What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2023-03-13 compared with 2022-03-30 · 79 added, 29 removed, 172 unchanged (39% of the section changed)

4 unchanged sentences

Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our company’s reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Based on the evaluation of our disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were ineffective as of December 31, 2021 due to the material weakness identified and described below.

In light of the material weakness described below, management performed additional analysis and other procedures to ensure that our interim and annual consolidated financial statements were prepared in accordance with U.S.

Based on the evaluation of our disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective as of December 31, 2022 due to the material weaknesses identified and described below.

In light of the material weaknesses described below, management performed additional analysis and other procedures to ensure that our interim and annual Consolidated Financial Statements were prepared in accordance with U.S.

generally accepted accounting principles (“GAAP”).

10 unchanged sentences

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2022 based on the guidelines established in the Internal Control—Integrated Framework (2013 framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Based on its assessment, management concluded that the Company’s internal control over financial reporting was ineffective as of December 31, 2021 due to a material weakness in our control environment whereby the Company did not have adequate controls over the accounting for complex transactions to sufficiently mitigate risks of material misstatement.

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

We will not be required to have our independent registered public accounting firm attest to the effectiveness of our internal control over financial reporting under Section 404 until our first Annual Report subsequent to our ceasing to be an "emerging growth company" within the meaning of Section 2(a)(19) of the Exchange Act.

As a result, such attestation report is excluded from this annual report form 10-K.

The Company is working to remediate the material weakness in internal control over financial reporting and is taking steps to improve the internal control environment.

Specifically, the Company is enhancing processes, and designing and implementing additional internal controls to properly account for complex transactions.

Additionally, the Company is hiring additional accounting personnel and implementing training of new and existing personnel on proper execution of designed control procedures.

The material weakness will be considered remediated when management concludes that, through testing, the applicable remediated controls are designed and implemented effectively.

We expect remediation of the material weaknesses will be completed in fiscal year 2022.

Based on its assessment, management concluded that the Company’s internal control over financial reporting was not effective as of December 31, 2022 due to material weaknesses in our control environment whereby the Company did not maintain (1) adequate controls surrounding manual journal entries and account reconciliations resulting from identified segregation of duties conflicts to sufficiently mitigate risks of material misstatement , (2) adequate information technology general controls related to administrative user access to the Company’s information systems that are relevant to the preparation of financial statements to ensure appropriate segregation of duties and to adequately restrict access to financial applications and data, and (3) adequate controls over the accounting for complex transactions.

Notwithstanding that we did not identify any material misstatements to the consolidated financial statements and there were no changes to previously released financial results as a

result of these material weaknesses, the control deficiencies created a reasonable possibility that a material misstatement to the consolidated financial statements would not be prevented or detected on a timely basis.

As a result, management believes that, as of December 31, 2022, our internal control over financial reporting was not effective.

BDO USA, LLP, the independent registered public accounting firm that audited the financial statements included in this Annual Report on Form 10-K, has provided an attestation report on Ranger’s internal control over financial reporting.

As a result of the material weaknesses described below, such report includes an adverse audit report on the effectiveness of internal control over financial reporting as of December 31, 2022.

Material Weaknesses in Internal Control Over Financial Reporting

In connection with the evaluation of the Company’s internal control over financial reporting as described above, management has identified the following deficiencies in our control environment in the current period that constituted material weaknesses in the Company’s internal control over financial reporting as of December 31, 2022:

• Ineffective controls over segregation of duties related to the review of manual journal entries and account reconciliations.

Specifically, certain personnel had the ability to both (a) create and post journal entries within our general ledger system, and (b) review account reconciliations.

• Ineffective information technology general controls related to administrative user access to the Company’s information systems that are relevant to the preparation of financial statements to ensure appropriate segregation of duties and to adequately restrict access to financial applications and data.

In addition, the following material weakness previously reporting in our 2021 Annual Report continued to exist as of December 31, 2022.

• Ineffective controls over the accounting for complex transactions.

