[PART I. FINANCIAL INFORMATION](index=4&type=section&id=Part%20I%20%E2%80%93%20Financial%20Information) This section details the company's unaudited condensed consolidated financial statements, management's analysis, market risk, and internal controls [ITEM 1. FINANCIAL STATEMENTS](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, stockholders' equity, and cash flows, along with explanatory notes [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's financial position, detailing assets, liabilities, and stockholders' equity at specific dates Condensed Consolidated Balance Sheets (in thousands) | Metric | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | Change (%) | | :----------------------------- | :-------------------------- | :-------------------------- | :--------- | | Total Assets | **$14,525** | **$19,838** | **-26.7%** | | Total Liabilities | **$13,283** | **$18,669** | **-28.9%** | | Total Stockholders' Equity | **$1,242** | **$1,169** | **+6.2%** | | Cash and cash equivalents | **$300** | **$35** | **+757.1%** | | Accounts receivable, net | **$1,363** | **$4,463** | **-69.5%** | | Property and equipment, net | **$7,652** | **$11,236** | **-31.9%** | | Total Current Liabilities | **$7,497** | **$10,241** | **-26.8%** | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section presents the company's financial performance over specific periods, including revenues, operating expenses, and net income or loss Condensed Consolidated Statements of Operations (in thousands) | Metric | 9 Months Ended Sep 30, 2023 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | Change (%) | | :---------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------- | | Total revenues | **$15,578** | **$15,142** | **+3.0%** | | Loss from operations | **$(5,148)** | **$(7,197)** | **+28.5%** | | Net loss | **$(6,574)** | **$(3,871)** | **+69.8%** | | Net loss per share - basic and diluted | **$(0.35)** | **$(0.34)** | **+2.9%** | | Gain on debt extinguishment | **$-** | **$4,277** | **-100.0%** | [Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) This section details changes in the company's equity accounts, reflecting share issuances, conversions, and net income or loss impacts Condensed Consolidated Statements of Stockholders' Equity (in thousands) | Metric | Sep 30, 2023 (in thousands) | Jan 1, 2023 (in thousands) | Change (%) | | :-------------------------- | :-------------------------- | :------------------------- | :--------- | | Total Stockholders' Equity | **$1,242** | **$1,169** | **+6.2%** | | Common Shares Outstanding | **25,586** | **11,829** | **+116.3%** | - Shares issued in February 2023 Offering: **3,900,000 shares**, contributing **$984,000** to additional paid-in capital [18](index=18&type=chunk) - Shares issued from March 2022 Convertible Note conversion: **2,275,000 shares** and **322,402 shares** [18](index=18&type=chunk)[81](index=81&type=chunk)[82](index=82&type=chunk) - Shares issued from July 2022 Convertible Note conversion: **2,400,000 shares** [18](index=18&type=chunk)[82](index=82&type=chunk) - Acquisition of OilServ, LLC assets through issuance of common stock: **2,645,220 shares** valued at **$951,000** [19](index=19&type=chunk)[100](index=100&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section outlines the company's cash inflows and outflows from operating, investing, and financing activities over specific periods Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | 9 Months Ended Sep 30, 2023 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | Change (in thousands) | | :-------------------------------------- | :--------------------------------------- | :--------------------------------------- | :-------------------- | | Net cash (used in) provided by operating activities | **$(100)** | **$150** | **$(250)** | | Net cash provided by investing activities | **$628** | **$141** | **$487** | | Net cash used in financing activities | **$(263)** | **$(229)** | **$(34)** | | Net Increase in Cash and Cash Equivalents | **$265** | **$62** | **$203** | | Cash and Cash Equivalents, end of period | **$300** | **$211** | **$89** | [Notes to the Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed explanations of the company's accounting policies, financial position, significant transactions, and segment performance [Note 1 – Basis of Presentation](index=11&type=section&id=Note%201%20%E2%80%93%20Basis%20of%20Presentation) The accompanying unaudited condensed consolidated financial statements are prepared in accordance with GAAP for interim financial information and Form 10-Q instructions, including all normal and recurring adjustments - The Company provides hot oiling and acidizing ("Production Services") and frac water heating ("Completion and Other Services") to the domestic onshore oil and natural gas industry [25](index=25&type=chunk) - Financial statements are unaudited and 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 [27](index=27&type=chunk) [Note 2 – Summary of Significant Accounting Policies](index=12&type=section&id=Note%202%20%E2%80%93%20Summary%20of%20Significant%20Accounting%20Policies) This note details the company's significant accounting policies, including its going concern basis, revenue recognition, and earnings per share - The Company generated net losses of **$3.0 million** for the three months and **$6.6 million** for the nine months ended September 30, 2023 [30](index=30&type=chunk) - As of September 30, 2023, the Company had cash and cash equivalents of **$300,000** and a working capital deficit of approximately **$2.5 million** [30](index=30&type=chunk) - The Company received net proceeds of **$3.0 million** from the February 2023 Offering and closed on **$1.1 million** of convertible debt financing in September 2023, with an additional **$562,500** in October 2023 [31](index=31&type=chunk)[32](index=32&type=chunk) - For the nine months ended September 30, 2023, revenues from two customers represented **28%** and **12%** of total revenues, respectively [35](index=35&type=chunk) - The Company recognized an impairment loss of **$250,000** for the nine months ended September 30, 2023, due to ceasing operations in North Dakota and reclassifying related assets as 'Assets held for sale' [41](index=41&type=chunk) - Outstanding warrants totaling **12,568,414** and **9,978,021** were excluded from EPS computation for the three and nine months ended September 30, 2023, respectively, as they were antidilutive [54](index=54&type=chunk) [Note 3 – Property and Equipment](index=18&type=section&id=Note%203%20%E2%80%93%20Property%20and%20Equipment) This note provides details on the company's property and equipment, including changes in net book value and depreciation expense Property and Equipment (in thousands) | Metric | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | Change (%) | | :-------------------------- | :-------------------------- | :-------------------------- | :--------- | | Property and equipment, net | **$7,652** | **$11,236** | **-31.9%** | | Accumulated depreciation | **$(44,192)** | **$(46,925)** | **+5.8%** | - Depreciation expense for the nine months ended September 30, 2023, was **$2.8 million**, a **15% decrease** compared to **$3.1 million** in the same period of 2022, primarily due to selling and disposing of idle trucks and vehicles and the sale of the Tioga property [69](index=69&type=chunk)[156](index=156&type=chunk) [Note 4 – Intangible Assets](index=18&type=section&id=Note%204%20%E2%80%93%20Intangible%20Assets) This note details the company's intangible assets, including changes in net book value and amortization expense Intangible Assets (in thousands) | Metric | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | Change (%) | | :-------------------- | :-------------------------- | :-------------------------- | :--------- | | Intangible assets, net | **$18** | **$182** | **-90.1%** | | Accumulated amortization | **$(1,049)** | **$(885)** | **-18.5%** | - Amortization expense for the nine months ended September 30, 2023, was approximately **$163,000** [70](index=70&type=chunk) - The intangible assets are expected to be fully amortized within the next **three months** [70](index=70&type=chunk) [Note 5 – Debt](index=19&type=section&id=Note%205%20%E2%80%93%20Debt) This note provides a comprehensive overview of the company's debt obligations, including various facilities, convertible notes, and changes due to conversions and new issuances Debt (in thousands) | Debt Type | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | Change (in thousands) | | :------------------------------------------ | :-------------------------- | :-------------------------- | :-------------------- | | Utica Facility | **$4,106** | **$5,379** | **$(1,273)** | | LSQ Facility | **$836** | **$2,945** | **$(2,109)** | | March 2022 Convertible Note (related party) | **$-** | **$1,200** | **$(1,200)** | | July 2022 Convertible Note (related party) | **$-** | **$1,200** | **$(1,200)** | | November 2022 Convertible Note (related party) | **$1,200** | **$1,200** | **$0** | | September 2023 Convertible Notes (related party) | **$1,113** | **$-** | **$1,113** | | Real Estate Loan | **$8** | **$54** | **$(46)** | | **Total long-term debt** | **$7,263** | **$11,978** | **$(4,715)** | | Less debt discount and debt issuance costs | **$(364)** | **$(548)** | **$184** | | Less current portion | **$(2,312)** | **$(4,409)** | **$2,097** | | **Long-term debt, net of discount and current portion** | **$4,587** | **$7,021** | **$(2,434)** | - The Company paid off and satisfied the **$1.0 million** EWB Obligation in April 2023 as part of the Refinancing [72](index=72&type=chunk) - Cross River converted approximately **$1.1 million** principal of the March 2022 Convertible Note into **2,275,000 shares** on March 28, 2023, and the remaining **$148,950** into **322,402 shares** on June 30, 2023 [81](index=81&type=chunk)[82](index=82&type=chunk) - The entire **$1.2 million** principal of the July 2022 Convertible Note was converted into **2,400,000 shares** on June 30, 2023, with an associated five-year warrant for **2,400,000 shares** [82](index=82&type=chunk) - In September 2023, the Company issued **$1.1125 million** in new convertible promissory notes to related parties, accruing interest at **16.00%** annually [83](index=83&type=chunk)[84](index=84&type=chunk)[87](index=87&type=chunk) - An additional **$562,500** was purchased in October 2023 [84](index=84&type=chunk)[87](index=87&type=chunk) [Note 6 – Income Taxes](index=22&type=section&id=Note%206%20%E2%80%93%20Income%20Taxes) This note details the company's income tax provisions, including deferred tax benefits and liabilities - The Company recognized a **$16,000** deferred tax benefit for the nine months ended September 30, 2023 [92](index=92&type=chunk) - As of