Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☑Yes☐ ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☑Yes☐ ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ~~[ ]Yes [~~☐ Yes ✓☑]No

As of ~~July 30, 2021,~~May 5, 2022, the registrant had ~~93,377,516~~77,066,612 shares of Class A ~~Common Stock~~common stock and 0 shares of Class B ~~Common Stock~~common stock outstanding.


	June 30, 2021			December 31, 2020			March 31, 2022			December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	57,544		$	3,693		$	40,407		$	6,384
Restricted cash		519			1,569			736			2,736
Accounts receivable (net of allowance for doubtful accounts of $0 and $12,000 as of June 30, 2021 and December 31, 2020, respectively)		54,890			44,393
Accounts receivable (net of allowance for doubtful accounts of $0 as of March 31, 2022 and December 31, 2021, respectively)								22,602			25,743
Inventory, net		7,531			7,965			7,311			6,351
Assets held for sale		14,744			-			0			2,043
Prepaids and other current assets		12,400			10,707			9,723			18,748
Total current assets		147,628			68,327			80,779			62,005
Property and equipment, net		213,301			235,332			157,651			162,664
Intangible assets, net		12,983			13,466
Operating lease right-of-use assets								1,411			0
Finance lease right-of-use assets								3,383			0
Intangible assets (net of accumulated amortization of $1,932 and $1,690 as of March 31, 2022 and December 31, 2021, respectively)								12,258			12,500
Goodwill		4,971			4,971			4,971			4,971
Deferred financing costs, net		747			1,127
Other assets								1,273			1,417
TOTAL ASSETS	$	379,630		$	323,223		$	261,726		$	243,557
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable	$	35,353		$	36,362		$	29,875		$	29,180
Accrued expenses and other current liabilities		12,210			14,781			13,796			16,842
Notes payable		6,440			998			4,311			2,320
Current portion of long-term debt		12,000			10,000			5,000			5,000
Current portion of equipment financing		3,611			3,519			3,425			3,412
Current portion of capital lease obligations		325			54			0			1,092
Current portion of operating lease liabilities								1,020			0
Current portion of finance lease liabilities								1,229			0
Total current liabilities		69,939			65,714			58,656			57,846
Warrant liabilities		8,914			1,619			4,307			3,557
Convertible senior notes								110,818			105,769
Long-term debt		281,052			274,555			153,192			167,507
Convertible senior notes		85,677			-
Long-term equipment financing		7,517			9,347			4,252			5,128
Long-term capital lease obligations		909			-			0			2,112
Long-term operating lease liabilities								470			0
Long-term finance lease liabilities								2,311			0
Other long-term liabilities		4,006			3,539			7,067			6,875
Total liabilities		458,014			354,774			341,073			348,794
Commitments and contingencies (NOTE 17)
Commitments and contingencies (NOTE 12)
Mezzanine equity:
Series A Redeemable Convertible Preferred Stock, par value $0.0001 per share; 55,000 shares authorized; 19,610 shares and 50,000 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively; aggregate liquidation preference of $25,228 and $60,418 as of June 30, 2021 and December 31, 2020, respectively		21,820			50,975
Series B Redeemable Convertible Preferred Stock, par value $0.0001 per share; 22,050 shares authorized; 21,038 shares and 22,050 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively; aggregate liquidation preference of $24,490 and $24,100 as of June 30, 2021 and December 31, 2020, respectively		23,141			22,686
Series A Redeemable Convertible Preferred Stock, par value $0.0001 per share; 55,000 shares authorized; 19,610 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively; aggregate liquidation preference of $28,365 and $27,274 as of March 31, 2022 and December 31, 2021, respectively								24,957			23,866
Stockholders' deficit:
Class A Common Stock, par value of $0.0001 per share; 400,000,000 shares authorized; 93,377,516 shares and 72,515,342 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively		9			7
Class B Common Stock, par value of $0.0001 per share; 20,000,000 shares authorized; 0 shares and 2,302,936 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively		-			-
Class A Common Stock, par value of $0.0001 per share; 400,000,000 shares authorized; 77,066,612 shares and 53,148,952 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively								8			5
Additional paid in capital		237,359			217,212			314,972			263,928
Accumulated deficit		(360,713	)		(322,431	)		(419,284	)		(393,036	)
Total Stockholders' deficit		(123,345	)		(105,212	)		(104,304	)		(129,103	)
TOTAL LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' DEFICIT	$	379,630		$	323,223		$	261,726		$	243,557

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


													Three Months Ended
	Three Months Ended June 30,						Six Months Ended June 30,						March 31,
	2021			2020			2021			2020			2022			2021
Revenue	$	78,799		$	39,837		$	155,057		$	151,872		$	41,150		$	76,258
Costs and expenses:
Cost of services (excluding depreciation and amortization)		59,252			29,011			121,883			114,165			40,723			62,631
Depreciation and amortization		9,836			17,358			20,942			49,366			5,700			11,106
Selling, general and administrative expenses		7,214			5,220			14,604			24,277			8,372			7,390
Impairment of long-lived assets		-			-			-			147,543
Litigation settlement		35,000			-			35,000			-
Loss (gain) on disposal of assets		(545	)		853			1,891			5,097
Loss on disposal of assets														3,056			2,436
Loss from operations		(31,958	)		(12,605	)		(39,263	)		(188,576	)		(16,701	)		(7,305	)
Interest expense, net		(7,333	)		(5,665	)		(13,516	)		(13,621	)		(7,968	)		(6,183	)
Change in fair value of warrant liabilities		(136	)		(1,364	)		(7,287	)		5,189			(746	)		(7,151	)
Patent license sales		22,500			-			22,500			-
Loss on extinguishment of debt		(839	)		-			(839	)		-			(1,651	)		-
Other income		23			45			52			51			1,321			29
Loss before income taxes		(17,743	)		(19,589	)		(38,353	)		(196,957	)		(25,745	)		(20,610	)
Income tax expense (benefit)		(27	)		13			(27	)		(737	)
Income tax benefit														-			-
Net loss		(17,716	)		(19,602	)		(38,326	)		(196,220	)		(25,745	)		(20,610	)
Net loss attributable to noncontrolling interest		-			(97	)		(44	)		(10,897	)		-			(44	)
Net loss attributable to U.S. Well Services, Inc.		(17,716	)		(19,505	)		(38,282	)		(185,323	)		(25,745	)		(20,566	)
Dividends accrued on Series A preferred stock		(1,998	)		(1,845	)		(3,811	)		(3,596	)		(1,091	)		(1,813	)
Dividends accrued on Series B preferred stock		(811	)		(666	)		(1,522	)		(666	)		-			(711	)
Deemed and imputed dividends on Series A preferred stock		(286	)		(5,142	)		(750	)		(12,114	)		-			(464	)
Deemed dividends on Series B preferred stock		(1,501	)		-			(5,669	)		-			-			(4,168	)
Exchange of Series A preferred stock for convertible senior notes		8,936			-			8,936			-
Net loss attributable to U.S. Well Services, Inc. common stockholders	$	(13,376	)	$	(27,158	)	$	(41,098	)	$	(201,699	)	$	(26,836	)	$	(27,722	)
Loss per common share (See Note 14):
Basic and diluted	$	(0.15	)	$	(0.41	)	$	(0.48	)	$	(3.19	)
Loss per common share (See Note 15):
Basic and diluted (1)													$	(0.45	)	$	(1.21	)
Weighted average common shares outstanding:
Basic and diluted		88,593			65,011			83,810			61,815
Basic and diluted (1)														59,766			22,565

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

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


							Three Months Ended
	Six Months Ended June 30,						March 31,
	2021			2020			2022			2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(38,326	)	$	(196,220	)	$	(25,745	)	$	(20,610	)
Adjustments to reconcile net loss to cash provided by (used in) operating activities:
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization		20,942			49,366			5,700			11,106
Change in fair value of warrant liabilities		7,287			(5,189	)		746			7,151
Impairment of long-lived assets		-			147,543
Provision for losses on accounts receivable		9			9,031			0			9
Provision for losses on inventory obsolescence		1,398			448			279			106
Loss on disposal of assets		1,891			5,097			3,056			2,436
Convertible senior notes converted into sales of patent licenses		(22,500	)		-
Non-cash lease expense								282			0
Amortization of debt discount, premium and issuance costs		3,606			1,883			1,253			1,458
Paid-in-kind interest on convertible senior notes		258			-
Loss on extinguishment of debt		839			-
Paid-in-kind interest								5,202			0
Loss on extinguishment of debt, net								1,651			0
Share-based compensation expense		3,661			3,481			2,028			1,648
Changes in assets and liabilities:
Accounts receivable		(10,506	)		32,053			3,141			(17,373	)
Inventory		(964	)		826			(1,239	)		(218	)
Prepaids and other current assets		(7,708	)		3,743			(1,994	)		(7,973	)
Accounts payable		6,427			(8,332	)		(1,252	)		10,424
Accrued liabilities		(2,641	)		(7,902	)		(1,289	)		(3,159	)
Accrued interest		7,956			(14,315	)		736			3,979
Net cash provided by (used in) operating activities		(28,371	)		21,513
Net cash used in operating activities								(7,445	)		(11,016	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(24,841	)		(40,756	)		(11,092	)		(14,218	)
Proceeds from sale of property and equipment and insurance proceeds from damaged property and equipment		8,553			15,036			17,250			6,393
Net cash used in investing activities		(16,288	)		(25,720	)
Net cash provided by (used in) investing activities								6,158			(7,825	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving credit facility		24,722			11,250			190			21,174
Repayments of revolving credit facility		(14,750	)		(33,381	)		(14,360	)		(9,000	)
Proceeds from issuance of long-term debt		3,004			-			0			3,004
Proceeds from issuance of long-term debt and warrants								21,500			0
Repayments of long-term debt		(12,563	)		(2,500	)		(17,772	)		(1,250	)
Payment of fees related to debt extinguishment		(41	)		-			(96	)		0
Proceeds from issuance of convertible senior notes		86,500			-
Proceeds from issuance of notes payable		9,139			-			3,826			9,139
Repayments of notes payable		(3,697	)		(4,109	)		(1,836	)		(1,014	)
Repayments of amounts under equipment financing		(1,738	)		(1,513	)		(862	)		(864	)
Principal payments under capital lease obligations		(109	)		(2,816	)		0			(34	)
Proceeds from issuance of common stock, net		13,562			19,875
Principal payments on finance lease liabilities								(233	)		0
Proceeds from issuance of common stock and warrants in registered direct offering, net								22,730			0
Proceeds from issuance of common stock via the ATM Agreement, net								21,282			10,669
Deferred financing costs		(6,569	)		(20,061	)		(1,059	)		0
Net cash provided by (used in) financing activities		97,460			(33,255	)
Net increase (decrease) in cash and cash equivalents and restricted cash		52,801			(37,462	)
Net cash provided by financing activities								33,310			31,824
Net increase in cash and cash equivalents and restricted cash								32,023			12,983
Cash and cash equivalents and restricted cash, beginning of period		5,262			41,404			9,120			5,262
Cash and cash equivalents and restricted cash, end of period	$	58,063		$	3,942		$	41,143		$	18,245

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

Three Months Ended June 30, 2021

Class A Common
Stock

Class B Common
Stock

Additional
Paid in

Accumulated

Noncontrolling

Total

Shares

Amount

Shares

Amount

Capital

Deficit

Interest

Deficit

Balance, March 31, 2021

90,068,356

$
9

-

$
-

$
226,740

$
(342,997
)

$
-

$
(116,248
)
Class A common stock issuance

2,381,660

-

-

-

2,891

-

-

2,891

Conversion of Series B preferred
   stock to Class A common stock

927,500

-

-

-

270

-

-

270

Exchange of Series A preferred
   stock for convertible senior notes

-

-

-

-

8,936

-

-

8,936

Share-based compensation

-

-

-

-

1,617

-

-

1,617

Deemed and imputed dividends on
   Series A preferred stock

-

-

-

-

(286
)

-

-

(286
)
Accrued Series A preferred
   stock dividends

-

-

-

-

(1,998
)

-

-

(1,998
)
Accrued Series B preferred
   stock dividends

-

-

-

-

(811
)

-

-

(811
)
Net loss

-

-

-

-

-

(17,716
)

-

(17,716
)
Balance, June 30, 2021

93,377,516

$
9

-

$
-

$
237,359

$
(360,713
)

$
-

$
(123,345
)

Three Months Ended June 30, 2020

Class A Common
Stock

Class B Common
Stock

Additional
Paid in

Accumulated

Noncontrolling

Total

Shares

Amount

Shares

Amount

Capital

Deficit

Interest

Deficit

Balance, March 31, 2020

62,355,657

$
5

5,500,692

$
1

$
218,500

$
(258,909
)

$
-

$
(40,403
)
Class A common stock issuance

5,529,622

1

-

-

1,437

-

-

1,438

Conversion of Class B common
   stock to Class A common stock

485,795

1

(485,795
)

(1
)

-

-

-

-

Share-based compensation

-

-

-

-

1,307

-

97

1,404

Restricted stock forfeitures

(9,861
)

-

-

-

-

-

-

-

Deemed and imputed dividends on
   Series A preferred stock

-

-

-

-

(5,142
)

-

-

(5,142
)
Accrued Series A preferred
   stock dividends

-

-

-

-

(1,845
)

-

-

(1,845
)
Accrued Series B preferred
   stock dividends

-

-

-

-

(666
)

-

-

(666
)
Net loss

-

-

-

-

-

(19,505
)

(97
)

(19,602
)
Balance, June 30, 2020

68,361,213

$
7

5,014,897

$
-

$
213,591

$
(278,414
)

$
-

$
(64,816
)

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

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

Six Months Ended June 30, 2021

Class A Common
Stock

Class B Common
Stock

Additional
Paid in

Accumulated

Noncontrolling

Total

Shares

Amount

Shares

Amount

Capital

Deficit

Interest

Deficit

Balance, December 31, 2020

72,515,342

$
7

2,302,936

$
-

$
217,212

$
(322,431
)

$
-

$
(105,212
)
Class A common stock issuance

15,006,317

1

-

-

13,241

-

-

13,242

Conversion of Class B common
   stock to Class A common stock

2,302,936

-

(2,302,936
)

-

-

-

-

-

Conversion of Series B preferred
   stock to Class A common stock

3,673,278

1

-

-

1,067

-

-

1,068

Exchange of Series A preferred
   stock for convertible senior notes

-

-

-

-

8,936

-

-

8,936

Share-based compensation

-

-

-

-

3,136

-

44

3,180

Tax withholding related to vesting of
   share-based compensation

(103,697
)

