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

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

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

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

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

As of ~~October 31, 2020,~~November 1, 2021, the registrant had ~~71,766,358~~52,351,768 shares of Class A Common Stock and ~~2,302,936~~0 shares of Class B Common Stock outstanding.

September 30, 2020

December 31, 2019

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$
519

$
33,794

Restricted cash

519

7,610

Accounts receivable (net of allowance for doubtful accounts of
   $9,000 and $22 as of September 30, 2020 and December 31, 2019, respectively)

36,416

79,542

Inventory, net

7,321

9,052

Prepaids and other current assets

10,443

13,332

Total current assets

55,218

143,330

Property and equipment, net

242,810

441,610

Intangible assets, net

13,708

21,826

Goodwill

4,971

4,971

Deferred financing costs, net

1,196

1,045

TOTAL ASSETS

$
317,903

$
612,782

LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES:

Accounts payable

$
35,745

$
70,170

Accrued expenses and other current liabilities

12,142

40,481

Notes payable

1,867

8,068

Current portion of long-term equipment financing

3,473

5,564

Capital lease obligation

6,201

10,474

Current portion of long-term debt

-

6,250

Total current liabilities

59,428

141,007

Long-term equipment financing

10,243

10,501

Long-term debt

250,831

274,391

Other long-term liabilities

1,598

215

TOTAL LIABILITIES

322,100

426,114

Commitments and contingencies (NOTE 16)

MEZZANINE EQUITY

Series A Redeemable Convertible Preferred Stock, par value $0.0001 per share;
   55,000 shares authorized; 52,000 shares and 55,000 shares issued and
   outstanding as of September 30, 2020 and December 31, 2019, respectively;
   aggregate liquidation preference of $61,006 and $59,050 as of September 30,
   2020 and December 31, 2019, respectively

50,907

38,928

Series B Redeemable Convertible Preferred Stock, par value $0.0001 per share;
   22,050 shares 0 shares authorized, issued and outstanding as of September 30,
   2020 and December 31, 2019, respectively; aggregate liquidation preference of
   $23,398 and $0 as of September 30, 2020 and December 31, 2019, respectively

21,984

-

STOCKHOLDERS' EQUITY (DEFICIT)

Class A Common Stock, par value of $0.0001 per share; 400,000,000 shares
   authorized; 71,413,883 shares and 62,857,624 shares issued and outstanding
   as of September 30, 2020 and December 31, 2019, respectively

7

5

Class B Common Stock, par value of $0.0001 per share; 20,000,000 shares
   authorized; 2,302,936 shares and 5,500,692 shares issued and outstanding
   as of September 30, 2020 and December 31, 2019, respectively

-

1

Additional paid in capital

240,547

248,302

Accumulated deficit

(317,642
)

(111,201
)
Total stockholders' equity (deficit) attributable to U.S. Well Services, Inc.

(77,088
)

137,107

Noncontrolling interest

-

10,633

Total Stockholders' Equity (Deficit)

(77,088
)

147,740

TOTAL LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' EQUITY (DEFICIT)

$
317,903

$
612,782

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

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


													Three Months Ended						Nine Months Ended
	Three Months Ended September 30,						Nine Months Ended September 30,						September 30,						September 30,
	2020			2019			2020			2019			2021			2020			2021			2020
Revenue	$	44,042		$	130,884		$	195,914		$	422,075		$	56,477		$	44,042		$	211,534		$	195,914
Costs and expenses:
Cost of services (excluding depreciation and amortization)		31,157			90,792			145,321			307,841			58,115			31,157			179,998			145,321
Depreciation and amortization		16,393			39,723			65,759			117,888			6,980			16,393			27,922			65,759
Selling, general and administrative expenses		6,098			8,216			30,376			24,474			11,142			6,098			25,746			30,376
Impairment of long-lived assets		-			-			147,543			-			-			-			-			147,543
Loss on disposal of assets		755			4,976			5,852			15,884
Litigation settlement														-			-			35,000			-
Loss (gain) on disposal of assets														(12,001	)		755			(10,110	)		5,852
Loss from operations		(10,361	)		(12,823	)		(198,937	)		(44,012	)		(7,759	)		(10,361	)		(47,022	)		(198,937	)
Interest expense, net		(5,744	)		(8,449	)		(19,357	)		(21,384	)		(10,634	)		(5,748	)		(24,150	)		(19,369	)
Loss on extinguishment of debt		-			-			-			(12,558	)
Change in fair value of warrant liabilities														2,052			1,783			(5,235	)		6,972
Patent license sales														-			-			22,500			-
Gain on extinguishment of debt, net														6,645			-			5,806			-
Other income		30			62			81			1,774			117			30			169			81
Loss before income taxes		(16,075	)		(21,210	)		(218,213	)		(76,180	)		(9,579	)		(14,296	)		(47,932	)		(211,253	)
Income tax expense (benefit)		(87	)		39			(824	)		469
Income tax benefit														-			(87	)		(27	)		(824	)
Net loss		(15,988	)		(21,249	)		(217,389	)		(76,649	)		(9,579	)		(14,209	)		(47,905	)		(210,429	)
Net loss attributable to noncontrolling interest		(51	)		(4,280	)		(10,948	)		(15,929	)		-			(51	)		(44	)		(10,948	)
Net loss attributable to U.S. Well Services, Inc.		(15,937	)		(16,969	)		(206,441	)		(60,720	)		(9,579	)		(14,158	)		(47,861	)		(199,481	)
Dividends accrued on Series A preferred stock		(1,854	)		(1,670	)		(5,450	)		(2,330	)		(997	)		(1,854	)		(4,808	)		(5,450	)
Dividends accrued on Series B preferred stock		(681	)		-			(1,347	)		-			(3,069	)		(681	)		(4,591	)		(1,347	)
Deemed and imputed dividends on Series A preferred stock		(467	)		(4,406	)		(11,220	)		(5,966	)		-			(464	)		(750	)		(12,578	)
Deemed dividends on Series B preferred stock														(1,509	)		-			(7,178	)		-
Exchange of Series A preferred stock for convertible senior notes														-			-			8,936			-
Net loss attributable to U.S. Well Services, Inc. common stockholders	$	(18,939	)	$	(23,045	)	$	(224,458	)	$	(69,016	)	$	(15,154	)	$	(17,157	)	$	(56,252	)	$	(218,856	)
Loss per common share (See Note 12):
Basic and diluted	$	(0.28	)	$	(0.45	)	$	(3.46	)	$	(1.36	)
Loss per common share (See Note 14):
Basic and diluted (1)													$	(0.50	)	$	(0.88	)	$	(2.14	)	$	(11.80	)
Weighted average common shares outstanding:
Basic and diluted		66,667			50,250			63,431			49,182
Basic and diluted (1)														29,802			19,048			25,919			18,123

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

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

Nine Months Ended September 30,

2020

2019

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss

$
(217,389
)

$
(76,649
)
Adjustments to reconcile net loss to cash provided by
operating activities:

Depreciation and amortization

65,759

117,888

Impairment of long-lived assets

147,543

-

Provision for losses on accounts receivable

9,031

307

Provision for losses on inventory obsolescence

603

-

Loss on disposal of assets

5,852

15,884

Amortization of discount on debt

2,355

1,373

Deferred financing costs amortization

1,017

1,049

Loss on extinguishment of debt

-

12,558

Share-based compensation expense

4,519

5,672

Changes in assets and liabilities:

Accounts receivable

34,096

(50,331
)
Inventory

1,128

(2,036
)
Prepaids and other current assets

5,979

1,795

Accounts payable

(22,375
)

2,243

Accrued liabilities

(8,360
)

1,487

Accrued interest

(10,669
)

11,090

Net cash provided by operating activities

19,089

42,330

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of property and equipment

(43,948
)

(194,114
)
Proceeds from sale of property and equipment

15,778

706

Net cash used in investing activities

(28,170
)

(193,408
)
CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from revolving credit facility

25,723

49,134

Repayment of revolving credit facility

(51,034
)

(65,000
)
Proceeds from issuance of long-term debt

10,000

285,000

Repayments of long-term debt

(2,500
)

(75,000
)
Payment of fees related to debt extinguishment

-

(6,560
)
Proceeds from issuance of note payable

-

9,117

Repayments of notes payable

(6,201
)

(4,560
)
Repayments of amounts under equipment financing

(2,349
)

(66,872
)
Principal payments under finance lease obligation

(4,272
)

(12,494
)
Proceeds from issuance of preferred stock and warrants, net

19,596

54,524

Deferred financing costs

(20,248
)

(13,451
)
Net cash provided by (used in) financing activities

(31,285
)

153,838

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

(40,366
)

2,760

Cash and cash equivalents and restricted cash,
   beginning of period

41,404

30,036

Cash and cash equivalents and restricted cash,
   end of period

$
1,038

$
32,796

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

CONDENSED CONSOLIDATED STATEMENTS OF ~~CASH FLOWS (continued)~~STOCKHOLDERS' DEFICIT

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

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

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' ~~EQUITY (DEFICIT)~~DEFICIT (continued)

Class A Common
Stock

Class B Common
Stock

Additional

Paid in

Accumulated

Noncontrolling

Total

Shares

Amount

Shares

Amount

Capital

Deficit

Interest

Equity

Balance, December 31, 2018

49,254,760

$
5

13,937,332

$
1

$
204,928

$
(17,383
)

$
52,798

$
240,349

Adoption of ASC 606 as of
   January 1, 2019

-

-

-

-

-

95

27

122

Exercise of warrants

2,925,712

-

-

-

-

-

-

-

Conversion of Class B common stock to Class A common stock

161,932

-

(161,932
)

-

-

-

-

-

Restricted stock granted to
   employees

2,218,183

-

-

-

-

-

-

-

Class A common stock granted
   to board members

46,875

-

-

-

331

-

87

418

Share-based compensation

-

-

-

-

4,265

-

1,094

5,359

Restricted stock forfeitures

(18,687
)

-

-

-

-

-

-

-

Issuance of warrants to purchase common stock associated with preferred stock offering

-

-

-

-

10,720

-

-

10,720

Beneficial conversion feature of Series A preferred stock

-

-

-

-

20,132

-

-

20,132

Deemed and imputed dividends on Series A preferred stock

-

-

-

-

(5,966
)

-

-

(5,966
)
Accrued Series A preferred stock dividends

-

-

-

-

(2,330
)

-

-

(2,330
)
Net loss

-

-

-

-

-

(60,720
)

(15,929
)

(76,649
)
Balance, September 30, 2019

54,588,775

$
5

13,775,400

$
1

$
232,080

$
(78,008
)

$
38,077

$
192,155

Class A Common
Stock

Class B Common
Stock

Additional

Paid in

Accumulated

Noncontrolling

Total

Shares

Amount

Shares

Amount

Capital

Deficit

Interest

Equity

Balance, December 31, 2019

62,857,624

$
5

5,500,692

$
1

$
248,302

$
(111,201
)

$
10,633

$
147,740

Class A common stock issuance

5,530,022

1

-

-

1,437

-

-

1,438

Conversion of Class B common stock to Class A common stock

3,197,756

1

(3,197,756
)

(1
)

-

-

-

-

Conversion of Series A preferred stock to Class A common stock

523,973

-

-

-

4,691

-

-

4,691

Share-based compensation

-

-

-

-

4,204

-

315

4,519

Tax withholding related to vesting of share-based compensation

(154,253
)

-

-

-

(70
)

-

-

(70
)
Restricted stock forfeitures

(541,239
)

-

-

-

-

-

-

-

Deemed and imputed dividends on Series A preferred stock

-

-

-

-

(11,220
)

-

-

(11,220
)
Accrued Series A preferred stock dividends

-

-

-

-

(5,450
)

-

-

(5,450
)
Accrued Series B preferred stock dividends

-

-

-

-

(1,347
)

-

-

(1,347
)
Net loss

-

-

-

-

-

(206,441
)

(10,948
)

(217,389
)
Balance, September 30, 2020

71,413,883

$
7

2,302,936

$
-

$
240,547

$
(317,642
)

$
-

$
(77,088
)

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

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

U.S. WELL SERVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (continued)

(in thousands, except share amounts)

(unaudited)

Class A Common
Stock

Class B Common
Stock

Additional

Paid in

Accumulated

Noncontrolling

Total

Shares

Amount

Shares

Amount

Capital

Deficit

Interest

Equity

Balance, June 30, 2019

54,607,462

$
5

13,775,400

$
1

$
236,398

$
(61,039
)

$
41,914

$
217,279

Share-based compensation

-

-

-

-

1,758

-

443

2,201

Restricted stock forfeitures

(18,687
)

-

-

-

-

-

-

-

Deemed and imputed dividends on Series A preferred stock

-

-

-

-

(4,406
)

-

-

(4,406
)

Accrued Series A preferred stock dividends

-

-

-

-

(1,670
)

-

-

(1,670
)

Net loss

-

-

-

-

-

(16,969
)

(4,280
)

(21,249
)

Balance, September 30, 2019

54,588,775

$
5

13,775,400

$
1

$
232,080

$
(78,008
)

$
38,077

$
192,155

Class A Common
Stock

Class B Common
Stock

Additional

Paid in

Accumulated

Noncontrolling

Total

Shares

Amount

Shares

Amount

Capital

Deficit

Interest

Equity

Balance, June 30, 2020

68,361,213

$
7

5,014,897

$
-

$
237,872

$
(301,705
)

$
-

$
(63,826
)

Class A common stock issuance

400

-

-

-

-

-

-

-

Conversion of Class B common stock to Class A common stock

2,711,961

-

(2,711,961
)

-

-

-

-

-

Conversion of Series A preferred stock to Class A common stock

523,973

-

-

-

4,691

-

-

4,691

Share-based compensation

-

-

-

-

986

-

51

1,037

Restricted stock forfeitures

(183,664
)

-

-

-

-

-

-

-

Deemed and imputed dividends on Series A preferred stock

-

-

-

-

(467
)

-

-

(467
)

Accrued Series A preferred stock dividends

-

-

-

-

(1,854
)

-

-

(1,854
)

Accrued Series B preferred stock dividends

-

-

-

-

(681
)

-

-

(681
)

Net loss

-

-

-

-

-

(15,937
)

(51
)

(15,988
)

Balance, September 30, 2020

71,413,883

$
7

2,302,936

$
-

$
240,547

$
(317,642
)

$
-

$
(77,088
)

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

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~Notes to Unaudited Condensed Consolidated Financial Statements

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

NOTE 1 – DESCRIPTION OF BUSINESS

U.S. Well Services, Inc. (the ~~“Company”~~“Company,” “we,” “us” or “our”), f/k/a Matlin & Partners Acquisition Corp (“MPAC”), is a Houston, Texas-based technology-focused oilfield service company focused on ~~hydraulic fracturing~~electric powered pressure pumping services for oil and natural gas exploration and production (“E&P”) companies in the United States. The process of ~~hydraulic fracturing~~well stimulation involves pumping a pressurized stream of ~~fracturing~~ fluid—typically a mixture of water, chemicals, and proppant—into a well casing or tubing ~~in order~~ to cause the underground mineral formation to fracture or crack. Fractures release trapped hydrocarbon particles and provide a conductive channel for the oil or natural gas to flow freely to the wellbore for collection. The propping agent or proppant becomes lodged in the cracks created by the ~~hydraulic fracturing~~stimulation process, “propping” them open to facilitate the flow of hydrocarbons from the reservoir to the well.

The Company’s fleets consist of all-electric, mobile ~~hydraulic fracturing units~~well stimulation equipment and other auxiliary heavy equipment to perform ~~fracturing~~stimulation services. The Company has two designs for hydraulic fracturing units: (1) Conventional Fleets, which are powered by diesel fuel and utilize traditional internal combustion engines, transmissions, and radiators and (2)Company's Clean Fleet®~~, which replaces~~well stimulation fleets replace the traditional engines, transmissions, and radiators used in conventional diesel fleets with electric motors powered by electricity generated by natural gas-fueled turbine generators. ~~Both designs utilize~~The Company utilizes high-pressure ~~hydraulic fracturing~~well stimulation pumps mounted on ~~trailers. The Company~~trailers and refers to the group of pump trailers and other equipment necessary to perform a typical ~~fracturing~~ job as a “fleet” and the personnel assigned to each fleet as a “crew”.

~~MPAC was incorporated~~In May 2021, the Company announced its commitment to becoming an all-electric pressure pumping services provider and in ~~Delaware in March 2016 as a special purpose acquisition company, formed for~~August 2021, the ~~purpose~~Company ceased operations of ~~effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or other similar business combination with one or more target businesses.~~

~~On November 9, 2018, MPAC acquired USWS Holdings LLC, a Delaware limited liability company (“USWS Holdings”), pursuant to~~its last active conventional diesel fleet, marking its exit from the Merger and Contribution Agreement, dated as of July 13, 2018, and subsequently amended (as amended, the “Merger and Contribution Agreement”). The acquisition, together with the other transactions contemplated by the Merger and Contribution Agreement are referred to herein as the “Transaction”. In connection with the closing of the Transaction, MPAC changed its name to U.S. Well Services, Inc.conventional diesel pressure pumping market.

Following the completion of the Transaction, substantially all of the Company’s assets and operations are held and conducted by U.S. Well Services, LLC (“USWS LLC”), a wholly owned subsidiary of USWS Holdings, and the Company’s only assets are equity interests representing 97% ownership of USWS Holdings as of September 30, 2020.

Unless the context otherwise requires, “the Company”, “we,” “us,” and “our” refer, for periods prior to the completion of the Transaction, to USWS Holdings and its subsidiaries and, for periods upon or after the completion of the Transaction, to U.S. Well Services, Inc. and its subsidiaries, including USWS Holdings and its subsidiaries.

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements were prepared using generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and the instructions to Form 10-Q and Regulation S-X. Accordingly, these financial statements do not include all information or notes required by GAAP for annual financial statements and should be read in conjunction with the annual financial statements included in the ~~Company's 2019~~Amendment No. 1 to Annual Report on Form ~~10-K,~~10-K/A for the year ended December 31, 2020 (the “Amended Annual Report”), filed with the Securities and Exchange Commission (“SEC”) on ~~March 5, 2020 (the “Annual Report”).~~May 17, 2021.

The accompanying unaudited condensed consolidated financial statements and accompanying notes present the consolidated financial position, results of operations, cash flows, and ~~equity (deficit)~~stockholders’ deficit of the Company as of ~~the dates~~September 30, 2021 and December 31, 2020, and for the ~~periods presented.~~three and nine months ended September 30, 2021 and 2020. The interim data includes all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods. The results of operations for the three and nine months ended September 30, ~~2020~~2021 are not necessarily indicative of the results of operations expected for the entire fiscal year ended December 31, ~~2020.~~2021.

Reverse Stock Split

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

U.S. WELL SERVICES, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

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

Principles of Consolidation

The condensed consolidated financial statements comprise the financial statements of the Company and its wholly owned ~~subsidiaries, and its subsidiaries that it controls due to ownership of a majority voting interest.~~subsidiaries. Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Company obtains control, and continue to be consolidated until the date when such control ceases. The financial statements of the subsidiaries are prepared for the same reporting period as the Company. All significant intercompany balances and transactions are eliminated upon consolidation.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. We regularly evaluate estimates and judgments based on historical experience and other relevant facts and circumstances. Significant estimates included in these financial statements primarily relate to allowance for doubtful accounts, allowance for inventory obsolescence, estimated useful lives and valuation of ~~property and equipment and intangible~~long-lived assets, impairment assessments of goodwill and other long-lived assets, ~~Level 2 inputs used in~~estimates of fair value ~~estimation~~ of warrant liabilities, term ~~loans,~~loan, and ~~the assumptions used in our Black-Scholes~~convertible senior notes, and ~~Monte Carlo option pricing models associated with~~ the valuation of share-based compensation and certain equity instruments. Actual results could differ from those estimates.

Cash and cash equivalents that are restricted as to withdrawal or use under the terms of certain contractual agreements, or are reserved for a specific purpose, and not readily available for immediate or general use are recorded in restricted cash in our condensed consolidated balance sheets. The restricted cash in our condensed consolidated balance sheet represents cash transferred into a trust account to support our workers’ compensation obligations and cash held for use in approved capital expenditures ~~related to approved fleet expansion in amounts~~ of ~~$0.5 million~~$729 and ~~a nominal amount,~~$6, respectively, as of September 30, ~~2020,~~2021, and ~~$0.5 million~~$513 and ~~$7.1 million,~~$1,056, respectively, as of December 31, ~~2019.~~ 2020.

The following table provides a reconciliation of the amount of cash and cash equivalents and restricted cash reported on the condensed consolidated balance sheets that sum to the total of ~~cash and cash equivalents and restricted cash~~the same amounts shown on the condensed consolidated statements of cash ~~flows~~ flows:~~(in thousands)~~:


	September 30,
	2021		2020
Cash and cash equivalents	$	29,860	$	519
Restricted cash		735		519
Cash and cash equivalents and restricted cash	$	30,595	$	1,038

September 30, 2020

December 31, 2019

Cash and cash equivalents

$
519

$
33,794

Restricted cash

519

7,610

Cash and cash equivalents and restricted cash

$
1,038

$
41,404

Inventory

Inventory consists of proppant, chemicals, and other consumable materials and supplies used in our ~~high-pressure hydraulic fracturing~~pressure pumping operations. Inventories are stated at the lower of cost or net realizable value. Cost is determined principally on a first-in-first-out cost basis. All inventories are purchased for use by the Company in the delivery of its services with no inventory being sold separately to outside parties. Inventory quantities on hand are reviewed regularly and write-downs for obsolete inventory are recorded based on our forecast of the inventory item demand in the near future. During the nine months ended September 30, 2021, the Company recorded $2.4 million of reserves for losses on inventory obsolescence primarily related to conventional diesel parts. During the nine months ended September 30, 2021, the Company recorded write-downs of $1.5 million related to obsolete inventory parts. As of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company had established inventory reserves of ~~$0.4~~$1.3 million and ~~$0.6~~$0.3 million, respectively, for obsolete and slow-moving inventory.

Property and Equipment

Property and equipment are carried at cost, with depreciation provided on a straight-line basis over their estimated useful lives. Expenditures for renewals and betterments that extend the lives of the assets are capitalized. Amounts spent for maintenance and repairs, which do not improve or extend the life of the related asset, are charged to expense as incurred.

The Company separately identifies and accounts for certain critical components of its ~~hydraulic fracturing~~well stimulation units including the engine, transmission, and pump, which requires us to separately estimate the useful lives of these components. For our other service equipment, we do not separately identify and track depreciation of specific original components. When we replace components of these assets, we typically estimate the net book values of the components that are retired, which are based primarily upon their replacement costs, their ages and their original estimated useful lives.

U.S. WELL SERVICES, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

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

In the first quarter of 2020, our review of impairment of long-lived assets ~~(refer to “Note 5 – Goodwill and Intangible Assets”)~~ necessitated a review of the useful lives of our property and equipment. Current trends in ~~hydraulic fracturing~~pressure pumping equipment operating conditions, such as increasing treating pressures and higher pumping rates, along with the increase in daily pumping time are shortening the useful life of certain critical components we use. We determined that the average useful life of fluid ends and fuel injectors ~~is now~~was less than one year, ~~resulting~~which resulted in our determination that costs associated with the replacement of these components ~~will~~would no longer be capitalized, but instead expensed as they are used in operations. This change in accounting estimate was made effective in March 2020 and accounted for prospectively.

Assets Held for Sale

Assets that are classified as held for sale are measured at the lower of their carrying amount or fair value less expected selling costs (“estimated selling price”) with a loss recognized to the extent that the carrying amount exceeds the estimated selling price. The classification is applicable at the date upon which the sale of assets is probable and the assets are available for immediate sale in their present condition. Upon determining that an asset meets the criteria to be classified as held for sale, the Company ceases depreciation and reports the assets, if material, in assets held for sale in its condensed consolidated balance sheets.

