What changed in this filing

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Item 1. Financial Statements

2022-11-14 compared with 2022-08-15 · 87 added, 70 removed, 394 unchanged (28% of the section changed)

3 unchanged sentences

(in thousands, except par value)

June 30, December 31,

September 30, December 31,

Current Assets:

1 unchanged sentence

$ 2,586 $ 22,942

Trade accounts receivable, net of allowance for doubtful accounts of $ 380 and $ 1,129 , respectively

11,861 10,389

Trade accounts receivable, net 12,599 10,389

Inventory 21,761 19,329

4 unchanged sentences

49,806 65,103

Long-term inventory, net of allowance for obsolescence of $ 37 and $ 64 , respectively

Rental equipment, net of accumulated depreciation of $ 183,414 and $ 172,563 , respectively

214,702 206,985

Property and equipment, net of accumulated depreciation of $ 16,667 and $ 15,784 , respectively

20,170 20,828

Right of use assets - operating leases, net of accumulated amortization of $ 641 and $ 555 , respectively

Intangibles, net of accumulated amortization of $ 2,196 and $ 2,134 , respectively

Long-term inventory, net 1,726 1,582

Rental equipment, net 224,964 206,985

Property and equipment, net 20,015 20,828

Right of use assets - operating leases, net 277 285

Intangibles, net 931 1,025

Other assets 2,394 2,698

7 unchanged sentences

Total current liabilities 25,572 20,278

Line of credit — —

Long-term debt 2,000 —

Deferred income tax liability 39,573 39,288

17 unchanged sentences

(in thousands, except earnings per share)

Three months ended Six months ended

June 30, June 30,

Three months ended Nine months ended

September 30, September 30,

2022 2021 2022 2021

14 unchanged sentences

Total operating costs and expenses 22,241 19,808 61,462 58,615

Operating income (loss) 658 ( 2,293 ) 1,041 ( 2,661 )

Operating loss ( 1,498 ) ( 1,563 ) ( 458 ) ( 4,224 )

Other income (expense):

Interest expense ( 25 ) ( 25 ) ( 74 ) ( 40 )

Other income (expense), net ( 332 ) 50 ( 364 ) 151

Total other income (expense), net ( 356 ) 36 ( 413 ) 135

Other income, net 1,370 119 1,007 270

Total other income, net 1,345 94 933 230

Income (loss) before provision for income taxes ( 153 ) ( 1,469 ) 475 ( 3,994 )

18 unchanged sentences

Taxes paid related to net shares settlement of equity awards — — — — ( 224 ) — — — ( 224 )

Net income — — — — — ( 394 ) — — ( 394 )

Net loss — — — — — ( 394 ) — — ( 394 )

BALANCES, March 31, 2021

4 unchanged sentences

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

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

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

BALANCES, June 30, 2021

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

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

Purchase of treasury shares — — — — — — 258 ( 2,540 ) ( 2,540 )

Net loss — — — — — ( 1,257 ) — — ( 1,257 )

BALANCES, September 30, 2021

— $ — 13,394 $ 134 $ 113,596 $ 135,717 471 $ ( 4,922 ) $ 244,525

NATURAL GAS SERVICES GROUP, INC.

10 unchanged sentences

Purchase of treasury shares — — — — — — 247 ( 2,928 ) ( 2,928 )

Net loss — — — — — 337 — — 337

Net income — — — — — 337 — — 337

BALANCES, March 31, 2022

8 unchanged sentences

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

Compensation expense on common stock options — — — — 193 — — — 193

Compensation expense on restricted common stock — — — — 390 — — — 390

Net loss — — — — — ( 80 ) — — ( 80 )

BALANCES, September 30, 2022

— $ — 13,499 $ 135 $ 114,838 $ 130,290 1,310 $ ( 15,004 ) $ 230,259

See accompanying notes to these unaudited condensed consolidated financial statements.

2 unchanged sentences

(in thousands)

Six months ended

Nine months ended

September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

22 unchanged sentences

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from loan 2,000 —

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

24 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 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).

These financial statements include all adjustments, consisting of only normal recurring adjustments, which are necessary to make our financial position at September 30, 2022 and the results of our operations for the three and nine months ended September 30, 2022 and 2021 not misleading.

As permitted by the rules and regulations of the Securities and Exchange Commission (the "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).

These financial statements should be read in conjunction with the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2021 on file with the SEC.

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 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.

The results of operations for the three and nine months ended September 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 six months ended June 30, 2022 and 2021.

