What changed in this filing

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Item 1. Financial Statements

2021-08-16 compared with 2021-05-14 · 141 added, 91 removed, 337 unchanged (41% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

March 31, December 31,

(in thousands)

June 30, December 31,

Current Assets:

37 unchanged sentences

Retained earnings 136,974 139,286

Treasury Shares, at cost, 38 shares

Treasury Shares, at cost, 213 and 38 shares, respectively

( 2,382 ) ( 490 )

5 unchanged sentences

(in thousands, except earnings per share)

Three months ended

Three months ended Six months ended

June 30, June 30,

2021 2020 2021 2020

Rental income $ 15,613 $ 15,131 $ 30,954 $ 31,231

5 unchanged sentences

Cost of rentals, exclusive of depreciation stated separately below

9,082 6,629 16,239 14,526

Cost of sales, exclusive of depreciation stated separately below

1,777 1,860 4,392 3,599

Cost of service and maintenance, exclusive of depreciation stated separately below

250 100 298 225

Selling, general and administrative expenses 2,607 2,663 5,255 4,825

28 unchanged sentences

BALANCES, March 31, 2020 — — 13,273 133 110,926 141,560 38 ( 490 ) 252,129

Compensation expense on common stock options — — — — 1 — — — 1

Issuance of restricted stock — — 13 — — — — — —

Compensation expense on restricted common stock — — — — 562 — — — 562

Net income — — — — — 165 — — 165

BALANCES, June 30, 2020 — $ — 13,286 $ 133 $ 111,489 $ 141,725 38 $ ( 490 ) $ 252,857

NATURAL GAS SERVICES GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(in thousands)

Preferred Stock Common Stock Additional Paid-In Capital Retained Earnings Treasury Stock Total Stockholders' Equity

Shares Amount Shares Amount Shares Amount

BALANCES, January 1, 2021 — $ — 13,296 $ 133 $ 112,615 $ 139,286 38 $ ( 490 ) $ 251,544

4 unchanged sentences

BALANCES, March 31, 2021 — — 13,358 134 112,864 138,892 38 ( 490 ) 251,400

Issuance of restricted stock — — 36 — — — — — —

Compensation expense on restricted common stock — — — — 421 — — — 421

Taxes paid related to net shares settlement of equity awards — — — — ( 110 ) — — — ( 110 )

Purchase of treasury shares — — — — — — 175 ( 1,892 ) ( 1,892 )

Net loss — — — — — ( 1,918 ) — — ( 1,918 )

BALANCES, June 30, 2021 — $ — 13,394 $ 134 $ 113,175 $ 136,974 213 $ ( 2,382 ) $ 247,901

See accompanying notes to these unaudited condensed consolidated financial statements.

2 unchanged sentences

(in thousands)

Three months ended

Six months ended

CASH FLOWS FROM OPERATING ACTIVITIES:

2 unchanged sentences

Depreciation and amortization 12,623 12,541

Amortization of debt issuance costs 7 —

Deferred income taxes ( 224 ) 399

11 unchanged sentences

Deferred tax liability increase due to tax law change — 10,103

Other 164 ( 301 )

NET CASH PROVIDED BY OPERATING ACTIVITIES 12,752 14,802

3 unchanged sentences

Proceeds from sale of property and equipment — 383

Proceeds from sale of deferred compensation mutual fund — 10

NET CASH USED IN INVESTING ACTIVITIES ( 12,622 ) ( 10,792 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from loan — 4,601

Repayment of loan — ( 4,601 )

Payments of other long-term liabilities, net ( 1 ) ( 2 )

Payments of debt issuance costs ( 237 ) —

Repayments of line of credit, net ( 417 ) —

Purchase of treasury shares ( 1,892 ) —

Taxes paid related to net share settlement of equity awards ( 335 ) ( 149 )

21 unchanged sentences

All significant intercompany accounts and transactions for the periods presented have been eliminated in consolidation.

These financial statements include all adjustments, consisting of only normal recurring adjustments, which are necessary to make our financial position at March 31, 2021 and the results of our operations for the three months ended March 31, 2021 and 2020 not misleading.