September 30, 2023, the estimated amount of deferred tax liabilities that could reverse without an offsetting deferred tax asset was **$257,000** [92](index=92&type=chunk) [Note 7 – Commitments and Contingencies](index=23&type=section&id=Note%207%20%E2%80%93%20Commitments%20and%20Contingencies) This note outlines the company's lease commitments and significant legal contingencies, including an ongoing class action lawsuit Future Minimum Lease Payments (in thousands) | Year | Operating Leases | Finance Leases | | :-------------------------- | :--------------- | :------------- | | 2024 | **$523** | **$14** | | 2025 | **$384** | **$2** | | 2026 | **$269** | **$-** | | **Total future lease payments** | **$1,176** | **$16** | - A class action complaint was filed on May 22, 2022, alleging securities law violations related to the Company's 2021 Form 10-Q filings [95](index=95&type=chunk) - The Company filed a motion to dismiss on February 10, 2023, believing the complaint is baseless [96](index=96&type=chunk)[97](index=97&type=chunk) - The Company has Director's and Officer's insurance coverage for such claims [97](index=97&type=chunk) [Note 8 – Stockholders' Equity](index=25&type=section&id=Note%208%20%E2%80%93%20Stockholders%27%20Equity) This note details changes in stockholders' equity, including impacts from equity offerings, debt conversions, asset acquisitions, and NYSE compliance issues - The February 2023 Offering generated **$3.0 million** in net proceeds from the sale of common stock, pre-funded warrants, and common warrants [98](index=98&type=chunk) - Cross River converted approximately **$1.1 million** of the March 2022 Convertible Note and the entire **$1.2 million** of the July 2022 Convertible Note into a total of **4,997,402 shares** of common stock and warrants [99](index=99&type=chunk) - The Company acquired oilfield equipment assets from OilServ, LLC by issuing **2,645,220 shares** of common stock, valued at **$1,057,500** [100](index=100&type=chunk) - The Company received a NYSE notice of noncompliance as its equity balance fell below **$2.0 million** as of December 31, 2022, and has until **June 9, 2024**, to regain compliance [102](index=102&type=chunk)[103](index=103&type=chunk) [Note 9 – Restricted Stock and Stock Options](index=27&type=section&id=Note%209%20%E2%80%93%20Restricted%20Stock%20and%20Stock%20Options) This note outlines the company's restricted stock and stock option activity, including related compensation expenses and outstanding awards Stock-based Compensation Expense (in thousands) | Metric | 9 Months Ended Sep 30, 2023 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | | :------------------------------------------ | :--------------------------------------- | :--------------------------------------- | | Stock-based compensation expense (restricted stock) | **$224** | **$655** | | Stock-based compensation expense (stock options) | **$27** | **$-** | - As of September 30, 2023, there were **115,000 restricted shares** outstanding [106](index=106&type=chunk) - On September 11, 2023, **500,000 stock options** were granted to key employees, with **50%** vesting on January 1, 2024, and the remainder on January 1, 2025 [110](index=110&type=chunk) [Note 10 – Segment Reporting](index=28&type=section&id=Note%2010%20%E2%80%93%20Segment%20Reporting) This note provides financial information for the company's two operating segments: Production Services and Completion and Other Services - The Company's reportable operating segments are Production Services and Completion and Other Services [111](index=111&type=chunk) Segment Revenues (in thousands) | Segment | Q3 2023 Revenues (in thousands) | Q3 2022 Revenues (in thousands) | YTD Sep 2023 Revenues (in thousands) | YTD Sep 2022 Revenues (in thousands) | | :---------------------- | :------------------------------ | :------------------------------ | :----------------------------------- | :----------------------------------- | | Production Services | **$2,623** | **$2,788** | **$8,375** | **$8,645** | | Completion and Other Services | **$314** | **$321** | **$7,203** | **$6,497** | | **Total Revenues** | **$2,937** | **$3,109** | **$15,578** | **$15,142** | Segment Profit (Loss) (in thousands) | Segment | Q3 2023 Segment Profit (Loss) (in thousands) | Q3 2022 Segment Profit (Loss) (in thousands) | YTD Sep 2023 Segment Profit (Loss) (in thousands) | YTD Sep 2022 Segment Profit (Loss) (in thousands) | | :---------------------- | :--------------------------------------- | :--------------------------------------- | :------------------------------------------ | :------------------------------------------ | | Production Services | **$(528)** | **$189** | **$1,034** | **$669** | | Completion and Other Services | **$(121)** | **$(569)** | **$145** | **$(227)** | | **Total Segment (Loss) Profit** | **$(649)** | **$(380)** | **$1,179** | **$442** | - Completion and Other Services revenues increased by **$706,000**, or **11%**, for the nine months ended September 30, 2023, primarily due to earlier than usual completions activity in Colorado [149](index=149&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=31&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's analysis of the company's financial condition, results of operations, liquidity, and capital resources [Cautionary Note Regarding Forward-Looking Statements](index=31&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements) This section highlights various risks and uncertainties that could impact future results, including funding, market conditions, and litigation - Key risks include the ability to obtain working capital and additional funding, constraints from indebtedness, fluctuations in crude oil and natural gas prices, increased competition, ability to implement price increases, rising interest rates, weather conditions, general economic conditions, and litigation [122](index=122&type=chunk) [Recent Developments](index=33&type=section&id=Recent%20Developments) This section details recent significant events, including the issuance of new convertible promissory notes to various parties - On September 1, 2023, the Company issued convertible promissory notes totaling **$800,000** to Cross River and Kevin Chesser [124](index=124&type=chunk) - On September 11, 2023, the Company issued additional September 2023 Convertible Notes totaling **$312,500** to Angel Capital Partners, LP and Equigen, II, LLC [125](index=125&type=chunk) - In October 2023, Cross River, Richard Murphy (CEO), Equigen, and Angel Capital purchased an additional **$562,500** in New Convertible Notes [126](index=126&type=chunk) [Recent Market Conditions](index=33&type=section&id=Recent%20Market%20Conditions) This section discusses recent market conditions, including trends in oil prices, rig count, and their impact on the company's operations - WTI crude oil price averaged **$77 per barrel** for the nine months ended September 30, 2023, compared to **$98 per barrel** for the comparable period last year [127](index=127&type=chunk) - Domestic rigs in operation decreased to **623** as of September 30, 2023, from **765** as of September 30, 2022 [127](index=127&type=chunk) - The Company expects improved activity despite the uncertain impact of the political environment on oil exploration and production, increased inflation, and rising interest costs [128](index=128&type=chunk) [OVERVIEW](index=34&type=section&id=OVERVIEW) Enservco Corporation provides hot oiling and acidizing (Production Services) and frac water heating (Completion and Other Services) to the domestic onshore oil and natural gas industry - Enservco Corporation provides hot oiling and acidizing ("Production Services") and frac water heating ("Completion and Other Services") to the domestic onshore oil and natural gas industry [131](index=131&type=chunk) - The Company serves customers in several major domestic oil and gas areas, including the Denver-Julesburg Basin, Bakken area, San Juan Basin, Marcellus and Utica Shale areas, Jonah area, Green River and Powder River Basins, and the Eagle Ford Shale and East Texas Oilfield [132](index=132&type=chunk) [RESULTS OF OPERATIONS](index=34&type=section&id=RESULTS%20OF%20OPERATIONS) This section analyzes the company's operational results, including revenue, segment profit, net loss, and Adjusted EBITDA, considering seasonality [Executive Summary](index=34&type=section&id=Executive%20Summary) This executive summary provides a high-level overview of the company's financial performance, highlighting key revenue, profit, and loss trends - The Company's business is highly seasonal, with more than half of revenues generated in the colder seasons (winter and spring) [134](index=134&type=chunk) Executive Summary (in thousands) | Metric | Q3 2023 (in thousands) | Q3 2022 (in thousands) | YTD Sep 2023 (in thousands) | YTD Sep 2022 (in thousands) | | :-------------------------- | :--------------------- | :--------------------- | :-------------------------- | :-------------------------- | | Total revenues | **$2,937** | **$3,109** | **$15,578** | **$15,142** | | Segment profit (loss) | **$(649)** | **$(380)** | **$1,179** | **$442** | | Net loss | **$(3,016)** | **$(3,076)** | **$(6,574)** | **$(3,871)** | | Loss from operations | **$(2,600)** | **$(2,638)** | **$(5,148)** | **$(7,197)** | | Adjusted EBITDA (non-GAAP) | **$(1,528)** | **$(1,292)** | **$(1,542)** | **$(2,643)** | [Segment Overview](index=35&type=section&id=Segment%20Overview) This section provides a detailed breakdown of revenues and segment profit for Production Services and Completion and Other Services Segment Overview (in thousands) | Segment | YTD Sep 2023 Revenues (in thousands) | YTD Sep 2022 Revenues (in thousands) | YTD Sep 2023 Segment Profit (Loss) (in thousands) | YTD Sep 2022 Segment Profit (Loss) (in thousands) | | :---------------------- | :----------------------------------- | :----------------------------------- | :------------------------------------------ | :------------------------------------------ | | Production Services | **$8,375** | **$8,645** | **$1,034** | **$669** | | Completion and Other Services | **$7,203** | **$6,497** | **$145** | **$(227)** | | **Total** | **$15,578** | **$15,142** | **$1,179** | **$442** | - Completion and Other Services revenues increased by **$706,000**, or **11%**, for the nine months ended September 30, 2023, primarily due to earlier than usual completions activity occurring in Colorado [149](index=149&type=chunk) [Historical Seasonality of Revenues](index=37&type=section&id=Historical%20Seasonality%20of%20Revenues) This section discusses the significant seasonal fluctuations in the company's revenues, with higher activity in colder quarters - **70%** of the Company's 2022 revenues (**60%** of 2021 revenues) were generated during the first and fourth