The following discussion of Central's liquidity and capital resources should be read in conjunction with our unaudited consolidated financial statements and related notes thereto appearing elsewhere herein. Current Assets and Operations Regional
July 272007, we acquired the business of Regional Enterprises, Inc., a Virginiacorporation. Regional has provided liquid bulk storage, transportation and railcar trans-loading of bulk liquids, including hazardous chemicals and petroleum products, to its customers for over 40 years. Regional's facilities are located on the James Riverin Hopewell, Virginia, where it receives bulk chemicals and petroleum products from ships and barges into approximately 10 million gallons of available storage tanks for delivery throughout the mid-Atlantic region of the United States. Regional also receives product from a rail spur which is capable of receiving 18 rail cars at any one time for the trans-loading of chemical and petroleum liquids. In addition to its facility-based services, Regional also provides transportation services to customers for products which don't originate at any of Regional's terminal facilities. Certain customers for whom Regional provides storage services also use its transportation services. The hazardous materials and petroleum products stored, trans-loaded and transported by Regional are owned by its customers
at all times.
March 31, 2013, Regional also operated a trans-loading facility in Johnson City, Tennessee, with 6 rail car slots. This facility was closed effective March 31, 2013due to Regional's sole customer for this facility not renewing its agreement (which expired on March 31, 2013) as a result of the shut-down of a nearby processing plant for which that customer was supplying product out of the Johnson Citysite.
Regional's revenues for the three months and six months ended
Three Months Ended June 30, 2013 2014 Revenue % Revenue % Hauling
$ 57952 % $ 46743 % Storage 442 39 % 544 39 % Terminal 87 7 % 239 18 % Other 11 1 % - 0 % Total $ 1,119100 % $ 1,250100 % Six Months Ended June 30, 2013 2014 Revenue % Revenue % Hauling $ 1,34359 % $ 1,01940 % Storage 883 34 % 1,050 41 % Terminal 198 7 % 478 19 % Other 11 0 % - 0 % Total $ 2,435100 % $ 2,547100 % 21 Recent Developments Executive Officers Effective May 1, 2014, Mr. Douglas W. Weirwas appointed Chief Financial Officer and Chief Accounting Officer of the General Partner. Ian T. Bothwellwas appointed as Senior Vice President of the General Partner and President of Regional in recognition of Mr. Bothwell'snew focus on identifying potential asset investment opportunities for the Partnership and growing and expanding Regional's existing business. Results of Operations
The unaudited consolidated results of operations from continuing operations during the three months ended
Three Months Ended
Change Three Months Ended Three Months Ended Three Months Ended June 30, 2014 versus June 30, 2014 June 30, 2013 June 30, 2013 Regional Corporate Total
Regional Corporate Total Regional Corporate Total
$ 1,250$ - $ 1,250 $ 1,119$ - $ 1,119 $ 131$ - $ 131Costs Of Goods Sold $ 1,004$ - $ 1,004 $ 986$ - $ 98618 - 18 Gross Profit $ 246$ - $ 246 $ 133$ - $ 133113 - 113 Selling, General and Administrative Expenses $ 241$ 4 $ 245 $ 320 $ (674 ) $ (354 )79 (678 ) (599 ) Operating Income (Loss) $ 5 $ (4 ) $ 1 $ (187 ) $ 674 $ 487192 (678 ) (486 ) Interest Expense, net $ (79 ) $ (18 ) $ (97 ) $ (93 ) $ (4 ) $ (97 )14 (14 ) - Income (Loss) Before Taxes $ (74 ) $ (22 ) $ (96 ) $ (280 ) $ 670 $ 390206 (692 ) (486 ) Provision (Benefit) For Income Taxes $ - $ - $ - $ (9 )$ - $ (9 )(9 ) -
(9 ) Net Income (Loss)
Revenues. Our revenues for the three months ended
June 30, 2014increased by $0.131 millionover the revenues for the three months ended June 30, 2013. The increase was due to adding a new customer in May that has taken Regional to
Cost of Goods Sold. Our cost of goods sold for the three months ended
