10-Q

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, 2020

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

(Exact Name of registrant as Specified in its Charter)

Delaware	84-0811316
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)
14133 County Rd 9 1/2 Longmont, CO	80504
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number: (303) 333-3678

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.005 per share	ENSV	New York Stock Exchange

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

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

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

Large accelerated filer ☐                                                                             Accelerated filer ☐

Non-accelerated filer ☒                                                                               Smaller reporting company ☒

Emerging growth company☐

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

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

Indicate the number of shares outstanding of each of the Issuer's classes of common stock as of the latest practicable date.

Class	Outstanding at August 11, 2020
Common stock, $.005 par value	55,005,663

TABLE OF CONTENTS 

	Page
Part I – Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets	2
Condensed Consolidated Statements of Operations	3
Condensed Consolidated Statements of Stockholders' Equity (Deficit)	4
Condensed Consolidated Statements of Cash Flows	5
Notes to the Condensed Consolidated Financial Statements	6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3. Quantitative and Qualitative Disclosures about Market Risk	36
Item 4. Controls and Procedures	36
Part II
Item 1. Legal Proceedings	37
Item 1A.  Risk Factors	37
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	38
Item 3. Defaults Upon Senior Securities	38
Item 4. Mine Safety Disclosures	38
Item 5. Other Information	38
Item 6. Exhibits	38
Signatures	39

1

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ENSERVCO CORPORATION AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands)

	June 30,			December 31,
	2020			2019
	(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents	$	429		$	663
Accounts receivable, net		1,452			6,424
Prepaid expenses and other current assets		947			1,016
Inventories		314			398
Income tax receivable, current		57			43
Current assets of discontinued operations		-			187
Total current assets		3,199			8,731
Property and equipment, net		23,741			26,620
Goodwill		546			546
Intangible assets, net		726			828
Income taxes receivable, non-current		-			14
Right-of-use asset - financing, net		280			569
Right-of-use asset - operating, net		3,328			3,793
Other assets		333			445
Non-current assets of discontinued operations		816			1,430
TOTAL ASSETS	$	32,969		$	42,976
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts payable and accrued liabilities	$	2,100		$	4,470
Senior revolving credit facility		31,993			33,994
Subordinated debt		2,406			2,381
Lease liability - financing, current		127			207
Lease liability - operating, current		818			848
Current portion of long-term debt		148			147
Current liabilities of discontinued operations		31			72
Total current liabilities		37,623			42,119
Long-Term Liabilities
Long-term debt, less current portion		2,088			198
Lease liability - financing, less current portion		106			259
Lease liability - operating, less current portion		2,623			3,009
Other liability		12			33
Long-term liabilities of discontinued operations		21			34
Total long-term liabilities		4,850			3,533
Total liabilities		42,473			45,652
Commitments and Contingencies (Note 10)
Stockholders' Deficit
Preferred stock, $.005 par value, 10,000,000 shares authorized, no shares issued or outstanding		-			-
Common stock. $.005 par value, 100,000,000 shares authorized, 55,030,663 and 55,642,829 shares issued, respectively; 103,600 shares of treasury stock; and 54,927,063 and 55,539,229 shares outstanding, respectively		275			278
Additional paid-in capital		22,435			22,066
Accumulated deficit		(32,214	)		(25,020	)
Total stockholders' deficit		(9,504	)		(2,676	)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$	32,969		$	42,976

See notes to condensed consolidated financial statements.

2

ENSERVCO CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(In thousands except per share amounts)

(Unaudited)

	For the Three Months Ended						For the Six Months Ended
	June 30,						June 30,
	2020			2019			2020			2019
Revenues
Production services	$	1,383		$	3,835		$	4,585		$	7,951
Completion services		758			2,505			6,942			23,201
Total revenues		2,141			6,340			11,527			31,152
Expenses
Production services		1,814			3,343			5,308			6,689
Completion services		1,516			3,099			6,487			15,119
Sales, general, and administrative expenses		1,247			1,458			3,009			3,060
Patent litigation and defense costs		-			1			-			10
Severance and transition costs		139			-			139			-
Loss (gain) on disposal of assets		23			(4	)		38			(4	)
Impairment loss		-			-			-			127
Depreciation and amortization		1,310			1,442			2,706			2,842
Total operating expenses		6,049			9,339			17,687			27,843
(Loss) income from operations		(3,908	)		(2,999	)		(6,160	)		3,309
Other (expense) income
Interest expense		(547	)		(656	)		(1,188	)		(1,540	)
Other income		76			1,202			96			1,137
Total other (expense) income		(471	)		546			(1,092	)		(403	)
(Loss) income from continuing operations before tax expense		(4,379	)		(2,453	)		(7,252	)		2,906
Income tax expense		(9	)		(32	)		(9	)		(32	)
(Loss) income from continuing operations	$	(4,388	)	$	(2,485	)	$	(7,261	)	$	2,874
Income (loss) from discontinued operations (Note 6)		31			(724	)		67			(1,780	)
Net (loss) income	$	(4,357	)	$	(3,209	)	$	(7,194	)	$	1,094
(Loss) earnings from continuing operations per common share - basic	$	(0.08	)	$	(0.05	)	$	(0.13	)	$	0.05
Loss from discontinued operations per common share - basic		-			(0.01	)		-			(0.03	)
Net (loss) income per share - basic	$	(0.08	)	$	(0.06	)	$	(0.13	)	$	0.02
(Loss) earnings from continuing operations per common share - diluted	$	(0.08	)	$	(0.05	)	$	(0.13	)	$	0.05
Loss from discontinued operations per common share - diluted		-			(0.01	)		-			(0.03	)
Net (loss) income per share - diluted	$	(0.08	)	$	(0.06	)	$	(0.13	)	$	0.02
Basic weighted average number of common shares outstanding		55,352			54,978			55,435			54,589
Add: Dilutive shares		-			-			-			1,215
Diluted weighted average number of common shares outstanding		55,352			54,978			55,435			55,804

See notes to condensed consolidated financial statements.

3

ENSERVCO CORPORATION AND SUBSIDIARIES

Consolidated Statements of Stockholders’ Equity (Deficit)

(In thousands)

	Common Shares			Common Stock		Additional Paid-in Capital			Accumulated Earnings (Deficit)			Total Stockholders’ Equity (Deficit)
Balance at January 1, 2019		54,286		$	271	$	21,797		$	(17,466	)	$	4,602
Opening balance adjustment		-			-		-			108			108
Stock-based compensation, net of issuance costs		-			-		92			-			92
Restricted share cancellation		(55	)		-		-			-			-
Net income		-			-		-			4,303			4,303
Balance at March 31, 2019		54,231			271		21,889			(13,055	)		9,105
Stock-based compensation, net of issuance costs		-			-		77			-			77
Restricted share issuance		1,123			6		(6	)		-			-
Restricted share cancellation		(25	)		-		-			-			-
Net loss		-			-		-			(3,209	)		(3,209	)
Balance at June 30, 2019		55,329		$	277	$	21,960		$	(16,264	)	$	5,973

	Common Shares			Common Stock			Additional Paid-in Capital		Accumulated Earnings (Deficit)			Total Stockholders’ Equity (Deficit)
Balance at January 1, 2020		55,539		$	278		$	22,066	$	(25,020	)	$	(2,676	)
Stock-based compensation, net of issuance costs		-			-			39		-			39
Restricted share cancellation		(30	)		(3	)		3		-			-
Net loss		-			-			-		(2,837	)		(2,837	)
Balance at March 31, 2020		55,509			275			22,108		(27,857	)		(5,474	)
Stock-based compensation, net of issuance costs		-			-			322		-			322
Restricted share issuance		100			(4	)		4		-			-
Restricted share cancellation		(682	)		(1	)		1		-			-
Restricted shares vested		-			5			-		-			5
Net loss		-			-			-		(4,357	)		(4,357	)
Balance at June 30, 2020		54,927		$	275		$	22,435	$	(32,214	)	$	(9,504	)

See accompanying notes to consolidated financial statements.

4

ENSERVCO CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	For the Six Months Ended
	June 30,
	2020			2019
OPERATING ACTIVITIES
Net (loss) income	$	(7,194	)	$	1,094
Net income (loss) from discontinued operations		67			(1,780	)
Net (loss) income from continuing operations		(7,261	)		2,874
Adjustments to reconcile net (loss) income to net cash used in operating activities
Depreciation and amortization		2,706			2,842
Loss (gain) on disposal of equipment		38			(4	)
Gain on Adler settlement		-			(1,252	)
Impairment loss		-			127
Stock-based compensation		361			168
Amortization of debt issuance costs and discount		95			226
Provision for bad debt expense		298			3
Changes in operating assets and liabilities
Accounts receivable		4,674			2,090
Inventories		85			142
Prepaid expense and other current assets		68			9
Income taxes receivable		(14	)		-
Amortization of operating lease assets		416			329
Other assets		320			138
Accounts payable and accrued liabilities		(2,365	)		(413	)
Operating lease liabilities		(416	)		(322	)
Other liabilities		(21	)		99
Net cash (used in) provided by operating activities - continuing operations		(1,016	)		7,056
Net cash provided by (used in) operating activities - discontinued operations		134			(1,202	)
Net cash (used in) provided by operating activities		(882	)		5,854
INVESTING ACTIVITIES
Purchases of property and equipment		(306	)		(297	)
Proceeds from insurance claims		294			27
Proceeds from disposals of property and equipment		335			219
Net cash provided by (used in) investing activities - continuing operations		323			(51	)
Net cash provided by investing activities - discontinued operations		681			490
Net cash provided by investing activities		1,004			439
FINANCING ACTIVITIES
Net line of credit payments		(2,001	)		(2,071	)
Proceeds from PPP loan		1,940			-
Repayment of long-term debt		(49	)		(70	)
Payments of finance leases		(245	)		(202	)
Repayment of note		-			(3,700	)
Other financing activities		-			(1	)
Net cash used in financing activities - continuing operations		(355	)		(6,044	)
Net cash used in financing activities - discontinued operations		(1	)		-
Net cash used in financing activities		(356	)		(6,044	)
Net (Decrease) Increase in Cash and Cash Equivalents		(234	)		249
Cash and Cash Equivalents, beginning of period		663			257
Cash and Cash Equivalents, end of period	$	429		$	506
Supplemental Cash Flow Information:
Cash paid for interest	$	1,026		$	1,254
Supplemental Disclosure of Non-cash Investing and Financing Activities:
Non-cash proceeds from revolving credit facilities	$	-		$	32

See notes to condensed consolidated financial statements.

5

ENSERVCO CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

Note 1 – Basis of Presentation

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

The accompanying unaudited condensed consolidated financial statements have been derived from the accounting records of Enservco Corporation, Heat Waves Hot Oil Service LLC (“Heat Waves”), Dillco Fluid Service, Inc. (“Dillco”), Heat Waves Water Management LLC (“HWWM”), and Adler Hot Oil Service, LLC ("Adler") (collectively, the “Company”) as of June 30, 2020 and December 31, 2019 and the results of operations for the three and six months ended June 30, 2020 and 2019.

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

Name	State of Formation	Ownership	Business
Heat Waves Hot Oil Service LLC	Colorado	100% by Enservco	Oil and natural gas well services, including logistics and stimulation.
Adler Hot Oil Service, LLC	Delaware	100% by Enservco	Operations integrated into Heat Waves during 2019.
Heat Waves Water Management LLC	Colorado	100% by Enservco	Discontinued operations in 2019
Dillco Fluid Service, Inc	Kansas	100% by Enservco	Discontinued operation in 2018
HE Services LLC	Nevada	100% by Heat Waves	No active business operations. Owns construction equipment used by Heat Waves.

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

The accompanying unaudited condensed consolidated financial statements were prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and follow the same accounting policies and methods of their application as the most recent annual financial statements. These interim financial statements should be read in conjunction with the financial statements and related footnotes included in the Annual Report on Form 10-K of Enservco Corporation for the year ended December 31, 2019. All inter-company balances and transactions have been eliminated in the accompanying condensed consolidated financial statements.

6

Note 2 - Summary of Significant Accounting Policies

Going Concern

Our financial statements have been prepared on the going concern basis, which contemplates the continuity of normal business activities and the realization of assets and settlement of liabilities in the normal course of business. We incurred a net loss of $7.7 million for the year ended December 31, 2019 and have incurred a net loss of $4.4 million and $7.2 million for the three and six months ended June 30, 2020. As of the balance sheet date of this report we had total current liabilities of $37.6 million, which exceeded our total current assets of $3.2 million by $34.4 million. On August 10, 2017, we entered into the 2017 Credit Agreement, as amended, with East West Bank (the "2017 Credit Agreement") which provides for a three-year, $37.0 million senior secured revolving credit facility (the "Credit Facility"). We are in breach of two of our covenants under the 2017 Credit Agreement and have failed to pay an over-advance that occurred in October 2019 that has continued through the date of this report  (as discussed in Note 7 of the accompanying Notes to the Condensed Consolidated Financial Statements), resulting in our borrowings payable of $34.4 million being classified in current liabilities. On August 10, 2020, we received a 45-day extension on the maturity of the Credit Facility, and the total $32.0 million outstanding thereunder is due September 24, 2020. The Company has been in ongoing discussions and negotiations with other lenders, and we are currently negotiating a prospective refinancing of this debt. We cannot assure that we will be successful in any debt refinancing. Additionally, on July 24, 2020, the Company filed with the SEC a Registration Statement on Form S-3 (the "Shelf Registration") with the intent of seeking to raise further capital in the near term, which, if capital is raised thereunder, could aid in both the Company's cash position and in a possible refinancing of the Credit Facility. See Note 14 - Subsequent Events for more information on the extension for the maturity of our Credit Facility.

Our ability to continue as a going concern is dependent on the renegotiation of the 2017 Credit Agreement and/or raising further capital and our ability to further reduce costs, of which there can be no assurance. These factors raise substantial doubt over our ability to continue as a going concern and whether we will realize our assets and extinguish our liabilities in the normal course of business and at the amounts stated in the financial statements. Given our current financial situation we may be required to accept onerous terms on the transactions that we are seeking.

Recent Market Conditions

The COVID-19 pandemic has significantly impacted the world economic conditions including in the United States, with significant effects beginning in February 2020, and continuing through the issuance of this report, as federal, state and local governments react to the public health crisis, creating significant uncertainties relating to the United States economy. Consequently, the Company has experienced and expects to further experience a material adverse impact on its revenues, results of operations and cash flows. The situation changes rapidly and additional impacts to our business may arise that we are not aware of currently. We cannot predict whether, when or the manner in which the conditions surrounding COVID-19 will change including the timing of lifting any restrictions or office closure requirements.

In addition, certain producing countries within the Organization of Petroleum Exporting Countries and their allies (" OPEC+") group have attempted to increase market share through pricing activity that has had limited impact on the severe decline in domestic oil prices that occurred during the first quarter of 2020, and drilling and operating activity within our markets has remained depressed.

The full extent of the impact of COVID-19 and OPEC+ actions on our operations and financial performance depends on future developments that are uncertain and unpredictable, including the duration and spread of the pandemic, its impact on capital and financial markets, any new information that may emerge concerning the severity of the virus, its spread to other regions as well as the actions taken to contain it, production response of domestic oil producers to lower oil prices, and the adherence to and continuity of OPEC+ production cuts, among others.

Cash and Cash Equivalents

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

Accounts Receivable

Accounts receivable are stated at the amounts billed to customers, net of an allowance for uncollectible accounts. The Company provides an allowance for uncollectible accounts based on a review of outstanding receivables, historical collection information and existing economic conditions. The allowance for uncollectible amounts is continually reviewed and adjusted to maintain the allowance at a level considered adequate to cover future losses. The allowance is management's best estimate of uncollectible amounts and is determined based on historical collection experience related to accounts receivable coupled with a review of the current status of existing receivables. The losses ultimately incurred could differ materially in the near term from the amounts estimated in determining the allowance. As of June 30, 2020, and December 31, 2019, the Company had an allowance for doubtful accounts of approximately $480,000 and $246,000, respectively. For the three and six months ended June 30, 2020, the Company recorded approximately $(2,000) and $298,000 to bad debt (recovery) expense. For the three and six months ended June 30, 2019, the Company recorded approximately $3,000 to bad debt expense.

Inventories

Inventory consists primarily of propane, diesel fuel and chemicals that are used in the servicing of oil wells and is carried at the lower of cost or net realizable value in accordance with the first in, first out method (FIFO). The Company periodically reviews the value of items in inventory and provides write-downs or write-offs, of inventory based on its assessment of market conditions. Write-downs and write-offs are charged to cost of goods sold. For the three and six months ended June 30, 2020 and 2019, the Company did not recognize any write-downs or write-offs of inventory.

7

Property and Equipment

Property and equipment consists of (i) trucks, trailers and pickups; (ii) water transfer pumps, pipe, lay flat hose, trailers, and other support equipment; (iii) real property which includes land and buildings used for office and shop facilities and wells used for the disposal of water; (iv) other equipment such as tools used for maintaining and repairing vehicles, and (v) office furniture and fixtures, and computer equipment. Property and equipment is stated at cost less accumulated depreciation. The Company capitalizes interest on certain qualifying assets that are undergoing activities to prepare them for their intended use. Interest costs incurred during the fabrication period are capitalized and amortized over the life of the assets. The Company charges repairs and maintenance against income when incurred and capitalizes renewals and betterments, which extend the remaining useful life, expand the capacity or efficiency of the assets. Depreciation is recorded on a straight-line basis over estimated useful lives of 5 to 30 years.

Any difference between net book value of the property and equipment and the proceeds of an assets’ sale or settlement of an insurance claim is recorded as a gain or loss in the Company’s earnings.

Leases

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

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

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

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

8

Long-Lived Assets

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets  may not be recovered. During the first quarter of 2020, the combination of the COVID-19 pandemic and actions taken by the OPEC+ countries caused oil and gas commodity demand to decrease significantly. The Company determined that these were triggering events which could indicate impairment of its long-lived assets. The Company reviewed both qualitative and quantitative aspects of the business during the analysis of impairment. During the quantitative review, the Company reviewed the undiscounted future cash flows in its assessment of whether long-lived assets were impaired. The Company determined that there was no impairment of its long-lived assets during the three months and six months ended June 30, 2020.  During the three and six months ended June 30, 2019, the Company recorded impairment charges of approximately $0 and $127,000 related to its saltwater disposal wells which it expects to divest during 2020.

Goodwill and Other Intangible Assets

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

During the first six months of 2020, the combination of the COVID-19 pandemic and actions taken by the OPEC+ countries caused oil and gas commodity demand to decrease significantly. The Company determined that these were triggering events during the three months ended March 31, 2020, which could indicate impairment of its goodwill and other intangible assets. The Company reviewed both qualitative and quantitative aspects of the business during the analysis of impairment. During the quantitative review, the Company reviewed the undiscounted future cash flows in its assessment of whether goodwill and other intangible assets were impaired. The Company concluded that there were no further triggering events during the three months ended June 30, 2020. Further, the Company determined that there was no impairment of its goodwill and other intangible assets during the three months and six months ended June 30, 2020.

Revenue Recognition 

We have adopted Accounting Standards Update 2014-09, Revenue - Revenue from Contracts with Customers, Accounting Standards Codification ("ASC") Topic 606, beginning January 1, 2018, using the modified retrospective approach, which we have applied to contracts within the scope of the standard. There was no material impact on the Company's condensed consolidated financial statements from adoption of this new standard. The Company evaluates revenue when we can identify the contract with the customer, the performance obligations in the contract, the transaction price, and we are certain that the performance obligations have been met. Revenue is recognized when the service has been provided to the customer. The vast majority of the Company's services and product offerings are short-term in nature. The time between invoicing and when payment is due under these arrangements is generally 30 to 60 days. Revenue is not generated from contractual arrangements that include multiple performance obligations.

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

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

Disaggregation of Revenue

See Note 13 - Segment Reporting for disaggregation of revenue.

Earnings (Loss) Per Share

Earnings per Common Share - Basic is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Earnings per Common Share - Diluted earnings is calculated by dividing net income (loss) by the diluted weighted average number of common shares. The diluted weighted average number of common shares is computed using the treasury stock method for common stock that may be issued for outstanding stock options and warrants.

As of June 30, 2020 and 2019, there were outstanding stock options and warrants to acquire an aggregate of 2,162,499 and 2,203,499 shares of Company common stock, respectively, which have a potentially dilutive impact on earnings per share. As of June 30, 2020, these outstanding stock options and warrants had no aggregate intrinsic value (the difference between the estimated fair value of the Company’s common stock on June 30, 2020, and the exercise price, multiplied by the number of in-the-money instruments).

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Derivative Instruments

From time to time, the Company has interest rate swap agreements in place to hedge against changes in interest rates. The fair value of the Company’s derivative instrument is reflected as an asset or liability on the balance sheet. The accounting for changes in the fair value of a derivative instrument depends on the intended use of the derivative instrument and the resulting designation. Transactions related to the Company’s derivative instruments accounted for as hedges are classified in the same category as the item hedged in the consolidated statement of cash flows. The Company did not hold derivative instruments at June 30, 2020 or December 31, 2019, for trading purposes.

On February 23, 2018, we entered into an interest rate swap agreement with East West Bank in order to hedge against the variability in cash flows from future interest payments related to the 2017 Credit Agreement. The terms of the interest rate swap agreement included an initial notional amount of $10.0 million, a fixed payment rate of 2.52% paid by us and a floating payment rate equal to LIBOR paid by East West Bank. The purpose of the swap agreement is to adjust the interest rate profile of our debt obligations. The fair value of the interest rate swap agreement is recorded in Other Liabilities as of December 31, 2019, and changes to the fair value are recorded to Other Expense. The swap agreement matured during the second quarter of 2020, and the balance was adjusted to $0, accordingly.

Income Taxes

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

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

Interest and penalties associated with tax positions are recorded in the period assessed as Other expense. The Company files income tax returns in the United States and in the states in which it conducts its business operations. The Company’s United States federal income tax filings for tax years 2016 through 2019 remain open to examination. In general, the Company’s various state tax filings remain open for tax years 2015 to 2019.

In response to the COVID-19 pandemic, many governments have enacted or are contemplating measures to provide aid and economic stimulus. These measures may include deferring the due dates of tax payments or other changes to their income and non-income-based tax laws. The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which was enacted on March 27, 2020 in the U.S., includes measures to assist companies, including temporary changes to income and non-income-based tax laws. For the three and six months ended June 30, 2020, there were no material tax impacts to our condensed consolidated financial statements relating to COVID-19 measures. We continue to monitor additional guidance issued by the U.S. Treasury Department, the Internal Revenue Service, and others.

Fair Value

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

Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions of what market participants would use in pricing the asset or liability based on the best information available in the circumstances.  Beginning in 2017 the Company valued its warrants using the Binomial Lattice model ("Lattice"). The Company did not have any transfers between hierarchy levels during the three and six months ended June 30, 2020. The financial and nonfinancial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement.

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

Level 1: Quoted prices are available in active markets for identical assets or liabilities;

Level 2: Quoted prices in active markets for similar assets and liabilities that are observable for the asset or liability; or

Level 3: Unobservable pricing inputs that are generally less observable from objective sources, such as discounted cash flow models or valuations.

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Stock-Based Compensation

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

The Company uses the Black-Scholes pricing model as a method for determining the estimated grant date fair value for all stock options awarded to employees, independent contractors, officers, and directors. The expected term of the options is based upon evaluation of historical and expected exercise behavior. The risk-free interest rate is based upon U.S. Treasury rates at the date of grant with maturity dates approximately equal to the expected life of the grant. Volatility is determined upon historical volatility of our stock and adjusted if future volatility is expected to vary from historical experience. The dividend yield is assumed to be none as we have not paid dividends, nor do we anticipate paying any dividends in the foreseeable future.

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

The Company used the market-value of Company stock to determine the fair value of the performance-based restricted stock awarded in 2018 and 2019. The fair-value is updated quarterly based on actual forfeitures.

The Company used a lattice model to determine the fair value of market-based restricted stock awarded in 2020 and 2019.

Management Estimates

The preparation of the Company’s consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include the realization of accounts receivable, evaluation of impairment of long-lived assets, stock-based compensation expense, income tax provision, the valuation of warrant liability and the Company's interest rate swaps, and the valuation of deferred taxes. Actual results could differ from those estimates.

Reclassifications

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

Related Parties

From time-to-time, the Company enters into transactions and agreements with certain related parties for various professional services.

Business Combinations 

We recognize and measure the assets acquired and liabilities assumed in a business combination based on their estimated fair values at the acquisition date, with any remaining difference recorded as goodwill or gain from a bargain purchase. For material acquisitions, management typically engages an independent valuation specialist to assist with the determination of fair value of the assets acquired, liabilities assumed, noncontrolling interest, if any, and goodwill, based on recognized business valuation methodologies. If the initial accounting for the business combination is incomplete by the end of the reporting period in which the acquisition occurs, an estimate will be recorded. Subsequent to the acquisition, and not later than one year from the acquisition date, we will record any material adjustments to the initial estimate based on new information obtained about facts and circumstances that existed as of the acquisition date. An income, market or cost valuation method may be utilized to estimate the fair value of the assets acquired, liabilities assumed, and noncontrolling interest, if any, in a business combination. The income valuation method represents the present value of future cash flows over the life of the asset using: (i) discrete financial forecasts, which rely on management’s estimates of volumes, commodity prices, revenue and operating expenses; (ii) long-term growth rates; and (iii) appropriate discount rates. The market valuation method uses prices paid for a reasonably similar asset by other purchasers in the market, with adjustments relating to any differences between the assets. The cost valuation method is based on the replacement cost of a comparable asset at prices at the time of the acquisition reduced for depreciation of the asset. See Note 4 – Business Combinations for additional information regarding our business combinations.

Recently Adopted Accounting Pronouncements 

In February 2016, the FASB issued ASU 2016-02, Leases, which introduces the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous guidance. The update is effective for annual reporting periods beginning after December 15, 2018, including interim periods within those reporting periods, with early adoption permitted. The original guidance required application on a modified retrospective basis with the earliest period presented. In August 2018, the FASB issued ASU 2018-11, Targeted Improvements to ASC 842, Leases, which includes an option to not restate comparative periods in transition and elect to use the effective date of ASC 842, Leases, as the date of initial application of transition. Based on the effective date, the Company adopted this ASU beginning on January 1, 2019 and elected the transition option provided under ASU 2018-11. This standard had a material effect on our consolidated balance sheet with the recognition of new right of use assets and lease liabilities for all operating leases, as these leases typically have a non-cancelable lease term of greater than one year. Upon adoption, both assets and liabilities on our consolidated balance sheets increased by approximately $2.4 million. The Company elected a package of transition practical expedients which include not reassessing whether any expired or existing contracts are or contain leases, not reassessing the lease classification of expired or existing leases, and not reassessing initial direct costs for existing leases. The Company also elected a practical expedient to not separate lease and non-lease components. The Company did not elect the practical expedient to use hindsight in determining the lease terms or assessing impairment of the Right-of-Use (‘ROU”) assets. See Note 10 - Commitments and Contingencies for more information.

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

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Note 3 - Property and Equipment

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

	June 30,			December 31,
	2020			2019
Trucks and vehicles	$	58,034		$	59,788
Other equipment		1,319			1,303
Buildings and improvements		3,176			3,184
Land		378			378
Total property and equipment		62,907			64,653
Accumulated depreciation		(39,166	)		(38,033	)
Property and equipment, net	$	23,741		$	26,620

Note 4 – Business Combinations 

Acquisition of Adler Hot Oil Service, LLC 

On October 26, 2018, Enservco Corporation entered into a Membership Interest Purchase Agreement (the “Agreement”) with Adler Hot Oil Holdings, LLC, a Delaware limited liability company (the “Seller”), pursuant to which Enservco acquired all of the outstanding membership interests of Adler Hot Oil Service, LLC, a Delaware limited liability company (“Adler”) for a gross aggregate purchase price of $12.5 million, plus approximately $500,000 in working capital adjustments (the “Transaction”). The purchase price allocation differs from the gross aggregate purchase price due to fair value adjustments to the indemnity holdback, earnout, plus the discount on the subordinated note. Certain former members of Adler are also parties to the Agreement. Adler is a provider of frac water heating and hot oiling services, whose assets consist primarily of vehicles and equipment, with a complementary base of customers in several oil and gas producing basins where Enservco operates.

The consideration paid or to be paid by Enservco under the Agreement originally included: (i) $3.7 million in cash paid to or for the benefit of the Seller at the closing; (ii) a subordinated promissory note issued to the Seller in the principal amount of $4.8 million, plus interest accrued thereon (the “Seller Subordinated Note”), as further discussed below; (iii) retirement by Enservco of $2.5 million in indebtedness of Adler; (iv) an earn-out payment of up to $1.0 million in cash payable to the Seller (the "Earn-Out Payment"), the actual amount of which is subject to Enservco’s satisfaction of certain EBITDA-related performance conditions during 2019; and (v) $1.0 million in cash held by Enservco and payable to the Seller on April 26, 2020, subject to offset by Enservco for any indemnification obligations owed by the Seller or certain former members of Adler under the Agreement (the "Indemnity Holdback Payment"). Certain aspects of the consideration have been modified since execution of the Agreement as further discussed below. 

On April 4, 2019 Enservco and the Seller entered into a Settlement Agreement and Mutual Release (the “Settlement Agreement”) in order to resolve certain disputes and disagreements relating to the Transaction. Pursuant to the Settlement Agreement the parties agreed to (i) waive all rights of the Seller to the Earn-Out Payment and the Indemnity Holdback Payment, (ii) reduce the original principal balance of the Seller Subordinated Note from $4,800,000 to $4,500,000, (iii) extend the maturity date of the Seller Subordinated Note from March 31, 2019 to April 10, 2019, subject to a nine-day grace period, and (iv) execute a mutual release. All adjustments to the original purchase accounting were recognized in the second quarter of 2019, when the settlement occurred. We also considered whether the execution of the Settlement Agreement was an indicator of impairment regarding the recorded balance of goodwill and the definite-lived intangible assets. With regard to goodwill, we determined that it was not more likely than not that the carrying amount of the reporting unit was greater than its fair value, and thus determined that further evaluation of goodwill for potential impairment was not necessary. We perform a goodwill impairment analysis over the recorded balance on an annual basis, or if we determine an indicator of impairment exists. With regard to the definite-lived intangible assets, we determined that there were no events or changes in circumstances that would indicate that its carrying amount may not be recoverable, and therefore determined that a test for recoverability was not required.

The acquisition of Adler qualified as a business combination and as such, we estimated the fair value of the assets acquired and liabilities assumed as of the closing date. Additionally, we estimated the fair value of contingent consideration given. The fair value measure of the assets acquired, and liabilities assumed applied various valuation methods to estimate the value of the intangibles that would provide a fair and reasonable value to a market participant, in view of the facts available at the time. Each valuation method was analyzed to determine which method would generate the most reasonable estimate of value of the Company’s intangible assets as of October 26, 2018. Both internal and external factors influencing the value of the intangibles were considered such as Adler’s financial position, results of operations, historical financial data, future financial expectations, economic conditions, status of the oil and gas industry and Adler’s position in the industry.

In connection with the execution of the Settlement Agreement, we reviewed our estimates and allocation of the fair value of assets acquired, consideration transferred, and contingent consideration given in connection with the Transaction. In our judgment, the reduction in the fair value of the consideration did not have a clear and direct link to the purchase price, and therefore the change in the fair value of the Indemnity Holdback Payment of approximately $908,000, the change in the fair value of the Earn-Out Payment, of approximately $44,000, and the $300,000 reduction in the amount of the Seller Subordinated Note, were each recorded as gains within Other Income (Expense) in the accompanying Statements of Operations during 2019.