-

-

-

(150
)

-

-

(150
)
Restricted stock forfeitures

(16,660
)

-

-

-

-

-

-

-

Deemed and imputed dividends on
   Series A preferred stock

-

-

-

-

(750
)

-

-

(750
)
Accrued Series A preferred
   stock dividends

-

-

-

-

(3,811
)

-

-

(3,811
)
Accrued Series B preferred
   stock dividends

-

-

-

-

(1,522
)

-

-

(1,522
)
Net loss

-

-

-

-

-

(38,282
)

(44
)

(38,326
)
Balance, June 30, 2021

93,377,516

$
9

-

$
-

$
237,359

$
(360,713
)

$
-

$
(123,345
)

Six Months Ended June 30, 2020

Class A Common
Stock

Class B Common
Stock

Additional
Paid in

Accumulated

Noncontrolling

Total
Equity

Shares

Amount

Shares

Amount

Capital

Deficit

Interest

(Deficit)

Balance, December 31, 2019

62,857,624

$
5

5,500,692

$
1

$
225,382

$
(93,091
)

$
10,633

$
142,930

Class A common stock issuance

5,529,622

1

-

-

1,437

-

-

1,438

Conversion of Class B common
   stock to Class A common stock

485,795

1

(485,795
)

(1
)

-

-

-

-

Share-based compensation

-

-

-

-

3,218

-

264

3,482

Tax withholding related to vesting of
   share-based compensation

(154,253
)

-

-

-

(70
)

-

-

(70
)
Restricted stock forfeitures

(357,575
)

-

-

-

-

-

-

-

Deemed and imputed dividends on
   Series A preferred stock

-

-

-

-

(12,114
)

-

-

(12,114
)
Accrued Series A preferred
   stock dividends

-

-

-

-

(3,596
)

-

-

(3,596
)
Accrued Series B preferred
   stock dividends

-

-

-

-

(666
)

-

-

(666
)
Net loss

-

-

-

-

-

(185,323
)

(10,897
)

(196,220
)
Balance, June 30, 2020

68,361,213

$
7

5,014,897

$
-

$
213,591

$
(278,414
)

$
-

$
(64,816
)

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

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements ~~were~~have been prepared ~~using~~in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and pursuant to the instructions to Form 10-Q and Regulation ~~S-X.~~S-X issued by the Securities and Exchange Commission (“SEC”). 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~~10-K for the year ended December 31, ~~2020~~2021 (the ~~“Amended Annual~~“Annual Report”), filed with the ~~Securities and Exchange Commission (“SEC”)~~SEC on ~~May 17, 2021.~~March 30, 2022.

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~~March 31, 2022 and December 31, ~~2020,~~2021, and for the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 and ~~2020.~~2021. 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~~March 31, 2022 are not necessarily indicative of the results of operations expected for the entire fiscal year ended December 31, ~~2021.~~2022.

Our operations are organized into a single business segment, which consists of pressure pumping services, and we have 1 reportable geographical business segment, the United States.

Reverse Stock Split

At the annual meeting of the Company’s stockholders held on May 14, 2021, the Company’s stockholders approved a proposal to amend the Company’s certificate of incorporation to effect a reverse stock split at a ratio to be determined by the Company’s Board of Directors within a specified range. On September 30, 2021, the Company effected a 1-for-3.5 reverse split of its Class A common stock. All owners of record as of September 30, 2021 received one issued and outstanding share of the Company’s Class A common stock in exchange for three and one half outstanding shares of the Company’s Class A common stock. No fractional shares of Class A common stock were issued as a result of the reverse stock split. Any fractional shares in connection with the reverse stock split were rounded up to the nearest whole share and no stockholders received cash in lieu of fractional shares. The reverse stock split had no impact on the number of shares of Class A common stock that the Company is authorized to issue pursuant to its certificate of incorporation or on the par value per share of the Class A common stock. Proportional adjustments were made to the number of shares of Class A common stock issuable upon exercise or conversion of the Company's equity awards, convertible preferred stock and warrants, as well as the applicable exercise price. All share and per share information included in this Quarterly Report on Form 10-Q has been retroactively adjusted to reflect the impact of the reverse stock split.

U.S. WELL SERVICES, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

(in thousands, except shares and per share amounts, or where otherwise noted)

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, valuation of right-of-use assets and lease liabilities, 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.

~~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 inon our condensed consolidated balance sheets. ~~The~~ As of March 31, 2022, restricted cash inprimarily consisted of $0.7 million transferred into a trust account to support our ~~condensed consolidated balance sheet represents~~workers’ compensation obligations. As of December 31, 2021, restricted cash consisted of $0.7 million transferred into a trust account to support our workers’ compensation obligations and ~~cash held~~$2.0 million for ~~use in approved capital expenditures~~the prepayment of ~~$513 and $6, respectively, as of June 30, 2021, and $513 and $1,056, respectively, as of December 31, 2020.~~the Senior Secured Term Loan.

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:


	March 31,
	2022		2021
Cash and cash equivalents	$	40,407	$	17,726
Restricted cash		736		519
Cash and cash equivalents and restricted cash	$	41,143	$	18,245

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

Accounts Receivable

Accounts receivable are recorded at their outstanding balances adjusted for an allowance for doubtful accounts. Revenue earned and recognized in advance of invoice issuance creates assets referred to as “unbilled receivables”. Unbilled receivables are presented on a combined basis with accounts receivable. 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 first quarter of 2021, the Company wrote-off accounts receivables of $12.0 million, which was previously reserved in full as of December 31, 2020. As of March 31, 2022, the Company did 0t record an allowance for doubtful accounts.

Inventory

Inventory consists of proppant, chemicals, and other consumable materials and supplies used in our ~~high-pressure hydraulic fracturing~~pressure pumping 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~~March 31, 2022 and December 31, ~~2020,~~2021, the Company had established inventory reserves of ~~$0.2~~$1.5 million and ~~$0.3~~$1.3 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.

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 separately identifies and accounts for certain critical components of its ~~hydraulic fracturing~~pressure pumping 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.

Leases

InAt inception, the ~~first quarter of 2020, our review of impairment of long-lived assets necessitated~~Company determines whether an arrangement is a ~~review~~lease and the appropriate lease classification as operating or finance. When a lease is identified, a right-of-use asset and the corresponding lease liability are recorded on the lease commencement date based on the present value 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~~remaining lease payments over the ~~increase in daily pumping time are shortening~~lease term on 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.~~

~~U.S. WELL SERVICES, INC.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

(sheet. In the event a lease does not provide an implicit rate, the Company uses its incremental borrowing rate based on information available at the commencement date in ~~thousands, except shares and per share amounts, or where otherwise noted)~~

~~When~~determining the ~~net carryin~~gpresent value of ~~an asset designated~~the remaining lease payments. Leases may include options to extend or terminate the lease. The Company generally does not include renewal or termination options in its assessment of the leases unless extension or termination for certain assets is deemed to be reasonably certain. The Company has elected the practical expedient to not recognize lease assets and liabilities for leases with a term of 12 months or less. Operating lease expenses are recognized on a straight-line basis over the lease term. The Company also has some lease agreements with lease and non-lease components, which are accounted for 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~~ ~~assetsheldforsale~~ ~~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 0 impairment charges on its held for sale assets.a single lease component.

~~Goodwill~~

~~Goodwill is not amortized, but is reviewed~~Right-of-use assets are assessed periodically for impairment ~~annually, or more frequently when~~if 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 existoccur 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~~asset may not be recoverable. The Company ~~estimates using a guideline public company method, a form~~monitors events and modifications of existing lease agreements that would require reassessment of the ~~market approach. The guideline public company method utilizes~~lease. When a reassessment results in the ~~trading multiples~~remeasurement of ~~similarly traded public companies as they relate~~a lease liability, a corresponding adjustment is made 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.~~corresponding right-of-use asset.

Warrants

~~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~~Company’s issued ~~public warrants~~ and ~~private placement warrants (collectively, the “public~~outstanding Public Warrants, Private Placement Warrants 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~~Warrants are recognized as liabilities. Accordingly, we recognize ~~the~~these 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~~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~~Private Placement Warrants are valued using a Monte Carlo simulation model. The Series A ~~warrants~~Warrants are valued using the Black-Scholes option pricing model.

~~Convertible Notes~~The Company’s issued and ~~Convertible Preferred Stock~~outstanding Term C Loan Warrants, RDO Investor Warrants and Placement Agent Warrants are recognized as equity.

~~When the Company issues convertible notes or convertible preferred stock, it first evaluates the balance sheet classification~~See “Note 9 – Warrants” for additional disclosure 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.outstanding warrants.

~~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 conver~~sion 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.

•

~~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:~~instruments:

Senior Secured Term Loan. The fair value of the Senior Secured Term Loan is ~~$193.2~~$96.5 million and ~~$198.0~~$106.6 million as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, 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.

U.S. WELL SERVICES, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

(in thousands, except shares and per share amounts, or where otherwise noted)

Term C Loan. The fair value the Term C Loan is $22.6 million as of March 31, 2022 based on the market price quoted from external sources. If the Term C 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 notes approximates fair value as its terms are consistent with and comparable to current market rates as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively.

Warrants. ~~The~~Certain of the Company’s outstanding warrants are accounted for as liabilities and measured at fair value. See “Note 89 – ~~Warrant Liabilities”~~Warrants” for fair value measurements associated with the Company’s warrants.

Convertible Senior Notes. ~~As of June 30, 2021, the~~The fair value of the Convertible Senior Notes is ~~$91.2~~$75.1 million and $73.5 million as of March 31, 2022 and December 31, 2021, respectively, 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~~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.

~~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 afive-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 3 licenses to build and operate 3 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 0t 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~~table shows the percentage of revenues from our significant ~~customers for the periods indicated:~~customers:

	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,			Three Months Ended March 31,
	2021	2020		2022	2021
Customer A	*	17.2%		15.0%	*
Customer B	12.9%	15.2%		*	13.0%
Customer C	11.6%	16.4%		21.8%	12.6%
Customer E	18.1%	12.5%		*	16.6%
Customer F	19.0%	14.6%		41.4%	20.3%
Customer H	15.2%	*		*	18.5%
Customer K				16.0%	*

An asterisk indicates that revenue is less than 10 percent.
An asterisk indicates that revenue is less than ten percent.			An asterisk indicates that revenue is less than ten percent.

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:


	March 31, 2022	December 31, 2021
Customer A	27.9%	*
Customer C	20.0%	20.4%
Customer D	10.4%	*
Customer F	26.6%	24.3%
Customer J	*	29.7%
Customer K	14.9%	25.0%

An asterisk indicates that trade receivable is less than ten percent.

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 10 percent.

~~Income Taxes~~

~~The Company, under ASC 740,~~ ~~Accounting for~~ Income Taxes~~, uses the asset and liability method of accounting for~~

The provision or benefit from income taxes ~~under which~~for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter, the Company updates the estimate of the annual effective tax rate, and if the estimated tax rate changes, the Company records a cumulative adjustment.

The Company’s effective tax rate on continuing operations for the three months ended March 31, 2022 and 2021, was 0.00%. The difference between the effective tax rate and the U.S. federal statutory rate is primarily due to a valuation allowance on the Company's federal and state net deferred tax assets and ~~liabilities are recognized~~excess tax benefits related to net operating losses. Due to tax losses and offsetting valuation allowance, the Company did not record a provision for U.S. income taxes in any period.

The Company is subject to taxation in the ~~future~~U.S. The tax ~~consequences~~years subsequent to 2018 remain open and subject to examination by federal and state taxing authorities in which the Company is subject to tax. The Company is not under examination in any other jurisdictions.

As of ~~(i) temporary differences between~~March 31, 2022, the ~~financial statement carrying amounts~~Company has provided a valuation allowance against all federal and state deferred tax assets. Management continues to evaluate the ~~tax bases~~realizability 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~~related valuation allowance. If management's assessment of the ~~rate change is enacted. A valuation allowance is provided for~~ deferred tax assets ~~when~~or the corresponding valuation allowance were to change, the Company would record the related adjustment to income during the period in which management makes the determination. After consideration of all 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 will not be realized.~~assets.

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. NaN 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.

~~(in thousands, except shares and per share amounts, or where otherwise noted)~~

Depreciation and amortization expense related to property and equipment was ~~$9.6~~$5.2 million and ~~$17.4~~$10.9 million ~~for~~during the three months ended ~~June 30,~~March 31, 2022 and 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~~Assets Sales~~, respectively, and a loss of $1.9 million and $5.1 million~~ ~~for the six months ended June 30, 2021 and 2020, respectively.~~

In May 2021, the Company announced its commitment to becoming an all-electric ~~hydraulic fracturing~~pressure pumping services provider and ~~that it expects to fully exit the diesel frac market by the end~~since then has sold most of ~~2021. As a result, the Company has been executing a plan to sell~~ its ~~diesel fracturing~~legacy, diesel-powered pressure pumping equipment. As of ~~June 30,~~March 31, 2022, the Company did not have any assets classified as held for sale. As of December 31, 2021, the Company ~~has~~had classified ~~$14.7~~$2.0 million in net book value of diesel ~~fracturing~~pressure pumping equipment ~~that is anticipated to be sold in the next 12 months,~~ as assets held for sale on the condensed consolidated balance sheet.

During the three months ended March 31, 2022, the Company received $5.2 million in proceeds from the sale of property and equipment, of which $2.1 million was for assets classified as held for sale. The Company used the proceeds received from the asset sales to pay down the principal balance of its Senior Secured Term Loan.

The Company recognized a loss of $3.1 million and $2.4 million from disposal of assets during the three months ended March 31, 2022 and 2021, respectively.

The Company enters into various premium finance agreements with a credit finance institution to pay the premiums on insurance policies for its directors’ and officers’ liability, general liability, workers’ compensation, umbrella, auto and pollution coverage needs. During the three months ended March 31, 2022 and 2021, the aggregate amount of the premiums financed was $3.8 million and $9.1 million, respectively, payable in equal monthly installments at a weighted average interest rate of 4.0% and 5.4%, respectively. 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,~~March 31, 2022 and December 31, 2021, the Company had a ~~total~~remaining balance of ~~19,167,417~~$4.3 million and $2.3 million, respectively, related to notes payable.

