UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________________________________________

FORM 10-Q

_____________________________________________________


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

For the Quarterly Period Ended ~~June~~September 30, 2022


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

For the Transition Period from ___ to ___

Commission file number 001-37936

SMART SAND, INC.

(Exact name of registrant as specified in its charter)


Delaware			45-2809926
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification Number)

1725 Hughes Landing Blvd, Suite 800
The Woodlands, Texas 77380			(281) 231-2660
(Address of principal executive offices)			(Registrant’s telephone number)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001 per share

SND

Nasdaq Global Select Market

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted 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 and post such files). Yes ☒ No ☐

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

Large accelerated filer ☐

Accelerated filer ☐

Non-accelerated Filer ☒

Smaller reporting company

☒

Emerging Growth Company

☐

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

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

Number of shares of common stock outstanding, par value $0.001 per share, as of ~~August 2,~~November 1, 2022: ~~45,293,519~~45,276,607

TABLE OF CONTENTS


		PAGE
PART I	FINANCIAL INFORMATION

ITEM 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets as of ~~June~~September 3 0 ,30, 2022 (Unaudited) and December 31, 2021	3
	Condensed Consolidated Statements of Operations for the Three and ~~and Six~~Nine Months Ended ~~June~~September 3 0 ,30, 2022 and 2021 (Unaudited)	4
	Condensed Consolidated Statements of Comprehensive Income (Loss) Income for the Three and Nine ~~and Six~~ Months Ended ~~June~~September 3 0 ,30, 2022 and 2021 (Unaudited)	5
	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the ~~Six~~Nine Months Ended ~~June~~September 3 0 ,30, 2022 and 2021 (Unaudited)	6
	Condensed Consolidated Statements of Cash Flows for the ~~Six~~Nine Months Ended ~~June~~September 3 0 ,30, 2022 and 2021 (Unaudited)	8
	Notes to the Condensed Consolidated Financial Statements (Unaudited)	9
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1920
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	3132
ITEM 4.	Controls and Procedures	3132

PART II	OTHER INFORMATION	3233

ITEM 1.	Legal Proceedings	3233
ITEM 1A.	Risk Factors	3233
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3233
ITEM 3.	Defaults upon Senior Securities	3233
ITEM 4.	Mine Safety Disclosures	3233
ITEM 5.	Other Information	3233
ITEM 6.	Exhibits	3334

SIGNATURES		3435

Certain Definitions

The following definitions apply throughout this quarterly report unless the context requires otherwise:


“We”, “Us”, “Company”, “Smart Sand” or “Our”						Smart Sand, Inc., a company organized under the laws of Delaware, and its subsidiaries.

“shares”, “stock”						The common stock of Smart Sand, Inc., nominal value $0.001 per share.

“ABL Credit Facility”, “ABL Credit Agreement”, “ABL Security Agreement”						The five-year senior secured asset-based lending credit facility (the “ABL Credit Facility”) pursuant to: (i) an ABL Credit Agreement, dated December 13, 2019, between the Company and Jefferies Finance LLC, as amended from time to time (as amended, the “ABL Credit Agreement”); and (ii) a Guarantee and Collateral Agreement, dated December 13, 2019, between the Company and Jefferies Finance LLC, as agent, as amended from time to time (as amended, the “Security Agreement”).

“Oakdale Equipment Financing”, “MLA”						The five-year Master Lease Agreement, dated December 13, 2019, between Nexseer Capital (“Nexseer”) and related lease schedules in connection therewith (collectively, the “MLA”). The MLA is structured as a sale-leaseback of substantially all of the equipment at the Company’s mining and processing facility located near Oakdale, Wisconsin. The Oakdale Equipment Financing is considered a lease under article 2A of the Uniform Commercial Code but is considered a financing arrangement (and not a lease) for accounting or financial reporting purposes.


“Exchange Act”						The Securities Exchange Act of 1934, as amended.

“Securities Act”						The Securities Act of 1933, as amended.



“FASB”, “ASU”, “ASC”, “GAAP”						Financial Accounting Standards Board, Accounting Standards Update, Accounting Standards Codification, Accounting Principles Generally Accepted in the United States, respectively.

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SMART SAND, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS


		June 30, 2022		December 31, 2021			September 30, 2022		December 31, 2021
		(unaudited)					(unaudited)
		(in thousands, except share amounts)					(in thousands, except share amounts)
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	2,098	$	25,588	Cash and cash equivalents	$	10,371	$	25,588
Accounts receivable	Accounts receivable	32,224		17,481		Accounts receivable	32,902		17,481
Unbilled receivables	Unbilled receivables	4,751		1,884		Unbilled receivables	1,292		1,884
Inventory	Inventory	16,875		15,024		Inventory	20,618		15,024
Prepaid expenses and other current assets	Prepaid expenses and other current assets	9,197		13,886		Prepaid expenses and other current assets	7,405		13,886
Total current assets	Total current assets	65,145		73,863		Total current assets	72,588		73,863
Property, plant and equipment, net	Property, plant and equipment, net	270,593		262,465		Property, plant and equipment, net	267,210		262,465
Operating lease right-of-use assets	Operating lease right-of-use assets	30,818		29,828		Operating lease right-of-use assets	28,418		29,828
Intangible assets, net	Intangible assets, net	7,065		7,461		Intangible assets, net	6,867		7,461
Other assets	Other assets	347		402		Other assets	315		402
Total assets	Total assets	$	373,968	$	374,019	Total assets	$	375,398	$	374,019
Liabilities and Stockholders’ Equity	Liabilities and Stockholders’ Equity					Liabilities and Stockholders’ Equity
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	12,698	$	8,479	Accounts payable	$	11,634	$	8,479
Accrued expenses and other liabilities	Accrued expenses and other liabilities	14,146		14,073		Accrued expenses and other liabilities	16,267		14,073
Current portion of deferred revenue	Current portion of deferred revenue	9,339		9,842		Current portion of deferred revenue	9,905		9,842

Current portion of long-term debt	Current portion of long-term debt	6,869		7,127		Current portion of long-term debt	6,495		7,127
Current portion of operating lease liabilities	Current portion of operating lease liabilities	10,663		9,029		Current portion of operating lease liabilities	10,560		9,029
Total current liabilities	Total current liabilities	53,715		48,550		Total current liabilities	54,861		48,550
Long-term deferred revenue	Long-term deferred revenue	2,389		6,428		Long-term deferred revenue	—		6,428
Long-term debt	Long-term debt	14,783		15,353		Long-term debt	16,289		15,353
Long-term operating lease liabilities	Long-term operating lease liabilities	22,541		23,690		Long-term operating lease liabilities	19,989		23,690
Deferred tax liabilities, long-term, net	Deferred tax liabilities, long-term, net	19,170		22,434		Deferred tax liabilities, long-term, net	19,650		22,434
Asset retirement obligation	Asset retirement obligation	24,816		16,155		Asset retirement obligation	25,006		16,155

Other non-current liabilities	Other non-current liabilities	42		249		Other non-current liabilities	42		249
Total liabilities	Total liabilities	137,456		132,859		Total liabilities	135,837		132,859
Commitments and contingencies (Note 14)		0		0
Commitments and contingencies (Note 15)						Commitments and contingencies (Note 15)
Stockholders’ equity	Stockholders’ equity					Stockholders’ equity
Common stock, $0.001 par value, 350,000,000 shares authorized; 44,115,732 issued and 42,242,852 outstanding at June 30, 2022; 43,789,814 issued and 42,012,813 outstanding at December 31, 2021		42		42
Treasury stock, at cost, 1,872,880 and 1,777,001 shares at June 30, 2022 and December 31, 2021, respectively		(4,776)		(4,535)
Common stock, $0.001 par value, 350,000,000 shares authorized; 44,607,002 issued and 42,647,334 outstanding at September 30, 2022; 43,789,814 issued and 42,012,813 outstanding at December 31, 2021						Common stock, $0.001 par value, 350,000,000 shares authorized; 44,607,002 issued and 42,647,334 outstanding at September 30, 2022; 43,789,814 issued and 42,012,813 outstanding at December 31, 2021	42		42
Treasury stock, at cost, 1,959,668 and 1,777,001 shares at September 30, 2022 and December 31, 2021, respectively						Treasury stock, at cost, 1,959,668 and 1,777,001 shares at September 30, 2022 and December 31, 2021, respectively	(4,986)		(4,535)
Additional paid-in capital	Additional paid-in capital	176,150		174,486		Additional paid-in capital	176,992		174,486
Retained earnings	Retained earnings	64,580		70,593		Retained earnings	67,263		70,593
Accumulated other comprehensive income	Accumulated other comprehensive income	516		574		Accumulated other comprehensive income	250		574
Total stockholders’ equity	Total stockholders’ equity	236,512		241,160		Total stockholders’ equity	239,561		241,160
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	373,968	$	374,019	Total liabilities and stockholders’ equity	$	375,398	$	374,019

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

SMART SAND, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2022		2021		2022		2021
		(in thousands, except per share amounts)									(in thousands, except per share amounts)
Revenues:	Revenues:									Revenues:
Sand sales revenue	Sand sales revenue	$	67,111	$	28,801	$	105,400	$	51,948	Sand sales revenue	$	66,663	$	31,343	$	172,063	$	83,291
Shortfall revenue	Shortfall revenue	—		—		1,915		1,741		Shortfall revenue	2,681		2,680		4,596		4,421
Logistics revenue	Logistics revenue	1,603		838		3,004		3,400		Logistics revenue	2,248		456		5,252		3,856
Total revenue	Total revenue	68,714		29,639		110,319		57,089		Total revenue	71,592		34,479		181,911		91,568
Cost of goods sold	Cost of goods sold	59,743		31,999		103,329		64,426		Cost of goods sold	60,163		36,526		163,492		100,952
Gross profit	Gross profit	8,971		(2,360)		6,990		(7,337)		Gross profit	11,429		(2,047)		18,419		(9,384)
Operating expenses:	Operating expenses:									Operating expenses:
Salaries, benefits and payroll taxes	Salaries, benefits and payroll taxes	3,225		2,285		6,617		4,660		Salaries, benefits and payroll taxes	3,554		2,490		10,171		7,150
Depreciation and amortization	Depreciation and amortization	563		577		1,090		1,138		Depreciation and amortization	556		352		1,646		1,490
Selling, general and administrative	Selling, general and administrative	3,795		3,855		7,843		7,009		Selling, general and administrative	3,542		3,867		11,385		10,876
Bad debt expense	Bad debt expense	1		19,592		1		19,592		Bad debt expense	—		—		1		19,592

Total operating expenses	Total operating expenses	7,584		26,309		15,551		32,399		Total operating expenses	7,652		6,709		23,203		39,108
Operating income (loss)	Operating income (loss)	1,387		(28,669)		(8,561)		(39,736)		Operating income (loss)	3,777		(8,756)		(4,784)		(48,492)
Other income (expenses):	Other income (expenses):									Other income (expenses):

Interest expense, net	Interest expense, net	(406)		(513)		(833)		(1,060)		Interest expense, net	(411)		(467)		(1,244)		(1,527)
Other income	Other income	56		3,467		268		3,665		Other income	148		1,792		416		5,457
Total other income (expenses), net	Total other income (expenses), net	(350)		2,954		(565)		2,605		Total other income (expenses), net	(263)		1,325		(828)		3,930
Income (loss) before income tax expense (benefit)	Income (loss) before income tax expense (benefit)	1,037		(25,715)		(9,126)		(37,131)		Income (loss) before income tax expense (benefit)	3,514		(7,431)		(5,612)		(44,562)
Income tax expense (benefit)	Income tax expense (benefit)	1,127		1,552		(3,113)		(5,952)		Income tax expense (benefit)	831		(169)		(2,282)		(6,121)
Net loss		$	(90)	$	(27,267)	$	(6,013)	$	(31,179)
Net loss per common share:
Net income (loss)										Net income (loss)	$	2,683	$	(7,262)	$	(3,330)	$	(38,441)
Net income (loss) per common share:										Net income (loss) per common share:
Basic	Basic	$	0.00	$	(0.65)	$	(0.14)	$	(0.75)	Basic	$	0.06	$	(0.17)	$	(0.08)	$	(0.92)
Diluted	Diluted	$	0.00	$	(0.65)	$	(0.14)	$	(0.75)	Diluted	$	0.06	$	(0.17)	$	(0.08)	$	(0.92)
Weighted-average number of common shares:	Weighted-average number of common shares:									Weighted-average number of common shares:
Basic	Basic	42,181		41,748		42,134		41,689		Basic	42,522		41,850		42,265		41,743
Diluted	Diluted	42,181		41,748		42,134		41,689		Diluted	42,524		41,850		42,265		41,743

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

SMART SAND, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2022		2021		2022		2021
		(in thousands)									(in thousands)
Net loss		$	(90)	$	(27,267)	$	(6,013)	$	(31,179)
Net income (loss)										Net income (loss)	$	2,683	$	(7,262)	$	(3,330)	$	(38,441)
Other comprehensive income (loss):	Other comprehensive income (loss):									Other comprehensive income (loss):
Foreign currency translation adjustment	Foreign currency translation adjustment	(74)		44		(58)		169		Foreign currency translation adjustment	(266)		(239)		(324)		(70)
Comprehensive loss		$	(164)	$	(27,223)	$	(6,071)	$	(31,010)
Comprehensive income (loss)										Comprehensive income (loss)	$	2,417	$	(7,501)	$	(3,654)	$	(38,511)

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

SMART SAND, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)

~~Six~~Nine Months Ended ~~June~~September 30, 2022


		Common Stock			Treasury Stock			Additional Paid-in Capital								Accumulated Other Comprehensive (Loss) Income					Total Stockholders’ Equity			Common Stock							Treasury Stock							Additional Paid-in Capital				Accumulated Other Comprehensive (Loss) Income		Total Stockholders’ Equity
		Outstanding Shares	Par Value		Shares	Amount				Retained Earnings										Outstanding Shares					Par Value				Shares			Amount				Retained Earnings
		(in thousands, except share amounts)																						(in thousands, except share amounts)
Balance at December 31, 2021	Balance at December 31, 2021	42,012,813	$	42	1,777,001	$	(4,535)			$	174,486			$	70,593			$	574					$	241,160	Balance at December 31, 2021	42,012,813			$	42		1,777,001				$		(4,535)	$	174,486	$	70,593	$	574	$	241,160
Foreign currency translation adjustment	Foreign currency translation adjustment	—	—		—	—		—				—				16					16		Foreign currency translation adjustment	—				—			—			—				—		—		16		16
Vesting of restricted stock	Vesting of restricted stock	179,630	—		—	—		—				—				—					—		Vesting of restricted stock	179,630				—			—			—				—		—		—		—
Stock-based compensation	Stock-based compensation	—	—		—	—		826				—				—					826		Stock-based compensation	—				—			—			—				826		—		—		826
Employee stock purchase plan compensation	Employee stock purchase plan compensation	—	—		—	—		5				—				—					5		Employee stock purchase plan compensation	—				—			—			—				5		—		—		5
Employee stock purchase plan issuance	Employee stock purchase plan issuance	16,285	—		—	—		25				—				—					25		Employee stock purchase plan issuance	16,285				—			—			—				25		—		—		25
Purchase of treasury stock	Purchase of treasury stock	(56,400)	—		56,400	(127)		—				—				—					(127)		Purchase of treasury stock	(56,400)				—			56,400			(127)				—		—		—		(127)

Net loss	Net loss	—	—		—	—		—				(5,923)				—					(5,923)		Net loss	—				—			—			—				—		(5,923)		—		(5,923)
Balance at March 31, 2022	Balance at March 31, 2022	42,152,328	$	42	1,833,401	$	(4,662)	$	175,342			$	64,670			$	590				$	235,982	Balance at March 31, 2022	42,152,328				$	42		1,833,401			$	(4,662)			$	175,342	$	64,670	$	590	$	235,982
Foreign currency translation adjustment	Foreign currency translation adjustment	—	—		—	—		—				—				(74)					(74)		Foreign currency translation adjustment	—				—			—			—				—		—		(74)		(74)
Vesting of restricted stock	Vesting of restricted stock	130,003	—		—	—		—				—				—					—		Vesting of restricted stock	130,003				—			—			—				—		—		—		—
Stock-based compensation	Stock-based compensation	—	—		—	—		802				—				—					802		Stock-based compensation	—				—			—			—				802		—		—		802
Employee stock purchase plan compensation	Employee stock purchase plan compensation	—	—		—	—		6				—				—					6		Employee stock purchase plan compensation	—				—			—			—				6		—		—		6

Purchase of treasury stock	Purchase of treasury stock	(39,479)	—		39,479	(114)		—				—				—					(114)		Purchase of treasury stock	(39,479)				—			39,479			(114)				—		—		—		(114)
Net loss	Net loss	—	—		—	—		—				(90)				—					(90)		Net loss	—				—			—			—				—		(90)		—		(90)
Balance at June 30, 2022	Balance at June 30, 2022	42,242,852	$	42	1,872,880	$	(4,776)	$	176,150			$	64,580			$	516				$	236,512	Balance at June 30, 2022	42,242,852				$	42		1,872,880			$	(4,776)			$	176,150	$	64,580	$	516	$	236,512

Foreign currency translation adjustment																							Foreign currency translation adjustment	—				—			—			—				—		—		(266)		(266)
Vesting of restricted stock																							Vesting of restricted stock	473,032				—			—			—				—		—		—		—
Stock-based compensation																							Stock-based compensation	—				—			—			—				808		—		—		808
Employee stock purchase plan compensation																							Employee stock purchase plan compensation	—				—			—			—				7		—		—		7
Employee stock purchase plan issuance																							Employee stock purchase plan issuance	18,238				—			—			—				27		—		—		27
Purchase of treasury stock																							Purchase of treasury stock	(86,788)				—			86,788			(210)				—		—		—		(210)
Net income																							Net income	—				—			—			—				—		2,683		—		2,683
Balance at September 30, 2022																							Balance at September 30, 2022	42,647,334				$	42		1,959,668			$	(4,986)			$	176,992	$	67,263	$	250	$	239,561

SMART SAND, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (continued)

(UNAUDITED)

~~Six~~Nine Months Ended ~~June~~September 30, 2021


		Common Stock			Treasury Stock			Additional Paid-in Capital								Accumulated Other Comprehensive (Loss) Income					Total Stockholders’ Equity			Common Stock							Treasury Stock							Additional Paid-in Capital				Accumulated Other Comprehensive (Loss) Income		Total Stockholders’ Equity
		Outstanding Shares	Par Value		Shares	Amount				Retained Earnings										Outstanding Shares					Par Value				Shares			Amount				Retained Earnings
		(in thousands, except share amounts)																						(in thousands, except share amounts)
Balance at December 31, 2020	Balance at December 31, 2020	41,575,129	$	42	1,618,265	$	(4,134)			$	171,209			$	121,267			$	423					$	288,807	Balance at December 31, 2020	41,575,129			$	42		1,618,265				$		(4,134)	$	171,209	$	121,267	$	423	$	288,807
Foreign currency translation adjustment	Foreign currency translation adjustment	—	—		—	—		—				—				125					125		Foreign currency translation adjustment	—				—			—			—				—		—		125		125
Acquisition stock issuance	Acquisition stock issuance	14,430	—		—	—		20				—				—					20		Acquisition stock issuance	14,430				—			—			—				20		—		—		20
Vesting of restricted stock	Vesting of restricted stock	158,364	—		—	—		—				—				—					—		Vesting of restricted stock	158,364				—			—			—				—		—		—		—
Stock-based compensation	Stock-based compensation	—	—		—	—		678				—				—					678		Stock-based compensation	—				—			—			—				678		—		—		678
Employee stock purchase plan compensation	Employee stock purchase plan compensation	—	—		—	—		7				—				—					7		Employee stock purchase plan compensation	—				—			—			—				7		—		—		7
Employee stock purchase plan issuance	Employee stock purchase plan issuance	19,483	—		—	—		17				—				—					17		Employee stock purchase plan issuance	19,483				—			—			—				17		—		—		17
Purchase of treasury stock	Purchase of treasury stock	(48,077)	—		48,077	(140)		—				—				—					(140)		Purchase of treasury stock	(48,077)				—			48,077			(140)				—		—		—		(140)

Net loss	Net loss	—	—		—	—		—				(3,912)				—					(3,912)		Net loss	—				—			—			—				—		(3,912)		—		(3,912)
Balance at March 31, 2021	Balance at March 31, 2021	41,719,329	$	42	1,666,342	$	(4,274)	$	171,931			$	117,355			$	548				285,602		Balance at March 31, 2021	41,719,329				$	42		1,666,342			$	(4,274)			$	171,931	$	117,355	$	548	285,602
Foreign currency translation adjustment	Foreign currency translation adjustment	—	—		—	—		—				—				44					44		Foreign currency translation adjustment	—				—			—			—				—		—		44		44
Vesting of restricted stock	Vesting of restricted stock	162,253	—		—	—		—				—				—					—		Vesting of restricted stock	162,253				—			—			—				—		—		—		—
Stock-based compensation	Stock-based compensation	—	—		—	—		574				—				—					574		Stock-based compensation	—				—			—			—				574		—		—		574
Employee stock purchase plan compensation	Employee stock purchase plan compensation	—	—		—	—		7				—				—					7		Employee stock purchase plan compensation	—				—			—			—				7		—		—		7
Employee stock purchase plan issuance		—	—		—	—		—				—				—					—

Purchase of treasury stock	Purchase of treasury stock	(48,793)	—		48,793	(148)		—				—				—					(148)		Purchase of treasury stock	(48,793)				—			48,793			(148)				—		—		—		(148)
Net loss	Net loss	—	—		—	—		—				(27,267)				—					(27,267)		Net loss	—				—			—			—				—		(27,267)		—		(27,267)
Balance at June 30, 2021	Balance at June 30, 2021	41,832,789	$	42	1,715,135	$	(4,422)	$	172,512			$	90,088			$	592				$	258,812	Balance at June 30, 2021	41,832,789				$	42		1,715,135			$	(4,422)			$	172,512	$	90,088	$	592	$	258,812
Foreign currency translation adjustment																							Foreign currency translation adjustment	—				—			—			—				—		—		(239)		(239)

Vesting of restricted stock																							Vesting of restricted stock	4,875				—			—			—				—		—		—		—
Stock-based compensation																							Stock-based compensation	—				—			—			—				879		—		—		879
Employee stock purchase plan compensation																							Employee stock purchase plan compensation	—				—			—			—				10		—		—		10
Employee stock purchase plan issuance																							Employee stock purchase plan issuance	14,944				—			—			—				25		—		—		25
Restricted stock buy back																							Restricted stock buy back	(1,670)				—			1,670			(5)				—		—		—		(5)
Net loss																							Net loss	—				—			—			—				—		(7,262)		—		(7,262)
Balance at September 30, 2021																							Balance at September 30, 2021	41,850,938				$	42		1,716,805			$	(4,427)			$	173,426	$	82,826	$	353	$	252,220

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

SMART SAND, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


		Six Months Ended June 30,					Nine Months Ended September 30,
		2022		2021			2022		2021
		(in thousands)					(in thousands)
Operating activities:	Operating activities:					Operating activities:
Net loss	Net loss	$	(6,013)	$	(31,179)	Net loss	$	(3,330)	$	(38,441)
Adjustments to reconcile net (loss) income to net cash provided by operating activities:	Adjustments to reconcile net (loss) income to net cash provided by operating activities:					Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation, depletion and accretion of asset retirement obligation	Depreciation, depletion and accretion of asset retirement obligation	13,206		12,604		Depreciation, depletion and accretion of asset retirement obligation	19,904		18,937
Amortization of intangible assets	Amortization of intangible assets	398		398		Amortization of intangible assets	596		596
Gain on disposal of assets		(16)		(58)
(Gain) loss on disposal of assets						(Gain) loss on disposal of assets	(482)		223
Provision for bad debt	Provision for bad debt	1		19,592		Provision for bad debt	1		19,592
Amortization of deferred financing cost	Amortization of deferred financing cost	53		53		Amortization of deferred financing cost	79		79
Accretion of debt discount	Accretion of debt discount	93		93		Accretion of debt discount	140		140
Deferred income taxes	Deferred income taxes	(3,264)		(5,839)		Deferred income taxes	(2,784)		(7,543)
Stock-based compensation, net	Stock-based compensation, net	1,628		1,252		Stock-based compensation, net	2,436		2,131
Employee stock purchase plan compensation	Employee stock purchase plan compensation	11		14		Employee stock purchase plan compensation	18		24

Changes in assets and liabilities:	Changes in assets and liabilities:					Changes in assets and liabilities:
Accounts receivable	Accounts receivable	(10,974)		39,756		Accounts receivable	(14,238)		34,791
Unbilled receivables	Unbilled receivables	(6,635)		(1,094)		Unbilled receivables	(593)		(1,113)
Inventory	Inventory	(1,850)		3,199		Inventory	(5,594)		3,755
Prepaid expenses and other assets	Prepaid expenses and other assets	1,854		(2,391)		Prepaid expenses and other assets	3,072		(1,886)
Deferred revenue	Deferred revenue	(4,542)		1,215		Deferred revenue	(6,365)		6,092
Accounts payable	Accounts payable	3,229		1,698		Accounts payable	2,784		1,564
Accrued and other expenses	Accrued and other expenses	1,872		(2,833)		Accrued and other expenses	4,187		(1,397)
Net cash (used in) provided by operating activities	Net cash (used in) provided by operating activities	(10,949)		36,480		Net cash (used in) provided by operating activities	(169)		37,544
Investing activities:	Investing activities:					Investing activities:
Acquisition of Blair facility	Acquisition of Blair facility	(6,547)		—		Acquisition of Blair facility	(6,547)		—
Purchases of property, plant and equipment	Purchases of property, plant and equipment	(5,137)		(5,043)		Purchases of property, plant and equipment	(9,535)		(6,976)
Proceeds from disposal of assets	Proceeds from disposal of assets	—		2		Proceeds from disposal of assets	995		78
Net cash used in investing activities	Net cash used in investing activities	(11,684)		(5,041)		Net cash used in investing activities	(15,087)		(6,898)
Financing activities:	Financing activities:					Financing activities:
Repayments of notes payable	Repayments of notes payable	(3,581)		(3,370)		Repayments of notes payable	(5,474)		(5,168)
Payments under finance leases	Payments under finance leases	(60)		(65)		Payments under finance leases	(88)		(92)

Proceeds from revolving credit facility	Proceeds from revolving credit facility	3,000		—		Proceeds from revolving credit facility	6,000		—

Payment of contingent consideration	Payment of contingent consideration	—		(180)		Payment of contingent consideration	—		(180)
Employee stock purchase plan issuance	Employee stock purchase plan issuance	25		17		Employee stock purchase plan issuance	52		42
Purchase of treasury stock	Purchase of treasury stock	(241)		(288)		Purchase of treasury stock	(451)		(294)
Net cash used in financing activities		(857)		(3,886)
Net cash provided by (used in) financing activities						Net cash provided by (used in) financing activities	39		(5,692)
Net decrease in cash and cash equivalents	Net decrease in cash and cash equivalents	(23,490)		27,553		Net decrease in cash and cash equivalents	(15,217)		24,954
Cash and cash equivalents at beginning of year	Cash and cash equivalents at beginning of year	25,588		11,725		Cash and cash equivalents at beginning of year	25,588		11,725
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	2,098	$	39,278	Cash and cash equivalents at end of period	$	10,371	$	36,679
Supplemental disclosure of cash flow information	Supplemental disclosure of cash flow information					Supplemental disclosure of cash flow information
Capitalized expenditures in accounts payable and accrued expenses		$	927	$	172
Purchases of property, plant and equipment in accounts payable and accrued expenses						Purchases of property, plant and equipment in accounts payable and accrued expenses	$	685	$	267
Issuance of acquisition common stock	Issuance of acquisition common stock	$	—	$	20	Issuance of acquisition common stock	$	—	$	—
Asset retirement obligation		$	8,281	$	737
Additions to asset retirement obligations						Additions to asset retirement obligations	$	8,281	$	737

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

SMART SAND, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

(UNAUDITED)

NOTE 1 — Organization and Nature of Business & Market Update

Organization and Nature of Business

The Company was incorporated in July 2011 and is headquartered in The Woodlands, Texas. The Company primarily operates as a fully integrated frac and industrial sand supply and services company. The Company offers complete mine to wellsite proppant supply and logistics solutions to our frac sand customers. These operations include the excavation, processing and sale of sand, or proppant, for use in hydraulic fracturing operations for the oil and natural gas industry. The Company also offers proppant logistics and wellsite storage solutions through its SmartSystemsTM products and services. In late 2021, the Company created its Industrial Products Solutions (“IPS”) business in order to diversify its customer base and markets it serves by offering sand to customers for industrial uses, such as glass, foundry, building products, filtration, geothermal, renewables, ceramics, turf & landscape, retail, and recreation.

