UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

FORM 10-K/A

Amendment No. 1 to Form 10-K

 

(Mark One)

 

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Fiscal Year ended December 31, 2017

 

or

 

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                 to

 

Commission File Number: 001-36909

 

ECO-STIM ENERGY SOLUTIONS, INC.

(Exact name of registrant as specified in its charter)

 

	Nevada		20-8203420
	(State or other jurisdiction of		(IRS Employer
	incorporation or organization)		Identification Number)

 

2930 W. Sam Houston Pkwy N., Suite 275, Houston TX		77043
(Address of principal executive offices)		(Zip Code)

 

281-531-7200

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Name of each exchange on which registered
Common Stock, par value $0.001 per share		The NASDAQ Stock Market LLC

 

Securities registered pursuant to Section 12(g) of the Act: NONE

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [  ] No [X]

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [  ] No [X]

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [  ]

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer	[  ]	Accelerated filer [  ]
Non-accelerated filer	[  ] (Do not check if a smaller reporting company)	Smaller reporting company [X]
		Emerging growth company [  ]

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.           [  ]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [  ] No [X]

 

As of June 30, 2017, the aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant, computed by reference to the closing price of that date, was $15,489,917.

 

The registrant had 74,577,899 shares of common stock outstanding at March 16, 2018.

 

Documents Incorporated by Reference: None

 

 

 

EXPLANATORY NOTE

 

On March 19, 2018 Eco-Stim Energy Solutions, Inc. (we use the terms “Eco-Stim,” “EcoStim,” “Company,” “we,” “us” and “our” to refer to Eco-Stim Energy Solutions, Inc.) filed its Annual Report on Form 10-K for the fiscal year ended December 31, 2017 (the “Original Form 10-K”). This Amendment No. 1 on Form 10-K/A (the “Form 10-K/A”) amends Part III, Items 10 through 14 of the Original Form 10-K to revise information previously provided in the Original Form 10-K. Specifically, certain of the information relating to our named executive officers’ compensation as reported in the Summary Compensation Table included in the Original Form 10-K was incorrect due to inadvertent errors made in connection with the preparation of the Summary Compensation Table. The corrected information relating to our named executive officer’s compensation earned for services rendered to us is presented below on page 7. The result of this correction (a) increased the total compensation reflected in the Summary Compensation Table for each of Messrs. Boswell, Fernandez and Nickolatos for 2017 by $680,878, $860,636 and $594,872, respectively, and (b) decreased the total compensation reflected in the Summary Compensation Table for each of Messrs. Boswell, Fernandez and Nickolatos for 2016 by $34,194, $56,980 and $26,402, respectively.

 

In addition, certain of the information provided with respect to our named executive officers in the Outstanding Equity Awards at 2017 Fiscal Year-End table included in our Original Form 10-K was incorrect due to (i) the inadvertent inclusion of certain previously vested awards in the “Number of Shares of Stock That Have Not Vested” and the “Market Value of Shares of Stock That Have Not Vested” columns; and (ii) errors in the number of options listed as either exercisable or unexercisable in the table. The corrected information relating to our named executive officers is presented below on page 9. The result of this correction (a) decreased the number of shares of stock that have not vested reflected for each of Messrs. Boswell, Fernandez and Nickolatos as of December 31, 2017 by 93,000, 118,125 and 87,500 shares, respectively, and (b) decreased the market value of the shares of stock that have not vested reflected for each of Messrs. Boswell, Fernandez and Nickolatos as of December 31, 2017 by $117,180, $148,838 and $110,250, respectively.

 

Although the Company sufficiently included Part III in the Original Form 10-K, the Company has opted to file this Form 10-K/A so that the disclosure provided in the Company’s proxy statement for its 2018 annual meeting of stockholders is consistent with the disclosure provided in the Company’s Annual Report on Form 10-K, as amended by this Form 10-K/A. Except as described above, and except for certain immaterial changes conforming disclosure in this Form 10-K/A to disclosure provided in the Company’s proxy for its 2018 annual meeting of stockholders, this Form 10-K/A does not modify or update disclosure in, or exhibits to, the Original Form 10-K. Furthermore, this Form 10-K/A does not change any previously reported financial results, nor does it reflect events occurring after the date of the Original Form 10-K. Information not affected by this Form 10-K/A remains unchanged and reflects the disclosures made at the time the Original Form 10-K was filed.

 

As required by Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), certifications by Eco-Stim’s principal executive officer and principal financial officer are filed as exhibits to this Form 10-K/A under Item 15 of Part IV hereof.

 

 

TABLE OF CONTENTS

 

		Page
explanatory note
PART III.
Item 10.	Directors, Executive Officers and Corporate Governance	2
Item 11.	Executive Compensation	7
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	13
Item 13.	Certain Relationships and Related Transactions, and Director Independence	15
Item 14.	Principal Accounting Fees and Services	17
PART IV.
Item 15.	Exhibits	17
SIGNATURES		18

 

 

PART III.

 

Item 10. Directors, Executive Officers and Corporate Governance

 

All of our directors have been elected to serve until our next annual meeting of stockholders or until their earlier resignation, removal or death. Biographical information regarding our executive officers and directors, including their ages as of May 16, 2018, is as follows:

 

Name		Age		Position
Brian R. Stewart		62		Chairman
Jon Christopher Boswell		57		Director, President and Chief Executive Officer
Barry B. Ekstrand		60		Chief Operating Officer
Carlos A. Fernandez		61		Executive Vice President-Corporate Business Development and General Manager-Latin America
Alexander Nickolatos		40		Chief Financial Officer and Assistant Secretary
Bjarte Bruheim		62		Director
Christopher A. Krummel		50		Director
Timothy L. Reynolds		39		Director
Todd R. Snyder		55		Director
Andrew Teno		33		Director

 

Former Directors Lap Wai Chan, Leonal Narea and Ahmad Al-Sati advised the Company in March 2017 that each would resign from our Board of Directors effective immediately. Former Director Donald Stoltz advised the Company in August 2017 that he would resign from our Board of Directors effective immediately. Former Directors Andrew Colvin and David Proman advised the Company in October 2017 that each would resign from our Board of Directors effective immediately. There was no disagreement between Messrs. Chan, Narea, Al-Sati, Stoltz, Colvin or Proman and the Company.

 

Brian R. Stewart. Mr. Stewart was designated by Fir Tree to serve on our Board of Directors in October 2017 pursuant to the A&R Stockholder Rights Agreement. Mr. Stewart was appointed as Chairman of our Board of Directors in December 2017. Mr. Stewart retired from Devon Energy Corporation (“Devon”) in June 2012 after 35 years of service. During a portion of his tenure, he served as Devon’s Chief Engineer responsible for the development and integration of company-wide best practices for horizontal drilling, frac design, and well control. During his last five years at Devon, Mr. Stewart served as the Vice President of Well Engineering for the Offshore Division. Beginning in June 2012 following his retirement from Devon, Mr. Stewart served as President and Chief Executive Officer of U.S. Well Services (“USWS”), a provider of fracturing services in the Appalachian Basin (Marcellus and Utica Shales). Mr. Stewart retired from the day to day operations of USWS on December 31, 2015 but remained on USWS’s Board of Directors until it was recapitalized in February 2017. Mr. Stewart received a BS degree in Petroleum Engineering from Louisiana State University and a MS degree in Engineering Management from the University of Southwestern Louisiana (now UL-Lafayette).

 

Jon Christopher Boswell. Mr. Boswell has served as President and Chief Executive Officer and a Director of our Company and its predecessors, FracRock International Inc. (“FRI”) and FRIBVI, since December 2011. Prior to FRI, from 2009 to 2011, Mr. Boswell served as Chief Financial Officer for NEOS GeoSolutions, a Silicon Valley backed oilfield technology company (“NEOS”). Prior to NEOS, from August 2003 to January 2009, he served as Chief Financial Officer for Particle Drilling Technologies, an oilfield services and technology company (“Particle”). Prior to Particle, he served as Senior Vice President and Chief Financial Officer of Petroleum Geo-Services ASA (“PGS”) from December 1995 until October 2002. Mr. Boswell began his career at Arthur Andersen & Co. and later served in management positions with PriceWaterhouse, LLP in Houston, Texas. Mr. Boswell is a 1985 graduate of the University of Texas at Austin.