NOTE 9 – WARRANTS

Warrants issued and outstanding consisted of the following:


	Balance Sheet Classification	March 31, 2022		December 31, 2021
Public Warrants	Liability		9,994,635		9,994,635
Private Placement Warrants	Liability		9,172,782		9,172,782
Series A Warrants	Liability		6,666,662		6,222,218
Term C Loan Warrants	Equity		14,999,999		-
RDO Investor Warrants	Equity		14,180,375		0
Placement Agent Warrants	Equity		992,626		-

Public Warrants and Private Placement Warrants

The Company issued public ~~warrants~~ and private ~~placement~~ warrants ~~were~~in connection with its initial public offering in November 2018 (the "Public Warrants" and "Private Placement Warrants"). As of March 31, 2022, the outstanding Public Warrants and Private Placement Warrants were exercisable for an aggregate of ~~9,583,709~~2,738,203 shares of Class A common stock. Each ~~public warrant~~Public Warrant and ~~private placement warrant~~Private Placement Warrant entitles its holder to purchase ~~one half~~one-seventh of ~~one~~a share of our Class A common stock at an exercise price of ~~$5.75~~$5.75 per ~~half share~~warrant ($~~11.50 for~~40.25 per full share equivalent), to be exercised only for a whole number of shares of Class A common stock. The ~~public warrants~~Public Warrants and ~~private placement warrants~~Private Placement Warrants expire on November 9, 2023 or earlier upon ~~redemption.~~redemption or liquidation. The Public Warrants and Private Placement Warrants are recognized as warrant liabilities in the condensed consolidated balance sheet.

Series A Warrants

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 (the “Series A Warrants”). The Company issued additional warrants to the purchasers in quarterly installments beginning nine months after May 24, 2019 and ending on March 31, 2022.

During the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021, the Company issued 444,444 ~~and 888,888~~ additional Series A ~~warrants~~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~~March 31, 2022, the outstanding Series A ~~warrants~~Warrants were ~~outstanding pursuant to the Series A preferred stock purchase agreement, and~~ exercisable for ~~5,733,329~~1,904,761 shares of Class A common stock. The Series A ~~warrants have~~Warrants entitle their holders to purchase two-sevenths of a share of Class A common stock at an exercise price of ~~$7.66~~$7.66 per warrant ($26.81 per full share equivalent), to be exercised only for a whole number of shares of Class A common stock. The Series A Warrants expire on November 25, 2025. The Series A Warrants are recognized as warrant liabilities in the condensed consolidated balance sheet.

Term C Loan Warrants

On February 28, 2022, in connection with the entry into the Term C Loan, the Company issued 13,953,488 warrants to certain of the Term C Loan Lenders (the “February 2022 Warrants”) exercisable to purchase an equivalent number of shares of Class A common stock at an exercise price of $1.10 per share, subject to adjustment, and ~~expire~~expiring on ~~November 25, 2025.~~February 28, 2028.

15On March 1, 2022, in connection with the entry into the Term C Loan, the Company issued 1,046,511 warrants to certain of the Term C Loan Lenders (the “March 2022 Warrants” and, together with the February 2022 Warrants, the “Term C Loan Warrants”) exercisable to purchase an equivalent number of shares of Class A common stock at an exercise price of $1.29, subject to adjustment, and expiring on March 1, 2028.

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 Term C Loan Warrants were offered in a private offering that is exempt from registration under the Securities Act, and may not be offered or sold in the United States absent such registration or an exemption from the registration requirements of the Securities Act.

The Term C Loan Warrants are recognized as equity in the condensed consolidated balance sheet. See “Note 11 - Debt” for additional disclosure on the accounting for the Term C Loan and Term C Loan Warrants.

RDO Investor Warrants and Placement Agent Warrants

On March 11, 2022, the Company completed a registered direct offering for 14,180,375 shares of Class A common stock and in a concurrent private placement, the Company also issued 14,180,375 warrants to the purchasers of the shares of Class A common stock in the registered direct offering (the “RDO Investor Warrants”).

The RDO Investor Warrants are exercisable to purchase an equivalent number of shares of Class A common stock at an initial exercise price of $1.763 per share. The RDO Investor Warrants are exercisable immediately, subject to certain ownership limitations and will expire three and one-half years following the date of issuance.

The Company also issued 992,626 warrants to the placement agent as partial compensation for its services in connection with the registered direct offering (the “Placement Agent Warrants”) on March 11, 2022. The Placement Agent Warrants are exercisable to purchase an equivalent number of shares of Class A common stock at an initial exercise price of $2.2038 per share. The Placement Agent Warrants are exercisable immediately, subject to certain ownership limitations and will expire three and one-half years following the date of issuance.

The RDO Investor Warrants and Placement Agent Warrants are recognized as equity in the condensed consolidated balance sheet. See “Note 14 - Stockholders’ Equity” for additional disclosure on the accounting for the RDO Investor Warrants and Placement Agent Warrants.

Fair Value Measurement

The Company’s ~~warrants~~Public Warrants, Private Placement Warrants and Series A 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


	Quoted Prices in Active Markets (Level 1)		Other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)		Total
As of March 31, 2022
Public Warrants	$	1,100	$	-	$	-	$	1,100
Private Placement Warrants		-		1,202		-		1,202
Series A Warrants		-		2,005		-		2,005
	$	1,100	$	3,207	$	-	$	4,307
As of December 31, 2021
Public Warrants	$	752	$	-	$	-	$	752
Private Placement Warrants		-		871		-		871
Series A Warrants		-		1,934		-		1,934
	$	752	$	2,805	$	-	$	3,557

Public ~~warrants~~Warrants. The fair value of the ~~public warrants~~Public Warrants are classified as Level 1 in the fair value hierarchy and is valued using quoted market prices, as they are traded in active markets.

Private ~~placement warrants.~~ Placement Warrants. The fair value of the ~~private placement warrants~~Private Placement Warrants are classified as Level 2 in the fair value hierarchy and is determined using a Monte Carlo simulation model.

Series A ~~warrants~~Warrants. The fair value of the Series A ~~warrants~~Warrants are classified as Level 2 in the fair value hierarchy and is determined using the Black-Scholes ~~valuation method.~~option pricing model.

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 assumptions were used to calculate the fair value for the ~~private placement warrants~~Private Placement Warrants and Series A ~~warrants:~~Warrants:

	Private Placement Warrants	Series A Warrants
As of June 30, 2021
			Private Placement Warrants	Series A Warrants
As of March 31, 2022
Expected remaining life	2.4 years	4.4 years	1.6 years	3.7 years
Volatility rate	153.0%	153.0%	329.0%	329.0%
Risk-free interest rate	0.3%	0.7%	2.0%	2.4%
Expected dividend rate	0%	0%	0%	0%

As of December 30, 2020
As of December 31, 2021
Expected remaining life	2.86 years	4.9 years	1.9 years	3.9 years
Volatility rate	115.8%	115.8%	227.5%	227.5%
Risk-free interest rate	0.2%	0.4%	0.7%	1.1%
Expected dividend rate	0%	0%	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.

~~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.~~

~~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 1110 – 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%~~issue 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”). Two of the institutional investors were Crestview III USWS TE, LLC and Crestview III USWS, L.P. (collectively, “Crestview Partners”), which are related parties.

During the year ended December 31, 2021, pursuant to the Note Purchase Agreement, the Company issued $136.5 million in aggregate principal amount of Convertible Senior Notes, 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.~~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~~Loan Agreement. The 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.

~~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 3 licenses to build and operate 3 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%~~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~~Notes..

The ~~Company has accrued PIK interest~~carrying value of ~~$0.3 million related to~~ the Convertible Senior Notes ~~for~~is as follows:


	March 31, 2022			December 31, 2021
Principal	$	114,000		$	114,000
PIK interest		14,633			9,686
Unamortized debt premium		1,805			1,841
Unamortized debt discount and issuance costs		(19,620	)		(19,758	)
Net convertible senior notes	$	110,818		$	105,769

As of March 31, 2022, the ~~three months ended June 30, 2021.~~

~~Each~~ Convertible Senior Notes are convertible into ~~Equity Linked Note~~29,178,268~~, subject to earlier conversion, is due and payable on June 5, 2026 in~~ shares of the Company’s Class A common stock ~~equal to~~at the ~~entire outstanding~~option of the holders.

Equity Linked Notes. In June 2021 and ~~unpaid principal balance, plus any PIK interest, subject to certain limitations on~~July 2021, in connection with the ~~number of shares of Class A common stock that may be~~Private Placement, the Company issued and ~~which would require the Company to settle the conversion~~sold $75.0 million in ~~payment partially in cash. The number~~principal amount 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~~Convertible Senior Notes that are convertible at any time at the holder’s option, into shares of the ~~holder into a number of shares of~~Company’s Class A common stock ~~equal~~for cash (the “Cash Notes”). The conversion prices of the Cash Notes range from $3.43 to $4.38, subject to adjustment.

In June 2021, in connection with the Private Placement, the Company issued and sold $39.0 million in 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~~Convertible Senior Notes that are convertible at any time ~~in which there are 0 issued and outstanding~~at the holder’s option, into shares of the Company’s Class A common stock in exchange for 30,390 shares of the Company’s Series A preferred stock ~~or Series B preferred stock, if the~~ ~~twenty-day~~ ~~volume weighted average trading~~(the “Exchange Notes”). The Exchange Notes are convertible at a conversion price of ~~the Class A common stock is greater than $2.00 for 10 trading days during any 20 consecutive trading day period, the Company may deliver a notice~~$7.00 subject to ~~the holder of an Equity Linked~~ ~~Note~~adjustment. ~~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 infor 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~~

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 a Convertible Senior Note in the principal amount of $22.5 million 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. The debt issuance costs associated with the License Linked Note were fully amortized.

~~The following table summarizes the Company’s Series B Redeemable Convertible Preferred Stock, par value $0.0001~~21

(in thousands, except shares and per share ~~(“Series B preferred stock”) activities for the six months ended June 30, 2021:~~amounts, or where otherwise noted)

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.

As of March 31, 2022, the Series A preferred stock outstanding were convertible into 1,215,029 shares of Class A common stock, and dividends accrued and outstanding with respect to the Series A preferred stock were $8.8 million and reflected in the carrying value of Series A preferred stock.

On April 1, 2020, the Company issued Series B Redeemable Convertible Preferred Stock, par value of $0.0001 per share (“Series B preferred stock”) to certain institutional investors.

During the first quarter of 2021, 762 shares of Series B preferred stock and related accrued dividends were converted into 784,508 shares of Class A common stock 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 $0.8 million in the carrying value of the Series B preferred stock during the three months ended March 31, 2021.

As of March 31, 2022 and December 31, 2021, there were 0 shares of Series B preferred stock outstanding.

NOTE 1415 – 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.

U.S. WELL SERVICES, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

(in thousands, except shares and per share amounts, or where otherwise noted)

Basic and diluted net income (loss) per share excludes the income (loss) attributable to and shares associated with the ~~1,609,677~~459,909 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.

~~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
	March 31,
	2022			2021
Basic net income (loss) per share
Numerator:
Net loss attributable to U.S. Well Services, Inc.	$	(25,745	)	$	(20,566	)
Net loss attributable to cancellable Class A common stock		197			411
Basic net loss attributable to U.S. Well Services, Inc. shareholders		(25,548	)		(20,155	)
Dividends accrued on Series A preferred stock		(1,091	)		(1,813	)
Dividends accrued on Series B preferred stock		0			(711	)
Deemed and imputed dividends on Series A preferred stock		0			(464	)
Deemed and imputed dividends on Series B preferred stock		0			(4,168	)
Basic net loss attributable to U.S. Well Services, Inc. Class A common shareholders	$	(26,639	)	$	(27,311	)

Denominator:
Weighted average shares outstanding		60,225,431			23,024,793
Cancellable Class A common stock		(459,909	)		(459,909	)
Basic and diluted weighted average shares outstanding		59,765,522			22,564,884

Basic and diluted net loss per share attributable to Class A common shareholders	$	(0.45	)	$	(1.21	)

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
	Three Months Ended June 30,				Six Months Ended June 30,				March 31,
	2021		2020		2021		2020		2022		2021
Dilutive earnings per share:
Anti-dilutive stock options		877,266		877,266		877,266		877,266		250,649		250,649
Anti-dilutive warrants		15,317,038		16,658,427		15,317,038		16,658,427		34,815,964		4,249,313
Anti-dilutive restricted stock		1,079,249		1,675,825		1,079,249		1,675,825		289,312		308,357
Anti-dilutive deferred stock units		8,911,858		-		8,911,858		-		1,073,073		2,546,249
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 shares from Pool B Awards										3,363,872		2,892,779
Anti-dilutive Series A preferred stock convertible into Class A common stock		3,782,285		9,392,230		3,782,285		9,392,230		1,215,029		2,665,692
Anti-dilutive Series B preferred stock convertible into Class A common stock		79,512,587		73,754,101		79,512,587		73,754,101		0		22,275,825
Anti-dilutive Convertible Senior Notes convertible into Class A common stock		80,822,372		-		80,822,372		-		29,178,268		0
Potentially dilutive securities excluded as anti-dilutive		200,427,380		107,372,746		200,427,380		107,372,746		70,186,167		35,188,864

~~The following table summarizes the restricted stock activity for the six months ended June 30, 2021:~~

~~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.~~

~~The following table summarizes the stock option activity for the six months ended June 30, 2021:~~

~~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.~~

~~(in thousands, except shares and per share amounts, or where otherwise noted)~~

~~The following table summarizes the DSUs activity for the six months ended June 30, 2021:~~

~~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.~~

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.

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.~~

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)%.~~

~~(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 0t 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 1716 – ~~COMMITMENTS AND CONTINGENCIES~~SHARE-BASED COMPENSATION

~~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~~Share-based compensation expense consisted of the ~~State~~following:


	Three Months Ended
	March 31,
	2022			2021
Restricted stock	$	736		$	825
Stock options		213			214
Deferred stock units		330			246
Pool A Awards		359			86
Pool B Awards		390			280
Total	$	2,028	(1)	$	1,651	(2)

(1)

For the three months ended March 31, 2022, $297 was presented as cost 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,services 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$1,731 was presented as selling, general and administrative expenses 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.

(2)

For the three months ended March 31, 2021, $198 was presented as cost of services and $1,453 was presented as selling, general and administrative expenses in the condensed consolidated statement of operations.