The Company commenced mining operations at its Oakdale, Wisconsin facility in July 2012. Through multiple expansions at Oakdale and the acquisition of the Utica, Illinois facility in September 2020, the Company has current annual processing capacity of approximately 7.1 million tons. With the acquisition of the Blair, Wisconsin mine and processing facility in March 2022, which is currently idled, we have the ability to expand to approximately 10.0 million tons should the Company decide to bring the Blair facility online.

The Company also has several in-basin rail terminals. The Company acquired rights in 2018 to operate a unit train capable transloading terminal in Van Hook, North Dakota to service the Bakken Formation in the Williston Basin. In 2020, the Company, as part of its acquisition of the Utica, Illinois facility, obtained rights to use a rail terminal located in El Reno, Oklahoma. In September 2021, the Company acquired the rights to construct and operate another transloading terminal in Waynesburg, Pennsylvania to service the Appalachian Basin, including the Marcellus and Utica Formations, which became operational in January 2022.

The Company provides complete logistics solutions through its mine sites and transload facilities with direct access to four Class I rail lines, and has the ability to access all Class I rail lines within the United States and Canada.

The Company provides proppant storage and management solutions through its SmartSystems products and services under which it offers various solutions that create efficiencies, flexibility, enhanced safety and reliability for customers by providing the capability to unload, store and deliver proppant at the wellsite, as well as the ability to rapidly set up, takedown and transport the entire system. The SmartDepotTM silo system includes passive and active dust suppression technology, along with the capability of a gravity-fed operation. The self-contained SmartPathTM transloader, is a mobile sand transloading system designed to work with bottom dump trailers and features a drive over conveyor, surge bin, and dust collection system. Rapid deployment trailers are designed for quick setup, takedown and transportation of the entire SmartSystem, and they detach from the wellsite equipment, which allows for removal from the wellsite during operation. A proprietary software program, the SmartSystem TrackerTM allows customers to monitor silo-specific information, including location, proppant type and proppant inventory. We believe that our SmartSystems reduce trucking and related fuel consumption for our customers, helping them meet their goals to reduce their carbon footprint in their daily operations.

NOTE 2 — Summary of Significant Accounting Policies

The information presented below supplements the complete description of our significant accounting policies disclosed in our 2021 Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on March 8, 2022.

Basis of Presentation and Consolidation

The accompanying unaudited quarterly condensed consolidated financial statements (“interim statements”) of the Company are presented in accordance with the rules and regulations of the SEC for quarterly reports on Form 10-Q and therefore do not include all the information and notes required by GAAP. In the opinion of management, all adjustments and disclosures necessary for a fair presentation of these interim statements have been included. All adjustments are of a normal recurring nature. The results reported in these interim statements are not necessarily indicative of the results that may be reported for the entire year. The consolidated balance sheet as of December 31, 2021 was derived from the audited consolidated

SMART SAND, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

(UNAUDITED)

financial statements as of and for the year ended December 31, 2021. These interim statements should be read in conjunction with the Company’s consolidated financial statements for the year ended December 31, 2021.

~~SMART SAND, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(IN THOUSANDS, EXCEPT PER SHARE DATA)~~

~~(UNAUDITED)~~

Use of Estimates

The preparation of ~~financial~~interim statements ~~in accordance with GAAP~~ requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant estimates used in the preparation of these financial statements include, but are not limited to: impairment considerations of assets, including intangible assets, fixed assets, and inventory; estimated cost of future asset retirement obligations; fair value of acquired assets and assume liabilities; recoverability of deferred tax assets; inventory reserve; and the collectability of receivables; and certain liabilities.

Actual results could differ materially from management’s best estimates as additional information or actual results become available in the future, and those differences could be material. The decreases in demand related to the coronavirus (“COVID-19”) pandemic in 2020 and 2021 and the ongoing conflict in Ukraine have caused dramatic swings in oil and natural gas prices and significant volatility in the oilfield service sector. Additionally, future economic performance is uncertain due to current high inflation and other economic concerns. The Company is currently unable to estimate the impact of these events on its future financial position and results of operations. Therefore, the Company can give no assurances that these events will not have a material adverse effect on its financial position or results of operations.

Employee Retention Credit

The Company qualified for federal government assistance through employee retention credit provisions of the Consolidated Appropriations Act of 2021. As of September 30, 2022 and December 31, 2021, ~~and June 30, 2022,~~ the Company included ~~$4,676~~$2,710 and, ~~$4,317,~~$4,676 respectively, in prepaid expenses and other current assets on its consolidated balance sheets related to receivables for the employee retention credits. The calculation of the credit was based on employees continued employment and represents a portion of the wages paid to them. For income tax purposes, the credit will result in decreased expense related to the wages it offsets in the period received.

Recent Accounting Pronouncements

There are no recent accounting pronouncements that materially affect the financial statements of the Company.

NOTE 3 — Acquisition

Asset Acquisition Blair Facility

On March 4, 2022, the Company entered into a Membership Interest Purchase Agreement (the “Purchase Agreement”) with Hi-Crush Inc., a Delaware corporation (“HCR”), and Hi-Crush Blair LLC, a Delaware limited liability company and wholly-owned subsidiary of HCR (“Blair”), pursuant to which the Company acquired all of the issued and outstanding limited liability company interest of Blair from HCR for aggregate cash consideration of $6,450, subject to customary purchase price adjustments as set forth in the Purchase Agreement (the “Transaction”).

The primary assets of Blair consist of an idle frac sand mine and related processing facility located in Blair, Wisconsin. The Blair facility, once operational, will have approximately 2.9 million tons of total annual processing capacity and contains an onsite, unit train capable rail terminal with access to the Class 1 Canadian National Railway.

The Company accounted for this transaction as an asset acquisition based on an evaluation of the guidance in ASC 805. The Company determined that there was not a substantive process in place that generates outputs that can be sold to a customer, and therefore the acquisition did not meet the definition of a business. The Company recognized identifiable assets acquired on a relative fair value basis. All assets acquired are allocated to property, plant and equipment, net on the balance sheet as of

SMART SAND, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

(UNAUDITED)

March 31, 2022. The Company also recorded an increase to its asset retirement obligations and a corresponding increase in purchases of property plant and equipment in the amount of $8,281 for the ~~six~~nine months ended ~~June~~September 30, 2022.

The table below presents the calculation of the total purchase consideration:


Base price consideration	$	6,450
Net working capital adjustments and capitalized costs	97
Total purchase consideration	$	6,547

~~SMART SAND, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(IN THOUSANDS, EXCEPT PER SHARE DATA)~~

~~(UNAUDITED)~~

NOTE 4 — Inventory

Inventory consisted of the following:


		June 30, 2022		December 31, 2021			September 30, 2022		December 31, 2021
Raw material	Raw material	$	727	$	293	Raw material	$	728	$	293
Work in progress	Work in progress	3,063		3,082		Work in progress	5,871		3,082
Finished goods	Finished goods	8,349		7,269		Finished goods	8,815		7,269
Spare parts	Spare parts	4,736		4,380		Spare parts	5,204		4,380
Total inventory	Total inventory	$	16,875	$	15,024	Total inventory	$	20,618	$	15,024

NOTE 5 — Property, Plant and Equipment, net

Net property, plant and equipment consisted of:


		June 30, 2022		December 31, 2021			September 30, 2022		December 31, 2021
Machinery, equipment and tooling	Machinery, equipment and tooling	$	32,993	$	30,813	Machinery, equipment and tooling	$	34,411	$	30,813
SmartSystems	SmartSystems	27,534		27,343		SmartSystems	27,654		27,343
Vehicles	Vehicles	3,199		3,066		Vehicles	3,234		3,066
Furniture and fixtures	Furniture and fixtures	1,336		1,325		Furniture and fixtures	1,345		1,325
Plant and building	Plant and building	200,129		199,958		Plant and building	200,373		199,958
Real estate properties	Real estate properties	6,507		6,496		Real estate properties	6,523		6,496
Railroad and sidings	Railroad and sidings	33,622		27,703		Railroad and sidings	33,622		27,703
Land and land improvements	Land and land improvements	40,172		35,652		Land and land improvements	40,455		35,652
Asset retirement obligation	Asset retirement obligation	28,818		20,536		Asset retirement obligation	28,818		20,536
Mineral properties	Mineral properties	7,442		7,442		Mineral properties	7,442		7,442
Deferred mining costs	Deferred mining costs	2,455		2,455		Deferred mining costs	2,455		2,455
Construction in progress	Construction in progress	9,064		9,574		Construction in progress	9,708		9,574
		393,271		372,363			396,040		372,363
Less: accumulated depreciation and depletion	Less: accumulated depreciation and depletion	122,678		109,898		Less: accumulated depreciation and depletion	128,830		109,898
Total property, plant and equipment, net	Total property, plant and equipment, net	$	270,593	$	262,465	Total property, plant and equipment, net	$	267,210	$	262,465

Depreciation expense was ~~$6,449~~$6,498 and ~~$6,037~~$6,111 for the three months ended ~~June~~September 30, 2022 and 2021, respectively, and ~~$12,810~~$19,309 and ~~$12,213~~$18,325 for the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, respectively.

SMART SAND, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

(UNAUDITED)

NOTE 6 — Accrued and Other Expenses

Accrued and other expenses were comprised of the following:


		June 30, 2022		December 31, 2021			September 30, 2022		December 31, 2021
Employee related expenses	Employee related expenses	$	1,615	$	806	Employee related expenses	$	2,493	$	806

Accrued equipment expense	Accrued equipment expense	—		58		Accrued equipment expense	5		58
Accrued professional fees	Accrued professional fees	410		691		Accrued professional fees	522		691
Accrued royalties	Accrued royalties	2,617		2,701		Accrued royalties	2,726		2,701
Accrued freight and delivery charges	Accrued freight and delivery charges	3,818		2,164		Accrued freight and delivery charges	4,393		2,164
Accrued real estate tax	Accrued real estate tax	1,206		1,010		Accrued real estate tax	1,745		1,010
Accrued utilities	Accrued utilities	1,720		1,264		Accrued utilities	1,709		1,264
Sales tax liability	Sales tax liability	666		665		Sales tax liability	1,118		665
Income tax payable	Income tax payable	—		2,332		Income tax payable	—		2,332
Other accrued liabilities	Other accrued liabilities	2,094		2,382		Other accrued liabilities	1,556		2,382
Total accrued liabilities	Total accrued liabilities	$	14,146	$	14,073	Total accrued liabilities	$	16,267	$	14,073

NOTE 7 — Debt

The current portion of long-term debt consists of the following:


		June 30, 2022		December 31, 2021			September 30, 2022		December 31, 2021

Oakdale Equipment Financing	Oakdale Equipment Financing	3,926		3,814		Oakdale Equipment Financing	3,983		3,814
Finance leases	Finance leases	115		117		Finance leases	230		117
Notes payable	Notes payable	2,828		3,196		Notes payable	2,282		3,196
Long-term debt, net, current		$	6,869	$	7,127
Current portion of long-term debt						Current portion of long-term debt	$	6,495	$	7,127

Long-term debt, net of current portion consists of the following:


		June 30, 2022		December 31, 2021			September 30, 2022		December 31, 2021
ABL Credit Facility	ABL Credit Facility	$	3,000	$	—	ABL Credit Facility	$	6,000	$	—
Oakdale Equipment Financing, net	Oakdale Equipment Financing, net	9,709		11,608		Oakdale Equipment Financing, net	8,738		11,608

Finance leases	Finance leases	176		234		Finance leases	33		234
Notes payable	Notes payable	1,898		3,511		Notes payable	1,518		3,511
Long-term debt, net		$	14,783	$	15,353
Long-term debt						Long-term debt	$	16,289	$	15,353

SMART SAND, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

(UNAUDITED)

The follow summarizes the maturity of our debt:


		ABL Credit Facility		Oakdale Equipment Financing		Notes Payable		Finance Leases		Total			ABL Credit Facility		Oakdale Equipment Financing		Notes Payable		Finance Leases		Total
Remainder of 2022	Remainder of 2022	$	—	$	2,319	$	1,596	$	66	$	3,981	Remainder of 2022	$	—	$	1,160	$	666	$	33	$	1,859
2023	2023	—		4,639		2,073		245		6,957		2023	—		4,637		2,009		245		6,891
2024	2024	3,000		6,888		807		—		10,695		2024	6,000		6,888		807		—		13,695
2025	2025	—		1,724		187		—		1,911		2025	—		1,724		187		—		1,911
2026	2026	—		—		181		—		181		2026	—		—		181		—		181
2027 and thereafter	2027 and thereafter	—		—		174		—		174		2027 and thereafter	—		—		174		—		174
Total minimum payments	Total minimum payments	3,000		15,570		5,018		311		23,899		Total minimum payments	6,000		14,409		4,024		278		24,711
Amount representing interest	Amount representing interest	—		(1,481)		(292)		(20)		(1,793)		Amount representing interest	—		(1,281)		(224)		(15)		(1,520)
Amount representing unamortized lender fees	Amount representing unamortized lender fees	—		(454)		—		—		(454)		Amount representing unamortized lender fees	—		(407)		—		—		(407)
Present value of payments	Present value of payments							291				Present value of payments							263
Less: current portion	Less: current portion	—		(3,926)		(2,828)		(115)		(6,869)		Less: current portion	—		(3,983)		(2,282)		(230)		(6,495)
Total long-term debt, net		$	3,000	$	9,709	$	1,898	$	176	$	14,783
Total long-term debt												Total long-term debt	$	6,000	$	8,738	$	1,518	$	33	$	16,289

ABL Credit Facility

On December 13, 2019, the Company entered into a $20,000 five-year senior secured asset-based credit facility with Jefferies Finance LLC. The available borrowing amount under the ABL Credit Facility as of ~~June~~September 30, 2022 was $20,000 and is based on the Company’s eligible accounts receivable and inventory, as described in the ABL Credit Agreement. As of ~~June~~September 30, 2022, there was ~~$3,000~~$6,000 outstanding under the ABL Credit Facility, $1,000 letters of credit and ~~$16,000~~$13,000 was available to be drawn. As of ~~June~~September 30, 2022 and December 31, 2021, the Company was in compliance with all financial covenants.

