Aly Energy Services, Inc. (OTCMKTS:ALYE) Files An 8-K Entry into a Material Definitive Agreement

Aly Energy Services, Inc. (OTCMKTS:ALYE) Files An 8-K Entry into a Material Definitive Agreement

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Item 1.01 Entry into a Material Definitive Agreement

In the last Report on Form 8-K, filed August 10, 2016, we had
reported that we were not in compliance with certain financial
covenants under our credit agreement with Wells Fargo Bank and
had entered into a forbearance agreement with the lender, to
which the lender agreed to a forbearance period expiring August
31, 2016. During August 2016, Tiger Finance, LLC (Tiger)
commenced negotiations with Wells Fargo Bank for the purchase of
our obligations under the credit agreement and the outstanding
capital leases in favor of Wells Fargos equipment finance
affiliate (collectively the Aly Senior Obligations). Although the
forbearance period expired on August 31, 2016, Wells Fargo Bank
continued to forebear from the exercise of any creditor remedies
pending the resolution of its negotiations with Tiger.

On October 26, 2017, Tiger acquired the Aly Senior Obligations
from Wells Fargo Bank. Simultaneously, Tiger entered into an
assignment agreement with Permian Pelican, LLC (Pelican), a newly
formed entity organized by certain of the Companys principal
stockholders. Tiger agreed to sell the Aly Senior Obligations to
Pelican on the conditions that (i) Pelican provide up to $500,000
of unsecured working capital financing to the Company pending the
closing and (ii) the Company transfer to Tiger (in consideration
of Tigers reduction of the Aly Senior Obligations in the amount
of $2 million) certain excess equipment and vehicles which the
Company was not utilizing and did not consider as necessary for
its operations. As part of this transaction and upon satisfaction
of such conditions, Tiger extended the forbearance period to
December 9, 2016.

On December 12, 2016, Pelican acquired the Aly Senior Obligations
from Tiger. As the new holder of the Aly Senior Obligations,
Pelican further extended the forbearance period for the Aly
Senior Obligations to January 31, 2017, provided that the Company
was successful in completing a recapitalization transaction (the
Recap) prior to that date consisting of the following:

Exchange of the Aly Operating preferred stock, Aly Centrifuge
preferred stock, Aly Centrifuge subordinated debt and
liability for a contingent payment into approximately 10% of
our common stock on a fully diluted basis
Pelicans contribution of approximately $16.1 million of the
Aly Senior Obligations into shares of Aly Energy convertible
preferred stock that represents approximately 80% of our
common stock on a fully diluted basis.
Amendment of the remaining Aly Senior Obligations into a new
credit agreement (consisting of a $5.1 million term loan and
$1.0 million revolving credit arrangement) with an extended
maturity date of December 31, 2018.

Effective January 31, 2017, we completed the Recap as outlined
above through the execution and delivery of a Securities Exchange
Agreement and a Second Amended and Restated Credit Agreement.

Item 3.02 Unregistered Sales of Equity

Effective January 31, 2017, we issued 7,111,981 shares of our
common stock to the former holders of Aly Operating preferred
stock, Aly Centrifuge preferred stock, Aly Centrifuge
subordinated debt, and liability for contingent payment (a total
of six persons). We also issued 16,092 shares of our preferred
stock to Pelican as described in Item 1.01 above. The issuance of
such shares was exempt from registration to the provisions of
Section 4(2) of the Securities Act.

Item 5.02 Departure of Directors or Certain Officers;
Election of Directors; Appointment of Certain Officers;
Compensatory Arrangements of Certain Officers.

We had previously reported that Christopher Quinn was elected as
Chief Restructuring Officer on August 5, 2016 in connection with
fulfilling our obligations under the Wells Fargo forbearance
agreement. Mr. Quinn resigned from such role upon completion of
the sale of the Aly Senior Obligations to Tiger and such officer
position was eliminated.