 

 

Barry B. Ekstrand. Mr. Ekstrand joined our company in March 2017, and has served as Senior Vice President of Operations – North America from March 2017 through July 2017 and as Chief Operating Officer since August 2017. Prior to joining our company and since January 2016, Mr. Ekstrand served as an Executive-in-Residence at Republic Chemical Technologies (“RCT”), a portfolio company of the CSL Energy Fund, focusing on the application of chemical technologies and services in the energy industry. Mr. Ekstrand served as a freelance consultant in the energy services industry from October 2015 to January 2016. From May 2015 to October 2015, Mr. Ekstrand served as President of the Chemical Services Division of Chem Rock Technologies, a supplier of chemical products and services to the oil and gas industry, including additives and frac chemical for well fracturing and coiled tubing fluid. From October 2014 to May 2015, Mr. Ekstrand worked as a freelance consultant in the energy services industry. From May 2012 to October 2014, Mr. Ekstrand served first as Vice President – Coiled Tubing, and then as Sr. Vice President, Completion Services, for Key Energy Services, a company providing an array of onshore energy production services and solutions (“Key Energy”). Prior to Key Energy, from 2010 to 2012 Mr. Ekstrand served as President of CRS Proppants, a provider of resin coated sands for oil and gas well fracturing applications. He also served in various positions with Weatherford International from 2002 to 2010, including as its Global Vice President, Reservoir Stimulation & Pressure Pumping Business Unit. Mr. Ekstrand began his career with Halliburton Energy Services, where he served in various positions from 1980 to 2002, including as Global Strategic Business Manager and Country Manager. Mr. Ekstrand received an MBA from California State University, Bakersfield (1993), a BS in Chemical Engineering from California State Polytechnic University, Pomona (1980), and is named as an inventor of eight U.S. patents.

 

Carlos A. Fernandez. Mr. Fernandez has served as our Executive Vice President-Corporate Business Development and General Manager-Latin America since July 2014. He served as a member of the Board of our company and its predecessors from December 2011 to March 2017. Mr. Fernandez has over 35 years of experience in the oil and gas industry and over 30 years of experience in various executive management and sales positions. From January 2010 to present, he has worked as General Manager – Latin America for NEOS. From April 2006 to November 2009, he served as Senior Vice President Business Development for 3D-Geo. While at 3D-Geo, Mr. Fernandez led the formation of the Kaleidoscope seismic imaging project, a partnership among Repsol, 3D-Geo, Stanford University, IBM, and the Barcelona Supercomputing Center. From 1996 to March 2006, he served as General Manager – Latin America for Paradigm Geophysical. From 1990 to 1995, Mr. Fernandez served as President of Petroleum Information Argentina. From 1979 through 1990, he held various leadership positions with seismic technology and computing companies such as Silicon Graphics. Mr. Fernandez received his degree in geophysics with honors from the National University of La Plata in Argentina.  

 

Alexander Nickolatos. Mr. Nickolatos has served as our Chief Financial Officer since December 2013 and was appointed in July 2014 as our Assistant Secretary. Prior to being appointed our Chief Financial Officer, Mr. Nickolatos served as Controller of the Company’s predecessors, FRI and FRIBVI, since July 2012. From March 2006 until June 2012, Mr. Nickolatos served as the Director of Financial Planning and Analysis at NEOS. During his time at NEOS, he also served as Controller and Treasurer, and oversaw oil and gas accounting and finance operations in over seven countries, including Argentina. Prior to joining NEOS, he worked for Arthur Andersen and PricewaterhouseCoopers. Mr. Nickolatos is a Certified Public Accountant and holds a BBA degree, summa cum laude, from Walla Walla University.

 

 

Bjarte Bruheim. Mr. Bruheim has served as a Director our company and its predecessors since December 2011 and served as Chairman of our Board of Directors from 2012 to 2017. He has over 30 years of international management experience and is also a serial entrepreneur. He has spent the majority of his career introducing technologies that reduce risk and improve efficiencies in the oil and gas business. Such companies include oilfield services companies such as PGS, which he co-founded in 1991; Electromagnetic Geoservices ASA (“EMGS”), where he was an early venture investor and Executive Chairman starting in 2004 and became Chief Executive Officer in January 2015 serving until August 2015; Geo-Texture Technologies, Inc. (“Geo-Texture”), which he co-founded in 2005; and ODIM ASA (“ODIM”), which he worked to turn around and later sell. In addition to the oilfield service companies, Mr. Bruheim was a co-founder in Spinnaker Exploration Company using PGS technology, an early venture investor in Spring Energy using EMGS technology, and co-founder of a small exploration and production (“E&P”) company operating in the Eagle Ford field in Texas using Geo-Texture technology. Mr. Bruheim is also a founder of Axxis Geo Solutions AS and has served as executive chairman of that company since 2017. Mr. Bruheim started his career as an executive with WesternGeco, now Schlumberger, after graduating with a master’s degree in Physics and Electronics from the Norwegian University of Science & Technology in Trondheim, Norway.

 

Christopher A. Krummel. Mr. Krummel joined our Board of Directors in January 2014. Mr. Krummel serves as Vice President of Finance and Chief Accounting Officer of McDermott International Inc. (“McDermott”), responsible for all accounting functions including consolidated financial reporting, SEC filings and financial planning and analysis. Prior to joining McDermott, he provided advisory services to American Industrial Partners LLC (“AIP”), and other companies focused on the global energy industry. Prior to AIP, he served as the Vice President and Chief Financial Officer for EnTrans International LLC, a portfolio company of AIP. Prior to September of 2014, he served as Vice President-Finance, Controller and Chief Accounting Officer for Cameron International Corporation (“Cameron”), where he was responsible for all accounting functions including consolidated financial reporting and SEC filings. He started at Cameron in October 2007 and previously served as Chief Financial Officer for Enventure Global Technology, a private equity backed startup. Prior to Enventure, he held financial leadership roles with PGS and PriceWaterhouse LLP. He holds a BSBA in accounting from Creighton University and an MBA from The Wharton School of the University of Pennsylvania. In addition to our Board, Mr. Krummel is a director of Rebuilding Together Houston.

 

Timothy L. Reynolds. Mr. Reynolds joined our Board of Directors in August 2017. Mr. Reynolds serves as Co-CEO of Dakota Midstream, an independent midstream energy company in the Bakken shale formation. Prior to founding Dakota Midstream in July 2014, Mr. Reynolds led the acquisition of Mesa Oil Services, a salt water disposal operator in the Bakken in April 2014. Previously, Mr. Reynolds worked at Highstar Capital, an infrastructure investment firm from 2008 to March 2014, most recently as Principal and Director of Corporate Affairs. Earlier in his career, he worked at the White House, serving first with the National Economic Council from 2002 to 2004, and then in the Office of the Chief of Staff for the President from 2004 to 2006. In the former position, he focused on energy, health care, and social security policy formation and implementation. Mr. Reynolds is a graduate of the University of North Carolina at Chapel Hill (2001), and earned his MBA from the Stanford Graduate School of Business (2008).

 

Todd R. Snyder. Mr. Snyder was designated by Fir Tree to serve on our Board of Directors in October 2017 pursuant to the A&R Stockholder Rights Agreement. Mr. Snyder is the founder and Senior Managing Director of TRS Advisors LLC, an investment banking and financial advisory firm. Mr. Snyder has also served as a director of Midstates Petroleum Company, Inc. since October 2016. Prior to founding TRS Advisors LLC in late 2017, for seventeen years, Mr. Snyder was an executive vice chairman of Rothschild & Co. Before joining Rothschild & Co. in March 2000, Mr. Snyder was a Managing Director at Peter J. Solomon Company. Prior to joining Peter J. Solomon Company, Mr. Snyder was a Managing Director at KPMG Peat Marwick in the Corporate Recovery group where he was also National Director of the Corporate Recovery Practice for Government Enterprises (regulated and privatizing industries). Prior to his move to investment banking, Mr. Snyder practiced law at Weil, Gotshal & Manges. Mr. Snyder received a B.A. degree from Wesleyan University and a J.D. from the University of Pennsylvania Law School.

