REDUCTION IN VALUE OF ASSETS AND OTHER CHARGES

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

NOTE 3 . REDUCTION IN VALUE OF ASSETS AND OTHER CHARGES

During the three months and nine months ended September 30, 2016, the Company incurred a reduction in value of assets of $0.8 million and $1.6 million, respectively. During the three and nine months ended September 30, 2015, the Company incurred a reduction in value of $0.2 million.

The components of reduction in value of assets are as follows (in thousands):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2016		2015		2016		2015
	(unaudited)				(unaudited)
Reduction in value of property and equipment - disposals	$	787	$	205	$	1,087	$	205
Reduction in value of intangibles		-		-		543		-
Total reduction in value of assets	$	787	$	205	$	1,630	$	205

Reduction in Value of Property and Equipment – Disposals

During the nine months ended September 30, 2016, the Company recorded an aggregate loss on the disposal of property and equipment of $1.1 million which consisted of a loss of $0.3 million during the first quarter and $0.8 million during the third quarter.

During the three months ended March 31, 2016, the Company recorded a loss on disposal of property and equipment of $0.3 million when the Company sold idle and underutilized equipment and vehicles with a net book value of $0.8 million for cash proceeds of approximately $0.5 million. Due to the depressed market for oilfield services, these assets were sold for proceeds significantly less than the net book value resulting in higher losses than normal. These assets were sold within the basket of permitted asset sales, as defined in our credit facility, and the Company used the proceeds to fund working capital needs created by the significant deterioration in the industry throughout 2015.

During the three months ended September 30, 2016, the Company recorded a loss on the disposal of property and equipment of $0.8 million when the Company sold idle and underutilized equipment and vehicles with a net book value of $1.1 million for cash proceeds of approximately $0.3 million. Due to the depressed market for oilfield services, these assets were sold for proceeds significantly less than the net book value resulting in higher losses than normal. Wells Fargo provided the required consent to sell the assets subject to all proceeds, net of commission, being immediately used to pay down outstanding balances owed to Wells Fargo under the terms of our credit facility.

During the nine months ended September 30, 2015, the Company recorded a loss on the disposal of property and equipment of $0.3 million when the Company sold idle and underutilized equipment and vehicles. These assets were sold within the basket of permitted asset sales, as defined in our credit facility, and the Company used the proceeds to fund working capital needs created by the significant deterioration in the industry.

Reduction in Value of Intangibles

During the nine months ended September 30, 2016, the Company recorded a $0.5 million reduction in an intangible associated with a non-compete which management determined was non-enforceable. As of September 30, 2016, this intangible was recorded with no value on the condensed consolidated balance sheet. As of December 31, 2015, the non-compete was recorded at $0.7 million on the consolidated balance sheet.

Professional Fees – Recapitalization

During the three and nine months ended September 30, 2016, in connection with forbearance agreements and other negotiations with its former lender, Wells Fargo, and in connection with the Recapitalization, the Company recorded an aggregate of approximately $0.3 million and $0.4 million in charges, primarily for professional fees, which are included in selling, general and administrative expenses on the condensed consolidated statements of operations.

Severance Expense – Operational Restructuring

During the nine months ended September 30, 2016 and 2015, the Company recorded $0.5 million and approximately $95,000 in charges relating to severance due to the significant downturn in the industry. In 2016, we ceased making cash severance payments due to our limited liquidity and we do not know when or if we will be able to satisfy the remaining outstanding severance claims. As such, there was an accrued severance liability balance of $0.5 million as of September 30, 2016 which is included in accounts payable and accrued expenses on the condensed consolidated balance sheet. As of December 31, 2015, an accrued severance liability of $0.1 is included in accrued expenses on the consolidated balance sheet.