UNITED STATES ~~SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549~~

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year ended December 31, ~~2017~~2018

[ ] 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: 001-36909

ECO-STIM ENERGY SOLUTIONS, INC.

(Exact name of registrant as specified in its charter)

Nevada		20-8203420
(State or other jurisdiction of		(IRS Employer
incorporation or organization)		Identification Number)

2930 W. Sam Houston Pkwy N., Suite 275, Houston TX		77043
1773 Westborough Drive, Katy TX		77449
(Address of principal executive offices)		(Zip Code)

281-531-7200

(Registrant’s telephone number, including area code)

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

Title of each class		Name of each exchange on which registered
Common Stock, par value $0.001 per share		The NASDAQ Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]

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 the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ 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 ~~and post~~ such files). Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or 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. (Check one):

Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] ~~(Do not check if a smaller reporting company)~~ Smaller reporting company [X] Emerging growth company [ ]

If an emerging growth company, indicate 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 Act). Yes [ ] No [X]

As of June 30, ~~2017~~2018, the aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant, computed by reference to the closing price of that date, was $15,~~489~~299,~~917~~268.

The registrant had 7418,~~577~~869,~~899~~514 shares of common stock outstanding at ~~March~~May 167, ~~2018~~2019.

Documents ~~Incorporated~~incorporated by ~~Reference~~reference: None

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K (this “Form 10-K”) contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements, other than statements of historical facts, included in this Form 10-K that address activities, events or developments that we expect, project, believe or anticipate will or ~~may~~many occur in the future are forward-looking statements. When used in this Form 10-K, the words “could’,” “would,”, “should,”, “believe,”, “anticipate,”, “plan,”, “intend,”, “estimate,”, “expect,”, “project”, and other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. Our forward-looking statements are based on our current expectations and assumptions and currently available information. Such statements should not be unduly relied upon. Forward-looking statements may include statements that relate to, among other things:

● our future financial ~~and operating~~ performance ~~and results, including estimated revenue, margins, earnings or losses, or growth rates~~; ● our ~~business strategy and budgets; ● our~~ prospects and the plans and objectives of our management; ● ~~future~~our ~~pricing~~financial ~~and other conditions in the markets we serve~~strategy; ● our ~~efforts~~anticipated ~~and~~property ~~ability to obtain future contracts~~ and ~~customers~~equipment sales; ● ~~our~~the ~~efforts~~effective ~~and~~liquidation ~~ability~~of ~~to renegotiate~~ the ~~terms~~Company’s ~~of our existing contract in Argentina and enter into a new modified definitive agreement, or to otherwise exit our existing contract in Argentina, or to bid for new contracts in Argentina~~assets; ● ~~our~~the ~~technology;~~orderly ●wind ~~our~~down ~~financial~~of ~~strategy~~the Company; ● the ~~amount,~~settlement ~~nature and timing~~ of ~~capital~~creditor ~~expenditures;~~and ●other ~~competition~~claims ~~and~~against ~~government~~the ~~regulations~~Company; ● ~~future~~the ~~operating~~distribution ~~costs~~of ~~and~~any ~~other expenses; ● our~~ cash ~~flow~~or ~~and~~other ~~anticipated~~assets ~~liquidity;~~to ~~● our property and equipment acquisitions and sales~~stockholders; and ● our plans, forecasts, objectives, expectations and intentions.

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance, or achievements to be materially different from the anticipated future results or financial condition expressed or implied by the forward-looking statements. ~~These~~There ~~risks,~~are ~~uncertainties~~important ~~and other~~ factors ~~include~~that ~~but~~could ~~are~~cause ~~not~~actual ~~limited~~results to vary materially from those described in this Form 10-K as anticipated, estimated or expected, including:

● ~~the~~our ~~cyclical~~vulnerability ~~nature~~to ofadverse ~~the~~economic ~~oil~~conditions ~~and~~due ~~natural~~to ~~gas~~our ~~industry~~incurrence of indebtedness; ● ~~the~~our ~~potential~~ability to identify buyers for, and complete the sale of our ~~customers~~assets; to● ~~backward-integrate~~the bycontrol ~~starting~~of ~~their~~Fir ~~own~~Tree ~~well~~Partners ~~service~~(together ~~operations~~with orits ~~otherwise~~affiliated ~~reduce~~funds, ~~the~~“Fir ~~use~~Tree”) over stockholder voting; ● loss of ~~our~~key ~~services~~executives; ● the ~~potential~~ability to employ and retain skilled and qualified workers; ● work stoppages and other labor matters; ● inadequacy of insurance coverage for ~~excess~~certain ~~capacity~~losses or liabilities; ● delays in ~~the~~obtaining ~~oil~~required ~~and~~permits ~~natural~~or ~~gas~~other ~~service~~governmental ~~industry~~authorizations; ● ~~dependence~~ability to import equipment or spare parts into Argentina on a timely basis; ● ability to consummate the ~~spending~~sale of certain of our assets in Argentina; ● foreign currency exchange rate fluctuations; ● volatility of economic conditions in Argentina; and ~~drilling~~● ~~activity~~costs byand ~~the~~liabilities ~~onshore~~associated ~~oil~~with labor, employment, environmental, health and ~~natural~~safety ~~gas~~laws, ~~industry;~~including any changes in the interpretation or enforcement thereof.

● competition within the oil and natural gas service industry; ● concentration of our customer base and fulfillment of existing customer contracts; ● our ability to maintain pricing and obtain contracts; ● deterioration of the credit markets; ● our ability to raise For additional ~~capital~~information toregarding ~~fund~~known ~~future~~material ~~and~~factors ~~committed~~that ~~capital~~could ~~expenditures;~~affect ~~● increased vulnerability to adverse economic conditions due to~~ our ~~incurrence~~financial ofresults ~~indebtedness; ● our limited operating history; ● our ability to obtain raw materials~~ and ~~specialized equipment; ● technological developments or enhancements; ● asset impairment and other charges; ● our ability to identify~~performance, ~~make~~please ~~and~~read ~~integrate acquisitions; ● Fir Tree Partners~~ (~~together with its affiliated funds,~~ 1) “~~Fir~~Part ~~Tree”)~~I ~~control~~– ~~over~~Item ~~stockholder~~1A ~~voting;~~– ●Risk ~~loss~~Factors” of key executives; ● the ability to employ and retain skilled and qualified workers; ● work stoppages and other labor matters; ● hazards inherent to the oil and natural gas industry; ● inadequacy of insurance coverage for certain losses or liabilities; ● delays in ~~obtaining~~this ~~required~~Annual ~~permits;~~Report ~~● ability to import equipment or spare parts into Argentina~~ on aForm ~~timely~~10-K ~~basis; ● legislation~~ and ~~regulations~~(2) ~~affecting~~“Management’s Discussion ~~the oil~~ and ~~natural~~Analysis ~~gas industry or aspects~~ of ~~our~~Financial ~~business,~~Condition ~~including future legislative~~ and ~~regulatory~~Results ~~developments; ● legislation and regulatory initiatives relating to well stimulation; ● foreign currency exchange rate fluctuations; ● effects~~ of ~~climate~~Operations” ~~change; ● volatility of economic conditions~~ in ~~Argentina;~~Part ●II ~~market~~– ~~acceptance~~Item of7 ~~turbine pressure pumping technology; ● the profitability for our customers~~ of ~~shale~~this ~~oil~~Annual ~~and~~Report on ~~gas~~Form ~~as commodity prices decrease; ● risks of doing business in Argentina and the United States;~~10-K.

●Events may ~~risks~~occur ~~associated~~in ~~with~~ the ~~start-up~~future ofthat ~~new~~we ~~business~~are ~~operations~~unable into ~~new~~accurately ~~markets~~predict, ~~such~~or asover ~~the~~which ~~inability~~we tohave ~~hire~~no ~~sufficient~~control. ~~qualified~~Except ~~employees,~~as ~~obtain~~required ~~necessary~~by ~~machinery~~law, we ~~and~~assume ~~equipment~~no ~~needed~~obligation to ~~conduct~~update ~~our~~any ~~operations~~forward-looking ~~and~~statements ~~meet the needs of our customers~~publicly, ~~and~~or ~~our ability~~ to ~~obtain~~update ~~operating~~the ~~permits~~reasons inactual ~~time;~~results ~~and~~could ●differ materially ~~costs~~from ~~and~~those ~~liabilities~~anticipated ~~associated~~in ~~with~~any ~~labor,~~forward-looking ~~employment~~statements, ~~environmental,~~even ~~health~~if ~~and~~new ~~safety~~information ~~laws,~~becomes ~~including~~available ~~any changes~~ in the ~~interpretation or enforcement thereof~~future.

For additional information regarding known material factors that could affect our operating results and performance, please read (1) “Part I—Item 1A—Risk Factors” in this Annual Report on Form 10-K and (2) “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II—Item 7 of this Annual Report on Form 10-K. Should one or more of these known material risks occur, or should the underlying assumptions prove incorrect, our actual results, performance, achievements or other events could differ materially from those expressed or implied in any forward-looking statement. There also may be risks of which we are currently unaware.

We believe that it is important to communicate our expectations of future performance to our investors. However, events may occur in the future that we are unable to accurately predict, or over which we have no control. When considering our forward-looking statements, you should keep in mind the cautionary statements in this Form 10-K, which provide examples of risks, uncertainties and events that may cause our actual results to differ materially from those contained in any forward-looking statement.

All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section and any other cautionary statements that may accompany such forward-looking statements. Except as otherwise required by applicable law, we disclaim any duty to revise or update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this Form 10-K.

You should not place undue reliance on forward-looking statements. Each forward-looking statement speaks only of our expectations based on known factors as of the date of the particular statement.

TABLE OF CONTENTS

		Page
PART I.
Item 1.	Business	1
Item 1A.	Risk Factors	89
Item 1B.	Unresolved Staff Comments	2719
Item 2.	Properties	2719
Item 3.	Legal Proceedings	2820
Item 4.	Mine Safety Disclosures	2820
PART II.
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	2921
Item 6.	Selected Financial Data	3022
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3123
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	4138
Item 8.	Financial Statements and Supplementary Data	4239
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	6770
Item 9A.	Controls and Procedures	6770
Item 9B.	Other Information	6870
PART III.
Item 10.	Directors, Executive Officers and Corporate Governance	6971
Item 11.	Executive Compensation	75
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	8281
Item 13.	Certain Relationships and Related Transactions, and Director Independence	8483
Item 14.	Principal Accounting Fees and Services	86
PART IV.
Item 15.	Exhibits, Financial Statement Schedules	87
Item 16.	Form 10-K Summary	90
SIGNATURES		91

PART I.

Except when the context otherwise requires or where otherwise indicated, throughout this Annual Report on Form 10-K, we use the terms “Eco-Stim,” “EcoStim,” “Company,” “we,” “us” and “our” to refer to Eco-Stim Energy Solutions, Inc.

ITEM 1.

BUSINESS

~~General~~Eco-Stim Energy Solutions, Inc. is a technology-driven independent oilfield services company that has historically offered well stimulation, coiled tubing and field management services to the upstream oil and gas industry. Our service offerings extended to exploration and production (“E&P) companies in the United States and Argentina.

~~Eco-Stim~~In ~~Energy~~September ~~Solutions~~2018, ~~Inc.~~we iscompleted awork ~~growth-oriented,~~under ~~technology-driven~~our ~~independent~~pressure ~~oilfield~~pumping ~~services~~contract ~~company~~with ~~providing~~our ~~well~~primary ~~stimulation, coiled~~U.S. ~~tubing~~customer. ~~and~~Based ~~field~~on ~~management~~the ~~services~~weakness to of the ~~upstream oil and gas industry~~U.S. Wewell ~~are~~stimulation ~~focused~~market, onin ~~reducing~~September ~~the~~2018 ~~ecological~~we ~~impact and~~elected ~~improving~~to ~~the~~suspend ~~economic~~our ~~performance~~U.S. ~~of the~~ well stimulation ~~process~~operations inand ~~“unconventional”~~significantly reduce ~~drilling~~our ~~formations~~U.S. ~~We currently~~workforce ~~offer~~in ~~our~~alignment ~~services~~with topotential ~~oil~~near-term ~~and~~opportunities, ~~natural~~including ~~gas~~pump ~~exploration~~down and ~~production~~miscellaneous ~~(“E&P”)~~pumping ~~companies~~services. As previously disclosed in ~~the~~our ~~United States~~Form ~~and~~10-Q ~~Argentina.~~as ~~Our~~of ~~focus~~September is30, to2018 ~~bring~~filed ~~our~~on ~~service~~November ~~offerings~~14, ~~technologies~~2018, ~~and~~we ~~processes~~have tobeen actively pursuing the ~~most~~sale ~~active~~of ~~shale~~all ~~resource basins~~material ~~both~~equipment, ~~domestically~~inventory and ~~outside~~other ofoperating ~~North~~assets ~~America~~relating ~~using our technology~~ to ~~differentiate~~ our ~~service~~U.S. ~~offerings~~operations.

~~For~~During ~~information~~the ~~about~~fourth ~~our~~quarter ~~operating~~of ~~segments~~2018, ~~and~~the ~~financial~~Company ~~information~~completed bythe disposition of certain of its U.S. equipment and other operating ~~segment~~assets to unrelated third parties in several separate transactions in exchange for aggregate cash proceeds, before commissions and ~~geographic~~selling expenses, ~~area~~of approximately $5.7 million. On January 24, ~~please~~2019, ~~read~~the ~~“Management’s~~Company completed the disposition of certain of its U.S. equipment ~~Discussion~~to ~~and~~an ~~Analysis~~unrelated party in exchange for approximately $2.8 million of ~~Financial~~aggregate ~~Condition~~cash proceeds, before commissions and ~~Results~~selling expenses. On February 21, 2019, the Company completed the disposition of ~~Operations”~~certain ~~included~~of its U.S. equipment to an unrelated party in ~~Part~~exchange for IIapproximately $6.2 million of aggregate cash proceeds, ~~Item~~before 7commissions and selling expenses. On March 14, 2019, the Company completed the disposition of ~~this~~certain ~~Annual~~of ~~Report~~its U.S. equipment to an unrelated party in exchange for approximately $2.1 million of onaggregate ~~Form~~cash ~~10-K~~proceeds, before commissions and ~~Note~~selling 19expenses. toNet ~~our~~of ~~consolidated~~commissions, ~~financial~~the ~~statements~~Company ~~included~~received inapproximately ~~Part~~$16.8 million. IIIn the U.S., ~~Item~~we 8have ofsold ~~this~~all ~~Annual~~the ~~Report~~material onequipment, ~~Form~~inventory ~~10-K~~and other operating assets relating to our U.S. operations and terminated all field level employees.

In Argentina, we operated under a transition agreement with our primary customer beginning May 2018 and continued to provide services under that agreement during the third quarter of 2018. Subsequent to the third quarter of 2018, we have not provided any services to our primary customer in Argentina under the transition agreement or otherwise, and have not generated any material revenue from our Argentina operations since the third quarter of 2018. As previously disclosed in our Form 10-Q as of September 30, 2018 filed on November 14, 2018, we have been pursuing strategic alternatives, including alternatives for the Company’s operations in Argentina that could include selling, reducing the scale of, or shutting down the Company’s operations in Argentina.

In line with the Company’s decision to either sell the Argentine company or sell the assets of the Argentine company, on March 18, 2019, the Company signed an agreement with an unrelated third party to purchase significantly all of our equipment and machinery assets in Argentina. The transactions contemplated by this agreement are expected to close in phases during the second quarter of 2019, with no continuing obligation or involvement by the Company in the operation of these assets. Following the consummation of the transactions contemplated by this agreement, the Company expects to shut down its operations in Argentina.

As of December 31, 2018, the Company has classified our Argentina subsidiary as discontinued operations for all periods presented in this filing. The Company made the decision, having received a letter of intent during the fourth quarter of 2018 from a third party, to sell the subsidiary. Refer to Note 17 – Assets Held for Sale-Discontinued Operations of our consolidated financial statements for additional details. As of December 31, 2018, the Company classified certain U.S. spare parts, equipment and machinery as held for sale based on the decision by the Company to seek buyers for and sell these assets. Refer to Note 17 – Assets Held for Sale-Discontinued Operations of our consolidated financial statements for additional details on the impact of this classification.

On December 28, 2018, the Company received a determination letter from Nasdaq that the Company would be delisted pursuant to the Nasdaq Listing Rules. The Company determined not to appeal the determination and the quotation of the Company’s common stock moved to the “Pink Open Market” operated by the OTC Markets Group Inc. The common stock was subsequently delisted from Nasdaq due to the Company’s non-compliance with Nasdaq’s minimum bid price requirements. Specifically, the Nasdaq suspended trading in the Company’s common stock on Nasdaq, effective prior to the regular opening of the market on January 2, 2019. The Nasdaq subsequently filed a Notification of Removal from Listing and/or Registration on Form 25 with the Securities and Exchange Commission, or SEC, on February 26, 2019 to remove the common stock from listing on Nasdaq and withdraw the common stock from registration under Section 12(b) pursuant to Rule 12d2-2(b) of the Exchange Act. Pursuant to Rule 12d2-2(d)(1) of the Exchange Act, the application on Form 25 became effective with respect to the delisting of the common stock ten (10) days after the Form 25 was filed with the SEC.

As disclosed previously in Form 8-K filed February 14, 2019, the Company has implemented a reverse stock split. The reverse stock split reduced the number of shareholders of record and allows the Company to deregister the common stock and reduce ongoing expenses with respect to filings under the Exchange Act. Those shareholders who, immediately following the reverse stock split, held only a fraction of a share of the Company’s common stock were paid, in lieu thereof, an amount in cash equal to $0.08 (on a post-split basis) times such fraction of a share and are no longer shareholders of the Company. After the filing of this Annual Report on Form 10-K for the fiscal year ended December 31, 2018, and the filing of a Form 15 to suspend the Company’s reporting obligations under Section 15(d) of the Exchange Act, the Company will no longer be subject to certain provisions of the Exchange Act. In particular, the Company’s obligations to publicly file periodic and current reports with the SEC under Section 15(d) of the Exchange Act will be suspended.

Our Services

WeThe ~~offer~~Company offered a variety of specialized oilfield services and equipment generally categorized by their typical use during the ~~economic~~ economic life of a well. A description of the various services we ~~offer~~offered is provided below.

Pressure Pumping

Our customers ~~utilize~~utilized our pressure pumping services to enhance the production of oil and natural gas from formations with low permeability, which restricts the natural flow of hydrocarbons. The technique of well stimulation consists of pumping a fluid into a cased well at sufficient pressure to create new channels in the rock, which can increase the extraction rates and the ultimate recovery of the hydrocarbons. Our equipment that iswas contracted by E&P companies to provide pressure-pumping services is referred to as a “well stimulation fleet” or “spread.”

WeDuring ~~currently~~a ~~operate~~portion of 2018, we operated three well stimulation fleets, two in the United States based out of our operations facility in Fairview, Oklahoma, and one in Argentina based out of our operations facility in Neuquén, Argentina. In the United States, we ~~currently~~provided ~~provide~~ pressure pumping services to customers in the Anadarko Basin in Oklahoma. ~~Our~~From our operations base in Fairview, Oklahoma ~~is well situated~~, towe ~~provide~~provided services to E&P companies in the mid-continent region, including in the Scoop, Stack, Cana-Woodford, Mississippian Lime and Springer plays.

~~Our~~During 2018, our well stimulation fleets generally ~~include~~included high pressure well-stimulation pumps and other supporting equipment, in both trailer-mounted and skid-mounted configurations. We ~~have~~had the capability of providing a variety of pressure-pumping services, including work-over pumping and well injection. As of March 1, 2018, we (i) owned 47 high-pressure pumps with an aggregate capacity of approximately 110,250 horsepower (“HHP”); (ii) leased six high-pressure pumps with an aggregate capacity of approximately 13,500 HHP; and (iii) owned an additional 20 high-pressure pumps with an aggregate capacity of approximately 45,000 HHP that require refurbishment and upgrade prior to activation for service.

AAs ~~portion~~ of ~~our~~December ~~equipment~~31, ~~consists~~2018, ofwe ~~turbine~~owned ~~powered~~45 high-pressure ~~pumping~~pumps ~~equipment~~with ~~(referred~~an toaggregate ascapacity ~~“TPUs”)~~of approximately 101,250 ~~which~~horsepower ~~are~~(“HHP”) ~~powered~~and byowned ~~remanufactured~~an ~~turbine~~additional ~~engines~~12 ~~previously~~high-pressure ~~used~~pumps inwith ~~military~~an ~~applications.~~aggregate ~~Each~~capacity ~~turbine~~of ~~engine generates~~ approximately ~~4,000~~ ~~HHP and therefore when operating at 2~~27,000 HHP, ~~the~~that ~~engine~~require ~~is running at approximately 50% of its capacity, which benefits~~refurbishment ~~their reliability~~ and ~~durability.~~upgrade ~~They~~prior ~~also~~to ~~weigh~~activation ~~less~~for ~~than~~service. ~~10%~~As of ~~the~~April ~~typical~~1, ~~reciprocating~~2019, ~~engine~~significantly ofall ~~comparable horsepower. The weight differential allows for better use~~ of ~~space~~our onmaterial aoperating ~~trailer~~machinery and ~~more efficient operations. We believe the TPUs are more cost effective to operate and maintain than conventional diesel-powered~~ equipment ~~when run on natural gas. Prior field operations~~ ~~with~~has ~~our~~been current TPUs have demonstrated compliance with emission standards for nitrogen oxides (“NOx”) and carbon monoxide under the EPA’s Tier 4 standards that regulate emissions from certain off-road diesel enginessold. ~~Turbine engines also have significantly lower methane leakage compared to reciprocating engines.~~

Coiled Tubing

WeDuring ~~currently~~2018, ~~offer~~we offered coiled tubing services to customers in Argentina. Our coiled tubing services ~~are~~were used to perform various functions associated with well-servicing operations and to facilitate completion of horizontal wells. Coiled tubing services involve the insertion of steel tubing into a well to convey materials and/or equipment to perform various applications as part of a new completion or the servicing of existing wells, including wellbore maintenance, nitrogen services, thru-tubing services, and formation stimulation using acid and other chemicals. Coiled tubing has become a preferred method of well completion, workover and maintenance projects due to speed, ability to handle heavy-duty jobs across a wide spectrum of pressure environments, safety and ability to perform services without having to shut-in a well. The capabilities of our coiled tubing ~~unit~~units in Argentina ~~cover~~were their ability to cover a wide range of applications for horizontal completion, work-over and well-maintenance projects.

Customers

In May 2017, our first U.S. spread commenced operations in Oklahoma for an independent E&P company. In October 2017, our second U.S. spread commenced operations in Oklahoma for another independent E&P company. In November 2017, we negotiated an early release of our first U.S. spread from our contract with our first U.S. customer. In March 2018, and ~~have~~after ~~now~~securing ~~deployed~~sand ~~that~~delivery and ~~spread~~other needed equipment, we redeployed this fleet to serve an independent E&P company operating in the Sooner Trend Anadarko ~~other~~Basin Canadian and Kingfisher Counties (“STACK”) play. This spread did not provide services to customers ~~consisting~~in ~~primarily~~April 2018 ofbut resumed operations with a new independent E&P ~~companies~~company customer in early May 2018. ~~For~~We ~~the~~subsequently ~~year~~ceased ~~ended~~to ~~December~~provide services ~~31,~~to ~~2017~~this customer. In late May 2018, ~~our~~we ~~first~~agreed ~~two~~to provide our primary U.S. ~~customers~~ ~~accounted~~customer ~~for~~with ~~approximately~~additional ~~99%~~dedicated horsepower and equipment, including certain of our ~~total~~natural gas-powered pumping units, to create what we referred to as a “super fleet” in support of a collaborative plan to improve the efficiency of our U.S. ~~revenue~~operations.

2In September 2018, we completed work under our pressure pumping contract with our primary U.S. customer. Given the weakness of the U.S. well stimulation market, in September 2018 we elected to suspend our U.S. well stimulation operations and significantly reduce our U.S. workforce.

InDuring ~~Argentina,~~the ~~our~~fourth ~~customers~~quarter ~~have consisted primarily~~ of ~~international~~2018, ~~oil~~the ~~and~~Company ~~gas~~provided ~~E&P~~pump ~~companies~~down ~~including~~services ~~national~~for ~~oil~~a ~~companies, local~~major ~~privately-held~~E&P ~~exploration and production companies and~~company, onbut ~~occasion,~~did ~~other~~not ~~service companies that have contractual obligations to~~ provide ~~well~~any ~~stimulation and completion~~ other services. ~~For the year ended December 31, 2017, our largest customer~~ in ~~Argentina accounted for approximately 44% of our total revenue and 99% of~~ the ~~revenue generated from our operations in Argentina~~U.S.

Customer demand for our services depends primarily upon the capital and operating spending of oil and gas exploration and production companies and the level of drilling activity in the regions we serve. We expect to continue to derive a significant portion of our revenue from a relatively small number of customers in the future. If one or more of our customers decided not to continue to use our services, our revenue could decline significantly and our operating results, financial condition and cash flows could be adversely impacted.3

For the year ended December 31, 2018, one U.S. customer accounted for 99% of our total U.S. revenue.

In Argentina, our customers consisted primarily of international oil and gas E&P companies including national oil companies, local privately-held exploration and production companies and, on occasion, other service companies that have contractual obligations to provide well stimulation and completion services. For the year ended December 31, 2018, our largest customer in Argentina accounted for approximately 21% of our total revenue and 98% of the revenue generated from our operations in Argentina.

In 2018, we negotiated with our primary customer in Argentina to improve the terms of our agreement with this customer. In June 2018, we finalized the terms of a transition agreement with improved commercial terms. The transition agreement became effective in May 2018. Subsequent to the third quarter of 2018, we did not provide any services to our primary customer in Argentina under the transition agreement or otherwise, and we did not generate any material revenue from our Argentina operations in the fourth quarter of 2018.

Customer demand for our services depended primarily upon the capital and operating spending of oil and gas exploration and production companies and the level of drilling activity in the regions we serve. A significant portion of our revenue came from a relatively small number of customers.

Competition

WeDuring ~~provide~~a portion of 2018, we provided services in the U.S. and Argentina, both highly competitive markets, with competitors comprised of both small and large companies. Our revenues and earnings can be affected by numerous factors, including changes in competition, fluctuations in drilling and completion activity, perceptions of future prices of oil and gas, government regulation, disruptions caused by weather and general economic conditions. We believe the principal competitive factors are price, performance, service quality, safety, response time and breadth of services. WeDuring ~~believe~~2018, our primary competitors in Argentina ~~include~~included Schlumberger, Halliburton, Weatherford, Baker Hughes, Calfrac Well Services and San Antonio International and other oilfield service companies. During Ina portion of 2018, in the United States, we ~~compete~~competed against many of the same competitors as in Argentina but in addition, we also ~~face~~faced strong competition from many independent pressure pumping companies. We also ~~compete~~competed with various other regional and local providers within each of our geographic markets for products and services.

Markets

United States

In May 2017, our first U.S. spread commenced operations in Oklahoma. In October 2017, our second U.S. spread commenced operations in Oklahoma. The market in this region ishas been concentrated around wells being drilled in the Scoop, Stack, Cana-Woodford, Mississippian Lime and Springer plays. Activity in this region ~~has~~ accelerated in late 2016 and 2017, and on into the first quarter of 2018. ~~According~~ According to Baker Hughes’ North America Rotary Rig Count data, in early March 2018 there were 124 rigs operating in Oklahoma as compared to 98 rigs operating in early March 2017,. ~~and~~Rig 70count ~~rigs operating~~ in ~~early~~Oklahoma ~~March~~was ~~2016.~~108 Weat ~~have~~the ~~established~~end ~~a base~~ of ~~operations~~ inMarch ~~Fairview~~2019, ~~Oklahoma,~~dropping ~~which~~from we140 ~~believe~~rigs ~~is well situated to provide services to E&P companies in the mid-continent~~operating ~~region,~~at ~~including in~~ the ~~Scoop,~~end ~~Stack,~~of ~~Cana-Woodford, Mississippian Lime and Springer plays~~2018.

Argentina

We ~~have~~operated ~~been operating~~ an oilfield services business in Argentina since December 2014. Our first full year of operations was 2015. ~~The~~ ~~market~~During ~~for~~2018, we ~~our~~marketed ~~services in Argentina can be broken into~~ three service offerings, in Argentina: (1) pressure pumping, (2) coiled tubing and (3) field management. The majority of our revenue ~~comes~~came from the pressure pumping market which can be broken into three sub-markets, (1) conventional wells, (2) tight gas wells and (3) unconventional wells. Generally, the conventional wells ~~can~~were be serviced with 3-5 pumping units whereas the tight gas wells ~~require~~required 8-10 pumping units. The unconventional wells in Argentina ~~require~~required anywhere from 16 to 24 pumping units. In 2015, we had sufficient pumping capacity to participate in the conventional well market. In 2016, we expanded our capacity and had ~~now have~~ the capacity to serve customers in the tight gas market. In the second quarter of 2017, we entered into a two-year contract with the largest operator in Argentina to provide services for their tight gas completions program. WeDuring ~~anticipate~~the course of providing services under that ascontract, we incurred losses due to lower than expected utilization of our assets, higher than expected third-party costs incurred in order to provide the ~~market~~bundled services contemplated under the contract, and other factors. We engaged in negotiations with our primary customer in Argentina ~~recovers~~to improve the terms of the agreement, and ~~activity~~in ~~increases~~June 2018, ~~there~~we ~~may~~finalized bethe ~~opportunities~~terms toof ~~secure~~a ~~other~~transition ~~long-term~~agreement ~~agreements~~with improved commercial terms. We operated under the transition agreement with our primary customer in Argentina beginning May 2018 and ~~add~~we ~~additional~~continued ~~pumping~~to ~~capacity~~provide services under that agreement during the third quarter of 2018. Subsequent to ~~service~~the ~~all~~third ~~three~~quarter of ~~markets~~2018, we have not provided any services to our primary customer in Argentina under the transition agreement or otherwise, and we did not generate any material revenue from our Argentina operations since the third quarter of 2018.

Our coiled tubing services ~~support~~supported our pressure pumping business, including the drill out of frac plugs, wash-downs, chemical treatments and workover activity. We ~~provide~~provided these services to the conventional, tight gas and unconventional well markets in Argentina.

~~Our~~In 2018, our field management business ~~consists~~consisted of various degrees of subsurface analysis derived from the data received from clients or otherwise acquired. The different forms of data include geophysical, geo-mechanical, core samples and other information provided by our customers and data acquired, processed and interpreted by our team including real time fiber optic information data gathered ~~from~~ from pressure gauges installed in the wells. This market iswas driven by exploration and step-out development in new regions or in mature areas where our customers ~~are~~look ~~looking~~ to better understand the production associated with older wells. ~~The market for these services is limited but complements our primary business lines and we believe these services bring expertise and value to our customers.~~

The Baker Hughes rig ~~counts~~count noted drilling rig count in Argentina peaked at 113 in 2014, bottomed at 52 in January 2017 and was 68 in January 2018. ~~The~~During 2018, rig count istopped anat ~~indicator~~75 ofrigs ~~activity~~ in ~~Argentina~~September ~~that~~and weended ~~expect will continue to drive~~ the ~~utilization and~~year ~~pricing~~with ~~of our services~~74. ~~Additionally,~~The asrig ~~wells~~count ~~become~~is ~~more~~an ~~complex~~indicator of ~~and~~activity ~~drilling~~in ~~activity~~Argentina ~~moves~~which ~~from~~typically ~~traditional~~drives tothe ~~tight gas~~utilization and ~~then~~pricing ~~horizontals,~~of ~~we believe demand for pressure pumping~~ services ~~will~~we ~~grow~~provided.

Potential Liabilities and Insurance

~~Our~~Prior to the suspension in September 2018 of our U.S. well stimulation operations ~~involve~~and significant reduction of our U.S. workforce, our operations involved a high degree of operational risk and ~~expose~~exposed us to significant liabilities. As we continued into the fourth quarter of 2018 with our pump down operations, we continued to be exposed to significant liabilities. Even with the discontinuation of operations in Argentina in the fourth quarter of 2018, we continued to be exposed to significant liabilities. An accident involving our services or equipment, or the failure of a product sold by us, could result in personal injury, loss of life, and damage to property, equipment or the environment. Litigation arising from a catastrophic occurrence, such as fire, explosion, or well blowout, could ~~may~~ result in substantial claims for damages.

We ~~maintain~~maintained insurance coverage of types and amounts that we believe to be customary and reasonable for companies of our size and with similar operations. In accordance with industry practice, however, we do not maintain insurance coverage against all the operating risks to which our business iswas exposed. Therefore, there is a risk our insurance program may not be sufficient to cover any particular loss or all losses. ~~Currently,~~Our ~~our~~ insurance program ~~includes~~included, among other things, general liability, excess liability, ~~sudden~~ sudden and accidental pollution, contractors’ pollution, equipment floater, commercial property, vehicle, workers’ compensation, directors’ and officers’ liability, employment practices liability, and employer’s liability coverage. Our insurance includes various limits and deductibles or retentions, which must be met prior to or in conjunction with recovery. Currently, we have scaled back our coverages to match with our lower or no activity levels (operational activity, reduced headcount, etc.), but maintaining coverage that we believe is sufficient to protect the Company from continued risks associated with the discontinuation of our operations.

Government Regulation

Our business is significantly affected by federal, state, provincial and local laws and other regulations. These laws and regulations relate to, among other things:

	●	worker safety standards;

	●	the protection of the environment;

	●	the handling and transportation of hazardous materials;

	●	the protection of natural and cultural resources; and

	●	the mobilization of our equipment to, and operations conducted at, our work sites.

Numerous permits are required for the conduct of our business and operation of our various facilities and equipment, including our trucks and other heavy equipment. These permits can be revoked, modified or renewed by issuing authorities based on factors both within and outside our control.

We cannot predict changes in the interpretation of, or changes to the policies adopted by governmental agencies in connection with the enforcement of, existing laws and regulations or how such laws, regulations and policies may be interpreted by enforcement agencies or court rulings in the future. We also cannot predict whether additional laws and regulations will be adopted, including changes in regulatory oversight, increase of federal, state or local taxes, increase of inspection costs, or the effect such changes may have on us, our businesses or our financial condition.

Environmental Matters

Our operations, and those of our customers, are subject to extensive laws, regulations and treaties relating to air and water quality, generation, storage and handling of hazardous materials, and emission and discharge of materials into the environment, and the protection of natural resources. Compliance with these environmental laws and regulations ~~may~~could ~~expose~~have exposed us to significant costs and liabilities and ~~cause~~could have caused us to incur significant capital expenditures in our operations. Failure to ~~comply~~have complied with these laws and regulations ~~may~~ ~~result~~could have resulted in the assessment of administrative, civil and criminal penalties, imposition of investigatory and remedial obligations, and the issuance of injunctions delaying or prohibiting operations. ~~Historically~~Although we have currently discontinued operations both in Argentina and in the U.S., we could remain liable for past activities. Historically, our expenditures in furtherance of our compliance with these laws, regulations and treaties have not been material, and we do not expect the cost of compliance to be material in the future; however, we can provide no guarantee that this will not change.

The primary U.S. federal environmental laws to which our operations ~~are~~were subject include the federal Clean Air Act (“CAA”) and regulations thereunder, which regulate air emissions; the Clean Water Act (“CWA”) and regulations thereunder, which regulate the discharge of pollutants in industrial wastewater and storm water runoff; the Resource Conservation and Recovery Act and regulations thereunder, which regulate the management and disposal of hazardous and non-hazardous solid wastes; and the Comprehensive Environmental Response, Compensation, and Liability Act and regulations thereunder, known more commonly as “Superfund,” which imposes liability for the remediation of releases of hazardous substances in the environment. We ~~are~~were also subject to regulation under the U.S. federal Occupational Safety and Health Act and regulations thereunder, which regulate the protection of the safety and health of workers. Analogous state and local laws and regulations ~~may~~could have also ~~apply~~applied. Similar laws and regulations ~~exist~~ existed at the national and provincial level in Argentina.

In the last several years, there has been domestic and international scrutiny of hydraulic fracturing activities, resulting in additional regulation. Domestically, the U.S. Environmental Protection Agency (“EPA”) and other federal agencies, including the Bureau of Land Management (“BLM”) have finalized rules or made proposals that would subject hydraulic fracturing to further regulation and could restrict the practice of hydraulic fracturing. ~~For~~Any example, in 2016 the EPA issued final regulations under the CAA establishing performance standards for oil and gas activities, including standards for the capture of air emissions released during hydraulic fracturing and finalized CWA regulations that prohibit the discharge of wastewater from hydraulic fracturing operations to publicly owned wastewater treatment plants. In addition, some states and municipalities have significantly limited drilling activities and/or hydraulic fracturing, or are considering doing so. The BLM and several states have already adopted and more states are considering adopting laws and/or regulations that require disclosure of chemicals used in hydraulic fracturing and impose more stringent permitting, disclosure and well-construction requirements on hydraulic fracturing operations. The BLM published a final rule in March 2015 that established new ~~or more stringent standards relating to hydraulic fracturing on~~ federal ~~and American Indian lands. This BLM rule was challenged in litigation~~, and, in December 2017, the BLM published a final rule rescinding the March 2015 rule. In January 2018, litigation challenging the BLM’s rescission of the 2015 rule was brought in federal court. If such litigation is successful or if the March 2015 rule is otherwise restored in whole or in part, our hydraulic fracturing activities may be subject to increased regulatory burden. Also in Oklahoma, where we operate in the U.S., the Oklahoma Corporation Commission has taken steps to address the potential link between hydraulic fracturing activities and underground injection disposal well operations and induced seismic events. In Argentina, Neuquén Province has promulgated rules and procedures for the exploration and development of unconventional reservoirs, while other provinces have banned hydraulic fracturing altogether. Although it is not possible at this time to predict the final outcome of these proposals, any new federal, state or local restrictions on hydraulic fracturing that may be imposed in areas in which we conduct business could potentially result in increased compliance costs for us or our customers, or delays in development or restrictions on our operations or the operations of our customers, which in turn could have an adverse effect on our business and results of operations.

In addition, from time to time regulators in both the U.S. and Argentina have taken steps to restrict emissions of carbon dioxide, methane, and other greenhouse gases based on determinations by the scientific community that such emissions are contributing to climate change. Initiatives to date have generally focused on the development of cap-and-trade and/or carbon tax programs. A cap-and-trade program generally would cap overall greenhouse gas emissions on an economy-wide basis and require major sources of greenhouse gas emissions or major fuel producers to acquire and surrender emission allowances. Carbon taxes could likewise affect us by being based on emissions from our equipment and could indirectly affect us by increasing operating costs for our customers. Although it is not possible at this time to predict how legislation or new regulations that may be adopted to address greenhouse gas emissions would impact our business, any such future laws and regulations imposing reporting obligations on, or limiting emissions of greenhouse gases from, our equipment and operations could require us to incur costs to reduce emissions of greenhouse gases associated with our operations. Severe limitations on greenhouse gas emissions could also adversely affect demand for oil and natural gas, which could decrease demand for our services and have a material adverse effect on our profitability, financial condition and liquidity.

Raw Materials

WeDuring ~~purchase~~2018, we purchased various raw materials and component parts in connection with delivering our services. These materials ~~are~~ were generally, but not always, available from multiple sources and ~~may~~were be subject to price volatility. While we generally dodid not experience ~~significant~~ significant long-term shortages of these materials, we ~~have~~had from time to time experienced temporary shortages of particular raw ~~materials.~~ ~~We are always seeking ways to ensure the availability of resources, as well as manage costs of raw~~ materials.

Cyclical Nature of Our Industry

We ~~operate~~operated in a highly cyclical industry. The key factor ~~driving~~that drove demand for our services and that drives demand in our industry is the level of drilling activity by E&P companies, which in turn depends largely on the current and anticipated economics of new well completions. Global supply and demand for oil and the domestic supply and demand for natural gas ~~are~~is critical in assessing industry outlook. Demand for oil and natural gas is cyclical and subject to large, rapid fluctuations. E&P companies tend to increase capital expenditures in response to increases in oil and natural gas prices, which generally ~~results~~result in greater revenues and profits for oilfield service companies such as ours. Increased capital expenditures also ultimately lead to greater production, which historically ~~has~~ resulted in increased supplies and reduced prices which in turn tend to reduce demand for oilfield services. For these reasons, the results of our operations ~~may~~ can fluctuate from quarter to quarter and from year to year.

Seasonality

Seasonal weather and severe weather conditions ~~can~~are capable of temporarily ~~impair~~impairing our operations by reducing our ability to operate for certain time periods, thereby reducing demand for our services.

Employees

At December 31, ~~2017~~2018, we had approximately ~~230~~97 employees, all of which were full-time employees. As of December 31, ~~2017~~2018, approximately 9093% of our Argentine employees and none of our U.S. employees were represented by unions under collective bargaining agreements. As of April 15, 2019, we have approximately 9 employees in Argentina. As a result of our termination of all field level employees in the U.S., as of April 15, 2019, we had approximately 5 employees.

Facilities

Our principal executive offices are located at ~~2930~~1773 ~~West~~Westborough ~~Sam Houston Parkway North~~Drive, Suite ~~275~~110, ~~Houston~~Katy, Texas ~~77043~~77449. In addition, we own or lease additional facilities in the various areas in which we operate and maintain assets. For more information about our facilities, ~~please~~ please read Part 1 – Item 2 – “Properties.”

Intellectual Property

We have registered with the United States Patent and Trademark Office for the following trademarks: Geo-Predict® and Geo-Iteration®. We have not filed any applications for the registration of our trademarks in foreign jurisdictions, but may do so in the ~~future~~ future as we deem necessary to protect our business. ~~In addition, we rely to a great extent on the technical expertise~~ and ~~know-how~~/ ~~of our~~or ~~personnel to maintain~~ our ~~competitive~~patent ~~position~~value.

Research and Development

~~See~~The ~~Part~~Company IIhas –invested ~~Item~~in 7research –activities ~~Management’s~~related ~~Discussion~~to our fiber optics technology and ~~Analysis~~in ofour ~~Financial~~latest ~~Condition~~generation ~~and~~turbine-powered pressure ~~Results~~pumping technology. Since the research efforts around the initial configuration of ~~Operations~~the –turbine-powered pressure pumping ~~Results~~were ofsubstantially ~~Operations~~completed –in ~~“Overview~~2016, ofour ~~Business~~investments ~~Services~~have decreased substantially.”

Corporate Information

We are a Nevada corporation. We were formed in 2003 in connection with the domestication of a predecessor from the Province of Ontario to Nevada. Our principal executive offices are located at ~~2930~~1773 W.Westborough ~~Sam Houston Pkwy. N.~~Drive, Suite ~~275~~110, ~~Houston~~Katy, Texas ~~77043~~77449, and our main telephone number at that address is (281) 531-7200. Our website is available at www.ecostim-es.com. Investors should also note that we may announce material financial information in our filings with the U.S. Securities and Exchange Commission (the “SEC”), press releases and public conference calls. Based on guidance from the SEC, we may use the investor relations section of our website to communicate with our investors. It is possible that the financial and other information posted there could be deemed to be material information. Information contained on or available through our website is not part of or incorporated by reference into this Form 10-K or any other report we may file with the SEC, except to the extent explicitly stated in any such report.

We file our reports, proxy statements and other information with the SEC. You can read and copy these reports, proxy statements and other information concerning Eco-Stim at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549, on official business days during the hours of 10 a.m. to 3 p.m. Please call the SEC at 1-800-SEC-0330 for further information about the operation of the SEC’s Public Reference Room. The SEC ~~also~~ maintains an internet site that contains all reports, proxy statements and other information that we file electronically with the SEC. The address of that website is http://www.sec.gov. We also make available free of charge on our internet website our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after we electronically file such reports with, or furnish them to, the SEC. Additionally, we make available free of charge on our internet website:

	●	our Code of Business Conduct and Ethics, which includes our Financial Code of Ethics for our Chief Executive Officer and Senior Financial Officers; and

	●	the charters of the audit, compensation, and nominating and governance committees of the Board.

We intend to disclose changes in or waivers of our Financial Code of Ethics for our Chief Executive Officer and Senior Financial Officers and waivers of our Code of Business Conduct and Ethics for our directors or executive officers on our internet website within four business days of such change or waiver and maintained for at least 12 months, or report such changes or waivers on Item 5.05 of Form 8-K. All of these corporate governance materials are also available free of charge in print to stockholders who request them in writing addressed to Eco-Stim Energy Solutions, Inc., Attention: Investor Relations, ~~2930~~1773 W.Westborough ~~Sam Houston Pkwy N.~~Drive, Suite ~~275~~110, ~~Houston~~Katy, Texas ~~77043~~77449.