Effective December 31, 2016, Mark Pattersons employment
agreement, as our President and Chief Operating Officer, was not
renewed and his employment with the Company and its subsidiaries

Effective December 12, 2016, Nadine Smith resigned as a member of
our board of directors.

On January 30, 2017 and in contemplation of the closing of the
Recap, our board of directors implemented the following changes:

Shauvik Kundagrami was elected Chief Executive Officer and a
member of the board of directors; provided that, the
effective date of his election as Chief Executive Officer
will be determined at a later date, but prior to May 1, 2017.
Micki Hidayatallah will serve as Chief Executive Officer
until the effective date of Mr. Kundagramis election to the
position. Mr. Hidayatallah will remain Executive Chairman of
the Board.
Ali Afdhal resigned as a member of the board of directors but
will continue to assist the Company as an emeritus director.
Bryan Dutt was added to the board of directors.
Greg Price was elected as Chief Operating Officer.

Shauvik Kundagrami, 53 years of age, has served as co-head of the
energy group at RBC for the prior 10 years.

Bryan Dutt, 57 years of age, is the Founder and President of
Ironman Energy Capital Management, LLC, which he founded in 1999.
Ironman has three SEC registered private partnership funds which
specialize in upstream energy securities.

Greg Price, 65 years of age, has served as a Special Advisor to
the CEO of the Company since April 2016. Previously, from 2005 to
2016, Mr. Price served in various positions, including President
of Directional Drilling Services and President of Rental Tubular
Division, at Allis-Chalmers Energy Inc., which was acquired in
2011 and subsequently named Archer.

Item 5.03 Amendment to Articles of Incorporation or
Bylaws; Change in Fiscal Year

On February 10, 2017, we filed a certificate of designation to
our certificate of incorporation to set forth the rights,
preferences and designations of the series of preferred stock of
the Company issued to Pelican in connection with the consummation
of the Recap. A copy of this filing appears as Exhibit 3.1 to
this Report on Form 8-K.

Item 8.01. Other Events.

We operate in the commodity-driven, cyclical oil and gas
industry. From 2011 through mid-2014, the industry operated in an
environment where crude oil prices were relatively stable and,
except for comparatively short intervals, generally traded at
prices at, or in excess of, $100 per barrel. During the second
half of 2014, oil prices declined dramatically resulting in a
significant reduction in the land-based drilling rig count in the
United States. The downward trend in both oil prices and rig
count continued throughout 2015 and into 2016. Many oil and
natural gas exploration and production companies, including our
customers, reduced their drilling-related activity and
simultaneously sought and received significant price reductions
from us and our competitors during this time. As such, we were
faced with sharp declines in both utilization and pricing.
Revenues for the year ended December 31, 2016 declined
significantly compared to revenues for the year ended December
31, 2015 due primarily to decreased activity and pricing. In
2016, our decision to exit the directional drilling business and
temporarily reduce our presence in the northeast to achieve
operational efficiencies also contributed to the decline in
revenues year-over-year.

During mid-2016, we began to see the price of oil and the
drilling rig count stabilize and then slowly increase. In
conjunction with these changes, we began to see increases in the
demand for and utilization of our equipment, particularly
equipment related to our surface rental product line. Although
our activity level has picked up since mid-2016, we have not been
able to significantly increase pricing to our customers and, in
some cases, we have cut pricing even further to retain business.

Despite significant declines in revenue in 2016 when compared to
2015, we were successful at improving the efficacy of our sales
organization, operating more efficiently, and implementing
multiple rounds of cost cuts. We worked with multiple advisors
during 2016, including Greg Price who has subsequently been
appointed as President and Chief Operating Officer, to focus
continuously on cost cutting initiatives. By the end of 2016, we
had cut variable costs and fixed costs significantly by reducing
headcount and fixed salaries, among other things.

