This Amendment No. 2 (“Amendment No. 2”) to the Quarterly Report on Form 10-Q/A amends the Quarterly Report on Form 10-Q of Enservco Corporation as of and for the quarter ended September 30, 2021, as filed with the Securities and Exchange Commission (“SEC”) on November 15, 2021 (the “Original Filing”), and as amended and filed with the SEC on April 11, 2022 ("Amendment No. 1").

The Company has re-evaluated its accounting for income taxes in connection with a change in control that occurred pursuant to the issuance of 4,199,998 shares of common stock during the first quarter of 2021. This change in control led to a change in management's judgment about the realizability of the Company's deferred tax assets. Pursuant to such re-evaluation, the Company’s management has determined that for the three months ended September 30, 2021 the Company should have recognized a deferred income tax benefit through a partial release of the Company's valuation allowance, as well as recognizing deferred income tax expense for the nine months ended September 30, 2021 through the recording of additional valuation allowance.

Therefore, on April 14, 2022, the Company’s management and the audit committee of the Company’s board of directors concluded that the Company’s unaudited interim financial statements included in the Original Filing, as amended by Amendment No. 1, should be restated to recognize the deferred tax liability associated with this limitation. As such, the Company is filing this Amendment No. 2 to affect such restatement.

~~The restatement has no impact on the Company’s cash position, revenues, operating expenses, loss from operations or Adjusted EBITDA as of and for the three and nine months ended September 30, 2021.~~

We are filing this Amendment No. 2 to amend and restate the Original Filing, as previously amended by Amendment No. 1, with modification as necessary to reflect the restatement. The following items have been amended to reflect the restatement: (i) Part I, Item 1. Financial Statements; and (ii) Part I, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. In addition, the Company’s Principal Executive Officer and Interim Principal Financial Officer has provided new certifications dated as of the date of this filing in connection with this Form 10-Q/A (Exhibits 31.1 and 32).

As a result of the factors described above, the Company’s management has concluded that a material weakness existed in the Company’s internal control over financial reporting and that the Company’s disclosure controls and procedures were not effective. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the financial statements will not be prevented or detected and corrected on a timely basis. For a discussion of management’s consideration of the material weakness identified, see Part I, Item 4. Controls and Procedures included in this Amendment No. 2.

Except as described above, no other information included in the Original Filing, as amended by Amendment No. 1, is being amended or updated by this Amendment No. 2. This Amendment No. 2 continues to describe the conditions as of the date of the Original Filing. Except as expressly contained herein, we have not updated, modified or supplemented the disclosures contained in the Original Filing or Amendment No. 1, and this Amendment No. 2 does not purport to reflect any information or events subsequent to the date of the Original Filing. Accordingly, this Amendment No. 2 should be read in conjunction with the Original Filing, Amendment No. 1 and with our filings with the SEC subsequent to the Original Filing.

See accompanying notes to the condensed consolidated financial statements.

See accompanying notes to the condensed consolidated financial statements.

Enservco Corporation ("Enservco") through its wholly-owned subsidiaries (collectively referred to as the "Company", "we" or "us") provides various services to the domestic onshore oil and natural gas industry. These services include hot oiling and acidizing ("Production Services") and frac water heating ("Completion and Other Services").

The accompanying unaudited condensed consolidated financial statements have been derived from the accounting records of Enservco Corporation, Heat Waves Hot Oil Service LLC ("Heat Waves"), Dillco Fluid Service, Inc. ("Dillco"), Heat Waves Water Management LLC ("HWWM"), and Adler Hot Oil Service, LLC ("Adler") (collectively, the "Company") as of September 30, ~~2021~~2022 and December 31, ~~2020~~2021 and the results of operations for the three and nine months ended September 30, ~~2021~~2022 and ~~2020.~~2021.

The below table provides an overview of the Company’s current ownership hierarchy:

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the disclosures required by generally accepted accounting principles in the United States of America ("GAAP") for complete financial statements. In the opinion of management, all normal and recurring adjustments necessary to fairly present the interim financial information set forth herein have been included. The results of operations for interim periods are not necessarily indicative of the expected operating results of a full year or of future years.

The accompanying unaudited condensed consolidated financial statements were prepared in accordance with GAAP and follow the same accounting policies and methods of their application as the most recent annual financial statements. These interim financial statements should be read in conjunction with the financial statements and related footnotes included in the Annual Report on Form 10-K of Enservco Corporation for the year ended December 31, ~~2020.~~2021. All intercompany balances and transactions have been eliminated in the accompanying condensed consolidated financial statements.

Table of Contents

~~Note~~ 2– ~~Restatement of Previously Issued Financial Statements~~

~~In accordance with Accounting Standards Codification ("ASC")~~ ~~740,~~ ~~and pursuant to re-evaluation by the Company's management, the Company has determined that for the~~ ~~three~~ ~~months ended~~ ~~September~~ ~~30,~~~~2021~~ ~~the Company should have recognized a deferred income tax benefit through a partial release of the Company's valuation allowance, as well as recognizing deferred income tax expense for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2021~~ ~~through the recording of additional valuation allowance. This limitation is due to a change in control that occurred in~~ ~~February 2021~~ ~~pursuant to the issuance of 4,199,998 shares of Company common stock.~~

~~The following tables summarize the effects of the restatement on each financial statement line item as of the date, and for the periods, indicated (in thousands except per share amounts):~~

September 30, 2021

As Previously Restated

Adjustments

As Restated

Condensed Consolidated Balance Sheet (unaudited)

Deferred tax liability, net

$
0
-

$
402

$
402

Total non-current liabilities

14,542

402

14,944

Total liabilities

19,035

402

19,437

Accumulated deficit

(32,093
)
(402
)
(32,495
)
Total stockholders' equity

8,770

(402
)

8,368

For the Three Months Ended September 30, 2021

As Previously Reported

Adjustments

As Restated

Condensed Consolidated Statement of Operations (unaudited)

Deferred income tax benefit

$
0
-

$
546

$
546

(Loss) income from continuing operations

(177
)
546

369

Net income (loss)

(177
)

546

369

(Loss) income from continuing operations per common share - basic and diluted

(0.02
)

0.05

0.03

Net (loss) income per share - basic and diluted

(0.02
)

0.05

0.03

For the Nine Months Ended September 30, 2021

As Previously Restated

Adjustments

As Restated

Condensed Consolidated Statement of Operations (unaudited)

Deferred income tax expense

$
0
-

$
(402
)
$
(402
)
Loss from continuing operations

(4,556
)
(402
)
(4,958
)
Net (loss) income

(4,564
)

(402
)
(4,966
)
Loss from continuing operations per common share - basic and diluted

(0.43
)

(0.03
)
(0.46
)
Net loss per share - basic and diluted

(0.43
)

(0.03
)
(0.46
)

Additional
Paid-in
Capital

Accumulated
Deficit

Total
Stockholders’
Equity

Consolidated Statement of Stockholders' Equity (Deficit) (unaudited)

As Previously Restated:

Net loss (for the three months ended March 31, 2021)
$
-
$
(2,477
)
$
(2,477
)
Balance at March 31, 2021

40,760

(30,006
)

10,811

Net loss (for the three months ended June 30, 2021)

-

(1,910
)

(1,910
)
Balance at June 30, 2021

40,785

(31,916
)

8,926

Net loss (as previously reported for the three months ended September 30, 2021) - (177 ) (177 )
Balance at September 30, 2021, as previously reported 40,806 (32,093 ) 8,770
Adjustments:

Net loss (for the three months ended March 31, 2021)
$
-
$
(1,425
)
$
(1,425
)
Balance at March 31, 2021
0
-

(1,425
)

(1,425
)
Net loss (for the three months ended June 30, 2021) - 477 477
Balance at June 30, 2021

-

477

477

Net loss (for the three months ended September 30, 2021) - 546 546
Balance at September 30, 2021 0 546 546
As Restated:

Net loss (for the three months ended March 31, 2021)
$
-
$
(3,902
)
$
(3,902
)
Balance at March 31, 2021

40,760

(31,431
)

9,386

Net loss (for the three months ended June 30, 2021)

-

(1,433
)

(1,433
)
Balance at June 30, 2021

40,785

(32,864
)

7,978

Net income (for the three months ended September 30, 2021) 0 369 369
Balance at September 30, 2021 40,806 (32,495 ) 8,368

For the Nine Months Ended September 30, 2021

As Previously Restated

Adjustments

As Restated

Condensed Consolidated Statement of Cash Flows (unaudited)

OPERATING ACTIVITIES

Net loss

$
(4,564
)

$
(402
)

$
(4,966
)
Net loss from continuing operations

(4,556
)

(402
)

(4,958
)
Deferred income tax expense
0
-

402

402

Note 32– Summary of Significant Accounting Policies

~~Going Concern~~ Liquidity and Capital Resources

On August 10, 2017, the Company entered into a Loan and Security Agreement, as amended, with East West Bank (the "2017 Amended Credit Agreement") which provided for a three-year, $37.0 million senior secured revolving credit facility (the ~~"Credit~~"Senior Revolving Credit Facility" or "2017 Amended Credit Facility"). On September 23, 2020, the Company and East West Bank entered into the Fifth Amendment to Loan and Security Agreement and Waiver (the "Fifth Amendment") which, among other things, provided for a loan concession of $16.0 million in exchange for 533,334 shares of Company common stock and a five-year warrant to purchase up to 1,000,000 additional shares of Company common stock in the future, as well as further extending the maturity date for the repayment of the 2017 Amended Credit Facility to October 15, 2021. On February 1, 2021, we entered into the Sixth Amendment to Loan and Security Agreement (the "Sixth Amendment") which extended the maturity date of the loan for an additional year to October 15, 2022, and modified certain covenants. The Seventh Amendment to the 2017 Amended Credit Facility dated April 26, 2021 (the "Seventh Amendment") provided for amortization of the loan on a ~~10-year~~10-year straight-line basis commencing on November 15, 2021 and continuing until maturity on October 15, 2022.

~~Subsequent to~~ ~~September 30, 2021,~~ ~~the Company determined that it would be in non-compliance of its trailing~~ ~~three~~~~-month revenue covenant under the Credit Facility for the month ended~~ ~~October 31, 2021,~~ ~~and would likely also be in non-compliance for the trailing~~ ~~three~~~~-month period ending~~ ~~November 30, 2021.~~ ~~This covenant requires the Company to achieve actual revenues in an amount~~ ~~not~~ ~~less than 70% of the revenue projections previously delivered by the Company (and accepted by East West Bank) for each trailing~~ ~~three~~~~-month period. The Company’s non-compliance with the covenant resulted from October’s revenues being approximately~~ ~~$172,000~~ lower than what was required to meet the requirements of the covenant. The Company has determined that October’s lower revenues were the result of warmer than usual temperatures that have existed in the areas that the Company operates which caused the Company's frac water heating season to begin later than anticipated.

On November 12, 2021, we entered into the Eighth Amendment to Loan and Security Agreement with East West Bank (the "Eighth Amendment") which, among other things, ~~provides~~provided for a waiver of default of the ~~revenue~~revenues covenant based upon our October trailing three-month period gross ~~revenue~~revenues and a reforecasting of our November and December revenues from what was previously provided to East West Bank. Per the Eighth Amendment, the ~~revenue~~revenues covenant utilizing October’s revenues iswas waived and ~~will~~would not be used in any future three-month period gross ~~revenue~~revenues covenant calculation. For the month ended November 30, 2021, covenant compliance ~~will be~~was measured at 80% of reforecast November revenues. Covenant compliance for the month ended December 31, 2021 ~~will be~~was measured at 80% of the reforecast November and December revenues. Beginning ~~for~~with the month ended January 31, 2022 ~~and~~and continuing until March 31, 2022, ~~revenue~~revenues covenant compliance ~~will~~was to be measured at 80% of the trailing three months forecast gross revenues. Beginning with the month ended April 30, 2022 and continuing through September 30, 2022, covenant compliance ~~will~~was to be measured at 70% of the trailing three months forecasted gross revenues, except for the months ended April 30, 2022 and May 31, 2022, as those ~~will~~would include an 80% requirement for the months of February 2022 and March 2022. Upon execution of the Eighth Amendment, the Company paid East West Bank a fee of $70,000 for the October ~~revenue~~revenues waiver and the Eight Amendment.

In March 2022, the Company entered into a new financing arrangement with lenders which replaced the 2017 Amended Credit Facility in its entirety. The new facilities consist of a term debt facility, a receivables factoring agreement, as well as a convertible subordinated promissory note (the "March 2022 Convertible Note"), the latter of which was issued by Cross River Partners, LP ("Cross River"), an entity controlled by Richard Murphy, the Company’s CEO and Chairman. Upon entry into these facilities, East West Bank agreed to forgive approximately $4.3 million of the Company's indebtedness under the 2017 Amended Credit Facility. In July 2022, the Company entered into a second convertible subordinated promissory note (the "July 2022 Convertible Note") with Cross River, whereby the Company received $1.2 million of capital for general working capital purposes. In addition, in September 2022, the Company entered into a $750,000 revolving credit facility with Cross River (the "Cross River Revolver Note"). The March 2022 refinancing facilities, as well as the recent convertible note and revolver financings with Cross River, are more fully described in Note 5 - Debt.

Our condensed consolidated financial statements have been prepared on the going concern basis, which contemplates the continuity of normal business activities and the realization of assets and settlement of liabilities in the normal course of business. For the three and nine months ended September 30, ~~2021,~~2022, we generated net ~~income~~losses of approximately ~~$369,000~~$3.1 million and a$3.9 million, respectively. Our net loss for the nine months ended September 30, 2022 includes a $4.3 million gain on debt extinguishment related to the Refinancing as discussed in Note 5 - Debt. In addition, our loss from operations decreased to approximately $7.2 million for the nine months ended September 30,2022, compared with a loss from operations of approximately ~~$5.0~~$8.2 million ~~respectively.~~ for the nine months ended September 30, 2021. As of September 30, ~~2021,~~2022, we had ~~total current assets~~cash and cash equivalents of ~~$7.0 million~~$211,000 and ~~total current liabilities of $4.5 million, or~~a working capital deficit of ~~$2.5~~approximately $4.3 million.

Although the Company ~~has made substantial progress in improving its capitalization~~believes the Refinancing, recent debt financing from Cross River, and ~~financial position over~~cash from operations will provide sufficient liquidity for at least the ~~past~~next twelve months, the ~~current maturity date~~Company may need to raise additional capital for its growth and ongoing operations. As the Company seeks additional sources of financing, there can be no assurance that such financing would be available to the ~~Credit Facility is~~ ~~October 15, 2022.~~ ~~This maturity date of the Credit Facility creates substantial doubt over our~~Company on favorable terms, or at all. The Company’s ability to ~~continue~~obtain additional financing in the debt and equity capital markets, whether public or private, is subject to several factors including market and economic conditions, the Company’s performance, and investor sentiment with respect to the Company and its industry. See Note 5 - Debt for a description of events that have occurred subsequent to the balance sheet date that impact our liquidity position as ~~a going concern from~~ ~~one~~ ~~year after~~of the date of ~~issuance of~~ this ~~current report, or~~ ~~November 15, 2022.~~ ~~We continue to work with East West Bank on repayment strategies and are working diligently to secure a refinancing of the Credit Facility.~~filing.

Cash and Cash Equivalents

The Company considers all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents. The Company continually monitors its positions with, and the credit quality of, the financial institutions with which it invests. Enservco maintains its excess cash in one financial institution, where deposits may exceed federally insured amounts at times.

Accounts Receivable

Accounts receivable are stated at the amounts billed to customers, net of an allowance for uncollectible accounts. The Company provides an allowance for uncollectible accounts based on a review of outstanding receivables, historical collection information and existing economic conditions. The allowance for uncollectible amounts is continually reviewed and adjusted to maintain the allowance at a level considered adequate to cover potential future losses. This allowance is management's best estimate of uncollectible amounts and is determined based on historical collection experience related to accounts receivable coupled with a review of the current status of existing receivables. The losses ultimately incurred could differ materially in the near term from the amounts estimated in determining this allowance. As of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the Company had an allowance for doubtful accounts of approximately ~~$195,000 and $322,000,~~$245,000 and $482,000, respectively. For the three and nine months ended September 30, ~~2021,~~2022, the Company recorded ~~approximately $18,000 and $15,000, respectively, to~~no bad debt ~~recovery.~~expense nor recovery; however, approximately $237,000 in uncollectible accounts were written off during the nine months ended September 30, 2022, all of which occurred during the first quarter of 2022. For the three and nine months ended September 30, ~~2020,~~ 2021,the Company recorded approximately ~~$64,000~~$18,000 and ~~$362,000,~~$15,000, respectively, toas bad debt ~~expense.~~recovery.

Inventories

Inventories consist primarily of propane, diesel fuel and chemicals that are used in the servicing of oil wells and are carried at the lower of cost or net realizable value in accordance with the first in, first out method of accounting ("FIFO"). The Company periodically reviews the value of items in inventories and provides write-downs or write-offs of inventories based on its assessment of market conditions. Write-downs and write-offs are charged to cost of goods ~~sold.~~sold. For the three and nine months ended September 30, ~~2021~~2022, the Company wrote-off approximately $52,000 of inventories. For the three and nine months ended September 30, 202~~2020,~~1, the Company did not recognize any write-downs or write-offs of inventories.

Property and Equipment

Property and equipment consists of (i) trucks, trailers and pickups; (ii) water transfer pumps, pipe, lay flat hose, trailers, and other support equipment; (iii) real property which includes land and buildings used for office and shop facilities and wells used for the disposal of water; (iv) other equipment such as tools used for maintaining and repairing vehicles; and (v) office furniture and fixtures, and computer equipment. Property and equipment is stated at cost less accumulated depreciation. The Company capitalizes interest on certain qualifying assets that are undergoing activities to prepare them for their intended use. Interest costs incurred during the fabrication period are capitalized and amortized over the life of the assets. The Company did not capitalize any interest for the three and nine months ended September30, ~~2021~~ 2022or ~~2020.~~2021. The Company charges repairs and maintenance against income when incurred and capitalizes renewals and betterments which extend the remaining useful life or expand the capacity or efficiency of the assets. Depreciation is recorded on a straight-line basis over estimated useful lives ranging from 5 to 30 years.

Any difference between the net book value of the property and equipment and the proceeds of an asset’s sale, or settlement of an insurance claim, is recorded as a gain or loss in the Company’s condensed consolidated statements of operations.

Leases

The Company assesses whether an arrangement is a lease at inception. Leases with an initial term of 12 months or less are not recorded on the balance sheet. We have elected the practical expedient to not separate lease and non-lease components for all assets. Operating lease assets and operating lease liabilities are calculated based on the present value of the future minimum lease payments over the lease term at the lease start date. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the lease start date in determining the present value of future lease payments. The operating lease asset is increased by any lease payments made at or before the lease start date and reduced by lease incentives and initial direct costs incurred. The lease term includes options to renew or terminate the lease when it is reasonably certain that we will exercise that option. The exercise of lease renewal options is at our sole discretion. The depreciable life of lease assets and leasehold improvements are limited by the lease term. Lease expense for operating leases is recognized on a straight-line basis over the lease term.

The Company conducts a major part of its operations from leased facilities. Each of these leases is accounted for as an operating lease. Operating lease assets and liabilities are recognized at the lease commencement date. Operating lease liabilities represent the present value of lease payments not yet paid. Operating lease assets represent our right to use an underlying asset and are based upon the operating lease liabilities adjusted for prepayments or accrued lease payments, initial direct costs, lease incentives, and impairment of operating lease assets.

The Company amortizes leasehold improvements over the shorter of the life of the lease or the projected life of the improvements.

The Company leases trucks and equipment in the normal course of business, which may be recorded as operating or finance leases, depending on the term of the lease. The Company records rental expense on equipment under operating leases over the lease term as it becomes payable; there are no rent escalation terms associated with these equipment leases. The Company records amortization expense on equipment under finance leases on a straight-line basis, as well as interest expense based on our implicit borrowing rate at the date of the lease inception. The equipment leases contain purchase options that allow the Company to purchase the leased equipment at the end of the lease term, based on the market price of the equipment at the time of the lease termination.