When the net carrying value of an asset designated as held for sale exceeds its estimated fair value, which we estimate based on the estimated selling price, we recognize the difference as an impairment charge. When an impairment charge is recorded, subsequent changes to the estimated selling price of assets held for sale are recorded as gains or losses to the condensed consolidated statements of operations wherein the recognition of subsequent gains is limited to the cumulative loss previously recognized. During the nine months ended September 30, 2021, the Company recorded 0 impairment charges on its held for sale assets.

Goodwill

Goodwill is not amortized, but is reviewed for impairment annually, or more frequently when events or changes in circumstances indicate that the carrying value may not be recoverable. Judgements regarding indicators of potential impairment are based on market conditions and operational performance of the business.

As of December 31 of each year, or as required, the Company performs an impairment analysis of goodwill. The Company may assess its goodwill for impairment initially using a qualitative approach to determine whether conditions exist that indicate it is more likely than not that a reporting unit’s carrying value is greater than its fair value, and if such conditions are identified, then a quantitative analysis will be performed to determine if there is any impairment. The Company may also elect to perform a single step quantitative analysis in which the carrying amount of the reporting unit is compared to its fair value, which the Company estimates using a guideline public company method, a form of the market approach. The guideline public company method ~~utilized~~utilizes the trading multiples of similarly traded public companies as they ~~related~~relate to the Company’s operating metrics. An impairment charge would be recognized for the amount by which the carrying amount of the reporting unit exceeds the reporting unit’s fair value, and only limited to the total amount of goodwill allocated to the reporting unit.

Warrant Liabilities

The Company evaluates all its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity and ASC 815-15, Derivatives and Hedging—Embedded Derivatives. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or equity is evaluated pursuant to ASC 815-40,Derivatives and Hedging—Contracts in Entity’s Own Equity.

The Company issued public warrants and private placement warrants (collectively, the “public and private placement warrants”) in connection with its initial public offering in November 2018. Additionally, the Company issued warrants to certain institutional investors in connection with the Company’s private placement of Series A Preferred Stock on May 24, 2019 (“Series A warrants,” and together with the public and private placement warrants, the “warrants”). All our outstanding warrants are recognized as liabilities. Accordingly, we recognize the warrant instruments as liabilities at fair value upon issuance and adjust the instruments to fair value at the end of each reporting period. Any change in fair value is recognized in our condensed consolidated statements of operations. The public warrants are valued using their quoted market price since they are publicly traded and thus had an observable market price. The private placement warrants are valued using a Monte Carlo simulation model. The Series A warrants are valued using the Black-Scholes option pricing model.

Convertible Notes and Convertible Preferred Stock

When the Company issues convertible notes or convertible preferred stock, it first evaluates the balance sheet classification of the convertible instrument in its entirety to determine whether the instrument should be classified as a liability under ASC 480 and second whether the conversion feature should be accounted for separately from the host instrument. A conversion feature of a convertible note instrument or certain convertible preferred stock would be separated from the convertible instrument and classified as a derivative liability if the conversion feature, were it a standalone instrument, meets the definition of an “embedded derivative” in ASC 815-15. Generally, characteristics that require derivative treatment include, among others, when the conversion feature is not indexed to the Company’s equity, as defined in ASC 815-40, or when it must be settled either in cash or by issuing stock that is readily convertible to cash. When a conversion feature meets the definition of an embedded derivative, it would be separated from the host instrument and classified as a derivative liability carried on the condensed consolidated balance sheet at fair value, with any changes in its fair value recognized in the condensed consolidated statements of operations.

If a conversion feature does not meet the conditions to be separated and accounted for as an embedded derivative liability, the Company then determines whether the conversion feature is “beneficial”. A conversion feature would be considered beneficial if the conversion feature is “in the money” when the host instrument is issued or, under certain circumstances, at a later time. The beneficial conversion feature (“BCF”) for convertible instruments is recognized and measured by allocating a portion of the proceeds equal to the intrinsic value of that feature to additional paid-in capital. The intrinsic value is generally calculated at the commitment date as the difference between the conversion price and the fair value of the common stock or other securities into which the security is convertible, multiplied by the number of shares into which the security is convertible. If certain other securities are issued with the convertible security, the proceeds are allocated among the different components. The portion of the proceeds allocated to the convertible security is divided by the contractual number of the conversion shares to determine the effective conversion price, which is used to measure the BCF. The effective conversion price is used to compute the intrinsic value. The value of the BCF is limited to the basis that is initially allocated to the convertible security.

If the convertible note contains a BCF, the amount of the proceeds allocated to the BCF reduces the balance of the convertible note, creating a discount which is amortized over the note’s term to interest expense in the condensed consolidated statements of operations.

When a convertible preferred stock contains a BCF, after allocating the proceeds to the BCF, the resulting discount is either amortized as deemed dividends over the period beginning when the convertible preferred stock is issued up to the earliest date the conversion feature may be exercised, or if the conversion feature is immediately exercisable, the discount is fully amortized at the date of issuance.

Fair Value of Financial Instruments

Fair value is defined under ~~Accounting Standards Codification (ASC)~~ASC 820, Fair Value Measurement, as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 also establishes a three-level hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels are defined as follows:



Level 1–inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.



Level 2–inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.



Level 3–inputs are unobservable for the asset or liability.

The following is a summary of the carrying amounts and estimated fair values of our financial instruments as of September 30, ~~2020~~2021 and December 31, ~~2019:~~2020:

Senior Secured Term Loan. The fair value of the Senior Secured Term Loan is ~~$193.9~~$160.7 million and ~~approximates carrying value~~$198.0 million as of September 30, ~~2020~~2021 and December 31, ~~2019, respectively.~~2020, respectively, based on the market price quoted from external sources. If the Senior Secured Term Loan was measured at fair value in the financial statements, it would be classified as Level 2 in the fair value hierarchy.

Equipment financing. The carrying value of the equipment financing approximates fair value as its terms are consistent with and comparable to current market rates as of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

Warrants. The Company’s warrants are accounted for as liabilities and measured at fair value. See “Note 8 – Warrant Liabilities” for fair value measurements associated with the Company’s warrants.

Convertible Senior Notes. As of September 30, 2021, the fair value of the Convertible Senior Notes is $96.8 million, based on an option pricing framework using a lattice model. If the Convertible Senior Notes were measured at fair value in the financial statements, they would be classified as Level 2 in the fair value hierarchy.

Revenue Recognition

The Company recognizes revenue based on the customer’s ability to benefit from the services rendered in an amount that reflects the consideration expected to be received in exchange for those services.

The Company’s performance obligations are satisfied over time, typically measured inby the number of stages completed or the number of pumping days a fleet is available to pump for a customer in a month. All revenue is recognized when a contract with a customer exists, collectability of amounts subject to invoice is probable, the performance obligations under the contract have been satisfied over time, and the amount to which the Company has the right to invoice has been determined. A portion of the Company’s contracts contain variable consideration; however, this variable consideration is typically unknown at the time of contract inception, and is not known until the job is complete, at which time the variability is resolved.

The Company has elected to use the “as invoiced” practical expedient to recognize revenue based upon the amount it has a right to invoice upon the completion of each performance obligation per the terms of the contract.

Patent License Sales. On June 24, 2021, the Company issued a Convertible Senior Note (See “Note 11 – Convertible Senior Notes”) convertible into a patent license agreement. On June 29, 2021, the holder exercised its right to convert the Convertible Senior Note in full and the Company entered into a Patent License Agreement (the “License Agreement”), which provides the licensee a five-year option to purchase up to 20 licenses to build and operate electric well stimulation fleets using the Company’s patented Clean Fleet® technology (the “licenses”). Upon entry into the License Agreement, the Company sold 3 licenses to build and operate 3 electric well stimulation fleets, each valued at $7.5 million.

The sales of the right to use the Company’s patented Clean Fleet® technology is a single performance obligation. The Company recognizes the income associated with the patent license sales at the point in time when the Company satisfies its performance obligation by granting the purchaser the right to use the patented Clean Fleet® technology and transfer of control has occurred. The patent license sales are recognized as other income in our condensed consolidated statement of operations.

Accounts receivable are recorded at their outstanding balances adjusted for an allowance for doubtful accounts. The allowance for doubtful accounts is determined by analyzing the payment history and credit worthiness of each customer. Receivable balances are charged off when they are considered uncollectible by management. Recoveries of receivables previously charged off are recorded as income when received.

During the nine months ended September 30, 2021, the Company entered into an Assignment of Claim Agreement (the “Assignment”) with a third-party, whereby the Company transferred to the third-party all right, title, and interest in the Company’s claim in the amount of $14.5 million in connection with a customer’s bankruptcy. The Assignment was for consideration of $2.5 million, which the Company ~~held a reserve~~received on April 26, 2021. During the first quarter of 2021, the Company wrote-off the related receivables of $12.0 million, which was the unrealized amount of the claim assigned and was previously reserved for ~~doubtful accounts~~in full as of ~~$9.0 million and a nominal amount as~~December 31, 2020. As of September 30, ~~2020 and December 31, 2019, respectively. The reserve was recorded due to growing uncertainty as to collectability of billed amounts from customers weakened by~~2021, the ~~recent collapse in crude oil prices. We are continuing to work with our customers on collecting these receivables.~~Company did 0t record an allowance for doubtful accounts.

Major Customer and Concentration of Credit Risk

The concentration of our customers in the oil and natural gas industry may impact our overall exposure to credit risk, either positively or negatively, in that customers may be similarly affected by changes in economic and industry conditions. We perform ongoing credit evaluations of our customers and do not generally require collateral in support of our trade receivables.

The following ~~table shows~~tables show the percentage of revenues from our significant customers for the ~~three and nine months ended September 30, 2020 and 2019:~~periods indicated:


	Three Months Ended September 30,
	2021	2020
Customer B	*	23.6%
Customer C	14.9%	21.5%
Customer E	16.7%	18.0%
Customer F	17.6%	26.0%
Customer I	21.1%	*

	Nine Months Ended September 30,
	2021	2020
Customer A	*	13.5%
Customer B	*	17.1%
Customer C	12.5%	17.5%
Customer E	17.7%	13.7%
Customer F	18.6%	17.1%
Customer H	11.1%	*

An asterisk indicates that revenue is less than ten percent.

Three Months Ended September 30,

2020

2019

Customer A

*

21.8%

Customer B

23.6%

*

Customer C

21.5%

10.1%

Customer D

*

16.1%

Customer E

18.0%

*

Customer F

26.0%

*

Customer G

*

20.0%

Nine Months Ended September 30,

2020

2019

Customer A

13.5%

16.3%

Customer B

17.1%

*

Customer C

17.5%

*

Customer D

*

17.4%

Customer E

13.7%

*

Customer F

17.1%

*

Customer G

*

16.9%

Customer I

*

10.9%

An asterisk indicates that revenue is less than 10 percent.

The following table shows the percentage of trade receivables from our significant ~~customers as of September 30, 2020 and December 31, 2019:~~customers:

	September 30, 2020	December 31, 2019
Customer A	*	12.0%
				September 30, 2021	December 31, 2020
Customer B	25.9%	10.3%		*	32.2%
Customer C	14.6%	*		13.2%	17.0%
Customer D	*	12.1%		13.2%	*
Customer E	14.0%	*		25.1%	*
Customer F	13.4%	*		*	12.7%
Customer G	23.5%	34.5%		*	12.5%
Customer H	*	15.9%		*	13.5%
Customer I				29.0%	*

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

Income Taxes

The Company, under ASC 740,Accounting for Income Taxes, uses the asset and liability method of accounting for income taxes, under which deferred tax assets and liabilities are recognized for the future tax consequences of (i) temporary differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities and (ii) operating loss and tax credit carryforwards. Deferred income tax assets and liabilities are based on enacted tax rates applicable to the future period when those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period the rate change is enacted. A valuation allowance is provided for deferred tax assets when it is more likely than not the deferred tax assets will not be realized.

ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. NaN amounts were accrued for the payment of interest and penalties at September 30, ~~2020.~~2021. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.

NOTE 3 – ACCOUNTING STANDARDS

Except as discussed below, there have been no recent accounting pronouncements or changes in accounting pronouncements during the nine months ended September 30, ~~2020,~~2021, as compared to the recent accounting pronouncements described in the Amended Annual Report, that are of significance, or potential significance to the Company.

In ~~January 2017,~~August 2018, the FASB issued ASU ~~2017-04,~~ 2018-15, Intangibles - Goodwill and Other ~~(Topic 350)~~- Internal-Use Software (Subtopic 350-40): ~~Simplifying~~Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract, requiring a customer in a cloud computing arrangement that is a service contract to follow the ~~Test~~guidance in ASC 350-40 in determining the requirements for ~~Goodwill Impairment~~, which eliminates the second step of the previous two-step quantitative test of goodwill impairment. Under the new guidance, the quantitative test consists of a single step in which the carrying amount of the reporting unit is comparedcapitalizing implementation costs incurred to its fair value. An impairment charge would be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the amount of the impairment would be limited to the total amount of goodwill allocated to the reporting unit. The guidance does not affect the existing option to perform the qualitative assessment for a reporting unit to determine whether the quantitative impairment test is necessary.develop or obtain internal-use-software. The new guidance will be effective for emerging growth companies for ~~fiscal years~~annual reporting periods beginning after December 15, ~~2021; however, early~~2020, and interim periods within annual periods beginning after December 15, 2021. Early adoption is permitted. The Company ~~early~~ adopted ~~this guidance during the first quarter of 2020. The Company’s impairment analysis did not result in any impairment of goodwill.~~

~~In June 2020, the FASB issued~~ ASU ~~2020-05,~~ ~~Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842) - Effective Dates for Certain Entities~~, which provided deferral of the effective dates for implementing previously issued Topic 606 and Topic 842 for one year to give some relief for businesses and the difficulties they are facing during the COVID-19 coronavirus pandemic. The Company adopted Topic 6062018-15 on January 1, ~~2019. We expect to adopt Topic 842 using~~2021, and the ~~effective date~~adoption of ~~January 1, 2022 as~~this standard did not have a material impact on the ~~date of our initial application of the standard.~~Company’s condensed consolidated financial statements.

Prepaids and other current assets ~~as of September 30, 2020 and December 31, 2019~~ consisted of the ~~following~~ following:


	September 30, 2021		December 31, 2020
Prepaid insurance	$	6,595	$	3,162
Recoverable costs from insurance		-		4,635
Income tax receivable		757		1,567
Other current assets		2,682		1,343
Total prepaid expenses and other current assets	$	10,034	$	10,707

During the nine months ended September 30, 2021, the Company prepaid $11.7 million in ~~thousands)~~insurance premiums related to renewals of various insurance policies.:

~~During~~The $4.6 million of recoverable costs from insurance, recorded as of December 31, 2020, was collected in full during the first quarter of 2021. In October 2021, we received approval of additional insurance proceeds of $2.8 million related to equipment damaged in the third quarter of 2020, ~~certain pieces~~ of equipment were damaged. The Company has insurance coverage in place covering, among other things, property damage up to certain specified amounts. Other current assets include recoverable costs from insurance amounting to $3.1which we received $2.2 million ~~which represents net book value of the equipment damaged.~~on November 8, 2021.

NOTE 5 – ~~GOODWILL AND~~ INTANGIBLE ASSETS

~~Goodwill~~

Goodwill represents the difference between the purchase price and the estimated fair value of identifiable assets acquired and liabilities assumed. The Company performs an impairment analysis related to goodwill as of December 31 of each year, or when the Company identifies certain triggering events or circumstances that would more likely than not reduce the estimated fair value of the goodwill below its carrying amount.

In the first quarter of 2020, the Company performed an impairment analysis of goodwill and long-lived assets. This impairment analysis was triggered by the sudden and drastic decline in oil prices in March 2020 and the corresponding decrease in the Company’s stock price, operating results and revised forecasts. The Company performed a quantitative goodwill impairment test utilizing the single-step approach to compare the carrying value of the reporting unit to its estimated fair value. The estimated fair value of the reporting unit was determined using a guideline public company method, a form of the market approach. The guideline public company method utilized the trading multiples of similarly traded public companies as they related to our operating metrics. Based on the impairment test, the Company determined that goodwill was not impaired as the reporting unit’s carrying value, after accounting for the impairment charges of long-lived assets, did not exceed the reporting unit’s fair value.

~~Intangible Assets~~

A summary of intangible assets ~~as of September 30, 2020 and December 31, 2019~~ consisted of the ~~following~~ ~~(in thousands)~~following::

	Estimated Useful Life (in years)	Gross Carrying Value		Accumulated Amortization		Net Book Value
As of September 30, 2020
								Estimated Useful Life (in years)	Gross Carrying Value		Accumulated Amortization		Net Book Value
As of September 30, 2021
Trademarks	10	$	1,415	$	104	$	1,311	10	$	1,415	$	310	$	1,105
Patents	20		12,776		379		12,397	20		12,775		1,138		11,637
		$	14,191	$	483	$	13,708		$	14,190	$	1,448	$	12,742
As of December 31, 2019
As of December 31, 2020
Trademarks	10	$	3,132	$	913	$	2,219	10	$	1,415	$	156	$	1,259
Patents	20		22,955		3,348		19,607	20		12,775		568		12,207
		$	26,087	$	4,261	$	21,826		$	14,190	$	724	$	13,466

The intangible assets are amortized over the period the Company expects to receive the related economic benefit. Amortization expense related to amortizable intangible assets was $0.2 million for the three months ended September 30, 2021 and 2020, and ~~2019 was $0.2~~$0.7 million and ~~$1.9~~$0.8 million for the nine months ended September 30, 2021 and 2020, respectively, ~~and~~which was included as part of depreciation and amortization in the condensed consolidated statements of operations. ~~Amortization expense related~~

U.S. WELL SERVICES, INC.

Notes to ~~amortizable intangible assets for the nine months ended~~Unaudited Condensed Consolidated Financial Statements

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

As of September 30, ~~2020 and 2019 was $0.8 million and $5.7 million, respectively.~~

~~As discussed above,~~2021, the Company identified a triggering event in the first quarter of 2020 and performed a quantitative impairment test on long-lived assets. The expected present value method, a form of the income approach, was utilized to determine the fair value of long-lived assets. This method is based on expected cash flows using a risk-adjusted discount rate, which reflects the weighted average cost of capital of similarly traded public companies. As a result of the impairment test performed, the Company recorded in the first quarter of 2020 an impairment charge of $7.2 million to reduce the carrying value of intangible assets from $21.4 million to $14.2 million, representing its fair value on the date of impairment.

~~The~~ estimated amortization expense for future periods is as ~~follows~~ follows:


Fiscal Year	Estimated Amortization Expense
Remainder of 2021	$	242
2022		966
2023		966
2024		966
2025		966
Thereafter		8,636
Total	$	12,742

Fiscal Year

Estimated
Amortization
Expense

Remainder of 2020

$
242

2021

966

2022

966

2023

966

2024

966

Thereafter

9,602

Total

$
13,708

Property and equipment asconsisted of the following:


	Estimated Useful Life (in years)	September 30, 2021			December 31, 2020
Pressure pumping equipment	1.5 to 25	$	239,077		$	263,869
Light duty vehicles (1)	5		4,442			2,483
Furniture and fixtures	5		67			67
IT equipment	3		1,331			1,676
Auxiliary equipment	2 to 20		12,552			11,058
Leasehold improvements	Term of lease		287			287
			257,756			279,440
Less: Accumulated depreciation and amortization			(39,873	)		(44,108	)
Property and equipment, net		$	217,883		$	235,332

(1)

As of September 30, ~~2020~~2021 and December 31, ~~2019 consisted of~~2020, the ~~following~~ Company had capitalized $~~(in thousands)~~2.4:

Estimated
Useful
Life

September 30, 2020

December 31, 2019

Fracturing equipment

1.5 to 25 years

$
258,218

$
651,162

Light duty vehicles

5 years

2,184

8,188

Furniture and fixtures

5 years

67

277

IT equipment

3 years

1,676

6,724

Auxiliary equipment

2 to 20 years

12,720

38,502

Leasehold improvements

Term of lease

287

725

275,152

705,578

Less: Accumulated depreciation and amortization

(32,342
)

(263,968
)
Property and equipment, net

$
242,810

$
441,610

million and $0.3 million, respectively, related to capital leases and the accumulated depreciation was $275 and $31, respectively.

Depreciation and amortization expense related to property and equipment was $6.7 million and $16.2 million for the three months ended September 30, 2021 and 2020, respectively, and ~~2019 was $16.2~~$27.2 million and ~~$37.8~~$64.9 million ~~respectively. Depreciation and amortization expense related to property and equipment~~ for the nine months ended September 30, 2021 and 2020, respectively.

Assets Sales

In May 2021, the Company announced its commitment to becoming an all-electric pressure pumping services provider and ~~2019 was $64.9 million and $112.2 million, respectively.~~

in August 2021, the Company ceased operations of its last active conventional diesel fleet, marking its exit from the conventional diesel pressure pumping market. As a result, ~~of the impairment test on long-lived assets described in “Note 5 – Goodwill and Intangible Assets,”~~ the Company ~~recorded~~has been executing a plan to sell its diesel pressure pumping equipment. As of September 30, 2021, the Company has classified $16.7 million in net book value of diesel pressure pumping equipment, that is anticipated to be sold in the ~~first quarter of 2020 an impairment charge of $140.3~~next 12 months, as assets held for sale on the condensed consolidated balance sheet.

During the nine months ended September 30, 2021, the Company received $26.6 million ~~to reduce~~in proceeds from the ~~carrying value~~sale of property and equipment, of which $23.4 million was for assets classified as held for sale. Subsequent to September 30, 2021, the Company received $41.1 million in proceeds from ~~$414.1~~the sale of property and equipment, of which $6.0 million was for assets classified as assets held for sale. The Company used the proceeds received from the asset sales to ~~$273.8~~pay down the principal of its Senior Secured Term Loan.

The Company recognized a gain of $12.0 million ~~representing its fair value on~~and $10.1 million from disposal of assets for the ~~date~~three and nine months ended September 30, 2021, respectively, and a loss of ~~impairment.~~$0.8 million and $5.9 million for the three and nine months ended September 30, 2020, respectively.

Accrued expenses and other current liabilities asconsisted of the following:


	September 30, 2021		December 31, 2020
Accrued payroll and benefits	$	5,830	$	7,208
Accrued taxes		4,437		5,380
Accrued interest		425		317
Other current liabilities		1,271		1,876
Accrued expenses and other current liabilities	$	11,963	$	14,781

NOTE 8 – WARRANT LIABILITIES

Warrants

As of September 30, ~~2020~~2021, a total of 19,167,417 public warrants and ~~December 31, 2019 consisted~~private placement warrants were outstanding, and exercisable for an aggregate of 2,738,202 shares of Class A common stock. Each public warrant and private placement warrant entitles its holder to purchase one-seventh of a share of Class A common stock at an exercise price of $5.75 per warrant ($40.25 per full share equivalent), to be exercised only for a whole number of shares of Class A common stock. The public warrants and private placement warrants expire on November 9, 2023 or earlier upon redemption.

During the three and nine months ended September 30, 2021, the Company issued 444,444 and 1,333,332 additional Series A warrants to the purchasers of Series A preferred stock, respectively, in accordance with the Series A preferred stock purchase agreement. As of September 30, 2021, 6,177,773 Series A warrants were outstanding pursuant to the Series A preferred stock purchase agreement, and exercisable for 1,765,078 shares of Class A common stock. The Series A warrants entitle its holders to purchase two-sevenths of a share of Class A common stock at an exercise price of $7.66 per warrant ($26.81 per full share equivalent), to be exercised only for a whole number of shares of Class A common stock. The Series A warrants expire on November 25, 2025.

Fair Value Measurement

The Company’s warrants are accounted for as liabilities measured at fair value upon issuance, with subsequent changes in fair value reported in the Company’s condensed consolidated statements of operations each reporting period.

