usws-10q_20190630.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended June 30, 2019

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 001-38025

U.S. WELL SERVICES, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

 

81-1847117

(State or other jurisdiction of

 

(I.R.S. Employer incorporation or

organization)

 

Identification No.)

 

1360 Post Oak Boulevard, Suite 1800, Houston, TX

 

77056

(Address of principal executive offices)

 

(Zip Code)

Registrant’s telephone number, including area code (832) 562-3730

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

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

CLASS A COMMON SHARES $0.0001, par value

WARRANTS

USWS

USWSW

NASDAQ Capital Market

NASDAQ Capital Market

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 No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an 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.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

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 [X]No

 

As of August 5, 2019, the registrant had 54,607,462 shares of Class A Common Stock and 13,775,400 shares of Class B Common Stock outstanding.

 

 

 


TABLE OF CONTENTS

 

 

 

Page No.

PART I

FINANCIAL INFORMATION

 

Item 1.

Financial Statements (Unaudited)

 

 

Condensed Consolidated Balance Sheets

2

 

Condensed Consolidated Statements of Operations

3

 

Condensed Consolidated Statements of Cash Flows

4

 

Condensed Consolidated Statements of Stockholders’ Equity

6

 

Notes to Condensed Consolidated Financial Statements

8

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

27

Item 3.

Quantitative and Qualitative Disclosure about Market Risk

33

Item 4.

Controls and Procedures

34

 

 

 

PART II

OTHER INFORMATION

35

Item 1.

Legal Proceeding

35

Item 1A.

Risk Factors

35

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

35

Item 3.

Defaults Upon Senior Securities

35

Item 4.

Mine Safety Disclosures

35

Item 5.

Other Information

35

Item 6.

Exhibits

36

SIGNATURES

 

37

 

1


U.S. WELL SERVICES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

(unaudited)

 

 

 

June 30, 2019

 

 

December 31, 2018

 

ASSETS

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

34,758

 

 

$

29,529

 

Restricted cash

 

 

16,976

 

 

 

507

 

Accounts receivable (net of allowance for doubtful accounts of

   $474 and $189 in 2019 and 2018, respectively)

 

 

108,406

 

 

 

58,026

 

Inventory, net

 

 

9,810

 

 

 

9,413

 

Prepaids and other current assets

 

 

11,760

 

 

 

16,437

 

Total current assets

 

 

181,710

 

 

 

113,912

 

Property and equipment, net

 

 

489,839

 

 

 

331,387

 

Intangible assets, net

 

 

24,091

 

 

 

27,890

 

Goodwill

 

 

4,971

 

 

 

4,971

 

Deferred financing costs, net

 

 

1,171

 

 

 

2,070

 

TOTAL ASSETS

 

$

701,782

 

 

$

480,230

 

LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

Accounts payable

 

$

114,394

 

 

$

89,360

 

Accrued expenses and other current liabilities

 

 

22,167

 

 

 

17,044

 

Notes payable

 

 

173

 

 

 

4,560

 

Current portion of long-term equipment financing

 

 

10,227

 

 

 

3,263

 

Current portion of long-term capital lease obligation

 

 

15,935

 

 

 

25,338

 

Current portion of long-term debt

 

 

3,750

 

 

 

900

 

Total current liabilities

 

 

166,646

 

 

 

140,465

 

Long-term equipment financing

 

 

13,272

 

 

 

8,304

 

Long-term capital lease obligation

 

 

2,786

 

 

 

-

 

Long-term debt

 

 

275,791

 

 

 

91,112

 

Deferred rent

 

 

116

 

 

 

-

 

TOTAL LIABILITIES

 

 

458,611

 

 

 

239,881

 

Commitments and contingencies (NOTE 16)

 

 

 

 

 

 

 

 

MEZZANINE EQUITY

 

 

 

 

 

 

 

 

Series A Convertible Redeemable Preferred Stock, par value $0.0001 per share;

   10,000,000 shares authorized; 55,000 shares issued and outstanding as of

   June 30, 2019; aggregate liquidation preference of $55,660 as of June 30, 2019

 

 

25,892

 

 

 

-

 

STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Class A Common Stock, par value of $0.0001 per share; 400,000,000 shares

   authorized; 54,607,462 shares and 49,254,760 shares issued and outstanding

   as of June 30, 2019 and December 31, 2018, respectively

 

 

5

 

 

 

5

 

Class B Common Stock, par value of $0.0001 per share; 20,000,000 shares

   authorized; 13,775,400 shares and 13,937,332 shares issued and outstanding

   as of June 30, 2019 and December 31, 2018, respectively

 

 

1

 

 

 

1

 

Additional paid in capital

 

 

236,398

 

 

 

204,928

 

Accumulated deficit

 

 

(61,039

)

 

 

(17,383

)

Total stockholders' equity attributable to U.S. Well Services, Inc.