Long-Lived Assets

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recovered. For the three and nine months ended September30,2022 and 2021,the Company concluded that there were no triggering events which could indicate potential impairment of its long-lived assets. Du~~ring the~~ ~~first~~ ~~quarter of~~ ~~2020,~~ ~~the combination of the COVID-~~19 pandemic and actions taken by the Organization of Petroleum Exporting Countries and their allies ("OPEC+") countries caused oil and gas commodity demand to decrease significantly. The Company determined that these were triggering events which could indicate potential impairment of its long-lived assets. The Company reviewed both qualitative and quantitative aspects of the business during the analysis of potential impairment. During the quantitative review, the Compan~~y reviewed the undiscounted future cash flows in its assessment of whether long-lived assets had been impaired. The Company concluded that there was 0 impairment of its long-lived assets for the~~ ~~three~~ ~~and~~ ~~nine~~ ~~months ended~~ ~~September 30, 2020.~~

Table of Contents

Assets Held for Sale

The Company classifies long-lived assets intended to be sold as held for sale in the period in which all of the following criteria are met: (1) management, having the authority to approve the action, commits to a plan to sell the asset or disposal group; (2) the asset or disposal group is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets; (3) an active program to locate a buyer and other actions required to complete the plan to sell the asset or disposal group have been initiated; (4) the sale of the asset or disposal group is probable, and transfer of the asset or disposal group is expected to qualify for recognition as a completed sale within one year, except if events or circumstances beyond our control extend the period of time required to sell the asset or disposal group beyond one year; (5) the asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and (6) actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

We initially measure a long-lived asset or disposal group that is classified as held for sale at the lower of carrying value or fair value less any costs to sell. Any loss resulting from this measurement is recognized in the period in which the held for sale criteria are met. Conversely, gains are not recognized on the sale of a long-lived asset or disposal group until the date of sale. We assess the fair value of a long-lived asset or disposal group less any costs to sell each reporting period it remains classified as held for sale and report any subsequent changes as an adjustment to the carrying value of the asset or disposal group, as long as the new carrying value does not exceed the carrying value of the asset at the time it was initially classified as held for sale. For the three and nine months ended September30, ~~2021~~ 2022and ~~2020,~~2021, the Company recorded 0no impairment charges on its held for sale assets.

Upon determining that a long-lived asset or disposal group meets the criteria to be classified as held for sale, the Company ceases depreciation and reports long-lived assets and/or the assets and liabilities of the disposal group, if material, in the line item "Assets held for sale" in our condensed consolidated balance sheets.

Goodwill and Other Intangible Assets

Goodwill represents the excess purchase price over the fair value of identifiable assets received attributable to business acquisitions and combinations. Goodwill and other intangible assets are measured for impairment at least annually and/or whenever events and circumstances arise that indicate impairment may exist, such as a significant adverse change in the business climate. In assessing the value of goodwill, assets and liabilities are assigned to the reporting units and the appropriate valuation methodologies are used to determine fair value at the reporting unit level. Identified intangible assets are amortized using the straight-line method over their estimated useful lives.

For the three and nine months ended September30,2022 and 2021,the Company concluded that there were no triggering events which could indicate potential impairment of its goodwill and other intangible assets. ~~During t~~he ~~first~~ ~~quarter of~~ ~~2020,~~ ~~the combination of the COVID-~~19 pandemic and actions taken by the OPEC+ countries caused oil and gas commodity demand to decrease significantly. The Company determined that these were triggering events which could indicate potential impairment of its goodwill and other intangible assets. The Company reviewed both qualitative and quantitative aspects of the business during the analysis of impairment. During the quantitative review, the Company used both the fair value and discounted future cash flows in its assessment of whether goodwill and other intangible assets had been impaired. The Company concluded that there was 0 impairment of its goodwill and other intangible assets for the ~~three~~ ~~and~~ ~~nine~~ ~~months ended~~ ~~September 30, 2020.~~

Revenue Recognition

The Company evaluates revenue when we can identify the contract with the customer, the performance obligations in the contract, the transaction price, and we are certain that the performance obligations have been met. Revenue is recognized when the service has been provided to the customer. The vast majority of the Company's services and product offerings are short-term in nature. The time between invoicing and when payment is due under these arrangements is generally 30thirty to 60sixty days. ~~Revenue is~~Due to the nature of our business, the Company has ~~not~~no ~~generated from~~ contractual arrangements that include multiple performance obligations.

The Company’s agreements with its customers are often referred to as "price sheets" and sometimes provide pricing for multiple services. However, these agreements generally do not authorize the performance of specific services or provide for guaranteed throughput amounts. As customers are free to choose which services, if any, to use based on the Company’s price sheet, the Company prices its separate services on the basis of their standalone selling prices. Customer agreements generally do not provide for performance, cancellation, termination, or refund type provisions. Services based on price sheets with customers are generally performed under separately issued "work orders" or "field tickets" as services are requested.

Revenue is recognized for certain projects that take more than one day as projects over time, based on the number of days during the reporting period and the agreed upon price as work progresses on each project.

Disaggregation of ~~Revenue~~Revenues

SeeNote 1110 - Segment Reporting for disaggregation of ~~revenue.~~

~~Employee Retention Credits~~

~~The Employee Retention Credits, a provision of the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"), was extended through~~ ~~December 31, 2021~~ ~~through the American Rescue Plan Act. On~~ ~~November 15, 2021,~~ ~~the Infrastructure Investment and Jobs Act was signed into law and retroactively ends the Employee Retention Credits on~~ ~~September 30, 2021.~~ ~~For~~ ~~2021,~~ ~~the Employee Retention Credits are up to $7,000 per employee per quarter on qualified wages for the~~ ~~first~~~~three~~ ~~quarters of~~ ~~2021.~~ ~~During the~~ ~~second~~ ~~quarter of~~ ~~2021,~~ ~~the Company amended certain payroll tax returns~~ ~~in order to claim refundable Employee Retention Credits for prior periods. For the~~ ~~three~~ ~~and~~ ~~nine~~ ~~months ended~~ ~~September 30, 2021,~~ ~~the Company recorded $612,000 and $1.8 million, respectively, to other income in the condensed consolidated statements of operations.~~revenues.

Earnings (Loss) Per Share

Basic earnings per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted earnings per common share is calculated by dividing net income (loss) by the diluted weighted average number of common shares outstanding for the period. The diluted weighted average number of common shares outstanding for the period is computed using the treasury stock method for Company common stock that may be issued for outstanding stock options ~~restricted stock~~ or ~~warrants.~~warrants and is computed using the if-converted method for convertible securities and convertible debt.

As of September 30,2022 and 2021, ~~and~~ ~~2020~~~~, there were outstanding stock options,~~the Company had unvested restricted stock awards with service and performance conditions. For the three and nine months ended September 30, 2022, there were 242,500 unvested restricted shares included in the computation for basic and diluted earnings per share since they are participating share-based awards and are considered outstanding as of the grant date. For the three and nine months ended September 30, 2022, there were 25,000 unvested restricted shares that have performance conditions and these shares are also participating share-based awards and are considered outstanding as of the grant date.

As of September 30,2022, there were warrants to acquire an ~~aggregate~~ aggregate of ~~1,376,239~~ ~~and~~ ~~1,166,733~~1,192,085 shares of Company common stock ~~respectively,~~ which have a potentially dilutive impact on earnings per share. See Note 5 - Debt and Note 9 - Stock Options and Restricted Stock. As of September 30, ~~2021~~ ~~and~~ ~~2020,~~2022, the outstanding ~~stock options and~~ warrants had 0no aggregate intrinsic value ~~(the~~(the difference between the estimated fair value of the Company’s common stock on September 30, ~~2021~~ 2022, and the exercise price, multiplied by the number of in-the-money instruments). Dilution is not permitted if there are net losses during the period.

Further, as of September 30,2022, the Company has two $1.2 million convertible notes (the "March 2022 Convertible Note" and the "July 2022 Convertible Note", both as discussed in Note 5 - Debt) outstanding. The March 2022 Convertible Note is convertible at a conversion price equal to the average closing price of the Company's common stock for a five-day period prior to exercising such conversion. The July 2022 Convertible Note is convertible at a conversion price of $1.69 per share or equity securities issued by the Company in an equity offering with minimum offering proceeds to the Company (net of any related placement agent or underwriting fees) of $1.2 million at the conversion price per equity security issued in such equity offering. Accordingly, applying the if-converted method to the March 2022 Convertible Note and ~~2020,~~July 2022 Convertible Note as of September 30, 2022 results in common stock equivalents totaling 1,532,239 and 850,289 for the three and nine months ended September 30, 2022, respectively, that would have been included in the computation of diluted earnings per share if the Company had net income for either of the three or nine months ended September 30, 2022.

As of September30,2021, there were outstanding stock options and warrants to acquire an aggregate of 1,195,019 shares of Company common stock which have a potentially dilutive impact on earnings per share. See Note 9 - Stock Options and Restricted Stock. As of September30,2021, the outstanding stock options and warrants had no aggregate intrinsic value (the difference between the estimated fair value of the Company’s common stock on September30,2021, and the exercise price, multiplied by the number of in-the-money instruments). Dilution is not permitted if there are net losses during the period.

109

Table of Contents

Income Taxes

The Company recognizes deferred tax liabilities and assets based on the differences between the tax basis of assets and liabilities and their reported amounts in the condensed consolidated financial statements that will result in taxable or deductible amounts in future years. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities will be recognized in income in the period that includes the enactment date. A deferred tax asset or liability that is not related to an asset or liability for financial reporting is classified according to the expected reversal date. The Company records a valuation allowance to reduce deferred tax assets to an amount that it believes is more likely than not expected to be realized.

The Company accounts for any uncertainty in income taxes by recognizing the tax benefit from an uncertain tax position only if, in the Company’s opinion, it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The Company measures the tax benefits recognized in the financial statements from such a position based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. The application of income tax law is inherently complex. Laws and regulations in this area are voluminous and are often ambiguous. As such, the Company is required to make many subjective assumptions and judgments regarding income tax exposures. Interpretations of and guidance surrounding income tax law and regulations change over time and may result in changes to the Company’s subjective assumptions and judgments which can materially affect amounts recognized in the condensed consolidated balance sheets and condensed consolidated statements of operations. The result of the reassessment of the Company’s tax positions did not have an impact on the condensed consolidated financial statements.

Interest and penalties associated with tax positions are recorded in the period assessed as "Other expense" in the condensed consolidated statements of operations. The Company files income tax returns in the United States of America ("USA") and in the states in which it conducts its business operations. The Company’s USA federal income tax filings for tax ~~years~~ year~~2017~~s 2019 through ~~2020~~2021 ~~remain~~remain open to examination. In general, the Company’s various state tax filings remain open for tax years~~2016~~2018 to ~~2020.~~2021.

Fair Value

The Company follows authoritative guidance that applies to all financial assets and liabilities required to be measured and reported on a fair value basis. The Company also applies the guidance to non-financial assets and liabilities measured at fair value on a ~~nonrecurring~~non-recurring basis, including non-competition agreements and goodwill. The guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability ("exit price") in an orderly transaction between market participants at the measurement date. The guidance establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available.

Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions of what market participants would use in pricing the asset or liability based on the best information available in the circumstances. Beginning in 2017 the Company valued its warrants using the Binomial Lattice model ("Lattice"). Specific inputs used in the Lattice are the underlying stock price, the exercise price of the warrant, expected dividends, historical volatility, term to expiration and risk-free interest rates. The Company did not have any transfers between hierarchy levels for the three and nine months ended September30, ~~2021.~~ 2022.The financial and non-financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement.

The hierarchy is broken down into three levels based on the reliability of the inputs as follows:

Level 1:

Quoted prices are available in active markets for identical assets or liabilities;

Level 2:

Quoted prices in active markets for similar assets and liabilities that are observable for the asset or liability; or

Level 3:

Unobservable pricing inputs that are generally less observable from objective sources, such as discounted cash flow models or valuations.

1110

Table of Contents

Stock-based Compensation

Stock-based compensation cost is measured at the date of grant, based on the calculated fair value of the award as described below, and is recognized over the requisite service period, which is generally the vesting period of the equity grant.

The Company uses the Black-Scholes pricing model as a method for determining the estimated grant date fair value for all stock options awarded to employees, independent contractors, officers, and directors. The expected term of the options is based upon evaluation of historical and expected exercise behavior. The risk-free interest rate is based upon USA Treasury rates at the date of grant with maturity dates approximately equal to the expected life of the grant. Volatility is determined upon historical volatility of our stock and adjusted if future volatility is expected to vary from historical experience. The dividend yield is assumed to be zero as we have not historically paid dividends, nor do we anticipate paying any dividends in the foreseeable future.

The Company uses a Lattice model to determine the fair value of certain warrants. The expected term used was the remaining contractual term. Expected volatility is based upon historical volatility over a term consistent with the remaining term. The risk-free interest rate is derived from the yield on zero-coupon USA government securities with a remaining term equal to the contractual term of the warrants. The dividend yield is assumed to be zero.

The Company used the market-value of Company common stock to determine the fair value of the performance-based restricted stock awarded in 2018 and 2019. Stock-based ~~compensation~~compensation is updated quarterly based on actual forfeitures. The Company used either a Lattice model or the Black-Scholes pricing model to determine the fair value of market-based restricted stock ~~awarded~~awarded in 2021 and 2020.

Management Estimates

The preparation of the Company’s condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include the realization of accounts receivable, evaluation of impairment of long-lived assets, stock-based compensation expense, income tax provisions and the valuation of deferred taxes. Actual results could differ from those estimates.

~~Table of Contents~~

Reclassifications

Certain ~~prior-period~~prior period amounts may have been reclassified for comparative purposes to conform to the current presentation. These reclassifications have no effect on the Company’s condensed consolidated statements of operations.

Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-13, Financial Statements - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires companies to measure credit losses utilizing a methodology that reflects expected credit losses and requires a consideration of a broader range of reasonable and supportable information to ascertain credit loss estimates. The standard is effective for fiscal years beginning after December 15, 2022. The Company does not expect the adoption of ASU 2016-13 to have a material impact on its consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by removing certain exceptions to the general principles of Topic 740, and improves consistent application by clarifying and amending existing guidance. The Company adopted ASU 2019-12 on January 1, 2021, and the adoption of this guidance did not have a material impact on the Company's consolidated financial statements.

Table of Contents

Note 43 – Property and Equipment

Property and equipment consist of the following (in thousands):

	September 30, 2021			December 31, 2020			September 30, 2022			December 31, 2021
Trucks and vehicles	$	57,076		$	57,224		$	53,313		$	54,670
Other equipment		1,961			1,319			2,059			2,059
Buildings and improvements		3,203			3,176			2,600			3,140
Land		378			378			190			378
Total property and equipment		62,618			62,097			58,162			60,247
Accumulated depreciation		(45,548	)		(41,780	)		(45,956	)		(44,074	)
Property and equipment, net	$	17,070		$	20,317		$	12,206		$	16,173

For the three and nine months ended September 30, 2022, the Company recorded depreciation expense of approximately $1.0 million and $3.1 million, respectively. For the three and nine months ended September 30, 2021, the Company recorded depreciation expense of ~~approximately $1.2~~ ~~million and $3.8 million, respectively. For the~~ ~~three~~ ~~and~~ ~~nine~~ ~~months ended~~ ~~September 30, 2020,~~ ~~the Company recorded depreciation expense of~~ approximately $1.2 million and ~~$3.7~~$3.8 million, respectively.

Note 54 – Intangible Assets

The components of our intangible assets are as follows (in thousands):

	September 30, 2021			December 31, 2020			September 30, 2022			December 31, 2021
Customer relationships	$	626		$	626		$	626		$	626
Patents and trademarks		441			441			441			441
Total intangible assets		1,067			1,067			1,067			1,067
Accumulated amortization		(613	)		(450	)		(831	)		(668	)
Net carrying value	$	454		$	617		$	236		$	399

The useful lives of our intangible assets are estimated to be five ~~years.~~years at inception. For the three and nine months ended September 30, 2022 and 2021,amortization expense was app~~roximately~~roximately $54,000 and $163,000, ~~respectively. For the~~ ~~three~~ ~~and~~ ~~nine~~ ~~months ended~~ ~~September 30, 2020,~~ ~~amortization expense was approximately $54,000 and $156,000,~~ respectively.

The following table represents the amortization expense for the ~~next~~ ~~five~~ ~~years for the~~ twelve months ending September30 (in (in thousands):

	2022		2023		2024		2025		2026		2023		2024		2025		2026		2027
Customer relationships	$	125	$	125	$	10	$	0	$	0	$	125	$	10	$	-	$	-	$	-
Patents and trademarks		93		93		8		0		0		93		8		-		-		-
Total intangible asset amortization expense	$	218	$	218	$	18	$	0	$	0	$	218	$	18	$	-	$	-	$	-

Table of Contents

Note 65 – Debt

East West Bank Revolving Credit Facility

On August 10, 2017, the Company entered into the 2017 Amended Credit Agreement with East West Bank. The 2017 Amended Credit Agreement originally allowed us to borrow up to 85% of our eligible receivables and up to 85% of the appraised value of our eligible equipment. The Fifth Amendment entered into on September 23, 2020 restructured the loan by exchanging $16.0 million of the loan into the Company's equity and converting the remaining principal balance to a $17.0 million equipment term loan and a revolver to provide the Company with a maximum $1.0 million line of credit. The Sixth Amendment effective January 1, 2021 further extended the maturity date and modified the financial covenants effective January 1, 2021. The Seventh Amendment to the 2017 Amended Credit Facility dated April 26, 2021 (the "Seventh Amendment") provided for amortization of the loan on a 10-year straight-line basis commencing on November 15, 2021 and continuing until maturity on October 15, 2022. Interest on the 2017 Amended Credit Facility iswas fixed at 8.25%. Interest on the first 5.25% iswas calculated monthly and paid in arrears, while the remaining 3.00% iswould have been accrued to the loan balance through October 15, 2022, and due with all remaining outstanding principal on the maturity date. Additionally, the 2017 Amended Credit Facility iswas subject to an unused credit line fee of 0.5% per annum multiplied by the amount by which total availability ~~exceeds~~exceeded the average monthly balance of the 2017 Amended Credit Facility, payable monthly in arrears. The 2017 Amended Credit Facility iswas collateralized by substantially all our assets and subject to financial covenants.

Under the 2017 Amended Credit Agreement, we ~~are~~were subject to the following financial ~~covenants, with which we were in compliance as of~~ ~~September 30, 2021:~~covenants:

(1) On December 31, ~~2020,~~2021, we were required to maintain liquidity of not less than $1.5 million; and

(2) For each trailing three-month period, commencing with the three-month period ending March 31, ~~2021,~~2022, we ~~are~~were required to achieve gross ~~revenue~~revenues of at least seventy percent (70%) of our projected gross ~~revenue;~~revenues; and

(3) We ~~are~~were limited to a capital expenditures cap of $1.2 million for any fiscal year that the loan remains outstanding.

On February 11, 2021, the Company made a $3.0 million payment of principal on the equipment term loan. As of ~~September 30,~~December 31, 2021, we had an outstanding principal loan balance under the 2017 Amended Credit Facility of approximately ~~$14.0~~$13.5 million with a weighted average interest rate of 8.25% per year. As of ~~September 30,~~December 31, 2021, our availability under the 2017 Amended Credit Agreement was $1.0 million. The 2017 Amended Credit Facility balance of ~~$14.8~~$14.1 million as of ~~September 30,~~December 31, 2021 ~~includes~~included approximately ~~$792,000~~$38,000 of future interest payable due over the remaining term of the2017 Amended Credit Facility in accordance with Accounting Standards Codification ("ASC") 470-60, Troubled Debt Restructuring by Debtors.

~~Subsequent to~~ ~~September 30, 2021,~~ ~~the Company determined that it would be in non-compliance of its trailing~~ ~~three~~~~-month revenue covenant under the Credit Facility for the month ended~~ ~~October 31, 2021,~~ ~~and would likely also be in non-compliance for the trailing~~ ~~three~~~~-month period ending~~ ~~November 30, 2021.~~ ~~This covenant requires the Company to achieve actual revenues in an amount~~ ~~not~~ ~~less than~~ ~~70%~~ ~~of the revenue projections previously delivered by the Company (and accepted by East West Bank) for each trailing~~ ~~three~~~~-month period. The Company’s non-compliance with the covenant resulted from October’s revenues being approximately~~ ~~$172,000 l~~ower than what was required to meet the requirements of the covenant. The Company has determined that October’s lower revenues were the result of warmer than usual temperatures that have existed in the areas that the Company operates which caused the Company's frac water heating season to begin later than anticipated.

On November 12, 2021, we entered into the Eighth Amendment to Loan and Security Agreement with East West Bank which, among other things, ~~provides~~provided for a waiver of default of the ~~revenue~~revenues covenant based upon our October trailing three-month period gross ~~revenue~~revenues and a reforecasting of our November and December revenues from what was previously provided to East West Bank. Per the Eighth Amendment, the ~~revenue~~revenues covenant utilizing October’s revenues iswas waived and ~~will~~would not be used in any future three-month period gross ~~revenue~~revenues covenant calculation. For the month ended November 30, 2021, covenant compliance ~~will be~~was measured at 80% of reforecast November revenues. Covenant compliance for the month ended December 31, 2021 ~~will be~~was measured at 80% of the reforecast November and December revenues. Beginning for the month ended January 31, 2022 and continuing until March 31, 2022, ~~revenue~~revenues covenant compliance ~~will~~was to be measured at 80% of the trailing three months forecasted gross revenues. Beginning the month ended April 30, 2022 and continuing through September 30, 2022, covenant compliance ~~will~~was to be measured at 70% of the trailing three months forecasted gross revenues, except for the months ended April 30, 2022 and May 31, 2022, as those ~~will~~would include an 80% requirement for the months of February 2022 and March 2022. Upon execution of the Eighth Amendment, the Company paid East West Bank a fee of $70,000 for the October ~~revenue~~revenues waiver and the Eight Amendment.

We capitalized certain debt issuance costs incurred in connection with the 2017 Amended Credit Facility and the Utica Facility discussed above and these costs were amortized to interest expense over the ~~term~~terms of the ~~facility~~facilities on a straight-line basis. There was approximately $184,000 of remaining unamortized debt discount for the Utica Facility as of September 30, 2022. There were 0no remaining unamortized debt issuance costs for the 2017 Amended Credit Facility as of~~September 30, 2021~~ ~~and~~ December 31, ~~2020.~~2021. For the three and nine months ended September 30, ~~2020,~~2022, the Company amortized approximately ~~$12,000~~ $20,000 and ~~$82,000,~~$41,000, respectively, of these costs to ~~"Interest expense" in the condensed consolidated statements of operations.~~

On ~~April 10, 2020,~~ the Company entered into a promissory note (the "Note" or "PPP Loan") with East West Bank in the aggregate amount of $1,939,900, pursuant to the Paycheck Protection Program (the "PPP") under Division A, Title I of the CARES Act, which was enacted ~~March 27, 2020,~~ ~~and is administered by the USA Small Business Administration ("SBA").~~

On ~~November 9, 2020,~~ ~~the Company submitted the initial loan forgiveness application to East West Bank for review and approval. On~~ ~~July 8, 2021,~~ the SBA approved our loan forgiveness application in full, which includes forgiveness of the total principal balance of approximately $1.9 million, as well as approximately $24,000 in accrued interest. The total amount forgiven was approximately $2.0 million and was recorded in "Other income (expense)"“Interest expense” in the condensed consolidated statements of operations ~~for~~as it relates to the ~~three~~ ~~and~~ ~~nine~~ ~~months ended~~ ~~September 30,~~ ~~2021.~~Utica Facility.

Aggregate contractual principal maturities of debt for the twelve months ending September 30 are as follows (in thousands):

On November 3, 2022, the Company entered into a note exchange agreement with Cross River pursuant to which Cross River loaned an additional $450,000 to the Company, exchanged the $750,000 Cross River Revolver Note for a $1.2 million convertible secured subordinated promissory note (the “November 2022 Convertible Note”) and received a five-year warrant to acquire 568,720 shares of Company common stock at $2.11 per share. The November 2022 Convertible Note has a two-year term and accrues interest at 10.00% per annum, payable quarterly starting March 30, 2023 at the option of the Company in cash or the Company’s common stock. Subject to any shareholder approval required by any exchange upon which the Company’s common stock is then listed, the principal and accrued interest of the November 2022 Convertible Note is convertible into the Company’s common stock at a conversion price of $2.11 per share. The November 2022 Convertible Note is secured by two Company-owned parcels of real property located in North Dakota. On December 13, 2022, the Company sold one of these two parcels for a combination of cash and a promissory note/mortgage totaling $550,000. As consideration for Cross River releasing its security interest on such parcel, the Company has agreed that it will enter into a collateral assignment of the security on such parcel back to Cross River in the event the buyer defaults on their promissory note/mortgage to the Company.

Income tax expense during interim periods is based on applying an estimated annual effective income tax rate to year-to-date income, plus any significant unusual or infrequently occurring items which are recorded in the interim period. The provision for income taxes for the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 differs from the amount that would be provided by applying the statutory USA federal income tax rate of 21% to pre-tax income primarily because of state income taxes and estimated permanent differences.

The computation of the annual estimated effective tax rate at each interim period requires certain estimates and significant judgment including, but not limited to, the expected operating income for the year, projections of the proportion of income earned and taxed in various jurisdictions, permanent and temporary differences, and the likelihood of recovering deferred tax assets generated in the current year. The accounting estimates used to compute the provision for income taxes may change as new events occur, more experience is obtained, additional information becomes known, or as the tax environment changes.

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment.

~~As discussed in the Explanatory Note above, during~~During the first quarter of 2021, the Company experienced a change in control pursuant to the issuance of 4,199,998 shares of common stock. As a result of this change in control, and in accordance with Internal Revenue Service Code Section 382, the realizability of the Company's deferred tax assets became limited. Based on management's judgment, the Company ~~estimates~~estimated that as of September 30, 2021, ~~30,~~$0.4~~2021,~~ ~~$0.4~~ million of deferred tax liabilities could reverse without an offsetting deferred tax asset. Due to this, the Company ~~has~~ recognized $0.4 million of deferred income tax expense for the nine months ended September 30, 2021. ~~30,~~~~2021.~~For the nine months ended September 30, 2022, ~~30,~~~~2020,~~the Company's income tax ~~provision~~benefit of ~~$15,000~~$0.9 million was adjusted by the valuation allowance which resulted in a net tax provision of ~~zero.~~zero.

As of September 30, 2022,~~2021,~~ the Company leases facilities and certain equipment under lease commitments that expire ~~throu~~throghugh ~~June~~September 2026. F~~uture~~uture minimum lease payments for these operating and finance lease commitments for the twelve months ending September30are as follows (in thousands):

The following table summarizes the components of our gross operating and finance lease costs incurred for the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 (in thousands):

Our weighted-average lease term and discount rate used for the nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 are as follows:

In June 2015, the Company became self-insured under its Employee Group Medical Plan, and ~~currently is~~under that plan was responsible to pay the first $50,000 in medical costs per individual participant for claims incurred in the calendar year, up to a maximum of approximately $1.8 million per year in the aggregate based on enrollment. The Company had anno accrued liability ~~of approximately $95,000and~~ ~~$15~~~~0,000~~ as of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively, for insurance claims that it anticipates paying in the future related to claims that occurred prior to December 31, ~~2020.~~2021. ~~Effective~~The Company's trailing potential liability for unsubmitted claims under the self-insured plan expired on December 31, 2021, and the remaining $92,000 was recorded to Other income on that date. Effective January 1, 2021, the Company moved onto a traditional Employee Group Medical Plan and was no longer self-insured for claims occurring after that date.

Effective April 1, 2015, the ~~Company~~Company had entered into a workers’ compensation and employer’s liability insurance policy with a term through March 31, 2018. Under the terms of the policy, the Company was required to pay premiums in addition to a portion of the cost of any claims made by our employees, up to a maximum of approximately $1.8 million over the term of the policy (an amount that was variable with changes in annualized compensation amounts). ~~As of~~ ~~September~~ ~~30,~~~~2021,~~ a former employee of ours had an open claim relating to injuries sustained while in the course of employment, and the projected maximum cost of the policy, as determined by the insurance carrier, included estimated claim costs that have ~~not~~ ~~yet been paid or incurred in connection with the claim. For the year ended~~ ~~December 31, 2017,~~ ~~our insurance carrier formally denied the workers' compensation claim and has moved to close the claim entirely.~~ Per the terms of our insurance policy, through ~~September 30, 2021,~~March 31, 2022, we had paid in approximately $1.8 million of the projected maximum plan cost of $1.8 million and had recorded approximately $1.6 million as expense over the term of the policy. In the ~~September 2020,~~ fourth quarter of 2021,the final remaining claim was ~~officially denied~~settled resulting in no additional liability to the Company at that time. Concurrent with this settlement, the Company was provided with a range of most likely amounts which would be returned. During the fourth quarter of 2021, the Company reduced the deposit to the lowest amount in the range, or $126,000. The Company collected the remaining unused deposit that was being held by the ~~Kansas Division~~underwriter in the second quarter of ~~Workers Compensation Judicial Unit. As of~~ ~~September 30, 2021,~~ 2022.no ~~appeal has been made and the Company expects to collect the remaining $189,000 on deposit with the underwriter. Effective~~ ~~April 1, 2018,~~ ~~we entered into a new workers’ compensation policy with a fixed premium amount determined annually, and therefore are~~ no ~~longer partially self-insured for workers' compensation and employer's liability.~~

On November 8, 2021, ~~Amanda Mordica,~~a plaintiff who is a Texas resident, filed a complaint in Texas State Court in Atascosa County, against the Company, its wholly owned subsidiary, Heat Waves Hot Oil Service, LLC, and two individual former Company employees alleging negligence by the Company and its subsidiary in connection with a traffic accident sustained by ~~Ms. Mordica~~the plaintiff on November 19, 2019. ~~Ms. Mordica’s~~On August 9, 2022, the Company, its insurance carriers, and the plaintiff entered into a mediated settlement of all claims against all parties in the matter of the auto liability claim. The $9.3 million settlement agreement was executed by all parties in September 2022. The insurance claim ispayment to the plaintiff was covered by the Company’s insurance policies.

On May 22, 2022, Ali Safe, acting individually and on behalf of others, filed a class action complaint in ~~excess~~United States District Court for the District of ~~$1.0 million.~~Colorado alleging that the Company and certain of its officers violated securities laws in relation to certain of its SEC Form 10-Q filings in 2021 which required amendments and restatements to such filings. On November 28,2022, the plaintiff amended their complaint primarily to add Jan Lambert as lead plaintiff and to include Cross River Partners, L.P. and Cross River Capital Management, LLC as defendants.

We believe the claims are without merit and have engaged counsel to vigorously defend the Company against such claims. The Company has ~~tendered this~~Director’s and Officer’s insurance coverage to defend against such claims and the Company's insurance carriers have been notified about the lawsuit. While we believe the claims are without merit, there can be no assurances that a favorable final outcome will be obtained, and defending any lawsuit can be costly and can impose a significant burden on management and employees. Any litigation to ~~its insurer who has preliminarily indicated~~which we are a party may result in an unfavorable judgment that ~~they have accepted coverage. As such, the Company does~~ may not ~~believe~~be reversed upon appeal or in payments of substantial monetary damages or fines, or we may decide to settle such lawsuit on similarly unfavorable terms, either of which could materially adversely affect our business, financial condition, or results of operations. Furthermore, there can be no assurances that ~~this litigation~~our insurance coverage will ~~have a materially adverse impact on the Company.~~be available in sufficient amounts to cover such claim, or at all.

On~~August 13, 2020,~~ the Company's Board of Directors approved a transaction to exchange 50%, or $1.25 million, of our subordinated debt with Cross River, a related party, as well as $265,000 in accrued interest, for 403,602 shares of Company common stock. The total Company common stock fair value consideration was $963,000 and the Company recognized a gain of $552,000 in the condensed consolidated statements of stockholders’ equity.

~~In a separate transaction on~~ February 11, 2021, the Company exchanged ~~the remaining 50%, or $1.25 million,~~$625,000 of ~~our~~its outstanding subordinated debt with Cross River, as well as $62,000 in accrued interest, for 601,674 shares of Company common stock, which was based on the price of Company common stock at market close on the date of the conversion. In addition, the Company awarded a warrant to Cross River to purchase up to 150,418 shares of the Company's common stock at an exercise price of $2.507 per share. The warrants had a grant-date fair value $2.02 per share and are exercisable beginning one-year from the issuance date on February 11, 2022 until February 11, 2026. The issuance of the warrant at its grant date fair value of $2.02 per share caused the Company to record a loss of approximately $304,000 upon the conversion of the subordinated debt on February 3, 2021.

On ~~November 11, 2019,~~ ~~in connection with a subordinated loan agreement, the Company granted Cross River~~ ~~onefive~~-year warrant to buy an aggregate total of 41,667 shares of the Company's common stock at an exercise price of $3.00 per share. The warrants had a grant-date fair value $2.40 and were fully vested upon issuance and remain outstanding and exercisable until ~~November 11, 2024.~~

On ~~September 23, 2020,~~ ~~in connection with the Fifth Amendment, the Company granted East West Bank~~ ~~onefive~~-year warrant to buy an aggregate total of 1,000,000 shares of the Company's common stock at an exercise price of $3.75 per share. The warrants had a grant-date fair value of $1.42, were fully vested upon issuance and remain outstanding and are exercisable beginning ~~one-year from the issuance date on~~ ~~September 23, 2021~~ ~~until~~ ~~September 23, 2025.~~

On February 11, 2021, in connection with the conversion of the subordinated loan agreement to Company common stock, the Company granted Cross River onefive-year warrant to buy an aggregate total of 150,418 shares of the Company's common stock at an exercise price of $2.507 per share. The warrants had a grant-date fair value $2.02 and are exercisable beginning one-year from the issuance date on February 11, 2022 until February 11, 2026.

~~Each grant~~The issuance of warrants ~~granted~~ to Cross River was reviewed and approved by the independent directors of the Company.

On April 12, 2021, the Securities and Exchange Commission ("SEC") issued a Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies ("SPACs") (the "Staff Statement"). The SEC highlighted accounting considerations which could, in certain circumstances, indicate that warrants should be accounted for as liabilities rather than equity instruments, in which case the warrants would be subject to fair value adjustments during each reporting period. Although the Staff Statement focused on SPACs, the same accounting considerations may apply to warrants issued by non-SPAC entities. Upon issuance of the Staff Statement, the Company performed further analysis on its population of warrants, which are listed above, giving consideration to the areas of concern noted in the Staff Statement. Upon this further review of its warrant agreements, the Company determined that it has correctly accounted for its warrants as equity instruments.

A summary of warrant activity for the nine months ended September 30, ~~2021~~2022 is as follows (in thousands):

On July 27, 2010, the Company’s Board of Directors adopted the 2010 Stock Incentive Plan (the "2010 Plan"). The aggregate number of shares of Company common stock that could be granted under the 2010 Plan was reset at the beginning of each year based on 15% of the number of shares of Company common stock then outstanding. As such, on January 1, 2016, the number of shares of Company common stock available under the 2010 Plan was reset to 381,272 shares based upon 2,541,809 shares outstanding on that date. Options were typically granted with an exercise price equal to the estimated fair value of the Company's common stock at the date of grant with a vesting schedule of one to three years and a contractual term of 5 years. As discussed below, the 2010 Plan has been replaced by a new stock option plan and 0no additional stock option grants will be granted under the 2010 Plan. As of September 30, ~~2021,~~2022, there were no options available for issuance under the 2010 Plan.

On July 18, 2016, the Board of Directors unanimously approved the adoption of the Enservco Corporation 2016 Stock Incentive Plan (the "2016 Plan"), which was approved by the stockholders on September 29, 2016. The aggregate number of shares of Company common stock that may be granted under the 2016 Plan is 533,334 shares plus authorized and unissued shares from the 2010 Plan totaling 159,448, for a total reserve of 692,782 shares. As of September 30, 2022, ~~2021,~~there were no outstanding ~~options to purchase 2,934 shares and~~ options. Further, as of September 30, 2022, we had granted ~~restricted stock shares of~~ ~~181,221~~226,221 shares of restricted stock that remained outstanding under the 2016 Plan.

For thethe nine months ended September30,~~2021~~2022 and ~~2020,~~2021,0 no options were granted or exercised.

The following is a summary of stock option activity for all equity plans for the nine months ended September30, ~~2021:~~2022:

~~There was 0 aggregate intrinsic value (the difference between the estimated fair value of the Company’s common stock on~~ ~~September 30, 2021,~~ ~~and the exercise price, multiplied by the number of in-the-money options) of our outstanding options.~~

For the three and nine months ended September30,,2022 and 2021, the ~~Compa~~nyCompany recognized 0no stock-based compensation costs for stock options. ~~For~~ the ~~three~~ ~~months ended~~ ~~September 30~~, ~~2020,~~ ~~the Company recognized~~ no ~~stock-based compensation costs for stock options. For~~ ~~the~~ ~~nine~~ ~~months ended~~ ~~September 30~~, ~~2020,~~ the Company recognized stock-based compensation costs for stock options of approximately $3,000 in "Sales, general, and administrative expenses" in the condensed consolidated statements of operations.

As of September30, ~~2021,~~ 2022,there was 0no remaining unrecognized compensation costs related to non-vested ~~shares~~options under the Company's stock option plans.

Restricted shares issued pursuant to restricted stock awards under the 2016 Stock Plan are restricted as to sale or disposition. These restrictions lapse periodically, generally over a period of three years. Restrictions may also lapse for early retirement and other conditions in accordance with our established policies. Upon termination of employment, shares on which restrictions have not lapsed must be returned to us, resulting in restricted stock forfeitures. The fair market value on the date of the grant of the stock with a service condition is amortized and charged to income on a straight-line basis over the requisite service period for the entire award. The fair market value on the date of the grant of the stock with a performance condition shall be accrued and recognized when it becomes probable that the performance condition will be achieved. Restricted shares that contain a market condition are amortized and charged over the life of the award.

For the three and nine months ended September30 ~~2021,~~ 2022,the Company recognized stock-based compensation costs for restricted stock of approximately ~~$21,000~~$159,000 and ~~$70,000,~~$655,000, respectively, in "Sales, general, and administrative expenses" in the condensed consolidated statements of operations. For the three and nine months ended September30, ~~2020,~~ 2021,the Company recognized stock-based compensation costs for restricted stock of ~~approximately $16,000~~approximately $21,000 and ~~$374,000, respectively,~~$70,000, respectively, in "Sales, general, and administrative expenses" in the condensed consolidated statements of operations. Compensation cost is revised if subsequent information indicates that the actual number of restricted stock vested due to service is likely to differ from previous estimates.

As of September 30, 2022, there is approximately $323,000 of unamortized stock-based compensation expense for restricted stock to be amortized over the next 1.25 years.

The following table sets forth the weighted average outstanding of potentially dilutive instruments for the three and nine months ended September 30, ~~2021~~2022 and ~~2020:~~2021:

The Company awarded ~~Company common stock to members of its Board of Directors with an award date fair value of approximately $311,000 based on~~70,340 restricted shares for the ~~closing price of the Company's stock reported on the NYSE American on the date of the award. As of~~ ~~December 31, 2020,~~ 2022~~the Company accrued~~ Board of Directors fees and recognized expense of approximately ~~$221,000~~$60,000 related to the award of these shares for ~~services rendered from~~ ~~October 2019~~ ~~through~~ ~~December 2020.~~ ~~For~~ the nine months ended September 30, ~~2021,~~ 2022.~~the~~

The Company issued ~~118,184~~50,000 restricted shares ~~to settle the outstanding accrual. For~~for the nine months ended September 30, ~~2021,~~2022 as part of the severance agreement related to the resignation of a former Chief Financial Officer. This issuance had a grant date fair value of approximately $112,000 and the expense for this issuance was recognized within the line item "Severance and transition costs" in the condensed consolidated statement of operations for the nine months ended September 30, 2022. Unvested restricted performance share-based awards totaling 61,000 shares were forfeited as part of the severance agreement.

The Company granted Mark Patterson, the Company's Chief Financial Officer, a 300,000 share restricted stock award for the nine months ended September 30, 2022 that is subject to transfer and forfeiture restrictions. The vesting of 100,000 of the restricted shares from this award occurred simultaneous with the grant date; however, the transfer and forfeiture restrictions on the remaining 200,000 restricted shares will lapse in two equal installments of 100,000 restricted shares on each of January 1, 2023 and January 1, 2024, subject to his continuous service through each vesting date. This restricted stock award is not being granted under the Company’s 2016 Equity Incentive Plan. Additionally for the nine months ended September 30, 2022, the Company ~~awarded 48,129~~granted Mr. Patterson a 45,000 share restricted stock award that is also subject to transfer and forfeiture restrictions. The vesting of 15,000 of the restricted shares ~~for~~ ~~2021~~ ~~Board of Directors fees~~from this award occurred simultaneous with the grant date; however, the transfer and ~~has recognized expense of approximately $68,000 related to the award of these shares. The Company will expense~~forfeiture restrictions on the remaining ~~$22,000 related~~30,000 restricted shares will lapse in two equal installments of 15,000 restricted shares on each of January 1, 2023 and January 1, 2024, subject to his continuous service through each vesting date. This restricted stock award is being granted under the ~~award~~Company’s 2016 Equity Incentive Plan. The vesting of ~~these~~all such shares ~~during~~of restricted stock for Mr. Patterson would accelerate upon any termination or constructive termination of his employment with the Company without cause that occurs within ~~fourth~~one ~~quarter~~year of ~~2021.~~a change of control of the Company.

Enservco’s reportable operating segments are Production Services and Completion and Other Services. These segments have been selected based on management’s resource allocation and performance assessment in making decisions regarding the Company. The following is a description of the segments.

This segment utilizes a fleet of hot oiling trucks and acidizing units to provide maintenance services to the domestic oil and gas industry. These services include hot oiling services and acidizing services. Hot oiling is utilized by customers to remove paraffins from wellbores, pipes and vessels. Acidizing services are utilized by customers to clean reservoir surfaces and increase flow rates.

This segment utilizes a fleet of frac water heating units to provide frac water heating services and related support services to the domestic oil and gas industry. These services also include other services for other industries, which consist primarily of hauling and transport of materials and heat treating for customers. Frac water heating is utilized by customers during the completion of oil and gas wells.

This segment includes general overhead expenses and assets associated with managing all reportable operating segments which have not been allocated to a specific segment.

The following tables set forth certain financial information with respect to Enservco’s reportable segments (in thousands):

The following table reconciles the segment losses reported above to the loss from operations reported in the condensed consolidated statements of operations (in thousands):

The Company only conducts business in the USA, in what it believes are three geographically diverse regions. The following tables set forth ~~revenue~~revenues from operations for the Company’s three geographic regions (in thousands):

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

The following discussion provides information regarding the results of operations for the three and nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, as well as our financial condition, liquidity and capital resources as of September 30, ~~2021~~2022 and December 31, ~~2020.~~2021. The condensed consolidated financial statements and notes thereto contain detailed information that should be referred to in conjunction with this discussion.

The information discussed in this Quarterly Report on Form 10-Q ("Quarterly Report") includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act"). All statements, other than statements of historical facts, included herein concerning, among other things, planned capital expenditures, future cash flows and borrowings, pursuit of potential acquisition opportunities, our financial position, business strategy and other plans and objectives for future operations, are forward-looking statements. These forward-looking statements are identified by their use of terms and phrases such as "may," "expect," "estimate," "project," "plan," "believe," "intend," "achievable," "anticipate," "will," "continue," "potential," "should," "could," and similar terms and phrases. Although we believe that the expectations reflected in these forward-looking statements are reasonable, they do involve certain assumptions, risks and uncertainties. Our results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, among others:

Finally, our future results will depend upon various other risks and uncertainties, including, but not limited to, those detailed in our filings with the SEC. For additional information regarding risks and uncertainties, please read our filings with the SEC under the Exchange Act and the Securities Act, including our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020.~~2021. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements in this paragraph and elsewhere in this Quarterly Report. Other than as required under securities laws, we do not assume a duty to update these forward-looking statements, whether as a result of new information, subsequent events or circumstances, changes in expectations or otherwise.

On September 22, 2022, the Company entered into a revolving credit facility with Cross River pursuant to which the Company issued a $750,000 revolving promissory note to Cross River (the “Cross River Revolver Note”). The Cross River Revolver Note is structured as a revolving credit facility to the Company with advances to be made on an ad hoc basis by Cross River to the Company. The Cross River Revolver Note has a one-year term and accrues interest at 8.00% per annum. Prior to the September 22, 2023 maturity date, the Company is required to make principal payments to Cross River upon demand with thirty (30) days’ notice. The Cross River Revolver Note is not convertible into the Company’s equity and is secured by certain of the Company’s owned real property located in North Dakota. As of September 30, 2022, $225,000 was outstanding under this Cross River Revolver Note.

On November ~~9, 2020,~~3, 2022, the Company ~~submitted~~entered into a note exchange agreement with Cross River pursuant to which Cross River loaned an additional $450,000 to the ~~initial Paycheck Protection Loan forgiveness application~~Company, exchanged the $750,000 Cross River Revolver Note for a $1.2 million convertible secured subordinated promissory note (the “November 2022 Convertible Note”) and received a five-year warrant to ~~East West Bank for review~~acquire 568,720 shares of Company common stock at $2.11 per share. The November 2022 Convertible Note has a two-year term and ~~approval. On July 8, 2021,~~accrues interest at 10.00% per annum, payable quarterly starting March 30, 2023 at the ~~SBA approved our loan forgiveness application in full, which includes forgiveness~~option of the ~~total~~Company in cash or the Company’s common stock. Subject to any shareholder approval required by any exchange upon which the Company’s common stock is then listed, the principal ~~balance~~and accrued interest of ~~$1.9 million, as well as approximately $24,000~~the November 2022 Convertible Note is convertible into the Company’s common stock at a conversion price of $2.11 per share. The November 2022 Convertible Note is secured by two Company-owned parcels of real property located in ~~accrued interest.~~North Dakota. On December 13, 2022, the Company sold one of these two parcels for a combination of cash and a promissory note/mortgage totaling $550,000. As consideration for Cross River releasing its security interest on such parcel, the Company has agreed that it will enter into a collateral assignment of the security on such parcel back to Cross River in the event the buyer defaults on their promissory note/mortgage to the Company.

~~On November 12, 2021, w~~e entered into the Eighth Amendment to Loan and Security Agreement with East West Bank which, among other things, provides for a waiver of default of the revenue covenant based upon our October trailing three-month period gross revenue and a reforecasting of our November and December revenues from what was previously provided to East West Bank. Per the Eighth Amendment, the revenue covenant utilizing October’s revenues is waived and will not be used in any future three-month period gross revenue covenant calculation. For the month ended November 30, 2021, covenant compliance will be measured at 80% of reforecast November revenues. Covenant compliance for the month ended December 31, 2021 will be measured at 80% of the reforecast November and December revenues. Beginning for the month ended January 31, 2022 and continuing until March 31, 2022, revenue covenant compliance will be measured at 80% of the trailing three months forecasted gross revenues. Beginning the month ended April 30, 2022 and continuing through September 30, 2022, covenant compliance will be measured at 70% of the trailing three months forecasted gross revenues, except for the months ended April 30, 2022 and May 31, 2022, as those will include an 80% requirement for the months of February 2022 and March 2022. Upon execution of the Eighth Amendment, the Company paid East West Bank a fee of $70,000 for the October revenue waiver and the Eight Amendment.

On November 8, 2021, Amanda Mordica, a Texas resident, filed a complaint in Texas State Court in Atascosa County, against the Company, its wholly owned subsidiary, Heat Waves Hot Oil Service, LLC, and two individual former Company employees alleging negligence by the Company and its subsidiary in connection with a traffic accident sustained by Ms. Mordica on November 19, 2019. Ms. Mordica’s claim is in excess of $1.0$5.2 million. The Company has ~~tendered this litigation~~until January 9, 2023, to ~~its insurer who~~submit a plan (the “Plan”) advising of actions it has ~~preliminarily indicated that they have accepted coverage. As such,~~taken or will take to regain compliance with the continued listing standards by June 9, 2024. If NYSE accepts the Plan, the Company ~~does not believe that this litigation~~ will have ~~a materially adverse impact~~an eighteen (18) month cure period to comply with the Plan and will be subject to periodic reviews including quarterly monitoring for compliance with the Plan. The NYSE notice has no immediate effect on the ~~Company.~~listing or trading of the Company’s common stock on the NYSE American. The Company intends to consider available options to regain compliance with the stockholders’ equity requirement, but no decisions have been made at this time. There can be no assurance that the Company will ultimately regain compliance with all applicable NYSE American listing standards.

On ~~September 9, 2021, President Biden announced~~December 13, 2022, the Company closed upon a ~~new COVID-19 Action Plan entitled~~sale agreement for its physical property located in Tioga, North Dakota. The sales price was $550,000, with $250,000 of proceeds (net of fees and commissions) being delivered upon closing by the ~~“Path out~~purchaser along with a forty-eight-month finance agreement for the balance of $300,000, payable in equal monthly principal installments together with interest on the outstanding balance calculated at the rate of 7.00% per annum. A security interest in the real estate secures the Cross River Revolver Note. In order to facilitate the transaction, Cross River released its previously recorded security interest in this real property to the benefit of the ~~Pandemic” (the “Plan”).~~Company. The ~~Plan mandates COVID-19 vaccinations or at least weekly COVID-19 testing~~Cross River security interest had been previously granted by the Company as an inducement for all United States employers with 100 or more employees. The United States Department of Labor’s Occupational Safety and Health Administration ("OSHA") issued on November 5, 2021 an emergency temporary standard entitled “COVID-19 Vaccination and Testing; Emergency Temporary Standard” to makeCross River establishing the ~~testing requirements of the Plan effective beginning January 4,~~$750,000 Cross River Revolver Note in September 2022, until a permanent rule is later issued. Legal challenges to this standard are currently underway with additional challenges expected, which leads to uncertainty about the potential timing of when or if this standard might actually take effect. The standard also contains exemptions for “remote workers” who work 100% alone and employees who work exclusively outdoors as long as their use of indoor spaces is de minimis. Our current headcount is below the 100 employee threshold but it will likely exceed 100 employees during the heating season. We believe OSHA’s exemptions may apply to some of our employees, but as with any complex new standard, it is impossible to be certain how OSHA will apply it until they issue further guidance or begin enforcement. As a result, this mandate could increase the challenges of maintaining and growing our number of employees across all functions. This mandate, if imposed and if we are unable to obtain appropriate exemptions, could lead to employee turnover and could materially and adversely affect our growth and profitability.discussed above.

Recent Market Conditions

The recovery of the economy from the impact of COVID-19, coupled with global demand for energy products due to international conflicts, has had a positive impact on oil prices and hence our business for the ~~three~~nine months ended September 30, ~~2021.~~2022. For the nine months ended September 30, ~~2021,~~2022, WTI crude oil price averaged approximately ~~$65~~ $98 per b~~arrel,~~barrel, versus an average of ~~approximately $38 pe~~rapproximately $60 per barrel in the comparable period last year, which resulted in an increase in rig count ~~in our markets.~~within the markets we serve. However, we continue to feel the impact of the pandemic, domestic political actions and ~~certain actions Russia~~international activities (including the war in Ukraine) which have continued to impact domestic oil and certain oil producing countries with the Organization of Petroleum Exporting Countries and their allies ("OPEC+") undertook in early 2020 with respect to increasing their market share by increasing supply which had a significant adverse impact on domestic drilling and operating activity within our markets.gas industries. While there has been a slow rebound in active ~~North American~~USA domestic rig count beginning in the fourth quarter of 2020, rig count as of September 30, ~~2021~~2022 still ~~remains over 30% bel~~owremains below pre-pandemic active rigs. ~~While the COVID-19 pandemic and OPEC+ concerns have continued to impact the Company’s business when compared to pre-COVID-19 and OPEC+ activity,~~During this same period, the Company has experienced increased demand and micro and macro-economic conditions have continued to improve, allowing the Company to expect further improvement compared to the prior year.

The Company's expectations for improved activity are somewhat offset by the change in political environment and its uncertain impact on oil exploration and ~~production.~~production, as well as increased inflation and rising interest costs. Reductions or limitations in leasing federal property for oil exploration in addition to other measures impacting oil and gas supply and demand have had an impact on the oil exploration and production industry. Finally, to the extent that state and local governments increase regulations, there can be a negative impact to the oil exploration and production industry.

The full extent of the impact of the COVID-19 pandemic, OPEC+ actions, USA governmental actions and oil price changes on our operations and financial performance depends on future developments that are uncertain and unpredictable, including any potential resurgence restrictions related to the pandemic, its impact on capital and financial markets, any new information that may emerge concerning the severity of other strains of the virus, its spread to other regions as well as the actions taken to contain it, production response of domestic oil producers to lower oil prices, and the adherence to any actions by OPEC+.

2821

Table of Contents

OVERVIEW

Enservco Corporation ("Enservco") through its wholly owned subsidiaries (collectively referred to as the "Company", "we" or "us") provides various services to the domestic onshore oil and natural gas industry. These services include hot oiling and acidizing ("Production Services") and frac water heating ("Completion and Other Services").

We and our wholly owned subsidiaries provide well enhancement and fluid management services to the domestic onshore oil and natural gas industry. These services include hot oiling and acidizing and frac water heating. We own and operate a fleet of ~~approximate~~spe~~ly 327 specialized~~cialized trucks, trailers, frac tanks and other well-site related equipment and serve customers in several major domestic oil and gas areas, including the DJ Basin/Niobrara area in Colorado and Wyoming, the Bakken area in North Dakota, the San Juan Basin in northwestern New Mexico, the Marcellus and Utica Shale areas in Pennsylvania and Ohio, the Jonah area, Green River and Powder River Basins in Wyoming, and the Eagle Ford Shale and East Texas Oilfield in Texas.

The Company’s corporate offices are located at 14133 County Road 9 1/2, Longmont, CO 80504. Our telephone number is (303) 333-3678. Our website is ~~www.enservco.com.~~www.enservco.com.

RESULTS OF OPERATIONS

Executive Summary

Our business is highly seasonal, with most of our revenues being generated in the colder seasons of each year (winter and spring). Accordingly, the second and third quarters of each year are traditionally the slow season for our services, as water heating activities are mostly unnecessary for our customers during the warmer months of each year.

Revenues for the three months ended September 30, ~~2021~~2022 increased by approximately ~~$1.3 million,~~$82,000, or ~~72%~~3%, as ~~compared~~compared to the same period in ~~2020 as the economy continued to emerge from the impacts related to the COVID-19 pandemic that began in March 2020 and the Company's expansion into East Texas in late second quarter~~ 2021. ~~Average North American rig count increased by 95% from 254 rigs in operation during the third quarter of 2020 to 496 average rigs in operation during the third quarter of 2021.~~

Revenues for the nine months ended September 30, ~~2021 decreased~~2022 increased by approximately ~~$2.0~~$3.9 million, or ~~15%~~35%, as compared to the same ~~nine-month~~ period in ~~2020~~2021, due ~~primarily~~ to ~~the broader impact of the COVID-19 pandemic~~significant increases in completions activity in Colorado and ~~the inclusion of normal activity during the first quarter of 2020 that occurred prior to the pandemic and OPEC+ events.~~production services in Texas. Average ~~North American~~USA domestic rig count ~~declined~~increased by 7%58% from ~~477~~448 average rigs in operation during the first three quarters of ~~2020~~2021 to ~~445 average~~702 average rigs in operation during the first three quarters of ~~2021.~~2022.

~~Segme~~ntSegment loss for the three months ended September 30, ~~2021~~2022 decreased by approximately ~~$58,000,~~$271,000, or ~~8%, as~~ ~~compared to the same period in 2020 due primarily to the slow recovery from the COVID-19 pandemic noted above. Sales, general & administrative expenses for the~~ ~~three months ended September 30,~~ ~~2021 decreased by approximately $142,000, or 14%~~42%, as compared to the same period in 2020 due primarily to a decrease in our outside professional fees that were incurred as a result of the debt restructuring and ATM offering in the third quarter of 2020, as well as a decrease in bad debt expense from the reduction of the allowance2021. Segment profit for ~~doubtful accounts.~~

~~Segment loss for~~ the nine months ended September 30, 20212022 increased by approximately ~~$248,000,~~$1.7 million, or ~~25%~~136%, as compared to the segment loss incurred for the same ~~nine-month~~ period in ~~2020~~2021. These increases to segment profit were primarily due ~~primarily~~ to the ~~decrease in~~factors noted above for revenues ~~resulting from the COVID-19 pandemic noted above. Sales, general & administrative expenses~~ for ~~the~~ ~~nine months ended September 30, 2021 decreased by approximately $1.2 million, or 28%, as compared to the same nine-month period in 2020 due primarily to a decrease in~~their respective periods, combined with stricter control over variable costs during our professional services, bad debt expense, personnel costs, and stock-based compensation from the severance awarded to the former CEO in the second quarter of 2020, partially offset by an increase in our public company expenses as a result of exchange fees related to our share issuances.historically slower third quarter.

~~Other income~~Sales, general, and administrative expenses for the three months ended September 30, 2022 increased by approximately $187,000, or 21%, as compared to the same period in 2021. Sales, general, and administrative expenses for the nine months ended September 30, 2022 increased by approximately $866,000, or 30%, as compared to the same period in 2021. These increases were primarily due to increases in professional fees associated with the Company's restatement of its Form 10-Qs for all three quarters of 2021 as well as additional work relating to the 2021 year end audit and Form 10-K, coupled with a significant period-over-period increase in stock-based compensation expense resulting from the severance agreement with the Company's former President and Chief Financial Officer and equity awards issued to our current Chief Financial Officer.

Other expense for the three months ended September 30, 2022 was approximately ~~$2.7 million,~~$438,000 compared to ~~other~~Other income of approximately ~~$11.5~~$2.7 million for the same period in ~~2020.~~2021. This decrease ~~of $8.8 million, or 77%,~~ was primarily due to the ~~$11.9 million gain on~~non-recurrence of Employee Retention Credits recognized by the ~~restructuring of the Credit Facility in~~Company during the third quarter of ~~2020, partially offset by the~~2021, as well as a $2.0 million gain on forgiveness of PPP loan for the ~~PPP Loan and $612,000 in Employee Retention Credits during the third quarter of~~three months ended September 30, 2021. Other income for the nine months ended September 30, ~~2021~~2022 was approximately ~~$3.6~~$3.3 million compared to ~~other~~Other income of approximately ~~$10.4~~$3.6 million for the same period in ~~2020.~~2021. This decrease ~~of $6.8 million, or 65%,~~ was primarily due ~~primarily~~ to the ~~$11.9 million gain on~~non-recurrence of Employee Retention Credits recognized by the ~~restructuring of the Credit Facility reduced by $1.7 million in interest expense~~Company during the ~~nine months ended September 30, 2020, partially offset by the~~first three quarters of 2021, as well as a $2.0 million gain on forgiveness of ~~the~~ PPP ~~Loan and $1.8 million in Employee Retention Credits during the same period in 2021.~~

~~Net income for the three months ended September 30, 2021 was approximately $369,000, or $0.03 per share, compared to net income of approximately $8.4 million, or $2.15 per share, for the same period in 2020. Net loss~~loan for the nine months ended September 30, 2021, partially offset by the gain on debt extinguishment related to the Refinancing as discussed in Note 5 - Debt to the condensed consolidated financial statements.

Net loss for the three months ended September 30, 2022 was ~~approximately $5.0~~approximately $3.1 million,, or ~~$0.46~~a loss of $0.27 per basic and diluted share, compared to net income of approximately ~~$1.2 million,~~$369,000, or ~~$0.32~~$0.03 per basic and diluted share, for the same ~~nine-month~~ period in ~~2020~~2021. This increase to net loss was primarily due to the ~~factors noted above.~~reasons mentioned above for Other income, a period-over-period increase of $442,000 of interest expense resulting from the Refinancing as discussed in Note 5 - Debt to the condensed consolidated financial statements, and the non-recurrence of a deferred income tax benefit recognized during the prior period.

Net loss for the nine months ended September 30, 2022 was approximately $3.9 million, or a loss of $0.34 per basic and diluted share, compared to a net loss of approximately $5.0 million, or a loss of $0.46 per basic and diluted share, for the same period in 2021. This decrease to net loss was primarily due to a $1.0 million improvement to our loss from operations and a $4.3 million gain on debt extinguishment recognized during the first quarter of 2022, partially offset by a $1.0 million period-over-period increase to interest expense resulting from the Refinancing as discussed in Note 5 - Debt to the condensed consolidated financial statements, as well as the reasons mentioned above for Other income.

Adjusted EBITDA for the three months ended September 30, ~~2021~~2022 was a loss of approximately ~~$1.5~~$1.3 million, compared to a loss of approximately ~~$1.7~~$1.5 million for the same period in ~~2020.~~2021. Adjusted EBITDA for the nine months ended September 30, ~~2021~~2022 was a loss of approximately $2.7 million compared to a loss of approximately $4.1 million ~~compared to a loss of approximately $4.3 million~~ for the same ~~nine-month~~ period in ~~2020.~~2021. The approximately $1.4 million period-over-period improvement in Adjusted EBITDA for the nine month period was primarily due to a $1.7 million improvement to our segment profit, partially offset by an $281,000 increase to our sales, general, and administrative expenses (net of stock-based compensation expense). See the section below titled "Adjusted EBITDA*" within this Item 2 for our definition of Adjusted EBITDA.

Industry Overview

For the nine months ended September 30, ~~2021,~~2022, WTI crude oil price averaged ~~approximately $65~~approximately $98 per ~~barrel,~~barrel, versus an average of approximately ~~$38~~$60 per barrel in the comparable period last year. The ~~North American~~USA domestic rig ~~count increased~~count increased to ~~521~~763 rigs in ~~operation~~operation as of September 30, ~~2021,~~2022, compared to ~~261~~521 rigs at the same time a year ago. ~~Despite~~Given the ~~lower~~increased activity levels and ~~reduced~~a significant jump in rig count in the first ~~quarter~~three quarters of 2022 compared to 2021, we have ~~grown~~been able to continue to grow our customer base and ~~allocated~~allocate resources to the most active basins. We are focused on increasing utilization levels and optimizing the deployment of our equipment and workforce while maintaining high standards for service quality and safe operations. We compete on the basis of the quality and breadth of our service offerings, as well as price.