Investors should be aware that while we do, at various times, communicate with securities analysts, it is against our policy to disclose to them selectively any material non-public information or other confidential information. Accordingly, investors should not assume that we agree with any statement or report issued by an analyst with respect to our past or projected performance. To the extent that reports issued by securities analysts contain any projections, forecasts or opinions, such reports are not our responsibility.

ITEM 1A.

RISK FACTORS

An investment in our securities involves a number of risks. You should carefully consider the risks described in “Risk Factors,” in addition to the other information contained in this Form 10-K, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes, before investing in our securities. These risks could materially affect our business, financial condition and results of operations, and cause the trading price of our securities to decline. You could lose part or all of your investment. You should bear in mind, in reviewing this Form 10-K, that past experience is no indication of future performance. You should read the section titled “Cautionary Statements Regarding Forward-Looking Statements” for a discussion of what types of statements are forward-looking statements, as well as the significance of such statements in the context of this Form 10-K.

Risks Related toTo Our Business

Our ~~business~~working ~~depends on~~ capital ~~spending~~requirements, byliquidity ~~the~~needs ~~oil~~and indebtedness, and ~~natural~~any ~~gas~~indebtedness ~~industry,~~we ~~and~~may ~~reductions~~incur in ~~capital~~the ~~spending~~future, could ~~have a material~~restrict ~~adverse~~our ~~effect~~operations, onlimit our ~~results~~ability ofto ~~operations~~grow, ~~financial~~and ~~condition~~make ~~and~~us ~~cash~~more ~~flows~~vulnerable to adverse economic conditions or other adverse developments.

~~Our~~Any ~~business~~indebtedness, iswhether ~~directly~~incurred ~~affected~~in byconnection ~~the~~with ~~capital~~acquisitions, ~~spending~~operations ofor ~~E&P~~otherwise, ~~companies~~may toadversely ~~explore~~affect ~~for,~~our ~~develop~~operations and limit ~~produce~~our ~~oil~~growth. ~~and~~Our ~~natural gas~~obligations inunder the ~~United~~Negotiable ~~States~~Demand ~~and~~Promissory ~~Argentina.~~Note ~~The~~(the ~~significant~~“Demand ~~decline~~Note”) inwe ~~oil~~executed ~~and~~in ~~natural~~favor of ~~gas~~Eco-Lender, ~~prices~~LLC ~~that~~(the ~~began~~“Lender”), ~~in late 2014 caused~~ a ~~reduction~~ inDelaware ~~the~~limited ~~exploration,~~liability ~~development~~company and ~~production~~an ~~activities~~affiliate of ~~most~~Fir ofTree ~~these~~(the ~~companies.~~“Lender”), are ~~These~~guaranteed ~~cuts~~by inour ~~spending~~wholly ~~have~~owned ~~curtailed drilling~~subsidiary, ~~programs~~EcoStim, ~~which~~Inc., ~~has~~and ~~resulted~~are insecured by a ~~reduction~~security ininterest ~~the~~(subject ~~demand for our services as compared~~ to ~~activity~~permitted ~~levels~~ liens) in ~~late~~substantially ~~2014, as~~all ~~well~~of asour ~~the~~personal ~~prices~~property weand ~~can~~the ~~charge.~~personal Inproperty ~~addition, certain~~ of ~~these~~EcoStim, ~~companies could become unable to pay their vendors and service providers~~Inc., including ~~us,~~100% ~~as a result~~ of the ~~decline~~outstanding inequity of ~~commodity~~our ~~prices~~U.S. ~~Reduced~~subsidiaries ~~discovery~~(including ~~rates~~EcoStim, ofInc.) ~~new oil~~ and ~~natural~~65% ~~gas reserves in our areas~~ of ~~operation~~the asoutstanding aequity ~~result~~ of ~~decreased~~our ~~capital spending may also have a negative long~~non-~~term~~U.S. ~~impact~~subsidiaries. onAs ~~our~~of ~~business,~~December ~~even~~31, in2018, anthe ~~environment~~aggregate ofprincipal ~~stronger~~amount ~~oil~~ and ~~natural~~accrued ~~gas~~interest ~~prices.~~outstanding ~~Any~~under ofthe ~~these~~Demand ~~conditions~~Note orwas ~~events~~approximately ~~could~~$8.1 ~~adversely~~million. If ~~affect~~ our ~~operating results.~~obligations Ifunder the ~~recent~~Demand ~~recovery~~Note inare ~~oil~~accelerated ~~and~~pursuant ~~natural~~to ~~gas~~their ~~prices~~respective ~~does~~terms, ~~not~~we ~~continue~~cannot orassure ~~E&P~~you ~~companies~~that ~~fail~~we ~~to further increase~~will ~~their~~have ~~capital~~sufficient ~~spending,~~funds itto ~~could~~repay ~~have~~such aobligations ~~material~~and ~~adverse effect on~~ our ~~results~~other ofobligations ~~operations,~~arising ~~financial~~under ~~condition~~our ~~and~~indebtedness ~~cash~~or ~~flows~~other obligations.

~~Industry~~Our ~~conditions~~level ~~are~~of ~~influenced~~indebtedness bymay ~~numerous~~affect ~~factors~~our ~~over~~operations ~~which~~in weseveral ~~have no control~~ways, including the following:

● ~~domestic~~increasing ~~and~~our ~~foreign~~vulnerability ~~economic~~to ~~conditions~~general ~~and~~adverse ~~supply~~economic of and ~~demand~~industry ~~for~~conditions ~~oil~~or ~~and~~other ~~natural~~adverse ~~gas~~developments; ● the ~~level~~covenants ofthat ~~prices,~~are ~~and~~contained ~~expectations~~in ~~about future prices, of oil and natural gas; ●~~ the ~~level~~agreements ofgoverning ~~global~~our ~~oil~~indebtedness ~~and~~could ~~natural~~limit ~~gas~~our ~~exploration~~ability ~~and~~to ~~production;~~borrow ●funds, ~~the~~dispose ~~level~~ of ~~domestic~~assets, ~~and~~pay ~~global~~dividends ~~oil~~ and ~~natural~~make ~~gas~~certain ~~inventories~~investments; ● ~~the~~our ~~supply~~debt ofcovenants ~~and~~could ~~demand~~also ~~for~~affect ~~pressure~~our ~~pumping~~flexibility ~~services and equipment~~ in ~~the~~planning ~~United~~for, ~~States~~ and ~~Argentina;~~reacting ~~● federal~~to, ~~state~~changes ~~and~~in ~~local~~the ~~regulation~~economy ~~of hydraulic fracturing~~ and ~~exploration~~in ~~and~~our ~~production~~industry; ~~activities,~~● ~~and~~any ~~U.S.~~failure ~~federal,~~to ~~state~~comply ~~and~~with ~~local~~the ~~and~~financial ~~non-U.S.~~or ~~governmental~~other ~~regulations~~covenants ~~and~~of ~~taxes~~our asdebt, ~~well~~including ascovenants ~~public~~that ~~pressure~~impose onrequirements ~~governmental bodies and regulatory agencies~~ to ~~regulate~~maintain ~~our~~certain ~~industry;~~financial ●ratios, ~~governmental~~could ~~regulations,~~result ~~including~~in ~~the~~an ~~policies~~event of ~~governments~~default, ~~regarding~~which ~~the~~could ~~exploration~~result ~~for~~in ~~and~~some ~~production~~or ~~and~~all ~~development~~ of ~~their~~our ~~oil~~indebtedness ~~and~~becoming ~~natural~~immediately ~~gas~~due ~~reserves~~and payable; ● ~~political~~our ~~and~~level ~~economic~~of ~~conditions~~debt incould ~~oil~~impair ~~and~~our ~~natural~~ability ~~gas~~to ~~producing~~obtain ~~countries;~~additional ●financing ~~actions~~in by the ~~members~~future offor ~~the~~working ~~Organization~~capital, ofcapital ~~Petroleum~~expenditures, ~~Exporting~~acquisitions ~~Countries~~or ~~(“OPEC”)~~other ~~with~~general ~~respect~~corporate topurposes; ~~oil production levels~~ and ~~announcements~~● ofour ~~potential~~business ~~changes~~may innot ~~such~~generate ~~levels,~~sufficient ~~including~~cash ~~the~~flow ~~failure~~from ofoperations ~~such countries~~ to ~~comply~~enable ~~with~~us ~~announced~~to ~~production~~meet ~~cuts;~~our ●obligations ~~worldwide~~under ~~political~~our indebtedness, ~~military~~ and ~~economic~~we ~~conditions;~~may ●have ~~the~~difficulty ~~cost~~making ofdebt ~~producing~~service ~~and~~payments ~~delivering~~on ~~oil~~such ~~and~~indebtedness ~~natural~~as ~~gas;~~payments ●become ~~the discovery rates of new oil and natural gas reserves;~~due.

8In addition, we have incurred significant operating losses during the twelve months ended December 31, 2018 and incurred a consolidated net loss of $87.9 million.

● shareholder activism or activities by non-governmental organizations to restrict the exploration, development and production of oil and natural gas; ● the availability of water resources, suitable proppant and chemicals in sufficient quantities for use in hydraulic fracturing fluids; ● advances in exploration, development and production technologies or in technologies affecting energy consumption; ● the potential acceleration of development of alternative fuels; and ● uncertainty in capital and commodities markets and the ability of oil and natural gas companies to raise equity capital and debt financing.

The volatility of oil and natural gas prices may adversely affect the demand for our services and adversely impact our results of operations.

The demand for our services is primarily determined by current and anticipated oil and natural gas prices and the related levels of capital spending and drilling activity in the areas in which we have operations. Volatility or weakness in oil prices or natural gas prices (or the perception that oil prices or natural gas prices will decrease) affects the spending patterns of E&P companies and may result in the drilling of fewer new wells. This, in turn, could lead to lower demand for our services and may cause lower utilization of our assets. We may experience significant fluctuations in operating results as a result of the reactions of E&P companies to changes in oil and natural gas prices. For example, prolonged low commodity prices experienced by the oil and natural gas industry beginning in late 2014 and uncertainty about future prices even when prices increased, combined with adverse changes in the capital and credit markets, caused many E&P companies to significantly reduce their capital budgets and drilling activity. This resulted in a significant decline in demand for oilfield services and adversely impacted the prices oilfield services companies could charge for their services.

Prices for oil and natural gas historically have been extremely volatile and are expected to continue to be volatile. During the past four years, the posted West Texas Intermediate (“WTI”) price for oil has ranged from a low of $26.21 per barrel (“Bbl”) in February 2016 to a high of $107.26 per Bbl in June 2014. During 2016, WTI prices ranged from $26.21 to $54.06 per Bbl and during 2017, WTI prices ranged from $42.48 to $57.21 per Bbl. As of the first week of March 2018, WTI prices were around $62 per Bbl. If the prices of oil and natural gas continue to be volatile, reverse their recent increases, or decline, our operations, financial condition and cash flows may be materially and adversely affected.

We may be adversely affected by uncertainty in the global financial markets and the deterioration of the financial condition of E&P companies.

Our future results may be impacted by the uncertainty caused by an economic downturn, volatility or deterioration in the debt and equity capital markets, inflation, deflation or other adverse economic conditions that may negatively affect us or parties with whom we do business resulting in a reduction in our customers’ spending and their non-payment or inability to perform obligations owed to us, such as the failure of customers to honor their commitments or the failure of major suppliers to complete orders. Additionally, during times when the natural gas or crude oil markets weaken, E&P companies are more likely to experience financial difficulties, including being unable to access debt or equity financing, which could result in a reduction in spending for our services. In addition, in the course of our business we hold accounts receivable from our customers. In the event of the financial distress or bankruptcy of a customer, we could lose all or a portion of such outstanding accounts receivable associated with that customer. Further, if a customer was to enter into bankruptcy, it could also result in the cancellation of all or a portion of our service contracts with such customer at significant expense or loss of expected revenues to us.

Our operations are subject to inherent risks, some of which are beyond our control. These risks may be self-insured, or may not be fully covered under our insurance policies.

Our operations are subject to hazards inherent in the oil and natural gas industry, such as, but not limited to, accidents, blowouts, explosions, craterings, fires, oil spills and releases of hydraulic fracturing fluids or wastewater into the environment. These conditions can cause:

●Our limited ~~disruption in~~ operations;, ●limited ~~substantial~~cash ~~repair~~flows orand ~~remediation~~existing ~~costs;~~obligations ~~● personal injury or loss of human life; ● significant damage~~ to orthird ~~destruction~~parties ofcould ~~property~~significantly ~~and~~limit ~~equipment;~~our ~~● environmental pollution~~alternatives, ~~including groundwater contamination; ● unusual or unexpected geological formations or pressures~~ and we ~~industrial~~cannot ~~accidents;~~assure ●you ~~impairment~~that orbankruptcy ~~suspension~~will ofnot ~~operations;~~be ~~and ● substantial revenue loss~~filed.

In ~~addition~~September 2018, we completed work under our ~~operations~~pressure ~~are~~pumping ~~subject~~contract towith our primary U.S. customer. Given the weakness of the U.S. well stimulation market, ~~and~~in ~~exposed~~September 2018 we elected to, ~~employee/employer~~suspend ~~liabilities~~our U.S. well stimulation operations and ~~risks~~significantly ~~such~~reduce our asU.S. ~~wrongful~~workforce ~~termination~~in alignment with potential near-term opportunities, including pump down and miscellaneous pumping services. ~~discrimination~~During the fourth quarter of 2018 and on into the first quarter of 2019, ~~labor~~we ~~organizing~~conducted one pump down operation for a customer in the Permian basin. We actively pursued the sale of a substantial majority of the equipment, ~~retaliation~~inventory ~~claims~~and other operating assets relating to our U.S. operations and ~~general~~did ~~human~~not ~~resource~~conduct ~~related~~any ~~matters~~well stimulation operations in the U.S. in the fourth quarter of 2018. In addition, we do not expect that our U.S. operations will generate any material revenue in future periods unless we are able to obtain access to additional third-party capital to fund our future operations on reasonable terms or are otherwise able to consummate a strategic transaction.

~~The~~We ~~occurrence~~have incurred significant operating losses during 2018, and as of aDecember ~~significant~~31, ~~event~~2018, orwe ~~adverse~~had ~~claim~~a inworking ~~excess~~capital deficit of $5.5 million. Following the ~~insurance~~suspension ~~coverage~~of ~~that~~our U.S. well stimulation operations, we ~~maintain~~have orsold ~~that~~a issubstantial ~~not~~majority ~~covered~~of the equipment, byinventory ~~insurance~~and ~~could~~other ~~have~~operating aassets ~~material~~relating ~~adverse~~to ~~effect~~our onU.S. operations. We currently intend to use the proceeds from such sales to reduce our outstanding liabilities and improve our liquidity, ~~combined~~however, ~~results~~we ofcan ~~operations~~provide ~~and~~no ~~combined~~assurances ~~financial~~as ~~condition.~~to our ability to successfully ~~Claims~~negotiate ~~for~~the ~~loss~~resolution of ~~oil~~outstanding ~~and~~creditor ~~natural~~claims ~~gas~~or ~~production~~our ~~and~~ability ~~damage~~ to ~~formations~~negotiate ~~can~~the ~~occur~~resolution inof ~~the~~such ~~oilfield~~claims ~~services~~on ~~industry~~favorable terms. ~~Litigation arising~~In ~~from~~addition, we do not have access to a ~~catastrophic~~working ~~occurrence~~capital facility and may not have access to other sources of external capital on reasonable terms or at all. If we are unable to obtain a ~~location~~sufficient ~~where~~amount ~~our~~of ~~equipment~~proceeds ~~and~~from ~~services~~asset ~~are~~sales ~~being~~or ~~used~~funds from other sources, we may ~~result~~not inbe ~~our~~able ~~being~~to ~~named as~~satisfy aour ~~defendant~~working incapital ~~lawsuits~~requirements, ~~asserting~~indebtedness ~~large~~and ~~claims~~other obligations.

WeIt dois ~~not~~possible ~~have~~that ~~insurance~~our ~~against~~Demand ~~all~~Note ~~foreseeable~~could ~~risks,~~be ~~either~~called ~~because~~or ~~insurance~~creditor isclaims ~~not~~could ~~available~~be orasserted ~~because~~that ofresult in the ~~high~~Company ~~premium~~becoming party ~~costs~~to bankruptcy filings, whether voluntarily or involuntarily. ~~The~~For ~~occurrence~~the duration of anany ~~event~~such ~~not~~bankruptcy ~~fully~~case ~~insured~~or ~~against~~cases, orour ~~the~~operations and ~~failure~~our ofability anto ~~insurer~~execute our business strategy will be subject to ~~meet~~risks ~~its~~and ~~insurance~~uncertainties ~~obligations~~associated ~~could~~with bankruptcy and additional ~~result~~costs inand ~~substantial~~expenses ~~losses~~associated with bankruptcy. InThe ~~addition,~~associated werisks ~~may~~and ~~not~~uncertainties beinclude ~~able~~our ability to ~~maintain~~operate ~~adequate~~within ~~insurance~~the restrictions inand the ~~future~~liquidity atlimitations ~~rates~~imposed weby ~~consider reasonable.~~bankruptcy; ~~Insurance~~obtain ~~may~~bankruptcy ~~not~~court beapproval ~~available~~with respect to ~~cover~~motions ~~any~~filed in orthe ~~all~~bankruptcy ofcases ~~the~~from ~~risks~~time to ~~which~~time; ~~we are subject~~develop, orprosecute, ~~even~~confirm ifand ~~available,~~consummate ita plan of reorganization or liquidation; ~~may~~and fund and execute on a business plan. We would also be ~~inadequate,~~subject orto ~~insurance~~risks ~~premiums~~and oruncertainties with respect to the actions and decisions of the creditors and other ~~costs~~third ~~could~~parties ~~rise~~who ~~significantly~~have interests in the ~~future~~bankruptcy socase asthat tomay ~~make~~be ~~such~~inconsistent ~~insurance~~with ~~prohibitively expensive~~our plans.

WeFollowing ~~have~~the athird ~~limited~~quarter ~~operating~~of ~~history~~2018, ~~and~~we ~~are~~have ~~subject~~not provided any services to ~~the~~our ~~substantial~~customer ~~risks~~in ~~inherent~~Argentina, we did not generate any material revenue from our Argentina operations in the ~~growth~~fourth quarter of 2018, and ~~development~~our contemplated sale of aassets ~~relatively~~in Argentina may not be consummated ~~new~~due ~~business~~to ~~enterprise~~an inability to comply with our sale agreement and the legal and local administrative risks.

WeIn Argentina, we have been operating under a ~~limited~~transition ~~operating~~agreement ~~history~~with ~~and,~~our ~~accordingly,~~primary wecustomer ~~are~~since ~~subject~~May 2018 and continued to ~~substantial~~provide services ~~risks~~under ~~inherent~~that inagreement during the ~~growth~~third ~~and~~quarter ~~development~~ of a2018. ~~relatively~~Subsequent ~~new~~to ~~business~~the ~~enterprise.~~third Wequarter ~~have~~of ~~been~~2018, ~~operating~~we anhave ~~oilfield~~not provided any services ~~business~~to our primary customer in Argentina ~~since~~under ~~December~~the ~~2014~~transition agreement or otherwise, ~~with~~ ~~2015~~and aswe ~~our~~did ~~first~~not ~~full~~generate ~~year~~any ofrevenue from our Argentina operations in ~~that~~October ~~country~~2018. We ~~commenced~~are ~~our~~not ~~oilfield~~currently ~~services~~pursuing ~~operations~~new work in ~~the~~Argentina, ~~United~~, ~~States in~~and ~~the~~we ~~second~~do not ~~quarter~~expect ofto ~~2017,~~generate ~~with~~any ~~our~~material ~~first~~revenue ~~U.S.~~from ~~spread~~our ~~commencing~~Argentina operations in ~~May~~the ~~2017~~fourth ~~and~~quarter ~~our~~of ~~second~~2018 ~~U.S.~~or ~~spread~~in ~~commencing operations~~future ~~October 2017~~periods. As ~~Although~~a ~~the~~result, ~~amount of revenue generated from~~ our Argentina operations ~~increased~~may ~~significantly~~require inaccess ~~2017 as compared~~ to ~~prior~~additional ~~periods~~capital, wewhich ~~have~~may ~~sustained~~not ~~operating~~be ~~losses~~available inon ~~each~~reasonable ofterms or ~~the~~at ~~past~~all. ~~three~~If ~~years~~we ~~and~~are ~~there~~unable ~~can~~to beobtain noa ~~assurance~~sufficient ~~that~~amount of funds, we ~~will~~ may not be able to ~~continue~~satisfy tothe ~~grow~~working ~~our~~capital ~~revenues~~requirements, indebtedness or ~~attain~~other ~~operating~~obligations ~~profitability~~of our operations in Argentina.

In addition, we have a very limited business history that investors can analyze to aid them in making an informed judgment as to the merits of an investment in our company. Any investment in our company should be considered a high-risk investment because the investor will be placing funds at risk in our company with unforeseen costs, expenses, competition, operational challenges, and other problems to which new ventures are often subjected. Investors should not invest in our company unless they can afford to lose their entire investment. As we are relatively early in the revenue-generation process, our prospects must be considered in light of the risks, expenses, and difficulties encountered in the establishment, growth and development of a new business in a highly competitive industry.

WeThe ~~may~~Company ~~have~~has ~~difficulty~~entered ~~managing~~into ~~growth~~an agreement with an unrelated third party to dispose of substantially all of the assets and equipment used in ~~our~~the ~~business~~Company’s operations in Argentina. The transaction is closing in phases over approximately a 90 day period, subject ~~which~~to ~~could~~certain ~~adversely~~closing ~~affect~~conditions. ~~our~~If ~~financial~~these ~~condition~~closing conditions are not met or are significantly delayed, the process of closing operations in Argentina will be delayed or terminated, resulting in additional costs and ~~results~~we may not be able to satisfy the working capital requirements, indebtedness or other obligations of our operations in Argentina.

As a relatively new business enterprise, growth in accordance with our business plan, if achieved, could place a significant strain on our financial, technical, operational and management resources. As we expand the scope of our activities and our geographic coverage through either organic growth or acquisitions, there will be additional demands on our financial, technical, operational and management resources. The ~~failure to continue to upgrade our technical, administrative, operating and financial control systems~~ orloss ~~the occurrences~~ of ~~unexpected~~key ~~expansion~~personnel ~~difficulties, including the failure to recruit and retain experienced managers, engineers and other professionals in the oilfield services industry,~~ could ~~have~~adversely aaffect ~~material adverse effect on~~ our ~~business, financial condition, results of operations and our~~ ability to ~~successfully~~efficiently orsell ~~timely execute~~ our ~~business~~assets ~~plan.~~and Weseek ~~do not have highly sophisticated systems~~ to ~~forecast~~dissolve, ~~our~~liquidate ~~future revenue or profitability~~ and ~~therefore could experience difficulty in managing our growth and associated~~wind ~~working capital needs~~up.

IfWe ~~our~~intend ~~intended~~to ~~expansion~~rely ofon ~~our~~a ~~business~~few isindividuals ~~not~~in ~~successful,~~key management roles as we sell our ~~financial~~remaining ~~condition~~assets and seek to dissolve, ~~profitability~~liquidate and wind ~~results~~up ofthe ~~operations~~Company. ~~could be~~Loss ~~adversely~~of ~~affected,~~one ~~and~~or wemore ~~may~~of ~~not~~these ~~achieve~~key ~~increases~~individuals incould ~~revenue~~hamper ~~and~~the ~~profitability~~efficiency ~~that~~or weeffectiveness ~~hope~~of tothese ~~realize~~processes.

AWe ~~key~~are ~~element~~required ofto ~~our~~evaluate ~~business strategy involves the expansion of~~ our ~~services,~~internal ~~geographic~~control ~~presence~~over ~~and~~financial ~~customer~~reporting ~~base.~~in ~~These~~accordance ~~aspects of~~with ~~our~~the ~~strategy~~Sarbanes-Oxley ~~are subject to numerous risks and uncertainties, including:~~Act.

●Although we anhave ~~inability~~been required to ~~retain~~incur orcosts ~~hire~~and ~~experienced~~require ~~crews~~management ~~and~~resources ~~other~~to ~~personnel;~~evaluate ●our ainternal ~~lack~~control ofover ~~customer~~financial ~~demand~~reporting as ~~for~~required under the ~~services~~Sarbanes-Oxley weAct ~~intend~~in tothe ~~provide;~~past, ●we ancurrently ~~inability~~do tonot ~~secure~~expect ~~necessary~~to ~~equipment,~~file ~~raw~~any ~~materials~~further ~~(particularly~~reports ~~sand~~with ~~and~~the ~~other~~SEC. ~~proppants)~~Should we orbe ~~technology~~required to ~~successfully~~continue ~~execute~~such ~~our~~reporting, ~~expansion~~we ~~plans;~~would ●need ~~shortages~~to ofconduct ~~water~~such ~~used~~evaluations in ~~our~~respect ~~hydraulic~~of ~~fracturing~~those ~~operations;~~filings. ●Any ~~unanticipated~~failure to ~~delays~~comply ~~that could limit~~ or ~~defer~~any ~~the~~adverse ~~provision~~result offrom ~~services~~such byevaluation usmay ~~and~~have ~~jeopardize~~an ~~our~~adverse ~~relationships~~effect ~~with~~on ~~existing~~the ~~customers~~results ~~and~~of ~~adversely affect~~ our ~~ability to obtain new customers for such services; and ● competition from new and existing services providers~~audit.

~~Encountering~~Legal, ~~any~~labor ~~of these~~ or ~~any~~creditor ~~unforeseen~~claims ~~problems~~can incause ~~implementing~~delay ~~our~~and ~~planned~~additional ~~expansion~~costs ~~could~~associated ~~have~~with athe ~~material~~sale ~~adverse impact on our business, financial condition, results~~ of ~~operations~~assets and ~~cash~~ultimate ~~flows,~~liquidation ~~and~~of ~~could prevent us from achieving~~ the ~~increases in revenues and profitability~~ ~~that we hope to realize~~Company.

WeUnresolved ~~participate~~legal, inlabor aor ~~capital-intensive~~creditor ~~industry~~claims can add additional costs and ~~have~~delays ~~limited~~in ~~sources~~our ofplan ~~liquidity.~~to ~~Accordingly,~~sell weassets ~~may~~and ~~have~~ultimately ~~capital~~liquidate ~~needs~~the ~~for~~Company. ~~which~~Creditor ~~our~~claims ~~internally~~in ~~generated~~the ~~cash~~U.S. ~~flows~~can ~~and~~trigger ~~other~~involuntary ~~sources~~bankruptcy ofwhich ~~liquidity~~could ~~may~~result ~~not~~in beadditional ~~adequate~~costs and delays in our plan to liquidate.

~~The~~Fir ~~oil and gas industry is capital intensive. We have substantial future capital requirements~~Tree, ~~including~~in ~~the~~their ~~need~~position toas ~~fund~~majority ~~growth through acquisition of additional equipment and assets~~shareholder, ~~working~~could ~~capital~~call ~~and~~their ~~capital~~Demand ~~expenditures and any future debt service obligations. Since December 2013~~Note, ~~our operations~~ and ~~growth~~other ~~have~~actions ~~been~~that ~~funded~~could ~~primarily~~cause by proceeds from various equity and debt offerings and more recently by cash flows from operations. Our ability to fund future operations and our planned capital expenditures will depend upon our future operating performance and, more broadly, on the ~~availability and terms of equity and debt financing since~~Company we have limited internal sources of liquidity. The availability and terms of financing will be affected by prevailing economic conditions, market conditions in the exploration and production industry, and financial, business and other factors, many of which are beyond our control. If we are unable to ~~generate sufficient cash flows from operations or to obtain additional capital on favorable terms or at all, we may~~ be unable to ~~continue~~make ~~growing~~any ~~our~~payments ~~business or~~ to ~~sustain~~holders ~~or increase our current level~~ of ~~profitability. Our~~common ~~inability to grow our business may adversely impact our ability to generate profits~~stock. Moreover, if we cannot generate sufficient cash flows or otherwise secure sufficient liquidity to support our capital requirements, we may not be able to meet our payment obligations, which could have a material adverse effect on our results of operations or liquidity.

Fir Tree, as majority owner of the Company’s outstanding common stock, could call their Demand Note demanding payments, which could cause the Company to limit any distributions or could cause the Company to file bankruptcy protection.

Risks Related to the Oil and Natural Gas Industry

The oil and gas industry is intensely competitive.

The oil and gas industry is highly competitive, and most of our potential competitors have greater financial resources than we do. Our ability to renew or replace existing contracts with our customers at rates sufficient to maintain or improve current revenue and cash flows could be adversely affected by the activities of our competitors and our customers. If our competitors increase the resources they devote to the development and marketing of competitive services or decrease the prices at which they offer their services, we may be unable to compete effectively. Some of these competitors may expand or construct newer, more powerful or more flexible well stimulation fleets that would create additional competition for us. Furthermore, reductions in drilling activity in markets such as North America may drive other oilfield services companies to relocate their equipment to the regions outside the U.S. in which we operate or intend to operate. Such increase in supply relative to demand could negatively impact pricing and utilization of our services. All of these competitive pressures could have a material adverse effect on our business, results of operations and financial condition. There can be no assurance that additional competitors will not enter markets served or proposed to be served by us, that we will be able to compete successfully, or that we will have adequate funds to compete.

~~Our~~Regulatory ~~liquidity~~compliance ~~needs~~costs and ~~indebtedness~~restrictions, ~~and~~as ~~any~~well ~~indebtedness~~as wedelays ~~may~~in ~~incur~~obtaining inpermits by the ~~future~~customers for their operations, ~~could~~such ~~restrict~~as ~~our~~for ~~operations~~well stimulation and ~~make~~pressure pumping, or by us ~~more vulnerable~~for toour ~~adverse~~operations, ~~economic~~could ~~conditions~~impair our business.

~~Any~~Our ~~indebtedness,~~operations ~~whether~~and ~~incurred~~the inoperations ~~connection~~of ~~with~~our ~~acquisitions,~~customers ~~operations~~are orsubject ~~otherwise,~~to ~~may~~or ~~adversely~~impacted ~~affect~~by ~~our~~a ~~operations~~wide ~~and limit~~array ~~our~~of ~~growth.~~regulations Inin ~~addition,~~the ~~our~~jurisdictions in ~~obligations~~which ~~under~~ our ~~Recourse~~and ~~Receivables~~their ~~Purchase~~operations &are ~~Security~~located. ~~Agreement~~As ~~with~~a ~~Porter~~result ~~Capital Corporation~~of ~~(the~~changes ~~“Receivables~~in ~~Agreement”)~~regulations ~~are~~and ~~secured~~laws byrelating ~~liens~~to onthe ~~certain~~oil ofand ~~our~~natural gas ~~assets~~industry, including ~~our~~well ~~accounts receivable~~stimulation, ~~chattel~~ ~~paper,~~our ~~inventory~~operations ~~and~~or ~~substantially~~the ~~all~~operations of our ~~equipment~~customers ~~for~~could ~~our~~be ~~U.S.~~disrupted ~~operations~~or ~~(excluding~~curtailed ~~equipment subject to vendor~~by ~~financing)~~governmental authorities. IfThe ~~our~~high ~~obligations~~cost ~~under~~of ~~the~~compliance ~~Receivables~~with ~~Agreement~~applicable ~~are~~regulations ~~accelerated~~may ~~pursuant~~cause customers to ~~the~~discontinue ~~terms~~or oflimit their ~~the~~operations ~~agreement,~~and wemay ~~cannot assure~~discourage ~~you~~companies ~~that~~from wecontinuing ~~will~~development ~~have~~activities. ~~sufficient~~As ~~funds~~a toresult, ~~repay~~demand ~~such~~for ~~obligations~~our ~~and~~services could ~~our~~be ~~other~~substantially ~~obligations~~affected ~~arising~~by ~~under~~regulations ~~our~~adversely ~~indebtedness or~~impacting ~~other~~the ~~obligations~~oil and natural gas industry.

Our ~~level~~operations ofare ~~indebtedness~~subject ~~may~~to ~~affect~~hazards ~~our~~and ~~operations~~environmental risks inherent in ~~several~~the ~~ways,~~oil ~~including~~and ~~the~~natural ~~following:~~gas industry.

●Historically, we ~~increasing~~have ~~our~~been ~~vulnerability~~a toprovider ~~general~~of ~~adverse~~well ~~economic~~stimulation and ~~industry~~pressure ~~conditions;~~pumping ●services, ~~the~~a ~~covenants~~process ~~that~~involving ~~are contained in~~ the ~~agreements~~injection ~~governing~~of ~~our~~fluids—typically consisting ~~indebtedness~~mostly ~~could limit our ability to borrow funds, dispose~~ of ~~assets,~~water ~~pay dividends~~ and ~~make~~also ~~certain~~including ~~investments;~~several ●chemical ~~our~~additives—as ~~debt~~well ~~covenants~~as ~~could~~sand ~~also affect our flexibility~~ in ~~planning~~order ~~for, and reacting~~ to, ~~changes~~create infractures extending from the ~~economy~~well ~~and~~bore inthrough ~~our~~the ~~industry;~~rock ●formation ~~any failure~~ to ~~comply~~enable ~~with~~oil ~~the financial~~ or ~~other~~natural ~~covenants~~gas ofto ~~our~~move ~~debt,~~more ~~including~~easily ~~covenants~~through ~~that~~the ~~impose~~rock ~~requirements~~pores to ~~maintain~~a ~~certain~~production well. ~~financial~~In ~~ratios~~addition, ~~could~~we ~~result~~have inprovided ana ~~event~~range of ~~default,~~services ~~which~~to ~~could~~onshore ~~result~~oil inand ~~some~~natural orgas ~~all~~exploration ~~of our indebtedness becoming immediately due~~ and ~~payable;~~production ●operations, consisting ~~our level~~ of, ~~debt~~among ~~could~~other ~~impair our ability to obtain additional financing in the future for working capital~~things, ~~capital~~coiled ~~expenditures,~~tubing ~~acquisitions~~services. orRisks ~~other~~inherent ~~general~~to ~~corporate purposes; and ●~~ our ~~business~~industry ~~may~~create ~~not~~the ~~generate~~potential ~~sufficient~~for ~~cash~~significant losses ~~flow~~associated ~~from~~with ~~operations~~damage to ~~enable~~the usenvironment toor ~~meet~~natural ~~our obligations under our indebtedness~~resources, ~~and~~such weas ~~may~~the ~~have~~potential ~~difficulty~~for ~~making~~contamination ~~debt~~of ~~service~~drinking ~~payments on such indebtedness as payments become due~~water resources.

~~Our~~We ~~customer~~are ~~base~~subject isto ~~concentrated~~extensive environmental, ~~and~~worker ~~the~~health ~~loss~~and ofsafety ~~one~~laws orand ~~more~~regulations ofthat ~~our~~may ~~significant~~subject ~~customers~~us ~~could~~to ~~cause~~substantial ~~our~~liability or ~~revenues~~require us to ~~decline~~take ~~substantially and~~actions ~~have~~that awill ~~material~~adversely ~~adverse~~affect ~~effect on~~ our results of operations~~, financial condition and cash flows~~.

~~Our~~The ~~customer~~oil ~~base~~and innatural ~~both~~gas industry is significantly affected by stringent and complex federal, state and local laws and regulations concerning the ~~United~~discharge ~~States~~of substances into the environment or otherwise relating to environmental protection and ~~Argentina~~worker ishealth and ~~concentrated~~safety matters. WeThe ~~commenced~~cost ~~our~~of ~~operations~~compliance inwith ~~Argentina~~these inlaws ~~December~~can ~~2014~~be significant. Failure to properly handle, transport or dispose ~~and~~of these materials or otherwise conduct our operations in ~~the~~accordance ~~U.S.~~with inthese ~~May~~and ~~2017.~~other ~~For~~environmental ~~the~~laws ~~year~~could ~~ended~~expose ~~December~~us 31to substantial liability for administrative, ~~2017~~civil and criminal penalties, ~~our~~cleanup ~~first~~and ~~two~~site ~~U.S.~~restoration ~~customers~~costs ~~accounted~~and ~~for~~liability ~~approximately~~associated ~~99%~~with releases of ~~our~~such ~~total~~materials, ~~U.S.~~damages ~~revenue.~~to Innatural ~~November~~resources ~~2017,~~and weother ~~negotiated~~damages, anas ~~early~~well ~~release~~as ofpotentially impair our ~~first~~ability Uto conduct our operations.S. ~~spread~~We ~~from~~could ~~our~~be ~~contract with~~exposed ~~our~~to ~~first~~liability ~~U.S.~~for ~~customer~~cleanup ~~and~~costs, wenatural ~~are~~resource ~~redeploying~~damages ~~that~~and ~~spread~~other todamages ~~serve~~under these and other ~~customers;~~environmental ~~however,~~laws. ~~there~~Such liability can be noon ~~assurance that~~a westrict, ~~will~~joint beand ~~able~~several liability basis, without regard to ~~successfully~~fault. ~~redeploy~~Liability may ~~this~~be ~~spread~~imposed as a result of our conduct that was lawful at ~~attractive~~the ~~utilization~~time it occurred or ~~pricing~~the ~~levels~~conduct of, or ~~within~~conditions acaused ~~short period~~by, ofprior ~~time~~operators or other third parties. ~~For~~Environmental ~~the~~laws ~~year~~and ~~ended~~regulations ~~December~~have ~~31,~~changed ~~2017~~in the past, ~~our~~and ~~largest~~they ~~customer~~are likely to change in ~~Argentina~~the ~~accounted~~future. ~~for~~If ~~approximately~~existing ~~44%~~environmental ofrequirements ~~our~~or ~~total revenue~~enforcement policies change and ~~approximately~~become ~~99%~~more ofstringent, ~~the~~we ~~revenue~~may ~~generated~~be ~~from~~required to ~~our~~make ~~operations~~significant inunanticipated ~~Argentina~~capital and operating expenditures.

WeThe ~~will~~adoption ~~likely continue to derive a significant portion~~ of ~~our~~climate ~~revenue~~change ~~from~~legislation a relatively small number of customers in the future. If a significant customer fails to pay us, our revenue would be adversely impacted and our operating results and financial condition could be materially harmed. Additionally, if we were to lose a major customer, we may not be able to redeploy our equipment at similar utilization or ~~pricing~~regulations ~~levels~~restricting oremissions ~~within a short period~~ of ~~time~~greenhouse ~~and~~gases ~~such loss~~ could ~~have~~result a material adverse effect on our business until the equipment is redeployed at similar utilization or pricing levels. In addition, contracts with our existing customers may contain provisions whereby the customers may terminate the agreement in ~~the~~increased ~~event we are unable to perform under~~operating ~~the~~costs ~~terms of the contract or make adjustments to service~~ and~~/or~~ ~~materials~~reduced ~~fees~~demand ~~payable~~for ~~thereunder~~oil ~~based on changing market conditions. Our customer contracts are also subject to termination by customers under certain circumstances,~~ and ~~any~~natural ~~such termination could have a material adverse effect on our business~~gas.

In recent years, many national, federal, state and local governments have taken steps to reduce emissions of greenhouse gases. For example, in the United States, the EPA has finalized a series of greenhouse gas monitoring, reporting and emissions control rules for the oil and natural gas industry, and the U.S. Congress has, from time to time, considered adopting legislation to reduce emissions including carbon dioxide and methane. In December 2015, the United States and Argentina participated in the 21st Conference of the Parties of the United Nations Framework Convention on Climate Change in Paris, France. The resulting Paris Agreement calls for the parties to undertake “ambitious efforts” to limit the average global temperature, and to conserve and enhance sinks and reservoirs of greenhouse gases. The Agreement, which went into effect in November 2016, establishes a framework for the parties to cooperate and report actions to reduce greenhouse gas emissions. However, in August 2017, the U.S. State Department officially informed the United Nations of the intent of the United States to withdraw from the Paris Agreement. The Paris Agreement provides for a four-year exit process beginning when it took effect in November 2016, which would result in an effective exit date of November 2020. The United States’ adherence to the exit process and/or the terms on which the United States may re-enter the Paris Agreement or a separately negotiated agreement are unclear at this time. In addition, we cannot predict what additional steps, if any, Argentina may take as a result of participation in the Paris Agreement. Argentina has also passed a number of energy-efficiency related measures as well as requirements for the blending of ethanol and other biofuels with petroleum fuels. These measures could reduce demands for petroleum products, which in turn could have an adverse impact on demand for our services.

WeMoreover, ~~have~~climate ~~incurred~~change ~~losses~~may tocause ~~date~~more ~~under~~extreme ~~our~~weather ~~service~~conditions ~~contract~~such ~~with~~as ~~our~~more ~~largest~~intense ~~customer~~hurricanes, inthunderstorms, ~~Argentina.~~tornadoes Ifand ~~our~~snow ~~efforts~~or ice tostorms, ~~renegotiate the~~as ~~terms~~well ofas ~~our~~rising ~~existing~~sea ~~contract~~levels and ~~enter~~increased ~~into~~volatility ain ~~new~~seasonal ~~agreement~~temperatures. ~~with~~Extreme ~~more~~weather ~~favorable~~conditions ~~terms~~can ~~are unsuccessful, we may continue~~interfere towith ~~incur losses under the contract. Also, if~~ our ~~negotiations~~services ~~are unsuccessful~~ and weincrease ~~are unable to reach agreement with~~ our ~~customer,~~costs weand ~~may~~damage beresulting ~~released~~ from ~~the~~extreme ~~contract~~weather. IfAt wethis ~~receive an early release from the contract~~time, ~~our operations in Argentina may continue to incur losses, which could be substantial, until~~ we are ~~able~~unable to ~~obtain~~determine ~~new~~the extent ~~work~~to ~~from~~which ~~other~~climate ~~customers.~~change ~~In addition, we~~ may ~~determine~~lead to ~~reduce~~increased ~~the~~storm ~~scale~~or ~~of,~~weather ~~shut~~hazards ~~down,~~affecting ~~or sell~~ our operations ~~in Argentina, which could result in the incurrence of material losses and expenses~~.

InNew ~~the~~technology ~~second~~may ~~quarter~~cause of 2017, we entered into a two-year contract with the largest operator in Argentina to provide services for their tight gas completions program. To date, we have incurred losses under the contract due to lower than expected utilization of our assets, higher than expected third party costs incurred in order to provide the bundled services contemplated under the contract, and other factors. We have been engaged in extensive negotiations with our customer to seek modifications to the contract that would provide us ~~with more favorable operating results. However, there can be no assurance that our efforts~~ to ~~renegotiate the~~become ~~terms~~less ~~of the contract will be successful, and we may continue to incur losses under the contract in the future~~competitive. Our negotiations with our customer may also result in an early release from our obligations under the contract. If we receive an early release from the contract, we may incur further losses associated with our Argentina operations, which could be substantial, while we transition to new customers, and there can be no assurance that we obtain contracts with new customers on favorable terms. In addition, there can be no assurance that our negotiations will result in either modifications to the contract or a release from the contract prior to the end of its current term. In addition, our Argentina operations may require access to additional capital if we continue to incur losses under our existing contract or during any transition period from our current customer to work for new customers following an early release from our current contract, which could involve the incurrence of indebtedness, cash contributions to our Argentinian subsidiary from our parent company, or third-party financing. We may also incur other material costs in connection with our efforts to renegotiate or exit our current contract. In addition, we may determine to reduce the scale of, shut down, or sell our operations in Argentina, which could result in the incurrence of material losses and expenses.

WeThe ~~may~~oilfield ~~not~~services beindustry ~~able~~is subject to ~~fulfill,~~the ~~renew~~introduction orof ~~replace~~new ~~our~~drilling ~~existing~~and ~~agreements~~completion ontechniques ~~attractive~~and ~~terms~~services orusing atnew ~~all~~technologies, some of which ~~could~~may ~~adversely~~be ~~impact~~subject to patent protection. If competitors and others use or develop new technologies in the future that ~~our~~are ~~results~~more ofefficient ~~operations~~or productive than ours, ~~financial~~we ~~condition~~may ~~and~~lose ~~cash~~market ~~flows~~share or be placed at a competitive disadvantage.

WeThe ~~can~~industry ~~provide~~is noaffected ~~assurance~~by ~~that~~excess weequipment ~~will~~inventory be able to successfully fulfill, renew or replace our existing agreements with new agreements on or prior to their expiration on terms satisfactory to us or the customer or that we will be able to continue to provide services under those existing agreements without service interruptionlevels. We are dependent on entering into additional service agreements to grow our business. If we are not able to either renew or enter into additional service agreements, our results of operations, financial condition and cash flows could be adversely impacted.

WeBecause ~~are~~of ~~exposed~~the long-life nature of oilfield service equipment and the lag between when a decision to build additional equipment is made and when the ~~credit~~equipment ~~risk~~is ofplaced ~~our~~into ~~customers~~service, ~~and~~the ~~any~~inventory ~~material~~of ~~nonpayment~~oilfield orservice ~~nonperformance~~equipment byin ~~our~~the ~~customers~~industry ~~could~~does ~~adversely~~not always correlate ~~affect~~with ~~our~~the ~~financial~~level ~~results~~of demand for service equipment.

