The accompanying notes are an integral part of these condensed consolidated financial statements.
The accompanying notes are an integral part of these condensed consolidated financial statements.
The accompanying notes are an integral part of these condensed consolidated financial statements.
The accompanying notes are an integral part of these condensed consolidated financial statements.
The accompanying notes are an integral part of these condensed consolidated financial statements.
The accompanying notes are an integral part of these condensed consolidated financial statements.
U.S. WELL SERVICES, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except shares and per share amounts, or where otherwise noted)
NOTE 1 – DESCRIPTION OF BUSINESS
U.S. Well Services, Inc. (the “Company,” “we,” “us” or “our”), f/k/a Matlin & Partners Acquisition Corp (“MPAC”), is a Houston, Texas-based technology-focused oilfield service company focused on hydraulic fracturing for oil and natural gas exploration and production (“E&P”) companies in the United States. The process of hydraulic fracturing involves pumping a pressurized stream of fracturing fluid—typically a mixture of water, chemicals, and proppant—into a well casing or tubing to cause the underground mineral formation to fracture or crack. Fractures release trapped hydrocarbon particles and provide a conductive channel for the oil or natural gas to flow freely to the wellbore for collection. The propping agent or proppant becomes lodged in the cracks created by the hydraulic fracturing process, “propping” them open to facilitate the flow of hydrocarbons from the reservoir to the well.
The Company’s fleets consist of mobile hydraulic fracturing units and other auxiliary heavy equipment to perform fracturing services. The Company has two designs for hydraulic fracturing units: (1) Conventional Fleets, which are powered by diesel fuel and utilize traditional internal combustion engines, transmissions, and radiators and (2) Clean Fleet®, which replaces the traditional engines, transmissions, and radiators with electric motors powered by electricity generated by natural gas-fueled turbine generators. Both designs utilize high-pressure hydraulic fracturing pumps mounted on trailers. The Company refers to the group of pump trailers and other equipment necessary to perform a typical fracturing job as a “fleet” and the personnel assigned to each fleet as a “crew”. In May 2021, the Company announced its commitment to becoming an all-electric hydraulic fracturing service provider and that it expects to fully exit the diesel frac market by the end of 2021.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements were prepared using generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and the instructions to Form 10-Q and Regulation S-X. Accordingly, these financial statements do not include all information or notes required by GAAP for annual financial statements and should be read in conjunction with the annual financial statements included in the Amendment No. 1 to Annual Report on Form 10-K/A for the year ended December 31, 2020 (the “Amended Annual Report”), filed with the Securities and Exchange Commission (“SEC”) on May 17, 2021.
The accompanying unaudited condensed consolidated financial statements and accompanying notes present the consolidated financial position, results of operations, cash flows, and stockholders’ deficit of the Company as of June 30, 2021 and December 31, 2020, and for the three and six months ended June 30, 2021 and 2020. The interim data includes all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods. The results of operations for the three and six months ended June 30, 2021 are not necessarily indicative of the results of operations expected for the entire fiscal year ended December 31, 2021.
Principles of Consolidation
The condensed consolidated financial statements comprise the financial statements of the Company and its wholly owned subsidiaries. Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Company obtains control, and continue to be consolidated until the date when such control ceases. The financial statements of the subsidiaries are prepared for the same reporting period as the Company. All significant intercompany balances and transactions are eliminated upon consolidation.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. We regularly evaluate estimates and judgments based on historical experience and other relevant facts and circumstances. Significant estimates included in these financial statements primarily relate to allowance for doubtful accounts, allowance for inventory obsolescence, estimated useful lives and valuation of long-lived assets, impairment assessments of goodwill and other long-lived assets, estimates of fair value of warrant liabilities, term loan, and convertible senior notes, and the valuation of share-based compensation and certain equity instruments. Actual results could differ from those estimates.
8
U.S. WELL SERVICES, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except shares and per share amounts, or where otherwise noted)
Restricted Cash
Cash and cash equivalents that are restricted as to withdrawal or use under the terms of certain contractual agreements, or are reserved for a specific purpose, and not readily available for immediate or general use are recorded in restricted cash in our condensed consolidated balance sheets. The restricted cash in our condensed consolidated balance sheet represents cash transferred into a trust account to support our workers’ compensation obligations and cash held for use in approved capital expenditures of $513 and $6, respectively, as of June 30, 2021, and $513 and $1,056, respectively, as of December 31, 2020.
The following table provides a reconciliation of the amount of cash and cash equivalents and restricted cash reported on the condensed consolidated balance sheets that sum to the total of the same amounts shown on the condensed consolidated statements of cash flows:
|
|
|
June 30,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
Cash and cash equivalents
|
|
$
|
57,544
|
|
|
$
|
3,423
|
|
|
Restricted cash
|
|
|
519
|
|
|
|
519
|
|
|
Cash and cash equivalents and restricted cash
|
|
$
|
58,063
|
|
|
$
|
3,942
|
|
Inventory
Inventory consists of proppant, chemicals, and other consumable materials and supplies used in our high-pressure hydraulic fracturing operations. Inventories are stated at the lower of cost or net realizable value. Cost is determined principally on a first-in-first-out cost basis. All inventories are purchased for use by the Company in the delivery of its services with no inventory being sold separately to outside parties. Inventory quantities on hand are reviewed regularly and write-downs for obsolete inventory are recorded based on our forecast of the inventory item demand in the near future. During the three months ended June 30, 2021, the Company recorded a write-down of $1.4 million related to obsolete inventory parts. As of June 30, 2021 and December 31, 2020, the Company had established inventory reserves of $0.2 million and $0.3 million, respectively, for obsolete and slow-moving inventory.
Property and Equipment
Property and equipment are carried at cost, with depreciation provided on a straight-line basis over their estimated useful lives. Expenditures for renewals and betterments that extend the lives of the assets are capitalized. Amounts spent for maintenance and repairs, which do not improve or extend the life of the related asset, are charged to expense as incurred.
The Company separately identifies and accounts for certain critical components of its hydraulic fracturing units including the engine, transmission, and pump, which requires us to separately estimate the useful lives of these components. For our other service equipment, we do not separately identify and track depreciation of specific original components. When we replace components of these assets, we typically estimate the net book values of the components that are retired, which are based primarily upon their replacement costs, their ages and their original estimated useful lives.
In the first quarter of 2020, our review of impairment of long-lived assets necessitated a review of the useful lives of our property and equipment. Current trends in hydraulic fracturing equipment operating conditions, such as increasing treating pressures and higher pumping rates, along with the increase in daily pumping time are shortening the useful life of certain critical components we use. We determined that the average useful life of fluid ends and fuel injectors was less than one year, which resulted in our determination that costs associated with the replacement of these components would no longer be capitalized, but instead expensed as they are used in operations. This change in accounting estimate was made effective in March 2020 and accounted for prospectively.
Assets Held for Sale
Assets that are classified as held for sale are measured at the lower of their carrying amount or fair value less expected selling costs (“estimated selling price”) with a loss recognized to the extent that the carrying amount exceeds the estimated selling price. The classification is applicable at the date upon which the sale of assets is probable and the assets are available for immediate sale in their present condition. Upon determining that an asset meets the criteria to be classified as held for sale, the Company ceases depreciation and reports the assets, if material, in assets held for sale in its condensed consolidated balance sheets.
9
U.S. WELL SERVICES, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except shares and per share amounts, or where otherwise noted)
When the net carrying value of an asset designated as held for sale exceeds its estimated fair value, which we estimate based on the estimated selling price, we recognize the difference as an impairment charge. When an impairment charge is recorded, subsequent changes to the estimated selling price of assets held for sale are recorded as gains or losses to the condensed consolidated statements of operations wherein the recognition of subsequent gains is limited to the cumulative loss previously recognized. During the six months ended June 30, 2021, the Company recorded no impairment charges on its held for sale assets.
Goodwill
Goodwill is not amortized, but is reviewed for impairment annually, or more frequently when events or changes in circumstances indicate that the carrying value may not be recoverable. Judgements regarding indicators of potential impairment are based on market conditions and operational performance of the business.
As of December 31 of each year, or as required, the Company performs an impairment analysis of goodwill. The Company may assess its goodwill for impairment initially using a qualitative approach to determine whether conditions exist that indicate it is more likely than not that a reporting unit’s carrying value is greater than its fair value, and if such conditions are identified, then a quantitative analysis will be performed to determine if there is any impairment. The Company may also elect to perform a single step quantitative analysis in which the carrying amount of the reporting unit is compared to its fair value, which the Company estimates using a guideline public company method, a form of the market approach. The guideline public company method utilizes the trading multiples of similarly traded public companies as they relate to the Company’s operating metrics. An impairment charge would be recognized for the amount by which the carrying amount of the reporting unit exceeds the reporting unit’s fair value, and only limited to the total amount of goodwill allocated to the reporting unit.