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The goodwill of approximately $245,000 arising from the acquisition consists largely of the synergies expected be achieved from combining the operations of Enservco and Adler. None of the goodwill is expected to be deductible for income tax purposes. 

The following tables represent the consideration paid to the Seller and the estimated fair value of the assets acquired and liabilities assumed.

Consideration paid to Seller:
Cash consideration, including payment to retire Adler debt	$	6,206
Subordinated note, net of discount		4,580
Indemnity holdback at fair value		873
Earnout at fair value		44
Net purchase price	$	11,703

Recognized amounts of identifiable assets acquired and liabilities assumed:
Cash	$	43
Accounts receivable, net		1,317
Prepaid expenses and other current assets		239
Property, plant, and equipment		9,664
Intangible assets		1,045
Accounts payable and accrued liabilities		(850	)
Total identifiable net assets		11,458
Goodwill		245
Total identifiable assets acquired	$	11,703

Subordinated Note

In connection with the Transaction and pursuant to the terms of the Agreement, on October 26, 2018, Enservco issued to the Seller the Seller Subordinated Note in the original principal amount of $4.8 million, which was reduced to $4.5 million as discussed above, and unpaid amounts thereunder incurred simple interest at a rate of 8% per annum. Enservco was required to and made principal payments on November 30, 2018 of $800,000, on February 28, 2019 of $200,000, and additional payments during April 2019 totaling $3.5 million. The Seller Subordinated Note was guaranteed by Enservco’s subsidiaries and secured by a junior security interest in substantially all assets of Enservco and its subsidiaries. The Seller Subordinated Note was subject to a subordination agreement by and among Enservco, the Seller, and East West Bank. On April 19, 2019, Enservco made the final payment to settle the principal balance and accrued interest on the Seller Subordinated Note and Enservco has no further obligations to the Seller.

Second Amendment to Loan and Security Agreement and Consent 

In connection with the Transaction, on October 26, 2018, Enservco and East West Bank entered into a Second Amendment to Loan and Security Agreement and Consent (the “Second Amendment to LSA”), which amended the Loan and Security Agreement dated August 10, 2017 by and between Enservco and East West Bank (the “Loan Agreement”). Pursuant to the Second Amendment to LSA, East West Bank consented to the Transaction and increased the maximum borrowing limit of the senior secured revolving credit facility provided to Enservco under the Loan Agreement to $37.0 million. Proceeds of $6.2 million from the increased senior secured revolving credit facility were used in the Transaction to make the cash payments at closing and retire the indebtedness of Adler. In connection with the Second Amendment to LSA the capital expenditure limitation contained within the Loan Agreement was increased to $3.0 million from $2.5 million.

On October 26, 2018, in connection with the Second Amendment to LSA, Adler entered into a Joinder Agreement, pursuant to which Adler was joined as a party to the Loan Agreement.

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Note 5 – Intangible Assets 

The components of our intangible assets as of June 30, 2020, and December 31, 2019, are as follows (in thousands):

	June 30, 2020			December 31, 2019
Customer relationships	$	626		$	626
Patents and trademarks		441			441
Total intangible assets		1,067			1,067
Accumulated amortization		(341	)		(239	)
Net carrying value	$	726		$	828

The useful lives of our intangible assets are estimated to be five years. Amortization expense was approximately $51,000 and $102,000 for the three and six months ended June 30, 2020. Amortization expense was approximately $51,000 and $102,000 for the three and six months ended June 30, 2019.

The following table represents the amortization expense for the next five years for the twelve months ending June 30 (in thousands): 

	2021		2022		2023		2024		2025
Customer relationships	$	125	$	125	$	125	$	42	$	-
Patents and trademarks		93		93		93		30		-
Total intangible asset amortization expense	$	218	$	218	$	218	$	72		-

Note 6 – Discontinued Operations

Heat Waves Water Management

During December 2019, the Heat Waves Water Management business ceased operations. The decision to discontinue HWWM was made due to its history of net losses, declining revenues, and its failure to generate positive operating cash flow. In early 2020, the Company began disposing of the HWWM assets and plans on selling off the remaining HWWM assets during the remainder of 2020. HWWM was previously reported in the Water Transfer Services segment, however, the Company redefined its segments during the year ended December 31, 2019, and Water Management Services is no longer a reporting segment.

Dillco

Effective November 1, 2018, the Dillco water hauling business ceased operations for customers. In December 2018, we held an auction for all of the Dillco fixed assets which resulted in a gain of approximately $129,000. Additionally, we recorded an impairment charge of $130,000 related to land and building sold subsequent to December 31, 2018.

The following table represents a reconciliation of the carrying amounts of major classes of assets and liabilities disclosed as discontinued operations in the Balance Sheets:

	June 30,		December 31,
	2020		2019
Carrying amount of major classes of assets included as part of discontinued operations:
Accounts receivable, net	$	-	$	175
Property and equipment, net		771		1,373
Prepaid expenses and other current assets		-		12
Right-of-use asset - financing, net		45		57
Total major classes of assets of the discontinued operations	$	816	$	1,617
Carrying amounts of major classes of liabilities included as part of discontinued operations:
Accounts payable and accrued liabilities		6		47
Lease liabilities - financing (current and non-current portions)		46		59
Total liabilities included as part of discontinued operations	$	52	$	106

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The following table represents a reconciliation of the major classes of line items constituting pretax loss of discontinued operations that are disclosed as discontinued operations in the Statements of Operations:  

	Three months ended
	June 30,
	2020			2019
Revenue	$	-		$	867
Cost of sales		(11	)		(1,285	)
Sales, general, and administrative expenses		-			(1	)
Depreciation and amortization		(7	)		(294	)
Other income and expense items that are not major		11			5
Pretax loss of discontinued operations related to major classes of pretax profit		(7	)		(708	)
Gain (loss) on disposal of assets		38			(16	)
Total income (loss) on discontinued operations that is presented in the Statements of Operations	$	31		$	(724	)

	Six months ended
	June 30,
	2020			2019
Revenue	$	-			2,295
Cost of sales		(11	)		(3,470	)
Sales, general, and administrative expenses		-			(18	)
Depreciation and amortization		(13	)		(577	)
Other income and expense items that are not major		(1	)		6
Pretax loss of discontinued operations related to major classes of pretax profit		(25	)		(1,764	)
Gain (loss) on disposal of assets		92			(16	)
Total income (loss) on discontinued operations that is presented in the Statements of Operations	$	67		$	(1,780	)

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Note 7 – Debt

East West Bank Revolving Credit Facility

The 2017 Credit Agreement (as defined in Note of the accompanying Notes to the Condensed Consolidated Financial Statements) allows us to borrow up to 85% of our eligible receivables and up to 85% of the appraised value of our eligible equipment. Under the 2017 Credit Agreement, there are no required principal payments until maturity and we have the option to pay variable interest rate based on (i) 1-month LIBOR plus a margin of 3.5% or (ii) interest at the Wall Street Journal prime rate plus a margin of 1.75%. Interest is calculated monthly and paid in arrears. Additionally, the Credit Facility is subject to an unused credit line fee of 0.5% per annum multiplied by the amount by which total availability exceeds the average monthly balance of the Credit Facility, payable monthly in arrears. The Credit Facility is collateralized by substantially all our assets and subject to financial covenants. The outstanding principal loan balance was originally scheduled to mature on August 10, 2020. On August 10, 2020, we received a 45-day extension on the maturity of the Credit Facility, and the total outstanding principal balance and all accrued interest on the Credit Facility is due September 24, 2020. Under the terms of the 2017 Credit Agreement, collateral proceeds are collected in bank-controlled lockbox accounts and credited to the Credit Facility within one business day.

As of June 30, 2020, we had an outstanding principal loan balance under the Credit Facility of approximately $32.0 million with a weighted average interest rates of 3.93% per year for $30.5 million of outstanding LIBOR Rate borrowings and 3.93% per year for the approximately $1.5 million of outstanding Prime Rate borrowings. As of June 30, 2020, our available cash was approximately $0.4 million and we did not have any availability under the 2017 Credit Agreement, as discussed below.

Under the 2017 Credit Agreement, we are subject to the following financial covenants:

(1) Maintenance of a Fixed Charge Coverage Ratio (“FCCR”) of not less than 1.10 to 1.00 at the end of each month, upon which the ratio is measured on a trailing twelve-month basis;

(2) In periods when the trailing twelve-month FCCR is less than 1.20 to 1.00, we are required to maintain minimum liquidity of $1,500,000 (including excess availability under the Credit Facility and balance sheet cash).

On January 6, 2020, the Company received a notice (the “Default Notice”) from East West Bank regarding the 2017 Credit Agreement. As a result of the events of default, East West Bank may accelerate the $32.0 million outstanding loan balance under the 2017 Credit Agreement to be immediately due and payable. As of the date of this report, East West Bank has not accelerated the outstanding loan balance amount but it may do so in the future.

The Default Notice indicates that the Company is in default under the 2017 Credit Agreement as a result of its:

●failure to immediately repay a loan over advance that occurred on October 10, 2019 that has continued through the date of this report;

●failure to maintain a minimum liquidity of not less than $1,500,000 for the months ended October 31, 2019 and November 30, 2019; and

●failure to maintain a minimum fixed charge coverage ratio of not less than 1:10 to 1:00 for the months ended October 31, 2019 and November 30, 2019.

The Default Notice indicated that although East West Bank was not as of January 6, 2020, exercising its rights and remedies available as a result of the events of default, it specifically did not waive its rights and remedies resulting from the events of default and it reserves all other available rights and remedies under the Credit Agreement, certain other related documents and applicable law.

We are also currently negotiating and working with East West Bank in an effort to obtain a waiver for our breaches of the 2017 Credit Agreement. Our ability to continue as a going concern is dependent on our renegotiation of the 2017 Credit Agreement and our ability to further reduce costs and raise further capital, of which there can be no assurance. Further, there can be no assurance that we will successfully obtain a waiver from the East West Bank or maintain or increase our cash flows from operations. Given our current financial situation we may be required to accept onerous terms on the transactions that we are seeking.

The Default Notice received from East West Bank served as a triggering event for an event of default on our subordinated debt. As such, we have reclassified our subordinated debt to current liabilities. As of the date of this report, the lender of the subordinated debt has not waived its rights and remedies resulting from the events of default and it reserves all other available rights and remedies under the Amended and Restated Subordinated Loan Agreement with Cross Rivers, L.P., a related party, certain other related documents, and applicable law.

Debt Issuance Costs

We have capitalized certain debt issuance costs incurred in connection with the Credit Facility discussed above and these costs are being amortized to interest expense over the term of the facility on a straight-line basis. The long-term portion of debt issuance costs of approximately $12,000 and $82,000 is included in Other Assets in the accompanying condensed consolidated balance sheets for June 30, 2020, and December 31, 2019, respectively. During the three and six months ended June 30, 2020, the Company amortized approximately $35,000 and $70,000, respectively, of these costs to interest expense. During the three and six months ended June 30, 2019, the Company amortized approximately $24,000 and $58,000, respectively, of these costs to interest expense.

Paycheck Protection Program

On April 10, 2020, the Company, entered into a promissory note (the “Note”) with East West Bank in the aggregate amount of $1,939,900, pursuant to the Paycheck Protection Program (the “PPP”) under Division A, Title I of the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"), which was enacted March 27, 2020 and is administered by the United States Small Business Administration.

The Note matures on April 10, 2022 and bears interest at a rate of 1.00% per annum, payable in full plus all accrued interest on April 10, 2022. The Note may be prepaid by the Company at any time prior to maturity with no prepayment penalties. Funds received under the Note may only be used for the Company’s payroll costs, costs used to continue group health care benefits, mortgage payments, rent, utilities, and interest on other debt obligations incurred before February 15, 2020. The Company intends to use the entire Note proceeds for qualifying expenses. Under the terms of the PPP, amounts of the Note may be forgiven if they are used for qualifying expenses as described in the CARES Act.

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Notes Payable

Long-term debt (excluding borrowings under our Credit Facility described above) consists of the following (in thousands):

	June 30,				December 31,
	2020				2019
Paycheck Protection Loan. Interest at 1% with interest payments deferred until October 10, 2020. Matures April 10, 2022.	$	1,940		$		-
Subordinated Promissory Note with related party. Interest is at 10% and is paid quarterly. Matures June 28, 2022		1,000				1,000
Subordinated Promissory Note with related party. Interest is at 10% and is paid quarterly. Matures June 28, 2022		1,000				1,000
Subordinated Promissory Note with related party. Interest is at 10% and is paid quarterly. Matures June 28, 2022		500				500
Real Estate Loan for a facility in North Dakota, interest at 5.75%, and monthly principal and interest payment of $5,255 until October 3, 2028. Collateralized by land and property purchased with the loan.		193				218
Vehicle loans for three pickups, interest at 8.59% monthly principal and interest payments of $3,966, matures in August 2021		53				74
Note payable to the seller of Heat Waves. The note was garnished by the Internal Revenue Service (“IRS”) in 2009 and is due on demand; paid in annual installments of $36,000 per agreement with the IRS		50				53
Total		4,736				2,845
Less debt discount		(94	)			(119	)
Less current portion		(2,554	)			(2,528	)
Long-term debt, net of debt discount and current portion	$	2,088			$	198

Aggregate maturities of debt, (excluding the 2017 Credit Agreement described above), are as follows (in thousands):

Twelve Months Ending June 30,
2021	$	2,648
2022		2,004
2023		60
2024		24
2025		-
Thereafter		-
Total	$	4,736

17

Note 8 – Fair Value Measurements

The following table presents the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis by level within the fair value hierarchy (in thousands). The interest rate swap is valued at zero because it matured during the second quarter of 2020.  

	Fair Value Measurement Using
	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value Measurement
June 30, 2020
Derivative Instrument
Interest rate swap liability	$	-	$	-	$	-	$	-
December 31, 2019
Derivative Instrument
Interest rate swap liability	$	-	$	23	$	-	$	23

The fair value of the interest rate swap is estimated using a discounted cash flow model. Such models involve using market-based observable inputs, including interest rate curves. We incorporate credit valuation adjustments to appropriately reflect both our nonperformance risk and respective counterparty’s nonperformance risk in the fair value measurements, which we have concluded are not material to the valuation. Due to the interest rate swaps being unique and not actively traded, the fair value is classified as Level 2.

Certain assets and liabilities are measured at fair value on a nonrecurring basis. These assets and liabilities are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances. As of June 30, 2020, and December 31, 2019, the carrying value of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, and interest approximates fair value due to the short-term nature of such items. The carrying value of the Company’s credit agreements are carried at cost which are approximately the fair value of the debt as the related interest rate are at the terms that approximate rates currently available to the Company.

The Company did not have any transfers of assets or liabilities between Level 1, Level 2 or Level 3 of the fair value measurement hierarchy during the three and six months ended June 30, 2020.

Note 9 – Income Taxes

Income tax expense during interim periods is based on applying an estimated annual effective income tax rate to year-to-date income, plus any significant unusual or infrequently occurring items which are recorded in the interim period.  The provision for income taxes for the six months ended June 30, 2020 and 2019 differs from the amount that would be provided by applying the statutory U.S. federal income tax rate of 21% to pre-tax income primarily because of state income taxes and estimated permanent differences.

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

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

Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management recorded a valuation allowance to reduce its net deferred tax assets to zero.

During the six months ended June 30, 2020 and 2019, the Company's tax benefit of $1.8 million and tax provision of $0.3 million, respectively, were adjusted by the valuation allowance which resulted in a net tax provision of zero.

18

Note 10 – Commitments and Contingencies

Operating Leases

On January 1, 2019, we adopted ASC 842, Leases. Results for reporting periods beginning January 1, 2019 are presented in accordance with ASC 842, while prior period amounts are reported in accordance with ASC 840. On January 1, 2019, we recognized $2.4 million in right-of-use assets and $2.4 million in lease liabilities, representing the present value of minimum payment obligations associated with leased facilities and certain equipment with non-cancellable lease terms in excess of one year. We recognized approximately $845,000 in right-of-use assets and lease liabilities. We made a cumulative-effect adjustment to retained earnings of approximately $98,000 at January 1, 2019.

Operating lease assets and liabilities are recognized at the lease commencement date. Operating lease liabilities represent the present value of lease payments not yet paid. Operating lease assets represent our right to use an underlying asset and are based upon the operating lease liabilities adjusted for prepayments or accrued lease payments, initial direct costs, lease incentives, and impairment of operating lease assets. To determine the present value of lease payments not yet paid, the Company uses the weighted average interest rate on its Credit Facility. Long-term leases typically contain rent escalations over the lease term. The Company recognizes expense for these leases on a straight-line basis over the lease term.

The Company has elected the short-term lease recognition exemption for all applicable classes of underlying assets. Short-term disclosures include only those leases with a term greater than one month and 12 months or less, and expense is recognized on a straight-line basis over the lease term. Leases with an initial term of 12 months or less, that do not include an option to purchase the underlying asset that we are reasonably certain to exercise, are not recorded on the balance sheet.

The Company elected the expedient to account for lease and non-lease components as a single component for our entire population of operating lease assets.

As of June 30, 2020, the Company leases facilities and certain equipment under lease commitments that expire through June 2026. Future minimum lease commitments for these operating lease commitments are as follows (in thousands):

Twelve Months Ending June 30,		Operating Leases			Financing Leases
2021	$	955		$	167
2022		933			130
2023		644			-
2024		613			-
2025		358			-
Thereafter		359			-
		3,862			297
Impact of discounting		(421	)		(64	)
Discounted value of lease obligations	$	3,441		$	233

The following table summarizes the components of our gross operating lease costs incurred during the three and six months ended June 30, 2020 (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Operating lease expense:
Current lease cost	$	288	$	175	$	579	$	367
Long-term lease cost		23		197		43		322
Total operating lease cost	$	311	$	372	$	622	$	689
Finance lease expense:
Amortization of right-of-use assets	$	37	$	68	$	95	$	68
Interest on lease liabilities		5		9		12		9
Total lease cost	$	42	$	77	$	107	$	77

Our weighted-average lease term and discount rate used during the six months ended June 30, 2020 and 2019 are as follows:

	Six Months Ended June 30,
	2020			2019
Operating
Weighted-average lease term (years)		4.46			4.96
Weighted-average discount rate		6.08	%		6.08	%
Financing
Weighted-average lease term (years)		1.78			2.66
Weighted-average discount rate		6.10	%		6.10	%

19

Self-Insurance

In June 2015, the Company became self-insured under its Employee Group Medical Plan, and currently is responsible to pay the first $50,000 in medical costs per individual participant for claims incurred in the calendar year up to a maximum of approximately $1.8 million per year in the aggregate based on enrollment. The Company had an accrued liability of approximately $179,000 and $68,000 as of June 30, 2020 and December 31, 2019, respectively, for insurance claims that it anticipates paying in the future related to claims that occurred prior to June 30, 2020 and December 31, 2019, respectively.

Effective April 1, 2015, the Company had entered into a workers’ compensation and employer’s liability insurance policy with a term through March 31, 2018.  Under the terms of the policy, the Company was required to pay premiums in addition to a portion of the cost of any claims made by our employees, up to a maximum of approximately $1.8 million over the term of the policy (an amount that was variable with changes in annualized compensation amounts). As of June 30, 2020, a former employee of ours had an open claim relating to injuries sustained while in the course of employment, and the projected maximum cost of the policy as determined by the insurance carrier included estimated claim costs that have not yet been paid or incurred in connection with the claim. During the year ended December 31, 2017, our insurance carrier formally denied the workers' compensation claim and has moved to close the claim entirely. Per the terms of our insurance policy, through June 30, 2020, we had paid in approximately $1.8 million of the projected maximum plan cost of $1.8 million, and had recorded approximately $1.6 million as expense over the term of the policy. We recorded the remaining approximately $189,000 in payments made under the policy as a long-term asset, which we expect will either be recorded as expense in future periods, or refunded to us by the insurance carrier, depending on the outcome of the individual claim described above, and the final cost of any additional open claims incurred under the policy. As of June 30, 2020, we believe we have paid all amounts contractually due under the policy. Effective April 1, 2018, we entered into a new workers’ compensation policy with a fixed premium amount determined annually, and therefore are no longer partially self-insured for workers' compensation and employer's liability.

Litigation 

Enservco and Heat Waves were defendants in a civil lawsuit in federal court in Colorado, Civil Action No. 1:15-cv-00983-RBJ (“Colorado Case”), that alleged that Enservco and Heat Waves, in offering and selling frac water heating services, infringed and induced others to infringe two patents owned by Heat-On-The-Fly, LLC (“HOTF”)- U.S. Patent No. 8,171,993 (the "'993 Patent") and U.S. Patent No. 8,739,875 (the "'875 Patent"). In March of 2019, the parties moved to dismiss the Colorado Case. On March 15, 2019, the Colorado Case was dismissed in its entirety without any finding of wrongdoing by Enservco or Heat Waves.   

While the Colorado Case was pending, HOTF was issued two additional patents, which were related to the '993 and '875 Patents, but were not asserted in he Colorado Case. However, on March 31, 2015, the U.S. District Court for the District of North Dakota (Civil Action No. 4:13-cv-00010) ruled, in a case not involving Enservco or Heat waves, that the '993 Patent was invalid. On January 14, 2016, the court ruled that the ‘993 Patent was also unenforceable due to inequitable conduct by HOTF and the inventor. HOTF appealed, and on May 4, 2018, the United States Court of Appeals for the Federal Circuit (Case No. 16-1894) upheld the lower court's ruling of unenforceability. In light of the foregoing, Management believes that the inequitable conduct related to the '993 Patent could serve as a basis for asserting unenforceability of the two additional patents.

Note 11– Stockholders’ Equity

Warrants

In June 2016, the Company granted a principal of the Company’s investor relations firm warrants to acquire 30,000 shares of the Company’s common stock in connection with a reduction of the firm's ongoing monthly cash service fees. The warrants had a grant-date fair value of $0.36 per share and vested over a one-year period, 15,000 on December 21, 2016 and 15,000 on June 21, 2017. As of June 30, 2020, all of these warrants remain outstanding and are exercisable until June 21, 2021 at $0.70 per share.

On November 11, 2019, in connection with a subordinated loan agreement, the Company granted Cross River one five-year warrant to buy an aggregate total of 625,000 shares of the Company's common stock at an exercise price of $0.20 per share. The warrants had a grant-date fair value $0.16 and were fully vested upon issuance and remain outstanding and exercisable until November 11, 2024.

20

A summary of warrant activity for the six months ended June 30, 2020 is as follows (amounts in thousands): 

					Weighted
			Weighted		Average
			Average		Remaining		Aggregate
			Exercise		Contractual		Intrinsic
Warrants	Shares		Price		Life (Years)		Value
Outstanding at December 31, 2019		655,000	$	0.22		4.7	$	-
Issued		-		-		-		-
Exercised		-		-		-		-
Forfeited/Cancelled		-		-		-		-
Outstanding at June 30, 2020		655,000	$	0.22		4.2	$	-
Exercisable at June 30, 2020		655,000	$	0.22		4.2	$	-

Stock Issued for Services

During the three and six  months ended June 30, 2020, respectively, the Company did not issue any shares of common stock as compensation for services provided to the Company. 

Board Approval of Reverse Stock Spilt

On June 26, 2020, upon approval from shareholders at the Company's annual meeting of the stockholders, the Company is authorized to a reverse stock split of the Company's shares of common stock issued and outstanding, or reserved for issuance, at an exchange ratio of not greater than 25-to-1 and not less than 10-to-1. Both the timing, if any, and the exchange ratio, are to be determined at the sole discretion of the Company's Board of Directors. As of the date of this report, the Board of Directors has not declared a reverse stock split.

Note 12 – Stock Options and Restricted Stock

Stock Options

On July 27, 2010, the Company’s Board of Directors adopted the 2010 Stock Incentive Plan (the “2010 Plan”). The aggregate number of shares of common stock that could be granted under the 2010 Plan was reset at the beginning of each year based on 15% of the number of shares of common stock then outstanding. As such, on January 1, 2016 the number of shares of common stock available under the 2010 Plan was reset to 5,719,069 shares based upon 38,127,129 shares outstanding on that date. Options were typically granted with an exercise price equal to the estimated fair value of the Company's common stock at the date of grant with a vesting schedule of one to three years and a contractual term of 5 years. As discussed below, the 2010 Plan has been replaced by a new stock option plan and no additional stock option grants will be granted under the 2010 Plan. As of June 30, 2020, there were options to purchase 135,166 shares outstanding under the 2010 Plan.

On July 18, 2016, the Board of Directors unanimously approved the adoption of the Enservco Corporation 2016 Stock Incentive Plan (the “2016 Plan”), which was approved by the stockholders on September 29, 2016. The aggregate number of shares of common stock that may be granted under the 2016 Plan is 8,000,000 shares plus authorized and unissued shares from the 2010 Plan totaling 2,391,711 for a total reserve of 10,391,711 shares. As of June 30, 2020, there were options to purchase 1,372,333 shares and we had granted restricted stock shares of 429,998 that remained outstanding under the 2016 Plan 

We have not granted any stock options during the three and six months ended June 30, 2020 or the three and six months ended June 30, 2019. 

During the six months ended June 30, 2020 and 2019, no options were granted or exercised. 

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2019		1,945,333		$	0.55		1.95	$	-
Granted		-			-		-		-
Exercised		-			-		-		-
Forfeited or Expired		(437,834	)		1.38		-		-
Outstanding at June 30, 2020		1,507,499		$	0.31		1.81	$	-
Vested or Expected to Vest at June 30, 2020		1,507,499		$	0.31		1.81	$	-
Exercisable at June 30, 2020		1,507,499		$	0.31		1.81	$	-

The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between the estimated fair value of the Company’s common stock on June 30, 2020, and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had they exercised their options on June 30, 2020.

During the three and six months ended June 30, 2020, the Company recognized stock-based compensation costs for stock options of approximately $1,000 and $3,000, respectively, in sales, general, and administrative expenses. During the three and six months ended June 30, 2019, the Company recognized stock-based compensation costs for stock options of approximately $29,000 and $71,000, respectively, in sales, general, and administrative expenses. The Company currently expects all outstanding options to vest. Compensation cost is revised if subsequent information indicates that the actual number of options vested due to service is likely to differ from previous estimates. 

21

A summary of the status of non-vested shares underlying the options are presented below:

	Number of Shares			Weighted-Average Grant- Date Fair Value
Non-vested at December 31, 2019		53,001		$	0.22
Granted		-			0.22
Vested		(26,334	)		0.22
Forfeited		(26,667	)		1.92
Non-vested at June 30, 2020		-		$	-

As of June 30, 2020, there was no remaining unrecognized compensation costs related to non-vested shares under the Company’s stock option plans.

Restricted Stock

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

A summary of the restricted stock activity is presented below:

	Number of Shares			Weighted-Average Grant- Date Fair Value
Restricted shares at December 31, 2019		2,006,333		$	0.55
Granted		150,000			0.17
Vested		(1,002,501	)		0.40
Forfeited		(723,834	)		0.68
Restricted shares at June 30, 2020		429,998		$	0.45

During the three and six months ended June 30, 2020, the Company recognized stock-based compensation costs for restricted stock of approximately $322,000 and $358,000 in sales, general, and administrative expenses, of which $301,000 for both the three and six months ended June 30, 2020 was related to severance compensation in connection with a separation agreement with the Company's former CEO during the second quarter of 2020. In addition, of the 1,002,501 shares that vested during the first six months of 2020, 895,000 shares were related to the former CEO's separation agreement, as were 100,000 of the 150,000 shares that were granted during the same period. During the three and six months ended June 30, 2019, the Company recognized stock-based compensation costs for restricted stock of approximately $48,000 and $97,000 in sales, general, and administrative expenses. Compensation cost is revised if subsequent information indicates that the actual number of restricted stock vested due to service is likely to differ from previous estimates.

The following table sets forth the weighted average outstanding of potentially dilutive instruments for the three and six months ended June 30, 2020 and 2019: 

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Stock options		1,553,041		2,229,378		1,662,594		2,332,836
Warrants		655,000		30,000		655,000		30,000
Weighted average		2,208,041		2,259,378		2,317,594		2,362,836

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Note 13- Segment Reporting

In 2019 we reorganized our business segments to align with how the oil and gas industry and our management team evaluates the business. Enservco’s reportable business segments are Production Services and Completion Services. These segments have been selected based on management’s resource allocation and performance assessment in making decisions regarding the Company.

The following is a description of the segments.

Production Services: This segment utilizes a fleet of hot oil trucks and acidizing units to provide maintenance services to the domestic oil and gas industry. These services include hot oil services and acidizing services.

Completion Services: This segment utilizes a fleet of frac water heating units to provide frac water heating services to the domestic oil and gas industry.

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

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

	Production Services			Completion Services			Unallocated & Other		Total
Three Months Ended June 30, 2020:
Revenues	$	1,383		$	758		$	-	$	2,141
Cost of Revenue		1,814			1,516			-		3,330
Segment Loss	$	(431	)	$	(758	)	$	-	$	(1,189)
Depreciation and Amortization	$	647		$	567		$	96	$	1,310
Capital Expenditures (Excluding Acquisitions)	$	76		$	66		$	-	$	142
Identifiable assets (1)	$	13,228		$	15,085		$	1,135	$	29,448
Three Months Ended June 30, 2019:
Revenues	$	3,835		$	2,505		$	-	$	6,340
Cost of Revenue		3,343			3,099			-	$	6,442
Segment Profit (Loss)	$	492		$	(594	)	$	-	$	(102	)
Depreciation and Amortization	$	640		$	741		$	61	$	1,442
Capital Expenditures (Excluding Acquisitions)	$	90		$	77		$	2	$	169
Identifiable assets(1)	$	22,178		$	19,153			1,388	$	42,719

(1) Identifiable assets is calculated by summing the balances of accounts receivable, net; inventories; property and equipment, net; and other assets.

	Production Services			Completion Services		Unallocated & Other		Total
Six Months Ended June 30, 2020:
Revenues	$	4,585		$	6,942	$	-	$	11,527
Cost of Revenue		5,308			6,487		-		11,795
Segment (Loss) Profit	$	(723	)	$	455	$	-	$	(268	)
Depreciation and Amortization	$	1,317		$	1,214	$	175	$	2,706
Capital Expenditures (Excluding Acquisitions)	$	159		$	147	$	-	$	306
Six Months Ended June 30, 2019:
Revenues	$	7,951		$	23,201	$	-	$	31,152
Cost of Revenue		6,689			15,119		-	$	21,808
Segment Profit	$	1,262		$	8,082	$	-	$	9,344
Depreciation and Amortization	$	1,483		$	1,276	$	83	$	2,842
Capital Expenditures (Excluding Acquisitions)	$	118		$	136	$	38	$	292

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The following table reconciles the segment profits reported above to the income from operations reported in the consolidated statements of operations (in thousands): 

	Three Months Ended June 30,
	2020			2019
Segment profit	$	(1,189	)	$	(102	)
Sales, general, and administrative expenses		(1,247	)		(1,458	)
Patent litigation and defense costs		-			(1	)
Severance and Transition Costs		(139	)		-
(Loss) gain on disposals of equipment		(23	)		4
Impairment		-			-
Depreciation and amortization		(1,310	)		(1,442	)
(Loss) income from Operations	$	(3,908	)	$	(2,999	)

	Six Months Ended June 30,
	2020			2019
Segment profit	$	(268	)	$	9,344
Sales, general, and administrative expenses		(3,009	)		(3,060	)
Patent litigation and defense costs		-			(10	)
Severance and Transition Costs		(139	)		-
(Loss) gain on disposals of equipment		(38	)		4
Impairment		-			(127	)
Depreciation and amortization		(2,706	)		(2,842	)
(Loss) income from Operations	$	(6,160	)	$	3,309

Geographic Areas

The Company only does business in the United States, in what it believes are three geographically diverse regions. The following table sets forth revenue from operations for the Company’s three geographic regions during the three and six months ended June 30, 2020 and 2019 (amounts in thousands):

	Three Months Ended June 30,
	2020		2019
BY GEOGRAPHY
Production Services:
Rocky Mountain Region (1)	$	348	$	1,782
Central USA Region (2)		943		1,861
Eastern USA Region (3)		92		192
Total Production Services		1,383		3,835
Completion Services:
Rocky Mountain Region (1)		711		2,332
Central USA Region (2)		(2)		74
Eastern USA Region (3)		49		99
Total Completion Services		758		2,505
Total Revenues	$	2,141	$	6,340

24

	Six Months Ended June 30,
	2020		2019
BY GEOGRAPHY
Production Services:
Rocky Mountain Region (1)	$	1,541	$	3,845
Central USA Region (2)		2,816		3,627
Eastern USA Region (3)		228		479
Total Production Services		4,585		7,951
Completion Services:
Rocky Mountain Region (1)		5,717		17,144
Central USA Region (2)		107		2,844
Eastern USA Region (3)		1,118		3,213
Total Completion Services		6,942		23,201
Total Revenues	$	11,527	$	31,152

Notes to tables:

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

(2) Includes the Scoop/Stack Shale in Oklahoma and the Eagle Ford Shale in Texas.

