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Note 11 - Subsequent Events
6 Months Ended
Jun. 30, 2024
Notes to Financial Statements  
Subsequent Events [Text Block]

Note 11  Subsequent Events

 

Note Conversion

 

On July 12, 2024, pursuant to a Note Conversion Agreement, Kevin Chesser, a director of the Company, converted $50,000 of the principal balance on certain of the September and October 2023 Convertible Notes into 183,891 shares of the Company’s common stock.

 

Assignment and Bill of Sale - Frac Heating Equipment

 

On August 6, 2024, the Company sold certain Colorado-based assets (the "Purchased Assets") of Heat Waves Hot Oil Service, LLC, a wholly owned subsidiary of the Company, to HP Oilfield Services, LLC, a Nevada limited liability company ("HP Oilfield"), pursuant to an assignment and bill of sale (the "Assignment") . The Purchased Assets were primarily utilized in the Company’s frac water heating business. The aggregate purchase price for the Purchased Assets is $1,695,000, payable as follows: (i) $1,221,625 in cash; and (ii) a promissory note in the principal amount of $473,375 issued by HP Oilfield in favor of the Company (the "HP Note"), with principal payments of $94,675 plus accrued interest due and payable on the first day of each month beginning October 1, 2024 for a term of five months. The HP Note matures on February 1, 2025 and interest accrues on the unpaid principal thereof at a rate of 10% per annum. As part of the Assignment, HP Oilfield also agreed not to solicit business in Pennsylvania, West Virginia, and Ohio for an eight month period. Additionally, the Company granted HP Oilfield a ten month option to purchase certain heating assets of the Company for $1,850,000.

 

Acquisition of Buckshot Trucking LLC

 

On March 19, 2024, the Company entered into a membership interest purchase agreement (the "Buckshot Purchase Agreement") with Tony Sims, an individual resident of Colorado; Jim Fate, an individual resident of Colorado (together the “Sellers”), and Buckshot Trucking LLC, a Wyoming limited liability company ("Buckshot Trucking"), pursuant to which Enservco agreed to acquire from the Sellers all of the issued and outstanding membership interests of Buckshot Trucking (the “Buckshot Acquisition”) for $5,000,000 (the “Base Amount”), subject to a net working capital adjustment, plus up to $500,000 in the form of Enservco common stock, contingent upon satisfaction of certain conditions set forth in the Buckshot Purchase Agreement. The Base Amount consisted of $3,750,000 in cash and $1,250,000 in shares of Enservco common stock based on the volume-weighted average of Enservco common stock for the 10-day period immediately preceding the closing date.

 

On August 8, 2024, the Company entered into an Amendment to the Membership Interest Purchase Agreement (the “Buckshot Amendment”) with the Sellers and Buckshot Trucking. The Buckshot Amendment amends the Buckshot Purchase Agreement to provide that in lieu of the $3,750,000 cash payment due at closing, the Company will pay Messrs. Sims and Fate an aggregate of $1,000,000 in cash at closing and issue promissory notes to each of Mr. Sims ($2,025,000 principal amount) and Mr. Fate ($675,000 principal amount) in the aggregate principal amount of $2,700,000 (the “Buckshot Notes”). The Buckshot Notes are unsecured, non-convertible, due on December 31, 2024 and bear interest at 10% per annum. The Buckshot Amendment also provides that the Company will withhold and retain $50,000 of the cash consideration and $200,000 of the stock consideration in order to secure the indemnification obligations of the Sellers under the Buckshot Purchase Agreement, as amended.

 

The issuance of the Enservco common stock pursuant to the Buckshot Purchase Agreement was subject to the prior approval of the holders of a majority of the outstanding shares of Enservco common stock. On June 25, 2024, a majority of the stockholders of the Company approved the issuance of such shares via written consent. The Company closed on the acquisition of Buckshot Trucking on August 8, 2024 and issued to the Sellers an aggregate of 6,459,938 shares of Enservco common stock and the Buckshot Notes in aggregate principal amount of $2,700,000.

 

Share Exchange and Note Financing

 

On August 9, 2024, the Company entered into a share exchange agreement with Star Equity Holdings, Inc. ("Star"), a Delaware corporation, pursuant to which the Company sold to Star (i) 9,023,035 shares of the Company’s common stock and (ii) 3,476,965 shares of the Company’s 2% Cumulative Mandatorily Convertible Series A Preferred Stock (the “Series A Preferred Shares”) in exchange for 250,000 shares of Star’s 10% Series A Cumulative Perpetual Preferred Stock (which preferred stock trades on the Nasdaq Global Market under the symbol "STRRP"). Star’s 10% Series A Cumulative Perpetual Preferred Stock was valued at $10 par value, for a total share exchange value of $2.5 million. Star also has the right to exchange up to an additional $2.5 million of Series A Preferred Shares for an additional $2.5 million of Enservco common stock, calculated based on the transaction price of $0.20 per share.

 

In connection with the share exchange agreement, the Company expanded the size of its board of directors from five to six directors and provided Star the right to designate a director so long as Star owns 5% or more of the Company's outstanding common stock. Star's initial designee is Richard Coleman, Chief Executive Officer of Star.

 

Concurrently with the execution of the share exchange agreement, the Company also entered into a note purchase agreement with Star, providing for the purchase and sale of a promissory note (the "Star Note") in the aggregate principal amount of $1,000,000. The Company used the proceeds from the sale of the Star Note to complete the Buckshot Acquisition. The Star Note is non-convertible, has a three month term, and bears interest at a rate of 20% per annum. The three month term may be extended an additional month if 60% of the principal amount of the Star Note is paid by the end of such three month term and additional one month if 80% of the principal amount is paid by the end of the four month period. The Star Note is secured by 250,000 shares of 10% Series A Cumulative Perpetual Preferred Stock of Star held by the Company.