WeCompliance ~~are~~with ~~subject~~governmental toregulations ~~the~~may ~~risk~~impact ofour ~~loss resulting from nonpayment~~ or ~~nonperformance by~~ our customers,’ ~~many of whose~~ operations ~~are concentrated solely in the exploration~~ and ~~production industry which, as described above, is subject to volatility and, therefore, credit risk. Our credit procedures and policies~~ may ~~not~~adversely beaffect adequate to fully reduce customer credit risk. If we are unable to adequately assess the creditworthiness of existing or future customers or unanticipated deterioration in their creditworthiness, any resulting increase in nonpayment or nonperformance by them and our ~~inability~~ability to ~~re-market~~sell ~~or otherwise use~~ our ~~equipment could have a material adverse~~ ~~effect on our financial condition, results of operations and cash flows~~assets.

WeOur ~~may~~historic beoperations ~~unable~~were dependent on our customers’ decisions to ~~maintain~~develop orand ~~improve~~produce ~~pricing~~oil and natural gas reserves and on the regulatory environment in which our ~~core~~customers ~~services~~and we operate. The ability to produce oil and natural gas can be affected by the number and productivity of new wells drilled and completed, as well as the rate of production and resulting depletion of existing wells. Advanced technologies, such as horizontal drilling and well stimulation and pressure pumping, improve total recovery, but they also result in a more rapid production decline and may become subject to more stringent regulations in the future. Similarly, the market for our assets is affected by these factors.

~~Pressures~~Access ~~stemming~~to ~~from~~prospects ~~fluctuating~~is ~~market~~also ~~conditions~~important ~~and~~to ~~oil~~customers ~~and~~for ~~natural~~our ~~gas~~historic ~~prices~~services and such access may ~~make~~be itlimited ~~difficult~~because host governments do not allow access to ~~maintain~~the reserves or ~~improve~~because ~~the~~another ~~pricing for~~oil ~~our~~and ~~services.~~natural Wegas ~~have~~exploration ~~faced~~company inowns the ~~past,~~rights ~~and~~to ~~may~~develop ~~continue~~the prospect. toGovernment ~~face~~regulations inand the ~~future,~~costs ~~reductions~~incurred inby ~~demand~~oil ~~for~~and ~~our~~natural ~~services~~gas asexploration companies to conform to and comply ~~well~~with asgovernment ~~pricing~~regulations ~~pressure~~may ~~from~~also limit the ~~competitors~~quantity ~~who~~of ~~are~~oil ~~also~~and ~~competing~~natural ~~for~~gas ~~those~~that ~~same~~may ~~opportunities.~~be Ifeconomically weproduced. ~~are~~This ~~unable~~could lead customers to ~~maintain or~~curtail ~~improve~~their ~~pricing~~operations onand ~~our~~result ~~core~~in ~~services,~~a decrease in demand for our ~~financial~~assets, ~~results~~which ~~will~~in beturn ~~negatively~~could ~~impacted~~adversely affect our ability to sell our assets.

Any of these factors could have a material adverse effect on our results of operations.

Legislative and regulatory initiatives relating to well stimulation could result in increased costs and additional operating restrictions or delays for the operations of our customers.

Many national, provincial, and local governments and agencies have adopted laws and regulations or are evaluating proposed legislation and regulations that are focused on the extraction of shale gas or oil using well stimulation. Well stimulation is a treatment routinely performed on oil and gas wells in low-permeability reservoirs. Specially engineered fluids are pumped at high pressure and rate into the reservoir interval to be treated, causing cracks in the target formation. Proppant, such as sand of a particular size, is mixed with the treatment fluid to keep the cracks open when the treatment is complete. In response to concerns related to potential impacts to the environment and natural resources from well stimulation, governmental authorities have issued new rules and regulations governing the practice and are also pursuing studies related to its potential effects. Also, some national, state, and local governments have adopted bans or other measures restricting well stimulation activities. For example, the Province of Neuquén in Argentina, where we operate, has approved a set of rules regarding the extraction of shale oil and gas. These rules require, amongst other things, that operators performing well stimulation obtain permits prior to commencing drilling activities and file reports with the provincial government regarding the chemicals used in the well stimulation process and an analysis of the flowback water returning to the surface. In certain regions, the indigenous people have voiced their opposition to the increased shale development although to date these protests have been peaceful and have yet to disrupt activity in a meaningful way. In addition, several other provinces and local governments have voted to ban well stimulation within their borders, and some groups continue to advocate for a national ban on well stimulation in Argentina. The EPA and states, including Oklahoma, have also taken steps to regulate hydraulic fracturing. There has been increasing public controversy regarding hydraulic fracturing with regard to the use of fracturing fluids, induced seismic activity, impacts on drinking water supplies, use of water and the potential for impacts to surface water, groundwater and the environment generally. Legislative or regulatory changes could cause customers to incur substantial compliance costs. These factors could adversely affect customers and the market for our assets, and our historic compliance or the consequences of any failure to comply by us could have a material adverse effect on our financial condition and results of operations. At this time, it is not possible to estimate the impact on our business or assets of newly enacted or potential national, state or local laws governing hydraulic fracturing.

Our customers may choose to integrate their operations vertically by purchasing and operating their own well stimulation fleet, expanding the amount of well stimulation equipment they currently own or using alternative technologies for enhancing oil and gas production.

Our customers may choose to integrate their operations vertically by purchasing and operating their own well stimulation fleets in lieu of using our well stimulation services. In addition, there are other technologies available for the artificial enhancement of oil and natural gas production and our customers may elect to use these alternative technologies instead of the well stimulation services we provide. Vertical integration increases or use of alternative technologies could result in decreased demand for our well stimulation services, which may have a material adverse effect on our business, results of operations and financial condition.

Our assets require significant amounts of capital for maintenance, upgrades and refurbishment and we may require significant capital expenditures for additional equipment.

Our pressure pumping and other related equipment requires significant capital investment for maintenance, upgrades and refurbishment to maintain their competitiveness. The costs of components and labor have increased in the past and may increase in the future with increases in demand, which will require us to incur additional costs to maintain our current equipment or upgrade and maintain any spreads we may acquire in the future. Our spreads and other equipment typically do not generate revenue while they are undergoing maintenance, upgrades or refurbishment. Any maintenance, upgrade or refurbishment project for our assets could increase our indebtedness or reduce cash available for other opportunities. Furthermore, such projects may require proportionally greater capital investments as a percentage of total asset value, which may make such projects difficult to finance on acceptable terms. To the extent we are unable to fund such projects, we may have less equipment available for service or our equipment may not be attractive to potential or current customers. Additionally, competition or advances in technology within our industry may require us to update or replace existing spreads or build or acquire new spreads. Such demands on our capital or reductions in demand for our pressure pumping services and the increase in cost of labor necessary for such maintenance and improvement, in each case, could have a material adverse effect on our financial condition, results of operations, cash flows and prospects.

We rely on a limited number of third parties for sand, proppant and chemicals, and delays in deliveries of such materials, increases in the cost of such materials or our contractual obligations to pay for materials that we ultimately do not require could harm our business, results of operations and financial condition.

We have established relationships with a limited number of suppliers of our raw materials (such as guar gum, sand, proppant and chemicals). Should any of our current suppliers be unable to provide the necessary materials or otherwise fail to deliver the materials in a timely manner and in the quantities required, any resulting delays in the provision of services could have a material adverse effect on our business, results of operations and financial condition. Additionally, increasing costs of such materials may negatively impact demand for our services or the profitability of our operations. In the past, our industry has faced sporadic proppant shortages associated with hydraulic fracturing operations requiring work stoppages, which has adversely impacted the operating results of some of our competitors. We may not be able to mitigate any future shortages of materials, including proppant. Furthermore, to the extent our contracts require us to purchase more materials, including proppant, than we ultimately require, we may be forced to pay for the excess amount under “take or pay” contract provisions.

Our ability to operate successfully depends on the availability of water.

Well stimulation, and pressure pumping more generally, can require a significant supply of water, and water supply and quality are important requirements to our operations. We expect the water requirements necessary for us to conduct our operations will be obtained from sources on or near the well sites, but there is no assurance that there will be a sufficient supply of water from sources in these areas, some of which are prone to drought. For example, in December 2016, the Neuquén province in Argentina declared a 12-month state of emergency as a result of a severe drought. In response to this emergency, the Governor of Neuquén also established a special committee with broad powers to take any “urgent and immediate action deemed necessary to address the water emergency.” While we cannot predict what measures may be taken in response to drought conditions, limitations on water use or increased costs to obtain water from alternative sources has the potential to adversely affect our operations, financial position, and results of operations.

Federal or state legislative and regulatory initiatives related to induced seismicity could result in operating restrictions or delays in the drilling and completion of oil and natural gas wells that may reduce demand for our services and could have a material adverse effect on our business, financial condition and results of operations.

Our E&P company customers dispose of flowback and produced water or certain other oilfield fluids gathered from oil and natural gas E&P operations in accordance with permits issued by government authorities overseeing such disposal activities. While these permits are issued pursuant to existing laws and regulations, these legal requirements are subject to change based on concerns of the public or governmental authorities regarding such disposal activities. One such concern relates to recent seismic events near underground disposal wells that are used for the disposal by injection of flowback and produced water or certain other oilfield fluids resulting from oil and natural gas activities. When caused by human activity, such events are called induced seismicity. Developing research suggests that the link between seismic activity and wastewater disposal may vary by region, and that only a very small fraction of the tens of thousands of injection wells have been suspected to be, or may have been, the likely cause of induced seismicity. In March 2016, the United States Geological Survey identified six states with the most significant hazards from induced seismicity, including Oklahoma, Kansas, Texas, Colorado, New Mexico, and Arkansas. In response to concerns regarding induced seismicity, regulators in some states have imposed, or are considering imposing, additional requirements in the permitting of produced water disposal wells or otherwise to assess any relationship between seismicity and the use of such wells. For example, Oklahoma issued rules for wastewater disposal wells that imposed certain permitting and operating restrictions and reporting requirements on disposal wells in proximity to faults and also, from time to time, is developing and implementing plans directing certain wells where seismic incidents have occurred to restrict or suspend disposal well operations. The Texas Railroad Commission adopted similar rules. More recently, in December 2016, the Oklahoma Corporation Commission’s (“OCC”) Oil and Gas Conservation Division and the Oklahoma Geological Survey released well completion seismicity guidance, which requires operators to take certain prescriptive actions, including an operator’s planned mitigation practices, following certain unusual seismic activity within 1.25 miles of hydraulic fracturing operations. In addition, in February 2017, the OCC’s Oil and Gas Conservation Division issued an order limiting future increases in the volume of oil and natural gas wastewater injected below ground into the Arbuckle formation in an effort to reduce the number of earthquakes in the state and imposed further reductions in the Edmond area in August 2017. Another consequence of seismic events may be lawsuits alleging that disposal well operations have caused damage to neighboring properties or otherwise violated state and federal rules regulating waste disposal.

These developments could result in additional regulation and restrictions on the use of injection wells by our customers to dispose of flowback and produced water and certain other oilfield fluids. Increased regulation and attention given to induced seismicity also could lead to greater opposition to, and litigation concerning, oil and natural gas activities utilizing injection wells for waste disposal. Any one or more of these developments may result in our customers having to limit disposal well volumes, disposal rates or locations, or require our customers or third party disposal well operators that are used to dispose of customers’ wastewater to shut down disposal wells, which developments could adversely affect our customers’ business and result in a corresponding decrease in the need for our services, which could have a material adverse effect on our business, financial condition and results of operations.

We may not be able to provide services that meet the specific needs of oil and natural gas E&P companies at competitive prices.

The markets in which we operate are highly competitive and have relatively few barriers to entry, and the competitive environment has intensified as recent mergers among E&P companies have reduced the number of available customers. The principal competitive factors in the markets in which we operate are product and service quality and availability, responsiveness, experience, technology, equipment quality, reputation for safety and price. We compete with small companies capable of competing effectively in our markets on a local basis. We also compete with large national and multi-national companies that have longer operating histories, greater financial, technical and other resources and greater name recognition than we do. Our initial well stimulation fleet in Argentina currently does not have sufficient HHP to enable us to participate in unconventional or larger well stimulation jobs. See Part I – Item 1 – “Business—Markets.”

The inability to control the inherent risks of acquiring and integrating businesses in the future could adversely affect our operations.

As a part of our business strategy, we intend to pursue selected acquisitions or mergers. If we choose to grow our business through acquisitions or mergers, it is possible that companies acquired or merged into our company may have associated risks including:

● Unanticipated costs and assumption of liabilities and exposure to unforeseen liabilities; ● Inherent difficulties in integrating the operations and assets of the acquired business and personnel; ● Potential losses of key employees and customers of the acquired business; ● Internal control weaknesses or limitations on our ability to properly assess and maintain an effective internal control environment over an acquired business, in order to comply with public reporting requirements; ● Risks of entering markets in which we have limited prior experience; and ● Increases in our expenses and working capital requirements.

Unexpected equipment malfunctions, catastrophic events and scheduled maintenance may lead to decreased revenue and reduce our cash flows.

Our performance is primarily dependent upon the efficient and uninterrupted operation of our pressure pumping fleets and, to a lesser extent, the functionality of our coiled tubing unit in Argentina. If our operation of such core equipment experiences unanticipated disruption due to an accident, mechanical failure, shortage of spare parts or other unforeseen event such as a fire, explosion, violent weather conditions or unexpected operational difficulties, or if we have to schedule a temporary shutdown to perform maintenance on any of our core equipment, our ability to provide timely services to our customers could be negatively affected, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

We may not be successful in implementing technology development and enhancements.

The market for our services and products is characterized by continual technological developments to provide better and more reliable performance and services. If we are not able to provide commercially competitive services in a timely manner in response to changes in technology, our business and revenues could be materially and adversely affected. Likewise, if our technologies, equipment, or work processes become obsolete, we may no longer be competitive and our business and revenues could be materially and adversely affected.

We depend on the services of key executives, the loss of whom could materially harm our business.

The management of our Company is important to our success because they are instrumental in setting our strategic direction, operating the business, identifying, recruiting and training key personnel, and identifying expansion opportunities. Losing the services of any of these individuals could adversely affect our business until a suitable replacement could be found. We do not maintain key man life insurance on any of our management. As a result, we are not insured against any losses resulting from the death of our key employees.

We may be unable to employ a sufficient number of skilled and qualified workers.

The delivery of our services requires personnel with specialized skills and experience who can perform physically demanding work. As a result of the volatility of the oilfield service industry and the demanding nature of the work, workers may choose to pursue employment in fields that offer a more desirable work environment at wage rates that are competitive. The demand for skilled workers is high and the supply is limited.

We may be adversely impacted by work stoppages or other labor matters.

The petroleum and oil-service industries in Argentina, where we operate, and certain other countries are unionized, and it is likely that we may experience work stoppages or other labor disruptions from time to time. As of December 31, 2017, approximately 90% of our Argentine employees were represented by unions and they are working under the conditions stated in their collective bargaining agreements. No assurance can be given that the collective bargaining agreements will be successfully extended or renegotiated as they expire from time to time. If any collective bargaining agreement is not extended or renegotiated, if disputes with our unions arise, or if our unionized workers engage in a strike or other work stoppage or interruption, we could experience a significant disruption of, or inefficiencies in, our operations or incur higher labor costs, which could have a material adverse impact on our combined results of operations and financial condition by disrupting our ability to perform well stimulation or pressure pumping and other services for the customers under our service contracts. In addition, although none of our U.S. employees are currently represented by unions under collective bargaining agreements, there can be no assurance that will be the case in the future or that we will not encounter work stoppages or labor disruptions in the U.S. market.

If we become subject to warranty, similar claims or litigation, it could be time-consuming and costly to defend.

Errors, defects or other performance problems in the products that we sell or services that we offer could result in our customers seeking damages from us for losses associated with these errors, defects or other performance problems.

Our business involves certain operating risks and our insurance coverage or proceeds, if any, may not be adequate to cover all losses or liabilities that we might incur in our operations.

The technical complexities of our operations are such that we are exposed to a wide range of significant worker health, safety and environmental risks. Our services involve production-related activities, radioactive materials, explosives and other equipment and services that are deployed in challenging exploration, development and production environments. An accident involving our services or equipment, or a failure of a product, could cause personal injury, loss of life, damage to or destruction of property, equipment or the environment, or suspension of operations. Our insurance policies may not protect us against liability for some kinds of events, including events involving pollution, or against losses resulting from business interruption. Moreover, we may not be able to maintain insurance at levels of risk coverage or policy limits that we deem adequate. Any damages caused by our services or products that are not covered by insurance, or are in excess of policy limits or are subject to substantial deductibles, could adversely affect our financial condition, results of operations and cash flows.

A terrorist attack or armed conflict could harm our business.

Geopolitical and terrorism risks continue to grow in a number of countries, including those where we do business. Geopolitical and terrorism risks could lead to, among other things, a loss of our investment in the country, impairment of the safety of our employees and impairment of our ability to conduct our operations.

Recently enacted changes to the U.S. federal income tax laws could adversely affect our financial position, results of operations, and cash flows.

Recently enacted legislation, commonly referred to as the Tax Cuts and Jobs Act, made significant changes to the U.S. federal income taxation of business entities. These changes include a permanent reduction to the corporate income tax rate. Such rate reduction, however, could be offset by other changes intended to broaden the tax base, including (i) imposing new limitations on the utilization of net operating losses, (ii) limiting the deductibility of interest expense, and (iii) eliminating the deduction for certain domestic production activities. The Tax Cuts and Jobs Act is highly complex and subject to interpretation. We continue to examine the impact the Tax Cuts and Jobs Act may have on us, and it could have an adverse effect on our financial position, results of operations, and cash flows.

Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.

As of December 31, 2017, we had approximately $84.0 million of U.S. federal net operating loss carryforwards (“NOLs”), which begin to expire in 2018. Utilization of these NOLs depends on many factors, including our future income, which cannot be assured. In addition, Section 382 of the Internal Revenue Code of 1986, as amended (“Section 382”), generally imposes an annual limitation on the amount of NOLs that may be used to offset taxable income when a corporation has undergone an “ownership change” (as determined under Section 382). An ownership change generally occurs if one or more shareholders (or groups of shareholders) who are each deemed to own at least 5% of our stock change their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. In the event that an ownership change has occurred, or were to occur, utilization of our NOLs would be subject to an annual limitation under Section 382, determined by multiplying the value of our stock at the time of the ownership change by the applicable long-term tax-exempt rate as defined in Section 382, subject to certain adjustments. Any unused annual limitation may be carried over to later years. We may have previously experienced and may in the future experience one or more “ownership changes.” As a result, if we earn net taxable income, our ability to use our pre-change NOL carryforwards to offset U.S. federal taxable income may be subject to limitations, which could potentially result in increased future tax liability to us. We believe that the the Fir Tree transaction (noted in Part III – Item 13 - Certain Relationships and Related Transactions, and Director Independence-Transactions with Fir Tree) may constitute a change in control, which could impact our ability to utilize our NOLs; however, we have not yet fully evaluated the impact this transaction will have on us. Furthermore, as discussed above, we continue to examine the impact the Tax Cuts and Jobs Act may have on us with respect to our ability to utilize our NOLs as well as the value of our NOLs to us as a result of the decrease in corporate income tax rates. See “Recently enacted changes to the U.S. federal income tax laws could adversely affect our financial position, results of operations, and cash flows.”

Risks Related to Our Operations in Argentina and Other Foreign Jurisdictions

Our business may be impacted by economic conditions in Argentina.

Our business may be impacted by economic conditions prevailing in Argentina. The Argentine economy has experienced significant volatility in past decades, including numerous periods of low or negative growth and high and variable levels of inflation and devaluation. If economic conditions in Argentina contract, or if the Argentine government’s measures to attract or retain foreign investment and international financing in the future are unsuccessful, such developments could adversely affect our financial condition, results of operations, and cash flows.

Argentine economic conditions are dependent on a variety of factors, including (but not limited to) the following:

	●	international demand for Argentina’s principal exports;

	●	international prices for Argentina’s principal commodity exports;

	●	stability and competitiveness of the Argentine Peso against foreign currencies;

	●	levels of consumer consumption and foreign and domestic investment and financing; and

	●	the rate of inflation.

In recent years, Argentina has confronted inflationary pressure. Increased rates of inflation in Argentina could increase our cost of operation and may negatively impact our results of operations and financial condition. There can be no assurance that inflation rates will not be higher in the future.

In addition, Argentina’s economy is vulnerable to adverse developments affecting its principal trading partners. A significant decline in the economic growth of any of Argentina’s major trading partners, such as Brazil, China or the U.S., could have a material adverse impact on Argentina’s balance of trade and adversely affect Argentina’s economic growth and may consequently adversely affect our financial condition, results of operations and cash flows. The Argentine Peso has been subject to significant devaluation in the past and may be subject to significant fluctuations in the future, consequently affecting our financial condition, results of operations and cash flows (see additionally Part I – Item 1A. Risk Factors – “We may be exposed to fluctuations in foreign exchange rates.”) Until we complete the sale of our business in Argentina, we remain subject to these risks.

1814

The Argentinian government has fixed oil and gas prices for domestic producers. Any decrease or removal of the fixed price could result in a corresponding reduction in drilling activity in Argentina, which could adversely impact our results of operations, financial condition and cash flows.

The Argentinian government has historically fixed the price of oil and natural gas. More recently, the government has been supportive of fixed prices for natural gas but has indicated a desire to allow the oil prices to adjust to international prices. We have no assurance that the government will not lower the fixed prices for oil or natural gas in the future or remove them altogether. If the fixed price for oil or natural gas were to be reduced or removed, there may be less drilling activity in Argentina, which could have a corresponding adverse effect on the demand for our products or services.

Certain risks are inherent in any investment in a company operating in an emerging market such as Argentina.

Argentina is an emerging market economy and investing in emerging markets generally carries risks. These risks include political, social and economic instability that may affect Argentina’s economic results which can stem from many factors, including the following:

	●	high interest rates;

	●	abrupt changes in currency values;

	●	high levels of inflation;

	●	exchange controls;

	●	wage and price controls;

	●	regulations to import equipment and other necessities relevant for operations;

	●	changes in governmental economic or tax policies; and

	●	political and social tensions.

Any of these factors may adversely affect our financial condition and results of operation.

The Argentine economy has been adversely affected by economic developments in other markets.

Financial and securities markets in Argentina, and the Argentine economy, are influenced by economic and market conditions in other markets worldwide. Considering the current international turmoil, Argentina’s economy remains vulnerable to external shocks, including those relating to or similar to the global economic crisis that began in 2008 and the more recent uncertainties surrounding European sovereign debt. Although economic conditions vary from country to country, investors’ perceptions of events occurring in one country may substantially affect capital flows into and investments in securities from issuers in other countries, including Argentina.

Consequently, there can be no assurance that the Argentine financial system and securities markets will not continue to be adversely affected by events in developed countries’ economies or events in other emerging markets, which could in turn adversely affect the Argentine economy and, as a consequence, the Company’s results of operations and financial condition.

The implementation of new export duties, other taxes and import regulations could adversely affect our results.

Changes in export duties, taxes and import regulations may negatively affect our business, financial condition and cash flows. For example, in ~~2012~~2017, the Argentine government adopted an import procedure ~~pursuant~~(Decree to629) which ~~local~~created ~~authorities~~a ~~must~~regime ~~pre-approve~~of ~~any~~importation ~~import~~ of used ~~products~~goods ~~and~~in ~~services~~the tohydrocarbon ~~Argentina~~industry ~~as a precondition~~ to ~~allow~~expedite ~~importers access to~~ the ~~foreign~~importation ~~exchange market for the payment~~ of ~~such~~used ~~imported products and services~~equipment. We cannot assure you that these taxes and import regulations will ~~not~~ continue or be ~~increased~~ changed in the future or that other new taxes or import regulations will not be imposed.

1915

We may be exposed to fluctuations in foreign exchange rates.

Our results of operations are exposed to currency fluctuation and any devaluation of the Argentine Peso against the U.S. dollar and other hard currencies may adversely affect our business and results of operations. The value of the Argentine Peso has fluctuated significantly in the past and may do so in the future. We are unable to predict whether, and to what extent, the value of the Argentine Peso may further depreciate or appreciate against the U.S. dollar and how any such fluctuations would affect our business.

We are subject to exchange and capital controls.

In the past, Argentina imposed exchange controls and transfer restrictions substantially limiting the ability of companies to retain foreign currency or make payments abroad. Although the Macri government lifted exchange controls and liberalized capital controls as described above, there can be no assurances regarding future modifications to exchange and capital controls. Exchange and capital controls could adversely affect our financial condition, results of operations and cash flows, and our ability to meet our foreign currency obligations and execute our financing plans.

Operating internationally subjects us to significant risks and regulations inherent in operating in foreign countries.

We may conduct operations in a number of countries as part of our growth strategy. Our international operations will be subject to a number of risks inherent to any business operating in foreign countries, and especially those with emerging markets, including the following risks, among others:

	●	government instability, which can cause investment in capital projects by our potential customers to be withdrawn or delayed, reducing or eliminating the viability of some markets for our services;

	●	potential expropriation, seizure, nationalization or detention of assets, such as the 2012 nationalization of Repsol S.A.’s interest in YPF;

	●	difficulty in repatriating foreign currency received in excess of local currency requirements;

	●	foreign currency exchange rate fluctuations, import/export tariffs and quotas;

	●	civil uprisings, riots and war, which can make it unsafe to continue operations, adversely affect both budgets and schedules and expose us to losses;

	●	availability of suitable personnel and equipment, which can be affected by government policy, or changes in policy that limit the importation of qualified crewmembers or specialized equipment in areas where local resources are insufficient;

	●	decrees, laws, regulations, interpretation and court decisions under legal systems, which are not always fully developed and which may be retroactively applied and cause us to incur unanticipated and/or unrecoverable costs as well as delays which may result in real or opportunity costs; and

	●	terrorist attacks, including kidnappings of our personnel.

We cannot predict the nature and the likelihood of any such events. However, if any of these or other similar events should occur, it could have a material adverse effect on our financial condition, results of operation and cash flow.

Certain of the equipment that we use in certain foreign countries may require prior U.S. government approval in the form of an export license and may otherwise be subject to tariffs and import/export restrictions. The delay in obtaining required governmental approvals could affect our ability to timely commence a project, and the failure to comply with all such controls could result in fines and other penalties.

We may be subject to taxation in many foreign jurisdictions and the final determination of our tax liabilities involves the interpretation of the statutes and requirements of taxing authorities worldwide. Our tax returns will be subject to routine examination by taxing authorities, and these examinations may result in assessments of additional taxes, penalties and/or interest.

2016

Our overall success as an international company may depend, in part, upon our ability to succeed in differing economic, social and political conditions. We may not continue to succeed in developing and implementing policies and strategies that are effective in each location where we do business, which could negatively affect our profitability.

Our international operations involve the use of foreign currencies, which subjects us to exchange rate fluctuations, difficulty in repatriating foreign currencies and other currency risks.

We and our foreign subsidiaries from time to time will hold foreign currencies. Exchange rate fluctuations will subject us to currency risk as well as to other risks sometimes associated with international operations. In the future, we could experience fluctuations in financial results from our operations outside the U.S., and there can be no assurance that payments received in foreign currencies can be repatriated to the U.S. or that we will be able, contractually or otherwise, to reduce the currency risks associated with our international operations. In addition, the Tax Cuts and Jobs Act imposes one-time taxation on offshore earnings at reduced rates regardless of whether they are repatriated. The overall impact of the Tax Cuts and Jobs Act is uncertain, and our business and financial condition could be adversely affected.

We could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act and similar foreign anti-bribery laws.

The United States Foreign Corrupt Practices Act (the “FCPA”) and similar worldwide anti-bribery laws generally prohibit companies and their intermediaries from making, offering or authorizing improper payments to non-U.S. government officials for the purpose of obtaining or retaining business. We do business and may do additional business in the future in countries or regions where strict compliance with anti-bribery laws may conflict with local customs and practices.

As a company subject to compliance with the FCPA, our business may suffer and we may be subject to competitive disadvantages because our efforts to comply with U.S. laws could restrict our ability to do business in foreign markets relative to our competitors who are not subject to U.S. law. Additionally, our business plan involves establishing close relationships with stakeholders in certain foreign markets. Any determination that we or foreign shareholders, directors or officer’s partners have violated the FCPA may adversely affect our business and operations.

Violations of anti-bribery laws (either due to our acts or our inadvertence) may result in criminal and civil sanctions and could subject us to other liabilities in the U.S. and elsewhere. Even allegations of such violations could disrupt our business and result in a material adverse effect on our business and operations.

Risks Related to the Oil and Natural Gas Industry

We may face intense competition in our industry and in the markets where we operate.

The industry in which we compete is highly competitive, and most of our potential competitors will have greater financial resources than we do. Our ability to renew or replace existing contracts with our customers at rates sufficient to maintain or improve current revenue and cash flows could be adversely affected by the activities of our competitors and our customers. If our competitors substantially increase the resources they devote to the development and marketing of competitive services or substantially decrease the prices at which they offer their services, we may be unable to compete effectively. Some of these competitors may expand or construct newer, more powerful or more flexible well stimulation fleets that would create additional competition for us. Furthermore, reductions in drilling activity in markets such as North America may drive other oilfield services companies to relocate their equipment to the regions outside the U.S. in which we operate or intend to operate. Such increase in supply relative to demand could negatively impact pricing and utilization of our services. All of these competitive pressures could have a material adverse effect on our business, results of operations and financial condition. There can be no assurance that additional competitors will not enter markets served or proposed to be served by us, that we will be able to compete successfully, or that we will have adequate funds to compete.

Regulatory compliance costs and restrictions, as well as delays in obtaining permits by the customers for their operations, such as for well stimulation and pressure pumping, or by us for our operations, could impair our business.

Our operations and the operations of our customers are subject to or impacted by a wide array of regulations in the jurisdictions in which our and their operations are located. As a result of changes in regulations and laws relating to the oil and natural gas industry, including well stimulation, our operations or the operations of our customers could be disrupted or curtailed by governmental authorities. The high cost of compliance with applicable regulations may cause customers to discontinue or limit their operations, and may discourage companies from continuing development activities. As a result, demand for our services could be substantially affected by regulations adversely impacting the oil and natural gas industry.

Our operations are subject to hazards and environmental risks inherent in the oil and natural gas industry.

We are a provider of well stimulation and pressure pumping services, a process involving the injection of fluids—typically consisting mostly of water and also including several chemical additives—as well as sand in order to create fractures extending from the well bore through the rock formation to enable oil or natural gas to move more easily through the rock pores to a production well. In addition, we provide a range of services to onshore oil and natural gas exploration and production operations, consisting of, among other things, coiled tubing services. Risks inherent to our industry create the potential for significant losses associated with damage to the environment or natural resources, such as the potential for contamination of drinking water resources.

We are subject to extensive environmental, worker health and safety laws and regulations that may subject us to substantial liability or require us to take actions that will adversely affect our results of operations.

The oil and natural gas industry is significantly affected by stringent and complex federal, state and local laws and regulations concerning the discharge of substances into the environment or otherwise relating to environmental protection and worker health and safety matters. The cost of compliance with these laws can be significant. Failure to properly handle, transport or dispose of these materials or otherwise conduct our operations in accordance with these and other environmental laws could expose us to substantial liability for administrative, civil and criminal penalties, cleanup and site restoration costs and liability associated with releases of such materials, damages to natural resources and other damages, as well as potentially impair our ability to conduct our operations. We could be exposed to liability for cleanup costs, natural resource damages and other damages under these and other environmental laws. Such liability can be on a strict, joint and several liability basis, without regard to fault. Liability may be imposed as a result of our conduct that was lawful at the time it occurred or the conduct of, or conditions caused by, prior operators or other third parties. Environmental laws and regulations have changed in the past, and they are likely to change in the future. If existing environmental requirements or enforcement policies change and become more stringent, we may be required to make significant unanticipated capital and operating expenditures.

The adoption of climate change legislation or regulations restricting emissions of greenhouse gases could result in increased operating costs and reduced demand for oil and natural gas.

Moreover, climate change may cause more extreme weather conditions such as more intense hurricanes, thunderstorms, tornadoes and snow or ice storms, as well as rising sea levels and increased volatility in seasonal temperatures. Extreme weather conditions can interfere with our services and increase our costs and damage resulting from extreme weather. At this time, we are unable to determine the extent to which climate change may lead to increased storm or weather hazards affecting our operations.

New technology may cause us to become less competitive.

The oilfield services industry is subject to the introduction of new drilling and completion techniques and services using new technologies, some of which may be subject to patent protection. If competitors and others use or develop new technologies in the future that are more efficient or productive than ours, we may lose market share or be placed at a competitive disadvantage.

The industry is affected by excess equipment inventory levels.

Because of the long-life nature of oilfield service equipment and the lag between when a decision to build additional equipment is made and when the equipment is placed into service, the inventory of oilfield service equipment in the industry does not always correlate with the level of demand for service equipment.

Compliance with governmental regulations may impact our or our customers’ operations and may adversely affect our business and operating results.

Our operations are dependent on our customers’ decisions to develop and produce oil and natural gas reserves and on the regulatory environment in which our customers and we operate. The ability to produce oil and natural gas can be affected by the number and productivity of new wells drilled and completed, as well as the rate of production and resulting depletion of existing wells. Advanced technologies, such as horizontal drilling and well stimulation and pressure pumping, improve total recovery, but they also result in a more rapid production decline and may become subject to more stringent regulations in the future.

Access to prospects is also important to our customers and such access may be limited because host governments do not allow access to the reserves or because another oil and natural gas exploration company owns the rights to develop the prospect. Government regulations and the costs incurred by oil and natural gas exploration companies to conform to and comply with government regulations may also limit the quantity of oil and natural gas that may be economically produced. This could lead our customers to curtail their operations and result in a decrease in demand for our services, which in turn could adversely affect our financial position and results of operations.

Any of these factors could affect the supply of oil and natural gas and could have a material adverse effect on our results of operations.

Legislative and regulatory initiatives relating to well stimulation could result in increased costs and additional operating restrictions or delays for our operations or the operations of our customers.

Many national, provincial, and local governments and agencies have adopted laws and regulations or are evaluating proposed legislation and regulations that are focused on the extraction of shale gas or oil using well stimulation, which is part of the overall services we provide to our customers. Well stimulation is a treatment routinely performed on oil and gas wells in low-permeability reservoirs. Specially engineered fluids are pumped at high pressure and rate into the reservoir interval to be treated, causing cracks in the target formation. Proppant, such as sand of a particular size, is mixed with the treatment fluid to keep the cracks open when the treatment is complete. In response to concerns related to potential impacts to the environment and natural resources from well stimulation, governmental authorities have issued new rules and regulations governing the practice and are also pursuing studies related to its potential effects. Also, some national, state, and local governments have adopted bans or other measures restricting well stimulation activities. For example, the Province of Neuquén in Argentina, where we operate, has approved a set of rules regarding the extraction of shale oil and gas. These rules require, amongst other things, that operators performing well stimulation obtain permits prior to commencing drilling activities and file reports with the provincial government regarding the chemicals used in the well stimulation process and an analysis of the flowback water returning to the surface. In certain regions, the indigenous people have voiced their opposition to the increased shale development although to date these protests have been peaceful and have yet to disrupt activity in a meaningful way. In addition, several other provinces and local governments have voted to ban well stimulation within their borders, and some groups continue to advocate for a national ban on well stimulation in Argentina. The EPA and states, including Oklahoma, have also taken steps to regulate hydraulic fracturing. There has been increasing public controversy regarding hydraulic fracturing with regard to the use of fracturing fluids, induced seismic activity, impacts on drinking water supplies, use of water and the potential for impacts to surface water, groundwater and the environment generally. Legislative or regulatory changes could cause us or our customers to incur substantial compliance costs, and compliance or the consequences of any failure to comply by us could have a material adverse effect on our financial condition and results of operations. At this time, it is not possible to estimate the impact on our business of newly enacted or potential national, state or local laws governing hydraulic fracturing.

Future well stimulation-related legislation or regulations that further restrict or prohibit such activities could lead to operational delays and increased costs for our operations or the operations of our customers. Any adverse impacts on the operations of our customers could in turn reduce demand for our services. If such additional legislation or regulations are enacted and implemented, it could adversely affect our financial condition, results of operations and cash flows.

Risks Related to Ownership of Our Common Stock

We have incurred, and expect to continue to incur, increased costs and risks as a result of being a public company.

As a public company, we are required to comply with most, but not all, of the Sarbanes-Oxley Act of 2002 (“SOX”), as well as rules and regulations implemented by the SEC. Changes in the laws and regulations affecting public companies, including the provisions of SOX and rules adopted by the SEC, have resulted in, and will continue to result in, increased costs to us as we respond to these requirements. Given the risks inherent in the design and operation of internal controls over financial reporting, the effectiveness of our internal controls over financial reporting is uncertain. If our internal controls are not designed or operating effectively, we may not be able to issue an evaluation of our internal control over financial reporting as required. Investors may lose confidence in the reliability of our financial statements, which could cause the market price of our common stock to decline and which could affect our ability to run our business as we otherwise would like to. New rules could also make it more difficult or costlier for us to obtain certain types of insurance, including directors’ and officers’ liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the coverage that is the same or similar to our current coverage. The impact of these events could also make it more difficult for us to attract and retain qualified persons to serve on our Board, the committees of our Board, and as executive officers. We cannot predict or estimate the total amount of the costs we may incur or the timing of such costs to comply with these rules and regulations.

Compliance with SOX requirements will continue to strain our limited financial and management resources.

We incur significant legal, accounting and other expenses in connection with our status as a reporting public company. SOX and rules subsequently implemented by the SEC have imposed various requirements on public companies, including corporate governance practices. As such, our management and other personnel need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations have increased our legal and financial compliance costs and made some activities more time-consuming and costly. In addition, SOX requires, among other things, that we maintain effective internal controls for financial reporting and disclosure of controls and procedures. Our testing may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses. Our compliance with Section 404 of SOX requires that we incur substantial accounting expense and expend significant management efforts. We may need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge. Moreover, if we are not able to comply with the requirements of Section 404 of SOX in a timely manner, or if we or our independent registered public accounting firm identifies deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses, the market price of our stock could decline, and we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would require additional financial and management resources.

2417

We domay ~~not~~continue ~~intend~~ to ~~pay~~incur ~~cash~~costs ~~dividends on our common stock in the foreseeable future,~~ and ~~therefore~~expenses ~~only~~that ~~appreciation~~will ofreduce ~~the~~any ~~price of~~amounts ~~our~~available ~~common~~for ~~stock~~distribution ~~will provide a return~~ to our stockholders.

WeClaims, ~~currently~~liabilities ~~anticipate~~and ~~that~~expenses, weseverance ~~will~~payments, ~~retain~~directors’ ~~all~~and ~~future~~officers’ ~~earnings~~insurance, ~~if any~~income, topayroll ~~finance~~foreign, ~~the~~state ~~growth~~ and ~~development of our business. We~~ dolocal ~~not intend to pay cash dividends in the foreseeable future. Any payment of cash dividends will depend upon our financial condition~~taxes, ~~capital~~ ~~requirements~~legal, ~~earnings~~accounting and ~~other~~consulting ~~factors~~fees ~~deemed~~and ~~relevant~~general byand ~~our~~administrative ~~Board. In addition~~expenses, ~~the~~will ~~terms~~continue ofto ~~our~~be ~~existing~~incurred ~~indebtedness~~by us ~~and~~as ~~any indebtedness~~ we ~~may~~sell ~~incur in the future may restrict~~ our ~~ability~~remaining toassets ~~pay dividends~~ and ~~make~~prepare ~~other~~to ~~distributions~~wind down. AsWe acan ~~result,~~ only ~~appreciation~~estimate of the ~~price~~aggregate amount of ~~our~~these ~~common stock~~expenses, ~~which~~but ~~may~~these expenses ~~not~~will ~~occur,~~reduce isthe ~~expected~~amount toof ~~provide~~funds aavailable ~~return~~for distribution to our stockholders.

We ~~currently~~may ~~have~~continue ato ~~sporadic,~~incur ~~illiquid,~~costs ~~volatile~~and ~~market~~expenses ~~for~~if ~~our~~we ~~common~~are ~~stock,~~unable ~~and~~to ~~the~~cease ~~market~~to ~~for~~file our ~~common stock may remain sporadic~~annual, ~~illiquid,~~ quarterly and ~~volatile~~current inreports ~~the~~with ~~future~~the SEC.

WeBecause ~~currently~~of ~~have~~the acosts ~~highly~~associated ~~sporadic~~with preparing and filing our annual, ~~illiquid~~quarterly and ~~volatile~~current ~~market~~reports ~~for~~under applicable securities laws, we intend to take actions to terminate or suspend our ongoing reporting obligations under the Exchange Act. Specifically, the Nasdaq filed a Notification of Removal from the Listing and/or Registration on Form 25 with the SEC on February 26, 2019 to remove the common stock, ~~which~~listing ~~market~~on isNasdaq ~~anticipated~~and withdraw the common stock from registration under Section 12(b) pursuant to ~~remain~~Rule ~~sporadic~~12d2-2(b) of the Exchange Act. Pursuant to Rule 12d2-2(d)(1) of the Exchange Act, the application on Form 25 became effective with respect ~~illiquid~~to the delisting of the common stock ten (10) days after the Form 25 was filed with the SEC. The Company has implemented a reverse stock split which reduced the number of shareholders of record. This allows the Company to deregister the common stock and ~~volatile~~reduce ongoing inexpenses with respect to filings under the ~~future~~Exchange Act. After the filing of this Annual Report on Form 10-K for the fiscal year ended December 31, 2018, and the filing of Form 15 to suspend the Company’s reporting obligations under Section 15(d) of the Exchange Act, we expect that the Company will ~~likely~~no longer be subject to ~~wide~~certain ~~fluctuations~~provisions inof ~~response~~the Exchange Act. However, if we are required to ~~several~~continue ~~factors~~to file annual, ~~including~~quarterly or current reports with the SEC, or if we again become subject to such ~~but~~reporting ~~not~~obligations, ~~limited~~we will continue to: incur the associated costs and expenses, which are substantial.

● actual or anticipated variations in our results of operations; ● our ability or inability to generate revenues, profits or positive cash flow; ● the number of shares in our public float; ● increased competition; and ● conditions and trends in the market for oil and natural gas and oilfield services.

Furthermore, our stock price may be impacted by factors that are unrelated or disproportionate to our operating performance. These market fluctuations, as well as general economic, political and market conditions, such as recessions, interest rates or international currency fluctuations, may adversely affect the market price of our common stock. Stockholders and potential investors in our common stock should exercise caution before making an investment in our Company and should not place undue reliance on the publicly quoted or traded stock prices in determining our common stock value.

Fir Tree may have significant influence over us, including influence over decisions that require stockholder approval, which could limit your ability to influence the outcome of key transactions, including a change of control.

As of December 31, ~~2017~~2018, Fir Tree beneficially owned approximately 6776.1% of our outstanding common stock. In addition, Fir Tree currently has the right to nominate up to a total of three individuals to the Board. As a result, Fir Tree has influence over our decisions to take certain corporate actions including those specified in the Amended and Restated Stockholder Rights Agreement we have entered into with Fir Tree and certain other stockholders (the “A&R Stockholder Rights Agreement”).

Moreover, Fir Tree has a contractual right to maintain its percentage ownership in our Company. Specifically, under the terms of the A&R Stockholder Rights Agreement, for so long as Fir Tree beneficially owns more than 10% of our issued and outstanding common stock (calculated on a fully diluted basis), Fir Tree, subject to certain exclusions, has a preemptive right to purchase up to the amount of any new securities we propose to issue or sell as is necessary to maintain Fir Tree’s percentage ownership of us. As a result, Fir Tree’s preemptive right will apply to any securities we issue during an underwritten public offering. Therefore, while other holders of our stock would risk suffering a reduction in percentage ownership in connection with a new issuance of securities by us, Fir Tree would, through this preemptive right, have the opportunity to avoid a reduction in percentage ownership. As long as Fir Tree continues to hold a significant portion of our outstanding common stock, it will have the ability to influence the vote in any election of directors and over decisions that require stockholder approval. Please read Part III – Item 13 – “Certain Relationships and Related Party Transactions, and Director Independence.”

25We could become subject to penny stock regulations and restrictions, which could make it difficult for our stockholders to sell their shares of stock in our company.

