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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, 2021

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 July 30, 2021, the registrant had 93,377,516 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

2

 

Condensed Consolidated Statements of Operations

3

 

Condensed Consolidated Statements of Cash Flows

4

 

Condensed Consolidated Statements of Stockholders’ Deficit

6

 

Notes to Condensed Consolidated Financial Statements

8

 

 

 

Item 2.

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

28

Item 3.

Quantitative and Qualitative Disclosure about Market Risk

34

Item 4.

Controls and Procedures

34

 

 

 

PART II

OTHER INFORMATION

36

Item 1.

Legal Proceeding

36

Item 1A.

Risk Factors

36

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

36

Item 3.

Defaults Upon Senior Securities

36

Item 4.

Mine Safety Disclosures

36

Item 5.

Other Information

36

Item 6.

Exhibits

37

SIGNATURES

 

39

 

 

 

 

1


 

 

U.S. WELL SERVICES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

(unaudited)

 

 

June 30, 2021

 

 

December 31, 2020

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

57,544

 

 

$

3,693

 

Restricted cash

 

 

519

 

 

 

1,569

 

Accounts receivable (net of allowance for doubtful accounts of $0 and $12,000

   as of June 30, 2021 and December 31, 2020, respectively)

 

 

54,890

 

 

 

44,393

 

Inventory, net

 

 

7,531

 

 

 

7,965

 

Assets held for sale

 

 

14,744

 

 

 

-

 

Prepaids and other current assets

 

 

12,400

 

 

 

10,707

 

Total current assets

 

 

147,628

 

 

 

68,327

 

Property and equipment, net

 

 

213,301

 

 

 

235,332

 

Intangible assets, net

 

 

12,983

 

 

 

13,466

 

Goodwill

 

 

4,971

 

 

 

4,971

 

Deferred financing costs, net

 

 

747

 

 

 

1,127

 

TOTAL ASSETS

 

$

379,630

 

 

$

323,223

 

LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' DEFICIT

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

35,353

 

 

$

36,362

 

Accrued expenses and other current liabilities

 

 

12,210

 

 

 

14,781

 

Notes payable

 

 

6,440

 

 

 

998

 

Current portion of long-term debt

 

 

12,000

 

 

 

10,000

 

Current portion of equipment financing

 

 

3,611

 

 

 

3,519

 

Current portion of capital lease obligations

 

 

325

 

 

 

54

 

Total current liabilities

 

 

69,939

 

 

 

65,714

 

Warrant liabilities

 

 

8,914

 

 

 

1,619

 

Long-term debt

 

 

281,052

 

 

 

274,555

 

Convertible senior notes

 

 

85,677

 

 

 

-

 

Long-term equipment financing

 

 

7,517

 

 

 

9,347

 

Long-term capital lease obligations

 

 

909

 

 

 

-

 

Other long-term liabilities

 

 

4,006

 

 

 

3,539

 

Total liabilities

 

 

458,014

 

 

 

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

   June 30, 2021 and December 31, 2020, respectively; aggregate liquidation preference

   of $25,228 and $60,418 as of June 30, 2021 and December 31, 2020, respectively

 

 

21,820

 

 

 

50,975

 

Series B Redeemable Convertible Preferred Stock, par value $0.0001 per share; 22,050

   shares authorized; 21,038 shares and 22,050 shares issued and outstanding as of

   June 30, 2021 and December 31, 2020, respectively; aggregate liquidation preference

   of $24,490 and $24,100 as of June 30, 2021 and December 31, 2020, respectively

 

 

23,141

 

 

 

22,686

 

Stockholders' deficit:

 

 

 

 

 

 

 

 

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

   93,377,516 shares and 72,515,342 shares issued and outstanding as of June 30, 2021

   and December 31, 2020, respectively

 

 

9

 

 

 

7

 

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 June 30, 2021 and

   December 31, 2020, respectively

 

 

-

 

 

 

-

 

Additional paid in capital

 

 

237,359

 

 

 

217,212

 

Accumulated deficit

 

 

(360,713

)

 

 

(322,431

)

Total Stockholders' deficit

 

 

(123,345

)

 

 

(105,212

)

TOTAL LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' DEFICIT

 

$

379,630

 

 

$

323,223

 

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,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenue

 

$

78,799

 

 

$

39,837

 

 

$

155,057

 

 

$

151,872

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services (excluding depreciation and amortization)

 

 

59,252

 

 

 

29,011

 

 

 

121,883

 

 

 

114,165

 

Depreciation and amortization

 

 

9,836

 

 

 

17,358

 

 

 

20,942

 

 

 

49,366

 

Selling, general and administrative expenses

 

 

7,214

 

 

 

5,220

 

 

 

14,604

 

 

 

24,277

 

Impairment of long-lived assets

 

 

-

 

 

 

-

 

 

 

-

 

 

 

147,543

 

Litigation settlement

 

 

35,000

 

 

 

-

 

 

 

35,000

 

 

 

-

 

Loss (gain) on disposal of assets

 

 

(545

)

 

 

853

 

 

 

1,891

 

 

 

5,097

 

Loss from operations

 

 

(31,958

)

 

 

(12,605

)

 

 

(39,263

)

 

 

(188,576

)

Interest expense, net

 

 

(7,333

)

 

 

(5,665

)

 

 

(13,516

)

 

 

(13,621

)

Change in fair value of warrant liabilities

 

 

(136

)

 

 

(1,364

)

 

 

(7,287

)

 

 

5,189

 

Patent license sales

 

 

22,500

 

 

 

-

 

 

 

22,500

 

 

 

-

 

Loss on extinguishment of debt

 

 

(839

)

 

 

-

 

 

 

(839

)

 

 

-

 

Other income

 

 

23

 

 

 

45

 

 

 

52

 

 

 

51

 

Loss before income taxes

 

 

(17,743

)

 

 

(19,589

)

 

 

(38,353

)

 

 

(196,957

)

Income tax expense (benefit)

 

 

(27

)

 

 

13

 

 

 

(27

)

 

 

(737

)

Net loss

 

 

(17,716

)

 

 

(19,602

)

 

 

(38,326

)

 

 

(196,220

)

Net loss attributable to noncontrolling interest

 

 

-

 

 

 

(97

)

 

 

(44

)

 

 

(10,897

)

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

 

 

(17,716

)

 

 

(19,505

)

 

 

(38,282

)

 

 

(185,323

)

Dividends accrued on Series A preferred stock

 

 

(1,998

)

 

 

(1,845

)

 

 

(3,811

)

 

 

(3,596

)

Dividends accrued on Series B preferred stock

 

 

(811

)

 

 

(666

)

 

 

(1,522

)

 

 

(666

)

Deemed and imputed dividends on Series A preferred stock

 

 

(286

)

 

 

(5,142

)

 

 

(750

)

 

 

(12,114

)

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

 

$

(13,376

)

 

$

(27,158

)

 

$

(41,098

)

 

$

(201,699

)

Loss per common share (See Note 14):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.15

)

 

$

(0.41

)

 

$

(0.48

)

 

$

(3.19

)

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

88,593

 

 

 

65,011

 

 

 

83,810

 

 

 

61,815

 

 

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,

 

 

 

2021

 

 

2020

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net loss

 

$

(38,326

)

 

$

(196,220

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

20,942

 

 

 

49,366

 

Change in fair value of warrant liabilities

 

 

7,287

 

 

 

(5,189

)

Impairment of long-lived assets

 

 

-

 

 

 

147,543

 

Provision for losses on accounts receivable

 

 

9

 

 

 

9,031

 

Provision for losses on inventory obsolescence

 

 

1,398

 

 

 

448

 

Loss on disposal of assets

 

 

1,891

 

 

 

5,097

 

Convertible senior notes converted into sales of patent licenses

 

 

(22,500

)

 

 

-

 

Amortization of debt discount, premium and issuance costs

 

 

3,606

 

 

 

1,883

 

Paid-in-kind interest on convertible senior notes

 

 

258

 

 

 

-

 

Loss on extinguishment of debt

 

 

839

 

 

 

-

 

Share-based compensation expense

 

 

3,661

 

 

 

3,481

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(10,506

)

 

 

32,053

 

Inventory

 

 

(964

)

 

 

826

 

Prepaids and other current assets

 

 

(7,708

)

 

 

3,743

 

Accounts payable

 

 

6,427

 

 

 

(8,332

)

Accrued liabilities

 

 

(2,641

)

 

 

(7,902

)

Accrued interest

 

 

7,956

 

 

 

(14,315

)

Net cash provided by (used in) operating activities

 

 

(28,371

)

 

 

21,513

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(24,841

)

 

 

(40,756

)

Proceeds from sale of property and equipment and insurance proceeds from

   damaged property and equipment

 

 

8,553

 

 

 

15,036

 

Net cash used in investing activities

 

 

(16,288

)

 

 

(25,720

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Proceeds from revolving credit facility

 

 

24,722

 

 

 

11,250

 

Repayments of revolving credit facility

 

 

(14,750

)

 

 

(33,381

)

Proceeds from issuance of long-term debt

 

 

3,004

 

 

 

-

 

Repayments of long-term debt

 

 

(12,563

)

 

 

(2,500

)

Payment of fees related to debt extinguishment

 

 

(41

)

 

 

-

 

Proceeds from issuance of convertible senior notes

 

 

86,500

 

 

 

-

 

Proceeds from issuance of notes payable

 

 

9,139

 

 

 

-

 

Repayments of notes payable

 

 

(3,697

)

 

 

(4,109

)

Repayments of amounts under equipment financing

 

 

(1,738

)

 

 

(1,513

)

Principal payments under capital lease obligations

 

 

(109

)

 

 

(2,816

)

Proceeds from issuance of common stock, net

 

 

13,562

 

 

 

19,875

 

Deferred financing costs

 

 

(6,569

)

 

 

(20,061

)

Net cash provided by (used in) financing activities

 

 

97,460

 

 

 

(33,255

)

Net increase (decrease) in cash and cash equivalents and restricted cash

 

 

52,801

 

 

 

(37,462

)

Cash and cash equivalents and restricted cash, beginning of period

 

 

5,262

 

 

 

41,404

 

Cash and cash equivalents and restricted cash, end of period

 

$

58,063

 

 

$

3,942

 

 

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,

 

 

 

2021

 

 

2020

 

Supplemental cash flow disclosure:

 

 

 

 

 

 

 

 

Interest paid

 

$

1,276

 

 

$

25,492

 

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

 

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

 

 

 

12,114

 

Accrued Series A preferred stock dividends

 

 

3,811

 

 

 

3,596

 

Accrued Series B preferred stock dividends

 

 

1,522

 

 

 

666

 

Changes in accrued and unpaid capital expenditures

 

 

7,543

 

 

 

13,790

 

Assets under capital lease obligations

 

 

1,113

 

 

 

-

 

 

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

5


 

U.S. WELL SERVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT

(in thousands, except share amounts)

(unaudited)

 

 

 

Three Months Ended June 30, 2021

 

 

 

Class A Common

Stock

 

 

Class B Common

Stock

 

 

Additional

Paid in

 

 

Accumulated

 

 

Noncontrolling

 

 

Total

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Interest

 

 

Deficit

 

Balance, March 31, 2021

 

 

90,068,356

 

 

$

9

 

 

 

-

 

 

$

-

 

 

$

226,740

 

 

$

(342,997

)

 

$

-

 

 

$

(116,248

)

Class A common stock issuance

 

 

2,381,660

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,891

 

 

 

-

 

 

 

-

 

 

 

2,891

 

Conversion of Series B preferred

   stock to Class A common stock

 

 

927,500

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

270

 

 

 

-

 

 

 

-

 

 

 

270

 

Exchange of Series A preferred

   stock for convertible senior notes

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

8,936

 

 

 

-

 

 

 

-

 

 

 

8,936

 

Share-based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,617

 

 

 

-

 

 

 

-

 

 

 

1,617

 

Deemed and imputed dividends on

   Series A preferred stock

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(286

)

 

 

-

 

 

 

-

 

 

 

(286

)

Accrued Series A preferred

   stock dividends

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,998

)

 

 

-

 

 

 

-

 

 

 

(1,998

)

Accrued Series B preferred

   stock dividends

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(811

)

 

 

-

 

 

 

-

 

 

 

(811

)

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(17,716

)

 

 

-

 

 

 

(17,716

)

Balance, June 30, 2021

 

 

93,377,516

 

 

$

9

 

 

 

-

 

 

$

-

 

 

$

237,359

 

 

$

(360,713

)

 

$

-

 

 

$

(123,345

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 2020

 

 

 

Class A Common

Stock

 

 

Class B Common

Stock

 

 

Additional

Paid in

 

 

Accumulated

 

 

Noncontrolling

 

 

Total

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Interest

 

 

Deficit

 

Balance, March 31, 2020

 

 

62,355,657

 

 

$

5

 

 

 

5,500,692

 

 

$

1

 

 

$

218,500

 

 

$

(258,909

)

 

$

-

 

 

$

(40,403

)

Class A common stock issuance

 

 

5,529,622

 

 

 

1

 

 

 

-

 

 

 

-

 

 

 

1,437

 

 

 

-

 

 

 

-

 

 

 

1,438

 

Conversion of Class B common

   stock to Class A common stock

 

 

485,795

 

 

 

1

 

 

 

(485,795

)

 

 

(1

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Share-based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,307

 

 

 

-

 

 

 

97

 

 

 

1,404

 

Restricted stock forfeitures

 

 

(9,861

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Deemed and imputed dividends on

   Series A preferred stock

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(5,142

)

 

 

-

 

 

 

-

 

 

 

(5,142

)

Accrued Series A preferred

   stock dividends

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,845

)

 

 

-

 

 

 

-

 

 

 

(1,845

)

Accrued Series B preferred

   stock dividends

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(666

)

 

 

-

 

 

 

-

 

 

 

(666

)

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(19,505

)

 

 

(97

)

 

 

(19,602

)

Balance, June 30, 2020

 

 

68,361,213

 

 

$

7

 

 

 

5,014,897

 

 

$

-

 

 

$

213,591

 

 

$

(278,414

)