 

 

175,365

 

 

 

187,551

 

Noncontrolling interest

 

 

41,914

 

 

 

52,798

 

Total Stockholders' Equity

 

 

217,279

 

 

 

240,349

 

TOTAL LIABILITIES, MEZZANINE EQUITY  AND STOCKHOLDERS' EQUITY

 

$

701,782

 

 

$

480,230

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

2


U.S. WELL SERVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(unaudited)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2019

 

 

 

2018

 

 

2019

 

 

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

151,419

 

 

 

$

192,632

 

 

$

291,190

 

 

 

$

364,238

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services (excluding depreciation and

   amortization)

 

 

107,369

 

 

 

 

151,363

 

 

 

217,048

 

 

 

 

289,791

 

Depreciation and amortization

 

 

40,322

 

 

 

 

24,862

 

 

 

78,165

 

 

 

 

50,782

 

Selling, general and administrative expenses

 

 

7,638

 

 

 

 

5,278

 

 

 

16,258

 

 

 

 

9,615

 

Loss on disposal of assets

 

 

4,003

 

 

 

 

5,187

 

 

 

10,908

 

 

 

 

8,116

 

Income (loss) from operations

 

 

(7,913

)

 

 

 

5,942

 

 

 

(31,189

)

 

 

 

5,934

 

Interest expense, net

 

 

(7,820

)

 

 

 

(6,884

)

 

 

(12,935

)

 

 

 

(14,285

)

Loss on extinguishment of debt

 

 

(12,558

)

 

 

 

-

 

 

 

(12,558

)

 

 

 

-

 

Other income

 

 

1,686

 

 

 

 

5

 

 

 

1,712

 

 

 

 

322

 

Loss before income taxes

 

 

(26,605

)

 

 

 

(937

)

 

 

(54,970

)

 

 

 

(8,029

)

Income tax expense

 

 

306

 

 

 

 

-

 

 

 

430

 

 

 

 

-

 

Net loss

 

 

(26,911

)

 

 

 

(937

)

 

 

(55,400

)

 

 

 

(8,029

)

Net loss attributable to noncontrolling interest

 

 

(5,432

)

 

 

 

-

 

 

 

(11,649

)

 

 

 

-

 

Net loss attributable to U.S. Well Services, Inc.

 

 

(21,479

)

 

 

 

(937

)

 

 

(43,751

)

 

 

 

(8,029

)

Dividends accrued on Series A preferred stock

 

 

(660

)

 

 

 

-

 

 

 

(660

)

 

 

 

-

 

Deemed and imputed dividends on Series A preferred stock

 

 

(1,560

)

 

 

 

-

 

 

 

(1,560

)

 

 

 

-

 

Net loss attributable to U.S. Well Services, Inc. common stockholders

 

$

(23,699

)

 

 

$

(937

)

 

$

(45,971

)

 

 

$

(8,029

)

Loss per common share (See Note 12):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.46

)

 

 

$

(0.02

)

 

$

(0.92

)

 

 

$

(0.16

)

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

49,846

 

 

 

 

47,940

 

 

 

48,631

 

 

 

 

47,940

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

3


U.S. WELL SERVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

 

 

Six Months Ended June 30,

 

 

 

2019

 

 

2018

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net loss

 

$

(55,400

)

 

$

(8,029

)

Adjustments to reconcile net loss to cash provided by

operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

78,165

 

 

 

50,782

 

Provision for losses on accounts receivable

 

 

285

 

 

 

723

 

Provision for losses on inventory obsolescence

 

 

-

 

 

 

85

 

Non-cash interest

 

 

-

 

 

 

3,525

 

Loss on disposal of assets

 

 

10,908

 

 

 

8,116

 

Amortization of discount on debt

 

 

1,168

 

 

 

-

 

Deferred financing costs amortization

 

 

687

 

 

 

1,042

 

Loss on extinguishment of debt

 

 

12,558

 

 

 

-

 

Share-based compensation expense

 

 

3,366

 

 

 

1,907

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(50,666

)

 

 

(23,521

)

Inventory

 

 

(871

)

 

 

(2,933

)

Prepaids and other current assets

 

 

5,712

 

 

 

(2,539

)

Accounts payable

 

 

2,857

 

 

 

10,067

 

Accrued liabilities

 

 

806

 

 

 

2,493

 

Accrued interest

 

 

4,436

 

 

 

-

 

Net cash provided by operating activities

 

 

14,011

 

 

 

41,718

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(144,889

)

 

 

(23,599

)

Net cash used in investing activities

 

 

(144,889

)

 

 

(23,599

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Proceeds from issuance of revolving credit facility

 

 

49,025

 

 

 

-

 

Repayment of revolving credit facility

 

 

(65,000

)

 

 

-

 

Proceeds from issuance of long-term debt

 

 

285,000

 

 

 

-

 

Repayments of long-term debt

 

 

(75,000

)

 

 

-

 

Payment of fees related to debt extinguishment

 

 

(6,560

)

 

 

 

 

Repayments of long-term debt to related party

 

 

-

 

 

 

(1,710

)

Proceeds from issuance of note payable

 

 

-

 

 

 

1,394

 

Repayments of note payable

 

 

(4,387

)

 

 