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

Note 14- Subsequent Events

Extension for Maturity of Credit Facility

On August 10, 2020, we received a 45-day extension on the maturity of the Credit Facility from East West Bank. The outstanding principal and all accrued interest were to be due on the original maturity date of the Credit Facility, or August 10, 2020. Upon the execution of the extension, all remaining principal and accrued interest outstanding on the Credit Facility is now due on September 24, 2020.

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

The following discussion provides information regarding the results of operations for the three and six months ended June 30, 2020 and 2019, and our financial condition, liquidity and capital resources as of June 30, 2020, and December 31, 2019. The financial statements and the notes thereto contain detailed information that should be referred to in conjunction with this discussion.

Forward-Looking Statements

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

● Our lender under our existing Loan and Security Agreement (the “2017 Credit Agreement”) has declared us to be in violation of certain covenants under the 2017 Credit Agreement and therefore in default, and has reserved all its rights and remedies under that agreement including the right to accelerate and declare our loans due (presently $32 million) and payable and to foreclose on substantially all of our property and assets;

● our inability to achieve the compromise or restructuring of our 2017 Credit Agreement;

● substantial doubt exists about our ability to continue as a going concern;

● our ability to regain compliance with New York Stock Exchange American listing requirements or face delisting from that exchange;

● adverse developments in the global economy and pandemic risks related to the COVID-19 virus and the resulting diminished demand for oil and natural gas;

● recent significant decreases in the prices for crude oil and natural gas which has resulted in exploration and production companies cutting back their capital expenditures for oil and gas well drilling which in turn resulted in significantly reduced demand for our drilling completion services, thereby negatively affecting our revenues, results of operations and financial condition;

● fierce competition for the services we provide in our areas of operations, which has increased significantly due to the recent decrease in prices for oil and natural gas;

● our capital requirements and the uncertainty of being able to obtain additional funding on terms acceptable to us;

● the impact of general economic conditions on the demand for oil and natural gas and the availability of capital which may impact our ability to perform services for our customers;

● the geographical diversity of our operations which, while it could diversify the risks related to a slow-down in one area of operations, also adds significantly to our costs of doing business;

● our history of losses and working capital deficits which were significant;

● weather and environmental conditions, including abnormal warm winters in our areas of operations that adversely impact demand for our services;

● our ability to retain key members of our senior management and key technical employees;

● the impact of environmental, health and safety and other governmental regulations, and of current or pending legislation with which we and our customers must comply;

● risks relating to any unforeseen liabilities;

● federal and state initiatives relating to the regulation of hydraulic fracturing;

● sales or issuances of our common stock and the price and volume volatility of our common stock;

● the significant financial constraints imposed as a result of our indebtedness, including the fact that we have no borrowing availability on our Credit Facility and there are restrictions imposed on us under the terms of the Credit Agreement and our need to generate sufficient cash flows to repay our debt obligations;

● the volatility of domestic and international oil and natural gas prices and the resulting impact on production and drilling activity, and the effect that lower prices may have on our customers’ demand for our services, the result of which may adversely impact our revenues and financial performance;

● changes in tax laws; and

● the risks associated with the use of intellectual property that may be claimed by others and actual or potential litigation related thereto.

Finally, our future results will depend upon various other risks and uncertainties, including, but not limited to, those detailed in our filings with the SEC. For additional information regarding risks and uncertainties, please read our filings with the SEC under the Exchange Act and the Securities Act, including our Annual Report on Form 10-K for the fiscal year ended December 31, 2019. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements in this paragraph and elsewhere in this Quarterly Report. Other than as required under securities laws, we do not assume a duty to update these forward-looking statements, whether as a result of new information, subsequent events or circumstances, changes in expectations or otherwise.

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GOING CONCERN

Our financial statements have been prepared on the going concern basis, which contemplates the continuity of normal business activities and the realization of assets and settlement of liabilities in the normal course of business. We incurred a net loss of $7.2 million for the six months ended June 30, 2020. As of the balance sheet date of this report we had total current liabilities of $37.6 million, which exceeded our total current assets of $3.2 million by $34.4 million. We are in breach of two of our covenants as well as failed to pay an over advance that has continued through the date of this report related to the 2017 Credit Agreement (as discussed in Note 7 of the accompanying Notes to the Condensed Consolidated Financial Statements), resulting in our borrowings payable of $34.4 million being classified in current liabilities. On August 10, 2020, we received a 45-day extension on the maturity of the Credit Facility, and the total $32.0 million outstanding thereunder is due September 24, 2020. The Company has been in ongoing discussions and negotiations with other lenders, and we are currently negotiating a prospective refinancing of this debt. We cannot assure that we will be successful in any debt refinancing. Additionally, on July 24, 2020, the Company filed a Shelf Registration with the intent of seeking to raise further capital in the near term, which, if capital is raised thereunder, could aid in both the Company's cash position and in a possible refinancing of the Credit Facility. We have very limited liquidity and expect negative cash flow from operations in the near term.

We are currently negotiating with East West Bank in an effort to obtain a waiver for our breaches of the 2017 Credit Agreement. Our ability to continue as a going concern is dependent on our renegotiation of the 2017 Credit Agreement and our ability to further reduce costs and raise further capital, of which there can be no assurance. Further, there can be no assurance that we will successfully obtain a waiver from the East West Bank or maintain or increase our cash flows from operations. Given our current financial situation we may be required to accept onerous terms on the transactions that we are seeking. These factors raise substantial doubt over our ability to continue as a going concern and whether we will realize our assets and extinguish our liabilities in the normal course of business and at the amounts stated in the financial statements.

Recent Market Conditions

During March 2020, a global pandemic was declared by the World Health Organization related to the rapidly growing outbreak of a novel strain of coronavirus (“COVID-19”). The pandemic has significantly impacted the economic conditions in the United States, with accelerated effects in early 2020, as federal, state and local governments react to the public health crisis, creating significant uncertainties in the United States economy. As a result of these developments, the Company has experienced and expects to further experience a material adverse impact on its revenues, results of operations and cash flows. The situation changes rapidly and additional impacts to the business may arise that we are not aware of currently. We cannot predict whether, when or the manner in which the conditions surrounding COVID-19 will change including the timing of lifting any restrictions or office closure requirements.

In addition, certain producing countries within the Organization of Petroleum Exporting Countries and their allies (" OPEC+") group have attempted to increase market share through pricing activity that has had limited impact on the severe decline in domestic oil prices that occurred during the first quarter of 2020, and drilling and operating activity within our markets has remained depressed. Subsequent to the end of the quarter, OPEC+ countries have reportedly agreed to cooperate in limited and short-term production cuts, the impact of which is uncertain at this time.

The full extent of the impact of COVID-19 and OPEC+ actions on our operations and financial performance depends on future developments that are uncertain and unpredictable, including the duration and spread of the pandemic, its impact on capital and financial markets, any new information that may emerge concerning the severity of the virus, its spread to other regions as well as the actions taken to contain it, production response of domestic oil producers to lower oil prices, and the adherence to and continuity of OPEC+ production cuts, among others.

OVERVIEW

The Company, through its subsidiary, Heat Waves Hot Oil Service, LLC ("Heat Waves"), provides a range of oil field services to the domestic onshore oil and gas industry through two segments: 1) Production services, which include hot oiling and acidizing, and 2) Completion services, which includes frac water heating. The Company owns and operates a fleet of approximately 327 specialized trucks, trailers, frac tanks and other well-site related equipment and serves customers in the DJ Basin/Niobrara area in Colorado and Wyoming, the Bakken area in North Dakota, the San Juan Basin in northwestern New Mexico, the Marcellus and Utica Shale areas in Pennsylvania and Ohio, the Jonah area, Green River and Powder River Basins in Wyoming, the Eagle Ford Shale in Texas and the Stack and Scoop plays in the Anadarko Basin in Oklahoma.

RESULTS OF OPERATIONS

Executive Summary

Revenues for the six months ended June 30, 2020, decreased approximately $19.6 million, or 63%, from the comparable period last year due to weakness in domestic oil and gas activity levels driven by lower commodity prices, related pricing pressures, above average temperatures in Oklahoma, Pennsylvania, and eastern Ohio, and the more recent and broader impact of the OPEC+ supply cuts and the COVID-19 pandemic which began in March 2020.

Segment profits for the six-month period ended June 30, 2020, decreased by approximately $9.5 million, or 286%, due to the reasons noted above.  Sales, general & administrative expense, excluding severance and transition costs, decreased by approximately $51,000, or 2%, year over year, but include the impact of approximately $301,000 of severance compensation due to the acceleration of vesting and additional restricted stock awards in connection with a separation agreement with the Company's former CEO during the second quarter of 2020.

Net loss for the six months ended June 30, 2020, was approximately $7.2 million or $0.13 per share, compared to a net income of approximately $1.1 million, or $0.02 per share, in the same period last year due to the factors noted above, as well as a gain on settlement of approximately $1.2 million related to a settlement agreement with the sellers of Adler during the second quarter of 2019.

Adjusted EBITDA for the six months ended June 30, 2020, was a loss of approximately $2.6 compared to earnings of approximately $6.5 million for the same period last year due to the factors noted above. See the section titled Adjusted EBITDA* within this Item for definition of Adjusted EBITDA.

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Industry Overview

During the six months ended June 30, 2020, WTI crude oil price averaged approximately $37 per barrel, versus an average of approximately $57 per barrel in the comparable period last year. The North American rig count declined to 265 rigs in operation as of June 30, 2020, compared to 967 at the same time a year ago.  Despite the lower oil price environment and reduced rig count, we have grown our number of customers and allocated resources to the most active basins. We are focused on increasing utilization levels and optimizing the deployment of our equipment and workforce while maintaining high standards for service quality and safe operations. We compete on the basis of the quality, breadth of our service offerings, and price.

Segment Overview

Segment Results:

Enservco’s reportable business segments are Production Services and Completion Services. These segments have been selected based on management’s resource allocation and performance assessment in making decisions regarding the Company.

The following is a description of the segments.

Production Services: This segment utilizes a fleet of hot oil trucks and acidizing units to provide maintenance services to the domestic oil and gas industry. These services include hot oil services and acidizing services.

Completion Services: This segment utilizes a fleet of frac water heating units to provide frac water heating services and related support services to the domestic oil and gas industry.

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

The following tables set forth revenue from operations and segment profits for our business segments for the three and six months ended June 30, 2020 and 2019 (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
REVENUES:
Production Services	$	1,383	$	3,835	$	4,585	$	7,951
Completion Services		758		2,505		6,942		23,201
Total Revenues	$	2,141	$	6,340	$	11,527	$	31,152

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
SEGMENT PROFIT (LOSS):
Production services	$	(431	)	$	492		$	(723	)	$	1,262
Completion services		(758	)		(594	)		455			8,082
Total Segment (Loss) Profit	$	(1,189	)	$	(102	)	$	(268	)	$	9,344

Production Services

Production Services, which accounted for 65% of total revenue for the three months ended June 30, 2020, decreased approximately $2.4 million, or 64%, to $1.4 million compared to $3.8 million for the same quarter last year due to decreased activity levels related to the lower commodity prices. This segment, which accounted for 40% of total revenue for the six months ended June 30, 2020, decreased approximately $3.4 million, or 42%, to $4.6 million compared to $8.0 million for the same period last year due to a decrease in hot oil and acidizing activity stemming from the industry downturn.

Hot oil revenue for the three months ended June 30, 2020, decreased approximately $1.8 million, or 57%, compared to the three months ended June 30, 2019, from approximately $3.2 million to approximately $1.4 million. Hot oil revenue for the six months ended June 30, 2020, decreased approximately $2.5 million, or 37%, to $4.3 million compared to $6.8 million for the same period last year. These year-over-year declines were primarily driven by reduced activity due to an industry wide downturn.

Acidizing revenues for the three months ended June, 2020, decreased by approximately $648,000, or 95%, to approximately $31,000 from approximately $679,000. Acidizing revenues for the six months ended June 30, 2020, decreased by approximately $847,000, or 74%, to $301,000 compared to $1.1 million for the same period last year. These year-over-year declines were primarily driven by the reasons noted above.

Segment loss for our Production Services increased by $923,000, or 188%, to a loss of $431,000 for the three months ended June 30, 2020, compared to profit of $492,000 in the same quarter last year. Segment loss for Production Services increased by $2.0 million, or 157%, to a loss of $723,000 for the six months ended June 30, 2020, compared to profit of $1.3 million. The losses were primarily the result of industry conditions discussed above. 

Completion Services

Completion Services, which accounted for 35% of total revenue for the three months ended June 30, 2020, decreased approximately $1.7 million, or 70%, to $758,000 compared to $2.5 million for the same quarter last year due to the aforementioned related downturn in the industry. This segment, which accounted for 60% of total revenue for the six months ended June 30, 2020, decreased approximately $16.3 million, or 70%, to $6.9 million compared to $23.2 million for the same period last year due to the downturn in the industry, as well as above average temperatures in Oklahoma, Pennsylvania, and eastern Ohio in the first quarter of 2020.

The segment loss for Completion Services for the three months ended June 30, 2020, was approximately $758,000 compared to segment loss of approximately $594,000 during the three months ended June 30, 2019. The segment profit for Completion Services for the six months ended June 30, 2020, was approximately $455,000 compared to segment profit of approximately $8.1 million during the six months ended June 30, 2019. These decreased segment profits are related to the reasons discussed above. 

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Geographic Areas

The Company operates solely in three geographically diverse regions of the United States. The following table sets forth revenue from operations for the Company’s three geographic regions during the three and six months ended June 30, 2020 and 2019 (in thousands):

	Three Months Ended					Six Months Ended June 30,
	2020			2019		2020		2019
BY GEOGRAPHY
Production Services:
Rocky Mountain Region (1)	$	348		$	1,782	$	1,541	$	3,845
Central USA Region (2)		943			1,861		2,816		3,626
Eastern USA Region (3)		92			192		228		480
Total Production Services		1,383			3,835		4,585		7,951
Completion Services:
Rocky Mountain Region(1)		711			2,332		5,717		17,143
Central USA Region(2)		(2	)		74		108		2,845
Eastern USA Region(3)		49			99		1,117		3,213
Total Completion Services		758			2,505		6,942		23,201
Total Revenues	$	2,141		$	6,340	$	11,527	$	31,152

Notes to tables:

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

(2) Includes the Scoop/Stack Shale in Oklahoma and the Eagle Ford Shale in Texas. 

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

Production Services segment revenue in the Rocky Mountain Region for the three months ended June 30, 2020, decreased approximately $1.4 million, or 80%, primarily due to less acidizing and hot oiling activity in the D-J and Bakken Basins. Production Services segment revenue in the Rocky Mountain Region for the six months ended June 30, 2020, decreased by approximately $2.3 million, or 60%, primarily due to a decrease in acidizing activity in the D-J Basin and a decrease in hot oiling activity in the Bakken Basin. 

Production Services segment revenue in the Central USA region for the three months ended June 30, 2020, decreased by approximately $918,000, or 49%, due to a decrease in hot oiling activity in the Eagle Ford Shale. Production Services segment revenue in the Central USA region for the six months ended June 30, 2020, decreased by approximately $810,000, or 22%, primarily due to less acidizing and hot oiling activity in the Eagle Ford Shale. 

Production Services segment revenue in the Eastern USA region for the three months ended June 30, 2020, decreased approximately $100,000, or 52%, resulting from less hot oiling in the Marcellus and Utica Basins. Production Services segment revenue in the Eastern USA region for the six months ended June 30, 2020, decreased approximately $252,000, or 53%, resulting from decreased hot oiling activity in the Marcellus and Utica Basins. 

Completion Services segment revenue for both the three and six months ended June 30, 2020, decreased in all our regions due to a decline in frac heating activity throughout the first six months of 2020, in addition to above average temperatures in Oklahoma, Pennsylvania, and eastern Ohio during the first quarter of 2020.  

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Historical Seasonality of Revenues

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

As an indication of this quarter-to-quarter seasonality, the Company generated approximately 76% of its 2019 revenues during the first and fourth quarters compared to 24% of 2019 revenues during the second and third quarters of 2019. In an effort to grow our year-round hot oiling revenues, in 2019 we introduced a commission program to attract and retain experienced hot oil operators, as these operators are able to retain customers in some cases regardless of which company the operator works for.

Direct Operating Expenses:

Direct operating expenses, which include labor costs, propane, fuel, chemicals, truck repairs and maintenance, supplies, insurance, and site overhead costs for our operating segments, decreased by approximately $3.1 million or 48% during the second quarter of 2020 compared to the same period in 2019, primarily due to the severe reduction in revenue, discussed above. During the six months ended June 30, 2020, direct operating expenses decreased by approximately $10.0 million, or 46% compared to the same period on 2019, resulting primarily from the decrease in revenue discussed above as well as efficiencies gained from consolidation of Adler operations.

Sales, General, and Administrative Expenses:

During the three months ended June 30, 2020, sales, general, and administrative expenses decreased approximately $211,000, or 14%, to $1.2 million compared to the same period in 2019 primarily due to a decrease in administrative personnel costs and general office expenses, partially offset by stock compensation expense related to the acceleration of vesting and additional restricted stock awards in connection with a separation agreement with the Company's former CEO during the second quarter of 2020. During the six months ended June 30, 2020, sales, general, and administrative expenses decreased approximately $51,000, or 2%, to $3.0 million compared to the same period in 2019 primarily due to the same reasons noted above, as well as a year-over-year increase in professional fees related to our efforts in connection with seeking to restructure our debt.

Severance and Transition Costs:

Severance and transition costs increased from $0 to $139,000 for both the three months and six months ended June 30, 2020 compared to the same periods in 2019 primarily due to severance compensation recorded in connection with a separation agreement with the Company's former CEO during the second quarter of 2020. As discussed above, the Company also recorded $301,000 in stock compensation expense during the second quarter of 2020 in connection with the separation agreement, which is included in sales, general and administrative expenses.

Depreciation and Amortization:

Depreciation and amortization expense for the three months ended June 30, 2020 decreased approximately $132,000, or 9%, to $1.3 million compared to the same period in 2019.  Depreciation and amortization expense for the six months ended June 30, 2020 decreased approximately $136,000, or 5%, to $2.7 million compared to the same period in 2019. These decreases are due primarily to disposals of assets recorded during the second quarter of 2020. 

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(Loss) Income from Operations:

For the three months ended June 30, 2020, the Company recognized a loss from operations of $3.9 million compared to a loss from operations of $3.0 million for the comparable period in 2019, an increased loss of $0.9 million, or 30%. For the six months ended June 30, 2020, the Company recognized a loss from operations of $6.2 million compared to income from operations of $3.3 million for the comparable period in 2019, a decrease of $9.5 million, or 286%. The losses generated by the Company were primarily due to the decrease in segment profits described above. 

Interest Expense:

For the three months ended June 30, 2020, interest expense decreased approximately $109,000, or 17%, compared to the same period in 2019. For the six months ended June 30, 2020, interest expense decreased approximately $352,000, or 23%, compared to the same period in 2019. The decreases were primarily due to the decrease of our average borrowings.

Discontinued Operations:

Results for the three months and six months ended June 30, 2020 include income from discontinued operations of $31,000 and $67,000, respectively. Results for the three months and six months ended June 30, 2019 include losses from discontinued operations of $724,000 and $1.8 million, respectively. For more information regarding discontinued operations, see Note 6 to our financial statements included in “Item 1. Financial Statements” of this report.

Other Income:

Other income for the three months ended June 30, 2020 was approximately $76,000, compared to other income of approximately $1.2 million for the three months ended June 30, 2019. Other income for the six months ended June 30, 2020 was approximately $96,000, compared to other income of approximately $1.1 million for the six months ended June 30, 2019. The lower other income in both the three and six months ended June 30, 2020, was primarily due to a gain on settlement of approximately $1.2 million related to a settlement agreement with the sellers of Adler during the second quarter of 2019.

Income Taxes:

As of June 30, 2020, the Company had recorded a full valuation allowance on a net deferred tax asset of approximately $6.7 million. During the six months ended June 30, 2020 and 2019, the Company's tax benefit of $1.8 million and tax provision of $0.3 million, respectively, were adjusted by the valuation allowance which resulted in a net tax provision of zero.

Our effective tax rate was 0% for the six months ended June 30, 2020 and 2019, respectively. The effective tax expense for the six months ended June 30, 2020 and 2019 differs from the amount that would be provided by applying the statutory U.S. federal income tax rate of 21% to pre-tax income primarily because of state income taxes, estimated permanent differences and the recorded valuation allowance.

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Adjusted EBITDA*

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

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

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Adjusted EBITDA*
Net (loss) income	$	(4,357	)	$	(3,209	)	$	(7,194	)	$	1,094
Add back (deduct)
Interest expense		547			656			1,189			1,540
Provision for income tax expense		9			32			9			32
Depreciation and amortization (including discontinued operations)		1,317			1,736			2,719			3,419
EBITDA*		(2,484	)		(785	)		(3,277	)		6,085
Add back
Stock-based compensation		322			77			361			168
Severance and transition costs		139			-			139			-
Patent litigation and defense costs		-			1			-			10
(Gain) loss on disposal of equipment (including discontinued operations)		(15	)		12			(54	)		12
Impairment loss		-			-			-			127
One-time software expense		-			25			-			25
Other (income) expense (including discontinued operations)		(27	)		(1,208	)		252			(1,144)
EBITDA related to discontinued operations		1			418			11			1,192
Adjusted EBITDA*	$	(2,064	)	$	(1,460	)	$	(2,568	)	$	6,475

*Note: See below for discussion of the use of non-GAAP financial measurements.

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

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

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

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

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

Changes in Adjusted EBITDA*

Adjusted EBITDA for the three months ended June 30, 2020 decreased by approximately $604,000, or 41%, as compared to the same period in 2019. Adjusted EBITDA for the six months ended June 30, 2020 decreased by approximately $9.0 million, or 140%, as compared to the same period in 2019. These decreases were due primarily to the decline in segment profits discussed above and the higher EBITDA related to discontinued operations during the three and six months ended June 30, 2019.

LIQUIDITY AND CAPITAL RESOURCES 

As of June 30, 2020, we had an outstanding principal loan balance under the Credit Facility of approximately $32.0 million, which matures on August 10, 2020, with a weighted average interest rates of 3.93% per year for $30.5 million of outstanding LIBOR Rate borrowings and 3.93% per year for the approximately $1.5 million of outstanding Prime Rate borrowings. 

The following table summarizes our statements of cash flows for the six months ended June 30, 2020 and 2019 (in thousands):

	For the Six Months Ended June 30,
	2020			2019
Net cash used in operating activities	$	(882	)	$	5,854
Net cash provided by investing activities		1,004			439
Net cash used in financing activities		(356	)		(6,044	)
Net decrease in Cash and Cash Equivalents		(234	)		249
Cash and Cash Equivalents, Beginning of Period		663			257
Cash and Cash Equivalents, End of Period	$	429		$	506

The following table sets forth a summary of certain aspects of our balance sheet at June 30, 2020 and December 31, 2019:

	June 30, 2020			December 31, 2019
Current Assets	$	3,199		$	8,731
Total Assets	$	32,969		$	42,976
Current Liabilities	$	37,623		$	42,119
Total Liabilities	$	42,473		$	45,652
Working Capital (Current Assets net of Current Liabilities)	$	(34,424	)	$	(33,388	)
Stockholders’ Equity	$	(9,504	)	$	(2,676	)

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 Overview:

We do not currently generate adequate revenue to satisfy our current operations and expect we will need substantial additional capital to maintain operations for at least the remainder of 2020 absent a significant increase in demand for our services, which we do not expect. We cannot assure that we will be successful in raising additional debt or equity capital, if at all. We incurred significant net operating losses during the years ended December 31, 2019, and 2018, which have continued into the six months ended June 30, 2020 which raise substantial doubt about our ability to continue as a going concern. We are also in breach of two of our covenants under the 2017 Credit Agreement resulting in our borrowings thereunder of $34.4 million being classified as current liability, as well as failure to pay an over-advance that occurred on October 10, 2019 and has continued through the date of this report. Accordingly, our financial statements have been prepared on the going concern basis, which contemplates the continuity of normal business activities and the realization of assets and settlement of liabilities in the normal course of business. We are also currently negotiating and working with East West Bank in an effort to obtain a waiver for our breaches of the 2017 Credit Agreement. The  maturity of the $32.0 million due thereunder was extended August 10, 2020, and all remaining outstanding principal and interest is due September 24, 2020. The Company has been in ongoing discussions and negotiations with other lenders, and we are currently negotiating a prospective refinancing of this debt. We cannot assure that we will be successful in any debt refinancing. Additionally, on July 24, 2020, the Company filed a Shelf Registration with the intent of seeking to raise further capital in the near term, which, if capital is raised thereunder, could aid in both the Company's cash position and in a possible refinancing of the Credit Facility.

Our ability to continue as a going concern is dependent on our renegotiation of the 2017 Credit Agreement and our ability to further reduce costs and raise further capital, of which there can be no assurance. Further, there can be no assurance that we will successfully obtain a waiver from the East West Bank or maintain or increase our cash flows from operations. Given our current financial situation we may be required to accept onerous terms on the transactions that we are seeking.

The Default Notice received from East West Bank served as a triggering event for an event of default on our subordinated debt. As such, we have reclassified our subordinated debt to current liabilities. As of the date of this report, the lender of the subordinated debt has neither provided notice of default nor waived its rights and remedies resulting from the events of default and it reserves all other available rights and remedies under the Amended and Restated Subordinated Loan Agreement with Cross Rivers, L.P., a related party, certain other related documents, and applicable law.

We have relied on cash flow from operations, borrowings under our revolving credit agreements, and equity and debt offerings to satisfy our liquidity needs. Our ability to fund operating cash flow shortfalls, fund capital expenditures, and make acquisitions will depend upon our future operating performance and on the availability of equity and debt financing.  At June 30, 2020, we did not have any availability under the New Credit Facility. Our capital requirements over the next 12 months are anticipated to include, but are not limited to, operating expenses, debt servicing, and capital expenditures including maintenance of our existing fleet of assets.

 On March 31, 2017, our largest shareholder, Cross River Partners, L.P., posted a letter of credit in the amount of $1.5 million in accordance with the terms of the Tenth Amendment to our 2014 Credit Agreement, which was provided by PNC Bank. The letter of credit was converted into subordinated debt with a maturity date of June 28, 2022 with a stated interest rate of 10% per annum and a five-year warrant to purchase 967,741 shares of our common stock at an exercise price of $0.31 per share. On May 10, 2017, Cross River Partners, L.P. also provided $1.0 million in subordinated debt to us as required under the terms of the Tenth Amendment to the 2014 Credit Agreement. This subordinated debt has a stated annual interest rate of 10% and maturity date of June 28, 2022. In connection with this issuance of subordinated debt, Cross River Partners L.P. was granted a five-year warrant to purchase 645,161 shares of our common stock at an exercise price of $0.31 per share. On June 29, 2018 Cross River exercised both warrants and acquired 1,612,902 shares of our common stock. Proceeds from the exercise of the warrants in the amount of $500,000 were used to reduce the subordinated debt balance.

On November 11, 2019 Enservco and Cross River Partners, L.P. entered into an Amended and Restated Subordinated Loan Agreement (the “Amended Subordinated Loan”). The Amended Subordinated Loan increases the principal of the subordinated debt by $500,000 from $2.0 million to $2.5 million and provides Cross River Partners with a five-year warrant to purchase 625,000 shares of the Company’s common stock at an exercise price of $0.20 per share which are fully vested upon issuance.

34

Interest Rate Swap

On February 23, 2018, we entered into an interest rate swap agreement with East West Bank (the "2018 Swap") in order to hedge against the variability in cash flows from future interest payments related to the Credit Facility. The terms of the interest rate swap agreement included an initial notional amount of $10.0 million, a fixed payment rate of 2.52% paid by us, and a floating rate payment equal to LIBOR paid by East West Bank. The purpose of the swap agreement is to adjust the interest rate profile of our debt obligations. 

During the second quarter of 2020, the swap instrument matured and thus is recorded at $0 compared to a liability of $23,000 as of December 31, 2019.

Liquidity:

As of June 30, 2020, our available liquidity was $429,000, which represented our cash balance and we did not have any availability on the 2017 Credit Facility (subject to a covenant requirement that we maintain $1.5 million of available liquidity in periods where our fixed charge coverage ratio is less than 1.2:1). We utilize the 2017 Credit Facility to fund working capital requirements and investments, and during the six months ended June 30, 2020, we had net payments on our various lines of credit of approximately $2.0 million.

Working Capital:

As of June 30, 2020, we had a working capital deficit of approximately $34.4 million compared to $33.4 million as of December 31, 2019. 

Deferred Tax Asset, net:

As of June 30, 2020, the Company had recorded a valuation allowance to reduce its net deferred tax assets to zero. 

Cash flow from Operating Activities:

For the six months ended June 30, 2020, cash used in operating activities was approximately $882,000 compared to $5.9 million provided by operating activities during the comparable period in 2019. The decrease was attributable to the decrease in net income and the decrease in cash flows related to the decrease in accounts payable and accrued liabilities balances, partially offset by an increase in cash flows from the decrease in accounts receivables balances.

Cash flow from Investing Activities:

Cash provided by investing activities during the six months ended June 30, 2020 was approximately $1.0 million, compared to $439,000 during the comparable period in 2019. This increase is primarily due to proceeds received from the sale of equipment related to our discontinued operations, as well as proceeds from an insurance claim settlement paid during the second quarter of 2020.

Cash flow from Financing Activities:

Cash used in financing activities for the six months ended June 30, 2020 was $356,000 compared to $6.0 million for the comparable period in 2019. The change is primarily due to a note repayment of $3.7 million during the second quarter of 2019 and proceeds of $1.9 million relating to the Paycheck Protection Program loan during the second quarter of 2020.