Oakdale Equipment Financing

On December 13, 2019, the Company received net proceeds of $23,000 in an equipment financing arrangement with Nexseer. Substantially all of the Company’s mining and processing equipment at its Oakdale facility are pledged as collateral under the Oakdale Equipment Financing. The Oakdale Equipment Financing bears interest at a fixed rate of 5.79%.

Notes Payable

The Company has entered into various financing arrangements, primarily to finance its manufactured wellsite proppant storage solutions equipment. Upon completion of the equipment manufacturing, title to the subject equipment passes to the financial institutions as collateral. All notes payable bear interest at rates between 4.00% and 7.49%.

NOTE 8 — Leases

Lessee

The operating and financing components of the Company’s right-of-use assets and lease liabilities on the consolidated balance sheets were as follows:

SMART SAND, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

(UNAUDITED)


		Balance Sheet Location	June 30, 2022		December 31, 2021			Balance Sheet Location	September 30, 2022		December 31, 2021
Right-of-use assets	Right-of-use assets						Right-of-use assets
Operating	Operating	Operating right-of-use assets	$	30,818	$	29,828	Operating	Operating right-of-use assets	$	28,418	$	29,828
Financing	Financing	Property, plant and equipment, net	161		262		Financing	Property, plant and equipment, net	161		262
Total right-of use assets	Total right-of use assets		$	30,979	$	30,090	Total right-of use assets		$	28,579	$	30,090

Lease liabilities	Lease liabilities						Lease liabilities
Operating	Operating	Operating lease liabilities, current and long-term portions	$	33,204	$	32,719	Operating	Operating lease liabilities, current and long-term portions	$	30,549	$	32,719
Financing	Financing	Long-term debt, current and long-term portions	291		351		Financing	Long-term debt, current and long-term portions	263		351
Total lease liabilities	Total lease liabilities		$	33,495	$	33,070	Total lease liabilities		$	30,812	$	33,070

Operating lease costs are recorded as a single expense on the statement of operations and allocated to the right-of-use assets and the related lease liabilities as depreciation expense and interest expense, respectively. Lease cost recognized in the consolidated statement of operations for the three and ~~six~~nine months ended ~~June~~September 30, 2022 and 2021 was as follows:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2022		2021		2022		2021
Finance lease cost	Finance lease cost									Finance lease cost
Amortization of right-of-use assets	Amortization of right-of-use assets	$	31	$	35	$	66	$	70	Amortization of right-of-use assets	$	30	$	35	$	96	$	105
Interest on lease liabilities	Interest on lease liabilities	5		7		11		15		Interest on lease liabilities	5		7		16		22
Operating lease cost	Operating lease cost	3,073		2,878		5,880		5,765		Operating lease cost	3,174		2,610		9,054		8,375
Short-term lease cost	Short-term lease cost	122		34		446		34		Short-term lease cost	101		86		547		120

Total lease cost	Total lease cost	$	3,231	$	2,954	$	6,403	$	5,884	Total lease cost	$	3,310	$	2,738	$	9,713	$	8,622

SMART SAND, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

(UNAUDITED)

Other information related to the Company’s leasing activity for the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021 is as follows:


		Six Months Ended June 30,							Nine Months Ended September 30,
		2022			2021				2022			2021
Cash paid for amounts included in the measurement of lease liabilities	Cash paid for amounts included in the measurement of lease liabilities							Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows used for finance leases	Operating cash flows used for finance leases	$	11		$	150		Operating cash flows used for finance leases	$	16		$	22
Operating cash flows used for operating leases	Operating cash flows used for operating leases	$	6,384		$	4,693		Operating cash flows used for operating leases	$	9,810		$	7,680
Financing cash flows used for finance leases	Financing cash flows used for finance leases	$	60		$	65		Financing cash flows used for finance leases	$	88		$	92

Right-of-use assets obtained in exchange for new operating lease liabilities	Right-of-use assets obtained in exchange for new operating lease liabilities	$	5,948		$	—		Right-of-use assets obtained in exchange for new operating lease liabilities	$	6,301		$	4,401

Weighted average remaining lease term - finance leases	Weighted average remaining lease term - finance leases	1.3 years			2.0 years			Weighted average remaining lease term - finance leases	1.1 years			1.9 years
Weighted average discount rate - finance leases	Weighted average discount rate - finance leases	6.87		%	6.60		%	Weighted average discount rate - finance leases	6.87		%	6.60		%
Weighted average remaining lease term - operating leases	Weighted average remaining lease term - operating leases	3.2 years			3.7 years			Weighted average remaining lease term - operating leases	3.0 years			3.8 years
Weighted average discount rate - operating leases	Weighted average discount rate - operating leases	5.81		%	5.80		%	Weighted average discount rate - operating leases	5.81		%	5.81		%

Maturities of the Company’s lease liabilities as of ~~June~~September 30, 2022 are as follows:


		Operating Leases		Finance Leases		Total			Operating Leases		Finance Leases		Total
Remainder of 2022	Remainder of 2022	$	5,865	$	66	$	5,931	Remainder of 2022	$	2,540	$	33	$	2,573
2023	2023	12,199		245		12,444		2023	12,348		245		12,593
2024	2024	9,230		—		9,230		2024	9,299		—		9,299
2025	2025	4,422		—		4,422		2025	4,422		—		4,422
2026	2026	3,191		—		3,191		2026	3,191		—		3,191
Thereafter	Thereafter	1,806		—		1,806		Thereafter	1,806		—		1,806
Total cash lease payments	Total cash lease payments	36,713		311		37,024		Total cash lease payments	33,606		278		33,884
Less: amounts representing interest	Less: amounts representing interest	(3,509)		(20)		(3,529)		Less: amounts representing interest	(3,057)		(15)		(3,072)
Total lease liabilities	Total lease liabilities	$	33,204	$	291	$	33,495	Total lease liabilities	$	30,549	$	263	$	30,812

NOTE 9 — Asset Retirement Obligation

The Company had a post-closure reclamation and site restoration obligation of ~~$24,816~~$25,006 as of ~~June~~September 30, 2022. The following is a reconciliation of the total reclamation liability for asset retirement obligations.


Balance at December 31, 2021	$	16,155
Additions and revisions of prior estimates	8,282
Accretion expense	~~379~~569

Balance at ~~June~~September 30, 2022	$	~~24,816~~25,006

SMART SAND, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

(UNAUDITED)

NOTE 10 — Revenue

Disaggregation of Revenue

The following table presents the Company’s revenues disaggregated by type and percentage of total revenues for the periods indicated.


		Three Months Ended June 30,								Six Months Ended June 30,									Three Months Ended September 30,								Nine Months Ended September 30,
		2022				2021				2022				2021					2022				2021				2022				2021
		Revenue		Percentage of Total Revenue		Revenue		Percentage of Total Revenue		Revenue		Percentage of Total Revenue		Revenue		Percentage of Total Revenue			Revenue		Percentage of Total Revenue		Revenue		Percentage of Total Revenue		Revenue		Percentage of Total Revenue		Revenue		Percentage of Total Revenue
Sand sales revenue	Sand sales revenue	$	67,111	98	%	$	28,801	97	%	$	105,400	95	%	$	51,948	91	%	Sand sales revenue	$	66,663	93	%	$	31,343	91	%	$	172,063	94	%	$	83,291	91	%
Shortfall revenue	Shortfall revenue	—		—	%	—		—	%	1,915		2	%	1,741		3	%	Shortfall revenue	2,681		4	%	2,680		8	%	4,596		3	%	4,421		5	%
Logistics revenue	Logistics revenue	1,603		2	%	838		3	%	3,004		3	%	3,400		6	%	Logistics revenue	2,248		3	%	456		1	%	5,252		3	%	3,856		4	%
Total revenue	Total revenue	$	68,714	100	%	$	29,639	100	%	$	110,319	100	%	$	57,089	100	%	Total revenue	$	71,592	100	%	$	34,479	100	%	$	181,911	100	%	$	91,568	100	%

The Company recorded $16,270 of deferred revenue on the consolidated balance sheet as of December 31, 2021, of which ~~$5,493~~$8,819 has been recognized in the ~~six~~nine months ended ~~June~~September 30, 2022. Of the remaining amount, the Company expects to recognize ~~$4,556~~$938 through December 31, 2022 and the remainder through 2023.

NOTE 11 — Earnings Per Share

Basic net income per share of common stock is computed by dividing net income attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period, excluding the dilutive effects of restricted stock. Diluted net income per share of common stock is computed by dividing the net income attributable to common stockholders by the sum of the weighted-average number of shares of common stock outstanding during the period plus the potential dilutive effects of shares of restricted stock outstanding during the period calculated in accordance with the treasury stock method, although shares of restricted stock are excluded if their effect is anti-dilutive. The number of shares underlying equity-based awards that were excluded from the calculation of diluted earnings per share as their effect would be anti-dilutive was 2,625 for the three months ended September 30, 2022. Other periods presented below are in periods with a net loss and there was no difference between basic and diluted net loss per share of common stock. The following table reconciles the weighted-average common shares outstanding used in the calculation of basic net (loss) income per share to the weighted average common shares outstanding used in the calculation of diluted net income per share.


	Three Months Ended September 30,		Nine Months Ended September 30,
	2022	2021	2022	2021
Weighted average common shares outstanding	42,522	41,850	42,265	41,743
Assumed conversion of restricted stock	2	—	—	—
Diluted weighted average common stock outstanding	42,524	41,850	42,265	41,743

NOTE 12 — Stock-Based Compensation

Equity Incentive Plan

In November 2016, in connection with its initial public offering, the Company adopted the 2016 Omnibus Incentive Plan (“2016 Plan”) which provides for the issuance of Awards (as defined in the 2016 Plan) of up to a maximum of 3,911 shares of the Company’s common stock to employees, non-employee members of the Company’s board of directors and consultants of the Company. On April 3, 2020, the Company’s board of directors adopted an amendment to the 2016 Plan to increase the

SMART SAND, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

(UNAUDITED)

available shares of common stock authorized for issuance by an additional 2,088 shares. On July 27, 2021, the Company’s board of directors authorized 231 shares currently held in treasury stock for issuance under the 2016 Plan. On April 22, 2022, the board of directors adopted an amendment to the 2016 Plan to increase the number of shares of common stock authorized for issuance by an additional 3,900 shares.

During the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, ~~824~~879 and 01,982 shares of restricted stock were issued under the 2016 Plan, respectively. The grant date fair value per share of all the outstanding restricted stock was $1.78 - ~~$5.77.~~$4.34. The shares vest over one to four years from their respective grant dates. For equity awards issued under the 2016 Plan, the grant date fair value was either the actual market price of the Company’s shares or an adjusted price using a Monte Carlo simulation for awards subject to the Company’s performance as compared to a defined peer group. The Company recognized, in operating expenses and cost of goods sold on the condensed consolidated statement of operations, ~~$802~~$808 and ~~$572~~$879 of compensation expense for the restricted stock during the three months ended ~~June~~September 30, 2022 and 2021, respectively. The Company recognized, in operating expenses and cost of goods sold on the condensed consolidated statement of operations, ~~$1,628~~$2,436 and ~~$1,252~~$2,131 of compensation expense for the restricted stock during the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, respectively. There is no impact to the cash flows of the Company related to stock-based compensation expense. At ~~June~~September 30, 2022, the Company had unrecognized compensation expense of ~~$7,155~~$6,580 related to granted but unvested stock awards, which is to be recognized as follows:

~~SMART SAND, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(IN THOUSANDS, EXCEPT PER SHARE DATA)~~

~~(UNAUDITED)~~


Remainder of 2022	Remainder of 2022	$	1,526	Remainder of 2022	$	748
2023	2023	2,684		2023	2,753
2024	2024	1,845		2024	1,915
2025	2025	955		2025	1,002
2026	2026	145		2026	162
Total	Total	$	7,155	Total	$	6,580

The following table summarizes restricted stock activity under the Plans from December 31, 2021 through ~~June~~September 30, 2022:


		Number of Shares	Weighted Average			Number of Shares	Weighted Average
Unvested, December 31, 2021	Unvested, December 31, 2021	3,151	$	3.06	Unvested, December 31, 2021	3,151	$	3.06
Granted	Granted	824	$	3.43	Granted	879	$	3.56
Vested	Vested	(310)	$	4.75	Vested	(783)	$	3.74
Forfeited	Forfeited	(577)	$	2.68	Forfeited	(587)	$	2.68
Unvested, June 30, 2022		3,088	$	3.01
Unvested, September 30, 2022					Unvested, September 30, 2022	2,660	$	3.11

Employee Stock Purchase Plan

Shares of the Company’s common stock may be purchased by eligible employees under the Company’s 2016 Employee Stock Purchase Plan in six-month intervals at a purchase price equal to at least 85% of the lesser of the fair market value of the Company’s common stock on either the first day or the last day of each six-month offering period. Employee purchases may not exceed 20% of their gross compensation during an offering period.

NOTE 1213 — Income Taxes

The Company calculates its interim income tax provision by estimating the annual expected effective tax rate and applying that rate to its ordinary year-to-date earnings or loss. In addition, the effect of changes in enacted tax laws, rates or tax status is recognized in the interim period in which the change occurs.

For the three months ended ~~June~~September 30, 2022 and 2021, the effective tax rate was approximately ~~108.7%~~23.6% and ~~(6.0)%~~2.3%, respectively, based on the annual effective tax rate net of discrete federal and state taxes. For the ~~six~~nine months ended ~~June~~ September

SMART SAND, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

(UNAUDITED)

30, 2022 and 2021, the effective tax rate was approximately ~~34.1%~~40.7% and ~~16.0%~~13.7%, respectively, based on the annual effective tax rate net of discrete federal and state taxes. For the three and ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, the statutory tax rate was 21.0%. The computation of the effective tax rate includes modifications from the statutory rate such as income tax credits, tax depletion deduction, carrybacks, and state apportionment changes, among other items.

The Company has recorded a liability for uncertain tax positions included in its consolidated balance sheet as of ~~June~~September 30, 2022, related to its depletion deduction methodology, and a corresponding increase to the income tax expense on its condensed consolidated statement of operations. There was $2,163 liability for uncertain tax positions as of December 31, 2021 and there was no material change for the ~~six~~nine months ended ~~June~~September 30, 2022.