June 30, 2014increased slightly from the same period in 2013. The variance was minimal and in line with our forecast. Selling, General and Administrative Expenses. Selling, general and administrative expenses ("SG&A") during the three months ended June 30, 2014were $0.245 millioncompared to $(0.354) millionfor the three months ended June 30, 2013, an increase of approximately $0.5 million(204%). The increase was mainly the result of the abatement of tax penalties during the three months
June 30, 2014. 22
Six Months Ended
Change Six Months Ended Six Months Ended Six Months Ended June 30, 2014 versus June 30, 2014 June 30, 2013 June 30, 2013 Regional Corporate Total
Regional Corporate Total Regional Corporate Total
$ 2,547$ - $ 2,547 $ 2,435$ - $ 2,435 $ 112$ - $ 112Costs Of Goods Sold $ 2,011$ - $ 2,011 $ 2,108$ - $ 2,10897 - 97 Gross Profit $ 536$ - $ 536 $ 327$ - $ 327209 - 209 Selling, General and Administrative Expenses $ 525 $ 222 $ 747 $ 788 $ (545 ) $ 243263 (767 ) (504 ) Operating Income (Loss) $ 11 $ (222 ) $ 211 $ (461 ) $ 545 $ 85472 (767 ) (295 ) Interest Expense,
$ (164 ) $ (33 ) $ (197 ) $ (158 ) $ (8 ) $ (167 )(6 ) (25 ) (31 ) Income (Loss) Before Taxes $ (153 ) $ (255 ) $ (408 ) $ (619 ) $ 537 $ (82 )466 (792 ) (326 ) Provision (Benefit) For Income Taxes $ - $ - $ - $ 4$ - $ 4(4 ) - (4 )
Net Income (Loss)
Revenues. Our revenues for the six months ended
June 30, 2014increased by $0.1112 millionover the revenues for the six months ended June 30, 2013. The increase was due to adding a new customer in May that has taken Regional to
full capacity. Cost of Goods Sold. Our cost of goods sold for the six months ended
June 30, 2014decreased slightly from 2013. Costs of goods sold related to storage and terminal services did not increase despite the increase in related revenues as the costs are mostly fixed. The variance was minimal and in line with our forecast. Selling, General and Administrative Expenses. SG&A during the six months ended June 30, 2014were $0.747 millioncompared to $0.243 millionfor the six months ended June 30, 2013, an increase of approximately $0.5 million(67.5%). The increase was mainly the result of the abatement of tax penalties during the
six months ended
June 30, 2013.
Liquidity and Capital Resources
November 26, 2013("Closing"), the Partnership, the General Partner and CEGP Acquisition, LLC("CEGP") executed a definitive Purchase and Sale Agreement ("PSA") and certain other transaction documents ("Other Transaction Documents") providing for the sale of a 55% interest in the General Partner to CEGP through the purchase of newly issued membership interests of the General Partner by CEGP and the issuance of 3,000,000 Common Units to CEGP for $2,750,000(the "Purchase Price"), In addition, the Partnership issued performance warrants for $500each to affiliates of CEGP that provide the holders thereof with the opportunity, but not the obligation, to acquire, in the aggregate, an additional 3,000,000 Common Units at an exercise price of $0.093478, subject to adjustment, in the event the Partnership successfully completes one or more asset acquisition transactions with an aggregate gross purchase price of at least $20 millionwithin 12 months after Closing ("Performance Warrants"). In connection with the purchase of the equity securities by CEGP and the issuance of the Performance Warrants, the Partnership amended and restated (1) its Registration Rights Agreement to include the Common Units purchased by CEGP and issuable upon exercise of the Performance Warrants. (2) the General Partner Company Agreement, and Partnership Agreement, copies of which have been filed as exhibits to this report. At the Closing, net proceeds of $2,350,000("Net Proceeds") were delivered to the General Partner and the Partnership (the Purchase Price less credits for prior payments of $400,000made to the General Partner in connection with stand-still agreements in place until the execution of the PSA) ("Stand-Still Payments"). Of the total Purchase Price, the amount of $280,434was allocated to the price paid for the 3,000,000 Common Units. CEGP paid $240,434to