The following tables present the Company's fair value hierarchy for liabilities measured at fair value on a recurring basis:


	Quoted Prices in Active Markets (Level 1)		Other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)		Total
As of September 30, 2021
Public warrants	$	1,399	$	-	$	-	$	1,399
Private placement warrants		-		1,440		-		1,440
Series A warrants		-		4,028		-		4,028
	$	1,399	$	5,468	$	-	$	6,867
As of December 31, 2020
Public warrants	$	254	$	-	$	-	$	254
Private placement warrants		-		248		-		248
Series A warrants		-		1,117		-		1,117
	$	254	$	1,365	$	-	$	1,619

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

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

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

U.S. WELL SERVICES, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

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

September 30, 2020

December 31, 2019

Accrued payroll and benefits

$
5,011

$
9,356

Accrued taxes

5,013

9,817

Accrued interest

217

18,190

Other current liabilities

1,901

3,118

Accrued expenses and other current liabilities

$
12,142

$
40,481

The following assumptions were used to calculate the fair value for the private placement warrants and Series A warrants:


	Private Placement Warrants	Series A Warrants
As of September 30, 2021
Expected remaining life	2.1 years	4.2 years
Volatility rate	176.3%	176.3%
Risk-free interest rate	0.3%	0.8%
Expected dividend rate	0%	0%

As of December 30, 2020
Expected remaining life	2.86 years	4.9 years
Volatility rate	115.8%	115.8%
Risk-free interest rate	0.2%	0.4%
Expected dividend rate	0%	0%

NOTE 89 – NOTES PAYABLE

~~Notes payable represents~~During the nine months ended September 30, 2021, the Company entered into various insurance premium finance agreements ~~with~~amounting to $9.1 million, payable in equal monthly installments at a credit finance institution to pay the premiums on insurance policies for the Company’s directors’ and officers’ liability, general liability, workers’ compensation, umbrella, auto and pollution coverage needs.weighted average interest rate of 5.4%. These premium finance agreements ~~had total balances of $1.9 million~~are due within one year and ~~$8.1 million~~are recorded as notes payable under current liabilities in the condensed consolidated balance sheets. As of September 30, ~~2020 and December 31, 2019, respectively.~~2021, the Company had a remaining balance of $3.8 million related to the notes payable.

NOTE 910 – DEBT

Long-term debt ~~as of September 30, 2020 and December 31, 2019~~ consisted of the ~~following~~ ~~(in thousands)~~following::


	September 30, 2020			December 31, 2019			September 30, 2021			December 31, 2020
Senior Secured Term Loan	$	247,500		$	250,000		$	201,353		$	246,250
ABL Credit Facility		14,939			40,090			22,350			23,710
PPP Loan		10,000			-			0			10,000
USDA Loan								25,000			21,996
Equipment financing		13,716			16,065			10,210			12,866
Capital leases		6,201			10,474			1,793			229
Total debt principal balance		292,356			316,629			260,706			315,051
Unamortized discount on debt and debt issuance costs		(21,608	)		(9,449	)
Unamortized debt discount and issuance costs								(1,243	)		(17,576	)
Current maturities		(9,674	)		(22,288	)		(9,142	)		(13,573	)
Net Long-term debt	$	261,074		$	284,892		$	250,321		$	283,902

Senior Secured Term Loan

During the first quarter of 2020, the Company made principal and interest payments amounting to $2.5 million and $24.3 million, respectively. The interest payments consisted of $17.9 million of accrued interest as of December 31, 2019, and $6.4 million of interest incurred in the first quarter of 2020.

On ~~April 1, 2020,~~June 24, 2021, the Company, USWS LLC, as the borrower, and all ~~of the~~ other subsidiaries of the Company entered into a ~~Second~~Fifth Amendment (the ~~“Term~~“Fifth Term Loan Amendment”) to the ~~senior secured term loan~~Senior Secured Term Loan Credit Agreement (as amended, the “Senior Secured Term Loan”) with CLMG Corp., as administrative and collateral agent, and the lenders party thereto. The Senior Secured Term Loan matures on December 5, 2025.

Pursuant to the Fifth Term Loan Amendment, the interest rate on amounts outstanding under the senior secured term loan was reduced to 0.0% and scheduled principal amortization payments were suspended for the period beginning April 1, 2020 and ending March 31, 2022. Beginning April 1, 2022, the senior secured term loan, as amended by the Term Loan Amendment, will resume incurring interest at the applicable LIBOR rate, subject to a 2.0% floor, plus 8.25%, and scheduled principal amortization payments equal to 0.5% of the initial principal balance of the term loans will resume on a quarterly basis commencing June 30, 2022. Additionally, pursuant to the Term Loan Amendment, certain other covenants were amended including, but not limited to, covenants relating to collateral inspections and excess cash flow, and the maturity date of the senior secured term loan was extended to December 5, 2025.

~~The Company accounted for the Term Loan Amendment as a troubled debt restructuring under ASC 470-60,~~ ~~Troubled Debt Restructurings by Debtors~~, due to the level of concession provided by the lenders under the senior secured term loan. Under this guidance, the future undiscounted cash flows of the senior secured term loan, as amended, exceeded the carrying value, and accordingly, 0 gain was recognized and no adjustment was made to the carrying value of the debt. Interest expense on the amended senior secured term loan was computed using a new effective rate that equated the present value of the future cash payments specified by the new terms with the carrying value of the debt under the original terms.

In exchange for entering into the Term Loan Amendment, the lenders under the senior secured term loan received an extension fee comprised of a $20.0 million cash payment, 1,050 shares of Series B preferred stock valued at $1.1 million based on the stated liquidation preference of $1,000 per share, and 5,529,622 shares of Class A common stock valued at $1.4 million based on the closing price of the Class A common stock at the date of issuance. The Series B preferred stock issued to the lenders under the senior secured term loan had the same terms as the Series B preferred stock issued to certain institutional investors as described in “Note 10 – Mezzanine Equity”.

The total fair value of cash and non-cash consideration transferred to the lenders under the senior secured term loan were accounted for as discount on debt issuance and amortized using the effective interest method.

On July 30, 2020, the Company, USWS LLC, as the borrower, and all of the other subsidiaries of the Company entered into a Second Amendment (the “Third Term Loan Amendment”) to the senior secured term loan with CLMG Corp., as administrative and collateral agent and ~~the lenders party thereto.~~

~~Pursuant to the Third Term Loan Amendment, the agents and the~~ lenders agreed to make certain modifications and amendments to the ~~senior secured term loan in order~~Senior Secured Term Loan to, among other things, ~~consent~~permit the incurrence of debt and liens in connection with the Convertible Senior Notes as described in “Note 11 – Convertible Senior Notes”. Additionally, pursuant to the ~~entry into~~Fifth Term Loan Amendment, other covenants were amended including, but not limited to, certain covenants relating to collateral, asset dispositions, and special purpose entities used for stand-alone equipment financings.

The deferral period for interest on the ~~PPP~~Senior Secured Term Loan was shortened by three months, to January 1, 2022, in accordance with the Fifth Term Loan Amendment, and the Senior Secured Term Loan will resume incurring interest at that date at the applicable benchmark rate, subject to a 2.0% floor, plus the applicable margin of 8.25% per annum, subject to the ~~amended terms~~following exceptions. If on December 31, 2021, either:



the outstanding principal amount of the Senior Secured Term Loan is equal to or less than $132.0 million but greater than $110.0 million then the interest rate shall be 0.0% per annum from January 1, 2022 through March 31, 2022; and ~~conditions specified~~

U.S. WELL SERVICES, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

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



the outstanding principal amount of the Senior Secured Term Loan is equal to or less than $110.0 million then the interest rate shall be 0.0% per annum from January 1, 2022 through March 31, 2022 and 2.0% per annum from April 1, 2022 through December 31, 2022, provided, that if on April 1, 2022, the outstanding principal amount of the Senior Secured Term Loan is equal to or less than $103.0 million then the interest rate shall be 1.0% per annum from April 1, 2022 through December 31, 2022.

Since April 2020, the Company has accounted for the ~~same in the Third~~Senior Secured Term Loan ~~Amendment.~~

~~Additionally,~~as a troubled debt restructuring under ASC 470-60, Troubled Debt Restructurings by Debtors. The subsequent amendments, including the ~~Third~~Fifth Term Loan Amendment, ~~made certain modifications to~~did not result in a significant modification or extinguishment resulting in no change in accounting for the ~~senior secured term loan which limits the Company’s ability to deploy and use collateral outside of the continental United States and other than in~~Senior Secured Term Loan. In connection with ~~oil and gas fracking and exploration without~~ the ~~prior consent of the administrative agent. In the Third~~Fifth Term Loan Amendment, the Company ~~further agreed~~paid $3.0 million to ~~specific conditions~~the lenders under the Senior Secured Term Loan, which was accounted for as a debt discount and ~~covenants regarding~~is amortized to interest expense using the effective interest method over the remaining term of the Senior Secured Term Loan.

During the nine months ended September 30, 2021, the Company made principal payments of $44.9 million, which included prepayments of $38.6 million driven primarily by asset sales. The early repayment of debt resulted in a ~~turbine rental~~write-off of $3.8 million of unamortized debt discount and ~~services agreement entered into~~issuance costs and prepayment fees of $0.5 million, all of which were presented as loss on ~~June 19, 2020 and~~extinguishment of debt in the condensed consolidated statements of operations.

As of September 30, 2021, the outstanding principal balance of the Senior Secured Term Loan was $201.4 million, of which ~~affect~~$5.0 million was due within one year from the ~~equipment which is~~balance sheet date.

Subsequent to September 30, 2021, the ~~subject thereof.~~Company made additional prepayments of $44.6 million on the Senior Secured Term Loan. As of November 8, 2021, the outstanding principal balance of the Senior Secured Term Loan was $156.8 million.

ABL Credit Facility

~~In April and August of 2020,~~On June 24, 2021, the Company, USWS LLC, and all ~~of the~~ other subsidiaries of the Company entered into ~~the First~~a Fourth Amendment (the ~~“ABL Amendment”) and Second Amendment (the “Second~~“Fourth ABL Amendment”)~~, respectively,~~ to the ABL Credit ~~Facility~~Agreement (as amended, the “ABL Credit Facility”) with the lenders party thereto and Bank of America, N.A., as the administrative agent, swing line lender and letter of credit issuer. The ABL Credit Facility matures on April 1, 2025.

Pursuant to the Fourth ABL Amendment, the ~~aggregate revolving commitment under~~lenders agreed to make certain modifications and amendments to the ABL Credit Facility ~~was reduced from $75.0 million~~ to, $60.0 million, the maturity date was extended from May 7, 2024 to April 1, 2025, and the interest rate margin applicable to borrowings under the ABL Credit Facility was increased by 0.50% per annum and a LIBOR floor of 1% was added. In addition, the borrowing base under the ABL Credit Facility was amended to include a FILO Amount (as defined in the ABL Amendment) which increases borrowing base availability by up to the lesser of (i) $4.0 million and (ii) 5.0% of the value of eligible accounts receivable, subject to scheduled monthly reductions. Loans under the ABL Credit Facility which are advanced in respect of the FILO Amount accrue interest at a rate that is 1.50% higher than the rate applicable to other loans under the ABL Credit Facility, and may be repaid only after all other loans under the ABL Credit Facility have been repaid.

Pursuant to the Second ABL Amendment, the aggregate revolving commitment under the ABL Credit Facility was reduced from $60.0 million to $50.0 million and certain modifications were made to eligible accounts in the borrowing base and to the applicable thresholds in the cash dominion trigger period and financial covenant trigger period, among other ~~things. The Company’s option to request an increase in commitments under~~things, permit the ~~accordion feature was also removed under the terms~~incurrence of ~~the Second ABL Amendment.~~

~~Under ASC 470-50,~~ ~~Modifications~~debt and ~~Extinguishments~~, the Company accounted for each of the ABL Amendment and Second ABL Amendment as a modification of debt. Under the ABL Amendment, the borrowing capacity of the amended ABL Credit Facility was greater than the borrowing capacity of the old ABL Credit Facility and there was no change in the lenders. Accordingly, any unamortized deferred financing costs associated with the old ABL Credit Facility and feesliens in connection with the amended ABL Credit Facility were deferred and amortized over its remaining term. Under the Second ABL Amendment, the borrowing capacity of the amended ABL Credit Facility was less than the borrowing capacity of the old ABL Credit Facility. Accordingly, unamortized deferred financing cost amounting to $0.2 million, which was calculated in proportion to the decrease in the borrowing capacity of the old Credit Facility, was written off and recorded as interest expense in the condensed consolidated statements of operations. Any fees in connection with the Second ABL Amendment were deferred and amortized over its remaining term.Convertible Senior Notes.

TheABL Credit Facility is subject to a borrowing base which is calculated based on a formula referencing the Company’s eligible accounts receivables. ~~As of~~On September 30, ~~2020,~~2021, the borrowing base was ~~$25.7~~$39.2 million and the outstanding revolver loan balance was ~~$14.9~~$22.3 million, classified as long-term debt in the condensed consolidated balance sheets.

Paycheck Protection Program ~~(PPP)~~("PPP") Loan

In July 2020, the Company received an unsecured ~~$10.0 million~~ loan (the “PPP Loan”) in the principal amount of $10.0 million that ~~bears~~bore interest at a rate of ~~1.0%~~1.0% per annum and ~~matures~~matured in five years under the Paycheck Protection Program from a commercial bank. In August 2021, the Company was notified that the principal amount of $10.0 million and accrued interest of $0.1 million with respect to the PPP Loan had been forgiven. The ~~Paycheck Protection Program~~loan amount and accrued interest was ~~established under~~recognized as a gain on extinguishment of debt in the condensed consolidated statement of operations.

USDA Loan

In November 2020, we entered into a Business Loan Agreement (the “USDA Loan”) with a commercial bank pursuant to the United States Department of Agriculture, Business & Industry Coronavirus Aid, Relief, and Economic Security Act ~~(as amended,~~Guaranteed Loan Program, in the ~~“CARES Act”) and is administered by the U.S. Small Business Administration. Under the terms~~aggregate principal amount of ~~the CARES Act, loan recipients can apply for and be granted forgiveness for all or a portion of the loan. Forgiveness is determined, subject~~up to certain limitations, based on the use of the loan proceeds for payroll costs, interest on mortgages or other debt obligations, rents and utilities. At least 60% of the proceeds must be used for payroll costs. No assurance can be given that the Company will obtain forgiveness of the PPP Loan either in whole or in part. Accordingly, the Company accounted$25.0 million for the ~~PPP Loan as part~~purpose of providing long-term ~~debt in~~financing for eligible working capital. Interest payments are due monthly at the ~~condensed consolidated balance sheets.~~

~~Equipment Financing~~

In March 2020, the Company entered into an agreement with a lender to consolidate various individual equipment financing agreements, which represented substantially all of our equipment financing notes, with the same lender into four notes. The amendments under the consolidated equipment financing agreements pertain to maturity date, interest rate, and date of first installment payment. The Company evaluated the debt modification in accordance with ASC 470-50 and concluded that the debt modification did not result in a substantially different debt, and accordingly, no gain or loss was recorded.

~~The total outstanding balance of the consolidated equipment financing agreements as of September 30, 2020 was $13.7 million, payable in equal monthly installments through May 1, 2024, at an~~ interest rate of ~~5.7%.~~

~~The weighted average interest rate~~5.75% per annum beginning on December 12, 2020 but principal payments are not required until December 12, 2023. During the fourth quarter of ~~amounts outstanding~~2020, we received proceeds amounting to $22.0 million under the ~~equipment financing agreements was 5.7%~~USDA Loan. In January 2021, we received the remaining proceeds amounting to $3.0 million.

U.S. WELL SERVICES, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

(in thousands, except shares and ~~6.4%~~ per ~~annum as of September 30, 2020 and December 31, 2019, respectively.~~ share amounts, or where otherwise noted)

Payments of Debt Obligations due by Period

~~Presented in~~As of September 30, 2021, the ~~following table is a~~ schedule of the repayment requirements of long-term debt is as follows:


	Principal Amount
Fiscal Year	of Long-term Debt
Remainder of 2021	$	2,264
2022		9,199
2023		9,682
2024		10,191
2025		210,791
Thereafter		18,579
Total	$	260,706

NOTE 11 – CONVERTIBLE SENIOR NOTES

On June 24, 2021, the Company entered into a Note Purchase Agreement (as amended, the “Note Purchase Agreement”). As of September 30, ~~2020~~ 2021, pursuant to the Note Purchase Agreement, the Company issued $136.5 million in aggregate principal amount of 16.0% Convertible Senior Secured (Third Lien) PIK Notes (the “Convertible Senior Notes”), in a private placement to institutional investors (the “Private Placement”), comprised of Cash Notes, Exchange Notes (collectively with the Cash Notes, the “Equity Linked Notes”) and a License Linked Note, as described below, which mature on June 5, 2026. The Convertible Senior Notes are secured by a third priority security interest in the collateral that secures the Company’s obligations under the Senior Secured Term Loan.

Equity Linked Notes. In June 2021 and July 2021, in connection with the Private Placement, the Company issued and sold $75.0 million in principal amount of Convertible Senior Notes that are convertible at any time at the holder’s option, into shares of the Company’s Class A common stock for cash (the “Cash Notes”). The conversion prices of the Cash Notes range from $3.43 to $4.38, subject to adjustment.

In June 2021, in connection with the Private Placement, the Company issued and sold $39.0 million in principal amount of Convertible Senior Notes that are convertible at any time at the holder’s option, into shares of the Company’s Class A common stock in exchange for 30,390 shares of the Company’s Series A preferred stock (the “Exchange Notes”). The Exchange Notes are convertible at a conversion price of $7.00 subject to adjustment.

License Linked Note. On June 24, 2021, in connection with the Private Placement, the Company issued and sold a Convertible Senior Note in the principal amount of $22.5 million that was convertible into a patent license agreement (the “License Linked Note”). On June 29, 2021, the holder exercised its right to convert the License Linked Note in full and the Company entered into the License Agreement, which provides the licensee a five-year option to purchase up to 20 licenses to build and operate electric well stimulation fleets using the Company’s patented Clean Fleet® technology (the “licenses”). Upon entry into the License Agreement, the holder purchased 3 licenses to build and operate 3 electric well stimulation fleets, each valued at $7.5 million. The Company recognized the $22.5 million as other income from patent license sales in its condensed consolidated statement of operations. The debt issuance costs associated with the License Linked Note were fully amortized.

The carrying value of the Convertible Senior Notes is as follows:


	September 30, 2021
Principal	$	114,000
PIK interest		4,827
Unamortized debt premium		1,872
Unamortized debt discount and issuance costs		(19,836	)
Net Convertible Senior Notes	$	100,863

During the nine months ended September 30, 2021, the Company received $97.5 million in cash proceeds from the issuance of the Convertible Senior Notes. The Company used a portion of the proceeds from the issuance of the Convertible Senior Notes to pay the cash settlement amount in accordance with the Settlement Agreement (as described in “Note 17 – Commitments and Contingencies”) and expects to use the remainder for general corporate purposes, including growth capital.

The Convertible Senior Notes bear interest at a rate of 16.0% per annum. Accrued and unpaid interest is calculated on the last day of each quarter, commencing September 30, 2021, and will be paid in kind (“PIK”) on such date by increasing the principal amount of the outstanding Convertible Senior Notes. The Company has accrued PIK interest of $4.8 million related to the Convertible Senior Notes for the nine months ended September 30, 2021.

U.S. WELL SERVICES, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

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

Each Equity Linked Note, subject to earlier conversion, is due and payable on June 5, 2026 in shares of Class A common stock equal to the entire outstanding and unpaid principal balance, plus any PIK interest, subject to certain limitations on the number of shares of Class A common stock that may be issued and which would require the Company to settle the conversion in payment partially in cash. The number of shares of Class A common stock will be based on the 20-day volume weighted average trading price of the Class A common stock immediately preceding the maturity date. The Equity Linked Notes are convertible at any time at the option of the holder into a number of shares of Class A common stock equal to the principal amount of such notes then outstanding plus PIK interest through the conversion date divided by the then applicable conversion price as described above. If the Company experiences an event of default (as defined in the Note Purchase Agreement), which is continuing on the maturity date, then payment of principal and PIK interest shall be made in cash on any outstanding Equity Linked Notes.

Additionally, following the first anniversary of the Note Purchase Agreement, and at any time in which there are 0 issued and outstanding shares of Series A preferred stock or Series B preferred stock, if the 20-day volume weighted average trading price of the Class A common stock is greater than $7.00 for 10 trading days during any 20 consecutive trading day period, the Company may deliver a notice to the holder of an Equity Linked Note to convert such Equity Linked Notes at the conversion prices set forth above.

In accordance with ASC 480,the Company evaluated the Equity Linked Notes and determined they should be classified as liabilities due to the unconditional obligation to settle the notes in a variable number of shares of the Company’s Class A common stock based on a fixed monetary amount known at inception. Certain of the Equity Linked Notes issued were initially measured at fair value as they were considered new instruments issued concurrently to extinguish the Series A preferred stock. See “Note 12 – Mezzanine Equity” for the discussion of Series A preferred stock exchange.

The initial measurement at fair value of those certain Equity Linked Notes resulted in the Company recording a premium of $1.9 million and a total discount of $16.1 million. The Company amortizes such premium and discount as an adjustment to interest expense using the effective interest method over the term of the Equity Linked Notes.

During the nine months ended September 30, 2021, we incurred transaction costs related to the issuance of the Convertible Senior Notes of $4.4 million which were recorded as debt issuance costs and are presented as a direct deduction from the carrying amount of the Convertible Senior Notes on our condensed consolidated balance sheet. The debt issuance costs are being amortized under the effective interest method over the term of the Convertible Senior Notes. Amortization expense related to the Convertible Senior Notes was $27 and $706 for the three and nine months ended September 30, 2021, respectively, and is presented in interest expense in the condensed consolidated statements of operations.

Principal Amount

of Long-term Debt

Remainder of 2020

$
7,052

2021

3,519

2022

7,462

2023

8,930

2024

6,705

Thereafter

258,688

Total

$
292,356

The following table summarizes the Company’s Series A Redeemable Convertible Preferred Stock, par value ~~$0.0001~~$0.0001 per share (“Series A preferred stock”) activities for the nine months ended September 30, ~~2020 (in thousands, except share amounts~~2021:):

Shares

Amount

Series A preferred stock as of December 31, 2019

55,000

$
38,928

Deemed and imputed dividends on Series A preferred stock

-

11,220

Accrued Series A preferred stock dividends

-

5,450

Conversion of Series A preferred stock to Class A common stock

(3,000
)

(4,691
)
Series A preferred stock as of September 30, 2020

52,000

$
50,907


	Shares			Amount
Series A preferred stock as of December 31, 2020		50,000		$	50,975
Exchange of Series A preferred stock for Convertible Senior Notes		(30,390	)		(33,716	)
Deemed and imputed dividends on Series A preferred stock		-			750
Accrued Series A preferred stock dividends		-			4,808
Series A preferred stock as of September 30, 2021		19,610		$	22,817

~~In accordance with~~At the initial closing of the Series A preferred stock purchase agreement subject to there being Series A preferred stock outstanding, the Company will issue an additional 4,399,992 warrants to the purchasers of Series A preferred stock in quarterly installments of 488,888 warrants beginning nine months after on May 24, ~~2019. During the nine months ended September 30, 2020,~~2019, the Company issued ~~1,466,664 additional warrants to the purchasers of~~ Series A ~~preferred~~warrants exercisable for shares of Class A common stock.

In See “Note 8 – Warrant Liabilities” for the ~~third quarter~~discussion of ~~2020, a holder of~~the Series A warrants issued pursuant to the Series A preferred stock ~~converted 3,000~~purchase agreement.

In June 2021, the Company exchanged 30,390 shares of Series A preferred stock ~~and accrued dividends into 523,973 shares of Class A common stock pursuant to~~for the ~~certificate of designations authorizing and establishing the rights, preferences and privileges of the Series A preferred stock.~~Exchange Notes. Accordingly, the Company recorded a reduction of ~~$4.7~~$33.7 million in the carrying value of the Series A preferred ~~stock.~~stock during the nine months ended September 30, 2021. Concurrent with the issuance of the Exchange Notes, the Company also received, from such holders of the Series A preferred stock total cash proceeds of $39.0 million in consideration for an additional $39.0 million in principal amount of Convertible Senior Notes (the "Cash Notes"). In connection with the extinguishment of the Series A preferred stock, the Company initially recorded the Convertible Senior Notes issued to such holders at a total fair value of $63.8 million. The difference of $8.9 millionbetween the fair value of the Convertible Senior Notes issued and the carrying amount of $72.7 million of consideration received was recorded in additional paid in capital as a return from the Series A preferred holders for the nine months ended September 30, 2021.

U.S. WELL SERVICES, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

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

As of September 30, ~~2020, 52,000~~2021, 19,610 shares of Series A preferred stock were outstanding and convertible into ~~9,146,254~~1,123,362 shares of Class A common stock, and dividends accrued and outstanding with respect to the Series A preferred stock were ~~$9.5~~$6.6 million and reflected in the carrying value of Series A preferred stock.

Series B Redeemable Convertible Preferred Stock

The following table summarizes the Company’s Series B Redeemable Convertible Preferred Stock, par value ~~$0.0001~~$0.0001 per share (“Series B preferred stock”) activities for the nine months ended September 30, ~~2020 (in thousands, except share amounts~~2021:):

Shares

Amount

Series B preferred stock as of December 31, 2019

-

$
-

Proceeds from issuance of Series B preferred stock

21,000

21,000

Issuance of Series B preferred stock to senior secured term loan lenders

1,050

1,050

Issuance cost associated with Series B preferred stock

-

(1,413
)
Accrued Series B preferred stock dividends

-

1,347

Series B preferred stock as of September 30, 2020

22,050

$
21,984


	Shares			Amount
Series B preferred stock as of December 31, 2020		22,050		$	22,686
Conversion of Series B preferred stock to Class A common stock		(22,050	)		(27,277	)
Accrued Series B preferred stock dividends		-			4,591
Series B preferred stock as of September 30, 2021		0		$	0

~~On March 31, 2020, the Company entered into a purchase agreement with certain institutional investors (collectively, the “Purchasers”), pursuant to which the Company agreed to issue~~In February 2021 and ~~sell in a private placement 21,000~~May 2021, 762 and 250 shares of Series B preferred stock ~~for an aggregate purchase price~~and related accrued dividends were converted into 784,508 and 265,000 shares of ~~$21.0 million. On April 1, 2020 (the “Series B Closing Date”),~~Class A common stock, respectively, pursuant to the ~~Purchasers purchased~~certificate of designations authorizing and establishing the rights, preferences, and privileges of the Series B preferred stock. ~~Two~~

On September 14, 2021, the Company amended the certificate of ~~the purchasers~~designations of the Series B preferred stock ~~were affiliates of Crestview Partners, which held, prior~~ to ~~the issuance, an aggregate 36.67% ownership interest in~~provide that the Company ~~and is entitled~~could, subject to ~~designate for nomination by~~certain conditions, convert all, but not less than all, of the ~~Company for election two directors to serve on~~outstanding shares of the ~~Company’s Board of Directors.~~

~~The~~ Series B preferred stock ~~ranks senior to~~into shares of the Company's Class A common stock. Upon conversion, each holder of the Series B preferred stock would receive the number of shares of Class A common stock ~~and Class B common stock and in parity with~~equal to the ~~Series A preferred stock, with respect to distributions. The~~aggregate amount of Series B preferred stock ~~has only specified voting rights, including with respect to~~dividends that would have accrued if such shares were converted as of April 1, 2022, divided by the ~~issuance or creation~~conversion price set forth in the certificate of ~~senior securities, amendments to~~designations.

On September 17, 2021, the ~~Company’s Second Amended and Restated Certificate of Incorporation that negatively impact~~Company converted the ~~rights~~remaining 21,038 shares of the Series B preferred stock and ~~the payment of~~related accrued dividends ~~on, or repurchase or redemption~~for 25,565,707 shares of Class A common ~~stock.~~stock, pursuant to the amended certificate of designations.

The Company ~~has~~recorded a reduction of $26.2 million and $27.3 million in the ~~option, but no obligation, to redeem~~carrying value of the Series B preferred stock ~~for cash. If~~during the ~~Company notifies the holders that it has elected to redeem the Series B preferred stock, a holder may instead elect to convert its~~three and nine months ended September 30, 2021, respectively.

As of September 30, 2021, there were 0 shares of Series B preferred stock at the specified conversion price, which is initially $0.308 per share. The Series B preferred stock converted in response to a redemption notice will net settle for a combination of cash and Class A common stock.outstanding.

Each holder of Series B preferred stock may convert all or any portion of its Series B preferred stock into Class A common stock based on the then-applicable liquidation preference, subject to anti-dilution adjustments, at any time, but not more than once per quarter, so long as any conversion is for at least $1.0 million based on the liquidation preference on the date of the conversion notice.

Following the eighteen-month anniversary of the Series B Closing Date, the Company may cause the conversion of all or any portion of the Series B preferred stock into Class A common stock if (i) the closing price of the Class A common stock is greater than 130% of the conversion price for 20 days over any 30-day trading period; (ii) the average daily trading volume of the Class A common stock exceeded 250,000 for 20 days over any 30-day trading period; and (iii) the Company has an effective registration statement on file with the Securities and Exchange Commission covering resales of the underlying Class A common stock to be received upon such conversion.

The Series B preferred stock was recorded as Mezzanine Equity, net of issuance cost, on the condensed consolidated balance sheets because it has redemption features upon certain triggering events that are outside the Company’s control, such as change in control.

As of September 30, 2020, 22,050 shares of Series B preferred stock were outstanding and convertible into 75,966,724 shares of Class A common stock, and dividends accrued and outstanding with respect to the Series B preferred stock was $1.3 million and reflected in the carrying value of Series B preferred stock.

NOTE 1113 – STOCKHOLDERS’ EQUITY

~~Shares Authorized and Outstanding~~

Preferred Stock

The Company is authorized to issue 10,000,000 shares of preferred stock with a par value of ~~$0.0001~~$0.0001 per share with such designation, rights and preferences as may be determined from time to time by the Company’s Board of Directors. See “Note 1012 – Mezzanine Equity” for the discussion of preferred stock issued and outstanding.

Class A Common Stock

The Company is authorized to issue 400,000,000 shares of Class A common stock with a par value of ~~$0.0001~~$0.0001 per share. AtAs of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, there were ~~71,413,883~~52,352,178 and ~~62,857,624~~20,718,659 shares of Class A common stock issued and outstanding, respectively. AtAs of September 30, ~~2020, 1,000,000~~2021, 285,715 outstanding shares of Class A common stock were subject to cancellation on November 9, 2024, unless the closing price per share of the Class A common stock has equaled or exceeded ~~$12.00~~$42.00 for any 20 trading days within any ~~30-trading~~30-trading day period, and ~~609,677~~174,194 outstanding shares of Class A common stock were subject to the same cancellation provision, but at a closing price per share of ~~$13.50.~~$47.25.

ATM Agreement.On June 26, 2020, the Company entered into an Equity Distribution Agreement (the “ATM Agreement”) with Piper Sandler & Co. relating to the Company’s shares of Class A common stock. In accordance with the terms of the ATM Agreement, the Company may offer and sell ~~over a period of time, up to $10.3 million~~shares of our Class A common ~~stock.~~stock over a period of time. The ATM Agreement relates to an “at-the-market” offering program. Under the ATM Agreement, the Company will pay Piper Sandler an aggregate commission of up to 3%3% of the gross sales price per share of Class A common stock sold under the ATM Agreement. ~~The~~On March 19, 2021, the Company increased the number of shares of Class A common stock that it may offer in accordance with the terms of the ATM Agreement by an additional $39.7 million in excess of the original amount of $10.3 million.

U.S. WELL SERVICES, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

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

During the nine months ended September 30, 2021, the Company sold ~~400~~4,287,519 shares of Class A common stock for total net proceeds of ~~two hundred~~$13.6 million and ~~two dollars and seventy six cents~~paid $0.4 million in commissions under ~~this~~the ATM Agreement, asrespectively. The Company did 0t sell any shares of Class A common stock under the ATM Agreement during the three months ended September 30, ~~2020. The~~2021. During the three and nine months ended September 30, 2020, the Company sold 114 shares of Class A common stock for total net proceeds of $0.2 thousand under the ATM Agreement. Since inception on June 26, 2020 through September 30, 2021, the Company has sold a total of 4,513,879 shares of Class A common stock under the ATM Agreement for total net proceeds of $14.0 million and paid ~~six dollars and twenty four cents~~$0.4 million in ~~commission with respect to this sale.~~commissions.

Class B Common Stock

The Company is authorized to issue 20,000,000 shares of Class B common stock with a par value of ~~$0.0001~~$0.0001 per share. The shares of Class B common stock are non-economic; however, holders are entitled to one vote per share. Each share of Class B common stock, together with one unit of USWS Holdings, is exchangeable for one share of Class A common stock or, at the Company’s election, the cash equivalent to the market value of one share of Class A common stock.

As of ~~September 30, 2020 and~~ December 31, ~~2019,~~2020, there were 2,302,936 ~~and 5,500,692~~ shares of Class B common stock issued and outstanding, ~~respectively.~~

which were converted into ~~During~~657,982 shares of Class A common stock, which has been adjusted to reflect the reverse stock split, during the nine months ended September 30, ~~2020, 3,197,756~~2021. As of September 30, 2021, there were 0 shares of Class B common stock ~~were converted to an equivalent number~~issued and outstanding.

Noncontrolling Interest

During the first quarter of 2021, the remaining noncontrolling interest holders of USWS Holdings exchanged all of their respective shares offor the Company’s Class A common stock.

~~Warrants~~

As of September 30, 2020, 9,994,635 public warrants and 15,500,000 private placement warrants were outstanding, and exercisable for an aggregate of 12,747,318 shares of Class A common stock. In addition, Accordingly, USWS Holdings became the Company’s wholly owned subsidiary as of ~~September 30, 2020, 4,399,997 warrants were outstanding pursuant to the Series A preferred stock purchase agreement, and exercisable for 4,399,997 shares of Class A common stock.~~March 31, 2021.

~~Noncontrolling Interest~~

The Company’s noncontrolling ownership interest in consolidated subsidiaries is presented in the condensed consolidated balance sheet within stockholders’ equity (deficit) as a separate component and represents approximately 3% ownership of USWS Holdings as of September 30, 2020.

~~Long-Term Incentive Plan~~

An aggregate of 8,160,500 shares of Class A common stock were initially available for issuance under the 2018 Long Term Incentive Plan (“LTIP”). Shares issued under the LTIP are further discussed in “Note 13 - Share-Based Compensation”. The aggregate number of shares available for issuance as of September 30, 2020 was 5,053,961.

NOTE 1214 – EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per share is computed by dividing income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed in the same manner as basic earnings per share except that the denominator is increased to include the number of additional Class A common shares that could have been outstanding assuming the exercise of stock options ~~exercise of~~and warrants, conversion of Series A and Series B preferred stock, conversion of Class B common stock, ~~and~~ vesting of restricted shares of Class A common ~~stock.~~stock, conversion of Convertible Senior Notes and issuance of Class A common stock associated with the deferred stock units and certain performance awards.

Basic and diluted net income (loss) per share excludes the income (loss) attributable to and shares associated with the ~~1,609,677~~459,909 shares of Class A common stock that are subject to cancellation on November 9, 2024 if certain market conditions have not been met. The Company has included in the calculation accrued dividends on Series A and Series B preferred stock and related deemed ~~dividends resulting from the amortization of discounts related~~and imputed dividends.

U.S. WELL SERVICES, INC.

Notes to ~~the Series A preferred stock.~~Unaudited Condensed Consolidated Financial Statements

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

The following table sets forth the calculation of basic and diluted earnings (loss) per share for the periods indicated based on the weighted average number of shares of Class A common stock ~~outstanding for the period~~ outstanding:~~(in thousands, except share and per share amounts)~~:


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2021			2020			2021			2020
Basic net income (loss) per share
Numerator:
Net loss attributable to U.S. Well Services, Inc.	$	(9,579	)	$	(14,158	)	$	(47,861	)	$	(199,481	)
Net loss attributable to cancellable Class A common stock		146			334			834			4,937
Basic net loss attributable to U.S. Well Services, Inc. shareholders		(9,433	)		(13,824	)		(47,027	)		(194,544	)
Dividends accrued on Series A preferred stock		(997	)		(1,854	)		(4,808	)		(5,450	)
Dividends accrued on Series B preferred stock		(3,069	)		(681	)		(4,591	)		(1,347	)
Deemed and imputed dividends on Series A preferred stock		-			(464	)		(750	)		(12,578	)
Deemed and imputed dividends on Series B preferred stock		(1,509	)		-			(7,178	)		-
Exchange of Series A preferred stock for Convertible Senior Notes		-			-			8,936			-
Basic net loss attributable to U.S. Well Services, Inc. Class A common shareholders	$	(15,008	)	$	(16,823	)	$	(55,418	)	$	(213,919	)

Denominator:
Weighted average shares outstanding		30,262,070			19,507,620			26,379,273			18,582,968
Cancellable Class A common stock		(459,909	)		(459,909	)		(459,909	)		(459,909	)
Basic and diluted weighted average shares outstanding		29,802,161			19,047,711			25,919,364			18,123,059
Basic and diluted net loss per share attributable to Class A common shareholders	$	(0.50	)	$	(0.88	)	$	(2.14	)	$	(11.80	)

Three Months Ended September 30,

Nine Months Ended September 30,

2020

2019

2020

2019

Basic Net Income (Loss) Per Share

Numerator:

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

$
(15,937
)

$
(16,969
)

$
(206,441
)

$
(60,720
)
Net loss attributable to cancellable
   Class A common stock

376

527

5,109

1,924

Basic net loss attributable to U.S. Well
   Services, Inc. shareholders

(15,561
)

(16,442
)

(201,332
)

(58,796
)
Dividends accrued on Series A preferred stock

(1,854
)

(1,670
)

(5,450
)

(2,330
)
Dividends accrued on Series B preferred stock

(681
)

-

(1,347
)

-

Deemed and imputed dividends on Series A
   preferred stock

(467
)

(4,406
)

(11,220
)

(5,966
)
Basic net loss attributable to U.S. Well
   Services, Inc. Class A common shareholders

$
(18,563
)

$
(22,518
)

$
(219,349
)

$
(67,092
)

Denominator:

Weighted average shares outstanding

68,276,671

51,859,283

65,040,390

50,791,787

Cancellable Class A common stock

(1,609,677
)

(1,609,677
)

(1,609,677
)

(1,609,677
)
Basic and diluted weighted average shares
   outstanding

66,666,994

50,249,606

63,430,713

49,182,110

Basic and diluted net income (loss) per share
   attributable to Class A common shareholders

$
(0.28
)

$
(0.45
)

$
(3.46
)

$
(1.36
)

A summary of securities excluded from the computation of diluted earnings per share is presented below for the applicable periods:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Dilutive earnings per share:
Anti-dilutive stock options		250,649		250,649		250,649		250,649
Anti-dilutive warrants		4,503,280		4,899,233		4,503,280		4,899,233
Anti-dilutive restricted stock		389,659		426,332		389,659		426,332
Anti-dilutive deferred stock units		2,052,474		-		2,052,474		-
Anti-dilutive shares from Pool B Awards		3,387,218		-		3,387,218		-
Anti-dilutive Class B common stock convertible into Class A common stock		-		657,982		-		657,982
Anti-dilutive Series A preferred stock convertible into Class A common stock		1,123,362		2,613,215		1,123,362		2,613,215
Anti-dilutive Series B preferred stock convertible into Class A common stock		-		21,704,778		-		21,704,778
Anti-dilutive Convertible Senior Notes convertible into Class A common stock		26,953,911		-		26,953,911		-
Potentially dilutive securities excluded as anti-dilutive		38,660,553		30,552,189		38,660,553		30,552,189

U.S. WELL SERVICES, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

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

Three Months Ended September 30,

Nine Months Ended September 30,

2020

2019

2020

2019

Dilutive earnings per share:

Anti-dilutive stock options

877,266

1,068,162

877,266

1,068,162

Anti-dilutive warrants

17,147,315

15,680,651

17,147,315

15,680,651

Anti-dilutive restricted stock

1,492,161

2,729,496

1,492,161

2,729,496

Anti-dilutive Class B common stock convertible into Class A common stock

2,302,936

13,775,400

2,302,936

13,775,400

Anti-dilutive Series A preferred stock convertible into Class A common stock

9,146,254

8,595,172

9,146,254

8,595,172

Anti-dilutive Series B preferred stock convertible into Class A common stock

75,966,724

-

75,966,724

-

Potentially dilutive securities excluded as anti-dilutive

106,932,656

41,848,881

106,932,656

41,848,881

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


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2021			2020			2021			2020
Restricted stock	$	906		$	819		$	2,607		$	3,832
Stock options		218			218			648			687
Deferred stock units		544			-			1,036			-
Pool A Awards		3,525			-			4,006			-
Pool B Awards		663			-			1,220			-
Total	$	5,856	(1)	$	1,037	(2)	$	9,517	(3)	$	4,519	(4)

(1)

For the three months ended September 30, 2021, $1,228 was presented as cost of services and $4,628 was presented as selling, general and administrative expenses in ~~thousands~~the condensed consolidated statement of operations.

(2)

For the three months ended September 30, 2020, ($97):

was presented as cost of services and $1,134 was presented as selling, general and administrative expenses in the condensed consolidated statement of operations.

Three Months Ended September 30,

Nine Months Ended September 30,

2020

2019

2020

2019

Restricted stock

$
819

$
1,937

$
3,832

$
4,788

Unrestricted stock

-

104

-

312

Stock options

218

265

687

572

Total

$
1,037

⁽¹⁾
$
2,306

⁽²⁾
$
4,519

⁽³⁾
$
5,672

⁽⁴⁾

⁽¹⁾ ($97) was presented as part of cost of services and $1,134 was presented as part of selling, general and administrative expenses in the condensed consolidated statement of operations.
⁽²⁾ $757 was presented as part of cost of services and $1,549 was presented as part of selling, general and administrative expenses in the condensed consolidated statement of operations.
⁽³⁾ $1,106 was presented as part of cost of services and $3,413 was presented as part of selling, general and administrative expenses in the condensed consolidated statement of operations.
⁽⁴⁾ $1,835 was presented as part of cost of services and $3,837 was presented as part of selling, general and administrative expenses in the condensed consolidated statement of operations.
(3)

For the nine months ended September 30, 2021, $1,702 was presented as cost of services and $7,815 was presented as selling, general and administrative expenses in the condensed consolidated statement of operations.

(4)

For the nine months ended September 30, 2020, $1,106 was presented as cost of services and $3,413 was presented as selling, general and administrative expenses in the condensed consolidated statement of operations.

Pursuant to the Amended and Restated U.S. Well Services, Inc. 2018 Stock Incentive Plan (as amended, the “LTIP”), the Company grants shares of restricted Class A common stock ("restricted stock") to certain employees and directors. Restricted stock is subject to restrictions on transfer and is generally subject to a risk of forfeiture if the award recipient is no longer an employee or director of the Company prior to the lapse of the restriction. Restricted stock granted to employees generally vests over four years in equal installments each year on the anniversary of the grant date and grants to directors generally vest in full after one year. The grant date fair value of the restricted stock is determined using the closing price of the Company's Class A common stock on the grant date.

The following table summarizes the restricted stock activity for the nine months ended September 30, ~~2020:~~2021:


	Shares			Weighted- Average Grant-Date Fair Value per Share
Outstanding at December 31, 2020		414,071		$	31.01
Granted		88,025			2.70
Vested		(102,646	)		31.19
Forfeited		(9,791	)		31.19
Outstanding at September 30, 2021		389,659		$	24.57

As of September 30, 2021, the total unrecognized compensation cost related to restricted stock was $4.7 million which is expected to be recognized over a weighted-average period of 1.44 years.

The following table summarizes the stock option activity for the nine months ended September 30, ~~2020:~~2021:


	Shares		Weighted- Average Exercise Price per Share		Weighted-Average Remaining Contractual Life (in years)
Outstanding at December 31, 2020		250,649	$	31.19		5.21
Exercised		-		-		-
Forfeited/Expired		-		-		-
Outstanding at September 30, 2021		250,649	$	31.19		4.46
Exercisable at September 30, 2021		125,325	$	31.19		4.46

Number of
shares

Weighted
average
exercise price
(per share
data)

Weighted
Average
Remaining
Contractual
Life (years)

Outstanding as of December 31, 2019

1,068,162

$
8.91

6.21

Exercised

-

-

-

Forfeited/Expired

(190,896
)

8.91

-

Outstanding as of September 30, 2020

877,266

$
8.91

5.46

Exercisable as of September 30, 2020

219,317

$
8.91

5.46

U.S. WELL SERVICES, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

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

As of September 30, ~~2020,~~2021, the total unrecognized compensation cost related to ~~stock-based compensation grants under the LTIP~~stock options was ~~$10.7 million. We expect~~$1.3 million which is expected to ~~recognize these costs~~be recognized over a weighted average period of ~~2.4~~1.46 years.

~~NOTE 14 – EMPLOYEE BENEFIT PLAN~~

~~In 2013,~~Deferred Stock Units (“DSUs”)

The Company awards DSUs to certain key employees of the Company ~~established~~pursuant to the ~~U.S. Well Services 401(k) Plan. The Company matched 100% of employee contributions up~~LTIP. Each DSU represents the right to 6%receive 1 share of the ~~employee’s salary,~~Company’s Class A common stock. DSUs generally vest over three years in equal installments each year on the anniversary of the vesting effective date, subject to ~~cliff~~the grantee’s continuous service through each vesting ~~after two years of service. At the end~~period. The grant date fair value of the ~~first quarter~~DSU is determined using the closing price of ~~2020,~~ the ~~Company suspended its match of employee contributions. For~~Company's Class A common stock on the ~~three months ended September 30, 2020 and 2019, matching contributions were $0.0 million and $1.1 million, respectively. For~~grant date.

The following table summarizes the DSUs activity for the nine months ended September 30, 2021:


	Units			Weighted- Average Grant Date Fair Value per Unit
Outstanding at December 31, 2020		2,546,249		$	1.16
Granted		404,294			2.87
Vested		(873,408	)		1.16
Forfeited		(24,661	)		1.16
Outstanding at September 30, 2021		2,052,474		$	1.49

As of September 30, 2021, the total unrecognized compensation cost related to DSUs was $2.1 million which is expected to be recognized over a weighted average period of 1.67 years.

Pool A Performance Awards

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

The Company accounts for the Pool A Awards under liability accounting as a result of the fixed monetary amount that could be settled either in cash or a variable number of shares of the Company’s Class A common stock. Since the settlement will not occur until the fifth anniversary of the grant date, the Company considers the delayed settlement as a post-vesting restriction which would impact the determination of grant-date fair value of the award.

In 2020, the Company granted Pool A Awards which fully vested on January 1, 2021. During the third quarter of 2021, the Company granted Pool A Awards that will fully vest on January 1, 2022. As of September 30, 2021, the fair value of the Pool A Awards liabilities were remeasured to $2.9 million and $3.4 million for the 2020 and ~~2019, matching contributions were $1.0 million and $3.8 million,respectively. The matching contributions were included in~~2021 Pool A Awards, respectively, which was estimated using a risk-adjusted discount rate reflecting the weighted-average cost of ~~services and selling, general and administrative expenses~~capital of similarly traded public companies.

As of September 30, 2021, the total unrecognized compensation cost related to Pool A Awards was $4.3 million, which is expected to be recognized over a weighted average period of 4.58 years.

Pool B Performance Awards

The Company grants Pool B Performance Awards ("Pool B Awards") to certain key employees of the Company. Each Pool B Award represents the right to receive, at the Company’s election, either a cash payment calculated in accordance with the award agreement, or a fixed number of shares of the Company’s Class A common stock. The Pool B Awards vest over three years in equal installments each year on the anniversary of the vesting effective date specified in the ~~condensed consolidated statement~~applicable award agreement, subject to the grantee’s continuous services through each vesting period. The grant date fair value of ~~operations.~~the Pool B Awards is determined using the closing price of the Company's Class A common stock on the grant date.