 

Andrew Teno. Mr. Teno was designated by Fir Tree to serve on our Board of Directors in March 2017, pursuant to the A&R Stockholder Rights Agreement. Mr. Teno has worked at Fir Tree Partners out of the Miami office since July 2011 and is currently a Director. He is focused on international value investing across capital structures, industries and geographies. Prior to Fir Tree, he worked at Crestview Partners from July 2009 to July 2011 as an associate in their Private Equity business. Prior to Crestview, Mr. Teno worked at Gleacher Partners, an M&A boutique, from July 2007 to July 2009. Mr. Teno received an undergraduate business degree from the Wharton School at the University of Pennsylvania in 2007.

 

 

There are no family relationships between any of the executive officers and directors.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Under Section 16(a) of the Exchange Act, directors, officers and beneficial owners of 10 percent or more of our common stock (“Reporting Persons”) are required to report to the SEC on a timely basis the initiation of their status as a Reporting Person and any changes with respect to their beneficial ownership of our common stock. Based solely on a review of Forms 3, 4 and 5 (and any amendments thereto) furnished to us, we have concluded that no Reporting Persons were delinquent with respect to their reporting obligations, as set forth in Section 16(a) of the Exchange Act, other than the initial statement of beneficial ownership on Form 3 for Mr. Timothy L. Reynolds, which was filed late.

 

Director Qualifications and Board Leadership Structure

 

Mr. Stewart has significant operational and executive experience in the oil and gas industry, including serving in roles of increasing responsibility at a large independent oil and gas exploration and production company and as the chief executive officer of an oil field services company. Mr. Boswell is the President and Chief Executive Officer of our company and has an extensive track record as an executive officer in the energy industry and has been part of starting and building multiple companies within the oilfield services sector. He also brings a strong financial background to our Board of Directors. Mr. Bruheim has significant operational experience in the oilfield services industry and brings both a practical understanding of the industry as well as hands-on experience at building companies in this sector. He currently serves on several boards of directors of private companies in the oil and gas industry and as Chief Executive Officer of companies operating in our industry and brings experience with young growing companies to our Board, which adds significant value. Mr. Krummel has significant financial experience in the industry with current and previous roles as Chief Financial Officer and Chief Accounting Officer with public companies where he was responsible for all accounting functions, including consolidated financial reporting and SEC filings. Mr. Reynolds has extensive experience serving as an executive in the energy sector and has relationships with many E&P companies, including companies operating in the U.S. and Argentina. Mr. Snyder has significant expertise in corporate finance and experience serving as a public company director, and he enhances the financial expertise of our Board of Directors. Mr. Teno has experience investing globally across asset classes including public equities and credit including high yield and investment grade bonds and loans, as well as private equity. He also has experience in corporate advisory including mergers and acquisitions and fairness opinions.

 

Committees of our Board of Directors

 

Our Board of Directors has three standing committees: the Audit Committee, the Compensation Committee, and the Nominating and Governance Committee.

 

AUDIT COMMITTEE

 

The Audit Committee of our Board of Directors currently consists of Messrs. Bruheim, Reynolds and Krummel. Mr. Krummel has served as chairman of the Audit Committee since January 2014. Previously, Mr. Narea served on the Audit Committee from March 2016 to his resignation in March 2017. Our Board of Directors determined in March 2018 that all members of the Audit Committee meet the independence standards of the applicable NASDAQ Stock Market Rules and the heightened standards applicable to audit committee members (to the extent relevant to the Audit Committee). In addition, our Board of Directors has determined that Mr. Krummel qualifies as an “audit committee financial expert,” as defined in Item 407(d)(5)(ii) of Regulation S-K.

 

The Audit Committee oversees, reviews, acts on and reports on various auditing and accounting matters to our Board, including:

 

	●	overseeing the accounting and financial reporting processes of our company and audits of our financial statements;
	●	overseeing the quality, integrity and reliability of our financial statements and other financial information we provide to any governmental body or the public;

 

 

	●	overseeing our compliance with legal and regulatory requirements;
	●	overseeing our independent auditors’ qualifications, independence and performance;
	●	overseeing our systems of internal controls regarding finance, accounting, legal compliance and ethics that management and our Board of Directors have established; and
	●	providing an open avenue of communication among our independent auditors, financial and senior management, and our Board of Directors, always emphasizing that the independent auditors are accountable to the Audit Committee.

 

We have an Audit Committee Charter that outlines the primary duties of the Audit Committee, which is available on our website in the “Corporate Governance” subsection in the “Investors” section. The Audit Committee held seven meetings during the fiscal year ended December 31, 2017.

 

COMPENSATION COMMITTEE

 

The Compensation Committee of our Board of Directors currently consists of Messrs. Krummel, Reynolds and Teno. Mr. Krummel has served as chairman of the Compensation Committee since March 2015. Previously, Mr. Al-Sati served on the Compensation Committee from March 2015 to his resignation in March 2017, and Mr. Stoltz served on the Compensation Committee from March 2016 to his resignation in August 2017. Our Board of Directors determined in March 2018 that all members of the Compensation Committee meet the independence standards of the applicable NASDAQ Stock Market Rules. In March 2018, our Board also determined that Messrs. Krummel and Reynolds each satisfy the requirements of non-employee directors under Rule 16b-3(b)(3) of the Exchange Act.

 

The Compensation Committee assists our Board of Directors in carrying out its responsibilities with respect to (i) employee compensation, benefit plans, and employee stock programs and (ii) matters relating to the compensation of persons serving as senior management and the Chief Executive Officer of the Company. The Compensation Committee determines and approves the total compensation of the Chief Executive Officer and senior management based on its evaluation of the performance of the Chief Executive Officer and senior management in light of certain goals and objectives as well as input from the Nominating and Governance Committee, and with respect to senior management, the Compensation Committee also considers input from the Chief Executive Officer. The Compensation Committee has broad delegating authority, including the authority to delegate to subcommittees as it deems appropriate, to delegate to one or more executive officers the authority to approve equity compensation awards under established equity compensation plans of the Company to employees and officers of the Company other than those subject to Section 16 of the Exchange Act and to delegate any non-discretionary administrative authority under Company compensation and benefit plans consistent with any limitations specified in the applicable plans.

 

We have a Compensation Committee Charter that outlines the primary duties of the Compensation Committee, which is available on our website in the “Corporate Governance” subsection in the “Investors” section. The Compensation Committee held two meetings during the fiscal year ended December 31, 2017.

 

NOMINATING AND GOVERNANCE COMMITTEE

 

The Nominating and Governance Committee of our Board of Directors currently consists of Messrs. Bruheim and Teno. Mr. Bruheim has served as chairman of the Nominating and Governance Committee since March 2016. Previously, Mr. Al-Sati served on the Nominating and Governance Committee from March 2016 to his resignation in March 2017, and Mr. Stoltz served on the Nominating and Governance Committee from March 2016 to his resignation in August 2017. In addition, Mr. Proman served on the Nominating and Governance Committee from March 2017 to his resignation in October 2017.

 

 

The Nominating and Governance Committee identifies, evaluates and nominates qualified candidates for appointment or election to our Board of Directors. In identifying, evaluating and recommending director nominees to the Board, the Nominating and Governance Committee identifies persons who possess the integrity, leadership skills and competency required to direct and oversee our management in the best interests of its stockholders, customers, employees, communities we serve and other affected parties. A candidate must be willing to regularly attend Board meetings and if applicable, committee meetings, to participate in Board development programs, to develop a strong understanding of the Company, its businesses and its requirements, to contribute his or her time and knowledge to the Company and to be prepared to exercise his or her duties with skill and care. While the Board does not have a formal policy on diversity, in selecting nominees, the Nominating and Governance Committee seeks to have a Board that represents a diverse range of perspectives and experience relevant to the Company.

