10-Q

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, 2021


☐	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)

(832) 562-3730

(Registrant’s telephone number, including area code)

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

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 November 1, 2021, the registrant had 52,351,768 shares of Class A Common Stock and no 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	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Cash Flows	5
	Condensed Consolidated Statements of Stockholders’ Deficit	7
	Notes to Condensed Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3.	Quantitative and Qualitative Disclosure about Market Risk	36
Item 4.	Controls and Procedures	36

PART II
Item 1.	Legal Proceeding	38
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38
Item 3.	Defaults Upon Senior Securities	38
Item 4.	Mine Safety Disclosures	38
Item 5.	Other Information	38
Item 6.	Exhibits	39
SIGNATURES		40

PART I

ITEM 1. FINANCIAL STATEMENTS (Unaudited)

U.S. WELL SERVICES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

(unaudited)


	September 30, 2021			December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	29,860		$	3,693
Restricted cash		735			1,569
Accounts receivable (net of allowance for doubtful accounts of $0 and $12,000 as of September 30, 2021 and December 31, 2020, respectively)		38,362			44,393
Inventory, net		5,571			7,965
Assets held for sale		16,687			-
Prepaids and other current assets		10,034			10,707
Total current assets		101,249			68,327
Property and equipment, net		217,883			235,332
Intangible assets, net		12,742			13,466
Goodwill		4,971			4,971
Other assets		1,505			1,127
TOTAL ASSETS	$	338,350		$	323,223
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable	$	33,455		$	36,362
Accrued expenses and other current liabilities		11,963			14,781
Notes payable		3,848			998
Current portion of long-term debt		5,000			10,000
Current portion of equipment financing		3,658			3,519
Current portion of capital lease obligations		484			54
Total current liabilities		58,408			65,714
Warrant liabilities		6,867			1,619
Long-term debt		242,460			274,555
Convertible senior notes		100,863			-
Long-term equipment financing		6,552			9,347
Long-term capital lease obligations		1,309			-
Other long-term liabilities		7,524			3,539
Total liabilities		423,983			354,774
Commitments and contingencies (NOTE 17)
Mezzanine equity:
Series A Redeemable Convertible Preferred Stock, par value $0.0001 per share; 55,000 shares authorized; 19,610 shares and 50,000 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively; aggregate liquidation preference of $26,225 and $60,418 as of September 30, 2021 and December 31, 2020, respectively		22,817			50,975
Series B Redeemable Convertible Preferred Stock, par value $0.0001 per share; 22,050 shares authorized; 0 shares and 22,050 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively; aggregate liquidation preference of $0 and $24,100 as of September 30, 2021 and December 31, 2020, respectively		-			22,686
Stockholders' deficit:
Class A Common Stock, par value of $0.0001 per share; 400,000,000 shares authorized; 52,352,178 shares and 20,718,659 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively (1)		5			2
Class B Common Stock, par value of $0.0001 per share; 20,000,000 shares authorized; 0 shares and 2,302,936 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively		-			-
Additional paid in capital (1)		261,837			217,217
Accumulated deficit		(370,292	)		(322,431	)
Total Stockholders' deficit		(108,450	)		(105,212	)
TOTAL LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' DEFICIT	$	338,350		$	323,223

(1) Prior periods have been adjusted to reflect the 1-for-3.5 reverse stock split on September 30, 2021. See Note 2, Reverse Stock Split, for details.

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

U.S. WELL SERVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(unaudited)


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2021			2020			2021			2020
Revenue	$	56,477		$	44,042		$	211,534		$	195,914
Costs and expenses:
Cost of services (excluding depreciation and amortization)		58,115			31,157			179,998			145,321
Depreciation and amortization		6,980			16,393			27,922			65,759
Selling, general and administrative expenses		11,142			6,098			25,746			30,376
Impairment of long-lived assets		-			-			-			147,543
Litigation settlement		-			-			35,000			-
Loss (gain) on disposal of assets		(12,001	)		755			(10,110	)		5,852
Loss from operations		(7,759	)		(10,361	)		(47,022	)		(198,937	)
Interest expense, net		(10,634	)		(5,748	)		(24,150	)		(19,369	)
Change in fair value of warrant liabilities		2,052			1,783			(5,235	)		6,972
Patent license sales		-			-			22,500			-
Gain on extinguishment of debt, net		6,645			-			5,806			-
Other income		117			30			169			81
Loss before income taxes		(9,579	)		(14,296	)		(47,932	)		(211,253	)
Income tax benefit		-			(87	)		(27	)		(824	)
Net loss		(9,579	)		(14,209	)		(47,905	)		(210,429	)
Net loss attributable to noncontrolling interest		-			(51	)		(44	)		(10,948	)
Net loss attributable to U.S. Well Services, Inc.		(9,579	)		(14,158	)		(47,861	)		(199,481	)
Dividends accrued on Series A preferred stock		(997	)		(1,854	)		(4,808	)		(5,450	)
Dividends accrued on Series B preferred stock		(3,069	)		(681	)		(4,591	)		(1,347	)
Deemed and imputed dividends on Series A preferred stock		-			(464	)		(750	)		(12,578	)
Deemed dividends on Series B preferred stock		(1,509	)		-			(7,178	)		-
Exchange of Series A preferred stock for convertible senior notes		-			-			8,936			-
Net loss attributable to U.S. Well Services, Inc. common stockholders	$	(15,154	)	$	(17,157	)	$	(56,252	)	$	(218,856	)
Loss per common share (See Note 14):
Basic and diluted (1)	$	(0.50	)	$	(0.88	)	$	(2.14	)	$	(11.80	)
Weighted average common shares outstanding:
Basic and diluted (1)		29,802			19,048			25,919			18,123

(1) Prior periods have been adjusted to reflect the 1-for-3.5 reverse stock split on September 30, 2021. See Note 2, Reverse Stock Split, for details.

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

U.S. WELL SERVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	Nine Months Ended
	September 30,
	2021			2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(47,905	)	$	(210,429	)
Adjustments to reconcile net loss to cash provided by (used in) operating activities:
Depreciation and amortization		27,922			65,759
Change in fair value of warrant liabilities		5,235			(6,972	)
Impairment of long-lived assets		-			147,543
Provision for losses on accounts receivable		9			9,031
Provision for losses on inventory obsolescence		2,428			603
Loss (gain) on disposal of assets		(10,110	)		5,852
Convertible senior notes converted into sales of patent licenses		(22,500	)		-
Amortization of debt discount, premium and issuance costs		5,131			3,372
Paid-in-kind interest on convertible senior notes		4,827			-
Gain on extinguishment of debt, net		(5,806	)		-
Share-based compensation expense		9,517			4,519
Changes in assets and liabilities:
Accounts receivable		6,022			34,096
Inventory		(34	)		1,128
Prepaids and other current assets		(6,649	)		5,979
Accounts payable		3,408			(22,375	)
Accrued liabilities		(3,213	)		(8,360	)
Accrued interest		11,465			(10,657	)
Net cash provided by (used in) operating activities		(20,253	)		19,089
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(47,565	)		(43,948	)
Proceeds from sale of property and equipment and insurance proceeds from damaged property and equipment		32,933			15,778
Net cash used in investing activities		(14,632	)		(28,170	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving credit facility		28,589			25,723
Repayments of revolving credit facility		(29,950	)		(51,034	)
Proceeds from issuance of long-term debt		3,004			10,000
Repayments of long-term debt		(44,896	)		(2,500	)
Payment of fees related to debt extinguishment		(523	)		-
Proceeds from issuance of convertible senior notes		97,500			-
Proceeds from issuance of notes payable		9,139			-
Repayments of notes payable		(6,289	)		(6,201	)
Repayments of amounts under equipment financing		(2,656	)		(2,349	)
Principal payments under capital lease obligations		(205	)		(4,272	)
Proceeds from issuance of common stock, net		13,562			19,596
Deferred financing costs		(7,057	)		(20,248	)
Net cash provided by (used in) financing activities		60,218			(31,285	)
Net increase (decrease) in cash and cash equivalents and restricted cash		25,333			(40,366	)
Cash and cash equivalents and restricted cash, beginning of period		5,262			41,404
Cash and cash equivalents and restricted cash, end of period	$	30,595		$	1,038

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

U.S. WELL SERVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(in thousands)

(unaudited)


	Nine Months Ended
	September 30,
	2021		2020
Supplemental cash flow disclosure:
Interest paid	$	2,004	$	25,865
Income tax paid		-		144
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
Conversion of Series A preferred stock to Class A common stock		-		2,895
Exchange of Series A preferred stock for convertible senior notes		24,780		-
Conversion of Series B preferred stock to Class A common stock		27,277		-
Deemed and imputed dividends on Series A preferred stock		750		12,578
Accrued Series A preferred stock dividends		4,808		5,450
Accrued Series B preferred stock dividends		4,591		1,347
Changes in accrued and unpaid capital expenditures		6,316		12,149
Assets under capital lease obligations		1,769		-

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

U.S. WELL SERVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT

(in thousands, except share amounts)

(unaudited)


	Three Months Ended September 30, 2021
	Class A Common Stock (1)					Class B Common Stock				Additional Paid in			Accumulated			Noncontrolling		Total
	Shares			Amount		Shares		Amount		Capital (1)			Deficit			Interest		Deficit
Balance, June 30, 2021		26,679,279		$	3		-	$	-	$	237,365		$	(360,713	)	$	-	$	(123,345	)
Class A common stock issuance for reverse stock split round up		24,197			-		-		-		-			-			-		-
Conversion of Series B preferred stock to Class A common stock		25,565,707			2		-		-		26,207			-			-		26,209
Share-based compensation		-			-		-		-		2,331			-			-		2,331
Restricted stock grants		88,025			-		-		-		-			-			-		-
Restricted stock forfeitures		(5,030	)		-		-		-		-			-			-		-
Accrued Series A preferred stock dividends		-			-		-		-		(997	)		-			-		(997	)
Accrued Series B preferred stock dividends		-			-