SEC regulations generally define “penny stocks” as equity securities that have a market price of less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exemptions. As of December 31, 2018, the closing price for our common stock were $0.065 per share. Although we currently meet the net tangible assets and/or the minimum revenue exemptions from the “penny stock” definition, no assurance can be given that such exemption will be maintained. If we lose the exemption, our common stock may become subject to Rule 15g-9 under the Exchange Act, which regulations are commonly referred to as the “Penny Stock Rules.” The Penny Stock Rules impose additional sales practice requirements on broker-dealers prior to selling penny stocks, which may make it burdensome to conduct transactions in our shares. If our shares become subject to the Penny Stock Rules, it may be difficult to sell shares of our stock, and because it may be difficult to find quotations for shares of our stock, it may be impossible to accurately price an investment in our shares. There can be no assurance that our common stock will continue to qualify for an exemption from the Penny Stock Rules. In any event, even if our common stock continues to remain exempt from the Penny Stock Rules, we remain subject to Section 15(b)(6) of the Exchange Act, which gives the SEC the authority to restrict any person from participating in a distribution of a penny stock if the SEC determines that such a restriction would be in the public interest.

Preferences exist that would prioritize certain shareholders in the event of a Company liquidation, winding-up or dissolving of the Company.

Each share of Series A Preferred ranks senior to the Company’s common stock with respect to dividend rights and rights upon the liquidation, winding-up or dissolution of the Company and has a stated value of $1,000 per share (the “Stated Value”). In the event the Company is liquidated, wound up or dissolved, or if the Company effects any Deemed Liquidation Event (as defined below), the holders of Series A Preferred are entitled to receive in respect thereof the greater of (i) the Stated Value plus any accrued and unpaid dividends thereon, (ii) the amount the holder thereof would receive if such shares of Series A Preferred were converted into common stock immediately prior to such liquidation, dissolution, winding up or Deemed Liquidation Event or (iii) a liquidating distribution equal to 1.5 times the Stated Value. A “Deemed Liquidation Event” includes certain merger or consolidation transactions, a sale of all or substantially all of the Company’s assets, a change of control transaction or similar event.

We may issue preferred stock with terms that could adversely affect the voting power or value of our common stock.

Our certificate of incorporation authorizes us to issue, without the approval of our stockholders, one or more classes or series of preferred stock having such designations, preferences, limitations and relative rights, including preferences over our common stock respecting dividends and distributions, as our Board may determine. The terms of one or more classes or series of preferred stock could adversely impact the voting power or value of our common stock. For example, we might grant holders of preferred stock the right to elect some number of our directors in all events or on the happening of specified events or the right to veto specified transactions. Similarly, the repurchase or redemption rights or liquidation preferences we might assign to holders of preferred stock could affect the residual value of our common stock.

2618

Item 1B.

Unresolved Staff Comments

None.

Item 2.

Properties

Properties

Our principal executive offices are now located at 1773 Westborough Drive, Suite 110, Katy, Texas 77449, where we lease 1,117 square foot of general office space. Prior to March 11, 2019, our executive offices were located at 2930 West Sam Houston Parkway North, Suite 275, Houston, Texas 77043, where we lease 6,577 square feet of general office space.

We ~~own or~~ lease facilities and administrative offices throughout the geographic regions in which we operate. As of December 31, ~~2017~~2018, we we owned or leased the following principal properties:

Location

Type of Facility

Size

Leased or Owned

Monthly Lease (Approx.)

Expiration of Lease

Primary Use

2930 West Sam Houston Pkwy North, Suite 275, Houston, Texas

Corporate Office

6,577 sq. ft. building space

Leased

1718,~~536~~569

~~Month~~November to30, ~~month~~2019

Administrative Office

Uruguay 1134 Buenos Aires, Argentina

Administrative Offices

1,900 sq. ft. building space

Leased

4,500

Month to month

Administrative Office

10800 Clay Road, #8205, Houston, Texas

Corporate Apartment

950 sq, ft, building space

Leased

1,711

Month to month

Corporate Apartment

Leloir 451 Neuquén, Argentina

Administrative Offices

1,990 sq. ft. building space

Leased

4,500

Month to month

Neuquén Operations

256946 E. County Road 49, Fairview, Oklahoma

Yard and Office

Approx, 13 acres, portable building

Leased

23,000

March 7, 2019

US Operations

Plottier, Argentina

Land

12 acres

Owned

N/A

—

Future Neuquén Operations

Centenario, Neuquén, Argentina Lote 3, Manzana D, parque industrial

Warehouse

8,073 sq. ft building space

Leased

7,000

November 30, 2018

Argentina Operations

Neuquén, Neuquén, Argentina Lote 4, Manzana 2C, parque industrial

Warehouse

129,167 sq. ft. building space

Leased

7,312

November 30, 2018

Argentina Operations

2719

Item 3.

Legal Proceedings

From time to time, we may be a party or otherwise subject to legal or regulatory proceedings or other claims incidental to or arising in the ordinary course of our business. We are not ~~currently party to any legal or regulatory proceedings that we believe will have a material adverse effect on our financial position, results of operations or cash flows, and we are not~~ aware of any material legal or regulatory proceedings contemplated by governmental authorities.

On May 1, 2018, a collective action lawsuit was filed against Eco-Stim Energy Solutions, Inc. and certain of its subsidiaries by a former employee in the United States District Court for the Southern District of Texas (Houston Division) alleging that we failed to pay a class of workers in compliance with the Fair Labor Standards Act and seeking recovery of such wages, attorney’s fees, costs, interest and other related damages. In September 2018, this case was stayed pending resolution through arbitration proceedings among the parties. On or about May 3, 2019, both parties agreed to a mutually acceptable settlement and release agreement, with no material adverse effect on our consolidated financial position, results of operations or cash flows.

In addition, seven of our vendors have filed lawsuits against us in seven separate Texas state court actions, and two of our vendors have filed lawsuits against us and a former customer in two separate Oklahoma state court actions. All together, they are seeking to collect an aggregate of approximately $3.4 million of damages for amounts alleged to be owed by us for various goods, equipment or services alleged to have been provided by such vendors, as well as pre-judgment and post-judgment interest and attorney’s fees. In addition, certain of our vendors have filed, or have threatened to file, liens against certain assets of our former customers with respect to amounts alleged to be owed by us for various goods, equipment or services alleged to have been provided by such vendors in an aggregate amount of approximately $3.8 million. We intend to vigorously contest these matters or seek mutually agreeable settlements of the claimed amounts, and we may incur material expenses in connection with the resolution of these lawsuits and claims. We are currently not able to predict the outcome of these cases, whether they will have a material impact on our financial position, results of operations or cash flows, or whether mutually acceptable settlements and resolution can be obtained. If these matters cannot be resolved at acceptable levels, they could have a material adverse effect on our consolidated financial position, results of operations or cash flows, however we are unable to predict the effect on our consolidated financial position, results of operations or cash flows.

Item 4.

Mine Safety Disclosures

Not applicable.

2820

PART II.

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity securities

Market Information

Our common stock, ispar ~~currently~~value $0.001 per share (“common stock”) was listed on the NASDAQ Capital Market under the symbol “ESES.” ~~The~~Effective ~~reported~~January ~~high~~2, ~~and~~2019, ~~low~~trading ~~last sale~~was ~~prices~~suspended ~~for~~on ~~our~~the ~~common~~Company stock ~~are~~as ~~shown~~a ~~below~~result ~~for~~of ~~the~~our ~~periods~~not ~~indicated.~~being ~~The~~in ~~quotations~~compliance with ~~reflect~~Nasdaq’s ~~inter-dealer~~Listing ~~prices,~~Rule ~~without retail~~5550(a)(2) ~~mark-up,~~as ~~markdown~~the orminimum ~~commission,~~bid ~~and~~price ~~may~~of ~~not~~the ~~necessarily~~Company’s ~~represent~~common ~~actual~~stock ~~transactions~~had been below $1.00 per Onshare ~~March~~for ~~16,~~30 ~~2018,~~consecutive business days. Upon delisting from the ~~last reported~~NASDAQ, ~~sale~~the ~~price~~shares of ~~our~~the common stock ~~was~~were ~~$1.20~~traded ~~per~~on ~~share~~OTC “Pink Open Market” under the symbol “ESES”.

	High		Low
2017
First quarter ended March 31, 2017	$	2.00	$	0.71
Second quarter ended June 30, 2017	$	1.45	$	1.04
Third quarter ended September 30, 2017	$	1.68	$	1.21
Fourth quarter ended December 31, 2017	$	1.60	$	1.23
2016
First quarter ended March 31, 2016	$	2.95	$	2.00
Second quarter ended June 30, 2016	$	3.12	$	2.14
Third quarter ended September 30, 2016	$	2.80	$	2.09
Fourth quarter ended December 31, 2016	$	2.19	$	0.96

On February 28, 2019, a reverse stock split was effected. The reverse stock split provided for the conversion and reclassification of each four outstanding shares of common stock into one share of common stock, with the holders of common stock receiving one share of common stock for each four shares they held. For the 20 trading days following our reverse stock split the shares of our common stock traded under the symbol “ESESD”. The shares of our common stock resumed trading under the symbol “ESES” on March 26, 2019. Any over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.

Holders

As of ~~March~~May 137, ~~2018~~2019, we had approximately ~~663~~126 record holders of our common stock.

Dividend Policy

WeOur ~~currently~~policy ~~intend~~has tobeen that we retain future earnings, if any, for use in the operation and expansion of our business and, therefore, do did not anticipate paying any cash dividends in the foreseeable future. However, in line with the anticipated liquidation of the Company, our Board, in its discretion, may authorize the payment of ~~dividends~~liquidating payments, if any, in the future. ~~Any~~Subject ~~decision~~ to ~~pay~~uncertainties inherent ~~future~~in ~~dividends~~the ~~will~~winding ~~depend~~up ~~upon~~of ~~various~~the ~~factors~~Company’s business, ~~including~~the ~~our~~Company ~~results~~may or may not make liquidating distributions following the liquidation to cash of ~~operations~~its remaining non-cash assets and settlement of debts. However, the dissolution process and ~~financial~~the ~~condition,~~payment ~~capital~~of ~~requirements~~any distributions to stockholders involve substantial risks and ~~investment~~uncertainties, ~~opportunities~~as discussed above in “Item 1A. InRisk ~~addition~~Factors”. Accordingly, it is not possible to predict the ~~terms~~timing or aggregate size of ~~indebtedness~~any weamount which may ~~incur~~ultimately be indistributed to Company stockholders, and no assurance can be given that such distributions, if made, will equal or exceed the estimate of net assets presented in the ~~future~~Statement ~~may~~of ~~restrict~~Net ~~our~~Assets ~~ability~~accompanying tothis ~~make~~Annual ~~distributions~~Report toon ~~our~~Form ~~stockholders~~10-K.

Securities Authorized for Issuance under Equity Compensation Plans

We have two equity incentive plans, the 2013 Stock Incentive Plan (the “2013 Plan”) and the 2015 Stock Incentive Plan (the “2015 Plan”), which provide for the granting of stock-based incentive awards, including incentive stock options, non-qualified stock options, restricted stock, and phantom stock awards to employees, consultants and members of the Board. The 2013 Plan was adopted in 2012 and amended in 2013 and authorizes 1,000,000 shares to be issued under the 2013 Plan. The 2015 Plan, f/k/a “the 2014 Stock Incentive Plan,” was adopted in 2014; in 2015 and in 2016 it was amended and a total of 700,000 additional shares were authorized, resulting in a maximum of 1,200,000 shares being authorized for issuance under the 2015 Plan. On June 15, 2017, at our annual meeting of stockholders (the “2017 Annual Meeting”), our stockholders approved an increase to the aggregate maximum number of shares available under the 2015 Plan by 5,000,000 shares (from 1,200,000 shares to 6,200,000 shares). ~~Both~~On June 20, 2018, at our annual meeting of stockholders (the “2018 Annual Meeting”), our stockholders approved an increase to the aggregate maximum number of shares of common stock available under the 2015 Plan by 3,000,000 shares (from 6,200,000 shares to 9,200,000 shares). As of December 31, 2018, 256,991 shares of common stock were available for grant under the 2013 Plan and 2,075,686 shares of common stock were available for grant under the 2015 Plan. Both the 2013 Plan and the 2015 Plan have been approved by the stockholders of the Company. Currently, there is no plan to grant any additional stock-based awards. Share amounts set forth above are on a pre-stock split basis.

For additional information regarding the Stock Incentive Plans, as of December 31, ~~2017~~2018, please see Part II – Item 8 – Financial Statements and Supplemental Data – Notes to consolidated financial statements – Note 1411 – “Stock-Based Compensation.”

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Equity Compensation Plan Information

Plan category

Number of securities to be issued upon exercise of outstanding options, and restricted stock (a)

Weighted- average exercise price of outstanding options, and restricted stock (b)

Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)

Equity compensation plans approved by security holders

61,~~384~~586,~~597~~661

31.3479

583,~~839~~169

Equity compensation plans not approved by security holders

—

Total

61,~~384~~586,~~597~~661

31.3479

583,~~839~~169

Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities

Except as previously reported on our Current Reports on Form 8-K, we did not have any sales of unregistered equity securities during the fiscal year ended December 31, ~~2017~~2018. There were no repurchases of shares during the year ended December 31, 2018.

Item 6.

Selected Financial Data

Not applicable.

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Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our ~~condensed~~ consolidated financial statements and the related notes thereto included in this Form 10-K. This section contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussed in any forward-looking statement because of various factors, including those described in the ~~section~~sections titled “Cautionary Statements Regarding Forward-Looking Statements” and “Risk Factors” in this Form 10-K.

Executive Summary

General

WeEco-Stim ~~are~~Energy aSolutions, ~~growth~~Inc. (together with its subsidiaries, the “Company,” “Eco-~~oriented~~Stim,” “we” or “us”) is a technology-driven independent oilfield services company ~~providing~~that has historically offered well stimulation, coiled tubing and field management services to the upstream oil and gas industry. WeOur ~~currently~~service ~~operate~~offerings ~~three~~have ~~well~~been ~~stimulation~~extended ~~fleets, two in the United~~to ~~States~~exploration ~~based out of our operations facility in Fairview, Oklahoma,~~ and ~~one~~production in(“E&P”) ~~Argentina~~companies ~~based out of our facilities~~ in ~~Neuquén, Argentina. In~~ the United States, weand ~~currently provide pressure pumping services to customers in the Anadarko Basin in Oklahoma. In~~ Argentina~~, we are currently providing services to the largest operator in the country for its tight gas completions program~~.

~~Factors~~In ~~that~~September ~~may~~2018, ~~influence~~we completed work under our ~~outlook~~pressure pumping contract with our primary U.S. customer. Given the current weakness of the U.S. well stimulation market, in September 2018 we elected to suspend our U.S. well stimulation operations and ~~performance~~significantly reduce ~~include:~~our U.S. workforce in alignment with potential near-term opportunities, including pump down and miscellaneous pumping services. Since the third quarter of 2018, we have been actively pursuing the sale of a substantial majority of the equipment, inventory and other operating assets relating to our U.S. operations, and we have now sold substantially all of the material equipment, inventory and other operating assets related to our U.S. operations and terminated all field-level employees. We currently intend to use the proceeds from any such sales to reduce our outstanding liabilities and improve our liquidity, however, there can be no assurance as to the ultimate consummation, timing or amount of proceeds generated from any such asset sales.

●Specifically, during ~~capital~~the ~~spending~~fourth byquarter ~~E&P~~of ~~companies~~2018, inthe Company completed the ~~United~~disposition ~~States~~of ~~and~~certain ~~Argentina;~~of ●its ~~oil~~U.S. equipment and ~~natural~~other ~~gas~~operating assets ~~prices;~~to ●unrelated ~~the~~third ~~reliability~~parties in several separate transactions in exchange for aggregate cash proceeds, before commissions and ~~performance~~selling expenses, of ~~our~~approximately ~~equipment;~~$5.7 ●million. ~~the~~On ~~utilization~~January of24, ~~our~~2019, ~~assets~~the inCompany ~~both~~completed the disposition of certain of its U.S. ~~and~~equipment ~~Argentina~~to ~~markets~~an ~~and~~unrelated ~~the~~party ~~related~~in ~~amount~~exchange for approximately $2.8 million of ~~non-productive~~aggregate ~~down~~cash ~~time~~proceeds, ~~for~~before ~~our~~commissions and ~~assets;~~selling ●expenses. On February 21, 2019, the ~~size~~Company completed the disposition of ~~each~~certain ~~job~~of weits ~~perform;~~U.S. ●equipment ~~the~~to ~~pricing~~an ~~levels~~unrelated party in exchange for ~~our~~approximately ~~services;~~$6.2 ●million ~~the~~of ~~location~~aggregate cash proceeds, before commissions and ~~design~~selling ofexpenses. On March 14, 2019, the ~~wells~~Company ~~with~~completed ~~respect~~the todisposition ~~which~~of wecertain ~~are~~of ~~providing~~its ~~services;~~U.S. ●equipment ~~the~~to ~~service~~an ~~and~~unrelated ~~product~~party ~~components~~in exchange for approximately $2.1 million of ~~each~~aggregate ~~job;~~cash proceeds, before commissions and ●selling ~~our~~expenses. ~~access~~Net toof ~~sand~~commissions, ~~proppant~~the Company received approximately $16.8 million. In the U.S., ~~chemicals~~we ~~and~~have ~~other~~sold ~~raw~~all ~~materials~~material ~~required~~equipment, ~~for~~inventory usand toother ~~provide~~operating assets relating to our ~~services,~~U.S. operations and ~~the~~terminated ~~costs~~all offield ~~such~~level ~~materials~~employees.

We continue using the proceeds from any such sales to reduce our outstanding liabilities and improve our liquidity, however, there can be no assurance as to the ultimate consummation, timing or amount of proceeds generated from any such asset sales.

In Argentina, we had been operating under a transition agreement with our primary customer since May 2018 and continued to provide services under that agreement during the third quarter of 2018. Subsequent to the third quarter of 2018, we have not provided any services to our primary customer in Argentina under the transition agreement or otherwise, and have not generated any material revenue from our Argentina operations since the third quarter of 2018.

As previously disclosed in our Form 10-Q as of September 30, 2018 filed on November 14, 2018, we have been actively pursuing strategic alternatives, including alternatives for our operations in Argentina. In line with the Company’s decision to sell certain assets, the Company considered whether to sell the Argentine company or sell the assets of the Argentine company in connection with shutting down our operations, either of which could result in the incurrence of material losses and expenses. On March 18, 2019, the Company signed an agreement with an unrelated third party to purchase all material machinery and equipment assets in Argentina. The transactions contemplated by this agreement are expected to close in phases over an approximate three-month period in the second quarter of 2019. Following the consummation of these transactions, the Company expects to shut down its Argentina subsidiary.

As of December 31, 2018, the Company has classified our Argentina subsidiary as discontinued operations for all periods presented in this filing. The Company made the decision, having received a letter of intent during the fourth quarter of 2018 from a third party, to sell the subsidiary. As of December 31, 2018, the Company classified certain U.S. spare parts, equipment and machinery as held for sale based on the decision by the Company to seek buyers for and sell these assets. As such, as of December 31, 2018, our Argentina subsidiary and a majority of our assets in the U.S. has been classified as held for sale. Refer to Note 17 – Assets Held for Sale-Discontinued Operations of our consolidated financial statements for additional details on the impact of these classifications.

Our common stock, par value $0.001 per share (“common stock”) was previously listed on the NASDAQ Capital Market under the symbol “ESES.” Effective January 2, 2019, trading was suspended on the Company stock as a result of our not being in compliance with Nasdaq’s Listing Rule 5550(a)(2) as the minimum bid price of the Company’s common stock had been below $1.00 per share for 30 consecutive business days. Upon delisting from the NASDAQ, the shares of the common stock were traded on OTC “Pink Open Market” under the symbol “ESES”, although for the 20 trading days following our reverse stock split the shares of our common stock traded under the symbol “ESESD.” The shares of our common stock resumed trading under the symbol “ESES” on March 26, 2019.

As disclosed previously in Form 8-K filed February 14, 2019, in February 2019, the Company implemented a reverse stock split to reduce the number of shareholders of record to allow the Company to deregister the common stock and reduce ongoing expenses with respect to filings under the Exchange Act. Those shareholders who, immediately following the reverse stock split, held only a fraction of a share of the Company’s common stock were paid, in lieu thereof, an amount in cash equal to $0.08 (on a post-split basis) times such fraction of a share and are no longer shareholders of the Company. After the filing of this Annual Report on Form 10-K for the fiscal year ended December 31, 2018, and the filing of a Form 15 to suspend the Company’s reporting obligations under Section 15(d) of the Exchange Act, the Company will no longer be subject to certain provisions of the Exchange Act. In particular, the Company’s obligations to publicly file periodic and current reports with the SEC will be suspended. This will mean that our duty to file periodic reports with the SEC will be suspended, and we will no longer be classified as an SEC reporting company.

Historically, Eco-Stim was a growth-oriented, technology-driven independent oilfield services company providing well stimulation, coiled tubing and field management services to the upstream oil and gas industry. We operated three well stimulation fleets, two in the United States based out of our operations facility in Fairview, Oklahoma, and one in Argentina based out of our operations facility in Neuquén, Argentina. In the United States, we provided pressure pumping services to customers in the Anadarko Basin in Oklahoma and in the Permian Basin in West Texas and Southeast New Mexico. In Argentina, we provided services to the largest operator in the country for its tight gas completions program.

Business Segments

With the start-up of our U.S. operations during the second quarter of 2017, in accordance with ASC 280, Segment Reporting, we report the results of our two reportable segments. Our Chief Executive Officer evaluates the results of operations on a consolidated as well as a segment level and is the person responsible for the final assessment of performance and making key operating decisions. Discrete financial information is available for each of the segments, and the operating results of each of the operating segments are used for performance evaluation and resource allocations. We now manage our business through operating segments that are aligned with our two geographic regions,; the United States and Argentina. We also report certain corporate and other non-operating activities under the heading “Corporate and Other”, which primarily reflects corporate personnel and activities, incentive compensation programs and other non-operational allocable costs. For financial information about our segments, see Note 1916, Segment Reporting.”

Our segment operating results are frequently influenced by the number of active contracts we have in the area, and also the level of our customers’ well activity which dictates the amount of activity we will have in any given period. This directly effects our revenue, but also the level of expenses we incur.

United States Segment. Through our U.S. segment, we serve the needs of our customers’ U.S. based operations by providing pressure pumping and field management operations services. In February 2017, we signed a one-year contract to provide pressure pumping in north central Oklahoma, at which time we began setting up and thus incurring start-up related costs associated with our operations in order to properly meet our contract service obligations. We established a base of operation in Fairview, Oklahoma, and utilize this base to service the surrounding areas. Revenue recognition for this segment began in May of 2017. The third quarter of 2017 was our first full operating quarter for this segment. In July 2017, we entered into a one-year contract with a second U.S. oil and natural gas exploration and production company to expand our pressure pumping operations in the north central region of Oklahoma. The work being performed under this contract supports a second well stimulation crew. We commenced work and began recognizing revenue under this contract in mid-October 2017.24

31United States Segment. Beginning operations in May 2017, our U.S. segment has historically served the needs of our independent E&P customers’ U.S. based operations by offering pressure pumping and field management operations services primarily operating in the Sooner Trend Anadarko Basin Canadian and Kingfisher Counties (STACK) play. Our U.S. based operations started with one U.S. based fleet. We added an additional fleet in October 2017 to accommodate an additional customer, however, upon negotiating an early release of our first U.S. fleet from our contract with our first U.S. customer due to low pricing and lower planned activity, our first spread did not provide services to customers until late April 2018. We subsequently ceased to provide services to this customer and in late May 2018, we agreed to provide our primary U.S. customer with additional dedicated horsepower and equipment, including certain of our natural gas-powered pumping units, to create what we referred to as a “super fleet” in support of a collaborative plan to improve the efficiency of our U.S. operations. As a result, in May 2018, we transitioned from operating two well stimulation fleets in the U.S. to operating a single well stimulation fleet in the U.S. providing pumping services to a single customer. In September 2018, we completed work under our pressure pumping contract with our primary U.S. customer. Given the current weakness of the U.S. well stimulation market, in September 2018 we elected to suspend our U.S. well stimulation operations and significantly reduce our U.S. workforce in alignment with potential near-term opportunities, including pump down and miscellaneous pumping services. We are currently conducting one pump down operation for a customer in the Permian basin. We have been actively pursuing the sale of a substantial majority of the equipment, inventory and other operating assets relating to our U.S. operations, and we have completed several such sales.

InArgentina ~~November~~Segment. ~~2017~~Through our Argentina segment, we ~~negotiated~~have anhistorically ~~early~~served ~~release~~the needs of our ~~first~~Argentine Ucustomers by providing pressure pumping and coiled tubing services.S. ~~spread~~We ~~from~~began our ~~contract~~service offerings in late 2014 in Argentina with our ~~first~~base ~~U.S.~~of ~~customer~~operation ~~and,~~located ~~starting~~ in ~~early~~Neuquén ~~March 2018~~City, weArgentina. ~~have~~The ~~redeployed~~majority ~~that~~of ~~spread~~our torevenues ~~serve~~since ~~other~~inception ~~customers~~and ~~consisting~~through ~~primarily~~the end of ~~independent~~the ~~E&P companies~~third ~~operating~~quarter inof 2017 came from the ~~STACK~~Neuquén ~~play~~Basin and a majority of that revenue has come from our pressure pumping operations.

~~Argentina~~In ~~Segment.~~the ~~Through~~second ~~our~~quarter ~~Argentina~~of ~~segment~~2017, we ~~serve~~entered ~~the~~into ~~needs~~a oftwo-year ~~our~~contract ~~Argentine~~based ~~customers~~on bya ~~providing~~proposal ~~pressure~~submitted ~~pumping~~in ~~and~~November ~~coiled~~2016 with the largest ~~tubing~~operator in Argentina to provide services for their tight gas completions program. WeDuring ~~began~~the course of providing services under that contract, we incurred losses due to lower than expected utilization of our ~~service~~assets, ~~offerings~~higher inthan ~~late~~expected ~~2014~~third-party costs incurred in ~~Argentina~~order to provide the bundled services contemplated under the contract, and other factors. We engaged in negotiations with our ~~base~~primary customer in Argentina to improve the terms of ~~operation~~the ~~located~~agreement, and in ~~Neuquén City~~June 2018, ~~Argentina.~~we ~~The~~finalized ~~majority~~the terms of a transition agreement with improved commercial terms. We began operating under the transition agreement with our ~~revenues~~primary ~~since~~customer ~~inception~~in Argentina in May 2018 and ~~through~~we continued to provide services under that agreement during the ~~end~~third quarter of 2018. Subsequent to the third quarter of ~~2017~~2018, ~~coming~~we ~~from~~have not provided any services to our primary customer in Argentina under the transition agreement ~~Neuquén~~or ~~Basin~~otherwise, and we did not generate any material revenues from our Argentina operations since the third quarter of 2018.

InOn March 18, 2019, the ~~second~~Company ~~quarter~~signed ofan ~~2017,~~agreement wewith ~~entered~~an ~~into~~unrelated athird ~~two-year~~party ~~contract~~to ~~with~~purchase ~~the~~all ~~largest~~material ~~operator~~machinery and equipment assets in Argentina. toThe ~~provide~~transactions ~~services~~contemplated ~~for their~~by ~~tight~~this ~~gas~~agreement ~~completions~~are ~~program~~expected ~~which~~to ~~has~~close ~~increased~~in ~~our~~phases ~~activity~~over an approximate three-month period in the ~~region.~~second ~~The~~quarter ~~majority~~ of ~~our~~2019. ~~revenues~~Following inthe ~~our~~consummation ~~Argentina segment~~of ~~have~~these ~~come~~transactions, ~~from~~the ~~our~~Company ~~pressure~~expects ~~pumping~~to ~~operations~~shut down its Argentina subsidiary.

To date, we have incurred losses under the contract entered into in the second quarter of 2017 due to lower than expected utilization of our assets, higher than expected third party costs incurred in order to provide the bundled services contemplated under the contract, and other factors. We have been engaged in extensive negotiations with our customer to modify the contract in order to provide us with more favorable operating results. However, there can be no assurance that our efforts to renegotiate the terms of the contract will be successful, and we may continue to incur losses under the contract in the future. In addition, the negotiations may result in an early release from our obligations under the contract. If we receive an early release from the contract, we may incur further losses associated with our Argentina operations, which could be substantial, while we transition to new customers, and there can be no assurance that we obtain contracts with new customers on favorable terms or at all.

Operating Financial Results

During ~~2017~~2018, we generated $4440.07 million of revenue from continuing operations, up from $824.45 million of revenue generated in ~~2016~~2017. ~~Approximately $24.5 million of~~All ~~the~~of ~~increase~~our ~~was~~revenue ~~attributable~~from tocontinuing ~~our~~operations ~~start-up~~for of2018 ~~operations~~was inattributable ~~the~~to U.S. ~~during~~continuing ~~2017~~operations. Revenue from our Argentina operations ~~generated $19.6~~segment ~~million~~were ofreclassified ~~revenue~~into ~~for~~discontinued ~~2017,~~operations upfor ~~from~~the ~~$8.4~~years ~~million~~ending ofDecember ~~revenue~~31, ~~generated~~2018 inand ~~2016~~2017. ~~This~~The increase in ~~Argentina~~the U.S. was attributable to ~~a new contract with our largest customer, allowing us~~ to ~~secure~~higher awell ~~larger amount of~~ stimulation stages ~~and coiled tubing jobs. During 2016, our Argentina operations~~ completed 75as ~~stimulation~~well ~~stages~~as ~~and~~higher 37stage ~~coiled~~rates ~~tubing~~earned ~~jobs. For 2017, we completed 169 stimulation stages and 39 coiled tubing jobs~~ in ~~Argentina.~~the ~~Our~~ U.S. ~~operations~~for 2018 ~~completed~~compared ~~561~~with ~~stimulation stages during~~ 2017.

During ~~2017~~2018, we incurred a net operating loss of $2565.95 million compared with a net operating loss in ~~2016~~2017 of $13.37 million. For ~~2017~~2018, we incurred cost of services of $5351.06 million and for ~~2016~~2017, $1028.6 million. Most of this increase was attributable to ~~our~~a ~~new operational~~higher ~~start-up~~number of well stimulation stages completed in the U.S., ~~including~~increasing ~~the~~costs. ~~operational~~Costs ~~start-up~~from ~~period~~our ~~prior~~Argentina tooperations ~~revenues~~segment ~~being~~were ~~recognized~~classified into discontinued operations for the years ending December 31, 2018 and 2017. Depreciation and amortization expense also increased due primarily to the acquisition of equipment for our new U.S. start-up. Selling, general and administrative expenses ~~also~~ increased due to increased non-cash stock compensation expense, increased director compensation expense, an increase in headcount and salaries, and an increase in certain legal expenses.

Industry Trends

The oil and gas industry is both cyclical and seasonal. The level of spending by E&P companies is highly influenced by current and expected demand and future prices of oil and natural gas. Changes in spending result in an increased or decreased demand for our services and products. Rig count is an indicator of the level of spending by oil and gas companies. Our financial performance and outlook is significantly affected by the rig count in the United States and Argentina as well as oil and natural gas prices, which are summarized in the table below.

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	2017		2016		2017 to 2016 Change			2015		2016 to 2015 Change
	2018		2017		2018 to 2017 Change			2016		2017 to 2016 Change
Rig Count Recap (1)
U.S. Land (excl offshore)		~~856~~1,013		~~486~~856		7618	%		~~943~~486		~~-48~~76	%
Argentina		6271		6862		-915	%		~~105~~68		-359	%
Commodity Prices (average)
Crude Oil (West Texas Intermediate)	$	5064.8090	$	4350.2980		1728	%	$	4843.6629		~~-11~~17	%
Natural Gas (Henry Hub)	$	23.9917	$	2.5299		196	%	$	2.6252		-419	%

(1) Average annual drilling activity as measured by active drilling rigs based on Baker Hughes Incorporated rig count information.

Baker Hughes rig count reported at December 31, ~~2017~~2018, the U.S. Land only rig count was ~~911~~1,083 rigs, which represented ana 8719% increase from the same count at December 31, ~~2016~~2017 and a 4471% increase from the lowest level during 2017 of 634 rigs. For our U.S. operations, which began activity during 2017, our activity was concentrated in the Anadarko Basin in Oklahoma. Oklahoma’s annual rig count average was 66134 and 120 for ~~2016~~2018 and 2017, respectively.

According to the Baker Hughes rig count reporting at December ~~2017~~2018, the Argentinian rig count was 7174 rigs, which represented a 204% increase from December ~~2016~~2017 and a 4551% increase from the lowest monthly average level during 2017 of 49 rigs. For our Argentina operations, our ~~2016~~2018 and 2017 activity was concentrated in the Neuquén Basin in Argentina. Per Baker Hughes rig count reporting, the rig count in Argentina ~~remained~~increased ~~relatively~~from ~~flat~~62 ~~between~~to ~~2016~~71 ~~and~~rigs ~~2017,~~from ~~with the average count for 2016 at 68 and for~~ 2017 atto ~~62 rigs~~2018.

Overview of our business services

Our customers utilize our pressure pumping services to enhance the production of oil and natural gas from formations with low permeability, which restricts the natural flow of hydrocarbons. The technique of well stimulation consists of pumping a fluid into a cased well at sufficient pressure to create new channels in the rock, which can increase the extraction rates and the ultimate recovery of the hydrocarbons. Our equipment is contracted by E&P companies to provide this pressure-pumping service, which is referred to as well stimulation. Demand for these services can change quickly and is highly dependent on the number of oil and natural gas wells drilled and completed. Given the cyclical nature of these drilling and completion activities, coupled with the high labor intensity of these services, operating margins can fluctuate widely depending on supply and demand at a given point in the cycle.

Our customers ~~utilize~~have historically utilized our coiled tubing services to perform various functions associated with well-servicing operations and to facilitate completion of horizontal wells. Coiled tubing services involve the insertion of steel tubing into a well to convey materials and/or equipment to perform various applications as part of a new completion or the servicing of existing wells, including wellbore maintenance, nitrogen services, thru-tubing services, and formation stimulation using acid and other chemicals. Coiled tubing has become a preferred method of well completion, workover and maintenance projects due to speed, ability to handle heavy-duty jobs across a wide spectrum of pressure environments, safety and ability to perform services without having to shut-in a well. Our coiled tubing capabilities cover a wide range of applications for horizontal completion, work-over and well-maintenance projects. As a result, coiled tubing services are less tied to active rig count and more tied to price of oil and gas as well as customers’ expenditure budgets, which is usually also tied to the price of oil and natural gas.

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	Years Ended December 31,
	2017			2016			Change
	2018			2017			Change
Revenues	$	4440,~~017~~709,~~748~~621		$	824,~~352~~464,~~236~~164		$	3516,~~665~~245,~~512~~457
Operating cost and expenses:
Cost of services		5351,~~002~~578,~~499~~914			1028,~~630~~550,~~233~~114			4223,~~372~~028,~~266~~800
Selling, general, and administrative expenses		811,~~441~~654,~~933~~363			56,~~892~~890,~~235~~843			24,~~549~~763,~~698~~520
Research and development		456,288			486,128			(29,840	)
Depreciation and amortization expense		14,199,357			2,760,277			11,439,080
Depreciation and amortization expense		8,029,247			4,667,797			3,361,450
Impairment of assets		28,803,756			—			28,803,756
Total operating costs and expenses		69106,~~929~~236,~~967~~390			2138,~~676~~201,~~393~~234			4868,~~253~~035,~~574~~156
Operating loss		(2565,~~912~~526,~~219~~769	)		(13,~~324~~737,~~157~~070	)		(1251,~~588~~789,~~062~~699	)
Other income (expense):
Interest expense, net of forgiven		(1,~~314~~685,~~520~~117	)		(31,~~978~~061,~~728~~017	)		2(624,~~664,208~~100	)
Other expense		(~~353~~274,~~667~~528	)		(~~317~~12,~~043~~647	)		(36261,~~624~~881	)
Total other income (expense)		(1,~~668~~959,~~187~~645	)		(41,~~295~~073,~~771~~664	)		(2885,~~627,584~~981	)
Benefit (provision) for income taxes		633,529			(305,320	)		938,849
Net loss, continuing operations	$	(67,486,414	)	$	(14,810,734	)	$	(52,675,680	)
Net loss	$	(26,946,877	)	$	(17,925,248	)	$	(9,021,629	)
Net loss, discontinued operations	$	(20,380,656	)	$	(12,136,143	)	$	(8,244,513	)

For the Years Ended December 31, ~~2017~~2018 and ~~2016~~2017

Revenue from continuing operations for the year ended December 31, ~~2017~~2018 increased $3516.72 million to $4440.07 million from $824.45 million for the year ended December 31, ~~2016.~~ ~~Approximately $25~~2017.4 ~~million~~The ~~of this~~ increase was ~~due~~attributable to ~~the~~higher ~~start-up~~well ~~activity~~stimulation ofstages ~~our~~completed ~~U.S.~~as ~~stimulation~~well ~~operations~~as ~~in Q2 of~~higher ~~2017.~~stage ~~Also,~~rates ~~well~~earned ~~stimulation~~in ~~and~~the ~~coiled~~U.S. ~~tubing~~for ~~operations~~the inyears ~~Argentina~~ending ~~increased~~2018 ascompared awith ~~result~~2017. ofOur ~~the~~Argentina ~~two-year~~operations ~~contract~~segment ~~signed~~was inreclassified ~~early~~to ~~2017~~discontinued ~~with~~operations for the ~~largest~~years ~~operator~~ending inDecember ~~Argentina~~31, ~~which~~2018 ~~drove~~and ~~higher utilization~~2017.

Costs of services increased $4223.40 million to $5351.06 million for the year ended December 31, ~~2017~~2018 compared to $1028.6 million for the year ended December 31, ~~2016~~2017. OfThis ~~this~~ increase, ~~$28.1~~ was ~~due~~attributable to ~~the~~higher ~~new start-up~~ activity levels in ~~our~~the U.S. ~~stimulation~~in ~~operations,~~completing ~~including pre-operating~~higher ~~start-up~~number ~~costs~~of ~~associated~~stages in ~~with~~2018 ~~this~~compared ~~new~~with ~~activity; and $14~~2017.3 ~~million~~Costs ~~was~~associated ~~due~~with toour anArgentina ~~increase~~operations insegment ~~activity~~were ~~levels~~reclassified ~~related~~ to ~~our~~discontinued ~~well stimulation and coiled tubing~~ operations for ~~in Argentina attributable to~~ the ~~two-year~~years ~~contract~~ending weDecember ~~signed~~31, ~~with~~2018 ~~our~~and ~~largest customer in~~ 2017. The $311.4 million increase in depreciation and amortization expense was primarily attributable to the acquisition of equipment for our new U.S. operations in 2017 and into 2018. Impairment of assets occurred during 2018 attributable to our U.S. continuing operations upon the Company’s reviews of its long-lived assets given changes in circumstances indicating that the carrying amount of an asset was not recoverable, thus triggering impairment.

Our selling, general, and administrative expenses increased $24.58 million to $811.47 million for the year ended December 31, ~~2017~~2018 compared to $56.9 million for the year ended December 31, ~~2016~~2017. This increase was a result of increases in non-cash stock compensation ~~of $0.1 million~~, ~~$1.0 million in~~ legal costs and professional fees due to increased director compensation and certain increased legal expenses, and ~~$0.7 million in~~ corporate salaries due to increased headcount and salary increases.

Net other expense ~~decreased~~increased $20.69 million to $12.70 million for the year ended December 31, ~~2017~~2018 compared to net other expense of $41.31 million for the year ended December 31, ~~2016~~2017. This ~~decrease~~increase was primarily a result of a ~~decrease~~increase in interest expense incurred in ~~2017~~2018 compared with ~~2016~~2017. During ~~2016~~2018, the Company had ~~drawn~~financed ~~down~~equipment ~~the~~purchases, ~~full~~utilized ~~$22 million on~~ a ~~secured~~receivables ~~promissory~~agreement ~~note~~to ~~with the~~facilitate ~~ACM~~working ~~entities. The note was fully paid effective March 6~~capital, ~~2017~~and insecured a ~~transaction~~demand ~~the~~note ~~Company~~financing ~~entered into with Fir Tree as~~ (discussed below under Liquidity and Capital Resources).

During ~~2017~~2018, we incurred a net operating loss from continuing operations of $2565.95 million compared with a net operating loss from ~~2016~~ 2017 of $13.37 million.

Accounts receivable ~~increased~~decreased $75.35 million to $100.2 million at December 31, ~~2017~~2018 from $25.97 million at December 31, ~~2016~~2017 due primarily to the ~~start-up~~Company’s ofdecision ~~new~~to ~~operations~~suspend inits ~~the~~ U.S. ~~and~~well ~~the~~stimulation ~~increase~~operations inand ~~sales~~only inconducting ~~Argentina~~pump ~~related~~down tooperations anthat ~~increase~~contributed significantly inreduced ~~activity~~revenue ~~in our well stimulation~~ and ~~coil~~related ~~tubing~~accounts ~~operations~~receivable ~~attributable~~in to the ~~two~~fourth ~~year~~quarter ~~contract~~of ~~we signed with our largest customer in 2017~~2018.

Prepaids increased $2.4 million to $4.4 million at December 31, 2017 from $1.9 million at December 31, 2016 due to: i) Argentina VAT and other tax prepaid amounts increasing as a result of purchase tax for a larger amount of purchases in 2017 compared with 2016 exceeding sales/revenue tax; and ii) start-up activity in the U.S. with vendors and vehicles purchased. The Company will use the prepaid value added tax as it continues to invoice customers in Argentina.27

34Prepaids decreased $0.6 million to $0.1 million at December 31, 2018 from $0.7 million at December 31, 2017 due primarily to vehicle registration fees for U.S. vehicles being amortized with no added registration fees attributable to the asset sales in the U.S as well as other various other non-recurring prepaids as a result of our election to suspend our U.S. well stimulation operations and significantly reduce our U.S. workforce in alignment with potential near-term opportunities.

Accounts payable increased $143.74 million to $1715.12 million at December 31, ~~2017~~2018 from $211.58 million at December 31, ~~2016~~2017 ~~due~~attributable ~~primarily~~ to ~~the~~ ~~start-up of new operations~~ delays in ~~the~~payments ~~U.S.~~being ~~and~~made ~~the increase in sales in Argentina related~~ to ~~an increase in activity in our well stimulation and coil tubing operations attributable to the two-year contract we signed with our largest customer in 2017~~vendors.

Short-term notes payable increased $57.09 million to $7.09 million at December 31, ~~2017~~2018 from $20.0 million at December 31, ~~2016~~2017 due ~~primarily~~ to ~~the~~borrowings made ~~repayment~~during in2018 ~~2017~~associated ofwith ~~the~~our ~~$2.0~~demand ~~million~~promissory ~~loan~~note ~~the~~described ~~Company~~below ~~held~~in ~~with~~“Liquidity ~~two~~and ~~of the Company’s largest stockholders, offset~~Capital ~~by approximately $7~~Resources.~~0 million of loans entered into which financed equipment purchases in 2017.~~”

Liquidity and Capital Resources

Our primary sources of liquidity to date have been proceeds from various equity and debt offerings which are discussed in “Part II – Item 8 – Financial Statements and Supplemental Data – Notes to consolidated financial statements – Note 119 – “Equity ~~Offerings”~~.”

On March 6, 2017, the Company closed a financing transaction with Fir Tree, (the “Fir Tree Transaction”) that was part of a comprehensive recapitalization designed to create a path to a potential conversion to equity of substantially all the Company’s debt, subject to stockholder approval and satisfaction of certain other conditions. In connection with the Fir Tree Transaction, the Company entered into an Amended and Restated Convertible Note Facility Agreement with Fir Tree (the “A&R Note”), which replaced the convertible note previously issued by the Company to certain funds affiliated with Albright Capital Management (collectively “ACM”), which Fir Tree purchased from ACM in connection with the 2017 Recapitalization. In addition, the Company issued to Fir Tree a new convertible note with a principal amount of $19.4 million, (the “New Convertible Note”), representing an additional $17 million aggregate principal amount of convertible notes issued by the Company to the Fir Tree affiliate on March 6, 2017 and approximately $2.4 million principal amount of convertible notes in payment of accrued and unpaid interest on the existing ACM Note acquired by the Fir Tree affiliate from ACM. The unpaid principal amount of the New Convertible Note accrued interest at a rate of 20% per annum and was scheduled to mature on May 28, 2018. Approximately $2.1 million of the proceeds of the additional $17 million aggregate principal amount of New Convertible Note issued to the Fir Tree affiliate was used to repay existing debt under the Loan Agreement described under “Short Term Stockholder Debt” below, with the balance of the proceeds used for equipment purchases, other approved capital expenditures incurred in accordance with an approved operating budget, and other working capital purposes. After giving effect to the Fir Tree Transaction, the Company had approximately $41.4 million of outstanding convertible notes which were all held by Fir Tree or an affiliate.