the Partnership at Closing from the Net Proceeds, with the $40,000balance of the purchase price for the 3,000,000 Common Units being a portion of the Stand-Still Payments. The remaining amount of the Purchase Price, or $2,469,566, was allocated to the value of the 55% Membership Interest of the General Partner, represented by 136,888.89 Units issued to CEGP, and $2,109,566was paid to the General Partner at Closing from the Net Proceeds with the balance of $360,000being the attributed portion of the Stand-Still Payments. With the completion of the CEGP Investment, CEGP now holds 55% of the issued and outstanding membership interests in the General Partner, and appoints five (5) of the nine (9) members of the Board of the General Partner. As a result, CEGP controls the General Partner. In addition, CEGP holds 3,000,000 Common Units, which represent 15.7% of the issued and outstanding Common Units of the Partnership. Prior to execution of the PSA, Messrs. Imad K. Anboubaand Carter R. Montgomeryand The Cushing MLP Opportunity Fund I, L. P. (the " Cushing Fund") controlled the General Partner and had controlling authority over the Partnership. CEGP is a newly-formed Texaslimited liability company controlled by John L. Denman, Jr. and G. Thomas Graves III.Upon completion of the CEGP Investment, Mr. Denmanreplaced Mr. Anboubaas CEO and President of the General Partner and Mr. Graveswas appointed as the Chairman of the Board replacing Mr. Jerry V. Swank. JLD Services, Ltd., a company controlled by Mr. Denman, and Mr. Graveswere each granted a Performance Warrant. Assuming exercise of the Performance Warrants, Messrs. Denman and Graves would be deemed the beneficial owners of 27.1% of the issued and outstanding Common Units of the Partnership. 23 Tax Liabilities
Failure to File Electronically and Delivery of Schedules K-1 to Unitholders
November 2013, we received a notice from the IRSthat we were liable for penalties ("2012 IRS Penalties") of approximately $296,000in connection with the late filing of the 2012 federal partnership tax return ("2012 Tax Return"), and approximately $142,000in connection with failing to file the 2012 Tax Return electronically. We timely filed the 2012 Tax Return with the IRSmanually. During January 2014, we submitted an appeal to the IRSto have the 2012 IRS Penaltiesremoved. On February 25, 2014, we received written notice from the IRSthat the appeal of the late filing penalty was approved, and the appeal of the failure to file the 2012 Tax Return electronically was denied. We believe that there existed reasonable cause for the Partnership's failure to file the 2012 Tax Return electronically and as a result we intend to appeal the decision to deny. During the year ended December 31, 2013, we accrued a reserve of $142,000in connection with the remaining 2012 IRS Penalties. There can be no assurance that our request for relief from the remaining outstanding 2012 IRS Penaltieswill be approved by the IRSor that we will have adequate financial resources to pay the remaining outstanding 2012 IRS Penalties. Disputes
We may be involved with other proceedings, lawsuits and claims in the ordinary course of its business. We believe that the liabilities, if any, ultimately resulting from such proceedings, lawsuits and claims should not materially affect our consolidated financial results.
Debt Obligations Hopewell Note On
March 20, 2013, we entered into a Term Loan and Security Agreement (" HopewellLoan Agreement") with Hopewell Investment Partners, LLC("Hopewell") pursuant to which Hopewellwould loan Regional up to $2,500,000("Hopewell Loan"), all of which was advanced during 2013. William M. Comegys III, a member of the Board of Directors of the General Partner, is a member of Hopewell. As a result of this affiliation, the terms of the Hopewell Loan were reviewed by the Conflicts Committee of the Board of Directors of the General Partner. The committee determined that the Hopewell Loan was on terms better than could be obtained from a third-party lender.