quarters [153](index=153&type=chunk) - Revenues generated during the cooler first and fourth quarters are typically significantly higher than revenues during the second and third quarters [152](index=152&type=chunk) [Direct Operating Expenses](index=37&type=section&id=Direct%20Operating%20Expenses) This section analyzes direct operating expenses, including labor, fuel, and maintenance, for the current and prior periods - Direct operating expenses for the three and nine months ended September 30, 2023, were similar to the same periods in 2022 [154](index=154&type=chunk) [Sales, General, and Administrative Expenses](index=37&type=section&id=Sales%2C%20General%2C%20and%20Administrative%20Expenses) This section reviews sales, general, and administrative expenses for the current and prior reporting periods - Sales, general, and administrative expenses for the three and nine months ended September 30, 2023, were similar to the same periods in 2022 [155](index=155&type=chunk) [Depreciation and Amortization](index=37&type=section&id=Depreciation%20and%20Amortization) This section details depreciation and amortization expenses, highlighting changes due to asset disposals and sales Depreciation and Amortization (in thousands) | Metric | Q3 2023 (in thousands) | Q3 2022 (in thousands) | YTD Sep 2023 (in thousands) | YTD Sep 2022 (in thousands) | | :-------------------------- | :--------------------- | :--------------------- | :-------------------------- | :-------------------------- | | Depreciation and amortization | **$905** | **$1,069** | **$2,821** | **$3,317** | - Depreciation and amortization expense decreased by **$164,000 (15%)** for Q3 2023 and **$496,000 (15%)** for YTD Sep 2023, primarily due to the selling and disposing of idle trucks and vehicles and the sale of the Tioga property [156](index=156&type=chunk) [Loss from Operations](index=37&type=section&id=Loss%20from%20Operations) This section analyzes the company's loss from operations, noting period-over-period changes and contributing factors Loss from Operations (in thousands) | Metric | Q3 2023 (in thousands) | Q3 2022 (in thousands) | YTD Sep 2023 (in thousands) | YTD Sep 2022 (in thousands) | | :------------------- | :--------------------- | :--------------------- | :-------------------------- | :-------------------------- | | Loss from operations | **$(2,600)** | **$(2,638)** | **$(5,148)** | **$(7,197)** | - Loss from operations for the nine months ended September 30, 2023, improved by **$2.0 million**, or **28%**, compared to the same period in 2022 [157](index=157&type=chunk) [Interest Expense](index=37&type=section&id=Interest%20Expense) This section details interest expense, explaining increases due to financing facilities, convertible notes, and rising interest rates Interest Expense (in thousands) | Metric | Q3 2023 (in thousands) | Q3 2022 (in thousands) | YTD Sep 2023 (in thousands) | YTD Sep 2022 (in thousands) | | :------------- | :--------------------- | :--------------------- | :-------------------------- | :-------------------------- | | Interest expense | **$(476)** | **$(448)** | **$(1,584)** | **$(1,053)** | - Interest expense for the nine months ended September 30, 2023, increased by **$531,000**, or **50%**, compared to the same period in 2022, due to the 2022 Financing Facilities, convertible promissory notes, and rising interest rates [158](index=158&type=chunk) [NON-GAAP FINANCIAL MEASURES](index=38&type=section&id=NON-GAAP%20FINANCIAL%20MEASURES) This section presents non-GAAP financial measures, primarily Adjusted EBITDA, to provide additional insights into operating performance [Adjusted EBITDA](index=38&type=section&id=Adjusted%20EBITDA) This section provides a reconciliation and analysis of Adjusted EBITDA for the current and prior reporting periods Adjusted EBITDA (in thousands) | Metric | Q3 2023 (in thousands) | Q3 2022 (in thousands) | YTD Sep 2023 (in thousands) | YTD Sep 2022 (in thousands) | | :-------------------------- | :--------------------- | :--------------------- | :-------------------------- | :-------------------------- | | Adjusted EBITDA (non-GAAP) | **$(1,528)** | **$(1,292)** | **$(1,542)** | **$(2,643)** | [Use of Non-GAAP Financial Measures](index=38&type=section&id=Use%20of%20Non-GAAP%20Financial%20Measures) Adjusted EBITDA is used by management and investors to evaluate operating performance by excluding non-cash items and items not useful in assessing ongoing operations - Adjusted EBITDA excludes non-cash items (depreciation, amortization, stock-based compensation, impairment losses) and items management does not consider useful in assessing ongoing operating performance (income taxes, gains or losses on sale of assets, severance and transition costs, non-recurring legal expense) [163](index=163&type=chunk)[164](index=164&type=chunk) - EBITDA and Adjusted EBITDA are used to compare operating performance on a consistent basis by removing the impact of certain items that do not directly reflect core operations [165](index=165&type=chunk) [Changes in Adjusted EBITDA](index=39&type=section&id=Changes%20in%20Adjusted%20EBITDA) This section analyzes the period-over-period changes in Adjusted EBITDA, attributing them to shifts in segment profits and expenses - Adjusted EBITDA for the three months ended September 30, 2023, decreased by **$236,000**, or **18%**, compared to the same period in 2022 [167](index=167&type=chunk) - Adjusted EBITDA for the nine months ended September 30, 2023, improved by **$1.1 million**, or **42%**, compared to the same period in 2022 [167](index=167&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=40&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) This section discusses the company's liquidity position, capital resources, and strategies for managing cash flows and funding operations [Cash Flows](index=40&type=section&id=Cash%20Flows) This section provides a detailed breakdown of cash flows from operating, investing, and financing activities Cash Flows (in thousands) | Cash Flow Activity | YTD Sep 30, 2023 (in thousands) | YTD Sep 30, 2022 (in thousands) | Change (in thousands) | | :-------------------------------------- | :------------------------------ | :------------------------------ | :-------------------- | | Net cash (used in) provided by operating activities | **$(100)** | **$150** | **$(250)** | | Net cash provided by investing activities | **$628** | **$141** | **$487** | | Net cash used in financing activities | **$(263)** | **$(229)** | **$(34)** | | **Net increase in cash and cash equivalents** | **$265** | **$62** | **$203** | | Cash and Cash Equivalents, end of period | **$300** | **$211** | **$89** | - The decrease in cash from operating activities was primarily due to a year-over-year reduction in net working capital changes [170](index=170&type=chunk) - The increase in cash from investing activities was primarily due to a year-over-year increase in net proceeds from disposals and purchases of property and equipment [171](index=171&type=chunk) [Overview (Liquidity and Capital Resources)](index=41&type=section&id=Overview%20%28Liquidity%20and%20Capital%20Resources%29) This overview summarizes the company's funding sources, outstanding debt, and recent financing activities impacting liquidity - As of September 30, 2023, outstanding principal loan balances on indebtedness were **$7.3 million** with a weighted average interest rate of **13.08%** [175](index=175&type=chunk) - The February 2023 Offering generated net proceeds of **$3.0 million** [176](index=176&type=chunk) - Approximately **$2.3 million** in related party convertible debt (March 2022 and July 2022 Convertible Notes) was converted into common stock and warrants [177](index=177&type=chunk) - In September 2023, the Company issued **$1.1 million** in new convertible promissory notes to related parties, with an additional **$562,500** purchased in October 2023 [179](index=179&type=chunk)[180](index=180&type=chunk) [Liquidity](index=42&type=section&id=Liquidity) This section details the company's available liquidity and the ongoing need for additional capital to support operations - As of September 30, 2023, available liquidity was comprised of cash and cash equivalents balance of **$300,000** [182](index=182&type=chunk) - The Company will need to raise additional capital for its ongoing operations, with no assurance that such financing would be available on favorable terms, or at all [182](index=182&type=chunk) [Working Capital](index=42&type=section&id=Working%20Capital) This section analyzes the company's working capital position, highlighting changes and contributing factors Working Capital (in thousands) | Metric | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | Change (in thousands) | | :------------------------------------------ | :-------------------------- | :-------------------------- | :-------------------- | | Working capital deficit | **$(2,544)** | **$(4,281)** | **$1,737** | - The **$1.8 million** decrease in working capital deficit was primarily attributable to reductions of short-term debt obligations under the 2022 Financing Facilities [183](index=183&type=chunk) [Outlook](index=42&type=section&id=Outlook) This section provides the company's outlook on future performance, considering market conditions, strategic initiatives, and operational improvements - Revenues are primarily derived from services within the domestic oil and natural gas industry, subject to geopolitical influences, demand variances, drilling activities, and cold weather [184](index=184&type=chunk) - The Company has strengthened its balance sheet through the Refinancing and the February 2023 Offering, and is focused on controlling general and administrative expenses and costs during slower revenue-generating seasons [186](index=186&type=chunk) - The Company believes there will be a continued demand for fossil fuels and its services, which improve operating efficiencies of oil wells, barring a sudden decline in crude oil prices or a substantial reduction in domestic rigs in operation [186](index=186&type=chunk) [Capital Commitments and Obligations](index=42&type=section&id=Capital%20Commitments%20and%20Obligations) This section details the company's capital commitments and obligations, including various debt facilities and lease payments - Capital obligations include the 2022 Financing Facilities, the November 2022 Convertible Note, and various September 2023 Convertible Notes, along with scheduled principal payments under term loans, debt obligations, finance leases, and operating leases [187](index=187&type=chunk) [OFF-BALANCE SHEET ARRANGEMENTS](index=43&type=section&id=OFF-BALANCE%20SHEET%20ARRANGEMENTS) As of September 30, 2023, the company had no significant off-balance sheet arrangements - As of September 30, 2023, the Company had no significant off-balance sheet arrangements [188](index=188&type=chunk) [CRITICAL ACCOUNTING POLICIES AND ESTIMATES](index=43&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20ESTIMATES) There have been no changes in the company's critical accounting policies since the filing of its Annual Report on Form 10-K for the year ended December 31, 2022 - There have been no changes in critical accounting policies since the Annual Report on Form 10-K for the year ended December 31, 2022 [189](index=189&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=43&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) As a smaller reporting company, Enservco Corporation is not required to provide quantitative and qualitative disclosures about market risk under SEC regulations - The Company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk [190](index=190&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=43&type=section&id=Item%204.