Restricted Stock

~~Equipment Purchase Agreement~~

~~On June 29, 2021,~~Pursuant to the Amended and Restated U.S. Well Services, Inc. 2018 Stock Incentive Plan (as amended, the “LTIP”), the Company ~~entered into an Equipment Purchase~~grants shares of restricted Class A common stock (“restricted stock”) to certain employees 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~~directors. Restricted stock is subject to ~~minimum purchase quantities~~restrictions on transfer and is generally subject to a ~~monthly, quarterly,~~risk of forfeiture if the award recipient is no longer an employee or ~~annual basis at fixed prices or may pay penalties~~director of the Company prior to the lapse of the restriction. Restricted stock granted to employees generally vests over four years in equal installments each year on the ~~event~~anniversary of ~~any shortfall.~~the grant date and grants to directors generally vest in full after one year. The grant date fair value of the restricted stock is determined using the closing price of the Company's Class A common stock on the grant date.

The following table summarizes the restricted stock activity for the three months ended March 31, 2022:


	Shares			Weighted- Average Grant-Date Fair Value per Share
Outstanding at December 31, 2021		388,886		$	24.55
Granted		0			0
Vested		(95,214	)		31.19
Forfeited		(4,360	)		31.19
Outstanding at March 31, 2022		289,312		$	22.27

As of ~~June 30, 2021,~~March 31, 2022, the ~~Company’s contracted volumes in dollars~~total unrecognized compensation cost related to restricted stock was ~~$8.3 million. The Company’s minimum commitments was $6.1~~$2.9 million which ~~represents~~is expected to be recognized over a weighted-average period of 0.96 years.

Stock Options

The following table summarizes the ~~aggregate amounts that we would be obligated to pay if we procured no additional proppant under~~stock option activity for the ~~contracts after June 30, 2021.~~three months ended March 31, 2022:


	Shares		Weighted- Average Exercise Price per Share		Weighted-Average Remaining Contractual Life (in years)
Outstanding at December 31, 2021		250,649	$	31.19		4.21
Exercised		-		-		-
Forfeited/Expired		-		-		-
Outstanding at March 31, 2022		250,649	$	31.19		3.96
Exercisable at March 31, 2022		187,987	$	31.19		3.96

~~Lease Agreements~~

~~The Company has various operating leases for facilities with terms ranging from 36 to 76 months.~~

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~~As of March 31, 2022, the total unrecognized compensation cost related to stock options was ~~$333 and $525~~$0.8 million which is expected to be recognized over a weighted average period of 0.96 years.

Deferred Stock Units

The Company awards deferred stock units (“DSUs”) to certain key employees of the Company pursuant to the LTIP. Each DSU represents the right to receive 1 share of the Company’s Class A common stock. DSUs generally vest over three years in equal installments each year on the anniversary of the vesting effective date, subject to the grantee’s continuous service through each vesting period but settlement does not occur until the fifth anniversary of the grant date. The grant date fair value of the DSU is determined using the closing price of the Company's Class A common stock on the grant date.

The following table summarizes the DSUs activity for the three months ended ~~June 30,~~March 31, 2022:


	Units			Weighted- Average Grant Date Fair Value per Unit
Outstanding at December 31, 2021		2,052,474		$	1.49
Granted		0			0
Vested		(958,850	)		1.40
Forfeited		(20,551	)		1.16
Outstanding at March 31, 2022		1,073,073		$	1.59

As of March 31, 2022, the total unrecognized compensation cost related to DSUs was $1.4 million which is expected to be recognized over a weighted average period of 1.24 years.

Pool A Performance Awards

The Company grants Pool A Performance Awards (“Pool A Awards”) to certain key employees of the Company. Each Pool A Award represents the right to receive, at the Company’s election, a fixed monetary amount either in cash or a variable number of shares of the Company’s Class A common stock based on its closing share price on the date of settlement. The Pool A Awards vest in full one year on the anniversary of the vesting effective date specified in the applicable award agreement but settlement does not occur until the fifth anniversary of the grant date. As of March 31, 2022, all Pool A Awards outstanding were fully vested.

The Company accounts 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. Since the settlement will not occur until the fifth anniversary of the grant date, the Company considers the delayed settlement as a post-vesting restriction which would impact the determination of grant-date fair value of the award.

During the third quarter of 2021, ~~and 2020, respectively,~~the Company granted Pool A Awards that fully vested on January 1, 2022. As of March 31, 2022, the fair value of the Pool A Awards liabilities were remeasured to $7.1 million, which ~~$271 and $330, respectively, are recorded as~~was estimated using a risk-adjusted discount rate reflecting the weighted-average cost of ~~services and $62 and $195, respectively, are recorded as selling, general and administrative expenses~~capital of similarly traded public companies.

As of March 31, 2022, the total unrecognized compensation cost related to Pool A Awards was $3.6 million, which is expected to be recognized over a weighted average period of 4.09 years.

Pool B Performance Awards

The Company grants Pool B Performance Awards (“Pool B Awards”) to certain key employees of the Company. Each Pool B Award represents the right to receive, at the Company’s election, either a cash payment calculated in accordance with the award agreement, or a fixed number of shares of the Company’s Class A common stock. The Pool B Awards vest over three years in equal installments each year on the anniversary of the vesting effective date specified in the ~~condensed consolidated statements~~applicable award agreement, subject to the grantee’s continuous services through each vesting period but settlement does not occur until the fifth anniversary of ~~operations. Rent expense was $629~~the grant date. The grant date fair value of the Pool B Awards is determined using the closing price of the Company's Class A common stock on the grant date.

U.S. WELL SERVICES, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

(in thousands, except shares and ~~$1,187~~per share amounts, or where otherwise noted)

The following table summarizes the Pool B Awards activity for the ~~six~~three months ended ~~June 30, 2021 and 2020, respectively,~~March 31, 2022:


	Fair Value
Outstanding at December 31, 2021	$	3,672
Granted		0
Vested		(1,586	)
Forfeited		(27	)
Outstanding at March 31, 2022	$	2,059

As of March 31, 2022, the total unrecognized compensation cost related to Pool B Awards was $1.7 million, which ~~$496 and $803, respectively, are recorded as cost~~is expected to be recognized over a weighted average period of ~~services and $133 and $384, respectively, are recorded as selling, general and administrative expenses in the condensed consolidated statements of operations.~~1.27 years.

~~The following is a schedule of minimum future payments on non-cancellable operating leases and capital leases as of June 30, 2021:~~

~~The total capital leases payments include a nominal amount of imputed interest.~~

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.

Crestview III USWS TE, LLC and Crestview III USWS, L.P. and its affiliates (collectively, “Crestview Partners”) are part of an affiliate group which have an ownership interest in the Company of greater than 10% and is entitled to designate for nomination by the Company for election two directors to serve on the Company’s Board of Directors.

On June 24, 2021, Crestview Partners ~~(“Crestview”)~~ purchased ~~$40.0~~$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~~$20.0 million in cash and in exchange for 15,588 shares of the Company’s Series A preferred stock.

~~On April 1, 2020,~~ As of March 31, 2022 and December 31, 2021, the Convertible Senior Notes held by Crestview ~~purchased 11,500 shares~~Partners have a carrying value 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~~$37.7 million and $35.9 million, respectively, which is included in convertible senior notes on the condensed consolidated balance sheets. See “Note 10 - Convertible Senior Notes” for additional disclosure regarding the Cash Notes and Exchange Notes.

On February 28, 2022, Crestview Partners contributed $10.0 million in Term C Loans to the Company. As of March 31, 2022, the carrying value of the Term C Loan owed to Crestview Partners was $6.7 million, which is included in long-term debt on the condensed consolidated balance sheet. In connection with the entry into the Term C Loan, Crestview received 6,976,744 February 2022 Warrants.

On March 1, 2022, David Matlin ~~a member~~contributed $1.0 million in Term C Loans to the Company. As of March 31, 2022, the carrying value of the ~~Company’s Board of Directors, purchased 1,878 shares of Series B preferred stock~~Term C Loan owed to David Matlin was $0.7 million, which is included in long-term debt on the condensed consolidated balance sheet. In connection with the entry into the Term C Loan, David Matlin received 697,674 March 2022 Warrants.

See “Note 9 - Warrants” and “Note 11 - Debt” for ~~a total payment of $1.9 million.~~additional disclosure regarding the Term C Loan and Term C Loan Warrants.

~~During July 2021, we received $18.0 million in proceeds from the sale of various assets that were classified as held for sale.~~ 28

ITEM 2:2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and the related notes in Item 1. ~~"Financial Statements"~~“Financial Statements” contained herein and our audited consolidated financial statements as of December 31, ~~2020,~~2021, included in our ~~Amendment No. 1 to~~ Annual Report on Form ~~10-K/A~~10-K for the year ended December 31, ~~2020~~2021 (our ~~"Amended Annual~~"Annual Report"), as filed with the Securities and Exchange Commission (the ~~"SEC"~~“SEC”) on ~~May 17, 2021.~~March 30, 2022. The information provided below supplements, but does not form part of, our unaudited condensed consolidated financial statements.

This Quarterly Report on Form 10-Q (this ~~"Report"~~“Quarterly Report”) contains “forward-looking statements” as defined in Section 27A of the United States Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements usually relate to future events, conditions and anticipated revenues, earnings, cash flows or other aspects of our operations or operating results. Forward-looking statements are often identified by words such as “believes,” “expects,” “intends,” “estimates,” “projects,” “anticipates,” “will,” “plans,” “may,” “should,” “would,” “foresee,” or the negative thereof. The absence of these words, however, does not mean that these statements are not forward-looking. These statements are based on our current expectations, beliefs and assumptions concerning future developments and business conditions and their potential effect on us. While management believes that these forward-looking statements are reasonable as and when made, there can be no assurance that future developments affecting us will be those that we anticipate. All of our forward-looking statements involve risks and uncertainties (some of which are significant or beyond our control) and assumptions that could cause actual results to differ materially from our historical experience and our present expectations or projections. These factors include geological, operating and economic factors and ~~declining~~changes in prices and market conditions, including ~~reduced~~changes in expected or realized oil and gas prices and demand for oilfield services and changes in supply or demand for maintenance, repair and operating products, equipment and service; the effectiveness of management's strategies and decisions; our ability to obtain financing, raise capital and continue as a going concern; our ability to implement our internal growth and acquisition growth strategies; ~~our ability to convert to an all electric hydraulic fracturing service provider and to exit the diesel frac market;~~ general economic and business conditions specific to our primary customers; our ability to collect accounts receivable; compliance with our debt agreements and equity-related securities; volatility in market prices; our ability to satisfy the continued listing requirements of Nasdaq with respect to our Class A common stock and warrants or to cure any continued listing standard deficiency with respect thereto; changes in government regulations; our ability to effectively integrate businesses we may acquire; new or modified statutory or regulatory requirements; availability of materials and labor; inability to obtain or delay in obtaining government or third-party approvals and permits; non-performance by third parties of their contractual obligations; unforeseen hazards such as natural disasters, catastrophes and severe weather conditions, including floods, hurricanes and earthquakes; public health crises, such as a pandemic, including the COVID-19 pandemic and new and potentially more contagious variants of ~~COVID-19, such as the delta variant;~~COVID-19; acts of war or terrorist acts and the governmental or military response thereto; and cyber-attacks adversely affecting our operation. This Quarterly Report identifies other factors that could cause such differences. There can be no assurance that these are all of the factors that could cause actual results to vary materially from the forward-looking statements. Factors that could cause or contribute to such differences also include, but are not limited to, those discussed in our filings with the SEC, including under ~~"Risk Factors"~~“Risk Factors” in this Quarterly Report and in our ~~Amended~~ Annual Report. We caution you not to place undue reliance on any forward-looking statements, which speak only as of the date hereof. We assume no obligation and do not intend to update these forward-looking statements. Unless the context otherwise requires, references in this Quarterly Report to the “Company”, “USWS”, “we”, or “our” shall mean U.S. Well Services, Inc. and its subsidiaries.

We provide ~~high-pressure, hydraulic fracturing~~pressure pumping services in oil and natural gas basins. ~~Both our conventional and~~Our Clean Fleet® ~~hydraulic fracturing~~ electric fleets are among the most reliable and highest performing fleets in the industry, with the capability to meet the most demanding pressure and pump rate requirements. In May 2021, we announced the next generation of our Clean Fleet® technology withthe unveiling of our newly designed Nyx Clean Fleet®. We anticipate the first Nyx Clean Fleet® to be delivered in the second quarter of 2022.

We operate in many of the active shale and unconventional oil and natural gas basins of the United States and our clients benefit from the performance and reliability of our equipment and personnel. Specifically, all of our fleets operate on a 24-hour basis and have the ability to withstand high utilization rates, which results in more efficient operations. Our senior management team has extensive industry experience providing pressure pumping services to exploration and production companies across North America. ~~In May 2021, we announced~~Since announcing our commitment to becoming an all-electric ~~hydraulic fracturing~~pressure pumping services provider in May 2021, we have sold most of our legacy, diesel-powered pressure pumping equipment. We have retained some of our legacy, diesel-powered pressure pumping equipment for use during our transition to support our electric fleets and bridge the time gap between our customers' current service ~~provider~~needs and ~~that we expect~~the deployment of our newbuild Nyx Clean Fleets®. Upon delivery, our Nyx Clean Fleets® are intended to ~~fully exit the diesel frac market by the end of 2021. As a result of this strategic transition, we expect to become the first publicly-traded, pure-play electric completions services provider.~~replace any conventional fleet in operation.

We generate revenue by providing ~~hydraulic fracturing~~pressure pumping services to our customers. We own and operate ~~a fleet~~fleets of ~~hydraulic fracturing units~~pressure pumping equipment to perform these services. We seek to enter into contractual arrangements with our customers or fleet dedications, which establish pricing terms for a fixed duration. Under the terms of these agreements, we charge our customers base monthly rates, adjusted for activity and provision of materials such as proppant and chemicals, or we charge a variable rate based on the nature of the job including pumping time, well pressure, ~~sand~~proppant and chemical volumes and transportation.

The principal costs involved in conducting our ~~hydraulic fracturing~~pressure pumping services are labor, maintenance, equipment rentals, including the rental of power generation equipment, materials, and transportation costs. A large portion of our costs are variable, based on the number and requirements of ~~hydraulic fracturing~~pressure pumping jobs. We manage our fixed costs, other than depreciation and amortization, based on factors including industry conditions and the expected demand for our services.

