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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, 2020

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 []No

 

As of October 31, 2020, the registrant had 71,766,358 shares of Class A Common Stock and 2,302,936 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 (Deficit)

6

 

Notes to Condensed Consolidated Financial Statements

8

 

 

 

Item 2.

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

26

Item 3.

Quantitative and Qualitative Disclosure about Market Risk

33

Item 4.

Controls and Procedures

33

 

 

 

PART II

OTHER INFORMATION

34

Item 1.

Legal Proceeding

34

Item 1A.

Risk Factors

34

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

37

Item 3.

Defaults Upon Senior Securities

37

Item 4.

Mine Safety Disclosures

37

Item 5.

Other Information

37

Item 6.

Exhibits

41

SIGNATURES

 

42

 

1


U.S. WELL SERVICES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

(unaudited)

 

 

 

September 30, 2020

 

 

December 31, 2019

 

ASSETS

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

519

 

 

$

33,794

 

Restricted cash

 

 

519

 

 

 

7,610

 

Accounts receivable (net of allowance for doubtful accounts of

   $9,000 and $22 as of September 30, 2020 and December 31, 2019, respectively)

 

 

36,416

 

 

 

79,542

 

Inventory, net

 

 

7,321

 

 

 

9,052

 

Prepaids and other current assets

 

 

10,443

 

 

 

13,332

 

Total current assets

 

 

55,218

 

 

 

143,330

 

Property and equipment, net

 

 

242,810

 

 

 

441,610

 

Intangible assets, net

 

 

13,708

 

 

 

21,826

 

Goodwill

 

 

4,971

 

 

 

4,971

 

Deferred financing costs, net

 

 

1,196

 

 

 

1,045

 

TOTAL ASSETS

 

$

317,903

 

 

$

612,782

 

LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' EQUITY (DEFICIT)

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

Accounts payable

 

$

35,745

 

 

$

70,170

 

Accrued expenses and other current liabilities

 

 

12,142

 

 

 

40,481

 

Notes payable

 

 

1,867

 

 

 

8,068

 

Current portion of long-term equipment financing

 

 

3,473

 

 

 

5,564

 

Capital lease obligation

 

 

6,201

 

 

 

10,474

 

Current portion of long-term debt

 

 

-

 

 

 

6,250

 

Total current liabilities

 

 

59,428

 

 

 

141,007

 

Long-term equipment financing

 

 

10,243

 

 

 

10,501

 

Long-term debt

 

 

250,831

 

 

 

274,391

 

Other long-term liabilities

 

 

1,598

 

 

 

215

 

TOTAL LIABILITIES

 

 

322,100

 

 

 

426,114

 

Commitments and contingencies (NOTE 16)

 

 

 

 

 

 

 

 

MEZZANINE EQUITY

 

 

 

 

 

 

 

 

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

   55,000 shares authorized; 52,000 shares and 55,000 shares issued and

   outstanding as of September 30, 2020 and December 31, 2019, respectively;

   aggregate liquidation preference of $61,006 and $59,050 as of September 30,

   2020 and December 31, 2019, respectively

 

 

50,907

 

 

 

38,928

 

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

   22,050 shares 0 shares authorized, issued and outstanding as of September 30,

   2020 and December 31, 2019, respectively; aggregate liquidation preference of

   $23,398 and $0 as of September 30, 2020 and December 31, 2019, respectively

 

 

21,984

 

 

 

-

 

STOCKHOLDERS' EQUITY (DEFICIT)

 

 

 

 

 

 

 

 

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

   authorized; 71,413,883 shares and 62,857,624 shares issued and outstanding

   as of September 30, 2020 and December 31, 2019, respectively

 

 

7

 

 

 

5

 

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

   authorized; 2,302,936 shares and 5,500,692 shares issued and outstanding

   as of September 30, 2020 and December 31, 2019, respectively

 

 

-

 

 

 

1

 

Additional paid in capital

 

 

240,547

 

 

 

248,302

 

Accumulated deficit

 

 

(317,642

)

 

 

(111,201

)

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

 

 

(77,088

)

 

 

137,107

 

Noncontrolling interest

 

 

-

 

 

 

10,633

 

Total Stockholders' Equity (Deficit)

 

 

(77,088

)

 

 

147,740

 

TOTAL LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' EQUITY (DEFICIT)

 

$

317,903

 

 

$

612,782

 

 

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,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenue

 

$

44,042

 

 

$

130,884

 

 

$

195,914

 

 

$

422,075

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services (excluding depreciation and

   amortization)

 

 

31,157

 

 

 

90,792

 

 

 

145,321

 

 

 

307,841

 

Depreciation and amortization

 

 

16,393

 

 

 

39,723

 

 

 

65,759

 

 

 

117,888

 

Selling, general and administrative expenses

 

 

6,098

 

 

 

8,216

 

 

 

30,376

 

 

 

24,474

 

Impairment of long-lived assets

 

 

-

 

 

 

-

 

 

 

147,543

 

 

 

-

 

Loss on disposal of assets

 

 

755

 

 

 

4,976

 

 

 

5,852

 

 

 

15,884

 

Loss from operations

 

 

(10,361

)

 

 

(12,823

)

 

 

(198,937

)

 

 

(44,012

)

Interest expense, net

 

 

(5,744

)

 

 

(8,449

)

 

 

(19,357

)

 

 

(21,384

)

Loss on extinguishment of debt

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(12,558

)

Other income

 

 

30

 

 

 

62

 

 

 

81

 

 

 

1,774

 

Loss before income taxes

 

 

(16,075

)

 

 

(21,210

)

 

 

(218,213

)

 

 

(76,180

)

Income tax expense (benefit)

 

 

(87

)

 

 

39

 

 

 

(824

)

 

 

469

 

Net loss

 

 

(15,988

)

 

 

(21,249

)

 

 

(217,389

)

 

 

(76,649

)

Net loss attributable to noncontrolling interest

 

 

(51

)

 

 

(4,280

)

 

 

(10,948

)

 

 

(15,929

)

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

 

 

(15,937

)

 

 

(16,969

)

 

 

(206,441

)

 

 

(60,720

)

Dividends accrued on Series A preferred stock

 

 

(1,854

)

 

 

(1,670

)

 

 

(5,450

)

 

 

(2,330

)

Dividends accrued on Series B preferred stock

 

 

(681

)

 

 

-

 

 

 

(1,347

)

 

 

-

 

Deemed and imputed dividends on Series A preferred stock

 

 

(467

)

 

 

(4,406

)

 

 

(11,220

)

 

 

(5,966

)

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

 

$

(18,939

)

 

$

(23,045

)

 

$

(224,458

)

 

$

(69,016

)

Loss per common share (See Note 12):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.28

)

 

$

(0.45

)

 

$

(3.46

)

 

$

(1.36

)

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

66,667

 

 

 

50,250

 

 

 

63,431

 

 

 

49,182

 

 

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,

 

 

 

2020

 

 

2019

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net loss

 

$

(217,389

)

 

$

(76,649

)

Adjustments to reconcile net loss to cash provided by

operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

65,759

 

 

 

117,888

 

Impairment of long-lived assets

 

 

147,543

 

 

 

-

 

Provision for losses on accounts receivable

 

 

9,031

 

 

 

307

 

Provision for losses on inventory obsolescence

 

 

603

 

 

 

-

 

Loss on disposal of assets

 

 

5,852

 

 

 

15,884

 

Amortization of discount on debt

 

 

2,355

 

 

 

1,373

 

Deferred financing costs amortization

 

 

1,017

 

 

 

1,049

 

Loss on extinguishment of debt

 

 

-

 

 

 

12,558

 

Share-based compensation expense

 

 

4,519

 

 

 

5,672

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

34,096

 

 

 

(50,331

)

Inventory

 

 

1,128

 

 

 

(2,036

)

Prepaids and other current assets

 

 

5,979

 

 

 

1,795

 

Accounts payable

 

 

(22,375

)

 

 

2,243

 

Accrued liabilities

 

 

(8,360

)

 

 

1,487

 

Accrued interest

 

 

(10,669

)

 

 

11,090

 

Net cash provided by operating activities

 

 

19,089

 

 

 

42,330

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(43,948

)

 

 

(194,114

)

Proceeds from sale of property and equipment

 

 

15,778

 

 

 

706

 

Net cash used in investing activities

 

 

(28,170

)

 

 

(193,408

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Proceeds from revolving credit facility

 

 

25,723

 

 

 

49,134

 

Repayment of revolving credit facility

 

 

(51,034

)

 

 

(65,000

)

Proceeds from issuance of long-term debt

 

 

10,000

 

 

 

285,000

 

Repayments of long-term debt

 

 

(2,500

)

 

 

(75,000

)

Payment of fees related to debt extinguishment

 

 

-

 

 

 

(6,560

)

Proceeds from issuance of note payable

 

 

-

 

 

 

9,117

 

Repayments of notes payable

 

 

(6,201

)

 

 

(4,560

)

Repayments of amounts under equipment financing

 

 

(2,349

)

 

 

(66,872

)

Principal payments under finance lease obligation

 

 

(4,272

)

 

 

(12,494

)

Proceeds from issuance of preferred stock and warrants, net

 

 

19,596

 

 

 

54,524

 

Deferred financing costs

 

 

(20,248

)

 

 

(13,451

)

Net cash provided by (used in) financing activities

 

 

(31,285

)

 

 

153,838

 

Net increase (decrease) in cash and cash equivalents

   and restricted cash

 

 

(40,366

)

 

 

2,760

 

Cash and cash equivalents and restricted cash,

   beginning of period

 

 

41,404

 

 

 

30,036

 

Cash and cash equivalents and restricted cash,

   end of period

 

$

1,038

 

 

$

32,796

 

 

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,

 

 

 

2020

 

 

2019

 

Supplemental cash flow disclosure:

 

 

 

 

 

 

 

 

Interest paid

 

$

25,865

 

 

$

7,853

 

Income tax paid

 

 

144

 

 

 

353

 

Non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Issuance of Class A common stock to senior secured term loan lenders

 

 

1,438

 

 

 

-

 

Issuance of Series B preferred stock to senior secured term loan lenders

 

 

1,050

 

 

 

 

 

Beneficial conversion feature of Series A preferred stock

 

 

-

 

 

 

20,132

 

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

 

 

-

 

 

 

10,720

 

Conversion of Series A preferred stock to Class A common stock

 

 

4,691

 

 

 

-

 

Deemed and imputed dividends on Series A preferred stock

 

 

11,220

 

 

 

5,966

 

Accrued Series A preferred stock dividends

 

 

5,450

 

 

 

2,330

 

Accrued Series B preferred stock dividends

 

 

1,347

 

 

 

-

 

Changes in accrued and unpaid capital expenditures

 

 

12,149

 

 

 

13,045

 

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 (DEFICIT)

(in thousands, except share amounts)

(unaudited)

 

 

 

Class A Common

Stock

 

 

Class B Common

Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Paid in

 

 

Accumulated

 

 

Noncontrolling

 

 

Total

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

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

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

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

)