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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 June 30, 2022

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)

(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

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 August 5, 2022, the registrant had 12,827,306 shares of Class A common stock and no shares of Class B common stock outstanding.

 

 

 


 

TABLE OF CONTENTS

 

 

 

Page

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

33

Item 3.

Quantitative and Qualitative Disclosure about Market Risk

40

Item 4.

Controls and Procedures

40

PART II

 

 

Item 1.

Legal Proceeding

41

Item 1A.

Risk Factors

41

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

41

Item 3.

Defaults Upon Senior Securities

41

Item 4.

Mine Safety Disclosures

41

Item 5.

Other Information

41

Item 6.

Exhibits

42

SIGNATURES

 

44

 

 

 

 

2


PART I

ITEM 1. FINANCIAL STATEMENTS

U.S. WELL SERVICES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

(unaudited)

 

 

June 30, 2022

 

 

December 31, 2021

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

17,268

 

 

$

6,384

 

Restricted cash

 

 

736

 

 

 

2,736

 

Accounts receivable (net of allowance for doubtful accounts of $0 as of June 30, 2022 and December 31, 2021, respectively)

 

 

31,721

 

 

 

25,743

 

Inventory, net

 

 

8,074

 

 

 

6,351

 

Assets held for sale

 

 

-

 

 

 

2,043

 

Prepaids and other current assets

 

 

6,373

 

 

 

18,748

 

Total current assets

 

 

64,172

 

 

 

62,005

 

Property and equipment, net

 

 

194,943

 

 

 

162,664

 

Operating lease right-of-use assets

 

 

18,197

 

 

 

-

 

Finance lease right-of-use assets

 

 

3,246

 

 

 

-

 

Intangible assets (net of accumulated amortization of $2,173 and $1,690 as of June 30, 2022 and December 31, 2021, respectively)

 

 

12,017

 

 

 

12,500

 

Goodwill

 

 

4,971

 

 

 

4,971

 

Other assets

 

 

1,119

 

 

 

1,417

 

TOTAL ASSETS

 

$

298,665

 

 

$

243,557

 

LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' DEFICIT

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

49,027

 

 

$

29,180

 

Accrued expenses and other current liabilities

 

 

14,301

 

 

 

16,842

 

Notes payable

 

 

2,814

 

 

 

2,320

 

Current portion of long-term debt

 

 

8,750

 

 

 

5,000

 

Current portion of equipment financing

 

 

3,437

 

 

 

3,412

 

Current portion of capital lease obligations

 

 

-

 

 

 

1,092

 

Current portion of operating lease liabilities

 

 

9,605

 

 

 

-

 

Current portion of finance lease liabilities

 

 

1,168

 

 

 

-

 

Total current liabilities

 

 

89,102

 

 

 

57,846

 

Warrant liabilities

 

 

2,733

 

 

 

3,557

 

Convertible senior notes

 

 

116,183

 

 

 

105,769

 

Long-term debt

 

 

158,423

 

 

 

167,507

 

Long-term equipment financing

 

 

3,328

 

 

 

5,128

 

Long-term capital lease obligations

 

 

-

 

 

 

2,112

 

Long-term operating lease liabilities

 

 

8,748

 

 

 

-

 

Long-term finance lease liabilities

 

 

2,176

 

 

 

-

 

Other long-term liabilities

 

 

7,927

 

 

 

6,875

 

Total liabilities

 

 

388,620

 

 

 

348,794

 

Commitments and contingencies (NOTE 12)

 

 

 

 

 

 

Mezzanine equity:

 

 

 

 

 

 

Series A Redeemable Convertible Preferred Stock, par value $0.0001 per share; 55,000 shares authorized; 19,610 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively; aggregate liquidation preference of $29,499 and $27,274 as of June 30, 2022 and December 31, 2021, respectively

 

 

26,092

 

 

 

23,866

 

Stockholders' deficit:

 

 

 

 

 

 

Class A Common Stock, par value of $0.0001 per share; 400,000,000 shares authorized; 12,827,306 shares and 8,858,161 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively (1)

 

 

1

 

 

 

1

 

Additional paid in capital (1)

 

 

312,571

 

 

 

263,932

 

Accumulated deficit

 

 

(428,619

)

 

 

(393,036

)

Total Stockholders' deficit

 

 

(116,047

)

 

 

(129,103

)

TOTAL LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' DEFICIT

 

$

298,665

 

 

$

243,557

 

 

(1) Periods presented have been adjusted to reflect the 1-for-6 reverse stock split on August 4, 2022. See Note 2, Reverse Stock Splits, for details.

