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SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENT INFORMATION

9 Months Ended

Sep. 30, 2024

SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENT INFORMATION

SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENT INFORMATION

10. SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENT INFORMATION

Historical financial information for Breckenridge was derived from Breckenridge’s unaudited financial statements. In the opinion of the Company’s management, the financial information of Breckenridge reflects all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation. The non-cash items associated with the Purchase Agreement (unaudited and in thousands) shown on the Condensed Consolidated Statements of Cash Flows consist of “Deemed distribution (contribution)” and “Acquisition of Breckenridge net assets” and are derived as follows:


Deemed Distribution (Contribution)	Nine Months Ended September 30, 2023
Deemed distribution (contribution) of short-term investments	$	1,000
Deemed distribution (contribution) of accounts receivable		1,015
Deemed distribution (contribution) of prepaids and other		1
Deemed distribution (contribution) of land and buildings		514
Deemed (distribution) contribution of accounts payable		(132)
Deemed (distribution) contribution of accrued liabilities		(69)
Deemed (distribution) contribution of deferred revenue		—
Deemed distribution of Breckenridge net assets not acquired	$	2,329


Historical Carrying Value of Assets Acquired	March 24, 2023
Accounts receivable, net	$	67
Prepaid expenses and other current assets		56
Property and equipment, net		1,322
Other accrued liabilities		(16)
Deferred revenue		(94)
Acquisition of Breckenridge net assets	$	1,335

Total consideration for the asset purchase (in thousands) is as follows:


Consideration Paid	March 24, 2023
Common stock issued	$	2,020
Note payable issued		9,880
Purchase price	$	11,900

Because the Transaction constitutes a transaction among entities under common control, the excess purchase price over the historical carrying value of the net assets acquired was recorded as a charge to additional paid in capital. The excess purchase price over the historical carrying value of the assets at the acquisition date (unaudited and in thousands) is as follows:


Excess Purchase Price	March 24, 2023
Purchase price	$	11,900
Historical carrying value of assets acquired		(1,335)
Excess purchase price	$	10,565

Deferred Costs (in thousands)

Deferred costs were $4.3 million and $5.4 million at January 1, 2024 and 2023, respectively. The Company’s prepaid expenses and other current assets at September 30, 2024 and 2023, included deferred costs incurred to fulfill contracts with customers of $0.4 million and $4.2 million, respectively.

Deferred costs at September 30, 2024 and 2023, compared to January 1, 2024 and 2023, decreased primarily as a result of the completion of several projects during that nine month period that had deferred fulfillment costs at January 1, 2024. Deferred costs at September 30, 2023 compared to January 1, 2023 decreased primarily as a result of the completion of several projects during that nine month period that had deferred fulfillment costs at January 1, 2023.

The amount of total deferred costs amortized for the nine months ended September 30, 2024, and 2023, was $22.7 million and $31.4 million, respectively. There were no material impairment losses incurred during these periods.

Deferred Revenue (in thousands)

Deferred revenue was $11.8 million and $7.4 million at January 1, 2024 and 2023, respectively. The Company’s deferred revenue at September 30, 2024 and 2023 was $0.7 million and $6.7 million, respectively.

Deferred revenue at September 30, 2024 compared to January 1, 2024 decreased primarily as a result of completing projects for clients with prepayments for third party reimbursables. Deferred revenue at September 30, 2023 compared to January 1, 2023 remained fairly consistent.

Revenue recognized for the nine months ended September 30, 2024 and 2023 that was included in the contract liability balance at the beginning of 2024 and 2023 was $11.8 million and $7.3 million, respectively.

Accounts Receivable (in thousands)

Accounts receivable related to contracts with customers was $12.7 million and $8.0 million at January 1, 2024 and 2023, respectively. The accounts receivable balance at January 1, 2023 excluded a $3.0 million employee retention credit receivable.

Accounts receivable related to contracts with customers was $2.8 million and $6.0 million at September 30, 2024 and 2023, respectively.

Related Party Transactions

For the nine months ended September 30, 2024, the Company incurred related party expenses totaling approximately $126,000. These are charges by various commonly controlled companies of Wilks Brothers, LLC, the holder of approximately 80% of the Company’s outstanding stock. These transactions consisted of trucking charges of $117,000 and client hosting expenses of $9,000. For the nine months ended September 30, 2024, the Company received related party revenue of $22,000 for partial use of leased office space. For the nine months ended September 30, 2023, the Company did not have any related party transactions. As of September 30, 2024, the Company had no outstanding related party accounts payable and no outstanding related party accounts receivable.

For the nine months ended September 30, 2023, Breckenridge incurred related party expenses totaling approximately $110,000. These charges by various commonly controlled companies of Wilks Brothers, LLC consisted of trucking charges of $60,000, management charges of $44,000, and payroll administration charges of $6,000.