What changed in this filing

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Item 1. Financial Statements

2022-08-15 compared with 2022-05-16 · 83 added, 46 removed, 381 unchanged (25% of the section changed)

3 unchanged sentences

(in thousands, except par value)

March 31, December 31,

June 30, December 31,

Current Assets:

45 unchanged sentences

(in thousands, except earnings per share)

Three months ended

Three months ended Six months ended

June 30, June 30,

2022 2021 2022 2021

Rental income $ 18,144 $ 15,613 $ 35,274 $ 30,954

5 unchanged sentences

Cost of rentals, exclusive of depreciation stated separately below

9,242 9,082 18,472 16,239

Cost of sales, exclusive of depreciation stated separately below

1,440 1,777 3,428 4,392

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

234 250 407 298

Selling, general and administrative expenses 2,310 2,607 4,811 5,255

29 unchanged sentences

— — 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 income — — — — — ( 1,918 ) — — ( 1,918 )

BALANCES, June 30, 2021

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

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, 2022

8 unchanged sentences

— — 13,473 135 114,080 130,440 1,022 ( 11,272 ) 233,383

Compensation expense on common stock options — — — — 147 — — — 147

Issuance of restricted stock — — 26 — — — — — —

Compensation expense on restricted common stock — — — — 184 — — — 184

Taxes paid related to net shares settlement of equity awards — — — — ( 156 ) — — — ( 156 )

Purchase of treasury shares — — — — — — 288 ( 3,732 ) ( 3,732 )

Net loss — — — — — ( 70 ) — — ( 70 )

BALANCES, June 30, 2022

— $ — 13,499 $ 135 $ 114,255 $ 130,370 1,310 $ ( 15,004 ) $ 229,756

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:

23 unchanged sentences

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

Payments of debt issuance costs — ( 237 )

Repayments of line of credit, net — ( 417 )

22 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, 2022 and the results of our operations for the three months ended March 31, 2022 and 2021 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, 2022 and the results of our operations for the three and six months ended June 30, 2022 and 2021 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, 2022 are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31, 2022.

The results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31, 2022.

Revenue Recognition Policy

33 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, 2022 and 2021.

There was no revenue recognized for bill and hold arrangements for the six months ended June 30, 2022 and 2021.

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, 2022 and 2021:

Three months ended March 31,

(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, 2022 and 2021:

Three months ended June 30,

Six months ended June 30,

2022 2021 2022 2021

(in thousands) (in thousands)

Compressors - sales $ 286 $ — $ 2,253 $ 1,891

6 unchanged sentences

Contract Balances

As of March 31, 2022 and December 31, 2021, we had the following receivables and deferred income from contracts with customers:

March 31, 2022 December 31, 2021

As of June 30, 2022 and December 31, 2021, we had the following receivables and deferred income from contracts with customers:

June 30, 2022 December 31, 2021

(in thousands)

6 unchanged sentences

Deferred income $ — $ 1,312

The Company recognized sales revenues of $ 1.3 million for the three months ended March 31, 2022 that was included in deferred income at the beginning of 2022.

The Company recognized sales revenues of $ 1.3 million for the six months ended June 30, 2022 that was included in deferred income at the beginning of 2022.

For the year ended December 31, 2021, the Company recognized sales revenues of $ 1.1 million that was included in deferred income at the beginning of 2021.

1 unchanged sentence

Remaining Performance Obligations

As of March 31, 2022, the Company did no t have revenue related to unsatisfied performance obligations.

As of June 30, 2022, the Company did no t have deferred 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, 2022.

We have no liabilities for uncertain tax positions as of June 30, 2022.

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

5 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, 2022 and $ 64,000 at December 31, 2021, consisted of the following amounts:

March 31, 2022 December 31, 2021

Our inventory, net of allowance for obsolescence of $ 37,000 at June 30, 2022 and $ 64,000 at December 31, 2021, consisted of the following amounts:

June 30, 2022 December 31, 2021

(in thousands)

8 unchanged sentences

A summary of our inventory allowance is as follows:

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

(in thousands)

8 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, 2022.

Rental Equipment

Our rental equipment and associated accumulated depreciation as of March 31, 2022 and December 31, 2021, respectively, consisted of the following:

March 31, 2022 December 31, 2021

Our rental equipment and associated accumulated depreciation as of June 30, 2022 and December 31, 2021, respectively, consisted of the following:

June 30, 2022 December 31, 2021

(in thousands)

4 unchanged sentences

Rental equipment, net of accumulated depreciation $ 214,702 $ 206,985

We evaluated our rental equipment for potential impairment as of March 31, 2022, and determined that no such impairment existed as of that date.

We evaluated our rental equipment for potential impairment as of June 30, 2022, and determined that no such impairment existed as of that date.

Credit Facility

13 unchanged sentences

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

As of March 31, 2022, our allowable borrowing base was $ 20.0 million.

As of June 30, 2022, our allowable borrowing base was $ 20.0 million.

Interest and Fees.

29 unchanged sentences

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

As of March 31, 2022, we were in compliance with all financial covenants in our New Credit Agreement.

At March 31, 2022, we had no amounts outstanding under the New Credit Agreement.

As of June 30, 2022, we were in compliance with all financial covenants in our New Credit Agreement.

At June 30, 2022, 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, 2021, and changes during the three months ended March 31, 2022 is presented below.

A summary of all option activity as of December 31, 2021, and changes during the six months ended June 30, 2022 is presented below.

Stock Options

6 unchanged sentences

( 8,500 ) 14.89 — —

Outstanding, March 31, 2022 189,834 $ 21.59 4.73 $ 70

Exercisable, March 31, 2022 136,834 $ 25.85 2.79 $ —

The following table summarizes information about our stock options outstanding at March 31, 2022:

Outstanding, June 30, 2022 371,584 $ 18.79 3.45 $ 21

Exercisable, June 30, 2022 163,584 $ 23.65 2.21 $ 2

The following table summarizes information about our stock options outstanding at June 30, 2022:

Range of Exercise Prices

12 unchanged sentences

371,584 3.45 $ 18.79 163,584 $ 23.65

The summary of the status of our unvested stock options as of December 31, 2021 and changes during the three months ended March 31, 2022 is presented below:

The summary of the status of our unvested stock options as of December 31, 2021 and changes during the six months ended June 30, 2022 is presented below:

Unvested Stock Options:

2 unchanged sentences

55,500 $ 5.15

Granted 187,500 4.37

Vested ( 30,000 ) 2.85

Exercised — —

Cancelled/Forfeited ( 5,000 ) 5.15

Unvested at March 31, 2022

Unvested at June 30, 2022

208,000 $ 4.78

As of March 31, 2022, there was $ 218,643 unrecognized compensation cost related to unvested options.

For the three months ended March 31, 2022 there was $ 21,222 compensation expense for stock options.

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

As of June 30, 2022, there was $ 875,890 of unrecognized compensation cost related to unvested options.

For the six months ended June 30, 2022 there was $ 168,059 of compensation expense for stock options.

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

Restricted Shares/Units

3 unchanged sentences

Lastly, on April 1, 2021, 5,291 shares of restricted common stock were awarded to a newly appointed Board member.

The restricted stock issued to our directors vests in one year from the date of grant.

There were no grants of restricted common stock as of the three months ended March 31, 2022.

Total compensation expense related to these and previously granted restricted stock awards was $ 0.4 million and $ 0.5 million for the three months ended March 31, 2022 and 2021, respectively.

As of March 31, 2022, there was a total of $ 1.0 million of unrecognized compensation expense related to these shares/units which is expected to be recognized over the next 1.8 years.

A summary of all restricted stock/units outstanding as of December 31, 2021 and activity during the three months ended March 31, 2022 is presented below:

On April 26, 2022, 4,212 shares of restricted common stock were awarded to each of our four independent Board members.

The restricted stock issued to these directors vest in one year from the date of grant.

Total compensation expense related to these and previously granted restricted stock awards was $ 586,000 and $ 896,000 for the six months ended June 30, 2022 and 2021, respectively.

As of June 30, 2022, there was a total of $ 1.0 million of unrecognized compensation expense related to these shares/units which is expected to be recognized over the next 2.5 years.

A summary of all restricted stock/units outstanding as of December 31, 2021 and activity during the six months ended June 30, 2022 is presented below:

Shares Weighted Average

4 unchanged sentences

16,848 11.87 200

( 152,134 ) 10.99 1,778

Canceled/Forfeited

Outstanding, March 31, 2022 165,854 $ 7.62 1.56 $ 1,975

Outstanding, June 30, 2022 141,033 $ 8.51 2.50 $ 1,366

Other Long-Term Incentive Compensation

2 unchanged sentences

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.

On April 26, 2022, we issued a $ 50,000 award to our three independent Board members.

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

There were no long-term incentive awards issued to executives of directors during the three months ended March 31, 2022.

There were no long-term incentive awards issued to executives during the six months ended June 30, 2022.

The Company accounts for these other long-term incentive awards as liabilities under accrued liabilities on our condensed consolidated balance sheet.

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 $ 219,575 and $ 166,000 for the three months ended March 31, 2022 and 2021, respectively.

As of March 31, 2022, there was a total of $ 1.0 million of unrecognized compensation expense related to these other long-term incentive awards which is expected to be recognized over the next 1.7 years.

The vesting of these 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 $ 431,000 and $ 381,000 for the six months ended June 30, 2022 and 2021, respectively.

As of June 30, 2022, there was a total of $ 935,550 of unrecognized compensation expense related to these other long-term incentive awards which is expected to be recognized over the next 1.3 years.

(Loss) Earnings per Share

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

Three months ended

Three months ended Six months ended

June 30, June 30,

2022 2021 2022 2021

(in thousands, except per share data)

9 unchanged sentences

Diluted $ ( 0.01 ) $ ( 0.14 ) $ 0.02 $ ( 0.17 )

For the three months ended March 31, 2022, 4,852 restricted stock/units and 189,834 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, 2021, 315,359 restricted stock/units and 145,334 stock options 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, 2022, 141,033 and 33,550 restricted stock/units, respectively, 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, 2022 371,584 stock options were not included in the computation of diluted loss 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.

Commitments and Contingencies

3 unchanged sentences

Subsequent Events

In accordance with ASC 855 - Subsequent Events - the Company has evaluated all events subsequent to the balance sheet date as of June 30, 2022 through the date of this report and believes nothing is required hereunder.

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