Outlook: 

We face a very difficult operating environment in 2020 with exploration and production companies significantly cutting back their drilling and completions plans and exerting significant pressure on us to reduce our prices for the services we provide. Additionally, as indicated above, we are in default under out 2017 Credit Agreement and we will need additional debt or equity capital to continue operations through 2020. We cannot assure that we will raise such capital on terms acceptable to us, if at all. Due to our lack of capital we may be forced to curtail operations in some or all of our locations which will materially adversely affect our revenues and our ability to continue as a going concern. In the event we are able to continue as a going concern, our long-term goals include driving increased fleet utilization, optimizing fleet deployment, driving further operating efficiencies through technology and proactive cost management, and de-levering our balance sheet.  Our business is heavily dependent on exploration and production activity levels, which fluctuate based on commodity prices, capital budgets and other factors. Activity levels significantly declined beginning in the fourth quarter of 2019 due to year-end capital budget exhaustion, decreases in drilling and completion activity and substantial price decreases for crude oil and natural gas that occurred during the first quarter of 2020. Those declines may be partially mitigated by demand for our Production Services, although such services were substantially lower in the first six months of 2020 compared to the same period in 2019. We continue to seek opportunities to expand our business operations through organic growth, including increasing the volume of current services offered to our new and existing customers. We will also continue to seek to expand our customer relationships while seeking an appropriate balance between recurring maintenance work and drilling and completion related services.

Capital Commitments and Obligations:

Our capital obligations as of June 30, 2020 consist primarily the 2017 Credit Agreement which matures September 24, 2020. In addition, we also have scheduled principal payments under certain term loans and operating leases. General terms and conditions for amounts due under these commitments and obligations are summarized in the notes to the financial statements.  As discussed above, our lender under the 2017 Credit Agreement has declared us to be in default on our $32.0 million of indebtedness due to it and has reserved all its rights and remedies under the agreement including the right to accelerate and declare our loans due and payable and to foreclose on the collateral pledged, in whole or in part. The Company has been in ongoing discussions and negotiations with other lenders, and we are currently negotiating a prospective refinancing of this debt. We cannot assure that we will be successful in any debt refinancing.

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OFF-BALANCE SHEET ARRANGEMENTS

As of June 30, 2020, we had no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our stockholders.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES 

Going Concern

Our financial statements have been prepared on the going concern basis, which contemplates the continuity of normal business activities and the realization of assets and settlement of liabilities in the normal course of business. We incurred a net loss of $7.2 million for the six months ended June 30, 2020. As of the balance sheet date of this report we had total current liabilities of $37.6 million, which exceeded our total current assets of $3.2 million by $34.4 million. We are in breach of two of our covenants and have failed to repay overadvance that occurred in October 10, 2019 and has continued through the date of this report related to the 2017 Credit Agreement (as discussed in Note 7 of the accompanying Notes to the Condensed Consolidated Financial Statements), resulting in our borrowings payable of $34.4 million being classified in current liabilities.

Our ability to continue as a going concern is dependent on the renegotiation of the 2017 Credit Agreement and/or raising further capital. These factors raise substantial doubt over our ability to continue as a going concern and whether we will realize our assets and extinguish our liabilities in the normal course of business and at the amounts stated in the financial statements.

We are currently negotiating with East West Bank, however, given our current financial situation, we may be forced to accept onerous terms on these transactions. As of the date of this report East West Bank has not waived our breaches of the 2017 Credit Agreement.

There have been no other changes in our critical accounting policies since December 31, 2019. 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

As required by Rule 13a-15 under the Exchange Act, as of June 30, 2020, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer (our principal executive officer) and our Chief Financial Officer (our principal financial officer). Based upon and as of the date of that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, 2020.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There has been no change in the Company's internal control over financial reporting during the quarter covered by this report that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.

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PART II

ITEM 1.LEGAL PROCEEDINGS 

Enservco and Heat Waves were defendants in a civil lawsuit in federal court in Colorado, Civil Action No. 1:15-cv-00983-RBJ (“Colorado Case”), that alleged that Enservco and Heat Waves, in offering and selling frac water heating services, infringed and induced others to infringe two patents owned by Heat-On-The-Fly, LLC (“HOTF”)- U.S. Patent No. 8,171,993 (the "'993 Patent") and U.S. Patent No. 8,739,875 (the "'875 Patent"). In March of 2019, the parties moved to dismiss the Colorado Case. On March 15, 2019, the Colorado Case was dismissed in its entirety without any finding of wrongdoing by Enservco or Heat Waves.   

While the Colorado Case was pending, HOTF was issued two additional patents, which were related to the '993 and '875 Patents, but were not asserted in he Colorado Case. However, on March 31, 2015, the U.S. District Court for the District of North Dakota (Civil Action No. 4:13-cv-00010) ruled, in a case not involving Enservco or Heat waves, that the '993 Patent was invalid. On January 14, 2016, the court ruled that the ‘993 Patent was also unenforceable due to inequitable conduct by HOTF and the inventor. HOTF appealed, and on May 4, 2018, the United States Court of Appeals for the Federal Circuit (Case No. 16-1894) upheld the lower court's ruling of unenforceability. In light of the foregoing, Management believes that the inequitable conduct related to the '993 Patent could serve as a basis for asserting unenforceability of the two additional patents.

ITEM 1A. RISK FACTORS

See the Company’s risk factors set forth in the Company’s annual report on Form 10-K for the year ended December 31, 2019, filed on March 20, 2020, which is incorporated herein by reference. In addition, see the additional risk factor below.

Our success depends on key members of our management, the loss of any executive or key personnel could disrupt our business operations.

We depend, to a large extent, on the services of certain of our executive officers. The loss of the services of Rich Murphy or Marjorie Hargrave could disrupt our operations. Although we have entered into an employment agreement with Ms. Hargrave that contains, among other things, non-compete and confidentiality provisions, we may not be able to enforce the non-compete and/or confidentiality provisions in the employment agreement.

Our common stock may be delisted by the New York Stock Exchange American LLC.

We are continuing to seek to regain compliance with certain New York Stock Exchange American LLC (“NYSE American”) listing requirements. In November, 2019 we received notifications from the NYSE American that we were not in compliance with the minimum stock price continued listing standards and we were not in compliance with the minimum stockholders’ equity standards. Shortly thereafter, we provided the NYSE with a plan of compliance that contemplates a combination of the debt and additional equity capital proposed to be sought by us in order to achieve the stockholders’ equity requirement, and we have received the necessary stockholder approval to effect a reverse stock split of our common stock at an exchange ratio of not less than 1-for-10 (1:10) and not greater than 1-for-25 (1:25), in seeking to meet the minimum stock price standard.

We have updated our compliance plans with the NYSE American on an ongoing basis, and our common stock continues to be listed while we seek to regain compliance with the stockholders’ equity and stock price requirements. It is not certain how long it will take for us to meet the foregoing requirements and the NYSE American could determine to delist our common stock in the meantime.

If our common stock is delisted, we would be forced to list our common stock on the OTC Markets or some other quotation medium, depending on our ability to meet their specific requirements. In that case, we may lose the interest and support of some or all of our institutional investors and further, selling our common stock on the OTC Markets would be more difficult because smaller quantities of shares would likely be bought and sold. These factors could also result in lower prices and larger spreads in the bid and ask prices for shares of our common stock. Finally, because of additional regulatory burdens imposed upon broker-dealers with respect to lower price over the counter companies, delisting could discourage broker-dealers from effecting transactions in our stock, further limiting the liquidity of our shares. These factors could have a material adverse effect on the trading price, liquidity, value and marketability of our common stock.

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

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS 

Exhibit No.	Title
10.1	Fourth Amendment to Loan and Security Agreement.
31.1	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rich Murphy, Principal Executive Officer). Filed herewith.
31.2	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Marjorie Hargrave, Principal Financial Officer). Filed herewith.
32	Certification Pursuant to 18 U.S.C. §1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Rich Murphy, Chief Executive Officer, and Marjorie Hargrave, Chief Financial Officer). Filed herewith.
101.INS	XBRL Instance Document
101.SCH	XBRL Schema Document
101.CAL	XBRL Calculation Linkbase Document
101.LAB	XBRL Label Linkbase Document
101.PRE	XBRL Presentation Linkbase Document
101.DEF	XBRL Definition Linkbase Document

38

SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	ENSERVCO CORPORATION
Date: August 14, 2020		/s/ Rich Murphy
		Rich Murphy, Principal Executive Officer and Chief Executive Officer
Date: August 14, 2020		/s/ Marjorie Hargrave
		Marjorie Hargrave, Principal Financial Officer and Chief Financial Officer

39

EX-10.1

Exhibit 10.1

FOURTH AMENDMENT TO LOAN AND SECURITY AGREEMENT

THIS FOURTH AMENDMENT TO LOAN AND SECURITY AGREEMENT AND WAIVER (this “Amendment”) , dated as of July 6, 2020, is entered into by and among ENSERVCO CORPORATION, a Delaware corporation, DILLCO FLUID SERVICE, INC., a Kansas corporation, HEAT WA YES HOT OIL SERVICE LLC, a Colorado limited liability company, HEAT WAVES WATER MANAGEMENT LLC, a Colorado limited liability company (collectively, “Borrowers”), and EAST WEST BANK, a California banking corporation (“Lender”), with reference to the following facts:

RECITALS

A.     Borrowers and Lender previously entered into that certain Loan and Security Agreement, dated as of August 10, 2017, as amended by the First Amendment to Loan and Security Agreement dated as of November 20, 2017, the Second Amendment to Loan and Security Agreement dated as of October 26, 2018, and the Third Amendment to Loan and Security Agreement and Waiver dated as of August 14, 2019 (collectively, the “Loan Agreement”), pursuant to which Lender provides certain loans and other credit accommodations to Borrowers..

B.      Borrower and Lender wish to make certain amendments to the Loan Agreement as set forth herein.

NOW, THEREFORE, the parties hereto agree as follows:

1.      Defined Terms. Any and all initially capitalized terms used, but not expressly defined herein (including, without limitation, in the recitals hereto), shall have the respective meanings specified in the Loan Agreement.

2.       Amendments to Agreement.

(a)     Section 2.2 of the Agreement is hereby amended by restating subpart (c) in its entirety as follows:

“(c)   Payments. Interest hereunder on each Prime Rate Loan shall be due and payable on the first calendar day of each month during the term hereof. Interest hereunder on each LIBOR Loan shall be due and payable on the last day of each Interest Period applicable to such LIBOR Loan, provided that if the Interest Period for any LIBOR Loan is longer than three (3) months, interest on such LIBOR Loan shall be payable on the day that is three (3) months after the start of such LIBOR period and on the last day of such LIBOR period. Lender shall, at its option, charge such interest, all Lender Expenses, all Periodic Payments and all other Obligations against any of Borrowers' deposit accounts or against the Revolving Line, in which case those amounts shall thereafter accrue interest at the rate then applicable hereunder. Notwithstanding the foregoing, effective July 1, 2020, all Interest due on the Revolving Line shall be capitalized and compounded by becoming part of the Obligations, and such interest shall thereafter accrue interest at the rate then applicable hereunder.”

(b)     Exhibit “A” Definitions of the Agreement hereby amended by deleting the definition of “Letter of Credit Sublimit” in its entirety.

1

(c)     Section 2.1(b) of the Agreement is hereby amended by deleting item (iv) entitled “Letter of Credit Sublimit” in its entirety.

3.       Conditions Precedent. The effectiveness of this Amendment shall be subject to the prior satisfaction of each of the following conditions:

(a)     Lender shall have received this Amendment, duly executed by each Borrower; and

(b)     Lender shall have received such other documents and completion of such other matters as Lender may reasonably deem necessary or appropriate.

4.        Miscellaneous.

(a)     Survival of Representations and Warranties. All representations and warranties made in the Loan Agreement or in any other Loan Document shall survive the execution and delivery of this Amendment.

(b)     References to the Loan Agreement. The Loan Agreement, each of the other Loan Documents, and any and all other agreements, documents or instruments now or hereafter executed and delivered pursuant to the terms hereof, or pursuant to the terms of the Loan Agreement as amended hereby, are hereby amended so that any reference therein to the Loan Agreement shall mean a reference to the Loan Agreement as amended by this Amendment.

(c)     Loan Agreement Remains in Effect. The Loan Agreement and the other Loan Documents remain in full force and effect, and each Borrower hereby ratifies and confirms its agreements and covenants contained therein. Each Borrower hereby confirms that, after giving effect to this Amendment, no default or Event of Default shall have occurred and be continuing.

(d)     Severability. Any provision of this Amendment held by a court of competent jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of this Amendment and the effect thereof shall be confined to the provision so held to be invalid or unenforceable.

(e)     Governing Law. This Amendment shall be governed by and construed in accordance with the laws of the State of California applied to contracts to be performed wholly within the State of California.

(f)     Counterparts. This Amendment may be executed in two or more counterparts, each of which when so executed shall be deemed to be an original, but all of which when taken together shall constitute one and the same instrument.

(g)     Headings. The headings, captions and arrangements used in this Amendment are for convenience only and shall not affect the interpretation of this Amendment.

(h)     Expenses of Lender. Borrowers jointly and severally agree to pay on demand all costs and expenses reasonably incurred by Lender in connection with the preparation, negotiation and execution of this Amendment, including, without limitation, the reasonable fees and expenses of Lender's legal counsel.

(i)     NO ORAL AGREEMENTS. THIS AMENDMENT REPRESENTS THE FINAL AGREEMENT AMONG THE PARTIES HERETO WITH REGARD TO THE SUBJECT MATTER HEREOF AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS

2

OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES HERETO.

[Remainder of page intentionally left blank. Signature page(s) follow(s).}

3

IN WITNESS WHEREOF, the parties hereto have entered into this Amendment by their respective duly authorized officers as of the date first above written.

BORROWERS:

ENSERVCO CORPORATION,

a Delaware corporation

By:    /s/ Marjorie Hargrave     

Name: Marjorie Hargrave

Title: Chief Financial Officer

DILLCO FLUID SERVICE, INC.,

a Kansas corporation

By:    /s/ Marjorie Hargrave     

Name: Marjorie Hargrave

Title: Chief Financial Officer

HEAT WAVES HOT OIL SERVICES LLC,

     a Colorado limited liability company

By:    /s/ Marjorie Hargrave     

Name: Marjorie Hargrave

Title: Chief Financial Officer

HEAT WAVES WATER MANAGEMENT, LLC,

a Colorado limited liability company

By:    /s/ Marjorie Hargrave     

Name: Marjorie Hargrave

Title: Chief Financial Officer

LENDER:

EAST WEST BANK,

a California banking corporation

By:    /s/ Frank Chan          

Name: Frank Chan

Title: Senior Vice President

4

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Rich Murphy, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Enservco Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 14, 2020	/s/ Rich Murphy
	Rich Murphy, Principal Executive Officer, and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Marjorie Hargrave, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Enservco Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 14, 2020	/s/ Marjorie Hargrave
	Marjorie Hargrave, Principal Financial Officer, and Chief Financial Officer

EX-32

 Exhibit 32

ENSERVCO CORPORATION

Certification pursuant to 18 U.S.C. §1350 of the

Chief Executive Officer and Chief Financial Officer

In connection with the Quarterly Report on Form 10-Q (the “Report”) of Enservco Corporation (the “Company”) for the quarter ended June 30, 2020, each of the undersigned Rich Murphy, the Chief Executive Officer and principal executive officer of the Company, and Marjorie Hargrave, the Chief Financial Officer and the principal financial officer of the Company, hereby certifies pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of the undersigned’s knowledge and belief:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

August 14, 2020	/s/ Rich Murphy
	Rich Murphy, Principal Executive Officer, and Chief Executive Officer
August 14, 2020	/s/ Marjorie Hargrave
	Marjorie Hargrave, Principal Financial Officer, and Chief Financial Officer

The foregoing certifications are not deemed filed with the Securities and Exchange Commission for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (Exchange Act), and are not to be incorporated by reference into any filing of Enservco Corporation under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

XML

Document And Entity Information - shares	6 Months Ended
	Jun. 30, 2020	Aug. 11, 2020
Document Information [Line Items]
Entity Registrant Name	Enservco Corporation
Entity Central Index Key	0000319458
Trading Symbol	ensv
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Current Reporting Status	Yes
Entity Emerging Growth Company	false
Entity Small Business	true
Entity Interactive Data Current	Yes
Entity Common Stock, Shares Outstanding (in shares)		55,005,663
Entity Shell Company	false
Document Type	10-Q
Document Period End Date	Jun. 30, 2020
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q2
Amendment Flag	false
Title of 12(b) Security	Common stock, $0.005 par value

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) - USD ($)	Jun. 30, 2020	Dec. 31, 2019
Current Assets
Cash and cash equivalents	$ 429,000	$ 663,000
Accounts receivable, net	1,452,000	6,424,000
Prepaid expenses and other current assets	947,000	1,016,000
Inventories	314,000	398,000
Income tax receivable, current	57,000	43,000
Current assets of discontinued operations		187,000
Total current assets	3,199,000	8,731,000
Property and equipment, net	23,741,000	26,620,000
Goodwill	546,000	546,000
Intangible assets, net	726,000	828,000
Income taxes receivable, non-current		14,000
Right-of-use asset - financing, net	280,000	569,000
Right-of-use asset - operating, net	3,328,000	3,793,000
Other assets	333,000	445,000
Non-current assets of discontinued operations	816,000	1,430,000
TOTAL ASSETS	32,969,000	42,976,000
Current Liabilities
Accounts payable and accrued liabilities	2,100,000	4,470,000
Senior revolving credit facility	31,993,000	33,994,000
Subordinated debt	2,406,000	2,381,000
Lease liability - financing, current	127,000	207,000
Lease liability - operating, current	818,000	848,000
Current portion of long-term debt	148,000	147,000
Current liabilities of discontinued operations	31,000	72,000
Total current liabilities	37,623,000	42,119,000
Long-Term Liabilities
Long-term debt, less current portion	2,088,000	198,000
Lease liability - financing, less current portion	106,000	259,000
Lease liability - operating, less current portion	2,623,000	3,009,000
Other liability	12,000	33,000
Long-term liabilities of discontinued operations	21,000	34,000
Total long-term liabilities	4,850,000	3,533,000
Total liabilities	42,473,000	45,652,000
Commitments and Contingencies (Note 10)
Preferred stock, $.005 par value, 10,000,000 shares authorized, no shares issued or outstanding
Common stock. $.005 par value, 100,000,000 shares authorized, 55,030,663 and 55,642,829 shares issued, respectively; 103,600 shares of treasury stock; and 54,927,063 and 55,539,229 shares outstanding, respectively	275,000	278,000
Additional paid-in capital	22,435,000	22,066,000
Accumulated deficit	(32,214,000)	(25,020,000)
Total stockholders' deficit	(9,504,000)	(2,676,000)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$ 32,969,000	$ 42,976,000

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - $ / shares	Jun. 30, 2020	Dec. 31, 2019
Preferred stock, par value (in dollars per share)	$ 0.005	$ 0.005
Preferred stock, shares authorized (in shares)	10,000,000	10,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.005	$ 0.005
Common stock, shares authorized (in shares)	100,000,000	100,000,000
Common stock, shares issued (in shares)	55,030,663	55,642,829
Common stock, shares outstanding (in shares)	54,927,063	55,539,229
Treasury stock, shares (in shares)	103,660	103,660

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Revenue	$ 2,141,000	$ 6,340,000	$ 11,527,000	$ 31,152,000
Expenses
Cost of Revenue	3,330,000	6,442,000	11,795,000	21,808,000
Sales, general, and administrative expenses	1,247,000	1,458,000	3,009,000	3,060,000
Patent litigation and defense costs		1,000		10,000
Severance and transition costs	139,000		139,000
Loss (gain) on disposal of assets	23,000	(4,000)	38,000	(4,000)
Impairment loss				127,000
Depreciation and amortization	1,310,000	1,442,000	2,706,000	2,842,000
Total operating expenses	6,049,000	9,339,000	17,687,000	27,843,000
(Loss) income from operations	(3,908,000)	(2,999,000)	(6,160,000)	3,309,000
Other (expense) income
Interest expense	(547,000)	(656,000)	(1,188,000)	(1,540,000)
Other income	76,000	1,202,000	96,000	1,137,000
Total other (expense) income	(471,000)	546,000	(1,092,000)	(403,000)
(Loss) income from continuing operations before tax expense	(4,379,000)	(2,453,000)	(7,252,000)	2,906,000
Income tax expense	(9,000)	(32,000)	(9,000)	(32,000)
(Loss) income from continuing operations	(4,388,000)	(2,485,000)	(7,261,000)	2,874,000
Income (loss) from discontinued operations (Note 6)	31,000	(724,000)	67,000	(1,780,000)
Net (loss) income	$ (4,357,000)	$ (3,209,000)	$ (7,194,000)	$ 1,094,000
(Loss) earnings from continuing operations per common share - basic (in dollars per share)	$ (0.08)	$ (0.05)	$ (0.13)	$ 0.05
Loss from discontinued operations per common share - basic (in dollars per share)		(0.01)		(0.03)
Net (loss) income per share - basic (in dollars per share)	(0.08)	(0.06)	(0.13)	0.02
(Loss) earnings from continuing operations per common share - diluted (in dollars per share)	(0.08)	(0.05)	(0.13)	0.05
Loss from discontinued operations per common share - diluted (in dollars per share)		(0.01)		(0.03)
Net (loss) income per share - diluted (in dollars per share)	$ (0.08)	$ (0.06)	$ (0.13)	$ 0.02
Basic weighted average number of common shares outstanding (in shares)	55,352	54,978	55,435	54,589
Add: Dilutive shares (in shares)				1,215
Diluted weighted average number of common shares outstanding (in shares)	55,352	54,978	55,435	55,804
Production Services [Member]
Revenue	$ 1,383,000	$ 3,835,000	$ 4,585,000	$ 7,951,000
Expenses
Cost of Revenue	1,814,000	3,343,000	5,308,000	6,689,000
Depreciation and amortization	647,000	640,000	1,317,000	1,483,000
Completion Services [Member]
Revenue	758,000	2,505,000	6,942,000	23,201,000
Expenses
Cost of Revenue	1,516,000	3,099,000	6,487,000	15,119,000
Depreciation and amortization	$ 567,000	$ 741,000	$ 1,214,000	$ 1,276,000

XML

Consolidated Statements of Stockholders' Equity - USD ($) shares in Thousands	Common Stock Outstanding [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Total
Balance (in shares) at Dec. 31, 2018	54,286
Balance at Dec. 31, 2018	$ 271,000	$ 21,797,000	$ (17,466,000)	$ 4,602,000
Opening balance adjustment			108,000	108,000
Stock-based compensation, net of issuance costs		92,000		92,000
Restricted share cancellation (in shares)	(55)
Net (loss) income			4,303,000	4,303,000
Balance (in shares) at Mar. 31, 2019	54,231
Balance at Mar. 31, 2019	$ 271,000	21,889,000	(13,055,000)	9,105,000
Balance (in shares) at Dec. 31, 2018	54,286
Balance at Dec. 31, 2018	$ 271,000	21,797,000	(17,466,000)	4,602,000
Net (loss) income				1,094,000
Balance (in shares) at Jun. 30, 2019	55,329
Balance at Jun. 30, 2019	$ 277,000	21,960,000	(16,264,000)	5,973,000
Balance (in shares) at Dec. 31, 2018	54,286
Balance at Dec. 31, 2018	$ 271,000	21,797,000	(17,466,000)	4,602,000
Net (loss) income				(7,700,000)
Balance (in shares) at Dec. 31, 2019	55,539
Balance at Dec. 31, 2019	$ 278,000	22,066,000	(25,020,000)	(2,676,000)
Balance (in shares) at Mar. 31, 2019	54,231
Balance at Mar. 31, 2019	$ 271,000	21,889,000	(13,055,000)	9,105,000
Stock-based compensation, net of issuance costs		77,000		77,000
Restricted share cancellation (in shares)	(25)
Net (loss) income			(3,209,000)	(3,209,000)
Restricted share issuance (in shares)	1,123
Restricted share issuance	$ 6,000	(6,000)
Balance (in shares) at Jun. 30, 2019	55,329
Balance at Jun. 30, 2019	$ 277,000	21,960,000	(16,264,000)	5,973,000
Balance (in shares) at Dec. 31, 2019	55,539
Balance at Dec. 31, 2019	$ 278,000	22,066,000	(25,020,000)	(2,676,000)
Stock-based compensation, net of issuance costs		39,000		39,000
Restricted share cancellation (in shares)	(30)
Net (loss) income			(2,837,000)	(2,837,000)
Restricted share cancellation	$ (3,000)
Restricted share cancellation		3,000
Balance (in shares) at Mar. 31, 2020	55,509
Balance at Mar. 31, 2020	$ 275,000	22,108,000	(27,857,000)	(5,474,000)
Balance (in shares) at Dec. 31, 2019	55,539
Balance at Dec. 31, 2019	$ 278,000	22,066,000	(25,020,000)	(2,676,000)
Net (loss) income				(7,194,000)
Balance (in shares) at Jun. 30, 2020	54,927
Balance at Jun. 30, 2020	$ 275,000	22,435,000	(32,214,000)	(9,504,000)
Balance (in shares) at Mar. 31, 2020	55,509
Balance at Mar. 31, 2020	$ 275,000	22,108,000	(27,857,000)	(5,474,000)
Stock-based compensation, net of issuance costs		322,000		322,000
Restricted share cancellation (in shares)	(682)
Net (loss) income			(4,357,000)	(4,357,000)
Restricted share issuance (in shares)	100
Restricted share issuance	$ (4,000)	4,000
Restricted share cancellation	(1,000)
Restricted share cancellation		1,000
Restricted shares vested	$ 5,000			5,000
Balance (in shares) at Jun. 30, 2020	54,927
Balance at Jun. 30, 2020	$ 275,000	$ 22,435,000	$ (32,214,000)	$ (9,504,000)

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	3 Months Ended				6 Months Ended		12 Months Ended
	Jun. 30, 2020	Mar. 31, 2020	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2020	Jun. 30, 2019	Dec. 31, 2019
OPERATING ACTIVITIES
Net (loss) income	$ (4,357,000)	$ (2,837,000)	$ (3,209,000)	$ 4,303,000	$ (7,194,000)	$ 1,094,000	$ (7,700,000)
Net income (loss) from discontinued operations	31,000		(724,000)		67,000	(1,780,000)
Net (loss) income from continuing operations	(4,388,000)		(2,485,000)		(7,261,000)	2,874,000
Adjustments to reconcile net (loss) income to net cash used in operating activities
Depreciation and amortization					2,706,000	2,842,000
Loss (gain) on disposal of equipment	23,000		(4,000)		38,000	(4,000)
Gain on Adler settlement						(1,252,000)
Impairment loss						127,000
Stock-based compensation					361,000	168,000
Amortization of debt issuance costs and discount					95,000	226,000
Provision for bad debt expense	(2,000)		3,000		298,000	3,000
Changes in operating assets and liabilities
Accounts receivable					4,674,000	2,090,000
Inventories					85,000	142,000
Prepaid expense and other current assets					68,000	9,000
Income taxes receivable					(14,000)
Amortization of operating lease assets					416,000	329,000
Other assets					320,000	138,000
Accounts payable and accrued liabilities					(2,365,000)	(413,000)
Operating lease liabilities					(416,000)	(322,000)
Other liabilities					(21,000)	99,000
Net cash (used in) provided by operating activities - continuing operations					(1,016,000)	7,056,000
Net cash provided by (used in) operating activities - discontinued operations					134,000	(1,202,000)
Net cash (used in) provided by operating activities					(882,000)	5,854,000
INVESTING ACTIVITIES
Purchases of property and equipment					(306,000)	(297,000)
Proceeds from insurance claims					294,000	27,000
Proceeds from disposals of property and equipment					335,000	219,000
Net cash provided by (used in) investing activities - continuing operations					323,000	(51,000)
Net cash provided by investing activities - discontinued operations					681,000	490,000
Net cash provided by investing activities					1,004,000	439,000
FINANCING ACTIVITIES
Net line of credit payments					(2,001,000)	(2,071,000)
Proceeds from PPP loan					1,940,000
Repayment of long-term debt					(49,000)	(70,000)
Payments of finance leases					(245,000)	(202,000)
Repayment of note						(3,700,000)
Other financing activities						(1,000)
Net cash used in financing activities - continuing operations					(355,000)	(6,044,000)
Net cash used in financing activities - discontinued operations					(1,000)
Net cash used in financing activities					(356,000)	(6,044,000)
Net (Decrease) Increase in Cash and Cash Equivalents					(234,000)	249,000
Cash and Cash Equivalents, beginning of period		$ 663,000		$ 257,000	663,000	257,000	257,000
Cash and Cash Equivalents, end of period	$ 429,000		$ 506,000		429,000	506,000	$ 663,000
Supplemental Cash Flow Information:
Cash paid for interest					1,026,000	1,254,000
Supplemental Disclosure of Non-cash Investing and Financing Activities:
Non-cash proceeds from revolving credit facilities						$ 32,000

XML

Note 1 - Basis of Presentation

6 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

Note

1

– Basis of Presentation

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

The accompanying unaudited condensed consolidated financial statements have been derived from the accounting records of Enservco Corporation, Heat Waves Hot Oil Service LLC (“Heat Waves”),

Dillco Fluid Service, Inc

. (“Dillco”), Heat Waves Water Management LLC (“HWWM”), and Adler Hot Oil Service, LLC ("Adler") (collectively, the “Company”) as of

June 30, 2020 

and

December 31, 2019 

and the results of operations for the

three

and

six

 months ended

June 30, 2020 

and

2019.

The below table provides an overview of the Company

's current ownership hierarchy:

Name	State of Formation	Ownership	Business
Heat Waves Hot Oil Service LLC	Colorado	100% by Enservco	Oil and natural gas well services, including logistics and stimulation.
Adler Hot Oil Service, LLC	Delaware	100% by Enservco	Operations integrated into Heat Waves during 2019.
Heat Waves Water Management LLC	Colorado	100% by Enservco	Discontinued operations in 2019
Dillco Fluid Service, Inc	Kansas	100% by Enservco	Discontinued operation in 2018
HE Services LLC	Nevada	100% by Heat Waves	No active business operations. Owns construction equipment used by Heat Waves.

The accompanying unaudited

condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles for interim financial information and with the instructions to Form

10

-Q and Article

8

of Regulation S-

X.

Accordingly, they do

not

include all of the disclosures required by generally accepted accounting principles in the United States for complete financial statements. In the opinion of management, all of the normal and recurring adjustments necessary to fairly present the interim financial information set forth herein have been included. The results of operations for interim periods are

not

necessarily indicative of the operating results of a full year or of future years.

The accompanying unaudited condensed consolidated financial statements were prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and follow the same accounting policies and methods of their application as the most recent annual financial statements. These interim financial statements should be read in conjunction with the financial statements and related footnotes included in the Annual Report on Form

10

-K of Enservco Corporation for the year ended

December 31, 2019.

All inter-company balances and transactions have been eliminated in the accompanying condensed consolidated financial statements.

XML

Note 2 - Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Significant Accounting Policies [Text Block]

Note

2

 - Summary of Significant Accounting Policies

Going Concern

Our financial statements have been prepared on the going concern basis, which contemplates the continuity of normal business activities and the realization of assets and settlement of liabilities in the normal course of business. We incurred a net loss of

$7.7

million for the year ended

December 31, 2019

and have incurred a net loss of

$4.4

million and

$7.2

million for the

three

and

six

months ended

June 30, 2020. 

