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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 8-K
 
 
CURRENT REPORT
 
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
 
Date of Report March 22, 2022
(Date of earliest event reported)
 
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Enservco Corporation
(Exact name of registrant as specified in its charter)
 
 
 
Delaware
  
001-36335
  
84-0811316
(State or other jurisdiction of
incorporation)
  
(Commission File Number)
  
(IRS Employer Identification No.)
 
14133 County Road 9½
Longmont, Colorado 80504
 
(Address of principal executive offices) (Zip Code)
 
(303) 333-3678
(Registrant’s telephone number, including area code)
 
(Former name or former address, if changed since last report)
 
 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
 
☐
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
 
☐
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
 
☐
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
 
☐
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
Trading Symbol(s)
Name of each exchange on which
registered
Common Stock, $0.005 par value
ENSV
NYSE American
 
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934. ☐
 
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. ☐
 
 
 
 
 
 
Item 4.02.         Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review. 
 
On March 22, 2022, Enservco Corporation (the “Company”), in consultation with the Audit Committee of its Board of Directors, concluded that the Company’s previously issued condensed consolidated financial statements as of and for the quarters ended March 31, 2021, June 30, 2021 and September 30, 2021 (collectively, the “Relevant Periods”) should no longer be relied upon largely because of the Company’s accounting for a conversion of debt to equity with a related party, in addition to misinterpretation of eligibility for certain employee retention tax credits under relevant provisions of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), as discussed below. The Company intends to amend its Quarterly Reports on Form 10-Q for the Relevant Periods to reflect restatements of its condensed consolidated financial statements for the Relevant Periods. These restatements will have no impact on the Company’s revenues, operating expenses, loss from operations or Adjusted EBIDTA for the Relevant Periods.
 
Employee Retention Tax Credits
 
The errors in the condensed consolidated financial statements as of and for the quarters ended June 30, 2021 and September 30, 2021 relate to the Company’s recognition of certain payroll tax credits (“Employee Retention Credits”) under relevant provisions of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). During the second quarter of 2021, the Company amended payroll tax returns originally filed for the third and fourth quarters of 2020 in order to claim refundable Employee Retention Credits for those periods. Enservco reported such refundable Employee Retention Credits as other receivables on each of its balance sheets for the quarters ended June 30, 2021 and September 30, 2021, and the amounts were reflected as other income in the Company’s condensed consolidated statements of operations for the quarter ended June 30, 2021.
 
In consultation with Plante & Moran, PLLC, the Company’s independent registered public accounting firm, and with the Company’s independent tax consultants, the Company has determined that it was not eligible for a portion of the Employee Retention Credits due to the aggregation of eligible employees at the Company and its subsidiaries. As a result, the Company determined that it improperly recorded accounts receivable of approximately $304,000 during the quarter ended June 30, 2021 related to Employee Tax Credits to which it was not entitled, and recognized such amount in other income in the Company’s condensed consolidated statements of operations for such quarter.
 
Cash reflected on the Company’s condensed consolidated balance sheets for the quarters ended June 30, 2021 and September 30, 2021 was not impacted by the error because the Company did not receive cash payments for the ineligible Employee Tax Credits until the first quarter of 2022.
 
Loss Attributable to Conversion of Subordinated Debt and Warrant Issuance
 
On February 3, 2021, Cross River Partners, L.P., a related party, converted subordinated debt in the principal amount of $1.25 million and $62,000 in accrued interest into 601,674 shares of Company common stock. In connection with such conversion, the Company issued a warrant to Cross River Partners, L.P. to purchase up to 150,418 additional shares of Company common stock in the future at an exercise price of $2.507 per share. At the time, the Company did not record a loss on the debt conversion and recorded the transaction through equity. This transaction is similar to the conversion that was done with Cross River Partners, L.P. in the third quarter of 2020 that was correctly accounted for through equity as the conversion resulted in a gain, However, the combination of the fair value of the common stock and warrant provided in this transaction resulted in a loss. The Company has since determined that the debt conversion in conjunction with the warrant issuance resulted in a loss of $304,000, which should have been reflected on the Company’s consolidated statement of operations for the quarter ended March 31, 2021.
 
 
 
 
Restatements
 
The errors described above are not related to operating matters, and adjustments to correct the errors will have no impact on revenues, operating expenses or loss from operations as reflected on the Company’s condensed consolidated statement of operations for the Relevant Periods. Further, the adjustments to correct the errors will have no impact on Adjusted EBITDA, which is an important non-GAAP reporting metric presented by the Company and used by analysts and investors in evaluating Company performance. Nonetheless, the Company has determined that these changes have a material impact on the as filed condensed consolidated financial statements for the Relevant Periods. As soon as practicable, the Company intends to amend its Quarterly Reports on Form 10-Q for the Relevant Periods to reflect restatements of its condensed consolidated financial statements for the Relevant Periods.
 