 

We have a Nominating and Governance Committee Charter that outlines the primary duties of the Nominating and Governance Committee, which is available on our website in the “Corporate Governance” subsection in the “Investors” section. The functions of the Nominating and Governance Committee, which are discussed in its charter, include (i) developing a pool of potential directorial candidates for consideration in the event of a vacancy on the Board, (ii) screening directorial candidates in accordance with certain guidelines and criteria set forth in its charter and (iii) recommending nominees to the Board. The Nominating and Governance Committee held one meeting during the fiscal year ended December 31, 2017.

 

The Nominating and Governance Committee seeks recommendations from our existing directors to identify potential candidates to fill vacancies on our Board. The Nominating and Governance Committee will also consider nominee recommendations properly submitted by stockholders in accordance with the procedures outlined in our bylaws, on the same basis as candidates recommended by the Board and other sources. Recommendations must be received by the Secretary of the Company no later than the earlier of (a) the close of business on the tenth (10th) day following the day on which such notice of the date of the Annual Meeting was mailed or such public disclosure was made, whichever first occurs, or (b) two (2) days prior to the date of the Annual Meeting.

 

In addition, the Nominating and Governance Committee will also consider all director candidates submitted by a stockholder, if such nomination is properly submitted by the stockholder in accordance with the procedures outlined in our bylaws. Stockholder nominations of directors must be made in writing and delivered to the address shown below. Nominations must be received by the Secretary of the Company no later than (i) thirty-five (35) days prior to the date of the annual meeting of stockholders, if notice of such annual meeting is given or publicly disclosed at least fifty (50) days prior to the meeting date, or (ii) if notice of the annual meeting is given less than fifty (50) days prior to the meeting date, the earlier of (a) the close of business on the tenth (10th) day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure was made, whichever first occurs, or (b) two (2) days prior to the date of such annual meeting. For stockholder nominations of directors for the Annual Meeting, nominations must comply with the provisions of our Bylaws, must be made in writing and must be delivered to the Secretary of the Company at 2930 West Sam Houston Pkwy North, Suite 275, Houston, Texas 77043.

 

Item 11. Executive Compensation

 

We are currently considered a “smaller reporting company” for purposes of the SEC’s executive compensation and other disclosure rules. In accordance with such rules, we are required to provide a Summary Compensation Table and an Outstanding Equity Awards at Fiscal Year End Table, as well as limited narrative disclosures.

 

Summary Compensation Table

 

The following table summarizes, with respect to each of our named executive officers, information relating to all compensation earned for services rendered to us in all capacities in the last two completed fiscal years.

 

Name and principal position		Year				Salary ($)				Bonus ($)				Stock Awards ($)(1)				Option Awards ($)(2)				Non-Equity Incentive Plan Compensation				Nonqualified Deferred Compensation Earnings ($)				All Other Compensation ($)(3)				Total ($)
Jon Christopher Boswell			2017				354,250				—				359,863				498,953				—				—				22,843				1,235,909
Chief Executive Officer			2016				200,000				65,000				26,390				7,234				—				—				22,621				321,245
Carlos Fernandez			2017				284,000				—				385,708				474,928				—				—								1,144,636
Executive Vice President-			2016				200,000				65,000				56,070				—				—				—				12,000				333,070
Corporate Business Development and General Manager Latin America
Alexander Nickolatos			2017				287,500				—				350,634				416,238				—				—				23,450				1,077,822
Chief Financial Officer and Assistant Secretary			2016				200,000				65,000				19,808				6,220				—				—				24,208				315,236

 

 

(1)	The amounts in this column reflect the aggregate grant date fair value of all stock awards calculated in accordance with FASB ASC Topic 718. See “Part II – Item 8 – Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 14 – Stock-Based Compensation” in our Annual Report on Form 10-K for the year ended December 31, 2017 for additional information regarding the assumptions used to calculate the grant date fair value of the stock awards. The stock awards granted to Messrs. Boswell, Fernandez and Nickolatos in 2017 were phantom stock awards granted under our 2015 Stock Incentive Plan. The stock awards granted to Messrs. Boswell, Fernandez and Nickolatos in 2016 were awards of restricted stock under our 2013 Stock Incentive Plan and 2015 Stock Incentive Plan.
(2)	The amount in this column reflects the aggregate grant date fair value of all option awards calculated in accordance with FASB ASC Topic 718. See “Part II – Item 8 – Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 14 – Stock-Based Compensation” in our Annual Report on Form 10-K for the year ended December 31, 2017 for additional information regarding the assumptions used to calculate the fair value of the option awards. The option awards granted to Messrs. Boswell, Fernandez and Nickolatos in 2017 were granted under our 2015 Stock Incentive Plan. The option awards granted to Messrs. Boswell and Nickolatos in 2016 were granted under our 2013 Stock Incentive Plan and our 2015 Stock Inventive Plan.
(3)	Amounts reported in the “All Other Compensation” column consist of, with respect to all named executive officers, (a) employer matching contributions to our tax-qualified Section 401(k) retirement savings plan and (b) with respect to Messrs. Boswell and Nickolatos, a monthly car allowance.

 

Certain of the information relating to our named executive officers’ compensation as reported in the Summary Compensation Table included in our previously filed Annual Report on Form 10-K for the year ended December 31, 2017 was incorrect due to inadvertent errors made in connection with the preparation of the Summary Compensation Table. The corrected information relating to our named executive officer’s compensation earned for services rendered to us is presented above. The result of this correction (a) increased the total compensation reflected in the Summary Compensation Table for each of Messrs. Boswell, Fernandez and Nickolatos for 2017 by $680,878, $860,636 and $594,872, respectively, and (b) decreased the total compensation reflected in the Summary Compensation Table for each of Messrs. Boswell, Fernandez and Nickolatos for 2016 by $34,194, $56,980 and $26,402, respectively.

 

Narrative Disclosure to Summary Compensation Table

 

Employment Agreements. The following summary provides a description of the material terms of the employment agreements that we have entered into with our named executive officers.

 

Jon Christopher Boswell. Effective as of April 1, 2017, we entered into an employment agreement (the “Boswell Employment Agreement”) with Mr. Boswell that superseded and replaced his prior employment agreement. The Boswell Employment Agreement provides for an initial one-year term of employment that commenced as of April 1, 2017 and, unless either party provides written notice of non-renewal within the requisite time period, the term will automatically be extended for an additional one-year period on April 1, 2018 and each subsequent anniversary of such date in accordance with the renewal provisions set forth in the agreement. The Boswell Employment Agreement provides for an initial annualized base salary of $350,000 per year and a target annual bonus equal to a maximum of 125% of Mr. Boswell’s annualized base salary. The Boswell Employment Agreement also contains severance provisions, which are discussed below under “Potential Payments Upon Termination or a Change in Control.” The Boswell Employment Agreement also provides that during the term of employment and for six (6) months after the termination of Mr. Boswell’s employment (for whatever reason), Mr. Boswell will not compete with us or solicit our customers or our employees. The agreement also provides for the nondisclosure of any confidential information relating to us by Mr. Boswell.

 

Carlos Fernandez. Effective as of April 1, 2017, we entered into an employment agreement (the “Fernandez Employment Agreement”) with Mr. Fernandez that superseded and replaced his prior employment agreement. The Fernandez Employment Agreement provides for an initial one-year term of employment that commenced as of April 1, 2017 and, unless either party provides written notice of non-renewal within the requisite time period, the term will automatically be extended for an additional one-year period on April 1, 2018 and each subsequent anniversary of such date in accordance with the renewal provisions set forth in the agreement. The Fernandez Employment Agreement provides for an initial annualized base salary of $312,000 per year and a target annual bonus equal to a maximum of 100% of Mr. Fernandez’s annualized base salary. The Fernandez Employment Agreement also contains severance provisions, which are discussed below under “Additional Narrative Disclosure –Potential Payments Upon Termination or a Change in Control.” The Fernandez Employment Agreement also provides that during the term of employment and for six (6) months after the termination of Mr. Fernandez’s employment (for whatever reason), Mr. Fernandez will not compete with us or solicit our customers or our employees. The agreement also provides for the non-disclosure of our confidential information by Mr. Fernandez.