~~Beginning in early March~~ As much of ~~2020, the market experienced a precipitous decline in oil prices in response to oil demand concerns due to the economic impacts~~our completion services segment of our business is seasonal, some of the ~~COVID-19 virus~~aforementioned utilization and ~~anticipated increases in supply from Russia and OPEC+, particularly Saudi Arabia. Additionally,~~allocation activities are limited during the recent change in political environment has an uncertain impact on oil exploration and production. While there has been a slow rebound in active North American rig count beginning in the fourth quarterwarmer months of ~~2020, rig count remains over 30% below pre-pandemic active rigs. We anticipate that our~~ ~~completion services activity and, to some degree, our gross margins will be impacted by regional changes in drilling and completion activity of our customers~~. each year.

2922

Table of Contents

Segment Overview

Segment Results

Production Services

Completion and Other Services

Unallocated

This segment includes general overhead expenses and assets associated with managing all reportable operating segments which have not been allocated to a specific segment.

The following tables set forth ~~revenue~~revenues from operations and segment profits (losses) for our business segments for the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 (in thousands):

	For the Three Months Ended				For the Nine Months Ended				For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,				September 30,				September 30,
	2021		2020		2021		2020		2022		2021		2022		2021
REVENUES:
Production services	$	2,483	$	1,363	$	6,556	$	5,948	$	2,788	$	2,483	$	8,645	$	6,556
Completion and other services		544		401		4,701		7,343		321		544		6,497		4,701
Total revenues	$	3,027	$	1,764	$	11,257	$	13,291	$	3,109	$	3,027	$	15,142	$	11,257

3023

Table of Contents

	For the Three Months Ended						For the Nine Months Ended						For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,						September 30,						September 30,
	2021			2020			2021			2020			2022			2021			2022			2021
SEGMENT PROFIT (LOSS):
Production services	$	(6	)	$	16		$	(246	)	$	(707	)	$	189		$	(6	)	$	669		$	(246	)
Completion and other services		(645	)		(725	)		(979	)		(270	)		(569	)		(645	)		(227	)		(979	)
Total segment loss	$	(651	)	$	(709	)	$	(1,225	)	$	(977	)
Total segment (loss) profit													$	(380	)	$	(651	)	$	442		$	(1,225	)

Production Services

Production Services revenues, which ~~accounted~~accounted for ~~82%~~90% of total ~~revenue~~revenues for the three months ended September 30 ~~2021,~~, 2022, increased by approximately ~~$1.1 million,~~$305,000, or ~~82%~~12%, to ~~$2.5~~$2.8 million ~~compared~~compared to ~~$1.4~~$2.5 million for the same period in ~~2020 due to increased hot oiling activity, especially in our Central USA Region. This segment's~~2021. Production Services revenues, which accounted for ~~58%~~57% of total ~~revenue~~revenues for the nine months ended September 30, ~~2021,~~2022, increased by approximately ~~$608,000,~~$2.1 million, or ~~10%~~32%, to ~~$6.6~~$8.6 million compared to ~~$5.9~~$6.6 million for the same ~~nine-month~~ period in ~~2020 also~~2021. These increases were primarily due ~~primarily~~ to ~~the increase~~significant increases in hot oiling activity in our Central USA Region, partially offset by slight decreases in hot oiling activity in our Rocky Mountain Region.

Hot oiling revenues for the three months ended September 30, 2022 increased by approximately $295,000, or 13%, as compared to the same period in 2021, from approximately $2.3 million to approximately $2.6 million. Hot oiling revenues for the nine months ended September 30, 2022 increased by approximately ~~$981,000,~~$1.8 million, or ~~76%~~29%, as compared to the same period in ~~2020,~~2021, from approximately ~~$1.3~~$6.2 million to approximately ~~$2.3 million,~~$8.0 million. These increases were primarily due ~~primarily~~ to increased domestic oil and gas activity ~~and~~combined with elevated price levels ~~during the third quarter of 2021.~~thus far in 2022. As a result of the higher crude oil prices during the ~~third quarter~~first nine months of ~~2021,~~2022, we have worked with our customers and have been successful in implementing price increases for our hot oiling ~~services. Hot oiling revenues for the nine months ended September 30, 2021 increased approximately $633,000, or 11%, as compared to the same nine-month period~~services that are reflected in 2020, from approximately $5.6 million to approximately $6.2 million, due to the same reasons as mentioned for the three months ended, partially offset by lower activity and price levels during the first quarter of 2021.our near term operating results.

Acidizing revenues for the three months ended September 30, ~~2021~~2022 increased by approximately ~~$139,000,~~$10,000, or ~~199%~~5%, to approximately ~~$209,000~~$219,000 from approximately $70,000, due to increased activity levels and continued efforts to pursue customers and partner with chemical suppliers to develop new cost-effective acid programs in seeking to expand our acidizing services across our service areas.$209,000. Acidizing revenues for the nine months ended September 30, ~~2021 decreased~~2022 increased by approximately ~~$25,000,~~$274,000, or 7%79%, to approximately ~~$345,000~~$620,000 from approximately ~~$371,000. This year-over-year decline is attributable~~$345,000. These increases were due to increased activity levels and demand for this service line as well as our continued efforts to pursue new customers and partner with chemical suppliers to develop the ~~significant decrease in acidizing revenues from the first quarter of 2021, partially offset by the period-over-period increases we realized in the second and third quarters of this year.~~most cost-effective acid programs available.

~~Segment~~Segment profit for ~~Production~~Production Services for the three months ended September 30, ~~2021 decreased~~2022 increased by ~~$22,000, or 138%,~~$195,000, to a ~~loss~~profit of ~~$6,000,~~$189,000, as compared to a segment ~~profit~~loss of ~~$16,000~~$6,000 for the same period in ~~2020.~~2021. Segment ~~loss~~profit for Production Services for the nine months ended September 30, ~~2021 decreased~~2022 increased by ~~$461,000,~~$915,000, or ~~65%~~372%, to a profit of $669,000, as compared to a segment loss of $246,000 ~~as compared to segment loss of $707,000~~ for the same ~~nine-month~~ period in ~~2020, which was due~~ 2021. These increases were primarily to the result of cost saving measures that were implemented to offset the adverse industry conditions ~~discussed above and increased~~that existed throughout 2021, coupled with the uptick in industry activity in ~~the second~~2022 and ~~third quarters of 2021.~~ price levels discussed above.

Completion and Other Services

Completion and Other Services revenues, which ~~accounted~~accounted for ~~18%~~10% of total ~~revenue~~revenues for the three months ~~ended~~ended September 30, ~~2021, increased~~2022, decreased by approximately ~~$143,000,~~$223,000, or ~~36%~~41%, to ~~$544,000~~$321,000 compared to ~~$401,000~~$544,000 for the same period in ~~2020.~~2021. This decrease was primarily due to changes in the product mix of our "other services" offerings, whereby period-over-period we experienced a significant decrease in construction and roustabout services, which was partially offset by an uptick in water hauling services. Completion activity revenues period-over-period were comparable. This segment's revenues, which ~~accounted~~accounted for ~~42%~~43% of total ~~revenue~~revenues for ~~the~~the nine months ended September 30, ~~2021, decreased~~2022, increased by approximately ~~$2.6~~$1.8 million, or ~~36%~~38%, to ~~$4.7~~$6.5 million ~~compared~~compared to ~~$7.3~~$4.7 million for the same ~~nine-month~~ period in ~~2020.~~ 2021. This ~~year-over-year decline is attributable~~increase was primarily due to ~~the significant decrease in segment revenues from~~strong completion activity volume realized during the first quarter of ~~2021,~~2022 resulting from the continued increase in domestic oil and gas activity, especially in our Rocky Mountain Region, partially offset by ~~the period-over-period increases we realized~~warmer than usual weather early in the second ~~and third quarters~~quarter of ~~this year.~~2022 coupled with the aforementioned net decline in "other services" revenues.

~~Segment~~Segment loss ~~for~~for Completion and Other Services for the three months ended September 30, ~~2021~~2022 was ~~approximately $645,000~~ approximately $569,000, as compared to a segment loss of approximately ~~$725,000~~$645,000 for the same period in ~~2020.~~ 2021. This quarter-over-quarter decrease in segment loss was ~~due~~primarily related to ~~an increase in domestic oil and gas activity in the~~stricter control over variable costs during our historically slower third ~~quarter of 2021. Segment~~quarter. Segment loss for Completion and Other Services for the nine months ended September 30, ~~2021~~2022 was ~~approximately $979,000 compared~~approximately $227,000, as compared to a segment loss of approximately ~~$270,000~~$979,000 for the same period in ~~2020. The resulting~~2021. This year-over-year decrease in segment ~~profit is~~loss was primarily related to the reasons discussed above for nine month segment ~~revenues.~~revenues, coupled with stricter control over variable costs during our historically slower third quarter.

3124

Table of Contents

Geographic Areas

The Company only conducts business in the USA, in what it believes are three geographically diverse regions. The following table sets forth ~~revenue~~revenues from operations for the Company’s three geographic regions (in thousands):

	For the Three Months Ended				For the Nine Months Ended				For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,				September 30,				September 30,
	2021		2020		2021		2020		2022		2021		2022		2021
BY GEOGRAPHY

Production Services:
Rocky Mountain Region⁽¹⁾	$	676	$	539	$	1,708	$	2,080	$	325	$	676	$	1,494	$	1,708
Central USA Region⁽²⁾		1,651		746		4,304		3,562		2,249		1,651		6,587		4,304
Eastern USA Region⁽³⁾		156		78		544		306		214		156		564		544
Total Production Services		2,483		1,363		6,556		5,948		2,788		2,483		8,645		6,556

Completion and Other Services:
Rocky Mountain Reg ion⁽¹⁾		435		375		3,142		6,092		52		435		4,932		3,142
Central USA Region⁽²⁾		38		-		38		108		233		38		481		38
Eastern USA Region⁽³⁾		71		26		1,521		1,143		36		71		1,084		1,521
Total Completion and Other Services		544		401		4,701		7,343		321		544		6,497		4,701

Total Revenues	$	3,027	$	1,764	$	11,257	$	13,291	$	3,109	$	3,027	$	15,142	$	11,257

Notes to tables:

(1)

Includes the DJ Basin/Niobrara field (northeastern Colorado and southeastern Wyoming), the San Juan Basin (southeastern Colorado and northeastern New Mexico), the Powder River and Green River Basins (northeastern and southwestern Wyoming), the Bakken area (western North Dakota and eastern Montana).

(2)

Includes the Eagle Ford Shale in Southern Texas and the East Texas Oil Field beginning during the second quarter of 2021.

(3)

Consists of the southern region of the Marcellus Shale formation (southwestern Pennsylvania and northern West Virginia) and the Utica Shale formation (eastern Ohio).

Production Services segment ~~revenue~~revenues in the Rocky Mountain Region for the three months ended September 30, ~~2021 increased~~2022 decreased by approximately ~~$137,000,~~$351,000, or ~~25%~~52%, as compared to the same period in ~~2020, primarily due to an increase in acidizing and hot oiling activity the DJ Basin. Production~~2021. Production Services segment ~~revenue~~revenues in the Rocky Mountain Region for the nine months ended September 30, ~~2021~~2022 decreased by approximately ~~$372,000,~~$214,000, or ~~18%~~13%, as ~~compared~~compared to the same ~~nine-month~~ period in ~~2020,~~2021. These decreases were primarily due to ~~less acidizing and~~decreases in hot oiling activity in both the DJPowder River and Green River Basins as well as the Bakken ~~Basins during the first quarter of 2021.~~area.

Production Services segment ~~revenue~~revenues in the Central USA Region for the three months ended September 30, ~~2021~~2022 increased by approximately ~~$905,000,~~$598,000, or ~~121%~~36%, as compared to the same period in 2021. Production Services segment revenues in the Central USA Region for the nine months ended September 30, 2022 increased by approximately $2.3 million, or 53%, as compared to the same period in ~~2020,~~2021. This quarter-over-quarter increase was primarily due to increases in hot oiling activity, which were largely the result of increases in oil prices, and acidizing services in the Eagle Ford Shale, while the year-over-year increase included the addition of and continued improvement of results in the East Texas Oilfield.

Production Services segment revenues in the Eastern USA Region for the three months ended September 30, 2022 increased by approximately $58,000, or 37%, as compared to the same period in 2021. Production Services segment revenues in the Eastern USA Region for the nine months ended September 30, 2022 increased by approximately $20,000, or 4%, as compared to the same period in 2021. These increases were due to increases in hot oiling activity in the ~~Eagle Ford~~Marcellus and Utica Shale formations.

Completion and ~~the introduction of the East Texas Oilfield~~Other Services segment revenues in the ~~second~~Rocky Mountain Region for the three months ended September 30, 2022 decreased by approximately $383,000, or 88%, as compared to the same period in 2021 primarily due to decreases in completion activity in both the DJ Basin and Bakken area as a result of unseasonably warmer weather late in the third quarter of ~~2021. Production~~2022, coupled with changes in the product mix of our "other services" offerings, whereby period-over-period we experienced a significant decrease in construction and roustabout services, which was partially offset by an uptick in water hauling services. Completion and Other Services segment ~~revenue~~revenues in the Rocky Mountain Region for the nine months ended September 30, 2022 increased by approximately $1.8 million, or 57%, as compared to the same period in 2021 primarily due to increases in completions activity, which were largely the result of increases in oil prices, during the first quarter of 2022 in the same areas mentioned above.

Completion and Other Services segment revenues in the Central USA Region for the three months ended September 30, 2022 increased by approximately $195,000, or 513%, as compared to the same period in 2021. Completion and Other Services segment revenues in the Central USA Region for the nine months ended September 30, ~~2021~~2022 increased by approximately ~~$743,000, or 21%,~~$443,000, as compared to the same ~~nine-month~~ period in ~~2020,~~2021. These increases were due to ~~increased hot oiling activity~~significant increases in water hauling activities in the ~~Eagle Ford Shale~~region during the first three quarters of 2022 compared to the same period in ~~the second and third quarter of 2021 and the expansion into East Texas in the second quarter of~~ 2021.

~~Production~~Completion and Other Services segment ~~revenue~~revenues in the Eastern USA Region for the three months ended September 30, ~~2021 increased~~2022 decreased by approximately ~~$78,000,~~$35,000, or ~~100%~~49%, as ~~compared~~compared to the same period in ~~2020. Production~~2021. Completion and Other Services segment ~~revenue~~revenues in the Eastern USA Region for the nine months ended September 30, ~~2021 increased~~2022 decreased by approximately ~~$237,000,~~$437,000, or ~~77%~~29%, as ~~compared~~compared to the same ~~nine-month~~ period in ~~2020.~~2021. These ~~increases resulted primarily from increased hot oiling activity~~decreases were due to decreases in completion activities in the Marcellus ~~and Utica Basins.~~

~~Completion and Other Services segment revenue in~~Shale formation during the ~~Rocky Mountain Region for the~~first three ~~months ended September 30, 2021 increased approximately $60,000, or 16%, as~~quarters of 2022 compared to the same period in 2020, primarily due to an increase in hauling activity in the region. Completion and Other Services segment revenue in the Rocky Mountain Region for the nine months ended September 30, 2021 decreased approximately $3.0 million, or 48%, as compared to the same nine-month period in 2020 primarily due to less completion activity in the DJ and Bakken Basins in the first quarter of 2021.

Completion and Other Services segment revenue in the Central USA Region for the three months ended September 30, 2021 increased approximately $38,000, or 100%, as compared to the same period in 2020, due to hauling activity in the region. Completion and Other Services segment revenue in the Central USA Region for the nine months ended September 30, 2021 decreased approximately $70,000, or 65%, as compared to the same nine-month period in 2020, primarily due to the closure of our facility in the Anadarko Basin.

Completion and Other Services segment revenue in the Eastern USA Region for the three months ended September 30, 2021 increased approximately $45,000, or 173%, as compared to the same period in 2020. Completion and Other Services segment revenue in the Eastern USA Region for the nine months ended September 30, 2021 increased approximately $378,000, or 33%, as compared to the same nine-month period in 2020. These increases resulted from increased frac water heating activity in the Marcellus and Utica Basins.

3225

Table of Contents

Historical Seasonality of Revenues

Because of the seasonality of our frac water heating business and, to a lesser extent, our hot oiling business, revenues generated during the cooler first and fourth quarters of our fiscal year, which constitute our "heating season," and are typically significantly higher than revenues during the second and third quarters of our fiscal year. In addition, the ~~revenue~~revenues mix of our service offerings changes outside our heating season as our Completion and Other Services (which includes frac water heating) typically decrease as a percentage of total revenues and our Production Services increase as a percentage of total ~~revenue.~~revenues. Thus, the revenues recognized in our quarterly financial statements in any given period are not indicative of the annual or quarterly revenues through the remainder of that fiscal year.

As an illustration of this quarter-to-quarter revenue seasonality, the Company generated ~~approximately 75%~~60% of its 2021 revenues (75% of 2020 ~~revenues~~revenues) during the first and fourth quarters compared to ~~25%~~40% of its 2021 revenues (25% of 2020 ~~revenues~~revenues) during the second and third quarters.

Direct Operating Expenses

Direct operating expenses, which include labor costs, propane, fuel, chemicals, truck repairs and maintenance, supplies, insurance, and site overhead costs for our operating segments, ~~increased~~decreased by approximately ~~$1.2 million,~~$189,000, or ~~49%~~5%, for the ~~three~~three months ended September 30, ~~2021~~2022, as compared to the same period in ~~2020. This was due to the increased activity during~~2021. The decrease in direct operating expenses in the third quarter of ~~2021.~~2022 compared to 2021 was primarily due to decreases in Completion Services activities performed in the third quarter of 2022, partially offset by a period-over-period increase in Production Services direct operating expenses which were the result of higher activity levels for this service offering in the current quarter. Direct operating ~~expenses~~expenses for the nine months ended September 30, ~~2021 decreased~~2022 increased by approximately ~~$1.8~~$2.2 million, or ~~13%~~18%, as compared to the same ~~nine-month~~ period in ~~2020.~~2021. This increase was primarily due to the ~~severe reduction in~~increased activity levels across both service offerings that the Company experienced primarily during the first quarter of ~~2021 discussed previously.~~2022, as compared to the first quarter in 2021.

Sales, General, and Administrative Expenses

Sales, general, and ~~administrative~~administrative expenses for the three months ended September 30, ~~2021 decreased~~2022 increased by approximately ~~$142,000,~~$187,000, or ~~14%~~21%, to ~~$907,000~~$1.1 million, as compared to the same period in 2020. This was due primarily to a decrease in our outside professional fees that were incurred as a result of the debt restructuring and ATM offering in the third quarter of 2020, as well as a decrease in bad debt expense from the reduction of the allowance for doubtful accounts.2021. Sales, general, and administrative expenses for the nine months ended September 30, ~~2021 decreased~~2022 increased by approximately ~~$1.3 million,~~$866,000, or ~~31%~~30%, to ~~$2.9~~$3.8 million, as compared to ~~the~~the same ~~nine-month~~ period in ~~2020. This was~~2021. These increases were primarily due to increases in professional fees associated with the Company's restatement of its Form 10-Qs for all three quarters of 2021, as well as additional work relating to the 2021 year end audit and Form 10-K filing, coupled with a significant ~~decrease~~period-over-period increase in ~~our bad debt expense, reductions in personnel costs, outside professional services related to our attempt to refinance our Credit Facility and~~ stock-based compensation expense resulting from the severance ~~awarded to~~agreement with the Company's former ~~CEO in the second quarter of 2020, partially offset by an increase in our public company expenses as a result of exchange fees related~~President and Chief Financial Officer and equity awards issued to our ~~share issuances.~~current Chief Financial Officer.

Depreciation and Amortization

Depreciation and amortization expense for the three months ended September 30, 2022 decreased by approximately $233,000, or 18%, to $1.1 million, as compared to the same period in 2021. Depreciation and amortization ~~expenses~~ ~~were comparable~~ expense for the ~~three and~~ nine months eended September~~nded September~~ 30, ~~2021~~2022 decreased by $658,000, or 17%, to $3.3 million, as compared to the same period in 2021. These decreases were primarily due to the selling and ~~2020.~~disposing of certain idle trucks and vehicles within our property and equipment during the first three quarters of 2022, creating a smaller depreciable base on which our depreciation expense is calculated.