Warrant Liabilities
The Company evaluates all its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity and ASC 815-15, Derivatives and Hedging—Embedded Derivatives. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or equity is evaluated pursuant to ASC 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity.
The Company issued public warrants and private placement warrants (collectively, the “public and private placement warrants”) in connection with its initial public offering in November 2018. Additionally, the Company issued warrants to certain institutional investors in connection with the Company’s private placement of Series A Preferred Stock on May 24, 2019 (“Series A warrants,” and together with the public and private placement warrants, the “warrants”). All our outstanding warrants are recognized as liabilities. Accordingly, we recognize the warrant instruments as liabilities at fair value upon issuance and adjust the instruments to fair value at the end of each reporting period. Any change in fair value is recognized in our condensed consolidated statements of operations. The public warrants are valued using their quoted market price since they are publicly traded and thus had an observable market price. The private placement warrants are valued using a Monte Carlo simulation model. The Series A warrants are valued using the Black-Scholes option pricing model.
Convertible Notes and Convertible Preferred Stock
When the Company issues convertible notes or convertible preferred stock, it first evaluates the balance sheet classification of the convertible instrument in its entirety to determine whether the instrument should be classified as a liability under ASC 480 and second whether the conversion feature should be accounted for separately from the host instrument. A conversion feature of a convertible note instrument or certain convertible preferred stock would be separated from the convertible instrument and classified as a derivative liability if the conversion feature, were it a standalone instrument, meets the definition of an “embedded derivative” in ASC 815-15. Generally, characteristics that require derivative treatment include, among others, when the conversion feature is not indexed to the Company’s equity, as defined in ASC 815-40, or when it must be settled either in cash or by issuing stock that is readily convertible to cash. When a conversion feature meets the definition of an embedded derivative, it would be separated from the host instrument and classified as a derivative liability carried on the condensed consolidated balance sheet at fair value, with any changes in its fair value recognized in the condensed consolidated statements of operations.
10
U.S. WELL SERVICES, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except shares and per share amounts, or where otherwise noted)
If a conversion feature does not meet the conditions to be separated and accounted for as an embedded derivative liability, the Company then determines whether the conversion feature is “beneficial”. A conversion feature would be considered beneficial if the conversion feature is “in the money” when the host instrument is issued or, under certain circumstances, at a later time. The beneficial conversion feature (“BCF”) for convertible instruments is recognized and measured by allocating a portion of the proceeds equal to the intrinsic value of that feature to additional paid-in capital. The intrinsic value is generally calculated at the commitment date as the difference between the conversion price and the fair value of the common stock or other securities into which the security is convertible, multiplied by the number of shares into which the security is convertible. If certain other securities are issued with the convertible security, the proceeds are allocated among the different components. The portion of the proceeds allocated to the convertible security is divided by the contractual number of the conversion shares to determine the effective conversion price, which is used to measure the BCF. The effective conversion price is used to compute the intrinsic value. The value of the BCF is limited to the basis that is initially allocated to the convertible security.
If the convertible note contains a BCF, the amount of the proceeds allocated to the BCF reduces the balance of the convertible note, creating a discount which is amortized over the note’s term to interest expense in the condensed consolidated statements of operations.
When a convertible preferred stock contains a BCF, after allocating the proceeds to the BCF, the resulting discount is either amortized as deemed dividends over the period beginning when the convertible preferred stock is issued up to the earliest date the conversion feature may be exercised, or if the conversion feature is immediately exercisable, the discount is fully amortized at the date of issuance.
Fair Value of Financial Instruments
Fair value is defined under ASC 820, Fair Value Measurement, as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 also establishes a three-level hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels are defined as follows:
|
|
•
|
Level 1–inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.
|
|
|
•
|
Level 2–inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
|
|
|
•
|
Level 3–inputs are unobservable for the asset or liability.
|
The following is a summary of the carrying amounts and estimated fair values of our financial instruments as of June 30, 2021 and December 31, 2020:
Senior Secured Term Loan. The fair value of the Senior Secured Term Loan is $193.2 million and $198.0 million as of June 30, 2021 and December 31, 2020, respectively, based on the market price quoted from external sources. If the Senior Secured Term Loan was measured at fair value in the financial statements, it would be classified as Level 2 in the fair value hierarchy.
Equipment financing. The carrying value of the equipment financing approximates fair value as its terms are consistent with and comparable to current market rates as of June 30, 2021 and December 31, 2020, respectively.
Warrants. The Company’s warrants are accounted for as liabilities and measured at fair value. See “Note 8 – Warrant Liabilities” for fair value measurements associated with the Company’s warrants.
Convertible Senior Notes. As of June 30, 2021, the fair value of the Convertible Senior Notes is $91.2 million, based on an option pricing framework using a lattice model. If the Convertible Senior Notes were measured at fair value in the financial statements, they would be classified as Level 2 in the fair value hierarchy.
Revenue Recognition
The Company recognizes revenue based on the customer’s ability to benefit from the services rendered in an amount that reflects the consideration expected to be received in exchange for those services.
The Company’s performance obligations are satisfied over time, typically measured by the number of stages completed or the number of pumping days a fleet is available to pump for a customer in a month. All revenue is recognized when a contract with a customer exists, collectability of amounts subject to invoice is probable, the performance obligations under the contract have been satisfied over time, and the amount to which the Company has the right to invoice has been determined. A portion of the Company’s contracts contain variable consideration; however, this variable consideration is typically unknown at the time of contract inception, and is not known until the job is complete, at which time the variability is resolved.
11
U.S. WELL SERVICES, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except shares and per share amounts, or where otherwise noted)
The Company has elected to use the “as invoiced” practical expedient to recognize revenue based upon the amount it has a right to invoice upon the completion of each performance obligation per the terms of the contract.
Patent License Sales. On June 24, 2021, the Company issued a Convertible Senior Note (See “Note 11 – Convertible Senior Notes”) convertible into a patent license agreement. On June 29, 2021, the holder exercised its right to convert the Convertible Senior Note in full and the Company entered into a Patent License Agreement (the “License Agreement”), which provides the licensee a five-year option to purchase up to 20 licenses to build and operate electric hydraulic fracturing fleets using the Company’s patented Clean Fleet® technology (the “licenses”). Upon entry into the License Agreement, the Company sold three licenses to build and operate three electric frac fleets, each valued at $7.5 million.
The sales of the right to use the Company’s patented Clean Fleet® technology is a single performance obligation. The Company recognizes the income associated with the patent license sales at the point in time when the Company satisfies its performance obligation by granting the purchaser the right to use the patented Clean Fleet® technology and transfer of control has occurred. The patent license sales are recognized as other income in our condensed consolidated statement of operations.
Accounts Receivable
Accounts receivable are recorded at their outstanding balances adjusted for an allowance for doubtful accounts. The allowance for doubtful accounts is determined by analyzing the payment history and credit worthiness of each customer. Receivable balances are charged off when they are considered uncollectible by management. Recoveries of receivables previously charged off are recorded as income when received.
During the six months ended June 30, 2021, the Company entered into an Assignment of Claim Agreement (the “Assignment”) with a third-party, whereby the Company transferred to the third-party all right, title, and interest in the Company’s claim in the amount of $14.5 million in connection with a customer’s bankruptcy. The Assignment was for consideration of $2.5 million, which the Company received on April 26, 2021. During the first quarter of 2021, the Company wrote-off the related receivables of $12.0 million, which was the unrealized amount of the claim assigned and was previously reserved for in full as of December 31, 2020. As of June 30, 2021, the Company did not record an allowance for doubtful accounts.
Major Customer and Concentration of Credit Risk
The concentration of our customers in the oil and natural gas industry may impact our overall exposure to credit risk, either positively or negatively, in that customers may be similarly affected by changes in economic and industry conditions. We perform ongoing credit evaluations of our customers and do not generally require collateral in support of our trade receivables.