There was no revenue recognized for bill and hold arrangements for the nine months ended September 30, 2022 or 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 and six months ended June 30, 2022 and 2021:

Three months ended June 30,

Six months ended June 30,

The following table shows the Company's revenue disaggregated by product or service type for the three and nine months ended September 30, 2022 and 2021:

Three months ended September 30,

Nine months ended September 30,

2022 2021 2022 2021

8 unchanged sentences

Contract Balances

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

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

September 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 six months ended June 30, 2022 that was included in deferred income at the beginning of 2022.

The Company recognized sales revenues of $ 1.3 million for the nine months ended September 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 June 30, 2022, the Company did no t have deferred revenue related to unsatisfied performance obligations.

As of September 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 June 30, 2022.

We have no liabilities for uncertain tax positions as of September 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 June 30, 2022 and $ 64,000 at December 31, 2021, consisted of the following amounts:

June 30, 2022 December 31, 2021

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

September 30, 2022 December 31, 2021

(in thousands)

8 unchanged sentences

A summary of our inventory allowance is as follows:

June 30, 2022 December 31, 2021

September 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 June 30, 2022.

Rental Equipment

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

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

September 30, 2022 December 31, 2021

(in thousands)

4 unchanged sentences

Rental equipment, net of accumulated depreciation $ 224,964 $ 206,985

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

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

Long-term Debt

Our long-term debt consists of the following:

September 30, 2022 December 31, 2021

(in thousands)

Revolving credit facility $ 2,000 $ —

Previous Credit Agreement

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.

Prior to maturation, the outstanding balance of $ 0.4 million was repaid.

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

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

As of September 30, 2022, our allowable borrowing base was $ 18.0 million.

Interest and Fees.

16 unchanged sentences

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.

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.

9 unchanged sentences

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

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.

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

At September 30, 2022, we had $ 2.0 million outstanding under the New Credit Agreement with an interest rate of 6.50 % as of September 30, 2022.

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 six months ended June 30, 2022 is presented below.

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

Stock Options

6 unchanged sentences

( 13,500 ) $ 13.29 — $ —

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:

Outstanding, September 30, 2022 326,584 $ 18.21 3.33 $ —

Exercisable, September 30, 2022 120,584 $ 23.72 1.96 $ —

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

Range of Exercise Prices

12 unchanged sentences

326,584 3.33 $ 18.21 120,584 $ 23.72

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:

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

Unvested Stock Options:

6 unchanged sentences

Cancelled/Forfeited ( 9,500 ) $ 5.42

Unvested at June 30, 2022

Unvested at September 30, 2022

206,000 $ 4.76

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.

As of September 30, 2022, there was $ 0.7 million of unrecognized compensation cost related to unvested options.

For the nine months ended September 30, 2022 there was $ 0.4 million of compensation expense for stock options.

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

Restricted Shares/Units

5 unchanged sentences

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:

On August 15, 2022, the Compensation Committee awarded 32,040 shares of restricted common stock to two executive officers that vest ratably over 3 years, beginning on April 25, 2023.

In addition, on August 15, 2022, the Compensation Committee awarded 60,839 shares of restricted stock to Mr.

Stephen Taylor, our former Chief Executive Officer.

The restricted shares granted to Mr.

Taylor will vest in full on June 30, 2023.

Total compensation expense related to these and previously granted restricted stock awards was $ 1.0 million and $ 1.3 million for the nine months ended September 30, 2022 and 2021, respectively.

As of September 30, 2022, there was a total of $ 1.5 million of unrecognized compensation expense related to these shares/units which is expected to be recognized over the next 1.7 years.

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

Shares Weighted Average

6 unchanged sentences

Canceled/Forfeited

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

Outstanding, September 30, 2022 233,912 $ 9.01 1.71 $ 2,179

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.

On April 26, 2022, we issued a $ 50,000 award to each of 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 during the six months ended June 30, 2022.

There were no long-term incentive awards issued to executives during the nine months ended September 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 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

Total compensation expense related to these other long-term incentive awards was approximately $ 0.7 million and $ 0.6 million for the nine months ended September 30, 2022 and 2021, respectively.

As of September 30, 2022, there was a total of $ 0.8 million of unrecognized compensation expense related to these other long-term incentive awards which is expected to be recognized over the next 0.6 years.

Earnings (Loss) per Share

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

Three months ended Six months ended

June 30, June 30,

Three months ended Nine months ended

September 30, September 30,

2022 2021 2022 2021

10 unchanged sentences

Diluted $ ( 0.01 ) $ ( 0.10 ) $ 0.02 $ ( 0.27 )

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.

For the three and nine months ended September 30, 2022, 233,912 and 143,891 restricted stock/units, respectively, were not included in the computation of diluted earnings per share due to their antidilutive effect.

For the three and nine months ended September 30, 2022 326,584 stock options were not included in the computation of diluted loss per share due to their antidilutive effect.

For the three and nine months ended September 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.

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

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