(1,827

)

Repayments of amounts under equipment financing

 

 

(63,186

)

 

 

(8,245

)

Principal payments under finance lease obligation

 

 

(8,389

)

 

 

(4,793

)

Proceeds from issuance of preferred stock and warrants, net

 

 

54,524

 

 

 

-

 

Deferred financing costs

 

 

(13,451

)

 

 

-

 

Net cash provided by (used in) financing activities

 

 

152,576

 

 

 

(15,181

)

Net increase in cash and cash equivalents

   and restricted cash

 

 

21,698

 

 

 

2,938

 

Cash and cash equivalents and restricted cash,

   beginning of period

 

 

30,036

 

 

 

6,426

 

Cash and cash equivalents and restricted cash,

   end of period

 

$

51,734

 

 

$

9,364

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

4


U.S. WELL SERVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(in thousands)

(unaudited)

 

 

 

Six Months Ended June 30,

 

 

 

2019

 

 

2018

 

Supplemental cash flow disclosure:

 

 

 

 

 

 

 

 

Interest paid

 

$

6,679

 

 

$

7,847

 

Income tax paid

 

 

353

 

 

$

-

 

Non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Beneficial conversion feature of Series A preferred stock

 

 

20,132

 

 

 

-

 

Issuance of warrants to purchase common stock associated with preferred stock offering

 

 

10,720

 

 

 

-

 

Deemed and imputed dividends on Series A preferred stock

 

 

1,560

 

 

 

-

 

Accrued Series A preferred stock dividends

 

 

660

 

 

 

-

 

Changes in accrued and unpaid capital expenditures

 

 

22,177

 

 

 

10,745

 

Assets under finance lease obligations

 

 

10,451

 

 

 

-

 

Financed equipment purchases

 

 

66,342

 

 

 

-

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

5


U.S. WELL SERVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(in thousands, except share amounts)

(Unaudited)

 

 

 

Class A Common

Stock

 

 

Class B Common

Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Members'

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Paid in

 

 

Members'

 

 

Accumulated

 

 

Accumulated

 

 

Noncontrolling

 

 

Total

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Interest

 

 

Deficit

 

 

Deficit

 

 

Interest

 

 

Equity

 

Balance, December 31, 2017

 

 

-

 

 

$

-

 

 

 

-

 

 

$

-

 

 

$

-

 

 

$

137,885

 

 

$

(93,622

)

 

$

-

 

 

$

-

 

 

$

44,263

 

Deemed contribution related to

   unit-based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,907

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,907

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(8,029

)

 

 

-

 

 

 

-

 

 

 

(8,029

)

Balance, June 30, 2018

 

 

-

 

 

$

-

 

 

 

-

 

 

$

-

 

 

$

-

 

 

$

139,792

 

 

$

(101,651

)

 

$

-

 

 

$

-

 

 

$

38,141

 

 

 

 

Class A Common

Stock

 

 

Class B Common

Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Members'

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Paid in

 

 

Members'

 

 

Accumulated

 

 

Accumulated

 

 

Noncontrolling

 

 

Total

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Interest

 

 

Deficit

 

 

Deficit

 

 

Interest

 

 

Equity

 

Balance, December 31, 2018

 

 

49,254,760

 

 

$

5

 

 

 

13,937,332

 

 

$

1

 

 

$

204,928

 

 

$

-

 

 

$

-

 

 

$

(17,383

)

 

$

52,798

 

 

$

240,349

 

Adoption of ASC 606 as of

   January 1, 2019 (Note 1)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

95

 

 

 

27

 

 

 

122

 

Exercise of warrants

 

 

2,925,712

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Conversion of Class B common stock to Class A common stock

 

 

161,932

 

 

 

-

 

 

 

(161,932

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Restricted stock granted to

   employees

 

 

2,218,179

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Class A Common stock granted

   to board members

 

 

46,879

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

331

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

87

 

 

 

418

 

Share-based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,507

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

651

 

 

 

3,158

 

Issuance of warrants to purchase common stock associated with preferred stock offering

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

10,720

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

10,720

 

Beneficial conversion feature of Series A preferred stock

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

20,132

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

20,132

 

Deemed and imputed dividends on Series A preferred stock

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,560

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,560

)

Accrued Series A preferred stock dividends

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(660

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(660

)

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(43,751

)

 

 

(11,649

)

 

 

(55,400

)

Balance, June 30, 2019

 

 

54,607,462

 

 

$

5

 

 

 

13,775,400

 

 

$

1

 

 

$

236,398

 

 

$

-

 

 

$

-

 

 

$

(61,039

)

 

$

41,914

 

 

$

217,279

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

6


 

U.S. WELL SERVICES, INC.

 

 

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (continued)

 

 

(in thousands, except share amounts)

 

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A Common

Stock

 

 

Class B Common

Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Members'

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Paid in

 

 

Members'

 

 

Accumulated

 

 

Accumulated

 

 

Noncontrolling

 

 

Total

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Interest

 

 

Deficit

 

 

Deficit

 

 

Interest

 

 

Equity