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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
 _____________________________________________________
FORM 10-Q
 _____________________________________________________ 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2020
OR
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 001-37936
https://cdn.kscope.io/b93735b3217780cbe6a32638acd1c831-snd-20200630_g1.jpg
SMART SAND, INC.
(Exact name of registrant as specified in its charter) 
Delaware45-2809926
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification Number)
1725 Hughes Landing Blvd, Suite 800
The Woodlands, Texas 77380
(281) 231-2660
(Address of principal executive offices)(Registrant’s telephone number)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.001 per shareSNDNasdaq Global Select Market
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 ý No ☐
Indicate by check mark whether the registrant has submitted electronically 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 ý No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an 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. 
Large accelerated filer  ☐
Accelerated Filer  ý
Non-accelerated filer  ☐
Smaller reporting company
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 ý
Number of shares of common stock outstanding, par value $0.001 per share, as of July 29, 2020: 42,025,249




TABLE OF CONTENTS
  PAGE
 
   
 
 
 
 
 
  
  
  
  
 

1


Certain Definitions
The following definitions apply throughout this quarterly report unless the context requires otherwise:
“We”, “Us”, “Company”, “Smart Sand” or “Our”Smart Sand, Inc., a company organized under the laws of Delaware, and its subsidiaries.
“shares”, “stock”The common stock of Smart Sand, Inc., nominal value $0.001 per share.
“ABL Credit Facility”, “ABL Credit Agreement”,
“ABL Security Agreement”
The five-year senior secured asset-based lending credit facility (the “ABL Credit Facility”) pursuant to: (i) an ABL Credit Agreement, dated December 13, 2019, between the Company and Jefferies Finance LLC (the “ABL Credit Agreement”); and (ii) a Guarantee and Collateral Agreement, dated December 13, 2019, between the Company and Jefferies Finance LLC, as agent (the “Security Agreement”).
“Oakdale Equipment Financing”, “MLA”The five-year Master Lease Agreement, dated December 13, 2019, between Nexseer Capital (“Nexseer”) and related lease schedules in connection therewith (collectively, the “MLA”). The MLA is structured as a sale-leaseback of substantially all of the equipment at the Company’s mining and processing facility located near Oakdale, Wisconsin. The Oakdale Equipment Financing is considered a lease under article 2A of the Uniform Commercial Code but is considered a financing arrangement (and not a lease) for accounting or financial reporting purposes.
“Former Credit Agreement”, “Former Credit
Facility”
The $45 million 3-year senior secured revolving credit facility (the “Former Credit Facility”) under a revolving credit agreement, dated December 8, 2016, with Jefferies Finance LLC, as administrative and collateral agent (as amended, the “Former Credit Agreement”). The Former Credit Facility was paid in full and terminated with proceeds from the Oakdale Equipment Financing.
“Exchange Act”The Securities Exchange Act of 1934, as amended.
“Securities Act”The Securities Act of 1933, as amended.
“FCA”, “DAT”, “DAP”Free Carrier, Delivered at Terminal, Delivered at Place, respectively, Incoterms 2010.
“FASB”, “ASU”, “ASC”, “GAAP”Financial Accounting Standards Board, Accounting Standards Update, Accounting Standards Codification, Accounting Principles Generally Accepted in the United States, respectively.