The following tables show the percentage of revenues from our significant customers for the periods indicated:
|
|
|
Three Months Ended June 30,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
Customer B
|
|
12.9%
|
|
|
19.0%
|
|
|
Customer C
|
|
10.6%
|
|
|
24.1%
|
|
|
Customer E
|
|
19.6%
|
|
|
26.5%
|
|
|
Customer F
|
|
17.8%
|
|
|
30.4%
|
|
|
Customer H
|
|
12.1%
|
|
|
*
|
|
|
Customer I
|
|
11.4%
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
Customer A
|
|
*
|
|
|
17.2%
|
|
|
Customer B
|
|
12.9%
|
|
|
15.2%
|
|
|
Customer C
|
|
11.6%
|
|
|
16.4%
|
|
|
Customer E
|
|
18.1%
|
|
|
12.5%
|
|
|
Customer F
|
|
19.0%
|
|
|
14.6%
|
|
|
Customer H
|
|
15.2%
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
An asterisk indicates that revenue is less than ten percent.
|
|
12
U.S. WELL SERVICES, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except shares and per share amounts, or where otherwise noted)
The following table shows the percentage of trade receivables from our significant customers:
|
|
|
June 30, 2021
|
|
|
December 31, 2020
|
|
|
Customer B
|
|
12.8%
|
|
|
32.2%
|
|
|
Customer C
|
|
*
|
|
|
17.0%
|
|
|
Customer D
|
|
10.6%
|
|
|
*
|
|
|
Customer E
|
|
27.3%
|
|
|
*
|
|
|
Customer F
|
|
13.1%
|
|
|
12.7%
|
|
|
Customer G
|
|
*
|
|
|
12.5%
|
|
|
Customer H
|
|
*
|
|
|
13.5%
|
|
|
Customer I
|
|
16.4%
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
An asterisk indicates that trade receivable is less than ten percent.
|
|
Income Taxes
The Company, under ASC 740, Accounting for Income Taxes, uses the asset and liability method of accounting for income taxes, under which deferred tax assets and liabilities are recognized for the future tax consequences of (i) temporary differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities and (ii) operating loss and tax credit carryforwards. Deferred income tax assets and liabilities are based on enacted tax rates applicable to the future period when those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period the rate change is enacted. A valuation allowance is provided for deferred tax assets when it is more likely than not the deferred tax assets will not be realized.
ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. No amounts were accrued for the payment of interest and penalties at June 30, 2021. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.
NOTE 3 – ACCOUNTING STANDARDS
Except as discussed below, there have been no recent accounting pronouncements or changes in accounting pronouncements during the six months ended June 30, 2021, as compared to the recent accounting pronouncements described in the Amended Annual Report, that are of significance, or potential significance to the Company.
In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract, requiring a customer in a cloud computing arrangement that is a service contract to follow the guidance in ASC 350-40 in determining the requirements for capitalizing implementation costs incurred to develop or obtain internal-use-software. The new guidance will be effective for emerging growth companies for annual reporting periods beginning after December 15, 2020, and interim periods within annual periods beginning after December 15, 2021. Early adoption is permitted. The Company adopted ASU 2018-15 on January 1, 2021, and the adoption of this standard did not have a material impact on the Company’s consolidated financial statements.
NOTE 4 – PREPAIDS AND OTHER CURRENT ASSETS
Prepaids and other current assets consisted of the following:
|
|
|
June 30, 2021
|
|
|
December 31, 2020
|
|
|
Prepaid insurance
|
|
$
|
9,519
|
|
|
$
|
3,162
|
|
|
Recoverable costs from insurance
|
|
|
-
|
|
|
|
4,635
|
|
|
Income tax receivable
|
|
|
757
|
|
|
|
1,567
|
|
|
Other current assets
|
|
|
2,124
|
|
|
|
1,343
|
|
|
Total prepaid expenses and other current assets
|
|
$
|
12,400
|
|
|
$
|
10,707
|
|
13
U.S. WELL SERVICES, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except shares and per share amounts, or where otherwise noted)
During the six months ended June 30, 2021, the Company prepaid $11.7 million in insurance premiums related to renewals of various insurance policies.
The $4.6 million of recoverable costs from insurance, recorded as of December 31, 2020, was collected in full during the first quarter of 2021.
NOTE 5 – INTANGIBLE ASSETS
A summary of intangible assets consisted of the following:
|
|
|
Estimated
Useful
Life (in years)
|
|
Gross
Carrying
Value
|
|
|
Accumulated
Amortization
|
|
|
Net Book
Value
|
|
|
As of June 30, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trademarks
|
|
10
|
|
$
|
1,415
|
|
|
$
|
260
|
|
|
$
|
1,155
|
|
|
Patents
|
|
20
|
|
|
12,775
|
|
|
|
947
|
|
|
|
11,828
|
|
|
|
|
|
|
$
|
14,190
|
|
|
$
|
1,207
|
|
|
$
|
12,983
|
|
|
As of December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trademarks
|
|
10
|
|
$
|
1,415
|
|
|
$
|
156
|
|
|
$
|
1,259
|
|
|
Patents
|
|
20
|
|
|
12,775
|
|
|
|
568
|
|
|
|
12,207
|
|
|
|
|
|
|
$
|
14,190
|
|
|
$
|
724
|
|
|
$
|
13,466
|
|
The intangible assets are amortized over the period the Company expects to receive the related economic benefit. Amortization expense related to amortizable intangible assets was $0.3 million and $0.2 million for the three months ended June 30, 2021 and 2020, respectively, and $0.5 million and $0.6 million for the six months ended June 30, 2021 and 2020, respectively, which was included as part of depreciation and amortization in the condensed consolidated statements of operations.
As of June 30, 2021, the estimated amortization expense for future periods is as follows:
|
Fiscal Year
|
|
Estimated
Amortization
Expense
|
|
|
Remainder of 2021
|
|
$
|
483
|
|
|
2022
|
|
|
966
|
|
|
2023
|
|
|
966
|
|
|
2024
|
|
|
966
|
|
|
2025
|
|
|
966
|
|
|
Thereafter
|
|
|
8,636
|
|
|
Total
|
|
$
|
12,983
|
|
14
U.S. WELL SERVICES, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except shares and per share amounts, or where otherwise noted)
NOTE 6 – PROPERTY AND EQUIPMENT, NET
Property and equipment consisted of the following:
|
|
|
Estimated
Useful
Life (in years)
|
|
June 30, 2021
|
|
|
December 31, 2020
|
|
|
Fracturing equipment
|
|
1.5 to 25
|
|
$
|
235,095
|
|
|
$
|
263,869
|
|
|
Light duty vehicles (1)
|
|
5
|
|
|
3,943
|
|
|
|
2,483
|
|
|
Furniture and fixtures
|
|
5
|
|
|
67
|
|
|
|
67
|
|
|
IT equipment
|
|
3
|
|
|
2,306
|
|
|
|
1,676
|
|
|
Auxiliary equipment
|
|
2 to 20
|
|
|
12,686
|
|
|
|
11,058
|
|
|
Leasehold improvements
|
|
Term of lease
|
|
|
287
|
|
|
|
287
|
|
|
|
|
|
|
|
254,384
|
|
|
|
279,440
|
|
|
Less: Accumulated depreciation and amortization
|
|
|
|
|
(41,083
|
)
|
|
|
(44,108
|
)
|
|
Property and equipment, net
|
|
|
|
$
|
213,301
|
|
|
$
|
235,332
|
|
|
(1)
|
As of June 30, 2021 and December 31, 2020, the Company had capitalized $1.5 million and $0.3 million, respectively, related to capital leases and the accumulated depreciation was $127 and $31, respectively.
|
Depreciation and amortization expense related to property and equipment was $9.6 million and $17.4 million for the three months ended June 30, 2021 and 2020, respectively, and $20.5 million and $49.4 million for the six months ended June 30, 2021 and 2020, respectively.
The Company recognized a gain of $0.5 million and a loss of $0.9 million from the disposal of assets for the three months ended June 30, 2021 and 2020, respectively, and a loss of $1.9 million and $5.1 million for the six months ended June 30, 2021 and 2020, respectively.
Assets Held for Sale
In May 2021, the Company announced its commitment to becoming an all-electric hydraulic fracturing services provider and that it expects to fully exit the diesel frac market by the end of 2021. As a result, the Company has been executing a plan to sell its diesel fracturing equipment. As of June 30, 2021, the Company has classified $14.7 million in net book value of diesel fracturing equipment, that is anticipated to be sold in the next 12 months, as assets held for sale on the condensed consolidated balance sheet.
NOTE 7 – ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consisted of the following:
|
|
|
June 30, 2021
|
|
|
December 31, 2020
|
|
|
Accrued payroll and benefits
|
|
$
|
6,636
|
|
|
$
|
7,208
|
|
|
Accrued taxes
|
|
|
3,335
|
|
|
|
5,380
|
|
|
Accrued interest
|
|
|
638
|
|
|
|
317
|
|
|
Other current liabilities
|
|
|
1,601
|
|
|
|
1,876
|
|
|
Accrued expenses and other current liabilities
|
|
$
|
12,210
|
|
|
$
|
14,781
|
|
NOTE 8 – WARRANT LIABILITIES
Warrants
As of June 30, 2021, a total of 19,167,417 public warrants and private placement warrants were outstanding, and exercisable for an aggregate of 9,583,709 shares of Class A common stock. Each public warrant and private placement warrant entitles its holder to purchase one half of one share of Class A common stock at an exercise price of $5.75 per half share ($11.50 for full share equivalent), to be exercised only for a whole number of shares of Class A common stock. The public warrants and private placement warrants expire on November 9, 2023 or earlier upon redemption.