 

 

Alexander Nickolatos. Effective as of April 1, 2017, we entered into an employment agreement (the “Nickolatos Employment Agreement”) with Mr. Nickolatos that superseded and replaced his prior employment agreement. The Nickolatos Employment Agreement provides for an initial one-year term of employment that commenced as of April 1, 2017 and, unless either party provides written notice of non-renewal within the requisite time period, the term will automatically be extended for an additional one-year period on the April 1, 2018 and each subsequent anniversary of such date in accordance with the renewal provisions set forth in the agreement. The Nickolatos Employment Agreement provides for an annualized base salary of $300,000 per year and a target annual bonus equal to a maximum of 100% of Mr. Nickolatos’ base salary. The Nickolatos Employment Agreement also contains severance provisions, which are discussed below under “Additional Narrative Disclosure –Potential Payments Upon Termination or a Change in Control.” The Nickolatos Employment Agreement also provides that during the term of the agreement and for six (6) months after the termination of Mr. Nickolatos’ employment (for whatever reason), Mr. Nickolatos will not compete with us or solicit our customers or our employees. The agreement also provides for the non-disclosure of our confidential information by Mr. Nickolatos.

 

Outstanding Equity Awards at 2017 Fiscal Year-End

 

The following table presents, for each named executive officer, information regarding outstanding option awards and stock awards held as of December 31, 2017.

 

Name		Number of Securities Underlying Unexercised Options Exercisable				Number of Securities Underlying Unexercised Options Unexercisable				Option Exercise Price ($)				Option Expiration Date		Number of Shares of Stock That Have Not Vested (2)				Market Value of Shares of Stock That Have Not Vested ($)(3)
Jon Christopher Boswell			30,048								3.33			8/28/22			206,250			$	259,875
			125,000								6.00			10/24/23
			12,750				4,250	(1)			6.00			7/11/24
			4,375				13,125	(4)			3.00			5/27/26
			125,000				375,000	(5)			1.41			5/4/27
			25,000				75,000	(5)			2.00			5/4/27
			50,000				150,000	(5)			2.50			5/4/27
Carlos Fernandez			22,318								3.33			8/28/22			206,250				259,875
			10,000								6.00			10/24/23
			125,000				375,000	(5)			1.41			5/4/27
			25,000				75,000	(5)			2.00			5/4/27
			37,500				112,500	(5)			2.50			5/4/27
Alexander Nickolatos			4,083								0.33			7/1/2022			187,500				236,250
			5,015								3.33			8/28/22
			25,000								6.00			10/24/23
			3,750				11,250	(4)			3.00			5/27/26
			112,500				337,500	(5)			1.41			5/4/27
			25,000				75,000	(5)			2.00			5/4/27
			25,000				75,000	(5)			2.50			5/4/27

 

	(1)	These options held by our named executive officer previously vested as to 75 percent of each award in equal installments on July 11, 2015, July 11, 2016 and July 11, 2017 and the remaining 25 percent of the award will become vested and exercisable in one installment on July 11, 2018 so long as the named executive officer remains employed by us on such date.
	(2)	Includes awards of our restricted stock held by our named executive officers that are scheduled to vest in three remaining equal installments on May 4, 2018, November 4, 2018, and May 4, 2019, so long as the named executive officer remains employed by us on each such date: (i) Mr. Boswell – 206,250, (ii) Mr. Fernandez – 206,250, and (iii) Mr. Nickolatos – 187,500.

 

 

	(3)	The amounts in this column reflect the closing price of our common stock on December 29, 2017 (the last trading day of fiscal year 2017), which was $1.26, multiplied by the number of outstanding shares of restricted stock.
	(4)	These options held by our named executive officers previously vested as to 25 percent of each award on May 27, 2017 and the remaining 75 percent of each award will become vested and exercisable in three equal annual installments on May 27, 2018, May 27, 2019 and May 27, 2020 so long as the named executive officer remains employed by us on each such date.
	(5)	These options held by our named executive officers previously vested as to 25 percent of each award on November 4, 2017 and the remaining 75 percent of each award will become vested and exercisable in three equal semi-annual installments on May 4, 2018, November 4, 2018 and May 4, 2019 so long as the named executive officer remains employed by us on such date.

 

Certain of the information provided with respect to our named executive officers in the Outstanding Equity Awards at 2017 Fiscal Year-End table included in our previously filed Annual Report on Form 10-K for the year ended December 31, 2017 was incorrect due to (i) the inadvertent inclusion of certain previously vested awards in the “Number of Shares of Stock That Have Not Vested” and the “Market Value of Shares of Stock That Have Not Vested” columns; and (ii) errors in the number of options listed as either exercisable or unexercisable in the table. The corrected information relating to our named executive officers is presented above. The result of this correction (a) decreased the number of shares of stock that have not vested reflected for each of Messrs. Boswell, Fernandez and Nickolatos as of December 31, 2017 by 93,000, 118,125 and 87,500 shares, respectively, and (b) decreased the market value of the shares of stock that have not vested reflected for each of Messrs. Boswell, Fernandez and Nickolatos as of December 31, 2017 by $117,180, $148,838 and $110,250, respectively.

 

Additional Narrative Disclosure

 

Retirement Benefits

 

As of December 31, 2017, we maintain a tax-qualified Section 401(k) retirement savings plan. This plan provides for employee contributions, employer matching contributions (5% of salary), and a discretionary profit sharing contribution. Our named executive officers are eligible to participate in our tax-qualified Section 401(k) retirement savings plan on the same basis as other employees who satisfy the plan’s eligibility requirements, including requirements relating to age and length of service. No discretionary profit sharing contributions were made during 2017 or 2016. Under this plan, participants may elect to make pre-tax contributions not to exceed the applicable statutory limitation, which was $18,500 for 2017. All employer contributions vest immediately.

 

Potential Payments Upon Termination or a Change in Control

 

The employment agreements with Messrs. Boswell, Fernandez and Nickolatos contain severance provisions, as described below.

 

Mr. Boswell. If we terminate Mr. Boswell’s employment without “cause” (as such term is defined in the Boswell Employment Agreement), or if Mr. Boswell terminates his employment with us for “good reason” (as such term is defined in the Boswell Employment Agreement), then Mr. Boswell is entitled to (a) his base salary accrued to the date of his termination and any unreimbursed business expenses, (b) an amount equal to one year of base salary, (c) full vesting of all unvested restricted stock or stock options, if any, that were granted prior to the effective date of the Boswell Employment Agreement (i.e., April 1, 2017) and (d) subject to Mr. Boswell’s timely election of medical benefit continuation pursuant to the Consolidated Omnibus Budget Reconciliation Act, as amended (“COBRA”), payment or reimbursement of the cost of COBRA continuation coverage (such that Mr. Boswell pays the same premium for COBRA continuation coverage as other executives pay for coverage under our medical plan) for Mr. Boswell and his covered dependents for up to 18 months. Payment of items (b), (c) and (d) is contingent upon the execution of a release by Mr. Boswell on a form provided by us.

 

If Mr. Boswell’s employment with us is terminated due to his becoming disabled or his death, Mr. Boswell (or his estate, as applicable) is entitled to his base salary accrued to the date of his termination, any unreimbursed business expenses and unpaid bonus from the prior year.

 

If Mr. Boswell’s employment with us is terminated for cause, or if Mr. Boswell terminates his employment with us voluntarily, Mr. Boswell is entitled to his base salary accrued to the date of his termination and any unreimbursed business expenses.

 

If we or Mr. Boswell elect to not renew the Boswell Employment Agreement at the end of its term, then Mr. Boswell is entitled to his base salary accrued to the date of his termination and any unreimbursed business expenses. In addition, if we elect to not renew the Boswell Employment Agreement at the end of its term, Mr. Boswell is entitled to an amount equal to one year of base salary, subject to the execution of a release by Mr. Boswell on a form provided by us.