%20Controls%20and%20Procedures) This section addresses the effectiveness of the company's disclosure controls and procedures, noting identified material weaknesses and remediation efforts - Disclosure controls and procedures were not effective as of September 30, 2023, due to material weaknesses in internal controls over financial reporting [192](index=192&type=chunk) - Material weaknesses relate to the accounting for a warrant, Employee Retention Credits, and income taxes in connection with a change in control during the first quarter of 2021 [192](index=192&type=chunk) - Management is in the process of implementing measures to improve internal control over financial reporting to remediate these material weaknesses [193](index=193&type=chunk) - Notwithstanding the identified material weaknesses, management believes the unaudited condensed consolidated financial statements fairly present the financial condition, results of operations, and cash flows [192](index=192&type=chunk) [PART II. OTHER INFORMATION](index=44&type=section&id=Part%20II) This section presents other pertinent information, including legal proceedings, risk factors, equity sales, and exhibits [ITEM 1. LEGAL PROCEEDINGS](index=44&type=section&id=Item%201.%20Legal%20Proceedings) This section details ongoing legal proceedings, specifically a class action lawsuit alleging securities law violations - A class action complaint was filed on May 22, 2022, alleging securities law violations related to the Company's 2021 Form 10-Q filings [195](index=195&type=chunk) - The Company filed a motion to dismiss on February 10, 2023, citing a lack of specific facts and evidence, and believes the complaint is baseless and without merit [196](index=196&type=chunk)[197](index=197&type=chunk) - The Company has Director's and Officer's insurance coverage to defend against such claims [197](index=197&type=chunk) [ITEM 1A. RISK FACTORS](index=44&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously set forth in the company's Annual Report on Form 10-K for the year ended December 31, 2022 - There have been no material changes to the 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, 2022 [198](index=198&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=44&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) All recent sales of unregistered equity securities and their use of proceeds have been previously reported by the company - All recent sales of unregistered securities have been previously reported [199](index=199&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=44&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities during the period - None [200](index=200&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=44&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's operations - Not applicable [201](index=201&type=chunk) [ITEM 5. OTHER INFORMATION](index=44&type=section&id=Item%205.%20Other%20Information) No other information is reported under this item for the period - None [202](index=202&type=chunk) [ITEM 6. EXHIBITS](index=45&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including various agreements and officer certifications - Exhibits include Convertible Promissory Notes dated September 1, 2023, an Asset Purchase Agreement dated September 11, 2023, a Note Purchase Agreement effective September 11, 2023, and certifications from the Principal Executive Officer and Principal Financial Officer [204](index=204&type=chunk)

Enservco Corporation (NYSE:ENSV) Q2 2023 Earnings Conference Call August 15, 2023 9:00 AM ET Company Participants Jay Pfeiffer – Investor Relations Rich Murphy – Executive Chairman Mark Patterson – Chief Financial Officer Conference Call Participants Jeff Grampp – Alliance Global Partners Operator Greetings. Welcome to Enservco's Second Quarter Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] P ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ Commission File Number 001-36335 ENSERVCO CORPORATION Delaware 84-0811316 (State or other jurisdiction of incorporation or organization) (IRS Employe ...

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 or For the transition period from ________ to ________ Commission File Number 001-36335 ENSERVCO CORPORATION (Exact name of registrant as specified in its charter) Delaware 84-0811316 (State or other jur ...

Financial Performance - Revenues for the year ended December 31, 2022 increased by $6.3 million, or 41%, to $21.6 million compared to $15.3 million in 2021, driven by increased demand for services due to higher oil and gas prices [156]. - Total segment profit for the year ended December 31, 2022 increased by $3.4 million, or 171%, to $1.4 million compared to a loss of $2.0 million in 2021, primarily due to increased demand for services [156]. - Net loss for the year ended December 31, 2022 was $5.6 million, or $0.48 per share, a decrease of $2.5 million, or 31%, from a net loss of $8.1 million, or $0.74 per share in 2021 [159]. - Adjusted EBITDA for the year ended December 31, 2022 was a loss of $2.6 million, an improvement from a loss of $6.1 million in 2021 [160]. - The company recognized a loss from operations of $8.4 million for the year ended December 31, 2022, an improvement from a loss of $11.4 million in 2021 [186]. - Adjusted EBITDA loss decreased by $3.4 million, or 56%, to a loss of $2.6 million for the year ended December 31, 2022, compared to a loss of $6.1 million in 2021 [197]. Revenue Segments - Production Services segment revenues increased by $2.2 million, or 24%, to $11.2 million for the year ended December 31, 2022, accounting for 52% of total revenues [170]. - Completion and Other Services segment revenues increased by $4.1 million, or 65%, to $10.4 million for the year ended December 31, 2022, accounting for 48% of total revenues [175]. - Hot oiling revenues increased by $2.0 million, or 24%, to $10.4 million for the year ended December 31, 2022, attributed to higher crude oil prices [172]. - Acidizing revenues increased by $212,000, or 37%, to $779,000 for the year ended December 31, 2022, driven by increased activity levels and demand [173]. Operating Expenses - Direct operating expenses increased by $2.9 million, or 17%, for the year ended December 31, 2022, compared to 2021, primarily due to increased Production and Completion service activity [182]. - Sales, general and administrative expenses rose by $690,000, or 16%, from the previous year, mainly due to increased professional services and stock-based compensation [183]. - Depreciation and amortization expense decreased by $868,000, or 17%, year-over-year, due to the disposal of idle trucks and vehicles [184]. - Interest expense increased to $1.4 million in 2022 from $57,000 in 2021, attributed to the 2022 Financing Facilities [187]. Assets and Liabilities - Current assets increased to $5.96 million in 2022 from $5.59 million in 2021, while total assets decreased to $19.84 million from $25.15 million [199]. - As of December 31, 2022, the company had outstanding principal loan balances of approximately $12.0 million with a weighted average interest rate of 12.13% [198]. - As of December 31, 2022, the Company had a working capital deficit of $4.3 million, improved from a deficit of $6.9 million as of December 31, 2021 [212]. - The Company has scheduled principal payments under various term loans and debt obligations as part of its capital commitments [223]. Cash Flow - Cash used in operating activities for the year ended December 31, 2022 was $2.2 million, a decrease of $2.6 million compared to $4.8 million for the year ended December 31, 2021 [214]. - Cash provided by financing activities for the year ended December 31, 2022 was $1.8 million, down from $3.7 million in the previous year [216]. - The Company raised net proceeds of $3.2 million through the issuance of 3,900,000 shares of common stock in February 2023 [209]. Future Outlook - The Company expects continued demand for services and exploration activity in the oil and gas sector in a stable commodity price environment [164]. - The Company plans to continue expanding operations through organic growth and increasing service volumes to existing customers [219]. - The demand for the Company's services is influenced by fluctuations in oil prices, which have been affected by geopolitical tensions and inflation [221]. - The Company believes that recent financing and cash from operations will provide sufficient liquidity for at least the next twelve months [211]. Accounting and Tax - The Company recognizes revenue for certain projects over time based on the number of days during the reporting period and the agreed-upon price as work progresses [232]. - The Company records contingent liabilities for probable and estimable future liabilities, particularly related to lawsuits, and recognizes a liability for the estimated amount [233]. - The Company analyzes warrant instruments under ASC 480-10 to determine their classification, with all issued warrants classified as permanent equity [234]. - The Company uses a Black-Scholes model to determine the fair value of certain warrants, with expected volatility based on historical data [235]. - Deferred tax liabilities and assets are recognized based on differences between tax basis and reported amounts, measured using enacted tax rates expected to apply in future years [236]. - The Company recognizes tax benefits from uncertain tax positions only if it is more likely than not that the position will be sustained upon examination [237]. - Interest and penalties associated with tax positions are recorded as income tax expense in the period assessed [238]. - The Company utilizes a cash forecast model to evaluate future cash flows to fund operations for a period extending twelve months or more [239]. - The Company is classified as a smaller reporting company and is not required to provide certain market risk disclosures [240].

