1. Organization and Background of Business

Description of Business

We are an independent provider of supply chain management and logistics solutions designed to drive efficiencies and reduce costs for the oil and natural gas industry. We manufacture and provide patented proppant management systems that unload, store and deliver proppant at oil and natural gas well sites. The systems are designed to address the challenges associated with transferring large quantities of proppant to the well site, including the cost and management of last mile logistics.

The systems are deployed in many of the most active oil and natural gas basins in the U.S., including the Permian Basin, the Eagle Ford Shale, the SCOOP/STACK Formations, the Haynesville Shale and the Marcellus and Utica Shales.

We are also developing an independent, unit-train capable, high speed transload facility in Oklahoma. Commercial operations commenced in January 2018 and we expect to complete the initial phase one of construction by August 2018. In July 2017, we entered into a seven-year contract with a leading STACK exploration and production company to provide proppant transloading service at the facility.

We also provide remote monitoring of proppant inventory from the source mine to well site through our Railtronix™ and PropView® inventory management systems. Our customers rely on this data to manage distribution of proppant along their supply chain.

Initial Public Offering

Solaris Oilfield Infrastructure, Inc. (“Solaris Inc.” or the “Company”) was incorporated as a Delaware corporation in February 2017 for the purpose of completing an initial public offering of equity (the “IPO” or the “Offering”) and related transactions. On May 11, 2017, in connection with the Offering, Solaris Inc. became a holding company whose sole material asset consists of units in Solaris Oilfield Infrastructure, LLC (“Solaris LLC Units”). Solaris Inc. became the managing member of Solaris Oilfield Infrastructure, LLC (“Solaris LLC”) and is responsible for all operational, management and administrative decisions relating to Solaris LLC's business. Solaris Inc. consolidates the financial results of Solaris LLC and its subsidiaries and reports non-controlling interest related to the portion of Solaris LLC Units not owned by Solaris Inc., which will reduce net income (loss) attributable to the holders of Solaris Inc.’s Class A stock.

On May 17, 2017, Solaris Inc. completed the Offering of 10,100,000 shares of the Class A common stock, par value $0.01 per share (“Class A common stock”), at a price to the public of $12.00 per share ($11.28 net of underwriting discounts and commissions). After deducting underwriting discounts and commissions payable by Solaris Inc., Solaris Inc. received net proceeds of approximately $113.9 million. After deducting offering expenses of approximately $2.8 million, Solaris Inc. received approximately $111.1 million. Solaris Inc. contributed all of the net proceeds of the IPO to Solaris LLC in exchange for Solaris LLC Units. Solaris LLC used the net proceeds (i) to fully repay borrowings under its credit facility of $5.5 million, (ii) to pay approximately $3.1 million in cash bonuses to certain employees and consultants and (iii) to distribute approximately $25.8 million to its then-existing members (the “Original Investors”) as partial consideration for the recapitalization of their membership interests in Solaris LLC in connection with the IPO. Solaris LLC has used and intends to continue to use the remaining proceeds for general corporate purposes, including funding the remainder of its 2017 capital program, the majority of which we expect will be used to manufacture additional systems for our fleet and advance construction of the Kingfisher Facility.

Reorganization Transactions

In connection with the IPO, we completed a series of reorganization transactions on May 17, 2017 (the "Reorganization Transactions"), including:

Solaris LLC's limited liability company agreement was amended and restated to, among other things, appoint Solaris Inc. as sole managing member, and all of the membership interests in Solaris LLC held by the Original Investors were converted into (i) a single class of units in Solaris LLC, referred to as "Solaris LLC Units," representing in the aggregate 32,365,823 Solaris LLC Units and (ii) the right to receive the distributions of cash and shares of Solaris Inc.'s Class B common stock described in clauses (c) and (d) below;

Solaris Inc. issued and contributed 32,365,823 shares of its Class B common stock and all of the net proceeds of the IPO to Solaris LLC in exchange for a number of Solaris LLC Units equal to the number of shares of Class A common stock issued in the IPO;

Solaris LLC used a portion of the proceeds from the IPO to distribute to the Original Investors, on a pro rata basis, an aggregate amount of cash equal to 2,288,800 times the initial public offering price per share of Class A common stock after underwriting discounts and commissions;

Solaris LLC distributed to each of the Original Investors one share of Class B common stock for each Solaris LLC Unit such Original Investors held; and

Solaris Inc. issued 648,676 shares of restricted stock under the Solaris Inc. Long-Term Incentive Plan (the "LTIP") of which 203,222 vest over one year and 445,454 vest over three years. Additionally, Options under the Solaris LLC 2015 Membership Unit Option Plan were converted to 591,261 options under the LTIP with accelerated vesting terms ending November 13, 2017.

November Offering

On November 14, 2017, Solaris Inc. completed the offering of 7,000,000 shares of its Class A common stock (the “November Offering”), including 3,000,000 shares issued and sold by Solaris Inc. and an aggregate of 4,000,000 shares sold by certain stockholders of the Company (the “Selling Stockholders”), at a price to the public of $15.75 per share ($15.04125 per share net of underwriting discounts and commissions). On November 13, 2017 the underwriters exercised an option to purchase an aggregate of 1,050,000 additional shares of Class A common stock. After deducting underwriting discounts and commissions and offering expenses payable by Solaris Inc., Solaris Inc. received net proceeds of approximately $44.5 million. Solaris Inc. contributed all of the net proceeds of the November Offering to Solaris LLC in exchange for Solaris LLC Units. Solaris LLC used the net proceeds for general corporate purposes, including to fund the Company’s 2017 capital program. Solaris Inc. did not receive any proceeds from the sale of shares of Class A common stock by the Selling Stockholders.