usws-10q_20190930.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 September 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

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 November 4, 2019, the registrant had 54,588,775 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)

 

 

 

September 30, 2019

 

 

December 31, 2018

 

ASSETS

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

20,712

 

 

$

29,529

 

Restricted cash

 

 

12,084

 

 

 

507

 

Accounts receivable (net of allowance for doubtful accounts of

   $22 and $189 in 2019 and 2018, respectively)

 

 

108,050

 

 

 

58,026

 

Inventory, net

 

 

10,488

 

 

 

9,413

 

Prepaids and other current assets

 

 

14,867

 

 

 

16,437

 

Total current assets

 

 

166,201

 

 

 

113,912

 

Property and equipment, net

 

 

461,529

 

 

 

331,387

 

Intangible assets, net

 

 

22,191

 

 

 

27,890

 

Goodwill

 

 

4,971

 

 

 

4,971

 

Deferred financing costs, net

 

 

1,108

 

 

 

2,070

 

TOTAL ASSETS

 

$

656,000

 

 

$

480,230

 

LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

Accounts payable

 

$

78,559

 

 

$

89,360

 

Accrued expenses and other current liabilities

 

 

29,453

 

 

 

17,044

 

Notes payable, current portion

 

 

7,250

 

 

 

4,560

 

Current portion of long-term equipment financing

 

 

7,886

 

 

 

3,263

 

Current portion of long-term capital lease obligation

 

 

13,286

 

 

 

25,338

 

Current portion of long-term debt

 

 

5,000

 

 

 

900

 

Total current liabilities

 

 

141,434

 

 

 

140,465

 

Notes payable, less current portion

 

 

1,867

 

 

 

-

 

Long-term equipment financing

 

 

11,926

 

 

 

8,304

 

Long-term capital lease obligation

 

 

1,330

 

 

 

-

 

Long-term debt

 

 

275,154

 

 

 

91,112

 

Deferred rent

 

 

166

 

 

 

-

 

TOTAL LIABILITIES

 

 

431,877

 

 

 

239,881

 

Commitments and contingencies (NOTE 16)

 

 

 

 

 

 

 

 

MEZZANINE EQUITY

 

 

 

 

 

 

 

 

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

   55,000 shares authorized, issued and outstanding as of September 30, 2019;

   aggregate liquidation preference of $57,330 as of September 30, 2019

 

 

31,968

 

 

 

-

 

STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

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

   authorized; 54,588,775 shares and 49,254,760 shares issued and outstanding

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

 

 

1

 

 

 

1

 

Additional paid in capital

 

 

232,080

 

 

 

204,928

 

Accumulated deficit

 

 

(78,008

)

 

 

(17,383

)

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

 

 

154,078

 

 

 

187,551

 

Noncontrolling interest

 

 

38,077

 

 

 

52,798

 

Total Stockholders' Equity

 

 

192,155

 

 

 

240,349

 

TOTAL LIABILITIES, MEZZANINE EQUITY  AND STOCKHOLDERS' EQUITY

 

$

656,000

 

 

$

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 September 30,

 

 

Nine Months Ended September 30,

 

 

 

2019

 

 

 

2018

 

 

2019

 

 

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

130,884

 

 

 

$

166,173

 

 

$

422,075

 

 

 

$

530,411

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services (excluding depreciation and

   amortization)

 

 

90,792

 

 

 

 

137,452

 

 

 

307,841

 

 

 

 

427,243

 

Depreciation and amortization

 

 

39,723

 

 

 

 

26,765

 

 

 

117,888

 

 

 

 

77,547

 

Selling, general and administrative expenses

 

 

8,216

 

 

 

 

5,248

 

 

 

24,474

 

 

 

 

14,863

 

Loss (gain) on disposal of assets

 

 

4,976

 

 

 

 

(126

)

 

 

15,884

 

 

 

 

7,990

 

Income (loss) from operations

 

 

(12,823

)

 

 

 

(3,166

)

 

 

(44,012

)

 

 

 

2,768

 

Interest expense, net

 

 

(8,449

)

 

 

 

(7,387

)

 

 

(21,384

)

 

 

 

(21,672

)

Loss on extinguishment of debt

 

 

-

 

 

 

 

-

 

 

 

(12,558

)

 

 

 

-

 

Other income

 

 

62

 

 

 

 

9

 

 

 

1,774

 

 

 

 

331

 

Loss before income taxes

 

 

(21,210

)

 

 

 

(10,544

)

 

 

(76,180

)

 

 

 

(18,573

)

Income tax expense

 

 

39

 

 

 

 

-

 

 

 

469

 

 

 

 

-

 

Net loss

 

 

(21,249

)

 

 

 

(10,544

)

 

 

(76,649

)

 

 

 

(18,573

)

Net loss attributable to noncontrolling interest

 

 

(4,280

)

 

 

 

-

 

 

 

(15,929

)

 

 

 

-

 

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

 

 

(16,969

)

 

 

 

(10,544

)

 

 

(60,720

)

 

 

 

(18,573

)

Dividends accrued on Series A preferred stock

 

 

(1,670

)

 

 

 

-

 

 

 

(2,330

)

 

 

 

-

 

Deemed and imputed dividends on Series A preferred stock

 

 

(4,406

)

 

 

 

-

 

 

 

(5,966

)

 

 

 

-

 

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

 

$

(23,045

)

 

 

$

(10,544

)

 

$

(69,016

)

 

 

$

(18,573

)

Loss per common share (See Note 12):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.45

)

 

 

$

(0.21

)

 

$

(1.36

)

 

 

$

(0.37

)

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

50,250

 

 

 

 

47,940

 

 

 

49,182

 

 

 

 

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)

 

 

 

Nine Months Ended September 30,

 

 

 

2019

 

 

2018

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net loss

 

$

(76,649

)

 

$

(18,573

)

Adjustments to reconcile net loss to cash provided by

operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

117,888

 

 

 

77,547

 

Provision for losses on accounts receivable

 

 

307

 

 

 

569

 

Provision for losses on inventory obsolescence

 

 

-

 

 

 

93

 

Non-cash interest

 

 

-

 

 

 

7,196

 

Loss on disposal of assets

 

 

15,884

 

 

 

7,990

 

Amortization of discount on debt

 

 

1,373

 

 

 

-

 

Deferred financing costs amortization

 

 

1,049

 

 

 

1,569

 

Loss on extinguishment of debt

 

 

12,558

 

 

 

-

 

Share-based compensation expense

 

 

5,672

 

 

 

2,802

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(50,331

)

 

 

2,794

 

Inventory

 

 

(2,036

)

 

 

1,364

 

Prepaids and other current assets

 

 

1,795

 

 

 

(4,514

)

Accounts payable

 

 

2,243

 

 

 

800

 

Accrued liabilities

 

 

1,487

 

 

 

4,477

 

Accrued interest

 

 

11,090

 

 

 

-

 

Net cash provided by operating activities

 

 

42,330

 

 

 

84,114

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(194,114

)

 

 

(58,557

)

Insurance proceeds from damaged property and equipment

 

 

706

 

 

 

8,011

 

Net cash used in investing activities

 

 

(193,408

)

 

 

(50,546

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Proceeds from issuance of revolving credit facility

 

 

49,134

 

 

 

-

 

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

 

 

-

 

 

 

(3,420

)

Proceeds from issuance of notes payable

 

 

9,117

 

 

 

6,513

 

Repayments of note payable

 

 

(4,560

)

 

 

(2,145

)

Repayments of amounts under equipment financing

 

 

(66,872

)

 

 

(12,484

)

Principal payments under finance lease obligation

 

 

(12,494

)

 

 

(7,144

)

Proceeds from issuance of preferred stock and warrants, net

 

 

54,524

 

 

 

-

 

Cash distribution to partners

 

 

-

 

 

 

(9

)

Deferred financing costs

 

 

(13,451

)

 

 

-

 

Net cash provided by (used in) financing activities

 

 

153,838

 

 

 

(18,689

)

Net increase in cash and cash equivalents

   and restricted cash

 

 

2,760

 

 

 

14,879

 

Cash and cash equivalents and restricted cash,

   beginning of period

 

 

30,036

 

 

 

6,426

 

Cash and cash equivalents and restricted cash,

   end of period

 

$

32,796

 

 

$

21,305

 

 

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)

 

 

 

Nine Months Ended September 30,

 

 

 

2019

 

 

2018

 

Supplemental cash flow disclosure:

 

 

 

 

 

 

 

 

Interest paid

 

$

7,853

 

 

$

12,586

 

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

 

 

5,966

 

 

 

-

 

Accrued Series A preferred stock dividends

 

 

2,330

 

 

 

-

 

Changes in accrued and unpaid capital expenditures

 

 

13,045

 

 

 

49,199

 

Assets under finance lease obligations

 

 

10,451

 

 

 

-

 

Financed equipment purchases

 

 

66,342

 

 

 

3,893

 

 

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

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,802

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,802

 

Cash distribution to partners

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9

)

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(18,573

)

 

 

-

 

 

 

-

 

 

 

(18,573

)

Balance, September 30, 2018

 

 

-

 

 

$

-

 

 

 

-

 

 

$

-

 

 

$

-

 

 

$

140,678

 

 

$

(112,195

)

 

$

-

 

 

$

-

 

 

$

28,483

 

 

 

 

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 2)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

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

 

 

2,218,183

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Class A Common stock granted

   to board members

 

 

46,875

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

331

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

87

 

 

 

418

 

Share-based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

4,265

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,094

 

 

 

5,359

 

Restricted stock forfeitures

 

 

(18,687

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

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

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(5,966

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(5,966

)

Accrued Series A preferred stock dividends

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,330

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,330

)

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(60,720

)

 

 

(15,929

)

 

 

(76,649

)

Balance, September 30, 2019

 

 

54,588,775

 

 

$

5

 

 

 

13,775,400

 

 

$

1

 

 

$

232,080

 

 

$

-

 

 

$

-

 

 

$

(78,008

)

 

$

38,077

 

 

$

192,155

 

 

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