Financial Performance - Revenues for the three months ended September 30, 2022 increased by approximately $82,000, or 3%, compared to the same period in 2021, while revenues for the nine months ended September 30, 2022 increased by approximately $3.9 million, or 35% [167]. - Segment profit for the nine months ended September 30, 2022 increased by approximately $1.7 million, or 136%, compared to the segment loss incurred for the same period in 2021 [168]. - Net loss for the three months ended September 30, 2022 was approximately $3.1 million, or a loss of $0.27 per basic and diluted share, compared to net income of approximately $369,000, or $0.03 per basic and diluted share, for the same period in 2021 [171]. - Net loss for the nine months ended September 30, 2022, was approximately $3.9 million, a decrease from a net loss of approximately $5.0 million for the same period in 2021, representing a 22% improvement [172]. - Adjusted EBITDA for the nine months ended September 30, 2022, was a loss of approximately $2.7 million, an improvement of approximately $1.4 million compared to a loss of approximately $4.1 million for the same period in 2021 [174]. - Adjusted EBITDA for the three months ended September 30, 2022, increased by approximately $222,000, or 14%, compared to the same period in 2021 [215]. Revenue Breakdown - Production Services revenues for the three months ended September 30, 2022, increased by approximately $305,000, or 12%, to $2.8 million compared to $2.5 million for the same period in 2021 [182]. - Completion and Other Services revenues for the nine months ended September 30, 2022, increased by approximately $1.8 million, or 38%, to $6.5 million compared to $4.7 million for the same period in 2021 [186]. - Hot oiling revenues for the nine months ended September 30, 2022, increased by approximately $1.8 million, or 29%, to approximately $8.0 million compared to approximately $6.2 million for the same period in 2021 [183]. - 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%, compared to the same period in 2021 [191]. - Completion and Other Services segment revenues in the Central USA Region increased by approximately $195,000, or 513%, for the three months ended September 30, 2022, compared to the same period in 2021 [194]. - Completion and Other Services segment revenues in the Eastern USA Region decreased by approximately $35,000, or 49%, for the three months ended September 30, 2022, compared to the same period in 2021 [195]. Expenses and Losses - Sales, general, and administrative expenses for the three months ended September 30, 2022 increased by approximately $187,000, or 21%, compared to the same period in 2021 [169]. - Other expense for the three months ended September 30, 2022 was approximately $438,000 compared to other income of approximately $2.7 million for the same period in 2021 [170]. - Segment loss for the three months ended September 30, 2022 decreased by approximately $271,000, or 42%, compared to the same period in 2021 [168]. - Direct operating expenses decreased by approximately $189,000, or 5%, for the three months ended September 30, 2022, compared to the same period in 2021 [199]. - Depreciation and amortization expense decreased by approximately $233,000, or 18%, to $1.1 million for the three months ended September 30, 2022, compared to the same period in 2021 [201]. - The Company recognized a loss from operations of $2.6 million for the three months ended September 30, 2022, compared to a loss of $2.9 million for the same period in 2021 [203]. Liquidity and Financing - The Company entered into a revolving credit facility with Cross River, issuing a $750,000 revolving promissory note, with $225,000 outstanding as of September 30, 2022 [155]. - As of September 30, 2022, the company's available liquidity was $736,000, consisting of $211,000 in cash and cash equivalents and $525,000 of unused availability through the Cross River Revolver Note [233]. - The company issued a $1.2 million convertible subordinated note in March 2022 and a $1.2 million convertible subordinated promissory note in July 2022, both with six-year terms [226][227]. - The company has capital obligations primarily related to its 2022 Financing Facilities, which mature through 2027, totaling $2.4 million in aggregate principal amount of convertible notes issued to Cross River [239]. - As of September 30, 2022, the Company had outstanding principal loan balances of approximately $9.3 million with a weighted average interest rate of 12.42% per year [217]. Market Conditions - WTI crude oil price averaged approximately $98 per barrel for the nine months ended September 30, 2022, compared to an average of approximately $60 per barrel in the comparable period last year [159]. - The price of crude oil increased from $55 per barrel in March 2021 to $98 per barrel as of September 30, 2022, positively impacting demand for the company's services [236]. - The number of domestic oil rigs in operation increased from 417 in March 2021 to 763 as of September 30, 2022, with a further rise to 780 rigs by the filing date of this report [236]. - The USA domestic rig count increased to 763 rigs in operation as of September 30, 2022, compared to 521 rigs at the same time a year ago, indicating increased activity levels [175]. - The company anticipates that fluctuations in demand for its services will continue to be cyclical, influenced by geopolitical factors and seasonal variations in the energy sector [235]. Working Capital and Cash Flow - As of September 30, 2022, the company had a working capital deficit of approximately $4.3 million, improved from a deficit of approximately $6.9 million as of December 31, 2021 [234]. - Cash provided by operating activities for the nine months ended September 30, 2022, was approximately $150,000, an increase of approximately $4.1 million compared to cash used in operating activities of approximately $3.9 million for the same period in 2021 [218]. - Cash provided by investing activities for the nine months ended September 30, 2022, was approximately $141,000, an increase of approximately $424,000 compared to cash used in investing activities of approximately $283,000 for the same period in 2021 [219]. - Cash used in financing activities for the nine months ended September 30, 2022, was approximately $229,000, a decrease of approximately $4.6 million compared to cash provided by financing activities of approximately $4.4 million for the same period in 2021 [220]. Accounting and Reporting - As of September 30, 2022, the company had no significant off-balance sheet arrangements that could materially affect its financial condition or results of operations [241]. - There have been no changes in the company's critical accounting policies since the filing of the Annual Report for the year ended December 31, 2021 [242]. - The company is classified as a smaller reporting company and is not required to provide additional market risk disclosures [243].

Revenue Growth - Revenues for the three months ended June 30, 2022 increased by approximately $363,000, or 12%, compared to the same period in 2021, driven by a recovery in USA domestic rig counts and expansion into East Texas [162]. - Revenues for the six months ended June 30, 2022 increased by approximately $3.8 million, or 46%, compared to the same period in 2021, with an average USA domestic rig count increase of 60% from 423 to 675 rigs [163]. - For the six months ended June 30, 2022, total revenues increased by approximately $3.8 million, or 46%, to $12.0 million compared to $8.2 million for the same period in 2021 [176]. - Production Services revenues increased approximately $1.8 million, or 44%, to $5.9 million for the six months ended June 30, 2022, driven by increased hot oiling activity [178]. - Hot oiling revenues for the six months ended June 30, 2022 increased approximately $1.6 million, or 39%, to approximately $5.5 million compared to $3.9 million for the same period in 2021 [179]. - Acidizing revenues for the six months ended June 30, 2022 increased by approximately $264,000, or 194%, to approximately $400,000 from approximately $136,000 [180]. - Completion and Other Services revenues for the six months ended June 30, 2022 increased approximately $2.0 million, or 49%, to $6.2 million compared to $4.2 million for the same period in 2021 [182]. - Production Services segment revenues in the Central USA Region for the six months ended June 30, 2022 increased approximately $1.7 million, or 63%, compared to the same period in 2021 [187]. - Completion and Other Services segment revenues in the Rocky Mountain Region for the six months ended June 30, 2022 increased approximately $2.2 million, or 80%, compared to the same period in 2021 [189]. Profit and Loss - Segment profit for the six months ended June 30, 2022 increased by approximately $1.4 million, or 243%, compared to the segment loss incurred for the same period in 2021 [164]. - Net loss for the three months ended June 30, 2022 was approximately $3.9 million, or a loss of $0.34 per share, compared to a net loss of approximately $1.4 million, or a loss of $0.13 per share, for the same period in 2021 [167]. - Net loss for the six months ended June 30, 2022 was approximately $795,000, or a loss of $0.07 per share, compared to a net loss of approximately $5.3 million, or a loss of $0.52 per share, for the same period in 2021 [168]. - Adjusted EBITDA for the three months ended June 30, 2022 was a loss of approximately $1.6 million, consistent with the loss in the same period in 2021 [169]. - The Company recognized a loss from operations of $3.6 million for the three months ended June 30, 2022, compared to a loss of $3.0 million for the same period in 2021, while the loss for the six months ended June 30, 2022 was $4.6 million, an improvement from a loss of $5.3 million in 2021 [200]. - Adjusted EBITDA for the six months ended June 30, 2022 increased by approximately $1.2 million, or 46%, compared to the same period in 2021, primarily due to improvement in segment profit [212]. Expenses - Sales, general, and administrative expenses for the three months ended June 30, 2022 increased by approximately $566,000, or 57%, primarily due to professional fees related to the restatement of Form 10-Qs [165]. - Direct operating expenses increased by approximately $222,000, or 6%, for the three months ended June 30, 2022, compared to the same period in 2021, and increased by approximately $2.4 million, or 27%, for the six