During the three and six months ended June 30, 2021, the Company issued 444,444 and 888,888 additional Series A warrants to the purchasers of Series A preferred stock, respectively, in accordance with the Series A preferred stock purchase agreement. As of June 30, 2021, 5,733,329 Series A warrants were outstanding pursuant to the Series A preferred stock purchase agreement, and exercisable for 5,733,329 shares of Class A common stock. The Series A warrants have an exercise price of $7.66 per share and expire on November 25, 2025.
15
U.S. WELL SERVICES, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except shares and per share amounts, or where otherwise noted)
Fair Value Measurement
The Company’s warrants are accounted for as liabilities measured at fair value upon issuance, with subsequent changes in fair value reported in the Company’s condensed consolidated statements of operations each reporting period.
The following tables present the Company's fair value hierarchy for liabilities measured at fair value on a recurring basis:
|
|
|
Quoted Prices in Active Markets
(Level 1)
|
|
|
Other Observable Inputs
(Level 2)
|
|
|
Unobservable Inputs
(Level 3)
|
|
|
Total
|
|
|
As of June 30, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Public warrants
|
|
$
|
1,809
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,809
|
|
|
Private placement warrants
|
|
|
-
|
|
|
|
1,880
|
|
|
|
-
|
|
|
|
1,880
|
|
|
Series A warrants
|
|
|
-
|
|
|
|
5,225
|
|
|
|
-
|
|
|
|
5,225
|
|
|
|
|
$
|
1,809
|
|
|
$
|
7,105
|
|
|
$
|
-
|
|
|
$
|
8,914
|
|
|
As of December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Public warrants
|
|
$
|
254
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
254
|
|
|
Private placement warrants
|
|
|
-
|
|
|
|
248
|
|
|
|
-
|
|
|
|
248
|
|
|
Series A warrants
|
|
|
-
|
|
|
|
1,117
|
|
|
|
-
|
|
|
|
1,117
|
|
|
|
|
$
|
254
|
|
|
$
|
1,365
|
|
|
$
|
-
|
|
|
$
|
1,619
|
|
Public warrants. The fair value of the public warrants are classified as Level 1 in the fair value hierarchy and valued using quoted market prices, as they are traded in active markets.
Private placement warrants. The fair value of the private placement warrants are classified as Level 2 in the fair value hierarchy and determined using a Monte Carlo simulation model.
Series A warrants. The fair value of the Series A warrants are classified as Level 2 in the fair value hierarchy and determined using the Black-Scholes valuation method.
The following assumptions were used to calculate the fair value for the private placement warrants and Series A warrants:
|
|
|
Private Placement Warrants
|
|
|
Series A Warrants
|
|
|
As of June 30, 2021
|
|
|
|
|
|
|
|
|
|
Expected remaining life
|
|
2.4 years
|
|
|
4.4 years
|
|
|
Volatility rate
|
|
153.0%
|
|
|
153.0%
|
|
|
Risk-free interest rate
|
|
0.3%
|
|
|
0.7%
|
|
|
Expected dividend rate
|
|
0%
|
|
|
0%
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 30, 2020
|
|
|
|
|
|
|
|
|
|
Expected remaining life
|
|
2.86 years
|
|
|
4.9 years
|
|
|
Volatility rate
|
|
115.8%
|
|
|
115.8%
|
|
|
Risk-free interest rate
|
|
0.2%
|
|
|
0.4%
|
|
|
Expected dividend rate
|
|
0%
|
|
|
0%
|
|
NOTE 9 – NOTES PAYABLE
During the six months ended June 30, 2021, the Company entered into various insurance premium finance agreements amounting to $9.1 million, payable in equal monthly installments at a weighted average interest rate of 5.4%. These premium finance agreements are due within one year and are recorded as notes payable under current liabilities in the condensed consolidated balance sheets. As of June 30, 2021, the Company had a remaining balance of $6.4 million related to the notes payable.
16
U.S. WELL SERVICES, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except shares and per share amounts, or where otherwise noted)
NOTE 10 – DEBT
Long-term debt consisted of the following:
|
|
|
June 30, 2021
|
|
|
December 31, 2020
|
|
|
Senior Secured Term Loan
|
|
$
|
233,687
|
|
|
$
|
246,250
|
|
|
ABL Credit Facility
|
|
|
33,682
|
|
|
|
23,710
|
|
|
PPP Loan
|
|
|
10,000
|
|
|
|
10,000
|
|
|
USDA Loan
|
|
|
25,000
|
|
|
|
21,996
|
|
|
Equipment financing
|
|
|
11,128
|
|
|
|
12,866
|
|
|
Capital leases
|
|
|
1,234
|
|
|
|
229
|
|
|
Total debt principal balance
|
|
|
314,731
|
|
|
|
315,051
|
|
|
Unamortized debt discount and issuance costs
|
|
|
(9,317
|
)
|
|
|
(17,576
|
)
|
|
Current maturities
|
|
|
(15,936
|
)
|
|
|
(13,573
|
)
|
|
Net Long-term debt
|
|
$
|
289,478
|
|
|
$
|
283,902
|
|
Senior Secured Term Loan
On June 24, 2021, the Company, USWS LLC, as the borrower, and all other subsidiaries of the Company entered into a Fifth Amendment (the “Fifth Term Loan Amendment”) to the Senior Secured Term Loan Credit Agreement (as amended, the “Senior Secured Term Loan”) with CLMG Corp., as administrative and collateral agent, and the lenders party thereto. The Senior Secured Term Loan matures on December 5, 2025.
Pursuant to the Fifth Term Loan Amendment, the agent and lenders agreed to make certain modifications and amendments to the Senior Secured Term Loan to, among other things, permit the incurrence of debt and liens in connection with the Convertible Senior Notes as described in “Note 11 – Convertible Senior Notes”. Additionally, pursuant to the Fifth Term Loan Amendment, other covenants were amended including, but not limited to, certain covenants relating to collateral, asset dispositions, and special purpose entities used for stand-alone equipment financings. In the Fifth Term Loan Amendment, the Company also agreed to a mandatory prepayment of $7.0 million, which is payable within 30 days of the Fifth Term Loan Amendment as long as certain requirements in the ABL Credit Facility agreement are met.
The deferral period for interest on the Senior Secured Term Loan was shortened by three months, to January 1, 2022, in accordance with the Fifth Term Loan Amendment, and the Senior Secured Term Loan will resume incurring interest at that date at the applicable benchmark rate, subject to a 2.0% floor, plus the applicable margin of 8.25% per annum, subject to the following exceptions. If on December 31, 2021, either:
|
|
•
|
the outstanding principal amount of the Senior Secured Term Loan is equal to or less than $132.0 million but greater than $110.0 million then the interest rate shall be 0.0% per annum from January 1, 2022 through March 31, 2022; and
|
|
|
•
|
the outstanding principal amount of the Senior Secured Term Loan is equal to or less than $110.0 million then the interest rate shall be 0.0% per annum from January 1, 2022 through March 31, 2022 and 2.0% per annum from April 1, 2022 through December 31, 2022, provided, that if on April 1, 2022, the outstanding principal amount of the Senior Secured Term Loan is equal to or less than $103.0 million then the interest rate shall be 1.0% per annum from April 1, 2022 through December 31, 2022.
|
Since April 2020, the Company has accounted for the Senior Secured Term Loan as a troubled debt restructuring under ASC 470-60, Troubled Debt Restructurings by Debtors. The subsequent amendments, including the Fifth Term Loan Amendment, did not result in a significant modification or extinguishment resulting in no change in accounting for the Senior Secured Term Loan. In connection with the Fifth Term Loan Amendment, the Company paid $3.0 million to the lenders under the Senior Secured Term Loan, which was accounted for as a debt discount and is amortized to interest expense using the effective interest method over the remaining term of the Senior Secured Term Loan.
During the six months ended June 30, 2021, the Company made principal payments of $12.6 million, which included prepayments of $7.6 million. The early repayment of debt resulted in a write-off of $798 of unamortized debt discount and issuance costs and prepayment fees of $41, all of which were presented as loss on extinguishment of debt in the condensed consolidated statements of operations.
As of June 30, 2021, the outstanding principal balance of the Senior Secured Term Loan was $233.7 million, of which $12.0 million was due within one year from the balance sheet date.