As of the balance sheet date of this report we had total current liabilities of

$37.6

million, which exceeded our total current assets of

$3.2

 million by

$34.4

million. On

August 10, 2017,

we entered into the

2017

Credit Agreement, as amended, with East West Bank (the

"2017

Credit Agreement") which provides for a

three

-year,

$37.0

million senior secured revolving credit facility (the "Credit Facility"). We are in breach of

two

of our covenants under the

2017

 Credit Agreement and have failed to pay an over-advance that occurred in

October 

2019

that has continued through the date of this report  (as discussed in Note

7

 of the accompanying Notes to the Condensed Consolidated Financial Statements), resulting in our borrowings payable of 

$34.4

million being classified in current liabilities. On

August 10, 2020,

we received a

45

-day extension on the maturity of the Credit Facility, and the total

$32.0

million outstanding thereunder is due

September 24, 2020. 

The Company has been in ongoing discussions and negotiations with other lenders, and we are currently negotiating a prospective refinancing of this debt. We cannot assure that we will be successful in any debt refinancing. Additionally, on

July 24, 2020,

the Company filed with the SEC a Registration Statement on Form S-

3

(the "Shelf Registration") with the intent of seeking to raise further capital in the near term, which, if capital is raised thereunder, could aid in both the Company's cash position and in a possible refinancing of the Credit Facility. See Note

14

- Subsequent Events for more information on the extension for the maturity of our Credit Facility.

Our ability to continue as a going concern is dependent on the renegotiation of the

2017

Credit Agreement and/or raising further capital and our ability to further reduce costs, of which there can be

no

assurance. These factors raise substantial doubt over our ability to continue as a going concern and whether we will realize our assets and extinguish our liabilities in the normal course of business and at the amounts stated in the financial statements. Given our current financial situation we

may

be required to accept onerous terms on the transactions that we are seeking.

Recent Market Conditions

The COVID-

19

pandemic has significantly impacted the world economic conditions including in the United States, with significant effects beginning in

February 2020,

and continuing through the issuance of this report, as federal, state and local governments react to the public health crisis, creating significant uncertainties relating to the United States economy. Consequently, the Company has experienced and expects to further experience a material adverse impact on its revenues, results of operations and cash flows. The situation changes rapidly and additional impacts to our business

may

arise that we are

not

aware of currently. We cannot predict whether, when or the manner in which the conditions surrounding COVID-

19

will change including the timing of lifting any restrictions or office closure requirements.

In addition, certain producing countries within the Organization of Petroleum Exporting Countries and their allies (" OPEC+") group have attempted to increase market share through pricing activity that has had limited impact on the severe decline in domestic oil prices that occurred during the

first

quarter of

2020,

and drilling and operating activity within our markets has remained depressed.

The full extent of the impact of COVID-

19

and OPEC+ actions on our operations and financial performance depends on future developments that are uncertain and unpredictable, including the duration and spread of the pandemic, its impact on capital and financial markets, any new information that

may

emerge concerning the severity of the virus, its spread to other regions as well as the actions taken to contain it, production response of domestic oil producers to lower oil prices, and the adherence to and continuity of OPEC+ production cuts, among others.

Cash and Cash Equivalents

The Company considers all highly liquid instruments purchased with an original maturity of

three

months or less to be cash equivalents. The Company continually monitors its positions with, and the credit quality of, the financial institutions with which it invests. Enservco maintains its excess cash in various financial institutions, where deposits

may

exceed federally insured amounts at times. 

Accounts Receivable

Accounts receivable are stated at the amounts billed to customers, net of an allowance for uncollectible accounts. The Company provides an allowance for uncollectible accounts based on a review of outstanding receivables, historical collection information and existing economic conditions. The allowance for uncollectible amounts is continually reviewed and adjusted to maintain the allowance at a level considered adequate to cover future losses. The allowance is management's best estimate of uncollectible amounts and is determined based on historical collection experience related to accounts receivable coupled with a review of the current status of existing receivables. The losses ultimately incurred could differ materially in the near term from the amounts estimated in determining the allowance. As of

June 30, 2020, 

and

December 31, 2019,

the Company had an allowance for doubtful accounts of approxim

ately

$480,000

and

$246,000,

respectively. For t

he

three

and

six

months ended

June 30, 2020,

the Compan

y recorded approximately $(

2,000

) and

$298,000

to bad debt (recovery) expense. For t

he

three

and

six

months ended

June 30, 2019,

the Compan

y recorded approximately

$3,000

to bad debt expense.

Inventories

Inventory consists primarily of propane, diesel fuel and chemicals that are used in the servicing of oil wells and is carried at the lower of cost or net realizable value in accordance with the

first

in,

first

out method (FIFO). The Company periodically reviews the value of items in inventory and provides write-downs or write-offs, of inventory based on its assessment of market conditions. Write-downs and write-offs are charged to cost of goods sold. For the

three

and

six

 months ended June

30

,

2020

and

2019,

the Compan

y did

not

recognize any

write-downs or write-offs of inventory

.

Property and Equipment

Property and equipment consists of (i) trucks, trailers and pickups; (ii)

water transfer pumps, pipe, lay flat hose, trailers, and other support equipment;

(iii) real property which includes land and buildings used for office and shop facilities and wells used for the disposal of water; (iv) other equipment such as tools used for maintaining and repairing vehicles, and (v) office furniture and fixtures, and computer equipment. Property and equipment is stated at cost less accumulated depreciation. The Company capitalizes interest on certain qualifying assets that are undergoing activities to prepare them for their intended use. Interest costs incurred during the fabrication period are capitalized and amortized over the life of the assets. The Company charges repairs and maintenance against income when incurred and capitalizes renewals and betterments, which extend the remaining useful life, expand the capacity or efficiency of the assets. Depreciation is recorded on a straight-line basis over estimated useful lives of

5

to

30

years.

Any difference between net book value of the property and equipment and the proceeds of an assets' sale or settlement of an insurance claim is recorded as a gain or loss in the Company's earnings.

Leases

The Company assesses whether an arrangement is a lease at inception. Leases with an initial term of

12

months or less are

not

recorded on the balance sheet. We have elected the practical expedient to

not

separate lease and non-lease components for all assets. Operating lease assets and operating lease liabilities are calculated based on the present value of the future minimum lease payments over the lease term at the lease start date. As most of our leases do

not

provide an implicit rate, we use our incremental borrowing rate based on the information available at the lease start date in determining the present value of future payments. The operating lease asset is increased by any lease payments made at or before the lease start date and reduced by lease incentives and initial direct costs incurred. The lease term includes options to renew or terminate the lease when it is reasonably certain that we will exercise that option. The exercise of lease renewal options is at our sole discretion. The depreciable life of lease assets and leasehold improvements are limited by the lease term. Lease expense for operating leases is recognized on a straight-line basis over the lease term.

The Company conducts a major part of its operations from leased facilities. Each of these leases is accounted for as an operating lease. Operating lease assets and liabilities are recognized at the lease commencement date. Operating lease liabilities represent the present value of lease payments

not

yet paid. Operating lease assets represent our right to use an underlying asset and are based upon the operating lease liabilities adjusted for prepayments or accrued lease payments, initial direct costs, lease incentives, and impairment of operating lease assets.

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

The Company has leased trucks and equipment in the normal course of business, which

may

be recorded as operating or financing leases, depending on the term of the lease. The Company recorded 

rental expense on equipment under operating leases over the lease term as it becomes payable; there were

no

 rent escalation terms associated with these equipment leases. The Company records amortization expense on equipment under financing leases on a straight-line basis as well as interest expense based on our implicit borrowing rate at the date of the lease inception. The equipment leases contain purchase options that allow the Company to purchase the leased equipment at the end of the lease term, based on the market price of the equipment at the time of the lease termination. 

Long-Lived Assets

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets 

may

not

be recovered. During the

first

quarter of

2020,

the combination of the COVID-

19

pandemic and actions taken by the OPEC+ countries caused oil and gas commodity demand to decrease significantly. The Company determined that these were triggering events which could indicate impairment of its long-lived assets. The Company reviewed both qualitative and quantitative aspects of the business during the analysis of impairment. During the quantitative review, the Company reviewed the undiscounted future cash flows in its assessment of whether long-lived assets were impaired. The Company determined that there was

no

impairment of its long-lived assets during the 

three

months and

six

months ended June

30,

2020.

  During the 

three

and

six

months ended June

30,

2019,

the Company recorded impairment charges of approximately

$0

 and 

$127,000

 related to its saltwater disposal wells which it expects to divest during 

2020.

Goodwill and Other Intangible Assets

Goodwill represents the excess purchase price over the fair value of identifiable assets received attributable to business acquisitions and combinations. Goodwill and other intangible assets are measured for impairment at least annually and/or whenever events and circumstances arise that indicate impairment

may

exist, such as a significant adverse change in the business climate. In assessing the value of goodwill, assets and liabilities are assigned to the reporting units and the appropriate valuation methodologies are used to determine fair value at the reporting unit level. Identified intangible assets are amortized using the straight-line method over their estimated useful lives.

During the

first

six

months of

2020,

the combination of the COVID-

19

pandemic and actions taken by the OPEC+ countries caused oil and gas commodity demand to decrease significantly. The Company determined that these were triggering events during the

three

months ended

March 31, 2020,

which could indicate impairment of its goodwill and other intangible assets. The Company reviewed both qualitative and quantitative aspects of the business during the analysis of impairment. During the quantitative review, the Company reviewed the undiscounted future cash flows in its assessment of whether goodwill and other intangible assets were impaired. The Company concluded that there were

no

further triggering events during the

three

 months ended

June 30, 2020.

Further, the Company determined that there was

no

impairment of its goodwill and other intangible assets during the 

three

months and

six

months ended

June 30, 

2020.

Revenue Recognition 

We have adopted Accounting Standards Update

2014

-

09,

Revenue - Revenue from Contracts with Customers, Accounting Standards Codification ("ASC") Topic

606,

beginning

January 1, 2018,

using the modified retrospective approach, which we have applied to contracts within the scope of the standard. There was

no

material impact on the Company's condensed consolidated financial statements from adoption of this new standard. The Company evaluates revenue when we can identify the contract with the customer, the performance obligations in the contract, the transaction price, and we are certain that the performance obligations have been met. Revenue is recognized when the service has been provided to the customer. The vast majority of the Company's services and product offerings are short-term in nature. The time between invoicing and when payment is due under these arrangements is generally

30

to

60

days. Revenue is

not

generated from contractual arrangements that include multiple performance obligations.

The Company's agreements with its customers are often referred to as “price sheets” and sometimes provide pricing for multiple services. However, these agreements generally do

not

authorize the performance of specific services or provide for guaranteed throughput amounts. As customers are free to choose which services, if any, to use based on the Company's price sheet, the Company prices its separate services on the basis of their standalone selling prices. Customer agreements generally do

not

provide for performance, cancellation, termination, or refund type provisions. Services based on price sheets with customers are generally performed under separately issued “work orders” or “field tickets” as services are requested.

Revenue is recognized for certain projects that take more than

one

day projects over time based on the number of days during the reporting period and the agreed upon price as work progresses on each project.

Disaggregation of Revenue

See Note

13

 - Segment Reporting for disaggregation of revenue.

Earnings (Loss) Per Share

Earnings per Common Share - Basic is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Earnings per Common Share - Diluted earnings is calculated by dividing net income (loss) by the diluted weighted average number of common shares. The diluted weighted average number of common shares is computed using the treasury stock method for common stock that

may

be issued for outstanding stock options and warrants.

As of

June 

30, 2020 and 2019

, there were outstanding stock options and warrants to acquire an aggregate

of

2,162,499

 and

2,203,499

 shares of Company common stock, respectively, which have a potentially dilutive impact on earnings per share. As of

June 

30, 2020,

these outstanding stock options and warrants had

no

aggregate intrinsic value

(the difference between the estimated fair value of the Company's common stock on

June 30

, 2020,

and the exercise price, multiplied by the number of in-the-money instruments)

.

Derivative Instruments

From time to time, the Company has

 interest rate swap agreements in place to hedge against changes in interest rates. The fair value of the Company's derivative instrument is reflected as an asset or liability on the balance sheet. The accounting for changes in the fair value of a derivative instrument depends on the intended use of the derivative instrument and the resulting designation. Transactions related to the Company's derivative instruments accounted for as hedges are classified in the same category as the item hedged in the consolidated statement of cash flows. The Company did

not

hold derivative instruments at June 

30, 2020 

or

December 31, 2019,

for trading purposes.

On

February 23, 2018,

we entered into an interest rate swap agreement with East West Bank in order to hedge against the variability in cash flows from future interest payments related to the

2017

Credit Agreement. The terms of the interest rate swap agreement included an initial notional amount of

$10.0

million, a fixed payment rate of

2.52%

paid by us and a floating payment rate equal to LIBOR paid by East West Bank. The purpose of the swap agreement is to adjust the interest rate profile of our debt obligations. The fair value of the interest rate swap agreement is recorded in Other Liabilities as of December

31,

2019,

and changes to the fair value are recorded to Other Expense. The swap agreement matured during the

second

quarter of

2020,

and the balance was adjusted to

$0,

accordingly.

Income Taxes

The Company recognizes deferred tax liabilities and assets based on the differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements that will result in taxable or deductible amounts in future years. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities will be recognized in income in the period that includes the enactment date. A deferred tax asset or liability that is

not

related to an asset or liability for financial reporting is classified according to the expected reversal date. The Company records a valuation allowance to reduce deferred tax assets to an amount that it believes is more likely than

not

expected to be realized.

The Company accounts for any uncertainty in income taxes by recognizing the tax benefit from an uncertain tax position only if, in the Company's opinion, it is more likely than

not

that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The Company measures the tax benefits recognized in the financial statements from such a position based on the largest benefit that has a greater than

50%

likelihood of being realized upon ultimate resolution. The application of income tax law is inherently complex. Laws and regulations in this area are voluminous and are often ambiguous.  As such, the Company is required to make many subjective assumptions and judgments regarding income tax exposures. Interpretations of and guidance surrounding income tax law and regulations change over time and

may

result in changes to the Company's subjective assumptions and judgments which can materially affect amounts recognized in the consolidated balance sheets and consolidated statements of income. The result of the reassessment of the Company's tax positions did

not

have an impact on the consolidated financial statements.

Interest and penalties associated with tax positions are recorded in the period assessed as Other expense. The Company files income tax returns in the United States and in the states in which it conducts its business operations. The Company

's United States federal income tax filings for tax years

2016

 through

2019

 remain open to examination. In general, the Company's various state tax filings remain open for tax years

2015

 to

2019.

In response to the COVID-

19

pandemic, many governments have enacted or are contemplating measures to provide aid and economic stimulus. These measures

may

include deferring the due dates of tax payments or other changes to their income and non-income-based tax laws. The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which was enacted on

March 27, 2020

in the U.S., includes measures to assist companies, including temporary changes to income and non-income-based tax laws. For the

three

and

six

months ended

June 30, 2020,

there were

no

material tax impacts to our condensed consolidated financial statements relating to COVID-

19

measures. We continue to monitor additional guidance issued by the U.S. Treasury Department, the Internal Revenue Service, and others.

Fair Value

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

Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company's assumptions of what market participants would use in pricing the asset or liability based on the best information available in the circumstances.  Beginning in 

2017

the Company valued its warrants using the Binomial Lattice model ("Lattice"). The Company did

not

have any transfers between hierarchy levels during the

three

and

six

months ended June 

30, 2020

. The financial and nonfinancial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement.

The hierarchy is broken down into

three

levels based on the reliability of the inputs as follows:

Level 1: Quoted prices are available in active markets for identical assets or liabilities;

Level 2: Quoted prices in active markets for similar assets and liabilities that are observable for the asset or liability; or

Level 3: Unobservable pricing inputs that are generally less observable from objective sources, such as discounted cash flow models or valuations.

Stock-Based Compensation

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

The Company uses the Black-Scholes pricing model as a method for determining the estimated grant date fair value for all stock options awarded to employees, independent contractors, officers, and directors. The expected term of the options is based upon evaluation of historical and expected exercise behavior. The risk-free interest rate is based upon U.S. Treasury rates at the date of grant with maturity dates approximately equal to the expected life of the grant. Volatility is determined upon historical volatility of our stock and adjusted if future volatility is expected to vary from historical experience. The dividend yield is assumed to be

none

as we have

not

paid dividends, nor do we anticipate paying any dividends in the foreseeable future.

The Company

 uses a Lattice model to determine the fair value of certain warrants. The expected term used was the remaining contractual term. Expected volatility is based upon historical volatility over a term consistent with the remaining term. The risk-free interest rate is derived from the yield on

zero

-coupon U.S. government securities with a remaining term equal to the contractual term of the warrants. The dividend yield is assumed to be zero.

The Company used the market-value of Company stock to determine the fair value of the performance-based restricted stock awarded in

2018

and

2019.

The fair-value is updated quarterly based on actual forfeitures.

The Company used a lattice model to determine the fair value of market-based restricted stock awarded in

2020

 and

2019.

Management Estimates

The preparation of the Company's consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include the realization of accounts receivable, evaluation of impairment of long-lived assets, stock-based compensation expense, income tax provision, the valuation of warrant liability and the Company's interest rate swaps, and the valuation of deferred taxes. Actual results could differ from those estimates.

Reclassifications

Certain prior-period amounts have been reclassified for comparative purposes to conform to the current

 presentation. These reclassifications have

no

effect on the Company's consolidated statement of operations.

Related Parties

From time-to-time, the Company enters into transactions and agreements with certain related parties for various professional services.

Business Combinations 

We recognize and measure the assets acquired and liabilities assumed in a business combination based on their estimated fair values at the acquisition date, with any remaining difference recorded as goodwill or gain from a bargain purchase. For material acquisitions, management typically engages an independent valuation specialist to assist with the determination of fair value of the assets acquired, liabilities assumed, noncontrolling interest, if any, and goodwill, based on recognized business valuation methodologies. If the initial accounting for the business combination is incomplete by the end of the reporting period in which the acquisition occurs, an estimate will be recorded. Subsequent to the acquisition, and

not

later than

one

year from the acquisition date, we will record any material adjustments to the initial estimate based on new information obtained about facts and circumstances that existed as of the acquisition date. An income, market or cost valuation method

may

be utilized to estimate the fair value of the assets acquired, liabilities assumed, and noncontrolling interest, if any, in a business combination. The income valuation method represents the present value of future cash flows over the life of the asset using: (i) discrete financial forecasts, which rely on management's estimates of volumes, commodity prices, revenue and operating expenses; (ii) long-term growth rates; and (iii) appropriate discount rates. The market valuation method uses prices paid for a reasonably similar asset by other purchasers in the market, with adjustments relating to any differences between the assets. The cost valuation method is based on the replacement cost of a comparable asset at prices at the time of the acquisition reduced for depreciation of the asset. See Note

4

 – Business Combinationsfor additional information regarding our business combinations.

Recently Adopted Accounting Pronouncements 

In

February 2016,

the FASB issued ASU

2016

-

02,

Leases, which introduces the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous guidance. The update is effective for annual reporting periods beginning after

December 15, 2018,

including interim periods within those reporting periods, with early adoption permitted. The original guidance required application on a modified retrospective basis with the earliest period presented. In

August 2018,

the FASB issued ASU

2018

-

11,

Targeted Improvements to ASC

842,

Leases, which includes an option to

not

restate comparative periods in transition and elect to use the effective date of ASC

842,

Leases, as the date of initial application of transition. Based on the effective date, the Company adopted this ASU beginning on

January 1, 2019

and elected the transition option provided under ASU

2018

-

11.

This standard had a material effect on our consolidated balance sheet with the recognition of new right of use assets and lease liabilities for all operating leases, as these leases typically have a non-cancelable lease term of greater than

one

year. Upon adoption, both assets and liabilities on our consolidated balance sheets increased by approximately

$2.4

 million. The Company elected a package of transition practical expedients which include

not

reassessing whether any expired or existing contracts are or contain leases,

not

reassessing the lease classification of expired or existing leases, and

not

reassessing initial direct costs for existing leases. The Company also elected a practical expedient to

not

separate lease and non-lease components. The Company did

not

elect the practical expedient to use hindsight in determining the lease terms or assessing impairment of the Right-of-Use (‘ROU”) assets. See Note

10

- Commitments and Contingencies for more information.

In

June 2016,

the FASB issued ASU

2016

-

13,

Financial Statements - Credit Losses (Topic

326

): Measurement of Credit Losses on Financial Instruments, which requires companies to measure credit losses utilizing a methodology that reflects expected credit losses and requires a consideration of a broader range of reasonable and supportable information to ascertain credit loss estimates. The standard is effective for fiscal years beginning after

December 15, 2022.

The Company does

not

expect the adoption of ASU

2016

-

13

to have a material impact on its consolidated financial statements.

XML

Note 3 - Property and Equipment

6 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Property, Plant and Equipment Disclosure [Text Block]

Note

3

 - Property and Equipment

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

	June 30,			December 31,
	2020			2019
Trucks and vehicles	$	58,034		$	59,788
Other equipment		1,319			1,303
Buildings and improvements		3,176			3,184
Land		378			378
Total property and equipment		62,907			64,653
Accumulated depreciation		(39,166	)		(38,033	)
Property and equipment,  net	$	23,741		$	26,620

XML

Note 4 - Business Combinations

6 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Business Combination Disclosure [Text Block]

Note

4

 – Business Combinations 

Acquisition of Adler Hot Oil Service, LLC 

On

October 26, 2018,

Enservco Corporation entered into a Membership Interest Purchase Agreement (the “Agreement”) with Adler Hot Oil Holdings, LLC, a Delaware limited liability company (the “Seller”), pursuant to which Enservco acquired all of the outstanding membership interests of Adler Hot Oil Service, LLC, a Delaware limited liability company (“Adler”) for a gross aggregate purchase price of

$12.5

 million, plus approximately

$500,000

in working capital adjustments (the “Transaction”). The purchase price allocation differs from the gross aggregate purchase price due to fair value adjustments to the indemnity holdback, earnout, plus the discount on the subordinated note. Certain former members of Adler are also parties to the Agreement. Adler is a provider of frac water heating and hot oiling services, whose assets consist primarily of vehicles and equipment, with a complementary base of customers in several oil and gas producing basins where Enservco operates.

The consideration paid or to be paid by Enservco under the Agreement originally included: (i)

$3.7

million in cash paid to or for the benefit of the Seller at the closing; (ii) a subordinated promissory note issued to the Seller in the principal amount of

$4.8

million, plus interest accrued thereon (the “Seller Subordinated Note”), as further discussed below; (iii) retirement by Enservco of

$2.5

 million in indebtedness of Adler; (iv) an earn-out payment of up to

$1.0

million in cash payable to the Seller (the "Earn-Out Payment"), the actual amount of which is subject to Enservco's satisfaction of certain EBITDA-related performance conditions during 

2019;

and (v)

$1.0

million in cash held by Enservco and payable to the Seller on

April 26, 2020,

subject to offset by Enservco for any indemnification obligations owed by the Seller or certain former members of Adler under the Agreement (the "Indemnity Holdback Payment"). Certain aspects of the consideration have been modified since execution of the Agreement as further discussed below. 

On

April 4, 2019 

Enservco and the Seller entered into a Settlement Agreement and Mutual Release (the “Settlement Agreement”) in order to resolve certain disputes and disagreements relating to the Transaction. Pursuant to the Settlement Agreement the parties agreed to (i) waive all rights of the Seller to the Earn-Out Payment and the Indemnity Holdback Payment, (ii) reduce the original principal balance of the Seller Subordinated Note from

$4,800,000

to

$4,500,000,

(iii) extend the maturity date of the Seller Subordinated Note from

March 31, 2019

to

April 10, 2019,

subject to a

nine

-day grace period, and (iv) execute a mutual release. All adjustments to the original purchase accounting were recognized in the

second

quarter of

2019,

when the settlement occurred. We also considered whether the execution of the Settlement Agreement was an indicator of impairment regarding the recorded balance of goodwill and the definite-lived intangible assets. With regard to goodwill, we determined that it was

not

more likely than

not

that the carrying amount of the reporting unit was greater than its fair value, and thus determined that further evaluation of goodwill for potential impairment was

not

necessary. We perform a goodwill impairment analysis over the recorded balance on an annual basis, or if we determine an indicator of impairment exists.With regard to the definite-lived intangible assets, we determined that there were

no

events or changes in circumstances that would indicate that its carrying amount

may

not

be recoverable, and therefore determined that a test for recoverability was

not

required.

The acquisition of Adler qualified as a business combination and as such, we estimated the fair value of the assets acquired and liabilities assumed as of the closing date. Additionally, we estimated the fair value of contingent consideration given. The fair value measure of the assets acquired, and liabilities assumed applied various valuation methods to estimate the value of the intangibles that would provide a fair and reasonable value to a market participant, in view of the facts available at the time. Each valuation method was analyzed to determine which method would generate the most reasonable estimate of value of the Company's intangible assets as of

October 26, 2018.

Both internal and external factors influencing the value of the intangibles were considered such as Adler's financial position, results of operations, historical financial data, future financial expectations, economic conditions, status of the oil and gas industry and Adler's position in the industry.

In connection with the execution of the Settlement Agreement, we reviewed our estimates and allocation of the fair value of assets acquired, consideration transferred, and contingent consideration given in connection with the Transaction. In our judgment, the reduction in the fair value of the consideration did

not

have a clear and direct link to the purchase price, and therefore the change in the fair value of the Indemnity Holdback Payment of approximately

$908,000,

 the change in the fair value of the Earn-Out Payment, of approximately

$44,000,

and the 

$300,000

reduction in the amount of the Seller Subordinated Note, were each recorded as gains within Other Income (Expense) in the accompanying Statements of Operations during

2019.

The goodwill of approximately

$245,000

arising from the acquisition consists largely of the synergies expected be achieved from combining the operations of Enservco and Adler.

None

of the goodwill is expected to be deductible for income tax purposes. 

The following tables represent the consideration paid to the Seller and the estimated fair value of the assets acquired and liabilities assumed.

Consideration paid to Seller:
Cash consideration, including payment to retire Adler debt	$	6,206
Subordinated note, net of discount		4,580
Indemnity holdback at fair value		873
Earnout at fair value		44
Net purchase price	$	11,703

Recognized amounts of identifiable assets acquired and liabilities assumed:
Cash	$	43
Accounts receivable, net		1,317
Prepaid expenses and other current assets		239
Property, plant, and equipment		9,664
Intangible assets		1,045
Accounts payable and accrued liabilities		(850	)
Total identifiable net assets		11,458
Goodwill		245
Total identifiable assets acquired	$	11,703

Subordinated Note

In connection with the Transaction and pursuant to the terms of the Agreement, on

October 26, 2018,

Enservco issued to the Seller the Seller Subordinated Note in the original principal amount of 

$4.8

million, which was reduced to

$4.5

million as discussed above, and unpaid amounts thereunder incurred simple interest at a rate of

8%

per annum. Enservco was required to and made principal payments on

November 30, 2018

of

$800,000,

on

February 28, 2019

of

$200,000,

and additional payments during

April 

2019

totaling

$3.5

million. The Seller Subordinated Note was guaranteed by Enservco's subsidiaries and secured by a junior security interest in substantially all assets of Enservco and its subsidiaries. The Seller Subordinated Note was subject to a subordination agreement by and among Enservco, the Seller, and East West Bank. On

April 19, 2019,

Enservco made the final payment to settle the principal balance and accrued interest on the Seller Subordinated Note and Enservco has

no

further obligations to the Seller.

Second Amendment to Loan and Security Agreement and Consent 

In connection with the Transaction, on

October 26, 2018,

Enservco and East West Bank entered into a Second Amendment to Loan and Security Agreement and Consent (the “Second Amendment to LSA”), which amended the Loan and Security Agreement dated

August 10, 2017

by and between Enservco and East West Bank (the “Loan Agreement”). Pursuant to the Second Amendment to LSA, East West Bank consented to the Transaction and increased the maximum borrowing limit of the senior secured revolving credit facility provided to Enservco under the Loan Agreement to

$37.0

million. Proceeds of

$6.2

 million from the increased senior secured revolving credit facility were used in the Transaction to make the cash payments at closing and retire the indebtedness of Adler. In connection with the Second Amendment to LSA the capital expenditure limitation contained within the Loan Agreement was increased to

$3.0

million from

$2.5

million.

On

October 26, 2018,

in connection with the Second Amendment to LSA, Adler entered into a Joinder Agreement, pursuant to which Adler was joined as a party to the Loan Agreement.

XML

Note 5 - Intangible Assets

6 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Intangible Assets Disclosure [Text Block]

Note 

5

 – Intangible Assets 

The components of our intangible assets as of

June 30, 2020,

and

December 31, 2019,

are as follows (in thousands):

	June 30, 2020			December 31, 2019
Customer relationships	$	626		$	626
Patents and trademarks		441			441
Total intangible assets		1,067			1,067
Accumulated amortization		(341	)		(239	)
Net carrying value	$	726		$	828

The useful lives of our intangible assets are estimated to be

five

 years. Amortization expense was approximately 

$51,000

 and

$102,000

 for the

three

and

six

months ended

June 30, 2020. 

Amortization expense was approximately 

$51,000

 and

$102,000

 for the

three

and

six

months ended

June 30, 2019.

The following table represents the amortization expense for the next

five

years for the

twelve

months ending

June 30 (

in thousands): 

	2021		2022		2023		2024		2025
Customer relationships	$	125	$	125	$	125	$	42	$	-
Patents and trademarks		93		93		93		30		-
Total intangible asset amortization expense	$	218	$	218	$	218	$	72		-

XML

Note 6 - Discontinued Operations

6 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]

Note

6

 – Discontinued Operations

Heat Waves Water Management

During

December 

2019,

the Heat Waves Water Management business ceased operations. The decision to discontinue HWWM was made due to its history of net losses, declining revenues, and its failure to generate positive operating cash flow. In early

2020,

the Company began disposing of the HWWM assets and plans on selling off the remaining HWWM assets during the remainder of

2020.

HWWM was previously reported in the Water Transfer Services segment, however, the Company redefined its segments during the year ended

December 31, 2019,

and Water Management Services is

no

longer a reporting segment.

Dillco

Effective

November 1, 2018,

the Dillco water hauling business ceased operations for customers. In

December 2018,

we held an auction for all of the Dillco fixed assets which resulted in a gain of approximately

$129,000.

Additionally, we recorded an impairment charge of

$130,000

related to land and building sold subsequent to

December 31, 2018.

The following table represents a reconciliation of the carrying amounts of major classes of assets and liabilities disclosed as discontinued operations in the Balance Sheets:

	June 30,		December 31,
	2020		2019
Carrying amount of major classes of assets included as part of discontinued operations:
Accounts receivable, net	$	-	$	175
Property and equipment, net		771		1,373
Prepaid expenses and other current assets		-		12
Right-of-use asset - financing, net		45		57
Total major classes of assets of the discontinued operations	$	816	$	1,617
Carrying amounts of major classes of liabilities included as part of discontinued operations:
Accounts payable and accrued liabilities		6		47
Lease liabilities - financing (current and non-current portions)		46		59
Total liabilities included as part of discontinued operations	$	52	$	106

The following table represents a reconciliation of the major classes of line items constituting pretax loss of discontinued operations that are disclosed as discontinued operations in the Statements of Operations: 

	Three months ended
	June 30,
	2020			2019
Revenue	$	-		$	867
Cost of sales		(11	)		(1,285	)
Sales, general, and administrative expenses		-			(1	)
Depreciation and amortization		(7	)		(294	)
Other income and expense items that are not major		11			5
Pretax loss of discontinued operations related to major classes of pretax profit		(7	)		(708	)
Gain (loss) on disposal of assets		38			(16	)
Total income (loss) on discontinued operations that is presented in the Statements of Operations	$	31		$	(724	)

	Six months ended
	June 30,
	2020			2019
Revenue	$	-			2,295
Cost of sales		(11	)		(3,470	)
Sales, general, and administrative expenses		-			(18	)
Depreciation and amortization		(13	)		(577	)
Other income and expense items that are not major		(1	)		6
Pretax loss of discontinued operations related to major classes of pretax profit		(25	)		(1,764	)
Gain (loss) on disposal of assets		92			(16	)
Total income (loss) on discontinued operations that is presented in the Statements of Operations	$	67		$	(1,780	)

XML

Note 7 - Debt

6 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Debt Disclosure [Text Block]

Note

7

 – Debt

East West Bank

Revolving Credit Facility

The

2017

Credit Agreement (as defined in Note of the accompanying Notes to the Condensed Consolidated Financial Statements) allows us to borrow up to

85%

of our eligible receivables and up to

85%

of the appraised value of our eligible equipment. Under the

2017

Credit Agreement, there are

no

required principal payments until maturity and we have the option to pay variable interest rate based on (i)

1

-month LIBOR plus a margin of

3.5%

 or (ii) interest at the Wall Street Journal prime rate plus a margin of

1.75%.

