To help you, there is a tiny tool called BootIce. It is a standalone application for Windows and does not require installation. Here is how to use it to restore lost space of your USB disk.
Download the Bootice RAR file and unzip it. Insert the affected USB drive in your PC and then run the BootIce (as BootIce needs formatting permissions, you may require administrative privilege to run it).
Select the destination disk (affected USB disk) and click on the Parts Manage button. A new window will open up, there you can see different portions and parameters.
Click on the ReFormat USB Disk option and select USB-HDD Mode (Single Partition) option (see screenshot below) from the list. Keep the ‘Align to cylinder’ option checked and then click the Next button.
Now a small window will pop-up. Choose the formatting option (FAT32 or FAT16) and click Ok to proceed. Note: Most of the USB disks usually come with FAT16, so you may choose FAT16.
If everything goes fine, you will get a congratulations message. Now check the USB disk capacity in the Windows Explorer. It should be restored back to the original full capacity.