 

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

3


 

U.S. WELL SERVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(unaudited)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenue

 

$

68,764

 

 

$

78,799

 

 

$

109,914

 

 

$

155,057

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services (excluding depreciation and amortization)

 

 

55,209

 

 

 

59,252

 

 

 

95,932

 

 

 

121,883

 

Depreciation and amortization

 

 

5,877

 

 

 

9,836

 

 

 

11,577

 

 

 

20,942

 

Selling, general and administrative expenses

 

 

9,406

 

 

 

7,214

 

 

 

17,778

 

 

 

14,604

 

Litigation settlement

 

 

-

 

 

 

35,000

 

 

 

-

 

 

 

35,000

 

Loss (gain) on disposal of assets

 

 

(76

)

 

 

(545

)

 

 

2,980

 

 

 

1,891

 

Loss from operations

 

 

(1,652

)

 

 

(31,958

)

 

 

(18,353

)

 

 

(39,263

)

Interest expense, net

 

 

(9,562

)

 

 

(7,333

)

 

 

(17,530

)

 

 

(13,516

)

Change in fair value of warrant liabilities

 

 

1,577

 

 

 

(136

)

 

 

831

 

 

 

(7,287

)

Patent license sales

 

 

-

 

 

 

22,500

 

 

 

-

 

 

 

22,500

 

Loss on extinguishment of debt

 

 

-

 

 

 

(839

)

 

 

(1,651

)

 

 

(839

)

Other income

 

 

302

 

 

 

23

 

 

 

1,623

 

 

 

52

 

Loss before income taxes

 

 

(9,335

)

 

 

(17,743

)

 

 

(35,080

)

 

 

(38,353

)

Income tax benefit

 

 

-

 

 

 

(27

)

 

 

-

 

 

 

(27

)

Net loss

 

 

(9,335

)

 

 

(17,716

)

 

 

(35,080

)

 

 

(38,326

)

Net loss attributable to noncontrolling interest

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(44

)

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

 

 

(9,335

)

 

 

(17,716

)

 

 

(35,080

)

 

 

(38,282

)

Dividends accrued on Series A preferred stock

 

 

(1,135

)

 

 

(1,998

)

 

 

(2,226

)

 

 

(3,811

)

Dividends accrued on Series B preferred stock

 

 

-

 

 

 

(811

)

 

 

-

 

 

 

(1,522

)

Deemed and imputed dividends on Series A preferred stock

 

 

-

 

 

 

(286

)

 

 

-

 

 

 

(750

)

Deemed dividends on Series B preferred stock

 

 

-

 

 

 

(1,501

)

 

 

-

 

 

 

(5,669

)

Exchange of Series A preferred stock for convertible senior notes

 

 

-

 

 

 

8,936

 

 

 

-

 

 

 

8,936

 

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

 

$

(10,470

)

 

$

(13,376

)

 

$

(37,306

)

 

$

(41,098

)

Loss per common share (See Note 15):

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted (1)

 

$

(0.82

)

 

$

(3.10

)

 

$

(3.27

)

 

$

(10.12

)

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted (1)

 

 

12,720

 

 

 

4,219

 

 

 

11,347

 

 

 

3,991

 

 

(1) Periods presented have been adjusted to reflect the 1-for-3.5 reverse stock split on September 30, 2021 and the 1-for-6 reverse stock split on August 4, 2022. See Note 2, Reverse Stock Splits, for details.

 

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

(in thousands)

(unaudited)

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2022

 

 

2021

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net loss

 

$

(35,080

)

 

$

(38,326

)

Adjustments to reconcile net loss to cash provided by (used in) operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

11,577

 

 

 

20,942

 

Change in fair value of warrant liabilities

 

 

(831

)

 

 

7,287

 

Provision for losses on accounts receivable

 

 

-

 

 

 

9

 

Provision for losses on inventory obsolescence

 

 

541

 

 

 

1,398

 

Loss on disposal of assets

 

 

2,980

 

 

 

1,891

 

Non-cash lease expense

 

 

1,997

 

 

 

-

 

Convertible senior notes converted into sales of patent licenses

 

 

-

 

 

 

(22,500

)

Amortization of debt discount, premium and issuance costs

 

 

3,130

 

 

 

3,606

 

Paid-in-kind interest

 

 

12,237

 

 

 

258

 

Loss on extinguishment of debt, net

 

 

1,651

 

 

 

839

 

Share-based compensation expense

 

 

1,613

 

 

 

3,661

 

Changes in assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(5,978

)

 

 

(10,506

)

Inventory

 

 

(2,263

)

 

 

(964

)

Prepaids and other current assets

 

 

1,445

 

 

 

(7,708

)

Accounts payable

 

 

8,902

 

 

 

6,427

 

Accrued liabilities

 

 

1,229

 

 

 

(2,641

)

Accrued interest

 

 

409

 

 

 

7,956

 

Net cash provided by (used in) operating activities

 

 

3,559

 

 

 

(28,371

)

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

Purchase of property and equipment

 

 

(48,337

)

 

 

(24,841

)

Proceeds from sale of property and equipment and insurance proceeds from damaged property and equipment

 

 

17,338

 

 

 

8,553

 

Net cash used in investing activities

 

 

(30,999

)

 

 

(16,288

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

Proceeds from revolving credit facility

 

 

7,344

 

 

 

24,722

 

Repayments of revolving credit facility

 

 

(14,495

)

 

 

(14,750

)

Proceeds from issuance of long-term debt

 

 

-

 

 

 

3,004

 

Proceeds from issuance of long-term debt and warrants

 

 

21,500

 

 

 

-

 

Repayments of long-term debt

 

 

(19,022

)

 

 

(12,563

)

Payment of fees related to debt extinguishment

 

 

(96

)

 

 

(41

)

Proceeds from issuance of convertible senior notes

 

 

-

 

 

 

86,500

 

Proceeds from issuance of notes payable

 

 

3,826

 

 

 

9,139

 

Repayments of notes payable

 

 

(3,332

)

 

 

(3,697

)

Repayments of amounts under equipment financing

 

 

(1,774

)

 

 

(1,738

)

Principal payments under capital lease obligations

 

 

-

 

 

 

(109

)

Principal payments on finance lease liabilities

 

 

(560

)

 

 

-

 

Proceeds from issuance of common stock and warrants in registered direct offering, net

 

 

22,730

 

 

 

-

 

Proceeds from issuance of common stock via the 2020 ATM Agreement, net

 

 

21,298

 

 

 

13,562

 

Deferred financing costs

 

 

(1,095

)

 

 

(6,569

)

Net cash provided by financing activities

 

 

36,324

 

 

 

97,460

 

Net increase in cash and cash equivalents and restricted cash

 

 

8,884

 

 

 

52,801

 

Cash and cash equivalents and restricted cash, beginning of period

 

 

9,120

 

 

 

5,262

 

Cash and cash equivalents and restricted cash, end of period

 

$

18,004

 

 

$

58,063

 

 

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

5


 

U.S. WELL SERVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(in thousands)

(unaudited)

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2022

 

 

2021

 

Supplemental cash flow disclosure:

 

 

 

 

 

 

Interest paid

 

$

1,411

 

 

$

1,276

 

Income tax refunds received

 

 

(757

)

 

 

(810

)

Non-cash investing and financing activities:

 

 

 

 

 

 

Issuance of warrants to term C loan lenders

 

 

6,491

 

 

 

-

 

Issuance of warrants to purchasers of Class A common stock in registered direct offering

 

 

7,044

 

 

 

-

 

Issuance of warrants to placement agent in registered direct offering

 

 

470

 

 

 

-

 

Exchange of Series A preferred stock for convertible senior notes

 

 

-

 

 

 

24,780

 

Conversion of Series B preferred stock to Class A common stock

 

 

-

 

 

 

1,067

 

Deemed and imputed dividends on Series A preferred stock

 

 

-

 

 

 

750

 

Accrued Series A preferred stock dividends

 

 

2,226

 

 

 

3,811

 

Accrued Series B preferred stock dividends

 

 

-

 

 

 

1,522

 

Changes in accrued and unpaid capital expenditures

 

 

8,927

 

 

 

7,543

 

Assets under capital lease obligations

 

 

-

 

 

 

1,113

 

 

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

6


 

U.S. WELL SERVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT

(in thousands, except share amounts)

(unaudited)

 

 

 

Three Months Ended June 30, 2022

 

 

 

Class A Common
Stock
(1)

 

 

Class B Common
Stock

 

 

Additional
Paid in

 

 

Accumulated

 

 

Noncontrolling

 

 

Total

 

 

 

Shares

 

 

Amount