In connection with the Hopewell Loan, we issued
Hopewella promissory note ("Hopewell Note") along with a security interest in all of Regional's assets, including a first lien mortgage on the real property owned by Regional and an assignment of rents and leases and fixtures on the remaining assets of Regional. In connection with the Hopewell Loan, we also delivered to Hopewella pledge of the outstanding capital stock of Regional and the Partnership entered into an unlimited guaranty for the benefit of Hopewell. In addition, we entered into an Environmental Certificate with Hopewellrepresenting as to the environmental condition of the property owned by Regional, agreeing to clean up or remediate any hazardous substances from the property, and agreeing, jointly and severally, to indemnify Hopewellfrom and against any claims whatsoever related to any hazardous substance on, in or impacting the property of Regional. The principal purpose of the Hopewell Loan was to repay the entire amounts due by Regional to our previous lender. The remaining amounts provided under the Hopewell Loan were used for working capital. The Hopewell Loan matures in March 19, 2016and carries a fixed annual rate of interest of 12%. Under the terms of the Hopewell Loan as amended, we are required to make interest payments only through December 2014and then 14 equal monthly payments of $56,000(principal and interest) from January 2015through the February 2016with a balloon payment of approximately $2 milliondue on March 19, 2016. We are also required to provide annual audited and certified quarterly financial statements to Hopewell. The failure to provide those financial statements as prescribed is an event of default, and Hopewellmay, by written notice to us, declare the Hopewell Note immediately due and payable. 24 We are also required to provide annual audited and certified quarterly financial statements to Hopewell. The failure to provide those financial statements as prescribed is an event of default, and Hopewellmay, by written notice to us, declare the Hopewell Note immediately due and payable. Advances from General Partner
All funds advanced to the Partnership by the General Partner since
November 17, 2010have been treated as a loan pursuant to the terms of an intercompany demand promissory note effective March 1, 2012, and amended during March 2014. The intercompany demand note provides for advances from time to time by the General Partner to the Partnership of up to $4,000,000. Repayment of such advances, together with accrued and unpaid interest, is to be made in 12 substantially equal quarterly installments starting with the quarter ended March 31, 2016. The note bears interest at the imputed rate of the IRSfor medium term notes. The rate at June 30, 2014is 1.89% per annum and such rate is adjusted monthly by the IRSunder IRB 625. At June 30, 2014, the total amount owed to the General Partner by the Partnership, including accrued interest, was $3,845,000. Intercompany Notes Regional. In connection with the Regional acquisition, on July 26, 2007Regional issued to the Partnership a promissory note in the amount of $2,500,000("Central Promissory Note") in order to provide the remaining funding needed to complete the acquisition of Regional. Interest on the Central Promissory Note is 10% annually and such interest is payable quarterly. The Central Promissory Note is due on demand. Regional has not made an interest payment on the Central Promissory Note since its inception. Interest is accruing but unpaid. The balance on the note at June 30, 2014is $4,234,000. The payment of this amount is subordinated to the payment of the Hopewell Note by Regional. Other Advances. In addition to the Central Promissory Note, there have been other intercompany net advances made from time to time from the Partnership and/or RVOP to Regional. These intercompany amounts were historically evidenced by book entries. Effective March 1, 2012, Regional and the Partnership entered into an intercompany demand promissory note incorporating all advances made as of December 31, 2010and since that date. The note bears interest at the rate of 10% annually from January 1, 2011. At June 30, 2014, the intercompany balance owed by Regional to the Partnership and/or RVOP is approximately $2,803,000, which includes interest. This amount is due to the Partnership and RVOP on demand; however, as is the case with the Central Promissory Note, payment of these amounts is also subordinated to payment of the Hopewell Note by Regional. Material Agreements
Tank Storage and Terminal Services Agreement
Regional currently has approximately 10 million gallons of storage capacity at its
Hopewellfacility, all of which were leased at June 30, 2014. All of our tanks are under contract with expiration dates ranging from ten months to three years from June 30, 2014. We expect to renew each contract on or before expiration; however there are no assurances that we will be successful. Equipment Leases