17
U.S. WELL SERVICES, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except shares and per share amounts, or where otherwise noted)
ABL Credit Facility
On June 24, 2021, the Company, USWS LLC, and all other subsidiaries of the Company entered into a Fourth Amendment (the “Fourth ABL Amendment”) to the ABL Credit Agreement (as amended, the “ABL Credit Facility”) with the lenders party thereto and Bank of America, N.A., as the administrative agent, swing line lender and letter of credit issuer. The ABL Credit Facility matures on April 1, 2025.
Pursuant to the Fourth ABL Amendment, the lenders agreed to make certain modifications and amendments to the ABL Credit Facility to, among other things, permit the incurrence of debt and liens in connection with the Convertible Senior Notes.
The ABL Credit Facility is subject to a borrowing base which is calculated based on a formula referencing the Company’s eligible accounts receivables. As of June 30, 2021, the borrowing base was $46.3 million and the outstanding revolver loan balance was $33.7 million, classified as long-term debt in the condensed consolidated balance sheets.
USDA Loan
In November 2020, we entered into a Business Loan Agreement (the “USDA Loan”) with a commercial bank pursuant to the United States Department of Agriculture, Business & Industry Coronavirus Aid, Relief, and Economic Security Act Guaranteed Loan Program, in the aggregate principal amount of up to $25.0 million for the purpose of providing long-term financing for eligible working capital. Interest payments are due monthly at the interest rate of 5.75% per annum beginning on December 12, 2020 but principal payments are not required until December 12, 2023. During the fourth quarter of 2020, we received proceeds amounting to $22.0 million under the USDA Loan. In January 2021, we received the remaining proceeds amounting to $3.0 million.
Payments of Debt Obligations due by Period
As of June 30, 2021, the schedule of the repayment requirements of long-term debt is as follows:
|
|
|
Principal Amount
|
|
|
Fiscal Year
|
|
of Long-term Debt
|
|
|
Remainder of 2021
|
|
$
|
11,442
|
|
|
2022
|
|
|
9,042
|
|
|
2023
|
|
|
9,517
|
|
|
2024
|
|
|
10,054
|
|
|
2025
|
|
|
256,098
|
|
|
Thereafter
|
|
|
18,578
|
|
|
Total
|
|
$
|
314,731
|
|
NOTE 11 – CONVERTIBLE SENIOR NOTES
On June 24, 2021, the Company entered into a Note Purchase Agreement (as amended, the “Note Purchase Agreement”). As of June 30, 2021, pursuant to the Note Purchase Agreement, the Company issued $125.5 million in aggregate principal amount of 16.0% Convertible Senior Secured (Third Lien) PIK Notes due June 5, 2026 (the “Convertible Senior Notes”), in a private placement to institutional investors (the “Private Placement”), comprised of Cash Notes, Exchange Notes (collectively with the Cash Notes, the “Equity Linked Notes”) and a License Linked Note, as described below, which mature on June 5, 2026. The Convertible Senior Notes are secured by a third priority security interest in the collateral that secures the Company’s obligations under the Senior Secured Term Loan.
Cash Notes. On June 24, 2021, in connection with the Private Placement, the Company issued and sold $45.0 million in principal amount of Convertible Senior Notes that are convertible at any time at the holder’s option, into shares of the Company’s Class A common stock for cash (the “Cash Notes”) with an applicable initial conversion price of $0.98 subject to adjustment. On June 25, 2021, the Company issued and sold an additional $19.0 million in principal amount of Cash Notes with an applicable initial conversion price of $1.25 subject to adjustment.
Exchange Notes. On June 24, 2021, in connection with the Private Placement, the Company issued and sold $20.0 million in principal amount of Convertible Senior Notes that are convertible at any time at the holder’s option, into shares of the Company’s Class A common stock in exchange for 15,588 shares of the Company’s Series A preferred stock (the “Exchange Notes”). On June 25, 2021, the Company issued and sold an additional $19.0 million in principal amount of Exchange Notes for 14,802 shares of Series A preferred stock. The Exchange Notes are convertible at an initial conversion price of $2.00 subject to adjustment.
18
U.S. WELL SERVICES, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except shares and per share amounts, or where otherwise noted)
License Linked Note. On June 24, 2021, in connection with the Private Placement, the Company issued and sold $22.5 million in principal amount of a Convertible Senior Note that was convertible into a patent license agreement (the “License Linked Note”). On June 29, 2021, the holder exercised its right to convert the License Linked Note in full and the Company entered into the License Agreement, which provides the licensee a five-year option to purchase up to 20 licenses to build and operate electric hydraulic fracturing fleets using the Company’s patented Clean Fleet® technology (the “licenses”). Upon entry into the License Agreement, the holder purchased three licenses to build and operate three electric frac fleets, each valued at $7.5 million. The Company recognized the $22.5 million as other income from patent license sales in its condensed consolidated statement of operations. The debt issuance costs associated with the License Linked Note were fully amortized.
The carrying value of the Convertible Senior Notes is as follows:
|
|
|
June 30, 2021
|
|
|
Principal
|
|
$
|
103,000
|
|
|
PIK interest
|
|
|
258
|
|
|
Unamortized debt premium
|
|
|
1,898
|
|
|
Unamortized debt discount and issuance costs
|
|
|
(19,479
|
)
|
|
Net Convertible Senior Notes
|
|
$
|
85,677
|
|
In June 2021, the Company received $86.5 million in cash proceeds from the issuance of the Convertible Senior Notes. The Company used a portion of the proceeds from the issuance of the Convertible Senior Notes to pay the cash settlement amount in accordance with the Settlement Agreement (as described in “Note 17 – Commitments and Contingencies”) and expects to use the remainder for general corporate purposes, including growth capital.
The Convertible Senior Notes bear interest at a rate of 16.0% per annum. Accrued and unpaid interest is calculated on the last day of each quarter, commencing September 30, 2021, and will be paid in kind (“PIK”) on such date by increasing the principal amount of the outstanding Convertible Senior Notes. The Company has accrued PIK interest of $0.3 million related to the Convertible Senior Notes for the three months ended June 30, 2021.
Each Equity Linked Note, subject to earlier conversion, is due and payable on June 5, 2026 in shares of Class A common stock equal to the entire outstanding and unpaid principal balance, plus any PIK interest, subject to certain limitations on the number of shares of Class A common stock that may be issued and which would require the Company to settle the conversion in payment partially in cash. The number of shares of Class A common stock will be based on the twenty-day volume weighted average trading price of the Class A common stock immediately preceding the maturity date. The Equity Linked Notes are convertible at any time at the option of the holder into a number of shares of Class A common stock equal to the principal amount of such notes then outstanding plus PIK interest through the conversion date divided by the then applicable conversion price as described above. If the Company experiences an event of default (as defined in the Note Purchase Agreement), which is continuing on the maturity date, then payment of principal and PIK interest shall be made in cash on any outstanding Equity Linked Notes.
Additionally, following the first anniversary of the Note Purchase Agreement, and at any time in which there are no issued and outstanding shares of Series A preferred stock or Series B preferred stock, if the twenty-day volume weighted average trading price of the Class A common stock is greater than $2.00 for ten trading days during any twenty consecutive trading day period, the Company may deliver a notice to the holder of an Equity Linked Note to convert such Equity Linked Notes at the conversion prices set forth above.
In accordance with ASC 480, the Company evaluated the Equity Linked Notes and determined they should be classified as liabilities due to the unconditional obligation to settle the notes in a variable number of shares of the Company’s Class A common stock based on a fixed monetary amount known at inception. Certain of the Equity Linked Notes issued were initially measured at fair value as they were considered new instruments issued concurrently to extinguish the Series A preferred stock. See “Note 12 – Mezzanine Equity” for the discussion of Series A preferred stock exchange.
The initial measurement at fair value of those certain Equity Linked Notes resulted in the Company recording a premium of $1.9 million and a total discount of $16.1 million. The Company amortizes such premium and discount as an adjustment to interest expense using the effective interest method over the term of the Equity Linked Notes.
We incurred transaction costs related to the issuance of the Convertible Senior Notes of $4.0 million which were recorded as debt issuance costs and are presented as a direct deduction from the carrying amount of the Convertible Senior Notes on our condensed consolidated balance sheet. The debt issuance costs are being amortized under the effective interest method over the term of the Convertible Senior Notes. Amortization expense is included in interest expense and was $0.7 million related to the Convertible Senior Notes for the three months ended June 30, 2021.