U.S. WELL SERVICES, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

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

The following table summarizes the Pool B Awards activity for the nine months ended September 30, 2021:


	Fair Value
Outstanding at December 31, 2020	$	3,356
Granted		1,499
Vested		(1,151	)
Forfeited		(32	)
Outstanding at September 30, 2021	$	3,672

As of September 30, 2021, the total unrecognized compensation cost related to Pool B Awards was $2.5 million, which is expected to be recognized over a weighted average period of 1.7 years.

NOTE 1516 – INCOME TAXES

On March 27, 2020, the President signed the ~~CARES~~Coronavirus Aid, Relief and Economic Security Act (as amended, the “CARES Act”) into law. The CARES Act contains several corporate income tax provisions, including, among other things, providing a 5-year carryback of net operating loss (“NOL”) tax carryforwards generated in tax years 2018, 2019, and 2020, removing the ~~80%~~80% taxable income limitation on utilization of those NOLs if carried back to prior tax years or utilized in tax years beginning before 2021, temporarily liberalizing the interest deductions rules under Section 163(j) of the Tax Cuts and Jobs Act of 2017, and making corporate alternative minimum tax credits immediately refundable. During the second quarter of 2020, the Company filed an application to carry back its 2018 NOLs, claiming a refund of approximately ~~$0.8 million. The Company continues to evaluate other potential effects of~~$0.8 million, which was received during the ~~CARES Act.~~nine months ended September 30, 2021.

The Company files income tax returns in the U.S. federal jurisdiction and various state and local jurisdictions and is subject to examination by the taxing authorities.

The Company’s effective tax rate on continuing operations for the nine months ended September 30, ~~2020~~2021 was ~~(0.38)~~(0.06)%. ~~The difference between the effective tax rate and the U.S. federal statutory rate is due to state taxes, flow-through income not subject to tax, and a valuation allowance.~~

We follow guidance issued by the FASB in accounting for uncertainty in income taxes. This guidance clarifies the accounting for income taxes by prescribing the minimum recognition threshold an income tax position is required to meet before being recognized in the condensed consolidated financial statements and applies to all income tax positions. Each income tax position is assessed using a two-step process. A determination is first made as to whether it is more likely than not that the income tax position will be sustained, based upon technical merits, upon examination by the taxing authorities. If the income tax position is expected to meet the more likely than not criteria, the benefit recorded in the condensed consolidated financial statements equals the largest amount that is greater than 50% likely to be realized upon its ultimate settlement.

We have considered our exposure under the standard at both the federal and state tax levels. We did 0t0t record any liabilities for uncertain tax positions as of September 30, ~~2020~~2021 or December 31, ~~2019.~~2020. We record income tax-related interest and penalties, if any, as a component of income tax expense. We did not incur any material interest or penalties on income taxes.

After consideration of all of the information available, management determined that a valuation allowance was appropriate, as it is more likely than not that the Company will not utilize its net deferred tax assets.

NOTE 1617 – COMMITMENTS AND CONTINGENCIES

Litigation

Liabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties, and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred.

The Company was named a defendant in a case filed on January 14, 2019 in the Superior Court of the State of Delaware styled Smart Sand, Inc. v. U.S. Well Services LLC, C.A. 19C-01-144 PRW. On June 1, 2021, the court ruled against the Company in the case on the breach of contract claim and subsequently, on June 17, 2021, entered judgement in favor of Smart Sand in the amount of approximately $51.0 million. On June 28, 2021, the Company entered into a Settlement Agreement and Release (the “Settlement Agreement”) with Smart Sand, Inc. (“Smart Sand”), pursuant to which the Company and Smart Sand reached a settlement of all matters in dispute. Pursuant to the Settlement Agreement, the Company agreed to pay $35.0 million in cash and to provide Smart Sand certain rights of first refusal related to the supply of proppant for a period of two years (the “Settlement”). The parties to the Settlement Agreement also released each other from claims arising from or related to the Smart Sand litigation or the final judgment of the court. As of September 30, 2021, the Company paid $35.0 million to Smart Sand and the settlement expense was reflected as litigation settlement on the condensed consolidated statement of operations.

U.S. WELL SERVICES, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

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

Purchase Commitments

The Company entered into an Equipment Purchase and Sale Agreement to purchase equipment. The Company intends to fund the commitments due in the next 12 months under the Equipment Purchase and Sale Agreement through additional financing transactions and cash on hand.

The Company has also entered into service agreements with certain power generation providers. The Company expects to offset a portion of the commitments it will owe under these service agreements through additional customer charges. As of the filing date, the Company is in negotiations to amend certain of the service agreements to extend the start date based on current supply constraints.

As of September 30, 2021, future minimum purchase commitments for equipment and services are as follows:


Fiscal Year
Remainder of 2021	$	8,850
2022		88,700
2023		46,250
2024		1,400
Total	$	145,200

Sand Purchase Agreements

The Company entered into agreements for the supply of proppant for use in its ~~hydraulic fracturing~~pressure pumping operations. Under the terms of these agreements, the Company is subject to minimum purchase quantities on a monthly, quarterly, or annual basis at fixed prices or may pay penalties in the event of any shortfall.

As of September 30, ~~2020, we estimated and accrued for a shortfall in quantities. This accrual is presented as part of accrued liabilities on~~2021, the ~~condensed consolidated balance sheets.~~

~~The following is a schedule of the~~Company’s contracted volumes in dollars ~~and~~was $2.8 million. The Company’s minimum commitments ~~under the proppant supply purchase agreements as of September 30, 2020~~was $1.8 ~~(in thousands)~~:

Minimum

Contracted

Commitments

Remainder of 2020

$
7,758

$
4,027

2021

11,340

960

Total

$
19,098

$
4,987

~~The minimum commitments represent~~million, which represents the aggregate amounts that we would be obligated to pay ~~in the event~~if we procured no additional proppant under the contracts ~~subsequent to~~after September 30, ~~2020.~~2021.

During the first quarter of 2019, we became involved in a contract dispute with a proppant vendor resulting in the cancellation of the contract. Accordingly, as of September 30, 2020, we have excluded $47.1 million and $48.0 million of contracted and minimum commitments, respectively, related to this contract. The litigation involving the contract in dispute is in the discovery stage, and as such no prediction can be made as to the outcome of the case at this time and we are unable to reasonably estimate the potential losses or range of losses resulting from this litigation, if any.

~~Operating~~ Lease Agreements

The Company has various operating leases for facilities with terms ranging from 2436 to 76 ~~months.~~months.

Rent expense was ~~$0.7 million~~$347 and $667 for ~~each of~~ the three months ended September 30, 2021 and 2020, ~~and 2019,~~respectively, of which ~~$0.4 million~~$278 and ~~$0.6 million,~~$347, respectively, are recorded as ~~part of~~ cost of services and ~~$0.3 million,~~$69 and ~~$0.1 million,~~$320, respectively, are recorded as ~~part of~~ selling, general and administrative expenses in the condensed consolidated statements of operations.

Rent expense was $976 and $1,854 for the nine months ended September 30, ~~2020~~2021 and ~~2019 was $1.8 million and $2.0 million,~~2020, respectively, of which ~~$1.1 million~~$774 and ~~$1.6 million,~~$1,150, respectively, are recorded as ~~part of~~ cost of services and ~~$0.7 million~~$202 and ~~$0.4 million,~~$704, respectively, are recorded as ~~part of~~ selling, general and administrative expenses in the condensed consolidated statements of operations.

The following is a schedule of minimum future payments on non-cancellable operating leases ~~as of September 30, 2020~~ ~~(in thousands)~~:

Remainder of 2020

$
358

2021

1,114

2022

828

2023

308

2024

258

Thereafter

67

Total minimum future rentals

$
2,933

On April 1, 2020, the Company entered into an agreement to extend the lease on one of its facilities. The extended term of the lease is for a period of 36 months commencing on April 1, 2020, with rent throughout the term totaling $0.7 million.

~~Capital Lease Agreements~~

~~The total amount of future minimum lease payments related to the~~and capital leases as of September 30, ~~2020 was $6.4 million, all~~2021:


Fiscal Year	Operating Leases		Capital Leases
Remainder of 2021	$	222	$	135
2022		828		541
2023		308		541
2024		258		536
2025		67		161
Total	$	1,683	$	1,914

The total capital leases payments include a nominal amount of ~~which is due in the remainder of 2020. This amount includes~~ imputed ~~interest totaling $0.2 million.~~interest.

Self-insurance

The Company established a self-insured plan for employees’ healthcare benefits except for losses in excess of varying threshold amounts. The Company charges to expense all actual claims made during each reporting period, as well as an estimate of claims incurred, but not yet reported. The amount of estimated claims incurred, but not reported was ~~$0.3~~$0.3 million and ~~$0.6~~$0.2 million as of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively, and was reported as accrued expenses in the condensed consolidated balance sheets. The Company believes that the liabilities recorded are appropriate based on the known facts and circumstances and does not expect further losses materially in excess of the amounts already accrued for existing claims.

NOTE 1718 – RELATED PARTY TRANSACTIONS

Convertible Senior Notes

On June 24, 2021, Crestview Partners (“Crestview”) purchased $40.0 million of Convertible Senior Notes that are convertible into shares of the Company’s Class A common stock for consideration of $20.0 million in cash and in exchange for 15,588 shares of the Company’s Series A preferred stock.

Series B Redeemable Convertible Preferred Stock

On April 1, 2020, Crestview ~~Partners~~ purchased 11,500 shares of Series B preferred stock for a total payment of ~~$11.5~~$11.5 million. ~~The~~On April 1, 2020, the TCW Group, Inc. ("TCW Group") purchased 6,500 shares of Series B preferred stock for a total payment of ~~$6.5~~$6.5 million and David Matlin, a member of the Company’s Board of Directors, purchased 1,878 shares of Series B preferred stock for a total payment of ~~$1.9~~$1.9 million.

~~NOTE 18 – SUBSEQUENT EVENTS~~

On ~~November 5, 2020,~~September 17, 2021, the Company converted Crestview's 11,500 shares of Series B preferred stock and related accrued dividends for 13,974,980 shares of Class A common stock, pursuant to the ~~Amended and Restated U.S. Well Services, Inc. 2018 Stock Incentive Plan (the “A&R LTIP”),~~amended certificate of designations. On September 17, 2021, the Company ~~made grants~~converted TCW Group's 6,500 shares of ~~deferred~~Series B preferred stock ~~units~~ and ~~certain performance incentive awards that will provide~~related accrued dividends for ~~potential future payments to be made to certain key employees~~7,898,902 shares of Class A common stock. On September 17, 2021, the ~~Company. The~~Company converted David Matlin's and David Treadwell's 1,678 and 200 shares of Series B preferred stock and related accrued dividends for 2,039,132 and 243,044 shares of Class A&R LTIP, which was approved by the Board of Directors, upon the recommendation of the Compensation Committee of the Board of Directors on September 21, 2020, is expected to be included in the Company’s Proxy Statement for its 2021 Annual Meeting of Stockholders for approval by the Company’s stockholders. The details of these grants are further discussed in “Part II, Item 5 – Other Information”. The Company is still in the process of evaluating the accounting impact of these grants. common stock, respectively.

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

~~The~~You should read the following ~~management~~ discussion and analysis ~~("MD&A")~~ of ~~the~~our financial condition and results of operations ~~of U.S. Well Services, Inc.~~ together ~~with its subsidiaries for the three and nine months ended September 30, 2020 should be read in conjunction~~ with our unaudited condensed consolidated financial statements and ~~accompanying~~the related notes in Item 1. "Financial Statements" contained herein and our audited consolidated financial statements as of December 31, 2020, included ~~elsewhere~~ in ~~this Quarterly~~our Amendment No. 1 to Annual Report on Form ~~10-Q.~~10-K/A for the year ended December 31, 2020 (our "Amended Annual Report"), as filed with the Securities and Exchange Commission (the "SEC") on May 17, 2021. The information provided below supplements, but does not form part of, our unaudited condensed consolidated financial statements.

This Quarterly Report on Form 10-Q (this "Report") contains “forward-looking statements” as defined in Section 27A of the United States Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements usually relate to future events, conditions and anticipated revenues, earnings, cash flows or other aspects of our operations or operating results. Forward-looking statements are often identified by words such as “believes,” “expects,” “intends,” “estimates,” “projects,” “anticipates,” “will,” “plans,” “may,” “should,” “would,” “foresee,” or the negative thereof. The absence of these words, however, does not mean that these statements are not forward-looking. These statements are based on our current ~~expectation, belief~~expectations, beliefs and assumptions concerning future developments and business conditions and their potential effect on us. While management believes that these forward-looking statements are reasonable as and when made, there can be no assurance that future developments affecting us will be those that we anticipate. All of our forward-looking statements involve risks and uncertainties (some of which are significant or beyond our control) and assumptions that could cause actual results to differ materially from our historical experience and our present expectations or projections. These factors include geological, operating and economic factors and ~~declining~~changes in prices and market conditions, including ~~reduced~~changes in expected or realized oil and gas prices ~~(including the recent significant decline in oil prices since the beginning of 2020)~~ and demand for oilfield services and changes in supply or demand for maintenance, repair and operating products, equipment and service; the effectiveness of management's strategies and decisions; our ability to obtain financing, raise capital and continue as a going concern; our ability to implement our internal growth and acquisition growth strategies; general economic and business conditions specific to our primary customers; our ability to collect accounts receivable; compliance with our debt agreements and equity-related securities; volatility in market prices; our ability to satisfy the continued listing requirements of Nasdaq with respect to our Class A common stock and warrants or to cure any continued listing standard deficiency with respect thereto; changes in government regulations; our ability to effectively integrate businesses we may acquire; new or modified statutory or regulatory requirements; availability of materials and labor; inability to obtain or delay in obtaining government or third-party approvals and permits; non-performance by third parties of their contractual obligations; unforeseen hazards such as natural disasters, catastrophes and severe weather conditions, including floods, hurricanes and earthquakes; public health crises, such as a pandemic, including the ~~recent~~ COVID-19 ~~pandemic;~~pandemic and new and potentially more contagious variants of COVID-19, such as the delta variant; acts of war or terrorist acts and the governmental or military response thereto; and cyber-attacks adversely affecting our operation. This Report identifies other factors that could cause such differences. There can be no assurance that these are all of the factors that could cause actual results to vary materially from the forward-looking statements. Factors that could cause or contribute to such differences also include, but are not limited to, those discussed in our filings with the SEC, including under "Risk Factors" in this Report and in our Amended Annual ~~Report on Form 10-K filed with the Securities and Exchange Commission on March 5, 2020.~~Report. We caution you not to place undue reliance on any forward-looking statements, which speak only as of the date hereof. We assume no obligation and do not intend to update these forward-looking statements. Unless the context otherwise requires, references in this Report to the “Company”, “USWS”, “we”, or “our” shall mean U.S. Well Services, Inc. and its subsidiaries.

We provide ~~high-pressure, hydraulic fracturing~~pressure pumping services in oil and natural gas basins. ~~Both our conventional and~~Our Clean Fleet® ~~hydraulic fracturing~~ well stimulation fleets are among the most reliable and highest performing fleets in the industry, with the capability to meet the most demanding pressure and pump rate requirements. We operate in many of the active shale and unconventional oil and natural gas basins of the United States and our clients benefit from the performance and reliability of our equipment and personnel. Specifically, all of our fleets operate on a 24-hour basis and have the ability to withstand ~~the~~ high utilization rates, which results in more efficient operations. Our senior management team has extensive industry experience providing pressure pumping services to exploration and production companies across North America. In May 2021, we announced our commitment to becoming an all-electric pressure pumping services provider and in August 2021, we ceased operations of our last active conventional diesel fleet, marking our exit from the conventional diesel pressure pumping market. As a result of this strategic transition, we are the only publicly-traded, pure-play electric completions services provider.

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

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

Materials include the cost of sand delivered to the basin of operations, chemicals, and other consumables used in our operations. These costs vary based on the quantity and ~~quality~~type of sand and chemicals utilized when providing ~~hydraulic fracturing~~pressure pumping services. Transportation represents the costs to transport materials and equipment from receipt points to customer locations. Labor costs include payroll and benefits related to our field crews and other ~~employees, as well as severance costs. A majority~~employees. Most of our employees are paid on an hourly basis. ~~During the nine months ended September 30, 2020, our labor cost included approximately $2.3 million of severance expense.~~ Maintenance costs include preventative and other repair costs that do not require the replacement of major components of our ~~hydraulic fracturing~~well stimulation fleets. Maintenance and repair costs are expensed as incurred. ~~During the nine months ended September 30, 2020, our maintenance costs included $0.4 million related to the disposal of obsolete inventory.~~

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

In May 2021, we announced our commitment to becoming an all-electric pressure pumping services provider and in August 2021, we ceased operations of our last active conventional diesel fleet, marking our exit from the conventional diesel pressure pumping market. As a result, we have been executing on our plan to sell our diesel pressure pumping equipment. The proceeds received from these sales were used to reduce the outstanding balance of our Senior Secured Term Loan and pay applicable prepayment penalties. Additionally, we expect the corresponding reduction of average active fleets to have a short-term significant impact on our results of operations as we ended our remaining contracts which utilize conventional diesel pressure pumping equipment in the third quarter of 2021. Specifically, we expect revenues, cost of services, and depreciation to decline entering the fourth quarter of 2021, until such time we are able to generate business activity from four new next-generation all-electric fleets, the first of which we expect to be delivered late in the first quarter of 2022.

Three months ended September 30, 2021, compared to the three months ended September 30, 2020 ~~and 2019~~

~~The global health and economic crisis sparked by~~ the ~~COVID-19 pandemic and~~above table may not equal the ~~associated decrease in commodity prices has significantly impacted industry activity in 2020. Weaker economic activity and lower demand for crude oil, driven by the persistence~~sum or difference of the COVID-19 pandemic, has adversely impacted our business, resulting in a reduction in our active fleet count and fleet utilization levels. As such, we are experiencing considerable uncertainty in our near-term business prospects and abilitycomponents due to ~~forecast future financial performance.~~

In response to the challenging business and operating environment created by the COVID-19 pandemic, we have taken proactive measures to safeguard the physical health of our employees and the financial health of our business. Employees capable of working from home were mandated to do so until conditions improve making it safe for their return on a voluntary basis. Additionally, all individuals entering into a Company facility or work location undergo a screening process. Beginning in February 2020, we took swift action to reduce costs, rationalizing the size of the organization to match activity through reductions-in-force, furloughing employees, reducing compensation levels across the board, and closing facilities. We also worked with customers to accelerate the collections of accounts receivables in certain cases and worked with suppliers to reduce our cost of goods and ensure the availability of supply. During the second quarter of 2020, we completed an offering of redeemable convertible preferred equity concurrent with the amendment of certain terms of our debt instruments in order to provide us with greater liquidity and financial flexibility (See “Note 9 - Debt” and “Note 10 – Mezzanine Equity” in the Notes to Condensed Consolidated Financial Statements). In addition, we have also taken advantage of relief offered by the CARES Act with the deferral of the employer portion of social security taxes, the carryback of our 2018 NOLs to prior year taxable income and in July 2020, the receipt of a $10.0 million PPP Loan. We also expect to substantially limit growth capital expenditures for the foreseeable future.

We expect hydraulic fracturing activity to remain depressed relative to historic levels throughout the remainder of 2020 but believe that industry activity should accelerate as overall economic conditions improve.Revenue

Results of Operations

Three months ended September 30, 2020, compared to three months ended September 30, 2019

(in thousands, except percentages)

Three Months Ended September 30,

2020

% ⁽¹⁾

2019

% ⁽¹⁾

Variance

% Variance

Revenue

$
44,042

100.0%

$
130,884

100.0%

$
(86,842
)

(66.4)%

Costs and expenses:

Cost of services (excluding depreciation
and amortization)

31,157

70.7%

90,792

69.4%

(59,635
)

(65.7)%

Depreciation and amortization

16,393

37.2%

39,723

30.3%

(23,330
)

(58.7)%

Selling, general and administrative expenses

6,098

13.8%

8,216

6.3%

(2,118
)

(25.8)%

Loss on disposal of assets

755

1.7%

4,976

3.8%

(4,221
)

(84.8)%

Loss from operations

(10,361
)

(23.5)%

(12,823
)

(9.8)%

2,462

* ⁽²⁾

Interest expense, net

(5,744
)

(13.0)%

(8,449
)

(6.5)%

2,705

(32.0)%

Other income

30

0.1%

62

0.0%

(32
)

* ⁽²⁾

Income tax expense (benefit)

(87
)

(0.2)%

39

0.0%

(126
)

* ⁽²⁾

Net loss

$
(15,988
)

(36.3)%

$
(21,249
)

(16.2)%

$
5,261

* ⁽²⁾

⁽¹⁾ As a percentage of revenues. Percentage totals or differences in the above table may not equal the sum or difference of the components due to rounding.

⁽²⁾ Not meaningful.

~~Revenue~~. The ~~decrease~~increase in revenue was primarily attributable to ~~the decline~~an increase in business activity asdue to economic recovery from the COVID-19 pandemic and depressed oil prices in the prior period. During the third quarter of 2021 our average active fleet count ~~during the period decreased to 5~~was 6 fleets compared to 95 fleets in the prior comparable period. ~~Revenue was also affected to a lesser extent by the continuing trend of customers self-sourcing lower margin consumables such as sand, chemicals, and sand transportation. We anticipate~~However, we expect revenue to ~~continue to be depressed~~decline in future quarters as ~~long as~~we ceased operations of our last active conventional diesel fleet in the ~~industry conditions discussed in “Significant Trends” above continue. In addition, we expect the trend~~third quarter of ~~customers self-sourcing consumables to continue, resulting in lower revenues from consumables as compared to periods in which we provided these consumables to customers.~~ 2021.

Cost of services, excluding depreciation and amortization. The ~~decrease~~increase in cost of services, excluding depreciation and amortization, was attributable to the ~~decline~~increase in business activity due to economic recovery from the COVID-19 pandemic and ~~significant cost cutting measures implemented~~depressed oil prices in ~~response~~the prior period. During the third quarter of 2021, we experienced elevated variable costs for labor, repair and maintenance, trucking and equipment rentals, and also incurred approximately $5.5 million of expenses related to ~~current industry conditions as described~~our exit from the diesel pressure pumping market and extra third-party labor to supplement staff out on COVID quarantine. Additionally, during the third quarter of 2021, we recognized $1.0 million in ~~“Significant Trends” above as well as~~share-based compensation expense related to share-based awards granted in the quarter. Due to a ~~reduction in consumables costs as a result~~vesting start date of ~~increased customer self-sourcing.~~January 1, 2021 for some of the share-based awards, $0.7 million of share-based compensation expense was attributable to the first half of 2021. Similar to ~~revenues,~~revenue, we ~~anticipate~~expect cost of services, excluding depreciation and amortization, to ~~remain at reduced levels~~decline in future quarters as ~~long as~~we ceased operations of our last active conventional diesel fleet in the ~~industry conditions and cost cutting measures described in “Significant Trends” above continue.~~third quarter of 2021.

Depreciation and amortization. The decrease in depreciation and amortization was primarily due to the lower cost basis of depreciating long-lived assets ~~as a result~~because of impairment losses recorded in the first quarter of ~~2020,~~2020. We expect depreciation and ~~fully depreciated long-lived assets since the end of the prior comparable quarter.~~amortization to decline in future quarters as we continue to execute on our plan to sell our remaining diesel pressure pumping equipment.

Selling, general and administrative expenses. The ~~decrease~~increase in selling, general, and administrative expenses was primarily attributable to ~~reductions-in-force, furloughing employees, and reduction~~the reinstatement of ~~employee compensation~~salary levels ~~in response~~due to ~~current industry~~improved economic conditions as ~~described~~compared to the prior period. Additionally, during the third quarter of 2021, we recognized $3.0 million in ~~“Significant Trends” above.~~share-based compensation expense related to share-based awards granted in the quarter. Due to a vesting start date of January 1, 2021 for some of the share-based awards, $2.0 million of share-based compensation expense was attributable to the first half of 2021.