 

 

Mr. Fernandez. If we terminate Mr. Fernandez’s employment without “cause” (as such term is defined in the Fernandez Employment Agreement), or if Mr. Fernandez terminates his employment with us for “good reason” (as such term is defined in the Fernandez Employment Agreement), then Mr. Fernandez is entitled to (a) his base salary accrued to the date of his termination and any unreimbursed business expenses, (b) an amount equal to one year of base salary, (c) full vesting of all unvested restricted stock or stock options, if any, that were granted prior to the effective date of the Fernandez Employment Agreement (i.e., April 1, 2017) and (d) subject to Mr. Fernandez’s timely election of medical benefit continuation pursuant to COBRA, payment or reimbursement of the cost of COBRA continuation coverage (such that Mr. Fernandez pays the same premium for COBRA continuation coverage as other executives pay for coverage under our medical plan) for Mr. Fernandez and his covered dependents for up to 18 months. Payment of items (b), (c) and (d) is contingent upon the execution of a release by Mr. Fernandez on a form provided by us.

 

If Mr. Fernandez’s employment with us is terminated due to his becoming disabled or his death, Mr. Fernandez (or his estate, as applicable) is entitled to his base salary accrued to the date of his termination, any unreimbursed business expenses and unpaid bonus from the prior year.

 

If Mr. Fernandez’s employment with us is terminated for cause, or if Mr. Fernandez terminates his employment with us voluntarily, Mr. Fernandez is entitled to his base salary accrued to the date of his termination and any unreimbursed business expenses.

 

If we or Mr. Fernandez elect to not renew the Fernandez Employment Agreement at the end of its term, then Mr. Fernandez is entitled to his base salary accrued to the date of his termination and any unreimbursed business expenses. In addition, if we elect not to renew the Fernandez Employment Agreement at the end of its term, then Mr. Fernandez is entitled to an amount equal to one year of base salary, subject to the execution of a release by Mr. Fernandez on a form provided by us.

 

Mr. Nickolatos. If we terminate Mr. Nickolatos’ employment without “cause” (as such term is defined in the Nickolatos Employment Agreement), or if Mr. Nickolatos terminates his employment with us for “good reason” (as such term is defined in the Nickolatos Employment Agreement), then Mr. Nickolatos is entitled to (a) his base salary accrued to the date of his termination and any unreimbursed business expenses, (b) an amount equal to one year of base salary, (c) full vesting of all unvested restricted stock or stock options, if any, that were granted prior to the effective date of the Nickolatos Employment Agreement (i.e., April 1, 2017) and (d) subject to Mr. Nickolatos’ timely election of medical benefit continuation pursuant to COBRA, payment or reimbursement of the cost of COBRA continuation coverage (such that Mr. Nickolatos pays the same premium for COBRA continuation coverage as other executives pay for coverage under our medical plan) for Mr. Nickolatos and his covered dependents for up to 18 months. Payment of items (b), (c) and (d) is contingent upon the execution of a release by Mr. Nickolatos on a form provided by us.

 

If Mr. Nickolatos’ employment with us is terminated due to his becoming disabled or his death, Mr. Nickolatos (or his estate, as applicable) is entitled to his base salary accrued to the date of his termination, any unreimbursed business expenses and unpaid bonus from the prior year.

 

If Mr. Nickolatos’ employment with us is terminated for cause, or if Mr. Nickolatos terminates his employment with us voluntarily, Mr. Nickolatos is entitled to his base salary accrued to the date of his termination and any unreimbursed business expenses.

 

If we or Mr. Nickolatos elect to not renew the Nickolatos Employment Agreement at the end of its term, then Mr. Nickolatos is entitled to his base salary accrued to the date of his termination and any unreimbursed business expenses. In addition, if we elect not to renew the Nickolatos Employment Agreement at the end of its term, then Mr. Nickolatos is entitled to an amount equal to one year of base salary, subject to the execution of a release by Mr. Nickolatos on a form provided by us.

 

 

Director Compensation

 

Historically, we have not had a formalized compensation program for our non-employee members of our Board of Directors for their service as directors. On November 8, 2017, the following compensation arrangements were approved for each of Messrs. Bruheim, Krummel, Reynolds, Snyder and Stewart:

 

	●	A phantom stock award under our 2015 Stock Incentive Plan that consists of 67,568 shares of phantom stock, which award vests as to 16,892 shares on each of May 8, 2018, November 8, 2018, May 8, 2019 and November 8, 2019; and
	●	An annual cash retainer of $50,000 that commenced effective as of April 1, 2017 and is payable in quarterly installments in arrears (pro-rated for partial periods of service).

 

With respect to Mr. Stewart’s service as Chairman, on December 18, 2017, our Board of Directors approved the following compensation arrangement:

 

	●	A one-time phantom stock award under our 2015 Stock Incentive Plan that consists of 300,000 shares of phantom stock, which award vests as to one-third of the shares upon each of three milestones, which are based on the market price of shares of our common stock, subject to Mr. Stewart’s continued service as Chairman through the first anniversary of the grant date of this award;
	●	A one-time phantom stock award under our 2015 Stock Incentive Plan that consists of an additional 150,000 shares of phantom stock, which award is expected to be approved on or around April 15, 2018, and which is expected to vest as to one-third of the shares upon each of three milestones, which will be based on the market price of shares of our common stock, subject to Mr. Stewart’s continued service as Chairman through the first anniversary of the grant date of this award; and
	●	A one-time phantom stock award under our 2015 Stock Incentive Plan that consists of an additional 300,000 shares of phantom stock, which award is expected to be approved on or around July 15, 2018, and which is expected to vest as to one-third of the shares upon each of three milestones, which will be based on the market price of shares of our common stock, subject to Mr. Stewart’s continued service as Chairman through the first anniversary of the grant date of this award.

 

In addition, we reimburse our non-employee directors for any travel or other business expenses related to their service as a director. The table below and the narrative in the footnotes provide the compensation amounts for our non-employee directors for 2017, as well as additional information in connection with such amounts.

 

Director Compensation Table

 

Name		Fees Earned or Paid in Cash ($)(1)				Stock Awards ($)				Option Awards ($)				Non-Equity Incentive Plan Compensation ($)				Nonqualified Deferred Compensation Earnings ($)				All Other Compensation ($)				Total ($)
Bjarte Bruheim			37,500				100,000				—				—				—				—				137,500
Christopher A. Krummel			37,500				100,000				—				—				—				—				137,500
Timothy L. Reynolds			17,391				100,000				—				—				—				—				117,391
Todd R. Snyder			10,734				100,000				—				—				—				—				110,734
Brian R. Stewart			10,734				420,000				—				—				—				—				430,734
Andrew Teno			—				—				—				—				—				—				—

 

(1)

Certain of these fees were paid in the first quarter of 2018 as compensation for serving as a director in the fourth quarter of 2017 with respect to Messrs. Bruheim ($12,500), Krummel ($12,500), Reynolds ($17,391), Snyder ($10,734) and Stewart ($10,734).

 

 

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

As of April 30, 2018, we had 74,596,116 shares of our common stock issued and outstanding. The following table sets forth information regarding the beneficial ownership of our common stock as of April 30, 2018 by:

 

	●	each person known by us to be the beneficial owner of more than 5% of our common stock;
	●	each of our directors;
	●	each of our named executive officers; and
	●	our executive officers and directors as a group.

 

Beneficial ownership is determined in accordance with SEC rules. The percentages in the table are computed using a denominator consisting of 74,596,116 shares of outstanding common stock plus the number of shares of common stock subject to vesting with respect to a holder within 60 days of April 30, 2018 or issuable upon the exercise of all outstanding options, warrants, rights or conversion privileges held by a holder which are exercisable within 60 days of April 30, 2018. Except as otherwise indicated, the persons listed below have sole voting and investment power with respect to all shares of our common stock owned by them, except to the extent that power may be shared with a spouse.