2


PART I – FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS
SMART SAND, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 2020December 31, 2019
(unaudited)
 (in thousands, except share amounts)
Assets  
Current assets:  
Cash and cash equivalents$16,643  $2,639  
Accounts receivable, net55,968  58,925  
Unbilled receivables48  4,765  
Inventories20,287  21,415  
Prepaid expenses and other current assets4,107  4,433  
Total current assets97,053  92,177  
Property, plant and equipment, net225,165  230,461  
Operating lease right-of-use assets24,892  28,178  
Intangible assets, net8,649  9,046  
Other assets3,475  3,541  
Total assets$359,234  $363,403  
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable$3,234  $3,961  
Accrued and other expenses4,337  8,578  
Deferred revenue, current6,717  7,654  
Income taxes payable4,187  542  
Long-term debt, net, current6,430  6,175  
Operating lease liabilities, current8,202  13,108  
Total current liabilities33,107  40,018  
Deferred revenue, net277  1,670  
Long-term debt, net24,865  28,240  
Operating lease liabilities, long-term17,248  15,469  
Deferred tax liabilities, long-term, net25,546  24,408  
Asset retirement obligation6,293  6,142  
Contingent consideration570  1,900  
Total liabilities107,906  117,847  
Commitments and contingencies (Note 15)
Stockholders’ equity
Common stock, $0.001 par value, 350,000,000 shares authorized; 41,314,469 issued and 39,754,071 outstanding at June 30, 2020; 40,975,408 issued and 40,234,451 outstanding at December 31, 201940  40  
Treasury stock, at cost, 1,560,398 and 740,957 shares at June 30, 2020 and December 31, 2019, respectively(4,024) (2,979) 
Additional paid-in capital167,263  165,223  
Retained earnings87,869  83,313  
Accumulated other comprehensive income (loss)180  (41) 
Total stockholders’ equity251,328  245,556  
Total liabilities and stockholders’ equity$359,234  $363,403  

 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3


SMART SAND, INC.
CONDENSED CONSOLIDATED INCOME STATEMENTS
(UNAUDITED) 
 Three Months Ended June 30,Six Months Ended June 30,
 2020201920202019
 (in thousands, except per share amounts)
Revenues$26,106  $67,941  $73,594  $119,716  
Cost of goods sold11,906  43,068  52,995  83,673  
Gross profit14,200  24,873  20,599  36,043  
Operating expenses:
Salaries, benefits and payroll taxes2,155  2,798  5,057  5,508  
Depreciation and amortization461  655  914  1,331  
Selling, general and administrative2,930  2,790  6,460  5,590  
Change in the estimated fair value of contingent consideration  (575) (1,020) (1,542) 
Total operating expenses5,546  5,668  11,411  10,887  
Operating income8,654  19,205  9,188  25,156  
Other income (expenses):
Interest expense, net(607) (994) (1,079) (1,975) 
Other income63  37  82  74  
Total other income (expenses), net(544) (957) (997) (1,901) 
Income before income tax expense8,110  18,248  8,191  23,255  
Income tax expense3,470  3,972  3,635  4,946  
Net income$4,640  $14,276  $4,556  $18,309  
Net income per common share:
Basic$0.12  $0.36  $0.11  $0.46  
Diluted$0.12  $0.36  $0.11  $0.46  
Weighted-average number of common shares:
Basic39,644  40,074  39,867  40,035  
Diluted39,644  40,173  39,867  40,117  
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4


SMART SAND, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
(in thousands)
Net income$4,640  $14,276  $4,556  $18,309  
Other comprehensive income:
Foreign currency translation adjustment384  91  221  236  
Comprehensive income$5,024  $14,367  $4,777  $18,545  

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5


SMART SAND, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(UNAUDITED) 

