Liquidity

9 Months Ended

Sep. 30, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Liquidity

NOTE 2. LIQUIDITY

The significant decline in oil demand due to COVID-19, the instability of oil prices caused by geopolitical issues and production levels, and the limited availability of storage capacity, have together resulted in our customers announcing significant reductions to their capital expenditure budgets for 2020. Demand for our products and services has been severely impacted as a result, and management expects this to continue for the duration of 2020 and potentially beyond; however, we are currently unable to estimate the full impact to our business, how long this significant drop in demand will last or the depth of the decline.

In an effort to offset the reduction in revenue resulting from the weakened macroeconomic environment, we have implemented certain cost reduction measures during 2020. These measures included, but were not limited to, the following:

● 20% reduction of the base salary beginning in April 2020 and a 40% salary deferral beginning in October 2020 for the Company’s Chief Executive Officer, Chief Operating Officer, and Chief Financial Officer;

● 20% reduction in the base salaries beginning in April 2020 and a 20% deferral of base salaries  beginning in October 2020 of certain non-executive officers of the Company;

● 20% reduction in fees to be paid beginning in April 2020 and a 40% deferral of fees beginning in October 2020 to the independent directors on the Board for their service as directors;

● 5% to 10% reduction in salaries beginning in April 2020 and a 10% deferral of salaries beginning in October 2020 of other members of the management team and salaried workforce;

● 43% reduction of the Company’s workforce; and 

● Closure of our West Texas repair facility in July 2020. 

We have also entered into amended agreements with certain of our customers, reduced our planned capital expenditures for 2020 and decided to defer further investment in new technology development, including our Strider technology, for the foreseeable future. Management is working diligently with vendors to achieve amended price concessions and terms of our payables. We believe the U.S. onshore activity for the remainder of 2020 will remain at depressed levels and continue to be constrained.

We are working to minimize the decline in revenue by adding additional revenue streams and maintaining cost containment measures in order to be cash flow positive. We believe that our borrowing capacity, cash generated from operations and the proceeds of the Paycheck Protection Program (“PPP”) loan (see Note 9 – Long-Term Debt) will be sufficient to fund our operations for the next 12 months. To enhance liquidity, our operational and financial strategies include managing our operating costs, accelerating collections of international receivables, and reducing working capital requirements and restructuring our debt. If we are unable to do this, we may not be able to, among other things, (i) maintain our revised general and administrative spending levels; (ii) fund certain obligations as they become due; and (iii) respond to competitive pressures or unanticipated capital requirements. COVID-19 has also led to a significant disruption in the equity and debt capital markets, which could hinder our ability to raise new capital or obtain financing on acceptable terms. We cannot provide any assurance that financing will be available to us in the future on acceptable terms, if at all.

Additionally, in July 2020, the Company filed a Form S-3 Shelf Registration that will allow the Company to offer and sell, from time to time, up to $20,000,000 of securities.