 

		Common Stock								Series A Preferred
Name and Address of Beneficial Owner(1)		Number of Shares				Percentage of Class				Number of Shares				Percentage of Class
5% Stockholders:
Fir Tree (2)			58,720,930				70.5	%			10,000				100.0	%
Bienville Capital Management, LLC (3)			5,984,205				8.0	%			—				—
Directors and Executive Officers:
Brian R. Stewart (4)			16,892				*				—				—
Chairman
Jon Christopher Boswell (5)			1,013,183				1.4	%			—				—
Director, President and Chief Executive Officer
Carlos Fernandez (6)			842,311				1.1	%			—				—
Executive Vice President-Corporate Business Development and General Manager- Latin America
Alexander Nickolatos (7)			620,504				*				—				—
Chief Financial Officer and Assistant Secretary
Bjarte Bruheim (8)			685,682				*				—				—
Director
Christopher A. Krummel (9)			87,467				*				—				—
Director
Timothy L. Reynolds (10)			16,892				*				—				—
Director
Todd R. Snyder (11)			16,892				*				—				—
Director
Andrew Teno			—				*				—				—
Director
All executive officers and directors as a group (10 persons)			3,524,823				4.7	%			—				—

 

* indicates less than 1%.

 

(1)	Unless otherwise specified the address of each stockholder is in care of 2930 West Sam Houston Parkway North, Suite 275, Houston, Texas 77043.

 

 

(2)	The number of shares of common stock shown as beneficially owned includes (a) a total of 50,025,278 shares of common stock, which include 4,020,831 shares of common stock held by Fir Tree Capital Opportunity Master Fund, LP; 2,191,466 shares of common stock held by Fir Tree Capital Opportunity Master Fund III, LP; 92,972 shares of common stock held by FT COF (E) Holdings, LLC; 750,593 shares of common stock held by FT SOF IV Holdings, LLC; and 42,969,416 shares of common stock held by FT SOF VII Holdings, LLC (collectively, “Fir Tree Funds”) and (b) 8,695,652 shares of common stock that are issuable upon conversion of the aggregate of 10,000 shares of Series A Preferred held by the Fir Tree Funds collectively. The number of shares of Series A Preferred includes 822 shares of Series A Preferred held by Fir Tree Capital Opportunity Master Fund, LP; 438 shares of Series A Preferred held by Fir Tree Capital Opportunity Master Fund III, LP; 150 shares of Series A Preferred held by FT SOF IV Holdings, LLC; and 8,590 shares of Series A Preferred held by FT SOF VII Holdings, LLC. Fir Tree Partners serves as the investment manager of each of the Fir Tree Funds and has been granted investment discretion over portfolio investments, including the shares of common stock and Series A Preferred held by the Fir Tree Funds. The business address of the Fir Tree Funds and Fir Tree Partners is c/o Fir Tree Partners, 55 West 46th Street, New York, New York 10036.
(3)	Based solely on the Schedule 13G filed with the SEC on April 9, 2018 by Bienville Global Opportunities Fund, LP, BGOF GP, LLC, Bienville Capital Management, William Herbert Stimpson II, and Michael Cullen Thompson, Jr. (collectively, “Bienville”). The business address of Bienville is 521 Fifth Avenue, 35th Fl, New York City, NY 10175.
(4)	Includes 16,892 shares of phantom stock scheduled to vest on May 8, 2018 provided that Mr. Stewart continues to serve on the Board through such date. Each share of phantom stock entitles the holder to receive one share of common stock at the time of vesting.
(5)	Includes (i) 372,173 shares of common stock subject to outstanding options that have vested, (ii) 68,750 shares of phantom stock scheduled to vest on May 4, 2018, (iii) 200,000 shares of common stock subject to outstanding options that are scheduled to vest on May 4, 2018, and (iv) 4,375 shares of common stock subject to outstanding options that are scheduled to vest on May 27, 2018. Each share of phantom stock entitles the holder to receive one share of common stock at the time of vesting.
(6)	Includes (i) 219,818 shares of common stock subject to outstanding options that have vested, (ii) 68,750 shares of phantom stock scheduled to vest on May 4, 2018, and (iii) 187,500 shares of common stock subject to outstanding options that are scheduled to vest on May 4, 2018. Each share of phantom stock entitles the holder to receive one share of common stock at the time of vesting.
(7)	Includes (i) 200,348 shares of common stock subject to outstanding options that have vested, (ii) 62,500 shares of phantom stock scheduled to vest on May 4, 2018, (iii) 162,500 shares of common stock subject to outstanding options that are scheduled to vest on May 4, 2018, and (iv) 3,750 shares of common stock subject to outstanding options that are scheduled to vest on May 27, 2018. Each share of phantom stock entitles the holder to receive one share of common stock at the time of vesting.
(8)	Includes (i) 143,151 shares of common stock subject to outstanding options that have vested and (ii) 16,892 shares of phantom stock scheduled to vest on May 8, 2018 provided that Mr. Bruheim continues to serve on the Board through such date. Each share of phantom stock entitles the holder to receive one share of common stock at the time of vesting.
(9)	Includes (i) 58,812 shares of common stock subject to outstanding options that have vested and (ii) 16,892 shares of phantom stock scheduled to vest on May 8, 2018 provided that Mr. Krummel continues to serve on the Board through such date. Each share of phantom stock entitles the holder to receive one share of common stock at the time of vesting.
(10)	Includes 16,892 shares of phantom stock scheduled to vest on May 8, 2018 provided that Mr. Reynolds continues to serve on the Board through such date. Each share of phantom stock entitles the holder to receive one share of common stock at the time of vesting.
(11)	Includes 16,892 shares of phantom stock scheduled to vest on May 8, 2018 provided that Mr. Snyder continues to serve on the Board through such date. Each share of phantom stock entitles the holder to receive one share of common stock at the time of vesting.

 

 

Item 13.

Certain RElationships and Related Transactions, and Director Independence

 

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

 

The Company has adopted a written policy pursuant to which the Audit Committee is responsible for the review, approval or ratification of “related party transactions” involving the Company. The following is a description of such transactions since January 1, 2015; “related party transactions” are transactions to which we have been a party, in which the amount involved exceeded or will exceed the lesser of $120,000 or 1% of the average of our total assets at year-end for the last two years, and in which any of our executive officers, directors or holders of more than 5% of our common stock, or an affiliate or immediate family member thereof, had or will have a direct or indirect material interest, other than compensation arrangements, which are described in the section above titled “Executive Compensation.”

 

Transactions with Fir Tree

 

On March 3, 2017, the Company entered into a transaction with Fir Tree pursuant to which Fir Tree purchased from ACM Emerging Markets Master Fund I, L.P. $22 million aggregate principal amount of the Company’s outstanding convertible notes which were due in 2018. This transaction was part of a comprehensive recapitalization designed to create a path to a potential equalization of substantially all of the Company’s debt, subject to stockholder approval. As part of the transaction, the Company issued to Fir Tree an additional $19.4 million aggregate principal amount of convertible notes. After giving effect to these transactions, the Company had approximately $41.4 million of outstanding convertible notes. Fir Tree agreed to convert all of the outstanding convertible notes into common stock at a conversion price of $1.40 per share, subject to receipt of stockholder approval and satisfaction of certain other conditions.

 

On June 20, 2017, the Company converted such notes into common stock at a price of $1.40 per share, and issued 29,538,786 shares of common stock to Fir Tree (the “Conversion”), upon the Company receiving stockholder approval at the Annual Meeting of Stockholders of the Company on June 15, 2017. As such, all obligations under the notes have been deemed paid in full and the notes have been terminated. No termination penalty or fee was incurred in connection with the termination of the notes. The Conversion reduced the Company’s debt by approximately $41.4 million.

 

July 2017 and August 2017 Private Placements

 

On July 6, 2017, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with each of the purchasers identified on the signature pages thereto, including funds affiliated with Fir Tree and Bienville (collectively, the “July Purchasers”) pursuant to which the July Purchasers agreed to purchase 10,000,000 shares of the Company’s common stock, par value $0.001 per share, at a price of $1.50 per share (the “July Private Placement”). The issuance of the Shares pursuant to the Purchase Agreement was made in reliance upon an exemption from registration provided under Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”). The July Private Placement closed on July 6, 2017 and resulted in approximately $15.0 million of gross proceeds and approximately $14.8 million of net proceeds (after deducting the Company’s estimated expenses).