As part of the Fir Tree Transaction, Fir Tree agreed to convert the A&R Note and the New Convertible Note into common stock at a conversion price of $1.40 per share, subject to receipt of stockholder approval and satisfaction of certain other conditions. On June 15, 2017, stockholder approval was received, and all the outstanding convertible notes were converted into approximately 29.5 million shares of common stock.

On July 6, 2017, the Company closed on a private placement of shares of the Company’s common stock providing gross proceeds of $15.0 million, and net of costs proceeds of $14.9 million (the “July 2017 PIPE”). As part of the offering, the Company issued 10,000,000 shares of its common stock for $1.50 per share to certain existing shareholders. The proceeds from the offering were used to finance capital expenditures to support existing contracts the Company has in both Oklahoma and Argentina, for working capital and for other general corporate purposes.

On August 8, 2017, the Company closed on a private placement of shares of the Company’s common stock providing gross proceeds of $28 million, with net of costs proceeds of $26.7 million (the “August 2017 PIPE”). As part of the offering, ~~the~~ the Company issued an aggregate of 19,580,420 shares of its common stock for $1.43 per share to two existing stockholders and ~~several~~ several new institutional investors. The proceeds from this offering were used to finance capital expenditures to support the Company’s new ~~most~~fourth ~~recent~~quarter 2017 customer contract in Oklahoma, for working capital and for other general corporate purposes.

3528

We ~~continually~~monitored ~~monitor~~ potential capital sources, including equity and debt financings, in order to meet our planned capital expenditures ~~and~~ and liquidity requirements. ~~The~~Our ~~successful~~historical ~~execution of our~~ growth strategy ~~depends~~was dependent on our ability to raise capital as needed to, among other things, finance the purchase of additional equipment. If we are unable to obtain additional capital on favorable terms or at all, we may be unable to sustain or increase our current level of growth in the future. The availability of equity and debt financing will be affected by prevailing economic conditions in our industry and financial, business and other factors, many of which are beyond our control.

On March 29, 2018, we entered into a Securities Purchase Agreement (the “Purchase Agreement”) with Fir Tree, pursuant to which Fir Tree agreed to purchase 10,000 shares of our newly-designated Series A Convertible Preferred Stock, par value $0.001 per share (the “Series A Preferred”), at a price of $1,000 per share. The transaction closed on April 2, 2018 providing for our sale and issuance of 10,000 shares of Series A Preferred, providing $10.0 million of gross proceeds and $9.7 million of net proceeds after expenses to us. Holders of Series A Preferred are entitled to cumulative dividends payable semi-annually in arrears at a rate of (i) 10% per year if we elect to pay the dividend in cash, or (ii) 12% per year if we elect to pay the dividend through the issuance of additional shares of Series A Preferred. On October 1, 2018, we paid the initial dividend on the outstanding shares of Series A Preferred through the issuance of an aggregate of 600 additional shares of Series A Preferred to the holders of outstanding shares of Series A Preferred.

On June 8, 2018, we executed a negotiable demand promissory note (the “Demand Note”) in the principal amount of up to $15.0 million in favor of Eco-Lender, LLC (the “Lender”), a Delaware limited liability company and an affiliate of Fir Tree. Pursuant to the Demand Note, on June 8, 2018, the Lender advanced approximately $5.5 million of gross proceeds and $5.1 million of net proceeds after expenses and on August 16, 2018 the Lender advanced an additional $3.0 million of gross proceeds and $2.97 million of net proceeds to us under the Demand Note. We do not have any right to re-borrow any amounts that have been advanced and repaid under the Demand Note. In addition, the Lender is not obligated to make any additional advances under the Note.

Interest on the unpaid principal balance of the Demand Note accrues at an annual rate of 10%, subject to a default interest rate of 14.00% or 24.00% depending on the payment date following the occurrence of a default. All payments of principal, interest and other amounts under the Demand Note are payable immediately upon written demand by the Lender to us; provided, however, the Lender cannot make any demand for payment under the Demand Note until the earlier of (A) 45 days after the date of the Demand Note, (B) the occurrence of a material adverse change as defined in the Demand Note and determined by the Lender in its sole and absolute discretion, (C) the occurrence of any default or event of default under any material agreement of ours or any of our subsidiaries, and (D) the date upon which we or any of our subsidiaries ceases operating for any reason.

We may prepay, in whole or in part, at any time, the principal, interest and other amounts owing under the Demand Note subject to a prepayment premium of 4.00% of the aggregate amount of such prepayment (inclusive of interest and other amounts due and owing under the Demand Note), provided that the minimum amount of any such prepayment is equal to the lesser of $1 million and the then outstanding balance of the Demand Note.

All of our obligations under the Note are guaranteed by our wholly owned subsidiary, EcoStim, Inc. (“EcoStim”), and secured by a security interest (subject to permitted liens) in substantially all of our personal property, including 100% of the outstanding equity of the our U.S. subsidiaries (including EcoStim) and 65% of the outstanding equity of our non-U.S. subsidiaries; provided, however, that the Lender had a subordinate lien on those of our assets that were subject to the lien of Porter Capital pursuant to the Receivables Agreement prior to the termination of such agreement as discussed elsewhere in this Form 10-K.

Receivables Agreement. On February 8, 2018, we entered into a Recourse Receivables Purchase & Security Agreement (the “Receivables Agreement”) with Porter Capital Corporation (“Porter Capital” or “Buyer”). Under the terms of the Receivables Agreement, we may, from time to time, sell accounts receivable (“Accounts”) to Buyer in exchange for funds in an amount equal to 80% of the face amount of the applicable Account at the time of sale of the Account, with the remaining 20% of the face amount of the applicable Account to be held back as a required reserve amount to be paid to us following Buyer’s receipt of payment on the Account by the account debtor, less applicable fees and interest charges. The total face amount of outstanding Accounts purchased by Buyer under the Receivables Agreement may not exceed $12.5 million.

Under the terms of the Receivables Agreement, we are obligated to pay interest on the face amount of the outstanding and unpaid Accounts purchased by Buyer, less the amount of the reserve account, at an interest rate equal to the Prime Rate (as defined in the Receivables Agreement) plus 8.25%. We are also obligated under the Receivables Agreement to pay certain fees, including a fee (the “Minimum Term Fee”) payable upon termination of the agreement in an amount equal to: (i) the monthly interest rate multiplied by $5 million, multiplied by the number of months in the agreement term, less the amount of actual interest paid during the term of the agreement; or (ii) following the occurrence of an Event of Default (as defined below) that has not been cured within the time periods contemplated under the agreement, $1.8 million, less the amount of actual interest paid during the term of the agreement. The Minimum Term Fee is also subject to reduction under certain circumstances if Buyer does not purchase certain eligible Accounts that are presented for purchase by us.29

~~All~~Under ofthe ~~our~~terms ~~obligations~~of ~~under~~ the Receivables Agreement, ~~are~~we ~~secured~~were byobligated ~~liens~~to onpay ~~certain~~interest ofon ~~our~~the ~~assets,~~face ~~including~~amount of the ~~accounts~~outstanding ~~receivable,~~and unpaid Accounts ~~chattel~~purchased ~~paper~~by Buyer, ~~inventory~~less ~~relating~~the toamount ~~our~~of ~~U.S.~~the ~~operations~~reserve ~~and~~account, ~~substantially~~at ~~all~~an ofinterest ~~our~~rate ~~equipment~~equal ~~for~~to ~~our~~the ~~U.S.~~Prime ~~operations~~Rate (~~excluding equipment~~as ~~subject~~defined toin ~~vendor~~the ~~financing~~Receivables Agreement) plus 8.25%. ~~The~~We ~~Receivables~~were ~~Agreement~~also ~~further~~obligated ~~provides~~under ~~for~~the ~~customary~~Receivables ~~events~~Agreement ofto ~~default~~pay ~~(“Events of~~certain ~~Default”)~~fees, including ~~but~~a ~~not~~fee ~~limited to~~ (the ~~failure~~“Minimum Term toFee”) ~~make~~payable ~~payments~~upon ~~when~~termination ~~due;~~of ~~insolvency events;~~ the ~~failure~~agreement toin ~~comply with~~an ~~covenant~~amount ~~obligations~~equal ~~arising~~to: ~~under~~(i) the ~~agreement~~monthly orinterest ~~other~~rate ~~agreements~~multiplied ~~with~~by $5 ~~Buyer~~million, ormultiplied ~~its~~by ~~affiliates;~~the ~~and~~number ~~breaches~~ of ~~representations and~~months ~~warranties.~~in ~~Upon~~ the ~~occurrence~~agreement ofterm, anless ~~Event~~the amount of ~~Default,~~actual ~~Porter~~interest ~~Capital~~paid ~~may~~during ~~terminate~~ the ~~Receivables Agreement and declare~~term ~~all~~ of ~~our~~the ~~outstanding~~agreement; ~~obligations~~or ~~under~~(ii) following the ~~Receivables~~occurrence ~~Agreement~~of toan beEvent ~~due~~of ~~and~~Default ~~payable.~~(as ~~The~~defined ~~Receivables~~below) ~~Agreement~~that has annot ~~initial term~~been ofcured ~~one~~within ~~year,~~the time ~~and~~periods ~~will~~contemplated ~~renew~~under ~~for~~the ~~successive~~agreement, ~~one-year~~$1.8 ~~terms~~million, ~~unless~~less wethe ~~provide~~amount ~~notice~~ of ~~cancellation~~actual ininterest ~~accordance~~paid ~~with~~during the ~~terms~~ term of the ~~Agreement~~agreement. The WeMinimum ~~may~~Term Fee was also ~~terminate~~subject ~~the~~to ~~Receivables~~reduction ~~Agreement~~under ~~prior~~certain tocircumstances ~~the~~if ~~expiration~~Buyer ofdid ~~the~~not ~~term~~purchase ~~upon~~certain ~~written~~eligible ~~notice~~Accounts ~~and~~that ~~payment~~are ofpresented ~~our~~for ~~obligations~~purchase ~~thereunder~~by us.

~~Argentina~~All ~~Operations. In the second quarter~~ of ~~2017,~~our weobligations ~~entered~~under ~~into a two-year contract with~~ the ~~largest~~Receivables ~~operator~~Agreement inwere ~~Argentina~~secured toby ~~provide services~~liens ~~for~~on ~~their~~certain ~~tight~~of ~~gas~~our ~~completions program. To date~~assets, weincluding ~~have incurred losses under~~ the ~~contract~~accounts ~~due to lower than expected~~receivable, ~~utilization~~chattel ~~of our assets~~paper, ~~higher~~inventory ~~than~~relating ~~expected third party costs incurred in order~~ to ~~provide~~our ~~the~~U.S. ~~bundled~~operations ~~services contemplated under the contract,~~ and ~~other~~substantially ~~factors.~~all Weof ~~have~~our ~~been~~equipment ~~engaged~~for ~~in extensive negotiations with~~ our ~~customer~~U.S. tooperations ~~seek modifications~~(excluding toequipment ~~the~~subject ~~contract~~to ~~that~~vendor ~~would provide us with more favorable operating results~~financing). ~~However,~~The ~~there~~Receivables ~~can~~Agreement befurther noprovided ~~assurance~~for ~~that~~customary ~~our~~events ~~efforts to~~of ~~renegotiate~~default ~~the terms~~ (“Events of ~~the contract will be successful~~Default”), ~~and~~including webut ~~may~~not ~~continue~~limited to ~~incur losses under~~ the ~~contract~~failure into ~~the~~make ~~future. In~~payments ~~addition,~~when ~~our~~due; ~~negotiations~~insolvency ~~with~~events; ~~our customer may result in an early release from our obligations under~~ the ~~contract.~~failure Ifto wecomply ~~receive~~with ancovenant ~~early~~obligations ~~release~~arising ~~from~~under the ~~contract,~~agreement weor ~~may~~other ~~incur~~agreements ~~further losses associated~~ with ~~our~~Buyer ~~Argentina~~or ~~operations,~~its ~~which~~affiliates; ~~could be substantial, while we transition to new customers,~~ and ~~there~~breaches ~~can~~of ~~be no assurance that we obtain contracts with new customers~~representations onand ~~favorable terms~~warranties. InUpon ~~addition,~~the ~~there~~occurrence ~~can~~of bean noEvent ~~assurance~~of ~~that~~Default, ~~our~~Porter ~~negotiations~~Capital ~~will~~could ~~result~~have interminated ~~either~~the ~~modifications~~Receivables toAgreement ~~the~~and ~~contract~~declared orall ~~a release from the contract prior to the end~~ of ~~its current term. As a result,~~ our ~~Argentinian~~outstanding ~~operations~~obligations ~~may require access to additional working capital if we continue to incur losses~~ under ~~our~~the ~~existing~~Receivables ~~contract~~Agreement ~~or during any transition period from our current customer~~ to ~~work~~be ~~for~~due ~~new~~and ~~customers following an early release from our current contract~~payable. The ~~working~~Receivables ~~capital~~Agreement had ~~requirements~~an ofinitial ~~our~~term ~~Argentina operations could result in our incurrence~~ of ~~indebtedness~~one year, ~~cash~~and ~~contributions~~would tohave ~~our~~renewed ~~Argentinian subsidiary~~for ~~from~~successive ~~our parent company, or other third~~one-~~party~~year ~~financings.~~terms Weunless ~~may~~we ~~also~~provided benotice ~~required~~of tocancellation ~~incur other material costs~~ in ~~connection~~accordance with ~~our~~the ~~efforts~~terms toof ~~renegotiate~~the orAgreement. ~~exit~~The ~~our~~Receivables ~~current~~Agreement ~~contract~~could ~~with~~be ~~our~~terminated ~~largest~~prior ~~customer in Argentina. In addition, we may determine~~ to ~~reduce~~ the ~~scale~~expiration of, ~~shut~~the ~~down,~~term upon orwritten ~~sell~~notice ~~our~~and ~~operations~~payment ~~in Argentina, which could result in the incurrence~~ of ~~material~~our ~~losses~~obligations ~~and expenses~~thereunder.

36On October 19, 2018, the Company terminated its Recourse Receivables Purchase & Security Agreement (“Receivables Agreement”) with Porter Capital Corporation (“Porter”). The Receivables Agreement had an initial term of one-year, with the Company permitted to terminate the Receivables Agreement prior to expiration of the initial term upon written notice to Porter and payment of the Company’s outstanding obligations under the Receivables Agreement, including amounts owed as a minimum term fee calculated in accordance with the terms of the Receivables Agreement. On October 19, 2018, the Company delivered a notice to Porter of our intent to terminate the Receivables Agreement following initial term upon written notice to Porter and payment of our outstanding obligations under the Receivables Agreement, including a minimum term fee of approximately $0.2 million. As a result, the Company will no longer be able to obtain funds under the Receivables Agreement and the collateral has been released from liens that had secured the Company’s obligations under the Receivables Agreement.

For sales of our receivables under this Receivables Agreement, the Company applies the guidance in ASC 860, “Transfers and Servicing – Sales of Financial Assets”, which requires the derecognition of the carrying value of those accounts receivable in the Condensed Consolidated Balance Sheets.

Argentina Operations. In Argentina, we have been operating under a transition agreement with our primary customer since May 2018 and continued to provide services under that agreement during the third quarter of 2018. In the fourth quarter of 2018, we did not provide any significant services to our primary customer in Argentina under the transition agreement or otherwise, and we did not generate any significant revenue from our Argentina operations during the fourth quarter of 2018. In addition, as reported previously, on March 18, 2019, the Company signed an agreement with an unrelated third party to purchase all material machinery and equipment assets in Argentina. The transactions contemplated by this agreement are expected to close in phases over an approximate three-month period in the second quarter of 2019. Following the consummation of these transactions, the Company expects to shut down its Argentina subsidiary.

Sources and Uses of Cash

Net cash used in operating activities was $1413.56 million for the year ended December 31, ~~2017~~2018 and $515.31 million for the year ended ~~December~~ December 31, ~~2016~~2017. The ~~increase~~decrease in cash used was primarily due to ~~pre-operating~~decreases ~~start-up~~in ~~costs~~accounts ~~associated~~receivable ~~with~~and ~~our~~inventory ~~U.S.~~and ~~start-up~~an ~~operations, no U.S.~~increase ~~operations~~ in ~~2016~~accounts payable, ~~and~~attributable ~~lower~~to ~~utilization~~the ofdecrease ~~our~~in ~~U.S.~~operational ~~and~~activity ~~Argentina crews~~ during the ~~twelve~~fourth ~~months~~quarter ~~ended~~of ~~December~~2018 ~~2017~~in ~~compared~~both Argentina toand the ~~same~~U.S. ~~period~~and ~~ended~~the ~~December~~slowing ~~31,~~in ~~2016~~payments of accounts payable.

Net cash used in investing activities was $35.4 million for the year ended December 31, 2017 and $4.6 million for the year ended December 31, 2016. This increase was primarily due to the increase in purchase of equipment associated with the start-up and expansion of operations in our U.S. segment during the twelve months ended December 2017 compared to the same period ended December 31, 2016.30

Net cash ~~provided by (~~used in) ~~financing~~investing activities was $571.02 million for the year ended December 31, ~~2017~~2018 and $(035.1)4 million for the year ended December 31, ~~2016~~2017. ~~The~~This ~~increase~~decrease inwas ~~net~~primarily ~~cash~~due ~~provided~~to bythe ~~financing~~decrease ~~activities~~in ~~was~~purchases ~~primarily~~of ~~attributable~~equipment tofor ~~greater sales~~the oftwelve ~~common~~months ~~stock~~ended ofDecember ~~$40.1~~2018 compared ~~million,~~with ~~net~~the oftwelve ~~issuance~~months ~~cost,~~ended ~~during~~December 2017. asPurchases ~~well~~were ashigher ~~$16.5~~for ~~million~~the ~~greater~~twelve ~~proceeds~~months ~~from~~ended ~~notes~~December 2017 due to the ~~payable,~~start-up ~~net~~and expansion of ~~cost,~~operations ~~during~~in ~~2017~~our ~~when~~U.S. ~~compared~~segment toduring the ~~same~~twelve ~~period~~months ended December ~~31,~~2017. ~~2016~~The decrease was also due to proceeds received in 2018 as a result of selling U.S. based operational assets during the fourth quarter of 2018.

~~The~~Net ~~following~~cash ~~table~~provided ~~summarizes~~by ~~our~~financing ~~cash~~activities ~~flows~~was $11.6 million for the ~~years~~year ended December 31, 2018 and $57.0 million for the year ended December 31, 2017. The decrease was primarily attributable to sales of common stock of $41.6 million, net of issuance cost, during 2017, as well as $7.2 million greater proceeds from notes payable, net of cost, during 2017 when compared to the same period ended December 31, 2018. These were offset by an increase in 2018 in cash provided by the sale of preferred stock and ~~2016:~~an increase in payments made on our notes payable compared to the same period ended December 31, 2017.

	Years Ended December 31,
	2017			2016
Financing Activities
Proceeds from sale of common stock	$	43,982,386		$	1,722,596
Sale of common stock issuance cost		(2,357,984	)		(164,041	)
Proceeds from notes payable		18,719,126			2,194,611
Payments on notes payable		(2,587,852	)		(3,293,732	)
Payments on capital lease		(789,166	)		(565,449	)
Purchase of treasury stock		-			(37,175	)
Net cash provided by (used in) financing activities	$	56,966,510		$	(143,190	)

The following table summarizes our financing activities cash flows for the years ended December 31, 2018 and 2017:

	Years Ended December 31,
	2018			2017
Financing Activities
Proceeds from sale of common stock	$	—		$	41,624,402
Proceeds from sale of preferred stock, net		9,702,793			—
Proceeds from notes payable		11,537,417			18,719,126
Payments on notes payable		(9,160,095	)		(2,587,852	)
Payments on capital lease		(518,236	)		(789,166	)

Net cash provided by financing activities	$	11,561,879		$	56,966,510

On December 15, 2015, the Board authorized the Company to repurchase, from time to time, from December 16, 2015 through December 16, 2017, up to $5 million in shares of its outstanding common stock. Through the years ending December 31, 2015, 2016 and 2017, the Company had purchased 6,939, 14,911 and 0 shares, respectively, at a cost of $20,294, $37,175, and $0, respectively, through the repurchase arrangement.

On July 13, 2016, the Company entered into an At-Market Issuance Sale Agreement as disclosed in Note 119 – “Equity ~~Offerings”~~. During 2016, the Company sold 796,573 shares through this agreement for total gross proceeds of $1,722,596 before deducting approximately $164,000 of commissions. During 2017, the Company sold 563,753 shares through this agreement for total gross proceeds of $982,385 ~~before~~ before deducting approximately $13,105 of commissions.

In 2017, the Company converted all of its outstanding convertible notes into common stock pursuant to the Fir Tree Transactions, raised gross proceeds of $15.0 million, and net of costs proceeds of $14.9 million through the July 2017 PIPE, and raised gross proceeds of $28 million, with net of costs proceeds of $26.7 million, through the August 2017 PIPE.

For additional information, see “—Liquidity and Capital Resources” above.

We had a net ~~increase~~decrease in cash and cash equivalents of $73.12 million for the year ended December 31, ~~2017~~2018, compared to a net ~~decrease~~increase in cash and cash equivalents of $106.05 million during the year ended December 31, ~~2016~~2017 primarily resulting from a reduction in our proceeds from stock issuances infor 2018 compared with 2017, offset by ana ~~increase~~reduction in ~~operating~~equipment ~~activities~~purchases ~~and capital expenditures~~ for ~~2017~~2018 compared with ~~2016~~2017.

37We do not generate positive cash flow. Further, our liquidity provided by our existing cash and cash equivalents may not be sufficient to fund our cash requirements in 2019.

We do not generate positive cash flow at this time. Further, while we believe we will begin generating positive cash flow from operations in 2018, our liquidity provided by our existing cash and cash equivalents may not be sufficient to fund our full capital expenditure plan. Our current capital commitments may require us to obtain additional equity or debt financing, which may not be available to us on favorable terms or at all.31

Capital Requirements

The energy services business is capital intensive, requiring significant investment to expand, upgrade and maintain equipment. ~~Our~~Historically, our primary uses of capital have been the acquisition of equipment, working capital to finance ~~the start of~~ our operations and general ~~administrative~~ administrative expenses.

~~Going~~We ~~forward,~~intend weto ~~expect~~incur ~~our~~minimal capital ~~requirements~~expenditures during 2019, and only those required to ~~consist~~maintain ~~primarily~~our current assets being utilized in operations or as required for sale of: an asset.

● growth capital expenditures, such as those to acquire additional equipment and other assets to grow our business; and ● maintenance capital expenditures, which are capital expenditures made to extend the useful life of our assets.

Additionally, we continually monitor new advances in well stimulation equipment and down-hole technology as well as technologies that may complement our business and opportunities to acquire additional equipment to meet our customers’ needs. We intend to incur approximately $6.0 million in capital expenditures during the first half of 2018 and will incur additional capital expenditures on a discretionary basis as necessary to meet customer demands and subject to satisfactory financing. Our ability to make any significant acquisition for cash would likely require us to obtain additional equity or debt financing, which may not be available to us on favorable terms or at all.

Our ability to fund operations, and to fund planned and committed 2018 capital expenditures will depend upon our future operating performance, and more broadly, on the availability of equity and debt financing, which will be affected by prevailing economic conditions, market conditions in the exploration and production industry and financial, business and other factors, many of which are beyond our control.

Our ability to acquire equipment could require us to obtain additional equity or debt financing, which may not be available to us on favorable terms or at all.

From time to time, we may also consider the acquisition or disposition of assets or businesses or possible joint ventures or other joint ownership arrangements with respect to assets or businesses. Any determination to take action in this regard will be based on market conditions and opportunities existing at the time, and accordingly, the timing, size or success of any efforts and the associated potential capital requirements for these activities are unpredictable. We may seek to fund all or part of any such efforts with proceeds from debt and/or equity issuances.

Impact of Inflation on Operations

~~Management~~Inflation iscan ofhave ~~the opinion that inflation has not had~~ a significant impact on ~~our~~operations. ~~business~~Historically, towe ~~date.~~have Wepurchased ~~purchase~~ our equipment and materials from suppliers who provide competitive prices and employ skilled workers from competitive labor markets. If inflation in the general economy increases, our costs for equipment, materials and labor could increase as well. Also, increases in activity in oilfields can cause upward wage pressures in the labor markets from which we hire employees as well as increases in the costs of certain materials and key equipment components used to provide services to our customers. Inflation in Argentina has had a significant impact on our business, driving the weakening of the Argentine Peso against the U.S. dollar by over 102% during 2018. As a result, the Company has recognized significant foreign currency translation losses for the year to date 2018.

Off-Balance Sheet Arrangements

As of December 31, ~~2017~~2018, we dohad ~~not~~no ~~have~~material ~~any~~ off-balance sheet arrangements ~~that~~except ~~have~~for orthe ~~are~~operating ~~reasonably~~leases ~~likely~~and topurchase ~~have a current or~~commitments ~~future~~under ~~effect~~supply onand ~~our~~transportation ~~financial~~agreements ~~condition,~~disclosed ~~changes~~under inNote ~~financial~~12 ~~condition,~~– ~~revenues~~Commitments orand ~~expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors~~Contingencies. The term “off-balance sheet arrangements” generally means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with us is a party, under which we have (i) any obligation arising under a guarantee contract, derivative instrument or variable interest or (ii) a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets.

38Going Concern. Under Accounting Standards Update 2014-15, Presentation of Financial Statements-Going Concern, we are required to evaluate whether there is a substantial doubt about our ability to continue as a going concern each reporting period, including interim periods. In evaluating our ability to continue as a going concern, management has considered conditions and events that could raise substantial doubt about our ability to continue as a going concern for 12 months following the date our financial statements are issued (May 10, 2018), including our current financial condition and liquidity sources, including current cash balances, forecasted cash flows, our obligations due before May 10, 2019, including our obligations described in Note 12 - Commitments and Contingencies to the condensed consolidated financial statements included in Part I – Item 1 of this Form 10-Q, and the other conditions and events described below.

We have incurred substantial net losses and losses from operations since inception. As of December 31, 2018, we had cash and cash equivalents of approximately $3.7 million and a working capital deficit of approximately $5.0 million. We do not have access to a working capital facility and may not have access to other sources of external capital on reasonable terms or at all. In September 2018, we elected to suspend our U.S. well stimulation operations and significantly reduce our U.S. workforce in alignment with potential near-term opportunities. As a result, as of November 14, 2018, we were only conducting pump down operations in the U.S. and will not generate any material revenue from our U.S. operations in future periods unless we are able to obtain access to additional third party capital to fund our future operations on reasonable terms or are otherwise able to consummate a strategic transaction. In Argentina, we have been operating under a transition agreement with our primary customer since May 2018. Following the third quarter of 2018, we have not provided any services to our primary customer in Argentina under the transition agreement or otherwise, and we did not generate any revenue from our Argentina operations in the fourth quarter of 2018. We do not expect to generate any material revenue from our Argentina operations in future periods. As of December 31, 2018, the outstanding aggregate principal amount of our outstanding Negotiable Demand Promissory Note was approximately $7.8 million. If our obligations under the Negotiable Demand Promissory Note are accelerated pursuant to its terms, there can be no assurance that we will have sufficient funds to repay such obligations or our other obligations.

Management’s plans to alleviate substantial doubt include: (i) pursuing the sale of a substantial majority of the equipment, inventory and other operating assets relating to our U.S. operations; (ii) using the proceeds from asset sales to reduce our outstanding liabilities and improve our liquidity; (iii) pursuing the sale of our Argentina assets; (iv) significantly reducing costs and expenses which would include, but not limited to significantly reducing our U.S. workforce in alignment with potential near-term opportunities, which actions have been substantially implemented; and (v) taking other steps to reduce costs and liabilities. However, there can be no assurance as to the ultimate consummation, timing or amount of proceeds generated from any such asset sales or other actions. Based on the uncertainty of achieving these items and the significance of the factors described above, there is substantial doubt as to our ability to continue as a going concern for a period of 12 months following May 10, 2019.

The Fir Tree Transaction. On March 6, 2017, we closed a financing transaction with Fir Tree, (the “Fir Tree Transaction”) that was part of a comprehensive recapitalization designed to create a path to a potential conversion to equity of substantially all of our debt, subject to stockholder approval and satisfaction of certain other conditions. In connection with the Fir Tree Transaction, we entered into an Amended and Restated Convertible Note Facility Agreement with Fir Tree (the “A&R Note”), which replaced the convertible note previously issued by us to certain funds affiliated with Albright Capital Management (collectively “ACM”), which Fir Tree purchased from ACM. In addition, we issued to Fir Tree a new convertible note with a principal amount of $19.4 million, (the “New Convertible Note”), representing an additional $17 million aggregate principal amount of convertible notes issued by us to Fir Tree on March 6, 2017 and approximately $2.4 million principal amount of convertible notes in payment of accrued and unpaid interest on the existing ACM Note acquired by Fir Tree from ACM. The unpaid principal amount of the New Convertible Note accrued interest at a rate of 20% per annum and was scheduled to mature on May 28, 2018. Approximately $2.1 million of the proceeds of the additional $17 million aggregate principal amount of New Convertible Note issued to Fir Tree was used to repay existing debt under a Loan Agreement that was entered into on November 30, 2016 between us and two of our largest stockholders, with the balance of the proceeds used for equipment purchases, other approved capital expenditures incurred in accordance with an approved operating budget, and other working capital purposes. After giving effect to the Fir Tree Transaction, we had approximately $41.4 million of outstanding convertible notes which were all held by Fir Tree.

Equity Offerings. On July 6, 2017, we closed on a private placement of shares of our common stock providing gross proceeds of $15 million, and net of cost proceeds of $14.9 million. As part of the offering, we issued 10,000,000 shares of our common stock for $1.50 per share to certain existing shareholders. The proceeds from the offering were used to finance capital expenditures to support contracts in both Oklahoma and Argentina, for working capital and for other general corporate purposes.

On August 8, 2017, we closed on a private placement of shares of our common stock providing gross proceeds of $28 million, and net of cost proceeds of $26.8 million. As part of the offering, we issued an aggregate of 19,580,420 shares of our common stock for $1.43 per share to two existing stockholders and several new institutional investors. The proceeds from this offering were used to finance capital expenditures to support customer contracts in Oklahoma, for working capital and for other general corporate purposes.

All of the equity offerings with the exception of the April 2, 2018 private placement noted above are as discussed in our Annual Report on Form 10-K for the year ended December 31, 2017, Part II – Item 8 – Financial Statements and Supplemental Data – Notes to consolidated financial statements – Note 9 – Equity.

Negotiable Demand Promissory Note. On June 8, 2018, we executed a negotiable demand promissory note (the “Demand Note”) in the principal amount of up to $15.0 million in favor of Eco-Lender, LLC (the “Lender”), a Delaware limited liability company and an affiliate of Fir Tree. Pursuant to the Demand Note, on June 8, 2018, the Lender advanced approximately $5.5 million of gross proceeds and $5.1 million of net proceeds after expenses and on August 16, 2018 the Lender advanced an additional $3.0 million of gross proceeds and $2.97 million of net proceeds to us under the Demand Note. We do not have any right to re-borrow any amounts that have been advanced and repaid under the Demand Note. In addition, the Lender is not obligated to make any additional advances under the Note.

Working Capital. As of December 31, 2018, our cash and cash equivalents were approximately $3.7 million, as compared to $3.9 million as of September 30, 2018, $1.9 million as of June 30, 2018 and $8.8 million as of December 31, 2017. Our working capital, which we define as the difference between our current assets and our current liabilities, is an indication of our liquidity and our potential requirements for short-term financing. Changes in our working capital are driven generally by changes in our accounts receivable, changes in our accounts payable, credit extended to and the timing of collections from our customers, and the level and timing of our capital expenditures. As of December 31, 2018, we had a working capital deficit of approximately $5.5 million, as compared to a working capital deficit of $28.3 million as of September 30, 2018, $20.8 million as of June 30, 2018 and $2.0 million as of December 31, 2017. This decrease in working capital deficit occurred primarily as a result of the reclassification of our long-term assets (primarily property, plant and equipment) to current assets held for sale of approximately $25.0 million.

Argentina Operations. As discussed under “– Business Segments – Argentina Segment,” we have incurred losses under out two-year contract with our primary customer in Argentina. We have been operating under a transition agreement with our primary customer in Argentina since May 2018 and we continued to provide services under that agreement during the third quarter of 2018. Subsequent to the third quarter of 2018, we have not provided any services to our primary customer in Argentina under the transition agreement or otherwise, and we did not generate any revenue from our Argentina operations in the fourth quarter of 2018. We did not generate any material revenue from our Argentina operations in the fourth quarter of 2018 and may not generate any material revenue in future periods. As of December 31, 2018, the working capital associated with our Argentina operations was approximately $9.2 million (amount includes asset held for sale reclassification of $12.5 million from long-term into current), as compared to working capital of $2.5 million as of September 30, 2018, $2.4 million as of June 30, 2018 and $2.3 million as of December 31, 2017. As a result, our Argentina operations may require access to additional capital, which may not be available on reasonable terms or at all. If we are unable to obtain a sufficient amount of funds, we may not be able to satisfy the working capital requirements, indebtedness or other obligations of our operations in Argentina.

Historically, we have managed our working capital requirements primarily with our existing cash balances, funds provided under the Receivables Agreement described below and external financings. We are actively pursuing the sale of a substantial majority of the equipment, inventory and other operating assets relating to our U.S. operations. We currently intend to use the proceeds from any such sales to reduce our outstanding liabilities and improve our liquidity, however, there can be no assurance as to the ultimate consummation, timing or amount of proceeds generated from any such asset sales. If we are unable to obtain a sufficient amount of proceeds from asset sales or funds from other sources, we may not be able to satisfy our working capital requirements, indebtedness and other obligations.

On March 18, 2019, the Company entered into an Asset Purchase Agreement with an unrelated third party to dispose of substantially all of the assets and equipment used in the Company’s operations in Argentina for a purchase price of approximately $13 million. The transaction is expected to close in phases over approximately 90 days from the date of signing.

Receivables Agreement. On February 8, 2018, we entered into a Recourse Receivables Purchase & Security Agreement (the “Receivables Agreement”) with Porter Capital Corporation (“Porter Capital”). Under the terms of the Receivables Agreement, we were able, from time to time to sell accounts receivable (“Accounts”) to Porter Capital in exchange for funds in an amount equal to 80% (or less as percentage is subject to credit limits established by Porter Capital) of the face amount of the applicable Account at the time of sale of the Account, with the remaining 20% of the face amount of the applicable Account to be held back as a required reserve amount to be paid to us following Porter Capital’s receipt of payment on the Account by the account debtor, less applicable fees and interest charges. The total face amount of outstanding Accounts purchased by Porter Capital under the Receivables Agreement could not exceed $12.5 million.

Under the terms of the Receivables Agreement, we were obligated to pay interest on the face amount of the outstanding and unpaid Accounts purchased by Porter Capital, less the amount of the reserve account, at an interest rate equal to the Prime Rate (as defined in the Receivables Agreement) plus 8.25%. We were obligated under the Receivables Agreement to pay certain fees, including a fee (the “Minimum Term Fee”) payable upon termination of the agreement in an amount equal to: (i) the monthly interest rate multiplied by $5 million, multiplied by the number of months in the agreement term, less the amount of actual interest paid during the term of the agreement; or (ii) following the occurrence of an Event of Default (as defined below) that had not been cured within the time periods contemplated under the agreement, $1.8 million, less the amount of actual interest paid during the term of the agreement. The Minimum Term Fee was also subject to reduction under certain circumstances if Porter Capital did not purchase certain eligible Accounts that were presented for purchase by us.

All of our obligations under the Receivables Agreement were secured by liens on certain of our assets, including the accounts receivable, chattel paper, inventory relating to our U.S. operations and certain equipment used for our U.S. operations (excluding equipment subject to vendor financing) (collectively the “Collateral”). The Receivables Agreement had an initial one-year term, with us being permitted to terminate the Receivables Agreement prior to the expiration of the initial term upon written notice to Porter Capital and payment of our outstanding obligations under the Receivables Agreement, including the Minimum Term Fee. On October 19, 2018, we delivered a notice to Porter Capital of our election to terminate the Receivables Agreement following the payment of our remaining obligations thereunder, including a Minimum Term Fee of approximately $0.2 million. As a result, we will no longer be able to obtain funds under the Receivables Agreement and the Collateral has been released from the liens that had secured our obligations under the Receivables Agreement.

For sales of our receivable under this Receivables Agreement, the Company applies the guidance in ASC 860, “Transfers and Servicing – Sales of Financial Assets”, which requires the derecognition of the carrying value of those accounts receivable in the Consolidated Balance Sheets. For the year ended December 31, 2018, $31.0 million of accounts receivable transferred pursuant to the Receivables Agreement qualified as sales of receivables and the carrying amounts were derecognized. There was no loss associated with the sales of these receivables. Upon termination on October 19, 2018, we were owed $0.5 million representing the held back required reserve amount to be paid to us following Porter Capital’s receipt of payment on the Account by the account debtor. This balance was paid prior to December 31, 2018. Additionally, in connection with the termination of the Receivables Agreement in October 2018, we were refunded approximately $0.2 million from Porter Capital after payment of the Minimum Term Fee.

Critical Accounting Policies

For a complete summary of our significant accounting policies, refer to Note 2, Basis of Presentation and Significant Accounting Policies, in our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.

The preparation of consolidated financial statements in conformity with generally accepted accounting principles (“GAAP”) requires management to select appropriate accounting principles from those available, to apply those principles consistently and to make reasonable estimates and assumptions that affect revenues and associated costs as well as reported amounts of assets and liabilities, and related disclosure of contingent assets and liabilities. Certain accounting policies involve judgments and uncertainties. We evaluate estimates and assumptions on a regular basis. We base our respective estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from the estimates and assumptions used in preparation of our consolidated financial statements. We consider the following policies to be the most critical to understanding the judgments that are involved and the uncertainties that could impact our results of operations, financial condition and cash flows.

As a “smaller reporting company”, we are reporting in accordance with certain reduced public company reporting requirements permitted by applicable SEC requirements. As a result, our financial statements may not be comparable to companies that are not smaller reporting or elect to avail themselves of this provision.

We believe the following critical accounting policies involve significant areas of management’s judgments and estimates in the preparation of our consolidated financial statements.

Property and Equipment. Fixed asset additions are recorded at cost less accumulated depreciation. Cost of services consists of products, components, labor and overhead. Expenditures for renewals and betterments that extend the lives of the assets are capitalized. ~~An allocable amount of interest on borrowings is capitalized for self-constructed assets and equipment during their construction period.~~ Amounts spent for maintenance and repairs are charged against operations as incurred. Costs of fixed assets are depreciated on on a straight-line basis over the estimated useful lives of the related assets which range from one and a half to seven years ~~for~~ for service equipment. Leasehold improvements will be depreciated over the lesser of the estimated useful life of the improvement or the remaining lease term. Management is responsible for reviewing the carrying value of property and equipment for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to the amount by which the carrying value exceeds the fair value of assets. When making this assessment, the following factors are considered: current operating results, trends and prospects, as well as the effects of obsolescence, demand, competition and other economic factors.

~~Capital~~Revenue ~~Lease Obligations~~Recognition. ~~The~~Effective ~~Company~~January ~~leases~~1, ~~certain~~2018, ~~equipment~~the ~~under~~Company ~~lease~~adopted ~~agreements.~~a ~~The~~comprehensive ~~Company~~new ~~evaluates~~revenue ~~each~~recognition ~~lease~~standard, toASC ~~determine~~Topic ~~its~~606-Revenue ~~appropriate~~from ~~classification~~Contracts aswith anCustomers. ~~operating~~The ordetails ~~capital~~of ~~lease~~the ~~for~~significant ~~financial~~changes ~~reporting~~to ~~purposes.~~accounting ~~Any~~policies ~~lease~~resulting ~~that~~from ~~does~~the ~~not meet~~adoption of the ~~criteria~~new ~~for~~standard aare ~~capital~~set ~~lease~~out isbelow. ~~accounted~~The ~~for~~Company asadopted anthe ~~operating~~standard ~~lease.~~using ~~The~~a ~~assets~~modified ~~and~~retrospective ~~liabilities~~method; ~~under~~accordingly, ~~capital~~the comparative ~~leases~~information ~~are~~for ~~recorded at~~ the years ~~lower~~ended ofDecember ~~the~~31, ~~present~~2017 ~~value~~and of2016 ~~the~~has ~~minimum~~not ~~lease~~been ~~payments~~adjusted orand ~~the~~continues ~~fair~~to ~~market~~be ~~value~~reported under of the ~~related~~previous ~~assets~~revenue standard. ~~Assets~~The ~~under~~adoption ~~capital leases~~of ~~are~~this ~~amortized~~standard ~~using~~did ~~the~~not ~~straight-line~~have ~~method~~a ~~over~~material impact to the ~~initial~~consolidated ~~lease~~financial position, ~~term.~~reported ~~Amortization~~revenue, results of ~~assets~~operations ~~under~~or ~~capital~~cash ~~leases~~flows ~~is included~~as inof ~~depreciation~~and ~~expense~~for the year ended December 31, 2018.

~~Revenue~~Under ~~Recognition.~~the ~~Revenues~~new ~~are~~standard, ~~recognized~~revenue asrecognition ~~services~~is ~~are~~based ~~completed~~on ~~and~~the ~~collectability~~transfer isof ~~reasonably~~control, ~~assured.~~or ~~With~~the ~~respect~~customer’s ability to ~~hydraulic fracturing~~benefit from the services, weand ~~expect~~products toin ~~recognize~~an ~~revenue~~amount atthat reflects the ~~completion~~consideration ofexpected ~~each~~to ~~fracturing~~be ~~stage~~received ~~and~~in ~~invoice~~exchange ~~the~~for ~~customer~~those ~~upon~~services ~~the~~and ~~completion~~products. ofIn ~~each~~recognizing ~~job.~~revenue Infor ~~our~~services ~~industry~~and products, itthe transaction price is ~~not~~determined ~~uncommon~~from ~~for~~sales aorders ~~service~~or ~~provider~~contracts with tocustomers. ~~complete~~Revenue ~~multiple~~is recognized at the completion of each fracturing ~~stages~~stage, ~~per day~~and ~~during~~in most cases the ~~course~~price at the end of aeach stage ~~job~~is fixed, however, in limited circumstances contracts may contain variable consideration.

39Variable consideration typically may relate to discounts, price concessions and incentives. We estimate variable consideration based on the amount of consideration we expect to receive. The Company accrues revenue on an ongoing basis to reflect updated information for variable consideration as performance obligations are met.

The Company also assesses customers’ ability and intention to pay, which is based on a variety of factors including historical payment experience and financial condition. Payment terms and conditions vary by contract type, although terms generally include a requirement of payment within 30 to 45 days.

Stock-Based Payments. We account for stock incentive awards issued to employees and non-employees in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Stock Compensation. Accordingly, employee stock-based compensation is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the requisite service period, or upon the occurrence of certain vesting events. Additionally, stock-based awards to non-employees are expensed over the period in which the related services are rendered. The grant-date fair value of awards is estimated using the Black-Scholes option-pricing model, which requires the use of highly subjective assumptions such as the estimated market value of our stock, expected term of the award, expected volatility and the risk-free interest rate. Since some of our share options were not publicly traded at the time of issuance and have not been traded privately, the value of the shares is estimated based on significant unobservable inputs, primarily consisting of the estimated value of the start-up activities completed as of the grant date, as well as other inputs that are estimated based on similar entities with publicly traded securities. We continue to use judgment in evaluating the expected term, volatility and forfeiture rate related to our stock-based compensation on a prospective basis and incorporate these factors into our option-pricing model. Each of these inputs is subjective and generally requires significant management judgment. If, in the future, we determine that another method for calculating the fair value of our unit-based awards is more reasonable, or if another method for calculating these input assumptions is prescribed by authoritative guidance, and, therefore, should be used to estimate expected volatility or expected term, the fair value calculated for our employee unit-based awards could change significantly. Higher volatility and longer expected terms generally result in an increase to stock-based compensation expense determined at the date of grant.

Income Taxes. We account for income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carryforwards. 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 on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Our tax filings for various periods are subject to audit by the tax authorities in most jurisdictions where we conduct business. These audits may result in assessments of additional taxes that are resolved with the authorities or through the courts. We believe these assessments may occasionally be based on erroneous and even arbitrary interpretations of local tax law. Resolution of these situations inevitably includes some degree of uncertainty; accordingly, we provide taxes only for the amounts we believe will ultimately result from these proceedings. The resulting change to our tax liability, if any, is dependent on numerous factors including, among others, the amount and nature of additional taxes potentially asserted by local tax authorities; the willingness of local tax authorities to negotiate a fair settlement through an administrative process; the impartiality of the local courts; the number of countries in which we do business; and the potential for changes in the tax paid to one country to either produce, or fail to produce, an offsetting tax change in other countries. The potential exists that the tax resulting from the resolution of current and potential future tax controversies may differ materially from the amount accrued.

Tax Cuts and Jobs Act. On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35 percent to 21 percent; (2) requiring companies to pay a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) a new provision designed to tax global intangible low-taxed income (GILTI); (5) eliminating the corporate alternative minimum tax (AMT) and changing how existing AMT credits can be realized; (6) creating the base erosion anti-abuse tax (BEAT), a new minimum tax, (7) creating a new limitation on deductible interest expense; and (8) changing rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after December 31, 2017.37

Shortly after enactment of the Tax Act, the SEC staff issued SAB 118, which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

Valuation Allowance for Deferred Tax Assets. We record a valuation allowance to reduce the carrying value of our deferred tax assets when it is more likely than not that a portion or all of the deferred tax assets will expire before realization of the benefit or future deductibility is not probable. The ultimate realization of the deferred tax assets depends on the ability to generate sufficient taxable income of the appropriate character and in the related jurisdiction in the future. In evaluating our ability to recover our deferred tax assets, we consider the available positive and negative evidence, including our past operating results, the existence of cumulative losses in the most recent years and our forecast of future taxable income. In estimating future taxable income, we develop assumptions, including the amount of future pretax operating income, the reversal of temporary differences and the implementation of feasible and prudent tax planning strategies. These assumptions require significant judgment.

Recent Accounting Pronouncements

See Part II, Item 8, Notes to consolidated financial statements – Note 2 – “Basis of Presentation and Significant ~~Accounting~~ Accounting Policies.”

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

We are exposed to certain market risks as part of our ongoing business operations, including risks from changes in foreign currency exchange rates and commodities that could impact our financial position, results of operations and cash flows. We manage our exposure to these risks through regular operating and financing activities.

Foreign Currency Risk

During the years ended December 31, ~~2015,~~2017 ~~2016~~ and ~~2017~~2018, we conducted operations in Argentina. The functional currency for our Argentina ~~operations~~ operations is the U.S. dollar. We and our foreign subsidiaries from time to time will hold foreign currencies. Exchange rate fluctuations will subject us to foreign currency risk. In the future, we could experience fluctuations in financial results from our operations outside the U.S., and there can be no assurance that payments received in foreign currencies can be repatriated to the U.S. or that we will be able, contractually or otherwise, to reduce the foreign currency risks associated with our international operations.

Commodity Price Risk

Our revenues, profitability and future rate of growth significantly depend upon the market prices of oil and natural gas. Lower prices may also reduce the amount of oil and gas that can economically be produced.

4138

Item 8.

Financial Statements and Supplemental Data

Report of Independent Registered Public Accounting Firm	4340
Consolidated balance sheets	4441
Consolidated statements of operations	4542
Consolidated statements of cash flows	4643
Consolidated statements of changes in stockholders’ equity	47
Consolidated statements of changes in stockholders’ equity (deficit)	44
Notes to consolidated financial statements	4845

4239

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Eco-Stim Energy Solutions, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Eco-Stim Energy Solutions, Inc. and Subsidiaries (the “Company”) as of December 31, ~~2017~~2018 and ~~2016~~2017, and the related consolidated statements of operations, cash flows, and changes in stockholders’ equity for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, ~~2017~~2018 and ~~2016~~2017, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered recurring losses and negative cash flows from operations and has a net capital deficiency which raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("“PCAOB"”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of ~~their~~its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

We have served as the Company’s auditor since 2013.

/s/ Whitley Penn LLP

We have served as the Company's auditor since 2013.

Houston, Texas

~~March~~May 1910, ~~2018~~2019

4340

ECO-STIM ENERGY SOLUTIONS, INC.

~~CONDENSED~~ CONSOLIDATED BALANCE SHEETS

	December 31, 2017			December 31, 2016
	December 31, 2018			December 31, 2017
Assets
Current assets:
Cash and cash equivalents	$	83,~~826~~741,~~076~~627		$	16,~~731~~970,~~364~~926
Accounts receivable		10,167,044			2,865,707
Accounts receivable, net of allowance		182,464			5,692,479
Inventory		3,699,245			2,047,163
Prepaids		81,459			699,150
Prepaids		4,363,064			1,918,875
Other assets		69,235			254,454
Other assets		787,846			31,664
Assets held for sale		25,030,359			79,050,532
Total current assets		2729,~~843~~105,~~275~~144			892,~~594~~667,~~773~~541
Property, plant and equipment, net		752,~~825~~050,~~539~~000			3811,~~382~~001,~~391~~273
Other non-current assets		—			325,756
Total assets	$	31,155,144		$	103,668,814
Total assets	$	103,668,814		$	47,302,920
Liabilities and stockholders’ equity (deficit)
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	1715,~~110~~181,~~691~~502		$	211,~~453~~828,~~551~~201
Accrued expenses		43,~~820~~760,~~774~~135			41,~~503~~606,~~180~~922
Short-term notes payable		7,~~047~~916,~~020~~188			~~2,000,000~~—
Current portion of capital lease payable		836,855			789,166
Liabilities held for sale		7,703,411			17,552,929
Total current liabilities		2934,~~815~~561,~~340~~236			930,~~745~~988,~~897~~052
Non-current liabilities:
Long-term notes payable		1,172,712			21,737,404
Long-term capital lease payable		—			766,687
Total non-current liabilities		1,172,712			22,504,091
Commitments and contingencies
Stockholders’ equity
Stockholders’ equity (deficit)
Preferred stock, $0.001 par value, 50,000,000 shares authorized, none issued		—			—
Preferred stock, $0.001 par value, 50,000,000 shares authorized, 30,000 designated as Series A Convertible Preferred Stock, 10,600 of Series A Preferred issued and outstanding at December 31, 2018 and none issued or outstanding at December 31, 2017		11			—
Common stock, $0.001 par value, 200,000,000 shares authorized, 74,599,749 issued and 74,577,899 outstanding at December 31, 2017 and 14,485,937 issued and 14,464,087 outstanding at December 31, 2016		74,578			14,485
Common stock, $0.001 par value, 200,000,000 shares authorized, 18,849,935 issued and 18,844,472 outstanding at December 31, 2018 and 18,649,937 issued and 18,644,474 outstanding at December 31, 2017		75,400			74,578
Additional paid-in capital		~~144~~155,~~071~~850,~~119~~502			59144,~~556~~071,~~505~~119
Treasury stock, at cost; 21,850 common shares at December 31, 2017 and December 31, 2016		(57,469	)		(57,469	)
Treasury stock, at cost; 5,462 common shares at December 31, 2018 and December 31, 2017		(57,469	)		(57,469	)
Accumulated deficit		(71159,~~407~~274,~~466~~536	)		(4471,~~460~~407,~~589~~466	)
Total stockholders’ equity		72,680,762			15,052,932
Total stockholders’ equity (deficit)		(3,406,092	)		72,680,762
Total liabilities and stockholders’ equity	$	103,668,814		$	47,302,920
Total liabilities and stockholders’ equity (deficit)	$	31,155,144		$	103,668,814

See accompanying notes to consolidated financial statements.

4441

ECO-STIM ENERGY SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

	Years Ended December 31,
	2017			2016
	2018			2017
Revenues	$	4440,~~017~~709,~~748~~621		$	824,~~352~~464,~~236~~164
Operating cost and expenses:
Cost of services		5351,~~002~~578,~~499~~914			1028,~~630~~550,~~233~~114
Selling, general, and administrative expenses		811,~~441~~654,~~933~~363			56,~~892~~890,~~235~~843
Research and development		456,288			486,128
Depreciation and amortization expense		14,199,357			2,760,277
Depreciation and amortization expense		8,029,247			4,667,797
Impairment of assets		28,803,756			—
Total operating costs and expenses		69106,~~929~~236,~~967~~390			2138,~~676~~201,~~393~~234
Operating loss		(2565,~~912~~526,~~219~~769	)		(13,~~324~~737,~~157~~070	)
Other income (expense):
Interest expense		(1,~~948~~685,~~997~~117	)		(31,~~978~~695,~~728~~494	)
Interest forgiven		~~634,477~~—			—634,477
Other expense		(~~353~~274,~~667~~528	)		(~~317~~12,~~043~~647	)
Total other expense		(1,~~668~~959,~~187~~645	)		(41,~~295~~073,~~771~~664	)
Benefit (provision) for income taxes		633,529			(305,320	)
Net loss from continuing operations	$	(67,486,414	)	$	(14,810,734	)
Net loss	$	(26,946,877	)	$	(17,925,248	)
Loss from discontinued operations		(20,380,656	)		(12,136,143	)
Basic and diluted loss per share	$	(0.41	)	$	(1.32	)
Net loss		(87,867,070	)		(26,946,877	)
Weighted average number of common shares outstanding-basic and diluted		66,065,417			13,615,428
Basic and diluted loss per share continuing operations	$	(3.60	)	$	(0.90	)
Basic and diluted loss per share discontinued operations		(1.09	)		(0.73	)
Basic and diluted loss per share	$	(4.69	)	$	(1.63	)
Weighted average number of common shares outstanding-basic and diluted		18,726,628			16,516,354

See accompanying notes to consolidated financial statements.

4542

ECO-STIM ENERGY SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Years Ended December 31,
	2017			2016
	2018			2017
Operating Activities
Net loss	$	(2687,~~946~~867,~~877~~070	)	$	(1726,~~925~~946,~~248~~877	)
Depreciation and amortization		8,029,247			4,667,797
Adjustments to reconcile net loss from operations to net cash provided by operating activities:
Amortization of debt discount and loan origination cost		459,797			255,530
Depreciation and amortization		14,199,357			2,760,277
Stock based compensation		1,754,706			695,910
Amortization of debt discount and loan origination cost		70,167			459,797
Impairment of fixed assets		28,803,756			—
Stock based compensation		2,977,423			1,754,706
Gain on sale of fixed assets		(1,257,273	)		—
Changes in operating assets and liabilities:
Accounts receivable		(75,~~301~~510,~~337~~015	)		5(1,~~289~~217,~~557~~914	)
Inventory		(1550,~~652,082~~422	)		(~~500~~3,~~700~~699,245	)
Prepaids and other assets		(2,~~141~~128,~~490~~418	)		13,~~468~~080,~~076~~224
Accounts payable and accrued expenses		13912,~~305,679~~083			~~772~~(3,~~223~~447,915	)
Net cash used in operating activities		(14,492,357	)		(5,276,855	)
Net cash used in operating activities of continuing operations		(33,972,702	)		(27,256,947	)
Net cash provided by operating activities of discontinued operations		20,380,656			12,136,143
Net cash used in operating activities		(13,592,046	)		(15,120,804	)
Investing Activities
Purchases of equipment		(359,~~379~~832,~~441~~074	)		(434,~~591~~831,~~080~~333	)
Net cash used in investing activities		(35,379,441	)		(4,591,080	)
Proceeds from sale of equipment		8,635,788			—
Net cash used in investing activities of continuing operations		(1,196,286	)		(34,831,333	)
Net cash used in investing activities of discontinued operations		(2,846	)		(548,108	)
Net cash used in investing activities		(1,199,132	)		(35,379,441	)
Financing Activities
Proceeds from sale of common stock, net		~~41,624,402~~—			141,~~558~~624,~~555~~402
Proceeds from notes payable		18,719,126			2,194,611
Proceeds from sale of preferred stock, net		9,702,793			—
Payments on notes payable		(2,587,852	)		(3,293,732	)
Proceeds from notes payable		11,537,417			18,719,126
Payments on capital lease		(789,166	)		(565,449	)
Payments on notes payable		(9,160,095	)		(2,587,852	)
Purchase of treasury stock		—			(37,175	)
Payments on capital lease		(518,236	)		(789,166	)
Net cash provided by (used in) financing activities		56,966,510			(143,190	)
Net cash provided by financing activities		11,561,879			56,966,510
Net increase (decrease) in cash and cash equivalents		7(3,~~094~~229,~~712~~299	)		~~(10~~6,~~011~~466,~~125~~265	)
Cash and cash equivalents, beginning of year		16,~~731~~970,~~364~~926			11504,~~742,489~~661
Cash and cash equivalents, end of year	$	83,~~826~~741,~~076~~627		$	16,~~731~~970,~~364~~926
Supplemental Disclosure of Cash Flow Information
Cash paid during the year for interest	$	~~385~~1,~~259~~227,002		$	3385,~~448,408~~259
Cash paid during the year for income taxes	$	~~541~~309,~~723~~417		$	~~140~~541,~~341~~723
Non-cash transactions
Property, plant and equipment additions in accounts payable	$	1,~~669~~760,~~057~~514		$	1,~~327~~669,~~927~~057
Notes payable settled through recapitalization	$	~~22,000,000~~—		$	—22,000,000
Conversion of debt to equity	$	~~41,195,599~~—		$	—41,195,599
Equipment purchased with notes payable	$	844,~~807,582~~503		$	—8,807,582
Accrued but unpaid dividends	$	900,000		$	—
Return of capital leased assets	$	4,617,223		$	—

See accompanying notes to consolidated financial statements.

4643

ECO-STIM ENERGY SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY ~~YEARS ENDED~~(DEFICIT)

YEARS ENDED DECEMBER 31, ~~2017~~2018 AND ~~2016~~2017

	Common Stock					Additional Paid-in		Treasury			Accumulated
	Preferred Stock					Common Stock					Additional Paid-in			Treasury			Accumulated
	Shares			Amount		~~Capital~~Shares		~~Stock~~Amount			~~Deficit~~Capital			~~Total~~Stock			Deficit			Total
Balance at December 31, 2015		13,566,050		$	13,572	$	57,302,953	$	(20,294	)	$	(26,535,341	)	$	30,760,890
Balance at December 31, 2016		—		$	—		3,621,485	$	14,485		$	59,556,505		$	(57,469	)	$	(44,460,589	)	$	15,052,932
Sale of common stock, net		~~796,573~~—			~~797~~—		17,~~557~~536,~~758~~043		—30,086			—42,519,083			~~1,558,555~~—			—			42,549,169
Interest converted to common stock		116,375			116		695,794		—			—			695,910
Common stock-based compensation		—			—		107,713		468			1,754,238			—			—			1,754,706
Treasury stock		(14,911	)		—		—		(37,175	)		—			(37,175	)
Stock issued upon conversion of debt, net of costs		—			—		7,384,696		29,539			40,241,293			—			—			40,270,832
Net loss		—			—		—		—			~~(17,925,248~~—	)		~~(17,925,248~~—	)		(26,946,877	)		(26,946,877	)
Balance at December 31, 2016		14,464,087		$	14,485	$	59,556,505	$	(57,469	)	$	(44,460,589	)	$	15,052,932
Balance at December 31, 2017		—		$	—		18,649,937	$	74,578		$	144,071,119		$	(57,469	)	$	(71,407,466	)	$	72,680,762
Sale of common stock, net		30,144,174			30,086		42,519,083		—			—			42,549,169
Common stock-based compensation		—			—		199,998		822			2,976,601			—			—			2,977,423
Stock based compensation		430,853			468		1,754,238		—			—			1,754,706
Preferred stock based issuance, net of costs		10,600			11		—		—			9,702,782			—			—			9,702,793
Stock issued upon conversion of debt, net of costs		29,538,785			29,539		40,241,293		—			—			40,270,832
Preferred Dividends		—			—		—		—			(900,000	)		—			—			(900,000	)
Net loss		—			—		—		—			~~(26,946,877~~—	)		~~(26,946,877~~—	)		(87,867,070	)		(87,867,070	)
Balance at December 31, 2017		74,577,899		$	74,578	$	144,071,119	$	(57,469	)	$	(71,407,466	)	$	72,680,762
Balance at December 31, 2018		10,600		$	11		18,849,935	$	75,400		$	155,850,502		$	(57,469	)	$	(159,274,536	)	$	(3,406,092	)

See accompanying notes to consolidated financial statements.

4744

ECO-STIM ENERGY SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, ~~2017~~2018 and ~~2016~~2017

1. Nature of Business

Historically, Eco-Stim Energy Solutions, Inc. isoperated as a ~~growth-oriented,~~ technology-driven independent oilfield services company ~~providing~~that offered well stimulation, coiled tubing and field management services to the upstream oil and gas industry. WeIn ~~are~~September ~~focused~~2018, onwe ~~reducing~~completed ~~the~~work ~~ecological~~under ~~impact~~our ~~and~~pressure ~~improving~~pumping contract with our primary U.S. customer. Given the ~~economic~~current ~~performance~~weakness of the U.S. well stimulation ~~process~~market, in ~~“unconventional”~~September 2018 ~~drilling~~we ~~formations.~~elected ~~We currently~~to ~~offer~~suspend our ~~services~~U.S. towell ~~oil~~stimulation operations and ~~natural~~significantly ~~gas~~reduce ~~exploration~~our ~~and~~U.S. ~~production~~workforce ~~(“E&P”) companies~~ in ~~the~~alignment ~~United~~with ~~States~~potential near-term opportunities, including pump down and ~~Argentina~~miscellaneous pumping services. ~~Our~~In ~~focus~~Argentina, iswe topreviously ~~bring~~operated under a transition agreement with our ~~service~~primary ~~offerings,~~customer ~~technologies~~since ~~and~~May ~~processes~~2018 tothrough the ~~most~~third ~~active~~quarter ~~shale~~of ~~resource basins~~2018. ~~both~~Subsequent ~~domestically~~to ~~and~~the ~~outside~~third quarter of ~~North~~2018, ~~America~~we ~~using~~have ~~our~~not ~~technology~~provided any significant services to ~~differentiate~~our primary customer in Argentina under the transition agreement or otherwise and have not generated any material revenue from our ~~service~~Argentina ~~offerings~~operations since the third quarter of 2018.

During the fourth quarter of 2018, the Company completed the disposition of certain of its U.S. equipment and other operating assets to unrelated third parties in several separate transactions in exchange for aggregate cash proceeds, before commissions and selling expenses, of approximately $5.7 million. On January 24, 2019, the Company completed the disposition of certain of its U.S. equipment to an unrelated party in exchange for approximately $2.8 million of aggregate cash proceeds, before commissions and selling expenses. On February 21, 2019, the Company completed the disposition of certain of its U.S. equipment to an unrelated party in exchange for approximately $6.2 million of aggregate cash proceeds, before commissions and selling expenses. On March 14, 2019, the Company completed the disposition of certain of its U.S. equipment to an unrelated party in exchange for approximately $2.1 million of aggregate cash proceeds, before commissions and selling expenses. Net of commissions, the Company received approximately $16.8 million. In the U.S., we have sold materially all of the equipment, inventory and other operating assets relating to our U.S. operations and terminated all field level employees.

On March 18, 2019, the Company signed an agreement with an unrelated third party to purchase all of our material equipment and machinery assets in Argentina. See note 18. Subsequent Events.

2. Basis of Presentation and Significant Accounting Policies

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”).

The consolidated financial statements for the years ended December 31, 2018 and 2017 were prepared on the going concern basis of accounting, which contemplates realization of assets and satisfaction of liabilities in the normal course of business and were prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) and include the assets, liabilities, revenues and expenses of the Company’s subsidiaries.

Principles of Consolidation

We consolidate all wholly-owned subsidiaries, controlled joint ventures and variable interest entities where the Company has determined it is the primary beneficiary. All material intercompany accounts and transactions have been eliminated in consolidation. Our wholly-owned subsidiaries include: Viking Rock Holding, AS (100%), Viking Rock, AS (100% owned), Cherokee Rock, Inc. (100% owned), EcoStim, Inc. (100% owned), and ~~EcoStim~~Eco-Stim Energy Solutions Argentina, SA (100% owned).

Going Concern

~~The~~Under ~~Company~~Accounting ~~has~~Standards ~~incurred~~Update ~~net~~2014-15, ~~losses~~Presentation ~~and~~of ~~losses~~Financial ~~from~~Statements-Going ~~operations~~Concern, ~~since~~the ~~inception~~Company ~~and~~is ~~will~~required ~~require~~to ~~additional~~evaluate whether ~~capital~~there is a substantial doubt about its ability to continue ~~operations. As~~as ofa ~~December~~going ~~31,~~concern ~~2017~~each reporting period, ~~the~~including ~~Company~~interim periods. ~~had~~In ~~cash~~evaluating ~~and~~the ~~cash~~Company’s ~~equivalents~~ability ofto ~~approximately~~continue ~~$8.8~~as ~~million~~a ~~and~~going ~~working~~concern, ~~capital~~management ~~deficit~~has ~~of approximately~~considered ~~$2.0~~conditions ~~million.~~and ~~These~~events that ~~factors~~could raise substantial doubt about the Company’s ability to continue as a going concern for 12 months following the date the Company’s financial statements are issued (May 10, 2019), including the Company’s current financial condition and liquidity sources, including current cash balances, forecasted cash flows, the Company’s obligations due before May 10, 2019, including the Company’s obligations described in Note 6 – Commitments and Contingencies, and the other conditions and events described below.

~~Management’s~~The ~~plans~~Company tohas ~~alleviate~~incurred substantial ~~doubt~~net ~~include:~~losses ~~(i)~~and ~~deploying~~losses ~~all~~from Uoperations since inception.S As of December 31, 2018, the Company had cash and cash equivalents of approximately $3.7 ~~fleets~~million atand ~~higher~~working ~~rates;~~capital ~~(ii)~~deficit ~~securing~~of approximately $5.5 million. The Company does not have access to a working capital facility and may not have access to ~~enhance~~other ~~liquidity~~sources ~~and~~of ~~support~~external ~~growth;~~capital ~~(iii)~~on ~~re-negotiating~~reasonable terms or at all. In September 2018, the ~~contract~~Company ~~with~~elected to suspend its ~~largest~~U.S. ~~customer~~well instimulation ~~Argentina~~operations toand ~~eliminate~~significantly reduce ~~certain~~its ~~third-party~~U.S. ~~services~~workforce ~~which~~in ~~contributed~~alignment ~~negatively~~with topotential ~~the~~near-term ~~Company’s~~opportunities. ~~fleet~~As ~~level~~a ~~gross~~result, ~~margins~~beginning in ~~Argentina~~the ~~during~~fourth quarter of 2018, ~~2017;~~the ~~(iv)~~Company ~~re-negotiating~~was only conducting pump down operations in the ~~contract~~U.S. ~~with~~and the Company’s ~~largest~~did ~~customer~~not generate any material revenue from its U.S. operations in ~~Argentina~~the tofourth ~~improve~~quarter ~~utilization~~of 2018, and ~~reduce~~as of May 10, 2019, has not generated any material revenue from its ~~stand-by~~U.S. ~~time~~operations. In addition, ~~thus~~the ~~eliminating~~Company ~~factors~~does not expect that ~~have~~its ~~contributed~~U.S. tooperations ~~negative~~will ~~fleet~~generate ~~level~~any ~~gross~~material ~~margin~~revenue in future periods. In Argentina;, ~~and~~the Company had been operating under a transition agreement with its primary customer since May 2018. Following the third quarter of 2018, ~~(v)~~the ~~raising~~Company has not provided any services to its primary customer in Argentina under the transition ~~additional~~agreement ~~capital~~or ~~for~~otherwise, and the Company did not generate any significant revenue from its Argentina operations during the fourth quarter of 2018.

As of ~~March~~December 1531, 2018, the ~~Company~~outstanding ~~has~~aggregate ~~all~~principal ~~fleets~~amount ~~deployed,~~of ~~and~~ the ~~one~~Company’s ~~non-deployed~~outstanding ~~fleet~~Negotiable asDemand ~~of December 31, 2017 has been~~Promissory ~~deployed~~Note atwas ~~rates~~approximately ~~higher~~$7.9 ~~than rates in 2017~~million. InIf ~~February 2018,~~ the Company’s ~~secured~~obligations ~~a receivable~~under ~~agreement~~the ~~designed~~Negotiable ~~to enhance~~Demand ~~liquidity~~Promissory ~~and support growth as described in~~ Note ~~20. The Company has engaged in negotiations with its customer in~~are ~~Argentina~~accelerated topursuant ~~seek modifications~~ to ~~the~~its ~~contract that would provide the Company with more favorable operating results. However~~terms, there can be no assurance that the Company’s ~~efforts to renegotiate the terms of the contract~~ will ~~be successful,~~have ~~and~~sufficient ~~the~~funds ~~Company may continue~~ to ~~incur~~repay ~~losses~~such ~~under~~obligations or the ~~contract in the future. Management believes the~~ Company ~~has~~’s ~~the~~other ~~ability to continue as a going concern for twelve months from the date of filing of this 10-K~~obligations.

Management’s plans to alleviate substantial doubt include: (i) pursuing the sale of a substantial majority of the equipment, inventory and other operating assets relating to the Company’s U.S. operations; (ii) using the proceeds from asset sales to reduce the Company’s outstanding liabilities and improve its liquidity; (iii) pursuing strategic alternatives, including alternatives for the Company’s operations in Argentina which could include selling, reducing the scale of, or shutting down the Company’s operations in Argentina; (iv) significantly reducing the Company’s U.S. workforce in alignment with potential near-term opportunities, which actions have been substantially implemented; (v) pursuing new work for the Company’s operations in Argentina; and (vi) taking other steps to reduce costs and liabilities. However, there can be no assurance as to the ultimate consummation, timing or amount of proceeds generated from any such asset sales or other actions. Based on the uncertainty of achieving these items and the significance of the factors described above, there is substantial doubt as to the Company’s ability to continue as a going concern for a period of 12 months following May 10, 2019.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Estimates are used in, but are not limited to, determining the following: allowance for doubtful accounts, recoverability of long-lived assets and intangibles, useful lives used in depreciation and amortization, income taxes and stock-based compensation. The accounting estimates used in the preparation of the consolidated financial statements may change as new events occur, as more experience is acquired, as additional information is obtained and as the Company’s operating environment changes.

4846

Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The Company maintains deposits in several financial institutions, ~~which~~in both Argentina and the U.S. Funds held in the U.S. may at times exceed amounts covered by insurance provided by the U.S. Federal Deposit Insurance Corporation (“FDIC”). The Company has not experienced any losses related to amounts in excess of FDIC limits.

Revenue ~~Recognition~~

~~All~~The ~~revenue~~Company isadopted ~~recognized~~Accounting ~~when~~Standards ~~persuasive~~Update ~~evidence~~(“ASU”) of2014-09, an“Revenue ~~arrangement~~from ~~exists~~Contracts with Customers,” which ~~specific~~outlines ~~performance~~a ~~completed~~single comprehensive model for entities to use in accounting for revenue arising from contracts with customers, effective January 1, 2018, using the ~~price~~modified isretrospective ~~fixed~~method. orAs there was no material impact on the Company’s current ~~determinable,~~revenue ~~and~~recognition ~~collection~~processes, isno ~~reasonably~~retrospective ~~assured~~adjustments aswere ~~follows:~~necessary.

Revenue is earned at a point in time when services are rendered, which is generally on a per stage basis for our well stimulation business or fixed daily rate for the Company’s coiled tubing operations. All revenue is recognized when a contract with a customer exists, the performance obligations under the contract have been satisfied, the amount to which the Company has the right to invoice has been determined and collectability of amounts subject to invoice is probable. The Company does not incur contract acquisition and origination costs. Taxes collected from customers and remitted to governmental authorities are accounted for on a net basis and, therefore, are excluded from revenues in the consolidated statements of operations and net cash provided by operating activities in the consolidated statements of cash flows.

The Company has elected the practical expedient to recognize revenue based upon the transactional value it has the right to invoice upon completion of each performance obligation per the contract terms, as the Company believes its right to consideration corresponds directly with the value transferred to the customer, and this expedient does not lend itself to the application of significant judgment. As a result of electing these practical expedients, there was no material impact on the Company’s current revenue recognition processes and no retrospective adjustments were necessary.

The Company’s obligations for refunds as well as the warranties and related obligations stated in its contracts with its customers are standard to the industry and are related to the correction of any defectiveness in the execution of its performance obligations.

The Company expenses sales costs and any commissions when incurred as the amortization period would have been one year or less.

Well Stimulation Revenue

The Company ~~provides~~has historically provided well stimulation services based on contractual arrangements, such as term contracts and pricing agreements, or on a spot market basis. Revenue is recognized upon completion of stimulation stages and includes the components of the services, and the chemicals and proppants consumed while performing the well stimulation services. ~~Customers~~For our U.S. business, our performance obligations are defined as stages. In the case of our Argentina business, our performance obligations have been defined as stages plus specific defined services noted within the contract. For both businesses, customers are invoiced upon the ~~completion~~ completion of each job, which ~~can~~ consist of ~~one~~multiple ~~or more~~ stimulation stages.

Under term pricing agreement arrangements, customers commit to targeted utilization levels at agreed-upon pricing, but without termination penalties or obligations to pay for services not used by the customer. In addition, the agreed-upon pricing is typically subject to periodic review.

Spot market basis arrangements are based on an agreed-upon hourly spot market rate. The Company also charges fees for setup and mobilization of equipment depending on the job, additional equipment used on the job, if any, and materials that are consumed during the well stimulation process. Generally, these fees and other charges vary depending on the equipment and personnel required for the job and market conditions in the region in which the services are performed.47

~~The~~Spot ~~Company~~market ~~also~~basis ~~generates~~arrangements ~~revenues from chemicals and proppants that~~ are ~~consumed~~based ~~while~~on ~~performing~~agreed-upon ~~well~~spot ~~stimulation~~market ~~services~~rates.

Coiled Tubing Revenue

~~The~~For ~~Company~~our ~~began providing~~ coiled tubing ~~and~~services, ~~other~~performance ~~well~~obligations ~~stimulation~~are ~~services~~satisfied within a day, in ~~early~~line ~~2015.~~with day rates established by the contract. Jobs for these services are typically short term in nature, lasting anywhere from a few hours to ~~multiple~~a few days. Revenue is recognized upon completion of each job based upon a completed field ticket. The Company charges the customer for mobilization, services performed, personnel on the job, equipment used on the job, and miscellaneous consumables at agreed-upon spot market rates.

49Disaggregation of Revenue

Revenue activities from continuing operations during twelve months ended December 31, 2018 and 2017, respectively were as follows:

	Year Ended December 31,
	2018		2017

Revenues by service type:
Well stimulation	$	40,709,621	$	24,464,164
Total	$	40,709,621	$	24,464,164

See also Item 8. Notes to Consolidated Financial Statements, Note 16: Segment Reporting

Contract Balances

In line with industry practice, the Company bills its customers for its services in arrears, typically when the stage or well is completed or at month-end. The majority of the Company’s jobs are completed in less than 14 days. Furthermore, it is currently not standard practice for the Company to execute contracts with prepayment features. As such, the Company’s contract liabilities with its customers are immaterial to its unaudited condensed consolidated balance sheets.

Fair Value of Financial Instruments

The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, other assets, accounts payable, accrued expenses, capital lease obligations and notes payable. The recorded values of cash and cash equivalents, accounts receivable, other assets, accounts payable, and accrued expenses approximate their fair values based on their short-term nature. The carrying value of capital lease obligations and notes payable approximate their fair value, and the interest rates approximate market rates.

Functional and ~~Presentation~~Reporting Currency

Items included in the financial statements of each of the Company’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The functional currency for the Norwegian and Argentine subsidiaries is the U.S. Dollar. The consolidated financial statements are presented in U.S. Dollars, which is the Company’s ~~presentation~~reporting currency.

Net Loss per Common Share

For the ~~years~~twelve months ended December 31, ~~2017~~2018 and ~~2016~~2017, the weighted average shares outstanding excluded shares of common stock issuable upon the exercise of certain stock options and ~~convertible debt~~shares of 1common stock issuable upon the conversion of outstanding shares of Series A Preferred totaling 3,~~605~~303,~~575~~721 and 4401,~~478~~393,~~507,~~ respectively, from the calculation of diluted earnings per share because these shares would be anti-dilutive. As of June 20, 2017, the Company’s convertible debt was converted into common stock at $1.40 per share and therefore the Company no longer has any convertible debt outstanding. Anti-dilutive warrants of ~~100~~25,000 for each of the ~~years~~twelve months ended December 31, ~~2017~~2018 and ~~2016~~2017 were also excluded from the weighted average share outstanding calculation.

Accounts Receivable

Accounts receivable are stated at amounts management expects to collect from outstanding balances both billed and unbilled (unbilled accounts receivable represents amounts recognized as revenue for which invoices have not yet been sent to clients). Management provides for probable uncollectible amounts through a charge to earnings and a credit to a valuation allowance based on its assessment of the current status of individual accounts. ToThe ~~date,~~Company ~~the~~evaluated ~~Company~~all ~~has~~accounts ~~recognized~~receivable ~~only~~and ~~insignificant~~determined ~~losses~~that ~~due~~an toallowance ~~uncollectible~~for doubtful accounts. ~~Balances~~was ~~still~~necessary ~~outstanding~~at ~~after~~December ~~management~~31, ~~has~~2018, ~~used~~but ~~reasonable~~that ~~collection~~no ~~efforts~~allowance ~~are~~was ~~written~~needed ~~off~~at ~~through~~December a31, ~~charge~~2017. The allowance for todoubtful ~~the~~accounts ~~valuation~~was ~~allowance~~deemed ~~and~~necessary aat ~~credit~~December 31, 2018 due to ~~accounts~~the ~~receivable.~~aging ~~The~~of ~~Company~~our ~~evaluated~~Argentina ~~all~~unbilled accounts receivable of ~~and~~$2.1 ~~determined~~million ~~that no~~being ~~reserve~~greater ~~for~~than ~~doubtful~~120 ~~accounts~~days ~~was~~placing ~~necessary~~into atquestion ~~December~~our ~~31,~~ability ~~2017~~to ~~and~~collect ~~2016~~on these amounts.

~~Included~~Prepaids in the accounts receivable balance are certain unbilled receivables with a significant customer that relate to work performed before the company entered into its rotational on-call contract in 2016. Under this prior arrangement, the Company was required to go through an arduous process to collect the outstanding amounts and ~~while~~Other the Company has a track record of collecting amounts billed under this prior arrangement, it has proven to take long periods of time. At December 31, 2017 and 2016, there were $0 and approximately $855,706, respectively, in outstanding unbilled amounts due under this prior arrangement. All amounts included in this arrangement have been collected. Further, amounts billed to this significant customer under the rotational on-call contracts signed earlier this year have been collected within a more normal timeframe.Assets

~~Prepaids~~Prepaid expenses and other assets are primarily comprised of U.S. prepaid vehicle registration fees.

Prepaid expenses are primarily comprised of Argentinian value added tax, revenue and gross income taxes along with prepaid insurance and prepaid vehicle registration fees. The prepaid value added tax will be reduced as the Company continues to invoice customers in Argentina.

Inventory

Inventories are stated at the lower of cost or net realizable value using the average method and appropriate consideration is given to deterioration, obsolescence and other factors in evaluating net realizable value.

Property, Plant and Equipment

Property, Plant and Equipment (“PPE”) is stated at historical cost less depreciation. Historical cost includes expenditures that are directly attributable to the acquisition of the items.

5049

Depreciation is computed using the straight-line method over the estimated useful lives of the assets for financial reporting purposes. Expenditures for major renewals and betterments that extend the useful lives are capitalized. Expenditures for normal maintenance and repairs are expensed as incurred. The cost of assets sold or abandoned, and the related accumulated depreciation are eliminated from the accounts and any gains or losses are reflected in the accompanying consolidated statements of operations for the respective period.

The estimated useful lives of our major classes of PPE are as follows:

Major Classes of PPE		Estimated Useful Lives
Machinery and equipment		2-7 years
Vehicles		5 years
Leasehold improvements		5 years (or the life of the lease)
Furniture and office equipment		3-5 years

In September 2018, we sold certain of our non-core U.S. equipment for $2.9 million, recognizing a gain of $0.3 million. The proceeds were used to fund the general operations of the business. During the fourth quarter of 2018, we sold approximately $5.7 million of plant and equipment and recognized a gain of approximately $0.9 million.

Leases

The Company ~~leases~~leased certain equipment under lease agreements. The Company evaluates each lease to determine its appropriate classification as an operating or capital lease for financial reporting purposes. Any lease that does not meet the criteria for a capital lease is accounted for as an operating lease. The assets and liabilities under capital leases are recorded at the lower of the present value of the minimum lease payments or the fair market value of the related assets. Assets under capital leases are amortized using the straight-line method over the lease term. Amortization of assets under capital leases is included in depreciation expense.

Stock-Based Compensation

The Company accounts for its stock options, warrants, and restricted stock grants under the fair value recognition provisions of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718. The Company currently uses the straight-line amortization method for recognizing stock option and restricted stock compensation costs. The measurement and recognition of compensation expense for all share-based payment awards made to our employees, directors or outside service providers are based on the estimated fair value of the awards on the grant dates. The grant date fair value is estimated using either an option-pricing model which is consistent with the terms of the award or a market observed price, if such a price exists. Such cost is recognized over the period during which an employee, director or outside service provider is required to provide service in exchange for the award, i.e., “the requisite service period” (which is usually the vesting period). The Company also estimates the number of instruments that will ultimately be earned, rather than accounting for forfeitures as they occur. For the years ~~ended~~ December 31, ~~2017~~2018 and ~~2016~~2017, the Company recorded $12,~~754~~977,~~706~~423 and $~~695~~1,~~910~~754,706, respectively, of stock-based compensation, which is included in cost of services, and selling, general and administrative expense, ~~and research and development~~ in the statement of operations. Total unamortized stock-based compensation expense at December 31, ~~2017~~2018 was $31,~~247~~432,~~370~~ 391 compared to $~~928~~3,~~786~~247,370 at December 31, ~~2016, and will be fully expensed through 2020~~2017.

Impairment of Long-Lived Assets

The Company reviews its long-lived assets for impairment when changes in circumstances indicate that the carrying amount of an asset may not be recoverable. ASC Topic 360 requires the Company to review long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset or group of assets may not be recoverable. The impairment review includes a comparison of future cash flows expected to be generated by the asset or group of assets with their associated carrying value. If the carrying value of the asset or group of assets exceeds expected cash flows (undiscounted and without interest charges), an impairment loss is recognized to the extent that the carrying value exceeds the fair value. If estimated future cash flows are not achieved with respect to long-lived assets, additional write-downs may be required. ~~During 2017, the Company evaluated its long-lived assets for impairment and determined no impairment was necessary.~~

During 2017, the Company evaluated its long-lived assets for impairment and determined no impairment was necessary.

During the second quarter of 2018, the Company concluded it had a triggering event requiring assessment of impairment for certain of its long-lived assets in conjunction with our decision to move from providing services operating two well stimulation fleets in the U.S. to providing a single well stimulation fleet in the U.S. providing pumping services to a single customer. As a result, crew and staff reductions were taken. Further, the Company reviewed the long-lived assets for impairment and recorded a $3.7 million impairment expense. The full amount is related to our U.S. segment. The impairment was measured using the market approach utilizing an appraisal to determine fair value of the impaired assets.

During the third quarter of 2018, the Company concluded it had a triggering event requiring assessment of impairment for certain of its long-lived assets in conjunction with our decision to pursue the sale of a substantial majority of our U.S. equipment and suspension of its U.S. well stimulation operations. The Company reviewed the long-lived assets for impairment and recorded a $19.7 million impairment expense. The full amount is related to our U.S. segment. The impairment was measured using the market approach utilizing current bid values being obtained for the assets.

During the fourth quarter of 2018, the Company concluded it had a triggering event requiring assessment of impairment for certain of its long-lived assets in conjunction with our decision to pursue the sale of a substantial majority of our U.S. equipment and suspension of our U.S. well stimulation operations, as well as our decision in Argentina to seek opportunities for sale of our assets or business. The Company recorded a loss on impairment during the fourth quarter of 2018 of $5.5 million and $4.4 million (included in discontinued operations) in our U.S. and Argentina segments, respectively. The impairments were measured using the market approach utilizing current net realizable values received in the sale of the assets subsequent to December 31, 2018.

Major Customers and Concentration of Credit Risk

The majority of the Company’s business from inception through the first quarter of 2017 was conducted with major and independent oil and natural gas companies in Argentina. For the twelve months ending December 31, 2018, 78% or $40.7 million and 22% or $11.4 million of our revenue is from the U.S. and Argentina, respectively. The Company evaluates the financial strength of its customers and provides allowances for probable credit losses when deemed necessary. The Company has historically derived a large amount of revenue from a small number of national and independent oil and natural gas companies. At December 31, 2018, the Company had a concentration of receivables with two customers.

For the twelve months ended December 31, 2018 and 2017, two major customers accounted for approximately 97% and 74% of our services revenue, respectively. Our accounts receivable at December 31, 2018 and 2017 were concentrated with two major customers representing 88% and 78%, respectively. The Company did not generate any material revenue from these customers following the third quarter of 2018.

Major Customers and Concentration of Credit Risk.

The majority of the Company’s business is conducted with major and independent oil and gas companies in Argentina. The Company evaluates the financial strength of its customers and provides allowances for probable credit losses when deemed necessary. The Company derives a large amount of revenue from a small number of major and independent oil and gas companies. At December 31, 2017, the Company had a concentration of receivables with three customers.

For the years ended December 31, 2017 and 2016, three major customers accounted for approximately 99% and 100% of our services revenue, respectively. Our accounts receivable at December 31, 2017 were concentrated with three major customers representing 99% and at December 31, 2016 were concentrated with one major customer representing 73%.

The Company places its cash and cash equivalents with high credit quality financial institutions.

Income Taxes

Deferred income taxes are determined using the asset and liability method in accordance with ASC Topic 740. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred income taxes are measured using enacted tax rates expected to apply to taxable income in years in which such temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred income taxes is recognized in the consolidated statement of operations of the period that includes the enactment date. In addition, a valuation allowance is established to reduce any deferred tax asset for which it is determined that it is more likely than not that some portion of the deferred tax asset will not be realized.

The Company is subject to U.S. federal and foreign income taxes along with state income and franchise taxes in Texas and Oklahoma. When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, ~~while~~ while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50% likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying consolidated balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination.

~~Accounting~~Recently ~~Guidance~~ Issued and Adopted asAccounting ~~of December 31, 2017~~Guidance

In ~~July~~May ~~2015~~2017, the FASB ~~issues~~issued ASU No. ~~2015~~2017-1109, ~~“Inventory~~Compensation ~~(Topic~~– ~~330)”,~~Stock Compensation (~~“ASU~~Topic ~~2015-11”~~718): ~~which~~Scope ~~amends and simplifies the measurement~~ of ~~inventory.~~Modification ~~The~~Accounting, which ~~main~~clarifies ~~provisions~~when ofmodification ~~the~~accounting ~~standard~~should ~~require~~be ~~that~~applied ~~inventory~~for bechanges ~~measured~~to atterms ~~the~~or ~~lower~~conditions of ~~cost~~ ~~and~~a ~~net~~share-based ~~realizable~~payment ~~value~~award. This ~~Prior~~ASU tois ~~the~~applied ~~issuance~~prospectively ofand ~~the~~is ~~standard,~~effective ~~inventory~~for ~~was~~fiscal ~~measured~~years atbeginning ~~the~~after ~~lower~~December of15, ~~cost~~2017, orand ~~market~~interim ~~(where~~periods within ~~market~~those ~~was defined as replacement cost~~years, with aearly ~~ceiling~~adoption ~~of net realizable value and floor of net realizable value less a normal profit margin)~~permitted. ~~The~~We ~~Company~~ adopted ASU ~~2015~~2017-1109 asin ofthe ~~January~~first 1quarter of 2018, ~~2017.~~with ~~The~~such adoption ~~did~~having ~~not have a~~ no material impact on the ~~Company’s~~ accompanying condensed consolidated financial statements ~~and related disclosures~~.

~~Accounting~~In ~~Guidance~~May ~~Issued~~2014, ~~but~~FASB ~~Not~~issued ~~Adopted~~ASU as2014-09, Revenue from Contracts with Customers (Topic 606), which replaced most existing revenue recognition guidance in U.S. GAAP when it became effective. This new standard requires us to recognize the amount of ~~December~~revenue 31to which we expect to be entitled for the transfer of promised goods or services to customers. We adopted the new standard using the modified retrospective application in the first quarter of 2018, ~~2017~~with such adoption having no impact on the accompanying condensed consolidated financial statements and no cumulative effect adjustment was recognized.

~~The recent accounting standards that have been issued or proposed by the Financial~~ Accounting ~~Standards Board (“FASB”)~~ orGuidance ~~other~~Issued ~~standards-setting~~But ~~bodies~~Not ~~that~~Adopted doas ~~not~~of ~~require~~December ~~adoption~~31, ~~until a future date are not expected to have a material impact on the consolidated financial statements upon adoption.~~2018

On February 25, 2016, the FASB issued ASU 2016-02 Leases (Topic 842), which requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases. ASU 2016-02 will also require new qualitative and quantitative disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the effect this standard will have on its future condensed consolidated financial statements and related disclosures but does not expect adoption of have a material impact.