Interest is calculated monthly and paid in arrears. Additionally, the Credit Facility is subject to an unused credit line fee of

0.5%

per annum multiplied by the amount by which total availability exceeds the average monthly balance of the Credit Facility, payable monthly in arrears. The Credit Facility is collateralized by substantially all our assets and subject to financial covenants. The outstanding principal loan balance was originally scheduled to mature on

August 10, 2020. On August 10, 2020, we received a 45-day extension on the maturity of the Credit Facility, and the total outstanding principal balance and all accrued interest on the Credit Facility is due September 24, 2020.

Under the terms of the

2017

Credit Agreement, collateral proceeds are collected in bank-controlled lockbox accounts and credited to the Credit Facility within

one

business day.

As of

June 30, 2020,

we had an outstanding principal loan balance under the Credit Facility of approximately

$32.0

 million with a weighted average interest rates of

3.93%

per year for

$30.5

 million of outstanding LIBOR Rate borrowings and

3.93%

per year for the approximately

$1.5

million of outstanding Prime Rate borrowings. As of

June 30, 2020,

our available cash was approximately

$0.4

million and we did

not

have any availability under the

2017

Credit Agreement, as discussed below.

Under the

2017

Credit Agreement, we are subject to the following financial covenants:

(

1

) Maintenance of a Fixed Charge Coverage Ratio (“FCCR”) of

not

less than

1.10

to

1.00

at the end of each month, upon which the ratio is measured on a trailing

twelve

-month basis;

(

2

) In periods when the trailing

twelve

-month FCCR is less than

1.20

to

1.00,

we are required to maintain minimum liquidity of

$1,500,000

(including excess availability under the Credit Facility and balance sheet cash).

On

January 6, 2020,

the Company received a notice (the “Default Notice”) from East West Bank regarding the

2017

Credit Agreement. As a result of the events of default, East West Bank

may

accelerate the

$32.0

million outstanding loan balance under the

2017

Credit Agreement to be immediately due and payable. As of the date of this report, East West Bank has

not

accelerated the outstanding loan balance amount but it

may

do so in the future.

The Default Notice indicates that the Company is in default under the

2017

Credit Agreement as a result of its:

●failure to immediately repay a loan over advance that occurred on

October 10, 2019

that has continued through the date of this report;

●failure to maintain a minimum liquidity of

not

less than

$1,500,000

for the months ended

October 31, 2019

and

November 30, 2019;

and

●failure to maintain a minimum fixed charge coverage ratio of

not

less than

1:10

to

1:00

for the months ended

October 31, 2019

and

November 30, 2019.

The Default Notice indicated that although East West Bank was

not

as of

January 6, 2020,

exercising its rights and remedies available as a result of the events of default, it specifically did

not

waive its rights and remedies resulting from the events of default and it reserves all other available rights and remedies under the Credit Agreement, certain other related documents and applicable law.

We are also currently negotiating and working with East West Bank in an effort to obtain a waiver for our breaches of the

2017

Credit Agreement. Our ability to continue as a going concern is dependent on our renegotiation of the

2017

Credit Agreement and our ability to further reduce costs and raise further capital, of which there can be

no

assurance. Further, there can be

no

assurance that we will successfully obtain a waiver from the East West Bank or maintain or increase our cash flows from operations. Given our current financial situation we

may

be required to accept onerous terms on the transactions that we are seeking.

The Default Notice received from East West Bank served as a triggering event for an event of default on our subordinated debt. As such, we have reclassified our subordinated debt to current liabilities. As of the date of this report, the lender of the subordinated debt has

not

 waived its rights and remedies resulting from the events of default and it reserves all other available rights and remedies under the Amended and Restated Subordinated Loan Agreement with Cross Rivers, L.P., a related party, certain other related documents, and applicable law.

Debt Issuance Costs

We have capitalized certain debt issuance costs incurred in connection with the Credit Facility discussed above and these costs are being amortized to interest expense over the term of the facility on a straight-line basis. The long-term portion of debt issuance costs of approximately

$12,000

 and

$82,000

 is included in Other Assets in the accompanying condensed consolidated balance sheets for

June 30, 2020, 

and

December 31, 2019,

respectively. During the

three

and

six

 months ended June 

30, 2020

, the Company amortized approximately

$35,000

 and

$70,000,

respectively, of these costs to interest expense. During the

three

and

six

 months ended June 

30, 2019

, the Company amortized approximately

$24,000

 and

$58,000,

respectively, of these costs to interest expense.

Paycheck Protection Program

On

April 10, 2020,

the Company, entered into a promissory note (the “Note”) with East West Bank in the aggregate amount of

$1,939,900,

pursuant to the Paycheck Protection Program (the “PPP”) under Division A, Title I of the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"), which was enacted

March 27, 2020

and is administered by the United States Small Business Administration.

The Note matures on

April 10, 2022

and bears interest at a rate of

1.00%

per annum, payable in full plus all accrued interest on

April 10, 2022.

The Note

may

be prepaid by the Company at any time prior to maturity with

no

prepayment penalties. Funds received under the Note

may

only be used for the Company's payroll costs, costs used to continue group health care benefits, mortgage payments, rent, utilities, and interest on other debt obligations incurred before

February 15, 2020.

The Company intends to use the entire Note proceeds for qualifying expenses. Under the terms of the PPP, amounts of the Note

may

be forgiven if they are used for qualifying expenses as described in the CARES Act.

Notes Payable

Long-term debt (excluding borrowings under our Credit Facility described above) consists of the following (in thousands):

	June 30,				December 31,
	2020				2019
Paycheck Protection Loan. Interest at 1% with interest payments deferred until October 10, 2020. Matures April 10, 2022.	$	1,940		$		-
Subordinated Promissory Note with related party. Interest is at 10% and is paid quarterly. Matures June 28, 2022		1,000				1,000
Subordinated Promissory Note with related party. Interest is at 10% and is paid quarterly. Matures June 28, 2022		1,000				1,000
Subordinated Promissory Note with related party. Interest is at 10% and is paid quarterly. Matures June 28, 2022		500				500
Real Estate Loan for a facility in North Dakota, interest at 5.75%, and monthly principal and interest payment of $5,255 until October 3, 2028. Collateralized by land and property purchased with the loan.		193				218
Vehicle loans for three pickups, interest at 8.59% monthly principal and interest payments of $3,966, matures in August 2021		53				74
Note payable to the seller of Heat Waves. The note was garnished by the Internal Revenue Service (“IRS”) in 2009 and is due on demand; paid in annual installments of $36,000 per agreement with the IRS		50				53
Total		4,736				2,845
Less debt discount		(94	)			(119	)
Less current portion		(2,554	)			(2,528	)
Long-term debt, net of debt discount and current portion	$	2,088			$	198

Aggregate maturities of debt, (excluding the 

2017

 Credit Agreement described above), are as follows (in thousands):

Twelve Months Ending June 30,
2021	$	2,648
2022		2,004
2023		60
2024		24
2025		-
Thereafter		-
Total	$	4,736

XML

Note 8 - Fair Value Measurements

6 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Fair Value Disclosures [Text Block]

Note

8

 – Fair Value Measurements

The following table presents the Company

's financial assets and liabilities that were accounted for at fair value on a recurring basis by level within the fair value hierarchy (in thousands). The interest rate swap is valued at

zero

because it matured during the

second

quarter of

2020.

  

	Fair Value Measurement Using
	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value Measurement
June 30 , 2020
Derivative Instrument
Interest rate swap liability	$	-	$	-	$	-	$	-
December 31, 2019
Derivative Instrument
Interest rate swap liability	$	-	$	23	$	-	$	23

The fair value of the interest rate swap is estimated using a discounted cash flow model. Such models involve using market-based observable inputs, including interest rate curves. We incorporate credit valuation adjustments to appropriately reflect both our nonperformance risk and respective counterparty's nonperformance risk in the fair value measurements, which we have concluded are

not

material to the valuation. Due to the interest rate swaps being unique and

not

actively traded, the fair value is classified as Level

2.

Certain assets and liabilities are measured at fair value on a nonrecurring basis. These assets and liabilities are

not

measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances. As of

June 30, 2020,

and

December 31, 2019,

the carrying value of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, and interest approximates fair value due to the short-term nature of such items. The carrying value of the Company's credit agreements are carried at cost which are approximately the fair value of the debt as the related interest rate are at the terms that approximate rates currently available to the Company.

The Company did

not

have any transfers of assets or liabilities between Level

1,

Level

2

or Level

3

of the fair value measurement hierarchy during the

three

 and

six

months ended June 

30, 2020

.

XML

Note 9 - Income Taxes

6 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Income Tax Disclosure [Text Block]

Note

9

 – Income Taxes

Income tax expense during interim periods is based on applying an estimated annual effective income tax rate to year-to-date income, plus any significant unusual or infrequently occurring items which are recorded in the interim period.  The provision for income taxes for the

six

months ended

June 30

, 2020 

and

2019

 differs from the amount that would be provided by applying the statutory U.S. federal income tax rate of

21

% to pre-tax income primarily because of state income taxes and estimated permanent differences.

The computation of the annual estimated effective tax rate at each interim period requires certain estimates and significant judgment including, but

not

limited to, the expected operating income for the year, projections of the proportion of income earned and taxed in various jurisdictions, permanent and temporary differences, and the likelihood of recovering deferred tax assets generated in the current year.  The accounting estimates used to compute the provision for income taxes

may

change as new events occur, more experience is obtained, additional information becomes known or as the tax environment changes.

In assessing the realization of deferred tax assets, management considers whether it is more likely than 

not

 that some portion or all of the deferred tax assets will 

not

 be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment.

Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management recorded a valuation allowance to reduce its net deferred tax assets to zero.

During the

six

months ended

June 30, 2020

and

2019,

the Company's tax benefit of

$1.8

million and tax provision of

$0.3

million, respectively, were adjusted by the valuation allowance which resulted in a net tax provision of zero.

XML

Note 10 - Commitments and Contingencies

6 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

Note

10

 – Commitments and Contingencies

Operating Leases

On

January 1, 2019,

we adopted ASC

842,

Leases. Results for reporting periods beginning

January 1, 2019

are presented in accordance with ASC

842,

while prior period amounts are reported in accordance with ASC

840.

On

January 1, 2019,

we recognized

$2.4

million in right-of-use assets and

$2.4

 million in lease liabilities, representing the present value of minimum payment obligations associated with leased facilities and certain equipment with non-cancellable lease terms in excess of

one

year. We recognized approximately

$845,000

 in right-of-use assets and lease liabilities. We made a cumulative-effect adjustment to retained earnings of approximately

$98,000

 at

January 1, 2019.

Operating lease assets and liabilities are recognized at the lease commencement date. Operating lease liabilities represent the present value of lease payments

not

yet paid. Operating lease assets represent our right to use an underlying asset and are based upon the operating lease liabilities adjusted for prepayments or accrued lease payments, initial direct costs, lease incentives, and impairment of operating lease assets. To determine the present value of lease payments

not

yet paid, the Company uses the weighted average interest rate on its Credit Facility. Long-term leases typically contain rent escalations over the lease term. The Company recognizes expense for these leases on a straight-line basis over the lease term.

The Company has elected the short-term lease recognition exemption for all applicable classes of underlying assets. Short-term disclosures include only those leases with a term greater than

one

month and

12

months or less, and expense is recognized on a straight-line basis over the lease term. Leases with an initial term of

12

months or less, that do

not

include an option to purchase the underlying asset that we are reasonably certain to exercise, are

not

recorded on the balance sheet.

The Company elected the expedient to account for lease and non-lease components as a single component for our entire population of operating lease assets.

As of

June 

30, 2020,

the Company leases facilities and certain equipment under lease commitments that expire throu

gh

June

 2026.

F

uture minimum lease commitments for these operating lease commitments are as follows (in thousands):

Twelve Months Ending June 30,		Operating Leases			Financing Leases
2021	$	955		$	167
2022		933			130
2023		644			-
2024		613			-
2025		358			-
Thereafter		359			-
		3,862			297
Impact of discounting		(421	)		(64	)
Discounted value of lease obligations	$	3,441		$	233

The following table summarizes the components of our gross operating lease costs incurred during the

three

and

six

months ended

June 30, 2020 (

in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Operating lease expense:
Current lease cost	$	288	$	175	$	579	$	367
Long-term lease cost		23		197		43		322
Total operating lease cost	$	311	$	372	$	622	$	689
Finance lease expense:
Amortization of right-of-use assets	$	37	$	68	$	95	$	68
Interest on lease liabilities		5		9		12		9
Total lease cost	$	42	$	77	$	107	$	77

Our weighted-average lease term and discount rate used during the

six

months ended

June 30, 2020

and

2019

are as follows:

	Six Months Ended June 30,
	2020			2019
Operating
Weighted-average lease term (years)		4.46			4.96
Weighted-average discount rate		6.08	%		6.08	%
Financing
Weighted-average lease term (years)		1.78			2.66
Weighted-average discount rate		6.10	%		6.10	%

Self-Insurance

In

June 2015,

the Company became self-insured under its Employee Group Medical Plan, and currently is responsible to pay the

first

 

$50,000

in medical costs per indiv

idual participant for claims incurred in the calendar year up to a maximum of approximately

$1.8

million per year in the aggregate based on enrollment.

The Company had an accrued liability of approximately

$179,000

 

and

$68,000

 as of

June 

30, 2020 

and

December 31, 2019,

respectively, for insurance claims that it anticipates paying in the future related to claims that occurred prior

to

June 30, 2020 

and

December 31, 2019,

respectively.

Effective

April 1, 2015,

the Company had entered into a workers' compensation and employer's liability insurance policy with a term through

March 31, 2018. 

Under the terms of the policy, the Company was required to pay premiums in addition to a portion of the cost of any claims made by our employees, up to a maximum of approximately

$1.8

million over the term of the policy (an amount that was variable with changes in annualized compensation amounts). As of

June 30, 2020,

a former employee of ours had an open claim relating to injuries sustained while in the course of employment, and the projected maximum cost of the policy as determined by the insurance carrier included estimated claim costs that have

not

yet been paid or incurred in connection with the claim. During the year ended

December 31, 2017,

our insurance carrier formally denied the workers' compensation claim and has moved to close the claim entirely. Per the terms of our insurance policy, through

June 30, 2020,

we had paid in approximately

$1.8

million of the projected maximum plan cost of

$1.8

million, and had recorded approximately

$1.6

 million as expense over the term of the policy. We recorded the remaining approximately

$189,000

 in payments made under the policy as a long-term asset, which we expect will either be recorded as expense in future periods, or refunded to us by the insurance carrier, depending on the outcome of the individual claim described above, and the final cost of any additional open claims incurred under the policy. As of

June 30, 2020,

we believe we have paid all amounts contractually due under the policy. Effective 

April 1, 2018,

we entered into a new workers' compensation policy with a fixed premium amount determined annually, and therefore are

no

longer partially self-insured for workers' compensation and employer's liability.

Litigation 

Enservco and Heat Waves were defendants in a civil lawsuit in federal court in Colorado, Civil Action

No.

1:15

-cv-

00983

-RBJ (“Colorado Case”), that alleged that Enservco and Heat Waves, in offering and selling frac water heating services, infringed and induced others to infringe

two

patents owned by Heat-On-The-Fly, LLC (“HOTF”)- U.S. Patent

No.

8,171,993

(the

"'993

Patent") and U.S. Patent

No.

8,739,875

(the

"'875

Patent"). In

March

of

2019,

the parties moved to dismiss the Colorado Case. On

March 15, 2019,

the Colorado Case was dismissed in its entirety without any finding of wrongdoing by Enservco or Heat Waves.   

While the Colorado Case was pending, HOTF was issued

two

additional patents, which were related to the

'993

and

'875

Patents, but were

not

asserted in he Colorado Case. However, on

March 31, 2015,

the U.S. District Court for the District of North Dakota (Civil Action

No.

4:13

-cv-

00010

) ruled, in a case

not

involving Enservco or Heat waves, that the

'993

Patent was invalid. On

January 14, 2016,

the court ruled that the

‘993

Patent was also unenforceable due to inequitable conduct by HOTF and the inventor. HOTF appealed, and on

May 4, 2018,

the United States Court of Appeals for the Federal Circuit (Case

No.

16

-

1894

) upheld the lower court's ruling of unenforceability. In light of the foregoing, Management believes that the inequitable conduct related to the

'993

Patent could serve as a basis for asserting unenforceability of the

two

additional patents.

XML

Note 11 - Stockholders' Equity

6 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

Note

11

– Stockholders

' Equity

Warrants

In

June 2016,

the Company granted a principal of the Company's investor relations firm warrants to acquire

30,000

shares of the Company's common stock in connection with a reduction of the firm's ongoing monthly cash service fees. The warrants had a grant-date fair value of

$0.36

per share and vested over a

one

-year period,

15,000

on

December 21, 2016

and

15,000

on

June 21, 2017.

As of

June 30, 2020

,

all of these warrants remain outstanding and are exercisable until

June 21, 2021

at

$0.70

per share.

On

November 11, 2019,

in connection with a subordinated loan agreement, the Company granted Cross River

one five

-year warrant to buy an aggregate total of

625,000

shares of the Company's common stock at an exercise price of

$0.20

per share. The warrants had a grant-date fair value

$0.16

and were fully vested upon issuance and remain outstanding and exercisable until

November 11, 2024.

A summary of warrant activity for the

six

 

months ended

June 

30, 2020 

is as follows (amounts in thousands): 

					Weighted
			Weighted		Average
			Average		Remaining		Aggregate
			Exercise		Contractual		Intrinsic
Warrants	Shares		Price		Life (Years)		Value
Outstanding at December 31, 2019		655,000	$	0.22		4.7	$	-
Issued		-		-		-		-
Exercised		-		-		-		-
Forfeited/Cancelled		-		-		-		-
Outstanding at June 30, 2020		655,000	$	0.22		4.2	$	-
Exercisable at June 30, 2020		655,000	$	0.22		4.2	$	-

Stock Issued for Services

During the

three

and

six

  months ended June 

30, 2020

, respectively, the Company did

not

issue any shares of common stock as compensation for services provided to the Company. 

Board Approval of Reverse Stock Spilt

On

June 26, 2020,

upon approval from shareholders at the Company's annual meeting of the stockholders, the Company is authorized to a reverse stock split of the Company's shares of common stock issued and outstanding, or reserved for issuance, at an exchange ratio of

not

greater than

25

-to-

1

and

not

less than

10

-to-

1.

Both the timing, if any, and the exchange ratio, are to be determined at the sole discretion of the Company's Board of Directors. As of the date of this report, the Board of Directors has

not

declared a reverse stock split.

XML

Note 12 - Stock Options and Restricted Stock

6 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Share-based Payment Arrangement [Text Block]

Note

12

 – Stock Options and Restricted Stock

Stock Options

On

July 27, 2010,

the Company's Board of Directors adopted the

2010

Stock Incentive Plan (the

“2010

Plan”). The aggregate number of shares of common stock that could be granted under the

2010

Plan was reset at the beginning of each year based on

15%

of the number of shares of common stock then outstanding. As such, on

January 1, 2016

the number of shares of common stock available under the

2010

Plan was reset to

5,719,069

shares based upon

38,127,129

shares outstanding on that date. Options were typically granted with an exercise price equal to the estimated fair value of the Company's common stock at the date of grant with a vesting schedule of

one

to

three

years and a contractual term of

5

years. As discussed below, the

2010

Plan has been replaced by a new stock option plan and

no

additional stock option grants will be granted under the

2010

Plan. As of

June 30, 2020,

there were options to purchase

135,166

 shares outstanding under the

2010

Plan.

On

July 18, 2016,

the Board of Directors unanimously approved the adoption of the Enservco Corporation

2016

Stock Incentive Plan (the

“2016

Plan”), which was approved by the stockholders on

September 29, 2016.

The aggregate number of shares of common stock that

may

be granted under the

2016

Plan is

8,000,000

shares plus authorized and unissued shares from the

2010

Plan totaling

2,391,711

for a total reserve of

10,391,711

shares. As of

June 

30,

 

2020,

there were options to purchase

1,372,333

shares and we had granted restricted stock shares of

429,998

 that remained outstanding under the

2016

Plan 

We have 

not

granted any stock options during t

he

three

and

six

 

months ended

June 30, 

2020

 or t

he

three

and

six

 

months ended

June 30, 

2019.

 

During the 

six

months ended

June 30

, 2020 and 2019,

no

options were granted or exercised. 

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value (in thousands)
Outstanding at December 31 , 2019		1,945,333		$	0.55		1.95	$	-
Granted		-			-		-		-
Exercised		-			-		-		-
Forfeited or Expired		(437,834	)		1.38		-		-
Outstanding at June 30 , 2020		1,507,499		$	0.31		1.81	$	-
Vested or Expected to Vest at June 30, 2020		1,507,499		$	0.31		1.81	$	-
Exercisable at June 30, 2020		1,507,499		$	0.31		1.81	$	-

The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between the estimated fair value of the Company's common stock on

June 30

, 2020,

and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had they exercised their options on

June 30

, 2020.

During the

three

and

six

 months ended June 

30

, 2020

, the Company recognized stock-based compensation costs for stock options of approximately

$1,000

and

$3,000

, respectively, in sales, general, and administrative expenses. During the

three

and

six

 months ended June 

30

, 2019

, the Company recognized stock-based compensation costs for stock options of approximately

$29,000

 and

$71,000,

respectively, in sales, general, and administrative expenses. 

The Company currently expects all outstanding options to vest. Compensation cost is revised if subsequent information indicates that the actual number of options vested due to service is likely to differ from previous estimates. 

A summary of the status of non-vested shares underlying the options are presented below:

	Number of Shares			Weighted-Average Grant- Date Fair Value
Non-vested at December 31, 2019		53,001		$	0.22
Granted		-			0.22
Vested		(26,334	)		0.22
Forfeited		(26,667	)		1.92
Non-vested at June 30, 2020		-		$	-

As of

June 

30, 2020,

there was

no

remaining

 unrecognized compensation costs related to non-vested shares under the Company's stock option plans.

Restricted Stock

Restricted shares issued pursuant to restricted stock awards under the

2016

Stock Plan are restricted as to sale or disposition. These restrictions lapse periodically generally over a period of 

three

years. Restrictions

may

also lapse for early retirement and other conditions in accordance with our established policies. Upon termination of employment, shares on which restrictions have

not

lapsed must be returned to us, resulting in restricted stock forfeitures. The fair market value on the date of the grant of the stock with a service condition is amortized and charged to income on a straight-line basis over the requisite service period for the entire award. The fair market value on the date of the grant of the stock with a performance condition shall be accrued and recognized when it becomes probable that the performance condition will be achieved. Restricted shares that contain a market condition are amortized and charged over the life of the award.

A summary of the restricted stock activity is presented below:

	Number of Shares			Weighted-Average Grant- Date Fair Value
Restricted shares at December 31, 2019		2,006,333		$	0.55
Granted		150,000			0.17
Vested		(1,002,501	)		0.40
Forfeited		(723,834	)		0.68
Restricted shares at June 30, 2020		429,998		$	0.45

During the

three

and

six

months ended

June 30, 2020,

the Company recognized 

stock-based compensation costs for restricted stock of approximately

$322,000

 

and

$358,000

 

in sales, general, and administrative expenses, of which

$301,000

for both the

three

and

six

months ended

June 30, 2020 

was related to severance compensation in connection with a separation agreement with the Company's former CEO during the

second

quarter of

2020.

In addition, of the

1,002,501

shares that vested during the

first

six

months of

2020,

895,000

shares were related to the former CEO's separation agreement, as were

100,000

of the

150,000

shares that were granted during the same period. 

During the

three

and

six

months ended

June 30, 2019,

the Company recognized 

stock-based compensation costs for restricted stock of approximately $

48,000

 and

$97,000

 

in sales, general, and administrative expenses. Compensation cost is revised if subsequent information indicates that the actual number of restricted stock vested due to service is likely to differ from previous estimates.

The following table sets forth the weighted average outstanding of potentially dilutive instruments for the

three

and

six

months ended

June 30, 2020 

and

2019:

 

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Stock options		1,553,041		2,229,378		1,662,594		2,332,836
Warrants		655,000		30,000		655,000		30,000
Weighted average		2,208,041		2,259,378		2,317,594		2,362,836

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Note 13 - Segment Reporting

6 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

Note

13

- Segment Reporting

In

2019

we reorganized our business segments to align with how the oil and gas industry and our management team evaluates the business. Enservco's reportable business segments are Production Services and Completion Services. These segments have been selected based on management's resource allocation and performance assessment in making decisions regarding the Company.

The following is a description of the segments.

Production Services

: This segment utilizes a fleet of hot oil trucks and acidizing units to provide maintenance services to the domestic oil and gas industry. These services include hot oil services and acidizing services.

Completion Services

: This segment utilizes a fleet of frac water heating units to provide frac water heating services to the domestic oil and gas industry.

Unallocated and other includes general overhead expenses and assets associated with managing all reportable operating segments which have

not

been allocated to a specific segment.

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

	Production Services			Completion Services			Unallocated & Other		Total
Three Months Ended June 30, 2020:
Revenues	$	1,383		$	758		$	-	$	2,141
Cost of Revenue		1,814			1,516			-		3,330
Segment Loss	$	(431	)	$	(758	)	$	-	$	(1,189)
Depreciation and Amortization	$	647		$	567		$	96	$	1,310
Capital Expenditures (Excluding Acquisitions)	$	76		$	66		$	-	$	142
Identifiable assets (1)	$	13,228		$	15,085		$	1,135	$	29,448
Three Months Ended June 30, 2019:
Revenues	$	3,835		$	2,505		$	-	$	6,340
Cost of Revenue		3,343			3,099			-	$	6,442
Segment Profit (Loss)	$	492		$	(594	)	$	-	$	(102	)
Depreciation and Amortization	$	640		$	741		$	61	$	1,442
Capital Expenditures (Excluding Acquisitions)	$	90		$	77		$	2	$	169
Identifiable assets (1)	$	22,178		$	19,153			1,388	$	42,719

( 1 ) Identifiable assets is calculated by summing the balances of accounts receivable, net; inventories; property and equipment, net; and other assets.

	Production Services			Completion Services		Unallocated & Other		Total
Six Months Ended June 30, 2020:
Revenues	$	4,585		$	6,942	$	-	$	11,527
Cost of Revenue		5,308			6,487		-		11,795
Segment (Loss) Profit	$	(723	)	$	455	$	-	$	(268	)
Depreciation and Amortization	$	1,317		$	1,214	$	175	$	2,706
Capital Expenditures (Excluding Acquisitions)	$	159		$	147	$	-	$	306
Six Months Ended June 30, 2019:
Revenues	$	7,951		$	23,201	$	-	$	31,152
Cost of Revenue		6,689			15,119		-	$	21,808
Segment Profit	$	1,262		$	8,082	$	-	$	9,344
Depreciation and Amortization	$	1,483		$	1,276	$	83	$	2,842
Capital Expenditures (Excluding Acquisitions)	$	118		$	136	$	38	$	292

The following table reconciles the segment profits reported above to the income from operations reported in the consolidated statements of operations (in thousands): 

	Three Months Ended June 30,
	2020			2019
Segment profit	$	(1,189	)	$	(102	)
Sales, general, and administrative expenses		(1,247	)		(1,458	)
Patent litigation and defense costs		-			(1	)
Severance and Transition Costs		(139	)		-
(Loss) gain on disposals of equipment		(23	)		4
Impairment		-			-
Depreciation and amortization		(1,310	)		(1,442	)
(Loss) income from Operations	$	(3,908	)	$	(2,999	)

	Six Months Ended June 30,
	2020			2019
Segment profit	$	(268	)	$	9,344
Sales, general, and administrative expenses		(3,009	)		(3,060	)
Patent litigation and defense costs		-			(10	)
Severance and Transition Costs		(139	)		-
(Loss) gain on disposals of equipment		(38	)		4
Impairment		-			(127	)
Depreciation and amortization		(2,706	)		(2,842	)
(Loss) income from Operations	$	(6,160	)	$	3,309

Geographic Areas

The Company only does business in the United States, in what it believes are

three

geographically diverse regions. The following table sets forth revenue from operations for the Company's

three

geographic regions during the

three

and

six

months ended

June 30, 2020 

and

2019

 (amounts in thousands):

	Three Months Ended June 30,
	2020		2019
BY GEOGRAPHY
Production Services:
Rocky Mountain Region (1)	$	348	$	1,782
Central USA Region (2)		943		1,861
Eastern USA Region (3)		92		192
Total Production Services		1,383		3,835
Completion Services:
Rocky Mountain Region  (1)		711		2,332
Central USA Region  (2)		(2)		74
Eastern USA Region  (3)		49		99
Total Completion Services		758		2,505
Total Revenues	$	2,141	$	6,340

	Six Months Ended June 30,
	2020		2019
BY GEOGRAPHY
Production Services:
Rocky Mountain Region (1)	$	1,541	$	3,845
Central USA Region (2)		2,816		3,627
Eastern USA Region (3)		228		479
Total Production Services		4,585		7,951
Completion Services:
Rocky Mountain Region  (1)		5,717		17,144
Central USA Region  (2)		107		2,844
Eastern USA Region  (3)		1,118		3,213
Total Completion Services		6,942		23,201
Total Revenues	$	11,527	$	31,152

Notes to tables:

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

( 2 ) Includes the Scoop/Stack Shale in Oklahoma and the Eagle Ford Shale in Texas.

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

XML

Note 14 - Subsequent Events

6 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Subsequent Events [Text Block]

Note

14

- Subsequent Events

Extension for Maturity of Credit Facility

On

August 10, 2020,

we received a

45

-day extension on the maturity of the Credit Facility from East West Bank. The outstanding principal and all accrued interest were to be due on the original maturity date of the Credit Facility, or

August 10, 2020.

Upon the execution of the extension, all remaining principal and accrued interest outstanding on the Credit Facility is now due on

September 24, 2020.

XML

Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2020

Accounting Policies [Abstract]

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash and Cash Equivalents

The Company considers all highly liquid instruments purchased with an original maturity of

three

months or less to be cash equivalents. The Company continually monitors its positions with, and the credit quality of, the financial institutions with which it invests. Enservco maintains its excess cash in various financial institutions, where deposits

may

exceed federally insured amounts at times. 

Accounts Receivable [Policy Text Block]

Accounts Receivable

Accounts receivable are stated at the amounts billed to customers, net of an allowance for uncollectible accounts. The Company provides an allowance for uncollectible accounts based on a review of outstanding receivables, historical collection information and existing economic conditions. The allowance for uncollectible amounts is continually reviewed and adjusted to maintain the allowance at a level considered adequate to cover future losses. The allowance is management's best estimate of uncollectible amounts and is determined based on historical collection experience related to accounts receivable coupled with a review of the current status of existing receivables. The losses ultimately incurred could differ materially in the near term from the amounts estimated in determining the allowance. As of

June 30, 2020, 

and

December 31, 2019,

the Company had an allowance for doubtful accounts of approxim

ately

$480,000

and

$246,000,

respectively. For t

he

three

and

six

months ended

June 30, 2020,

the Compan

y recorded approximately $(

2,000

) and

$298,000

to bad debt (recovery) expense. For t

he

three

and

six

months ended

June 30, 2019,

the Compan

y recorded approximately

$3,000

to bad debt expense.

Inventory, Policy [Policy Text Block]

Inventories

Inventory consists primarily of propane, diesel fuel and chemicals that are used in the servicing of oil wells and is carried at the lower of cost or net realizable value in accordance with the

first

in,

first

out method (FIFO). The Company periodically reviews the value of items in inventory and provides write-downs or write-offs, of inventory based on its assessment of market conditions. Write-downs and write-offs are charged to cost of goods sold. For the

three

and

six

 months ended June

30

,

2020

and

2019,

the Compan

y did

not

recognize any

write-downs or write-offs of inventory

.

Property, Plant and Equipment, Policy [Policy Text Block]

Property and Equipment

Property and equipment consists of (i) trucks, trailers and pickups; (ii)

water transfer pumps, pipe, lay flat hose, trailers, and other support equipment;

(iii) real property which includes land and buildings used for office and shop facilities and wells used for the disposal of water; (iv) other equipment such as tools used for maintaining and repairing vehicles, and (v) office furniture and fixtures, and computer equipment. Property and equipment is stated at cost less accumulated depreciation. The Company capitalizes interest on certain qualifying assets that are undergoing activities to prepare them for their intended use. Interest costs incurred during the fabrication period are capitalized and amortized over the life of the assets. The Company charges repairs and maintenance against income when incurred and capitalizes renewals and betterments, which extend the remaining useful life, expand the capacity or efficiency of the assets. Depreciation is recorded on a straight-line basis over estimated useful lives of

5

to

30

years.

Any difference between net book value of the property and equipment and the proceeds of an assets' sale or settlement of an insurance claim is recorded as a gain or loss in the Company's earnings.

Lessee, Leases [Policy Text Block]

Leases

The Company assesses whether an arrangement is a lease at inception. Leases with an initial term of

12

months or less are

not

recorded on the balance sheet. We have elected the practical expedient to

not

separate lease and non-lease components for all assets. Operating lease assets and operating lease liabilities are calculated based on the present value of the future minimum lease payments over the lease term at the lease start date. As most of our leases do

not

provide an implicit rate, we use our incremental borrowing rate based on the information available at the lease start date in determining the present value of future payments. The operating lease asset is increased by any lease payments made at or before the lease start date and reduced by lease incentives and initial direct costs incurred. The lease term includes options to renew or terminate the lease when it is reasonably certain that we will exercise that option. The exercise of lease renewal options is at our sole discretion. The depreciable life of lease assets and leasehold improvements are limited by the lease term. Lease expense for operating leases is recognized on a straight-line basis over the lease term.

The Company conducts a major part of its operations from leased facilities. Each of these leases is accounted for as an operating lease. Operating lease assets and liabilities are recognized at the lease commencement date. Operating lease liabilities represent the present value of lease payments

not

yet paid. Operating lease assets represent our right to use an underlying asset and are based upon the operating lease liabilities adjusted for prepayments or accrued lease payments, initial direct costs, lease incentives, and impairment of operating lease assets.

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

The Company has leased trucks and equipment in the normal course of business, which

may

be recorded as operating or financing leases, depending on the term of the lease. The Company recorded 

rental expense on equipment under operating leases over the lease term as it becomes payable; there were

no

 rent escalation terms associated with these equipment leases. The Company records amortization expense on equipment under financing leases on a straight-line basis as well as interest expense based on our implicit borrowing rate at the date of the lease inception. The equipment leases contain purchase options that allow the Company to purchase the leased equipment at the end of the lease term, based on the market price of the equipment at the time of the lease termination. 

Impairment or Disposal of Long-Lived Assets, Policy [Policy Text Block]

Long-Lived Assets

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets 

may

not

be recovered. During the

first

quarter of

2020,

the combination of the COVID-

19

pandemic and actions taken by the OPEC+ countries caused oil and gas commodity demand to decrease significantly. The Company determined that these were triggering events which could indicate impairment of its long-lived assets. The Company reviewed both qualitative and quantitative aspects of the business during the analysis of impairment. During the quantitative review, the Company reviewed the undiscounted future cash flows in its assessment of whether long-lived assets were impaired. The Company determined that there was

no

impairment of its long-lived assets during the 

three

months and

six

months ended June

30,

2020.

  During the 

three

and

six

months ended June

30,

2019,

the Company recorded impairment charges of approximately

$0

 and 

$127,000

 related to its saltwater disposal wells which it expects to divest during 

2020.

Goodwill and Intangible Assets, Policy [Policy Text Block]

Goodwill and Other Intangible Assets

Goodwill represents the excess purchase price over the fair value of identifiable assets received attributable to business acquisitions and combinations. Goodwill and other intangible assets are measured for impairment at least annually and/or whenever events and circumstances arise that indicate impairment

may

exist, such as a significant adverse change in the business climate. In assessing the value of goodwill, assets and liabilities are assigned to the reporting units and the appropriate valuation methodologies are used to determine fair value at the reporting unit level. Identified intangible assets are amortized using the straight-line method over their estimated useful lives.

During the

first

six

months of

2020,

the combination of the COVID-

19

pandemic and actions taken by the OPEC+ countries caused oil and gas commodity demand to decrease significantly. The Company determined that these were triggering events during the

three

months ended

March 31, 2020,

which could indicate impairment of its goodwill and other intangible assets. The Company reviewed both qualitative and quantitative aspects of the business during the analysis of impairment. During the quantitative review, the Company reviewed the undiscounted future cash flows in its assessment of whether goodwill and other intangible assets were impaired. The Company concluded that there were

no

further triggering events during the

three

 months ended

June 30, 2020.

Further, the Company determined that there was

no

impairment of its goodwill and other intangible assets during the 

three

months and

six

months ended

June 30, 

2020.

Revenue [Policy Text Block]

Revenue Recognition 

We have adopted Accounting Standards Update

2014

-

09,

Revenue - Revenue from Contracts with Customers, Accounting Standards Codification ("ASC") Topic

606,

beginning

January 1, 2018,

using the modified retrospective approach, which we have applied to contracts within the scope of the standard. There was

no

material impact on the Company's condensed consolidated financial statements from adoption of this new standard. The Company evaluates revenue when we can identify the contract with the customer, the performance obligations in the contract, the transaction price, and we are certain that the performance obligations have been met. Revenue is recognized when the service has been provided to the customer. The vast majority of the Company's services and product offerings are short-term in nature. The time between invoicing and when payment is due under these arrangements is generally

30

to

60

days. Revenue is

not

generated from contractual arrangements that include multiple performance obligations.

The Company's agreements with its customers are often referred to as “price sheets” and sometimes provide pricing for multiple services. However, these agreements generally do

not

authorize the performance of specific services or provide for guaranteed throughput amounts. As customers are free to choose which services, if any, to use based on the Company's price sheet, the Company prices its separate services on the basis of their standalone selling prices. Customer agreements generally do

not

provide for performance, cancellation, termination, or refund type provisions. Services based on price sheets with customers are generally performed under separately issued “work orders” or “field tickets” as services are requested.

Revenue is recognized for certain projects that take more than

one

day projects over time based on the number of days during the reporting period and the agreed upon price as work progresses on each project.

Disaggregation of Revenue

See Note

13

 - Segment Reporting for disaggregation of revenue.

Earnings Per Share, Policy [Policy Text Block]

Earnings (Loss) Per Share

Earnings per Common Share - Basic is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Earnings per Common Share - Diluted earnings is calculated by dividing net income (loss) by the diluted weighted average number of common shares. The diluted weighted average number of common shares is computed using the treasury stock method for common stock that

may

be issued for outstanding stock options and warrants.

As of

June 

30, 2020 and 2019

, there were outstanding stock options and warrants to acquire an aggregate

of

2,162,499

 and

2,203,499

 shares of Company common stock, respectively, which have a potentially dilutive impact on earnings per share. As of

June 

30, 2020,

these outstanding stock options and warrants had

no

aggregate intrinsic value

(the difference between the estimated fair value of the Company's common stock on

June 30

, 2020,

and the exercise price, multiplied by the number of in-the-money instruments)

.

Derivatives, Policy [Policy Text Block]

Derivative Instruments

From time to time, the Company has

 interest rate swap agreements in place to hedge against changes in interest rates. The fair value of the Company's derivative instrument is reflected as an asset or liability on the balance sheet. The accounting for changes in the fair value of a derivative instrument depends on the intended use of the derivative instrument and the resulting designation. Transactions related to the Company's derivative instruments accounted for as hedges are classified in the same category as the item hedged in the consolidated statement of cash flows. The Company did

not

hold derivative instruments at June 

30, 2020 

or

December 31, 2019,

for trading purposes.

On

February 23, 2018,

we entered into an interest rate swap agreement with East West Bank in order to hedge against the variability in cash flows from future interest payments related to the

2017

Credit Agreement. The terms of the interest rate swap agreement included an initial notional amount of

$10.0

million, a fixed payment rate of

2.52%

paid by us and a floating payment rate equal to LIBOR paid by East West Bank. The purpose of the swap agreement is to adjust the interest rate profile of our debt obligations. The fair value of the interest rate swap agreement is recorded in Other Liabilities as of December

31,

2019,

and changes to the fair value are recorded to Other Expense. The swap agreement matured during the

second

quarter of

2020,

and the balance was adjusted to

$0,

accordingly.

Income Tax, Policy [Policy Text Block]

Income Taxes

The Company recognizes deferred tax liabilities and assets based on the differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements that will result in taxable or deductible amounts in future years. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities will be recognized in income in the period that includes the enactment date. A deferred tax asset or liability that is

not

related to an asset or liability for financial reporting is classified according to the expected reversal date. The Company records a valuation allowance to reduce deferred tax assets to an amount that it believes is more likely than

not

expected to be realized.

The Company accounts for any uncertainty in income taxes by recognizing the tax benefit from an uncertain tax position only if, in the Company's opinion, it is more likely than

not

that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The Company measures the tax benefits recognized in the financial statements from such a position based on the largest benefit that has a greater than

50%

likelihood of being realized upon ultimate resolution. The application of income tax law is inherently complex. Laws and regulations in this area are voluminous and are often ambiguous.  As such, the Company is required to make many subjective assumptions and judgments regarding income tax exposures. Interpretations of and guidance surrounding income tax law and regulations change over time and

may

result in changes to the Company's subjective assumptions and judgments which can materially affect amounts recognized in the consolidated balance sheets and consolidated statements of income. The result of the reassessment of the Company's tax positions did

not

have an impact on the consolidated financial statements.

Interest and penalties associated with tax positions are recorded in the period assessed as Other expense. The Company files income tax returns in the United States and in the states in which it conducts its business operations. The Company

's United States federal income tax filings for tax years

2016

 through

2019

 remain open to examination. In general, the Company's various state tax filings remain open for tax years

2015

 to

2019.

In response to the COVID-

19

pandemic, many governments have enacted or are contemplating measures to provide aid and economic stimulus. These measures

may

include deferring the due dates of tax payments or other changes to their income and non-income-based tax laws. The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which was enacted on

March 27, 2020

in the U.S., includes measures to assist companies, including temporary changes to income and non-income-based tax laws. For the

three

and

six

months ended

June 30, 2020,

there were

no

material tax impacts to our condensed consolidated financial statements relating to COVID-

19

measures. We continue to monitor additional guidance issued by the U.S. Treasury Department, the Internal Revenue Service, and others.

Fair Value of Financial Instruments, Policy [Policy Text Block]

Fair Value

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

Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company's assumptions of what market participants would use in pricing the asset or liability based on the best information available in the circumstances.  Beginning in 

2017

the Company valued its warrants using the Binomial Lattice model ("Lattice"). The Company did

not

have any transfers between hierarchy levels during the

three

and

six

months ended June 

30, 2020

. The financial and nonfinancial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement.

The hierarchy is broken down into

three

levels based on the reliability of the inputs as follows:

Level 1: Quoted prices are available in active markets for identical assets or liabilities;

Level 2: Quoted prices in active markets for similar assets and liabilities that are observable for the asset or liability; or

Level 3: Unobservable pricing inputs that are generally less observable from objective sources, such as discounted cash flow models or valuations.

Share-based Payment Arrangement [Policy Text Block]

Stock-Based Compensation

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

The Company uses the Black-Scholes pricing model as a method for determining the estimated grant date fair value for all stock options awarded to employees, independent contractors, officers, and directors. The expected term of the options is based upon evaluation of historical and expected exercise behavior. The risk-free interest rate is based upon U.S. Treasury rates at the date of grant with maturity dates approximately equal to the expected life of the grant. Volatility is determined upon historical volatility of our stock and adjusted if future volatility is expected to vary from historical experience. The dividend yield is assumed to be

none

as we have

not

paid dividends, nor do we anticipate paying any dividends in the foreseeable future.

The Company

 uses a Lattice model to determine the fair value of certain warrants. The expected term used was the remaining contractual term. Expected volatility is based upon historical volatility over a term consistent with the remaining term. The risk-free interest rate is derived from the yield on

zero

-coupon U.S. government securities with a remaining term equal to the contractual term of the warrants. The dividend yield is assumed to be zero.

The Company used the market-value of Company stock to determine the fair value of the performance-based restricted stock awarded in

2018

and

2019.

The fair-value is updated quarterly based on actual forfeitures.

The Company used a lattice model to determine the fair value of market-based restricted stock awarded in

2020

 and

2019.

Use of Estimates, Policy [Policy Text Block]

Management Estimates

The preparation of the Company's consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include the realization of accounts receivable, evaluation of impairment of long-lived assets, stock-based compensation expense, income tax provision, the valuation of warrant liability and the Company's interest rate swaps, and the valuation of deferred taxes. Actual results could differ from those estimates.

Reclassification, Comparability Adjustment [Policy Text Block]

Reclassifications

Certain prior-period amounts have been reclassified for comparative purposes to conform to the current

 presentation. These reclassifications have

no

effect on the Company's consolidated statement of operations.

Related Party, Policy [Policy Text Block]

Related Parties

From time-to-time, the Company enters into transactions and agreements with certain related parties for various professional services.

Business Combinations Policy [Policy Text Block]

Business Combinations 

We recognize and measure the assets acquired and liabilities assumed in a business combination based on their estimated fair values at the acquisition date, with any remaining difference recorded as goodwill or gain from a bargain purchase. For material acquisitions, management typically engages an independent valuation specialist to assist with the determination of fair value of the assets acquired, liabilities assumed, noncontrolling interest, if any, and goodwill, based on recognized business valuation methodologies. If the initial accounting for the business combination is incomplete by the end of the reporting period in which the acquisition occurs, an estimate will be recorded. Subsequent to the acquisition, and

not

later than

one

year from the acquisition date, we will record any material adjustments to the initial estimate based on new information obtained about facts and circumstances that existed as of the acquisition date. An income, market or cost valuation method

may

be utilized to estimate the fair value of the assets acquired, liabilities assumed, and noncontrolling interest, if any, in a business combination. The income valuation method represents the present value of future cash flows over the life of the asset using: (i) discrete financial forecasts, which rely on management's estimates of volumes, commodity prices, revenue and operating expenses; (ii) long-term growth rates; and (iii) appropriate discount rates. The market valuation method uses prices paid for a reasonably similar asset by other purchasers in the market, with adjustments relating to any differences between the assets. The cost valuation method is based on the replacement cost of a comparable asset at prices at the time of the acquisition reduced for depreciation of the asset. See Note

4

 – Business Combinationsfor additional information regarding our business combinations.

New Accounting Pronouncements, Policy [Policy Text Block]

Recently Adopted Accounting Pronouncements 

In

February 2016,

the FASB issued ASU

2016

-

02,

Leases, which introduces the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous guidance. The update is effective for annual reporting periods beginning after

December 15, 2018,

including interim periods within those reporting periods, with early adoption permitted. The original guidance required application on a modified retrospective basis with the earliest period presented. In

August 2018,

the FASB issued ASU

2018

-

11,

Targeted Improvements to ASC

842,

Leases, which includes an option to

not

restate comparative periods in transition and elect to use the effective date of ASC

842,

Leases, as the date of initial application of transition. Based on the effective date, the Company adopted this ASU beginning on

January 1, 2019

and elected the transition option provided under ASU

2018

-

11.

This standard had a material effect on our consolidated balance sheet with the recognition of new right of use assets and lease liabilities for all operating leases, as these leases typically have a non-cancelable lease term of greater than

one

year. Upon adoption, both assets and liabilities on our consolidated balance sheets increased by approximately

$2.4

 million. The Company elected a package of transition practical expedients which include

not

reassessing whether any expired or existing contracts are or contain leases,

not

reassessing the lease classification of expired or existing leases, and

not

reassessing initial direct costs for existing leases. The Company also elected a practical expedient to

not

separate lease and non-lease components. The Company did

not

elect the practical expedient to use hindsight in determining the lease terms or assessing impairment of the Right-of-Use (‘ROU”) assets. See Note

10

- Commitments and Contingencies for more information.

In

June 2016,

the FASB issued ASU

2016

-

13,

Financial Statements - Credit Losses (Topic

326

): Measurement of Credit Losses on Financial Instruments, which requires companies to measure credit losses utilizing a methodology that reflects expected credit losses and requires a consideration of a broader range of reasonable and supportable information to ascertain credit loss estimates. The standard is effective for fiscal years beginning after

December 15, 2022.

The Company does

not

expect the adoption of ASU

2016

-

13

to have a material impact on its consolidated financial statements.

XML

Note 1 - Basis of Presentation (Tables)

6 Months Ended

Jun. 30, 2020

Notes Tables

Schedule of Current Ownership Hierarchy [Table Text Block]

Name	State of Formation	Ownership	Business
Heat Waves Hot Oil Service LLC	Colorado	100% by Enservco	Oil and natural gas well services, including logistics and stimulation.
Adler Hot Oil Service, LLC	Delaware	100% by Enservco	Operations integrated into Heat Waves during 2019.
Heat Waves Water Management LLC	Colorado	100% by Enservco	Discontinued operations in 2019
Dillco Fluid Service, Inc	Kansas	100% by Enservco	Discontinued operation in 2018
HE Services LLC	Nevada	100% by Heat Waves	No active business operations. Owns construction equipment used by Heat Waves.

XML

Note 3 - Property and Equipment (Tables)

6 Months Ended

Jun. 30, 2020

Notes Tables

Property, Plant and Equipment [Table Text Block]

	June 30,			December 31,
	2020			2019
Trucks and vehicles	$	58,034		$	59,788
Other equipment		1,319			1,303
Buildings and improvements		3,176			3,184
Land		378			378
Total property and equipment		62,907			64,653
Accumulated depreciation		(39,166	)		(38,033	)
Property and equipment,  net	$	23,741		$	26,620

XML

Note 4 - Business Combinations (Tables)

6 Months Ended

Jun. 30, 2020

Notes Tables

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Table Text Block]

Consideration paid to Seller:
Cash consideration, including payment to retire Adler debt	$	6,206
Subordinated note, net of discount		4,580
Indemnity holdback at fair value		873
Earnout at fair value		44
Net purchase price	$	11,703

Recognized amounts of identifiable assets acquired and liabilities assumed:
Cash	$	43
Accounts receivable, net		1,317
Prepaid expenses and other current assets		239
Property, plant, and equipment		9,664
Intangible assets		1,045
Accounts payable and accrued liabilities		(850	)
Total identifiable net assets		11,458
Goodwill		245
Total identifiable assets acquired	$	11,703

XML

Note 5 - Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2020

Notes Tables

Schedule of Finite-Lived Intangible Assets [Table Text Block]

	June 30, 2020			December 31, 2019
Customer relationships	$	626		$	626
Patents and trademarks		441			441
Total intangible assets		1,067			1,067
Accumulated amortization		(341	)		(239	)
Net carrying value	$	726		$	828

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]

	2021		2022		2023		2024		2025
Customer relationships	$	125	$	125	$	125	$	42	$	-
Patents and trademarks		93		93		93		30		-
Total intangible asset amortization expense	$	218	$	218	$	218	$	72		-

XML

Note 6 - Discontinued Operations (Tables)

6 Months Ended

Jun. 30, 2020

Notes Tables

Disposal Groups, Including Discontinued Operations [Table Text Block]

	June 30,		December 31,
	2020		2019
Carrying amount of major classes of assets included as part of discontinued operations:
Accounts receivable, net	$	-	$	175
Property and equipment, net		771		1,373
Prepaid expenses and other current assets		-		12
Right-of-use asset - financing, net		45		57
Total major classes of assets of the discontinued operations	$	816	$	1,617
Carrying amounts of major classes of liabilities included as part of discontinued operations:
Accounts payable and accrued liabilities		6		47
Lease liabilities - financing (current and non-current portions)		46		59
Total liabilities included as part of discontinued operations	$	52	$	106

	Three months ended
	June 30,
	2020			2019
Revenue	$	-		$	867
Cost of sales		(11	)		(1,285	)
Sales, general, and administrative expenses		-			(1	)
Depreciation and amortization		(7	)		(294	)
Other income and expense items that are not major		11			5
Pretax loss of discontinued operations related to major classes of pretax profit		(7	)		(708	)
Gain (loss) on disposal of assets		38			(16	)
Total income (loss) on discontinued operations that is presented in the Statements of Operations	$	31		$	(724	)

	Six months ended
	June 30,
	2020			2019
Revenue	$	-			2,295
Cost of sales		(11	)		(3,470	)
Sales, general, and administrative expenses		-			(18	)
Depreciation and amortization		(13	)		(577	)
Other income and expense items that are not major		(1	)		6
Pretax loss of discontinued operations related to major classes of pretax profit		(25	)		(1,764	)
Gain (loss) on disposal of assets		92			(16	)
Total income (loss) on discontinued operations that is presented in the Statements of Operations	$	67		$	(1,780	)

XML

Note 7 - Debt (Tables)

6 Months Ended

Jun. 30, 2020

Notes Tables

Schedule of Long-term Debt Instruments [Table Text Block]

	June 30,				December 31,
	2020				2019
Paycheck Protection Loan. Interest at 1% with interest payments deferred until October 10, 2020. Matures April 10, 2022.	$	1,940		$		-
Subordinated Promissory Note with related party. Interest is at 10% and is paid quarterly. Matures June 28, 2022		1,000				1,000
Subordinated Promissory Note with related party. Interest is at 10% and is paid quarterly. Matures June 28, 2022		1,000				1,000
Subordinated Promissory Note with related party. Interest is at 10% and is paid quarterly. Matures June 28, 2022		500				500
Real Estate Loan for a facility in North Dakota, interest at 5.75%, and monthly principal and interest payment of $5,255 until October 3, 2028. Collateralized by land and property purchased with the loan.		193				218
Vehicle loans for three pickups, interest at 8.59% monthly principal and interest payments of $3,966, matures in August 2021		53				74
Note payable to the seller of Heat Waves. The note was garnished by the Internal Revenue Service (“IRS”) in 2009 and is due on demand; paid in annual installments of $36,000 per agreement with the IRS		50				53
Total		4,736				2,845
Less debt discount		(94	)			(119	)
Less current portion		(2,554	)			(2,528	)
Long-term debt, net of debt discount and current portion	$	2,088			$	198

Schedule of Maturities of Long-term Debt [Table Text Block]

Twelve Months Ending June 30,
2021	$	2,648
2022		2,004
2023		60
2024		24
2025		-
Thereafter		-
Total	$	4,736

XML

Note 8 - Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2020

Notes Tables

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block]

	Fair Value Measurement Using
	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value Measurement
June 30 , 2020
Derivative Instrument
Interest rate swap liability	$	-	$	-	$	-	$	-
December 31, 2019
Derivative Instrument
Interest rate swap liability	$	-	$	23	$	-	$	23

XML

Note 10 - Commitments and Contingencies (Tables)

6 Months Ended

Jun. 30, 2020

Notes Tables

Lessee, Operating Lease, Liability, Maturity [Table Text Block]

Twelve Months Ending June 30,		Operating Leases			Financing Leases
2021	$	955		$	167
2022		933			130
2023		644			-
2024		613			-
2025		358			-
Thereafter		359			-
		3,862			297
Impact of discounting		(421	)		(64	)
Discounted value of lease obligations	$	3,441		$	233

Lease, Cost [Table Text Block]

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Operating lease expense:
Current lease cost	$	288	$	175	$	579	$	367
Long-term lease cost		23		197		43		322
Total operating lease cost	$	311	$	372	$	622	$	689
Finance lease expense:
Amortization of right-of-use assets	$	37	$	68	$	95	$	68
Interest on lease liabilities		5		9		12		9
Total lease cost	$	42	$	77	$	107	$	77

	Six Months Ended June 30,
	2020			2019
Operating
Weighted-average lease term (years)		4.46			4.96
Weighted-average discount rate		6.08	%		6.08	%
Financing
Weighted-average lease term (years)		1.78			2.66
Weighted-average discount rate		6.10	%		6.10	%

XML

Note 11 - Stockholders' Equity (Tables)

6 Months Ended

Jun. 30, 2020

Notes Tables

Schedule of Stockholders' Equity Note, Warrants or Rights [Table Text Block]

					Weighted
			Weighted		Average
			Average		Remaining		Aggregate
			Exercise		Contractual		Intrinsic
Warrants	Shares		Price		Life (Years)		Value
Outstanding at December 31, 2019		655,000	$	0.22		4.7	$	-
Issued		-		-		-		-
Exercised		-		-		-		-
Forfeited/Cancelled		-		-		-		-
Outstanding at June 30, 2020		655,000	$	0.22		4.2	$	-
Exercisable at June 30, 2020		655,000	$	0.22		4.2	$	-

XML

Note 12 - Stock Options and Restricted Stock (Tables)

6 Months Ended

Jun. 30, 2020

Notes Tables

Share-based Payment Arrangement, Option, Activity [Table Text Block]

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value (in thousands)
Outstanding at December 31 , 2019		1,945,333		$	0.55		1.95	$	-
Granted		-			-		-		-
Exercised		-			-		-		-
Forfeited or Expired		(437,834	)		1.38		-		-
Outstanding at June 30 , 2020		1,507,499		$	0.31		1.81	$	-
Vested or Expected to Vest at June 30, 2020		1,507,499		$	0.31		1.81	$	-
Exercisable at June 30, 2020		1,507,499		$	0.31		1.81	$	-

Schedule of Nonvested Share Activity [Table Text Block]

	Number of Shares			Weighted-Average Grant- Date Fair Value
Non-vested at December 31, 2019		53,001		$	0.22
Granted		-			0.22
Vested		(26,334	)		0.22
Forfeited		(26,667	)		1.92
Non-vested at June 30, 2020		-		$	-

Share-based Payment Arrangement, Restricted Stock and Restricted Stock Unit, Activity [Table Text Block]

	Number of Shares			Weighted-Average Grant- Date Fair Value
Restricted shares at December 31, 2019		2,006,333		$	0.55
Granted		150,000			0.17
Vested		(1,002,501	)		0.40
Forfeited		(723,834	)		0.68
Restricted shares at June 30, 2020		429,998		$	0.45

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share [Table Text Block]

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Stock options		1,553,041		2,229,378		1,662,594		2,332,836
Warrants		655,000		30,000		655,000		30,000
Weighted average		2,208,041		2,259,378		2,317,594		2,362,836

XML

Note 13 - Segment Reporting (Tables)

6 Months Ended

Jun. 30, 2020

Notes Tables

Schedule of Segment Reporting Information, by Segment [Table Text Block]

	Production Services			Completion Services			Unallocated & Other		Total
Three Months Ended June 30, 2020:
Revenues	$	1,383		$	758		$	-	$	2,141
Cost of Revenue		1,814			1,516			-		3,330
Segment Loss	$	(431	)	$	(758	)	$	-	$	(1,189)
Depreciation and Amortization	$	647		$	567		$	96	$	1,310
Capital Expenditures (Excluding Acquisitions)	$	76		$	66		$	-	$	142
Identifiable assets (1)	$	13,228		$	15,085		$	1,135	$	29,448
Three Months Ended June 30, 2019:
Revenues	$	3,835		$	2,505		$	-	$	6,340
Cost of Revenue		3,343			3,099			-	$	6,442
Segment Profit (Loss)	$	492		$	(594	)	$	-	$	(102	)
Depreciation and Amortization	$	640		$	741		$	61	$	1,442
Capital Expenditures (Excluding Acquisitions)	$	90		$	77		$	2	$	169
Identifiable assets (1)	$	22,178		$	19,153			1,388	$	42,719

	Production Services			Completion Services		Unallocated & Other		Total
Six Months Ended June 30, 2020:
Revenues	$	4,585		$	6,942	$	-	$	11,527
Cost of Revenue		5,308			6,487		-		11,795
Segment (Loss) Profit	$	(723	)	$	455	$	-	$	(268	)
Depreciation and Amortization	$	1,317		$	1,214	$	175	$	2,706
Capital Expenditures (Excluding Acquisitions)	$	159		$	147	$	-	$	306
Six Months Ended June 30, 2019:
Revenues	$	7,951		$	23,201	$	-	$	31,152
Cost of Revenue		6,689			15,119		-	$	21,808
Segment Profit	$	1,262		$	8,082	$	-	$	9,344
Depreciation and Amortization	$	1,483		$	1,276	$	83	$	2,842
Capital Expenditures (Excluding Acquisitions)	$	118		$	136	$	38	$	292

Reconciliation of Operating Profit (Loss) from Segments to Consolidated [Table Text Block]

	Three Months Ended June 30,
	2020			2019
Segment profit	$	(1,189	)	$	(102	)
Sales, general, and administrative expenses		(1,247	)		(1,458	)
Patent litigation and defense costs		-			(1	)
Severance and Transition Costs		(139	)		-
(Loss) gain on disposals of equipment		(23	)		4
Impairment		-			-
Depreciation and amortization		(1,310	)		(1,442	)
(Loss) income from Operations	$	(3,908	)	$	(2,999	)

	Six Months Ended June 30,
	2020			2019
Segment profit	$	(268	)	$	9,344
Sales, general, and administrative expenses		(3,009	)		(3,060	)
Patent litigation and defense costs		-			(10	)
Severance and Transition Costs		(139	)		-
(Loss) gain on disposals of equipment		(38	)		4
Impairment		-			(127	)
Depreciation and amortization		(2,706	)		(2,842	)
(Loss) income from Operations	$	(6,160	)	$	3,309

Schedule of Revenue from External Customers and Long-Lived Assets, by Geographical Areas [Table Text Block]

	Three Months Ended June 30,
	2020		2019
BY GEOGRAPHY
Production Services:
Rocky Mountain Region (1)	$	348	$	1,782
Central USA Region (2)		943		1,861
Eastern USA Region (3)		92		192
Total Production Services		1,383		3,835
Completion Services:
Rocky Mountain Region  (1)		711		2,332
Central USA Region  (2)		(2)		74
Eastern USA Region  (3)		49		99
Total Completion Services		758		2,505
Total Revenues	$	2,141	$	6,340

	Six Months Ended June 30,
	2020		2019
BY GEOGRAPHY
Production Services:
Rocky Mountain Region (1)	$	1,541	$	3,845
Central USA Region (2)		2,816		3,627
Eastern USA Region (3)		228		479
Total Production Services		4,585		7,951
Completion Services:
Rocky Mountain Region  (1)		5,717		17,144
Central USA Region  (2)		107		2,844
Eastern USA Region  (3)		1,118		3,213
Total Completion Services		6,942		23,201
Total Revenues	$	11,527	$	31,152