Loss (gain) on disposal of assets. ~~The~~In May 2021, we announced our plan to exit the diesel pressure pumping market and began selling our diesel pressure pumping equipment. As a result, we recognized a net gain on disposal of assets during the third quarter of 2021 as compared to a loss on disposal of assets in the prior period. We anticipate additional gains from the sale of diesel pressure pumping equipment in the coming quarters as we continue to execute on our plan to divest this equipment. Excluding these sales, the amount of gain or loss on disposal of assets fluctuates period over period due to differences in the operating conditions of our ~~hydraulic fracturing~~well stimulation equipment, such as wellbore pressure and rate of barrels pumped per minute, that impact the timing of disposals of our ~~hydraulic fracturing~~well stimulation pump components and the amount of gain or loss recognized. The decrease in the loss on disposal of assets was primarily attributable to the significant decrease in loss on disposal related to fluid ends, due to a change in accounting estimate related to their useful life (See Property and Equipment in “Note 2 – Significant Accounting Policies” in the Notes to Condensed Consolidated Financial Statements). Beginning in the second quarter of 2020, fluid ends are expensed as they are used in operations, due to their shortened useful life estimate.components.

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

Gain on extinguishment of debt, net. During the third quarter of 2021, we recognized a ~~lower average~~gain on extinguishment of debt ~~balance~~of $10.1 million for the forgiveness of the PPP loan and ~~lower effective~~accrued interest, ~~rates~~offset by a loss on extinguishment of debt for the unamortized debt discount and issuance costs and prepayment fees associated with the early repayment of our Senior Secured Term Loan.

Nine months ended September 30, 2021, compared to the ~~prior period.~~nine months ended September 30, 2020

Nine months ended September 30, 2020, compared to nine months ended September 30, 2019

(in thousands, except percentages)

Nine Months Ended September 30,

2020

% ⁽¹⁾

2019

% ⁽¹⁾

Variance

% Variance

Revenue

$
195,914

100.0%

$
422,075

100.0%

$
(226,161
)

(53.6)%

Costs and expenses:

Cost of services (excluding depreciation
and amortization)

145,321

74.2%

307,841

72.9%

(162,520
)

(52.8)%

Depreciation and amortization

65,759

33.6%

117,888

27.9%

(52,129
)

(44.2)%

Selling, general and administrative expenses

30,376

15.5%

24,474

5.8%

5,902

24.1%

Impairment of long-lived assets

147,543

75.3%

-

0.0%

147,543

100.0%

Loss on disposal of assets

5,852

3.0%

15,884

3.8%

(10,032
)

(63.2)%

Loss from operations

(198,937
)

(101.5)%

(44,012
)

(10.4)%

(154,925
)

* ⁽²⁾

Interest expense, net

(19,357
)

(9.9)%

(21,384
)

(5.1)%

2,027

(9.5)%

Loss on extinguishment of debt

-

0.0%

(12,558
)

(3.0)%

12,558

* ⁽²⁾

Other income

81

0.0%

1,774

0.4%

(1,693
)

* ⁽²⁾

Income tax expense (benefit)

(824
)

(0.4)%

469

0.1%

(1,293
)

* ⁽²⁾

Net loss

$
(217,389
)

(111.0)%

$
(76,649
)

(18.2)%

$
(140,740
)

* ⁽²⁾

⁽¹⁾ As a percentage of revenues. Percentage totals or differences in the above table may not equal the sum or difference of the components due to rounding.

⁽²⁾ Not meaningful.

(1)

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

Revenue. The ~~decrease~~increase in revenue was primarily attributable to ~~the decline~~an increase in business activity ~~as our~~due to economic recovery from the COVID-19 pandemic and depressed oil prices in the second quarter of 2020. Our average active fleet count during the period ~~decreased~~increased to 78 fleets compared to 117 fleets in the prior comparable period. ~~The decrease in revenue was also attributable to an increased amount of self-sourcing by customers of lower-margin consumables such as sand, chemicals, and sand transportation. We~~However, we expect the industry trend of E&P companies self-sourcing to continue, resulting in decreased revenues from consumables as compared to prior years in which we provided these consumables to our customers. In addition, we anticipate revenue to ~~continue to be depressed~~decline in future quarters as ~~long as industry conditions discussed~~we ceased operations of our last active conventional diesel fleet in ~~“Significant Trends” above continue.~~the third quarter of 2021.

Cost of services, excluding depreciation and amortization. The ~~decrease~~increase in cost of services, excluding depreciation and amortization, was ~~primarily~~ attributable to the ~~decline~~increase in business activity due to economic recovery from the COVID-19 pandemic and ~~significant cost cutting measures implemented~~depressed oil prices in ~~response to current industry conditions as described in “Significant Trends” above. The decrease in cost~~the prior comparable period. During the third quarter of ~~services, excluding depreciation~~2021, we experienced elevated variable costs for labor, repair and ~~amortization, was~~maintenance, trucking and equipment rentals, and also ~~due in part to the change in revenue mix discussed above, offset in part by $2.3~~incurred approximately $5.5 million of ~~severance recorded in~~expenses related to our exit from the ~~current period.~~diesel pressure pumping market and extra third-party labor to supplement staff out on COVID quarantine. Similar to ~~revenues,~~revenue, we ~~anticipate~~expect cost of services, excluding depreciation and amortization, to ~~remain at reduced levels~~decline in future quarters as ~~long as~~we ceased operations of our last active conventional diesel fleet in the ~~industry conditions and cost cutting measures described in “Significant Trends” above continue.~~third quarter of 2021.

Depreciation and amortization. The decrease in depreciation and amortization was primarily due to the lower cost basis of depreciating long-lived assets ~~as a result~~because of impairment losses recorded in the first quarter of ~~2020,~~2020. We expect depreciation and ~~fully depreciated long-lived assets since the end of the prior comparable period.~~amortization to decline in future quarters as we continue to execute on our plan to sell our remaining diesel pressure pumping equipment.

Selling, general and administrative expenses. The ~~increase~~decrease in selling, general, and administrative expenses was primarily attributable to our recording of a bad debt reserve of $9.0 million in the first quarter of 2020 due to ~~growing uncertainty as to collectability~~the economic downturn, which was partly offset by increases in the nine months ended September 30, 2021 associated with the reinstatement of billed amounts from customers weakened by the recent collapse in crude oil prices. We are continuing to work with our customers on collecting these receivables. The increase in selling, general, and administrative expenses was offset in part by reduction of expensessalary levels due to ~~reductions-in-force, furloughing employees, and reduction of employee compensation levels in response to current industry~~improved economic conditions as ~~described~~compared to the prior period. Additionally, share-based compensation expense increased in ~~“Significant Trends” above.~~the current period due to share-based awards issued in the fourth quarter of 2020 and third quarter of 2021.

Impairment of long-lived assets.As a result of impairment tests that we performed in the first quarter of 2020, we determined that the carrying value of long-lived assets exceeded their fair ~~value, and~~value. Therefore, we recorded an impairment charge of $147.5 million in the first quarter of 2020 to reduce the carrying value of property and equipment and finite-lived intangible assets to fair ~~value (See “Note 5 – Goodwill and Intangible Assets” and “Note 6 – Property and Equipment, Net” in~~value. No such impairment charge was recorded during the ~~Notes to Condensed Consolidated Financial Statements).~~nine months ended September 30, 2021.

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

Patent license sales.On June 24, 2021, the Company issued a Convertible Senior Note in the principal amount of $22.5 million that was convertible into the License Agreement. On June 29, 2021, the holder exercised its right to convert the Convertible Senior Note in full and the ~~amount~~Company entered into the License Agreement, which provides the licensee a five-year option to purchase up to 20 licenses to build and operate electric well stimulation fleets using the Company’s patented Clean Fleet® technology. Upon entry into the License Agreement, the Company sold three licenses to build and operate three electric well stimulation fleets, each valued at $7.5 million.

Gain on extinguishment of debt, net. During the third quarter of 2021, we recognized a gain ~~or loss recognized. The decrease in~~on extinguishment of debt of $10.1 million for the forgiveness of the PPP loan and accrued interest, offset by a loss on ~~disposal~~extinguishment of ~~assets was primarily attributable to~~debt for the ~~significant decrease in loss on disposal related to fluid ends, due to a change in accounting estimate related to their useful life (See Property~~unamortized debt discount and ~~Equipment in “Note 2 – Significant Accounting Policies” in~~issuance costs and prepayment fees associated with the ~~Notes to Condensed Consolidated Financial Statements). Beginning in the second quarter~~early repayment of ~~2020, fluid ends are expensed as they are used in operations, due to their shortened useful life estimate.~~our Senior Secured Term Loan.

Our primary sources of liquidity and capital resources are cash on the balance sheet, cash flow generated from operating activities, proceeds from the issuance of equity, ~~borrowings under our revolving credit facility, senior secured term loan and PPP Loan, and~~ ~~borrowing capacity~~ ~~under our revolving credit facility.~~

On March 31, 2020, we entered into a purchase agreement with certain institutional investors (collectively, the “Purchasers”), pursuant to which we agreed to issue and sell in a private placement 21,000 shares of Series B Redeemable Convertible preferred stock, par value $0.0001 per share (“Series B preferred stock”), for an aggregate purchase price of $21.0 million. On April 1, 2020, the Purchasers purchased the Series B preferred stock. We used substantially all of the proceeds from the ~~Series B preferred stock to obtain the amendment on our senior secured term loan described below.~~

~~On April 1, 2020, we entered into agreements to amend our existing senior secured term loan~~issuance of Convertible Senior Notes, and ~~revolving credit facility. Pursuant to the amendment to our senior secured term loan, the interest rate on the outstanding loan was reduced to 0.0%~~borrowings and the scheduled principal amortization payments were suspended for the period beginning April 1, 2020 and ending March 31, 2022. In addition, the maturity date of the senior secured term loan was extended to December 5, 2025. Pursuant to the amendment to our revolving credit facility, the aggregate revolving commitment was reduced from $75.0 million to $60.0 million, the maturity date was extended from May 7, 2024 to April 1, 2025, and the interest rate margin applicable to borrowingsborrowing capacity under our ~~revolving credit facility was increased by 0.50% per annum. In addition, the~~ABL Credit Facility.

We believe that our current cash position, working capital balance, favorable payment terms under our Senior Secured Term Loan, borrowing ~~base~~capacity under ~~the~~our ABL Credit Facility, ~~was amended to include a FILO Amount, which increases borrowing base availability by up to the lesser of (i) $4.0 million~~ and (ii) 5.0% of the value of eligible accounts receivables, subject to scheduled monthly reductions. Advances under the FILO amount accrue interest at a rate that is 1.50% higher than the rate applicable to other loans under the revolving credit facility and may be repaid only after all other revolving credit facility loans have been repaid.

~~In August 2020, we entered into an amendment to our revolving credit facility pursuant to which the aggregate revolving commitment under the facility was reduced~~amounts raised from $60.0 million to $50.0 million and certain modifications were made to eligible accounts in the borrowing base and to the applicable thresholds in the cash dominion trigger period and financial covenant trigger period, among other things. Our option to request an increase in commitments under the accordion feature was also removed under the terms of the amendment.

~~For more information regarding~~ the issuance of Convertible Senior Notes and shares of Class A common stock under the ~~Series B preferred stock~~ATM Agreement will be sufficient to satisfy the anticipated cash requirements associated with our existing operations for at least the next twelve months.

Senior Secured Term Loan and amendments to our senior secured term loan and revolving credit facility, please refer to “Note 9 – Debt” and “Note 10 – Mezzanine Equity” in the Notes to Condensed Consolidated Financial Statements.ABL Credit Facility

As of ~~September 30, 2020,~~November 1, 2021, our ~~senior secured term loan~~Senior Secured Term Loan is not subject to financial covenants but is subject to certain non-financial covenants, including but not limited to, reporting, insurance, notice and collateral maintenance covenants as well as limitations on the incurrence of indebtedness, permitted investments, liens on assets, asset dispositions, ~~of assets,~~ paying dividends, transactions with affiliates, mergers, consolidations and ~~consolidations. In addition,~~special purpose entities used for stand-alone equipment financings. As of November 8, 2021, the outstanding principal balance of the Senior Secured Term Loan was $156.8 million. As of September 30, 2021, we were in compliance with all of the covenants under our Senior Secured Term Loan.

All borrowings under our ~~revolving credit facility~~ABL Credit Facility are subject to the satisfaction of customary conditions, including the absence of a default and the accuracy of representations and warranties and certifications regarding sales of certain inventory, and to a borrowing base. As of ~~September 30, 2020,~~November 1, 2021, the borrowing base was ~~$25.7~~$29.5 million and the outstanding revolver loan balance was ~~$14.9~~$14.7 million. As of September 30, ~~2020,~~2021, we were in compliance with all of the covenants under our ~~senior secured term loan~~ABL Credit Facility.

In November 2020, we entered into a Business Loan Agreement (the “USDA Loan”) with a commercial bank pursuant to the United States Department of Agriculture, Business & Industry Coronavirus Aid, Relief, and ~~our revolving credit facility.~~Economic Security Act Guaranteed Loan Program, in the aggregate principal amount of up to $25.0 million for the purpose of providing long-term financing for eligible working capital. Interest payments are due monthly at the interest rate of 5.75% per annum beginning on December 12, 2020 but principal payments are not required until December 12, 2023. As of September 30, 2021, the outstanding principal balance of the USDA Loan was $25.0 million.

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

During the nine months ended September 30, 2021, we issued an aggregate of $136.5 million in principal amount of 16.0% Convertible Senior Secured (Third Lien) PIK Notes (the “Convertible Senior Notes”) in exchange for cash and shares of Series A preferred stock. During the nine months ended September 30, 2021, we received cash proceeds of $97.5 million. We used a portion of the proceeds to pay a litigation settlement of $35.0 million and expect that the remaining proceeds will be used for general corporate purposes, including capital growth. As of September 30, 2021, we had $114.0 million of principal outstanding of the Convertible Senior Notes, which are convertible into the shares of the Company’s Class A common stock.

On June 26, 2020, the Company ~~received~~entered into an ~~unsecured $10.0 million loan~~Equity Distribution Agreement (the ~~“PPP Loan”~~“ATM Agreement”) ~~that bears interest at a rate of 1.0% per annum and matures in five years under~~with Piper Sandler & Co. relating to the ~~Paycheck Protection Program from a commercial bank. The Paycheck Protection Program was established under the CARES Act and is administered by the U.S. Small Business Administration. Under~~Company’s Class A common stock. In accordance with the terms of the ~~CARES Act, loan recipients can apply for~~ATM Agreement, the Company may offer and ~~be granted forgiveness for all or~~sell shares of its Class A common stock over a ~~portion~~period of time. The ATM Agreement relates to an “at-the-market” offering program. Under the loan. Forgiveness is determined, subject to certain limitations, based on the use of the loan proceeds for payroll costs, interest on mortgages or other debt obligations, rents and utilities. At least 60% of the proceeds must be used for payroll costs. No assurance can be given thatATM Agreement, the Company will ~~obtain forgiveness~~pay Piper Sandler an aggregate commission of up to 3% of the ~~PPP Loan either in whole or in part. Monthly principal and interest payments will commence after an initial deferral period as specified~~gross sales price per share of Class A common stock sold under the ~~Paycheck Protection Program on any unforgiven loan proceeds.~~

~~We believe~~ATM Agreement. On March 19, 2021, the Company increased the number of shares of Class A common stock that ~~our current cash position, working capital balance, cash generated from operations, favorable payment~~it may offer in accordance with the terms ~~under our amended senior secured term loan, borrowing capacity under our revolving credit facility, deferral~~ of the ~~employer portion~~ATM Agreement to a total amount of ~~social security tax~~$50.0 million. During the nine months ended September 30, 2021, the Company sold 4,287,519 shares of Class A common stock for total net proceeds of $13.6 million and paid $0.4 million in commissions under the ~~CARES Act,~~ATM Agreement. Since inception on June 26, 2020 through September 30, 2021, the Company has sold a total of 4,513,879 shares of Class A common stock under the ATM Agreement for total net proceeds from our PPP Loan will be sufficient to satisfy the anticipated cash requirements associated with our existing operations for at least the next twelve months. While we are focused on maintaining adequate liquidity to fund our operations, service our debtof $14.0 million and ~~fund capital expenditures, sustained weakness or further deterioration~~paid $0.4 million in ~~industry activity may make it difficult for us to do so.~~commissions.

Operating Activities. Net cash provided by (used in) operating activities primarily represents the results of operations exclusive of non-cash expenses, including depreciation, amortization, provision for losses on accounts receivable and inventory, interest, impairment losses, losses on disposal of assets, changes in fair value of warrant liabilities and share-based compensation and the impact of changes in operating assets and liabilities. Net cash used in operating activities was $20.3 million for the nine months ended September 30, 2021 primarily due to a litigation settlement of $35.0 million and $3.0 million of working capital payments from proceeds under our USDA Loan, which was partly offset by improvement in collection of our receivables.

Net cash provided by operating activities was $19.1 million for the nine months ended September 30, 2020, ~~a decrease of $23.2 million from the prior corresponding period. This decrease was~~ primarily attributable to accelerated collections of accounts receivables, which was offset in part by interest payments ~~amounting to $24.3 million~~ related to our ~~senior secured term loan, which represented interest from May 7, 2019 through March 31,~~Senior Secured Term Loan during the first quarter of 2020. ~~With the entry into the amendment to our senior secured term loan on April 1, 2020, we have no interest coming due on the senior secured term loan over the next twelve months.~~

~~Net Cash used in~~ Investing Activities. Net cash used in investing activities decreased by ~~$165.2~~$13.6 million from the prior corresponding period, primarily related to proceeds from the sale of property and equipment as we began selling our diesel pressure pumping equipment in May 2021. Net cash used in investing activities was $14.6 million for the nine months ended September 30, 2021, primarily due to ~~reduced~~$47.6 million in purchases of property and equipment, consisting of $22.6 million related to growth ~~and maintenance~~ capital expenditures ~~as a result~~and the remainder related to maintaining and supporting our existing pressure pumping equipment and payments made to replace damaged property and equipment. This was offset in part by $26.6 million in proceeds from the sale of ~~a decline in business activity.~~ property and equipment and $6.4 million of insurance proceeds related to the damaged property and equipment.

Net cash used in investing activities was $28.2 million for the nine months ended September 30, 2020, primarily due to $43.9 million in purchases of property and equipment, ~~amounting to $43.9 million,~~consisting of $18.8 million ~~of which~~ related to maintaining and supporting our existing ~~hydraulic fracturing~~pressure pumping equipment, $0.3 million ~~of which~~ related to fleet enhancements and $24.8 million ~~of which~~ related to ~~growth.~~growth capital expenditures. This was offset in part by proceeds of $15.8 million from the sale of certain property and equipment.

Financing Activities. During the nine months ended September 30, 2021, cash provided by financing activities primarily consisted of $97.5 million of proceeds from the issuance of Convertible Senior Notes, proceeds of $13.6 million from the issuance of common stock and $2.9 million of net proceeds from notes payable, offset in part by $44.9 million of payments on our Senior Secured Term Loan, $1.4 million of net payments on our ABL Credit Facility and debt issuance costs of $7.1 million.

During the nine months ended September 30, 2020, cash used in financing activities ~~reflects~~primarily consisted of net payments of ~~amounts outstanding under~~$25.3 million related to our ~~revolving credit facility, long term debt, note~~ABL Credit Facility, $6.2 million repayment of notes payable, ~~equipment financing arrangements, finance~~$4.3 million of payments for capital leases and ~~payment~~debt issuance costs of ~~senior secured term loan amendment fee amounting to $51.0~~$20.2 million. This was offset by $19.6 million ~~$2.5 million, $6.2 million, $2.4 million, $4.3 million, and $20.0 million, respectively, offset~~ in ~~part by proceeds under our revolving credit facility of $25.7 million,~~ net proceeds from the issuance of Series B preferred stock ~~of $19.6~~and $10.0 million ~~and~~of proceeds from the PPP ~~Loan of $10.0 million. With the entry into the amendment to our senior secured term loan on April 1, 2020, we have no scheduled quarterly principal payments due over the next twelve months.~~Loan.

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

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

We continuously evaluate our capital expenditures and the amount we ultimately spend will depend on ~~a number of~~several factors, including expected industry activity levels and company initiatives. ~~As discussed in “Significant Trends” above, we expect to substantially limit growth capital expenditures for the foreseeable future.~~ We intend to fund ~~the majority~~most of our capital expenditures, contractual obligations and working capital needs with cash on hand, cash generated from operations, borrowing capacity under our ~~revolving credit facility~~ABL Credit Facility and other financing sources.

~~We enter into certain contractual obligations in the normal course of our business. The following table summarizes our known contractual commitments as of September 30, 2020~~ ~~(in thousands)~~:

We are a party to transactions, agreements or other contractual arrangements defined as “off-balance sheet arrangements” that could have a material future effect on our financial position, results of operations, liquidity, and capital resources. The ~~Company’s~~most significant of these off-balance sheet arrangements include ~~the operating leases~~equipment and sand purchase commitments disclosed in ~~the “Contractual Obligations” section herein. For further description of such operating leases and purchase commitments, see~~ “Note 1617 – Commitments and Contingencies” in the Notes to Condensed Consolidated Financial Statements.

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

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

WeAs a smaller reporting company, we are ~~exposed to market risks from interest rate and commodity price fluctuations. We have~~ not entered into any derivative financial instrument transactions to manage or reduce market risk for speculative purposes. Our operations are conducted entirely in the United States; therefore, we have no significant exposure to foreign currency exchange rate risk. The consolidated financial statements are subject to concentrations of credit risk consisting primarily of accounts receivable.

Beginning April 1, 2022, we will be subject to interest rate risk on our senior secured term loan. At that time, this loan will be subject to an annual interest rate that is indexed to the London Interbank Offered Rate (“LIBOR”). Refer to “Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.” The impact of a 1% increase in interest rates on this debt would result in an increase in interest expense of approximately $2.6 million annually.

Our material and fuel purchases expose us to commodity price risk. Our material costs primarily consist of proppants and chemicals that are consumed while providing hydraulic fracturing services. Our fuel costs primarily consist of diesel fuel used by our trucks and other equipment. Our material and fuel costs are variable and are impacted by changes in supply and demand. We generally pass along price increases to our customers; however, we may be unable to do so in the future. We do not engage in commodity price hedging activities. However, we have commitments in place with certain vendors to purchase sand. Some of these agreements have minimum purchase requirements. We could be required to ~~purchase sand and pay prices in excess of market prices at~~provide the time of purchase. Refer to “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Contractual Obligations” for the contractual commitments and obligations table as of September 30, 2020.

~~The concentration of our customers in the oil and gas industry may impact our overall exposure to credit risk in that customers may be similarly affected~~information required by changes in economic and industry conditions. We extend credit to customers and other parties in the normal course of our business. We manage our credit exposure by performing credit evaluations of our customers and maintaining an allowance for doubtful accounts. As of September 30, 2020, we recorded a reserve for doubtful accounts of $9.0 million, which was primarily driven by growing uncertainty that we will be able collect billed amounts from customers weakened by the recent collapse in crude oil prices. We are continuing to work with our customers to collect on our receivables.this item.

Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of such date. Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

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

During the quarter ended June 30, 2021, management identified a material weakness in our internal control over financial reporting with respect to the classification of the Company’s warrants as components of equity instead of as liabilities as more fully described in our Amended Annual Report. Management implemented remediation steps to address the material weakness and to improve our internal control over financial reporting. Specifically, we expanded and improved our review process for complex securities and related accounting standards. We further improved this process by enhancing access to accounting literature, research materials and documents and increased communication among our personnel and third-party professionals with whom we consult regarding complex accounting applications. Management believes that the previously identified material weakness has been remediated as of September 30, 2021.