19
U.S. WELL SERVICES, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except shares and per share amounts, or where otherwise noted)
NOTE 12 – MEZZANINE EQUITY
Series A Redeemable Convertible Preferred Stock
The following table summarizes the Company’s Series A Redeemable Convertible Preferred Stock, par value $0.0001 per share (“Series A preferred stock”) activities for the six months ended June 30, 2021:
|
|
|
Shares
|
|
|
Amount
|
|
|
Series A preferred stock as of December 31, 2020
|
|
|
50,000
|
|
|
$
|
50,975
|
|
|
Exchange of Series A preferred stock for Convertible Senior Notes
|
|
|
(30,390
|
)
|
|
|
(33,716
|
)
|
|
Deemed and imputed dividends on Series A preferred stock
|
|
|
-
|
|
|
|
750
|
|
|
Accrued Series A preferred stock dividends
|
|
|
-
|
|
|
|
3,811
|
|
|
Series A preferred stock as of June 30, 2021
|
|
|
19,610
|
|
|
$
|
21,820
|
|
At the initial closing of the Series A preferred stock purchase agreement on May 24, 2019, the Company issued Series A warrants exercisable for shares of Class A common stock. See “Note 8 – Warrant Liabilities” for the discussion of the Series A warrants issued pursuant to the Series A preferred stock purchase agreement.
During the three months ended June 30, 2021, the Company exchanged 30,390 shares of Series A preferred stock for $39.0 million in principal amount of Convertible Senior Notes. Accordingly, the Company recorded a reduction of $33.7 million in the carrying value of the Series A preferred stock during the three months ended June 30, 2021. Concurrent with such exchange, the Company also received, from such holders of the Series A preferred stock total cash proceeds of $39.0 million in consideration for an additional $39.0 million in principal amount of Convertible Senior Notes. In connection with the extinguishment of the Series A preferred stock, the Company initially recorded the Convertible Senior Notes issued to such holders at a total fair value of $63.8 million. The difference of $8.9 million between the fair value of the Convertible Senior Notes issued and the carrying amount of $72.7 million of consideration received was recorded in additional paid in capital as a return from the Series A preferred holders for the three months ended June 30, 2021.
As of June 30, 2021, 19,610 shares of Series A preferred stock were outstanding and convertible into 3,782,285 shares of Class A common stock, and dividends accrued and outstanding with respect to the Series A preferred stock were $5.6 million and reflected in the carrying value of Series A preferred stock.
Series B Redeemable Convertible Preferred Stock
The following table summarizes the Company’s Series B Redeemable Convertible Preferred Stock, par value $0.0001 per share (“Series B preferred stock”) activities for the six months ended June 30, 2021:
|
|
|
Shares
|
|
|
Amount
|
|
|
Series B preferred stock as of December 31, 2020
|
|
|
22,050
|
|
|
$
|
22,686
|
|
|
Conversion of Series B preferred stock to Class A common stock
|
|
|
(1,012
|
)
|
|
|
(1,067
|
)
|
|
Accrued Series B preferred stock dividends
|
|
|
-
|
|
|
|
1,522
|
|
|
Series B preferred stock as of June 30, 2021
|
|
|
21,038
|
|
|
$
|
23,141
|
|
In February 2021 and May 2021, 762 and 250 shares of Series B preferred stock and related accrued dividends were converted into 2,745,778 and 927,500 shares of Class A common stock, respectively, pursuant to the certificate of designations authorizing and establishing the rights, preferences, and privileges of the Series B preferred stock. Accordingly, the Company recorded a reduction of $0.3 million and $1.1 million in the carrying value of the Series B preferred stock during the three and six months ended June 30, 2021, respectively.
As of June 30, 2021, 21,038 shares of Series B preferred stock were outstanding and convertible into 79,512,587 shares of Class A common stock, and dividends accrued and outstanding with respect to the Series B preferred stock was $3.5 million and reflected in the carrying value of Series B preferred stock.
NOTE 13 – STOCKHOLDERS’ EQUITY
Shares Authorized and Outstanding
Preferred Stock
The Company is authorized to issue 10,000,000 shares of preferred stock with a par value of $0.0001 per share with such designation, rights and preferences as may be determined from time to time by the Company’s Board of Directors. See “Note 12 – Mezzanine Equity” for the discussion of preferred stock issued and outstanding.
20
U.S. WELL SERVICES, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except shares and per share amounts, or where otherwise noted)
Class A Common Stock
The Company is authorized to issue 400,000,000 shares of Class A common stock with a par value of $0.0001 per share. As of June 30, 2021 and December 31, 2020, there were 93,377,516 and 72,515,342 shares of Class A common stock issued and outstanding, respectively. As of June 30, 2021, 1,000,000 outstanding shares of Class A common stock were subject to cancellation on November 9, 2024, unless the closing price per share of the Class A common stock has equaled or exceeded $12.00 for any 20 trading days within any 30-trading day period, and 609,677 outstanding shares of Class A common stock were subject to the same cancellation provision, but at a closing price per share of $13.50.
On June 26, 2020, the Company entered into an Equity Distribution Agreement (the “ATM Agreement”) with Piper Sandler & Co. relating to the Company’s shares of Class A common stock. In accordance with the terms of the ATM Agreement, the Company may offer and sell shares of our Class A common stock over a period of time. The ATM Agreement relates to an “at-the-market” offering program. Under the ATM Agreement, the Company will pay Piper Sandler an aggregate commission of up to 3% of the gross sales price per share of Class A common stock sold under the ATM Agreement. On March 19, 2021, the Company increased the number of shares of Class A common stock that it may offer in accordance with the terms of the ATM Agreement by an additional $39.7 million in excess of the original amount of $10.3 million.
During the three and six months ended June 30, 2021, the Company sold 2,381,660 and 15,006,317 shares of Class A common stock for total net proceeds of $2.9 million and $13.6 million and paid $0.1 million and $0.4 million in commissions under the ATM Agreement, respectively. The Company did not sell any shares of Class A common stock under the ATM Agreement during the three months ended June 30, 2020. Since inception on June 26, 2020 through June 30, 2021, the Company has sold a total of 15,798,575 shares of Class A common stock under the ATM Agreement for total net proceeds of $14.0 million and paid $0.4 million in commissions.
Class B Common Stock
The Company is authorized to issue 20,000,000 shares of Class B common stock with a par value of $0.0001 per share. The shares of Class B common stock are non-economic; however, holders are entitled to one vote per share. Each share of Class B common stock, together with one unit of USWS Holdings, is exchangeable for one share of Class A common stock or, at the Company’s election, the cash equivalent to the market value of one share of Class A common stock.
As of December 31, 2020, there were 2,302,936 shares of Class B common stock issued and outstanding, which were all converted to an equivalent number of shares of Class A common stock during the six months ended June 30, 2021. As of June 30, 2021, there were no shares of Class B common stock issued and outstanding.
Noncontrolling Interest
During the first quarter of 2021, the remaining noncontrolling interest holders of USWS Holdings exchanged all of their respective shares for the Company’s Class A common stock. Accordingly, USWS Holdings became the Company’s wholly owned subsidiary as of March 31, 2021.
NOTE 14 – EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share is computed by dividing income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed in the same manner as basic earnings per share except that the denominator is increased to include the number of additional Class A common shares that could have been outstanding assuming the exercise of stock options and warrants, conversion of Series A and Series B preferred stock, conversion of Class B common stock, vesting of restricted shares of Class A common stock, conversion of Convertible Senior Notes and issuance of Class A common stock associated with the deferred stock units and certain performance awards.
Basic and diluted net income (loss) per share excludes the income (loss) attributable to and shares associated with the 1,609,677 shares of Class A common stock that are subject to cancellation on November 9, 2024 if certain market conditions have not been met. The Company has included in the calculation accrued dividends on Series A and Series B preferred stock and related deemed and imputed dividends.
21
U.S. WELL SERVICES, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except shares and per share amounts, or where otherwise noted)
The following table sets forth the calculation of basic and diluted earnings (loss) per share for the periods indicated based on the weighted average number of shares of Class A common stock outstanding:
|
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
Basic net income (loss) per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to U.S. Well Services, Inc.
|
|
$
|
(17,716
|
)
|
|
$
|
(19,505
|
)
|
|
$
|
(38,282
|
)
|
|
$
|
(185,323
|
)
|
|
Net loss attributable to cancellable Class A common stock
|
|
|
316
|
|
|
|
471
|
|
|
|
721
|
|
|
|
4,703
|
|
|
Basic net loss attributable to U.S. Well Services, Inc.
shareholders
|
|
|
(17,400
|
)
|
|
|
(19,034
|
)
|
|
|
(37,561
|
)
|
|
|
(180,620
|
)
|
|
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 and imputed dividends on Series B
preferred stock
|
|
|
(1,501
|
)
|
|
|
-
|
|
|
|
(5,669
|
)
|
|
|
-
|
|
|
Exchange of Series A preferred stock for Convertible
Senior Notes
|
|
|
8,936
|
|
|
|
-
|
|
|
|
8,936
|
|
|
|
-
|
|
|
Basic net loss attributable to U.S. Well Services, Inc.