months ended June 30, 2022 [196]. - Sales, general, and administrative expenses for the six months ended June 30, 2022 increased approximately $679,000, or 34%, to $2.7 million [197]. - Interest expense for the three months ended June 30, 2022 increased approximately $422,000, and for the six months ended June 30, 2022 increased approximately $561,000 compared to the same periods in 2021 [201]. - Other income for the three months ended June 30, 2022 was approximately $57,000, down from approximately $1.1 million for the same period in 2021, and for the six months ended June 30, 2022 was approximately $92,000 compared to approximately $1.0 million in 2021 [202]. Cash Flow and Financing - Cash provided by operating activities for the six months ended June 30, 2022 was approximately $1.3 million, compared to cash used of approximately $2.1 million for the same period in 2021, reflecting a $3.4 million improvement [215]. - Cash provided by investing activities for the six months ended June 30, 2022 was approximately $203,000, compared to cash used of approximately $130,000 in 2021, an increase of approximately $333,000 [216]. - Cash used in financing activities for the six months ended June 30, 2022 was approximately $1.3 million, a decrease of approximately $5.9 million compared to cash provided of approximately $4.6 million in 2021 [217]. - As of June 30, 2022, the Company had outstanding principal loan balances of approximately $8.1 million with a weighted average interest rate of 11.50% per year [214]. - The Company completed a refinancing transaction, paying $8.4 million in cash to East West Bank and agreeing to pay 5.00% of net proceeds from Receivables Financing, capped at $1.0 million [220]. - Heat Waves entered into a Master Lease Agreement with Utica Leaseco for a $6.225 million equipment-collateralized loan, requiring 51 monthly payments starting at $168,075 [221]. - Under the Receivables Financing with LSQ Funding Group, the Company can factor accounts receivable up to 85%, with a maximum of $10.0 million [222]. - The Company issued a $1.2 million convertible subordinated note to Cross River Partners, accruing interest at 7% per annum, with quarterly interest payments for the first year [223]. - As of June 30, 2022, the Company had available liquidity of $320,000, consisting of $308,000 in cash and $12,000 under the LSQ Facility [229]. - The working capital deficit improved to approximately $3.9 million as of June 30, 2022, from $6.9 million as of December 31, 2021, primarily due to the refinancing [230]. Market Conditions - The average WTI crude oil price for the six months ended June 30, 2022 was approximately $100 per barrel, compared to approximately $57 per barrel in the same period last year [154]. - The price of crude oil increased from $55 per barrel in March 2021 to $108 per barrel as of June 30, 2022, impacting demand for the Company's services [232]. - The domestic rig count rose from 417 in March 2021 to 770 as of the filing date, indicating a correlation between rig count and demand for services [232]. - The Company experienced increased demand for its services due to improved micro and macro-economic conditions, despite ongoing impacts from the pandemic and geopolitical tensions [154]. - The Company anticipates capital requirements for operating expenses, debt servicing, and capital expenditures for the remainder of 2022 [228]. - The Company believes it is positioned for improved operational results barring a decline in crude oil prices or a reduction in domestic rig counts [234].

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the fiscal year ended December 31, 2020 ☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from _______ to ______ Commission file number: 001-36335 ENSERVCO CORPORATION (Exact name of registrant as specified in its charter) Delaware 84-0811316 (State or other jurisdiction of incorpo ...

Company Overview - ENSERVCO is a leading provider of well enhancement and water transfer services to domestic onshore oil and gas customers[5] - The company serves over 360 customers, with over 145 under Master Service Agreements[7] - ENSERVCO's primary services include frac water heating, hot oiling, acidizing, and water transfer[5] Financial Performance - Total revenue for the first six months of 2019 was $33.4 million, up 19% year-over-year[22] - Adjusted EBITDA for the first six months of 2019 was $5.1 million, up 16% year-over-year[22] - Full year 2018 revenue was $46.9 million, a 27% increase year-over-year[23] - Adjusted EBITDA for 2018 was $4.9 million, a 29% increase year-over-year[23] Service Lines - Frac water heating accounted for 58% of 2018 revenue[13, 18] - Hot oiling accounted for 25% of 2018 revenue[11, 18] - Water transfer accounted for 9% of 2018 revenue, growing from 6% in 2017[16, 18, 19] - Acidizing accounted for 6% of 2018 revenue[15, 18] Fleet and Expansion - The company's revenue capacity has more than doubled since 2014 due to fleet investments and acquisitions[20] - The company has 52 frac water heating units, 70 hot oil trucks, and 7 acid transports[11, 13, 15]

PART I – FINANCIAL INFORMATION This part contains the unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations [ITEM 1. FINANCIAL STATEMENTS](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements of Enservco Corporation and its subsidiaries, including balance sheets, statements of operations, statements of stockholders' equity, and statements of cash flows, along with detailed notes explaining significant accounting policies, business combinations, debt, equity, and segment performance for the periods ended June 30, 2019, and December 31, 2018 [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section presents the company's financial position, detailing assets, liabilities, and equity at specific points in time Condensed Consolidated Balance Sheet Summary | Metric | June 30, 2019 (in thousands) | December 31, 2018 (in thousands) | | :----- | :--------------------------- | :------------------------------- | | Total Assets | $48,672 | $49,021 | | Total Liabilities | $42,699 | $44,419 | | Total Stockholders' Equity | $5,973 | $4,602 | | Current Assets | $10,629 | $13,530 | | Current Liabilities | $4,148 | $7,452 | - **Right-of-use assets for financing ($777k) and operating ($4,899k)** were recognized as of June 30, 2019, reflecting the adoption of new lease accounting standards[11](index=11&type=chunk)[67](index=67&type=chunk)[114](index=114&type=chunk) [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section outlines the company's revenues, expenses, and net income or loss over specific reporting periods Condensed Consolidated Statements of Operations Summary | Metric (Six Months Ended June 30) | 2019 (in thousands) | 2018 (in thousands) | | :-------------------------------- | :------------------ | :------------------ | | Revenues | $33,446 | $28,214 | | (Loss) Income from Operations | $1,524 | $698 | | Net (Loss) Income | $1,094 | $(1,241) | | Net (Loss) Income per Share - Basic | $0.02 | $(0.02) | - Discontinued operations resulted in a **loss of $(390)k** for the six months ended June 30, 2018, but had **no impact in 2019**[15](index=15&type=chunk)[90](index=90&type=chunk)[191](index=191&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) This section details changes in equity, including common shares, accumulated deficit, and other equity components Condensed Consolidated Statements of Stockholders' Equity Summary | Metric | June 30, 2019 (in thousands) | June 30, 2018 (in thousands) | | :----- | :--------------------------- | :--------------------------- | | Total Stockholders' Equity | $5,973 | $9,023 | | Accumulated Deficit | $(16,264) | $(12,842) | | Common Shares Outstanding | 55,329 | 54,426 | - **An opening balance adjustment of $108k** was made to accumulated earnings (deficit) at January 1, 2019[19](index=19&type=chunk)[114](index=114&type=chunk)[227](index=227&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section summarizes cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows Summary | Cash Flow Activity (Six Months Ended June 30) | 2019 (in thousands) | 2018 (in thousands) | | :-------------------------------------------- | :------------------ | :------------------ | | Net cash provided by operating activities | $5,854 | $6,525 | | Net cash provided by (used in) investing activities | $439 | $(1,203) | | Net cash used in financing activities | $(6,044) | $(5,478) | | Net Increase (Decrease) in Cash and Cash Equivalents | $249 | $(156) | | Cash and Cash Equivalents, end of period | $506 | $235 | - Cash provided by investing activities significantly improved in 2019, moving from a **net use of $1.2 million in 2018 to a net provision of $439k**, primarily due to proceeds from equipment sales related to discontinued operations and reduced investment in water transfer equipment[22](index=22&type=chunk)[221](index=221&type=chunk) [Notes to the Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations of significant accounting policies, business combinations, debt, equity, and segment performance [Note 1 – Basis of Presentation](index=11&type=section&id=Note%201%20%E2%80%93%20Basis%20of%20Presentation) This note describes the company's business, services, and the basis for preparing the unaudited interim financial statements - Enservco provides frac water heating, hot oiling, acidizing (well enhancement), and water transfer/treatment services to the domestic onshore oil and natural gas industry[26](index=26&type=chunk) - The financial statements are unaudited and prepared in accordance with GAAP for interim financial information, derived from subsidiaries including Heat Waves, Adler, and Heat Waves Water Management[27](index=27&type=chunk)[28](index=28&type=chunk)[29](index=29&type=chunk) [Note 2 - Summary of Significant Accounting Policies](index=12&type=section&id=Note%202%20-%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the key accounting principles and policies applied, including revenue recognition and lease accounting - The Company adopted ASC 842, Leases, on January 1, 2019, resulting in the **recognition of approximately $2.4 million in new right-of-use assets and lease liabilities** on the consolidated balance sheet[67](index=67&type=chunk)[114](index=114&type=chunk) - An **impairment charge of approximately $127k** was recorded related to salt water disposal wells expected to be divested in 2019[41](index=41&type=chunk) - Revenue recognition follows ASC