Pomerantz Appointed Lead Counsel in Enservco Securities Litigation

On August 25, 2022, U.S. Magistrate Judge Scott T. Varholak, of the District of Colorado, appointed Pomerantz LLP as Lead Counsel on behalf of Jan Lambert, the Lead Plaintiff, and the class, in Saee v. Enservco Corporation, 22-cv-1267 (D. Colo.). This securities action alleges that Enservco Corporation ("Enservco" or the "Company") misled the market regarding the effectiveness of its disclosure controls, the accuracy of its financial statements, and the true scope of its financial reporting issues.

Enservco, through its subsidiaries, provides well enhancement and fluid management services to the onshore oil and natural gas industry in the U.S.

Allegations against Enservco include that: (i) the Company had defective disclosure controls and procedures and internal control over financial reporting; (ii) as a result, there were errors in Enservco’s financial statements relating to, among other things, its accounting for Employee Retention Credits (“ERCs”) and its transactions with Cross River Partners, LP (“Cross River Partners”) – a related party; (iii) accordingly, the Company would need to restate certain of its financial statements and delay the filing of its 2021 annual report with the SEC; (iv) Enservco downplayed the true scope and severity of its financial reporting issues; and (v) accordingly, the Company could not file its delayed 2021 annual report with the SEC within its initially represented timeline.

As a part of a recent effort to strengthen its balance sheets, Enservco’s Board of Directors approved a transaction to, inter alia, exchange 50% of the Company’s subordinated debt with Cross River Partners. The Company’s Chief Executive Officer (“CEO”), Defendant Richard A. Murphy (“Murphy”), is a managing member of Cross River Capital Management, LLC – the general partner of Cross River Partners. On February 3, 2021, Enservco exchanged the remaining 50% of its subordinated debt with Cross River Partners. In addition, the Company awarded a warrant to Cross River Partners to purchase more than 150,000 additional shares of the Company’s common stock in the future at an exercise price of $2.507 per share.

Moreover, during the second quarter of 2021, Enservco amended payroll tax returns originally filed for the third and fourth quarters of 2020 to claim refundable Employee Retention Credits (“ERCs”) for those periods.

The truth began to emerge on March 28, 2022, when Enservco disclosed that it had concluded that its previously issued financial statements for the quarters ended March 31, 2021, June 30, 2021 and September 30, 2021 (collectively, the “Relevant Periods”) “should no longer be relied upon largely because of the Company’s accounting for a conversion of debt to equity with a related party,” namely, Cross River Partners.  The Company further advised that it had “misinterpret[ed the] eligibility for certain employee retention tax credits under relevant provisions of the [CARES Act]” and would “amend its Quarterly Reports on Form 10-Q for the Relevant Periods to reflect restatements of its condensed consolidated financial statements for the Relevant Periods.” On this news, Enservco’s share price fell 12.3%.

On March 31, 2022, Enservco disclosed that it could not timely file its annual report because it was “in the process of restating [its] financial statements and preparing amendments to its Quarterly Reports on Form 10-Q filings for the Relevant Periods, which must be completed prior to the completion and filing of the [Company]’s Annual Report on Form 10-K for the period ended December 31, 2021.” On this news, Enservco’s share price fell 7.78%.

On April 4, 2022, Enservco disclosed that its Chief Financial Officer, Defendant Marjorie A. Hargrave, was departing the Company effective April 22, 2022. On this news, Enservco’s share price fell 7.48%.

On April 11, 2022, Enservco filed amended quarterly reports with the SEC for the Relevant Periods, each of which reported adjusted net losses that increased, and adjusted other income that decreased, significantly for their respective periods.

Then, on April 18, 2022, Enservco disclosed that it would “not be filing its Form 10-K for the fiscal year ended December 31, 2021, within the 15-day extension period provided by the Company’s 12b-25 filing” because it “intends to [again] amend its Quarterly Reports on Form 10-Q for the Relevant Periods to reflect restatements of its condensed consolidated financial statements for the Relevant Periods.” On this news, Enservco’s share price fell 10.47%.