As of ~~June~~September 30, 2022, the Company determined that it is more likely than not that it will not be able to fully realize the benefits of certain existing deductible temporary differences and has recorded a partial valuation allowance against the gross deferred tax assets, which is included in the deferred tax liabilities, long-term, net on its consolidated balance sheet, and a corresponding increase to the income tax expense on its condensed consolidated statement of operations. At December 31, 2021, the Company recorded a partial valuation allowance against the gross deferred tax assets on its consolidated balance sheet in the amount of $1,574 and a corresponding increase to the income tax expense on its consolidated statements of operations and there was no material change for the three and ~~six~~nine months ended ~~June~~September 30, 2022.

~~SMART SAND, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(IN THOUSANDS, EXCEPT PER SHARE DATA)~~

~~(UNAUDITED)~~

The Company’s federal income tax returns subsequent to 2017 remain open to audit by taxing authorities. The Company has not been informed that its tax returns are the subject of any audit or investigation by taxing authorities.

NOTE 1314 — Concentrations

As of ~~June~~September 30, 2022 three customers accounted for ~~69%~~67% of the Company’s total accounts receivable. As of December 31, 2021, 59% of the Company’s total accounts receivable balance was with two customers.

During the three months ended ~~June~~September 30, 2022, ~~72%~~62% of the Company’s revenues were earned from four customers. During the three months ended September 30, 2021, 50% of the Company’s revenues were earned from three customers. During the ~~three~~nine months ended ~~June~~September 30, ~~2021, 75%~~2022, 65% of the Company’s revenues were earned from four customers. During the ~~six~~nine months ended ~~June~~September 30, ~~2022, 57%~~2021, 68% of the Company’s revenues were earned from ~~three customers. During the six months ended June 30, 2021, 66% of the Company’s revenues were earned from three~~four customers.

As of ~~June~~September 30, 2022, one vendor accounted for 10% of the Company’s accounts payable. As of December 31, 2021, one vendor accounted for 19% of the Company’s accounts payable.

During the three months ended ~~June~~September 30, 2022, two suppliers accounted for 37% of the Company’s cost of goods sold. During the three months ended ~~June~~September 30, 2021, ~~two suppliers~~one supplier accounted for ~~53%~~23% of the Company’s cost of goods sold. During the ~~six~~nine months ended ~~June~~September 30, 2022, two suppliers accounted for ~~31%~~33% of the Company’s cost of goods sold. During the ~~six~~nine months ended ~~June~~September 30, 2021, ~~two suppliers~~one supplier accounted for ~~51%~~22% of the Company’s cost of goods sold.

The Company’s primary product is Northern White sand and its mining operations are limited to Wisconsin and Illinois. There is a risk of loss if there are significant environmental, legal or economic changes to these geographic areas of our mines, the oil and natural gas producing basins they serve, or the transportation routes between them.

NOTE 1415 — Commitments and Contingencies

Litigation

We may be subject to various legal proceedings, claims and governmental inspections, audits or investigations arising out of our operations in the normal course of business, which cover matters such as general commercial, governmental and trade regulations, product liability, environmental, intellectual property, employment and other actions. Although the outcomes of these routine claims cannot be predicted with certainty, in the opinion of management, the ultimate resolution of these matters will not have a material adverse effect on our financial statements.

SMART SAND, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

(UNAUDITED)

Bonds

The Company has performance bonds with various public and private entities regarding reclamation, permitting and maintenance of public roadways. Total aggregate principal amount of performance bonds outstanding as of ~~June~~September 30, 2022 was $17,651.

1819

SMART SAND, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(UNAUDITED)

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis summarizes the significant factors affecting the consolidated operating results, financial condition, liquidity and cash flows of the Company as of and for the periods presented below. The following discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements and related information contained herein and our audited financial statements as of December 31, 2021 contained in our Annual Report on Form 10-K. We use contribution margin, EBITDA, Adjusted EBITDA and free cash flow herein as non-GAAP measures of our financial performance. For further discussion of contribution margin, EBITDA, Adjusted EBITDA and free cash flow, see the section entitled “Non-GAAP Financial Measures.” We define various terms to simplify the presentation of information in this Quarterly Report on Form 10-Q (this “Report”). All share amounts are presented in thousands.

Forward-Looking Statements

This discussion contains forward-looking statements that are based on the beliefs of our management, as well as assumptions made by, and information currently available to our management. Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors, including those discussed herein and in the section entitled “Risk Factors” in our Form 10-K for the year ended December 31, 2021. Our estimates and forward-looking statements are primarily based on our current expectations and estimates of future events and trends, which affect or may affect our business and operations. Although we believe that these estimates and forward-looking statements are based upon reasonable assumptions, they are subject to several risks and uncertainties and are made in light of information currently available to us. Important factors, in addition to the factors described in this Report, may adversely affect our results as indicated in forward-looking statements. You should read this Report and the documents that we have filed as exhibits hereto completely and with the understanding that our actual future results may be materially different from what we expect. The words “may,” “will,” “should,” “could,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “intend,” “potential,” “might,” “would,” “continue” or the negative of these terms or other comparable terminology and similar words are intended to identify estimates and forward-looking statements. Estimates and forward-looking statements speak only as of the date they were made, and, except to the extent required by law, we undertake no obligation to update, to revise or to review any estimate and/or forward-looking statement because of new information, future events or other factors. Estimates and forward-looking statements involve risks and uncertainties and are not guarantees of future performance. As a result of the risks and uncertainties described above, the estimates and forward-looking statements discussed in this Report might not occur and our future results, level of activity, performance or achievements may differ materially from those expressed in these forward-looking statements due to, including, but not limited to, the factors mentioned above, and the differences may be material and adverse. Because of these uncertainties, you should not place undue reliance on these forward-looking statements.

Overview

The Company

We are a fully integrated frac and industrial sand supply and services company. ~~The Company offers~~We offer complete mine to wellsite proppant supply and logistics solutions to our frac sand customers. We produce low-cost, high quality Northern White sand, which is a premium sand used as proppant used to enhance hydrocarbon recovery rates in the hydraulic fracturing of oil and natural gas wells and for a variety of industrial applications. We also offer proppant logistics solutions to our customers through our in-basin transloading terminals and our SmartSystemsTM wellsite storage capabilities. In late 2021, we created our Industrial Products Solutions (“IPS”) business in order to diversify our customer base and markets we serve by offering sand for industrial uses. We market our products and services to oil and natural gas exploration and production companies, oilfield service companies, and industrial manufacturers. We sell our sand through long-term contracts or spot sales in the open market. We provide wellsite proppant storage solutions services and equipment under flexible contract terms custom tailored to meet the needs of our customers. We believe that, among other things, the size and favorable geologic characteristics of our sand reserves, the strategic location and logistical advantages of our facilities, our proprietary SmartDepotTM portable wellsite

1920

SMART SAND, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(UNAUDITED)

storage silos and SmartPathTM transloader, access to all Class I rail lines, and the industry experience of our senior management team make us as a highly attractive provider of sand and logistics services.

We incorporated in Delaware in July 2011 and began operations at our Oakdale facility with 1.1 million tons of annual processing capacity in July 2012. We currently have 7.1 million tons of annual capacity at our Oakdale and Utica facilities with the ability to expand annual processing capacity to approximately 10.0 million tons of sand should we bring ~~the~~our recently acquired Blair facility online.

We directly control two in-basin transloading facilities and have access to third party transloading terminals in all operating basins. We operate a unit train capable transloading terminal in Van Hook, North Dakota to service the Bakken Formation in the Williston Basin. We operate this terminal under a long-term agreement with Canadian Pacific Railway to service the Van Hook terminal directly along with the other key oil and natural gas exploration and production basins of North America. In 2020, as part of our acquisition of the Utica, Illinois mining facility, we obtained rights to use a rail terminal located in El Reno, Oklahoma. In January 2022, we began operations at an additional unit train capable transloading terminal in Waynesburg, Pennsylvania to service the Appalachian Basin, including the Marcellus and Utica Formations. These terminals allow us to offer more efficient and sustainable delivery options to our customers. We have long-standing relationships with third party terminal operators that allow us access to all oil and natural gas exploration production basins of North America.

We also offer to our customers portable wellsite storage and management solutions through our SmartSystems products and services. Our SmartSystems provide our customers with the capability to unload, store and deliver proppant at the wellsite, as well as the ability to rapidly set up, takedown and transport the entire system. This capability creates efficiencies, flexibility, enhanced safety and reliability for customers. Through our SmartSystems wellsite proppant storage solutions, we offer the SmartDepot and SmartDepotXL™ silo systems, SmartPath transloader, and our rapid deployment trailers. Our SmartDepot silos include passive and active dust suppression technology, along with the capability of a gravity-fed operation. Our self-contained SmartPath transloader is a mobile sand transloading system designed to work with bottom dump trailers and features a drive over conveyor, surge bin, and dust collection system, and we believe the system has the ability to keep up with any hydraulic fracturing operation. Our rapid deployment trailers are designed for quick setup, takedown and transportation of the entire SmartSystem, and detach from the wellsite equipment, which allows for removal from the wellsite during operation. We have also developed a proprietary software program, the SmartSystem Tracker™, which allows our SmartSystems customers to monitor silo-specific information, including location, proppant type and proppant inventory. We believe that our SmartSystems reduce ~~tracking~~trucking and related fuel consumption for our customers, helping them meet their goals to reduce their carbon footprint in their daily operations.

In ~~the fourth quarter of~~late 2021, we started our IPS business whereby we offer our sand to customers for various industrial purposes, such as glass, foundry, building products, filtration, geothermal, renewables, ceramics, turf & landscape, retail, and recreation. While we are still in the early stages of this business, we believe that as it grows, it will provide us with the ability to diversify our sales into more stable, consumer-driven products to help mitigate price volatility in the oil and gas industry.

Recent Acquisitions

On March 4, 2022, we entered into a Membership Interest Purchase Agreement (the “Purchase Agreement”) with Hi-Crush Inc., a Delaware corporation (“HCR”), and Hi-Crush Blair LLC, a Delaware limited liability company and wholly-owned subsidiary of HCR (“Blair”) pursuant to which we acquired all of the issued and outstanding limited liability company interest of Blair from HCR for aggregate cash consideration of approximately $6.5 million, subject to customary working capital adjustments.

The primary assets of Blair consist of an idle frac sand mine and related processing facility located in Blair, Wisconsin. The Blair facility once operational, will have approximately 2.9 million tons of total annual processing capacity and contains an onsite, unit train capable rail terminal with access to the Class 1 Canadian National Railway.

Market Trends

Our historical results of operations and cash flows are not indicative of results of operations and cash flows to be expected in the future.

SMART SAND, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(UNAUDITED)

During most of 2020, demand for frac sand declined significantly as a result of decreased demand for oil and natural gas as a result of the ongoing effects of the coronavirus (“COVID-19”) pandemic, which caused a global decrease in all means of travel, the closure of borders between countries and a general slowing of economic activity worldwide. Activity in the oil and gas industry began to rebound in the fourth quarter of 2020 and through 2021 as the global distribution of COVID-19 vaccines ramped up and travel restrictions lessened. However, the prices of frac sand remained depressed during 2021 as supply remained out of balance with demand even though market activity was improving. Through the first ~~six~~nine months of 2022, supply and demand fundamentals have continued to improve and frac sand prices ~~began~~continued recovering from previous historic lows.

~~SMART SAND, INC.~~

~~MANAGEMENT'S DISCUSSION AND ANALYSIS~~

~~OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(UNAUDITED)~~

~~Additionally, the~~ The ongoing conflict in the Ukraine has ~~also~~ contributed to dramatic swings in oil and natural gas prices and significant volatility in the oilfield service sector. ~~However, we~~Additionally, current high inflation and other economic factors could lead to a global economic recession that could have a negative impact on global oil and natural gas demand, which may lead to continued volatility in the oil field service sector. We cannot predict if ~~this trend~~positive pricing trends will continue or if sand prices will increase, decrease or stabilize.

Northern White sand, which is found predominantly in Wisconsin and limited portions of Minnesota, Illinois, and Missouri, is considered a premium proppant due to its favorable physical characteristics. While we ~~anticipate~~believe that regional sand will continue to affect the demand for Northern White sand in some of the oil and natural gas producing basins in which we operate, we believe there will continue to be demand for our high-quality Northern White sand. In particular, we believe that Northern White sand has logistical advantages in the Appalachian basin, Bakken basin, the western basins of Colorado, Wyoming, and in Canada. We expect demand for our frac sand to continue to be supported by customers who are focused on long-term well performance and ultimate recovery of reserves from the oil and natural gas wells they are completing as well as those interested in the efficiency of their logistics supply chain and delivery of sand to the wellsite. Additionally, we believe market trends continue to support increased proppant usage per well drilled due to operator focus on well efficiencies through increasing lengths of drilling laterals, use of simul-fracking techniques and other well enhancement strategies. As the amount of sand per well continues to increase, we believe the delivery of sand to the operating basins by rail in bulk shipments to terminals in close proximity to drilling activity provides more sustainable and efficient delivery of sand to meet a customer’s long term proppant needs. Finally, we believe that the adoption of our SmartSystems in the marketplace, which has a smaller footprint on customer sites than other sand storage solutions, will allow us to sell more sand when packaged with our last mile solutions. We believe the combination of our high quality Northern White sand delivered in bulk to in basin terminals and ultimately delivered to the wellsite through our SmartSystems wellsite proppant storage solutions provides our customers efficient and sustainable sand supply to the wellsite that will reduce trucking and related fuel consumption for our customers, helping them to meet their goals to reduce their carbon footprint in their daily operations.

Demand in the IPS business is relatively stable as customers are spread over a wide range of industries including glass, foundry, building products, filtration, geothermal, renewables, ceramics, turf & landscape, retail, recreation and more. The IPS business is primarily influenced by macroeconomic drivers such as consumer demand and population growth. We began our diversification into the IPS business in late 2021 and we expect to see continued growth throughout North America.

2122

SMART SAND, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(UNAUDITED)

GAAP Results of Operations

Three Months Ended ~~June~~September 30, 2022 Compared to Three Months Ended ~~June~~September 30, 2021

The following table summarizes our revenue and expenses for the periods indicated.


		Three Months Ended June 30,				Change					Three Months Ended September 30,				Change
		2022		2021		Dollars		Percentage			2022		2021		Dollars		Percentage

Revenues:	Revenues:									Revenues:
Sand sales revenue	Sand sales revenue	$	67,111	$	28,801	$	38,310	133	%	Sand sales revenue	$	66,663	$	31,343	$	35,320	113	%

Shortfall revenue										Shortfall revenue	2,681		2,680		1		—	%
Logistics revenue	Logistics revenue	1,603		838		765		91	%	Logistics revenue	2,248		456		1,792		393	%
Total revenue	Total revenue	68,714		29,639		39,075		132	%	Total revenue	71,592		34,479		37,113		108	%
Cost of goods sold	Cost of goods sold	59,743		31,999		27,744		87	%	Cost of goods sold	60,163		36,526		23,637		65	%
Gross profit	Gross profit	8,971		(2,360)		11,331		(480)	%	Gross profit	11,429		(2,047)		13,476		658	%
Operating expenses:	Operating expenses:									Operating expenses:
Salaries, benefits and payroll taxes	Salaries, benefits and payroll taxes	3,225		2,285		940		41	%	Salaries, benefits and payroll taxes	3,554		2,490		1,064		43	%
Depreciation and amortization	Depreciation and amortization	563		577		(14)		(2)	%	Depreciation and amortization	556		352		204		58	%
Selling, general and administrative	Selling, general and administrative	3,795		3,855		(60)		(2)	%	Selling, general and administrative	3,542		3,867		(325)		(8)	%
Bad debt expense		1		19,592		(19,591)		(100)	%

Total operating expenses	Total operating expenses	7,584		26,309		(18,725)		(71)	%	Total operating expenses	7,652		6,709		943		14	%
Operating income (loss)	Operating income (loss)	1,387		(28,669)		30,056		(105)	%	Operating income (loss)	3,777		(8,756)		12,533		143	%
Other income (expenses):	Other income (expenses):									Other income (expenses):

Interest expense, net	Interest expense, net	(406)		(513)		107		(21)	%	Interest expense, net	(411)		(467)		56		12	%
Other income	Other income	56		3,467		(3,411)		(98)	%	Other income	148		1,792		(1,644)		(92)	%
Total other income (expenses), net	Total other income (expenses), net	(350)		2,954		(3,304)		(112)	%	Total other income (expenses), net	(263)		1,325		(1,588)		(120)	%
Income (loss) before income tax expense (benefit)	Income (loss) before income tax expense (benefit)	1,037		(25,715)		26,752		(104)	%	Income (loss) before income tax expense (benefit)	3,514		(7,431)		10,945		147	%
Income tax expense (benefit)	Income tax expense (benefit)	1,127		1,552		(425)		(27)	%	Income tax expense (benefit)	831		(169)		1,000		592	%
Net loss		$	(90)	$	(27,267)	$	27,177	(100)	%
Net income (loss)										Net income (loss)	$	2,683	$	(7,262)	$	9,945	137	%

Revenues

Revenues were ~~$68.7~~$71.6 million for the three months ended ~~June~~September 30, 2022, during which time we sold approximately ~~1,196,000~~1,110,000 tons of sand. Revenues for the three months ended ~~June~~September 30, 2021 were ~~$29.6~~$34.5 million, during which time we sold approximately ~~767,000~~790,000 tons of sand. The key factors contributing to the increase in revenues for the three months ended ~~June~~September 30, 2022 as compared to the three months ended ~~June~~September 30, 2021 were as follows:

•Sand sales revenue increased from ~~$28.8~~$31.3 million for the three months ended ~~June~~September 30, 2021 to ~~$67.1~~$66.7 million or ~~133%~~113% for the three months ended ~~June~~September 30, 2022 as a result of an increase in total volumes sold of approximately ~~56%~~41% and higher average sale prices of our sand. Higher demand relative to supply for oil and natural gas has led to increased prices in oil and natural gas which we believe has led to increased demand for frac sand resulting in higher sand prices.

•Logistics revenue, which includes freight for certain mine gate sand sales, ~~railcar usage,~~ logistics services, and SmartSystems rentals, ~~was~~were approximately ~~$1.6~~$2.2 million for the three months ended ~~June~~September 30, 2022 compared to ~~$0.8~~$0.5 million for the three months ended ~~June~~September 30, 2021. The increase in logistics revenue was due to a higher utilization of our SmartSystems fleet.

2223

SMART SAND, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(UNAUDITED)

Cost of Goods Sold

Cost of goods sold was ~~$59.7~~$60.2 million and ~~$32.0~~$36.5 million for the three months ended ~~June~~September 30, 2022 and 2021, respectively. The increase was primarily due to higher volumes sold in the current period and the related increase in production costs and freight costs that accompany higher ~~volumes. Additionally,~~volumes, along with higher labor ~~costs~~ and utilities ~~have also contributed to an increase in cost of goods sold.~~costs.

Gross Profit

Gross profit was ~~$9.0~~$11.4 million for the three months ended ~~June~~September 30, 2022, compared to ~~$(2.4)~~$(2.0) million for the three months ended ~~June~~September 30, 2021. The increase in profitability for the three months ended ~~June~~September 30, 2022 as compared to the three months ended ~~June~~September 30, 2021 was primarily due to higher sales volumes and higher average sale prices of our sand relative to the cost to produce and deliver products to our customers.

Operating Expenses

Operating expenses were ~~$7.6~~$7.7 million and ~~$26.3~~$6.7 million for the three months ended ~~June~~September 30, 2022 and 2021, respectively. For the three months ended June 30, 2021, we recorded non-cash bad debt expense of $19.6 million, which is the difference between the $54.6 million accounts receivable balance that was subject to litigation and the $35.0 million cash payment received under the Settlement Agreement and Release, dated as of June 28, 2021 (the “Settlement Agreement”), by and between the Company and U.S. Well Services, LLC (“U.S. Well”). Salaries, benefits and payroll taxes increased to ~~$3.2~~$3.6 million for the three months ended ~~June~~September 30, 2022 as compared to ~~$2.3~~$2.5 million for the three months ended ~~June~~September 30, 2021, due primarily to accrued bonuses as management has reinstated a formal employee bonus plan based on company performance for 2022 and increased ~~staffing~~headcount to support higher sales volumes and our IPS ~~business segment.~~business. Depreciation and amortization ~~remained constant at~~increased to $0.6 million for the three months ended ~~June~~September 30, 2022 ~~and 2021.~~from $0.4 million for the three months ended September 30, 2021, due to additional assets placed in service. Selling, general and administrative expenses were ~~$3.8~~$3.5 million for the three months ended ~~June~~September 30, 2022 compared to $3.9 million for the three months ended ~~June~~September 30, 2021.

Other Income

In 2021 we qualified for federal government assistance through employee retention credit provisions of the Consolidated Appropriations Act of 2021. During the three months ended ~~June~~September 30, 2021, we recorded ~~$3.4~~$1.7 million in employee retention ~~credits, whereas for the three months ended June 30, 2022, we~~credits. We did not record any employee retention ~~credits.~~credits for the three months ended September 30, 2022.

Interest Expense, net

We incurred $0.4 million and $0.5 million of net interest expense for the three months ended ~~June~~September 30, 2022 and 2021, respectively.

Income Tax Expense (Benefit)

For the three months ended ~~June~~September 30, 2022 and 2021, our effective tax rate was approximately ~~108.7%~~23.6% and ~~(6.0)%~~2.3%, respectively, based on the annual effective tax rate net of discrete federal and state taxes. The computation of the effective tax rate includes modifications from the statutory rate such as income tax credits, tax depletion deduction, carrybacks, and state apportionment changes, among other items.

As of ~~June~~September 30, 2022, we have recorded a liability for uncertain tax positions included in deferred tax liabilities, long-term, net on our balance sheet, related to our depletion deduction methodology. As of ~~June~~September 30, 2022, we determined that it is more likely than not that we will not be able to fully realize the benefits of certain existing deductible temporary differences and have recorded a partial valuation allowance against the gross deferred tax assets, which is included in liabilities, long-term, net on our balance sheet, and a corresponding increase to the income tax expense on our condensed consolidated statement of operations.

Net Income (Loss)

Net income was $2.7 million for the three months ended September 30, 2022 as compared to net loss of $(7.3) million for the three months ended September 30, 2021. The improvement in net income in the current period relative to the prior period is primarily due to increased total volumes sold at higher average sales prices as increased demand has caused a positive shift in sand prices, partially offset by an increase in operating expenses.

SMART SAND, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(UNAUDITED)

Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021

The following table summarizes our revenue and expenses for the periods indicated.


	Nine Months Ended September 30,				Change
	2022		2021		Dollars		Percentage
	(in thousands)
Revenues:
Sand sales revenue	$	172,063	$	83,291	88,772		107	%
Shortfall revenue	4,596		4,421		175		4	%
Logistics revenue	5,252		3,856		1,396		36	%
Total revenue	181,911		91,568		90,343		99	%
Cost of goods sold	163,492		100,952		62,540		62	%
Gross profit	18,419		(9,384)		27,803		296	%
Operating expenses:
Salaries, benefits and payroll taxes	10,171		7,150		3,021		42	%
Depreciation and amortization	1,646		1,490		156		10	%
Selling, general and administrative	11,385		10,876		509		5	%
Bad debt expense	1		19,592		(19,591)		(100)	%

Total operating expenses	23,203		39,108		(15,905)		(41)	%
Operating income (loss)	(4,784)		(48,492)		43,708		90	%
Other income (expenses):

Interest expense, net	(1,244)		(1,527)		283		19	%
Other income	416		5,457		(5,041)		(92)	%
Total other income (expenses), net	(828)		3,930		(4,758)		(121)	%
Loss before income tax benefit	(5,612)		(44,562)		38,950		87	%
Income tax benefit	(2,282)		(6,121)		3,839		63	%
Net income (loss)	$	(3,330)	$	(38,441)	$	35,111	91	%

Revenues

Revenues were $181.9 million for the nine months ended September 30, 2022, during which time we sold approximately 3,158,000 tons of sand. Revenues for the nine months ended September 30, 2021 were $91.6 million, during which time we sold approximately 2,317,000 tons of sand. The key factors contributing to the increase in revenues for the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021 were as follows:

•Sand sales revenue increased from $83.3 million for the nine months ended September 30, 2021 to $172.1 million for the nine months ended September 30, 2022 as a result of an approximately 36% increase in total volumes sold. In addition to an increase in our sales volumes, the 107% increase in our revenue is also attributable to higher average sale prices of our sand. Sand prices have increased due to a shift in supply and demand, which we believe is driven by increased prices in oil and natural gas leading to increased completion activity of new oil and natural gas wells.

•Logistics revenue, which includes freight for certain mine gate sand sales, logistics services, and SmartSystems rentals, was approximately $5.3 million for the nine months ended September 30, 2022 compared to $3.9 million for the nine months ended September 30, 2021. The increase in logistics revenue was due to higher utilization of our SmartSystems fleet.

SMART SAND, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(UNAUDITED)

Cost of Goods Sold

Cost of goods sold was $163.5 million and $101.0 million for the nine months ended September 30, 2022 and September 30, 2021, respectively. The increase was primarily due to higher volumes sold in the current period and the related increase in production costs and freight costs that accompany higher volumes, along with higher labor costs and utilities costs.

Gross Profit

Gross profit was $18.4 million and $(9.4) million for the nine months ended September 30, 2022 and September 30, 2021, respectively. The improvement in the gross profit for the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021 was primarily due to higher sales volumes and higher average sale prices of our sand relative to the cost to produce and deliver products to our customers.

Operating Expenses

Operating expenses were $23.2 million and $39.1 million for the nine months ended September 30, 2022 and September 30, 2021, respectively. Salaries, benefits and payroll taxes increased to $10.2 million for the nine months ended September 30, 2022 as compared to $7.2 million for the nine months ended September 30, 2021, due primarily to accrued bonuses as management has reinstated a formal employee bonus plan based on company performance for 2022 and increased staffing to support our IPS business. Depreciation and amortization increased slightly from $1.5 million for the nine months ended September 30, 2021 to $1.6 million for the nine months ended September 30, 2022. Selling, general and administrative expenses increased to $11.4 million for the nine months ended September 30, 2022 compared to $10.9 million for the nine months ended September 30, 2021, primarily driven by increased travel costs post-COVID-19, increased royalty expense due to higher total volumes sold and development costs related to our Waynesburg terminal. In the second quarter of 2021, we recorded a $19.6 million non-cash charge related to the write-off of accounts receivable related to our legal settlement with U.S. Well Services, LLC. As part of the settlement we received $35 million in cash.

Interest Expense, net

We incurred $1.2 million and $1.5 million of net interest expense for the nine months ended September 30, 2022 and September 30, 2021, respectively. We continue to reduce debt levels and decrease interest expense through scheduled amortizing payments.

Income Tax Benefit

For the nine months ended September 30, 2022 and September 30, 2021, our effective tax rate was approximately 40.7% and 13.7%, respectively, based on the annual effective tax rate net of discrete federal and state taxes. The computation of the effective tax rate includes modifications from the statutory rate such as income tax credits, tax depletion deduction, carrybacks, and state apportionment changes, among other items.

As of September 30, 2022, we have recorded a liability for uncertain tax positions included on our balance sheet, related to our depletion deduction methodology. As of September 30, 2022, we determined that it is more likely than not that we will not be able to fully realize the benefits of certain existing deductible temporary differences and have recorded a partial valuation allowance against the gross deferred tax assets, which is included in liabilities, long-term, net on our balance sheet, and a corresponding increase to the income tax expense on our condensed consolidated statement of operations.

Net Loss

Net loss was ~~$(0.1)~~$(3.3) million for the ~~three~~nine months ended ~~June~~September 30, 2022 as compared to net loss of ~~$(27.3)~~$(38.4) million for the ~~three~~nine months ended June 30, 2021. The decrease in net loss is attributable to an increase in total volumes sold and higher average sale prices of our sand. Additionally, the difference was also due to non-cash bad debt expense recorded against the residual balance of accounts receivable that were previously the subject of litigation for the three months ended June 30, 2021.

~~SMART SAND, INC.~~

~~MANAGEMENT'S DISCUSSION AND ANALYSIS~~

~~OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(UNAUDITED)~~

~~Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021~~

~~The following table summarizes our revenue and expenses for the periods indicated.~~
Six Months Ended June 30, Change
2022 2021 Dollars Percentage
(in thousands)
Revenues:
Sand sales revenue $ 105,400 $ 51,948 53,452 103 %
Shortfall revenue 1,915 1,741 174 10 %
Logistics revenue 3,004 3,400 (396) (12) %
Total revenue 110,319 57,089 53,230 93 %
Cost of goods sold 103,329 64,426 38,903 60 %
Gross profit 6,990 (7,337) 14,327 (195) %
Operating expenses:
Salaries, benefits and payroll taxes 6,617 4,660 1,957 42 %
Depreciation and amortization 1,090 1,138 (48) (4) %
Selling, general and administrative 7,843 7,009 834 12 %
Bad debt expense 1 19,592 (19,591) (100) %
Total operating expenses 15,551 32,399 (16,848) (52) %
Operating income (loss) (8,561) (39,736) 31,175 (78) %
Other income (expenses):
Interest expense, net (833) (1,060) 227 (21) %
Other income 268 3,665 (3,397) (93) %
Total other income (expenses), net (565) 2,605 (3,170) (122) %
Loss before income tax benefit (9,126) (37,131) 28,005 (75) %
Income tax benefit (3,113) (5,952) 2,839 (48) %
Net loss $ (6,013) $ (31,179) $ 25,166 (81) %

~~Revenues~~

Revenues were $110.3 million for the six months ended June 30, 2022, during which time we sold approximately 2,048,000 tons of sand. Revenues for the six months ended June 30, 2021 were $57.1 million, during which time we sold approximately 1,527,000 tons of sand. The key factors contributing to the increase in revenues for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021 were as follows:

•Sand sales revenue increased from $51.9 million for the six months ended June 30, 2021 to $105.4 million for the six months ended June 30, 2022 as a result of an increase in total volumes sold of approximately 34%. In addition to an increase in our volume, the 103% increase in our revenue is also attributable to higher average sale prices of our sand. Sand prices have increased due to a shift in supply and demand, which we believe is driven by increased prices in oil and natural gas.

•We had $1.9 million contractual shortfall revenue for the six months ended June 30, 2022 compared to $1.7 million of contractual shortfall revenue for the six months ended June 30, 2021. Our customer contracts dictate whether shortfall is earned quarterly or at the end of their respective contract year. We recognize revenue to the extent of the unfulfilled minimum contracted quantity at the shortfall price per ton as stated in the contract.

•Logistics revenue, which includes freight for certain mine gate sand sales, railcar usage, logistics services, and SmartSystems rentals, was approximately $3.0 million for the six months ended June 30, 2022 compared to $3.4

~~SMART SAND, INC.~~

~~MANAGEMENT'S DISCUSSION AND ANALYSIS~~

~~OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(UNAUDITED)~~

million for the six months ended June 30, 2021. The decrease in logistics revenue was due to the shift from mine gate sales to in-basin sales, which include transportation and any other handling services, partially offset by higher utilization of our SmartSystems fleet.

~~Cost of Goods Sold~~

Cost of goods sold was $103.3 million and $64.4 million for the six months ended June 30, 2022 and June 30, 2021, respectively. The increase was primarily due to higher volumes sold in the current period and the related increase in production costs and freight costs that accompany higher volumes. Additionally higher labor costs and utilities have also contributed to an increase in cost of goods sold.

~~Gross Profit~~

Gross profit was $7.0 million and $(7.3) million for the six months ended June 30, 2022 and June 30, 2021, respectively. The improvement in the gross profit for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021 was primarily due to higher sales volumes and higher average sale prices of our sand relative to the cost to produce and deliver products to our customers.

Operating expenses were $15.6 million and $32.4 million for the six months ended June 30, 2022 and June 30, 2021, respectively. For the six months ended June 30, 2021, we recorded non-cash bad debt expense of $19.6 million, which is the difference between the $54.6 million accounts receivable balance that was subject to litigation and the $35.0 million cash payment received under the Settlement Agreement. Salaries, benefits and payroll taxes increased to $6.6 million for the six months ended June 30, 2022 as compared to $4.7 million for the six months ended June 30, 2021, due primarily to accrued bonuses as management has reinstated a formal employee bonus plan based on company performance for 2022 and increased staffing to support our IPS business segment. Depreciation and amortization remained constant at $1.1 million for the six months ended June 30, 2022 and June 30, 2021. Selling, general and administrative expenses increased to $7.8 million for the six months ended June 30, 2022 compared to $7.0 million for the six months ended June 30, 2021, primarily driven by higher travel costs post-COVID-19, increased royalty expense due to higher total volumes sold and development costs related to our Waynesburg terminal.

~~Interest Expense~~

We incurred $0.8 million and $1.1 million of net interest expense for the six months ended June 30, 2022 and June 30, 2021, respectively. We continue to reduce debt levels and decrease interest expense through scheduled amortizing payments.

~~Income Tax Benefit~~

For the six months ended June 30, 2022 and June 30, 2021, our effective tax rate was approximately 34.1% and 16.0%, respectively, based on the annual effective tax rate net of discrete federal and state taxes. The computation of the effective tax rate includes modifications from the statutory rate such as income tax credits, tax depletion deduction, carrybacks, and state apportionment changes, among other items.

As of June 30, 2022, we have recorded a liability for uncertain tax positions included on our balance sheet, related to our depletion deduction methodology. As of June 30, 2022, we determined that it is more likely than not that we will not be able to fully realize the benefits of certain existing deductible temporary differences and have recorded a partial valuation allowance against the gross deferred tax assets, which is included in liabilities, long-term, net on our balance sheet, and a corresponding increase to the income tax expense on our condensed consolidated statement of operations.

~~Net Loss~~

~~Net loss was $(6.0) million for the six months ended June 30, 2022 as compared to net loss of $(31.2) million for the six months ended June~~September 30, 2021. The decrease in net loss is attributable to an increase in total volumes sold and higher average sale prices of our sand in addition to non-cash bad debt expense recorded against the residual balance of accounts receivable that were previously the subject of litigation in ~~June 30, 2021.~~the prior year.

~~SMART SAND, INC.~~

~~MANAGEMENT'S DISCUSSION AND ANALYSIS~~

~~OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(UNAUDITED)~~

Non-GAAP Financial Measures

Contribution margin, EBITDA, Adjusted EBITDA and free cash flow are not financial measures presented in accordance with GAAP. We believe that the presentation of these non-GAAP financial measures will provide useful information to

SMART SAND, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(UNAUDITED)

investors in assessing our financial condition and results of operations. Gross profit is the GAAP measure most directly comparable to contribution margin, net income is the GAAP measure most directly comparable to EBITDA and Adjusted EBITDA and net cash provided by operating activities is the GAAP measure most directly comparable to free cash flow. Our non-GAAP financial measures should not be considered as alternatives to the most directly comparable GAAP financial measures. Each of these non-GAAP financial measures has important limitations as analytical tools because they exclude some but not all items that affect the most directly comparable GAAP financial measures. You should not consider contribution margin, EBITDA, Adjusted EBITDA or free cash flow in isolation or as substitutes for an analysis of our results as reported under GAAP. Because contribution margin, EBITDA, Adjusted EBITDA and free cash flow may be defined differently by other companies in our industry, our definitions of these non-GAAP financial measures may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.

Contribution Margin

We use contribution margin, which we define as total revenues less cost of goods sold excluding depreciation, depletion and accretion of asset retirement obligations, to measure our financial and operating performance. Contribution margin excludes other operating expenses and income, including costs not directly associated with the operations of our business such as accounting, human resources, information technology, legal, sales and other administrative activities.

We believe that reporting contribution margin and contribution margin per ton sold provides useful performance metrics to management and external users of our financial statements, such as investors and commercial banks, because these metrics provide an operating and financial measure of our ability, as a combined business, to generate margin in excess of our operating cost base.

Gross profit is the GAAP measure most directly comparable to contribution margin. Contribution margin should not be considered an alternative to gross profit presented in accordance with GAAP. Since contribution margin may be defined differently by other companies in our industry, our definition of contribution margin may not be comparable to similarly titled measures of other companies, thereby diminishing its utility. The following table presents a reconciliation of contribution margin to gross profit.


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2022		2021		2022		2021
		(in thousands, except per ton amounts)									(in thousands, except per ton amounts)
Revenue	Revenue	$	68,714	$	29,639	$	110,319	$	57,089	Revenue	$	71,592	$	34,479	$	181,911	$	91,568
Cost of goods sold	Cost of goods sold	59,743		31,999		103,329		64,426		Cost of goods sold	60,163		36,526		163,492		100,952
Gross profit		8,971		(2,360)		6,990		(7,337)
Gross profit (loss)										Gross profit (loss)	11,429		(2,047)		18,419		(9,384)
Depreciation, depletion, and accretion of asset retirement obligations	Depreciation, depletion, and accretion of asset retirement obligations	6,283		5,851		12,514		11,864		Depreciation, depletion, and accretion of asset retirement obligations	6,340		6,145		18,854		18,009
Contribution margin	Contribution margin	$	15,254	$	3,491	$	19,504	$	4,527	Contribution margin	$	17,769	$	4,098	$	37,273	$	8,625
Contribution margin per ton	Contribution margin per ton	$	12.75	$	4.55	$	9.52	$	2.96	Contribution margin per ton	$	16.01	$	5.19	$	11.80	$	3.72
Total tons sold	Total tons sold	1,196		767		2,048		1,527		Total tons sold	1,110		790		3,158		2,317

Contribution margin was ~~$15.3~~$17.8 million and ~~$3.5~~$4.1 million, or ~~$12.75~~$16.01 and ~~$4.55~~$5.19 per ton sold, for the three months ended ~~June~~September 30, 2022 and 2021, respectively. For the ~~six~~nine months ended contribution margin was ~~$19.5~~$37.3 million and ~~$4.5~~$8.6 million, or ~~$9.52~~$11.80 and ~~$2.96~~$3.72 per ton sold, for the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, respectively. The increase in overall contribution margin and contribution margin per ton was due primarily to higher sales volumes and higher average sale prices relative to the cost to produce and deliver products to our ~~customers.~~customers, along with increased IPS sales and higher utilization of our SmartSystems fleet in the current period.

~~SMART SAND, INC.~~

~~MANAGEMENT'S DISCUSSION AND ANALYSIS~~

~~OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(UNAUDITED)~~

EBITDA and Adjusted EBITDA

We define EBITDA as net income, plus: (i) depreciation, depletion and amortization expense; (ii) income tax expense (benefit); (iii) interest expense; and (iv) franchise taxes. We define Adjusted EBITDA as EBITDA, plus: (i) gain or loss on sale of fixed assets or discontinued operations; (ii) integration and transition costs associated with specified transactions; (iii) equity

SMART SAND, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(UNAUDITED)

compensation; (iv) acquisition and development costs; (v) non-recurring cash charges related to restructuring, retention and other similar actions; (vi) earn-out, contingent consideration obligations and other acquisition and development costs; and (vii) non-cash charges and unusual or non-recurring charges. Adjusted EBITDA is used as a supplemental financial measure by management and by external users of our financial statements, such as investors and commercial banks, to assess:

•the financial performance of our assets without regard to the impact of financing methods, capital structure or historical cost basis of our assets;

•the viability of capital expenditure projects and the overall rates of return on alternative investment opportunities;

•our ability to incur and service debt and fund capital expenditures;

•our operating performance as compared to those of other companies in our industry without regard to the impact of financing methods or capital structure; and

•our debt covenant compliance, as Adjusted EBITDA is a key component of critical covenants to the ABL Credit Facility.

We believe that our presentation of EBITDA and Adjusted EBITDA will provide useful information to investors in assessing our financial condition and results of operations. Net income is the GAAP measure most directly comparable to EBITDA and Adjusted EBITDA. EBITDA and Adjusted EBITDA should not be considered alternatives to net income presented in accordance with GAAP. Because EBITDA and Adjusted EBITDA may be defined differently by other companies in our industry, our definitions of EBITDA and Adjusted EBITDA may not be comparable to similarly titled measures of other companies, thereby diminishing their utility. The following table presents a reconciliation of EBITDA and Adjusted EBITDA to net loss for each of the periods indicated.


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2022		2021		2022		2021
		(in thousands)									(in thousands)
Net loss		$	(90)	$	(27,267)	$	(6,013)	$	(31,179)
Net income (loss)										Net income (loss)	$	2,683	$	(7,262)	$	(3,330)	$	(38,441)
Depreciation, depletion and amortization	Depreciation, depletion and amortization	6,658		6,317		13,225		12,777		Depreciation, depletion and amortization	6,705		6,165		19,931		18,941
Income tax expense (benefit)	Income tax expense (benefit)	1,127		1,552		(3,113)		(5,952)		Income tax expense (benefit)	831		(169)		(2,282)		(6,121)
Interest expense	Interest expense	417		515		851		1,070		Interest expense	431		484		1,282		1,554
Franchise taxes	Franchise taxes	131		97		191		195		Franchise taxes	77		42		268		237
EBITDA	EBITDA	$	8,243	$	(18,786)	$	5,141	$	(23,089)	EBITDA	$	10,727	$	(740)	$	15,869	$	(23,830)
Gain on sale of fixed assets		(16)		(60)		(16)		(58)
(Gain) loss on sale of fixed assets										(Gain) loss on sale of fixed assets	(466)		281		(482)		223
Equity compensation	Equity compensation	636		581		1,311		1,266		Equity compensation	713		784		2,023		2,050

Employee retention credit										Employee retention credit	—		(1,674)		—		(5,026)
Acquisition and development costs	Acquisition and development costs	—		(5)		337		18		Acquisition and development costs	97		—		434		17

Cash charges related to restructuring and retention of employees										Cash charges related to restructuring and retention of employees	31		8		137		9
Accretion of asset retirement obligations	Accretion of asset retirement obligations	190		111		379		225		Accretion of asset retirement obligations	189		332		569		558
Adjusted EBITDA	Adjusted EBITDA	$	9,159	$	(21,511)	$	7,258	$	(24,990)	Adjusted EBITDA	$	11,291	$	(1,009)	$	18,550	$	(25,999)

Adjusted EBITDA was ~~$9.2~~$11.3 million for the three months ended ~~June~~September 30, 2022 compared to ~~$(21.5)~~$(1.0) million for the three months ended ~~June~~September 30, 2021. Adjusted EBITDA was ~~$7.3~~$18.6 million for the ~~six~~nine months ended ~~June~~September 30, 2022 compared to ~~$(25.0)~~$(26.0) million for the ~~six~~nine months ended ~~June~~September 30, 2021. The increase in Adjusted EBITDA was primarily due to higher sales volumes, and higher average sale prices of our sand relative to the cost to produce and deliver products to our customers.

2728

SMART SAND, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(UNAUDITED)

Free Cash Flow

Free cash flow, which we define as net cash provided by operating activities less purchases of property, plant and equipment, is used as a supplemental financial measure by our management and by external users of our financial statements, such as investors and commercial banks, to measure the liquidity of our business.

Net cash provided by operating activities is the GAAP measure most directly comparable to free cash flows. Free cash flows should not be considered an alternative to net cash provided by operating activities presented in accordance with GAAP. Because free cash flows may be defined differently by other companies in our industry, our definition of free cash flows may not be comparable to similarly titled measures of other companies, thereby diminishing its utility. The following table presents a reconciliation of free cash flows to net cash provided by operating activities.


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2022		2021		2022		2021
		(in thousands, except per ton amounts)									(in thousands, except per ton amounts)
Net cash (used in) provided by operating activities	Net cash (used in) provided by operating activities	$	(2,287)	$	32,566	$	(10,949)	$	36,480	Net cash (used in) provided by operating activities	$	10,780	$	1,064	$	(169)	$	37,544
Acquisition of Blair facility	Acquisition of Blair facility	—		—		(6,547)		—		Acquisition of Blair facility	—		—		(6,547)		—
Purchases of property, plant and equipment	Purchases of property, plant and equipment	(1,369)		(2,830)		(5,137)		(5,043)		Purchases of property, plant and equipment	(4,398)		(1,933)		(9,535)		(6,976)
Free cash flow	Free cash flow	$	(3,656)	$	29,736	$	(22,633)	$	31,437	Free cash flow	$	6,382	$	(869)	$	(16,251)	$	30,568

Free cash flow was ~~$(3.7)~~$6.4 million for the three months ended ~~June~~September 30, 2022 compared to ~~$29.7~~$(0.9) million for the three months ended ~~June~~September 30, 2021.

The increase in free cash flow was primarily attributable to cash collections from customers on positive results of operations and measured spending during the quarter. Free cash flow was ~~$(22.6)~~$(16.3) million for the ~~six~~nine months ended ~~June~~September 30, 2022 compared to ~~$31.4~~$30.6 million for the ~~six~~nine months ended ~~June~~September 30, 2021. The decrease in free cash flow was primarily attributable to purchase of Blair for $6.5 million, increase in accounts receivable, repayment of tax refund IRS mistakenly provided in prior period of $2.3 million, and increase in unbilled receivables in the ~~six~~nine months ended ~~June~~September 30, 2022 compared to the ~~six~~nine months ended ~~June~~September 30, 2021. We expect that the investments made in the current period will be cash-generating assets in the future.

Liquidity and Capital Resources

Our primary sources of liquidity are cash flow generated from operations and availability under our ABL Credit Facility and other equipment financing sources. As of ~~June~~September 30, 2022, cash on hand was ~~$2.1~~$10.4 million and we had ~~$16.0~~$13.0 million in undrawn availability on our ABL Credit Facility.

Based on our balance sheet, cash flows, current market conditions, and information available to us at this time, we believe that we have sufficient liquidity and other available capital resources, to meet our cash needs for the next twelve months.

Material Cash Requirements

Capital Requirements

We expect full year 2022 capital expenditures,including amounts relating to the acquisition of the Blair facility, to be between $20.0 million and $25.0 million, which we anticipate will primarily support efficiency projects at Oakdale and Utica and capital related to the Waynesburg terminal. We expect to fund these capital expenditures with cash from operations, equipment financing options available to us or borrowings under the ABL Credit Facility or other financing sources, such as equipment finance providers. For the ~~six~~nine months ended ~~June~~September 30, 2022, we spent approximately ~~$5.1~~$9.5 million on capital ~~expenditures.~~expenditures and $6.5 million on the acquisition of the Blair facility.

2829

SMART SAND, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(UNAUDITED)

Indebtedness

~~We have several~~Our debt facilities ~~including~~include the Oakdale Equipment Financing, various notes payable and our ABL Credit Facility. Our Oakdale Equipment Financing is secured by substantially all of the assets at our Oakdale facility. The balance on this facility as of ~~June~~September 30, 2022 was ~~$13.6~~$12.7 million. Minimum cash payments on this facility for the remainder of 2022 are anticipated to be ~~$2.3~~$1.2 million. Our various notes payable are primarily secured by our manufactured SmartSystems equipment. Total debt under these notes payable as of ~~June~~September 30, 2022 was ~~$4.7~~$3.8 million. Minimum cash payments on these notes payable for the remainder of 2022 are anticipated to be ~~$1.6~~$0.7 million. There was ~~$3.0~~$6.0 million outstanding on our ABL Credit Facility as of ~~June~~September 30, 2022.

Operating Leases

We use leases primarily to procure certain office space, railcars and heavy equipment as part of ~~its~~our operations. The majority of our lease payments are fixed and determinable. Our operating lease liabilities as of ~~June~~September 30, 2022 were ~~$33.2~~$30.5 million. Minimum cash payments on operating leases for the remainder of 2022 are anticipated to be ~~$5.9~~$2.5 million.

Mineral Rights Property

The Company is obligated under certain contracts for minimum payments for the right to use land for extractive activities. The annual minimum payments under these contracts are approximately $2.5 million per year in the aggregate for the next 15 years.

Off-Balance Sheet Arrangements

We had outstanding performance bonds of $17.7 million and $8.6 million at ~~June~~September 30, 2022 and December 31, 2021, respectively. The increase in performance bonds is due primarily to the acquisition of the Blair facility and the assumption of performance bonds related to its potential future reclamation obligations.

Contractual Obligations

As of ~~June~~September 30, 2022, we had contractual obligations for the ABL Credit Facility, Oakdale Equipment Financing, notes payable, operating and finance leases, minimum payments for the rights to mine land, capital expenditures, asset retirement obligations, and other commitments to municipalities for maintenance.

Environmental Matters

We are subject to various federal, state and local laws and regulations governing, among other things, hazardous materials, air and water emissions, environmental contamination and reclamation and the protection of the environment and natural resources. We have made, and expect to make in the future, expenditures to comply with such laws and regulations, but cannot predict the full amount of such future expenditures.

Seasonality

Our business is affected to some extent by seasonal fluctuations in weather that impact the production levels for a portion of our wet sand processing capacity. While our dry plants are able to process finished product volumes evenly throughout the year, our excavation and our wet sand processing activities have historically been limited ~~to primarily non-winter~~during winter months. As a consequence, we have experienced lower cash operating costs in the first and fourth quarter of each calendar year, and higher cash operating costs in the second and third quarter of each calendar year when we overproduced to meet demand in the winter months. These higher cash operating costs were capitalized into inventory and expensed when these tons are sold, which can lead to us having higher overall cost of production in the first and fourth quarters of each calendar year as we expense inventory costs that were previously capitalized. We have indoor wet processing facilities at each of our plant locations, which allow us to produce wet sand inventory year-round to support a portion of our dry sand processing capacity, which may reduce certain of the effects of this seasonality. We may also sell frac sand for use in oil and natural gas producing basins where severe weather

2930

SMART SAND, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(UNAUDITED)

conditions may curtail drilling activities and, as a result, our sales volumes to those areas may be reduced during such severe weather periods.

Customer Concentration

For the ~~six~~nine months ended ~~June~~September 30, 2022, revenue from EQT Production Corporation, Halliburton Energy Services, ~~and~~ Encino Energy, and Liberty Oilfield Services accounted for ~~28.3%~~22.5%, ~~18.7%~~16.1%, 13.4%, and ~~10.1%~~13.0%, respectively, of total revenue. For the ~~six~~nine months ended ~~June~~September 30, 2021, ~~revenue from Rice Energy (a predecessor of~~ EQT Production ~~Corporation),~~Corporation, Halliburton Energy Services, Liberty Oilfield Services, and Enerplus Resources Corporation accounted for ~~30.9%~~26.1%, ~~21.8%~~18.2%, 13.0%, and ~~13.0%~~10.6%, respectively, of total revenue.

Critical Accounting Policies and Estimates

There have been no material changes in our critical accounting policies and procedures during the ~~six~~nine months ended ~~June~~September 30, 2022.

Use of Estimates

The preparation of ~~financial~~interim statements ~~in accordance with GAAP~~ requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant estimates used in the preparation of these financial statements include, but are not limited to: impairment considerations of assets, including intangible assets, fixed assets, and inventory; estimated cost of future asset retirement obligations; fair values of acquired assets and assumed liabilities; recoverability of deferred tax assets; inventory reserve; and the collectability of receivables; and certain liabilities.

Actual results could differ from management’s best estimates as additional information or actual results become available in the future, and those differences could be material. The decreases in demand related to COVID-19 pandemic in 2020 and 2021 and the ongoing conflict in Ukraine have caused dramatic swings in oil and natural gas prices and significant volatility in the oilfield service ~~sector since.~~sector. Additionally, future economic performance is uncertain due to current high inflation and other economic concerns. We continue to actively monitor the global impact of current events, but we are currently unable to estimate the impact of these events on our future financial position and results of operations or give any assurances that these events will not have a material adverse effect on our financial position or results of operations.

3031

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

The majority of our debt is financed under fixed interest rates. Borrowings under the ABL Credit Facility bear interest at a rate per annum equal to an applicable margin, plus, at our option, either a LIBOR rate or an alternate base rate (“ABR”). The applicable margin is 2.00% for LIBOR loans and 1.00% for ABR loans. The outstanding balance onunder our ABL Credit Facility as of ~~June~~September 30, 2022 was ~~$3.0~~$6.0 million. We do not believe this represents a material interest rate risk.

We have considered other changes in our exposure to market risks during the ~~six~~nine months ended ~~June~~September 30, 2022 and have determined that there have been no additional material changes to our exposure to market risks from those described in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 8, 2022.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Report. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of such date, our disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

There have been no changes in internal control over financial reporting for the quarter ended ~~June~~September 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

3132

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time we may be involved in litigation relating to claims arising out of our operations in the normal course of business. The disclosure called for by Part II, Item 1 regarding our legal proceedings is incorporated by reference herein from Part I, Item 1. Note 15 - Commitments and Contingencies - Litigation of the notes to the condensed consolidated financial statements in this Form 10-Q for the three and ~~six~~nine months ended ~~June~~September 30, 2022.

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors described in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2021.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the quarter ended ~~June~~September 30, 2022, no shares were sold by the Company without registration under the Securities Act of 1933, as amended.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

We are committed to maintaining a culture that prioritizes mine safety. We believe that our commitment to safety, the environment and the communities in which we operate is critical to the success of our business. Our sand mining operations are subject to mining safety regulation. The U.S. Mining Safety and Health Administration (“MSHA”) is the primary regulatory organization governing frac sand mining and processing. Accordingly, MSHA regulates quarries, surface mines, underground mines and the industrial mineral processing facilities associated with and located at quarries and mines. The mission of MSHA is to administer the provisions of the Federal Mine Safety and Health Act of 1977 and to enforce compliance with mandatory miner safety and health standards. As part of MSHA’s oversight, representatives perform at least two unannounced inspections annually for each above-ground facility.

We are also subject to regulations by the U.S. Occupational Safety and Health Administration, which has promulgated rules for workplace exposure to respirable silica for several other industries. Respirable silica is a known health hazard for workers exposed over long periods. MSHA is expected to adopt similar rules as part of its “Long Term Items” for rulemaking. Airborne respirable silica is associated with work areas at our site and is monitored closely through routine testing and MSHA inspection. If the workplace exposure limit is lowered significantly, we may be required to incur certain capital expenditures for equipment to reduce this exposure.

Our operations are subject to the Federal Mine Safety and Health Act of 1977, as amended by the Mine Improvement and New Emergency Response Act of 2006, which imposes stringent health and safety standards on numerous aspects of mineral extraction and processing operations, including the training of personnel, operating procedures, operating equipment, and other matters. Our failure to comply with such standards, or changes in such standards or the interpretation or enforcement thereof, could have a material adverse effect on our business and financial condition or otherwise impose significant restrictions on our ability to conduct mineral extraction and processing operations. Following passage of The Mine Improvement and New Emergency Response Act of 2006, MSHA significantly increased the numbers of citations and orders charged against mining operations. The dollar penalties assessed for citations issued has also increased in recent years. Information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K (17 CFR 229.104) is included in Exhibit 95.1 to this Report.

ITEM 5. OTHER INFORMATION

None.

3233

ITEM 6. EXHIBITS


3.1						Second Amended and Restated Certificate of Incorporation of Smart Sand, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on November 15, 2016)
3.2						Second Amended and Restated Bylaws of Smart Sand, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed with the SEC on November 15, 2016)
10.1*						Amendment No. 13 to ~~Smart Sand, Inc. Amended and Restated 2016 Omnibus Incentive Plan~~ABL Credit Agreement
31.1*						Certification Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*						Certification Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*†						Certification Pursuant to 18 U.S.C. adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*†						Certification Pursuant to 18 U.S.C. adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
95.1*						Mine Safety Disclosure Exhibit
101.INS						Extracted XBRL Instance Document - the instance document does not appear in the Interactive Data File as XBRL tags are embedded in the Inline XBRL document.
101.SCH*						XBRL Taxonomy Extension Schema
101.CAL*						XBRL Taxonomy Extension Calculation Linkbase
101.DEF*						XBRL Taxonomy Extension Definition Linkbase
101.LAB*						XBRL Taxonomy Extension Label Linkbase
101.PRE*						XBRL Taxonomy Extension Presentation Linkbase
104*						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


*			Filed Herewith.
†			This certification is deemed not filed for purposes of section 18 of the Exchange Act, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act.

3334

Signatures

Pursuant to the requirements of Section 13 or 15(d) 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.


	Smart Sand, Inc.

~~August 9,~~November 8, 2022	By:	/s/ Charles E. Young
		Charles E. Young, Chief Executive Officer
		(Principal Executive Officer)


	Smart Sand, Inc.

~~August 9,~~November 8, 2022	By:	/s/ Lee E. Beckelman
		Lee E. Beckelman, Chief Financial Officer
		(Principal Financial Officer)

3435