Enservco?

Reportedly founded in 1980, Enservco Corporation is a Longmont, Colorado based company that provides specialized well-site services, such as drilling, hot oiling and acidizing, and frac water heating, to the domestic onshore oil and gas industry. Enservco reportedly conducts its business operations through Heat Waves Hot Oil Service LLC, a wholly owned subsidiary operating in oil and natural gas areas in Colorado, Montana, North Dakota, Ohio, Oklahoma, Pennsylvania, Texas, West Virginia, and Wyoming. In addition to Heat Waves Hot Oil Service, Enservco conducts operations through Heat Waves Water Management, and Adler Hot Oil Service.

Enservco’s common stock is traded on the NYSE American under the symbol “ENSV.” According to data provided by Yahoo! Finance, on August 22, 2022, the price per ENSV share closed at $1.68.

In June 2022, a class action complaint was filed against Enservco Corporation, Richard A. Murphy (Enservco’s CEO), and Marjorie A. Hargrave (Enservco’s CFO and former President).

The plaintiffs alleged, among others, that “in an apparent effort to strengthen its balance sheets,” Enservco allegedly exchanged its subordinated debt in two transactions with a related party called Cross River Partners, L.P., a company reportedly managed by Enservco’s CEO Richard A. Murphy. In addition, Enservco allegedly issued a warrant to Cross River Partners, L.P. to purchase up to 150,418 additional shares of Company common stock in the future at an exercise price of $2.507 per share. Furthermore, the complaint alleges that to claim refundable Employee Retention Credits under the Coronavirus Aid, Relief, and Economic Security Act, Enservco allegedly amended payroll tax returns originally filed for the third and fourth quarters of 2020 during the second quarter of 2021.

The complaint alleges that Envervco failed to implement effective disclosure controls over financial reporting which allegedly led to errors in Enservco’s financial statements that allegedly misrepresented the transactions with Cross River Partners and the accounting for Employee Retention Credits.

In a 8-K Report filed on May 28, 2022, Enservco communicated to investors that following a consultation with the Audit Committee the previously issued condensed financial statements as for the quarters ended March 31, 2021, June 30, 2021 and September 30, 2021 should no longer be relied upon. The company further indicated that the errors were related, among others, to improperly recognizing a portion of the Employee Retention Credits as other receivables while Enservco was reportedly not entitled to it.

In the same 8-K Report, the company disclosed that it failed to record one of the debt conversion transactions with Cross River Partners, L.P. as a loss, and instead recorded it through equity. As a result, Enservco announced it will restate its financial statements on three Form 10-Q filings from 2021, and that it will extend the filing date of its 2021 Form 10-K. According to the class action complaint, the news allegedly caused a 12% decline of ENSV share price to close at $3.21 per share on March 28, 2022.

On March 31, 2022, Enservco reportedly filed a notification of inability to timely file Form 10-K which reportedly caused the price per ENSV share to decline additional 7.78%, according to the complaint. A few days later, on April 4, 2022, the company filed an 8-K report to disclose the departure of its then CFO and President Majorie Hargrave, which was followed by an an additional decline in price per ENSV share. Finally, on April 18, 2022, Enservco filed an 8-K report announcing that previously issued condensed consolidated financial statements “should no longer be relied upon due to the Company’s utilization of certain deferred tax liabilities in 2021,” allegedly causing the price per ENSV share to decline over 10% and close at $3.25 on April 19, 2022, according to the complaint.

As a result, the plaintiffs sought damages, pre-judgment and post-judgment interest, as well as reasonable attorneys’ fees and costs, and expert fees. The class action is currently pending.