Topic 606, with revenue recognized when services are provided, typically for short-term contracts without multiple performance obligations[43](index=43&type=chunk)[44](index=44&type=chunk) [Note 3 - Property and Equipment](index=19&type=section&id=Note%203%20-%20Property%20and%20Equipment) This note details the composition and net carrying value of the company's property and equipment Property and Equipment Details | Category | December 31, 2018 (in thousands) | | :------- | :------------------------------- | | Trucks and vehicles | $59,535 | | Water transfer equipment | $4,952 | | Other equipment | $961 | | Buildings and improvements | $2,822 | | Land | $378 | | Disposal wells | $400 | | Total property and equipment | $69,048 | | Accumulated depreciation | $(35,991) | | Property and equipment, net | $33,057 | [Note 4 – Business Combinations](index=19&type=section&id=Note%204%20%E2%80%93%20Business%20Combinations) This note describes the acquisition of Adler Hot Oil Service and related settlement agreements - Enservco acquired Adler Hot Oil Service, LLC on October 26, 2018, for a **gross purchase price of $12.5 million**, plus working capital adjustments, to expand frac water heating and hot oiling services[72](index=72&type=chunk) - A **Settlement Agreement on April 4, 2019**, resolved disputes related to the Adler acquisition, waiving earn-out and indemnity holdback payments and reducing the **Seller Subordinated Note from $4.8 million to $4.5 million**[74](index=74&type=chunk) - **Gains totaling approximately $1.25 million** from the changes in fair value of the Indemnity Holdback Payment, Earn-Out Payment, and reduction in the Subordinated Note were recorded in Other Income (Expense)[76](index=76&type=chunk) [Note 5 – Intangible Assets](index=23&type=section&id=Note%205%20%E2%80%93%20Intangible%20Assets) This note provides information on the company's intangible assets, including customer relationships and patents Intangible Assets Summary | Intangible Asset | June 30, 2019 (in thousands) | December 31, 2018 (in thousands) | | :--------------- | :--------------------------- | :------------------------------- | | Customer relationships | $626 | $626 | | Patents and trademarks | $441 | $441 | | Total intangible assets | $1,067 | $1,067 | | Accumulated amortization | $(136) | $(34) | | Net carrying value | $931 | $1,033 | - **Amortization expense for intangible assets was approximately $102k** for the six months ended June 30, 2019, with useful lives estimated at **five years**[86](index=86&type=chunk) [Note 6 – Discontinued Operations](index=24&type=section&id=Note%206%20%E2%80%93%20Discontinued%20Operations) This note details the financial impact and assets/liabilities related to discontinued business segments - The Dillco water hauling business ceased operations effective November 1, 2018, and its fixed assets were auctioned, resulting in a **gain of $129k**[88](index=88&type=chunk) - An **impairment charge of $130k** was recorded related to land and building sold subsequent to December 31, 2018[88](index=88&type=chunk) Discontinued Operations Financials | Metric (Discontinued Operations) | June 30, 2019 (in thousands) | December 31, 2018 (in thousands) | | :------------------------------- | :--------------------------- | :------------------------------- | | Total major classes of assets | $37 | $1,041 | | Total liabilities | $0 | $44 | - **Loss from discontinued operations for the six months ended June 30, 2018, was $(390)k**, with **no loss reported for the same period in 2019**[90](index=90&type=chunk) [Note 7 – Debt](index=26&type=section&id=Note%207%20%E2%80%93%20Debt) This note outlines the company's debt obligations, including credit facilities and maturity schedules - The Company has a **$37 million senior secured revolving credit facility with East West Bank, maturing August 10, 2020**, with an **outstanding principal balance of approximately $31.9 million** at June 30, 2019[92](index=92&type=chunk)[93](index=93&type=chunk) - **A payment default occurred on July 1, 2019, due to borrowing in excess of available credit, which was subsequently waived via a Third Amendment that also increased interest rates and reduced allowable capital expenditures**[93](index=93&type=chunk) Debt Maturity Schedule | Debt Maturity (excluding Credit Facility) | Amount (in thousands) | | :---------------------------------------- | :-------------------- | | 2020 | $144 | | 2021 | $98 | | 2022 | $2,064 | | 2023 | $60 | | 2024 | $24 | | Thereafter | $0 | | Total | $2,390 | [Note 8 – Fair Value Measurements](index=29&type=section&id=Note%208%20%E2%80%93%20Fair%20Value%20Measurements) This note describes the fair value hierarchy and measurements for financial instruments like interest rate swaps Fair Value Measurements of Financial Instruments | Financial Instrument | June 30, 2019 (Fair Value, in thousands) | December 31, 2018 (Fair Value, in thousands) | | :------------------- | :--------------------------------------- | :--------------------------------------- | | Interest rate swap liability | $18 (Level 2) | $75 (asset, Level 2) | | Earn-Out Payment liability | - | $44 (Level 3) | | Indemnity Holdback Payment liability | - | $887 (Level 3) | - The **fair value of the interest rate swap is estimated using a discounted cash flow model with market-based observable inputs, classified as Level 2**[103](index=103&type=chunk) [Note 9 – Income Taxes](index=30&type=section&id=Note%209%20%E2%80%93%20Income%20Taxes) This note explains the company's income tax position, including deferred tax assets and effective tax rates - **Management recorded a full valuation allowance to reduce its net deferred tax assets to zero**[111](index=111&type=chunk) - **Income tax expense for the six months ended June 30, 2019, was approximately $314k**, which reduced the gross deferred tax asset and a like amount from the valuation allowance[112](index=112&type=chunk) - The **effective tax rate was approximately 5% for the six months ended June 30, 2019, compared to -3% in 2018**, primarily due to state income taxes, permanent differences, and the valuation allowance[194](index=194&type=chunk) [Note 10 – Commitments and Contingencies](index=31&type=section&id=Note%2010%20%E2%80%93%20Commitments%20and%20Contingencies) This note details lease commitments, legal proceedings, and other contingent liabilities - **The Company adopted ASC 842, Leases, on January 1, 2019, recognizing $2.4 million in right-of-use assets and lease liabilities, with a cumulative-effect adjustment to retained earnings of $108k**[114](index=114&type=chunk) Lease Commitments Schedule | Lease Commitments (Twelve Months Ending June 30) | Operating Leases (in thousands) | Financing Leases (in thousands) | | :----------------------------------------------- | :------------------------------ | :------------------------------ | | 2020 | $1,096 | $275 | | 2021 | $1,041 | $239 | | 2022 | $933 | $191 | | 2023 | $644 | - | | 2024 | $613 | - | | Thereafter | $717 | - | | Discounted value of lease obligations | $4,902 | $638 | - A **civil lawsuit regarding patent infringement (Colorado Case) against Enservco and Heat Waves was dismissed on March 15, 2019, without any finding of wrongdoing**[124](index=124&type=chunk)[235](index=235&type=chunk) [Note 11 – Stockholders' Equity](index=34&type=section&id=Note%2011%20%E2%80%93%20Stockholders'%20Equity) This note provides information on warrants and other components of stockholders' equity Warrants Activity Summary | Warrants Activity (June 30, 2019) | Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (Years) | | :-------------------------------- | :----- | :------------------------------ | :-------------------------------------------------- | | Outstanding | 30,000 | $0.70 | 2.0 | | Exercisable | 30,000 | $0.70 | 2.0 | - **Cross River exercised 1,612,902 warrants on June 29, 2018, for $500k, which was used to reduce subordinated debt**[128](index=128&type=chunk)[212](index=212&type=chunk) [Note 12 – Stock Options and Restricted Stock](index=35&type=section&id=Note%2012%20%E2%80%93%20Stock%20Options%20and%20Restricted%20Stock) This note details stock option and restricted stock activity and related compensation costs Stock Option Activity Summary | Stock Option Activity (June 30, 2019) | Shares | Weighted Average Exercise Price | | :------------------------------------ | :----- | :------------------------------ | | Outstanding | 2,173,499 | $0.73 | | Exercisable | 2,098,998 | $0.74 | - **No stock options were granted during the three and six months ended June 30, 2019 or 2018**[132](index=132&type=chunk) - **Stock-based compensation costs for stock options were $71k for the six months ended June 30, 2019, and for restricted stock were $97k for the same period**[135](index=135&type=chunk)[139](index=139&type=chunk) Restricted Stock Activity Summary | Restricted Stock Activity (June 30, 2019) | Number of Shares | Weighted Average Grant Date Fair Value | | :---------------------------------------- | :--------------- | :------------------------------------- | | Restricted shares at December 31, 2018 | 836,667 | $0.98 | | Granted | 1,123,000 | $0.27 | | Restricted shares at June 30, 2019 | 1,857,166 | $0.51 | [Note 13- Segment Reporting](index=38&type=section&id=Note%2013-%20Segment%20Reporting) This note presents financial information by reportable business segments, including revenues and profit/loss - Enservco operates in two reportable business segments: Well Enhancement Services (frac water heating, hot oiling, acidizing) and Water Transfer Services (moving water for well completion)[141](index=141&type=chunk)[142](index=142&type=chunk)[143](index=143&type=chunk) Segment Revenues | Segment Revenues (Six Months Ended June 30) | 2019 (in thousands) | 2018 (in thousands) | | :------------------------------------------ | :------------------ | :------------------ | | Well Enhancement Services | $31,151 | $26,290 | | Water Transfer Services | $2,295 | $1,924 | | Total Revenues | $33,446 | $28,214 | Segment Profit (Loss) | Segment Profit (Loss) (Six Months Ended June 30) | 2019 (in thousands) | 2018 (in thousands) | | :----------------------------------------------- | :------------------ | :------------------ | | Well Enhancement Services | $9,789 | $7,299 | | Water Transfer Services | $(1,177) | $(12) | | Unallocated & Other | $(442) | $(326) | - **Well Enhancement Services revenue in the Rocky Mountain Region increased by $4.7 million (29%) for the six months ended June 30, 