Six months ended June 30, 2020
 Common StockTreasury StockAdditional Paid-in Capital Accumulated Other Comprehensive LossTotal Stockholders’ Equity
 Outstanding
Shares
Par ValueSharesAmountRetained
Earnings
 (in thousands, except share amounts)
Balance at December 31, 201940,234,451  $40  740,957  $(2,979) $165,223  $83,313  $(41) $245,556  
Foreign currency translation adjustment—  —  —  —  —  —  (163) (163) 
Vesting of restricted stock139,947  —  —  —  —  —  —  —  
Stock-based compensation—  —  —  —  1,025  —  —  1,025  
Employee stock purchase plan compensation—  —  —  —  14  —  —  14  
Employee stock purchase plan issuance21,486  —  —  —  46  —  —  46  
Restricted stock buy back(10,468) —  10,468  (14) —  —  —  (14) 
Shares repurchased(778,300) —  778,300  (1,000) —  —  —  (1,000) 
Net loss—  —  —  —  —  (84) —  (84) 
Balance at March 31, 202039,607,116  40  1,529,725  (3,993) 166,308  83,229  (204) 245,380  
Foreign currency translation adjustment—  —  —  —  —  —  384  384  
Vesting of restricted stock177,628  —  —  —  —  —  —  —  
Stock-based compensation—  —  —  —  943  —  —  943  
Employee stock purchase plan compensation—  —  —  —  12  —  —  12  
Employee stock purchase plan issuance  —  —  —    —  —    
Restricted stock buy back(30,673) —  30,673  (31) —  —  —  (31) 
Shares repurchased—  —  —  —  —  —  —  —  
Net income—  —  —  —  —  4,640  —  4,640  
Balance at June 30, 202039,754,071  $40  1,560,398  $(4,024) $167,263  $87,869  $180  $251,328  




6



SMART SAND, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (continued)
(UNAUDITED) 

Six months ended June 30, 2019
 Common StockTreasury StockAdditional Paid-in Capital Accumulated Other Comprehensive LossTotal Stockholders’ Equity
 Outstanding
Shares
Par ValueSharesAmountRetained
Earnings
 (in thousands, except share amounts)
Balance at December 31, 201839,974,478  $40  699,035  $(2,839) $162,195  $48,864  $(313) $207,947  
Foreign currency translation adjustment—  —  —  —  —  —  145  145  
Vesting of restricted stock30,729  —  —  —  —  —  —  —  
Stock-based compensation—  —  —  —  790  —  —  790  
Employee stock purchase plan compensation—  —  —  —  9  —  —  9  
Employee stock purchase plan issuance20,954  —  —  —  40  —  —  40  
Restricted stock buy back(5,714) —  5,714  (23) —  —  —  (23) 
Net income—  —  —  —  —  4,033  —  4,033  
Balance at March 31, 201940,020,447  40  704,749  (2,862) 163,034  52,897  (168) 212,941  
Foreign currency translation adjustment—  —  —  —  —  —  91  91  
Vesting of restricted stock224,653  —  —  —  —  —  —  —  
Stock-based compensation—  —  —  —  754  —  —  754  
Employee stock purchase plan compensation—  —  —  —  9  —  —  9  
Employee stock purchase plan issuance  —  —  —    —  —    
Restricted stock buy back(35,691) —  35,691  (116) —  —  —  (116) 
Net income—  —  —  —  —  14,276  —  14,276  
Balance at June 30, 201940,209,409  $40  740,440  $(2,978) $163,797  $67,173  $(77) $227,955  

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
7


SMART SAND, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended June 30,
 20202019
 (in thousands)
Operating activities:  
Net income $4,556  $18,309  
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation, depletion and accretion of asset retirement obligation10,697  12,501  
Amortization of intangible assets398  837  
Asset retirement obligation settlement  (1,883) 
Gain on disposal of assets275    
Amortization of deferred financing cost53  117  
Accretion of debt discount92  331  
Deferred income taxes 1,004  4,287  
Stock-based compensation, net1,968  1,544  
Employee stock purchase plan compensation25  18  
Change in contingent consideration fair value(1,020) (1,542) 
Imputed interest61    
Changes in assets and liabilities:
Accounts receivable2,957  (26,663) 
Unbilled receivables4,717  512  
Inventories1,128  6,194  
Prepaid expenses and other assets460  1,587  
Deferred revenue(2,196) (694) 
Accounts payable(361) (1,977) 
Accrued and other expenses(2,618) 3,925  
Income taxes payable3,646    
Net cash provided by operating activities25,842  17,403  
Investing activities:
Purchases of property, plant and equipment(6,423) (13,869) 
Net cash used in investing activities(6,423) (13,869) 
Financing activities:
Proceeds from the issuance of notes payable952  4,696  
Repayments of notes payable(2,482) (734) 
Payments under equipment financing obligations(56) (50) 
Payment of deferred financing and debt issuance costs(20) (835) 
Proceeds from revolving credit facility6,000  22,750  
Repayment of revolving credit facility(8,500) (28,250) 
Payment of contingent consideration(310) (1,225) 
Proceeds from equity issuance46  40  
Purchase of treasury stock(1,045) (139) 
Net cash provided by financing activities(5,415) (3,747) 
Net increase in cash and cash equivalents14,004  (213) 
Cash and cash equivalents at beginning of year2,639  1,466  
Cash and cash equivalents at end of period$16,643  $1,253  
Supplemental disclosure of cash flow information
Non-cash investing activities:
Asset retirement obligation$  $3,301  
Non-cash financing activities:
Capitalized expenditures in accounts payable and accrued expenses$225  $1,237  