January 18, 2012, we entered into a Vehicle Maintenance Agreement ("Maintenance Agreement") with Penske Truck Leasing Co., L. P. ("Penske") for the maintenance of our owned tractor and trailer fleet. The Maintenance Agreement provides for (i) fixed servicing as described in the agreement, which is basically scheduled maintenance, at the fixed monthly rate for tractors and for trailers and (ii) additional requested services, such as tire replacement, mechanical repairs, physical damage repairs, towing and roadside service and the provision of substitute vehicles, at hourly rates and discounts set forth in the agreement. Pricing for the fixed services is subject to upward adjustment for each rise of at least one percent (1%) for the Consumer Price Index for All Urban Consumers for the United Statespublished by the United States Department of Labor. The term of the agreement is 36 months. Regional is obligated to maintain liability insurance coverage on all vehicles naming Penske as a co-insured and indemnify Penske for any loss it or its representatives may incur in excess of the insurance coverage. Penske has the right to terminate the Maintenance Agreement for any breach by Regional upon 60 days written notice, including failure to pay timely all fees owing Penske, maintenance of Regional's insurance obligation or any other breach of the terms of the agreement. 25 On February 17, 2012, we entered into a seven-year Vehicle Lease ServiceAgreement with Penske for the outsourcing of 20 new Volvo tractors ("Leased Tractors") to be acquired by Penske and leased to us for seven years, and the outsourcing of the maintenance of the Leased Tractors to Penske ("Lease Agreement"). Under the terms of the Lease Agreement, we made a $90,000deposit, the proceeds for which were obtained from the sale of six of Regional's owned tractors, and will pay a monthly lease fee per tractor and monthly maintenance charge ("Maintenance Charge") which is based on the actual miles driven by each New Tractor during each month. The Maintenance Charge covers all scheduled maintenance, including tires, to keep the Leased Tractors in good repair and operating condition. Any replacement parts and labor for repairs which are not ordinary wear and tear shall be in accordance with Penske fleet pricing, and such costs are subject to upward adjustment on the same terms as set forth in the Maintenance Agreement. Penske is also obligated to provide roadside service resulting from mechanical or tire failure. Penske will obtain all operating permits and licenses with respect to the use of the Leased Tractors by Regional. In connection with the delivery of the Leased Tractors, we sold our remaining owned tractor fleet, except for several owned tractor units which were retained to be used for terminal site logistics. Under the terms of the Lease Agreement, Regional (i) may acquire any or all of the Leased Tractors after the first anniversary date of the Lease Agreement based on the non-depreciated value of the tractor, and (ii) has the option after the first anniversary date of the Lease Agreement to terminate the lease arrangement with respect to as many as five of the Leased Tractors based on a documented downturn in business. On May 31, 2013, Regional notified Penske of its intent to terminate the lease arrangement effective June 15, 2013, for five Leased Tractors as provided in the Lease Agreement due to a decline in Regional's transportation business. As a result of this partial termination, Regional now leases 15 tractors pursuant to the Lease Agreement. Regional is obligated to maintain liability insurance coverage on all vehicles covered by the Lease Agreement on the same basis as in the Lease Agreement. Reimbursement Agreements
December 31, 2013, in connection with the CEGP Investmentand the resulting change in control of the General Partner, the Partnership moved its principal executive offices to another office location within Dallas, Texasthat is leased from Katy Resources LLC("Katy"), an entity controlled by G. Thomas Graves III, the Chairman of the Board of the General Partner. As a result, we entered into a new reimbursement agreement with Katy on a month-to-month basis for reimbursement of allocable "overhead costs" and can be terminated by either party on 30 day's advance written notice. Effective January 1, 2011, the Partnership entered into an identical agreement with Rover Technologies LLC, a limited liability company affiliated with Ian Bothwell, the General Partner's Senior Vice President located in Manhattan Beach, California. Mr. Bothwellis a resident of Californiaand lives in Manhattan Beach. Since June 2012, Regional has been directly charged for its allocated portion of Rover Technologies LLC'sexpenses. In connection with the CEGP Investment, the Partnership reimbursed Rover Technologies LLCfor the outstanding unpaid overhead costs as of the date of the CEGP Investment. For the three months and six months ended June 30, 2013and 2014, expenses billed in connection with the reimbursement agreements were $12,000, $13,000, $30,000and $35,000, respectively.
Allocated Expenses Charged to Subsidiary
Regional is charged for direct expenses paid by the Partnership on its behalf, as well as its share of allocable overhead for expenses incurred by the Partnership which are indirectly attributable to Regional related activities. For the three months and six months ended
June 30, 2013and 2014, Regional recorded allocable expenses of $12,000, $55,000, $30,000and $120,000, respectively.