Materials include the cost of ~~sand~~proppant delivered to the basin of operations, chemicals, and other consumables used in our operations. These costs vary based on the quantity and ~~quality~~type of ~~sand~~proppant and chemicals utilized when providing ~~hydraulic fracturing~~pressure pumping services. Transportation represents the costs to transport materials and equipment from receipt points to customer locations. Labor costs include payroll and benefits related to our field crews and other employees. Most of our employees are paid on an hourly basis. Maintenance costs include preventative and other repair costs that do not require the replacement of major components of our ~~hydraulic fracturing~~ fleets. Maintenance and repair costs are expensed as incurred.

The following table presents our cost of services for the periods indicated (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

2021

2020

2021

2020

Materials

$
6,737

$
2,490

$
15,453

$
12,938

Transportation

3,220

1,427

6,259

10,970

Labor

24,003

10,172

47,689

43,281

Maintenance

14,916

6,746

31,511

22,617

Other ⁽¹⁾

10,376

8,176

20,971

24,359

Cost of services

$
59,252

$
29,011

$
121,883

$
114,165

(1)

Other consists of fuel, lubes, other equipment rentals, travel and lodging costs for our crews, site safety costs and other costs incurred in performing our operating activities.

~~(1)~~

~~Other consists of fuel, lubes, equipment rentals, travel and lodging costs for our crews, site safety costs and other costs incurred in performing our operating activities.~~

Significant Trends

Since our announcement in May 2021 of our commitment to becoming an all-electric pressure pumping services provider, we have sold most of our legacy, diesel-powered pressure pumping equipment. The ~~global health~~proceeds received from these sales were used to reduce the outstanding principal balance of our Term A and ~~economic crisis sparked by~~Term B Loan (collectively the ~~COVID-19 pandemic~~“Senior Secured Term Loan”), which resulted in no cash interest payments for the first quarter of 2022 and ~~the associated decrease~~an interest rate of (i) 1.0% per annum in ~~commodity prices has significantly impacted industry activity since late~~cash and (ii) 4.125% per annum PIK interest from April 1, 2022 through December 31, 2022.

Our revenues and operating costs remained lower in the first quarter of ~~2020. Weaker economic activity and lower demand for crude oil, driven by~~2022 versus the persistence of the COVID-19 pandemic, adversely impacted our business, resulting in a reduction in our active fleet count and fleet utilization levels throughout much of 2020. During the fourth quarter of 2020, crude oil prices averaged $42 per barrel and since then have been increasing, averaging approximately $66 per barrel during the second quarter of 2021. As commodity prices have continued to improve demand for hydraulic fracturing services and the number of working fracturing fleets have also increased significantly.

In May 2021, we announced our plan to exit the diesel frac market by the end of 2021 pursuant to our strategy of becoming an all-electric hydraulic fracturing services provider. As a result, we have been executing on our plan to sell our diesel fracturing equipment. We plan on using proceeds from these sales to reduce outstanding indebtedness and for general corporate purposes, including the buildout of our next-generation all-electric fracturing fleets. Additionally, we expect the corresponding reduction of average active fleets to have a short-term significant impact on our results of operations starting in the thirdfirst quarter of 2021, as we ~~end~~continued to experience a lower average active fleet count resulting from our ~~remaining contracts which utilize~~ongoing exit from the diesel ~~frac equipment. Specifically,~~pressure pumping market. However, we experienced an uptick in our utilization rate as a greater proportion of our fleets were working under contract as opposed to the spot market, and thus less exposed to customer “white space.” We expect ~~revenues, cost~~to see our average active fleet count continue to increase as we begin taking delivery of ~~services, and depreciation to start declining~~our newbuild Nyx Clean Fleets® beginning in the ~~third~~second quarter of ~~2021, until such time we are able~~2022.

During the first quarter of 2022, prompt month futures contracts for WTI crude oil and Henry Hub natural gas averaged $94.92 per Bbl and $4.57 per MMBtu, respectively, as compared to ~~generate business activity~~$77.17 per Bbl and $4.85 per MMBtu, respectively, in the fourth quarter of 2021. We benefitted from the ~~new buildout~~upward trend in commodity prices, as higher demand for pressure pumping services combined with increasing scarcity of available crews and equipment resulted in a favorable environment for deploying crews and negotiating pricing and other terms with customers. However, during the period, we continued to experience cost inflation for certain goods and services as well as non-productive time driven by supply chain issues such as our customers’ inability to source sufficient materials and transportation for goods. We anticipate that these trends will persist throughout the remainder of 2022.

We expect that completions activity and demand for pressure pumping services will remain elevated throughout the year. We also anticipate that the rising price of diesel fuel will continue to improve the economic benefit of switching from conventional to electric pressure pumping, further increasing demand for next-generation, all-electric ~~fracturing fleets.~~fleets such as our Clean Fleets® and Nyx Clean Fleets®.

Results of Operations

Three months ended ~~June 30, 2021,~~March 31, 2022, compared to the three months ended ~~June 30, 2020~~March 31, 2021

(in thousands, except percentages)


	Three Months Ended March 31,
	2022			% (1)	2021			% (1)	Variance			% Variance
Revenue	$	41,150		100.0%	$	76,258		100.0%	$	(35,108	)	(46.0)%
Costs and expenses:
Cost of services (excluding depreciation and amortization)		40,723		99.0%		62,631		82.1%		(21,908	)	(35.0)%
Depreciation and amortization		5,700		13.9%		11,106		14.6%		(5,406	)	(48.7)%
Selling, general and administrative expenses		8,372		20.3%		7,390		9.7%		982		13.3%
Loss on disposal of assets		3,056		7.4%		2,436		3.2%		620		25.5%
Loss from operations		(16,701	)	(40.6)%		(7,305	)	(9.6)%		(9,396	)	* (2)
Interest expense, net		(7,968	)	(19.4)%		(6,183	)	(8.1)%		(1,785	)	28.9%
Change in fair value of warrant liabilities		(746	)	(1.8)%		(7,151	)	(9.4)%		6,405		*(2)
Loss on extinguishment of debt		(1,651	)	(4.0)%		-		0.0%		(1,651	)	100.0%
Other income		1,321		3.2%		29		0.0%		1,292		* (2)
Income tax expense (benefit)		-		0.0%		-		0.0%		-		* (2)
Net loss	$	(25,745	)	(62.6)%	$	(20,610	)	(27.0)%	$	(5,135	)	* (2)

Three Months Ended June 30,

2021

% ⁽¹⁾

2020

% ⁽¹⁾

Variance

% Variance

Revenue

$
78,799

100.0%

$
39,837

100.0%

$
38,962

97.8%

Costs and expenses:

Cost of services (excluding depreciation
and amortization)

59,252

75.2%

29,011

72.8%

30,241

104.2%

Depreciation and amortization

9,836

12.5%

17,358

43.6%

(7,522
)

(43.3)%

Selling, general and administrative
expenses

7,214

9.2%

5,220

13.1%

1,994

38.2%

Litigation settlement

35,000

44.4%

-

0.0%

35,000

100.0%

Loss (gain) on disposal of assets

(545
)

(0.7)%

853

2.1%

(1,398
)

(163.9)%

Loss from operations

(31,958
)

(40.6)%

(12,605
)

(31.6)%

(19,353
)

*⁽²⁾

Interest expense, net

(7,333
)

(9.3)%

(5,665
)

(14.2)%

(1,668
)

29.4%

Change in fair value of warrant liabilities

(136
)

(0.2)%

(1,364
)

(3.4)%

1,228

*⁽²⁾

Patent license sales

22,500

28.6%

-

0.0%

22,500

100.0%

Loss on extinguishment of debt

(839
)

(1.1)%

-

0.0%

(839
)

*⁽²⁾

Other income

23

0.0%

45

0.1%

(22
)

*⁽²⁾

Income tax expense (benefit)

(27
)

(0.0)%

13

0.0%

(40
)

*⁽²⁾

Net loss

$
(17,716
)

(22.5)%

$
(19,602
)

(49.2)%

$
1,886

(9.6)%

(1)

As a percentage of revenues. Percentage totals or differences in the above table may not equal the sum or difference of the components due to rounding.

(2)

Not meaningful.

~~(1)~~Revenue

~~As a percentage of revenues. Percentage totals or differences in the above table may not equal the sum or difference of the components due to rounding.~~

~~(2)~~

~~Not meaningful.~~

~~Revenue~~. The ~~increase~~decrease in revenue was primarily attributable to ~~an increase in business activity due to economic recovery from the~~ ~~COVID-19~~ ~~pandemic and depressed oil prices~~a lower active fleet count in the first quarter of 2022 compared to the prior ~~period. Our~~comparable period as we began to transition to an all-electric pressure pumping service provider in May 2021. For the three months ended March 31, 2022, our average active fleet count ~~during the period increased~~decreased to 94.7 fleets compared to 410.0 fleets in the prior comparable period. ~~However, we expect revenue to decline in future quarters as we end our remaining diesel fracturing equipment-related contracts in the third quarter of 2021.~~

Cost of services, excluding depreciation and amortization. The ~~increase~~decrease in cost of services, excluding depreciation and amortization, was attributable to the ~~increase~~decrease in ~~business~~variable costs as activity ~~due~~was reduced with a lower number of active fleets in the first quarter of 2022 compared to ~~economic recovery from the~~ ~~COVID-19~~ ~~pandemic and depressed oil prices in~~ the prior period. ~~Similar to revenue, we expect cost of~~This was offset by costs associated with procuring third-party power generation services ~~excluding depreciation and amortization, to decline in future quarters~~ as we ~~end our remaining diesel fracturing equipment-related contracts~~transitioned away from owning power generation assets starting in ~~the third quarter of~~October 2021.

Depreciation and amortization. The decrease in depreciation and amortization was primarily due to the ~~lower cost basis~~sale of ~~depreciating long-lived assets because~~most of ~~impairment losses recorded in~~our diesel-powered pressure pumping equipment during the ~~first quarter~~second half of ~~2020. We expect depreciation and amortization to decline in future quarters as we execute on our plan to sell our diesel fracturing equipment.~~2021.

~~Litigation settlement.~~ The Company was named as a defendant in a lawsuit filed in January 2019 by a vendor alleging that the Company breached a multi-year contract. In June 2021, following entry of the final judgement by the court in favor of the vendor, the Company entered into a settlement agreement whereby it paid $35.0 million in cash.

Selling, general and administrative expenses. The increase in selling, general, and administrative expenses was primarily attributable to an increase in consulting fees, information technology costs and reinstatement of salary levels ~~during~~after the ~~second~~first quarter of 2021 due to improved economic conditions as compared to the prior period. Additionally, there was an increase in share-based compensation expense during the second quarter of 2021 as compared to the prior period due to the equity awards issued in the fourth quarter of 2020.2021.

Loss ~~(gain)~~ on disposal of assets. The amount of gain or loss on disposal of assets fluctuates period over period due to differences in the operating conditions of our ~~hydraulic fracturing~~pressure pumping equipment, such as wellbore pressure and rate of barrels pumped per minute, ~~that impact~~which impacts the timing of disposals of our ~~hydraulic fracturing~~ pump ~~components and~~components. Additionally, during the ~~amount of gain or loss recognized. In May 2021, the Company announced its plan to exit the diesel frac market and began selling its diesel fracturing equipment. As a result,~~three months ended March 31, 2022, we recognized ~~a gain on disposal~~$2.9 million of ~~assets during~~losses associated with the ~~second quarter~~sale of ~~2021 as compared to a loss on disposal of assets in the prior period.~~property and equipment.

Interest expense, ~~net~~net.. The increase was primarily attributable to the interest expense associated with the Convertible Senior Notes issued during the second quarter of 2021.

~~Patent license sales.On June 24, 2021, the Company issued $22.5 million~~ ~~in principal amount of a Convertible Senior Note that was convertible into a patent license agreement (the “License Agreement”).~~ ~~On June 29, 2021, the holder exercised its right to convert the Convertible Senior 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.~~ ~~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.~~

~~Six~~Loss on extinguishment of debt. During the three months ended ~~June 30, 2021, compared to the six months ended June 30, 2020~~

~~(in thousands, except percentages)~~

Six Months Ended June 30,

2021

% ⁽¹⁾

2020

% ⁽¹⁾

Variance

% Variance

Revenue

$
155,057

100.0%

$
151,872

381.2%

$
3,185

2.1%

Costs and expenses:

Cost of services (excluding depreciation
and amortization)

121,883

78.6%

114,165

286.6%

7,718

6.8%

Depreciation and amortization

20,942

13.5%

49,366

123.9%

(28,424
)

(57.6)%

Selling, general and administrative
expenses

14,604

9.4%

24,277

60.9%

(9,673
)

(39.8)%

Impairment of long-lived assets

-

0.0%

147,543

370.4%

(147,543
)

100.0%

Litigation settlement

35,000

22.6%

-

0.0%

35,000

100.0%

Loss on disposal of assets

1,891

1.2%

5,097

12.8%

(3,206
)

(62.9)%

Loss from operations

(39,263
)

(25.3)%

(188,576
)

(473.4)%

149,313

* ⁽²⁾

Interest expense, net

(13,516
)

(8.7)%

(13,621
)

(34.2)%

105

(0.8)%

Change in fair value of warrant liabilities

(7,287
)

(4.7)%

5,189

13.0%

(12,476
)

*⁽²⁾

Patent license sales

22,500

14.5%

-

0.0%

22,500

100.0%

Loss on extinguishment of debt

(839
)

(0.5)%

-

0.0%

(839
)

*⁽²⁾

Other income

52

0.0%

51

0.1%

1

* ⁽²⁾

Income tax expense (benefit)

(27
)

(0.0)%

(737
)

(1.9)%

710

* ⁽²⁾

Net loss

$
(38,326
)

(24.7)%

$
(196,220
)

(492.6)%

$
157,894

* ⁽²⁾

~~(1)~~

AsMarch 31, 2022, we recognized a ~~percentage of revenues. Percentage totals or differences in the above table may not equal the sum or difference of the components due to rounding.~~

~~(2)~~

~~Not meaningful.~~

~~Revenue. The increase in revenue was primarily attributable to an increase in business activity due to economic recovery from the~~ ~~COVID-19~~ pandemic and depressed oil prices in the second quarter of 2020. Our average active fleet count during the period increased to 10 fleets compared to 8 fleets in the prior comparable period. However, we expect revenue to decline in future quarters as we end our remaining diesel fracturing equipment-related contracts in the third quarter of 2021.

~~Cost of services, excluding depreciation and amortization. The increase in cost of services, excluding depreciation and amortization, was attributable to the increase in business activity due to economic recovery from the~~ ~~COVID-19~~ pandemic and depressed oil prices in the prior comparable period. Similar to revenue, we expect cost of services, excluding depreciation and amortization, to decline in future quarters as we end our remaining diesel fracturing equipment-related contracts in the third quarter of 2021.

~~Depreciation and amortization.~~ The decrease in depreciation and amortization was primarily due to the lower cost basis of depreciating long-lived assets because of impairment losses recorded in the first quarter of 2020. We expect depreciation and amortization to decline in future quarters as we execute on our plan to sell our diesel fracturing equipment.

~~Selling, general and administrative expenses~~. The decrease in selling, general, and administrative expenses was primarily attributable to our recording of a bad debt reserve of $9.0 million in the first quarter of 2020 due to the economic downturn at the end of that prior period.

~~Impairment of long-lived assets.~~ As a result of impairment tests that we performed in the first quarter of 2020, we determined that the carrying value of long-lived assets exceeded their fair value. Therefore, we recorded an impairment charge of $147.5 million in the first quarter of 2020 to reduce the carrying value of property and equipment and finite-lived intangible assets to fair value. No such impairment charge was recorded during the six months end June 30, 2021.

~~Loss on disposal of assets. The amount of~~ loss on ~~disposal~~extinguishment of ~~assets fluctuates period over period due to differences in~~debt for the ~~operating conditions~~unamortized debt discount and issuance costs and prepayment fees associated with the early repayment of our hydraulic fracturing equipment, such as wellbore pressure and rate of barrels pumped per minute, that impact the timing of disposals of our hydraulic fracturing pump components and the amount of gain or loss recognized. The decrease in the loss on disposal of assets was primarily attributable to the assets sold during the second quarter of 2021 and the significant decrease in loss on disposal of assets related to fluid ends, due to a change in accounting estimate related to their useful life during the second quarter of 2020. Beginning in the second quarter of 2020, fluid ends are expensed as they were used in operations, due to their shortened useful life estimate.Senior Secured Term Loan.

~~Patent license sales.On June 24, 2021, the Company issued $22.5 million~~ ~~in principal amount of a Convertible Senior Note that was convertible into the License Agreement.~~ ~~On June 29, 2021, the holder exercised its right to convert the Convertible Senior 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.~~ ~~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.~~

Liquidity and Capital Resources

Overview

Our primary sources of liquidity and capital resources ~~are~~have historically been cash, ~~on the balance sheet,~~ cash flow generated from operating activities, proceeds from the issuance of debt or equity ~~proceeds from the issuance of Convertible Senior Notes,~~ and borrowings ~~and borrowing capacity~~ under our ABL Credit Facility. As of March 31, 2022, our total liquidity was $49.6 million, consisting of $41.1 million of cash and restricted cash and $8.5 million of availability under our ABL Credit Facility.

Our short-term and long-term liquidity requirements consist primarily of capital expenditures, payments of contractual obligations, including debt service obligations and working capital.

We believe that our current cash position, current and expected working capital ~~balance,~~balances, favorable cash interest payment terms under our Senior Secured Term Loan ~~borrowing capacity~~Agreement, availability under our ABL Credit Facility, ~~and~~proceeds received from issuance of debt or equity, as well as amounts raised from the issuance of ~~Convertible Senior Notes~~Class A common stock under our 2022 ATM Agreement, and other anticipated sources of credit will be sufficient to satisfy cash requirements associated with our existing operations, capital expenditures and contractual obligations for the next twelve months. Although there is no assurance, we plan to satisfy our long-term financial obligations through operating cash flows that we could generate as we increase our number of working fleets with our planned additions of Nyx Clean Fleets® and additional financing as our long-term financial obligations mature.

Sources of Cash

During the first quarter of 2022, we raised approximately $68.4 million of gross proceeds from the issuance of approximately $46.9 million common equity through a registered direct offering and under our ATM Agreement and borrowings of $21.5 million under the last-out senior secured term loan (the “Term C Loan”). We intend to use the proceeds for general working capital, including the funding of capital expenditures related to our newbuild Nyx Clean Fleets®.

Registered Direct Offering. On March 11, 2022, we completed a registered direct offering of 14,180,375 shares of Class A common stock and 14,180,375 RDO Investor Warrants for gross proceeds of approximately $25.0 million, before deducting placement agent fees and other offering expenses. We intend to use the net proceeds for working capital purposes, including the funding of certain capital expenditures.

ATM Agreement. During the three months ended March 31, 2022, we sold 9,767,941 shares of Class A common stock for total net proceeds of $21.3 million and paid $0.6 million in commissions under the ATM Agreement. Since inception on June 26, 2020 through March 31, 2022, we sold a total of 15,086,100 shares of Class A common stock under the ATM Agreement ~~will~~for total net proceeds of $36.4 million and paid $1.1 million in commissions.

2022 ATM Agreement. On April 26, 2022, we entered into a new Equity Distribution Agreement (the “2022 ATM Agreement”) with Piper Sandler & Co. relating to our shares of Class A common stock to replace the former ATM Agreement, which expired on April 26, 2022. We may offer and sell up to a total of $50.0 million in shares of our Class A common stock in an “at-the-market” offering program over a period of time pursuant to the 2022 ATM Agreement. No shares may be ~~sufficient~~sold under the 2022 ATM Agreement until the registration statement filed on April 26, 2022 has been declared effective by the SEC.

Cash Flows

(in thousands)


	Three Months Ended
	March 31,
	2022			2021
Net cash provided by (used in):
Operating activities	$	(7,445	)	$	(11,016	)
Investing activities		6,158			(7,825	)
Financing activities		33,310			31,824

Operating Activities. Net cash used in operating activities primarily represents the results of operations exclusive of non-cash expenses, including depreciation, amortization, provision for losses on accounts receivable and inventory, interest, impairment losses, (gains) losses on disposal of assets, changes in fair value of warrant liabilities, loss on extinguishment of debt and share-based compensation and the impact of changes in operating assets and liabilities. Net cash used in operating activities was $7.4 million for the three months ended March 31, 2022 primarily due to ~~satisfy~~ the ~~anticipated cash requirements~~working capital build associated with the deployment of additional fleets during the quarter.

Net cash used in operating activities was $11.0 million for the three months ended March 31, 2021, primarily attributable to the redeployment of pressure pumping fleets. While we experienced an increase in customer activity during the second half of the quarter, the related collection of receivables is not expected until the second quarter of 2021. Additionally, we made working capital payments of $3.0 million using proceeds from our USDA Loan.

Investing Activities. Net cash provided by investing activities increased by $14.0 million from the prior corresponding period, primarily related to insurance proceeds related to damaged property and equipment. Net cash provided by investing activities was $6.2 million for the three months ended March 31, 2022, primarily due to $5.2 million in proceeds from the sale of property and equipment and $12.0 million of insurance proceeds related to damaged property and equipment. This was offset by $11.1 million in purchases of property and equipment, consisting of $10.3 million related to growth capital expenditures and the remainder related to maintaining and supporting our existing ~~operations~~pressure pumping equipment.

Net cash used in investing activities was $7.8 million for ~~at least~~ the ~~next twelve months.~~three months ended March 31, 2021, primarily due to $14.2 million in purchases of property and equipment, related to maintaining and supporting our existing pressure pumping equipment and payments made to replace damaged property and equipment. This was offset by $6.4 million of insurance proceeds related to damaged property and equipment.

~~Senior Secured Term Loan~~Financing Activities. Net cash provided by financing activities was $33.3 million for the three months ended March 31, 2022, primarily attributable to gross proceeds of $68.4 million from the issuance of long-term debt, common stock and ~~ABL Credit Facility~~

Aswarrants, offset in part by $17.8 million of ~~June 30, 2021,~~payments on our Senior Secured Term Loan, $14.2 million of net payments on our ABL Credit Facility and debt issuance costs of $1.1 million.

Net cash provided by financing activities was $31.8 million for the three months ended March 31, 2021, primarily attributable to net borrowings of $12.2 million on our ABL Credit Facility, $8.1 million of net proceeds from notes payable and net proceeds of $10.7 million from the issuance of common stock.

Contractual Cash Obligations and Other Commitments

Our material cash commitments from known contractual and other obligations consist primarily of debt service obligations, including interest, operating and finance leases, and purchase commitments.

Senior Secured Term Loan. As of March 31, 2022, the outstanding principal balance of our Term A and Term B Loan (collectively the “Senior Secured Term Loan”) was $103.0 million, of which $5.0 million is ~~not subject~~due within one year. The Senior Secured Term Loan matures on December 5, 2025. As of March 31, 2022, we were in compliance with all of the covenants under our Senior Secured Term Loan.

The Senior Secured Term Loan interest rate is 0.0% for the first quarter of 2022 and an interest rate of (i) 1.0% per annum in cash and (ii) 4.125% per annum PIK interest from April 1, 2022 through December 31, 2022. The Senior Secured Term Loan requires quarterly principal payments of $1.25 million until March 31, 2023 and $5.0 million from June 30, 2023 through September 30, 2025, with final payment due at maturity.

Term C Loan. As of March 31, 2022, the outstanding principal balance of our Term C Loan was $21.8 million and matures on December 5, 2025. Our Term C Loan has a PIK interest rate of 14.0% and contains provisions with up to ~~financial~~a 100% premium payable upon any repayment, prepayment or acceleration. As of March 31, 2022, we were in compliance with all of the covenants but is subject to certain non-financial covenants, including but not limited to, reporting, insurance, notice and collateral maintenance covenants as well as limitations on the incurrence of indebtedness, permitted investments, liens on assets, asset dispositions, paying dividends, transactions with affiliates, mergers, consolidations and special purpose entities used for stand-alone equipment financings. In addition, all under our Term C Loan.

ABL Credit Facility. All borrowings under our ABL Credit Facility are subject to the satisfaction of customary conditions, including the absence of a default and the accuracy of representations and warranties and certifications regarding sales of certain inventory, and to a borrowing base. As of ~~June 30, 2021, the borrowing base was $46.3 million and the~~March 31, 2022, we had no outstanding ~~revolver loan~~ balance ~~was $33.7 million.~~on our ABL Credit Facility. The ABL Credit Facility matures on April 1, 2025. As of ~~June 30, 2021,~~March 31, 2022, we were in compliance with all of the covenants under our ~~Senior Secured Term Loan and our~~ ABL Credit Facility.

~~USDA Loan~~

The USDA Loan is subject to certain financial covenants. The Company is required to maintain a Debt Service Coverage Ratio (as defined in the USDA Loan) of not less than 1.25:1, to be monitored annually, beginning in calendar year 2021. Additionally, the Company is required to maintain a ratio of debt to net worth of not more than 9:1, to be monitored annually based upon year-end financial statements beginning in calendar year 2022.

~~Convertible Senior Notes~~

In June 2021, we issued an aggregate of $125.5 million in principal amount of 16.0% Convertible Senior Secured (Third Lien) PIK Notes due June 2026 (the “Convertible Senior Notes”) in exchange for cash and shares of Series A preferred stock. In June 2021, we received cash proceeds of $86.5 million. We used a portion of the proceeds to pay a litigation settlement of $35.0 million and expect that the remaining proceeds will be used for general corporate purposes, including capital growth. As of June 30, 2021, we had $103.0 million of principal outstanding of the Convertible Senior Notes, which are convertible into the shares of the Company’s Class A common stock. In July 2021, we issued an additional $11.0 million in aggregate principal amount of Convertible Senior Notes under the Note Purchase Agreement to certain investors for cash.

~~ATM Agreement~~

On June 26, 2020, the Company entered into an Equity Distribution Agreement (the “ATM Agreement”) with Piper Sandler & Co. relating to the Company’s Class A common stock. In accordance with the terms of the ATM Agreement, the Company may offer and sell shares of its 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 six months ended June 30, 2021, the Company sold 15,006,317 shares of Class A common stock for total net proceeds of $13.6 million and paid $0.4 million in commissions under the ATM Agreement. 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.

~~Cash Flows~~

~~(in thousands)~~

Six Months Ended June 30,

2021

2020

Net cash provided by (used in):

Operating activities
$
(28,371
)

$
21,513

Investing activities

(16,288
)

(25,720
)
Financing activities

97,460

(33,255
)

~~Operating Activities~~. Net cash provided by (used in) operating activities primarily represents the results of operations exclusive of non-cash expenses, including depreciation, amortization, provision for losses on accounts receivable and inventory, interest, impairment losses, losses on disposal of assets, changes in fair value of warrant liabilities and share-based compensation and the impact of changes in operating assets and liabilities. Net cash used in operating activities was $28.4 million for the six months ended June 30, 2021 primarily due to a litigation settlement of $35.0 million and $3.0 million of working capital payments from proceeds under our USDA Loan.

Net cash provided by operating activities was $21.5 million for the six months ended June 30, 2020, primarily attributable to accelerated collections of accounts receivables, which was offset in part by interest payments of $24.3 million related to our Senior Secured Term Loan.

~~Investing Activities~~. Net cash used in investing activities decreased by $9.4 million from the prior corresponding period, primarily due to reduced growth and maintenance capital expenditures due to the decline in business activity that occurred at the end of the first quarter of 2020 and continued into the second quarter of 2020. Net cash used in investing activities was $16.3 million for the six months ended June 30, 2021, primarily due to $24.8 million in purchases of property and equipment, which related to maintaining and supporting our existing hydraulic fracturing equipment and payments made to replace damaged property and equipment. This was offset in part by $6.4 million of insurance proceeds related to the damaged property and equipment and $2.1 million of proceeds from the sale of property and equipment.

Net cash used in investing activities was $25.7 million for the six months ended June 30, 2020, primarily due to $40.8 million in purchases of property and equipment, consisting of $16.0 million related to maintaining and supporting our existing hydraulic fracturing equipment and $24.8 million related to growth. This was offset in part by proceeds of $15.0 million from the sale of certain property and equipment.

~~Financing Activities. During the six months ended June 30, 2021, cash provided by financing activities reflected proceeds of $2~~4.7 million under our ABL Credit Facility, $3.0 million of proceeds from issuance of long-term debt, $86.5 million of proceeds from the issuance of Convertible Senior Notes, $9.1 million of proceeds of notes payable and proceeds of $13.6 million from the issuance of common stock, offset in part by payments related to our ABL Credit Facility of $14.8 million, long-term debt of $12.6 million, notes payable of $3.7 million, equipment financing arrangements of $1.7 million and debt issuance costs of $6.6 million.

During the six months ended June 30, 2020, cash used in financing activities reflected repayments related to our ABL Credit Facility of $33.4 million, repayment of long-term debt of $2.5 million, repayment of notes payable of $4.1 million, repayments of equipment financing agreements of $1.5 million, repayments of finance leases of $2.8 million and debt issuance costs of $20.1 million. This was offset by $19.9 million in net proceeds from the issuance of Series B preferred stock and $11.2 million of proceeds under our ABL Credit Facility.

Capital Expenditures. Our business requires continual investments to upgrade or enhance existing property and equipment and to ensure compliance with safety and environmental regulations. Capital expenditures primarily relate to maintenance capital expenditures, growth capital expenditures and fleet enhancement capital expenditures. Maintenance capital expenditures include expenditures needed to maintain and to support our current operations. Growth capital expenditures include expenditures to add additional fleets and generate incremental distributable cash flow. Fleet enhancement capital expenditures include expenditures on new equipment related to technology enhancements to existing fleets that increase the productivity of the fleet.

During the three months ended March 31, 2022, our capital expenditures was $11.1 million. We currently expect that growth capital expenditures, on an accrual basis, will be approximately $95 million to $115 million for the remainder of 2022, primarily related to the buildout of our four new Nyx Clean Fleets®and associated equipment. Capital expenditures for growth and fleet enhancement initiatives are discretionary.

We classify maintenance capital expenditures as expenditures required to maintain or supplement existing hydraulic fracturing fleets. We budget maintenance capital expenditures based on historical run rates and current maintenance schedules. Growth capital expenditures relate to adding additional hydraulic fracturing fleets and are based on quotes obtained from equipment manufacturers and our estimate for the timing of placing orders, disbursing funds and receiving the equipment. Fleet enhancement capital expenditures relate to technology enhancements to existing fleets that increase their productivity and are based on quotes obtained from equipment manufacturers and our estimate for the timing of placing orders, disbursing funds and receiving the equipment.

We continuously evaluate our capital expenditures and the amount we ultimately spend will depend on several factors, including expected industry activity levels and company initiatives. We intend to fund most of our capital expenditures, contractual obligations and working capital needs with cash on hand, cash generated from operations, borrowing capacity under our ABL Credit Facility and other financing sources.

~~Off-Balance Sheet Arrangements~~

We are a party to transactions, agreements or other contractual arrangements defined as “off-balance sheet arrangements” that could have a material future effect on our financial position, results of operations, liquidity, and capital resources. The most significant of these off-balance sheet arrangements include equipment and sand purchase commitments disclosed in “Note 17 – Commitments and Contingencies” in the Notes to Condensed Consolidated Financial Statements.33

We do not have a retained or contingent interest in assets transferred to an unconsolidated entity, we do not have any obligation under a contract that would be accounted for as a derivative instrument, and we do not have any interest in entities referred to as variable interest entities.

~~Item~~

ITEM 3. ~~Quantitative and Qualitative Disclosures About Market Risk.~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

As a smaller reporting company, we are not required to provide the information required by this item.

~~Item~~

ITEM 4. ~~Controls and Procedures.~~CONTROLS AND PROCEDURES.

Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the quarter ended ~~June 30, 2021.~~March 31, 2022. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were ~~not~~ effective as of the quarter ended June 30, 2021, due solely to the material weakness in our internal control over financial reporting with respect to the classification of the Company’s warrants as components of equity instead of as liabilities as more fully described in our Amended Annual Report.March 31, 2022. Notwithstanding the material weakness, management believes that the financial statements included in this Quarterly Report on Form 10-Q present fairly in all material respects our financial position, results of operations and cash flows as of the dates and for the periods presented in accordance with GAAP.

~~Remediation Plan for Material Weakness in Internal Control over Financial Reporting and Status~~

Management implemented remediation steps to address the material weakness, described above and to improve our internal control over financial reporting. Specifically, we expanded and improved our review process for complex securities and related accounting standards. We further plan to improve this process by enhancing access to accounting literature, research materials and documents and increasing communication among our personnel and third-party professionals with whom we consult regarding complex accounting applications.

Changes in Internal Control over Financial Reporting

~~Other than the changes described above, there~~There were no changes made in our internal control over financial reporting during the quarter ended ~~June 30, 2021~~March 31, 2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II

~~Item~~ITEM 1. ~~Legal Proceedings.~~LEGAL PROCEEDINGS.

See “Note 1712 – Commitments and Contingencies” in the Notes to Condensed Consolidated Financial Statements for further information.

~~Item~~ITEM 1A. ~~Risk Factors.~~RISK FACTORS.

Except as set forth below, no material changes have occurred from the risk factors previously disclosed in the Company’s ~~Amended~~ Annual Report. See also Part I, Item 2 “Disclosure Regarding Forward-Looking Statements” of this Quarterly Report on Form 10-Q.

~~Our planned exit from the diesel frac market may negatively impact our liquidity and our ability to generate revenues and service our outstanding indebtedness for a period of time.~~

In May 2021, we announced our commitment to becoming an all-electric hydraulic fracturing service provider and that we expect to fully exit the diesel frac market by the end of 2021. We have sold a portion of our diesel frac equipment and expect to continue to sell off the remainder of our diesel frac equipment, which has and will result in a reduction in the number of fleets we have available to provide hydraulic fracturing services until we are able to build out our all-electric hydraulic fracturing equipment. Until we are able to complete the build out of the electric equipment, we expect to generate less revenue, which may adversely impact our ability to service our outstanding indebtedness. Additionally, the decrease in revenue will result in a reduction in the borrowing base available under our ABL Credit Facility, which may adversely impact our liquidity.

~~Item~~ITEM 2. ~~Unregistered Sales of Equity Securities and Use of Proceeds.~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None.

~~Item~~ITEM 3. ~~Defaults Upon Senior Securities.~~DEFAULTS UPON SENIOR SECURITIES.

Not applicable.

~~Item~~ITEM 4. ~~Mine Safety Disclosures.~~MINE SAFETY DISCLOSURES.

Not applicable.

~~Item~~ITEM 5. ~~Other Information.~~OTHER INFORMATION.

None.

~~Item~~

ITEM 6. ~~Exhibits~~EXHIBITS

The exhibits required to be filed or furnished by Item 601 of Regulation S-K are listed below.


Exhibit No.		Description
3.1		Second Amended and Restated Certificate of Incorporation of U.S. Well Services, Inc (incorporated by reference to Exhibit 3.1 of the Current Report on Form 8-K (File No. 001-38025), filed with the SEC on November 16, 2018).
3.2		~~3.2~~Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation of U.S. Well Services, Inc., dated as of September 30, 2021 (incorporated by reference to Exhibit 3.1 of the Current Report on Form 8-K (File No. 001-38025), filed with the SEC on October 1, 2021).
3.3		Certificate of Designations, dated May 24, 2019, of U.S. Well Services, Inc. (incorporated by reference to Exhibit 3.1 of the Current Report on Form 8-K (File No. 001-38025), filed with the SEC on May 24, ~~2019.~~2019).
~~3.3~~3.4		Certificate of Designations, dated March 31, 2020, of U.S. Well Services, Inc. (incorporated by reference to Exhibit 3.1 of the Current Report on Form 8-K (File No. 001-38025), filed with the SEC on April 2, ~~2020.~~2020).
3.5		~~3.4~~First Amendment to Certificate of Designations of the Series B Redeemable Convertible Preferred Stock, dated September 14, 2021 (incorporated by reference to Exhibit 3.1 of the Current Report on Form 8-K (File No. 001-38025), filed with the SEC on September 17, 2021).
3.6		Amended and Restated Bylaws (incorporated by reference to Exhibit 3.4 of the Registration Statement on Form S-1 (File No. 333-216076), filed with the SEC on February 15, 2017).
4.1		~~4.1~~Specimen Class A Common Stock Certificate (incorporated by reference to Exhibit 4.2 of the Registration Statement on Form S-1 (File No. 333-216076), filed with the SEC on February 15, 2017).
4.2		Amended and Restated Registration Rights Agreement, dated as of November 9, 2018, by and among U.S. Well Services, Inc., Matlin & Partners Acquisition Sponsor LLC, the Blocker Stockholders, certain Non-Blocker USWS Members, Crestview, the Lenders, Piper and Joel Broussard (incorporated by reference to Exhibit 4.1 of the Current Report on Form 8-K (File No. 001-38025), filed with the SEC on November 16, 2018).
4.3		Warrant Agreement, dated May 24, 2019, by and between U.S. Well Services, Inc. and Continental Stock Transfer & Trust Company (incorporated by reference to Exhibit 4.1 of the Current Report on Form 8-K (File No. 001-38025), filed with the SEC on May 24, 2019).
4.4		Registration Rights Agreement, dated JMay 24, 2019, by and among U.S. Well Services, Inc. and the Purchasers party thereto (incorporated by reference to Exhibit 10.2 of the Current Report on Form 8-K (File No. 001-38025), filed with the SEC on May 24, 2019).
~~une~~4.5		Registration Rights Agreement, dated April 1, 2020, by and among U.S. Well Services, Inc. and the Purchasers party thereto (incorporated by reference to Exhibit 4.1 of the Current Report on Form 8-K (File No. 001-38025), filed with the SEC on April 2, 2020).
4.6		First Amendment to Registration Rights Agreement, dated July 20, 2020, by and among U.S. Well Services, Inc. and the Purchasers party thereto.(incorporated by reference to Exhibit 4.6 to the Registration Statement on Form S-3 (File No. 333-248086), filed with the SEC on August 18, 2020).
4.7		Registration Rights Agreement, dated June 24,, 2021, by and among U.S. Well Services, Inc. and the Purchasers party thereto (incorporated by reference to Exhibit 4.4 of the Current Report on Form 8-K (File No. 001-38025), filed with the SEC on June 28, 2021).
~~4.2~~4.8		First Amendment to Registration Rights Agreement, dated June 25, 2021, by and among U.S. Well Services, Inc. and the Purchasers party thereto (incorporated by reference to Exhibit 4.5 to the Current Report on Form 8-K (File No. 001-38025) filed with the SEC on June 28, 2021).
4.9		~~4.3~~Second Amendment to Amended and Restated Registration Rights Agreement, by and among the Company and the Holders party thereto, dated September 14, 2021 (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K (File No. 001-38025) filed with the SEC on September 17, 2021).
4.10		Form of Cash Note (included as Exhibit B-1 to the Note Purchase Agreement, ~~filed as Exhibit 10.2 to this Quarterly Report on Form 10-Q).~~
~~4.4~~		~~Form of Exchange Note (included as Exhibit B-2 to the Note Purchase Agreement filed as Exhibit 10.2 to this Quarterly Report on Form 10-Q).~~
~~4.5~~		~~Form of License Linked Notes (included as Exhibit B-3 to the Note Purchase Agreement filed as Exhibit 10.2 to this Quarterly Report on Form 10-Q).~~
10.1*		~~Equipment Purchase Agreement, dated May 21, 2021, between U.S. Well Services, LLC and Alamo Pump Holdings, LLC.~~
~~10.2~~		Note Purchase Agreement, dated June 24, 2021, by and among U.S. Well Services, Inc. and the Purchasers party thereto and Wilmington Savings Fund Society, FSB, as collateral agent for the Purchasers (incorporatedincorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K (File No. 001-38025) filed with the SEC on June 28, 2021).
~~10.3~~4.11		~~First Amendment~~Form of Exchange Note (included as Exhibit B-2 to the Note Purchase Agreement, ~~dated June 25, 2021, by and among U.S. Well Services, Inc. and the Purchasers party thereto and Wilmington Savings Fund Society, FSB, as collateral agent for the Purchasers (incorporated~~incorporated by reference to Exhibit ~~10.2~~10.1 to the Current Report on Form 8-K (File No. 001-38025) filed with the SEC on June 28, 2021).
~~10.4~~4.12		~~Settlement~~Form of License Linked Notes (included as Exhibit B-3 to the Note Purchase Agreement, ~~and Release by and among Smart Sand, Inc., U.S. Well Services, LLC and U.S. Well Services, Inc., dated June 28, 2021 (incorporated~~incorporated by reference to Exhibit ~~10.3~~10.1 to the Current Report on Form 8-K (File No. 001-38025) filed with the SEC on June 28, 2021).
4.13		~~10.5~~Form of Warrant (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K (File No. 001-38025) filed with the SEC on March 11, 2022).
4.14		Form of Placement Agent Warrant (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K (File No. 001-38025) filed with the SEC on March 11, 2022).
4.15		Registration Rights Agreement, dated February 28, 2022, by and among U.S. Well Services, Inc. and the Purchasers party thereto (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K (File No. 001-38025) filed with the SEC on March 4, 2022).


4.16		First Amendment to Registration Rights Agreement, dated March 1, 2022, by and among U.S. Well Services, Inc. and the Purchasers party thereto (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K (File No. 001-38025) filed with the SEC on March 4, 2022).
4.17		Warrant Agreement, dated February 28, 2022, by and among U.S. Well Services, Inc. and Continental Stock Transfer & Trust Company (incorporated by reference to Exhibit 10.6 to the Current Report on Form 8-K (File No. 001-38025) filed with the SEC on March 4, 2022).
4.18		Warrant Agreement, dated March 1, 2022, by and among U.S. Well Services, Inc. and Continental Stock Transfer and Trust Company (incorporated by reference to Exhibit 10.7 to the Current Report on Form 8-K (File No. 001-38025) filed with the SEC on March 4, 2022).
10.1		Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K (File No. 001-38025) filed with the SEC on March 11, 2022).
10.2		Engagement Letter between U.S. Well Services, Inc. and H.C. Wainright & Co., LLC, dated as of March 8, 2022 (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K (File No. 001-38025) filed with the SEC on March 11, 2022).
10.3		Consent and ~~Fifth~~Sixth Amendment to the Senior Secured Term Loan Credit Agreement, dated ~~June 24, 2021,~~February 28, 2022, among U.S. Well Services, LLC, U.S. Well Services, Inc., USWS Fleet 10, LLC, USWS Fleet 11, LLC, USWS Holdings LLC, CLMG Corp., as administrative agent and collateral agent, and the lenders party thereto (incorporated by reference to Exhibit ~~10.4~~10.1 to the Current Report on Form 8-K (File No. 001-38025) filed with the SEC on ~~June 28, 2021)~~March 4, 2022).
~~10.6~~10.4		~~Fourth Amendment and Limited Consent~~Joinder to ~~ABL~~Senior Secured Term Loan Credit Agreement, dated as of ~~June 24, 2021,~~March 1, 2022, by and among the Term Loan Parties, THRC Holdings, LP, David Matlin, Peter Schoels, and CLMG Corp. (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K (File No. 001-38025) filed with the SEC on March 4, 2022).
10.5		Agreement Among Lenders, dated February 28, 2022, by and among U.S. Well Services, LLC, U.S. Well Services, Inc., USWS Fleet 10, LLC, USWS Fleet 11, LLC, USWS Holdings LLC, LNV Corporation, LPP Mortgage, Inc., Crestview III USWS, L.P. and Crestview III USWS TE, LLC (incorporated by reference to Exhibit 10.3 to the ~~lenders party thereto,~~Current Report on Form 8-K (File No. 001-38025) filed with the SEC on March 4, 2022).
10.6		Letter Agreement, dated February 28, 2022, by and ~~Bank of America, N.A., as administrative agent, lender, swing line lender~~among the Term C Loan Lenders and ~~letter of credit lender~~the Term Loan Parties (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K (File No. 001-38025) filed with the SEC on March 4, 2022).
10.7		Amendment to Term Loan C Side Letter, dated March 3, 2022, by and among the Term Loan C Lenders and the Term Loan Parties (incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K (File No. 001-38025) filed with the SEC on ~~June 28, 2021)~~March 4, 2022).
~~10.7~~31.1*		Guarantee and Third Lien Collateral Agreement, dated as of June 24, 2021, among U.S. Well Services, Inc., U.S. Well Services, LLC, USWS Holdings LLC, and the other grantors referred to therein, in favor of Wilmington Savings Fund Society, FSB, as notes agent (incorporated by reference to Exhibit 10.6 to the Current Report on Form 8-K (File No. 001-38025) filed with the SEC on June 28, 2021).
~~10.8~~		Amended and Restated Intercreditor Agreement by and among Bank of America, N.A., CLMG Corp., Wilmington Savings Fund Society, FSB, and U.S. Well Services, LLC, dated June 24, 2021 (incorporated by reference to Exhibit 10.7 to the Current Report on Form 8-K (File No. 001-38025) filed with the SEC on June 28, 2021).
10.9*		~~Patent License Agreement, effective as of June 29, 2021, by and between U.S. Well Services, LLC and ProFrac Holdings LLC.~~
10.10*		~~Equipment Purchase and Sale Agreement, dated June 29, 2021, between AmeriMex Motor & Controls, LLC and U.S. Well Services, LLC~~

31.1*		Certification of Chief Executive Officer pursuant to Rule 13(a)-14 and 15(d)-14 under the Securities Exchange Act of 1934.
31.2*		Certification of Chief Financial Officer pursuant to Rule 13(a)-14 and 15(d)-14 under the Securities Exchange Act of ~~1934~~1934..
32.1**		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section ~~1350~~1350..
32.2**		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section ~~1350~~1350..
101.INS*		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.
101.SCH*		Inline XBRL Taxonomy Extension Schema Document
101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document
104*		Cover Page Interactive Data File (embedded within the Inline XBRL document)

* Filed herewith.

** Furnished herewith.

SIGNATURES

~~Filed herewith.~~

**	~~Furnished herewith.~~

~~SIGNATURES~~

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on ~~August 12, 2021.~~May 16, 2022.


	U.S. WELL SERVICES, INC.

	By:


	/s/ ~~Joel Broussard~~Kyle O’Neill
	Name:	~~Joel Broussard~~Kyle O’Neill
	Title:	President, Chief Executive Officer, and Director

	/s/ ~~Kyle O’Neill~~Josh Shapiro
	Name:	~~Kyle O’Neill~~Josh Shapiro
	Title:	Chief Financial Officer

3938


Delaware		81-1847117
(State or other jurisdiction of		(I.R.S. Employer
organization)		Identification No.)


1360 Post Oak Boulevard, Suite 1800, Houston, TX		77056
(Address of principal executive offices)		(Zip Code)


		Page ~~No.~~
PART I	FINANCIAL INFORMATION	~~FINANCIAL INFORMATION~~
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets	23
	Condensed Consolidated Statements of Operations	34
	Condensed Consolidated Statements of Cash Flows	45
	Condensed Consolidated Statements of Stockholders’ Deficit	67
	Notes to Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2829
Item 3.	Quantitative and Qualitative Disclosure about Market Risk	34
Item 4.	Controls and Procedures	34

PART II	~~OTHER INFORMATION~~	36
Item 1.	Legal Proceeding	3635
Item 1A.	Risk Factors	3635
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3635
Item 3.	Defaults Upon Senior Securities	3635
Item 4.	Mine Safety Disclosures	3635
Item 5.	Other Information	3635
Item 6.	Exhibits	3736
SIGNATURES		3938


	June 30, 2021		December 31, 2020		March 31, 2022		December 31, 2021
Prepaid insurance	$	9,519	$	3,162	$	7,382	$	5,207
Recoverable costs from insurance		-		4,635		0		11,109
Income tax receivable		757		1,567		757		757
Other current assets		2,124		1,343		1,584		1,675
Total prepaid expenses and other current assets	$	12,400	$	10,707	$	9,723	$	18,748

	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


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☑	Smaller reporting company	☑
Emerging growth company	☑

	Three Months Ended June 30, 2021
	Class A Common Stock					Class B Common Stock						Additional Paid in			Accumulated			Noncontrolling			Total
	Shares			Amount		Shares			Amount			Capital			Deficit			Interest			Deficit
Balance, March 31, 2021		90,068,356		$	9		-		$	-		$	226,740		$	(342,997	)	$	-		$	(116,248	)
Class A common stock issuance		2,381,660			-		-			-			2,891			-			-			2,891
Conversion of Series B preferred stock to Class A common stock		927,500			-		-			-			270			-			-			270
Exchange of Series A preferred stock for convertible senior notes		-			-		-			-			8,936			-			-			8,936
Share-based compensation		-			-		-			-			1,617			-			-			1,617
Deemed and imputed dividends on Series A preferred stock		-			-		-			-			(286	)		-			-			(286	)
Accrued Series A preferred stock dividends		-			-		-			-			(1,998	)		-			-			(1,998	)
Accrued Series B preferred stock dividends		-			-		-			-			(811	)		-			-			(811	)
Net loss		-			-		-			-			-			(17,716	)		-			(17,716	)
Balance, June 30, 2021		93,377,516		$	9		-		$	-		$	237,359		$	(360,713	)	$	-		$	(123,345	)


	Three Months Ended June 30, 2020
	Class A Common Stock					Class B Common Stock						Additional Paid in			Accumulated			Noncontrolling			Total
	Shares			Amount		Shares			Amount			Capital			Deficit			Interest			Deficit
Balance, March 31, 2020		62,355,657		$	5		5,500,692		$	1		$	218,500		$	(258,909	)	$	-		$	(40,403	)
Class A common stock issuance		5,529,622			1		-			-			1,437			-			-			1,438
Conversion of Class B common stock to Class A common stock		485,795			1		(485,795	)		(1	)		-			-			-			-
Share-based compensation		-			-		-			-			1,307			-			97			1,404
Restricted stock forfeitures		(9,861	)		-		-			-			-			-			-			-
Deemed and imputed dividends on Series A preferred stock		-			-		-			-			(5,142	)		-			-			(5,142	)
Accrued Series A preferred stock dividends		-			-		-			-			(1,845	)		-			-			(1,845	)
Accrued Series B preferred stock dividends		-			-		-			-			(666	)		-			-			(666	)
Net loss		-			-		-			-			-			(19,505	)		(97	)		(19,602	)
Balance, June 30, 2020		68,361,213		$	7		5,014,897		$	-		$	213,591		$	(278,414	)	$	-		$	(64,816	)

	Six Months Ended June 30, 2021
	Class A Common Stock					Class B Common Stock						Additional Paid in			Accumulated			Noncontrolling			Total
	Shares			Amount		Shares			Amount			Capital			Deficit			Interest			Deficit
Balance, December 31, 2020		72,515,342		$	7		2,302,936		$	-		$	217,212		$	(322,431	)	$	-		$	(105,212	)
Class A common stock issuance		15,006,317			1		-			-			13,241			-			-			13,242
Conversion of Class B common stock to Class A common stock		2,302,936			-		(2,302,936	)		-			-			-			-			-
Conversion of Series B preferred stock to Class A common stock		3,673,278			1		-			-			1,067			-			-			1,068
Exchange of Series A preferred stock for convertible senior notes		-			-		-			-			8,936			-			-			8,936
Share-based compensation		-			-		-			-			3,136			-			44			3,180
Tax withholding related to vesting of share-based compensation		(103,697	)		-		-			-			(150	)		-			-			(150	)
Restricted stock forfeitures		(16,660	)		-		-			-			-			-			-			-
Deemed and imputed dividends on Series A preferred stock		-			-		-			-			(750	)		-			-			(750	)
Accrued Series A preferred stock dividends		-			-		-			-			(3,811	)		-			-			(3,811	)
Accrued Series B preferred stock dividends		-			-		-			-			(1,522	)		-			-			(1,522	)
Net loss		-			-		-			-			-			(38,282	)		(44	)		(38,326	)
Balance, June 30, 2021		93,377,516		$	9		-		$	-		$	237,359		$	(360,713	)	$	-		$	(123,345	)


	Six Months Ended June 30, 2020
	Class A Common Stock					Class B Common Stock						Additional Paid in			Accumulated			Noncontrolling			Total Equity
	Shares			Amount		Shares			Amount			Capital			Deficit			Interest			(Deficit)
Balance, December 31, 2019		62,857,624		$	5		5,500,692		$	1		$	225,382		$	(93,091	)	$	10,633		$	142,930
Class A common stock issuance		5,529,622			1		-			-			1,437			-			-			1,438
Conversion of Class B common stock to Class A common stock		485,795			1		(485,795	)		(1	)		-			-			-			-
Share-based compensation		-			-		-			-			3,218			-			264			3,482
Tax withholding related to vesting of share-based compensation		(154,253	)		-		-			-			(70	)		-			-			(70	)
Restricted stock forfeitures		(357,575	)		-		-			-			-			-			-			-
Deemed and imputed dividends on Series A preferred stock		-			-		-			-			(12,114	)		-			-			(12,114	)
Accrued Series A preferred stock dividends		-			-		-			-			(3,596	)		-			-			(3,596	)
Accrued Series B preferred stock dividends		-			-		-			-			(666	)		-			-			(666	)
Net loss		-			-		-			-			-			(185,323	)		(10,897	)		(196,220	)
Balance, June 30, 2020		68,361,213		$	7		5,014,897		$	-		$	213,591		$	(278,414	)	$	-		$	(64,816	)

	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

Fiscal Year	Estimated Amortization Expense
Remainder of 2021	$	483
2022		966
2023		966
2024		966
2025		966
Thereafter		8,636
Total	$	12,983


		March 31, 2022
Weighted average remaining lease term:
Operating leases		1.8 years
Finance leases		3.1 years
Weighted average discount rate:
Operating leases		8.9%
Finance leases		8.4%


	Three Months Ended
	March 31, 2022
Operating lease expense	$	316
Short-term lease expense		9,268
Finance lease expense:
Amortization of right-of-use assets		308
Interest on lease liabilities		78
Total	$	9,970


	Three Months Ended
	March 31, 2022
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows used for operating lease	$	248
Financing cash flow used for finance leases	$	233
Right-of-use assets upon adoption of ASC 842 and obtained in exchange for new lease liabilities
Operating leases	$	1,678
Finance leases	$	3,690


Fiscal Year	Operating Leases		Capital Leases
2022	$	1,107	$	1,241
2023		308		896
2024		258		891
2025		67		447
Total	$	1,740	$	3,475


	March 31, 2022		December 31, 2021
Accrued payroll and benefits	$	5,702	$	5,188
Accrued taxes		2,967		5,041
Accrued interest		218		287
Deferred gain on sale-leaseback		3,705		5,557
Other current liabilities		1,204		769
Accrued expenses and other current liabilities	$	13,796	$	16,842

	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

	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

	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


	February 2022 Warrants		March 2022 Warrants
Exercise price	$	1.10	$	1.29
Contractual term	6.0 years		6.0 years
Volatility rate	55.0%		55.0%
Risk-free interest rate	1.8%		1.6%
Expected dividend rate	0%		0%

	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

	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


	Shares		Amount
Balance at December 31, 2021		19,610	$	23,866
Accrued Series A preferred stock dividends		-		1,091
Balance at March 31, 2022		19,610	$	24,957


	RDO Investor Warrants		Placement Agent Warrants
Exercise price	$	1.763	$	2.2038
Contractual term	3.5 years		3.5 years
Volatility rate	80.0%		80.0%
Risk-free interest rate	1.9%		1.9%
Expected dividend rate	0%		0%

	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

	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

	Three Months Ended June 30,
	2021			% ⁽¹⁾	2020			% ⁽¹⁾	Variance			% Variance
Revenue	$	78,799		100.0%	$	39,837		100.0%	$	38,962		97.8%
Costs and expenses:
Cost of services (excluding depreciation and amortization)		59,252		75.2%		29,011		72.8%		30,241		104.2%
Depreciation and amortization		9,836		12.5%		17,358		43.6%		(7,522	)	(43.3)%
Selling, general and administrative expenses		7,214		9.2%		5,220		13.1%		1,994		38.2%
Litigation settlement		35,000		44.4%		-		0.0%		35,000		100.0%
Loss (gain) on disposal of assets		(545	)	(0.7)%		853		2.1%		(1,398	)	(163.9)%
Loss from operations		(31,958	)	(40.6)%		(12,605	)	(31.6)%		(19,353	)	*⁽²⁾
Interest expense, net		(7,333	)	(9.3)%		(5,665	)	(14.2)%		(1,668	)	29.4%
Change in fair value of warrant liabilities		(136	)	(0.2)%		(1,364	)	(3.4)%		1,228		*⁽²⁾
Patent license sales		22,500		28.6%		-		0.0%		22,500		100.0%
Loss on extinguishment of debt		(839	)	(1.1)%		-		0.0%		(839	)	*⁽²⁾
Other income		23		0.0%		45		0.1%		(22	)	*⁽²⁾
Income tax expense (benefit)		(27	)	(0.0)%		13		0.0%		(40	)	*⁽²⁾
Net loss	$	(17,716	)	(22.5)%	$	(19,602	)	(49.2)%	$	1,886		(9.6)%