Class A common shareholders
|
|
$
|
(13,060
|
)
|
|
$
|
(26,687
|
)
|
|
$
|
(40,377
|
)
|
|
$
|
(196,996
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
90,202,949
|
|
|
|
66,620,619
|
|
|
|
85,419,935
|
|
|
|
63,424,948
|
|
|
Cancellable Class A common stock
|
|
|
(1,609,677
|
)
|
|
|
(1,609,677
|
)
|
|
|
(1,609,677
|
)
|
|
|
(1,609,677
|
)
|
|
Basic and diluted weighted average shares outstanding
|
|
|
88,593,272
|
|
|
|
65,010,942
|
|
|
|
83,810,258
|
|
|
|
61,815,271
|
|
|
Basic and diluted net income (loss) per share
attributable to Class A common shareholders
|
|
$
|
(0.15
|
)
|
|
$
|
(0.41
|
)
|
|
$
|
(0.48
|
)
|
|
$
|
(3.19
|
)
|
A summary of securities excluded from the computation of diluted earnings per share is presented below for the applicable periods:
|
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
Dilutive earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anti-dilutive stock options
|
|
|
877,266
|
|
|
|
877,266
|
|
|
|
877,266
|
|
|
|
877,266
|
|
|
Anti-dilutive warrants
|
|
|
15,317,038
|
|
|
|
16,658,427
|
|
|
|
15,317,038
|
|
|
|
16,658,427
|
|
|
Anti-dilutive restricted stock
|
|
|
1,079,249
|
|
|
|
1,675,825
|
|
|
|
1,079,249
|
|
|
|
1,675,825
|
|
|
Anti-dilutive deferred stock units
|
|
|
8,911,858
|
|
|
|
-
|
|
|
|
8,911,858
|
|
|
|
-
|
|
|
Anti-dilutive shares from Pool B awards
|
|
|
10,124,725
|
|
|
|
-
|
|
|
|
10,124,725
|
|
|
|
-
|
|
|
Anti-dilutive Class B common stock convertible into
Class A common stock
|
|
|
-
|
|
|
|
5,014,897
|
|
|
|
-
|
|
|
|
5,014,897
|
|
|
Anti-dilutive Series A preferred stock convertible into
Class A common stock
|
|
|
3,782,285
|
|
|
|
9,392,230
|
|
|
|
3,782,285
|
|
|
|
9,392,230
|
|
|
Anti-dilutive Series B preferred stock convertible into
Class A common stock
|
|
|
79,512,587
|
|
|
|
73,754,101
|
|
|
|
79,512,587
|
|
|
|
73,754,101
|
|
|
Anti-dilutive Convertible Senior Notes convertible into
Class A common stock
|
|
|
80,822,372
|
|
|
|
-
|
|
|
|
80,822,372
|
|
|
|
-
|
|
|
Potentially dilutive securities excluded as anti-dilutive
|
|
|
200,427,380
|
|
|
|
107,372,746
|
|
|
|
200,427,380
|
|
|
|
107,372,746
|
|
22
U.S. WELL SERVICES, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except shares and per share amounts, or where otherwise noted)
NOTE 15 – SHARE-BASED COMPENSATION
Share-based compensation expense consisted of the following:
|
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
|
Restricted stock
|
|
$
|
876
|
|
|
$
|
1,188
|
|
|
$
|
1,701
|
|
|
$
|
3,012
|
|
|
|
Stock options
|
|
|
216
|
|
|
|
215
|
|
|
|
430
|
|
|
|
469
|
|
|
|
DSUs
|
|
|
246
|
|
|
|
-
|
|
|
|
492
|
|
|
|
-
|
|
|
|
Pool A Awards
|
|
|
395
|
|
|
|
-
|
|
|
|
481
|
|
|
|
-
|
|
|
|
Pool B Awards
|
|
|
277
|
|
|
|
-
|
|
|
|
557
|
|
|
|
-
|
|
|
|
Total
|
|
$
|
2,010
|
|
(1)
|
$
|
1,403
|
|
(2)
|
$
|
3,661
|
|
(3)
|
$
|
3,481
|
|
(4)
|
|
(1)
|
$276 was presented as cost of services and $1,734 was presented as selling, general and administrative expenses in the condensed consolidated statement of operations.
|
|
(2)
|
$284 was presented as cost of services and $1,119 was presented as selling, general and administrative expenses in the condensed consolidated statement of operations.
|
|
(3)
|
$474 was presented as cost of services and $3,187 was presented as selling, general and administrative expenses in the condensed consolidated statement of operations.
|
|
(4)
|
$1,202 was presented as cost of services and $2,279 was presented as selling, general and administrative expenses in the condensed consolidated statement of operations.
|
Restricted Stock
The following table summarizes the restricted stock activity for the six months ended June 30, 2021:
|
|
|
Shares
|
|
|
Weighted-
Average Grant-Date
Fair Value per
Share
|
|
|
Non-vested restricted stock as of December 31, 2020
|
|
|
1,449,287
|
|
|
$
|
8.85
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
Vested
|
|
|
(353,378
|
)
|
|
|
8.91
|
|
|
Forfeited
|
|
|
(16,660
|
)
|
|
|
8.91
|
|
|
Non-vested restricted stock as of June 30, 2021
|
|
|
1,079,249
|
|
|
$
|
8.83
|
|
As of June 30, 2021, the total unrecognized compensation cost related to restricted stock was $5.5 million which is expected to be recognized over a weighted-average period of 1.68 years.
Stock Options
The following table summarizes the stock option activity for the six months ended June 30, 2021:
|
|
|
Shares
|
|
|
Weighted-
Average
Exercise Price
per Share
|
|
|
Weighted-Average
Remaining
Contractual
Life (in years)
|
|
|
Outstanding as of December 31, 2020
|
|
|
877,266
|
|
|
$
|
8.91
|
|
|
|
5.21
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Forfeited/Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Outstanding as of June 30, 2021
|
|
|
877,266
|
|
|
$
|
8.91
|
|
|
|
4.71
|
|
|
Exercisable as of June 30, 2021
|
|
|
438,633
|
|
|
$
|
8.91
|
|
|
|
4.71
|
|
As of June 30, 2021, the total unrecognized compensation cost related to stock options was $1.5 million which is expected to be recognized over a weighted average period of 1.71 years.
23
U.S. WELL SERVICES, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except shares and per share amounts, or where otherwise noted)
Deferred Stock Units (“DSUs”)
The following table summarizes the DSUs activity for the six months ended June 30, 2021:
|
|
|
Units
|
|
|
Weighted-
Average Grant Date
Fair Value per
Unit
|
|
|
Non-vested DSUs as of December 31, 2020
|
|
|
8,911,858
|
|
|
$
|
0.33
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
Vested
|
|
|
(2,970,619
|
)
|
|
|
0.33
|
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
|
Non-vested DSUs as of June 30, 2021
|
|
|
5,941,239
|
|
|
$
|
0.33
|
|
As of June 30, 2021, the total unrecognized compensation cost related to DSUs was $1.5 million which is expected to be recognized over a weighted average period of 1.5 years.
Pool A Performance Awards
In the fourth quarter of 2020, the Company made grants of Pool A Performance Awards (“Pool A Awards”) to certain key employees of the Company. The Company accounted for the Pool A Awards under liability accounting as a result of the fixed monetary amount that could be settled either in cash or a variable number of shares of the Company’s Class A common stock. The Pool A Awards became fully vested as of January 1, 2021. Since the settlement will not occur until the fifth anniversary of the grant date, the Company considered the delayed settlement as a post-vesting restriction which impacted the determination of grant-date fair value of the award.
As of June 30, 2021, the fair value of the Pool A Awards liability was remeasured to $2.8 million, which was estimated using a risk-adjusted discount rate reflecting the weighted-average cost of capital of similarly traded public companies.
During the three and six months ended June 30, 2021, the Company recorded additional compensation cost of $0.1 million and $0.2 million, respectively, attributable to the change in fair value of the Pool A Awards liability.
Pool B Performance Awards
In the fourth quarter of 2020, the Company made grants of Pool B Performance Awards (“Pool B Awards”) to certain key employees of the Company. The Pool B Awards vest over three years in equal installments each year on the anniversary of the vesting effective date, subject to the grantee’s continuous services through each vesting period.
On January 1, 2021, one-third of the fair value of the Pool B Awards vested in the amount of $1.1 million. As of June 30, 2021, the unvested fair value of the Pool B Awards was $2.2 million.