2019**, primarily due to the Adler acquisition[177](index=177&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=41&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective and analysis of Enservco Corporation's financial condition and results of operations for the three and six months ended June 30, 2019 and 2018, covering an executive summary, industry overview, detailed segment results, liquidity, capital resources, and critical accounting policies [Forward-Looking Statements](index=41&type=section&id=Forward-Looking%20Statements) This section highlights forward-looking statements and associated risks regarding future financial performance and operations - The report contains forward-looking statements regarding planned capital expenditures, future cash flows, borrowings, acquisitions, financial position, and business strategy[153](index=153&type=chunk) - Key risks include capital requirements, indebtedness, volatility of oil and natural gas prices, adverse weather, reliance on limited customers, and regulatory changes[153](index=153&type=chunk) [OVERVIEW](index=42&type=section&id=OVERVIEW) This section provides a general description of the company's oil field services and operational footprint - Enservco provides oil field services, including Well Enhancement (frac water heating, hot oiling, acidizing) and Water Transfer services, through its subsidiaries[155](index=155&type=chunk) - The Company operates a fleet of over 450 specialized trucks and equipment, serving major domestic oil and gas areas across multiple regions[155](index=155&type=chunk) [RESULTS OF OPERATIONS](index=42&type=section&id=RESULTS%20OF%20OPERATIONS) This section analyzes the company's financial performance, including revenue, net income, and segment results - **Revenues for the six months ended June 30, 2019, increased by $5.2 million (19%) to $33.4 million, driven by an 18% increase in Well Enhancement revenue and a 19% increase in Water Transfer revenue**[156](index=156&type=chunk) - **Net income for the six months ended June 30, 2019, was $1.1 million ($0.02 per share), a significant improvement from a net loss of $1.2 million ($0.02 per share) in the prior year, partly due to a $1.2 million gain on settlement related to the Adler acquisition**[158](index=158&type=chunk) - **Adjusted EBITDA for the six months ended June 30, 2019, increased by $726k to $5.3 million**, compared to $4.6 million in the same period last year, primarily due to improved segment profit[159](index=159&type=chunk)[203](index=203&type=chunk) - **The Water Transfer segment experienced a loss of approximately $1.2 million for the six months ended June 30, 2019**, primarily due to a **severe cold weather event in Wyoming** that caused crew downtime and significant cost overruns[172](index=172&type=chunk) - **Interest expense increased by $531k (53%) for the six months ended June 30, 2019**, due to higher average borrowings related to the Adler acquisition and increased interest rates on floating rate debt[190](index=190&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=51&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) This section discusses the company's ability to meet its financial obligations and fund operations through cash flow and credit facilities - The Company relies on cash flow from operations, revolving credit agreements, and equity/debt offerings to meet liquidity needs[210](index=210&type=chunk) - **At June 30, 2019, the outstanding principal loan balance under the Credit Facility was approximately $31.9 million, and the Company had borrowed $753k in excess of the maximum available, leading to a payment default that was subsequently waived**[205](index=205&type=chunk)[211](index=211&type=chunk) Balance Sheet Summary | Balance Sheet Summary | June 30, 2019 (in thousands) | December 31, 2018 (in thousands) | | :-------------------- | :--------------------------- | :------------------------------- | | Working Capital | $6,481 | $6,078 | | Stockholders' Equity | $5,973 | $4,602 | - **Available liquidity at June 30, 2019, was $506k**, comprised entirely of cash, with **zero availability on the Credit Facility** due to borrowing exceeding collateral[216](index=216&type=chunk) - The Company is optimistic about increasing cash flows through asset utilization and deployment in high-demand areas, aiming for organic growth and diversified high-margin services[223](index=223&type=chunk) [OFF-BALANCE SHEET ARRANGEMENTS](index=55&type=section&id=OFF-BALANCE%20SHEET%20ARRANGEMENTS) This section discloses any significant off-balance sheet arrangements impacting the company's financial position - **As of June 30, 2019, the Company had no significant off-balance sheet arrangements that materially affect its financial condition or results of operations**[226](index=226&type=chunk) [CRITICAL ACCOUNTING POLICIES AND ESTIMATES](index=55&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20ESTIMATES) This section outlines key accounting policies and estimates that require significant management judgment - **The Company adopted ASC Topic 842, Leases, on January 1, 2019, which required the recognition of $2.4 million in right-of-use assets and lease liabilities on the balance sheet**[227](index=227&type=chunk) - **A cumulative-effect adjustment of approximately $108k was made to retained earnings at January 1, 2019**, due to the adoption of the new lease accounting standard[227](index=227&type=chunk) - **There have been no other changes in the Company's critical accounting policies since December 31, 2018**[228](index=228&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=55&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) As a smaller reporting company, Enservco Corporation is exempt from providing detailed quantitative and qualitative disclosures about market risk in this report - **The Company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk**[229](index=229&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=55&type=section&id=Item%204.%20Controls%20and%20Procedures) This section outlines the evaluation of the company's disclosure controls and procedures, concluding their effectiveness as of June 30, 2019, and discusses changes in internal control related to the adoption of new lease accounting standards [Disclosure Controls and Procedures](index=55&type=section&id=Disclosure%20Controls%20and%20Procedures) This section evaluates the effectiveness of the company's disclosure controls and procedures - **The Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of June 30, 2019**[230](index=230&type=chunk) [Changes in Internal Control over Financial Reporting](index=55&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) This section reports on any material changes in internal control over financial reporting during the period - **Changes were implemented to processes and internal controls related to accounting for leases due to the adoption of ASC 842, Leases, effective January 1, 2019**[232](index=232&type=chunk) - **No other material changes in internal control over financial reporting occurred during the quarter covered by the report**[233](index=233&type=chunk) PART II This part includes legal proceedings, risk factors, and other information required for the quarterly report [ITEM 1. LEGAL PROCEEDINGS](index=56&type=section&id=Item%201.%20Legal%20Proceedings) This section reports on the dismissal of a civil lawsuit against Enservco and Heat Waves regarding patent infringement, with no finding of wrongdoing - **A civil lawsuit (Colorado Case) alleging patent infringement against Enservco and Heat Waves was dismissed in its entirety on March 15, 2019, without any finding of wrongdoing**[235](index=235&type=chunk) - **Heat-On-The-Fly, LLC (HOTF) dismissed claims with prejudice for one patent and without prejudice for another, agreeing not to sue Enservco or Heat Waves in the future for the latter based on prior services**[236](index=236&type=chunk) [ITEM 1A. RISK FACTORS](index=56&type=section&id=Item%201A.%20Risk%20Factors) This section incorporates by reference the risk factors from the company's latest annual report and adds an additional risk factor concerning the reliance on key management personnel - **The Company's risk factors are primarily set forth in its Annual Report on Form 10-K for the year ended December 31, 2018**[238](index=238&type=chunk) - **An additional risk factor highlights the Company's dependence on key members of senior management (Ian Dickinson, Kevin Kersting, Marjorie Hargrave), whose loss could disrupt business operations**[238](index=238&type=chunk)[239](index=239&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=57&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section states that there were no unregistered sales of equity securities or use of proceeds to report - **No unregistered sales of equity securities or use of proceeds to report**[241](index=241&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=57&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section states that there were no defaults upon senior securities to report - **No defaults upon senior securities to report**[242](index=242&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=57&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section states that there are no mine safety disclosures to report - **No mine safety disclosures to report**[243](index=243&type=chunk) [ITEM 5. OTHER INFORMATION](index=57&type=section&id=Item%205.%20Other%20Information) This section states that there is no other information to report - **No other information to report**[244](index=244&type=chunk) [ITEM 6. EXHIBITS](index=58&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the quarterly report, including certifications, amendments to loan agreements, and XBRL documents - **Exhibits include certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act, the Third Amendment to Loan and Security Agreement and Waiver, and various XBRL documents**[246](index=246&type=chunk) [SIGNATURES](index=59&type=section&id=SIGNATURES) This section contains the signatures of the Principal Executive Officer and Chief Executive Officer, Ian Dickinson, and the Principal Financial Officer and Chief Financial Officer, Marjorie Hargrave, certifying the report - **The report was signed on August 14, 2019, by Ian Dickinson, Principal Executive Officer and Chief Executive Officer, and Marjorie Hargrave, Principal Financial Officer and Chief Financial Officer**[249](index=249&type=chunk)