These financial statements include all adjustments, consisting of only normal recurring adjustments, which are necessary to make our financial position at June 30, 2021 and the results of our operations for the three and six months ended June 30, 2021 and 2020 not misleading.

As permitted by the rules and regulations of the Securities and Exchange Commission (SEC), the accompanying condensed consolidated financial statements do not include all disclosures normally required by generally accepted accounting principles in the United States of America (GAAP).

1 unchanged sentence

In our opinion, the condensed consolidated financial statements are a fair presentation of the financial position, results of operations, changes in stockholders' equity and cash flows for the periods presented.

The results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31, 2021.

The results of operations for the three and six months ended June 30, 2021 are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31, 2021.

Revenue Recognition Policy

26 unchanged sentences

this is a standard industry practice and is not considered a performance obligation.

From time to time, upon the customer’s written request, we recognize revenue when manufacturing is complete and the equipment is ready for shipment.

From time to time we recognize revenue when manufacturing is complete and the equipment is ready for shipment.

At the customer’s request, we will bill the customer upon completing all performance obligations, but before shipment.

4 unchanged sentences

All control is maintained by the customer and there are no exceptions to the customer’s commitment to accept and pay for the manufactured equipment.

There was no revenue recognized for bill and hold arrangements for the three months ended March 31, 2021.

Revenue recognized related to bill and hold arrangements for the three months ended March 31, 2020 was approximately $ 0.9 million.

There was no revenue recognized for bill and hold arrangements for the three months ended June 30, 2021.

Revenue recognized related to bill and hold arrangements for the six months ended June 30, 2020 was approximately $ 852,000 .

Parts - Revenue is recognized after the customer obtains control of the parts.

11 unchanged sentences

Disaggregation of Revenue

The following table shows the Company's revenue disaggregated by product or service type for the three months ended March 31, 2021 and 2020:

Three months ended March 30,

(in thousands)

The following table shows the Company's revenue disaggregated by product or service type for the three and six months ended June 30, 2021 and 2020:

Three months ended June 30, Six months ended June 30,

2021 2020 2021 2020

(in thousands) (in thousands)

Compressors - sales $ — $ 1,360 $ 1,891 $ 2,212

6 unchanged sentences

Contract Balances

As of March 31, 2021 and December 31, 2020, we had the following receivables and deferred income from contracts with customers:

March 31, 2021 December 31, 2020

As of June 30, 2021 and December 31, 2020, we had the following receivables and deferred income from contracts with customers:

June 30, 2021 December 31, 2020

(in thousands)

6 unchanged sentences

Deferred income $ 693 $ 1,103

The Company recognized sales and rental revenues of $ 1.1 million and $ 2,000 , respectively, for the three months ended March 31, 2021 that was included in deferred income at the beginning of 2021.

For the year ended December 31, 2020, the Company recognized sales and rental revenues of $ 0.5 million and $ 73,000 , respectively, that was included in deferred income at the beginning of 2020.

The Company recognized sales and rental revenues of $ 1.1 million and $ 2,000 , respectively, for the six months ended June 30, 2021 that was included in deferred income at the beginning of 2021.

For the year ended December 31, 2020, the Company recognized sales and rental revenues of $ 533,000 and $ 73,000 , respectively, that was included in deferred income at the beginning of 2020.

The increases (decreases) of accounts receivable and deferred income were primarily due to normal timing differences between our performance and the customers’ payments.

Remaining Performance Obligations

As of March 31, 2021, the Company did not have revenue related to unsatisfied performance obligations.

As of June 30, 2021, the Company did no t have revenue related to unsatisfied performance obligations.

Contract Costs

9 unchanged sentences

A liability for unrecognized tax benefits is recorded for any tax benefits claimed in our tax returns that do not meet these recognition and measurement standards.

We have no liabilities for uncertain tax positions as of March 31, 2021.

We have no liabilities for uncertain tax positions as of June 30, 2021.

Our policy regarding income tax interest and penalties is to expense those items as interest expense and other expense, respectively.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") was enacted in response to the economic impact caused by the COVID-19 pandemic.