~~There~~During the quarter ended September 30, 2021, the Company implemented a new enterprise resource planning (“ERP”) system. The new ERP system replaced our previous accounting system and general ledger. As a result of this implementation, the Company modified certain existing controls and implemented new controls and procedures related to the new ERP system to maintain appropriate internal control over financial reporting during and after the system change. We will continue to monitor the impact of this implementation on our processes and procedures, as well as the impact on our internal controls over financial reporting.

Other than the changes described above, there were no changes made in our internal control over financial reporting during the quarter ended September 30, ~~2020~~2021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

~~As described in our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2019, we were named as a defendant in a case filed on January 14, 2019~~See “Note 17 – Commitments and Contingencies” in the Superior Court of the State of Delaware (Smart Sand, Inc. v. U.S. Well Services, LLC) seeking monetary damages arising out of the cancellation of a sand contract. The litigation is in the discovery stages. As such, no prediction can be made asNotes to ~~the outcome of the case at this time.~~Condensed Consolidated Financial Statements for further information.

We are involved in various other pending or potential legal actions in the ordinary course of our business. Management is unable to predict the ultimate outcome of these actions because of the inherent uncertainty of litigation. However, management believes that the most probable, ultimate resolution of these matters will not have a material adverse effect on our consolidated financial position, results of operations or cash flows.

NoExcept as set forth below, no material changes have occurred from the risk factors previously disclosed in the Company’s Amended Annual ~~Report on Form 10-K for the year ended December 31, 2019, other than the risk factors disclosed below.~~Report. See also Part I, Item 2 ~~(Forward-Looking Statements)~~“Disclosure Regarding Forward-Looking Statements” of this Quarterly Report on Form 10-Q.

~~The volatility of oil and natural gas prices~~Our exit from the diesel pressure pumping market may ~~continue to adversely affect the demand for our services and~~ negatively impact our ~~results~~liquidity and our ability to generate revenues and service our outstanding indebtedness for a period of ~~operations.~~time.

~~The demand for~~In May 2021, we announced our commitment to becoming an all-electric pressure pumping services ~~is substantially influenced by current~~provider and ~~anticipated crude oil and natural gas commodity prices and the related levels of capital spending and drilling activity~~ in ~~the areas in which~~August 2021, we ~~have operations. Volatility or weakness in crude oil and natural gas commodity prices (or the perception that crude oil and natural gas commodity prices will decrease) affects the spending patterns~~ceased operations of our ~~customers,~~last active conventional diesel fleet, marking our exit from the conventional diesel pressure pumping market. We have sold a portion of our diesel pressure pumping equipment and the products and services we provide are, to a substantial extent, deferrable in the event oil and natural gas companies reduce capital expenditures. As a result, we have and may continue to experience lower utilization of and may be forcedexpect to continue to ~~lower our rates for our equipment and services.~~

Historical prices for crude oil and natural gas have been extremely volatile and are expected to continue to be volatile. The market prices for crude oil and natural gas depend on factors beyond our control, including worldwide and domestic supplies of crude oil and natural gas and actions taken by foreign oil and gas producing nations. For example, the price of oil has fallen significantly since the beginning of 2020, due to the COVID–19 coronavirus pandemic and its impact on the worldwide economy and global demand for oil. Weaker economic activity and lower demand for crude oil, driven by the onset of the COVID-19 coronavirus pandemic, has adversely impacted our business resulting in a sharp decrease in both our active fleet count and the utilization of our active fleets. As such, we are experiencing considerable uncertainty in our near-term business prospects and ability to forecast future performance. We expect hydraulic fracturing activity to be muted throughoutsell off the remainder of ~~2020~~our diesel pressure pumping equipment, which has and ~~that financial performance~~ will ~~be highly uncertain until global economic activity recovers. Beyond the current significant~~result in a reduction in ~~crude oil prices resulting from~~ the ~~COVID-19 coronavirus pandemic,~~number of fleets we have available to provide pressure pumping services until we are able to build out our all-electric well stimulation equipment. Until we are able to complete the build out of the electric equipment, we expect ~~continued volatility in oil and natural gas prices, as well as in the level of exploration and development activities by our customers.~~

~~As a result of declines and volatility in commodity prices, exploration and production companies moved~~ to significantly cut costs, both by decreasing drilling and completion activity and by demanding price concessions from their service providers, including providers of hydraulic fracturing services. In turn, service providers, including hydraulic fracturing service providers, were forced to lower their operating costs and capital expenditures, while continuing to operate their businesses in an extremely competitive environment. Prolonged periods of price instability in the oil and natural gas industry and any significant decline in exploration and development by our customers willgenerate less revenue, which may adversely ~~affect the demand for our products and services, our financial condition, prospects and results of operations and~~impact our ability to service our ~~debt or fund capital expenditures.~~

outstanding indebtedness. Additionally, ~~fuel conservation measures, alternative fuel requirements and increasing consumer demand for alternatives to oil and natural gas could reduce~~ the ~~demand for oil and natural gas products, creating downward pressure on commodity prices and the prices we are able to charge for our services.~~

A pandemic or epidemic, including the ongoing COVID-19 global pandemic, and the regulatory steps to reduce its transmission could have a material adverse effect on our business, financial condition, and results of operations.

The outbreak of the COVID–19 coronavirus, which has been declared by the World Health Organization to be a pandemic, has spread across the globe and is impacting worldwide economic activity, including the global demand for oil and natural gas. A pandemic, including the COVID–19 coronavirus or other public health epidemic, poses the risk that we or our employees, contractors, suppliers, customers and other partners may be prevented from conducting business activities for an indefinite period of time, including due to spread of the disease within these groups or due to restrictions that may be requested or mandated by governmental authorities, including quarantines of certain geographic areas, restrictions on travel and other restrictions that prohibit employees from going to work. The continued spread of the COVID–19 coronavirus and the related mitigation measures has resulted and may continue todecrease in revenue will result in a significant decrease in business from our customers and/or cause our customers to be unable to meet existing payment or other obligations to us. If the COVID–19 coronavirus continues to spread or the response to contain the COVID–19 coronavirus pandemic is unsuccessful, we could experience a material adverse effect on our business, financial condition, and results of operations.

~~We may not be entitled to forgiveness of our recently received PPP Loan, and our application for the PPP Loan could~~reduction in the ~~future be determined to have been impermissible or could result in damage to~~borrowing base available under our ~~reputation.~~

~~On July 28, 2020, we received proceeds of $10.0 million from a loan under the Paycheck Protection Program of the CARES Act, a portion of~~ABL Credit Facility, which may be forgiven. We intend to use the proceeds to retain current employees, maintain payroll and make lease and utility payments. A portion of the PPP Loan may be forgiven by the Small Business Administration (the “SBA”) uponadversely impact our application in accordance with the forgiveness rules set out in the CARES Act. Under the CARES Act, loan forgiveness is available for the sum of documented payroll costs, covered lease payments, covered mortgage interest and covered utilities during the twenty-four-week period beginning on the date the loan is advanced, but not to exceed December 31, 2020. Not more than 40% of the forgiven amount may be for non-payroll costs. In addition, the amount of the PPP Loan eligible for forgiveness related to payroll costs is subject to additional limitations as outlined in the CARES Act. Although we intend to use the entire PPP Loan for designated qualifying expenses and to apply for forgiveness in accordance with the terms of the Paycheck Protection Program, no assurance can be given that we will obtain forgiveness of the PPP Loan in whole or in part. Furthermore, on April 28, 2020, the Secretary of the U.S. Department of the Treasury stated that the SBA will perform a full review of any PPP loan over $2.0 million before forgiving the loan.

We will be required to repay any portion of the outstanding principal that is not forgiven, along with accrued interest, through monthly principal and interest payments. These payments will commence following the end of the deferment period as defined in the PPP Loan. The PPP Loan matures on July 24, 2025 and bears interest at a rate of 1% per annum. We may prepay the principal at any time without penalty.

As part of our application for the PPP Loan, we were required to certify, among other things, that the current economic uncertainty made the PPP Loan request necessary to support our ongoing operations. We made this certification in good faith after analyzing, among other things, our financial situation and access to alternative forms of capital, and believe that we satisfied all eligibility criteria for the PPP Loan and that our receipt of the PPP Loan is consistent with the broad objectives of the Paycheck Protection Program of the CARES Act. The certification described above does not contain any objective criteria and is subject to interpretation. On April 23, 2020, the SBA issued guidance stating that it is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith. The lack of clarity regarding loan eligibility under the Paycheck Protection Program has resulted in significant media coverage and controversy with respect to public companies applying for and receiving loans. If, despite our good faith belief that given our Company’s circumstances we satisfied all eligible requirements for the PPP Loan, we are later determined to have violated any of the laws or governmental regulations that apply to us in connection with the PPP Loan, such as the False Claims Act, or it is otherwise determined that we were ineligible to receive the PPP Loan, we may be subject to penalties, including significant civil, criminal and administrative penalties and could be required to repay the PPP Loan in its entirety. In addition, receipt of a PPP Loan may result in adverse publicity and damage to reputation, and a review or audit by the SBA or other government entity or claims under the False Claims Act could consume significant financial and management resources. Any of these events could have a material adverse effect on our business, results of operations and financial condition.

liquidity.Future sales or the availability for sale of substantial amounts of our Class A common stock, or the perception that these sales may occur, could adversely affect the trading price of our Class A common stock and could impair our ability to raise capital through future sales of equity securities.

Our Second Amended and Restated Certificate of Incorporation (as amended, the “Second Amended and Restated Charter”) authorizes us to issue 400,000,000 shares of Class A common stock, of which 71,766,358 shares were outstanding as of October 31, 2020, and 10,000,000 shares of preferred stock, of which 50,000 shares of Series A preferred stock and 22,050 shares of Series B preferred stock were outstanding as of October 31, 2020. The holders of the Series B preferred stock have the right to convert all or any portion of their shares of Series B preferred stock into shares of Class A common stock and the Series A preferred stock have the right to convert all or any portion of their shares of Series A preferred stock into shares of Class A common stock beginning in May 2020. In addition, as of October 31, 2020, warrants to purchase up to 17,147,315 shares of our Class A common stock were outstanding and immediately exercisable.

A large percentage of our shares of common stock are held by a relatively small number of investors. We entered into registration rights agreements (the “Registration Rights Agreements”) with certain of those investors in connection with the Transaction and in connection with their subsequent purchase of Series A preferred stock and the issuance of the Series B preferred stock pursuant to which we have filed registration statements with the SEC to facilitate potential future sales of such shares by them.

We may issue shares of our Class A common stock or other securities from time to time pursuant to our ATM Offering or as consideration for future acquisitions and investments. If any such acquisition or investment is significant, the number of shares of our Class A common stock, or the number or aggregate principal amount, as the case may be, of other securities that we may issue may in turn be substantial. We may also grant registration rights covering those shares of our Class A common stock or other securities in connection with any such acquisitions and investments.

We cannot predict the effect that future sales of our Class A common stock will have on the price at which our Class A common stock trades or the size of future issuances of our Class A common stock or the effect, if any, that future issuances will have on the market price of our Class A common stock. Sales of substantial amounts of our Class A common stock, or the perception that such sales could occur, may adversely affect the trading price of our Class A common stock and could impair our ability to raise capital through a future sale of, or pay for acquisitions using, our equity securities.

We are currently not in compliance with NASDAQ Capital Market listing standards. If our common stock is delisted, the market price and liquidity of our common stock and our ability to raise additional capital would be adversely impacted.

Our Class A common stock and warrants are currently listed on the NASDAQ Capital Market (“NASDAQ”). Continued listing of a security on NASDAQ is conditioned upon compliance with various continued listing standards. On April 21, 2020, we received a notice (the “Notice”) from NASDAQ stating we were not in compliance with the $1.00 minimum bid price requirement for continued listing on Nasdaq, as set forth in Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Rule”), because the bid price for our Class A common stock had closed below the minimum $1.00 price per share requirement for the last thirty (30) consecutive business days. On August 14, 2020, we received another notice (the “Second Notice”) from NASDAQ stating that, based upon its review of our market value of listed securities for the last thirty consecutive business days, we do not meet the market value of listed securities requirement set forth under Nasdaq Listing Rule 5550(b)(2) (the “MVLS Requirement”). In addition, the Second Notice informed us that as of August 14, 2020, we did not meet the alternative compliance standards relating to stockholders’ equity or net income from continuing operations (the “Alternative Compliance Standards”).

The Notice and the Second Notice have no immediate effect on our listing on the NASDAQ Capital Market. Given the extraordinary market conditions, Nasdaq determined to toll the compliance periods for the bid price and market value of publicly held shares requirements (collectively, the “Price-based Requirements”) through June 30, 2020. Accordingly, the compliance periods for the Price-based Requirements was reinstated on July 1, 2020.

In accordance with Listing Rule 5810(c)(3)(A), we have a period of 180 calendar days from July 1, 2020, or until December 28, 2020, to regain compliance with the minimum bid price requirement set forth in the Minimum Bid Price Rule. To regain compliance, the closing bid price of our Class A common stock must meet or exceed $1.00 per share for at least ten consecutive business days before the end of this 180-day period. We also have a period of 180 calendar days from the date of the Second Notice, or until February 10, 2021, to regain compliance with the MVLS Requirement. Compliance can be achieved by meeting the MVLS Requirement for a minimum of ten consecutive business days during the 180-day compliance period, unless NASDAQ exercises its discretion to extend this ten-day period.

If the Company does not regain compliance with the Minimum Bid Price Rule by December 28, 2020, the Company may be eligible for an additional 180-calendar day compliance period. To qualify, we would be required to meet the continued listing requirements for market value of publicly held shares and all other initial listing standards for NASDAQ, with the exception of the minimum bid price requirement, and provide written notice of our intention to cure the minimum bid price deficiency during the second compliance period, by effecting a reverse stock split, if necessary. If we meet these requirements, the Nasdaq staff will grant an additional 180 calendar days for us to regain compliance with the minimum bid price requirement. If the Nasdaq staff determines that we will not be able to cure the deficiency, or if we are otherwise not eligible for such additional compliance period, Nasdaq will provide notice that our Class A common stock will be subject to delisting. We would have the right to appeal a determination to delist our Class A common stock, and the Class A common stock would remain listed on Nasdaq until the completion of the appeal process.

We intend to actively monitor the bid price of our Class A common stock and may, as appropriate, consider available options to regain compliance with the Minimum Bid Price Rule or the MVLS Requirement. There can be no assurance we will be able to regain compliance with the Minimum Bid Price Rule or the MVLS Requirement by the end of the compliance period.

If our Class A common stock was to be delisted from NASDAQ, trading of our common stock most likely would be conducted in the over–the–counter market on an electronic bulletin board established for unlisted securities such as the OTCQX Market, OTCQB Market or OTC Bulletin Board. Such trading would likely reduce the market liquidity of our Class A common stock. As a result, an investor would find it more difficult to dispose of, or obtain accurate quotations for the price of, our Class A common stock. If our Class A common stock is delisted from NASDAQ and the trading price remains below $5.00 per share, trading in our Class A common stock might also become subject to the requirements of certain rules promulgated under the Exchange Act, which require additional disclosure by broker–dealers in connection with any trade involving a stock defined as a “penny stock” (generally, any equity security not listed on a national securities exchange or quoted on NASDAQ that has a market price of less than $5.00 per share, subject to certain exceptions). Many brokerage firms are reluctant to recommend low–priced stocks to their clients. Moreover, various regulations and policies restrict the ability of stockholders to borrow against or “margin” low–priced stocks, and declines in the stock price below certain levels may trigger unexpected margin calls. Additionally, because brokers’ commissions on low–priced stocks generally represent a higher percentage of the stock price than commissions on higher priced stocks, the current price of the Class A common stock can result in an individual stockholder paying transaction costs that represent a higher percentage of total share value than would be the case if our share price were higher. This factor may also limit the willingness of institutions to purchase our Class A common stock. Finally, the additional burdens imposed upon broker–dealers by these requirements could discourage broker–dealers from facilitating trades in our Class A common stock, which could severely limit the market liquidity of the stock and the ability of investors to trade our Class A common stock. As a result, the ability of our stockholders to resell their shares of Class A common stock, and the price at which they could sell their shares, could be adversely affected. The delisting of our Class A common stock from NASDAQ would also make it more difficult for us to raise additional capital.

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

Over the course of the year, the Compensation Committee of the Board of Directors (the “Board”) of the Company has evaluated means by which it can provide incentives for certain of the Company’s key employees to remain employed by the Company. After carefully evaluating many options, the Board, upon the recommendation of the Compensation Committee of the Board, has approved the grant of deferred stock units and certain performance incentive awards that will provide for potential future payments to be made to certain key employees of the Company, as summarized below. The Board believes that these awards will provide for a key retention pool that will benefit all of its stockholders. Specifically, the Board believes that these awards will enable the Company to: (i) enhance executive management’s and other key employees’ sense of participation in the Company; and (ii) provide incentives for continued employment. The Board also believes that these awards will further align the interests of executive management and key employees with those of the Company’s stockholders through the potential for increased stock ownership.

On November 5, 2020 (the “Grant Date”), the Company entered into Deferred Stock Unit Award Agreements (the “DSU Award Agreements”) with certain of its key employees, including Joel Broussard, the Company’s President and Chief Executive Officer, and Kyle O’Neill, the Company’s Chief Financial Officer. The DSU Award Agreements were made pursuant to the Amended and Restated U.S. Well Services, Inc. 2018 Stock Incentive Plan (the “A&R LTIP”), which was approved by the Board, upon the recommendation of the Compensation Committee of the Board, on September 21, 2020. The A&R LTIP is expected to be included in the Company’s Proxy Statement for its 2021 Annual Meeting of Stockholders for approval by the Company’s stockholders.

Pursuant to their respective DSU Award Agreements, Messrs. Broussard and O’Neill were granted 3,592,795 and 1,434,960 Deferred Stock Units (the “DSUs”), respectively. In addition, the other key employees were issued a total of 4,072,913 DSUs. Each DSU represents the right to receive one share of the Company’s Class A common stock, par value $0.0001 per share, which right is conditioned upon the Company receiving stockholder approval of the A&R LTIP. In the event that the Company’s stockholders do not approve the A&R LTIP and the Company lacks sufficient shares of Class A common stock reserved for issuance under the ~~2018 Stock Incentive Plan~~ITEM ~~to satisfy the DSU Award Agreements, then the unsatisfied portion of the DSU Award Agreements will be forfeited and void.~~5. OTHER INFORMATION.

The DSUs are subject to vesting and the award recipients continued employment with the Company, and will vest 1/3 each year, beginning on the first anniversary of January 1, 2020 (the “Vesting Effective Date”), or in full upon the occurrence of a Change of Control (as defined in the DSU Award Agreement). If a recipient’s employment is terminated as the result of certain events, such as death, disability or retirement, the participant will vest in 1/3 of the DSUs.None.

~~Shares of Class A common stock issuable with respect to vested DSUs held by Messrs. Broussard and O’Neill will be issued on the earlier of the following: (i) the 60~~^th ~~day after their respective termination; (ii) upon a Change of Control (as defined in the DSU Award Agreement); or (iii) upon the fifth anniversary of the Grant Date.~~38

The foregoing description of the DSU Award Agreements and the DSUs does not purport to be complete and is qualified in its entirety by reference to the complete text of the DSU Award Agreement, which is filed herewith as Exhibit 10.4.ITEM 6. EXHIBITS

On the Grant Date, the Company entered into Performance Awards (Pool A) (the “Pool A Performance Award Agreements”) with certain of its key employees, including Messrs. Broussard and O’Neill, under the A&R LTIP.

Pursuant to their respective Pool A Performance Award Agreements, Messrs. Broussard and O’Neill were each granted an award (the “Pool A Performance Award”) with a designated cash value equal to $0.9 million and $0.4 million, respectively, which amounts increase by 12.0% until May 24, 2021 and 16.0% thereafter, compounding quarterly (the “Pool A Award Value”). The cash value awarded to all other employees equals $1.0 million. The Pool A Award Value is subject to reduction if, in connection with any Change of Control (as defined in the Pool A Performance Award Agreements), the Company’s Series A Preferred Stock is redeemed for less than its redemption price. No payments will be made under a Pool A Performance Award prior to the date on which the Pool A Performance Award becomes vested and the restricted periods lapse, and payment date occurs, as summarized below.

The respective Pool A Performance Awards of Messrs. Broussard and O’Neill are subject to their continued employment and vest in full (i) on the first anniversary of the Vesting Effective Date or (ii) upon a Change of Control (as defined in the Pool A Performance Award Agreements). If the employment of either Messrs. Broussard or O’Neill is terminated prior to the first anniversary of the Vesting Effective Date or for certain events of cause, then the entire Pool A Performance Award held by such terminated executive will be forfeited, whether or not vested in the case of a for cause termination.

~~The vested Pool A Performance Award will be payable to Messrs. Broussard and O’Neill on the earlier of the following:~~

The fixed payment date (the “Fixed Payment Date”) is the fifth anniversary of the Grant Date, unless the Company elects to defer the payment date, subject to the requirements set forth in the Pool A Performance Award Agreement or Pool B Performance Award Agreement, as applicable, for such a deferral, to a date not less than five years from, nor more than six years after, the initial Fixed Payment Date.

In the event that the Company’s stockholders do not approve the A&R LTIP, then the Pool A Performance Awards cannot be paid in shares of Class A common stock and will, in such case, only be payable in cash.

The foregoing description of the Pool A Performance Award Agreements and the Pool A Performance Awards does not purport to be complete and is qualified in its entirety by reference to the complete text of the Pool A Performance Award Agreement, which is filed herewith as Exhibit 10.5.

On the Grant Date, the Company entered into Performance Awards (Pool B) (the “Pool B Performance Award Agreements”) with certain of its key employees, including Messrs. Broussard and O’Neill, under the A&R LTIP.

Pursuant to their respective Pool B Performance Award Agreements, Messrs. Broussard and O’Neill were each granted an award (the “Pool B Performance Award”) with a designated cash value equal to $0.6 million and $0.2 million, respectively, which amounts increase by 12.0% until May 24, 2021 and 16.0% thereafter, compounding quarterly (the “Pool B Award Value”). The cash value awarded to all other employees equals $0.7 million. The Pool B Award Value is subject to reduction if, in connection with any Change of Control (as defined in the Pool B Performance Award Agreements), the Company’s Series B Preferred Stock is redeemed for less than its redemption price. No payments will be made under a Pool B Performance Award prior to the date on which the Pool B Performance Award becomes vested and the restricted periods lapse and payment date occurs, as summarized below.

The respective Pool B Performance Awards of Messrs. Broussard and O’Neill are subject to their continued employment and vest 1/3 each year, beginning on the first anniversary of the Vesting Effective Date, or in full upon the occurrence of a Change of Control (as defined in the Pool B Performance Award Agreement). If the employment of either Messrs. Broussard or O’Neill is terminated (i) due to death or disability, then he will vest in 1/3 of the Pool B Performance Award or (ii) due to retirement after the first anniversary of the Vesting Effective Date, then he will vest in 1/3 of the Pool B Performance Award. Upon the termination of their employment for any other reason or for certain events of cause, then the unvested portion of the Pool B Performance Award held by such terminated executive will be forfeited, and in the case of a for cause termination, the entire Pool B Performance Award will be forfeited, whether or not vested.

~~The vested Pool B Performance Award will be payable to Messrs. Broussard and O’Neill on the earlier of the following:~~

In the event that the Company’s stockholders do not approve the A&R LTIP, then the Pool B Performance Awards cannot be paid in shares of Class A common stock and will, in such case, only be payable in cash.

The foregoing description of the Pool B Performance Award Agreements and the Pool B Performance Awards does not purport to be complete and is qualified in its entirety by reference to the complete text of the Pool B Performance Award Agreement, which is filed herewith as Exhibit 10.6.

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

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on November ~~6, 2020.~~12, 2021.