Registration Rights Agreements
Effective as of
August 1, 2011, the Partnership and the limited partners of Central Energy, LPexecuted a Registration Rights Agreement. The Registration Rights Agreement was prepared and signed by the parties as a part of the transaction consummated on November 17, 2010pursuant to which Central Energy, LP, an affiliate of the General Partner, acquired 12,724,019 Common Units of the Partnership. On May 26, 2011, Central Energy, LPdistributed 12,724,019 Common Units to its limited partners pursuant to the terms of the Central Energy, LPpartnership agreement. As a result, Central Energy, LPno longer holds any Common Units of the Partnership. The limited partners of Central Energy, LPare referred to herein as the "Purchasers." 26 The Registration Rights Agreement provides the Purchasers with shelf registration rights and piggyback registration rights, with certain restrictions, with respect to the Common Units held by them (" Registrable Securities"). The Partnership is required to file a shelf registration statement with the SECon behalf of the Purchasers as soon as practicable after April 15, 2012and maintain an effective shelf registration statement with respect to the Registrable Securitiesuntil the earlier to occur of (1) all securities registered under the shelf registration statement have been distributed as contemplated in the shelf registration statement, (2) there are no Registrable Securitiesoutstanding or (3) two years from the dated on which the shelf registration statement was first filed. The piggyback registration rights permit a Purchaser to elect to participate in an underwritten offering of the Partnership's securities other than a registration statement filed in connection with the registration of the Partnership's securities relating solely to (1) employee benefit plans or (2) a Rule 145 transaction. The amount of Registrable Securitiesthat the Purchasers can offer for sale in a piggyback registration is subject to certain restrictions as set forth in the Registration Rights Agreement. We are required to pay all costs associated with the shelf registration, any piggyback registration or an underwritten offer except for the underwriting fees, discounts and selling commission, transfer taxes (if any) applicable to the sale of the Registrable Securities, and fees and disbursements of legal counsel for any Purchaser. We are also indemnifying the Purchasers and their respective directors, officers, employees, agents, managers and underwriters, pursuant to an applicable underwriting agreement with such underwriter, from any losses, claims, damages, expenses or liabilities (1) arising from any untrue statement or alleged untrue statement of a material fact contained in the shelf registration statement or any other registration statement relating to the Registrable Securitiesor (2) the omission or alleged omission to state in such registration statement a material fact required to be stated therein or necessary to make the statements therein not misleading.
The Registration Rights Agreement also prohibits us from entering into a similar agreement which would be inconsistent with the rights granted in the Registration Statement or provide any other holder of the Partnership's securities rights that are more favorable than those granted to Purchasers without the prior written approval of Purchasers holding a majority of the
Given our current financial condition, as well as the current bid/ask price of the Common Units, we do not anticipate filing the shelf registration statement for the foreseeable future. We will seek to amend the Registration Rights Agreement to extend such filing requirement to a later date. Realization of Assets
Our unaudited consolidated balance sheets have been prepared in conformity with accounting principles generally accepted in
the United States of America, which contemplate our continuation as a going concern. We had a net loss for the year ended December 31, 2013and the six months ended June 30, 2014of $545,000
$408,000, respectively. During the period since December 31, 2012, we improved our overall liquidity. Our deficit in working capital, excluding current maturities of long-term debt, totaled $870,000at June 30, 2014compared with $3,163,000at December 31, 2012, a reduction of $2,293,000. In addition, we were successful in reducing our obligations owing under the Penske Lease Agreement and extending the interest only payment period under the Hopewell Loan Agreement. During 2013, we also satisfactorily resolved the TransMontaigne Dispute, the contingencies associated with the late filing tax matters, and paid down and/or obtained payment arrangements with critical accounts payable vendors. During November 2013, we completed the CEGP Investment, which provided working capital of $2.75 millionto the General Partner and Central Energy. We also recently amended the note agreement with the General Partner which provides for an increase in the amount of advances from the General Partner from $2.0 millionto $4.0 millionand extends the commencement date for amortization of the note with the General Partner to the quarter ended March 2017. Currently the General Partner's cash reserves are limited and the remaining available amounts (approximately $0.2 millionat July 17, 2014) are