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
8


SMART SAND, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

NOTE 1 — Organization and Nature of Business & Market Update
Organization and Nature of Business
The Company was incorporated in July 2011 and is headquartered in The Woodlands, Texas. The Company is a fully integrated frac sand supply and services company, offering complete mine to wellsite proppant logistics and storage solutions. The Company is engaged in the excavation, processing and sale of sand, or proppant, for use in hydraulic fracturing operations for the oil and natural gas industry and offers proppant logistics and wellsite storage solutions through its SmartSystemsTM products and services.
The Company completed construction of the first phase of its frac sand mine and related processing facility in Oakdale, Wisconsin and commenced operations in July 2012, and subsequently expanded its operations in 2014, 2015 and 2018 to the current annual processing capacity of approximately 5.5 million tons.
The Company provides complete logistics solutions through both its integrated Oakdale facility, with on-site rail infrastructure, with access to two Class I rail lines and its in-basin unit train capable transloading terminal in Van Hook, North Dakota to service the Bakken Formation in the Williston Basin. These logistics solutions enable the Company to cost-effectively deliver products to its customers anywhere in the United States.
The Company provides proppant storage and management solutions through its SmartSystems products and services under which it offers various solutions that create efficiencies, flexibility, enhanced safety and reliability for customers by providing the capability to unload, store and deliver proppant at the wellsite, as well as the ability to rapidly set up, takedown and transport the entire system. The SmartDepotTM silo system includes passive and active dust suppression technology, along with the capability of a gravity-fed operation. SmartSystems operate with proprietary the SmartSystem TrackerTM software program, which allows users to monitor silo-specific information, including location, proppant type, and proppant inventory. The Company is currently developing a new transload technology to complement its existing solutions.

Market Update
Generally, the price of frac sand correlates with the level of drilling and completions activity for oil and natural gas in the United States and Canada. In recent years, the increasing supply of sand, particularly in-basin sand, relative to demand, has led to a continued depression of frac sand prices. The willingness of exploration and production companies to engage in drilling and completing new wells is determined by a number of factors, the most important of which are the prevailing and projected prices of oil and natural gas, the cost to drill, complete and operate a well, the availability and cost of capital and environmental and government regulations, as well as their ability to acquire the sand at the wellsite.
Recently, oil prices declined to all-time lows as a result of decreased demand for oil from the COVID-19 coronavirus pandemic, as well as an increase in global oil supply driven by disagreements with respect to oil pricing between Russia and members of the Organization of the Petroleum Exporting Countries (“OPEC”), particularly Saudi Arabia. The COVID-19 coronavirus pandemic has caused a global decrease in all means of travel, the closure of borders between countries and a general slowing of economic activity worldwide which has decreased the demand for oil. In early March, discussions between Russia and Saudi Arabia deteriorated and the countries ended a three-year supply level agreement, which resulted in each country increasing its oil production. Subsequently, Russia and OPEC agreed to certain production cuts to mitigate the decline in the price of oil, however, such cuts may not be sufficient to stabilize the oil market if the decline in demand due to the COVID-19 coronavirus pandemic continues. Oil and natural gas prices are expected to continue to be depressed as a result of the increase of near-term supply and the decrease in overall demand caused by these events, and the Company cannot predict when prices will improve or stabilize.
In response to market conditions, the Company has reduced its total capital expenditure budget, primarily a reduction to SmartSystems manufacturing plans. The Company has also put in place several cost-cutting measures, including headcount reductions at its Oakdale and Saskatoon, Canada operating facilities, salary reductions and suspension of certain variable cash compensation programs for all employees, and reduced compensation for board members. The Company has also taken steps to limit cash outflows in the near-term by negotiating for deferred payments on certain of its operating leases, debt and minimum royalty payments. The Company has put in place multiple initiatives to protect the health and well-being of its workforce and
9