3326

Table of Contents

Loss from Operations

For the three months ended September 30, ~~2021,~~2022, the Company recognized a loss from operations of $2.6 million compared to a loss from operations of $2.9 million for the same period in 2021. This decreased loss of approximately $222,000 was due primarily to a period-over-period decrease in segment losses. For the nine months ended September 30, 2022, the Company recognized a loss from operations of ~~$2.9~~$7.2 million compared to a loss from operations of ~~$3.1~~$8.2 million for the same period in ~~2020.~~2021. This decreased loss of approximately ~~$190,000~~$977,000 was primarily due to the $1.7 million increase in segment ~~revenue discussed above,~~profits for the first three quarters of 2022, as ~~well as cost saving measures implemented to offset the industry conditions. For the nine months ended September 30, 2021, the Company recognized a loss from operations of $8.1 million~~ compared to 2021, partially offset by a ~~loss from operations of $9.2 million for the same nine-month period~~period-over-period increase in ~~2020. This decreased loss of approximately $1.1 million was primarily due to the cost saving measures implemented to offset the industry conditions~~our sales, general, and ~~the separation agreement with the Company's former CEO during the second quarter of 2020.~~ administrative expenses.

Interest Expense

Interest expense for the three months ended September 30, ~~2021 decreased~~2022 increased by approximately ~~$471,000, or 99%,~~$442,000 as ~~compared~~compared to the same period in ~~2020.~~2021. Interest expense for the nine months ended September 30, ~~2021 decreased~~2022 increased by approximately ~~$1.6~~$1.0 million ~~or 97%,~~ as ~~compared~~compared to the same ~~nine-month~~ period in ~~2020.~~ 2021. These ~~decreases~~increases were ~~primarily~~due to increased interest associated with the 2022 Financing Facilities. There was no interest expense on our pre-existing primary debt obligation (2017 Amended Credit Facility) recorded during 2021 in the first three quarters due to the ~~cessation of recording interest expense after the~~accounting for it as a troubled debt restructuring ~~of our Credit Facility~~ during the third quarter of 2020.

~~Discontinued Operations~~Other Income

~~Results~~Other income for the three months ended September 30, 2021 and 2020 include loss from discontinued operations of approximately $0 and $7,000, respectively. Results for the nine months ended September 30, 2021 and 2020 include loss from discontinued operations of approximately $8,000 and income from discontinued operations of approximately $60,000, respectively.

~~Other Income (Expense)~~

~~Other income for the three months ended September 30, 2021~~2022 was approximately ~~$2.7 million~~$10,000, as compared to ~~other income of~~ approximately ~~$11.9~~$2.7 million for the same period in 2020. This decrease of $9.2 million was due to the $11.9 million gain on the restructuring of the Credit Facility in the third quarter of 2020, partially offset by the $2.0 million gain on forgiveness of the PPP Loan and $612,000 in Employee Retention Credits during the third quarter of 2021. Other income for the nine months ended September 30, ~~2021~~2022 was approximately ~~$3.7 million~~$102,000, as compared to ~~other income of~~ approximately ~~$12.0~~$3.7 million for the same ~~nine-month~~ period in ~~2020. This decrease of $8.3 million was~~2021. These decreases were primarily due ~~primarily~~ to the ~~$11.9 million gain on~~non-recurrence of Employee Retention Credits recognized by the ~~restructuring~~Company during the ~~nine months ended September 30, 2020, partially offset by the~~first three quarters of 2021, as well as a $2.0 million gain on forgiveness of PPP loan for the ~~PPP Loan~~three and ~~$1.8 million in Employee Retention Credits during the same period in~~nine months ended September 30, 2021.

Income Taxes

~~As discussed in the Explanatory Note above, during~~During the first quarter of 2021, the Company experienced a change in control pursuant to the issuance of 4,199,998 shares of common stock. As a result of this change in control, and in accordance with Internal Revenue Service Code Section 382, the realizability of the Company's deferred tax assets became limited. Based on management's judgment, the Company ~~estimates~~estimated that as of September 30, 2021, $0.4 million of deferred tax liabilities could reverse without an offsetting deferred tax asset. Due to this, the Company ~~has~~ recognized ~~$0.4��~~$0.4 million of deferred income tax expense for the nine months ended September 30, 2021. For the nine months ended September 30, ~~2020,~~2022, the Company's income tax ~~provision~~benefit of ~~$15,000~~$0.9 million was adjusted by the valuation allowance which resulted in a net tax provision of zero.

The effective tax expense for the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 differs from the amount that would be provided by applying the statutory USA federal income tax rate of 21% to pre-tax income primarily because of state income taxes, estimated permanent differences and the recorded valuation allowance.

3427

Table of Contents

NON-GAAP FINANCIAL MEASURES

Adjusted EBITDA (Restated)*EBITDA*

Management believes that, for the reasons set forth below, Adjusted EBITDA (a non-GAAP measure) is a valuable measurement of the Company's liquidity and performance and is consistent with the measurements offered by other companies in Enservco's industry.

The following ~~table presents~~tables present a reconciliation of our net income (loss) to our Adjusted EBITDA for each of the periods indicated (in thousands):

For the Three Months Ended September 30,

2021

2021

2021

2020

As Previously Reported

Adjustments

As Restated

Adjusted EBITDA*

Net (loss) income

$
(177
)

$
546

$
369

$
8,405

Add back:

Interest expense (including discontinued operations)

6

-

6

478

Deferred income tax (benefit) expense

-

(546
)
(546
)
6

Depreciation and amortization (including discontinued operations)

1,302

-

1,302

1,277

EBITDA*

1,131

-

1,131

10,166

Add back (deduct):

Stock-based compensation

21

-

21

16

Loss on disposal of equipment (including discontinued operations)

-

-

-

20

Gain on debt restructuring - - - (11,916 )
Other (income) expense

(2,689
)

-

(2,689
)

1

Adjusted EBITDA*

$
(1,537
)

$
-

$
(1,537
)

$
(1,713
)

	For the Three Months Ended September 30,
	2022			2021
Reconciliation from Net (Loss) Income to Adjusted EBITDA*
Net (loss) income	$	(3,076	)	$	369
Add back:
Interest expense		448			6
Deferred income tax benefit		-			(546	)
Depreciation and amortization (including discontinued operations)		1,069			1,302
EBITDA* (non-GAAP)		(1,559	)		1,131
Add back (deduct):
Stock-based compensation		159			21
Severance and transition costs		2			-
Loss on disposal of assets (including discontinued operations)		93			-
Other income		(10	)		(2,689	)
Adjusted EBITDA* (non-GAAP)	$	(1,315	)	$	(1,537	)

For the Nine Months Ended September 30,

2021

2021

2021

2020

As Previously Restated

Adjustments

As Restated

Adjusted EBITDA*

Net (loss) income

$
(4,564
)

$
(402
)
$
(4,966
)

$
1,211

Add back:

Interest expense (including discontinued operations)

51

-

51

1,667

Deferred income tax expense

-

402

402

15

Depreciation and amortization (including discontinued operations)

3,981

-

3,981

3,996

EBITDA*

(532
)

-

(532
)

6,889

Add back (deduct):

Stock-based compensation

70

-

70

377

Severance and transition costs

7

-

7

139

Loss (gain) on disposal of equipment (including discontinued operations)

70

-

70

(34
)
Gain on debt restructuring - - - (11,916 )
Other (income) expense (including discontinued operations)

(3,668
)

-

(3,668
)

282

EBITDA related to discontinued operations

1

-

1

11

Adjusted EBITDA*

$
(4,052
)

$
-

$
(4,052
)

$
(4,252
)

	For the Nine Months Ended September 30,
	2022			2021
Reconciliation from Net Loss to Adjusted EBITDA*
Net loss	$	(3,871	)	$	(4,966	)
Add back:
Interest expense		1,053			51
Deferred income tax expense		-			402
Depreciation and amortization (including discontinued operations)		3,317			3,981
EBITDA* (non-GAAP)		499			(532	)
Add back (deduct):
Stock-based compensation		655			70
Severance and transition costs		301			7
Loss on disposal of assets (including discontinued operations)		258			70
Gain on debt extinguishment⁽¹⁾		(4,277	)		-
Other income		(102	)		(3,668	)
EBITDA related to discontinued operations		-			1
Adjusted EBITDA* (non-GAAP)	$	(2,666	)	$	(4,052	)

_________________________
* See below for discussion of(1) Relates to the ~~use of non-GAAP~~Refinancing, as defined and described in Note 5 - Debt in the condensed consolidated financial ~~measurements.~~statements.

Use of Non-GAAP Financial Measures

Non-GAAP results are presented only as a supplement to the financial statements and for use within management’s discussion and analysis based on GAAP. The non-GAAP financial information is provided to enhance the reader's understanding of the Company’s financial performance, but no non-GAAP measure should be considered in isolation or as a substitute for financial measures calculated in accordance with GAAP. Reconciliations of the most directly comparable GAAP measures to non-GAAP measures are provided herein.

EBITDA is defined as net income (loss), before interest expense, income taxes, and depreciation and amortization. Adjusted EBITDA excludes stock-based compensation expense from EBITDA and, when appropriate, other items that management does not utilize in assessing the Company’s ongoing operating performance as set forth in the next paragraph. None of these non-GAAP financial measures are recognized terms under GAAP and do not purport to be an alternative to net income (loss) as an indicator of operating performance or any other GAAP measure.

All of the items included in the reconciliation from net income (loss) to EBITDA and from EBITDA to Adjusted EBITDA are either (i) non-cash items (e.g., depreciation, amortization of purchased intangibles, stock-based compensation expense, impairment losses, etc.) or (ii) items that management does not consider to be useful in assessing the Company’s ongoing operating performance ~~(e.g.~~(e.g., income taxes, gain or losses on sale of assets, severance and transition costs, other expense (income), EBITDA related to discontinued operations, etc.). In the case of the non-cash items, management believes that investors can better assess the company’s operating performance if the measures are presented without such items because, unlike cash expenses, these adjustments do not affect the Company’s ability to generate free cash flow or invest in its business.

We use, and we believe investors benefit from the presentation of, EBITDA and Adjusted EBITDA in evaluating our operating performance because it provides us and our investors with an additional tool to compare our operating performance on a consistent basis by removing the impact of certain items that management believes do not directly reflect our core operations. We believe that EBITDA is useful to investors and other external users of our financial statements in evaluating our operating performance because EBITDA is widely used by investors to measure a company’s operating performance without regard to items such as interest expense, taxes, and depreciation and amortization, which can vary substantially from company to company depending upon accounting methods and book value of assets, capital structure and the method by which assets were acquired.

~~Table of Contents~~

Because not all companies use identical calculations, the Company’s presentation of non-GAAP financial measures may not be comparable to other similarly titled measures of other companies. However, these measures can still be useful in evaluating the Company’s performance against its peer companies because management believes the measures provide users with valuable insight into key components of GAAP financial disclosures.

The following table summarizes our statements of cash flows for the nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 (in thousands):

Cash provided by operating activities for the nine months ended September 30, 2022 was approximately $150,000 compared to cash used in operating activities of approximately $3.9 million for the same period in 2021. This increase in cash provided by operating activities of approximately $4.1 million was primarily due to a $5.8 million period-over-period improvement in net working capital, partially offset by period-over-period increases in sales, general, and administrative expenses and severance and transition costs.

Cash provided by investing activities for the nine months ended September 30, 2022 was approximately $141,000 compared to cash used in investing activities of approximately $283,000 for the same period in 2021. This increase in cash provided by investing activities of approximately $424,000 was primarily due to current year proceeds from disposals of property and equipment exceeding that of the prior year, as well as period-over-period reductions in purchases of property and equipment.

Cash used in financing activities for the nine months ended September 30, 2022 was approximately $229,000 compared to cash provided by financing activities of approximately $4.4 million for the same period in 2021. This decrease in cash provided by financing activities of approximately $4.6 million was primarily due to the non-recurrence of approximately $8.8 million of net cash generated through the February 2021 Public Offering from the prior year, as well as approximately $2.0 million of current year principal payments on the 2022 Financing Facilities that did not occur on these debt instruments in the prior year. This was partially offset by net proceeds from the current year March 2022 Convertible Note in the amount of $963,000, proceeds from the current year July 2022 Convertible Note in the amount of $1.2 million, proceeds from the current year Cross River Revolver Note in the amount of $225,000, as well as a $3.4 million period-over-period reduction in term loan and line of credit repayments.

The following table sets forth a summary of certain aspects of our condensed consolidated balance ~~sheet~~sheets as of September 30, 2022~~, 2021~~ and December 31, ~~2020:~~2021:

~~We have accomplished several capitalization initiatives~~On March 24, 2022, the Company completed a refinancing transaction (the “Refinancing”) in which it terminated its pre-existing 2017 Amended Credit Facility with East West Bank. Pursuant to the pay-off letter dated as of March 18, 2022 by the Company, certain wholly owned subsidiaries of the Company and East West Bank, in full satisfaction of the Company’s obligations under the East West Bank 2017 Amended Credit Facility, the Company paid East West Bank $8.4 million in cash and agreed to pay East West Bank 5.00% of the net proceeds that the Company receives under the Receivables Financing (as defined below), up to a maximum of $1.0 million.

As part of the Refinancing, Heat Waves entered into a Master Lease Agreement (the “Utica Facility”) with Utica Leaseco, LLC (“Utica”), pursuant to which Utica provided an equipment-collateralized loan to the Company in the ~~past year to deleverage our balance sheet and have positioned~~amount of $6.225 million. Under the Utica Facility, the Company ~~into~~is required to make 51 monthly payments with initial payments beginning at $168,075 each and a ~~much more favorable liquidity situation. We successfully completed two equity offerings during late 2020~~surcharge of 1.00% of the monthly payment amount per month for every 0.25% that the prime rate of Comerica Bank exceeds 3.25%. The aforementioned surcharge is discretionary on the part of Utica and ~~early 2021 that provided aggregate net proceeds~~will be calculated on July 1, 2022 and January 1, 2023, and on each July 1 and January 1 thereafter. This surcharge will be added to the monthly Basic Rent (as such term is defined in the Master Lease Agreement) due under the Utica Facility, and be due and payable with the next regularly scheduled Basic Rent payment under such schedule and on each payment date thereafter. At the end of ~~$12.3 million. Additionally, we entered into two amendments~~the fifty-one month term, the Company is required to ~~our Credit Facility~~make a residual payment to Utica between 1% and 10% of the initial principal amount, or between $62,250 and $622,500 depending upon the Company’s ratio of EBITDA to the sum of interest payments, cash paid for taxes and current debt and capital lease payments during the ~~third quarter~~period. The Company also has the option, after twelve months, to prepay $1.0 million of ~~2020 and~~ the ~~first quarter of 2021 that provided us with significant relief under our Credit~~Utica Facility ~~including~~in exchange for a ~~$16.0 million principal reduction, and two extensions of the debt which now matures on October 15, 2022. Upon closing on our second equity offering on February 11, 2021, we made a $3.0 million principal~~reduced payment ~~on our Credit Facility.~~schedule.

WeFurther, as part of the Refinancing, Heat Waves entered into an Invoice Purchase Agreement (the “Receivables Financing” or “LSQ Facility,” and together with the Utica Facility, the “2022 Financing Facilities”) with LSQ Funding Group, LLC (“LSQ”) pursuant to which LSQ provides receivables factoring to Heat Waves. Under the Receivables Financing, LSQ advances up to 85% on accounts receivable factored by Heat Waves, up to a maximum of $10.0 million. The Receivables Financing initially has an 18-month term that can be terminated upon payment of certain fees.

Additionally, as part of the Refinancing, the Company issued a $1.2 million convertible subordinated note (the “March 2022 Convertible Note”) to Cross River Partners, LP (“Cross River”). The March 2022 Convertible Note has a six-year term and accrues interest at 7% per annum. The Company is required to make quarterly interest only payments under the March 2022 Convertible Note for the first year starting June 30, 2022, followed by principal and interest payments for the remaining five years based upon a ten-year amortization schedule. Subject to any required stockholder approval, outstanding principal and accrued but unpaid interest under the March 2022 Convertible Note is convertible at the option of Cross River into common stock of the Company at a conversion price equal to the average closing price of the Company’s common stock on the five days prior to the date of any such conversion.

On July 15, 2022, the Company entered into a convertible subordinated promissory note (the “July 2022 Convertible Note”) with Cross River whereby the Company received $1.2 million of capital for general working capital purposes. The July 2022 Convertible Note matures six years from the date of issuance and carries interest at the rate of 7.75% per annum. The Company is required to make quarterly interest-only payments for the first year starting September 30, 2022, followed by principal and interest payments for the remaining five years based upon a ten-year amortization schedule. The July 2022 Convertible Note is unsecured and junior and subordinate to indebtedness which the Company may now or at any time hereafter owe to any lender. Subject to any required stockholder approval, all or some of the outstanding principal and accrued but unpaid interest under the July 2022 Convertible Note is convertible at the option of Cross River into (i) common stock of the Company at a conversion price of $1.69 per share; or (ii) equity securities issued by the Company in an equity offering with minimum offering proceeds to the Company (net of any related placement agent or underwriting fees) of $1.2 million at the conversion price per equity security issued in such equity offering.

On November 3, 2022, the Company entered into a note exchange agreement with Cross River pursuant to which Cross River loaned an additional $450,000 to the Company, exchanged the $750,000 Cross River Revolver Note for a $1.2 million convertible secured subordinated promissory note (the “November 2022 Convertible Note”) and received a five-year warrant to acquire 568,720 shares of Company common stock at $2.11 per share. The November 2022 Convertible Note has a two-year term and accrues interest at 10.00% per annum, payable quarterly starting March 30, 2023 at the option of the Company in cash or the Company’s common stock. Subject to any shareholder approval required by any exchange upon which the Company’s common stock is then listed, the principal and accrued interest of the November 2022 Convertible Note is convertible into the Company’s common stock at a conversion price of $2.11 per share. The November 2022 Convertible Note is secured by two Company-owned parcels of real property located in North Dakota. On December 13, 2022, the Company sold one of these two parcels for a combination of cash and a promissory note/mortgage totaling $550,000. As consideration for Cross River releasing its security interest on such parcel, the Company has agreed that it will enter into a collateral assignment of the security on such parcel back to Cross River in the event the buyer defaults on their promissory note/mortgage to the Company.

Prior to the 2022 Financing Facilities and the recent Cross River convertible note financings and revolver, we have relied on cash flow from operations ~~and~~as well as borrowings under the $1.0 million line of credit under our pre-existing 2017 Amended Credit Facility to satisfy our liquidity needs. Due to the maturity date of our Credit Facility of October 15, 2022, which is less than twelve months from the date of this report, absent our ability to refinance such debt or obtain equity financing, neither of which can be assured, substantial doubt exists about our ability to fund our capital requirements beyond the next twelve months. As of September 30, ~~2021, in addition to~~2022, the Company had cash and cash equivalents totaling $211,000 as well as $525,000 of ~~$1.7 million, we had $1.0 million available under~~unused availability through the ~~Credit Facility.~~ Cross River Revolver Note.

Our capital r~~equirements~~requirements for the remainder of ~~2021~~2022 are anticipated to include, but are not limited to, operating expenses, debt servicing, and capital expenditures, including maintenance of our existing fleet of assets. ~~Under our 2017 Amended Credit Agreement, we are restricted to capital expenditures of $1.2 million during 2021, of which we have utilized $348,000 through September 30, 2021.~~

As of September 30, ~~2021,~~ 2022, our available liquidity was ~~$2.7 million~~ $736,000, which represented our cash and cash equivalents balance of ~~$1.7 million~~$211,000 as well as $525,000 of unused availability through the Cross River Revolver Note. Although the Company believes the Refinancing, recent convertible note financings and ~~$1.0 million availability~~ revolver from Cross River, and cash from operations will provide sufficient liquidity for at least the next twelve months, the Company may need to raise additional capital for its growth and ongoing operations. If the Company seeks additional sources of financing, there can be no assurance that such financing would be available to the Company on favorable terms, or at all, including further financing from Cross River. The Company’s ability to obtain additional financing in the ~~line of credit under our Credit Facility. We utilize~~debt and equity capital markets, whether public or private, is subject to several factors including market and economic conditions, the ~~line of credit under our Credit Facility~~Company’s performance, and investor sentiment with respect to ~~fund working capital requirements~~the Company and ~~investments, and for the nine months ended September 30, 2021 we made net line of credit repayments of approximately $701,000.~~its industry.

As of September 30, ~~2021,~~2022, we had a working ~~capit~~alcapital deficit of approximately ~~$2.5~~$4.3 million, compared to a working capital deficit of ~~$306,000~~approximately $6.9 million as of December 31, ~~2020. The $2.2~~2021. This $2.6 million ~~increase~~decrease in working capital deficit was primarily attributable to the ~~closing~~Refinancing, as described in Note 5 - Debt of ~~our February 2021 public offering which provided net proceeds of approximately $8.8 million,~~the condensed consolidated financial statements, partially offset by the ~~$3.0 principal paydown of our long-term Credit Facility.~~

~~Cash used in operating activities for the nine months ended September 30, 2021 was approximately $3.9~~$1.6 million ~~compared to $2.3 million for the same nine-month period in 2020. The~~ increase in ~~cash used was attributable~~our accounts payable and accrued liabilities, the period-over-period increase to our Other current liabilities, and the ~~decrease~~period-over-period reductions in ~~cash provided by the monetization of~~our accounts receivable and ~~an increase in the cash used for~~ prepaid expenses and other current assets during the current year period, partially offset by the decrease in net loss adjusted to net cash used and the increase in cash flows related to the change in accounts payable balances.

Cash used in investing activities for the nine months ended September 30, 2021 was approximately $283,000 compared to cash provided by investing activities of $966,000 for the same nine-month period in 2020. This was primarily due to proceeds received from an insurance settlement and the sale of assets related to both our continuing and discontinued operations during the prior year period.

Cash provided by financing activities for the nine months ended September 30, 2021 was approximately $4.4 million compared to cash provided by financing activities of $666,000 for the same nine-month period in 2020. The change is due to the net proceeds from our February 2021 Public Offering, partially offset by accrued future interest payments, the paydown of our long-term Credit Facility during the first quarter of 2021 and the proceeds from the PPP loan during the second quarter of 2020.expenses.

~~In order~~Our revenues are primarily derived from the performance of services within the domestic oil and natural gas industry, most specifically hot oiling and acidizing services as well as frac water heating. Supplemental to ~~position us in a more sustainable liquidity situation,~~these services, we ~~successfully completed two equity offerings~~also perform hauling and labor services for our client base which typically occur during the slower revenues generating seasons of late ~~2020~~spring, summer and early ~~2021 that provided us with aggregate net proceeds of $12.3 million. Additionally,~~fall. As a service provider within the energy sector, we ~~entered into two amendments~~are subject to ~~our Credit Facility during late third quarter 2020~~geopolitical influences, demand variances and the ~~first quarter of 2021 that provided us with significant relief, including a $16.0 million principal reduction, and two extensions~~drilling activities of the ~~debt~~industry. In addition, our frac water heating services are further impacted by the extent of cold weather during winter months. The price of crude oil and natural gas greatly impacts the levels of activities of our clients, which ~~now matures~~in turn impacts our business. Unforeseen disruptions such as the worldwide COVID-19 pandemic also influence demand, thereby impacting our business. The change in the federal government administration and the governmental shift, both at the federal and state level, to move away from fossil fuels and towards cleaner energy alternatives has weakened demand for our services over the past few years; whereas, the invasion of Ukraine and the resulting impact of the war on ~~October 15, 2022. Upon closing on~~worldwide energy prices has led to a rebound in the number of domestic oil rigs in operation and has positively impacted demand for some of our ~~second equity offering, which occurred on February 11, 2021, we made a $3.0 million principal payment on~~services. We believe the swings in the demand for our ~~Credit Facility. Our business is heavily dependent on exploration and production activity levels, which fluctuate based on commodity prices, capital budgets and other factors. We~~services will continue to ~~seek opportunities~~be cyclical, in addition to ~~expand~~the annual seasonal swings our business operations through organic growth, including increasing the volume of current services offered to our new and existing customers and relocating more of our equipment to increase utilization. We will also continue to expand our customer relationships while maintaining an appropriate balance between recurring maintenance work and drilling and completion related services.Company has historically experienced.

~~Over~~As alluded to above, over the past three years we have ~~invested significantly~~witnessed significant variances in ~~process improvement initiatives designed to make the Company operate more efficiently and take better advantage~~demand for our services. The price of our expanded fleet and national leadership position in hot oiling, acidizing and frac water heating. We faced a very difficult operating environment during the first quarter of 2021 which began to improve during the second quarter of 2021 with the increases in crude oil ~~prices~~decreased from $52 per barrel in December 2019 to $24 per barrel in March 2020, subsequently rebounding to $55 per barrel in March 2021 and ~~active North American oil rigs. While crude oil prices~~continued its upward trajectory to $98 per barrel as of September 30, 2022. The number of rigs in operation in the domestic USA also followed this trend. In December 2019, the USA domestic rig count was at 805 rigs in operation. This number fell to 728 in March 2020, 417 in March 2021, and ~~active North American oil rigs~~has since rebounded to 763 as of September 30, 2022. The rig count has continued to rise ~~throughout~~to 780 rigs in operation through the ~~third quarter~~filing date of ~~2021,~~this report. As previously indicated, we believe there historically has been a significant correlation between rig count and the demand for our services. While the increases to rig counts ~~continue~~and to be over 30% below pre-pandemic levels. Additionally, E&P companies have continued their recent focus on improving free cash flow and debt reduction at the expense of rapidly increasing drilling activity even as crude oil prices rose well above $80 per barrel.

On September 9, 2021, President Biden announced a new COVID-19 Action Plan entitled the “Path out of the Pandemic” (the “Plan”). The Plan mandates COVID-19 vaccinations or at least weekly COVID-19 testingenergy demand in turn increases demand for all United States employers with 100 or more employees. The United States Department of Labor’s Occupational Safety and Health Administration ("OSHA") issued on November 5, 2021 an emergency temporary standard entitled “COVID-19 Vaccination and Testing; Emergency Temporary Standard” to make the testing requirements of the Plan effective beginning January 4, 2022 until a permanent rule is later issued. Legal challenges to this standard are currently underway with additional challenges expected, which leads to uncertainty about the potential timing of when or if this standard might actually take effect. The standard also contains exemptions for “remote workers” who work 100% alone and employees who work exclusively outdoors as long as their use of indoor spaces is de minimis. Our current headcount is below the 100 employee threshold but it will likely exceed 100 employees during the heating season. We believe OSHA’s exemptions may apply to some of our ~~employees, but as~~services, much of our revenues, specifically completion services revenues, are seasonal and there is no measurable way to anticipate the activity levels for these services or the impact of current warmer month demand on the upcoming winter months and heating season.

Our team has worked diligently to better position the Company to navigate some of the seasonal and demand swings within our industry. We have strengthened our balance sheet through the Refinancing. Our new LSQ Facility has given us access to a significant portion of the revenues generated on each completed job through cash advances that are generally received within a few days of job completion. Our team has been strengthened by the addition of some key executives and elevation of top performers into roles that better leverage their skills for the benefit of the organization. While we are still navigating some legacy obligations, events of the past few years of decline, and delays related to our financial restatements and resultant staff changes, we believe we are better positioning our Company to enjoy success within the markets we serve and control our costs during our slower revenues generating seasons than in the recent past. While there may be a long-term trend away from fossil fuels, we believe that there is also a realization that with ~~any complex new standard, it is impossible to~~supply chain shortages, fluctuations in semi-conductor and battery availability, and the process of infrastructure development, that there will be ~~certain how OSHA will apply it until they issue further guidance~~a continued demand for fossil fuels and our services which improve operating efficiencies of oil wells. Barring a sudden and unexpected decline in the price per barrel of crude oil or ~~begin enforcement. As~~ a ~~result, this mandate could increase~~substantial reduction in the ~~challenges of maintaining and growing our~~ number of ~~employees across all functions. This mandate, if imposed and if~~domestic rigs in operation within the USA, we ~~are unable~~believe our Company is positioning itself to ~~obtain appropriate exemptions, could lead to employee turnover and could materially and adversely affect our growth and profitability.~~enjoy improved operational results in the near future.

Our capital obligations as of September 30, ~~2021~~2022 consist primarily ~~the 2017 Amended Credit Agreement~~of our 2022 Financing Facilities which ~~matures October 15, 2022.~~mature through 2027, $2.4 million aggregate principal amount of convertible notes issued to Cross River, as well as our Cross River Revolver Note (which increased to $1.2 million in aggregate principal amount as of November 3, 2022). In a~~ddition,~~addition, we also have scheduled principal payments under ~~certain term loans,~~our finance ~~leases~~ and operating leases. General terms and conditions for amounts due under these commitments and obligations are summarized in the notes to the condensed consolidated financial statements.

As of September 30, ~~2021,~~2022, we had no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our stockholders.

We are a smaller reporting company as defined in Rule 12b-2 of the Exchange Act and are not required to provide the information under this Item.

~~We carried out an evaluation of the effectiveness of the design and operation of our disclosure~~Disclosure controls and procedures as such term is defined under Rule 13a-15(e) or 15d-15(e) promulgated under the Exchange Act, as of September 30, 2021. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer (our principal executive officer) and our Chief Financial Officer (our principal financial officer). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, due to the material weakness in our internal control over financial reporting described below, as of the Evaluation Date, our disclosureare controls and other procedures ~~were not effective~~that are designed to ensure that information required to be disclosed in ~~the~~our reports ~~that we file~~filed or ~~submit~~submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the ~~Securities and Exchange Commission’s~~SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial and accounting officer, as appropriate, to allow timely decisions regarding required disclosure.

AUnder the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended September 30, 2022, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial and accounting officer concluded that, during the period covered by this report, our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective due to material ~~weakness is a deficiency, or a combination of deficiencies,~~weaknesses in internal ~~control~~controls over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected and corrected on a timely basis. In connection withrelated to the ~~preparation of Amendment No. 1, management previously re-evaluated~~following: (i) the Company’s application of the accounting for a warrant issued to a related party in connection with a conversion of subordinated debt to equity during the first quarter of ~~2021. Upon such re-evaluation, management determined that the award of the warrant resulted in a loss on the transaction with a related party. Additionally, management re-evaluated~~2021; (ii) the Company's eligibility to receive certain Employee Retention Credits through the CARES Act of ~~2020. Upon such re-evaluation, management determined that~~2020 which were recorded during the ~~Company was not eligible to receive certain amounts awarded, both as discussed in Note 2 to our unaudited condensed consolidated financial statements in Amendment No. 1. As discussed in~~second quarter of 2021; and (iii) the ~~Explanatory Note above, in connection with the preparation of this Amendment No. 2, the Company has re-evaluated its~~Company's accounting for income taxes in connection with a change in control that occurred pursuant to the issuance of 4,199,998 shares of Company common stock during the first quarter of 2021. ~~This change in control led to a change in management's judgment about~~Notwithstanding the ~~realizability~~identified material weaknesses, as of ~~the Company's deferred tax assets. Pursuant to such re-evaluation, the Company’s management has determined that for the three months ended~~ September 30, ~~2021~~2022, management, including our principal executive officer and principal financial and accounting officer, believes that the Company should have recognized a deferred income tax benefit through a partial release of the Company's valuation allowance, as well as recognizing deferred income tax expense for the nine months ended September 30, 2021 through the recording of additional valuation allowance, as discussed in Note 2 to our unaudited condensed consolidated financial statements contained in this ~~Amendment No. 2.~~Quarterly Report on Form 10-Q fairly present, in all material respects, our financial condition, results of operations and cash flows for the fiscal period presented in conformity with GAAP.

~~As a result, our management concluded that there was a material weakness~~We are in the process of continuing to implement measures to improve our internal control over financial reporting ~~as of September 30, 2021 related~~to remediate these material weaknesses. We have identified additional processes and procedures and are working to appropriately apply applicable accounting requirements, and believe these enhanced processes should alleviate past deficiencies over complex accounting standards that apply to our ~~accounting for~~financial statements and complex financial ~~instruments~~transactions. We have obtained enhanced access to accounting standards literature, research materials, and documents, and have increased communication among our personnel and third-party professionals with whom we consult regarding complex accounting ~~for income taxes.~~applications. The elements of our remediation plan can only be accomplished over time. We can offer no assurance that the measures we implement will be sufficient to remediate the material weaknesses we have identified or avoid potential future material weaknesses.

~~There has been no change~~During the nine months ended September 30, 2022, we have made progress toward achieving the effectiveness of our internal controls and disclosure controls. The actions that we are taking are subject to ongoing management and executive level review, as well as audit committee oversight. We will not be able to conclude whether the steps we are taking will fully remediate the material weaknesses in ~~the Company's~~our internal control over financial reporting ~~as such term is defined under Rule 13a-15(f)~~until we have completed our remediation efforts and subsequent evaluation of their effectiveness. We may also conclude that additional measures may be required to remediate the ~~Exchange Act, during the quarter covered by this report that has materially affected, or is reasonably likely to materially affect, its~~material weaknesses in our internal control over financial reporting, ~~as the circumstances that led our management to conclude that our previously issued financial statements should be restated had not yet been identified.~~

In light of the material weakness described above, we plan to continue to enhance our system of evaluating and implementing the accounting standards that apply to our accounting for complex financial instruments and certain tax positions, including through enhanced analyses by our personnel and third-party professionals with whom we consult regarding complex accounting and tax applications. We can offer no assurance that our remediation plan will ultimately have the intended effects.which may necessitate further action.

On November 8, 2021, ~~Amanda Mordica,~~a plaintiff who is a Texas resident, filed a complaint in Texas State Court in Atascosa County, against the Company, ~~its~~our wholly owned subsidiary, Heat Waves Hot Oil Service, LLC, and two individual former Company employees alleging negligence by ~~the~~our Company and ~~its~~ subsidiary in connection with a traffic accident sustained by ~~Ms. Mordica~~the plaintiff on November 19, 2019. ~~Ms. Mordica’s~~On August 9, 2022, the Company, its insurance carriers and the plaintiff entered into a mediated settlement of all claims against all parties in the matter of the auto liability claim. The $9.3 million settlement agreement was executed by all parties in September 2022. The insurance claim ispayment to the plaintiff was covered by the Company’s insurance policies.

On May 22, 2022, Ali Safe, acting individually and on behalf of others, filed a class action complaint in ~~excess~~United States District Court for the District of ~~$1.0 million.~~Colorado alleging that the Company and certain of its officers violated securities laws in relation to certain of its SEC Form 10-Q filings in 2021 which required amendments and restatements to such filings. On November 28, 2022, the plaintiff amended their complaint primarily to add Jan Lambert as lead plaintiff and to include Cross River Partners, L.P. and Cross River Capital Management, LLC as defendants.

We believe the claims are without merit and have engaged counsel to vigorously defend the Company against such claims. The Company has ~~tendered this~~Director’s and Officer’s insurance coverage to defend against such claims and the Company's insurance carriers have been notified about the lawsuit. While we believe the claims are without merit, there can be no assurances that a favorable final outcome will be obtained, and defending any lawsuit can be costly and can impose a significant burden on management and employees. Any litigation to ~~its insurer who has preliminarily indicated~~which we are a party may result in an unfavorable judgment that ~~they have accepted coverage. As~~may not be reversed upon appeal or in payments of substantial monetary damages or fines, or we may decide to settle such ~~the Company does not believe~~lawsuit on similarly unfavorable terms, either of which could materially adversely affect our business, financial condition, or results of operations. Furthermore, there can be no assurances that ~~this litigation~~our insurance coverage will ~~have a materially adverse impact on the Company.~~be available in sufficient amounts to cover such claim, or at all.

~~See~~There have been no material changes to the ~~Company’s~~ risk factors set forth in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, filed on ~~March 23, 2021,~~July 7, 2022, which is incorporated herein by reference.

~~(1) Incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on November 15, 2021.~~

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.

Delaware		84-0811316
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

14133 Country Road 9 1/2 Longmont, CO		80504
(Address of principal executive offices)		(Zip Code)

Title of each class		Trading Symbol(s)		Name of exchange on which registered
Common stock		ENSV		NYSE American

~~Clas~~s		~~Outstanding at~~ ~~November 10~~~~, 2021~~
~~Common stock, $.005 par value~~		~~11,432,284~~

	Page
Part I – Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets	43
Condensed Consolidated Statements of Operations	54
Condensed Consolidated Statements of Stockholders' Equity	65
Condensed Consolidated Statements of Cash Flows	76
Notes to the Condensed Consolidated Financial Statements	87
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	2720
Item 3. Quantitative and Qualitative Disclosures about Market Risk	4031
Item 4. Controls and Procedures	4031

Part II
Item 1. Legal Proceedings	4132
Item 1A. Risk Factors	4132
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	4232
Item 3. Defaults Upon Senior Securities	4232
Item 4. Mine Safety Disclosures	4232
Item 5. Other Information	4232
Item 6. Exhibits	4333

	September 30, 2021			December 31, 2020
		(unaudited)
ASSETS		*(restated)*
Current Assets:
Cash and cash equivalents	$	1,673		$	1,467
Accounts receivable, net		2,279			1,733
Prepaid expenses and other current assets		2,152			858
Inventories		371			295
Assets held for sale		527			527
Total current assets		7,002			4,880

Property and equipment, net		17,070			20,317
Goodwill		546			546
Intangible assets, net		454			617
Right-of-use asset - finance, net		50			129
Right-of-use asset - operating, net		2,279			2,918
Other assets		404			423
Non-current assets of discontinued operations		0			353

TOTAL ASSETS	$	27,805		$	30,183

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities	$	1,635		$	1,931
Senior revolving credit facility, related party (including future interest payable of $772 and $892, respectively - see Note 6)		2,000			1,593
Lease liability - finance, current		26			65
Lease liability - operating, current		775			854
Current portion of long-term debt		57			100
Current liabilities of discontinued operations		0			31
Total current liabilities		4,493			4,574

Non-Current Liabilities:
Senior revolving credit facility, related party (including future interest payable of $20 and $485, respectively - see Note 6)		12,792			17,485
Subordinated debt, related party		0			1,180
Long-term debt, less current portion		69			2,052
Lease liability - finance, less current portion		26			55
Lease liability - operating, less current portion		1,631			2,185
Deferred tax liability, net		402			0
Other liabilities		24			88
Long-term liabilities of discontinued operations		0			9
Total non-current liabilities		14,944			23,054

TOTAL LIABILITIES		19,437			27,628

Commitments and Contingencies (Note 8)

Stockholders' Equity:
Preferred stock, $.005 par value, 10,000,000 shares authorized, no shares issued or outstanding		0			0
Common stock, $.005 par value, 100,000,000 shares authorized; 11,439,191 and 6,307,868 shares issued as of September 30, 2021 and December 31, 2020, respectively; 6,907 shares of treasury stock as of September 30, 2021 and December 31, 2020, respectively; and 11,432,284 and 6,300,961 shares outstanding as of September 30, 2021 and December 31, 2020, respectively		57			32
Additional paid-in capital		40,806			30,052
Accumulated deficit		(32,495	)		(27,529	)
Total stockholders' equity		8,368			2,555

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	27,805		$	30,183

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,						For the Three Months Ended						For the Nine Months Ended
	2021			2020			2021			2020			September 30,						September 30,
	(restated)						(restated)						2022			2021			2022			2021
Revenues:
Production services	$	2,483		$	1,363		$	6,556		$	5,948		$	2,788		$	2,483		$	8,645		$	6,556
Completion and other services		544			401			4,701			7,343			321			544			6,497			4,701
Total revenues		3,027			1,764			11,257			13,291			3,109			3,027			15,142			11,257

Expenses:
Production services		2,489			1,347			6,802			6,655			2,599			2,489			7,976			6,802
Completion and other services		1,189			1,126			5,680			7,613			890			1,189			6,724			5,680
Sales, general, and administrative expenses		907			1,049			2,904			4,058			1,094			907			3,763			2,897
Severance and transition costs		0			0			0			139			2			-			301			7
Loss on disposal of equipment		0			21			70			59
Loss on disposal of assets														93			-			258			70
Depreciation and amortization		1,302			1,271			3,975			3,977			1,069			1,302			3,317			3,975
Total operating expenses		5,887			4,814			19,431			22,501			5,747			5,887			22,339			19,431

Loss from operations		(2,860	)		(3,050	)		(8,174	)		(9,210	)		(2,638	)		(2,860	)		(7,197	)		(8,174	)

Other (expense) income:
Interest expense		(6	)		(477	)		(50	)		(1,665	)		(448	)		(6	)		(1,053	)		(50	)
Gain on restructuring of senior revolving credit facility (Note 6)		0			11,916			0			11,916
Gain on debt extinguishment (Note 5)														-			-			4,277			-
Other income		2,689			29			3,668			125			10			2,689			102			3,668
Total other income		2,683			11,468			3,618			10,376
Total other (expense) income														(438	)		2,683			3,326			3,618