When comparing the fourth quarter of 2016 to the first quarter of
2016, revenues declined almost 50%, but the decline in revenue
was more than offset by a decrease in variable and fixed costs
(excluding the impact of non-cash and non-recurring items). We
meaningfully decreased our cost of services as a percentage of
revenue and we decreased selling, general and administrative
expenses, excluding non-cash and non-recurring items, by over
50%. Although we have seen significant improvements in certain
financial measures during the second half of 2016 when compared
to the first half of 2016, market conditions are still depressed
and there is no assurance that conditions will continue to

Our cash balance as of January 31 was approximately $0.6 million.
In addition, we have incremental borrowing availability of
approximately $0.2 million under our revolving line of credit.
The terms of our new credit agreement include minimal monthly
interest payments and only require principal payments when free
cash flow is available. In addition, the credit facility has no
financial covenants, which makes it highly likely we will stay in
compliance with our credit agreement even if market conditions do
not improve further.

Due to the pick-up in activity we are experiencing, a meaningful
reduction in cost structure, and a restructured balance sheet, we
believe that our cash flow from operations in 2017 will be
sufficient to make interest payments on our indebtedness, fund
our working capital needs and fund required capital expenditures.
However, there is still a significant amount of uncertainty
related to market conditions and there is no assurance that we
will retain our current level of activity.

Micki Hidayatallah, the Chairman and CEO of the Company stated:
In 2016, Aly Energy felt the impact of the greatest and longest
recession in oilfield activity in the last 20 years. We stayed
true to our vision and survived the intense volatility of the
cycle. We initiated a 3-prong strategy of cutting costs,
maintaining market share, and preserving liquidity.

We never sought protection from our creditors through a
bankruptcy proceeding and, thanks to the loyal support of our
investors, a related party was formed to buy our senior secured
debt and leases from Tiger. In conjunction with this transaction,
we simplified our balance sheet through the conversion of all
outstanding preferred stock, subordinated debt and contingency
payments into common equity. Today, all of our debt is held by a
related party and we have cash in the bank to meet our
commitments in 2017 even if we do not see further improvements in
the market until 2018. In 2018, we believe that our customers
costs will be lowered sufficiently by new technology which will
result in increased activity in all forms of drilling, completion
and production in the domestic shale basins.

Our long-term business strategy still includes growth through the
acquisition of other businesses. Currently, we believe that there
are numerous acquisition candidates which would be attractive to
us and would add value to the Company and we are considering all
of these options.

It is a great privilege for me to be part of the management of
Aly Energy and I want to thank the entire management team and all
our dedicated and committed employees for their integrity and,
most of all, their loyalty. The acquisition of the senior secured
debt and capital leases by a related party and the financial
restructuring of the Company would not have been possible without
the determination and creativity of the entire Aly Energy team.

Item 9.01 Financial Statements and Exhibits

(d) Exhibits

3.1 Certificate of Designation of Preferred Stock

About Aly Energy Services, Inc. (OTCMKTS:ALYE)

Aly Energy Services, Inc. provides oilfield services, including surface equipment rental, solids control services and directional drilling services, to exploration and production companies. The Company provides a range of oilfield services to owners and operators of oil and gas wells. The Company offers services under various categories, including surface rental equipment, solids control systems, and directional drilling and measurement-while-drilling (MWD) services. The Company’s equipment and services are primarily designed for and used in land-based horizontal drilling. Its equipment includes centrifuges and auxiliary solids control equipment, mud circulating tanks (MCTs) and auxiliary surface rental equipment, portable mud mixing plants, containment systems, and MWD kits. The Company services the Permian Basin (in Texas and New Mexico), Eagle Ford Shale, Utica Shale, Marcellus Shale, Woodford Shale, Granite Wash, Mississippian Lime and Tuscaloosa Marine Shale.

Aly Energy Services, Inc. (OTCMKTS:ALYE) Recent Trading Information

Aly Energy Services, Inc. (OTCMKTS:ALYE) closed its last trading session 00.00000 at 0.00850 with 148 shares trading hands.

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