In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, which requires us to recognize the amount of revenue to which we expect to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard is effective on January 1, 2018, and we will adopt accordingly. The standard permits the use of either the retrospective or cumulative effect transition method. We are evaluating the effect ASU 2014-09 will have on our consolidated financial statements and related disclosures. The Company has performed an initial evaluation of this standard and its impact on the financial statements. This included tasks such as identifying contracts, identifying performance obligations and reviewing the applicable revenue streams. In this review, nothing has been identified that would result in a material change in the current accounting for revenue. The Company will continue to evaluate, particularly as we enter into new contracts and will update its procedures and internal controls and provide additional training for its staff as necessary to comply with this standard.

On February 25, 2016, the FASB issued ASU 2016-02 Leases (Topic 842), which requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases. The ASU will also require new qualitative and quantitative disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the effect this standard will have on its Consolidated Financial Statements.

In May 2017, the FASB issued ASU 2017-09, Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting. The general model for modifications of share-based payment awards is to record the incremental value arising from a change as additional compensation costs. This guidance clarifies situations in which the existing award is not probable of vesting, and a modification gives rise to a new measurement date; no change in the total compensation cost recognized for an existing award will be required if there is no change to the fair value, vesting conditions and classification of the award. This ASU is effective prospectively for annual periods beginning on or after December 31, 2017. Early adoption is permitted. The application of this amendment is not expected to have a material impact on our future Consolidated Financial Statements or related disclosures.

3. Accounts Receivable

Accounts receivable by category were as follows:

	December 31, 2017		December 31, 2016
	December 31, 2018		December 31, 2017
Billed	$	4116,~~439,637~~314	$	2,~~010~~218,~~001~~227
Unbilled		566,~~727,407~~150		~~855~~3,~~706~~474,252
Total accounts receivable	$	10182,~~167,044~~464	$	25,~~865~~692,~~707~~479

~~Accounts~~As ~~receivable~~of ~~(both~~December ~~billed~~31, ~~and~~2018, $66,150 unbilled) ~~have~~accounts ~~increased~~receivable ~~from~~related ~~2016~~ to ~~2017 almost exclusively due to~~ the ~~new~~ U.S., ~~activity~~and ~~started in~~were ~~May~~billed ~~2017~~subsequent to December 31, 2018.

4Receivables Agreement. On February 8, 2018, we entered into a Recourse Receivables Purchase & Security Agreement (the “Receivables ~~Inventory~~Agreement”) with Porter Capital Corporation (“Porter Capital”). Under the terms of the Receivables Agreement, we sold accounts receivable (“Accounts”) to Porter Capital in exchange for funds in an amount equal to 80% (or less as percentage is subject to credit limits established by Porter Capital) of the face amount of the applicable Account at the time of sale of the Account, with the remaining 20% of the face amount of the applicable Account to be held back as a required reserve amount to be paid to us following Porter Capital’s receipt of payment on the Account by the account debtor, less applicable fees and interest charges. The total face amount of outstanding Accounts purchased by Porter Capital under the Receivables Agreement could not exceed $12.5 million.

~~Inventories~~Under bythe ~~category~~terms of the Receivables Agreement, we were obligated to pay interest on the face amount of the outstanding and unpaid Accounts purchased by Porter Capital, less the amount of the reserve account, at an interest rate equal to the Prime Rate (as ~~follows~~defined in the Receivables Agreement) plus 8.25%. We were obligated under the Receivables Agreement to pay certain fees, including a fee (the “Minimum Term Fee”) payable upon termination of the agreement in an amount equal to: (i) the monthly interest rate multiplied by $5 million, multiplied by the number of months in the agreement term, less the amount of actual interest paid during the term of the agreement; or (ii) following the occurrence of an Event of Default (as defined below) that has not been cured within the time periods contemplated under the agreement, $1.8 million, less the amount of actual interest paid during the term of the agreement. The Minimum Term Fee was also subject to reduction under certain circumstances if Porter Capital did not purchase certain eligible Accounts that were presented for purchase by us.

	December 31, 2017		December 31, 2016
Chemicals and proppants	$	1,513,373	$	897,994
Spare parts		2,185,872		1,149,169
Total inventories	$	3,699,245	$	2,047,163

All of our obligations under the Receivables Agreement were secured by liens on certain of our assets, including the accounts receivable, chattel paper, inventory relating to our U.S. operations and certain equipment used for our U.S. operations (excluding equipment subject to vendor financing) (collectively, the “Collateral”). The Receivables Agreement further provided for customary events of default (“Events of Default”), including but not limited to the failure to make payments when due; insolvency events; the failure to comply with covenant obligations arising under the agreement or other agreements with Porter Capital or its affiliates; and breaches of representations and warranties. Upon the occurrence of an Event of Default, Porter Capital could terminate the Receivables Agreement and declare all of our outstanding obligations under the Receivables Agreement to be due and payable. The Receivables Agreement had an initial term of one year and would renew for successive one-year terms unless we provided notice of cancellation in accordance with the terms of the Receivables Agreement.

~~Inventory~~On ~~balances~~October ~~have~~19, ~~increased~~2018, ~~from~~the ~~2016~~Company terminated its Recourse Receivables Purchase & Security Agreement (“Receivables Agreement”) with Porter Capital Corporation (“Porter”). The Receivables Agreement had an initial term of one-year, with the Company permitted to ~~2017~~terminate ~~almost~~the ~~exclusively~~Receivables ~~due~~Agreement prior to expiration of the ~~new~~initial Uterm upon written notice to Porter and payment of the Company’s outstanding obligations under the Receivables Agreement, including amounts owed as a minimum term fee calculated in accordance with the terms of the Receivables Agreement.S On October 19, 2018, the Company delivered a notice to Porter of our intent to terminate the Receivables Agreement following initial term upon written notice to Porter and payment of our outstanding obligations under the Receivables Agreement, including a minimum term fee of approximately $0.2 ~~activity~~million. ~~started~~As ina ~~May~~result, ~~2017~~the Company will no longer be able to obtain funds under the Receivables Agreement and the collateral has been released from liens that had secured the Company’s obligations under the Receivables Agreement.

54. Prepaids

Prepaid by category were as follows:

	December 31, 2017		December 31, 2016
	December 31, 2018		December 31, 2017
Prepaid insurance	$	~~142,531~~—	$	9510,~~433~~866
Prepaid value added tax		1,772,733		992,979
Prepaid other vendors and vehicle registrations		81,459		688,284
Prepaid other taxes		1,162,618		690,909
Total prepaid	$	81,459	$	699,150
Prepaid other vendors and vehicle registrations		1,285,182		139,554
Total prepaid	$	4,363,064	$	1,918,875

~~Prepaid~~A ~~balances~~majority ~~have increased from 2016 to 2017 due to: i) Argentina VAT and other tax prepaid amounts increasing as a result~~ of ~~purchase tax~~the ~~for~~decrease ~~a larger amount of purchases~~ in ~~2017~~Prepaids ~~compared~~is ~~with~~attributable ~~2016~~to ~~exceeding sales/revenue tax; and ii) start-up activity in the~~ U.S. ~~with~~non-renewal ~~vendors~~of ~~and~~vehicle ~~vehicles~~registrations ~~purchased.~~associated ~~The~~with ~~Company~~vehicles ~~will~~sold or ~~use the prepaid value added tax as it continues~~ to ~~invoice~~be ~~customers in Argentina~~sold.

65. Other Assets

	December 31, 2017		December 31, 2016
	December 31, 2018		December 31, 2017
Deposits	$	~~703~~50,~~004~~130	$	10200,~~507~~846
Other current assets		8419,~~842~~105		2153,~~157~~608
Total other current assets	$	~~787~~69,~~846~~235	$	31254,~~664~~454

~~Short-term~~A ~~deposits~~majority ~~increased and long-term deposits decreased from 2016 to 2017 due to the maturity~~ of the ~~capital~~decrease ~~lease~~in ~~arrangement.~~other ~~As the~~assets ~~least term end~~ is ~~reached~~primarily inattributable ~~2018,~~to ~~the~~non-recurring ~~deposit~~deposits ismade ~~being~~in ~~applied~~2017 to ~~the~~equipment ~~final~~vendors for ~~six~~equipment ~~payments~~purchases.

	December 31, 2017		December 31, 2016
Long term deposits	$	—	$	325,756
Total other non-current assets	$	—	$	325,756

6. Property, Plant and Equipment

7. Property, Plant and Equipment

Property, plant and equipment consists of the following:

	December 31, 2017			December 31, 2016
	December 31, 2018			December 31, 2017
Land	$	600,000		$	600,000
Machinery & equipment	$	3,982,112		$	11,961,470
Leasehold improvement		772,357			726,361
Less accumulated depreciation		(1,932,112	)		(960,197	)
Computer hardware & software		737,200			547,428
Property, plant and equipment, net	$	2,050,000		$	11,001,273
Furniture & fixtures		600,943			210,941
Machinery & equipment		76,014,771			25,395,633
Machinery & equipment under construction		13,091,352			17,969,630
Work in progress		100,362			994,597
Property and equipment		91,916,985			46,444,590
Less accumulated depreciation		(16,091,446	)		(8,062,199	)
Property and equipment, net	$	75,825,539		$	38,382,391

Property, plant and equipment, ~~increased~~net decreased from ~~2016~~December to31, 2017 ~~due~~ to ~~the~~December ~~acquisition~~31, of2018 ~~machinery~~due ~~and~~primarily ~~equipment~~to ~~related~~2018 toimpairment ~~the~~charges, ~~start-up~~sales ~~operations~~of ~~in the~~ U.S. ~~Depreciation~~assets ~~expense~~in ~~increased~~the ~~from~~fourth ~~2016~~quarter toof ~~2017~~2018, byand ~~$3.4~~depreciation ~~million~~of to $814.02 million atrecorded ~~December~~during ~~31, 2017 from $4~~2018.~~7 million at December 31, 2016 due to the acquisition of machinery and equipment related to the start-up operation in the U.S.~~

87. Accrued Expenses

Accrued expenses consist of the following:

	December 31, 2017		December 31, 2016
	December 31, 2018		December 31, 2017
Accrued salaries	$	~~777~~141,~~163~~573	$	~~183~~502,~~572~~994
Accrued accounts payable trade expenses		2,~~986~~252,~~689~~171		1365,~~449,139~~866
Accrued bonuses		~~524~~121,~~000~~483		~~526~~524,~~994~~000
Accrued vacations		522,340		468,015
Accrued sales tax		37,441		—
Accrued interest		10,582		1,875,460
Accrued dividends		900,000		—
Total accrued expenses	$	4,820,774	$	4,503,180
Accrued unused paid time off		199,324		214,062
Accrued interest		108,143		—
Total accrued expenses	$	3,760,135	$	1,606,922

Accrued accounts payable trade ~~increase~~increased from ~~2016~~2018 to 2017 primarily due to the ~~start-up~~accrual of ~~operations~~contract inpenalties ~~the~~charged ~~U.S.~~by ~~Accrued~~a ~~interest~~supply ~~decreased~~vendor ~~from 2016 to 2017 primarily due to the interest owed on the ACM Note Agreement~~ and ~~Stockholder~~accruals ~~Note~~for ~~at December 31, 2016~~U. ~~These loans were paid off during 2017~~S. ~~Vendor~~sales ~~Equipment~~taxes ~~Financing~~owed ~~loans~~to ~~principle~~state ~~and~~tax ~~interest~~authorities ~~are~~owed ~~paid monthly resulting in a lower interest accrual~~ at December 31, ~~2017~~2018.

98. Debt

The carrying values of our debt obligations, ~~net of unamortized debt issuance costs of $0 and $262,596~~ as of December 31, ~~2017~~2018 and ~~December~~ ~~31,~~2017 ~~2016,~~were ~~respectively, are~~ as follows:

	December 31, 2017				December 31, 2016
	December 31, 2018				December 31, 2017
	Short Term		Long Term		Short Term		Long Term
Vendor Equipment Financing	$	7,047,020	$	1,172,712	$	—	$	—
Demand Note	$	7,916,188	$	—	$	—	$	—
Stockholder Note		—		—		2,000,000		—
Total	$	7,916,188	$	—	$	—	$	—
ACM Note Agreement		—		—		—		21,737,404
Total	$	7,047,020	$	1,172,712	$	2,000,000	$	21,737,404

Short-Term Stockholder Note

On November 30, 2016, the Company entered into a Loan Agreement with two of the Company’s largest stockholders, a portion of which was used to pay the remaining amount payable (approximately $1 million) by the Company under an equipment purchase agreement dated October 10, 2014, as amended, with Gordon Brothers Commercial & Industrial, LLC for the purchase of certain TPUs.

At December 31, 2016, the Company had a balance of $2,000,000 and accrued interest of $24,548. The indebtedness created under the Loan Agreement was repaid on March 6, 2017 with a portion of the proceeds of the credit facility extended by Fir Tree under the Amended and Restated Convertible Note Facility Agreement described below.

Vendor Equipment Financing

During various dates beginning in late September through November 2017, the Company purchased equipment through a financing arrangement with NOV Rolligon at an interest rate of 8% for 12 months. At December 31, 2017, the Company had a loan balance of $6,130,567 and accrued interest of $7,438.

Beginning August 23, 2017 through September 28, 2017, the Company purchased trucks through a financing arrangement with Ford Motor Credit Corporation at an interest rate of 4.99% annual interest for 36 months. At December 31, 2017, the Company had a loan balance of $816,226 and accrued interest of $1,894.

~~Beginning~~Negotiable ~~September~~Demand ~~21,~~Promissory 2017 through September 29, 2017, the Company purchased tractors through a financing arrangement with Hitachi Capital America Corporation at an interest rate of 8.59% for 24 months. At December 31, 2017, the Company had a loan balance of $903,463 and accrued interest of $3,354.Note

On ~~December~~June 208, ~~2017~~2018, the Company ~~purchased~~executed ~~tractors~~a ~~through~~Negotiable aDemand ~~financing~~Promissory ~~arrangement~~Note ~~with~~(the ~~Mercedes-Benz~~“Demand ~~Financial~~Note”) ~~Services~~in ~~USA~~the principal amount of up to $15.0 million in favor of Eco-Lender, LLC at (the “Lender”), a Delaware limited liability company and an ~~interest~~affiliate of ~~rate~~one or more funds that are managed by Fir Tree Capital Management LP (together with its affiliated funds, “Fir Tree”) and/or its affiliates, which affiliated funds collectively hold a majority of ~~8.9%~~the ~~for~~outstanding 36shares ~~months~~of capital stock of the Company. Pursuant Atto ~~December~~the 31Demand Note, ~~2017~~on June 8, 2018, the ~~Company~~Lender ~~had~~advanced aapproximately ~~loan~~$5.5 ~~balance~~million of gross proceeds and $~~369,475~~5.1 million of net proceeds after transaction expenses to the Company (the “Initial Advance”) and ~~accrued~~on ~~interest~~August 16, 2018 the Lender advanced an additional $3.0 million of gross proceeds and $~~991~~2.97 million of net proceeds to the Company. As of December 31, 2018, the aggregate principal amount outstanding under the Demand Note was approximately $7.9 million.

~~The~~Interest ~~total~~on ~~future~~the ~~minimum~~unpaid ~~payments~~principal ~~due~~balance of the Note accrues at an annual rate of 10%, subject to a default interest rate of 14.00% or 24.00%, depending on ~~our~~the ~~Vendor~~payment ~~Equipment~~date ~~Financings~~following asthe occurrence of ~~December~~a 31default. All payments of principal, ~~2017~~interest and other amounts under the Demand Note are ~~noted~~payable immediately upon written demand by the Lender to the Company; provided, however, the Lender cannot make any demand for payment under the Demand Note until the earlier of (A) 45 days after the date of the Demand Note, (B) the occurrence of a material adverse change as ~~follows:~~defined in the Note and determined by the Lender in its sole and absolute discretion, (C) the occurrence of any default or event of default under any material agreement of the Company or any of its subsidiaries, and (D) the date upon which the Company or any of its subsidiaries ceases operating for any reason.

Total payments for 2018	$	7,047,019
Total payments for 2019		789,313
Total payments for 2020		383,400
Total future payments		—
Total payments	$	8,219,732

The Company may prepay, in whole or in part, at any time, the principal, interest and other amounts owing under the Demand Note subject to a prepayment premium of 4.00% of the aggregate amount of such prepayment (inclusive of interest and other amounts due and owing under the Demand Note), provided that the minimum amount of any such prepayment is equal to the lesser of $1 million and the then outstanding balance of the Demand Note.

All of the Company’s obligations under the Demand Note are guaranteed by EcoStim, Inc., a Texas corporation and a wholly owned subsidiary of the Company (“EcoStim”), and secured by a security interest (subject to permitted liens) in substantially all of the personal property of the Company and EcoStim, including 100% of the outstanding equity of the Company’s U.S. subsidiaries (including EcoStim) and 65% of the outstanding equity of the Company’s non-U.S. subsidiaries; provided, however, that the Lender had a subordinate lien on those assets of the Company and EcoStim that were subject to the lien of Porter Capital pursuant to the Receivables Agreement. As a result of our October 19, 2018 termination of the Receivables Agreement, all collateral has been released that had been secured under the Receivables Agreement.

Long-Term Notes Payable

Convertible Note Facility

On ~~May~~March 283, ~~2014~~2017, (the Company entered into a transaction with Fir Tree pursuant to which Fir Tree purchased from ACM entities $22 million aggregate principal amount of the Company’s outstanding 14% convertible notes which were due in 2018, (“~~Closing~~the ACM ~~Date~~Note”) and 2,030,436 shares (pre-split) of the Company’s ~~entered~~outstanding ~~into~~common stock, par value $0.001 per share. This transaction was part of a ~~Convertible~~comprehensive recapitalization designed to create a path to a potential conversion to equity of substantially all the Company’s debt, subject to stockholder approval. As part of the transaction, the ACM Note ~~Facility~~was ~~Agreement~~amended and restated (the “~~Original Note~~A&R ~~Agreement~~Convertible Note”) ~~with~~and ~~certain~~the ~~funds~~Company ~~affiliated~~issued ~~with~~to ~~Albright~~Fir ~~Capital~~Tree ~~Management~~an additional $19.4 million aggregate principal amount convertible note (the “~~ACM~~New Convertible Note”), representing an additional $17 million aggregate principal amount of convertible notes issued by the Company to Fir Tree on March 3, 2017, and approximately $2.4 million principal amount of convertible notes in payment of accrued and unpaid interest on the ACM Note. The ~~proceeds~~unpaid ~~from~~principal amount of the ~~Original~~ A&R Convertible Note ~~Agreement~~and ~~were~~the ~~used~~New ~~primarily~~Convertible ~~for~~Note ~~capital~~bore ~~expenditures,~~an ~~certain~~interest ~~working~~rate ~~capital~~of ~~needs~~20% per annum and, ~~approved~~if ~~operating~~stockholder ~~budget~~approval were not obtained, would ~~expenses~~have matured on May 28, 2018.

The Original Note Agreement allowed the Company to issue ACM entities a multiple draw secured promissory note with maximum aggregate principal amount of $22,000,000, convertible into Common Stock at a price of $6.00 per share at the option of ACM entities. The outstanding debt under the facility is convertible immediately and accrues interest at 14% per annum with interest payments due annually in arrears. The debt could be prepaid in full under certain conditions after the first anniversary of the Closing Date, and was scheduled to mature on the date that is four years following the Closing Date.

As of December 31, 2016, the Company had drawn down the full $22,000,000 available under the Original Note Agreement, which was primarily used for capital expenditures, certain working capital needs and approved operating budget expenses. The accrued interest at December 31, 2016 was $1,831,123.

All obligations under the Original Note Agreement were secured by liens on substantially all of the assets of the company and have subsidiary guarantees and pledges of the capital stock of the subsidiary guarantors subject to certain terms and exceptions.

At December 31, 2016, the Company was not in compliance with certain loan covenants under the Original Note Agreement, nor had the Company received waivers or amendments to those covenants. In March 2017, the Company entered into a transaction with Fir Tree pursuant to which Fir Tree purchased from ACM entities $22 million aggregate principal amount of the Company’s outstanding convertible notes which were due in 2018. With this transaction, all obligations under the Original Note Agreement were dissolved.

On March 3, 2017, the Company entered into a transaction with Fir Tree pursuant to which Fir Tree purchased from ACM entities $22 million aggregate principal amount of the Company’s outstanding 14% convertible notes which were due in 2018, (“the ACM Note”) and 2,030,436 shares of the Company’s outstanding common stock, par value $0.001 per share. This transaction was part of a comprehensive recapitalization designed to create a path to a potential conversion to equity of substantially all the Company’s debt, subject to stockholder approval. As part of the transaction, the ACM Note was amended and restated (the “A&R Convertible Note”) and the Company issued to Fir Tree an additional $19.4 million aggregate principal amount convertible note (the “New Convertible Note”), representing an additional $17 million aggregate principal amount of convertible notes issued by the Company to Fir Tree on March 3, 2017, and approximately $2.4 million principal amount of convertible notes in payment of accrued and unpaid interest on the ACM Note. The unpaid principal amount of the A&R Convertible Note and the New Convertible Note bore an interest rate of 20% per annum and, if stockholder approval were not obtained, would have matured on May 28, 2018.

After giving effect to these transactions, the Company had approximately $41.4 million of outstanding convertible notes. Fir Tree ~~had~~ agreed to convert all the outstanding convertible notes into common stock at a conversion price of $1.40 per share, subject to ~~receipt~~ receipt of stockholder approval and satisfaction of certain other conditions. On June 15, 2017, with stockholder approval, all the outstanding convertible notes were subsequently converted into common stock and the Company issued approximately 29.5 million shares of common stock to Fir Tree as a result of such conversion.

109. ~~Deferred Debt Costs~~Equity

~~The Company capitalizes certain costs in connection with obtaining its financings, such as lender~~Stockholders’~~s fees and related attorney~~ ~~fees. These costs are amortized to interest expense using the straight-line method.~~Equity

~~Deferred~~The Company has implemented ~~debt~~a ~~costs~~reverse ~~were~~stock ~~approximately~~split ~~$262,596,~~to ~~net~~reduce ofthe ~~accumulated~~number ~~amortization~~of shareholders of ~~$478,853~~record ~~for~~to allow the ~~year~~Company ~~ended~~to ~~December~~deregister ~~31,~~the ~~2016.~~common ~~Deferred~~stock and reduce ~~debt~~ongoing ~~costs~~expenses ~~are~~with ~~presented~~respect ~~net~~to offilings ~~related~~under ~~debt~~the Exchange Act. Share amounts reflected in ~~long~~the consolidated financial statements and this note are on a post-~~term~~stock ~~notes~~split ~~payable~~basis asand ofgive ~~December~~effect 31to the 4:1 reverse stock split effected by the Company in February 2019, ~~2016~~except as indicated otherwise. ~~There~~After ~~are~~the nofiling ~~deferred~~of ~~debt~~this ~~costs at~~Annual Report on Form 10-K for the fiscal year ended December 31, 2018, ~~2017.~~and ~~The~~the ~~debt~~filing ~~associated~~of ~~with~~a ~~these~~Form ~~deferred~~15 ~~debt~~to ~~costs~~terminate ~~was~~the ~~converted~~Company’s toreporting ~~equity~~obligations ~~during~~under Sections 12(b) and 12(g) of the Exchange ~~year~~Act and suspend the ~~remaining~~Company’s reporting obligations under Section 15(d) of the Exchange Act, the Company will no ~~balance~~longer ~~was~~be ~~amortized~~subject to ~~interest~~certain ~~expense~~provisions inof ~~2017~~the Exchange Act. In particular, the Company’s obligations to publicly file periodic and current reports with the SEC will be suspended.

11The Company has 50,000,000 shares of preferred stock authorized at $0.001 par value, 30,000 of which have been designated as Series ~~Equity~~A ~~Offerings~~Convertible Preferred Stock (“Series A Preferred”). At December 31, 2018 and 2017, the Company had 10,600 shares of Series A Preferred and 0 shares of preferred stock issued and outstanding and none issued or outstanding, respectively. The Company has 200,000,000 shares of Common Stock authorized at $0.001 par value per share, of which 18,849,935 shares were issued and 18,844,472 shares were outstanding as of December 31, 2018 and of which 18,649,937 shares issued and 18,644,474 shares outstanding as of December 31, 2017.

~~On July~~As ~~13,~~disclosed ~~2016,~~previously in ~~the~~Form ~~Company~~8-K ~~entered~~filed ~~into~~February an14, ~~At-Market~~2019, ~~Issuance~~the ~~Sales~~Company ~~Agreement~~has ~~(the~~implemented ~~“Agreement”)~~a ~~with~~reverse ~~FBR~~stock ~~Capital Markets& Co~~split. ~~and~~The ~~MLV~~reverse &stock ~~Co.~~split ~~LLC~~reduced (the ~~“Distribution~~number of ~~Agents”).~~shareholders ~~Pursuant~~of torecord ~~the~~and ~~terms~~allows of the ~~Agreement, the~~ Company ~~was permitted~~ to ~~sell~~deregister ~~from time to time through~~ the ~~Distribution Agents shares of the Company’s~~ common stock, ~~par~~and ~~value~~reduce ~~$0.001~~ongoing ~~per~~expenses ~~share,~~ with anrespect ~~aggregate sales price of up~~ to ~~$5,801,796 (the “Shares”). Sales of the Shares were required to be approved~~filings byunder the ~~Board~~Exchange ~~and~~Act. ~~were~~Those ~~permitted~~shareholders towho, beimmediately ~~made~~following ~~by any method permitted that is deemed an “at~~ the ~~market~~reverse ~~offering”~~stock ~~as defined in Rule 415 under the Securities Act~~split, ~~including~~held ~~sales~~only ~~made~~a ~~directly~~fraction onof ora ~~through~~share of the ~~NASDAQ~~Company’s ~~Capital~~common ~~Market~~stock orwere onpaid, ~~any~~in ~~other~~lieu ~~existing trading~~thereof, ~~market~~an ~~for~~amount ~~our~~in ~~common~~cash ~~stock,~~equal ~~sales made~~ to or$0.08 ~~through~~(on a ~~market~~post-split ~~maker~~basis) ~~other than on an exchange or otherwise, in negotiated~~times ~~transactions~~such atfraction ~~market~~of ~~prices,~~a share and~~/or~~ ~~any~~are ~~other~~no ~~method~~longer ~~permitted~~shareholders ~~by law. Sales~~ of the ~~Shares~~Company. ~~may~~After ~~be made at market prices prevailing at~~ the ~~time~~filing of ~~sale,~~this atAnnual ~~prices~~Report ~~related~~on toForm ~~prevailing~~10-K ~~market~~for the ~~prices~~fiscal oryear atended ~~negotiated~~December ~~prices~~31, 2018, and ~~subject to such other terms as may be agreed upon at~~ the ~~time~~filing of ~~sale~~a ~~including~~Form a15 ~~minimum~~to ~~sales~~suspend ~~price~~the ~~that~~Company’s ~~may~~reporting beobligations ~~stipulated~~under Section by15(d) of the ~~Board.~~Exchange ~~During 2016~~Act, the Company ~~sold~~ ~~796,573~~will ~~Shares~~no ~~through~~longer ~~the~~be ~~Agreement~~subject ~~for~~to ~~total~~certain ~~gross~~provisions ~~proceeds~~ of ~~$1,722,596~~the ~~before~~Exchange ~~deducting~~Act. ~~approximately~~In ~~$164~~particular,~~000 of commissions.~~ ~~During 2017,~~ the Company’s ~~sold~~obligations ~~563,753~~to ~~Shares~~publicly ~~through~~file ~~the~~periodic ~~Agreement~~and ~~for~~current ~~total~~reports ~~gross~~with ~~proceeds~~the ofSEC ~~$982,385~~under ~~before~~Section ~~deducting approximately $~~15~~,605~~(d) of ~~commissions~~the Exchange Act will be suspended.

OnCommon ~~July~~Stock ~~6, 2017, the Company closed a private placement of shares of the Company’s common stock providing gross proceeds of $15.0 million,~~ and net of costs proceeds of $14.9 million. As part of the offering, the Company issued 10,000,000 shares of its common stock for $1.50 per share to certain existing shareholders. The proceeds from the offering were used to finance capital expenditures to support existing contracts the Company has in both Oklahoma and Argentina, for working capital and for other general corporate purposes.Issuances

On ~~August~~July 86, 2017, the Company closed on a private placement of shares of the Company’s common stock providing gross proceeds of of $2815.0 million, ~~with~~and net of costs proceeds of $2614.79 million. As part of the offering, the Company issued ~~an aggregate of 19~~10,~~580~~000,~~420~~ 000 shares (pre-split) of its common stock for $1.4350 per share to ~~two~~certain existing ~~stockholders and several new institutional investors~~shareholders. The proceeds from ~~this~~the offering were used to finance capital expenditures to support existing contracts the Company’s ~~most~~has ~~recent~~in ~~customer~~both ~~contract~~Oklahoma inand ~~Oklahoma~~Argentina, for working capital and for other general corporate purposes.

On August 8, 2017, the Company closed on a private placement of shares of the Company’s common stock providing gross proceeds of $28 million, with net of costs proceeds of $26.7 million. As part of the offering, the Company issued an aggregate of 19,580,420 shares (pre-split) of its common stock for $1.43 per share to two existing stockholders and several new institutional investors. The proceeds from this offering were used to finance capital expenditures to support the Company’s most recent customer contract in Oklahoma, for working capital and for other general corporate purposes.

Preferred Stock and Issuance

On March 29, 2018, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with Fir Tree, its majority stockholder, pursuant to which Fir Tree agreed to purchase 10,000 shares of the Company’s newly-designated Series A Preferred, at a price of $1,000 per share. An initial closing was conducted on April 2, 2018 providing $10.0 million of gross proceeds and $9.7 million of net proceeds after expenses to the Company.

Holders of Series A Preferred are entitled to vote with holders of the Company’s common stock and are entitled to one vote per share of common stock into which a share of Series A Preferred is then-convertible on any matter on which holders of the capital stock of the Company are entitled to vote. Each share of Series A Preferred was initially and as of December 31, 2018 convertible, at the option of the holder at any time, into a number of shares of common stock determined by dividing the Stated Value plus any dividends accrued but unpaid thereon by the conversion price of $1.15 (subject to adjustment for stock splits, combinations, certain distributions or similar events). In addition, for so long as shares of Series A Preferred are outstanding, the affirmative vote or consent of holders of a majority of the outstanding shares of Series A Preferred, voting together as a separate class, is necessary before taking certain actions, including but not limited to (i) amending the articles of incorporation, the bylaws or the Certificate of Designation for the Series A Preferred in a manner that would materially and adversely or disproportionately affect the powers, preferences or rights of the Series A Preferred, (ii) liquidating, dissolving or winding up the Company or entering into a Deemed Liquidation Event, (iii) creating or issuing any class of capital stock unless it ranks junior to the Series A Preferred with respect to the distribution of assets on the liquidation, dissolution or winding up of the Company or any Deemed Liquidation Event, payment of dividends and rights of redemption, (iv) reclassifying, altering or amending any existing security that is pari passu or junior to the Series A Preferred with respect to the distribution of assets on the liquidation, dissolution or winding up of the Company or any Deemed Liquidation Event, payment of dividends and rights of redemption if such reclassification, alteration or amendment would render such other security senior or pari passu with the Series A Preferred in respect of any such right, preference or privilege, (v) subject to certain exceptions, purchasing or redeeming any shares of capital stock or paying any dividend or making any distribution thereon and (vi) issuing any shares of Series A Preferred to anyone other than the original holders of the Series A Preferred. Holders of Series A Preferred are entitled to cumulative dividends payable semi-annually in arrears at a rate of (i) 10% per year, if paid in cash, or (ii) 12% per year, if, at the election of the Company, paid through the issuance of additional shares of Series A Preferred. In addition to the dividend rights described above, holders of Series A Preferred are entitled to receive dividends or distributions declared or paid on common stock on an as-converted basis. Following the end of the third quarter of 2018, the Company paid the initial preferred dividend on all outstanding shares of Series A Preferred through the issuance of 600 additional shares of Series A Preferred.

~~12.~~The ~~Stockholders’~~Company ~~Equity~~may redeem shares of Series A Preferred at any time in cash at a price per share equal to the greater of (i) the Stated Value plus any accrued and unpaid dividends thereon and (ii) the product of 1.5 times the Stated Value.

Common Stock

At December 31, 2017 and 2016 the Company had authorized 200,000,000 shares of common stock, of which 74,577,899 and 14,464,087 were outstanding, respectively, with a par value of $74,578 and $14,485, respectively.

Preferred Stock

At December 31, 2017 and 2016, the Company had authorized 50,000,000 shares of preferred stock, of which there were zero shares of preferred stock outstanding.

Treasury Stock

On December 15, 2015, the Board authorized the Company to repurchase, from time to time during the period from December 16, 2015 through December 16, 2017, up to $5 million in shares of its outstanding common stock. As of December 31, 2017, the Company had purchased 21,850 shares at a cost of $57,469 under the buy-back program. No shares were repurchased during 2018.

Warrants

In the fourth quarter of 2013, the Company executed a sale-leaseback transaction with a ~~related~~third party that included an inducement ~~payment~~ payment of ~~100~~25,000 common stock warrants. The exercise price per share of the common stock under the agreement is $7.00. The agreement expires five years after the date of issuance. The warrants can be exercised on a one for one basis starting July 1, 2014. ~~See Note 16-Related Parties for additional information.~~

13The estimated fair value of the warrants at issuance was approximately $0.3 million and was calculated using the Black-Scholes ~~Employee~~method ~~Benefit~~with ~~Plan~~the following weighted average assumptions being used.

The Company adopted a safe harbor defined contribution 401(k) plan effective January 1, 2012, covering all Company employees in the US headquarters. Under the plan, the Company contributes 5% towards the employee 401k. The contribution is fully vested at the time of contribution. The Company’s contributions for the years ended December 31, 2017 and 2016, were $326,683 and $81,326, respectively.

Volatility	75	%
Expected lives years	2.88
Expected dividend yield	—
Risk free rates	0.12	%

1410. ~~Stock-Based~~Employee ~~Compensation~~Benefit Plan

The Company ~~has~~adopted ~~two~~a ~~stock~~safe ~~incentive~~harbor ~~plans,~~defined ~~the~~contribution ~~2013 Stock Incentive Plan~~ 401(~~the “2013 Plan”~~k) ~~and~~plan ~~the~~effective ~~2015~~January ~~Stock Incentive Plan (the “2015 Plan”)~~1, ~~(or collectively~~2012, ~~“the~~covering ~~Plans”),~~all ~~for~~Company ~~the~~employees ~~granting~~in ~~of stock-based incentive awards,~~the ~~including~~US ~~incentive~~headquarters ~~stock~~and ~~options,~~US ~~non-qualified~~operations. ~~stock~~Under ~~options~~the ~~and restricted stock~~plan, ~~to employees, consultants and members of~~ the Company’s ~~Board.~~contributes ~~The~~5% ~~2013~~towards ~~Plan was adopted in 2012 and amended in 2013 and authorizes 1,000,000 shares to be issued under~~ the ~~2013~~employee ~~Plan~~401k. The ~~2015~~contribution ~~Plan,~~is ~~f/k/a “the 2014 Stock Incentive Plan,” was adopted in 2014 and was amended in~~fully ~~2015~~vested ~~and~~at ~~2016~~the totime ~~authorize a total~~ of ~~700,000 additional shares, resulting in a maximum of 1,700,000 shares being authorized for issue under the modified 2015 Plan~~contribution. ~~Both~~The ~~the 2013 Plan and the 2015 Plan have been approved by the stockholders of the~~ Company~~. On~~’s ~~June~~contributions ~~15,~~for ~~2017, at our annual meeting of stockholders (~~the ~~“2017~~years ~~Annual~~ended ~~Meeting”), our stockholders approved an increase to the aggregate maximum number of shares available under the 2015 Plan by 5,000,000 shares (from 1,200,000 shares to 6,200,000 shares). As of~~ December 31, ~~2017,~~2018 ~~122,510~~and ~~shares~~2017 were ~~available for grant under the 2013 Plan~~ $284,582 and ~~461~~$326,~~329~~683, ~~shares were available for grant under the 2015 Plan~~respectively.

~~The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable~~11. ~~Option valuation models require the input of highly subjective assumptions including~~ the expected stock price volatility. The expected life of awards granted represents the period of time that they are expected to be outstanding. The Company determined the initial expected life based on a simplified method in accordance with the FASB Accounting Standards Codification Topic 718, giving consideration to the contractual terms, vesting schedules, and preStock-~~vesting~~Based ~~and post-vesting forfeitures.~~Compensation

The Company has two stock incentive plans, the 2013 Stock Incentive Plan (the “2013 Plan”) and the 2015 Stock Incentive Plan (the “2015 Plan”), (or collectively, “the Plans”), for the granting of stock-based incentive awards, including incentive stock options, non-qualified stock options and restricted stock, to employees, consultants and members of the Company’s Board. The 2013 Plan was adopted in 2012 and amended in 2013 and authorizes 1,000,000 shares to be issued under the 2013 Plan. The 2015 Plan, formerly known as “the 2014 Stock Incentive Plan,” was adopted in 2014 and was amended in 2015 and 2016 to authorize a total of 700,000 additional shares, resulting in a maximum of 1,700,000 shares being authorized for issue under the modified 2015 Plan. Both the 2013 Plan and the 2015 Plan have been approved by the stockholders of the Company. On June 15, 2017, at our annual meeting of stockholders (the “2017 Annual Meeting”), our stockholders approved an increase to the aggregate maximum number of shares available under the 2015 Plan by 5,000,000 shares (from 1,200,000 shares to 6,200,000 shares). On June 20, 2018, at our annual meeting of stockholders (the “2018 Annual Meeting”), our stockholders approved an increase to the aggregate maximum number of shares of common stock available under the 2015 Plan by 3,000,000 shares (from 6,200,000 shares to 9,200,000 shares). As of December 31, 2018, 256,991 shares were available for grant under the 2013 Plan and 2,075,686 shares were available for grant under the 2015 Plan. Share amounts set forth above are on a pre-stock split basis.

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. Option valuation models require the input of highly subjective assumptions including the expected stock price volatility. The expected life of awards granted represents the period of time that they are expected to be outstanding. The Company determined the initial expected life based on a simplified method in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 718, giving consideration to the contractual terms, vesting schedules, and pre-vesting and post-vesting forfeitures.

The Company recorded $12,~~754~~977,~~706~~423 and $~~695~~1,~~910~~754,706 for ~~2017~~2018 and ~~2016~~2017, respectively, of stock-based compensation, which is included in selling, general, and administrative expense and cost of sales in the accompanying consolidated statement of operations. Total ~~unamortized~~ unamortized stock-based compensation expense at December 31, ~~2017~~2018 was $31,~~247~~432,~~370 compared to $928,786 at December 31, 2016, and will be fully expensed through 2020~~391.

Stock Options

Options granted vest over a period of two to four years, subject to the optionee’s continued employment or service, and may have an expiration date not longer than ten years following the date of grant. The Plans specify that the per share exercise price of an incentive stock option may not be less than 110% of the fair market value of the Company’s common stock on the date of grant, and the per share exercise price of a non-qualified stock option may not be less than the fair market value of the Company’s common stock on the date of grant. The Company’s general practice has been to grant options with a per share exercise price equal to the fair market value of the Company’s common stock on the date of grant.

A summary of the Company’s stock option activity for the years ended December 31, ~~2017~~2018 and ~~2016,~~2017 is presented below:

Awards	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term
Options outstanding at December 31, 2015		895,214		$	5.40		8.28
Options outstanding at December 31, 2016		239,428		$	5.20		7.44
Granted		821,~~500~~062,242			31.0084
Exercised		—			—
Forfeited		(2035,~~000~~420	)		5.0618
Options outstanding at December 31, 2016		957,714		$	5.20		7.44
Options outstanding at December 31, 2017		1,266,250		$	2.38		8.26
Granted		~~4,248,968~~—			~~1.84~~—
Exercised		—			—
Forfeited		(~~141~~132,~~682~~762	)		51.1825
Options outstanding at December 31, 2017		5,065,000		$	2.38		8.26
Options outstanding at December 31, 2018		1,133,488			1.75		8.14
Options exercisable at December 31, 2017		1,610,407		$	3.34		6.51
Options exercisable at December 31, 2018		934,156			2.47		7.69

As of December 31, ~~2017~~2018, the range of exercise prices for outstanding options was $0.33 – $7.00.

There were no stock options exercised during ~~2017,~~2018 ~~2016~~ or ~~2015~~2017. The intrinsic value is calculated as the total number of option shares multiplied by the excess of the closing price of our common stock on the last trading day over the exercise price of the options. This amount changes based on the fair market value of our common stock. Had all option holders exercised their options on December 31, ~~2017~~2018, the aggregate intrinsic value of the options would have been $51,~~424~~545 on December 31, ~~2017~~2018.

The following table presents the assumptions used in determining the fair value of option awards for the year ended December 31, ~~2017 and 2016~~2018:

	2017			2016
	2018
Weighted average grant date fair value per share of awards granted	$	0.7876		$	~~1.80~~
Significant fair value assumptions:
Expected term (in years)		5.75			~~2.40~~
Volatility		5152.3854	%		~~59.26~~	%
Risk-free interest rate		10.9903	%		~~0.58~~	%
Expected dividends		—			—

Restricted Stock

A summary of award activity under the Plan for the years ended December 31, ~~2017~~2018 and ~~2016~~2017 is presented below:

	Shares			Weighted Average Grant Date Fair Value
Non-vested at December 31, 2015		241,625
Non-vested at December 31, 2016		54,187
Granted		91276,~~500~~025			21.7742
Vested		(~~116~~83,~~375~~875	)
Non-vested at December 31, 2016		216,750
Non-vested at December 31, 2017		246,337
Granted		1600,~~104,100~~397			10.4276
Vested		(~~335~~220,~~500~~710	)
Non-vested at December 31, 2017		985,350
Expired		(154,844	)
Non-vested at December 31, 2018		471,180

The weighted average grant date fair value of awards of restricted stock is based on the market price of the Company’s common stock on the date of the grant.

1512. Commitments and Contingencies

Capital Lease Obligations

InThe ~~the fourth quarter of 2013, the~~ Company ~~purchased~~leased ~~and~~certain ~~upgraded~~ equipment from ~~non-related~~a third ~~parties,~~party ~~investing~~with ~~approximately $3.5~~certain ~~million.~~prepayments Inbeing ~~December~~made ~~2013,~~securing the ~~Company~~final ~~sold~~six ~~the~~months ~~equipment~~of topayments on athe ~~related~~lease. ~~party~~Lease ~~leasing~~payments ~~company~~are $81,439 ~~Impact~~per ~~Engineering~~month, ~~AS.~~with ~~Simultaneously,~~ the ~~equipment~~final ~~package~~three ~~was~~months ~~leased~~of ~~back~~prepaid topayments ~~the~~being ~~Company~~shown as aother ~~capital~~non-current assets ~~lease~~in ~~for~~the aconsolidated ~~60-month~~balance ~~period~~sheets with ~~payments~~a ~~beginning~~balance ~~in February~~ of ~~2014~~$244,317. The ~~Company~~minimum ~~agreed~~present tovalue ~~prepay one year~~ of ~~payments in~~ the ~~amount~~lease ofpayments ~~approximately~~is $1.0 .7 million ~~and~~with ~~maintain~~terms ~~a balance~~ of nosixty ~~less than six~~ months ofand ~~prepayments~~implied ~~until~~interest ~~the final six months~~ of ~~the lease~~14%.

~~These~~During ~~prepayments~~2018, ~~were~~the ~~made~~Company ~~prior~~leased tocertain ~~December~~other ~~31,~~equipment ~~2013.~~through ~~Further~~an equipment lease purchase agreement with a third party. Lease payments ranged ~~are~~between $81261,~~439~~240 per month ~~and~~to ~~commenced~~$1,077,615 onper ~~July~~month 1,based ~~2014~~on the agreement. The ~~final~~minimum ~~six~~present ~~months~~value of ~~prepaid~~the lease payment is ~~shown~~$3.3 asmillion ~~other~~with ~~current~~an ~~assets~~initial interm ~~the~~of ~~consolidated~~six ~~balance~~months ~~sheets~~and ~~with~~implied ainterest ~~balance~~rate of ~~$488~~8%. During the fourth quarter of 2018,~~633~~ the Company negotiated with the third party returning the leased equipment and dissolving the lease agreement and any further commitments.