intended to be used to fund the Partnership's ongoing working capital requirements. In connection with the Hopewell Note, Regional is currently required to make interest payments only of $25,000per month until December 2014and then equal monthly payments of $56,000(principal and interest) each month thereafter until March 2016at which time a balloon payment of approximately $2 millionwill be due. Regional also is required to make minimum monthly payments under the Penske Lease Agreement of approximately $30,000until May 2019. Payments under the Hopewell Note and the Penske Lease Agreement could be accelerated in the event of a default. The amount of penalties related to the remaining 2012 Tax Return is $142,000and will be required to be paid if our appeal is unsuccessful. Since the closing of the CEGP Investment, Messrs. Denman, Graves and Weir have agreed to forego receipt of any compensation as a result of concerns over the available cash resources. 27
Substantially all of our assets are pledged as collateral for the Hopewell Loan, and therefore, we are unable to obtain additional financing collateralized by those assets without repayment of the Hopewell Loan. In addition, we have obligations under existing registrations rights agreements. These rights may be a deterrent to any future equity financings. In view of the matters described in the preceding paragraphs, recoverability of the recorded asset amounts shown in the accompanying consolidated balance sheet assumes that: (1) the expected increase in revenues from recent contracts entered into by Regional; (2) we do not experience any significant disruptions in storage revenues resulting from the timing of termination of storage tank lease agreements and identifying replacement customers and/or disruptions resulting from the performance of maintenance on its facilities; (3) our hauling revenues remain at current levels; (4) obligations to creditors are not accelerated; (5) there is adequate funding available for us to complete required maintenance and upgrades to our facilities; (6)our pending facility upgrades are completed timely and within estimated budgets; (7) our operating expenses remain at current levels; (8) we obtain additional working capital to meet our contractual commitments through future intercompany advances or a refinancing of the Hopewell Loan; and/or (9) the Partnership is able to receive future distributions from Regional or future advances from the General Partner in amounts necessary to fund working capital until an acquisition transaction is completed by the Partnership.
There is no assurance that we will have sufficient working capital to cover ongoing cash requirements for the period of time we believe is necessary to complete an acquisition that will provide additional working capital for us. If we do not have sufficient cash reserves, our ability to pursue additional acquisition transactions will be adversely impacted. Furthermore, despite significant effort, we have thus far been unsuccessful in completing an acquisition transaction. There can be no assurance that we will be able to complete an accretive acquisition or otherwise find additional sources of working capital. If an acquisition transaction cannot be completed or if additional funds cannot be raised and cash flow is inadequate, we would be required to seek other alternatives which could include the sale of assets, closure of operations, and/or protection under the U.S. bankruptcy laws.
It is our intention to acquire additional assets during 2014 on terms that will enable us to expand our assets and generate additional cash from operations. We are also seeking to obtain additional funding through a refinancing of the Hopewell Loan or from a funding transaction. The audited consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should we be unable to obtain adequate funding to maintain operations and to continue in existence.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Recently Issued Financial Accounting Standards
The Accounting Standards Codification is the single source of authoritative generally accepted accounting principles ("GAAP") recognized by the
Financial Accounting Standards Boardto be applied by nongovernmental entities in the preparation of financial statements in conformity with GAAP. Rules and interpretive releases of the SEC, under authority of federal securities laws, are also sources of authoritative GAAP for SECregistrants. The Codification became effective for interim and annual periods ending after September 15, 2009and superseded all previously existing non- SECaccounting and reporting standards. All other non-grandfathered non- SECaccounting literature not included in the Codification is non-authoritative. All of Central's references to GAAP now use the specific Codification Topic or Section rather than prior accounting and reporting standards. The Codification did not change existing GAAP and therefore, did not affect Central's consolidated financial position or results of operations. 28 Critical Accounting Policies
Our unaudited consolidated financial statements reflect the selection and application of accounting policies which require us to make significant estimates and judgments. See note B to our audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended