UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________

FORM 10-Q

____________________


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended ~~March 31,~~September 30, 2021


☐			TRANSITION REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number. ~~000-24575~~001-40364

____________________

STABILIS SOLUTIONS, INC.

(Exact name of registrant as specified in its charter)

____________________


Florida			59-3410234
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

11750 Katy Freeway, Suite 900, Houston, TX 77079

(Address of principal executive offices, including zip code)

(832) 456-6500

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, $.001 par value

SLNG

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§. 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Act:

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☒

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~May 3,~~November 10, 2021, there were ~~16,896,626~~17,691,268 outstanding shares of our common stock, par value $.001 per share.

STABILIS SOLUTIONS, INC. AND SUBSIDIARIES

FORM 10-Q Index

For the Quarterly Period Ended ~~March 31,~~September 30, 2021

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This document includes statements that constitute forward-looking statements within the meaning of the federal securities laws. These statements are subject to risks and uncertainties. These statements may relate to, but are not limited to, information or assumptions about us, our capital and other expenditures, dividends, financing plans, capital structure, cash flow, our recent business combination, pending legal and regulatory proceedings and claims, including environmental matters, future economic performance, operating income, cost savings, and management’s plans, strategies, goals and objectives for future operations and growth. These forward-looking statements generally are accompanied by words such as “intend,” “anticipate,” “believe,” “estimate,” “expect,” “should,” “seek,” “project,” “plan” or similar expressions. Any statement that is not a historical fact is a forward-looking statement. It should be understood that these forward-looking statements are necessarily estimates reflecting the best judgment of senior management, not guarantees of future performance. They are subject to a number of assumptions, risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statements. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements described in Part II. “Item 1A. Risk Factors” in this document.

Forward-looking statements represent intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. In addition to the risk factors and other cautionary statements described in Part II. “Item 1A. Risk Factors” in this document, the factors include:

•our ability to execute our business strategy;

•our limited operating history;

•our ability to satisfy our liquidity needs, including our ability to generate sufficient liquidity or cash flow from operations and our ability to obtain additional financing to affect our strategy;

•loss of one or more of our customers;

•credit and performance risk of our customers and contractual counterparties;

•cyclical or other changes in the demand for and price of LNG and natural gas;

•operational, regulatory, environmental, political, legal and economic risks pertaining to the construction and operation of our facilities;

•the effects of current and future worldwide economic conditions and demand for oil and natural gas and power system equipment and services;

•hurricanes or other natural or man-made disasters;

•public health crises, such as the ongoing COVID-19 outbreak, which could further deteriorate economic conditions;

•dependence on contractors for successful completions of our energy related infrastructure;

•reliance on third party engineers;

•competition from third parties in our business;

•failure of LNG to be a competitive source of energy in the markets in which we operate, and seek to operate;

•increased labor costs, and the unavailability of skilled workers or our failure to attract and retain qualified personnel;

•major health and safety incidents relating to our business;

•failure to obtain and maintain approvals and permits from governmental and regulatory ~~agencies including with respect to our planned operational expansion in Mexico;~~agencies;

•changes to health and safety, environmental and similar laws and governmental regulations that are adverse to our operations;

•changes in regulatory, geopolitical, social, economic, tax or monetary policies and other factors resulting from the transition to the Biden administration and Democratic control of Congress;

•volatility of the market price of our common stock;

•our ability to successfully integrate acquisitions; and

•future benefits to be derived from our investments in technologies, joint ventures and acquired companies.

Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in the forward-looking statements contained herein. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. All forward-looking statements included in this document are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue.

In this Quarterly Report on Form 10-Q, we may rely on and refer to information from market research reports, analyst reports and other publicly available information. Although we believe that this information is reliable, we cannot guarantee the accuracy and completeness of this information, and we have not independently verified it.

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

Stabilis Solutions, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

~~(Unaudited)~~

(Unaudited, in thousands, except share and per share data)


		March 31, 2021		December 31, 2020			September 30, 2021		December 31, 2020
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	3,062	$	1,814	Cash and cash equivalents	$	2,938	$	1,814
Accounts receivable		6,327		5,620
Accounts receivable, net						Accounts receivable, net	7,328		5,620
Inventories, net	Inventories, net	158		226		Inventories, net	424		226

Prepaid expenses and other current assets	Prepaid expenses and other current assets	3,336		3,111		Prepaid expenses and other current assets	4,298		3,111
Due from related parties	Due from related parties	2		42		Due from related parties	—		42
Total current assets	Total current assets	12,885		10,813		Total current assets	14,988		10,813
Property, plant and equipment:	Property, plant and equipment:					Property, plant and equipment:
Cost	Cost	90,763		90,422		Cost	100,758		90,422
Less accumulated depreciation	Less accumulated depreciation	(40,560)		(38,384)		Less accumulated depreciation	(44,900)		(38,384)
Property, plant and equipment, net	Property, plant and equipment, net	50,203		52,038		Property, plant and equipment, net	55,858		52,038
Right-of-use assets	Right-of-use assets	678		786		Right-of-use assets	128		786
Goodwill	Goodwill	4,453		4,453		Goodwill	4,453		4,453
Investments in foreign joint ventures	Investments in foreign joint ventures	12,256		11,897		Investments in foreign joint ventures	11,923		11,897
Other noncurrent assets	Other noncurrent assets	320		326		Other noncurrent assets	319		326
Total assets	Total assets	$	80,795	$	80,313	Total assets	$	87,669	$	80,313
Liabilities and Stockholders’ Equity	Liabilities and Stockholders’ Equity					Liabilities and Stockholders’ Equity
Current liabilities:	Current liabilities:					Current liabilities:
Current portion of long-term notes payable		$	641	$	680
Current portion of long-term notes payable - related parties		3,422		3,351
Current portion of notes payable						Current portion of notes payable	$	1,379	$	1,112
Current portion of notes payable - related parties						Current portion of notes payable - related parties	2,580		3,351
Current portion of finance lease obligation	Current portion of finance lease obligation	17		0		Current portion of finance lease obligation	16		—
Current portion of finance lease obligation - related parties	Current portion of finance lease obligation - related parties	0		648		Current portion of finance lease obligation - related parties	—		648
Current portion of operating lease obligations	Current portion of operating lease obligations	306		362		Current portion of operating lease obligations	206		362
Short-term notes payable		190		432
Accrued liabilities	Accrued liabilities	5,232		4,361		Accrued liabilities	7,432		4,361
Accounts payable	Accounts payable	5,401		4,395		Accounts payable	5,163		4,395
Total current liabilities	Total current liabilities	15,209		14,229		Total current liabilities	16,776		14,229
Long-term notes payable, net of current portion	Long-term notes payable, net of current portion	667		682		Long-term notes payable, net of current portion	6,772		682
Long-term notes payable, net of current portion - related parties	Long-term notes payable, net of current portion - related parties	2,093		2,726		Long-term notes payable, net of current portion - related parties	919		2,726
Finance lease obligations, net of current portion		75		0
Long-term portion of finance lease obligations						Long-term portion of finance lease obligations	68		—
Long-term portion of operating lease obligations	Long-term portion of operating lease obligations	436		490		Long-term portion of operating lease obligations	314		490
Deferred compensation		44		59
Deferred income taxes		106		97
Other noncurrent liabilities						Other noncurrent liabilities	98		156
Total liabilities	Total liabilities	18,630		18,283		Total liabilities	24,947		18,283
Commitments and contingencies (Note 12)	Commitments and contingencies (Note 12)			0		Commitments and contingencies (Note 12)	0		0
0Stockholders’ Equity:
Preferred Stock; $0.001 par value, 1,000,000 shares authorized, 0 shares issued and outstanding at March 31, 2021 and December 31, 2020		0		0
Stockholders’ Equity:						Stockholders’ Equity:

Common stock; $0.001 par value, 37,500,000 shares authorized, 16,896,626 shares issued and outstanding at March 31, 2021 and December 31, 2020 (Note 13)		17		17

Preferred Stock; $0.001 par value, 1,000,000 shares authorized, no shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively						Preferred Stock; $0.001 par value, 1,000,000 shares authorized, no shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively	—		—
Common stock; $0.001 par value, 37,500,000 shares authorized, 17,691,268 and 16,896,626 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively						Common stock; $0.001 par value, 37,500,000 shares authorized, 17,691,268 and 16,896,626 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively	18		17

Additional paid-in capital	Additional paid-in capital	91,440		91,278		Additional paid-in capital	97,373		91,278
Accumulated other comprehensive income (loss)		(80)		122
Accumulated other comprehensive income						Accumulated other comprehensive income	172		122
Accumulated deficit	Accumulated deficit	(29,212)		(29,387)		Accumulated deficit	(34,841)		(29,387)
Total stockholders’ equity	Total stockholders’ equity	62,165		62,030		Total stockholders’ equity	62,722		62,030

Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	80,795	$	80,313	Total liabilities and stockholders’ equity	$	87,669	$	80,313

The accompanying notes are an integral part of the ~~condensed consolidated financial statements.~~Condensed Consolidated Financial Statements.

Stabilis Solutions, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

~~(Unaudited)~~

(Unaudited, in thousands, except share and per share data)


		Three Months Ended March 31,			Three Months Ended September 30,						Nine Months Ended September 30,
			2021			2020			2021		2020		2021		2020
Revenue	Revenue							Revenue
LNG product	LNG product		$	11,695		$	9,131	LNG product	$	14,420	$	6,594	$	37,927	$	18,609
Rental, service and other	Rental, service and other		4,425			3,397		Rental, service and other	3,359		1,073		10,364		5,613
Power delivery	Power delivery		1,544			1,310		Power delivery	1,925		1,352		5,129		3,638
Total revenues	Total revenues		17,664			13,838		Total revenues	19,704		9,019		53,420		27,860
Operating expenses:	Operating expenses:							Operating expenses:

Costs of LNG product	Costs of LNG product		8,812			6,097		Costs of LNG product	11,988		5,044		30,154		13,692
Costs of rental, service and other	Costs of rental, service and other		2,241			1,671		Costs of rental, service and other	1,917		808		5,649		3,381
Costs of power delivery	Costs of power delivery		1,160			1,247		Costs of power delivery	1,542		996		3,994		3,131
Selling, general and administrative expenses	Selling, general and administrative expenses		3,225			3,186		Selling, general and administrative expenses	6,155		2,338		13,195		7,892
Gain from disposal of fixed assets								Gain from disposal of fixed assets	—		—		(24)		(11)
Depreciation expense	Depreciation expense		2,225			2,270		Depreciation expense	2,324		2,266		6,767		6,802
Impairment of right-of-use lease asset								Impairment of right-of-use lease asset	376		—		376		—
Total operating expenses	Total operating expenses		17,663			14,471		Total operating expenses	24,302		11,452		60,111		34,887
Income (loss) from operations before equity income			1			(633)
Net equity income (loss) from foreign joint ventures' operations:
Income (loss) from equity investments in foreign joint ventures			421			(114)
Loss from operations before equity income								Loss from operations before equity income	(4,598)		(2,433)		(6,691)		(7,027)
Net equity income from foreign joint ventures' operations:								Net equity income from foreign joint ventures' operations:
Income from equity investments in foreign joint ventures								Income from equity investments in foreign joint ventures	308		642		1,267		1,529
Foreign joint ventures' operations related expenses	Foreign joint ventures' operations related expenses		(67)			(60)		Foreign joint ventures' operations related expenses	(62)		(69)		(192)		(182)
Net equity income (loss) from foreign joint ventures' operations			354			(174)
Income (loss) from operations			355			(807)
Net equity income from foreign joint ventures' operations								Net equity income from foreign joint ventures' operations	246		573		1,075		1,347
Loss from operations								Loss from operations	(4,352)		(1,860)		(5,616)		(5,680)
Other income (expense):	Other income (expense):							Other income (expense):

Interest expense, net	Interest expense, net		(17)			(11)		Interest expense, net	(130)		(2)		(224)		(28)
Interest expense, net - related parties	Interest expense, net - related parties		(173)			(240)		Interest expense, net - related parties	(120)		(199)		(441)		(681)
Other income			90			38
Gain from disposal of fixed assets			0			11
Other income (loss)								Other income (loss)	70		(31)		1,183		(6)

Total other income (expense)	Total other income (expense)		(100)			(202)		Total other income (expense)	(180)		(232)		518		(715)
Income (loss) before income tax expense			255			(1,009)
Loss before income tax expense								Loss before income tax expense	(4,532)		(2,092)		(5,098)		(6,395)
Income tax expense	Income tax expense		80			41		Income tax expense	93		41		356		251
Net income (loss)			$	175		$	(1,050)
Net loss								Net loss	$	(4,625)	$	(2,133)	$	(5,454)	$	(6,646)

Common Stock Data:	Common Stock Data:							Common Stock Data:
Net income (loss) per common share:
Net loss per common share:								Net loss per common share:
Basic and diluted	Basic and diluted		$	0.01		$	(0.06)	Basic and diluted	$	(0.26)	$	(0.13)	$	(0.32)	$	(0.39)
Weighted average number of common shares outstanding:	Weighted average number of common shares outstanding:							Weighted average number of common shares outstanding:
Basic and diluted	Basic and diluted		16,896,626			16,819,681		Basic and diluted	17,578,653		16,896,626		17,202,631		16,867,939

The accompanying notes are an integral part of the ~~condensed consolidated financial statements.~~Condensed Consolidated Financial Statements.

Stabilis Solutions, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (Loss)

~~(Unaudited)~~

(Unaudited, in thousands)

Three Months Ended
March 31,
2021 2020
Net income (loss) $ 175 $ (1,050)
Foreign currency translation adjustment (202) (619)
Total comprehensive income (loss) $ (27) $ (1,669)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net loss	$	(4,625)	$	(2,133)	$	(5,454)	$	(6,646)
Foreign currency translation adjustment	(150)		424		50		(111)
Total comprehensive loss	$	(4,775)	$	(1,709)	$	(5,404)	$	(6,757)

The accompanying notes are an integral part of the ~~condensed consolidated financial statements.~~Condensed Consolidated Financial Statements.

Stabilis Solutions, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity

~~(Unaudited)~~

(Unaudited, in thousands, except share data)


		Common Stock													Common Stock		Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)	Accumulated Deficit					Total
			Shares	Amount		Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total				Shares						Accumulated Deficit					Total
Balance at December 31, 2020	Balance at December 31, 2020		16,896,626	$	17	$	91,278	$	122	$	(29,387)	$	62,030	Balance at December 31, 2020		16,896,626	$	17					$	91,278				$	(29,387)			$	62,030

Stock-based compensation	Stock-based compensation		—	—		162		—		—		162		Stock-based compensation		—	—			162			—		—					162
Net income														Net income		—	—			—			—		175					175
Other comprehensive loss														Other comprehensive loss		—	—			—			(202)		—					(202)
Balance at March 31, 2021														Balance at March 31, 2021		16,896,626	17			91,440			(80)		(29,212)					62,165
Common stock issued														Common stock issued		101,284	—			—			—		—					—
Stock-based compensation														Stock-based compensation		—	—			122			—		—					122
Shares issued in asset acquisition														Shares issued in asset acquisition		500,000	1			3,794			—		—					3,795
Net loss														Net loss		—	—			—			—		(1,004)					(1,004)
Other comprehensive income														Other comprehensive income		—	—			—			402		—					402
Balance at June 30, 2021														Balance at June 30, 2021		17,497,910	18			95,356			322		(30,216)					65,480
Common stock issued														Common stock issued		250,000	—			—			—		—					—
Stock-based compensation														Stock-based compensation		—	—			2,447			—		—					2,447
Employee tax payments from restricted stock withholdings														Employee tax payments from restricted stock withholdings		(56,642)	—			(430)			—		—					(430)
Net loss	Net loss		—	—		—		—		175		175		Net loss		—	—			—			—		(4,625)					(4,625)
Other comprehensive loss	Other comprehensive loss		—	—		—		(202)		—		(202)		Other comprehensive loss		—	—			—			(150)		—					(150)
Balance at March 31, 2021			16,896,626	$	17	$	91,440	$	(80)	$	(29,212)	$	62,165

Balance at September 30, 2021														Balance at September 30, 2021		17,691,268	$	18		$	97,373		$	172	$	(34,841)				$	62,722


		Common Stock													Common Stock		Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)	Accumulated Deficit					Total
			Shares	Amount		Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total				Shares						Accumulated Deficit					Total
Balance at December 31, 2019	Balance at December 31, 2019		16,800,612	$	17	$	90,748	$	(291)	$	(22,631)	$	67,843	Balance at December 31, 2019		16,800,612	$	17					$	90,748				$	(22,631)			$	67,843
Common stock issued	Common stock issued		34,706	—		—		—		—		—		Common stock issued		34,706	—			—			—		—					—
Stock-based compensation	Stock-based compensation		—	—		19		—		—		19		Stock-based compensation		—	—			19			—		—					19
Net loss	Net loss		—	—		—		—		(1,050)		(1,050)		Net loss		—	—			—			—		(1,050)					(1,050)
Other comprehensive loss														Other comprehensive loss		—	—			—			(619)		—					(619)
Balance at March 31, 2020														Balance at March 31, 2020		16,835,318	17			90,767			(910)		(23,681)					66,193
Common stock issued														Common stock issued		61,308	—			—			—		—					—
Stock-based compensation														Stock-based compensation		—	—			139			—		—					139
Net loss														Net loss		—	—			—			—		(3,463)					(3,463)
Other comprehensive income	Other comprehensive income		—	—		—		(619)		—		(619)		Other comprehensive income		—	—			—			84		—					84
Balance at March 31, 2020			16,835,318	$	17	$	90,767	$	(910)	$	(23,681)	$	66,193

Balance at June 30, 2020														Balance at June 30, 2020		16,896,626	17			90,906			(826)		(27,144)					62,953
Stock-based compensation														Stock-based compensation		—	—			186			—		—					186
Net loss														Net loss		—	—			—			—		(2,133)					(2,133)
Other comprehensive income														Other comprehensive income		—	—			—			424		—					424
Balance at September 30, 2020														Balance at September 30, 2020		16,896,626	$	17		$	91,092		$	(402)	$	(29,277)				$	61,430

The accompanying notes are an integral part of the ~~condensed consolidated financial statements.~~Condensed Consolidated Financial Statements.

Stabilis Solutions, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

~~(Unaudited)~~

(Unaudited, in thousands)


		Three Months Ended March 31,					Nine Months Ended September 30,
		2021		2020			2021		2020
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income (loss)		$	175	$	(1,050)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Net loss						Net loss	$	(5,454)	$	(6,646)
Adjustments to reconcile net loss to net cash provided by operating activities:						Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization		2,225		2,270
Deferred income tax expense		(11)		41
Depreciation						Depreciation	6,767		6,802
Stock-based compensation expense	Stock-based compensation expense	162		19		Stock-based compensation expense	2,731		344
Bad debt expense	Bad debt expense	0		144		Bad debt expense	—		144
Gain on disposal of fixed assets	Gain on disposal of fixed assets	0		(11)		Gain on disposal of fixed assets	(24)		(11)
Gain on extinguishment of debt						Gain on extinguishment of debt	(1,086)		—
Income from equity investment in joint venture						Income from equity investment in joint venture	(1,267)		(1,529)
Distributions from equity investment in joint venture						Distributions from equity investment in joint venture	1,387		2,054

Income (loss) from equity investment in joint venture		(421)		114

Deferred compensation costs		(15)		0
Impairment of right-of-use lease asset						Impairment of right-of-use lease asset	376		—

Change in operating assets and liabilities, net of acquisitions:	Change in operating assets and liabilities, net of acquisitions:					Change in operating assets and liabilities, net of acquisitions:
Accounts receivable	Accounts receivable	(707)		(356)		Accounts receivable	(1,708)		3,629
Due to (from) related parties	Due to (from) related parties	15		(19)		Due to (from) related parties	42		—
Inventories	Inventories	68		82		Inventories	(173)		48

Prepaid expenses and other current assets	Prepaid expenses and other current assets	(200)		991		Prepaid expenses and other current assets	91		(396)
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	1,268		(1,902)		Accounts payable and accrued liabilities	3,878		(2,085)

Other	Other	4		26		Other	(82)		113
Net cash provided by operating activities	Net cash provided by operating activities	2,563		349		Net cash provided by operating activities	5,478		2,467
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Acquisition of fixed assets	Acquisition of fixed assets	(298)		(112)		Acquisition of fixed assets	(6,948)		(327)
Proceeds on sales of fixed assets	Proceeds on sales of fixed assets	0		11		Proceeds on sales of fixed assets	258		12

Net cash used in investing activities	Net cash used in investing activities	(298)		(101)		Net cash used in investing activities	(6,690)		(315)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:

Proceeds on long-term borrowings		0		0
Payments on long-term borrowings		0		0
Proceeds from borrowings on short- and long-term notes payable						Proceeds from borrowings on short- and long-term notes payable	7,228		1,856
Payments on short- and long-term notes payable						Payments on short- and long-term notes payable	(650)		(644)

Payments on long-term borrowings from related parties		(783)		(768)
Payments on notes payable and financed leases from related parties						Payments on notes payable and financed leases from related parties	(3,277)		(3,776)

Proceeds from short-term notes payable		0		0
Payments on short-term notes payable		(296)		(237)

Net cash used in financing activities		(1,079)		(1,005)
Payment of debt issuance costs						Payment of debt issuance costs	(420)		—
Employee tax payments from restricted stock withholdings						Employee tax payments from restricted stock withholdings	(430)		—
Net cash provided by (used in) financing activities						Net cash provided by (used in) financing activities	2,451		(2,564)
Effect of exchange rate changes on cash	Effect of exchange rate changes on cash	62		(60)		Effect of exchange rate changes on cash	(115)		(157)
Net increase (decrease) in cash and cash equivalents	Net increase (decrease) in cash and cash equivalents	1,248		(817)		Net increase (decrease) in cash and cash equivalents	1,124		(569)
Cash and cash equivalents, beginning of period	Cash and cash equivalents, beginning of period	1,814		3,979		Cash and cash equivalents, beginning of period	1,814		3,979
Cash and cash equivalents, end of period	Cash and cash equivalents, end of period	$	3,062	$	3,162	Cash and cash equivalents, end of period	$	2,938	$	3,410

Supplemental disclosure of cash flow information:	Supplemental disclosure of cash flow information:					Supplemental disclosure of cash flow information:
Interest paid	Interest paid	$	162	$	251	Interest paid	$	645	$	834
Income taxes paid	Income taxes paid	5		0		Income taxes paid	228		210
Non-cash investing and financing activities:	Non-cash investing and financing activities:					Non-cash investing and financing activities:

Common stock issued to acquire fixed assets						Common stock issued to acquire fixed assets	$	3,795	$	—
Insurance premium financing						Insurance premium financing	1,278		—
Equipment acquired under capital leases	Equipment acquired under capital leases	104		0		Equipment acquired under capital leases	104		—

The accompanying notes are an integral part of the ~~condensed consolidated financial statements~~Condensed Consolidated Financial Statements

STABILIS SOLUTIONS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

1. Overview and Basis of Presentation

Overview

Stabilis Solutions, Inc. and its subsidiaries (the “Company”, “Stabilis”, “our”, “us” or “we”) produce, provide turnkey clean energy production, storage, transportation and fueling solutions using liquefied natural gas (“LNG”) and hydrogen to multiple end markets across North America. The Company also distributes LNG and hydrogen from third parties and provides services, transportation, and equipment to customers.

The Company is a supplier of LNG and hydrogen solutions to customers in diverse end markets, including aerospace, agriculture, industrial, utility, pipeline, mining, energy, remote clean power, and high horsepower transportation markets in North America and provides turnkey fuel solutions to help industrial users of propane, diesel and other crude-based fuel products convert to LNG, which may result in reduced fuel costs and an improved environmental footprint. Stabilis is vertically integrated from LNG production through distribution including cryogenic equipment rental and field services. Stabilis opened its 100,000 gallons per day (“gpd”) LNG production facility in George West, Texas in January 2015 to service industrial and oilfield customers in Texas and the greater Gulf Coast region. The Company owns a second liquefaction plant capable of producing 25,000 gpd that is currently not in operation. ~~Stabilis is vertically integrated from~~

On June 1, 2021 the Company acquired a third LNG production ~~through distribution including cryogenic equipment rental and field services.~~facility in Port Allen, Louisiana. The plant is capable of producing 30,000 gpd.

The Company also provides power delivery equipment and services through its subsidiary in Brazil, M&I Electric Brazil Sistemas e Servicios em Energia LTDA (“M&I Brazil”) and its 40% interest in a joint venture in China, BOMAY Electric Industries Co., Ltd. (“BOMAY”).

Basis of Presentation

The accompanying unaudited, interim ~~unaudited~~ condensed consolidated financial statements ("Condensed Consolidated Financial Statements") include our accounts and those of our subsidiaries and, have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, certain information and disclosures normally included in the notes to ~~condensed~~ consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") have been condensed or omitted. We believe that the presentation and disclosures herein are adequate to ~~make~~prevent the information ~~not~~presented herein from being misleading. The ~~unaudited condensed consolidated financial statements~~Condensed Consolidated Financial Statements reflect all adjustments (consisting of normal recurring adjustments) for a fair presentation of the interim periods. The results of operations for the interim ~~period~~periods presented are not necessarily indicative of the results of operations to be expected for the full year. The accompanying ~~unaudited condensed consolidated financial statements~~Condensed Consolidated Financial Statements should be read in conjunction with the audited consolidated financial statements as of and for the year ended December 31, 2020 included in the Company's Annual Report on Form 10-K, as filed on March 16, 2021.

All intercompany accounts and transactions have been eliminated in consolidation. In the Notes to Condensed Consolidated Financial Statements, ~~(Unaudited),~~ all dollar amounts in tabulations are in thousands, unless otherwise indicated.

The accompanying ~~unaudited condensed consolidated financial statements~~Condensed Consolidated Financial Statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company is required to make certain disclosures if it concludes that there is substantial doubt about the entity’s ability to continue as a going concern within one year from the date of the issuance of these financial statements. The Company has incurred recurring operating losses, and ~~has negative working capital. The~~the Company is subject to business risks and uncertainties inherent in the current LNG industry. ~~Furthermore, the impact of the COVID-19 pandemic has created additional uncertainties regarding the future demand for LNG from our customers.~~ There is no assurance that the Company will be able to generate sufficient revenues in the future to sustain itself or to support future growth.

~~These factors~~The Company's working capital and business risks within the LNG industry were reviewed by management to determine if there was substantial doubt as to the Company’s ability to continue as a going concern. Management concluded that its plan to address the Company’s liquidity issues would allow it to continue as a going concern. The Company has recently experienced its highest ever ~~quarterly~~year-to-date revenue, including a resumption of activity with existing customers as well as new revenue opportunities, particularly in Mexico and with power generation customers. ~~Accordingly,~~On April 8, 2021, the Company obtained a new advancing loan facility, pursuant to the United States Department of Agriculture, Business & Industry Loan Program, in the aggregate principal amount of up to $10.0 million, of which $7.0 million was drawn and outstanding as of September 30, 2021.

The Company's management believes that current working capital, access to its advancing loan facility and revenue growth of the business will generate sufficient cash flows ~~from its operations~~ to fund the business for the next 12 months.

Reclassifications

Presentation of certain prior year amounts have been condensed on the Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Cash Flows herein to conform to current period presentation. Such reclassifications had no impact on the consolidated financial position, results of operations or cash flows.

Use of Estimates

The preparation of the ~~condensed consolidated financial statements~~Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates include the carrying amount of contingencies, valuation allowances for receivables, inventories, and deferred income tax assets, valuations assigned to assets and liabilities in business combinations, and impairments of long-lived assets. Actual results could differ from those estimates, and these differences could be material to the ~~condensed consolidated financial statements.~~Condensed Consolidated Financial Statements.

Income Taxes

The Company records income taxes for interim periods based on an estimated annual effective tax rate. The estimated annual effective tax rate is recomputed on a quarterly basis and may fluctuate due to changes in forecasted annual operating income, positive or negative changes to the valuation allowance for net deferred tax assets, the timing of distributions on foreign investments from which foreign taxes are withheld, and changes to actual or forecasted permanent book to tax differences.

The Company’s effective tax rate for the nine months ended September 30, 2021 and 2020 was 7.0% and 3.9%, respectively. The 2021 rate reflects state and foreign income taxes. No U.S. federal income tax benefit was recorded for the periods presented as any net U.S. deferred tax assets generated from operating losses were offset by a change in the Company's valuation allowance on net deferred tax assets.

2. Recent Accounting Pronouncements

Recently Adopted Accounting Standards

In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2019-12, “Simplifying the Accounting for Income Taxes” (“ASU No. 2019-12”), which simplifies the accounting for income taxes by removing certain exceptions to the general principles of Topic 740, Income Taxes and also improves consistent application by clarifying and amending existing guidance. ASU No. 2019-12 was adopted by the Company effective January 1, 2021. The adoption of this standard had no impact on our unaudited interim condensed consolidated financial position or results of operations.

Recently Issued Accounting Standards

In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (“ASU No. 2020-04”), which provides guidance to alleviate the burden in accounting for reference rate reform by allowing certain expedients and exceptions in applying generally accepted accounting principles to contract modifications, hedging relationships, and other transactions impacted by reference rate reform. The provisions of ASU No. 2020-04 apply only to those transactions that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. Adoption of the provisions of ASU No. 2020-04 are optional and are effective from March 12, 2020 through December 31, 2022. We are currently evaluating the impact of ASU No. 2020-04 on our ~~unaudited condensed~~ consolidated financial ~~statements.~~position and results of operations.

3. Revenue Recognition

Disaggregated Revenues

The table below presents revenue disaggregated by source, for the three and nine months ended ~~March 31,~~September 30, 2021 and 2020 (in thousands):

Three Months Ended March 31,
2021 2020
LNG Product $ 11,695 $ 9,131
Rental 3,387 2,890
Service 242 93
Power Delivery 1,544 1,310
Other 796 414
$ 17,664 $ 13,838


	Three Months Ended September 30,				Nine Months Ended September 30,
Revenues	2021		2020		2021		2020
LNG Product	$	14,420	$	6,594	$	37,927	$	18,609
Rental	2,712		737		8,039		4,012
Service	334		187		957		593
Power Delivery	1,925		1,352		5,129		3,638
Other	313		149		1,368		1,008
	$	19,704	$	9,019	$	53,420	$	27,860

The table below presents revenue disaggregated by geographic location, for the three and nine months ended ~~March 31,~~September 30, 2021 and 2020 (in thousands):


		Three Months Ended March 31,
			2021		2020			Three Months Ended September 30,			Nine Months Ended September 30,
Revenues	Revenues						Revenues		2021		2020		2021		2020
Brazil	Brazil		$	1,544	$	1,310	Brazil		$	1,925	$	1,352	$	5,129	$	3,638
Mexico	Mexico		1,616		33		Mexico		3,501		2,729		7,198		2,778
United States	United States		14,504		12,495		United States		14,278		4,938		41,093		21,444
			$	17,664	$	13,838			$	19,704	$	9,019	$	53,420	$	27,860

See Note 4—Business Segments, below, for additional disaggregation of revenue.

Contract Liabilities

The Company recognizes contract liabilities upon receipt of payments for which the performance obligations have not been fulfilled at the reporting date, resulting in deferred revenue. Contract liabilities are included in accrued liabilities in the accompanying unaudited condensed consolidated balance sheets. The ~~following~~ table below presents the changes in the Company’s contract liabilities for the ~~periods~~nine months ended ~~March 31,~~September 30, 2021 and December 31, 2020 (in thousands):


		March 31, 2021		December 31, 2020			September 30, 2021		December 31, 2020
Balance at beginning of period	Balance at beginning of period	$	357	$	185	Balance at beginning of period	$	357	$	185
Cash received, excluding amounts recognized as revenue	Cash received, excluding amounts recognized as revenue	31		777		Cash received, excluding amounts recognized as revenue	283		777
Amounts recognized as revenue	Amounts recognized as revenue	(344)		(605)		Amounts recognized as revenue	(352)		(605)
Balance at end of period	Balance at end of period	$	44	$	357	Balance at end of period	$	288	$	357

The Company has no other material contract assets or liabilities and contract costs.

4. Business Segments

The Company’s revenues are derived from 2 operating segments: LNG and Power Delivery. The LNG segment supplies LNG to multiple end markets in North America and provides turnkey fuel solutions to help users of propane, diesel and other crude-based fuel products convert to LNG. The Power Delivery segment provides power delivery equipment and services ~~through our subsidiary~~ in Brazil and ~~in China~~ through our ~~40% interest~~BOMAY joint venture in ~~BOMAY.~~

Three Months Ended March 31, 2021
(in thousands)
LNG Power Delivery Total
Revenues $ 16,120 $ 1,544 $ 17,664
Depreciation 2,188 37 2,225
Income (loss) from operations before equity income 268 (267) 1
Net equity income from foreign joint ventures' operations 0 354 354
Income from operations 268 87 355
Interest expense, net 7 10 17
Interest expense, net - related parties 173 0 173
Income tax expense 44 36 80
Net income 15 160 175
China. The tables below present operating results by segment for the three and nine months ended September 30, 2021 and 2020 as well as their respective total assets at September 30, 2021 and December 31, 2020 (in thousands):

March 31, 2021
(in thousands)
LNG Power Delivery Total
Total assets $ 65,233 $ 15,562 $ 80,795


	Three Months Ended September 30, 2021						Nine Months Ended September 30, 2021
	LNG		Power Delivery		Total		LNG		Power Delivery		Total

Revenues	$	17,779	$	1,925	$	19,704	$	48,291	$	5,129	$	53,420
Depreciation	2,284		40		2,324		6,653		114		6,767
Loss from operations before equity income	(4,441)		(157)		(4,598)		(6,013)		(678)		(6,691)
Net equity income from foreign joint ventures' operations	—		246		246		—		1,075		1,075
Income (loss) from operations	(4,441)		89		(4,352)		(6,013)		397		(5,616)
Interest expense, net	118		12		130		188		36		224
Interest expense, net - related parties	120		—		120		441		—		441
Income tax expense	93		—		93		356		—		356
Net income (loss)	(4,735)		110		(4,625)		(5,967)		513		(5,454)


	September 30, 2021
	LNG		Power Delivery		Total
Total assets	$	71,450	$	16,219	$	87,669


		Three Months Ended March 31, 2020
		(in thousands)			Three Months Ended September 30, 2020								Nine Months Ended September 30, 2020
			LNG			Power Delivery		Total			LNG		Power Delivery		Total		LNG		Power Delivery		Total
Revenues	Revenues		$	12,528		$	1,310	$	13,838	Revenues	$	7,667	$	1,352	$	9,019	$	24,222	$	3,638	$	27,860
Depreciation	Depreciation		2,235			35		2,270		Depreciation	2,237		29		2,266		6,706		96		6,802
Loss from operations before equity income	Loss from operations before equity income		(199)			(434)		(633)		Loss from operations before equity income	(2,179)		(254)		(2,433)		(5,898)		(1,129)		(7,027)
Net equity income from foreign joint ventures' operations	Net equity income from foreign joint ventures' operations		0			(174)		(174)		Net equity income from foreign joint ventures' operations	—		573		573		—		1,347		1,347
Loss from operations			(199)			(608)		(807)
Income (loss) from operations										Income (loss) from operations	(2,179)		319		(1,860)		(5,898)		218		(5,680)
Interest expense, net	Interest expense, net		4			7		11		Interest expense, net	11		(9)		2		16		12		28
Interest expense, net - related parties	Interest expense, net - related parties		240			0		240		Interest expense, net - related parties	199		—		199		681		—		681
Income tax expense	Income tax expense		35			6		41		Income tax expense	41		—		41		41		210		251
Net loss			(480)			(570)		(1,050)
Net income (loss)										Net income (loss)	(2,458)		325		(2,133)		(6,678)		32		(6,646)

December 31, 2020
(in thousands)
LNG Power Delivery Total
Total assets $ 64,757 $ 15,556 $ 80,313


	December 31, 2020
	LNG		Power Delivery		Total
Total assets	$	64,757	$	15,556	$	80,313

Our operating segments offer different products and services and are managed separately as business units. Cash, cash equivalents and investments are not managed centrally, so the gains and losses on foreign currency remeasurement, and interest and dividend income, are included in the segments’ results.

5. Prepaid Expenses and Other Current Assets

The Company’s prepaid expenses and other current assets at September 30, 2021 and December 31, 2020 consisted of the following (in thousands):


		March 31, 2021		December 31, 2020			September 30, 2021		December 31, 2020
Prepaid LNG	Prepaid LNG	$	93	$	90	Prepaid LNG	$	51	$	90
Prepaid insurance	Prepaid insurance	501		734		Prepaid insurance	1,385		734
Prepaid supplier expenses	Prepaid supplier expenses	311		299		Prepaid supplier expenses	326		299
Other receivables	Other receivables	1,969		1,521		Other receivables	1,923		1,521
Deposits	Deposits	310		285		Deposits	360		285
Other	Other	152		182		Other	253		182
Total prepaid expenses and other current assets	Total prepaid expenses and other current assets	$	3,336	$	3,111	Total prepaid expenses and other current assets	$	4,298	$	3,111

6. Property, Plant and Equipment

The Company’s property, plant and equipment at September 30, 2021 and December 31, 2020 consisted of the following (in thousands):


		March 31, 2021		December 31, 2020
							September 30, 2021		December 31, 2020
Liquefaction plants and systems	Liquefaction plants and systems	$	40,850	$	40,841	Liquefaction plants and systems	$	47,225	$	40,841
Real property and buildings	Real property and buildings	1,611		1,649		Real property and buildings	2,373		1,649
Vehicles and tanker trailers and equipment	Vehicles and tanker trailers and equipment	47,567		47,179		Vehicles and tanker trailers and equipment	49,556		47,179
Computer and office equipment	Computer and office equipment	513		532		Computer and office equipment	609		532
Construction in progress	Construction in progress	191		191		Construction in progress	964		191
Leasehold improvements	Leasehold improvements	31		30		Leasehold improvements	31		30
		90,763		90,422			100,758		90,422
Less: accumulated depreciation	Less: accumulated depreciation	(40,560)		(38,384)		Less: accumulated depreciation	(44,900)		(38,384)
		$	50,203	$	52,038		$	55,858	$	52,038

Depreciation expense for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 2020 both totaled ~~$2.2 million and $2.3~~$6.8 million respectively, of which all is included in the unaudited ~~condensed consolidated statements~~Condensed Consolidated Statements of ~~operations~~Operations as its own and separate line item.

On June 1, 2021 the Company closed on the purchase of an LNG production facility in Port Allen, Louisiana. The acquisition included the LNG liquefaction facility, the related assets and real property. The Company paid consideration of $5.0 million in cash and 500,000 shares of Company common stock, subject to a registration rights agreement, which shares were valued at $3.8 million.

7. Investments in Foreign Joint Ventures

~~BOMAY.~~The Company holds a 40% interest in BOMAY Electric Industries Company, Ltd. (“BOMAY”), which builds electrical systems for sale in China. The majority partner in this foreign joint venture is Baoji Oilfield Machinery Co., Ltd. (a subsidiary of China National Petroleum Corporation), which owns 51%. The remaining 9% is owned by AA Energies, Inc.

The Company made 0no sales to its joint venture induring the three and nine months ended ~~March 31,~~September 30, 2021 and 2020.

~~Below~~The Company accounts for its investment in BOMAY using the equity method of accounting. Under the equity method, the Company’s share of the joint venture operations earnings or losses is recognized in the condensed consolidated statements of operations as equity income (loss) from foreign joint venture operations. Joint venture income increases the carrying value of the joint venture and joint venture losses reduce the carrying value. Dividends received from the joint venture reduce the carrying value. The Company considers dividend distributions received from its equity method investments which do not exceed cumulative equity in earnings subsequent to the date of investment to be a return on investment and classifies these distributions as operating activities in the accompanying Condensed Consolidated Statements of Cash flows.

The tables below present a summary ~~financial information for BOMAY~~of BOMAY's assets and liabilities and equity at ~~March 31,~~September 30, 2021 and December 31, 2020, and its operational results for the three and nine months ended ~~March 31,~~September 30, 2021 and 2020 in U.S. dollars (in thousands, unaudited):


		March 31, 2021		December 31, 2020			September 30, 2021		December 31, 2020
Assets:	Assets:					Assets:
Total current assets	Total current assets	$	52,096	$	51,811	Total current assets	$	60,707	$	51,811
Total non-current assets	Total non-current assets	7,042		7,136		Total non-current assets	6,690		7,136
Total assets	Total assets	$	59,138	$	58,947	Total assets	$	67,397	$	58,947
Liabilities and equity:	Liabilities and equity:					Liabilities and equity:
Total liabilities	Total liabilities	$	25,636	$	26,355	Total liabilities	$	34,779	$	26,355
Total joint ventures’ equity	Total joint ventures’ equity	33,502		32,592		Total joint ventures’ equity	32,618		32,592
Total liabilities and equity	Total liabilities and equity	$	59,138	$	58,947	Total liabilities and equity	$	67,397	$	58,947


		Three Months Ended March 31,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020			2021		2020		2021		2020
Revenue	Revenue	$	14,216	$	8,556	Revenue	$	10,040	$	17,641	$	43,261	$	44,844
Gross Profit	Gross Profit	2,233		896		Gross Profit	3,420		3,224		8,111		7,456
Earnings	Earnings	970		(284)		Earnings	688		1,663		2,923		3,662

The ~~following is~~table below presents a summary of activity in our investment in BOMAY for the periods ended ~~March 31,~~September 30, 2021 and December 31, 2020 in U.S. dollars (in thousands, unaudited):

March 31, 2021 December 31, 2020
Investments in BOMAY (1)(2)
Initial investment $ 9,333 $ 9,333
Undistributed earnings:
Balance at the beginning of the period 1,908 1,257
Equity in earnings 421 2,705
Dividend distributions 0 (2,054)
Balance at end of period 2,329 1,908
Foreign currency translation:
Balance at the beginning of the period 656 (69)
Change during the period (62) 725
Balance at end of period 594 656
Total investment in BOMAY at end of period $ 12,256 $ 11,897

~~________~~


	September 30, 2021		December 31, 2020
Investment in BOMAY (1)(2)
Initial investment	$	9,333	$	9,333
Undistributed earnings:
Balance at the beginning of the period	1,908		1,257
Equity in earnings	1,267		2,705
Dividend distributions	(1,387)		(2,054)
Balance at end of period	1,788		1,908
Foreign currency translation:
Balance at the beginning of the period	656		(69)
Change during the period	146		725
Balance at end of period	802		656
Total investment in BOMAY at end of period	$	11,923	$	11,897

(1)Accumulated statutory reserves in equity method investments of $2.66 million at ~~March 31,~~September 30, 2021 and December 31, 2020 is included in our investment in BOMAY. In accordance with the People’s Republic of China, (“PRC”) regulations on enterprises with foreign ownership, an enterprise established in the PRC with foreign ownership is required to provide for certain statutory reserves, namely (i) General Reserve Fund, (ii) Enterprise Expansion Fund and (iii) Staff Welfare and Bonus Fund, which are appropriated from net profit as reported in the enterprise’s PRC statutory accounts. A non-wholly-owned foreign invested enterprise is permitted to provide for the above allocation at the discretion of its board of directors. The aforementioned reserves can only be used for specific purposes and are not distributable as cash dividends.

(2)The Company’s initial investment in BOMAY differed from the Company’s 40% share of BOMAY’s equity as a result of applying fair value accounting pursuant to ASC 805. The basis difference of approximately $1.2 million will be accreted over the remaining ~~eight~~seven year life of the joint venture. The Company accreted ~~$32~~$97 thousand ~~and $43 thousand during~~for both the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 2020, ~~respectively,~~ which is included in income from equity investments in foreign joint ventures in the accompanying unaudited interim condensed consolidated ~~statement~~statements of operations. As of ~~March 31,~~September 30, 2021 and December 31, 2020, accumulated accretion totaled ~~$215~~$280 thousand and $183 thousand, respectively.

The Company accounts for its investment in BOMAY using the equity method of accounting. Under the equity method, the Company’s share of the joint venture operations earnings or losses is recognized in the condensed consolidated statements of operations as equity income (loss) from foreign joint venture operations. Joint venture income increases the carrying value of the joint venture and joint venture losses reduce the carrying value. Dividends received from the joint venture reduce the carrying value. The Company considers dividend distributions received from its equity method investments which do not exceed cumulative equity in earnings subsequent to the date of investment to be a return on investment and classifies these distributions as operating activities in the accompanying consolidated statements of cash flows.

In accordance with our long-lived asset policy, when events or circumstances indicate the carrying amount of an asset may not be recoverable, management tests long-lived assets for impairment. If the estimated future cash flows are projected to be less than the carrying amount, an impairment write-down (representing the carrying amount of the long-lived asset which exceeds the present value of estimated expected future cash flows) would be recorded as a period expense. In making this evaluation, a variety of quantitative and qualitative factors are considered including national and local economic, political and market conditions, industry trends and prospects, liquidity and capital resources and other pertinent factors. Based on this evaluation for this reporting period, the Company does not believe an impairment ~~adjustment~~of our investment in BOMAY is necessary ~~at March 31,~~for the period ending September 30, 2021.

8. Accrued Liabilities

The Company’s accrued liabilities at September 30, 2021 and December 31, 2020 consisted of the following (in thousands):

March 31,
2021 December 31,
2020
Compensation and benefits $ 1,957 $ 1,745
Professional fees 390 408
LNG fuel and transportation 2,016 1,151
Accrued interest 31 21
Contract liabilities 44 357
Other taxes payable 454 328
Other accrued liabilities 340 351
Total accrued liabilities $ 5,232 $ 4,361


	September 30, 2021		December 31, 2020
Compensation and benefits	$	3,134	$	1,745
Professional fees	623		408
LNG fuel and transportation	2,507		1,151
Accrued interest	—		21
Contract liabilities	288		357
Other taxes payable	582		328
Other accrued liabilities	298		351
Total accrued liabilities	$	7,432	$	4,361

9. Debt

The Company’s carrying value of debt at September 30, 2021 and December 31, 2020 consisted of the following (in thousands):


		March 31, 2021		December 31, 2020			September 30, 2021		December 31, 2020
Unsecured promissory note	Unsecured promissory note	$	1,080	$	1,080	Unsecured promissory note	$	—	$	1,080
Secured term note, net of debt issuance costs						Secured term note, net of debt issuance costs	6,598		—
Secured term note payable - related party	Secured term note payable - related party	1,077		1,077		Secured term note payable - related party	—		1,077
Secured promissory note - related party	Secured promissory note - related party	4,438		5,000		Secured promissory note - related party	3,498		5,000
Insurance and other notes payable	Insurance and other notes payable	418		714		Insurance and other notes payable	1,554		714
Less: amounts due within one year	Less: amounts due within one year	(4,253)		(4,463)		Less: amounts due within one year	(3,959)		(4,463)
Total long-term debt	Total long-term debt	$	2,760	$	3,408	Total long-term debt	$	7,691	$	3,408

Unsecured Promissory Note

During 2020, the Company received loan proceeds of $1.1 million (the ~~“Loan”~~“PPP Loan”) pursuant to the Paycheck Protection Program (the “PPP”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). Under the terms of the PPP, all or a portion of the principal may be forgiven if the PPP Loan proceeds are used for qualifying expenses as described in the CARES Act, such as payroll costs, benefits, rent, and utilities. ~~While no assurance is provided that~~In June 2021, the ~~Company will obtain~~ forgiveness of the PPP Loan was approved by the Small Business Administration in ~~whole or in part, management believes we currently meet~~full and the ~~requirements.~~PPP Loan has been forgiven. The Company ~~has applied~~recognized a gain on forgiveness of debt in the amount of $1.1 million which is included in other income (expense) in the accompanying unaudited interim condensed consolidated statements of operations.

Secured Term Note

On April 8, 2021, the Company entered into a loan agreement (the “Loan Agreement”) with AmeriState Bank (“Lender”), as lender, pursuant to the United States Department of Agriculture, Business & Industry Loan Program, to provide for ~~forgiveness~~an advancing loan facility in the aggregate principal amount of up to $10.0 million (the “AmeriState Loan”), of which $7.0 million was drawn and outstanding as of September 30, 2021. The AmeriState Loan, which is in the form of a term loan facility, matures on April 8, 2031 and bears interest at 5.75% per annum through April 8, 2026, and the U.S. prime lending rate plus 2.5% per annum thereafter. The AmeriState Loan provides that proceeds from borrowings may be used for working capital purposes at the Company’s liquefaction plant in George West, Texas and related fees and costs associated with the AmeriState Loan.

Upon an Event of Default (as defined in the Loan Agreement), the Lender may (i) terminate its commitment, (ii) declare the outstanding principal amount of the Advancing Notes (as defined in the Loan Agreement) due and payable, or (iii) exercise all rights and remedies available to Lender under the ~~terms~~Loan Agreement.

On April 8, 2021, Mile High LNG LLC, Stabilis GDS, Inc., Stabilis LNG Eagle Ford LLC and Stabilis Energy Services, LLC, each a wholly owned subsidiary of the ~~Loan~~Company (collectively, “Debtor”), entered into a Security Agreement and ~~is currently awaiting a response. With respect to any portion~~Assignment (the “Security Agreement”) in favor of the ~~Loan~~Lender. The Security Agreement grants to Lender a first priority security interest in the collateral identified therein, which includes specific equipment collateral owned by the Company.

Repayment of Secured Term Note Payable - Related Party

The Company had a Secured Term Note Payable, as amended, with Chart Energy & Chemicals, Inc. (“Chart E&C”), who beneficially owns approximately 8.3% of our outstanding common stock. The note contained various covenants that ~~is not forgiven,~~limited the ~~Loan will be subject~~Company's ability to ~~customary provisions~~grant certain liens, incur additional indebtedness, guarantee or become contingently liable for obligations of any person except for those allowed by Chart E&C, merge or consolidate into or with a ~~loan~~third party or engage in certain asset dispositions and acquisitions, pay dividends or make distributions, transact with affiliates, prepay indebtedness, and issue additional equity interests. Borrowings incurred interest on the outstanding principal at the rate of ~~this type, including customary events of default relating to, among other things, payment defaults and breaches of~~3.0% plus the ~~provisions of the Note.~~

London interbank offered rate (3.15% at December 31, 2020). During the three months ended ~~March 31,~~September 30, 2021, the Company repaid this debt in full totaling approximately $1.1 million.

Amendment of Secured Promissory Note - Related Party

On September 20, 2021, the Company amended its secured promissory note with M/G Finance Co., Ltd, a related party, to defer scheduled debt and interest payments for September through December 2021 for a period of one year, such payments to be included with the scheduled payments for September through December 2022. The secured promissory note is secured by certain equipment of the Company.

During the nine months ended September 30, 2021 and 2020, the Company recorded interest expense on debt as follows (in thousands):


		March 31, 2021		March 31, 2020			September 30, 2021		September 30, 2020
Unsecured promissory note	Unsecured promissory note	$	0	$	0	Unsecured promissory note	$	—	$	4
Secured term note						Secured term note	$	176	$	—
Secured term note payable - related party	Secured term note payable - related party	10		25		Secured term note payable - related party	22		57
Secured promissory note - related party	Secured promissory note - related party	154		215		Secured promissory note - related party	409		224
Insurance and other notes payable	Insurance and other notes payable	14		11		Insurance and other notes payable	41		24
Total interest expense		$	178	$	251
Total interest expense on debt						Total interest expense on debt	$	648	$	309

Certain of the agreements governing our outstanding debt have certain covenants with which we must comply. As of ~~March 31,~~September 30, 2021, we were in compliance with all of these covenants.

10. Leases

On July 30, 2021, the Company terminated its office lease with Millenium-Windfall Partners, Ltd for a fixed settlement of $0.4 million, payable in 43 monthly payments. In accordance with the termination, the Company was released from all future rights and obligations under the lease. In accordance with the termination of the lease, the Company recorded an impairment charge of $0.4 million related to its remaining right-of-use asset for this lease for the three and nine months ended September 30,

~~10. Leases~~

2021. The ~~following~~Company also remeasured the lease obligation as of July 30, 2021 and the remaining obligation of $0.4 million under the termination settlement is included in the Company's liabilities at September 30, 2021. The table below summarizes the supplemental balance sheet information related to lease assets and lease liabilities as of ~~March 31,~~September 30, 2021 and December 31, 2020 (in thousands):


		Classification	March 31, 2021		December 31, 2020			Classification	September 30, 2021		December 31, 2020
Assets	Assets						Assets
Operating lease assets	Operating lease assets	Right-of-use assets	$	678	$	786	Operating lease assets	Right-of-use assets	$	128	$	786
Finance lease assets	Finance lease assets	Property and equipment, net of accumulated depreciation	101		6,781		Finance lease assets	Property and equipment, net of accumulated depreciation	90		6,781
Total lease assets	Total lease assets		$	779	$	7,567	Total lease assets		$	218	$	7,567
Liabilities	Liabilities						Liabilities
Current	Current						Current
Operating	Operating	Current portion of operating lease obligations	$	306	$	362	Operating	Current portion of operating lease obligations	$	206	$	362
Finance	Finance	Current portion of finance lease obligation	17		0		Finance	Current portion of finance lease obligation	16		—
Finance	Finance	Current portion of finance lease obligation - related parties	0		648		Finance	Current portion of finance lease obligation - related parties	—		648
Noncurrent	Noncurrent						Noncurrent
Operating	Operating	Long-term portion of operating lease obligation	436		490		Operating	Long-term portion of operating lease obligation	314		490
Finance	Finance	Finance lease obligations, net of current portion	75		0		Finance	Long-term portion of finance lease obligations	68		—
Total lease liabilities	Total lease liabilities		$	834	$	1,500	Total lease liabilities		$	604	$	1,500

The ~~following~~ table below summarizes the components of lease expense for the three and nine months ended ~~March 31,~~September 30, 2021 and 2020 (in thousands, unaudited):

Lease Cost Classification Three Months Ended
March 31,
2021 2020
Operating lease cost Cost of sales $ 43 $ 39
Operating lease cost Selling, general and administrative expenses 77 91
Finance lease cost
Amortization of leased assets Depreciation 3 293
Interest on lease liabilities Interest expense 12 161
Net lease cost $ 135 $ 584


Lease Cost	Classification	Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020
Operating lease cost	Cost of sales	$	39	$	42	$	116	$	122
Operating lease cost	Selling, general and administrative expenses	75		4		198		185
Finance lease cost
Amortization of leased assets	Depreciation	5		294		14		879
Interest on lease liabilities	Interest expense	2		104		17		400
Net lease cost		$	121	$	444	$	345	$	1,586

On January 25, 2021, the Company entered into 3 finance lease agreements for vehicles. Under the terms of the lease agreements, the ~~Company's~~Company has total monthly principal and interest payments ~~are~~of $2 thousand for a 36-month period at an annual rate of 10.7%. The leases include purchase options, which are reasonably certain to occur.

In December 2019, the Company refinanced its lease agreement with a subsidiary of The Modern Group, Ltd. (“The Modern Group”) for equipment purchases totaling approximately $3.2 million. Under the terms of the lease agreement, the Company exercised its purchase option and the remaining outstanding lease obligation of approximately $648 thousand became due on January 25, 2021. ~~The assets are now owned outright.~~ These assets are included in the Company's property, plant and equipment, net on the ~~consolidated balance sheets~~Condensed Consolidated Balance Sheets and the purchase had no effect on the net book value of these assets.

During 2018, Stabilis LLC entered into lease agreements with a subsidiary of The Modern Group to finance vehicles and machinery and equipment totaling approximately $1.5 million. During 2020, the Company exercised its purchase options under the terms of the lease agreements, which included remaining outstanding lease obligations of $413 thousand. The assets are now owned outright. These assets are included in the Company's property, plant and equipment, net on the consolidated balance sheets and the purchase had no effect on the net book value of these assets.

The ~~following~~ schedule below presents the future minimum lease payments for our operating and finance lease obligations at ~~March 31,~~September 30, 2021 (in thousands):


		Operating Leases		Finance Leases		Total			Operating Leases		Finance Leases		Total
Remainder 2021	Remainder 2021	$	295	$	19	$	314	Remainder 2021	$	85	$	6	$	91
2022	2022	211		25		236		2022	181		25		206
2023	2023	145		25		170		2023	147		25		172
2024	2024	149		43		192		2024	131		41		172
2025	2025	25		0		25		2025	21		—		21
Thereafter	Thereafter	0		0		0		Thereafter	—		—		—
Total lease payments	Total lease payments	825		112		937		Total lease payments	565		97		662
Less: Interest	Less: Interest	(83)		(20)		(103)		Less: Interest	(45)		(13)		(58)
Present value of lease liabilities	Present value of lease liabilities	$	742	$	92	$	834	Present value of lease liabilities	$	520	$	84	$	604

Lease term and discount rates for our operating and finance lease obligations are as follows:


~~Lease Term and Discount Rate~~						~~March 31,~~ September 30, 2021
Weighted-average remaining lease term (years)
Operating leases						2.7
Finance leases						2.3
Weighted-average discount rate
Operating leases						~~2.9~~
~~Finance leases~~						~~2.8~~
~~Weighted-average discount rate~~
~~Operating leases~~						~~7.3%~~7.2%
Finance leases						10.7%

The ~~following~~ table below summarizes the supplemental cash flow information related to leases for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and ~~2020:~~2020 (in thousands):


Other information		March 31, 2021		March 31, 2020
		(In thousands)					September 30, 2021		September 30, 2020
Cash paid for amounts included in the measurement of lease liabilities	Cash paid for amounts included in the measurement of lease liabilities					Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	Operating cash flows from operating leases	$	123	$	109	Operating cash flows from operating leases	$	250	$	287
Financing cash flows from finance leases	Financing cash flows from finance leases	164		768		Financing cash flows from finance leases	668		2,640
Interest paid	Interest paid	3		131		Interest paid	35		400
Noncash activities from right-of-use assets obtained in exchange for lease obligations:	Noncash activities from right-of-use assets obtained in exchange for lease obligations:					Noncash activities from right-of-use assets obtained in exchange for lease obligations:
Operating leases	Operating leases	$	0	$	0	Operating leases	$	—	$	1,163

11. Related Party Transactions

Other Purchases and Sales

During the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 2020, the Company paid Applied Cryo Technologies, Inc. (“ACT”), a company owned 51% by Crenshaw Family Holdings, LP (“Crenshaw Family Holdings”), ~~$366~~$530 thousand and ~~$33~~$109 thousand, respectively, for equipment, repairs and services. Casey Crenshaw, the Company's controlling shareholder, is the beneficial owner of 25% of Crenshaw Family Holdings and is deemed to jointly control Crenshaw Family Holdings with family members. During the three months ended September 30, 2021 and 2020, the Company paid ACT $32 thousand and $36 thousand, respectively, for equipment repairs and services. The Company had 0$30 thousand of sales to ACT during the three and nine months ended ~~March 31, 2021~~September 30, 2021. The Company had no sales to ACT during the three and nine months ended September 30, 2020. The Company had $30 thousand and $2 thousand due from ACT included in accounts receivable on the unaudited condensed consolidated balance sheets at ~~both March 31,~~September 30, 2021 and December 31, ~~2020.~~2020, respectively. As of ~~March 31,~~September 30, 2021 and December 31, 2020, the Company had ~~$353~~$15 thousand and $121 thousand, respectively, due to ACT included in accounts payable on the unaudited condensed consolidated balance sheets.

The Company purchases supplies and services from a subsidiary of The Modern Group. Casey Crenshaw is the beneficial owner of 25% of ~~the~~The Modern Group and is deemed to jointly control The Modern Group with family members. During the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 2020, the Company made purchases of supplies and services from a subsidiary of The Modern Group totaling ~~$530~~$848 thousand and ~~$33~~$213 thousand, respectively. ~~There was 0~~During the three months ended September 30, 2021 and 2020, the Company made purchases of supplies and services totaling $127 thousand and $18 thousand, respectively. The Company had $13 thousand of sales to The Modern Group during the three and nine months ended September 30, 2021 with no sales during the same period of 2020. The Company had an $11 thousand receivable due from The Modern Group ~~as of March 31, 2021 and~~at September 30, 2021. There was no receivable due from The Modern Group at December 31, 2020. As of ~~March 31,~~September 30, 2021 and December 31, 2020, the Company had ~~$902~~$548 thousand and $582 thousand, respectively, due to a subsidiary of The Modern Group included in accounts payable on the unaudited condensed consolidated balance sheets.

Chart ~~Energy & Chemicals, Inc. (“Chart~~ E~~&C”)~~&C beneficially owns ~~8.7%~~8.3% of our outstanding common stock and iswas party to a Secured Term Note Payable with the ~~Company.~~Company prior to its repayment by the Company during the three and nine months ended September 30, 2021. The Company purchases services from Chart E&C. During the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 2020, purchases from Chart E&C totaled ~~$43~~$137 thousand and ~~$10~~$22 thousand, respectively. During the three months ended September 30, 2021 and 2020, purchases from Chart E&C totaled $59 thousand and $2 thousand. As of ~~March 31,~~September 30, 2021 and December 31, 2020, the Company had ~~$19~~$58 thousand and $14 thousand, respectively, due to Chart E&C included in accounts payable on the unaudited condensed consolidated balance sheets.

Secured Promissory Note - Related Party

12. Commitments and Contingencies

Environmental Matters

The Company is subject to federal, state and local environmental laws and regulations. The Company does not anticipate any expenditures to comply with such laws and regulations that would have a material impact on the Company’s condensed consolidated financial position, results of operations or liquidity. The Company believes that its operations comply, in all material respects, with applicable federal, state and local environmental laws and regulations.

Litigation, Claims and Contingencies

The Company may become party to various legal actions that arise in the ordinary course of its business. The Company is also subject to audit by tax and other authorities for varying periods in various federal, state and local jurisdictions, and disputes may arise during the course of these audits. It is impossible to determine the ultimate liabilities that the Company may incur resulting from any of these lawsuits, claims, proceedings, audits, commitments, contingencies and related matters or the timing of these liabilities, if any. If these matters were to ultimately be resolved unfavorably, it is possible that such an outcome could have a material adverse effect upon the Company’s consolidated financial position, results of operations, or liquidity. The Company does not, however, anticipate such an outcome and it believes the ultimate resolution of these matters will not have a material adverse effect on the Company’s consolidated financial position, results of operations, or liquidity. Additionally, the Company currently expenses all legal costs as they are incurred.

In October 2018, American Electric Technologies, Inc., a predecessor in interest to the Company (“American Electric”) received notification of a potential liability of $4.3 million associated with an asset purchase agreement to sell substantially all of its U.S. business assets and operations to Myers Power Products, Inc. (“Myers”). The contractual terms of the agreement included a provision for true-up of the net working capital, estimated as of the date of closing, to actual working capital as calculated by Myers and agreed to by American Electric. Any difference in the actual (conclusive) net working capital in relation to the estimated working capital at closing results in an adjustment to the purchase price. In response, American Electric disputed Myers’ claim and Myers’ working capital calculation. On November 5, 2020, the Company filed a petition in Harris County, Texas requesting a declaratory judgment in favor of the Company. During the ~~three~~nine months ended ~~March 31,~~September 30, 2021, the parties reached an amicable resolution of their differences and all claims regarding the net working capital were mutually released and the lawsuit was dismissed with prejudice to refiling same.

1819

13. Stockholders’ Equity

Issuances of Common Stock

The Company is authorized to issue up to 37,500,000 shares of common stock, $0.001 par value per share.

During the ~~three~~nine months ended ~~March 31,~~September 30, 2021, the Company ~~did 0t issue any~~issued 500,000 shares of common ~~stock.~~stock, valued at $3.8 million, as partial consideration for the purchase of an LNG production facility in Port Allen, Louisiana. See Note 6—Property, Plant and Equipment, above, for additional information.

In addition, during the nine months ended September 30, 2021, the Company issued a net 294,642 shares of common stock upon vesting of the Restricted Stock Units under its 2019 Long Term Incentive Plan. See Note 14—Stock-Based Compensation, below, for additional information.

Issuances of Warrants

As of ~~March 31,~~September 30, 2021, the Company had outstanding Warrants to purchase 62,500 shares of our common stock as follows:

Date of Issuance

No. of Warrants

Exercise Price

Expiration Date

Nov. 13, 2017

62,500

$18.08

Nov. 13, 2022

14. Stock-Based Compensation

Amendment of the 2019 Long Term Incentive Plan

In July 2021, the Company's Board of Directors approved the Amended and Restated 2019 Long Term Incentive Plan (the “Amended and Restated Plan”), which was subsequently approved by the Company's shareholders on September 14, 2021. Under the Amended and Restated Plan, the maximum number of shares of common stock available for issuance was increased from 1,675,000 shares to 4,000,000 shares.

Awards under the Amended and Restated Plan may be granted to employees, officers and directors of the Company and affiliates, and any other person who provides services to the Company and its affiliates (including independent contractors and consultants of the Company and its subsidiaries). Awards may be granted in the form of stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards, dividend equivalents, substitute awards, other stock-based awards, cash awards and/or any combination of the foregoing. No participant may receive a grant covering more than 2,000,000 shares of our common stock in any year and a non-employee member of the Board may not be granted more than 100,000 shares in any year.

Restricted Stock Units

The Company granted 500,000 Restricted Stock Units ("RSUs") under the 2019 Plan during the nine months ended September 30, 2021 as outlined below.

On August 22, 2021, the Company entered into a separation and release agreement with James C. Reddinger (formerly the Company's chief executive officer) pursuant to which Mr. Reddinger voluntarily resigned from his employment with the Company and as a member of the Company’s Board of Directors. Under the separation and release agreement, the Company agreed that Mr. Reddinger’s 500,000 RSUs granted under the Company's 2019 Long Term Incentive Plan would fully vest as of August 22, 2021, subject to Mr. Reddinger agreeing to hold the shares through December 31, 2022, and his continued compliance with his obligations in his separation and release agreement. In accordance with the 2019 Long Term Incentive Plan, the RSUs will be settled upon the earlier of (i) Mr. Reddinger's death or (ii) the date that is six months after his separation from service.

On August 23, 2021, the Company appointed Westervelt T. “Westy” Ballard, Jr., age 49, as its president and chief executive officer. In connection with Mr. Ballard's appointment, the Company granted Mr. Ballard 500,000 RSUs, of which 250,000 RSUs vested immediately on August 23, 2021. The remaining 250,000 will vest over a two-year period in 2 equal tranches on August 23, 2022, and August 23, 2023, conditioned on Mr. Ballard remaining continuously employed through each vesting date.

Stock Options

The Company also agreed to grant Mr. Ballard 1,300,000 options to purchase the Company’s common stock, subject to Board approval with a strike price equal to $10.00 per share, which will vest (i) 442,000 options on August 23, 2022, (ii) 429,000 options on August 23, 2023, and (iii) 429,000 options on August 23, 2024, conditioned on Mr. Ballard remaining continuously employed through each vesting date. The Company anticipates entering into an award agreement with Mr. Ballard with respect to such options during the fourth quarter of 2021.

The Company includes stock compensation expense within general and administrative expenses in the unaudited interim condensed consolidated statements of operations. During the nine months ended September 30, 2021, the Company recognized $2.7 million of stock compensation expense which included $0.5 million and $1.7 million related to the immediate vesting of Mr. Reddinger's and Mr. Ballard's RSUs, respectively. During the nine months ended September 30, 2020, the Company recognized $249 thousand in stock-based compensation costs related to RSUs. The Company recognized $2.4 million and $148 thousand in stock-based compensation costs related to RSUs during the three months ended September 30, 2021 and 2020, respectively. During the nine months ended September 30, 2021, a net 294,642 share awards vested and were issued.

As of September 30, 2021, the Company had $1.7 million of unrecognized compensation costs related to 430,688 outstanding RSUs, which is expected to be recognized over a weighted average period of less than two years. All units are expected to vest.

Restricted Stock Awards

In February 2020, independent directors received 50% of their retainer fee as Restricted Stock Awards (“RSAs”). The 34,706 RSAs were issued immediately upon grant and were subject to a one year vesting period and other restrictions under the Company's 2019 Long Term Incentive Plan (the “2019 Plan”). During the ~~three~~nine months ended ~~March 31,~~September 30, 2021, the 34,706 RSAs vested.

The Company ~~did 0t grant~~granted 61,308 RSAs under the 2019 Plan to independent directors ~~during the three months ended March 31, 2021.~~in April 2020. The Company recognized $17 thousand and ~~$19~~$95 thousand in stock-based compensation costs related to RSAs for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 2020, respectively, which is included in general and administrative expenses in the unaudited condensed consolidated statements of operations.

The Company recognized $38 thousand in stock-based compensation costs related to RSAs during the three months ended September 30, 2020. The Company did not recognize stock-based compensation expense for the three months ended September 30, 2021. As of ~~March 31,~~September 30, 2021, the Company had 0no unrecognized compensation costs related to grants of ~~restricted stock awards.~~RSAs.

~~Restricted Stock Units~~

~~The Company did 0t grant Restricted Stock Units (“RSUs”) to employees under the 2019 Plan during~~15. Concentration of Credit Risk

As of September 30, 2021 and December 31, 2020, two customers comprised 42% and 47% of our net accounts receivable balance, respectively. During the three months ended ~~March 31, 2021. The Company recognized $145 thousand in stock-based compensation costs for~~September 30, 2021, revenues from two customers represented 39% of total revenues. During the three months ended ~~March~~September 30, 2020, revenues from one customer represented 26% of total revenues. During the nine months ended September 30, 2021 revenues from two customers represented 38% of our total revenues. During the nine months ended September 30, 2020, revenues from one customer represented 12% of our total revenues.

As of September 30, 2021, two vendors comprised 33% of our net accounts payable balance. As of December 31, ~~2021, which is included in general and administrative expenses in the unaudited condensed consolidated statements~~2020, one vendor comprised 15% of ~~operations. The Company did 0t recognize stock-based compensation costs related to RSUs during~~our net accounts payable balance. For the three months ended ~~March 31, 2020. The Company recognized 500 forfeitures, at a weighted average grant date fair value~~September 30, 2021 and September 30, 2020, cost of ~~$1.75 per share, as a reduction~~revenues from one vendor represented 17% and 23% of ~~expense previously recorded as general and administrative expenses in~~our total cost of revenues, respectively. During the ~~unaudited condensed consolidated statements of operations during the three~~nine months ended ~~March 31, 2021. NaN awards vested during~~September 30, 2021, cost of revenues from one vendor represented 13% of our total cost of revenues. During the ~~three~~nine months ended ~~March 31, 2021.~~

AsSeptember 30, 2020, cost of ~~March 31, 2021, the Company had $820 thousand~~revenues from two vendors represented 23% of ~~unrecognized compensation costs related to 778,000 outstanding RSUs, which is expected to be recognized over a weighted average period~~our total cost of ~~two years. All units are expected to vest.~~

~~15. Income Taxes~~

The Company’s effective tax rate for the three months ended March 31, 2021 and 2020 was 23.6% and 4.1%, respectively. The 2021 rate reflects state and foreign income taxes and the Company’s deferred federal income tax expense generated from an expected net operating income, offset by a change in the valuation allowance on net deferred tax assets.revenues.

1921

~~16. Subsequent Events~~

On April 8, 2021, the Company entered into a Loan Agreement (the “Loan Agreement”) with AmeriState Bank (“Lender”), as lender, pursuant to the United States Department of Agriculture, Business & Industry Loan Program, to provide for an advancing loan facility in the aggregate principal amount of up to $10.0 million (the “Loan”), of which $2.0 million was drawn and outstanding as of the filing date of this report. The Loan, which is in the form of a term loan facility, matures on April 8, 2031 and bears interest at 5.75% per annum through April 8, 2026, and the U.S. prime lending rate plus 2.5% per annum thereafter. The Loan provides that proceeds from borrowings may be used for working capital purposes at the Company’s liquefaction plant in George West, Texas and related fees and costs associated with the Loan.

Upon an Event of Default (as defined in the Loan Agreement), Lender may (i) terminate its commitment, (ii) declare the outstanding principal amount of the Advancing Notes (as defined in the Loan Agreement) under the Loan due and payable, or (iii) exercise all rights and remedies available to Lender under the Loan Agreement.

On April 8, 2021, Mile High LNG LLC, Stabilis GDS, Inc., Stabilis LNG Eagle Ford LLC and Stabilis Energy Services, LLC, each a wholly owned subsidiary of the Company (collectively, “Debtor”), entered into a Security Agreement and Assignment (the “Security Agreement”) in favor of Lender. The Security Agreement grants to Lender a first priority security interest in the collateral identified therein, which includes specific equipment collateral held by Debtor.

~~On April 29, 2021, the Company announced it has commenced trading on The Nasdaq Market LLC under the Company's existing ticker symbol, “SLNG”.~~

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion should be read in conjunction with the ~~condensed consolidated financial statements~~Condensed Consolidated Financial Statements and notes thereto included elsewhere in this Form 10-Q and the consolidated financial statements included in the 2020 Annual Report on Form 10-K filed on March 16, 2021. Historical results and percentage relationships set forth in the condensed consolidated statements of operations and cash flows, including trends that might appear, are not necessarily indicative of future operations or cash flows.

Overview

Stabilis is an energy transition company that provides turnkey clean energy production, storage, transportation and fueling solutions including ~~using~~providing natural gas and hydrogen to multiple end markets in North America. Our diverse customer base utilizes LNG and hydrogen solutions as a fuel source in a variety of applications in the aerospace, industrial, utilities and pipelines, mining, energy, remote clean power and high horsepower transportation markets. Our customers use LNG as a partner fuel for renewable energy and as an alternative to traditional fuel sources, such as diesel, fuel oil, and propane, to reduce harmful environmental emissions and to lower fuel costs. Our customers also use LNG as a “virtual pipeline” solution when natural gas pipelines are not available or are curtailed.

Stabilis seeks to provide our customers with safe, reliable and cost effective LNG and hydrogen fueling solutions and power delivery equipment and services. We provide multiple products and services to our customers, including:

LNG Production, LNG and Hydrogen Sales—Stabilis builds and operates cryogenic natural gas processing facilities, called “liquefiers”, which convert natural gas into LNG through a multiple stage cooling process. We currently own and operate a liquefier that can produce up to 100,000 LNG gallons (379 cubic meters) per day. In June 2021 the Company purchased another LNG production facility that can produce 30,000 LNG gallons (114 cubic meters) per day. We also purchase LNG from third-party production sources which allows us to support customers in markets where we do not own liquefiers.

Transportation and Logistics Services—Stabilis offers our customers a “virtual natural gas pipeline” by providing them with turnkey LNG transportation and logistics services in North America. We deliver LNG to our customers’ work sites from both our own production facility and our network of approximately 25 third-party production sources located throughout North America. We own a fleet of LNG fueled trucks and cryogenic trailers to transport and deliver LNG. We also outsource similar equipment and transportation services for both LNG and hydrogen from qualified third-party providers as required to support our customer base.

Cryogenic Equipment Rental—Stabilis owns and operates a rental fleet of approximately 150 mobile LNG storage and vaporization assets, including: transportation trailers, electric and gas-fired vaporizers, ambient vaporizers, storage tanks, and mobile vehicle fuelers. We also own several stationary storage and regasification assets. We believe this is one of the largest fleets of small-scale LNG equipment in North America. Our fleet consists primarily of trailer-mounted mobile assets, making delivery to and between customer locations more efficient. We deploy these assets on job sites to provide our customers with the equipment required to transport, store, and consume LNG in their fueling operations.

Engineering and Field Support Services—Stabilis has experience in the safe, cost effective, and reliable use of LNG and hydrogen in multiple customer applications. We have also developed many processes and procedures that we believe improve our customers’ use of LNG and hydrogen in their operations. Our engineers help our customers design and integrate LNG and hydrogen into their fueling operations and our field service technicians help our customers mobilize, commission and reliably operate on the job site.

Stabilis generates revenue by selling and delivering LNG and hydrogen to our customers. We also generate revenue by renting cryogenic equipment and providing engineering and field support services. We sell our products and services separately or as a bundle depending on the customer’s needs. LNG pricing depends on market pricing for natural gas and competing fuel sources (such as diesel, fuel oil, and propane among others), as well as the customer’s purchased volume, contract duration and credit profile.

Stabilis’ customers use LNG and hydrogen in their operations for multiple reasons, including lower and more stable fuel costs, reduced environmental emissions, and improved operating performance. We believe that LNG and hydrogen consumption will continue to increase in the future.

2122

Power Delivery—~~As a result of the business combination with American Electric,~~ Stabilis provides power delivery equipment and services for the oil and gas, marine, power generation and broad industrial market segments in Brazil, and builds electrical systems for sale in China through our 40% interest in BOMAY.

Recent Developments

Appointment of Westy Ballard as CEO and resignation of James Reddinger—On August 23, 2021, the Company appointed Westervelt T. “Westy” Ballard, Jr., as its president and chief executive officer. The ~~market in~~Company entered into a three-year employment agreement with Mr. Ballard effective as of August 23, 2021, subject to successive one-year extensions. The Company's Board of Directors also appointed Mr. Ballard as a director of the Company's Board of Directors, following which ~~we operate has been impacted~~he was subsequently elected as a director by the ~~recent downturn~~Company's shareholders at the Company's annual stockholder meeting. In connection with Mr. Ballard's appointment, the Company granted Mr. Ballard RSUs, and agreed to grant Mr. Ballard options to purchase the Company’s common stock as further discussed in Note 14 of the ~~energy market as well as~~Notes to Condensed Consolidated Financial Statements. On August 22, 2021, the ~~outbreak of COVID-19 and its progression~~Company entered into a ~~pandemic. Various containment measures, including large-scale travel bans, border closures, quarantines, shelter-in-place orders~~separation and ~~business~~release agreement with James C. Reddinger, the Company's prior president and ~~government shutdowns, have~~chief executive officer. Under the separation and release agreement, the Company agreed to pay Mr. Reddinger’s base salary through December 31, 2022. Additionally, the Company agreed that Mr. Reddinger’s RSUs granted under the 2019 Long Term Incentive Plan as of August 22, 2021, would fully vest subject to Mr. Reddinger's agreement to hold the shares through December 31, 2022, and his continued compliance with his obligations in his separation and release agreement. In accordance with the 2019 Long Term Incentive Plan, the RSUs will be settled upon the earlier of (i) Mr. Reddinger's death or (ii) the date that is six months after his separation from service.

Acquisition of additional LNG facilities—On June 1, 2021 the Company acquired an LNG production facility in Port Allen, Louisiana. The plant is capable of producing 30,000 gpd of LNG. The facility is strategically located and will support some of Stabilis' largest customers. The facility increases the Company's total production capacity by 30%.

Post-COVID 19 demand and increasing prices—The COVID-19 pandemic, in general, resulted in a period of depressed demand and uncertainty across many markets including our business, customers and suppliers. Roll-out, availability and access to vaccines has resulted in relaxing many of the ~~slowing~~COVID 19 restrictions creating a post-COVID-19 period of recovery in economic growth and demand in recent months. However, increases in economic growth and demand have been limited by supplies of natural gas, labor and transportation resources within our markets resulting a ~~reduced~~period of increasing costs. Further, natural gas inventories and production, which decreased during the COVID 19 pandemic, have been slow to respond. During the third quarter of 2021, we experienced higher than normal natural gas prices. Natural gas futures continue to trade at multi-year highs (in excess of $6.00 at certain times). We expect high natural gas price trends to continue in the near-term as winter approaches further pushing up demand ~~for oil~~in the physical market; however, no assurances can be made about price trends.

Limited labor resources have also resulted in a shortage of drivers to transport our product to our customers and increasing costs. While we pass a significant portion of the cost of natural gas and ~~the disruption of global manufacturing supply chains.~~ transportation on to our customers, we are not able to pass through all costs which has resulted in margin pressure and decreasing margins.

As ~~the COVID-19~~post-COVID-19 pandemic demand continues to evolve, ~~governments, corporations and other authorities may continue to implement restrictions or policies that adversely impact consumer spending,~~ the economy, commodity prices, demand for our products and our ~~business,~~cost of operations and share ~~price.~~price may all be impacted. The ultimate extent and ~~long-term~~ effects of ~~the pandemic~~these impacts are difficult to ~~determine, but a prolonged period~~estimate; however, continued periods of ~~market fluctuations~~increasing costs could adversely impact our future results and ~~weak general economic conditions may have a material adverse effect on the Company’s financial results.~~

operating cash flows.

2223

Results of Operations

~~Three Months Ended March 31, 2021 Compared to Three Months Ended March 31, 2020~~

The following table reflects line items from the accompanying Consolidated Statements of Operations for the three months ended March 31, 2021 (the “Current Quarter”) as compared to the three months ended March 31, 2020 (the “Prior Year Quarter”):

~~Stabilis Solutions, Inc.~~

~~Condensed Consolidated Statements of Operations~~

~~(In thousands, except percentages)~~

Three Months Ended March 31, Change % Change
2021 2020
(unaudited)
Revenue:
LNG product $ 11,695 $ 9,131 $ 2,564 28.1 %
Rental, service and other 4,425 3,397 1,028 30.3
Power delivery 1,544 1,310 234 17.9
Total revenues 17,664 13,838 3,826 27.6
Operating expenses:
Costs of LNG product 8,812 6,097 2,715 44.5
Costs of rental, service and other 2,241 1,671 570 34.1
Costs of power delivery 1,160 1,247 (87) (7.0)
Selling, general and administrative 3,225 3,186 39 1.2
Depreciation 2,225 2,270 (45) (2.0)
Total operating expenses 17,663 14,471 3,192 22.1
Income (loss) from operations before equity income 1 (633) 634 (100.2)
Net equity income (loss) from foreign joint ventures' operations:
Income (loss) from investments in foreign joint ventures 421 (114) 535 (469.3)
Foreign joint venture's operations related expenses (67) (60) (7) 11.7
Net equity income (loss) from foreign joint ventures' operations 354 (174) 528 (303.4)
Income (loss) from operations 355 (807) 1,162 (144.0)
Other income (expense):
Interest expense, net (17) (11) (6) 54.5
Interest expense, net - related parties (173) (240) 67 (27.9)
Other income 90 38 52 136.8
Gain from disposal of assets — 11 (11) (100.0)
Total other income (expense) (100) (202) 102 (50.5)
Income (loss) before income tax expense 255 (1,009) 1,264 (125.3)
Income tax expense 80 41 39 95.1
Net income (loss) $ 175 $ (1,050) $ 1,225 (116.7) %

~~Segment Results~~

The Company’s revenues are derived from two operating ~~segments:~~segments. The Company's LNG ~~and Power Delivery. The Company evaluates the performance of its segments based primarily on segment operating income.~~

~~LNG~~ Segment

~~Our LNG segment~~ supplies LNG to multiple end markets in North America and provides turnkey fuel solutions to help users of propane, diesel and other crude-based fuel products convert to LNG. The Company's Power Delivery Segment provides power delivery equipment and services in Brazil and through our BOMAY joint venture in China. The Company evaluates the performance of its segments based primarily on segment operating income. See also Note 4 to our Notes to Condensed Consolidated Financial Statements for further discussion of our segments.

Three Months Ended
March 31, Change % Change
2021 2020
(unaudited)
(In thousands, excluding percentages)
Revenue:
LNG product $ 11,695 $ 9,131 $ 2,564 28.1 %
Rental, service and other 4,425 3,397 1,028 30.3
Total revenues 16,120 12,528 3,592 28.7
Operating expenses:
Costs of LNG product 8,812 6,097 2,715 44.5
Costs of rental, service and other 2,241 1,671 570 34.1
Selling, general and administrative 2,611 2,724 (113) (4.1)
Depreciation 2,188 2,235 (47) (2.1)
Total operating expenses 15,852 12,727 3,125 24.6
Income (loss) from operations before equity income $ 268 $ (199) $ 467 234.7 %
Three Months Ended September 30, 2021 Compared to Three Months Ended September 30, 2020

The comparative tables below reflect our consolidated operating results as well as the operating results of our two operating segments for the three months ended September 30, 2021 (the “Current Quarter”) as compared to the three months ended September 30, 2020 (the “Prior Year Quarter”) (unaudited, amounts in thousands, except for percentages).


Consolidated	Three Months Ended September 30,				$ Change		% Change
	2021		2020
Revenue:
LNG product	$	14,420	$	6,594	$	7,826	118.7	%
Rental, service and other	3,359		1,073		2,286		213.0
Power delivery	1,925		1,352		573		42.4
Total revenues	19,704		9,019		10,685		118.5
Operating expenses:

Costs of LNG product	11,988		5,044		6,944		137.7
Costs of rental, service and other	1,917		808		1,109		137.3
Costs of power delivery	1,542		996		546		54.8
Selling, general and administrative	6,155		2,338		3,817		163.3
Depreciation	2,324		2,266		58		2.6
Impairment of right-of-use lease asset	376		—		376		n/a
Total operating expenses	24,302		11,452		12,850		112.2
Loss from operations before equity income	(4,598)		(2,433)		(2,165)		89.0



Net equity income from foreign joint ventures' operations	246		573		(327)		(57.1)
Loss from operations	(4,352)		(1,860)		(2,492)		134.0
Other income (expense):

Interest expense, net	(130)		(2)		(128)		98.5
Interest expense, net - related parties	(120)		(199)		79		(39.7)
Other income (expense)	70		(31)		101		(325.8)
Total other income (expense)	(180)		(232)		52		(22.4)
Loss before income tax expense	(4,532)		(2,092)		(2,440)		116.6
Income tax expense	93		41		52		126.8
Net loss	$	(4,625)	$	(2,133)	$	(2,492)	116.8	%

~~Power Delivery~~ Segment Results

~~Our Power Delivery segment provides power delivery equipment and services to the global energy industry through our subsidiary in Brazil and our joint venture in China.~~


LNG Segment	Three Months Ended September 30,				$ Change		% Change
	2021		2020
Revenue:
LNG product	$	14,420	$	6,594	$	7,826	118.7	%
Rental, service and other	3,359		1,073		2,286		213.0
Total revenues	17,779		7,667		10,112		131.9
Operating expenses:

Costs of LNG product	11,988		5,044		6,944		137.7
Costs of rental, service and other	1,917		808		1,109		137.3
Selling, general and administrative	5,655		1,757		3,898		221.9

Depreciation	2,284		2,237		47		2.1
Impairment of right-of-use lease asset	376		—		376		n/a
Total operating expenses	22,220		9,846		12,374		125.7
Loss from operations	$	(4,441)	$	(2,179)	$	(2,262)	103.8	%


		Three Months Ended March 31,				Change		% Change
		2021		2020
		(unaudited)
Power Delivery Segment										Power Delivery Segment	Three Months Ended September 30,				$ Change		% Change
		(In thousands, excluding percentages)									2021		2020
Revenue:	Revenue:									Revenue:

Power delivery	Power delivery	$	1,544	$	1,310	$	234	17.9	%	Power delivery	$	1,925	$	1,352	$	573	42.4	%

Operating Expenses:
Operating expenses:										Operating expenses:

Costs of power delivery	Costs of power delivery	1,160		1,247		(87)		(7.0)		Costs of power delivery	1,542		996		546		54.8
Selling, general and administrative	Selling, general and administrative	614		462		152		32.9		Selling, general and administrative	500		581		(81)		(13.9)
Depreciation	Depreciation	37		35		2		5.7		Depreciation	40		29		11		37.9
Total operating expenses	Total operating expenses	1,811		1,744		67		3.8		Total operating expenses	2,082		1,606		476		29.6
Loss from operations before equity income	Loss from operations before equity income	(267)		(434)		167		(38.5)		Loss from operations before equity income	(157)		(254)		97		(38.2)
Net equity income (loss) from foreign joint ventures' operations:
Income (loss) from equity investments in foreign joint ventures		421		(114)		535		(469.3)
Foreign joint venture's operations related expenses		(67)		(60)		(7)		11.7
Net equity income (loss) from foreign joint ventures' operations		354		(174)		528		(303.4)
Income (loss) from operations		$	87	$	(608)	$	695	(114.3)	%

Net equity income from foreign joint ventures' operations										Net equity income from foreign joint ventures' operations	246		573		(327)		(57.1)
Income from operations										Income from operations	$	89	$	319	$	(230)	(72.1)	%

Revenue

LNG ~~Product Revenue.~~product revenue. During the Current Quarter, LNG ~~Product revenues~~product revenue increased ~~$2.6~~$7.8 million or ~~28%~~119% versus the Prior Year Quarter primarily related to:

•An increase of 6.8 million LNG gallons delivered during the Current Quarter compared to ~~overall increased activity levels including~~the Prior Year Quarter particularly with power generation ~~customers, continued expansion of~~customers; and

•Increased natural gas prices compared to the ~~Company’s Mexico operations, and increased activity with aerospace customers.~~Prior Year Quarter.

Rental, ~~Service,~~service, and ~~Other Revenue.~~other revenue. Rental, service and other ~~revenues~~revenue increased by ~~$1.0~~$2.3 million or ~~30%~~213% in the Current Quarter ~~compared~~relative to the Prior Year Quarter ~~primarily related~~due to ~~increased activity~~the economic recovery and a higher concentration of current projects with additional equipment and labor revenues from projects in Mexico and power generation ~~and seasonal winter peaking~~ customers.

Power ~~Delivery Revenue.~~delivery. Power ~~Delivery~~delivery revenue increased by ~~$0.2~~$0.6 million or ~~18%~~42% in the Current Quarter due to new contracts.

Operating Expenses

Costs of LNG product. Cost of product in the Current Quarter increased $6.9 million or 138%. As a percentage of LNG product revenue, these costs increase from 76% from the prior year quarter to 83% in the Current Quarter. The increased costs were attributable to:

~~Operating Expenses~~•Inflationary pressures including increased costs from higher natural gas prices, increased transportation costs and increased liquefaction costs; and

~~Cost~~•Additional LNG gallons delivered.

Costs of ~~LNG Product.~~rental, service, and other. ~~Cost of LNG Product in the Current Quarter~~Costs increased ~~$2.7~~$1.1 million or 45%. The increased costs were attributable to additional gallons delivered, increased liquefaction costs, a higher gas index and higher transportation costs. As a percentage of LNG Product Revenue, these costs increased from 67% in the Prior Year Quarter to 75% in the Current Quarter.

~~Cost of Rental, Service, and Other.~~ ~~This cost increased $0.6 million or 34%~~137% in the Current Quarter primarily related to increased labor and equipment rentals, maintenance and travel costs to support the increase in rental, service and other revenues.

Costs of ~~Power Delivery.~~power delivery. Costs ~~decreased $0.1~~increased $0.5 million or 7%55% in the Current ~~Quarter.~~Quarter due to higher activity levels associated with new contracts.

Selling, general and ~~administrative~~administrative.. Selling, general and administrative expense inincreased $3.8 million or 163% during the Current Quarter ~~was consistent~~due to higher compensation costs primarily related to the executive transition and vesting of incentives. During the Current Quarter, we recorded $2.2 million related to the immediate vesting of restricted stock units associated with ~~the Prior Year Quarter.~~our executive transition and an additional $0.8 million of severance and legal expenses. The remaining increase is primarily related to increased headcount for sales and business development personnel, commissions and travel.

~~Depreciation~~Depreciation.. Depreciation expense ~~decreased 2%~~increased 3% during the Current Quarter as compared to the Prior Year ~~Quarter.~~Quarter due to the acquisition of our Port Allen facility on June 1, 2021, partially offset by decreases from other assets reaching the end of their depreciable lives.

Impairment of right-of-use lease asset. During the Current Quarter, we recorded an impairment of $0.4 million related to the settlement and release of our Houston office lease. See Note 10 of the Notes to Condensed Consolidated Financial Statements for additional discussion of our lease settlement.

Net Equity Income From Foreign Joint Ventures' Operations

Income from ~~Investments~~investments in ~~Foreign Joint Ventures.~~foreign joint ventures. Income from investments in foreign joint ventures ~~increased $0.5~~decreased $0.3 million induring the Current Quarter ~~as a result of shutdowns and project delays caused by the COVID-19 pandemic~~due to stronger than normal sales in ~~the Prior Year Quarter.~~

~~Operating expenses related to foreign joint ventures.~~ ~~Operating expenses related to BOMAY in the Current Quarter were consistent with~~ the Prior Year Quarter.

Other Income (Expense)

Interest expense, net. Interest expense inincreased $0.1 million during the Current Quarter ~~was consistent with~~as compared to the Prior Year ~~Quarter.~~Quarter primarily related to interest on the Company's advancing loan with AmeriState Bank.

Interest expense, net - related parties. Related party interest expense decreased $0.1 million during the Current Quarter as compared to the Prior Year Quarter primarily related to repayment of the short-term note payable - related party of $1.1 million as further discussed in Note 9 of the Notes to condensed consolidated financial Statements and the maturity of capital leases in 2020 and January of 2021, partially offset by a scheduled increase in interest rates.

Other income (expense). Other income was $0.1 million during the Current Quarter compared to other expense of $31 thousand in the Prior Year Quarter.

Income tax expense. The Company incurred state and foreign income tax expense of $0.1 million during the Current Quarter compared to $41 thousand during the Prior Year Quarter. No U.S. federal income tax benefit was recorded for the Current Quarter or Prior Quarter as any net U.S. deferred tax assets generated from operating losses were offset by a change in the Company's valuation allowance on net deferred tax assets.

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

The following comparative tables below reflect our consolidated operating results as well as the operating results of our two operating segments for the nine months ended September 30, 2021 (the “Current Year”) as compared to the nine months ended September 30, 2020 (the “Prior Year”) (unaudited, amounts in thousands, except for percentages):


Consolidated	Nine Months Ended September 30,				$ Change		% Change
	2021		2020

Revenue:
LNG product	$	37,927	$	18,609	$	19,318	103.8	%
Rental, service and other	10,364		5,613		4,751		84.6
Power delivery	5,129		3,638		1,491		41.0
Total revenues	53,420		27,860		25,560		91.7
Operating expenses:

Costs of LNG product	30,154		13,692		16,462		120.2
Costs of rental, service and other	5,649		3,381		2,268		67.1
Costs of power delivery	3,994		3,131		863		27.6
Selling, general and administrative	13,195		7,892		5,303		67.2
Gain from disposal of fixed assets	(24)		(11)		(13)		118.2
Depreciation	6,767		6,802		(35)		(0.5)
Impairment of right-of-use lease asset	376		—		376		n/a
Total operating expenses	60,111		34,887		25,224		72.3
Loss from operations before equity income	(6,691)		(7,027)		336		(4.8)



Net equity income from foreign joint ventures' operations	1,075		1,347		(272)		(20.2)
Loss from operations	(5,616)		(5,680)		64		(1.1)
Other income (expense):

Interest expense, net	(224)		(28)		(196)		700.0
Interest expense, net - related parties	(441)		(681)		240		(35.2)
Other income	1,183		(6)		1,189		n/a

Total other income (expense)	518		(715)		1,233		(172.4)
Loss before income tax expense	(5,098)		(6,395)		1,297		(20.3)
Income tax expense	356		251		105		41.8
Net loss	$	(5,454)	$	(6,646)	$	1,192	(17.9)	%

Segment Results


LNG Segment	Nine Months Ended September 30,				$ Change		% Change
	2021		2020
Revenue:
LNG product	$	37,927	$	18,609	$	19,318	103.8	%
Rental, service and other	10,364		5,613		4,751		84.6
Total revenues	48,291		24,222		24,069		99.4
Operating expenses:

Costs of LNG product	30,154		13,692		16,462		120.2
Costs of rental, service and other	5,649		3,381		2,268		67.1
Selling, general and administrative	11,496		6,352		5,144		81.0
Gain from disposal of fixed assets	(24)		(11)		(13)		118.2
Depreciation	6,653		6,706		(53)		(0.8)
Impairment of right-of-use lease asset	376		—		376		n/a
Total operating expenses	54,304		30,120		24,184		80.3
Loss from operations before equity income	$	(6,013)	$	(5,898)	$	(115)	(1.9)	%


Power Delivery Segment	Nine Months Ended September 30,				$ Change		% Change
	2021		2020
Revenue:

Power delivery	$	5,129	$	3,638	$	1,491	41.0	%

Operating Expenses:


Costs of power delivery	3,994		3,131		863		27.6
Selling, general and administrative	1,699		1,540		159		10.3
Depreciation	114		96		18		18.8
Total operating expenses	5,807		4,767		1,040		21.8
Loss from operations before equity income	(678)		(1,129)		451		(39.9)



Net equity income from foreign joint ventures' operations	1,075		1,347		(272)		(20.2)
Income (loss) from operations	$	397	$	218	$	179	82.1	%

Revenue

LNG product revenue. During the Current, Year LNG product revenues increased $19.3 million or 104% versus the Prior Year primarily related to:

•An increase of 20.9 million LNG gallons delivered compared to the Prior Year particularly with power generation customers; and

•Increased natural gas prices compared to the Prior Year.

Rental, service, and other revenue. Rental, service and other revenues increased by $4.8 million or 85% in the Current Year compared to Prior Year primarily related to the economic recovery and a higher concentration of current projects with additional equipment and labor revenues from projects in Mexico and power generation customers.

Power delivery revenue. Power delivery revenue increased by $1.5 million or 41% in the Current Year due to new contracts.

Operating Expenses

Cost of LNG product. Cost of LNG product in the Current Year increased $16.5 million or 120%. As a percentage of LNG product revenue, these costs increased from 74% in the Prior Year to 80% in the Current Year. The increased costs were attributable to:

•Inflationary pressure including increased costs from higher natural gas prices, increased transportation costs and increased liquefaction costs; and

•Additional LNG gallons delivered.

Cost of rental, service, and other. This cost increased $2.3 million or 67% in the Current Year primarily related to increased labor and equipment rentals to support the increase in rental, service and other revenues.

Costs of power delivery. Costs increased $0.9 million or 28% in the Current Year due to costs associated with new contracts.

Selling, general and administrative. Selling, general and administrative expense in the Current Year increased by $5.3 million or 67% from the Prior Year primarily due to the executive transition and vesting of incentives occurring in the Current Year. During the Current Year, we recorded $2.2 million related to the immediate vesting of restricted stock units associated with our executive transition and an additional $0.8 million of severance and legal expenses. The remaining increase is primarily related to higher compensation costs related to increased headcount for sales and business development personnel, commissions and travel.

Depreciation. Depreciation expense essentially remained the same, slightly decreaseing by 1% during the Current Year as compared to the Prior Year due to assets reaching the end of their depreciable lives, offset by additional depreciation expense on our Port Allen facility which was acquired on June 1, 2021.

Impairment of right-of-use lease asset. During the Current Year, we recorded an impairment of $0.4 million related to the settlement and release of our Houston office lease. See Note 10 of our Notes to Condensed Consolidated Financial Statements for additional discussion of our lease settlement.

Net Equity Income From Foreign Joint Ventures' Operations

Income from investments in foreign joint ventures. Income from investments in foreign joint ventures decreased $0.3 million from the Prior Year due to stronger sales in the Prior Year.

Other Income (Expense)

Interest expense, net. Interest expense in the Current Year increased $0.2 million primarily due to interest associated with the Company's advancing loan with AmeriState Bank.

Interest expense, net - related parties. Related party interest expense decreased $0.2 million during the Current Year primarily related to repayment of the short-term note payable - related party of $1.1 million as further discussed in Note 9 of the Notes to Condensed Consolidated Financial Statements and the maturity of capital leases in 2020 and January of 2021, partially offset by a scheduled increase in interest rates in the Current Year.

Other income (expense). Other income was ~~$90 thousand~~$1.2 million in the Current ~~Quarter~~Year compared to ~~income~~expense of ~~$38~~$6 thousand in the Prior Year. Current Year ~~Quarter~~income related to the Paycheck Protection Program loan forgiveness and the release of escrow funds from the Myers transaction ~~settlement in the Current Quarter.~~settlement.

Gain on the disposal of fixed assets. The gain from disposal of rolling stock was $11 thousand in the Prior Year ~~Quarter. No assets were disposed of~~compared to $24 thousand in the Current ~~Quarter.~~Year.

Income tax expense. The Company incurred foreign tax expense of ~~$80 thousand~~$0.4 million during the Current ~~Quarter~~Year compared to ~~$41 thousand~~$0.3 million during the Prior Year. No U.S. federal income tax benefit was recorded for the Current Year ~~Quarter.~~or Prior Year as any net U.S. deferred tax assets generated from operating losses were offset by a change in the Company's valuation allowance on net deferred tax assets.

Liquidity and Capital Resources

Overview

As of March 31, 2021, we had $3.1 million in cash and cash equivalents on hand and $7.1 million in outstanding debt and finance lease obligations (of which $4.3 million is due in the next twelve months).

We have historically funded the business primarily through cash flows from operations, short-term notes payable, debt from finance companies and related parties, and capital contributions. We have used a portion of our cash flows to invest in fixed assets to support growth. We have also used cash to pay interest and principal amounts outstanding under our borrowings.

The Company is subject to substantial business risks and uncertainties inherent in the LNG industry. There is no assurance that the Company will be able to generate sufficient cash flows in the future to sustain itself or to support future growth.

The Company has recently seen an increase in activity and additional revenue sales opportunities, including in Mexico. Accordingly, management believes the business will generate sufficient cash flows from its operations to fund the business for the next 12 months.

~~Cash Flows~~

~~Cash flows provided by (used in) our operating, investing and financing activities are summarized below (in thousands):~~

Three Months Ended March 31,
2021 2020
(unaudited)
Net cash provided by (used in):
Operating activities $ 2,563 $ 349
Investing activities (298) (101)
Financing activities (1,079) (1,005)
Effect of exchange rate changes on cash 62 (60)
Net increase (decrease) in cash and cash equivalents 1,248 (817)
Cash and cash equivalents, beginning of period 1,814 3,979
Cash and cash equivalents, end of period $ 3,062 $ 3,162

~~Operating Activities~~

Net cash provided by operating activities totaled $2.6 million for the three months ended March 31, 2021 compared to $0.3 million for the same period 2020. The increase in net cash provided by operating activities of $2.3 million as compared to the Prior Year was primarily attributable to net income in the Current Quarter compared to a net loss in the Prior Year Quarter and higher levels of accrued liabilities and accounts payable in the Current Quarter.

~~Investing Activities~~

Net cash used in investing activities totaled $0.3 million and $0.1 million for the three months ended March 31, 2021 and 2020, respectively. The increase in net cash used was driven by higher equipment purchases during the Current Quarter.

~~Financing Activities~~

Net cash used in financing activities totaled $1.1 million and $1.0 million for the three months ended March 31, 2021 and 2020, respectively. The change compared to Prior Year Quarter was primarily attributable to $0.1 million of additional payments on short-term notes payable and long-term borrowings from related parties in the Current Quarter.

~~Sources of Liquidity and Capital Resources~~

~~During the Current Quarter our principal sources of liquidity was cash provided by our operations.~~ Historically, our principal sources of liquidity have consisted of cash on hand, cash provided by our operations, and distributions from our BOMAY joint venture. ~~In addition,~~Additionally, the Company obtained equipment financing from MG Finance, a related ~~party,~~party. During the Current Year, our principal sources of liquidity were cash provided by our operations and ~~received~~an advancing loan facility with AmeriState Bank in the ~~Payroll Protection Loan~~aggregate principal amount of ~~$1.1~~up to $10.0 million. We have used a portion of our cash flows generated from operations to invest in fixed assets to support growth as well as to pay interest and principal amounts outstanding under our borrowings and increased working capital needs generated from organic growth.

As of September 30, 2021, we had $2.9 million in cash and cash equivalents on hand and $11.7 million in outstanding debt (net of debt issuance costs) and finance lease obligations (of which $4.0 million is due in the next twelve months). Future availability under the advancing loan facility at September 30, 2021, was $3.0 million.

The Company has experienced a recent increase in activity and additional revenue opportunities. Accordingly, management believes the business will generate sufficient cash flows from its operations along with availability under our advancing loan facility that is ~~evaluating~~sufficient to fund the business for the next 12 months. As we continue to grow, the Company continues to evaluate additional financing alternatives, however, there is no guarantee that additional financing will be available or available at terms that would be beneficial to shareholders.

Cash Flows

Cash flows provided by (used in) our operating, investing and financing activities are summarized below (unaudited, in thousands):


	Nine Months Ended September 30,
	2021		2020

Net cash provided by (used in):
Operating activities	$	5,478	$	2,467
Investing activities	(6,690)		(315)
Financing activities	2,451		(2,564)
Effect of exchange rate changes on cash	(115)		(157)
Net increase (decrease) in cash and cash equivalents	1,124		(569)

Operating Activities

Net cash provided by operating activities totaled $5.5 million for the nine months ended September 30, 2021 compared to $2.5 million for the same period 2020. The increase in net cash provided by operating activities of $3.1 million as compared to the Prior Year was primarily attributable to increased revenues and changes in working capital, partially offset by a reduced distribution from our BOMAY joint venture.

Investing Activities

Net cash used in investing activities totaled $6.7 million and $0.3 million for the nine months ended September 30, 2021 and 2020, respectively. The increase in net cash used in the Current Year was primarily due to the acquisition of the LNG plant in Port Allen, Louisiana and purchases of vaporizers and other LNG equipment.

Financing Activities

Net cash provided by financing activities totaled $2.5 million for the nine months ended September 30, 2021, compared to net cash used in financing activities totaling $2.6 million for the Prior Year. The change compared to Prior Year was primarily attributable to proceeds from the AmeriState Bank loan facility.

Future Cash Requirements

Uses of Liquidity and Capital Resources

We require cash to fund our operating expenses and working capital requirements, including costs associated with fuel sales, capital expenditures, debt repayments and repurchases, equipment purchases, maintenance of LNG production facilities, mergers and acquisitions (if any), pursuing market expansion, supporting sales and marketing activities, support of legislative and regulatory initiatives, and other general corporate purposes. While we believe we have sufficient liquidity and capital resources to fund our operations and repay our debt, we may elect to pursue additional financing activities such as refinancing existing debt, or debt or equity offerings to provide flexibility with our cash management. Certain of these alternatives may require the consent of current lenders or stockholders, and there is no assurance that we will be able to execute any of these alternatives on acceptable terms or at all.

Debt Level and Debt Compliance

We had total indebtedness of ~~$7.0~~$12.1 million in principal as of ~~March 31,~~September 30, 2021 with the expected maturities as follows (in thousands).


		March 31, 2021			September 30, 2021
Remainder 2021	Remainder 2021	$	3,563	Remainder 2021	$	347
2022	2022	3,359		2022	4,575
2023	2023	91		2023	117
2024	2024	—		2024	680
2025	2025	—		2025	1,000

Thereafter	Thereafter	—		Thereafter	5,331
					$	12,050
Debt issuance costs				Debt issuance costs	(400)
Total long-term debt, including current maturities	Total long-term debt, including current maturities	$	7,013	Total long-term debt, including current maturities	$	11,650

We expect our total interest payment obligations relating to our indebtedness to be approximately $0.6 million for the full year ending December 31, 2021. Certain of the agreements governing our outstanding debt have certain covenants with which we must comply. As of ~~March 31,~~September 30, 2021, we were in compliance with all of these covenants.

Off-Balance Sheet Arrangements

As of ~~March 31,~~September 30, 2021, we had no transactions that met the definition of off-balance sheet arrangements that may have a current or future material effect on our consolidated financial position or operating results.

NEW ACCOUNTING STANDARDS

See Note 2—Recent Accounting Pronouncements to the Notes to Condensed Consolidated Financial Statements included elsewhere in this report for information on new accounting standards.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The discussion and analysis of our financial condition and results of operations are based on our ~~condensed consolidated financial statements,~~Condensed Consolidated Financial Statements, which have been prepared in accordance with U.S. GAAP. The preparation of these ~~condensed consolidated financial statements~~Condensed Consolidated Financial Statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities known to exist at the date of the ~~condensed consolidated financial statements~~Condensed Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. We evaluate our estimates on an ongoing basis, based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. There can be no assurance that actual results will not differ from those estimates.

Critical Accounting Policies

Revenue Recognition

The Company recognizes revenue associated with the sale of LNG at the point in time when the customer obtains control of the asset. In evaluating when a customer has control of the asset, the Company primarily considers whether the transfer of legal title and physical delivery has occurred, whether the customer has significant risks and rewards of ownership, and whether the customer accepted delivery and a right of payment exists. Revenues from the providing of services, transportation and equipment to customers is recognized as the service is performed.

Revenue is measured as consideration specified in a contract with a customer and excludes any sales incentives and amounts collected on behalf of third parties. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer. Amounts are billed upon completion of service or transfer of a product and are generally due within 30 days.

Revenues from contracts with customers are disaggregated into (1) LNG product, (2) rental, service, and other, and (3) power delivery.

LNG product revenue generated includes the revenue from the product and delivery of the LNG to our customer’s location. Product revenue is recognized upon delivery of the related item to the customer, at which point the customer controls the product and the Company has an unconditional right to payment. Product contracts are established by agreeing on a sales price or transaction price for the related item. Revenue is recognized when the customer has taken control of the product. Payment terms for product contracts are generally within thirty days from the receipt of the invoice. The Company acts as a principal when using third party transportation companies and therefore recognizes the gross revenue for the delivery of LNG.

Rental, service and other revenue generated by the Company includes equipment and human resources provided to the customer to support the use of LNG and power delivery equipment and services in their application. Rental contracts are established by agreeing on a rental price or transaction price for the related piece of equipment and the rental period which is generally daily or monthly. The Company maintains control of the equipment that the customer uses and can replace the rented equipment with similar equipment should the rented equipment become inoperable or the Company chooses to replace the equipment for maintenance purposes. Revenue is recognized as the rental period is completed and for periods that cross month end, revenue is recognized for the portion of the rental period that has been completed to date. Payment terms for rental contracts are generally within thirty days from the receipt of the invoice. Performance obligations for rental revenue are considered to be satisfied as the rental period is completed based upon the terms of the related contract. LNG service revenue generated by the Company consists of mobilization and demobilization of equipment and onsite technical support while customers are consuming LNG in their applications. Service revenue is billed based on contractual terms that can be based on an event (i.e. mobilization or demobilization) or an hourly rate. Revenue is recognized as the event is completed or work is done. Payment terms for service contracts are generally within thirty days from the receipt of the invoice. Performance obligations for service revenue are considered to be satisfied as the event is completed or work is done per the terms of the related contract.

Power Delivery revenue is generated from time and material projects, consulting services, and the resale of electrical and instrumentation equipment. Revenue is billed based on contractual terms that can be based on an event or an hourly rate. Revenue is recognized as the event is completed or work is done. Payment terms for service contracts are generally within thirty days from the receipt of the invoice. Performance obligations for service revenue are considered to be satisfied as the event is completed or work is done per the terms of the related contract. The resale of electrical and instrumentation equipment is billed upon delivery and are generally due within thirty days from the receipt of the invoice.

All outstanding accounts receivable, net of allowance, on the consolidated balance sheet are typically due and collected within the next 30 days for our LNG business and 12 months for our power delivery business.

Impairment of Long-Lived Assets and Goodwill

LNG liquefaction facilities, and other long-lived assets held and used by the Company are reviewed periodically for potential impairment whenever events or changes in circumstances indicate that a particular asset’s carrying value may not be recoverable. Recoverability generally is determined by comparing the carrying value for the asset to the expected undiscounted future cash flows of the asset. If the carrying value of the asset is not recoverable, the amount of impairment loss is measured as the excess, if any, of the carrying value of the asset over its estimated fair value. The estimated undiscounted future cash flows are based on projections of future operating results; these projections contain estimates of the value of future contracts that have not yet been obtained, future commodity pricing and our future cost structure, among others. Projections of future operating results and cash flows may vary significantly from actual results. Management reviews its estimates of cash flows on an ongoing basis using historical experience, business plans, overall market conditions, and other factors.

Goodwill represents the excess of the cost of an acquired entity over the fair value of the identifiable assets acquired less liabilities assumed. Intangible assets are assets that lack physical substance (excluding financial assets). Goodwill acquired in a business combination and intangible assets with indefinite useful lives are not amortized, and intangible assets with finite useful lives are amortized. Goodwill and intangible assets not subject to amortization are tested for impairment annually or more frequently if events or changes in circumstances indicate the assets carrying value may not be recoverable. We currently test goodwill for impairment annually in the third quarter unless we determine that a triggering event has occurred requiring an earlier test.

Income Taxes

Deferred income taxes are accounted for under the asset-and-liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary

differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recorded when it is more likely than not that the deferred tax asset will not be realized.

The Company recognizes the effect of income tax positions only if those positions are more likely than not to be sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company records interest related to unrecognized tax benefits in interest expense and penalties in selling, general and administrative expenses.

Fair Value Measurements

The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in the fair value measurements, the fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels in accordance with U.S. GAAP:

Level 1 Inputs—Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.

Level 2 Inputs—Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

Level 3 Inputs—Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby, allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.

~~Recently Adopted Accounting Changes and Recently Issued and Adopted Accounting Standards.~~

~~For descriptions of recently adopted and issued accounting standards, see Note 2—Recent Accounting Pronouncements to the Notes to Condensed Consolidated Financial Statements.~~

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

As a “smaller reporting ~~company”,~~company,” the Company is not required to provide this information.

3033

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15(b) of the Exchange Act, we have evaluated, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Based upon the evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective at ~~March 31, 2021 at the reasonable assurance level.~~September 30, 2021.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during our last fiscal quarter that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

3134

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

The Company becomes involved in various legal proceedings and claims in the normal course of business. In management’s opinion, the ultimate resolution of these matters will not have a material effect on our financial position or results of operations.

ITEM 1A. RISK FACTORS.

Our operations and financial results are subject to various risks and uncertainties, including those described in the Part I. “Item 1A. Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the Securities and Exchange Commission on March 16, 2021 (“Form 10-K”), which could adversely affect our business, financial condition, results of operations, cash flows, and the trading price of our common stock. ~~During the three months ended March 31, 2021,~~Except as set forth below, there have been no material changes in our risk factors disclosed in our 2020 Form 10-K.

As post-COVID-19 pandemic demand continues to evolve, continued periods of increasing costs could decrease our margins and adversely impact our future results and operating cash flows.

The COVID-19 pandemic, in general, resulted in a period of depressed demand and uncertainty across many markets including our business, customers and suppliers. Roll-out, availability and access to vaccines has resulted in relaxing many of the COVID-19 restrictions creating a post-COVID-19 period of recovery in economic growth and demand in recent months. However, increases in economic growth and demand have been limited by supplies of natural gas, labor and transportation resources within our markets resulting a period of increasing costs. Further, natural gas inventories and production, which decreased during the COVID-19 pandemic, have been slow to respond. During the third quarter of 2021, we experienced higher than normal natural gas prices. Natural gas futures continue to trade at multi-year highs (in excess of $6.00 at certain times). We expect high natural gas price trends to continue in the near-term as winter approaches further pushing up demand in the physical market; however, no assurances can be made about price trends.

Limited labor resources have also resulted in a shortage of drivers to transport our product to our customers and increasing costs. While we pass a significant portion of the cost of natural gas and transportation on to our customers, we are not able to pass through all costs which has resulted in margin pressure and decreasing margins.

As post-COVID-19 pandemic demand continues to evolve, the economy, commodity prices, demand for our products and our cost of operations and share price may all be impacted. The ultimate extent and effects of these impacts are difficult to estimate; however, continued periods of increasing costs could adversely impact our future results and operating cash flows.

ITEM 5. OTHER INFORMATION.

None.

3235

ITEM 6. EXHIBITS.

(a) Index to Exhibits


Exhibit No.						Exhibit Description

~~2.1~~						(1) Share Exchange Agreement, dated December 17, 2018, by and among American Electric Technologies, Inc., LNG Investment Company, LLC, AEGIS NG LLC, Stabilis Energy, LLC, and PEG Partners, LLC (Incorporated by reference to Registrant’s Current Report on Form 8-K filed December 24, 2018)

~~2.2~~						(1) Amendment dated May 8, 2019 to the Share Exchange Agreement concerning the business combination with Stabilis (Incorporated by reference to Exhibit 2.1 to Registrant’s Current Report on Form 8-K filed May 9, 2019)

3.1						Amended and Restated Articles of Incorporation of the Registrant (Incorporated by Reference to Exhibit 3.1 to Registrant’s Current Report on Form 8-K filed October 15, 2020)

3.2						Amended and Restated Bylaws of the Registrant (Incorporated by Reference to Exhibit 3.2 to Registrant’s Current Report on Form 8-K filed September 18, 2020)





4.1						Investors Rights Agreement between Registrant and JCH Crenshaw Holdings, LLC dated May 2, 2012 (Incorporated by reference to Exhibit 4.3 to Registrant’s Quarterly Report on Form 10-Q filed on August 14, 2012)

~~4.2~~						Registration Rights Agreement between Registrant and JCH Crenshaw Holdings, LLC dated May 2, 2012 (Incorporated by reference to Exhibit 4.4 to Registrant’s Quarterly Report on Form 10-Q filed on August 14, 2012)

~~4.3~~						Warrant to Purchase Common Stock dated November 13, 2017, issued to HD Special-Situations III, LP (Incorporated by reference to Exhibit 10.3 to Registrant’s Quarterly Report on Form 10-Q filed on November 14, 2017)

~~4.4~~						Registration Rights Agreement dated November 13, 2017 between Registrant and HD Special-Situations III, LP (Incorporated by reference to Exhibit 10.4 to Registrant’s Quarterly Report on Form 10-Q filed on November 14, 2017)

~~4.5~~						Voting Agreement, dated as of December 17, 2018, by and among JCH Crenshaw Holdings, LLC and certain stockholders of Registrant (Incorporated by reference to Exhibit B of Amendment No. 8 to Schedule 13D filed by JCH Crenshaw Holdings, LLC and J. Casey Crenshaw on December 28, 2018)

~~4.6~~4.2						Registration Rights Agreement dated July 26, 2019, by and among Registrant, LNG Investment Company, LLC, and AEGIS NG LLC (Incorporated by Reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed August 1, 2019)

~~4.7~~4.3						Registration Rights Agreement dated as of August 20, 2019, by and among Registrant and the Investors named therein (Incorporated by Reference to Exhibit 4.9 to Registrant's Registration Statement on Form S-1 filed September 11, 2019)

























































4.4						Registration Rights Agreement, dated June 1, 2021, among TGB Equipment Leasing, LLC and Stabilis (Incorporated by reference to Exhibit 10.5 to Registrant's Quarterly Report on Form 10-Q filed on August 5, 2021)

10.1						Loan Agreement, dated April 8, 2021, between Stabilis Solutions, Inc., as borrower, and AmeriState Bank, as lender (Incorporated by Reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K filed April 13, 2021)

10.2						Form of Advancing Note, dated April 8, 2021, executed by Stabilis Solutions, Inc., as borrower, and made payable to AmeriState Bank, as lender (Incorporated by Reference to Exhibit 10.2 to Registrant's Current Report on Form 8-K filed April 13, 2021)

10.3						Security Agreement and Assignment, dated April 8, 2021, among Mile High LNG LLC, Stabilis GDS, Inc., Stabilis LNG Eagle Ford LLC and Stabilis Energy Services, LLC, to and in favor of AmeriState Bank, as the secured party (Incorporated by Reference to Exhibit 10.3 to Registrant's Current Report on Form 8-K filed on April 13, 2021)

10.4						Severance and Release Agreement, dated August 22, 2021 between Stabilis Solution, Inc. and James C. Reddinger (Incorporated by reference to Exhibit 10.2 to Registrant's Current Report on Form 8-K filed on August 24, 2021)

10.5						Employment A g reement, dated August 23, 2021 between Stabilis Solution s, Inc. and Westervelt T. Ballard, Jr. (Incorpo rated by re ference to Exhibit 10.1 to Registrant's Current Report on Form 8-K filed on August 24, 2021)

10.6						*Amendment to Secured Promissory Note - MG Finance Co., Ltd

10.7						Amended and Restated 2019 Stabilis Solutions, Inc. Long Term Incentive Plan (Incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K filed on September 15, 2021)

31.1						*Rule 13a-14(a) / 15d-14(a) Certification of Principal Executive Officer.

31.2						*Rule 13a-14(a) / 15d-14(a) Certification of Principal Financial Officer.

32.1						*Section 1350 Certifications of Principal Executive Officer and Principal Financial Officer.

101.INS						XBRL Instance Document.


~~Exhibit No.~~						~~Exhibit Description~~
101.SCH						XBRL Taxonomy Extension Schema Document.

101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF						XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB						XBRL Taxonomy Extension Labels Linkbase Document.

101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document.

~~(1)~~Exhibits and schedules to the Share Exchange Agreement and Amendment have been omitted pursuant to Item 601(b)(2) of Regulation S-K. Registrant hereby undertakes to furnish supplemental copies of any of the omitted exhibits and schedules upon request by the U.S. Securities and Exchange Commission.

* Filed herewith.

3436

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Date: ~~May 7,~~November 10, 2021

STABILIS SOLUTIONS, INC.

By:			/s/ ~~James C. Reddinger~~Westervelt T. Ballard, Jr.
			~~James C. Reddinger~~Westervelt T. Ballard, Jr.
			President and Chief Executive Officer (Principal Executive Officer)

By:			/s/ Andrew L. Puhala
			Andrew L. Puhala
			Chief Financial Officer (Principal Financial Officer)

3537


		Page
	Part I. Financial Information
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Operations	5
	Condensed Consolidated Statements of Comprehensive Income (Loss)	6
	Condensed Consolidated Statements of Stockholders’ Equity	7
	Condensed Consolidated Statements of Cash Flows	8
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2122

Item 4.	Controls and Procedures	3134
	Part II. Other Information
Item 1.	Legal Proceedings	3235
Item 1A.	Risk Factors	3235

Item 5.	Other Information	3235
Item 6.	Exhibits	3336
Signatures		3537


	Three Months Ended March 31, 2021
	(in thousands)
		LNG		Power Delivery		Total

Revenues		$	16,120	$	1,544	$	17,664
Depreciation		2,188		37		2,225
Income (loss) from operations before equity income		268		(267)		1
Net equity income from foreign joint ventures' operations		0		354		354
Income from operations		268		87		355
Interest expense, net		7		10		17
Interest expense, net - related parties		173		0		173
Income tax expense		44		36		80
Net income		15		160		175


	March 31, 2021		December 31, 2020
Investments in BOMAY (1)(2)
Initial investment	$	9,333	$	9,333
Undistributed earnings:
Balance at the beginning of the period	1,908		1,257
Equity in earnings	421		2,705
Dividend distributions	0		(2,054)
Balance at end of period	2,329		1,908
Foreign currency translation:
Balance at the beginning of the period	656		(69)
Change during the period	(62)		725
Balance at end of period	594		656
Total investment in BOMAY at end of period	$	12,256	$	11,897