What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-05-15 compared with 2023-11-14 · 138 added, 166 removed, 313 unchanged (49% of the section changed)

3 unchanged sentences

(in thousands, except par value)

September 30, December 31,

March 31, December 31,

Current Assets:

3 unchanged sentences

42,341 39,186

Inventory 26,115 23,414

Federal income tax receivable (Note 4) 11,538 11,538

Prepaid income taxes — 10

Inventory, net of allowance for obsolescence of $ 2,836

18,811 21,639

Federal income tax receivable 11,512 11,538

Prepaid expenses and other 938 1,162

1 unchanged sentence

78,841 76,271

Long-term inventory, net of allowance for obsolescence of $ 40 and $ 120 , respectively

Long-term inventory, net of allowance for obsolescence of $ 1,168

Rental equipment, net of accumulated depreciation of $ 197,780 and $ 191,745 , respectively

2 unchanged sentences

20,071 20,550

Right of use assets - operating leases, net of accumulated amortization $ 864 and $ 721 , respectively

Intangibles, net of accumulated amortization of $ 2,415 and $ 2,384 , respectively

5 unchanged sentences

Accrued liabilities 11,995 15,085

Current operating leases 98 155

Deferred income — 37

Total current liabilities 24,426 32,713

1 unchanged sentence

Deferred income tax liability 43,092 41,636

Long-term operating leases 163 194

Other long-term liabilities 5,392 4,486

15 unchanged sentences

(in thousands, except earnings per share)

Three months ended Nine months ended

September 30, September 30,

2023 2022 2023 2022

Three months ended

Rental income $ 33,734 $ 22,723

7 unchanged sentences

Cost of sales, exclusive of depreciation stated separately below

1,505 2,083 6,618 5,512

Cost of aftermarket services, exclusive of depreciation stated separately below

1,846 186 3,424 593

Selling, general and administrative expenses 4,702 4,562

Depreciation and amortization 7,087 6,165

Impairment expense — — 779 —

Retirement of rental equipment 5 —

Total operating costs and expenses 27,588 26,218

Operating income (expense) 4,904 ( 294 ) 6,018 746

Operating income 9,319 402

Other income (expense):

Interest expense ( 2,935 ) —

Other income (expense), net ( 87 ) 166 254 ( 197 )

Other income, net 193 118

Total other income (expense), net ( 2,742 ) 118

Income (loss) before provision for income taxes 3,217 ( 153 ) 4,487 475

Income before provision for income taxes 6,577 520

Income tax (expense) benefit ( 1,479 ) ( 150 )

Net income (loss) $ 2,171 $ ( 80 ) $ 3,045 $ 187

Earnings (loss) per share:

Net income $ 5,098 $ 370

Earnings per share:

Basic $ 0.41 $ 0.03

14 unchanged sentences

Taxes paid related to net shares settlement of equity awards — — — — ( 184 ) — — — ( 184 )

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

Net income — — — — — 370 — — 370

BALANCES, March 31, 2023 — $ — 13,548 $ 135 $ 115,714 $ 129,904 1,310 $ ( 15,004 ) $ 230,749

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

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

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

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.

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

2 unchanged sentences

Compensation expense on common stock options — — — — 29 — — — 29

Issuance of restricted stock — — 29 — — — — — —

Compensation expense on restricted common stock — — — — 245 — — — 245

2 unchanged sentences

BALANCES, March 31, 2024 — $ — 13,694 $ 137 $ 116,754 $ 139,379 1,310 $ ( 15,004 ) $ 241,266

Compensation expense on common stock options — — — — 30 — — — 30

Issuance of restricted stock — — 140 1 ( 1 ) — — — —

Compensation expense on restricted common stock — — — — 1,100 — — — 1,100

Taxes paid related to net shares settlement of equity awards — — — — ( 798 ) — — — ( 798 )

Net income — — — — — 504 — — 504

BALANCES, June 30, 2023 — — 13,688 136 116,045 130,408 1,310 ( 15,004 ) 231,585

Compensation expense on common stock options — — — — 22 — — — 22

Compensation expense on restricted common stock — — — — 187 — — — 187

Net income — — — — — 2,171 — — 2,171

BALANCES, September 30, 2023 — $ — 13,688 $ 136 $ 116,254 $ 132,579 1,310 $ ( 15,004 ) $ 233,965

See accompanying notes to these unaudited condensed consolidated financial statements.

2 unchanged sentences

(in thousands)

Nine months ended

September 30,

Three months ended

CASH FLOWS FROM OPERATING ACTIVITIES:

6 unchanged sentences

Bad debt allowance 110 48

Impairment expense 779 —

Gain on sale of assets — ( 25 )

Retirement of rental equipment 5 —

Loss (gain) on company owned life insurance ( 184 ) ( 18 )

10 unchanged sentences

Purchase of company owned life insurance ( 9 ) ( 50 )

Proceeds from sale of property and equipment 231 167

NET CASH USED IN INVESTING ACTIVITIES ( 10,941 ) ( 47,842 )

3 unchanged sentences

Payments of debt issuance costs — ( 2,131 )

Purchase of treasury shares — ( 6,660 )

Taxes paid related to net share settlement of equity awards — ( 184 )

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

99,837 ( 5,177 )

NET CASH PROVIDED BY FINANCING ACTIVITIES

NET CHANGE IN CASH AND CASH EQUIVALENTS 2,493 4,040

4 unchanged sentences

NON-CASH TRANSACTIONS

Right of use asset acquired through an operating lease $ 63 $ 91

Transfer of rental equipment to inventory $ — $ 708

Right of use asset acquired through a finance lease $ 532 $ —

See accompanying notes to these unaudited condensed consolidated financial statements.

3 unchanged sentences

Natural Gas Services Group, Inc.

(the "Company", “NGS”, "Natural Gas Services Group", "we" or "our") (a Colorado corporation), is a leading provider of natural gas compression equipment, technology and services to the energy industry.

The Company manufactures, fabricates, rents, sells and maintains natural gas compressors systems for oil and natural gas production and plant facilities.

NGS is headquartered in Midland, Texas, with fabrication facilities located in Tulsa, Oklahoma and Midland, Texas, and service facilities located in major oil and natural gas producing basins in the U.S.

The company also has increasingly used third-party fabricators as well.

(the "Company", “NGS”, "Natural Gas Services Group", "we" or "our") (a Colorado corporation), is a leading provider of natural gas compression equipment and services to the energy industry.

We rent, service and maintain natural gas compressors and related equipment.

We also design, fabricate and manufacture compressor units both for sale and rental to our customers.

NGS is headquartered in Midland, Texas, with a fabrication facility located in Tulsa, Oklahoma, a rebuild shop in Midland, Texas, and service facilities located in major oil and natural gas producing basins in the U.S.

The Company was formed on December 17, 1998.

Summary of Significant Accounting Policies

Principles of Consolidation and Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company, its subsidiary, NGSG Properties, LLC and the rabbi trust associated with the Company's deferred compensation plan.

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company, its subsidiary, NGSG Properties, LLC, which owns the Company's headquarter office building and the rabbi trust associated with the Company's deferred compensation plan.

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 September 30, 2023 and the results of our operations for the three and nine months ended September 30, 2023 and 2022 not misleading.

These financial statements include all adjustments, consisting of only normal recurring adjustments, which are necessary to make our financial position at March 31, 2024 and the results of our operations for the three months ended March 31, 2024 and 2023 not misleading.

Some adjustments may cause the prior year number in these financial statements to differ from the prior year interim financial statements.

2 unchanged sentences

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 nine months ended September 30, 2023 are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31, 2023.

The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31, 2024.

Revenue Recognition Policy

The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers ("ASC 606"), except for rental revenue as discussed below.

Under ASC 606, revenue is measured based on a consideration specified in a customer’s contract, excluding any sale incentives and taxes collected on behalf of third parties (i.e.

Revenue is measured based on the consideration and terms specified in a customer’s contract, excluding any sale incentives and taxes collected on behalf of third parties (i.e.

sales and property taxes).

5 unchanged sentences

and (v) recognize revenue when, or as, we satisfy the performance obligation(s).

Shipping and handling costs incurred are accounted for as fulfillment costs and are included in cost of revenues in our condensed consolidated statements of operations.

Shipping and handling costs incurred are accounted for as fulfillment costs and are included in cost of revenues in our Consolidated Statements of Operations.

Nature of Goods and Services

1 unchanged sentence

Rental Revenue.

The Company generates revenue from renting compressor systems to our customers.

These contracts, which all qualify as operating leases under ASC Topic 842, Leases (ASC 842), may also include a fee for servicing the compressor during the rental contract period.

Our rental contracts typically range from six to 24 months, with our larger horsepower compressors having contract terms of up to 60 months.

Our revenue is recognized over time, generally monthly, in accordance with payment terms under the contract.

The Company generates revenue from renting compressors to our customers.

These contracts, which all qualify as operating leases under ASC Topic 842, Leases (ASC 842), may also include a fee for servicing the compressor during the rental contract.

Our rental contracts typically range from six to 60 months.

Our revenue is recognized over time, with monthly payments over the term of the contract.

After the terms of the contract have expired, a customer may renew their contract or continue renting on a monthly basis thereafter.

In accordance with ASC 842, we have applied the practical expedient ASC 842-10-15-42A, which allows the Company to combine lease and non-lease components.

In accordance with ASC 842 – Leases, we have applied the practical expedient ASC 842-10-15-42A, which allows the Company to combine lease and non-lease components.

Sales Revenue .

The Company generates revenue by the sale of custom/fabricated compressors and parts, as well as exchange/rebuilding customer owned compressors and sale of used rental equipment.

Our sales revenue is recognized in accordance with ASC 606.

Custom/fabricated compressors - The Company designs and fabricates compressors based on the customer’s specifications outlined in their contract.

Though the equipment being built is customized by the customer, control under these contracts does not pass to the customer until the compressor package is complete and shipped, or in accordance with a bill and hold arrangement, the customer accepts title and assumes the risk and rewards of ownership.

We request some of our customers to make progressive payments as the product is being built;

these payments are recorded as a contract liability on the Deferred Income line on the condensed consolidated balance sheet until control has been transferred.

Though the equipment being built is customized by the customer, control under these contracts does not pass to the customer until the compressor is completed and shipped, or in accordance with a bill and hold arrangement, in which the customer accepts title and assumes the risk and rewards of ownership at a specified time.

We request some of our customers to make progressive payments as the compressor is being built;

these payments are recorded as a contract liability on the Accrued Liability line on the consolidated balance sheet until control has been transferred.

These contracts also may include an assurance warranty clause to guarantee the product is free from defects in material and workmanship for a set duration of time;

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

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.

The customer will formally request that we ship the equipment per their direction from our manufacturing facility or the third-party fabrication site at a later specified date and that we segregate this equipment from our finished goods, such that this equipment is not available to fill other orders.

Per the customer’s agreement change of control is passed to the customer once the equipment is complete and ready for shipment.

We have operated using bill and hold agreements with certain customers for many years, with consistent and satisfactory results for both the customer and us.

The credit terms on these agreements are consistent with the credit terms on all other sales.

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 nine months ended September 30, 2023 or 2022.

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

1 unchanged sentence

The amount of revenue recognized is not adjusted for expected returns, as our historical part returns have been de minimis.

Exchange or rebuilding customer owned compressors - Based on the contract, the Company will either exchange a new/rebuilt compressor for the customer’s malfunctioning compressor or rebuild the customer’s compressor.

Revenue is recognized after control of the replacement compressor has transferred to the customer based on the terms of the contract, i.e., by physical delivery, delivery and installment, or shipment of the compressor.

Exchange or rebuild customer owned compressors - Based on the contract, the Company will either exchange a new/rebuilt compressor for the customer’s malfunctioning compressor or rebuild the customer’s compressor.

Revenue is recognized after control of the replacement or rebuilt compressor has transferred to the customer based on the terms of the contract, i.e., by physical delivery, delivery and installment, or shipment of the compressor.

Used compressors - From time to time, a customer may request to purchase a used compressor out of our rental fleet.