SMART SAND, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
its customers, including work-from-home arrangements for all employees that are able to do so and implementing social distancing requirements as prescribed by the federal, state and local government authorities.
The ultimate disruption caused by these events is uncertain; however they may result in a material adverse impact on the Company’s financial position, results of operations and cash flows. Possible effects may include, but are not limited to, disruption to the Company’s customers and revenue, absenteeism in the Company’s labor workforce, unavailability of products and supplies used in operations, a decline in value of assets held by the Company, including accounts receivable, inventories, property, plant and equipment and intangible assets, and a decrease in liquidity due to lower cash flows from operations being generated, a reduction in the availability to borrow under the ABL Credit Facility and inability to access other sources of liquidity and capital, such as equipment financings or the capital markets.
Management is actively monitoring these global events, but given the rapidly changing nature of these events, the Company is currently unable to estimate the impact of these events on its future financial position and results of operations. Therefore, the Company can give no assurances that the events will not have a material adverse effect on its financial position or results of operations.

NOTE 2 — Summary of Significant Accounting Policies
The information presented below supplements the complete description of our significant accounting policies disclosed in our 2019 Form 10-K, filed with the SEC on February 26, 2020.
Basis of Presentation and Consolidation
The accompanying unaudited quarterly condensed consolidated financial statements (“interim statements”) of the Company are presented in accordance with the rules and regulations of the Securities and Exchange Commission for quarterly reports on Form 10-Q and therefore do not include all the information and notes required by GAAP. In the opinion of management, all adjustments and disclosures necessary for a fair presentation of these interim statements have been included. All adjustments are of a normal recurring nature. The results reported in these interim statements are not necessarily indicative of the results that may be reported for the entire year. The consolidated balance sheet as of December 31, 2019 was derived from the audited consolidated financial statements as of and for the year ended December 31, 2019. These interim statements should be read in conjunction with the Company’s consolidated financial statements for the year ended December 31, 2019. 
Revision of Previously Issued Financial Statements for Immaterial Misstatements
During the quarter ended June 30, 2020, the Company identified an error in costs of goods sold in the Company’s audited financial statements for the year ended December 31, 2018. The error related to a vendor rebate the company received during the current period, $1,800 of which related to expenses attributable to fiscal year 2018. As a result of the error, the Company reduced costs of goods sold by $1,800 and increased income tax expense by $387 in its audited financial statements for the year ended December 31, 2018, and increased prepaid expenses and other current assets by $1,800, increased deferred tax liability by $387 and increased retained earnings by $1,413 in its audited financial statements for the year ended December 31, 2019. Additionally, certain 2019 balance sheet items have been reclassified to conform to the current financial statement presentation. These reclassifications have no effect on previously reported net income.
Pursuant to the guidance of Staff Accounting Bulletin (“SAB”) No. 99, “Materiality”, the Company evaluated the materiality of these errors quantitatively and qualitatively and concluded that the errors described above were not material to any of its prior annual or quarterly financial statements or trends of financial results. However, due to reduced activity and the current economic environment, the errors could be considered material to the Company’s current period financial statements. As such, the Company has revised the prior period financial statements in accordance with SAB No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements.” The Company expects to similarly revise previously presented historical financial statements for these immaterial errors in future filings, including the annual audited financial statements to be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

10


SMART SAND, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Use of Estimates
The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant estimates used in the preparation of these financial statements include, but are not limited to: the sand reserves and their impact on calculating the depletion expense under the units-of-production method; depreciation and amortization associated with property, plant and equipment and definite-lived intangible assets; impairment considerations of assets (including impairment of identified intangible assets and other long-lived assets); estimated cost of future asset retirement obligations; stock-based compensation; recoverability of deferred tax assets; inventory reserve; collectability of receivables; and certain liabilities.
Actual results could differ from management’s best estimates as additional information or actual results become available in the future, and those differences could be material. The increased supply of oil and the decreased demand related to the COVID-19 coronavirus pandemic have caused a dramatic decline in oil prices and significant volatility in the oilfield services sector. The Company is currently unable to estimate the impact of these events on its future financial position and results of operations. Therefore, the Company can give no assurances that the events will not have a material adverse effect on its financial position or results of operations.

Recent Accounting Pronouncements
         Not yet adopted
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), which modifies how companies recognize expected credit losses on financial instruments and other commitments to extend credit held by an entity at each reporting date. Existing GAAP requires an “incurred loss” methodology whereby companies are prohibited from recording an expected loss until it is probable that the loss has been incurred. ASU 2016-13 requires companies to use a methodology that reflects current expected credit losses (“CECL”) and requires consideration of a broad range of reasonable and supportable information to record and report credit loss estimates, even when the CECL is remote. Companies will be required to record the allowance for credit losses and deduct that amount from the basis of the asset and a related expense will be recognized in selling, general and administrative expenses on the income statement, similar to bad debt expense under existing GAAP. There is much latitude given to entities in determining the methodology for calculating the CECL. The guidance is effective for the Company for financial statement periods beginning after December 15, 2022, although early adoption is permitted. While the Company is still in the process of evaluating the effects of ASU 2016-13 and its related updates on its consolidated financial statements, it believes the primary effect will be an allowance recorded against its accounts and unbilled receivables on its balance sheet and related expense on its income statement upon adoption. The Company cannot determine the financial impact on its consolidated financial statements upon adoption as its accounts and unbilled receivables balances are affected by ongoing transactions with customers.
In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes, which intends to simplify the guidance by removing certain exceptions to the general principles and clarifying or amending existing guidance. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Although the Company is currently evaluating the impact of the adoption of ASU 2019-12, it does not expect it to have a material impact on its consolidated financial statements.
11


SMART SAND, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

NOTE 3 — Inventory
Inventory consisted of the following:
 June 30, 2020December 31, 2019
Raw material$899  $527  
Work in progress12,309  14,173  
Finished goods4,158  4,097  
Spare parts2,921  2,618  
Total sand inventory$20,287  $21,415  


NOTE 4 — Property, Plant and Equipment, net
Net property, plant and equipment consisted of:
June 30, 2020December 31, 2019
Machinery, equipment and tooling$20,145  $19,683  
SmartSystems
20,538  15,811  
Vehicles2,708  2,419  
Furniture and fixtures1,214  1,228  
Plant and building170,401  170,283  
Real estate properties4,678  4,946  
Railroad and sidings27,703  27,701  
Land and land improvements21,337  21,320  
Asset retirement obligation11,480  11,480  
Mineral properties7,442  7,442  
Deferred mining costs2,104  2,004  
Construction in progress9,012  9,208  
298,762  293,525  
Less: accumulated depreciation and depletion73,597  63,064  
Total property, plant and equipment, net$225,165  $230,461  

Depreciation expense was $5,253 and $6,171 for the three months ended June 30, 2020 and 2019, respectively, and $10,529 and $12,038 for the six months ended June 30, 2020 and 2019, respectively.
12


SMART SAND, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

NOTE 5 — Accrued and Other Expenses
Accrued and other expenses were comprised of the following:
 June 30, 2020December 31, 2019
Employee related expenses$749  $2,233  
Accrued construction related expenses4  188  
Accrued equipment
14  429