The CARES Act, among other things, permits federal income tax

net operating loss ("NOL") carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021.

The CARES Act, among other things, permits federal income tax net operating loss ("NOL") carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021.

In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid federal income taxes.

6 unchanged sentences

We are currently evaluating the impact of ASU 2016-13 on our consolidated financial statements and note disclosures.

Our inventory, net of allowance for obsolescence of $ 37,000 at March 31, 2021 and $ 221,000 at December 31, 2020, consisted of the following amounts:

March 31, 2021 December 31, 2020

Our inventory, net of allowance for obsolescence of $ 37,000 at June 30, 2021 and $ 221,000 at December 31, 2020, consisted of the following amounts:

June 30, 2021 December 31, 2020

(in thousands)

8 unchanged sentences

A summary of our inventory allowance is as follows:

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

(in thousands)

7 unchanged sentences

Accordingly, during 2020, the Company recorded a federal income tax receivable of $ 15.0 million and an increase to its deferred income tax liability of $ 10.1 million on its condensed consolidated balance sheet.

During the third quarter of 2020, the Company received refunds totaling $ 3.9 million related to its 2018 NOLs, which reduced its federal income tax receivable to $ 11.5 million on its condensed consolidated balance sheet as of March 31, 2021.

During the third quarter of 2020, the Company received

refunds totaling $ 3.9 million related to its 2018 NOLs, which reduced its federal income tax receivable to $ 11.5 million on its condensed consolidated balance sheet as of June 30, 2021.

Rental Equipment

Our rental equipment and associated accumulated depreciation as of March 31, 2021 and December 31, 2020, respectively, consisted of the following:

March 31, 2021 December 31, 2020

Our rental equipment and associated accumulated depreciation as of June 30, 2021 and December 31, 2020, respectively, consisted of the following:

June 30, 2021 December 31, 2020

(in thousands)

4 unchanged sentences

Rental equipment, net of accumulated depreciation $ 208,176 $ 207,585

We evaluated our rental equipment for potential impairment as of March 31, 2021, and determined that no such impairment existed as of that date.

We evaluated our rental equipment for potential impairment as of June 30, 2021, and determined that no such impairment existed as of that date.

Credit Facility

1 unchanged sentence

We had a senior secured revolving credit agreement the ("Previous Credit Agreement") with JP Morgan Chase Bank, N.A (the "Lender") that matured on March 31, 2021.

Prior to maturation, the outstanding balance of $ 417,000 was repaid.

The Previous Credit Agreement had an aggregate commitment of $ 30 million, subject to collateral availability.

Subsequent to March 31, 2021, we entered into a new credit facility.

See footnote 10.

New Credit Agreement

On May 11, 2021, we entered into a five year senior secured revolving credit agreement ("New Credit Agreement") with Texas Capital Bank, National Association (the "Lender") with an initial commitment of $ 20 million and an accordion feature that would increase the maximum commitment to $ 30 million, subject to collateral availability.

We also have a right to request from the Lender, on an uncommitted basis, an increase of up to $ 30 million on the aggregate commitment;

provided, however, the aggregate commitment amount is not permitted to exceed $ 50 million.

The maturity date of the New Credit Agreement is May 11, 2026.

The obligations under the New Credit Agreement are secured by a first priority lien on a variety of our assets, including inventory and accounts receivable as well as a variable number of our leased compressor equipment.

Borrowing Base.

At any time before the maturity of the New Credit Agreement, we may draw, repay and re-borrow amounts available under the borrowing base up to the maximum aggregate availability discussed above.

Generally, the borrowing base equals the sum of (a) 90 % of eligible accounts receivable owed to the Company by investment grade debtors, plus (b) 85 % of the eligible accounts receivable owing by non-investment grade debtors, plus (c) 50 % of the eligible inventory, valued at the lower of cost or market value at such time, subject to a cap of this component not to exceed $ 2.0 million, plus (d) the lesser of (i) 95 % of the net book value of the compressors that the Lender has determined are eligible for the extension of credit, valued at the lower of cost or market value with depreciation not to exceed 25 years, at such time and (ii) 80 % of the net liquidation value percentage of the net book value of the eligible compressors that the Lender has determined are eligible for the extension of credit, valued at the lower of cost or market value with depreciation not to exceed 25 years, at such time, plus (e) 80 % of the value at cost (excluding any costs for capitalized interest or other non-cash capitalized costs) of the eligible new compressor fleet, minus (f) any required availability reserves determined by the Lender in its sole discretion.

The Lender may adjust the borrowing base components if material deviations in the collateral are discovered in future audits of the collateral.

As of June 30, 2021, our allowable borrowing base was $ 20.0 million.

Interest and Fees.

Under the terms of the New Credit Agreement, we have the option of selecting the applicable variable rate for each revolving loan, or portion thereof, of either (a) the Base Rate (as defined below) plus the Applicable Margin, or (b) in the case of a Eurodollar Rate Loan, the Adjusted Eurodollar Rate plus the Applicable Margin.

"Base Rate" means, for any day, a rate of interest per annum equal to the highest of (a) the prime rate for such day;

(b) the sum of the federal funds rate for such day plus 0.50 %;

and (c) the Adjusted Eurodollar Rate for such day plus 1.00 %.

The Applicable Margin is determined based upon the leverage ratio as set forth in the most recent compliance certificate received by the Lender for each fiscal quarter from time to time pursuant to the New Credit Agreement.

Depending on the leverage ratio, the Applicable Margin can be 0.25 % to 0.75 % for Base Rate Loans (as defined in the New Credit Agreement) and 1.25 % to 1.75 % for Eurodollar Rate Loans and for requested letters of credit.

Accrued interest is payable monthly on outstanding principal amounts, provided that accrued interest on Eurodollar Rate Loans is payable at the end of each interest period, but in no event less frequently than quarterly.

The New Credit Agreement contains customary representations and warranties, as well as covenants which, among other things, condition or limit our ability to incur additional indebtedness and liens;

enter into transactions with affiliates;

make acquisitions in excess of certain amounts;

pay dividends;

redeem or repurchase capital stock or senior notes;

make investments or loans;

make negative pledges;

consolidate, merge or effect asset sales;

or change the nature of our business.

In addition, we also have certain financial covenants that are applicable during certain trigger periods specified in the Credit Agreement and require us during such trigger periods to maintain a leverage ratio less than or equal to 3.00 to 1.00 as of the last day of each fiscal quarter and a fixed charge coverage ratio greater than or equal to 1.00 to 1.00 as of the last day of each fiscal quarter.

Events of Default and Acceleration.

The New Credit Agreement contains customary events of default for credit facilities of this size and type, and includes, without limitation, payment defaults;

defaults in performance of covenants or other agreements contained in the Credit Agreement and the other transaction documents;

inaccuracies in representations and warranties;

certain defaults, termination events or similar events;

certain defaults with respect to any other Company indebtedness in excess of $ 1.0 million;

certain bankruptcy or insolvency events;

the rendering of certain judgments in excess of $ 1.0 million;

certain ERISA events;

certain change in control events and the defectiveness of any liens under the secured revolving credit agreement.

Obligations outstanding under the Credit Agreement may be accelerated upon the occurrence of an event of default.

As of June 30, 2021, we were in compliance with all financial covenants in our New Credit Agreement.

A default under our New Credit Agreement could trigger the acceleration of our debt such that it is immediately due and payable.

Such default would likely limit our ability to access other credit.

At June 30, 2021, we had no amounts outstanding under the New Credit Agreement.

Stock-Based and Other Long-Term Incentive Compensation

Stock Options

A summary of all option activity as of December 31, 2020, and changes during the three months ended March 31, 2021 is presented below.

A summary of all option activity as of December 31, 2020, and changes during the six months ended June 30, 2021 is presented below.

Stock Options

6 unchanged sentences

( 16,000 ) 17.81 — —

Outstanding, March 31, 2021 145,334 $ 25.21 3.61 $ —

Exercisable, March 31, 2021 145,334 $ 25.21 3.61 $ —

The following table summarizes information about our stock options outstanding at March 31, 2021:

Outstanding, June 30, 2021 145,334 $ 25.21 3.37 $ —

Exercisable, June 30, 2021 145,334 $ 25.21 3.37 $ —

The following table summarizes information about our stock options outstanding at June 30, 2021:

Range of Exercise Prices

12 unchanged sentences

145,334 3.37 $ 25.21 145,334 $ 25.21

As of March 31, 2021 and December 31, 2020, there were no unvested stock options.

As of March 31, 2021, there was no unrecognized compensation cost related to unvested options.

For the three months ended March 31, 2020, total compensation expense for stock options was $ 17,000 .

For the three months ended March 31, 2021 there was no compensation expense for stock options.

As of June 30, 2021 and December 31, 2020, there were no unvested stock options.

As of June 30, 2021, there was no unrecognized compensation cost related to unvested options.

For the six months ended June 30, 2020, total compensation expense for stock options was $ 18,000 .

For the six months ended June 30, 2021 there was no compensation expense for stock options.

Restricted Shares/Units

2 unchanged sentences

Taylor was awarded 109,212 restricted shares/units on March 18, 2021, which vest over three years , in equal annual installments, beginning March 18, 2022.

On March 18, 2021, the Compensation Committee awarded 20,000 restricted shares/units to our Vice President of Technical Services, James Hazlett.

On March 18, 2021, the Compensation Committee awarded 20,000 restricted shares to our Vice President of Technical Services, James Hazlett.

The restricted shares to Mr.

Hazlett vest over three years , in equal annual installments, beginning March 18, 2022.

On June 17, 2021, the Compensation Committee awarded 5,000 restricted shares to our Vice President and Chief Financial Officer, Micah C.

The restricted shares granted to Mr.

Foster vest over 3 years, in equal annual installments, beginning on June 17, 2021.

On March 18, 2021, we also awarded and issued 5,612 shares of restricted common stock to each of our three independent members of our Board of Directors as partial payment for their services in 2021.

On April 1, 2021, we awarded and issued 5,291 shares of restricted common stock to a newly appointed member of our Board of Directors as partial payment for his services in 2021.

These awards of restricted stock vest one year from the date of grant.

Total compensation expense related to these and previously granted restricted stock awards was $ 474,000 and $ 485,000 for the three months ended March 31, 2021 and 2020, respectively.

As of March 31, 2021, there was a total of $ 2.6 million of unrecognized compensation expense related to these shares/units which is expected to be recognized over the next 2.0 years.

A summary of all restricted stock/units activity as of December 31, 2020 and changes during the three months ended March 31, 2021 is presented below:

Total compensation expense related to these and previously granted restricted stock awards was $ 896,000 and $ 485,000 for the six months ended June 30, 2021 and 2020, respectively.

As of June 30, 2021, there was a total of $ 2.2 million of unrecognized compensation expense related to these shares/units which is expected to be recognized over the next 1.9 years.

A summary of all restricted stock/units outstanding as of December 31, 2020 and activity during the six months ended June 30, 2021 is presented below:

Shares Weighted Average

7 unchanged sentences

( 3,333 ) 12.26 — 31

Outstanding, March 31, 2021 315,359 $ 9.04 9.26 $ 2,977

Outstanding, June 30, 2021 276,319 $ 9.63 2.27 $ 2,841

Other Long-Term Incentive Compensation

On April 28, 2020, based on its review of Mr.

Taylor's 2019 performance, the Compensation Committee issued a long-term incentive award of $ 1,061,820 to Mr.

Taylor's 2019 performance, the Compensation Committee issued a long-term incentive award of $ 1.1 million to Mr.

Taylor that vests in equal, annual tranches over 3 years beginning on the anniversary of the grant date.

At the time of vesting, each tranche will be payable in cash or common stock at the discretion of the Compensation Committee.

At the time of vesting, each tranche was or will be payable in cash or common stock at the discretion of the Compensation Committee.

On March 18, 2021, based on its review of Mr.

4 unchanged sentences

On March 18, 2021, we issued a $ 50,000 award to three of our independent members of our Board of Directors as partial payment for their services in 2021.

On April 1, 2021, we issued a $ 50,000 award to a newly appointed independent member of our Board of Directors as partial payment for his services in 2021.

These awards vest one year from the date of grant and are payable in cash upon vesting.

2 unchanged sentences

The vesting of these awards awards is subject to acceleration upon certain events, such as (i) death or disability of the recipient, (ii) certain circumstances in connection with a change of control of the Company, (iii) for executive officers, termination without cause (as defined in the agreement), and (iv) for executive officers, resignation for good reason (as defined).

Total compensation expense related to these other long-term incentive awards was approximately $ 166,000 for the three months ended March 31, 2021.

As of March 31, 2021, there was a total of $ 1.8 million of unrecognized compensation expense related to these other long-term incentive awards which is expected to be recognized over the next 2.4 years.

Total compensation expense related to these other long-term incentive awards was approximately $ 381,000 for the six months ended June 30, 2021.

As of June 30, 2021, there was a total of $ 1.6 million of unrecognized compensation expense related to these other long-term incentive awards which is expected to be recognized over the next 2.1 years.

(Loss) Earnings per Share

The following table reconciles the numerators and denominators of the basic and diluted (loss) earnings per share computation:

Three months ended

Three months ended Six months ended

June 30, June 30,

2021 2020 2021 2020

(in thousands, except per share data)

4 unchanged sentences

Weighted average common shares outstanding 13,305 13,237 13,284 13,197

Dilutive effect of stock options and restricted shares — 259

Dilutive effect of stock options and restricted stock/units — 243 — 251

Diluted weighted average shares 13,305 13,480 13,284 13,448

2 unchanged sentences

Diluted $ ( 0.14 ) $ 0.01 $ ( 0.17 ) $ 0.32

For the three months ended March 31, 2021, 315,359 restricted stock/units and 145,334 stock options were not included in the computation of diluted loss per share due to their antidilutive effect.

For the three months ended March 31, 2020, options to purchase 182,839 weighted average shares of common stock were not included in the computation of diluted earnings per share due to their antidilutive effect.

For the three and six months ended June 30, 2021, 276,319 restricted stock/units and 145,334 stock options were not included in the computation of diluted loss per share due to their antidilutive effect.

For the three months ended June 30, 2020, 168,334 stock options were not included in the computation of diluted earnings per share due to their antidilutive effect.

For the six months ended June 30, 2020, 175,587 stock options were not included in the computation of diluted earnings per share due to their antidilutive effect.

Commitments and Contingencies

2 unchanged sentences

We are not currently a party to any material legal proceedings, and we are not aware of any threatened material litigation.

Stock Repurchase Program

On August 12, 2019, the Company announced the Board of Directors had authorized the repurchase of up to $ 10.0 million of its outstanding shares of common stock in the open market, block trades or privately negotiated transactions.

The timing and extent of any repurchase is subject to the discretion of management and is dependent upon market pricing and conditions, business, legal, accounting and other considerations.

The repurchase program does not obligate the Company to purchase any shares and was set to expire on September 30, 2020, subject to earlier termination of the program by the Board of Directors.

On October 23, 2020, the Board of Directors authorized the extension of the repurchase program through September 30, 2021.

The repurchase program may be modified, suspended or terminated at any time without notice, in the Company’s discretion, based upon a number of factors, including market conditions, the cost of repurchasing shares, the availability of alternative investment opportunities, liquidity, the need for capital in the Company’s operations and other factors deemed appropriate.

The Company intends to finance the repurchases with existing liquidity and free cash flow.

For the six months ended June 30, 2021, the Company repurchased 175,007 of its outstanding shares of common stock with a value of $ 1.9 million, at an average price of $ 10.81 .

As of June 30, 2021, the Company has repurchased 212,943 of its outstanding shares of common stock with a value of $ 2.4 million, at an average price of $ 11.19 .

As of June 30, 2021, the Company had approximately $ 7.6 million remaining under the repurchase authorization.

For further information, see Part II Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds.

Subsequent Events

On May 11, 2021, we entered into a five year senior secured revolving credit agreement ("Credit Agreement") with Texas Capital Bank, National Association (the "Lender") with an initial commitment of $ 20 million and an accordion feature that would increase the maximum commitment to $ 30 million, subject to collateral availability.

We also have a right to request from the Lender, on an uncommitted basis, an increase of up to $ 30 million on the aggregate commitment;

provided, however, the aggregate commitment amount is not permitted to exceed $ 50 million.

The maturity date of the Credit Agreement is May 11, 2026.

The obligations under the Credit Agreement are secured by a first priority lien on all of our assets, including inventory and accounts receivable along with a first priority lien on a variable number of our leased compressor equipment.

Borrowing Base.

At any time before the maturity of the Credit Agreement, we may draw, repay and re-borrow amounts available under the borrowing base up to the maximum aggregate availability discussed above.

Generally, the borrowing base equals the sum of (a) 90 % of eligible accounts receivable owed to the Company by investment grade debtors, plus (b) 85 % of the eligible accounts receivable owing by non-investment grade debtors, plus (c) 50 % of the eligible inventory, valued at the lower of cost or market value at such time, subject to a cap of this component not to exceed $ 2,000,000 , plus (d) the lesser of (i) 95 % of the net book value of the compressors that the Lender has determined are eligible for the extension of credit, valued at the lower of cost or market value with depreciation not to exceed 25 years, at such time and (ii) 80 % of the net liquidation value percentage of the net book value of the eligible compressors that the Lender has determined are eligible for the extension of credit, valued at the lower of cost or market value with depreciation not to exceed 25 years, at such time, plus (e) 80 % of the value at cost (excluding any costs for capitalized interest or other non-cash capitalized costs) of the eligible new compressor fleet, minus (f) any required availability reserves determined by the Lender in its sole discretion.

The Lender may adjust the borrowing base components if material deviations in the collateral are discovered in future audits of the collateral.

Interest and Fees.

Under the terms of the Credit Agreement, we have the option of selecting the applicable variable rate for each revolving loan, or portion thereof, of either (a) the Base Rate (as defined below) plus the Applicable Margin, or (b) in the case of a Eurodollar Rate Loan, the Adjusted Eurodollar Rate plus the Applicable Margin.

"Base Rate" means, for any day, a rate of interest per annum equal to the highest of (a) the prime rate for such day;

(b) the sum of the federal funds rate fro such day plus 0.50 %;

and (c) the Adjusted Eurodollar Rate for such day plus 1.00 %.

Depending on the leverage ratio, the Applicable Margin can be 0.25 % to 0.75 % for Base Rate Loans (as defined in the Credit Agreement) and 1.25 % to 1.75 % for Eurodollar Rate Loans and for requested letters of credit.

The Credit Agreement contains customary representations and warranties, as well as covenants which, among other things, condition or limit our ability to incur additional indebtedness and liens;

enter into transactions with affiliates;

make acquisitions in excess of certain amounts;

pay dividends;

redeem or repurchase capital stock or senior notes;

make investments or loans;

make negative pledges;

consolidate, merge or effect asset sales;

or change the nature of our business.

Events of Default and Acceleration.

The Credit Agreement contains customary events of default for credit facilities of this size and type, and includes, without limitation, payment defaults;

defaults in performance of covenants or other agreements contained in the Credit Agreement and the other transaction documents;

inaccuracies in representations and warranties;

certain defaults, termination events or similar events;

certain defaults with respect to any other Company indebtedness in excess of $ 1,000,000 ;

certain bankruptcy or insolvency events;

the rendering of certain judgments in excess of $ 1,000,000 ;

certain ERISA events;

certain change in control events and the defectiveness of any liens under the secured revolving credit agreement.

Obligations outstanding under the Credit Agreement may be accelerated upon the occurrence of an event of default.

On May 11,2021, we had no amounts outstanding under the Credit Agreement.

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-Q

Item 1. Financial Statements