XML

Note 1 - Basis of Presentation - Current Ownership Hierarchy (Details)	6 Months Ended
	Jun. 30, 2020
Heat Waves Hot Oil Service LLC at Colorado [Member]
Subsidiary or Equity Method Investee	100.00%
Adler Hot Oil Service, LLC [Member]
Subsidiary or Equity Method Investee	100.00%
Heat Waves Water Management LLC at Colorado [Member]
Subsidiary or Equity Method Investee	100.00%
Dillco Fluid Service, Inc. at Kansas [Member]
Subsidiary or Equity Method Investee	100.00%
HE Services LLC at Nevada [Member]
Subsidiary or Equity Method Investee	100.00%

XML

Note 2 - Summary of Significant Accounting Policies (Details Textual) - USD ($)		3 Months Ended				6 Months Ended		12 Months Ended
	Aug. 10, 2017	Jun. 30, 2020	Mar. 31, 2020	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2020	Jun. 30, 2019	Dec. 31, 2019	Aug. 10, 2020	Jan. 01, 2019	Feb. 23, 2018
Net Income (Loss) Attributable to Parent, Total		$ (4,357,000)	$ (2,837,000)	$ (3,209,000)	$ 4,303,000	$ (7,194,000)	$ 1,094,000	$ (7,700,000)
Liabilities, Current, Total		37,623,000				37,623,000		42,119,000
Assets, Current, Total		3,199,000				3,199,000		8,731,000
Working Capital Deficit		34,400,000				34,400,000
Short-term Debt, Total		34,400,000				34,400,000
Accounts Receivable, Allowance for Credit Loss, Current		480,000				480,000		246,000
Accounts Receivable, Credit Loss Expense (Reversal)		(2,000)		3,000		298,000	3,000
Inventory Write-down		0		$ 0		0	$ 0
Impairment of Long-Lived Assets Held-for-use		0				0
Goodwill and Intangible Asset Impairment, Total		$ 0	$ 0			$ 0
Share-based Compensation Arrangement by Share-based Payment Award, Options and Warrants, Outstanding, Number (in shares)		2,162,499		2,203,499		2,162,499	2,203,499
Share-based Compensation Arrangement by Share-based Payment Award, Options and Warrants, Outstanding, Aggregate Intrinsic Value		$ 0				$ 0
Payments of Dividends, Total						0
Operating Lease, Right-of-Use Asset		3,328,000				3,328,000		$ 3,793,000		$ 2,400,000
Operating Lease, Liability, Total		3,441,000				$ 3,441,000				2,400,000
Accounting Standards Update 2016-02 [Member]
Operating Lease, Right-of-Use Asset										2,400,000
Operating Lease, Liability, Total										$ 2,400,000
Domestic Tax Authority [Member] | Internal Revenue Service (IRS) [Member]
Open Tax Year						2016 2017 2018 2019
State and Local Jurisdiction [Member]
Open Tax Year						2015 2016 2017 2018 2019
Interest Rate Swap [Member] | Cash Flow Hedging [Member]
Derivative, Notional Amount		$ 0				$ 0					$ 10,000,000
Derivative, Fixed Interest Rate											2.52%
Disposal Wells [Member]
Impairment of Long-Lived Assets Held-for-use				$ 0			$ 127,000
Minimum [Member]
Property, Plant and Equipment, Useful Life (Year)						5 years
Maximum [Member]
Property, Plant and Equipment, Useful Life (Year)						30 years
The 2017 Credit Agreement [Member] | East West Bank [Member] | Revolving Credit Facility [Member]
Debt Instrument, Term (Year)	3 years
Line of Credit Facility, Maximum Borrowing Capacity	$ 37,000,000
The 2017 Credit Agreement [Member] | East West Bank [Member] | Revolving Credit Facility [Member] | Subsequent Event [Member]
Long-term Line of Credit, Total									$ 32,000,000

XML

Note 3 - Property and Equipment - Summary of Property and Equipment (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Property and equipment, gross	$ 62,907	$ 64,653
Accumulated depreciation	(39,166)	(38,033)
Property and equipment, net	23,741	26,620
Vehicles [Member]
Property and equipment, gross	58,034	59,788
Property, Plant and Equipment, Other Types [Member]
Property and equipment, gross	1,319	1,303
Building and Building Improvements [Member]
Property and equipment, gross	3,176	3,184
Land [Member]
Property and equipment, gross	$ 378	$ 378

XML

Note 4 - Business Combinations (Details Textual) - USD ($)					1 Months Ended	6 Months Ended
	Apr. 04, 2019	Feb. 28, 2019	Nov. 30, 2018	Oct. 26, 2018	Apr. 30, 2019	Jun. 30, 2020	Jun. 30, 2019	Dec. 31, 2019	Aug. 10, 2017
Business Combination, Contingent Consideration Arrangements, Change in Amount of Contingent Consideration, Liability							$ (1,252,000)
Goodwill, Ending Balance						$ 546,000		$ 546,000
Subordinated Note Issued with Acquisition [Member]
Debt Instrument, Face Amount	$ 4,500,000			$ 4,800,000
Debt Instrument, Interest Rate, Stated Percentage				8.00%
Debt Instrument, Periodic Payment, Total		$ 200,000	$ 800,000		$ 3,500,000
Second Amendment to LSA [Member] | East West Bank [Member] | Revolving Credit Facility [Member]
Line of Credit Facility, Maximum Borrowing Capacity				$ 37,000,000
Proceeds from Long-term Lines of Credit				6,200,000
Maximum Capital Expenditures				3,000,000
The 2017 Credit Agreement [Member] | East West Bank [Member] | Revolving Credit Facility [Member]
Line of Credit Facility, Maximum Borrowing Capacity									$ 37,000,000
Maximum Capital Expenditures				2,500,000
Adler Hot Oil Service, LLC [Member]
Business Combination, Consideration Transferred, Total				12,500,000
Business Combination, Consideration, Working Capital Adjustments				500,000
Payments to Acquire Businesses, Gross				3,700,000
Business Combination, Consideration Transferred, Liabilities Incurred				4,800,000
Payments to Retire Acquiree's Debt				2,500,000
Goodwill, Ending Balance				245,000
Adler Hot Oil Service, LLC [Member] | Seller Subordinated Note [Member]
Business Combination, Provisional Information, Initial Accounting Incomplete, Adjustment, Financial Liabilities	300,000
Adler Hot Oil Service, LLC [Member] | Earn-out Payment Subject to Satisfaction of EBITDA-related Performance [Member]
Business Combination, Contingent Consideration Arrangements, Range of Outcomes, Value, High				1,000,000
Adler Hot Oil Service, LLC [Member] | Cash Held by Acquier, Subject Offset by Indemnification Obligations [Member]
Business Combination, Contingent Consideration Arrangements, Range of Outcomes, Value, High				$ 1,000,000
Adler Hot Oil Service, LLC [Member] | Indemnity Holdback Payment [Member]
Business Combination, Contingent Consideration Arrangements, Change in Amount of Contingent Consideration, Liability	908,000
Adler Hot Oil Service, LLC [Member] | Earn-out Payment [Member]
Business Combination, Contingent Consideration Arrangements, Change in Amount of Contingent Consideration, Liability	$ 44,000

XML

Note 4 - Business Combinations - Consideration Transferred and Assets Acquired and Liabilities Assumed (Details) - USD ($)	Oct. 26, 2018	Jun. 30, 2020	Dec. 31, 2019
Goodwill, Ending Balance		$ 546,000	$ 546,000
Adler Hot Oil Service, LLC [Member]
Cash consideration, including payment to retire Adler debt	$ 6,206,000
Subordinated note, net of discount	4,580,000
Net purchase price	11,703,000
Cash	43,000
Accounts receivable, net	1,317,000
Prepaid expenses and other current assets	239,000
Property, plant, and equipment	9,664,000
Intangible assets	1,045,000
Accounts payable and accrued liabilities	(850,000)
Total identifiable net assets	11,458,000
Goodwill, Ending Balance	245,000
Total identifiable assets acquired	11,703,000
Adler Hot Oil Service, LLC [Member] | Cash Held by Acquier, Subject Offset by Indemnification Obligations [Member]
Contingent consideration, net of discount	873,000
Adler Hot Oil Service, LLC [Member] | Earn-out Payment Subject to Satisfaction of EBITDA-related Performance [Member]
Contingent consideration, net of discount	$ 44,000

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Note 5 - Intangible Assets (Details Textual) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Finite-Lived Intangible Asset, Useful Life (Year)			5 years
Amortization of Intangible Assets, Total	$ 51,000	$ 51,000	$ 102,000	$ 102,000

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Note 5 - Intangible Assets - Components of Intangible Assets (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Intangible assets, gross	$ 1,067	$ 1,067
Accumulated amortization	(341)	(239)
Net carrying value	726	828
Customer Relationships [Member]
Intangible assets, gross	626	626
Intellectual Property [Member]
Intangible assets, gross	$ 441	$ 441

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Note 5 - Intangible Assets - Expected Future Amortization Expense (Details) $ in Thousands	Jun. 30, 2020 USD ($)
Expected amortization expense, 2021	$ 218
Expected amortization expense, 2022	218
Expected amortization expense, 2023	218
Expected amortization expense, 2024	72
Expected amortization expense, 2025
Customer Relationships [Member]
Expected amortization expense, 2021	125
Expected amortization expense, 2022	125
Expected amortization expense, 2023	125
Expected amortization expense, 2024	42
Expected amortization expense, 2025
Patents and Trademarks [Member]
Expected amortization expense, 2021	93
Expected amortization expense, 2022	93
Expected amortization expense, 2023	93
Expected amortization expense, 2024	30
Expected amortization expense, 2025

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Note 6 - Discontinued Operations (Details Textual) - Dillco Fluid Service, Inc [Member] - Discontinued Operations, Disposed of by Sale [Member] - USD ($)	1 Months Ended	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2019
Discontinued Operation, Gain (Loss) from Disposal of Discontinued Operation, before Income Tax, Total	$ 129,000
Discontinued Operation, Provision for Loss (Gain) on Disposal, before Income Tax, Total		$ 130,000

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Note 6 - Discontinued Operations - Information by Major Classes of Line Items Disclosed as Discontinued Operations in the Consolidated Statements (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019	Dec. 31, 2019
Total income (loss) on discontinued operations that is presented in the Statements of Operations	$ 31	$ (724)	$ 67	$ (1,780)
Dillco Fluid Service, Inc [Member]
Accounts receivable, net					$ 175
Property and equipment, net	771		771		1,373
Prepaid expenses and other current assets					12
Right-of-use asset - financing, net	45		45		57
Total major classes of assets of the discontinued operations	816		816		1,617
Accounts payable and accrued liabilities	6		6		47
Lease liabilities - financing (current and non-current portions)	46		46		59
Total liabilities included as part of discontinued operations	52		52		$ 106
Revenue		867		2,295
Cost of sales	(11)	(1,285)	(11)	(3,470)
Sales, general, and administrative expenses		(1)		(18)
Depreciation and amortization	(7)	(294)	(13)	(577)
Other income and expense items that are not major	11	5	(1)	6
Pretax loss of discontinued operations related to major classes of pretax profit	(7)	(708)	(25)	(1,764)
Gain (loss) on disposal of assets	38	(16)	92	(16)
Total income (loss) on discontinued operations that is presented in the Statements of Operations	$ 31	$ (724)	$ 67	$ (1,780)

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Note 7 - Debt (Details Textual)			1 Months Ended		3 Months Ended		6 Months Ended
	Apr. 10, 2020 USD ($)	Aug. 10, 2017 USD ($)	Nov. 30, 2019 USD ($)	Oct. 31, 2019 USD ($)	Jun. 30, 2020 USD ($)	Jun. 30, 2019 USD ($)	Jun. 30, 2020 USD ($)	Jun. 30, 2019 USD ($)	Jan. 06, 2020 USD ($)	Dec. 31, 2019 USD ($)
Line of Credit, Current					$ 31,993,000		$ 31,993,000			$ 33,994,000
Cash and Cash Equivalents, at Carrying Value, Ending Balance					429,000		429,000			663,000
Proceeds from Paycheck Protection Program Under CARES Act	$ 1,939,900
Interest Expense [Member]
Amortization of Debt Issuance Costs					35,000	$ 24,000	70,000	$ 58,000
Other Assets [Member]
Unamortized Debt Issuance Expense					12,000		$ 12,000			$ 82,000
The 2017 Credit Agreement [Member] | East West Bank [Member] | Revolving Credit Facility [Member]
Line of Credit Facility, Maximum Borrowing Capacity, Percent of Eligible Receivables		85.00%
Line of Credit Facility, Maximum Borrowing Capacity, Percentage of Trucks and Equipment		85.00%
Debt Instrument, Basis Spread on Variable Rate							3.93%
Line of Credit Facility, Unused Capacity, Commitment Fee Percentage		0.50%
Line of Credit, Current					32,000,000		$ 32,000,000		$ 32,000,000
Line of Credit Facility, Remaining Borrowing Capacity					0		$ 0
Line of Credit Facility, Covenant Compliance, Minimum Fixed Charge Coverage Ratio		1.1
Line of Credit Facility, Covenant Compliance, Trailing Twelve Month Fixed Charge Coverage Ratio		1.2	110	1.1
Line of Credit Facility, Covenant Compliance, Minimum Liquidity		$ 1,500,000	$ 1,500,000	$ 1,500,000
The 2017 Credit Agreement [Member] | East West Bank [Member] | Revolving Credit Facility [Member] | London Interbank Offered Rate (LIBOR) [Member]
Debt Instrument, Basis Spread on Variable Rate		3.50%					3.93%
Line of Credit, Current					30,500,000		$ 30,500,000
The 2017 Credit Agreement [Member] | East West Bank [Member] | Revolving Credit Facility [Member] | Prime Rate [Member]
Debt Instrument, Basis Spread on Variable Rate		1.75%
Line of Credit, Current					$ 1,500,000		$ 1,500,000

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Note 7 - Debt - Summary of Long-term Debt (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Long-term debt	$ 4,736	$ 2,845
Less debt discount	(94)	(119)
Less current portion	(2,554)	(2,528)
Long-term debt, net of debt discount and current portion	2,088	198
Unsecured Debt [Member]
Long-term debt	1,940
Subordinated Debt [Member] | Subordinated Promissory Note 1 [Member]
Long-term debt	1,000	1,000
Subordinated Debt [Member] | Subordinated Promissory Note 2 [Member]
Long-term debt	1,000	1,000
Subordinated Debt [Member] | Subordinated Promissory Note 3 [Member]
Long-term debt	500	500
Real Estate Loan 1 [Member]
Long-term debt	193	218
Vehicle Loans for Trucks [Member]
Long-term debt	53	74
Note Payable To Seller Of Heat Waves [Member]
Long-term debt	$ 50	$ 53

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Note 7 - Debt - Summary of Long-term Debt (Details) (Parentheticals) - USD ($)	6 Months Ended	12 Months Ended
	Jun. 30, 2020	Dec. 31, 2019
Unsecured Debt [Member]
Interest rate	1.00%
Subordinated Debt [Member] | Subordinated Promissory Note 1 [Member]
Interest rate	10.00%	10.00%
Subordinated Debt [Member] | Subordinated Promissory Note 2 [Member]
Interest rate	10.00%	10.00%
Subordinated Debt [Member] | Subordinated Promissory Note 3 [Member]
Interest rate	10.00%	10.00%
Real Estate Loan 1 [Member]
Interest rate	5.75%	5.75%
Monthly principal and interest payment	$ 5,255	$ 5,255
Vehicle Loans for Trucks [Member]
Interest rate	8.59%	8.59%
Monthly principal and interest payment	$ 3,966	$ 3,966
Note Payable To Seller Of Heat Waves [Member]
Monthly principal and interest payment	$ 36,000	$ 36,000

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Note 7 - Debt - Summary of Maturities of Long-term Debt (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
2021	$ 2,648
2022	2,004
2023	60
2024	24
2025
Thereafter
Total	$ 4,736	$ 2,845

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Note 8 - Fair Value Measurements (Details Textual) - USD ($) $ in Thousands	Jun. 30, 2020	Mar. 31, 2020	Dec. 31, 2019
Fair Value, Recurring [Member] | Interest Rate Swap [Member]
Derivative Liability, Total	$ 0		$ 23

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Note 8 - Fair Value Measurements - Financial Assets and Liabilities Measured on a Recurring Basis (Details) - Fair Value, Recurring [Member] - Interest Rate Swap [Member] - USD ($) $ in Thousands	Jun. 30, 2020	Mar. 31, 2020	Dec. 31, 2019
Derivative liabilities	$ 0		$ 23
Fair Value, Inputs, Level 1 [Member]
Derivative liabilities
Fair Value, Inputs, Level 2 [Member]
Derivative liabilities			23
Fair Value, Inputs, Level 3 [Member]
Derivative liabilities

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Note 9 - Income Taxes (Details Textual) - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019
Effective Income Tax Rate Reconciliation, Other Reconciling Items, Amount, Total	$ (1.8)	$ 0.3

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Note 10 - Commitments and Contingencies (Details Textual) - USD ($)		1 Months Ended	30 Months Ended
	Jan. 01, 2019	Jun. 30, 2015	Jun. 30, 2020	Dec. 31, 2019
Operating Lease, Right-of-Use Asset	$ 2,400,000		$ 3,328,000	$ 3,793,000
Operating Lease, Liability, Total	2,400,000		3,441,000
Right-of-Use Asset Obtained in Exchange for Finance Lease Liability	845,000
Cumulative Effect on Retained Earnings, Net of Tax, Total			(32,214,000)	(25,020,000)
Self-insured Amount per Individual Claim		$ 50,000
Self-insured, Maximum Coverage Policy		$ 1,800,000
Self Insurance Reserve			179,000	$ 68,000
Workers' Compensation, Maximum Coverage Policy			1,800,000
Workers' Compensation, Accumulated Payments on Claims			1,800,000
Workers' Compensation, Estimated Accruals			1,600,000
Other Noncurrent Assets [Member]
Worker's Compensation, Prepaid Amount			$ 189,000
Accounting Standards Update 2016-02 [Member]
Operating Lease, Right-of-Use Asset	2,400,000
Operating Lease, Liability, Total	2,400,000
Cumulative Effect, Period of Adoption, Adjustment [Member] | Accounting Standards Update 2016-02 [Member]
Cumulative Effect on Retained Earnings, Net of Tax, Total	$ 98,000

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Note 10 - Commitments and Contingencies - Future Minimum Lease Commitments (Details) - USD ($)	Jun. 30, 2020	Jan. 01, 2019
2021, operating leases	$ 955,000
2021, financing leases	167,000
2022, operating leases	933,000
2022, financing leases	130,000
2023, operating leases	644,000
2023, financing leases
2024, operating leases	613,000
2024, financing leases
2025, operating leases	358,000
2025, financing leases
Thereafter, operating leases	359,000
Thereafter, financing leases
Operating leases	3,862,000
Financing leases	297,000
Impact of discounting, operating leases	(421,000)
Impact of discounting, financing leases	(64,000)
Discounted value of lease obligations, operating leases	3,441,000	$ 2,400,000
Discounted value of lease obligations, financing leases	$ 233,000

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Note 10 - Commitments and Contingencies - Lease Cost (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Current lease cost	$ 288	$ 175	$ 579	$ 367
Long-term lease cost	23	197	43	322
Total operating lease cost	311	372	622	689
Amortization of right-of-use assets	37	68	95	68
Interest on lease liabilities	5	9	12	9
Total lease cost	$ 42	$ 77	$ 107	$ 77
Weighted-average lease term (years), operating (Year)	4 years 167 days	4 years 350 days	4 years 167 days	4 years 350 days
Weighted-average discount rate, operating	6.08%	6.08%	6.08%	6.08%
Weighted-average lease term (years), financing (Year)	1 year 284 days	2 years 240 days	1 year 284 days	2 years 240 days
Weighted-average discount rate, financing	6.10%	6.10%	6.10%	6.10%

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Note 11 - Stockholders' Equity (Details Textual)				1 Months Ended	3 Months Ended	6 Months Ended
	Nov. 11, 2019 $ / shares shares	Jun. 21, 2017 shares	Dec. 21, 2016 shares	Jun. 30, 2016 $ / shares shares	Jun. 30, 2020 $ / shares shares	Dec. 31, 2020	Jun. 30, 2020 $ / shares shares	Dec. 31, 2019 $ / shares
Class of Warrant or Right, Issued During Period (in shares)
Class of Warrant or Right, Exercise Price of Warrants or Rights (in dollars per share) | $ / shares					$ 0.22		$ 0.22	$ 0.22
Stock Issued During Period, Shares, Issued for Services (in shares)					0		0
Reverse Stock Split [Member] | Maximum [Member] | Forecast [Member]
Stockholders' Equity Note, Stock Split, Conversion Ratio						25
Reverse Stock Split [Member] | Minimum [Member] | Forecast [Member]
Stockholders' Equity Note, Stock Split, Conversion Ratio						10
Warrants Issued in June 2016 [Member]
Class of Warrant or Right, Issued During Period (in shares)				30,000
Class of Warrant or Right, Grants in Period, Grant-date Fair Value (in dollars per share) | $ / shares				$ 0.36
Class of Warrants or Rights, Vesting Period (Year)				1 year
Class of Warrants or Rights, Vested During the Period (in shares)		15,000	15,000
Class of Warrant or Right, Exercise Price of Warrants or Rights (in dollars per share) | $ / shares					$ 0.70		$ 0.70
Warrant In Connection With Amended Subordinated Loan [Member]
Class of Warrant or Right, Exercise Price of Warrants or Rights (in dollars per share) | $ / shares	$ 0.20
Warrants Expiration Period (Year)	5 years
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in shares)	625,000
Class of Warrants or Rights, Grant Date Fair Value (in shares)	0.16

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Note 11 - Stockholders' Equity - Summary of Warrant Activity (Details) - $ / shares	6 Months Ended	12 Months Ended
	Jun. 30, 2020	Dec. 31, 2019
Outstanding (in shares)	655,000
Outstanding, weighted average exercise price (in dollars per share)	$ 0.22
Outstanding, weighted average remaining contractual life (Year)	4 years 73 days	4 years 255 days
Issued (in shares)
Issued, weighted average exercise price (in dollars per share)
Exercised (in shares)
Exercised, weighted average exercise price (in dollars per share)
Forfeited/Cancelled (in shares)
Forfeited/Cancelled, weighted average exercise price (in dollars per share)
Outstanding (in shares)	655,000	655,000
Outstanding, weighted average exercise price (in dollars per share)	$ 0.22	$ 0.22
Exercisable (in shares)	655,000
Exercisable, weighted average exercise price (in dollars per share)	$ 0.22
Exercisable, weighted average remaining contractual life (Year)	4 years 73 days

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Note 12 - Stock Options and Restricted Stock (Details Textual) - USD ($)			3 Months Ended		6 Months Ended
	Jan. 01, 2016	Jul. 27, 2010	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019	Dec. 31, 2019	Jul. 18, 2016
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number, Ending Balance (in shares)			1,507,499		1,507,499		1,945,333
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross (in shares)			0	0	0	0
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period (in shares)					0	0
Share-based Payment Arrangement, Option [Member]
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount, Total			$ 0		$ 0
Share-based Payment Arrangement, Option [Member] | Selling, General and Administrative Expenses [Member]
Share-based Payment Arrangement, Expense			1,000	$ 29,000	$ 3,000	$ 71,000
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period (in shares)					1,002,501
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period (in shares)					150,000
Restricted Stock [Member] | Former CEO [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period (in shares)					895,000
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period (in shares)					100,000
Restricted Stock [Member] | Selling, General and Administrative Expenses [Member]
Share-based Payment Arrangement, Expense			322,000	$ 48,000	$ 358,000	$ 97,000
Restricted Stock [Member] | Selling, General and Administrative Expenses [Member] | Former CEO [Member]
Severance Costs			$ 301,000		$ 301,000
Option Plan 2010 Member
Share-based Compensation Arrangement by Share-based Payment Award, Percentage of Outstanding Stock Maximum		15.00%
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant (in shares)	5,719,069		0		0
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number, Ending Balance (in shares)	38,127,129		135,166		135,166
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period (Year)	5 years
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized (in shares)								2,391,711
Option Plan 2010 Member | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period (Year)	1 year
Option Plan 2010 Member | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period (Year)	3 years
The 2016 Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant (in shares)			1,372,333		1,372,333			10,391,711
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number, Ending Balance (in shares)			429,998		429,998
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized (in shares)								8,000,000

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Note 12 - Stock Options and Restricted Stock - Summary of Stock Option Activity (Details) - USD ($)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019	Dec. 31, 2019
Outstanding (in shares)			1,945,333
Outstanding, weighted average exercise price (in dollars per share)			$ 0.55
Outstanding, weighted average remaining contractual life (Year)			1 year 295 days		1 year 346 days
Outstanding, aggregate intrinsic value
Granted (in shares)	0	0	0	0
Granted, weighted average exercise price (in dollars per share)
Exercised (in shares)			0	0
Exercised, weighted average exercise price (in dollars per share)
Forfeited or Expired (in shares)			(437,834)
Forfeited or Expired, weighted average exercise price (in dollars per share)			$ 1.38
Outstanding (in shares)	1,507,499		1,507,499		1,945,333
Outstanding, weighted average exercise price (in dollars per share)	$ 0.31		$ 0.31		$ 0.55
Vested or Expected to Vest (in shares)	1,507,499		1,507,499
Vested or Expected to Vest, weighted average exercise price (in dollars per share)	$ 0.31		$ 0.31
Vested or Expected to Vest, weighted average remaining contractual life (Year)			1 year 295 days
Vested or Expected to Vest, aggregate intrinsic value
Exercisable (in shares)	1,507,499		1,507,499
Exercisable, weighted average exercise price (in dollars per share)	$ 0.31		$ 0.31
Exercisable, weighted average remaining contractual life (Year)			1 year 295 days
Exercisable, aggregate intrinsic value

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Note 12 - Stock Options and Restricted Stock - Summary of the Status of Non-vested Shares (Details) - $ / shares	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Balance, non-vested (in shares)			53,001
Balance, non-vested, weighted average grant date fair value (in dollars per share)			$ 0.22
Granted, non-vested (in shares)	0	0	0	0
Granted, weighted average grant date fair value (in dollars per share)			$ 0.22
Vested, non-vested (in shares)			(26,334)
Vested, weighted average grant date fair value (in dollars per share)			$ 0.22
Forfeited, non-vested (in shares)			(26,667)
Forfeited, weighted average grant date fair value (in dollars per share)			$ 1.92
Balance, non-vested (in shares)
Balance, non-vested, weighted average grant date fair value (in dollars per share)

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Note 12 - Stock Options and Restricted Stock - Summary of Restricted Stock Option (Details) - Restricted Stock [Member]	6 Months Ended
	Jun. 30, 2020 $ / shares shares
Balance, Restricted shares (in shares) | shares	2,006,333
Balance, Restricted shares, Weighted average grant date fair value (in dollars per share) | $ / shares	$ 0.55
Granted, Restricted shares (in shares) | shares	150,000
Granted, Restricted shares, Weighted average grant date fair value (in dollars per share) | $ / shares	$ 0.17
Vested, Restricted shares (in shares) | shares	(1,002,501)
Vested, Restricted shares, Weighted average grant date fair value (in dollars per share) | $ / shares	$ 0.40
Forfeited, Restricted shares (in shares) | shares	(723,834)
Forfeited, Restricted shares, Weighted average grant date fair value (in dollars per share) | $ / shares	$ 0.68
Balance, Restricted shares (in shares) | shares	429,998
Balance, Restricted shares, Weighted average grant date fair value (in dollars per share) | $ / shares	$ 0.45

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Note 12 - Stock Options and Restricted Stock - Potentially Dilutive Instruments (Details) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Potentially dilutive instruments (in shares)	2,208,041	2,259,378	2,317,594	2,362,836
Share-based Payment Arrangement, Option [Member]
Potentially dilutive instruments (in shares)	1,553,041	2,229,378	1,662,594	2,332,836
Warrant [Member]
Potentially dilutive instruments (in shares)	655,000	30,000	655,000	30,000

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Note 13 - Segment Reporting - Reportable Segments (Details) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Revenues		$ 2,141	$ 6,340	$ 11,527	$ 31,152
Cost of Revenue		3,330	6,442	11,795	21,808
Segment Profit (Loss)		(1,189)	(102)	(268)	9,344
Depreciation and amortization		1,310	1,442	2,706	2,842
Capital Expenditures (Excluding Acquisitions)		142	169	306	292
Identifiable assets (1)	[1]	29,448	42,719	29,448	42,719
Production Services [Member]
Revenues		1,383	3,835	4,585	7,951
Cost of Revenue		1,814	3,343	5,308	6,689
Segment Profit (Loss)		(431)	492	(723)	1,262
Depreciation and amortization		647	640	1,317	1,483
Capital Expenditures (Excluding Acquisitions)		76	90	159	118
Identifiable assets (1)	[1]	13,228	22,178	13,228	22,178
Completion Services [Member]
Revenues		758	2,505	6,942	23,201
Cost of Revenue		1,516	3,099	6,487	15,119
Segment Profit (Loss)		(758)	(594)	455	8,082
Depreciation and amortization		567	741	1,214	1,276
Capital Expenditures (Excluding Acquisitions)		66	77	147	136
Identifiable assets (1)	[1]	15,085	19,153	15,085	19,153
Unallocated and Other Segments [Member]
Revenues
Cost of Revenue
Segment Profit (Loss)
Depreciation and amortization		96	61	175	83
Capital Expenditures (Excluding Acquisitions)			2		38
Identifiable assets (1)	[1]	$ 1,135	$ 1,388	$ 1,135	$ 1,388

[1] Identifiable assets is calculated by summing the balances of accounts receivable, net; inventories; property and equipment, net; and other assets.

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Note 13 - Segment Reporting - Income From Operations (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Segment profit	$ (1,189)	$ (102)	$ (268)	$ 9,344
Sales, general, and administrative expenses	(1,247)	(1,458)	(3,009)	(3,060)
Patent litigation and defense costs		(1)		(10)
Severance and Transition Costs	(139)		(139)
(Loss) gain on disposals of equipment	(23)	4	(38)	4
Impairment				(127)
Depreciation and amortization	(1,310)	(1,442)	(2,706)	(2,842)
(Loss) income from Operations	$ (3,908)	$ (2,999)	$ (6,160)	$ 3,309

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Note 13 - Segment Reporting - Revenues by Geography (Details) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Revenue		$ 2,141	$ 6,340	$ 11,527	$ 31,152
Production Services [Member]
Revenue		1,383	3,835	4,585	7,951
Completion Services [Member]
Revenue		758	2,505	6,942	23,201
Rocky Mountain Region [Member] | Production Services [Member]
Revenue	[1]	348	1,782	1,541	3,845
Rocky Mountain Region [Member] | Completion Services [Member]
Revenue	[1]	711	2,332	5,717	17,144
Central USA Region [Member] | Production Services [Member]
Revenue	[2]	943	1,861	2,816	3,627
Central USA Region [Member] | Completion Services [Member]
Revenue	[2]	(2)	74	107	2,844
Eastern USA Region [Member] | Production Services [Member]
Revenue	[3]	92	192	228	479
Eastern USA Region [Member] | Completion Services [Member]
Revenue	[3]	$ 49	$ 99	$ 1,118	$ 3,213

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

[2] Includes the Scoop/Stack Shale in Oklahoma and the Eagle Ford Shale in Texas.

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