As of June 30, 2021, the total unrecognized compensation cost related to Pool B Awards was $1.7 million, which is expected to be recognized over a weighted average period of 1.5 years.
NOTE 16 – INCOME TAXES
On March 27, 2020, the President signed the CARES Act into law. The CARES Act contains several corporate income tax provisions, including, among other things, providing a 5-year carryback of net operating loss (“NOL”) tax carryforwards generated in tax years 2018, 2019, and 2020, removing the 80% taxable income limitation on utilization of those NOLs if carried back to prior tax years or utilized in tax years beginning before 2021, temporarily liberalizing the interest deductions rules under Section 163(j) of the Tax Cuts and Jobs Act of 2017, and making corporate alternative minimum tax credits immediately refundable. During the second quarter of 2020, the Company filed an application to carry back its 2018 NOLs, claiming a refund of approximately $0.8 million, which was received during the three months ended June 30, 2021.
The Company files income tax returns in the U.S. federal jurisdiction and various state and local jurisdictions and is subject to examination by the taxing authorities.
The Company’s effective tax rate on continuing operations for the six months ended June 30, 2021 was (0.07)%.
24
U.S. WELL SERVICES, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except shares and per share amounts, or where otherwise noted)
We follow guidance issued by the FASB in accounting for uncertainty in income taxes. This guidance clarifies the accounting for income taxes by prescribing the minimum recognition threshold an income tax position is required to meet before being recognized in the condensed consolidated financial statements and applies to all income tax positions. Each income tax position is assessed using a two-step process. A determination is first made as to whether it is more likely than not that the income tax position will be sustained, based upon technical merits, upon examination by the taxing authorities. If the income tax position is expected to meet the more likely than not criteria, the benefit recorded in the condensed consolidated financial statements equals the largest amount that is greater than 50% likely to be realized upon its ultimate settlement.
We have considered our exposure under the standard at both the federal and state tax levels. We did not record any liabilities for uncertain tax positions as of June 30, 2021 or December 31, 2020. We record income tax-related interest and penalties, if any, as a component of income tax expense. We did not incur any material interest or penalties on income taxes.
After consideration of all of the information available, management determined that a valuation allowance was appropriate, as it is more likely than not that the Company will not utilize its net deferred tax assets.
NOTE 17 – COMMITMENTS AND CONTINGENCIES
Litigation
Liabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties, and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred.
The Company was named a defendant in a case filed on January 14, 2019 in the Superior Court of the State of Delaware styled Smart Sand, Inc. v. U.S. Well Services LLC, C.A. 19C-01-144 PRW. Smart Sand, Inc. (“Smart Sand”) alleged that the Company breached a multi-year contract under which Smart Sand supplied frac sand to the Company. Smart Sand claimed damages of approximately $54.0 million. The Company denied that it breached the contract, alleged that Smart Sand breached the contract first, and asserted counterclaims for the misuse of the Company’s confidential information. The Company also asserted that the contract contained unenforceable penalty provisions. On June 1, 2021, the court ruled against the Company in the case on the breach of contract claim and subsequently, on June 17, 2021, entered judgement in favor of Smart Sand in the amount of approximately $51.0 million.
On June 28, 2021, the Company entered into a Settlement Agreement and Release (the “Settlement Agreement”) with Smart Sand, pursuant to which the Company and Smart Sand reached a settlement of all matters in dispute. Pursuant to the Settlement Agreement, the Company agreed to pay $35.0 million in cash and to provide Smart Sand certain rights of first refusal related to the supply of frac sand for a period of two years (the “Settlement”). The parties to the Settlement Agreement also released each other from claims arising from or related to the Smart Sand litigation or the final judgment of the court. As of June 30, 2021, the Company paid $35.0 million to Smart Sand and the settlement expense was reflected as litigation settlement on the condensed consolidated statement of operations.
Equipment Purchase Agreement
On June 29, 2021, the Company entered into an Equipment Purchase and Sale Agreement to purchase equipment for $61.5 million. The Company made an initial deposit of $12.3 million in July 2021 and anticipates the remaining $49.2 million to be paid over the next two years, with $32.8 million in 2022 and $16.4 million in 2023.
Sand Purchase Agreements
The Company entered into agreements for the supply of proppant for use in its hydraulic fracturing operations. Under the terms of these agreements, the Company is subject to minimum purchase quantities on a monthly, quarterly, or annual basis at fixed prices or may pay penalties in the event of any shortfall.
As of June 30, 2021, the Company’s contracted volumes in dollars was $8.3 million. The Company’s minimum commitments was $6.1 million, which represents the aggregate amounts that we would be obligated to pay if we procured no additional proppant under the contracts after June 30, 2021.
Lease Agreements
The Company has various operating leases for facilities with terms ranging from 36 to 76 months.
25
U.S. WELL SERVICES, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except shares and per share amounts, or where otherwise noted)
Rent expense was $333 and $525 for the three months ended June 30, 2021 and 2020, respectively, of which $271 and $330, respectively, are recorded as cost of services and $62 and $195, respectively, are recorded as selling, general and administrative expenses in the condensed consolidated statements of operations. Rent expense was $629 and $1,187 for the six months ended June 30, 2021 and 2020, respectively, of which $496 and $803, respectively, are recorded as cost of services and $133 and $384, respectively, are recorded as selling, general and administrative expenses in the condensed consolidated statements of operations.
The following is a schedule of minimum future payments on non-cancellable operating leases and capital leases as of June 30, 2021:
|
Fiscal Year
|
|
Operating Leases
|
|
|
Capital Leases
|
|
|
Remainder of 2021
|
|
$
|
471
|
|
|
$
|
182
|
|
|
2022
|
|
|
828
|
|
|
|
364
|
|
|
2023
|
|
|
308
|
|
|
|
364
|
|
|
2024
|
|
|
258
|
|
|
|
358
|
|
|
2025
|
|
|
67
|
|
|
|
50
|
|
|
Total minimum future rentals
|
|
$
|
1,932
|
|
|
$
|
1,318
|
|
The total capital leases payments include a nominal amount of imputed interest.
Self-insurance
The Company established a self-insured plan for employees’ healthcare benefits except for losses in excess of varying threshold amounts. The Company charges to expense all actual claims made during each reporting period, as well as an estimate of claims incurred, but not yet reported. The amount of estimated claims incurred, but not reported was $0.4 million and $0.2 million as of June 30, 2021 and December 31, 2020, respectively, and was reported as accrued expenses in the condensed consolidated balance sheets. The Company believes that the liabilities recorded are appropriate based on the known facts and circumstances and does not expect further losses materially in excess of the amounts already accrued for existing claims.
NOTE 18 – RELATED PARTY TRANSACTIONS
On June 24, 2021, Crestview Partners (“Crestview”) purchased $40.0 million of Convertible Senior Notes that are convertible into shares of the Company’s Class A common stock for consideration of $20.0 million in cash and in exchange for 15,588 shares of the Company’s Series A preferred stock.
On April 1, 2020, Crestview purchased 11,500 shares of Series B preferred stock for a total payment of $11.5 million. The TCW Group, Inc. purchased 6,500 shares of Series B preferred stock for a total payment of $6.5 million and David Matlin, a member of the Company’s Board of Directors, purchased 1,878 shares of Series B preferred stock for a total payment of $1.9 million.
NOTE 19 – SUBSEQUENT EVENTS
Convertible Senior Notes
On July 12, 2021 and July 13, 2021, the Company issued an additional $6.0 million in aggregate principal amount of Convertible Senior Notes under the Note Purchase Agreement to certain investors for cash, which mature on June 5, 2026. The additional Convertible Senior Notes are convertible into shares of the Company’s Class A common stock with an applicable initial conversion price of $1.25 subject to adjustment.
On July 27, 2021, the Company issued an additional $5.0 million in aggregate principal amount of Convertible Senior Notes under the Note Purchase Agreement to a certain investor for cash, which mature on June 5, 2026. The additional Convertible Senior Notes are convertible into shares of the Company’s Class A common stock with an applicable initial conversion price of $0.98 subject to adjustment.
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U.S. WELL SERVICES, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except shares and per share amounts, or where otherwise noted)
The interest and settlement terms for the Convertible Senior Notes issued in July 2021 are the same as the Equity Linked Notes previously issued in June 2021. See “Note 11 – Convertible Senior Notes” for additional information.
Assets Held for Sale
Subsequent to June 30, 2021, the Company classified an additional $8.1 million in net book value of diesel fracturing equipment, that is anticipated to be sold in the next 12 months, as assets held for sale.
During July 2021, we received $18.0 million in proceeds from the sale of various assets that were classified as held for sale.
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2. Representations of Seller. Seller represents to Buyer as follows: