement with Comerica Bank was amended in December 2016 to require that the Company pay the principal sum of $3,000,000, or the amount outstanding under the agreement, together with interest thereon at the daily LIBOR rate plus the applicable margin, due January 1, 2019. Eligible accounts consist solely of trade accounts created in the ordinary course of business, upon which the Company’s right to receive advances or repayments is absolute and not contingent upon the fulfillment of any condition.

At December 31, 2017 and 2016, the outstanding balance was $1,064,114, respectively.

Note 5.   Long-Term Debt

Long-term debt consisted of the following at December 31,:

 

 

 

 

 

 

 

 

 

    

2017

    

2016

 

Term notes payable to a financing company, payable in monthly installments totaling $2,664 including interest at 5.95% through January 6, 2020; secured by equipment.

 

$

60,382 

 

$

89,770 

 

Total long-term debt

 

 

60,382 

 

 

89,770 

 

Current portion

 

 
(26,787)				
 

 
(27,358)				
 

Long-term debt, net of current portion

 

$

33,595 

 

$

62,412 

 

 

As of December 31, 2017,  maturities of long-term debt are as follows:

 

 

 

 

 

2018

    

$

26,787  

 

2019

 

 

30,933  

 

2020

 

 

2,662  

 

 

 

$

60,382  

 

 

 

Note 6.   Income Taxes

Deferred income tax assets and liabilities for the Company are computed annually for temporary differences between financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to be realized. Income tax expenses are the taxes payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities.

The income tax provision differs from that computed by applying statutory rates to income before income tax expense (refund) primarily because of property basis adjustments required by tax regulations.

On December 22, 2017, legislation was signed into law which enacts significant changes to U.S. tax and related laws, including certain key U.S. federal income tax provisions applicable to oilfield service and manufacturing companies such as the Company. These include, but are not limited to, the following: a reduction in the maximum U.S. corporate tax rate to 21% beginning in 2018 from 35% in 2017, allows for the immediate expensing of certain property placed in service after September 27, 2017, elimination of certain manufacturing deductions after 2017 and limitations on the deductibility of Interest expense after 2017. U.S. state or other regulatory bodies have not announced potential changes to existing laws and regulations which may result from the new U.S. tax and related laws. U.S. GAAP requires that the impact of tax legislation be recognized in the period in which the law was enacted. As a result, the Company recorded a tax benefit of $190,288 due to a remeasurement of deferred tax assets and liabilities at December 31, 2017 at the U.S. corporate tax rate of 21%.

10

			 		

 

TitanLiner, Inc.

Notes to Financial Statements

			 		

The income tax provision for the years ended December 31, 2017, 2016, and 2015 consists of the following:

 

 

 

 

 

 

 

 

 

 

 

 

    

2017

    

2016

    

2015

 

Federal

 

 

 

 

 

 

 

Current

 

$

739,052 

 

$
(384,548)				
 

$

32,169 

 

Deferred

 

 

59,581 

 

 

6,052 

 

 

279,130 

 

State

 

 

 

 

 

 

 

 

 

 

Current

 

 

278,664 

 

 
(172,372)				
 

 

7,766 

 

Deferred

 

 

27,704 

 

 
(18,874)				
 

 

— 

 

Income tax provision(benefit)

 

$

1,105,001 

 

$
(569,742)				
 

$

319,065 

 

 

The estimated provision for income tax differs from the amount calculated by applying the statutory federal income tax rates to income before taxes due to expenses which are not deductible for federal income tax, as follows:

 

 

 

 

 

 

 

 

 

 

 

 

    

2017

    

2016

    

2015

 

Taxes at statutory rates

 

$

1,258,023 

 

$
(561,950)				
 

$

51,991 

 

State taxes at various rates

 

 

68,919 

 

 
(14,880)				
 

 

97,766 

 

Other

 

 
(221,941)				
 

 

7,088 

 

 

169,308 

 

Income tax provision (benefit)

 

$

1,105,001 

 

$
(569,742)				
 

$

319,065 

 

 

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at December 31, 2017 and 2016 are presented below:

 

 

 

 

 

 

 

 

 

 

 

 

 

    

2017

    

2016

 

Deferred income tax asset:

 

 

 

 

 

 

 

Stock compensation

 

$

23,182 

 

$

22,393 

 

Bad debts

 

 

18,810 

 

 

13,949 

 

Inventory

 

 

— 

 

 
(12,958)				
 

Accrued vacation

 

 

5,677 

 

 

8,789 

 

Total deferred income tax asset

 

$

47,669 

 

$

32,173 

 

 

 

 

 

 

 

 

 

Deferred income tax liability:

 

 

 

 

 

 

 

Property and equipment, principally due to depreciation

 

$

374,024 

 

$

253,590 

 

Net operating loss carryforward

 

 

— 

 

 
(13,008)				
 

Total deferred income tax liability

 

$

374,024 

 

$

240,582 

 

 

 

Note 7.   Leases

Capital Lease

The Company leases autos and equipment with lease terms through 2020.  The assets and liabilities under capital leases are recorded at the lower of the present value of the minimum lease payments or the fair value of the assets. The assets are depreciated over the shorter of their related lease terms or their estimated productive lives. Depreciation of assets under capital leases is included in depreciation expense.

Following is a summary of property held under capital leases at December 31, 2017 and 2016:

 

 

 

 

 

 

 

 

 

    

2017

    

2016

 

Autos

 

$

454,926 

 

$

482,948 

 

Accumulated depreciation

 

 
(350,581)				
 

 
(310,450)				
 

Total

 

$

104,345 

 

$

172,498 

 

 

11

			 		

 

TitanLiner, Inc.

Notes to Financial Statements

			 		

Minimum future lease payments under capital leases as of December 31, 2017 for each of the next three years are:

 

 

 

 

 

Year Ending December 31,

    

    

 

2018

 

$

134,051 

 

2019

 

 

28,585 

 

2020

 

 

2,383 

 

Total minimum lease payments

 

 

165,019 

 

Amount representing interest

 

 
(6,658)				
 

Present value of net minimum lease payments

 

 

158,361 

 

Current portion

 

 
(131,937)				
 

Present value of net minimum lease payments, net of current portion

 

$

26,424 

 

 

Operating Leases

The Company leases warehouse and office space under non-cancelable agreements classified as operating leases, expiring at various dates through 2022.  Rental expense for the year was $567,019,  $551,197, and $634,727 for 2017,  2016, and 2015 respectively.  Minimum annual rental commitments under non-cancelable agreements are as follows at December 31, 2017:

 

 

 

 

 

Year Ending December 31,

    

    

 

2018

 

$

439,702 

 

2019

 

 

333,248 

 

2020

 

 

219,000 

 

2021

 

 

78,000 

 

2022

 

 

45,500 

 

Total minimum lease payments

 

$

1,115,450 

 

 

 

Note 8.   Stockholders’ Equity

The Company has three classes of stock which includes  Series A  preferred stock, Series B preferred stock, and common stock. The Company is authorized to issue an aggregate of 6,669,837 shares having a par value of $0.001 per share, of which 5,000,000 shares shall be common stock, 370,664 shares shall be “Series A Convertible Preferred Stock”, and 1,299,173 shares shall be “Series B Convertible Preferred Stock”.

Preferred Stock

Series A Convertible Preferred Stock and Series B Convertible Preferred Stock holders may vote on any matters and are entitled to cast votes equal to the number of shares each respective class can convert into Common Stock. The holders may convert their shares at any time into Common Stock. In the event of liquidation, the holders of Series B shares shall be paid preferential amounts before payments are made to the holders of Series A shares.

Series A Convertible Preferred Stock are valued at the Series A Liquidation Preference on the date of such conversion. The Series A Liquidation Preference is equal to the original issue price plus all accrued and unpaid dividends thereon to the date fixed for liquidation. As of December 31, 2017 and 2016, there were no accrued and unpaid dividends.

Series B Convertible Preferred Stock are valued at the Series B Liquidation Preference on the date of such conversion. The Series B Liquidation Preference is equal to the original issue price plus the PIK Amount (“PIK”) defined as equal to 6% per annum of the original issue price wherein interest from the date of issuance shall accrue cumulatively and be compounded annually. As of December 31, 2017 and 2016, the balance related to PIK was $164,957 and 0, respectively.

As of December 31, 2017 and 2016,  all Series A shares and Series B shares totaling 1,669,837, respectively, were issued and held by the investor group consisting of Capital Southwest Corporation, K. Rick Turner Revocable Trust, Turner Family Partnership, and MK Holdings, LP.

12

			 		

 

TitanLiner, Inc.

Notes to Financial Statements

			 		

Warrants

At December 31, 2017 and 2016, the Company had outstanding warrants to purchase zero shares of Series A Convertible Preferred Stock with an exercise price of $0.01 per share, respectively.  The warrants became exercisable in 2012 and will expire on December 31, 2022. No warrants were exercised during 2017. 11,261 warrants were exercised in December 2016.

Common Stock

Common Stock has all the rights, privileges, preferences and obligations provided for in the Agreement, which are generally consistent with an ordinary equity ownership interest. At December 31, 2017 and 2016,  1,000,000 shares of Common Stock had been issued, 765,031 and 749,300 of which were still outstanding at December 31, 2017 and 2016, respectively.

Treasury Stock

Treasury stock is shown at cost and at December 31, 2017 and 2016, consisted of 234,969 and 250,700 shares of common stock respectively.

Stock Appreciation Rights

During 2017 and 2016, the Company granted 9,000 and 6,000 equity equivalent awards, respectively, in the form of Stock Appreciation Rights (“SARs”) to key members of management that vest evenly over four years from the date of the grant. The SARs have no rights with payment contingent on a change of control. The Company determined the fair value of the SARs to be $0 as of the date of the grant.

Note 9.   Commitments and Contingencies

In the normal course of business, the Company is involved in disputes and/or claims made by it against others or made by others against it. Management believes that the ultimate outcome of any dispute will not have a material adverse effect on its financial position, results of operations or on cash flows.

The Company is in an industry subject to increasingly demanding environmental standards imposed by federal, state and local environmental laws and regulations. Management believes it is in substantial compliance with applicable environmental laws and regulations.

Note 10.   Employee Benefit Plan

The Company has a safe harbor 401(k) plan through Fidelity Investments covering all employees who have worked for the Company for more than 90 days as defined in the plan. The plan provides for employer matching up to 4% of each eligible employee’s contributions. The Company contributed $73,896,  $57,525, and $52,684 to the plan for the years ended December 31, 2017, 2016, and 2015, respectively.

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