 

In connection with the closing of the July Private Placement, the Company and the July Purchasers entered into that certain Amended & Restated Registration Rights Agreement, dated July 6, 2017 (the “Registration Rights Agreement”). Under the Registration Rights Agreement, the Company agreed to (i) use its reasonable best efforts to file a Registration Statement (as defined in the Registration Rights Agreement) on Form S-1 or any successor form thereto (each a “Long-Form Registration” as defined in the Registration Rights Agreement) with the Securities and Exchange Commission (the “Commission”) upon the initial request of registration from the Demand Holders (as defined in the Registration Rights Agreement) within ninety (90) days after the date on which the initial request is given; and (ii) use its reasonable best efforts to file a Registration Statement on Form S-3 or any successor form thereto, if the Company is qualified for the use of Form S-3, (each a “Short-Form Registration” as defined in the Registration Rights Agreement) with the Commission upon the initial request of registration from the Demand Holders within sixty (60) days after the date on which the initial request is given. In addition, the Registration Rights Agreement provides holders of Registrable Securities (as defined in the Registration Rights Agreement) piggyback registration rights, subject to certain underwriter cutbacks and issuer blackout periods. The Company also agreed to pay all fees and expenses relating to the registration and disposition of the Registrable Securities in compliance with the Company’s obligations under the Registration Rights Agreement.

 

 

In addition, in connection with the closing of the July Private Placement, the Company’s Amended and Restated Stockholders Agreement dated as of March 3, 2017 (the “Rights Agreement”) was amended to clarify certain procedures set forth in the Rights Agreement with respect to matters subject to approval by directors nominated by FT SOF VII Holdings, LLC, an affiliate of Fir Tree Partners.

 

On August 2, 2017, the Company entered into a Common Stock Subscription Agreement (the “Subscription Agreement”) with (i) affiliates of Fir Tree, pursuant to which such Fir Tree affiliates agreed to purchase 9,456,056 shares of the Company’s common stock, (ii) Bienville Argentina Fund, pursuant to which Bienville agreed to purchase 1,923,077 shares of the Company’s common stock and (iii) certain other purchasers identified on the signature pages thereto (the “August Purchasers”) pursuant to which such other August Purchasers agreed to purchase an aggregate of 10,124,364 shares of the Company’s common stock, in each cases of clauses (i), (ii) and (iii), at a price of $1.43 per share, which was the closing market price for the Company’s common stock on August 1, 2017 (collectively, the “August Private Placement”). The issuance of such shares of common stock pursuant to the Subscription Agreement was made in reliance upon an exemption from registration provided under Section 4(a)(2) of the Securities Act. The August Private Placement closed on August 8, 2017 and resulted in approximately $28.0 million of gross proceeds and approximately $26.7 million of net proceeds (after deducting the Company’s estimated expenses).

 

In connection with the August Private Placement, the Company, Fir Tree, Bienville Argentina Fund, and the August Purchasers entered into a new Registration Rights Agreement as of August 2, 2017 that became effective upon the closing of the August Private Placement (the “PIPE Registration Rights Agreement”). Under the PIPE Registration Rights Agreement, the Company agreed to (i) use its reasonable best efforts to file a Registration Statement (“Shelf Registration Statement” as defined in the PIPE Registration Rights Agreement) with the Commission no later than sixty (60) days following the closing date of the August Private Placement, to be effective no later than one hundred twenty (120) days following such closing date. In addition, the PIPE Registration Rights Agreement provides holders of Registrable Securities (as defined in the PIPE Registration Rights Agreement) piggyback registration rights, subject to certain underwriter cutbacks and issuer blackout periods. The Company agreed to pay all fees and expenses relating to the registration and disposition of the Registrable Securities in compliance with the Company’s obligations under the PIPE Registration Rights Agreement.

 

In connection with the August Private Placement, the prior Restated Registration Rights Agreement, dated as of March 3, 2017 (the “Existing Registration Rights Agreement”), among the Company, Fir Tree, Bienville and the other parties thereto, was amended so as to include definitions related to the August Private Placement, to clarify certain clauses set forth in the Existing Registration Rights Agreement with respect to the Shelf Registration Statement as defined in the PIPE Registration Rights Agreement, and to clarify certain aspects of the relationship between the Company’s obligations under the Existing Registration Rights Agreement and the Company’s obligations under the PIPE Registration Rights Agreement.

 

Transactions with Our Directors, Executive Officers and Affiliates

 

On November 30, 2016, the Company entered into the Loan Agreement with Bienville Argentina Fund, a large stockholder, and an individual. A portion of the $2 million proceeds from the Loan Agreement was used to pay the remaining amount payable (approximately $1 million) by the Company under an equipment purchase agreement dated October 10, 2014, as amended, with Gordon Brothers Commercial & Industrial, LLC for the purchase of certain TPUs. Bienville held $750,000 of the $2 million loan. The indebtedness created under the Loan Agreement, including approximately $24,548 of interest at 14% per annum, was repaid on March 6, 2017 with a portion of the proceeds of the credit facility extended by Fir Tree under the Amended and Restated Convertible Note Facility Agreement.

 

Director Independence

 

The members of the Audit Committee, namely Messrs. Krummel, Reynolds and Bruheim, the members of the Nominating and Governance Committee, namely Messrs. Bruheim and Teno, and the three members of the Compensation Committee, namely Messrs., Krummel, Reynolds and Teno, have been determined to be independent under the applicable NASDAQ Stock Market Rules and rules of the SEC. In addition, Messrs. Stewart and Snyder were each determined to be independent by the Board in March 2018, and former Directors Messrs. Al-Sati, Chan, Colvin, Narea, Proman and Stoltz were each determined to be independent prior to their departure. For a discussion of independence standards applicable to our Board and factors considered by our Board in making its independence determinations, please refer to “Committees of the Board of Directors” included under Part III, Item 10 of this Form 10-K.

 

 

Item 14. Principal Accounting Fees and Services

 

The following table presents fees for professional audit services performed by Whitley Penn LLP for the audit of our annual financial statements for the fiscal year ended December 31, 2017 and 2016.

 

		2017				2016
Audit Fees(1)		$	170,000			$	107,843
Audit-Related Fees			—				—
Tax Fees			13,787				—
All Other Fees			—				—
Total Fees		$	183,787			$	107,843

 

(1)

Audit fees include professional services rendered for (i) the audit of our annual financial statements for the fiscal years ended December 31, 2017 and 2016, and (ii) the reviews of the financial statements included in our quarterly reports on Form 10-Q for such years and (iii) the reviews of the S-1 filed during 2017.

 

Pre-Approval Policies

 

It is the policy of our Board that all services to be provided by our independent registered public accounting firm, including audit services and permitted audit-related and non-audit services, must be pre-approved by the Audit Committee. The Audit Committee pre-approved all services, audit and non-audit, provided to us by Whitley Penn LLP for 2016 and 2017.

 

PART IV.

 

Item 15. Exhibits

 

(a)

Exhibits.   The exhibits listed in the Exhibit Index in Part IV, Item 15. “Exhibits, Financial Statement Schedules” of the Original Form 10-K were filed or incorporated by reference as part of the Original Form 10-K and the exhibits listed in the Exhibit Index below are filed as part of this Amendment No. 1 on Form 10-K/A.

 

Exhibit Number		Description
31.1*		Rule 13(a)-14(a) Certification of the Chief Executive Officer.
31.2*		Rule 13(a)-14(a) Certification of the Chief Financial Officer.

 

*	Filed herewith.

 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Date: May 18, 2018	ECO-STIM ENERGY SOLUTIONS, INC.
	By:	/s/ Jon Christopher Boswell
		Jon Christopher Boswell
		President and Chief Executive Officer