The minimum present value of the lease payments is $0.9 million with terms of sixty months and implied interest of 14%. The next five years of lease payments are:

	Capital Lease Payments
2018	$	977,267
2019		—
Total future payments		977,267
Less debt discount due to warrants		(70,167	)
Less amount representing interest		(70,245	)
Less current portion of capital lease obligations		(836,855	)
Capital lease obligations, excluding current installments	$	—

Operating Leases

The Company’s operating leases correspond to ~~equipment~~ facilities and office space in ~~Argentina and~~ the United States. The ~~combined~~operating leases also correspond to operational equipment utilized by the Company’s U.S. operations. The future minimum lease payments as of December 31, 2018 ~~2017~~ are as follows:

	Operating Leases
2018	$	468,070
2019	$	308,928
2019		69,000
2020		—
Thereafter		—
Total	$	~~537~~308,~~070~~928

~~16. Related Party Transactions~~Commitments

InHistorically, in the ~~fourth~~course ~~quarter~~ of ~~2013~~operations, ~~the~~we ~~Company~~entered ~~purchased~~into ~~and~~certain ~~upgraded~~long-term ~~equipment,~~raw ~~from~~material ~~non-related~~supply ~~third~~agreements ~~parties,~~ for ~~approximately $3.5 million. In December 2013,~~ the ~~Company~~supply ~~sold~~of ~~the~~proppant ~~equipment~~ to abe used ~~leasing~~in ~~company~~hydraulic ~~(Impact~~well ~~Engineering,~~stimulation ~~AS)~~in ~~controlled~~our byU.S. ~~two of its directors~~operations. ~~Simultaneously,~~As ~~the~~part ~~equipment~~of ~~package~~these ~~was~~agreements, ~~leased~~we ~~back~~are subject to ~~the~~minimum ~~Company,~~tonnage aspurchase requirements aand ~~capital~~may ~~lease~~pay ~~for~~penalties ain ~~60-month~~the ~~period with~~event ~~payments~~of ~~beginning~~any ~~in February 2014~~shortfall. ~~The~~Additionally, ~~Company~~we ~~agreed~~have toentered ~~prepay~~into ~~one~~certain ~~year~~long-term oftransportation agreements ~~payments~~for in the ~~amount~~transportation of ~~approximately~~raw ~~$1.0 million~~material ~~and~~from ~~maintain~~the avendors’ ~~balance~~point of nodelivery ~~less~~to ~~than six months of prepayments until~~ the ~~final~~well ~~six~~site ~~months~~to ofsupport ~~the~~our ~~lease~~U. ~~These prepayments~~S. ~~were~~operations. ~~made~~Per ~~prior~~the toagreements ~~December~~with 31these vendors, ~~2013.~~we ~~Further lease payments~~ are ~~approximately~~subject ~~$81,000~~to ~~per~~certain ~~month~~minimum ~~and~~commitments ~~commenced~~under onthe ~~February~~long-term 1,transportation ~~2014~~agreements.

In ~~connection~~September 2018, we completed work under our pressure pumping contract with ~~the~~our ~~sale~~primary ~~leaseback~~U.S. ~~transaction,~~customer. Given the ~~Company~~weakness ~~issued~~of ~~100~~the U.S. well stimulation market,~~000~~ ~~common~~in ~~stock~~September ~~warrants~~2018 we elected to ~~the~~suspend ~~related~~our ~~party~~U.S. ~~leasing~~well stimulation operations and significantly reduce ~~company~~our U.S. ~~The~~workforce ~~warrants~~in ~~were~~alignment ~~issued~~with aspotential annear-term ~~inducement~~opportunities, ~~payment~~including pump down and ~~can~~miscellaneous bepumping ~~exercised~~services. With onthis adecision, ~~one~~we ~~for~~believe ~~one~~it ~~basis~~is ~~for~~probable ~~common~~that ~~stock~~we ~~starting~~will not fulfill our commitments within the requirements under U.S. GAAP ~~July~~Contingencies 1,(Topic ~~2014~~450) regarding certain of the above noted supply and transportation agreements. ~~The~~As ~~exercise~~such, ~~price~~we ishave recorded accruals related to what we believe to be reasonable estimates related to the future settlements of these contingencies of $72.000 million recorded in Accounts Payable and Accrued expenses in our Consolidated Financial Statements. We intend to seek to negotiate with anthe ~~expiration~~counterparties ~~date~~to these agreements and therefore, the amount of ~~five~~ultimate ~~years~~settlement ~~after~~may be higher or lower than what we have recorded, with the ~~initial~~maximum ~~exercise~~aggregate ~~date~~potential ofliability ~~July~~estimated 1by us to be approximately $3.5 million, ~~2014~~including estimated litigation expenses. Payment terms would also be established upon settlement with these counterparties.

~~The~~Legal ~~estimated fair value of the warrants at issuance was approximately $0.4 million and was calculated using the Black Scholes method with the following weighted average assumptions being used.~~Proceedings

Volatility	75	%
Expected lives years	5.75
Expected dividend yield	—
Risk free rates	1.75	%

From time to time, we may be a party or otherwise subject to legal or regulatory proceedings or other claims incidental to or arising in the ordinary course of our business. While the ultimate outcome of these matters cannot be predicted at this time, we do not expect that the resolution of these matters will have a material adverse effect on our consolidated financial position, results of operations or cash flows.

On ~~November~~May 301, ~~2016~~2018, ~~the~~a ~~Company~~collective ~~entered~~action ~~into~~lawsuit awas ~~Loan~~filed ~~Agreement~~against ~~with~~Eco-Stim ~~two~~Energy ofSolutions, ~~the~~Inc. ~~Company’s~~and ~~largest~~certain ~~stockholders,~~of ~~which~~its ~~was~~subsidiaries ~~used~~by toa ~~pay~~former ~~the~~employee ~~remaining~~in ~~amount~~the ~~payable~~United ~~(approximately~~States $1District ~~million)~~Court byfor the ~~Company~~Southern ~~under~~District anof ~~equipment~~Texas ~~purchase~~(Houston ~~agreement~~Division) ~~dated~~alleging ~~October~~that we failed ~~10,~~to ~~2014,~~pay asa ~~amended,~~class ~~with~~of ~~Gordon~~workers ~~Brothers~~in ~~Commercial~~compliance &with ~~Industrial,~~the ~~LLC~~Fair ~~for~~Labor ~~the~~Standards ~~purchase~~Act ofand ~~certain~~seeking ~~turbine~~recovery ~~powered~~of ~~pressure~~such wages, attorney’s ~~pumping~~fees, ~~equipment~~costs, ~~(“TPU”)~~interest and other related damages. ~~The~~In ~~indebtedness~~September ~~created~~2018, ~~under~~this case was stayed pending resolution through arbitration proceedings among the ~~Loan~~parties. ~~Agreement~~On ~~was~~or ~~repaid~~about onMay ~~March~~3, 62019, ~~2017~~both ~~with~~ parties agreed to a ~~portion~~mutually ofacceptable ~~the~~settlement ~~proceeds~~and ofrelease ~~the~~agreement, with ~~credit~~no ~~facility~~material ~~extended~~adverse byeffect ~~Fir~~on ~~Tree~~our ~~under~~consolidated ~~the~~financial ~~Amended~~position, ~~and~~results ~~Restated~~of ~~Convertible~~operations ~~Note~~or ~~Facility Agreement~~cash flows.

In addition, seven of our vendors have filed lawsuits against us in seven separate Texas state court actions, and two of our vendors have filed lawsuits against us and a former customer in two separate Oklahoma state court actions. All together, they are seeking to collect an aggregate of approximately $3.4 million of damages for amounts alleged to be owed by us for various goods, equipment or services alleged to have been provided by such vendors, as well as pre-judgment and post-judgment interest and attorney’s fees. In addition, certain of our vendors have threatened to file liens against certain assets of our former customers with respect to amounts alleged to be owed by us for various goods, equipment or services alleged to have been provided by such vendors in an aggregate amount of approximately $3.8 million. We intend to vigorously contest these matters or seek mutually agreeable settlements of the claimed amounts, and we may incur material expenses in connection with the resolution of these lawsuits and claims. We are currently not able to predict the outcome of these cases and whether mutually acceptable settlements and resolution can be obtained. If these matters cannot be resolved at acceptable levels, they could have a material adverse effect on our consolidated financial position, results of operations or cash flows, however we are unable to predict the effect on our consolidated financial position, results of operations or cash flows.

13. Related Party Transactions

Transactions with Fir Tree

On March 3, 2017, the Company entered into a transaction with Fir Tree pursuant to which Fir Tree purchased from ACM Emerging Markets Master Fund I, L.P. $22 million aggregate principal amount of the Company’s outstanding convertible notes which were due in 2018. This transaction was part of a comprehensive recapitalization designed to create a path to a potential equalization of substantially all of the Company’s debt, subject to stockholder approval. As part of the transaction, the Company issued to Fir Tree an additional $19.4 million aggregate principal amount of convertible notes. After giving effect to these transactions, the Company had approximately $41.4 million of outstanding convertible notes. Fir Tree agreed to convert all of the outstanding convertible notes into common stock at a conversion price of $1.40 per share, subject to receipt of stockholder approval and satisfaction of certain other conditions.

On June 20, 2017, the Company converted such notes into Common Stock at a price of $1.40 per share, and issued 29,538,786 shares of of Common Stock to Fir Tree (the “Conversion”), upon the Company receiving stockholder approval at the Annual Meeting of Stockholders of the Company on June 15, 2017. As such, all obligations under the notes have been deemed paid in full and the notes have been terminated. No termination penalty or fee was incurred in connection with the termination of the notes. The Conversion reduced the Company’s debt by approximately $41.4 million.

All of our obligations under the Note are guaranteed by our wholly owned subsidiary, EcoStim, Inc. (“EcoStim”), and secured by a security interest (subject to permitted liens) in substantially all of our personal property, including 100% of the outstanding equity of the our U.S. subsidiaries (including EcoStim, Inc.) and 65% of the outstanding equity of our non-U.S. subsidiaries; provided, however, that the Lender had a subordinate lien on those of our assets that were subject to the lien of Porter Capital pursuant to the Receivables Agreement prior to the termination of such agreement.

July 2017 and August 2017 Private Placements

On July 6, 2017, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with each of the purchasers identified on the signature pages thereto, including funds affiliated with Fir Tree and Bienville (collectively, the “July Purchasers”) pursuant to which the July Purchasers agreed to purchase 10,000,000 shares of the Company’s common stock, par value $0.001 per share, at a price of $1.50 per share (the “July Private Placement”). The issuance of the Shares pursuant to the Purchase Agreement was made in reliance upon an exemption from registration provided under Section 4(a)(2) of the Securities Act. The July Private Placement closed on July 6, 2017 and resulted in approximately $15.0 million of gross proceeds and approximately $14.8 million of net proceeds (after deducting the Company’s estimated expenses).

In connection with the closing of the July Private Placement, the Company and the July Purchasers entered into that certain Amended & Restated Registration Rights Agreement, dated July 6, 2017 (the “Registration Rights Agreement”). Under the Registration Rights Agreement, the Company agreed to (i) use its reasonable best efforts to file a Registration Statement (as defined in the Registration Rights Agreement) on Form S-1 or any successor form thereto (each a “Long-Form Registration” as defined in the Registration Rights Agreement) with the Securities and Exchange Commission (the “Commission”) upon the initial request of registration from the Demand Holders (as defined in the Registration Rights Agreement) within ninety (90) days after the date on which the initial request is given; and (ii) use its reasonable best efforts to file a Registration Statement on Form S-3 or any successor form thereto, if the Company is qualified for the use of Form S-3, (each a “Short-Form Registration” as defined in the Registration Rights Agreement) with the Commission upon the initial request of registration from the Demand Holders within sixty (60) days after the date on which the initial request is given. In addition, the Registration Rights Agreement provides holders of Registrable Securities (as defined in the Registration Rights Agreement) piggyback registration rights, subject to certain underwriter cutbacks and issuer blackout periods. The Company also agreed to pay all fees and expenses relating to the registration and disposition of the Registrable Securities in compliance with the Company’s obligations under the Registration Rights Agreement.

In addition, in connection with the closing of the July Private Placement, the Company’s Amended and Restated Stockholders Agreement dated as of March 3, 2017 (the “Rights Agreement”) was amended to clarify certain procedures set forth in the Rights Agreement with respect to matters subject to approval by directors nominated by FT SOF VII Holdings, LLC, an affiliate of Fir Tree Partners.

On August 2, 2017, the Company entered into a Common Stock Subscription Agreement (the “Subscription Agreement”) with (i) affiliates of Fir Tree, pursuant to which such Fir Tree affiliates agreed to purchase 9,456,056 shares (pre-split) of the Company’s common stock, (ii) Bienville Argentina Fund, pursuant to which Bienville agreed to purchase 1,923,077 shares (pre-split) of the Company’s common stock and (iii) certain other purchasers identified on the signature pages thereto (the “August Purchasers”) pursuant to which such other August Purchasers agreed to purchase an aggregate of 10,124,364 shares of the Company’s common stock, in each cases of clauses (i), (ii) and (iii), at a price of $1.43 per share, which was the closing market price for the Company’s Common Stock on August 1, 2017 (collectively, the “August Private Placement”). The issuance of such shares of Common Stock pursuant to the Subscription Agreement was made in reliance upon an exemption from registration provided under Section 4(a)(2) of the Securities Act. The August Private Placement closed on August 8, 2017 and resulted in approximately $28.0 million of gross proceeds and approximately $26.7 million of net proceeds (after deducting the Company’s ~~estimated~~ estimated expenses).

In connection with the August Private Placement, the Company, Fir Tree, Bienville Argentina Fund, and the August Purchasers entered into a new Registration Rights Agreement as of August 2, 2017 that became effective upon the closing of the August Private Placement (the “PIPE Registration Rights Agreement”). Under the PIPE Registration Rights Agreement, the Company agreed to (i) use its reasonable best efforts to file a Registration Statement (“Shelf Registration Statement” as defined in the PIPE Registration Rights Agreement) with the Commission no later than sixty (60) days following the closing date of the August Private Placement, to be effective no later than one hundred twenty (120) days following such closing date. In addition, the PIPE Registration Rights Agreement provides holders of Registrable Securities (as defined in the PIPE Registration Rights Agreement) piggyback registration rights, subject to certain underwriter cutbacks and issuer blackout periods. The Company agreed to pay all fees and expenses relating to the registration and disposition of the Registrable Securities in compliance with the Company’s obligations under the PIPE Registration Rights Agreement.

In connection with the August Private Placement, the prior Restated Registration Rights Agreement, dated as of March 3, 2017 (the “Existing Registration Rights Agreement”), among the Company, Fir Tree, Bienville and the other parties thereto, was amended so as to include definitions related to the August Private Placement, to clarify certain clauses set forth in the Existing Registration Rights Agreement with respect to the Shelf Registration Statement as defined in the PIPE Registration Rights Agreement, and to clarify certain aspects of the relationship between the Company’s obligations under the Existing Registration Rights Agreement and the Company’s obligations under the PIPE Registration Rights Agreement.

17. Income Taxes

The components of the expense for income taxes are as follows for the years ended December 31, 2017 and 2016:

	For the year ended December 31,
	2017			2016
Current	$	—		$	—
Federal		—			—
State		—			—
Foreign		(633,530	)		305,320
Total	$	(633,530	)	$	305,320
Deferred	$	—		$	—
Federal		—			—
State		—			—
Foreign		—			—
Total	$	—		$	—
Total income tax provision	$	(633,530	)	$	305,320

The effective tax rate is reconciled to the U.S. federal statutory rate as follows as of December 31, 2017 and 2016, respectively:

	For the year ended December 31,
	2017			2016
Income tax benefit at the applicable federal rate (34%)	$	(9,377,341	)	$	(5,990,776	)
Permanent difference		348,212			105,246
Change in valuation allowance		(3,365,900	)		6,041,273
Deferred true-up		1,785,761			(87,594	)
Remeasurement of deferred taxes for tax law change		7,813,999			18,885
Currency exchange rate change		2,809,109			—
Foreign rate differential		3,160			(70,660	)
Employee Retention credit		(17,000	)		—
Withholding tax		(633,530	)		288,946
Income tax expense (benefit)	$	(633,530	)	$	305,320

The tax effects of the temporary differences between financial statement income and taxable income are recognized as deferred tax assets and liabilities. Significant components of the deferred tax assets and liabilities as of December 31, 2017 and 2016 respectively are as follows:

	December 31, 2017			December 31, 2016
Deferred assets
Stock-based compensation	$	376,224		$	363,242
Accrued vacation		54,335			50,126
Accrued bonus		235,297			179,178
Interest limitation		226,664			161,353
Withholding tax		—			151,982
Employee retention credit		17,000			—
R&D credit		46,497			—
Other accruals		118,500			2,216,408
Intangible assets		1,396			3,784
Tax losses		19,005,628			14,788,371
Total deferred tax assets	$	20,081,541		$	17,914,444
Deferred liability
Prepaids		(2,758	)		—
Property, plant and equipment		(6,394,456	)		(586,730	)
Total deferred tax liabilities	$	(6,397,214	)	$	(586,730	)
Net deferred tax asset		13,684,327			17,327,714
Valuation allowance		(13,684,327	)		(17,327,714	)
Total net deferred tax assets	$	—		$	—

~~The~~In ~~Company~~connection ~~has~~with ~~established~~the aAugust ~~valuation~~Private ~~allowance~~Placement, tothe ~~fully~~prior ~~reserve~~Restated ~~the~~Registration ~~net~~Rights ~~deferred~~Agreement, ~~tax~~dated ~~asset~~as ~~due~~of toMarch 3, 2017 (the “Existing ~~uncertainty~~Registration ofRights Agreement”), among the ~~timing and~~Company, ~~amounts~~Fir ofTree, ~~future~~Bienville ~~taxable~~and ~~income.~~the Atother ~~December~~parties 31thereto, ~~2017,~~was amended ~~the~~so ~~Company~~as ~~has~~to ainclude ~~federal~~definitions ~~tax~~related ~~loss~~to ~~carry~~the ~~forward~~August ofPrivate ~~$68~~Placement,~~146,909~~ ~~and~~to clarify certain clauses set forth in the Existing aRegistration ~~foreign~~Rights ~~tax~~Agreement ~~loss~~with ~~carry~~respect ~~forward~~to ofthe ~~$15~~Shelf Registration Statement as defined in the PIPE Registration Rights Agreement,~~857,215,~~ and ~~both~~to clarify certain aspects of ~~which~~the ~~have~~relationship ~~been~~between ~~fully~~the ~~reserved~~Company’s obligations under the Existing Registration Rights Agreement and the Company’s obligations under the PIPE Registration Rights Agreement.

The Registration Rights Agreement and the PIPE Registration Rights Agreement were terminated on February 21, 2019 in contemplation of the deregistration of the Company’s common stock with the SEC.

14. Income Taxes

The components of the expense for income taxes are as follows for the years ended December 31, 2018 and 2017:

	For the year ended December 31,
	2018		2017
Current	$		$
Federal		—		—
State		—		—
Foreign		—		(633,530	)
Total	$	—	$	(633,530	)
Deferred	$	—	$	—
Federal		—		—
State		—		—
Foreign		—		—
Total	$	—	$	—
Total income tax provision	$	—	$	(633,530	)

The effective tax rate is reconciled to the U.S. federal statutory rate as follows as of December 31, 2018 and 2017, respectively:

	For the year ended December 31,
	2018			2017
Income tax benefit at the applicable federal rate (21% for 2018; 34% for 2017)	$	(18,451,302	)	$	(9,377,343	)
Permanent difference		115,723			348,212
Change in valuation allowance		23,775,367			(3,365,898	)
Deferred true-up		(3,192,297	)		1,785,761
Remeasurement of deferred taxes for tax law change		121,471			7,813,999
Currency exchange rate change		2,342,681			2,809,109
Foreign rate differential		(1,594,237	)		3,160
Employee Retention credit		(3,117,406	)		(17,000	)
Withholding tax		—			(633,530	)
Income tax expense (benefit)	$	—		$	(633,530	)

	December 31, 2018			December 31, 2017
Deferred assets
Stock-based compensation	$	816,273		$	376,224
Accrued vacation		51,306			54,335
Accrued bonus		31,270			235,297
Interest limitation		519,149			226,664
Bad debt allowance		692,266			—
Employee retention credit		—			17,000
R&D credit		46,497			46,497
Other accruals		60,298			118,500
Intangible assets		1,630			1,396
Net operating loss carryforward		29,324,272			19,283,115
Total deferred tax assets	$	31,542,961		$	20,359,028
Deferred liability
Prepaids		—			(2,758	)
Property, plant and equipment		6,194,220			(6,394,456	)
Total deferred tax liabilities	$	6,194,220		$	(6,397,214	)
Net deferred tax asset		37,737,181			13,961,814
Valuation allowance		(37,737,181	)		(13,961,814	)
Total net deferred tax assets	$	—		$	—

The Company has established a valuation allowance to fully reserve the net deferred tax asset due to the uncertainty of the timing and amounts of future taxable income. At December 31, 2017, the Company had a federal tax loss carry forward of $68,146,909 and a foreign tax loss carry forward of $15,857,215, both of which have been fully reserved. At December 31, 2018, the Company has a federal tax loss carry forward of $91,139,261 and a foreign tax loss carry forward of $23,142,711, both of which have been fully reserved.

The loss carryforwards expire as follows:

Expiration year	Amount
2018	$	179,117
2019	$	179,117
2019		776,313
2020		395,023
2020		2,335,596
2021		1,188,455
2021		5,004,157
2022		2,546,339
2022 and forward		75,708,941
2023 and forward		109,973,037
Total	$	84114,~~004~~281,~~124~~971

The Company records accrued interest and penalties related to unrecognized tax benefits in general and administrative expense. No amounts of interest expense and penalties have been accrued or recognized related to unrecognized tax benefits since inception. We are currently subject to a three-year statute of limitations by major tax jurisdictions.

On June 20, 2017, all convertible debt was converted into approximately 29.5 million shares of the Company’s Common Stock resulting in a change of ownership greater than 50%. As a result, the Company’s ability to offset its income with its U.S. net operating losses are limited by the Internal Revenue Code Section 382.

~~The Tax Cuts and Jobs Act of 2017 was signed into law on December 22, 2017~~15. ~~The law includes significant changes to the U.S. corporate~~ ~~income~~Quarterly ~~tax~~Financial ~~system,~~Data including a federal corporate rate reduction from 35% to 21%. In accordance with ASC 740, the impact of a change in tax law is recorded in the period of enactment. There is no impact from the re-measurement of deferred tax assets and liabilities at December 31, 2017 because of the full valuation allowance.(unaudited)

~~18.~~Summarized ~~Quarterly~~quarterly ~~Financial~~financial ~~Data~~data ~~(unaudited)~~for the years ended December 31, 2018 and 2017 are presented below.

Summarized quarterly financial data for the years ended December 31, 2017 and 2016 are presented below.

	Quarter Ended
	March 2018			June 2018			September 2018			December 2018
Revenue	$	12,683,226		$	15,015,646		$	12,503,599		$	507,150
Operating loss		(9,746,075	)		(12,890,473	)		(30,050,053	)		(12,840,169	)
Loss before income taxes		(10,188,758	)		(13,525,627	)		(32,956,848	)		(10,815,182	)
Net loss from continuing operations		(10,188,758	)		(13,525,627	)		(32,953,863	)		(10,818,167	)
Basic and diluted loss per share-continued operations	$	(0.14	)	$	(0.18	)	$	(0.44	)	$	(0.14	)
Net loss from discontinued operations		(2,671,759	)		(3,050,835	)		(2,244,834	)		(12,413,228	)
Basic and diluted loss per share – discontinued operations	$	(0.04	)	$	(0.04	)	$	(0.03	)	$	(0.16	)

	Quarter Ended
	March 2017		June 2017		September 2017		December 2017
Revenue	$	2,562,657	$	8,527,659	$	13,120,229	$	19,807,203
Operating loss		4,163,579		6,582,248		6,476,191		8,690,201
Loss before income taxes		5,662,285		6,147,834		6,640,063		9,130,225
Net loss		5,029,025		6,147,834		6,640,063		9,129,955
Basic and diluted loss per share	$	0.34	$	0.31	$	0.10	$	0.12

	Quarter Ended
	March 2016		June 2016		September 2016		December 2016
Revenue	$	1,833,905	$	2,337,579	$	2,117,977	$	2,062,775
Operating loss		3,048,172		3,030,586		3,767,825		3,477,574
Loss before income taxes		4,792,051		3,591,068		4,733,088		4,503,721
Net loss		4,864,287		3,663,305		4,805,325		4,592,331
Basic and diluted loss per share	$	0.36	$	0.27	$	0.35	$	0.34

19. Segment Reporting

As a result of the Company beginning revenue generating activities in the U.S. in the second quarter of 2017, we are reporting the results of each of our two reportable segments beginning with the second quarter of 2017 in accordance with ASC 280, Segment Reporting. Our Chief Executive Officer evaluates the results of operations on a consolidated as well as a segment level, and is the person responsible for the final assessment of performance and making key operating decisions. Discrete financial information is available for each of the segments, and the operating results of each of the operating segments are used for performance evaluation and resource allocations.

Our two operating segments are managed through operating segments that are aligned with our geographic operating locations of Argentina and the U.S. We also report certain corporate and other non-operating activities under the heading “Corporate and Other”, which primarily reflects corporate personnel and activities, research and development activities, incentive compensation programs and other costs.

We account for intersegment sales at prices that we generally establish by reference to similar transactions with unaffiliated customers. Reporting segments are measured based on gross margin, which is defined as revenues reduced by total cost of services. Cost of services exclude research and development expenses and depreciation and amortization expense.

Summarized financial information is shown in the following tables:

	Year Ended December 31,
	2017			2016
Revenues(1):
Argentina	$	19,553,584		$	8,352,236
United States		24,464,164			—
Total revenues	$	44,017,748		$	8,352,236
Cost of services(1,2):
Argentina	$	24,934,757			10,630,233
United States		28,067,742			—
Total cost of services	$	53,002,499		$	10,630,233
Gross margin(1,2):
Argentina	$	(5,381,173	)	$	(2,277,997	)
United States		(3,603,578	)		—
Total gross margin	$	(8,984,751	)	$	(2,277,997	)
Capital expenditures:
Argentina	$	548,108		$	1,788,320
United States		34,805,359			—
Corporate and Other		25,974			2,802,760
Total capital expenditures	$	35,379,441		$	4,591,080
Depreciation and amortization:
Argentina	$	4,105,417		$	3,270,125
United States		2,593,145			—
Corporate and Other		1,330,685			1,397,672
Total depreciation and amortization	$	8,029,247		$	4,667,797

(1)	U.S. activity began in February 2017 with start-up expenses being incurred. The Company began recognizing U.S. revenue in late May 2017. Intersegment transactions included in revenues were not significant for any of the periods presented.
		Quarter Ended
(2)	Gross margin is defined as revenues less costs of services. Cost of services excludes selling, general and administrative expenses, research and development expenses and depreciation and amortization expense.
		March 2017			June 2017			September 2017			December 2017
Revenue		$	—		$	3,092,722		$	7.369.376		$	14,002,066
Operating loss			(1,599,912	)		(3,396,262	)		(3.263.783	)		(5,477,113	)
Loss before income taxes			(3,115,954	)		(2,823,964	)		(3.258.841	)		(5,611,975	)
Net loss from continuing operations			(3,115,954	)		(2,823,964	)		(3.258.841	)		(5,611,975	)
Basic and diluted loss per share-continued operations		$	(0.21	)	$	(0.16	)	$	(0.05	)	$	(0.08	)
Net loss from discontinued operations			(1,913,072	)		(3,323,870	)		(3,381,221	)		(3,517,980	)
Basic and diluted loss per share – discontinued operations		$	(0.13	)	$	(0.19	)	$	(0.05	)	$	(0.05	)

2016. ~~Subsequent~~Segment ~~Events~~Reporting

~~Receivables~~As ~~Agreement. On February 8, 2018, we entered into~~ a ~~Recourse~~result ~~Receivables~~of ~~Purchase & Security Agreement (~~the ~~“Receivables Agreement”)~~Company ~~with~~beginning ~~Porter~~revenue ~~Capital~~generating ~~Corporation~~activities ~~(“Porter~~in ~~Capital”~~the ~~or “Buyer”)~~U.S. ~~Under~~in the ~~terms~~second quarter of ~~the Receivables Agreement~~2017, we ~~may,~~began ~~from~~reporting the ~~time~~results toof ~~time,~~each ~~sell~~of ~~accounts~~our ~~receivable~~two ~~(“Accounts”)~~reportable tosegments ~~Buyer~~beginning inwith ~~exchange~~the ~~for~~second ~~funds in~~quarter anof ~~amount~~2017 ~~equal~~in toaccordance ~~80%~~with ofASC ~~the~~280, ~~face~~Segment Reporting. ~~amount~~Our ofChief ~~the~~Executive ~~applicable~~Officer ~~Account~~evaluates at the ~~time~~results of ~~sale~~operations ofon ~~the~~a ~~Account,~~consolidated ~~with~~as ~~the~~well ~~remaining 20%~~as ofa ~~the~~segment ~~face~~level and ~~amount~~is of the ~~applicable~~person ~~Account~~responsible tofor bethe ~~held~~final ~~back~~assessment asof aperformance ~~required~~and ~~reserve~~making ~~amount~~key tooperating bedecisions. ~~paid~~Discrete ~~to us following Buyer’s~~financial ~~receipt~~information ofis ~~payment~~available onfor ~~the~~each ~~Account~~of by the ~~account debtor~~segments, ~~less applicable fees~~ and ~~interest~~the ~~charges.~~operating ~~The~~results ~~total~~of ~~face~~each ~~amount~~ of ~~outstanding Accounts~~the ~~purchased~~operating bysegments ~~Buyer~~are ~~under~~used ~~the~~for ~~Receivables~~performance evaluation ~~Agreement~~and ~~may~~resource ~~not exceed $12~~allocations.~~5 million.~~

~~Under~~Our ~~the~~two ~~terms~~operating ofsegments ~~the~~are ~~Receivables~~managed ~~Agreement,~~through weoperating ~~are~~segments ~~obligated~~that toare ~~pay~~aligned ~~interest~~with onour ~~the~~geographic ~~face~~operating ~~amount~~locations of ~~the outstanding~~ Argentina and ~~unpaid Accounts purchased by Buyer, less~~ the ~~amount of the reserve account, at an interest rate equal to the Prime Rate (as defined in the Receivables Agreement) plus 8~~U.~~25%~~S. We ~~are~~ also ~~obligated~~report ~~under the Receivables Agreement to pay~~ certain ~~fees,~~corporate ~~including~~and aother ~~fee~~non-operating ~~(the~~activities ~~“Minimum Term~~under ~~Fee”) payable upon termination of~~ the ~~agreement~~heading in“Corporate anand ~~amount~~Other”, which ~~equal~~primarily ~~to:~~reflects ~~(i)~~corporate ~~the~~personnel ~~monthly~~and ~~interest rate multiplied by $5 million~~activities, ~~multiplied~~research byand ~~the~~development ~~number of months in the agreement term~~activities, ~~less~~incentive ~~the~~compensation ~~amount of actual interest paid during the term~~programs ofand ~~the~~other ~~agreement;~~costs. orThe ~~(ii)~~Argentina ~~following~~segment, ~~the~~which ~~occurrence~~is ofreported ~~an Event of Default (~~as ~~defined~~discontinued ~~below)~~operations, ~~that~~ has ~~not~~ been ~~cured~~included ~~within~~in the ~~time~~ ~~periods~~segment ~~contemplated under the agreement, $1.8 million, less the amount of actual interest paid during the term of the agreement.~~information ~~The Minimum Term Fee is subject to reduction under certain circumstances if Buyer does not purchase certain eligible Accounts that are presented for purchase by us~~below.

~~All~~We ofaccount ~~our~~for ~~obligations~~intersegment ~~under~~sales ~~the~~at ~~Receivables~~prices ~~Agreement~~that ~~are~~we ~~secured~~generally establish by ~~liens~~reference ~~on certain of our assets, including the accounts receivable, chattel paper, inventory relating~~ to ~~our~~similar ~~U.S.~~transactions ~~operations~~with ~~and~~unaffiliated ~~substantially all of our equipment for our U~~customers.~~S. operations (excluding~~ ~~equipment~~Reporting ~~subject~~segments toare ~~vendor~~measured ~~financing).~~based ~~The~~on ~~Receivables~~gross ~~Agreement further provides for customary events of default (“Events of Default”)~~margin, ~~including~~which ~~but~~is ~~not~~defined ~~limited~~as torevenues ~~the~~reduced ~~failure~~by tototal ~~make~~cost ~~payments when due; insolvency events; the failure to comply with covenant obligations arising under the agreement or other agreements with Buyer or its affiliates; and breaches~~ of ~~representations and warranties~~services. ~~Upon~~Cost ~~the occurrence~~ of services anexclude ~~Event~~research ofand ~~Default,~~development ~~Porter~~expenses ~~Capital may terminate the Receivables Agreement~~ and ~~declare all~~depreciation ~~of our outstanding obligations under the Receivables Agreement to be due~~ and ~~payable~~amortization expense.

The Receivables Agreement also includes certain representations, warranties and covenants customary for agreements of this type. The Receivables Agreement has an initial term of one year and will renew for successive one-year terms unless we provide notice of cancellation in accordance with the terms of the Agreement. We may also terminate the Receivables Agreement prior to the expiration of the term upon written notice and payment of our obligations thereunder.

Summarized financial information is shown in the following tables:

	Year Ended December 31,
	2018			2017

Revenues^(1,3):
Argentina-discontinued operations	$	11,396,142		$	19,553,584
United States		40,709,621			24,464,164
Total revenues	$	52,105,763		$	44,017,748

Cost of services^(1,2,3):
Argentina-discontinued operations	$	13,932,740			24,934,757
United States		51,578,914			28,067,742
Total cost of services	$	65,511,654		$	53,002,499

Gross margin^(1,2):
Argentina-discontinued operations	$	(2,536,598	)	$	(5,381,173	)
United States		(10,869,293	)		(3,603,578	)
Total gross margin	$	(13,405,891	)	$	(8,984,751	)

Capital expenditures:
Argentina-discontinued operations	$	2,846		$	548,108
United States		9,831,034			34,805,359
Corporate and Other		1,040			25,974
Total capital expenditures	$	9,834,920		$	35,379,441

Depreciation and amortization:
Argentina-discontinued operations	$	4,909,382		$	4,105,417
United States		14,087,347			2,593,145
Corporate and Other		1,275,564			1,330,685
Total depreciation and amortization	$	20,272,293		$	8,029,247

Asset Impairment:
Argentina-discontinued operations	$	4,427,564		$	—
United States		28,803,756			—
Total depreciation and amortization	$	33,231,320		$	—

⁽¹⁾	U.S. activity began in February 2017 with start-up expenses being incurred. The Company began recognizing U.S. revenue in late May 2017. Intersegment transactions included in revenues were not significant for any of the periods presented.

⁽²⁾	Gross margin is defined as revenues less costs of services. Cost of services excludes selling, general and administrative expenses, research and development expenses and depreciation and amortization expense.

⁽³⁾	The Argentina segment has been reclassified into discontinued operations.

17. Assets Held for Sale-Discontinued Operations

As of December 31, 2018, the Company classified the assets and liabilities of our Argentina subsidiary as held for sale, and its operations as discontinued operations for the periods presented. This determination was based on its decision to seek buyers for the subsidiary or for the sale of its assets. The Company made the decision, having received a letter of intent during the fourth quarter of 2018 from a third party to purchase the subsidiary. The Company, as described in more detail below in Note 18 – Subsequent Events, signed an agreement with an unrelated third party to purchase significantly all of the subsidiary’s machinery and equipment assets. The Company will proceed to dissolve the subsidiary. Expected costs to dissolve the subsidiary are estimated to be approximately $900,000.

As of December 31, 2018, the Company classified certain U.S. spare parts, equipment and machinery as held for sale based on the decision by the Company to seek buyers for and sell these assets. As described in more detail below in Note 18 – Subsequent Events, as of the date of this filing, has, subsequent to December 31, 2018, sold all the material equipment, inventory and other operating assets relating to our U.S. operations.

Due to the classification of our Argentina subsidiary and certain assets of our U.S. operations, the Company reclassified their respective assets and liabilities from their respective financial lines on the Consolidated Balance Sheet as of December 31, 2018 to current assets and liabilities held for sale.

The table below provides additional details related to the assets and liabilities of these reclassifications as of December 31, 2018 and 2017:

December 31, 2018	Argentina Segment		U.S. Operations		Total
Assets
Cash and cash equivalents	$	19,166	$	—	$	19,166
Inventories, net		500,000		50,422		550,422
Prepaid expenses and other current assets		877,439		—		877,439
Property, plant and equipment		12,499,999		11,083,333		23,583,332

Total current assets held for sale	$	13,896,604	$	11,133,755	$	25,030,359

Liabilities
Accounts payable	$	3,419,441	$	—	$	3,419,441
Accrued expenses and other current liabilities		1,274,487		—		1,274,487
Debt		—		3,009,483		3,009,483
Total current liabilities held for sale	$	4,693,928	$	3,009,483	$	7,703,411

December 31, 2017	Argentina Segment		U.S. Operations		Total
Assets
Cash and cash equivalents	$	1,855,150	$	—	$	1,855,150
Accounts receivable, net		4,474,565		—		4,474,565
Inventories, net		2,083,030		1,616,215		3,699,245
Prepaid expenses and other current assets		4,197,306		—		4,197,306
Property, plant and equipment		20,639,500		44,184,766		64,824,266

Total current assets held for sale	$	33,249,551	$	45,800,981	$	79,050,532

Liabilities
Accounts payable	$	5,282,490	$	—	$	5,282,490
Accrued expenses and other current liabilities		3,213,852		—		3,213,852
Debt		836,855		8,219,732		9,056,587
Total current liabilities held for sale	$	9,333,197	$	8,219,732	$	17,552,929

The table below provides additional details related to the discontinued operations as of December 31, 2018 and 2017:

	Years Ended December 31,
	2018			2017
Revenues from discontinued operations	$	11,396,142		$	19,553,584
Operating costs and expenses		(29,114,064	)		(31,728,733	)
Operating loss		(17,717,922	)		(12,175,149	)
Other expense		(2,679,109	)		(594,523	)
Benefit for income taxes		16,375			633,529
Loss from discontinued operations	$	(20,380,656	)	$	(12,136,143	)

18. Subsequent Events

On January 24, 2019, the Company completed the disposition of certain of its U.S. equipment to an unrelated party in exchange for approximately $2.8 million of aggregate cash proceeds, before commissions and selling expenses. On February 21, 2019, the Company completed the disposition of certain of its U.S. equipment to an unrelated party in exchange for approximately $6.2 million of aggregate cash proceeds, before commissions and selling expenses. On March 14, 2019, the Company completed the disposition of certain of its U.S. equipment to an unrelated party in exchange for approximately $2.1 million of aggregate cash proceeds, before commissions and selling expenses. Net of commissions, the Company received approximately $16.8 million. In the U.S., as of the date of this filing, we have sold all the material equipment, inventory and other operating assets relating to our U.S. operations and terminated all field level employees. Following the consummation of the transactions contemplated below regarding Argentina, and upon the completion of shutting down operations in Argentina and the U.S., our intent is to shut down the Company in the foregoing months.

On March 18, 2019, the Company signed an agreement with an unrelated third party to purchase significantly all of our equipment and machinery assets in Argentina. The transactions contemplated by this agreement are expected to close in phases during the second quarter of 2019. Following the consummation of the transactions contemplated by this agreement, the Company expects to shut down its operations in Argentina.

On December 28, 2018, the Company received a determination letter from Nasdaq that the Company will be delisted pursuant to the Nasdaq Listing Rules. The Company determined not to appeal the determination and the quotation of the Company’s common stock moved to the “Pink Open Market” operated by the OTC Markets Group Inc. The common stock was subsequently delisted from Nasdaq due to the Company’s non-compliance with Nasdaq’s minimum bid price requirements. Specifically, the Nasdaq suspended trading in the Company’s common stock on Nasdaq, effective prior to the regular opening of the market on January 2, 2019. The Nasdaq subsequently filed a Notification of Removal from Listing and/or Registration on Form 25 with the Securities and Exchange Commission, or SEC, on February 26, 2019 to remove the common stock from listing on Nasdaq and withdraw the common stock from registration under Section 12(b) pursuant to Rule 12d2-2(b) of the Exchange Act. Pursuant to Rule 12d2-2(d)(1) of the Exchange Act, the application on Form 25 became effective with respect to the delisting of the common stock ten (10) days after the Form 25 was filed with the SEC.

As disclosed previously in Form 8-K filed February 14, 2019, the Company has implemented a reverse stock split. The reverse stock split reduced the number of shareholders of record and allows the Company to deregister the common stock and reduce ongoing expenses with respect to filings under the Exchange Act. Those shareholders who, immediately following the reverse stock split, held only a fraction of a share of the Company’s common stock were paid, in lieu thereof, an amount in cash equal to $0.08 (on a post-split basis) times such fraction of a share and are no longer shareholders of the Company. The effects of this reverse stock split have been retroactively applied in this Form 10-K filing. After the filing of this Annual Report on Form 10-K for the fiscal year ended December 31, 2018, and the filing of a Form 15 to suspend the Company’s reporting obligations under Section 15(d) of the Exchange Act, the Company will no longer be subject to certain provisions of the Exchange Act. In particular, the Company’s obligations to publicly file periodic and current reports with the SEC under Section 15(d) of the Exchange Act will be suspended.

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A.

Controls and Procedures

Disclosure controls and procedures

As of the end of the period covered by this Annual Report, we carried out an evaluation, under the supervision and with the participation of our management, including our ~~Chief~~principal ~~Executive~~executive ~~Officer~~ and ~~Chief~~principal ~~Financial~~financial ~~Officer~~officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) adopted by the SEC under the Exchange Act) to determine whether such disclosure controls and procedures provide reasonable assurance that information to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and such information is accumulated and communicated to management, including our principal executive and principal financial officers or persons performing similar functions, as appropriate to allow timely decisions regarding disclosure. Our disclosure controls and procedures were developed through a process in which our management applied its judgment in assessing the costs and benefits of such controls and procedures, which, by their nature, can provide only reasonable assurance regarding the control objectives. You should note that the design of any system of disclosure controls and procedures is based in part upon various assumptions about the likelihood of future events, and we cannot assure you that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. Based on the evaluation referred to above, our Chief Executive Officer and Chief Financial Officer concluded that the design and operation of our disclosure controls and procedures ~~are~~were not effective as of December 31, ~~2017~~2018 todue ~~provide reasonable assurance that information required~~ to ~~be disclosed~~ ~~by us in~~ the ~~reports~~material ~~that~~weakness ~~we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified~~ in ~~the rules and forms of the Securities and Exchange Commission and such information is accumulated and communicated to management, including~~ our ~~principal~~internal ~~executive~~control ~~and~~over ~~principal~~ financial ~~officers~~reporting oridentified ~~persons performing similar functions, as appropriate to allow timely decisions regarding disclosure~~below.

Management’s Annual Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting (as that term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act), and for our assessment of the effectiveness of internal control over financial reporting.

Our internal control over financial reporting includes policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of our Consolidated Financial Statements in accordance with GAAP, and that receipts and expenditures are being made only in accordance with authorizations of our management and Board; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the Consolidated Financial Statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management, including our ~~Chief~~principal ~~Executive~~executive ~~Officer~~ and ~~Chief~~principal ~~Financial~~financial ~~Officer~~officer, has conducted an assessment of the effectiveness of our internal control over financial reporting as of December 31, ~~2017~~2018, based on the framework established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013 (the “COSO Framework”). This assessment included an evaluation of the design of our internal control over financial reporting and testing of the operational effectiveness of those controls. Based on our assessment under the criteria described above, management has concluded that our internal control over financial reporting was not effective as of December 31, ~~2017~~2018 and identified material weaknesses in internal control over financial reporting.

67A material weakness is a control deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

Management identified a material weakness in the operating effectiveness of internal control over financial reporting relating to the timely reporting of its financial results and disclosures for the fiscal year ended December 31, 2018, and its testing and assessment of the design and operating effectiveness of internal controls over financial reporting in a timely manner. This was also noted during the 2018 annual year-end audit and it was further noted that our disclosure controls and procedures were not effective at a reasonable assurance level as of December 31, 2018, due to the material weakness in internal control over financial reporting. The small size of the Company’s accounting staff may prevent adequate controls in the future, such as segregation of duties, due to the cost/benefit of such remediation.

Because of the above material weakness, management has concluded that we did not maintain effective internal control over financial reporting as of December 31, 2018, based on the criteria established in the COSO Framework.

This material weakness was identified prior to the issuance of our consolidated financial statements for the year ended December 31, 2018 and despite the existence of this material weakness, the Company believes the financial information presented in our Form 10-K as of December 31, 2018 is materially correct and in accordance with U.S. generally accepted accounting principles, and does not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made. However, we believe this material weakness could result in a future material misstatement(s) in the Company’s annual or interim consolidated financial statements that may not be prevented or detected.

Changes in Internal Control over Financial Reporting

There have been no changes in our system of internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended December 31, ~~2017~~2018 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Item 9B.

Other Information

Filing Compare · Eco-Stim Energy Solutions, Inc.