(Loss) income from continuing operations before taxes		(177	)		8,418			(4,556	)		1,166
Loss from continuing operations before taxes														(3,076	)		(177	)		(3,871	)		(4,556	)
Deferred income tax benefit (expense)		546			(6	)		(402	)		(15	)		-			546			-			(402	)
Income (loss) from continuing operations		369			8,412			(4,958	)		1,151
(Loss) income from discontinued operations		0			(7	)		(8	)		60
Net income (loss)	$	369		$	8,405		$	(4,966	)	$	1,211
(Loss) income from continuing operations														(3,076	)		369			(3,871	)		(4,958	)
Loss from discontinued operations														-			-			-			(8	)
Net (loss) income													$	(3,076	)	$	369		$	(3,871	)	$	(4,966	)


Income (loss) from continuing operations per common share - basic and diluted	$	0.03		$	2.15		$	(0.46	)	$	0.31
Income from discontinued operations per common share - basic and diluted		0			0			0			0.01
Net income (loss) per share - basic and diluted	$	0.03		$	2.15		$	(0.46	)	$	0.32
(Loss) income from continuing operations per common share - basic and diluted													$	(0.27	)	$	0.03		$	(0.34	)	$	(0.46	)
Loss from discontinued operations per common share - basic and diluted														-			-			-			-
Net (loss) income per share - basic and diluted													$	(0.27	)	$	0.03		$	(0.34	)	$	(0.46	)

Weighted average number of common shares outstanding - basic and diluted		11,433			3,910			10,692			3,768			11,536			11,433			11,494			10,692

	Common Shares			Common Stock		Additional Paid-in Capital		Accumulated Deficit			Total Stockholders’ Equity
Balance at January 1, 2021		6,301		$	32	$	30,052	$	(27,529	)	$	2,555

Stock-based compensation		-			-		24		-			24
Shares issued in offering, net of issuance costs		4,200			21		8,824		-			8,845
Shares and warrant issued to Cross River Partners, L.P. in subordinated debt and accrued interest conversion, net of discount		602			3		1,550		-			1,553
Restricted share issuances		330			1		310		-			311
Net loss		-			-		-		(3,902	)		(3,902	)
Balance at March 31, 2021		11,433		$	57	$	40,760	$	(31,431	)	$	9,386

Stock-based compensation		-			-		25		-			25
Net loss		-			-		-		(1,433	)		(1,433	)
Balance at June 30, 2021		11,433		$	57	$	40,785	$	(32,864	)	$	7,978

Stock-based compensation		-			-		21		-			21
Restricted share cancellation		(1	)		-		-		-			-
Net income		-			-		-		369			369
Balance at September 30, 2021		11,432		$	57	$	40,806	$	(32,495	)	$	8,368

	Common Shares			Common Stock		Additional Paid-in Capital		Accumulated Deficit			Total Stockholders’ Equity (Deficit)
Balance at January 1, 2020		3,703		$	19	$	22,325	$	(25,020	)	$	(2,676	)
Stock-based compensation, net of issuance costs		-			0		39		0			39
Restricted share cancellation		(2	)		0		0		0			0
Net loss		-			0		0		(2,837	)		(2,837	)
Balance at March 31, 2020		3,701		$	19	$	22,364	$	(27,857	)	$	(5,474	)

Stock-based compensation, net of issuance costs		-			0		322		0			322
Restricted share issuance		7			0		0		0			0
Restricted share cancellation		(45	)		0		0		0			0
Restricted share vested		-			0		5		0			5
Net loss		-			0		0		(4,357	)		(4,357	)
Balance at June 30, 2020		3,663		$	19	$	22,691	$	(32,214	)	$	(9,504	)

Stock-based compensation, net of issuance costs		-			0		16		0			16
Restricted share cancellation		(3	)		0		0		0			0
Shares issued to Cross River Partners, L.P. in subordinated debt and accrued interest conversion		404			2		1,513		0			1,515
Shares and warrants issued to East West Bank in senior revolving credit debt restructuring		533			2		2,530		0			2,532
Shares issued in at-the-market offering, net of offering costs		69			0		40		0			40
Net income		-			0		0		8,405			8,405
Balance at September 30, 2020		4,666		$	23	$	26,790	$	(23,809	)	$	3,004

Name	State of Formation	*Ownership*	*Business*
Heat Waves Hot Oil Service LLC	Colorado	100% by Enservco	Oil and natural gas well services, including logistics and stimulation.
Adler Hot Oil Service, LLC	Delaware	100% by Enservco	Operations integrated into Heat Waves during 2019. Adler Hot Oil Service, LLC was dissolved during the second quarter of 2021.
Heat Waves Water Management LLC	Colorado	100% by Enservco	Discontinued operations in 2019. Heat Waves Water Management LLC was dissolved during the second quarter of 2021.
Dillco Fluid Service, Inc	Kansas	100% by Enservco	Discontinued operations in 2018. Dillco Fluid Service, Inc was dissolved during the second quarter of 2021.
~~HE Services LLC~~	~~Nevada~~	~~100% by Heat Waves~~	~~No active business operations. Owned construction equipment used by Heat Waves. HE Services LLC was dissolved on December 23, 2020.~~

	September 30, 2021
	As Previously Restated			Adjustments			As Restated
Condensed Consolidated Balance Sheet (unaudited)
Deferred tax liability, net	$	0 -		$	402		$	402
Total non-current liabilities		14,542			402			14,944
Total liabilities		19,035			402			19,437
Accumulated deficit		(32,093	)		(402	)		(32,495	)
Total stockholders' equity		8,770			(402	)		8,368

	For the Three Months Ended September 30, 2021
	As Previously Reported			Adjustments		As Restated
Condensed Consolidated Statement of Operations (unaudited)
Deferred income tax benefit	$	0 -		$	546	$	546
(Loss) income from continuing operations		(177	)		546		369
Net income (loss)		(177	)		546		369
(Loss) income from continuing operations per common share - basic and diluted		(0.02	)		0.05		0.03
Net (loss) income per share - basic and diluted		(0.02	)		0.05		0.03

	Additional Paid-in Capital		Accumulated Deficit			Total Stockholders’ Equity
Consolidated Statement of Stockholders' Equity (Deficit) (unaudited)
As Previously Restated:
Net loss (for the three months ended March 31, 2021)	$	-	$	(2,477	)	$	(2,477	)
Balance at March 31, 2021		40,760		(30,006	)		10,811
Net loss (for the three months ended June 30, 2021)		-		(1,910	)		(1,910	)
Balance at June 30, 2021		40,785		(31,916	)		8,926
Net loss (as previously reported for the three months ended September 30, 2021)		-		(177	)		(177	)
Balance at September 30, 2021, as previously reported		40,806		(32,093	)		8,770
Adjustments:
Net loss (for the three months ended March 31, 2021)	$	-	$	(1,425	)	$	(1,425	)
Balance at March 31, 2021		0 -		(1,425	)		(1,425	)
Net loss (for the three months ended June 30, 2021)		-		477			477
Balance at June 30, 2021		-		477			477
Net loss (for the three months ended September 30, 2021)		-		546			546
Balance at September 30, 2021		0		546			546
As Restated:
Net loss (for the three months ended March 31, 2021)	$	-	$	(3,902	)	$	(3,902	)
Balance at March 31, 2021		40,760		(31,431	)		9,386
Net loss (for the three months ended June 30, 2021)		-		(1,433	)		(1,433	)
Balance at June 30, 2021		40,785		(32,864	)		7,978
Net income (for the three months ended September 30, 2021)		0		369			369
Balance at September 30, 2021		40,806		(32,495	)		8,368

	September 30, 2021				December 31, 2020
Senior Revolving Credit Facility with related party. All future interest through October 15, 2021 accrued to loan pursuant to the Fifth Amendment. Interest at 8.25%, 5.25% is paid monthly while 3% is accrued and paid upon maturity. Amortization of the loan on a 10-year straight-line basis will commence on November 15, 2021. Matures October 15, 2022.	$	14,792		$		19,078
Paycheck Protection Loan. Interest is at 1% with payments deferred until October 10, 2020. Matures April 10, 2022. Loan and accrued interest forgiven in full on July 8, 2021.		0				1,940
Subordinated Promissory Note with related party. Interest at 10% and paid quarterly. Balance converted to equity in February 2021.		0				1,250
Real Estate Loan for a facility in North Dakota. Interest is at 5.75% with monthly principal and interest payment of $5,255 until October 3, 2023. Collateralized by land and property purchased with the loan.		126				167
Vehicle loans for three pickups. Interest at 8.59% with monthly principal and interest payments of $3,966. Loans paid in full in June 2021.		0				31
Note payable to the seller of Heat Waves. The note was garnished by the Internal Revenue Service ("IRS") in 2009 and is due on demand; paid in annual installments of $36,000 per agreement with the IRS. Loan paid in full in June 2021.		0				14
Total long-term debt		14,918				22,480
Less debt discount		0				(70	)
Less current portion		(2,057	)			(1,693	)
Long-term debt, net of debt discount and current portion	$	12,861			$	20,717

For the twelve months ending September 30,
2022	$	2,057
2023		12,853	$	2,263
2024		8		1,514
2025				1,801
2026				2,131
2027				240
Thereafter				1,341
Total	$	14,918	$	9,290

	Operating Leases			Finance Leases			Operating Leases			Finance Leases
For the twelve months ending September 30,
2022	$	859		$	28
2023		637			14		$	675		$	14
2024		548			12			583			12
2025		352			1			384			1
2026		269			0			269			-
Total future lease payments		2,665			55			1,911			27
Impact of discounting		(259	)		(3	)		(183	)		(2	)
Discounted value of lease obligations	$	2,406		$	52		$	1,728		$	25

						Weighted Average
				*Weighted Average*		*Remaining*
Warrants	*Shares*			*Exercise Price*		*Contractual Life (Years)*
Outstanding as of December 31, 2020		1,043,667		$	3.73		4.7
Issued		150,418			2.51		4.0
Expired		(2,000	)		10.50		-
Outstanding as of September 30, 2021		1,192,085		$	3.57		4.0

Exercisable as of September 30, 2021		1,041,667		$	3.72		3.9

					Weighted Average
			*Weighted Average*		*Remaining*
	*Shares*		*Exercise Price*		*Contractual Life (Years)*
Outstanding as of December 31, 2021		1,192,085	$	3.57		3.75
Issued		-		-		-
Expired		-		-		-
Outstanding as of September 30, 2022		1,192,085	$	3.57		3.00

Exercisable as of September 30, 2022		1,192,085	$	3.57		3.00

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)
Outstanding as of December 31, 2020		11,569		$	5.87		0.53
Forfeited or expired		(8,635	)		5.98		-
Outstanding as of September 30, 2021		2,934		$	5.55		0.35

Vested as of September 30, 2021		2,934		$	5.55		0.35
Exercisable as of September 30, 2021		2,934		$	5.55		0.35

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)
Outstanding as of December 31, 2021		1,334		$	5.55		0.42
Forfeited or expired		(1,334	)		5.55		-
Outstanding as of September 30, 2022		-		$	-		-

Vested as of September 30, 2022		-		$	-		-

Exercisable as of September 30, 2022		-		$	-		-

	For the Nine Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2021			2020			2022			2021
Operating:
Weighted-average lease term (years)		3.57			4.26			3.07			3.57
Weighted-average discount rate		6.09	%		6.08	%		6.38	%		6.09	%

Finance:
Weighted-average lease term (years)		2.36			2.26			1.99			2.36
Weighted-average discount rate		5.72	%		5.95	%		5.59	%		5.72	%

	Number of Shares			Weighted Average Grant Date Fair Value		Shares			Weighted Average Grant Date Fair Value
Restricted shares as of December 31, 2020		24,393		$	7.32
Restricted shares as of December 31, 2021							181,221		$	1.58
Granted		165,000			1.05		345,000			2.68
Vested		(6,505	)		7.94		(178,721	)		2.12
Forfeited		(1,667	)		8.92		(80,000	)		2.21
Restricted shares as of September 30, 2021		181,221		$	1.58
Restricted shares as of September 30, 2022							267,500		$	2.44

	Production Services			Completion and Other Services			Unallocated		Total			Production Services			Completion and Other Services			Unallocated		Total
For the Three Months Ended September 30, 2021:
For the Three Months Ended September 30, 2022:
Revenues	$	2,483		$	544		$	0	$	3,027		$	2,788		$	321		$	-	$	3,109
Cost of revenue		2,489			1,189			0		3,678
Cost of revenues													2,599			890			-		3,489
Segment profit (loss)												$	189		$	(569	)	$	-	$	(380	)

Depreciation and amortization												$	546		$	432		$	91	$	1,069
Capital expenditures												$	34		$	27		$	-	$	61
Identifiable assets⁽¹⁾												$	9,017		$	7,131		$	206	$	16,354

For the Three Months Ended September 30, 2021:
Revenues												$	2,483		$	544		$	-	$	3,027
Cost of revenues													2,489			1,189			-		3,678
Segment loss	$	(6	)	$	(645	)	$	0	$	(651	)	$	(6	)	$	(645	)	$	-	$	(651	)

Depreciation and amortization	$	639		$	562		$	101	$	1,302		$	639		$	562		$	101	$	1,302
Capital expenditures	$	77		$	68		$	8	$	153		$	77		$	68		$	8	$	153
Identifiable assets⁽¹⁾	$	11,906		$	10,460		$	614	$	22,980		$	11,906		$	10,460		$	614	$	22,980

For the Three Months Ended September 30, 2020:
Revenues	$	1,363		$	401		$	0	$	1,764
Cost of revenue		1,347			1,126			0	$	2,473
Segment profit (loss)	$	16		$	(725	)	$	0	$	(709	)

Depreciation and amortization	$	496		$	655		$	120	$	1,271
Capital expenditures	$	11		$	28		$	0	$	39
Identifiable assets ⁽¹⁾	$	13,042		$	13,444		$	1,047	$	27,533

	Production Services			Completion and Other Services			Unallocated		Total
For the Nine Months Ended September 30, 2021:
Revenues	$	6,556		$	4,701		$	0	$	11,257
Cost of revenue		6,802			5,680			0		12,482
Segment loss	$	(246	)	$	(979	)	$	0	$	(1,225	)

Depreciation and amortization	$	1,739		$	1,935		$	301	$	3,975
Capital expenditures	$	166		$	174		$	8	$	348
Identifiable assets⁽¹⁾	$	11,906		$	10,460		$	614	$	22,980

For the Nine Months Ended September 30, 2020:
Revenues	$	5,948		$	7,343		$	0	$	13,291
Cost of revenue		6,655			7,613			0	$	14,268
Segment loss	$	(707	)	$	(270	)		0	$	(977	)

Depreciation and amortization	$	1,813		$	1,869		$	295	$	3,977
Capital expenditures	$	170		$	174		$	0	$	344
Identifiable assets⁽¹⁾	$	13,042		$	13,444		$	1,047	$	27,533

	Production Services			Completion and Other Services			Unallocated		Total
For the Nine Months Ended September 30, 2022:
Revenues	$	8,645		$	6,497		$	-	$	15,142
Cost of revenues		7,976			6,724			-		14,700
Segment profit (loss)	$	669		$	(227	)	$	-	$	442

Depreciation and amortization	$	1,593		$	1,440		$	284	$	3,317
Capital expenditures	$	116		$	104		$	-	$	220
Identifiable assets⁽¹⁾	$	9,017		$	7,131		$	206	$	16,354

For the Nine Months Ended September 30, 2021:
Revenues	$	6,556		$	4,701		$	-	$	11,257
Cost of revenues		6,802			5,680			-		12,482
Segment loss	$	(246	)	$	(979	)	$	-	$	(1,225	)

Depreciation and amortization	$	1,739		$	1,935		$	301	$	3,975
Capital expenditures	$	166		$	174		$	8	$	348
Identifiable assets⁽¹⁾	$	11,906		$	10,460		$	614	$	22,980

	●	Constraints on us as a result of our indebtedness, including restrictions imposed on us under the terms of our ~~Credit~~Utica Facility agreement and our ability to generate sufficient cash flows to repay our debt obligations;
	●	~~Decreases~~Excessive fluctuations in the prices for crude oil and natural gas and uncertainties in global crude markets caused in part by the war in Ukraine which ~~would~~could likely result in exploration and production companies cutting back their capital expenditures for oil and gas well drilling which in turn would result in significantly reduced demand for our drilling completion services, thereby negatively affecting our revenues and results of operations;

	●	Weather and environmental conditions, including the potential of abnormally warm winters in our areas of operations that adversely impact demand for our completion services;
	●	~~Our capital requirements and uncertainty of obtaining additional funding, whether equity or debt, on terms acceptable to us;~~

	●	The impact of general economic conditions and supply chain shortages on the demand for oil and natural gas and the availability of capital which may impact our ability to perform services for our customers;
	●	The geographical diversity of our operations which adds significantly to our costs of doing business;
	●	Our history of losses and working capital deficits which, at times, have been significant;
	●	Our ability to retain key members of our senior management and key technical employees;

	●	Our ability to attract and retain employees, especially in our critical heating season, given tight labor ~~markets and the potential for pandemic related mandates;~~markets;
	●	The impact of environmental, health and safety and other governmental regulations, and of current or pending legislation or regulations, including pandemic related mandates, with which we and our customers must comply;

	●	Reductions of leased federally owned property for oil exploration and production in addition to increased state and local regulations on drilling activity;
	●	Developments in the global economy as well as any further pandemic risks ~~related to the COVID-19 virus~~ and resulting demand and supply for oil and natural gas;

	●	The price and volume volatility of our common ~~stock.~~stock;
	●	Litigation, including the current class action lawsuit, which could lead us to incur significant liabilities and costs or harm our reputation; and
	●	Other risks and uncertainties, including those listed under the section "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2021.

	For the Nine Months Ended September 30,
	2021			2021			2021			2020
	As Previously Restated			Adjustments			As Restated
Adjusted EBITDA*
Net (loss) income	$	(4,564	)	$	(402	)	$	(4,966	)	$	1,211
Add back:
Interest expense (including discontinued operations)		51			-			51			1,667
Deferred income tax expense		-			402			402			15
Depreciation and amortization (including discontinued operations)		3,981			-			3,981			3,996
EBITDA*		(532	)		-			(532	)		6,889
Add back (deduct):
Stock-based compensation		70			-			70			377
Severance and transition costs		7			-			7			139
Loss (gain) on disposal of equipment (including discontinued operations)		70			-			70			(34	)
Gain on debt restructuring		-			-			-			(11,916	)
Other (income) expense (including discontinued operations)		(3,668	)		-			(3,668	)		282
EBITDA related to discontinued operations		1			-			1			11
Adjusted EBITDA*	$	(4,052	)	$	-		$	(4,052	)	$	(4,252	)

	For the Nine Months Ended September 30,
	2021			2020
Net cash used in operating activities	$	(3,883	)	$	(2,295	)
Net cash (used in) provided by investing activities		(283	)		966
Net cash provided by financing activities		4,372			666
Net increase (decrease) in cash and cash equivalents		206			(663	)

Cash and cash equivalents, beginning of period		1,467			663

Cash and cash equivalents, end of period	$	1,673		$	-

	September 30, 2021		December 31, 2020
	(restated)				September 30, 2022			December 31, 2021
Current assets	$	7,002	$	4,880	$	3,638		$	5,593
Total assets		27,805		30,183		18,583			25,148
Current liabilities		4,493		4,574		7,914			12,532
Total liabilities		19,437		27,628		16,285			19,806
Working capital (current assets net of current liabilities)		2,509		306
Working capital deficit (current assets net of current liabilities)						(4,276	)		(6,939	)
Stockholders’ equity		8,368		2,555		2,298			5,342

Exhibit No.		Title
10.1		~~Eighth Amendment~~Convertible Subordinated Promissory Note dated July 15, 2022 of Enservco Corporation issued to Cross River Partners, LP (incorporated by reference to Exhibit 10.1 to the ~~Loan and Security Agreement and Waiver,~~Registrant's Current Report on Form 8-K filed on July 20, 2022).
10.2		Revolving Promissory Note dated asSeptember 22, 2022 of ~~November 12, 2021, by and among~~ Enservco Corporation a Delaware corporation, Dillco Fluid Service, Inc., a Kansas corporation, Heat Waves Hot Oil Service LLC, a Colorado limited liability company, Heat Waves Water Management LLC, a Colorado limited liability company, and Adler Hot Oil Service, LLC, a Delaware limited liability company, and East West Bank.(1)issued to Cross River Partners, LP (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed on September 28, 2022).
31.1*		Certification of Principal Executive ~~Officer and Interim Principal Financial~~ Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32**		Certification of Principal Executive Officer and ~~Interim~~ Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded with the Inline XBRL document)
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

	ENSERVCO CORPORATION


Date: ~~May 20,~~December 23, 2022		/s/ Richard A. Murphy
		Director and Executive Chairman (Principal Executive ~~Officer, Interim Principal Financial Officer and Interim Principal Accounting~~ Officer)


Date: December 23, 2022		/s/ Mark K. Patterson
		Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)