The Audit Committee of the Company’s Board of Directors has discussed the matters disclosed in this Item 4.02 with Plante & Moran, PLLC, the Company’s independent registered public accounting firm.
 
 
 
 
 
Item 9.01. Financial Statements and Exhibits.
 
(d) Exhibits
 
 
Exhibit No.
  
Description
     
99.1
  
104
  
Cover Page Interactive Data File (embedded within the Inline XBRL document)
 
 
 
 
SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 25, 2022.
 
 
Enservco Corporation
   
     
     
 
By:
 /s/ Richard A. Murphy
   
 Richard A. Murphy, Executive Chairman
 
 
 
 

Exhibit 99.1

 

 

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Enservco Corporation Announces it Will Amend its Financial Statements for First, Second and Third Quarters of 2021

 

Amendments are not related to operating matters and will not impact the Company’s revenues, operating expenses, operating loss or adjusted EBITDA

 

Company also announced it will extend its Form 10-K filing date for up to 15 days to incorporate the Form 10-Q amendments and the recent debt refinancing that significantly strengthened its balance sheet

 

DENVER, CO – March 28, 2022 – Enservco Corporation (NYSE American: ENSV), a diversified national provider of specialized well-site services to the domestic onshore conventional and unconventional oil and gas industries, today announced it will restate its financial statements on three Form 10-Q filings from 2021. The amendments are not related to operating matters and will not affect the Company’s reported revenue, operating expenses, operating loss, or adjusted EBITDA. In addition, the Company intends to extend the filing date of its 2021 Form 10-K for up to 15 days to incorporate the restatements and the successful debt refinancing transactions announced today.

 

“The restatements were required for two reasons: First, our auditors believe that the Company was not eligible for the full amount of employee retention tax credits that we recorded pursuant to the CARES Act; and second, the Company erred in accounting for a warrant issuance in connection with the February 2021 conversion of subordinated debt to equity,” said Rich Murphy, Chairman and CEO. “It’s important to note that these restatements are not related to operating matters and do not impact revenue, operating expenses, operating loss or adjusted EBITDA. We expect to file three amended Form 10-Qs and our 2021 Form 10-K as soon practicable.”

 

The Company said it applied for the employee retention tax credits based on third-party expert advice at the time and further based on management’s understanding of the CARES Act, the rules for which were subsequently clarified.

 

Murphy added, “The pending amendments did not impact the successful refinancing that we also announced today that substantially reduced our total debt, converted the majority of our debt from current to long-term liabilities and provided increased working capital liquidity. This refinancing strengthens and stabilizes our balance sheet and increases our financial flexibility.”

 

About Enservco

Through its various operating subsidiaries, Enservco provides a range of oilfield services, including hot oiling, acidizing, frac water heating, and related services. The Company has a broad geographic footprint covering seven major domestic oil and gas basins and serves customers in Colorado, Montana, New Mexico, North Dakota, Oklahoma, Pennsylvania, Ohio, Texas, Wyoming, West Virginia, Utah, Michigan, Illinois, Florida, New Mexico and Louisiana. Additional information is available at www.enservco.com.

 

 
 

 

Cautionary Note Regarding Forward-Looking Statements

 

This news release contains information that is "forward-looking" in that it describes events and conditions Enservco reasonably expects to occur in the future. Expectations for the future performance of Enservco are dependent upon a number of factors, and there can be no assurance that Enservco will achieve the results as contemplated herein. Certain statements contained in this release using the terms "may," “intends,” "expects to," and other terms denoting future possibilities, are forward-looking statements. The accuracy of these statements cannot be guaranteed as they are subject to a variety of risks, which are beyond Enservco's ability to predict, or control and which may cause actual results to differ materially from the projections or estimates contained herein. Among these risks are those set forth in Enservco’s annual report on Form 10-K for the year ended December 31, 2020, and subsequently filed documents with the SEC. Forward looking statements in this news release include ability of the Company to filed amended Form 10-Qs and its 2021 Form 10-K, achieve its growth objectives, the sustainability of higher oil prices, ability to de-lever the business and strengthen its balance sheet and increase financial flexibility. In addition, we believe the higher oil price environment bodes well for the Company in the and the ability raise additional equity. Enservco disclaims any obligation to update any forward-looking statement made herein, except as required by law.

 

Contact:

 

Marjorie Hargrave

President and CFO

Enservco Corporation

mhargrave@enservco.com

 

Pfeiffer High Investor Relations, Inc.

Jay Pfeiffer

Phone: 303-880-9000

Email: jay@pfeifferhigh.com