Revenue from the sale of rental equipment is recognized when the control has passed to the customer based on the terms of the contract, i.e., when the customer has taken physical possession or the equipment has been shipped.

Aftermarket Services .

Revenue from the sale of rental equipment is recognized when the control has passed to the customer based on the terms of the contract, i.e.

when the customer has taken physical possession or the equipment has been shipped.

Aftermarket Service Revenue .

The Company provides routine or call-out services on customer owned equipment.

Revenue is recognized after services are rendered.

The company also provides freight and commissioning services for new compressor sets.

Payment terms for sales revenue and aftermarket services discussed above are generally 30 to 60 days, although terms for specific customers can vary.

Also, transaction prices are not subject to variable consideration constraints.

Revenue is recognized after services in the contract are rendered.

Payment terms for sales revenue and aftermarket services revenue discussed above are generally 30 to 60 days although terms for specific customers can vary.

Also, the transaction prices are not subject to variable consideration constraints.

Disaggregation of Revenue

The following table shows the Company's revenue disaggregated by product or service type for the three and nine months ended September 30, 2023 and 2022:

Three months ended September 30,

Nine months ended September 30,

2023 2022 2023 2022

(in thousands) (in thousands)

The following table shows the Company's revenue disaggregated by product or service type for the three months ended March 31, 2024 and 2023:

Three months ended March 31,

(in thousands)

Compressors - sales $ 1,283 $ 969

Flares - sales — 131 87 214

Other (parts/rebuilds) - sales 1,220 2,023

4 unchanged sentences

Contract Balances

As of September 30, 2023 and December 31, 2022, we had the following receivables and deferred income from contracts with customers:

September 30, 2023 December 31, 2022

As of March 31, 2024 and December 31, 2023, we had the following receivables and deferred income from contracts with customers:

March 31, 2024 December 31, 2023

(in thousands)

6 unchanged sentences

Deferred income $ — $ 418

The Company recognized sales revenues of $ 37 thousand for the nine months ended September 30, 2023 that was included in deferred income at the beginning of 2023.

The Company recognized sales revenues of $ 418 thousand for the three months ended March 31, 2024 that was included in accrued liabilities at the beginning of 2024.

The increase in accounts receivable and decrease in deferred income were primarily due to normal timing differences between our performance and the customers’ payments.

Remaining Performance Obligations

As of September 30, 2023, the Company had no deferred revenue related to unsatisfied performance obligations.

As of March 31, 2024, the Company had no 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 ta x positions as of September 30, 2023.

We have no liabilities for uncertain ta x positions as of March 31, 2024.

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

Capitalized Interest

Effective January 1, 2023, the Company began capitalizing interest from external borrowings on significant expenditures for the fabrication of its natural gas compressor equipment until such projects are ready for their intended use.

The Company capitalizes interest from external borrowings on significant expenditures for the fabrication of its natural gas compressor equipment until such projects are ready for their intended use.

Capitalized interest is added to the cost of the underlying asset and is amortized over the useful lives of the assets in the same manner as the underlying assets.

For the nine months ended September 30, 2023, the Company capitalized interest aggregating approximately $ 4.1 million.

For the three months ended March 31, 2024 and 2023, th e Company capitalized interest aggregating approximately $ 1.2 million a nd $ 0.9 million , respe ctively.

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (ASC Topic 326):

Measurement of Credit Losses on Financial Instruments.

The amendments to ASC Topic 326 require immediate recognition of estimated credit losses expected to occur over the remaining life of many financial assets, including trade receivables.

For companies that qualify as smaller reporting companies, the amendments in this update are effective for interim and annual periods beginning after January 1, 2023.

We adopted ASU 2016-13 on January 1, 2023.

The adoption did not result in any material change to our financial statements.

There were no other recent accounting pronouncements during the nine months ended September 30, 2023 that are expected to have a material impact on our financial statements.

Our inventory, net of allowance for obsolescence of $ 40,000 at September 30, 2023 and $ 120,000 at December 31, 2022, consisted of the following amounts:

September 30, 2023 December 31, 2022

In December 2023, the Financial Standards Accounting Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09 “Income Taxes (Topics 740):

Improvements to Income Tax Disclosures” to expand the disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid.

ASU 2023-09 is effective for our annual periods beginning January 1, 2025, with early adoption permitted.

The Company is currently evaluating the potential effect that the updated standard will have on the financial statement disclosures.

In November 2023, the FASB issued ASU 2023-07 “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures” which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses.

ASU 2023-07 is effective for our annual periods beginning January 1, 2024, and for interim periods beginning January 1, 2025, with early adoption permitted.

The adoption is not expected to have a material impact on the Company’s Consolidated Financial Statements or disclosures.

Our inventory, net of allowance for obsolescence of $ 4.0 million at March 31, 2024 and $ 4.0 million at December 31, 2023, consisted of the following amounts:

March 31, 2024 December 31, 2023

(in thousands)

Raw materials - current $ 24,587 $ 21,354

Inventory, net of allowance for obsolescence of $ 2,836,000

$ 17,934 $ 20,227

Work-in-process 877 1,412

Inventory - current 18,811 21,639

Raw materials - long term (net of allowance of $ 40 and $ 120 , respectively)

Raw materials - long term net of allowance of $ 1,168

Inventory - total $ 19,690 $ 22,340

3 unchanged sentences

A summary of our inventory allowance is as follows:

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

(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 September 30, 2023 and December 31, 2022.

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, 2024 and December 31, 2023.

Rental Equipment

Our rental equipment and associated accumulated depreciation as of September 30, 2023 and December 31, 2022, respectively, consisted of the following:

September 30, 2023 December 31, 2022

Our rental equipment and associated accumulated depreciation as of March 31, 2024 and December 31, 2023, respectively, consisted of the following:

March 31, 2024 December 31, 2023

(in thousands)

4 unchanged sentences

Rental equipment, net of accumulated depreciation $ 377,999 $ 373,649

We evaluated our rental equipment for potential material impairment as of September 30, 2023, and determined that no such impairment existed as of that date.

We evaluated our rental equipment for potential material impairment as of March 31, 2024, and determined that an impairment of less than $ 0.1 million existed as of that date.

Long-term Debt

Our long-term debt consists of the following:

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

(in thousands)

2 unchanged sentences

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.

At December 31, 2022, we had $ 25 million outstanding under the Credit Agreement with a weighted average interest rate of 7.32 % .

On February 28, 2023, we replaced our Credit Agreement by entering into a five-year senior secured revolving credit agreement (“Amended and Restated Credit Agreement”) with Texas Capital Bank, as administrative agent (the “Lender”), TCBI Securities, Inc., as joint lead arranger and sole book runner and Bank of America, N.A., as joint lead arranger, with an initial commitment of $ 175 million as of the closing date.

On December 12, 2022, we entered into a First Amendment to the Credit Agreement (the "First Amendment") to increase the maximum commitment to $ 30 million.

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 was May 11, 2026.

The obligations under the Credit Agreement were 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.

On February 28, 2023, we replaced our prior credit agreement by entering into a five-year senior secured revolving credit agreement (“Amended and Restated Credit Agreement”) with Texas Capital Bank, as administrative agent (the “Lender”), TCBI Securities, Inc., as joint lead arranger and sole book runner and Bank of America, N.A., as joint lead arranger, with an initial commitment of $ 175 million as of the closing date.

Subject to collateral availability, we also have a right to request from the Lender, on an uncommitted basis, an increase of up to $ 125 million on the aggregate commitment;

2 unchanged sentences

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

In connection with the amendment we agreed to pay fees of $ 2.0 million (representing fees equal to 1.39 % of the $ 145 million increase in the commitment) and reimburse the lenders for their expenses.

On November 14, 2023, the Company entered into a First Amendment to the Amended and Restated Credit Agreement (the "Amendment") with the Lender and certain other lenders to (i) increase the lender commitment from $ 175 million to $ 225 million, and (ii) to add First-Citizens Bank & Trust Company as a new lender to the facility.

In connection with the Amendment, we agreed to pay fees of $ 0.6 million (representing fees equal to 1.125 % of the $ 50 million increase in the commitment) and reimburse the lenders for their expenses.

As of March 31, 2024, we were in compliance with all financial covenants in our Amended and Restated Credit Agreement.

As of March 31, 2024, we had approximately $ 172 million outstanding under our Amended and Restated Credit Agreement with a weighted average interest rate of 8.93 %.

At March 31, 2024, we had approximately $ 46.1 million available for borrowing under the Amended and Restated Credit Agreement, subject to borrowing base determination.

Borrowing Base .

At any time before the maturity of the Amended and Restated 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) 85 % of eligible accounts receivable owed to the Company, plus (b) 50 % of the eligible inventory, valued at the lower of cost or market value at such time, subject to a cap of the component not to exceed $ 2.5 million, plus (c) 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 (d) 80 % of the net book value, valued at the lower cost (excluding any costs for capitalized interest or other non-cash capitalized costs) or market of the eligible new compressor fleet, minus (e) any required availability reserves determined by the Lender in its sole discretion.

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

At September 30, 2023, our borrowing base was approximately $ 175 million.

Generally, the borrowing base equals the sum of (a) 85 % of eligible accounts receivable owed to the Company, plus (b) 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 $ 2.5 million, plus (c) 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 (d) 80 % of the net book value, valued at the lower of cost (excluding any costs for capitalized interest or other noncash capitalized costs) or market of the eligible new compressor fleet, minus (e) 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 Amended and Restated 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 Term SOFR (“Secured Overnight Financing Rate”) Loan, the Adjusted Term SOFR 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 a day;

"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 %;

1 unchanged sentence

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 Amended and Restated Credit Agreement.

Depending on the leverage ratio, the Applicable Margin can be 2.00 % to 2.75 % for Base Rate Loans (as defined in Amended and Restated Credit Agreement) and 3.00 % to 3.75 % for Term SOFR Loans and for requested letters of credit.

Depending on the leverage ratio, the Applicable Margin can be 2.00 % to 2.75 % for Base Rate Loans (as defined in the Amended and Restated Credit Agreement) and 3 % to 3.75 % for Term SOFR Loans and for requested letters of credit.

In addition, we are required to pay a monthly commitment fee on the daily average unused amount of the commitment while the Amended and Restated Credit Agreement is in effect at an annual rate equal to 0.50 % of the unused commitment amount.

9 unchanged sentences

or change the nature of our business.

In addition, we are subject to certain financial covenants during certain trigger periods in the Amended and Restated Credit Agreement that require us to maintain (i) a leverage ratio, as defined, lesser than or equal to 3.50 to 1.00 as of the last day of each fiscal quarter thereafter and (ii) a fixed charge coverage ratio greater than or equal to 1.25 to 1.00 as of the last day of each fiscal quarter.

In addition, we are subject to certain financial covenants in the Amended and Restated Credit Agreement that require us to maintain (i) a leverage ratio, as defined, lesser than or equal to 3.50 to 1.00 as of the last day of each fiscal quarter ending on or prior to December 31, 2024 and 3.25 to 1.00 for the fiscal quarter ending March 31, 2025 and for each fiscal quarter thereafter and (ii) a fixed charge coverage ratio greater than or equal to 1.25 to 1.00 as of the last day of each fiscal quarter.

As of March 31, 2024, the Company is in compliance with these covenants.

Events of Default and Acceleration .

7 unchanged sentences

certain ERISA events;

certain change in control events and the defectiveness of any

liens under the secured revolving credit agreement.

certain change in control events and the defectiveness of any liens.

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

As of September 30, 2023, we were in compliance with all financial covenants in our Amended and Restated Credit Agreement.

As of September 30, 2023, we had approximately $ 128 million outstanding under our Amended and Restated Credit Agreement with a weighted average interest rate of 8.98 %.

At September 30, 2023, we had approximately $ 47 million available for borrowing under the Amended and Restated Credit Agreement, subject to borrowing base determination.

Stock-Based and Other Long-Term Incentive Compensation

Stock Options

A summary of all option activity as of December 31, 2022, and changes during the nine months ended September 30, 2023 is presented below:

A summary of all option activity as of December 31, 2023, and changes during the three months ended March 31, 2024 is presented below:

Stock Options

6 unchanged sentences

( 29,667 ) $ 30.41 — $ —

Outstanding, September 30, 2023 152,084 $ 20.33 3.81 —

Exercisable, September 30, 2023 119,750 $ 22.89 2.58 $ —

The following table summarizes information about our stock options outstanding at September 30, 2023:

Outstanding, March 31, 2024 99,417 $ 17.72 4.98 $ 442

Exercisable, March 31, 2024 75,082 $ 19.97 3.92 $ 231

The following table summarizes information about our stock options outstanding at March 31, 2024:

Range of Exercise Prices

8 unchanged sentences

99,417 4.98 $ 17.72 75,082 $ 19.97

30,667 0.47 $ 30.41 30,667 $ 30.41

152,084 3.81 $ 20.33 119,750 $ 22.89

The summary of the status of our unvested stock options as of December 31, 2022 and changes during the nine months ended September 30, 2023 is presented below:

The following table summarizes changes in our unvested stock options for the three months ended March 31, 2024:

Unvested Stock Options:

5 unchanged sentences

Cancelled/Forfeited — $ —

Unvested at September 30, 2023

Unvested at March 31, 2024

24,335 $ 5.45

As of September 30, 2023, there was $ 108,000 of unrecognized compensation cost related to unvested options.

For the nine months ended September 30, 2023, there was $ 74,000 of compensation expense for stock options.

For the nine months ended September 30, 2022, there was 361,000 of compensation expense for stock options.

Restricted Shares/Units

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

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

On August 15, 2022, the Compensation Committee awarded 32,040 shares of restricted common stock to two executive officers that vest ratably over three years , beginning on April 25, 2023 of these 32,040 shares, 11,024 shares were forfeited in connection with the executive officer's resignation.

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

Taylor, our Interim Chief Executive Officer, that vested in full on June 30, 2023.

As of March 31, 2024, there was $ 82,000 of unrecognized compensation cost related to unvested options.

For the three months ended March 31, 2024, there was $ 29,000 of compensation expense for stock options.

For the three months ended March 31, 2023, there was $ 22,000 of compensation expense for stock options.

Restricted Shares/Units and Performance Share Units

The following summarizes grants made of equity awards under our 2019 Equity Incentive Plan, as amended, on the dates indicated:

• On April 25, 2023, the Compensation Committee awarded 27,840 shares of restricted stock to our Chief Technical Officer that vest ratably over three years , beginning on April 25, 2024.

• Pursuant to the Retirement Agreement dated May 17, 2022, between the Company and Mr.

Taylor, our Interim Chief Executive Officer, on April 25, 2023, the Compensation Committee awarded 58,790 fully vested shares of common stock to Mr.

Taylor, on April 25, 2023, the Compensation Committee awarded 58,790 fully vested shares of common stock to Mr.

• On May 9, 2023, the Compensation Committee awarded each of our four independent Board members 9,470 restricted stock units.

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

With respect to the 9,470 share RSU award received by Mr.

Jacobs, at the time of grant, he was an employee of Mill Road Capital Management, LLC (“Mill Road”), and was serving on our Board pursuant to a right of appointment held by Mill Road in connection with a Cooperation Agreement between Mill Road and us.

Pursuant to a pre-existing contractual obligation, Mill Road has the right to receive the economic benefit of the shares upon vesting of this RSU.

On January 29, 2024, Mr.

Jacobs terminated his employment with Mill Road and on February 12, 2024, he began employment as our permanent Chief Executive Officer.

As a result, since he no longer qualified as an independent member of our Board, Mr.

Jacobs relinquished the vesting of 2,252 shares representing the pro-rata number of shares allocable under the award since the beginning his employment in February.

Thus, these shares have not been issued and remain in our 2019 Plan for future award grants.

In connection with the contractual obligation noted above, 6,856 of the vested shares are in the process of being transferred by Mr.

Jacobs to Mill Road for no consideration, and Mr.

Jacobs continues to own 362 of the vested shares relating the period between his termination of employment with Mill Road and employment as our CEO.

• On June 30, 2023, Stephen C.

Taylor was granted restricted stock units for 10,101 shares of common stock that will vest one year from the date of grant.

Total compensation expense related to these and previously granted restricted stock awards was $ 1.7 million and $ 1.0 million for the nine months ended September 30, 2023, and 2022, respectively.

A summary of all restricted stock/units outstanding as of December 31, 2022 and activity during the nine months ended September 30, 2023 is presented below:

Taylor, in connection with his agreement to continue as our Interim Chief Executive Officer while we finalized our permanent CEO search, was granted restricted stock units for 10,101 shares of common stock that vest one year from the date of grant.

In addition, Mr.

Taylor was also issued 10,101 shares of common stock pursuant to his Retirement Agreement.

• On October 8, 2023, the Compensation Committee awarded 6,361 restricted stock units to Brian Tucker, our Chief Operating Officer.

These units will vest ratably over three years beginning on October 9, 2024.

• On October 26, 2023, the compensation committee awarded 4,623 restricted stock units to an independent director.

These units vest one year from the date of the grant.

• On January 29, 2024, the compensation committee awarded Justin Jacobs, our Chief Executive Officer, 31,382 restricted stock units and two performance share unit awards, one for 6,494 shares representing a signing bonus and another for 31,382 shares representing an award for 2024 (pro-rated).

The restricted stock units vest over three years in equal tranches beginning on the one-year anniversary of the grant date.

• On March 4, 2024, the compensation committee awarded Brian Tucker our Chief Operating Officer 11,293 restricted stock units and 11,293 performance share units.

These restricted stock units vest over three years in equal tranches beginning on the one-year anniversary of the grant date.

• In addition on March 14, 2024, the compensation committee awarded Jim Hazlett, our Chief Technical Officer, 21,984 restricted stock units.

These restricted stock units vest over three years in equal tranches beginning on the one-year anniversary of the grant date.

In connection with the performance share unit awards granted to Messrs.

Jacobs and Tucker set forth above, potential payout for the PSU award is based upon performance for a three-year period ending December 31, 2026 measured against relative total shareholder return (“TSR”) compared to a peer group as established by the Compensation Committee.

The PSU award payout ranges from zero (if the Company ranks below the 30th percentile) and up to 200 % for Mr.

Jacobs, the CEO (if the Company ranks first) based upon the Company’s relative TSR performance ranking (subject to certain caps based on absolute TSR).

Total compensation expense related to these and previously granted restricted stock awards was $ 0.2 million and $ 0.5 million for the nine months ended March 31, 2024, and 2023, respectively.

A summary of all restricted stock/units outstanding as of December 31, 2023 and activity during the three months ended March 31, 2024 is presented below:

Shares Weighted Average

7 unchanged sentences

( 21,147 ) $ 11.12 $ 235

Outstanding, September 30, 2023 122,914 $ 10.29 4.84 $ 1,482

Other Long-Term Incentive Compensation

On April 26, 2022, subject to vesting we granted a $ 50,000 cash award to each of our three independent Board members.

These awards vested on April 26, 2023 and have been paid.

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

In general the vesting of long term 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 in the agreement).

Total compensation expense related to these and other long-term incentive awards was approximately $ 426,000 and $ 672,000 for the nine months ended September 30, 2023 and 2022, respectively.

As of September 30, 2023, all compensation expense related to these other long-term incentive awards had been recognized.

Outstanding, March 31, 2024 167,762 $ 13.02 3.97 $ 3,260

Earnings (loss) per Share

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

Three months ended Nine months ended

September 30, September 30,

2023 2022 2023 2022

Three months ended

(in thousands, except per share data)

12 unchanged sentences

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

The Company believes it maintains adequate insurance coverage against any potential litigation loss.

The Company believes it maintains adequate insurance coverage against any potential litigation loss relating to insurable risks.

Subsequent Events

In accordance with ASC 855 - Subsequent Events - the Company has evaluated all events subsequent to the balance sheet date as of September 30, 2023 through the date this report was issued and believes nothing is required thereunder.

In accordance with ASC 855 - Subsequent Events - the Company has evaluated all events subsequent to the balance sheet date as of March 31, 2024 through the date this report was issued 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