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


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


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


		Page No.
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets	23
	Condensed Consolidated Statements of Operations	34
	Condensed Consolidated Statements of Cash Flows	45
	Condensed Consolidated Statements of Stockholders’ ~~Equity (Deficit)~~Deficit	67
	Notes to Condensed Consolidated Financial Statements	89

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2630
Item 3.	Quantitative and Qualitative Disclosure about Market Risk	3336
Item 4.	Controls and Procedures	3336

PART II	~~OTHER INFORMATION~~	34
Item 11..	Legal Proceeding	3438
Item 1A.	Risk Factors	3438
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3738
Item 3.	Defaults Upon Senior Securities	3738
Item 4.	Mine Safety Disclosures	3738
Item 5.	Other Information	3738
Item 6.	Exhibits	4139
SIGNATURES		4240


	September 30, 2021			December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	29,860		$	3,693
Restricted cash		735			1,569
Accounts receivable (net of allowance for doubtful accounts of $0 and $12,000 as of September 30, 2021 and December 31, 2020, respectively)		38,362			44,393
Inventory, net		5,571			7,965
Assets held for sale		16,687			-
Prepaids and other current assets		10,034			10,707
Total current assets		101,249			68,327
Property and equipment, net		217,883			235,332
Intangible assets, net		12,742			13,466
Goodwill		4,971			4,971
Other assets		1,505			1,127
TOTAL ASSETS	$	338,350		$	323,223
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable	$	33,455		$	36,362
Accrued expenses and other current liabilities		11,963			14,781
Notes payable		3,848			998
Current portion of long-term debt		5,000			10,000
Current portion of equipment financing		3,658			3,519
Current portion of capital lease obligations		484			54
Total current liabilities		58,408			65,714
Warrant liabilities		6,867			1,619
Long-term debt		242,460			274,555
Convertible senior notes		100,863			-
Long-term equipment financing		6,552			9,347
Long-term capital lease obligations		1,309			0
Other long-term liabilities		7,524			3,539
Total liabilities		423,983			354,774
Commitments and contingencies (NOTE 17)
Mezzanine equity:
Series A Redeemable Convertible Preferred Stock, par value $0.0001 per share; 55,000 shares authorized; 19,610 shares and 50,000 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively; aggregate liquidation preference of $26,225 and $60,418 as of September 30, 2021 and December 31, 2020, respectively		22,817			50,975
Series B Redeemable Convertible Preferred Stock, par value $0.0001 per share; 22,050 shares authorized; 0 shares and 22,050 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively; aggregate liquidation preference of $0 and $24,100 as of September 30, 2021 and December 31, 2020, respectively		0			22,686
Stockholders' deficit:
Class A Common Stock, par value of $0.0001 per share; 400,000,000 shares authorized; 52,352,178 shares and 20,718,659 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively (1)		5			2
Class B Common Stock, par value of $0.0001 per share; 20,000,000 shares authorized; 0 shares and 2,302,936 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively		-			-
Additional paid in capital (1)		261,837			217,217
Accumulated deficit		(370,292	)		(322,431	)
Total Stockholders' deficit		(108,450	)		(105,212	)
TOTAL LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' DEFICIT	$	338,350		$	323,223


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


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


	Three Months Ended September 30, 2021
	Class A Common Stock (1)					Class B Common Stock					Additional Paid in			Accumulated			Noncontrolling			Total
	Shares			Amount		Shares			Amount		Capital (1)			Deficit			Interest			Deficit
Balance, June 30, 2021		26,679,279		$	3		0		$	0	$	237,365		$	(360,713	)	$	-		$	(123,345	)
Class A common stock issuance for reverse stock split round up		24,197			-		-			-		-			-			-			-
Conversion of Series B preferred stock to Class A common stock		25,565,707			2		-			-		26,207			-			-			26,209
Share-based compensation		-			-		-			-		2,331			-			-			2,331
Restricted stock grants		88,025			-		-			-		-			-			-			-
Restricted stock forfeitures		(5,030	)		-		-			-		-			-			-			-
Accrued Series A preferred stock dividends		-			-		-			-		(997	)		-			-			(997	)
Accrued Series B preferred stock dividends		-			-		-			-		(3,069	)		-			-			(3,069	)
Net loss		-			-		-			-		-			(9,579	)		-			(9,579	)
Balance, September 30, 2021		52,352,178		$	5		0		$	0	$	261,837		$	(370,292	)	$	-		$	(108,450	)


	Three Months Ended September 30, 2020
	Class A Common Stock (1)					Class B Common Stock					Additional Paid in			Accumulated			Noncontrolling			Total
	Shares			Amount		Shares			Amount		Capital (1)			Deficit			Interest			Deficit
Balance, June 30, 2020		19,531,768		$	2		5,014,897		$	-	$	213,596		$	(278,414	)	$	-		$	(64,816	)
Class A common stock issuance		114			-		-			-		-			-			-			-
Conversion of Class B common stock to Class A common stock		774,846			-		(2,711,961	)		-		-			-			-			-
Conversion of Series A preferred stock to Class A common stock		149,707			-		-			-		2,895			-			-			2,895
Share-based compensation		-			-		-			-		986			-			51			1,037
Restricted stock forfeitures		(52,477	)		-		-			-		-			-			-			-
Deemed and imputed dividends on Series A preferred stock		-			-		-			-		(464	)		-			-			(464	)
Accrued Series A preferred stock dividends		-			-		-			-		(1,854	)		-			-			(1,854	)
Accrued Series B preferred stock dividends		-			-		-			-		(681	)		-			-			(681	)
Net loss		-			-		-			-		-			(14,158	)		(51	)		(14,209	)
Balance, September 30, 2020		20,403,958		$	2		2,302,936		$	-	$	214,478		$	(292,572	)	$	-		$	(78,092	)

	Class A Common Stock					Class B Common Stock
											Additional
											Paid in			Accumulated			Noncontrolling			Total
	Shares			Amount		Shares			Amount		Capital			Deficit			Interest			Equity
Balance, December 31, 2018		49,254,760		$	5		13,937,332		$	1	$	204,928		$	(17,383	)	$	52,798		$	240,349
Adoption of ASC 606 as of January 1, 2019		-			-		-			-		-			95			27			122
Exercise of warrants		2,925,712			-		-			-		-			-			-			-
Conversion of Class B common stock to Class A common stock		161,932			-		(161,932	)		-		-			-			-			-
Restricted stock granted to employees		2,218,183			-		-			-		-			-			-			-
Class A common stock granted to board members		46,875			-		-			-		331			-			87			418
Share-based compensation		-			-		-			-		4,265			-			1,094			5,359
Restricted stock forfeitures		(18,687	)		-		-			-		-			-			-			-
Issuance of warrants to purchase common stock associated with preferred stock offering		-			-		-			-		10,720			-			-			10,720
Beneficial conversion feature of Series A preferred stock		-			-		-			-		20,132			-			-			20,132
Deemed and imputed dividends on Series A preferred stock		-			-		-			-		(5,966	)		-			-			(5,966	)
Accrued Series A preferred stock dividends		-			-		-			-		(2,330	)		-			-			(2,330	)
Net loss		-			-		-			-		-			(60,720	)		(15,929	)		(76,649	)
Balance, September 30, 2019		54,588,775		$	5		13,775,400		$	1	$	232,080		$	(78,008	)	$	38,077		$	192,155


	Nine Months Ended September 30, 2021
	Class A Common Stock (1)					Class B Common Stock						Additional Paid in			Accumulated			Noncontrolling			Total
	Shares			Amount		Shares			Amount			Capital (1)			Deficit			Interest			Deficit
Balance, December 31, 2020		20,718,659		$	2		2,302,936		$	-		$	217,217		$	(322,431	)	$	-		$	(105,212	)
Class A common stock issuance		4,287,519			1		-			-			13,241			-			-			13,242
Class A common stock issuance for reverse stock split round up		24,197			-		-			-			-			-			-			-
Conversion of Class B common stock to Class A common stock		657,982			-		(2,302,936	)		-			-			-			-			-
Conversion of Series B preferred stock to Class A common stock		26,615,215			2		-			-			27,275			-			-			27,277
Exchange of Series A preferred stock for convertible senior notes		-			-		-			-			8,936			-			-			8,936
Share-based compensation		-			-		-			-			5,467			-			44			5,511
Restricted stock grants		88,025			-		-			-			-			-			-			-
Tax withholding related to vesting of share-based compensation		(29,628	)		-		-			-			(150	)		-			-			(150	)
Restricted stock forfeitures		(9,791	)		-		-			-			-			-			-			-
Deemed and imputed dividends on Series A preferred stock		-			-		-			-			(750	)		-			-			(750	)
Accrued Series A preferred stock dividends		-			-		-			-			(4,808	)		-			-			(4,808	)
Accrued Series B preferred stock dividends		-			-		-			-			(4,591	)		-			-			(4,591	)
Net loss		-			-		-			-			-			(47,861	)		(44	)		(47,905	)
Balance, September 30, 2021		52,352,178		$	5		-		$	-		$	261,837		$	(370,292	)	$	-		$	(108,450	)


	Nine Months Ended September 30, 2020
	Class A Common Stock (1)					Class B Common Stock						Additional Paid in			Accumulated			Noncontrolling			Total
.	Shares			Amount		Shares			Amount			Capital (1)			Deficit			Interest			Deficit
Balance, December 31, 2019		17,959,321		$	2		5,500,692		$	1		$	225,385		$	(93,091	)	$	10,633		$	142,930
Class A common stock issuance		1,580,006			-		-			-			1,438			-			-			1,438
Conversion of Class B common stock to Class A common stock		913,645			-		(3,197,756	)		(1	)		1			-			-			-
Conversion of Series A preferred stock to Class A common stock		149,707			-		-			-			2,895			-			-			2,895
Share-based compensation		-			-		-			-			4,204			-			315			4,519
Tax withholding related to vesting of share-based compensation		(44,073	)		-		-			-			(70	)		-			-			(70	)
Restricted stock forfeitures		(154,648	)		-		-			-			-			-			-			-
Deemed and imputed dividends on Series A preferred stock		-			-		-			-			(12,578	)		-			-			(12,578	)
Accrued Series A preferred stock dividends		-			-		-			-			(5,450	)		-			-			(5,450	)
Accrued Series B preferred stock dividends		-			-		-			-			(1,347	)		-			-			(1,347	)
Net loss		-			-		-			-			-			(199,481	)		(10,948	)		(210,429	)
Balance, September 30, 2020		20,403,958		$	2		2,302,936		$	-		$	214,478		$	(292,572	)	$	-		$	(78,092	)

U.S. WELL SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (continued)
(in thousands, except share amounts)
(unaudited)

	Class A Common Stock					Class B Common Stock
											Additional
											Paid in			Accumulated			Noncontrolling			Total
	Shares			Amount		Shares			Amount		Capital			Deficit			Interest			Equity
Balance, June 30, 2019		54,607,462		$	5		13,775,400		$	1	$	236,398		$	(61,039	)	$	41,914		$	217,279
Share-based compensation		-			-		-			-		1,758			-			443			2,201
Restricted stock forfeitures		(18,687	)		-		-			-		-			-			-			-
Deemed and imputed dividends on Series A preferred stock		-			-		-			-		(4,406	)		-			-			(4,406	)
Accrued Series A preferred stock dividends		-			-		-			-		(1,670	)		-			-			(1,670	)
Net loss		-			-		-			-		-			(16,969	)		(4,280	)		(21,249	)
Balance, September 30, 2019		54,588,775		$	5		13,775,400		$	1	$	232,080		$	(78,008	)	$	38,077		$	192,155

	Class A Common Stock					Class B Common Stock
											Additional
											Paid in			Accumulated			Noncontrolling			Total
	Shares			Amount		Shares			Amount		Capital			Deficit			Interest			Equity
Balance, June 30, 2020		68,361,213		$	7		5,014,897		$	-	$	237,872		$	(301,705	)	$	-		$	(63,826	)
Class A common stock issuance		400			-		-			-		-			-			-			-
Conversion of Class B common stock to Class A common stock		2,711,961			-		(2,711,961	)		-		-			-			-			-
Conversion of Series A preferred stock to Class A common stock		523,973			-		-			-		4,691			-			-			4,691
Share-based compensation		-			-		-			-		986			-			51			1,037
Restricted stock forfeitures		(183,664	)		-		-			-		-			-			-			-
Deemed and imputed dividends on Series A preferred stock		-			-		-			-		(467	)		-			-			(467	)
Accrued Series A preferred stock dividends		-			-		-			-		(1,854	)		-			-			(1,854	)
Accrued Series B preferred stock dividends		-			-		-			-		(681	)		-			-			(681	)
Net loss		-			-		-			-		-			(15,937	)		(51	)		(15,988	)
Balance, September 30, 2020		71,413,883		$	7		2,302,936		$	-	$	240,547		$	(317,642	)	$	-		$	(77,088	)

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

Fiscal Year	Estimated Amortization Expense
Remainder of 2020	$	242
2021		966
2022		966
2023		966
2024		966
Thereafter		9,602
Total	$	13,708

	Estimated Useful Life	September 30, 2020			December 31, 2019
Fracturing equipment	1.5 to 25 years	$	258,218		$	651,162
Light duty vehicles	5 years		2,184			8,188
Furniture and fixtures	5 years		67			277
IT equipment	3 years		1,676			6,724
Auxiliary equipment	2 to 20 years		12,720			38,502
Leasehold improvements	Term of lease		287			725
			275,152			705,578
Less: Accumulated depreciation and amortization			(32,342	)		(263,968	)
Property and equipment, net		$	242,810		$	441,610

				Weighted- average
	Unvested shares			grant-date fair value per share
Non-vested restricted stock as of December 31, 2019		2,723,637		$	8.87
Granted		-			-
Vested		(690,237	)		8.87
Forfeited		(541,239	)		8.85
Non-vested restricted stock as of September 30, 2020		1,492,161		$	8.88

	Number of shares			Weighted average exercise price (per share data)		Weighted Average Remaining Contractual Life (years)
Outstanding as of December 31, 2019		1,068,162		$	8.91		6.21
Exercised		-			-		-
Forfeited/Expired		(190,896	)		8.91		-
Outstanding as of September 30, 2020		877,266		$	8.91		5.46
Exercisable as of September 30, 2020		219,317		$	8.91		5.46

			Minimum
	Contracted		Commitments
Remainder of 2020	$	7,758	$	4,027
2021		11,340		960
Total	$	19,098	$	4,987

Remainder of 2020	$	358
2021		1,114
2022		828
2023		308
2024		258
Thereafter		67
Total minimum future rentals	$	2,933


	Three Months Ended September 30,
	2021			% (1)	2020			% (1)	Variance			% Variance
Revenue	$	56,477		100.0%	$	44,042		100.0%	$	12,435		28.2%
Costs and expenses:
Cost of services (excluding depreciation and amortization)		58,115		102.9%		31,157		70.7%		26,958		86.5%
Depreciation and amortization		6,980		12.4%		16,393		37.2%		(9,413	)	(57.4)%
Selling, general and administrative expenses		11,142		19.7%		6,098		13.8%		5,044		82.7%
Loss (gain) on disposal of assets		(12,001	)	(21.2)%		755		1.7%		(12,756	)	(1689.5)%
Loss from operations		(7,759	)	(13.7)%		(10,361	)	(23.5)%		2,602		*(2)
Interest expense, net		(10,634	)	(18.8)%		(5,748	)	(13.1)%		(4,886	)	85.0%
Change in fair value of warrant liabilities		2,052		3.6%		1,783		4.0%		269		*(2)
Gain on extinguishment of debt, net		6,645		11.8%		-		0.0%		6,645		100.0%
Other income		117		0.2%		30		0.1%		87		*(2)
Income tax expense (benefit)		-		0.0%		(87	)	(0.2)%		87		*(2)
Net loss	$	(9,579	)	(17.0)%	$	(14,209	)	(32.3)%	$	4,630		(32.6)%

Results of Operations

Three months ended September 30, 2020, compared to three months ended September 30, 2019
(in thousands, except percentages)

	Three Months Ended September 30,
	2020			% ⁽¹⁾	2019			% ⁽¹⁾	Variance			% Variance
Revenue	$	44,042		100.0%	$	130,884		100.0%	$	(86,842	)	(66.4)%
Costs and expenses:
Cost of services (excluding depreciation and amortization)		31,157		70.7%		90,792		69.4%		(59,635	)	(65.7)%
Depreciation and amortization		16,393		37.2%		39,723		30.3%		(23,330	)	(58.7)%
Selling, general and administrative expenses		6,098		13.8%		8,216		6.3%		(2,118	)	(25.8)%
Loss on disposal of assets		755		1.7%		4,976		3.8%		(4,221	)	(84.8)%
Loss from operations		(10,361	)	(23.5)%		(12,823	)	(9.8)%		2,462		* ⁽²⁾
Interest expense, net		(5,744	)	(13.0)%		(8,449	)	(6.5)%		2,705		(32.0)%
Other income		30		0.1%		62		0.0%		(32	)	* ⁽²⁾
Income tax expense (benefit)		(87	)	(0.2)%		39		0.0%		(126	)	* ⁽²⁾
Net loss	$	(15,988	)	(36.3)%	$	(21,249	)	(16.2)%	$	5,261		* ⁽²⁾

⁽¹⁾ As a percentage of revenues. Percentage totals or differences in the above table may not equal the sum or difference of the components due to rounding.
⁽²⁾ Not meaningful.

Cash Flows
(in thousands)
	Nine Months Ended September 30,
	2020			2019
Net cash provided by (used in):
Operating activities	$	19,089		$	42,330
Investing activities		(28,170	)		(193,408	)
Financing activities		(31,285	)		153,838

	Less than 1 year		1 - 3 Years		3 - 5 Years		Thereafter		Total
Senior Secured Term Loan	$	-	$	7,500	$	10,000	$	230,000	$	247,500
ABL Credit Facility		-		-		14,939		-		14,939
PPP Loan		-		-		10,000		-		10,000
Equipment financing		3,474		7,533		2,709		-		13,716
Notes payable		1,867		-		-		-		1,867
Capital lease obligations ⁽¹⁾		6,201		-		-		-		6,201
Estimated interest payments ⁽²⁾		1,507		40,192		50,570		4,322		96,591
Operating lease obligations ⁽³⁾		1,250		1,297		386		-		2,933
Purchase commitments ⁽⁴⁾		1,999				-		-		1,999
Sand purchase agreements ⁽⁵⁾		4,747		240		-		-		4,987
Total	$	21,045	$	56,762	$	88,604	$	234,322	$	400,733


Exhibit No.		Description
3.1		Second Amended and Restated Certificate of Incorporation of U.S. Well Services, Inc (incorporated by reference to Exhibit 3.1 of the Current Report on Form 8-K (File ~~no.~~No. 001-38025), filed with the SEC on November 16, 2018).
3.2		~~3.2~~Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation of U.S. Well Services, Inc., dated as of September 30, 2021 (incorporated by reference to Exhibit 3.1 of the Current Report on Form 8-K (File No. 001-38025), filed with the SEC on October 1, 2021).
3.3		Certificate of Designations, dated May 24, 2019, of U.S. Well Services, Inc. (incorporated by reference to Exhibit 3.1 of the Current Report on Form 8-K (File ~~no.~~No. 001-38025), filed with the SEC on May 24, ~~2019.~~2019).
~~3.3~~3.4		Certificate of Designations, dated March 31, 2020, of U.S. Well Services, Inc. (incorporated by reference to Exhibit 3.1 of the Current Report on Form 8-K (File ~~no.~~No. 001-38025), filed with the SEC on April 2, ~~2020.~~2020).
3.5		~~3.4~~First Amendment to Certificate of Designations of the Series B Redeemable Convertible Preferred Stock, dated September 14, 2021 (incorporated by reference to Exhibit 3.1 of the Current Report on Form 8-K (File No. 001-38025), filed with the SEC on September 17, 2021).
3.6		Amended and Restated Bylaws (incorporated by reference to Exhibit 3.4 of the Registration Statement on Form S-1 (File No. 333-216076), filed with the SEC on February 15, 2017).
4.1		Registration Rights Agreement, dated ~~April 1, 2020,~~June 24, 2021, by and among U.S. Well Services, Inc. and the Purchasers party thereto (incorporated by reference to Exhibit ~~4.1~~4.4 of the Current Report on Form 8-K (File No. 001-38025), filed with the SEC on ~~April 2, 2020)~~June 28, 2021).
~~10.1~~4.2		~~Promissory Note,~~First Amendment to Registration Rights Agreement, dated ~~effective as of July 24, 2020,~~June 25, 2021, by and ~~between~~among U.S. Well Services, ~~LLC~~Inc. and ~~Bank of America, N.A.~~the Purchasers party thereto (incorporated by reference to Exhibit ~~10.12 of~~4.5 to the Current Report on Form 8-K (File No. 001-38025), filed with the SEC on ~~July 30, 2020)~~June 28, 2021).
~~10.2~~4.3		Second Amendment to ~~ABL Credit~~Amended and Restated Registration Rights Agreement, ~~dated as of April 1, 2020,~~ by and among ~~U.S. Well Services, LLC, U.S. Well Services Inc., USWS Fleet 10, LLC, USWS Fleet 11, LLC, USWS Holdings, LLC, lenders~~the Company and the Holders party thereto, ~~and Bank of America, N.A., as administrative agent, lender, swing line lender and letter of credit issuer~~dated September 14, 2021 (incorporated by reference to Exhibit ~~10.1. of~~4.1 to the Current Report on Form 8-K (File No. 001-38025) filed with the SEC on September 17, 2021).
4.4		Form of Cash Note (included as Exhibit B-1 to the Note Purchase Agreement, incorporated by referenced to Exhibit 10.1 to the Current Report on Form 8-K (File No. 001-38025) filed with the SEC on June 28, 2021).
4.5		Form of Exchange Note (included as Exhibit B-2 to the Note Purchase Agreement, incorporated by referenced to Exhibit 10.1 to the Current Report on Form 8-K (File No. 001-38025) filed with the SEC on June 28, 2021).
4.6		Form of License Linked Notes (included as Exhibit B-3 to the Note Purchase Agreement, incorporated by referenced to Exhibit 10.1 to the Current Report on Form 8-K (File No. 001-38025) filed with the SEC on June 28, 2021).
10.1		Second Amendment to Note Purchase Agreement, dated August 11, 2021, by and among U.S. Well Services, Inc., the Purchasers party thereto and Wilmington Savings Fund Society, FSB, as collateral agent for the Purchasers (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K (File No. 001-38025) filed with the SEC on August ~~20, 2020)~~13, 2021).
10.3*10.2		~~Third Amendment to Senior Secured Term Loan Credit~~Equipment Sale Agreement ~~dated July 30, 2020, among~~between U.S. Well Services, LLC ~~U.S. Well Services, Inc., USWS Fleet 11, LLC, USWS~~and Python Holdings, LLC, ~~CLMG Corp., as administrative agent and collateral agent, and~~dated September 30, 2021 (incorporated by reference to Exhibit 10.1 to the ~~lenders party thereto.~~Current Report on Form 8-K (File No. 001-38025) filed with the SEC on October 6, 2021).
10.431.1		~~Form of Deferred Stock Unit Award under the U.S. Well Services, Inc. 2018 Long Term Incentive Plan.~~
10.5*		~~Form of Performance Award (Pool A) under the U.S. Well Services, Inc. 2018 Long Term Incentive Plan.~~
10.6*		~~Form of Performance Award (Pool B) under the U.S. Well Services, Inc. 2018 Long Term Incentive Plan.~~
10.7*		~~U.S. Well Services, Inc. Amended and Restated 2018 Long Term Incentive Plan.~~
31.1*		Certification of Chief Executive Officer pursuant to Rule 13(a)-14 and 15(d)-14 under the Securities Exchange Act of 1934.
31.2*		Certification of Chief Financial Officer pursuant to Rule 13(a)-14 and 15(d)-14 under the Securities Exchange Act of 1934.
32.1**		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350.
32.2**		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350.
101.INS*		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.
101.SCH*		Inline XBRL Taxonomy Extension Schema Document
101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document
104*		Cover Page Interactive Data File (embedded within the Inline XBRL document)


	U.S. WELL SERVICES, INC.

	By:


	/s/ Joel Broussard
	Name:	Joel Broussard
	Title:	President, Chief Executive Officer, and Director

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