Notwithstanding we did not identify any material misstatements to the consolidated financial statements and there were no changes to previously released financial results as a result of these material weaknesses, the control deficiencies created a reasonable possibility that a material misstatement to the consolidated financial statements would not be prevented or detected on a timely basis.

Remediation Efforts to Address the Material Weaknesses Existing in the Current Period

• During the fourth quarter of 2022, management implemented a remediation plan to update its design and implementation of controls to remediate the deficiency related to manual journal entries and enhance the Company's internal control environment.

The Company has designed and implemented controls to prevent or detect a material misstatement resulting from certain personnel with the ability to create and post journal entries within the Company’s general ledger system.

Management has designed and implemented controls over the review of all manual journal entries initiated and approved to ensure appropriate segregation of duties.

• Management has initiated a remediation plan to enhance the design of information technology general controls related to administrative user access by restricting privileged access, implementing controls over user access and enforcing proper segregation of duties within IT environments based on roles and responsibilities.

• Management is enhancing processes and designing and implementing additional internal controls to properly account for complex transactions.

Additionally, the Company has hired additional accounting personnel and implementing training of new and existing personnel on proper execution of designed control procedures.

The material weaknesses will not be considered remediated until the controls have operated effectively, as evidenced through testing, for a sufficient number of instances.

Changes in Internal Control over Financial Reporting

Other than the material weakness described above, there were no changes in our internal control over financial reporting that occurred during the quarter-ended December 31, 2021 that have materially affected, or are reasonably likely to materially effect, our internal control over financial reporting.

Attestation Report of the Registered Public Accounting Firm

Our independent registered public accounting firm will not be required to formally attest to the effectiveness of our internal controls over financial reporting for as long as we are an “emerging growth company” pursuant to the provisions of the JOBS Act.

Material Weakness in Internal Control over Financial Reporting

As of December 31 , 2021, we identified a material weakness in internal controls over financial reporting.

The material weakness related to ineffective controls over accounting for non-routine and/or complex transactions.

To address this material weakness, we along with the oversight of our audit committee, are evaluating our controls over accounting for non-routine and/or complex transactions in an effort to identify additional controls to timely identify misstatements and strengthen our overall control environment as well as continuing to assess our accounting personnel staffing requirements.

Except for the changes in connection with our implementation of the remediation plan discussed above, there have been no other changes in our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) of the Exchange Act) that occurred during the fourth quarter of 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Report of Independent Registered Public Accounting Firm

Stockholders and Board of Directors

Ranger Energy Services, Inc.

Houston, Texas

Opinion on Internal Control over Financial Reporting

We have audited Ranger Energy Services, Inc.’s (the “Company’s”) internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”).

In our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on the COSO criteria.

We do not express an opinion or any other form of assurance on management’s statements referring to any corrective actions taken by the Company after the date of management’s assessment.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the years then ended, and the related notes to the consolidated financial statements (collectively referred to as “the financial statements”) and our report dated March 13, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying, “Item 9A, Management’s Report on Internal Control over Financial Reporting”.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audit also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

A material weakness is a 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.

These material weaknesses related to management’s failure to design and implement controls at a sufficient level of precision over (1) controls surrounding manual journal entries and account reconciliations resulting in segregation of duties conflicts, (2) information technology general controls related to administrative user access to information systems that are relevant to the preparation of financial statements, and (3) controls surrounding the accounting of complex transactions.

These material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2022 financial statements, and this report does not affect our report dated March 13, 2023 on those financial statements.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures

that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the 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.

/s/ BDO USA, LLP

Houston, Texas

March 13, 2023

Other Information

47 unchanged sentences

333‑220018) filed with the Commission on August 17, 2017)

10.3† Ame ndment to Ranger Energy Services, Inc.

2017 Long Term Incentive Plan.

(incorporated by reference to Exhibit 4.

4 to the Registrant’s Form S‑8 Registration Statement (File No.

333‑220018) filed with the Commission on June 1, 2022 )

10.4† Form of Restricted Stock Agreement (Employees) under the Ranger Energy Services, Inc.

9 unchanged sentences

10.7† Form of Ranger Energy Services, Inc.

Performance Stock Unit Award Incentive Agreement (2020) (incorporated by reference to Exhibit 10.25 to the Registrant’s Form 10‑K (File No.

001‑38183) filed with the Commission on February 26, 2021)

*10.8† Form of Ranger Energy Services, Inc.

Performance Stock Unit Award Incentive Agreement (202 1 )

*10.9† Form of Ranger Energy Services, Inc.

Performance Stock Unit Award Incentive Agreement (202 2 )

10.10 Tax Receivable Agreement (incorporated by reference to Exhibit 10.2 to the Registrant’s Form 8‑K (File No.

3 unchanged sentences

001- 38183) filed with the Commission on October 4, 2021).

10.9 Credit Agreement (incorporated by reference to Exhibit 10.3 to the Registrant’s Form 8‑K (File No.

001‑38183) filed with the Commission on August 22, 2017)

10.12† Indemnification Agreement (William M.

18 unchanged sentences

Kearney) (incorporated by reference to Exhibit 10.1 of the Registrant’s Form 8-K filed with the Commission on July 31, 2018)

10.18† Indemnification Agreement (J.

Brandon Blossman) (incorporated by reference to Exhibit 10.2 to the Registrant’s Form 8-K filed with the Commission on June 7, 2018)

10.20† Indemnification Agreement, dated as of June 15, 2022, by and between the Company and Melissa Cougle (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K (File No.

001-38183) filed with the SEC on June 9, 2022).

10.21† Indemnification Agreement, dated as of September 1, 2021, by and between the Ranger Energy Services, Inc.

4 unchanged sentences

001-38183) filed with the Commission on September 8, 2021).

10.21 Employment Agreement (J.

Brandon Blossman) (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed with the Commission on June 7, 2018)

10.23† Employment Agreement, dated as of June 15, 2022, by and between the Company and Melissa Cougle (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K (File No.

001-38183) filed with the SEC on June 9, 2022).

10.24 Master Financing and Security Agreement (incorporated by reference to Exhibit 10.1 to the Registrant's Form 8-K filed with the Commission on June 22, 2018)

10.23† Form of Ranger Energy Services, Inc.

Performance Stock Unit Award Incentive Agreement (2018) (incorporated by reference to Exhibit 10.21 of the Registrant’s Form 10-K Filed with the Commission on February 28, 2020)

10.25 Debt, Commitment Letter, dated as of September 10, 2021, by and among RNGR Energy Services, LLC, Eclipse Business Capital, LLC and Eclipse Business Capital SPV, LLC (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K (File No.

4 unchanged sentences

001-38183) filed with the Commission on January 13, 2022) .

10.28 Fourth Amendment to the Loan and Security Agreement, dated September 23, 2022, by and among RNGR Energy Services, LLC and certain of its subsidiaries, Ranger Energy Services, Inc., the lenders party thereto, and Eclipse Business Capital, LLC, as agent.

10.29 Secured Promissory Note, date July 8, 2021 by and among Bravo Wireline, LLC and Chief Investments, LLC (incorporated by reference to Exhibit 2.2 to the Registrant’s Form 8-K (File No.

1 unchanged sentence

10.30 Guaranty Agreement, dated as of July 8, 2021 by Ranger Energy Services, Inc.

in favor of Chief Investments, LLC

in favor of Chief Investments, LLC (incorporated by reference to Exhibit 10.

2 of the Registrant’s Form 10-Q (File No.

001-38183) filed with the Commission on July 30, 2021).

10.31† Securities Purchase Agreement entered into as of September 10, 2021, by and between Ranger Energy Services, Inc., and the purchasers named therein (incorporated by reference to Exhibit 10.1 of the Registrant’s Form 8-K (File No.

36 unchanged sentences

Bodden (Principal Executive Officer)

Brandon Blossman Chief Financial Officer March 30, 2022

Brandon Blossman (Principal Financial Officer)

/s/ Melissa K.

Cougle Chief Financial Officer March 13, 2023

Cougle (Principal Financial Officer)

/s/ William M.

13 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures