Stabilis Solutions(SLNG) - 2022 Q3 - Quarterly Report

FORM 10-Q General Information This section provides key filing details for the company's quarterly report ended September 30, 2022 Filing Details | Detail | Value | | :--- | :--- | | Filing Type | Quarterly Report (10-Q) | | Period Ended | September 30, 2022 | | Registrant Name | STABILIS SOLUTIONS, INC | | Trading Symbol | SLNG | | Exchange | The Nasdaq Stock Market LLC | | Filer Status | Non-accelerated filer, Smaller reporting company | | Outstanding Common Stock (as of Nov 1, 2022) | 18,386,733 shares | Cautionary Statement Regarding Forward-Looking Statements This statement outlines the nature of forward-looking statements and associated risks and uncertainties - Forward-looking statements represent intentions, plans, expectations, assumptions, and beliefs about future events, subject to risks and uncertainties that could cause actual results to differ materially[8] - The Company undertakes no obligation to update or revise any forward-looking statements, except as required under applicable securities laws[9] - Information from market research reports, analyst reports, and other publicly available information is relied upon but not independently verified for accuracy and completeness[10] Part I. Financial Information This part presents the unaudited financial statements and management's discussion and analysis of performance Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for the period ended September 30, 2022 Condensed Consolidated Balance Sheets The balance sheets detail the company's assets, liabilities, and equity as of September 30, 2022 Balance Sheet Highlights (in thousands) | Metric | Sep 30, 2022 | Dec 31, 2021 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $11,102 | $910 | $10,192 | 1120.0% | | Total current assets | $30,525 | $15,533 | $14,992 | 96.5% | | Total assets | $93,963 | $87,336 | $6,627 | 7.6% | | Total current liabilities | $25,429 | $15,628 | $9,801 | 62.7% | | Total liabilities | $35,522 | $26,277 | $9,245 | 35.2% | | Total stockholders' equity | $58,441 | $61,059 | $(2,618) | (4.3%) | Condensed Consolidated Statements of Operations The statements of operations show significant revenue growth and a reduced net loss for the reporting period Statements of Operations Highlights (in thousands, except per share data) | Metric | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | Change (YoY) | % Change (YoY) | | :--- | :--- | :--- | :--- | :--- | | Revenues | $25,819 | $17,779 | $8,040 | 45.2% | | Total operating expenses | $24,797 | $22,315 | $2,482 | 11.1% | | Income (loss) from operations | $1,136 | $(4,290) | $5,426 | 126.5% | | Net loss | $(277) | $(4,625) | $4,348 | 94.0% | | Basic net loss per common share | $(0.02) | $(0.26) | $0.24 | 92.3% | | Metric | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | Change (YoY) | % Change (YoY) | | :--- | :--- | :--- | :--- | :--- | | Revenues | $69,236 | $48,291 | $20,945 | 43.4% | | Total operating expenses | $71,116 | $54,864 | $16,252 | 29.6% | | Loss from operations | $(993) | $(5,498) | $4,505 | 81.9% | | Net loss | $(2,851) | $(5,454) | $2,603 | 47.7% | | Basic net loss per common share | $(0.16) | $(0.32) | $0.16 | 50.0% | Condensed Consolidated Statements of Comprehensive Income (Loss) The statements reflect total comprehensive loss, including net loss and foreign currency translation adjustments Comprehensive Income (Loss) Highlights (in thousands) | Metric | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | Change (YoY) | | :--- | :--- | :--- | :--- | | Net loss | $(277) | $(4,625) | $4,348 | | Foreign currency translation adjustment | $(849) | $(150) | $(699) | | Total comprehensive loss | $(1,126) | $(4,775) | $3,649 | | Metric | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | Change (YoY) | | :--- | :--- | :--- | :--- | | Net loss | $(2,851) | $(5,454) | $2,603 | | Foreign currency translation adjustment | $(1,424) | $50 | $(1,474) | | Total comprehensive loss | $(4,275) | $(5,404) | $1,129 | Condensed Consolidated Statements of Stockholders' Equity The statements detail changes in stockholders' equity, including stock issuance and accumulated deficits Stockholders' Equity Highlights (in thousands, except shares) | Metric | Sep 30, 2022 | Dec 31, 2021 | Change | | :--- | :--- | :--- | :--- | | Common Stock Shares Outstanding | 18,386,733 | 17,691,268 | 695,465 | | Common Stock Amount | $19 | $18 | $1 | | Additional Paid-in Capital | $99,531 | $97,875 | $1,656 | | Accumulated Other Comprehensive Income (Loss) | $(1,073) | $351 | $(1,424) | | Accumulated Deficit | $(40,036) | $(37,185) | $(2,851) | | Total Stockholders' Equity | $58,441 | $61,059 | $(2,618) | - Common stock issued from vesting of stock-based awards totaled 713,671 shares during the nine months ended September 30, 2022[21] - Stock-based compensation expense recognized during the nine months ended September 30, 2022, was $1,741 thousand[21] Condensed Consolidated Statements of Cash Flows The statements show a significant increase in cash and cash equivalents, driven by operating activities Cash Flow Highlights (in thousands) | Metric | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | Change (YoY) | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $11,538 | $5,429 | $6,109 | | Net cash provided by (used in) investing activities | $69 | $(6,690) | $6,759 | | Net cash provided by (used in) financing activities | $(1,422) | $2,451 | $(3,873) | | Net increase in cash and cash equivalents | $10,192 | $1,114 | $9,078 | | Cash and cash equivalents, end of period | $11,102 | $2,354 | $8,748 | - Cash provided by operating activities from continuing operations increased to $10.8 million in 2022 from $5.87 million in 2021[26] - Proceeds from assets held for sale contributed $2.05 million to investing activities in 2022[26] Notes to Condensed Consolidated Financial Statements (Unaudited) These notes provide detailed explanations of the accounting policies and figures in the financial statements 1. Description of Business and Basis of Presentation The company operates as an energy transition firm in North America, with its Brazil Operations now discontinued - Stabilis Solutions, Inc is an energy transition company providing turnkey clean energy production, storage, transportation, and fueling solutions using liquefied natural gas (LNG) in North America[27] - The company operates two LNG production facilities in George West, Texas, and Port Allen, Louisiana[28] - Stabilis holds a 40% equity investment in BOMAY Electric Industries, Inc, a Chinese joint venture building power and control systems for the energy industry[29] - The Brazil Operations have been classified as discontinued operations as of September 30, 2022, due to the company's decision to exit these operations, requiring retrospective application to prior periods[30][33] 2. Discontinued Operations The Brazil Operations were classified as discontinued, resulting in a $1.3 million impairment charge - The Company decided to exit its Brazil Operations to focus resources on the core LNG business, expecting a sale within the next year[40] - An impairment charge of $1.3 million was recorded for the Brazil Operations, measured as the estimated fair value ($0.9 million) less the carrying value of net assets[41] - The Brazil Operations are classified as discontinued operations, representing a strategic shift and requiring retrospective application to financial information for all prior periods presented[42][43] Loss from Discontinued Operations (in thousands) | Metric | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $3,202 | $1,925 | $8,602 | $5,129 | | Costs and expenses | $3,082 | $1,987 | $8,392 | $5,247 | | Impairment | $1,310 | $0 | $1,310 | $0 | | Loss from discontinued operations net of income taxes | $(1,301) | $(44) | $(1,441) | $(128) | Assets and Liabilities of Discontinued Operations (in thousands) | Metric | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Total current assets of discontinued operations | $3,667 | $3,446 | | Total assets of discontinued operations | $3,667 | $4,278 | | Total current liabilities of discontinued operations | $2,817 | $1,931 | | Total liabilities of discontinued operations | $2,817 | $2,219 | 3. Revenue Recognition Revenue is disaggregated by source and geography, with LNG product sales being the primary driver - Revenue is recognized when the transfer of promised goods or services are delivered to customers, disaggregated into LNG product, rental, service, and other[48] - LNG product revenue is recognized upon delivery of the product, with the Company acting as a principal[49] - Rental and service revenue is recognized as the rental period is completed or as the service work is done[50][51] Disaggregated Revenues by Source (in thousands) | Revenue Source | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | LNG Product | $21,623 | $14,420 | $58,744 | $37,927 | | Rental and service | $3,843 | $3,046 | $9,966 | $8,996 | | Other | $353 | $313 | $526 | $1,368 | | Total Revenues | $25,819 | $17,779 | $69,236 | $48,291 | Disaggregated Revenues by Geographic Location (in thousands) | Geographic Location | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Mexico | $3,427 | $3,501 | $12,087 | $7,198 | | United States | $22,392 | $14,278 | $57,149 | $41,093 | | Total Revenues | $25,819 | $17,779 | $69,236 | $48,291 | 4. Derivative Instruments The company uses natural gas call options to manage price risk, which are not designated as hedges - The Company held natural gas call options for 2.0 million MMBtu to manage the risk of increasing natural gas prices, with a fair value of $1.73 million at September 30, 2022[53] - These derivative instruments are not designated as hedges, and all resulting gains and losses from changes in fair value are included in the Condensed Consolidated Statements of Operations[54] Fair Value of Natural Gas Derivatives (in thousands) | Location on Balance Sheet | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Prepaid expenses and other current assets | $1,190 | $0 | | Right-of-use assets and other noncurrent assets | $538 | $0 | | Total Fair Value | $1,728 | $0 | Changes in Fair Value of Derivatives (in thousands) | Metric | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Fair value, beginning of period | $1,126 | $0 | | Purchases of natural gas derivatives | $0 | $2,241 | | Unrealized gains (losses) transferred to realized gains (losses), net | $(324) | $(540) | | Change in unrealized gain on natural gas derivatives | $926 | $27 | | Fair value, end of period | $1,728 | $1,728 | 5. Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets increased, driven by the fair value of derivatives and prepaid insurance Prepaid Expenses and Other Current Assets (in thousands) | Item | Sep 30, 2022 | Dec 31, 2021 | Change | | :--- | :--- | :--- | :--- | | Prepaid LNG | $0 | $92 | $(92) | | Prepaid insurance | $1,342 | $892 | $450 | | Prepaid supplier expenses | $248 | $201 | $47 | | Fair value of derivatives, current | $1,190 | $0 | $1,190 | | Deposits | $287 | $243 | $44 | | Other | $51 | $94 | $(43) | | Total | $3,118 | $1,522 | $1,596 | 6. Assets Held for Sale and Property, Plant and Equipment Certain assets were reclassified as held for sale, and net property, plant and equipment decreased - The Company entered an agreement to sell certain assets for $2.0 million, classified as assets held for sale, with no impairment recorded as proceeds equaled carrying value[61] Property, Plant and Equipment, Net (in thousands) | Item | Sep 30, 2022 | Dec 31, 2021 | Change | | :--- | :--- | :--- | :--- | | Cost | $101,752 | $101,192 | $560 | | Less: accumulated depreciation | $(53,617) | $(47,027) | $(6,590) | | Property, plant and equipment, net | $48,135 | $54,165 | $(6,030) | Depreciation Expense (in thousands) | Period | 2022 | 2021 | Change | | :--- | :--- | :--- | :--- | | Three Months Ended Sep 30 | $2,115 | $2,284 | $(169) | | Nine Months Ended Sep 30 | $6,589 | $6,653 | $(64) | 7. Investment in Foreign Joint Venture The value of the investment in the BOMAY joint venture decreased due to currency translation and dividends - Stabilis holds a 40% interest in BOMAY Electric Industries Company, Ltd, a Chinese joint venture that builds electrical systems for sale in China[63] - The decrease in investment value is primarily due to foreign currency translation losses and dividend distributions, partially offset by equity in earnings[64] BOMAY's Operational Results (in thousands) | Metric | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $12,364 | $10,040 | $55,090 | $43,261 | | Gross Profit | $2,332 | $3,420 | $7,637 | $8,111 | | Earnings | $430 | $688 | $2,573 | $2,923 | Investment in BOMAY Activity (in thousands) | Item | Balance at Dec 31, 2021 | Equity in Earnings | Dividend Distributions | Foreign Currency Translation (Loss) | Balance at Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | :--- | | Investment in BOMAY | $12,325 | $1,126 | $(1,550) | $(1,477) | $10,424 | 8. Accrued Liabilities Accrued liabilities increased significantly, driven by customer deposits and higher LNG fuel costs Accrued Liabilities (in thousands) | Item | Sep 30, 2022 | Dec 31, 2021 | Change | | :--- | :--- | :--- | :--- | | Compensation and benefits | $2,526 | $2,465 | $61 | | Professional fees | $275 | $275 | $0 | | LNG fuel and transportation | $6,969 | $2,788 | $4,181 | | Accrued interest | $32 | $53 | $(21) | | Customer deposits | $6,821 | $0 | $6,821 | | Other taxes payable | $394 | $476 | $(82) | | Other accrued liabilities | $172 | $260 | $(88) | | Total accrued liabilities | $17,189 | $6,317 | $10,872 | 9. Debt Total long-term debt decreased slightly, with amendments made to a related-party promissory note - The AmeriState Loan, a $10.0 million facility, had $9.0 million drawn and outstanding at September 30, 2022, bearing interest at 5.75% per annum through April 8, 2026[69] - The secured promissory note to M/G Finance Co, Ltd (related party) was amended to defer payments, reduce the interest rate from 12.0% to 6.0%, and extend the maturity date to December 2023[72] Carrying Value of Debt (in thousands) | Item | Sep 30, 2022 | Dec 31, 2021 | Change | | :--- | :--- | :--- | :--- | | Secured term note, net | $8,640 | $7,608 | $1,032 | | Secured promissory note - related party | $3,022 | $3,603 | $(581) | | Insurance and other notes payable | $1,085 | $855 | $230 | | Less: amounts due within one year | $(3,485) | $(2,023) | $(1,462) | | Total long-term debt | $9,262 | $10,043 | $(781) | Interest Expense on Debt (in thousands) | Item | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Secured term note | $143 | $117 | $408 | $176 | | Secured promissory note - related party | $49 | $120 | $129 | $441 | | Insurance and other notes payable | $5 | $0 | $23 | $7 | | Total interest expense on debt | $197 | $237 | $560 | $624 | 10. Related Party Transactions The company engaged in various transactions with related parties, including purchases and debt arrangements - Purchases from ACT (formerly 51% owned by Crenshaw Family Holdings) totaled $0.5 million for the nine months ended September 30, 2021, with sales of $29 thousand[76] - Chart E&C, which beneficially owns 8.0% of common stock, provided services totaling $0.1 million for both the three and nine months ended September 30, 2022 and 2021[78] - The Company has a secured promissory note payable with M/G Finance Co, Ltd, a related party, as detailed in Note 9[79] Purchases from The Modern Group Subsidiary (in thousands) | Period | 2022 | 2021 | Change | | :--- | :--- | :--- | :--- | | Three Months Ended Sep 30 | $38 | $100 | $(62) | | Nine Months Ended Sep 30 | $200 | $800 | $(600) | 11. Commitments and Contingencies The company is subject to various legal and environmental regulations not expected to have a material adverse effect - The Company is subject to federal, state, and local environmental laws and regulations, and does not anticipate material expenditures for compliance[80] - The Company may become party to various legal actions, but management believes the ultimate resolution will not have a material adverse effect on its consolidated financial position, results of operations, or liquidity[81] 12. Stockholders' Equity and Stock-Based Compensation The company issued common stock upon RSU vesting and recognized stock compensation expense - During the nine months ended September 30, 2022, 500,000 shares of common stock were issued to the former CEO and 212,337 shares to other employees upon vesting of RSUs[83] - The Amended and Restated 2019 Long Term Incentive Plan provides for a maximum of 4,000,000 shares of common stock available for issuance as awards[84] - During the nine months ended September 30, 2022, the Company issued 40,764 RSUs and 774,505 stock options[85] - As of September 30, 2022, unrecognized compensation costs included $1.1 million for 247,607 outstanding RSUs and $3.3 million for 2,074,505 outstanding options[86] Stock Compensation Expense (in thousands) | Period | 2022 | 2021 | Change | | :--- | :--- | :--- | :--- | | Nine Months Ended Sep 30 | $1,741 | $2,731 | $(990) | 13. Net Income (Loss) Per Share Net loss per common share improved significantly year-over-year for both the three and nine-month periods - Dilutive securities were included for the three months ended September 30, 2022, but excluded for other periods due to net losses making them antidilutive[89][90] Net Income (Loss) Per Common Share | Metric | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Basic weighted average common shares outstanding | 18,324,534 | 17,578,653 | 18,256,587 | 17,202,631 | | Dilutive securities | 272,074 | 0 | 0 | 0 | | Basic net loss per common share | $(0.02) | $(0.26) | $(0.16) | $(0.32) | | Diluted net loss per common share | $(0.01) | $(0.26) | $(0.16) | $(0.32) | 14. Supplemental Cash Flow Information This note details cash paid for interest and taxes, along with significant non-cash investing and financing activities Supplemental Cash Flow Information (in thousands) | Item | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Interest paid | $635 | $3 | | Income taxes paid | $29 | $1 | | Common stock issued to acquire fixed assets | $0 | $3,700 | | Equipment acquired from issuance of note payable | $359 | $0 | | Acquisition of fixed assets included within accounts payable | $565 | $0 | | Fixed assets transferred to assets held for sale | $1,841 | $0 | | Equipment acquired under capital leases | $0 | $100 | | Insurance premium financing | $1,203 | $1,200 | 15. Subsequent Events The company completed the sale of its Brazil Operations subsequent to the quarter's end - On October 31, 2022, the Company sold its Brazil Operations for approximately $0.9 million, comprising a $0.2 million cash payment and a note receivable[93] - No gain or loss is expected to be recorded on the sale due to the impairment loss recognized during the three and nine months ended September 30, 2022[93] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management provides an analysis of financial condition, operational results, and liquidity for the period Overview The company provides turnkey clean energy solutions using LNG across North America - Stabilis Solutions, Inc is an energy transition company providing turnkey clean energy production, storage, transportation, and fueling solutions primarily using liquefied natural gas (LNG) to multiple end markets across North America[96] - LNG is used as a partner fuel for renewable energy and as a cleaner alternative to traditional fuel sources, offering both environmental and economic benefits[96] - The company generates revenue by selling and delivering LNG, renting cryogenic equipment, and providing engineering and field support services[98] - Stabilis owns and operates LNG liquefiers in George West, Texas (100,000 LNG gallons/day) and Port Allen, Louisiana (30,000 LNG gallons/day)[99] - The company believes its technical expertise and asset capabilities are favorable for other alternative fuels, such as renewable natural gas, synthetic natural gas, and hydrogen[103] Inflationary Pressures The company is experiencing margin pressure from rising natural gas, liquefaction, and transportation costs - The Company continues to experience inflationary pressures for increasing costs of natural gas, liquefaction, and transportation[104] - While a significant portion of costs is passed on to customers, not all can be, resulting in margin pressure[104] - Global events, including Russia's invasion of Ukraine, are exacerbating these trends, with expected continued pressure on natural gas prices in the near-term[104] Recent Developments Key developments include receiving a DOE export authorization and exiting the Brazil Operations - Stabilis received authorization from the U.S. Department of Energy (DOE) to export up to 51.75 billion cubic feet of domestically produced LNG per year to all free trade and non-free trade countries for a term of 28 years[105] - The Company decided to exit its Brazil Operations, resulting in discontinued operations presentation and a $1.3 million impairment charge[106] - The sale of Brazil Operations closed on October 31, 2022, for approximately $0.9 million[106] Results of Operations This section compares operational results for the three and nine months ended September 30, 2022 and 2021 - The Company now has one reporting segment due to the classification of Brazil Operations as discontinued operations[108] Three Months Ended September 30, 2022 Compared to Three Months Ended September 30, 2021 Revenues increased 45% year-over-year, driven by higher LNG product sales and pricing Key Financials - 3 Months Ended Sep 30 (in thousands) | Metric | 2022 | 2021 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenues | $25,819 | $17,779 | $8,040 | 45.2% | | Cost of revenues | $19,904 | $14,369 | $5,535 | 38.5% | | Selling, general and administrative expenses | $3,658 | $5,286 | $(1,628) | (30.8%) | | Income (loss) from operations before equity income | $1,022 | $(4,536) | $5,558 | 122.5% | | Net equity income from foreign joint venture operations | $114 | $246 | $(132) | (53.7%) | | Net income (loss) from continuing operations | $1,024 | $(4,581) | $5,605 | 122.4% | | Loss from discontinued operations, net of tax | $(1,301) | $(44) | $(1,257) | n/a | | Net loss | $(277) | $(4,625) | $4,348 | 94.0% | - The increase in LNG product revenue was primarily related to additional LNG gallons delivered, increased natural gas prices, and increased pricing charged to customers[111] - The increased costs related to LNG product were attributable to additional LNG gallons delivered, increased natural gas prices, inflationary pressures (transportation, liquefaction), and increased electricity prices[112][119] - Selling, general and administrative expense decreased due to the non-recurrence of $2.2 million for restricted common stock vesting and $0.8 million in severance and legal costs from the prior year's executive transition[114] - Net equity income from foreign joint venture operations decreased due to supply chain challenges and foreign exchange losses resulting from a strong U.S. dollar[116] Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021 Revenues increased 43% for the nine-month period, while net loss significantly narrowed Key Financials - 9 Months Ended Sep 30 (in thousands) | Metric | 2022 | 2021 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenues | $69,236 | $48,291 | $20,945 | 43.4% | | Cost of revenues | $54,945 | $37,301 | $17,644 | 47.3% | | Selling, general and administrative expenses | $9,643 | $10,558 | $(915) | (8.7%) | | Loss from operations before equity income | $(1,880) | $(6,573) | $4,693 | 71.4% | | Net equity income from foreign joint venture operations | $887 | $1,075 | $(188) | (17.5%) | | Net loss from continuing operations before income tax expense | $(1,658) | $(5,097) | $3,439 | (67.5%) | | Loss from discontinued operations, net of tax | $(1,441) | $(128) | $(1,313) | n/a | | Net loss | $(2,851) | $(5,454) | $2,603 | 47.7% | - The increase in LNG product revenue was primarily due to additional LNG gallons delivered, increased natural gas prices, and increased pricing charged to customers[125] - The increase in the cost of LNG product was due to additional LNG gallons delivered, increased natural gas prices, inflationary pressures (transportation, liquefaction), and increased electricity prices[126][133] - Selling, general and administrative expenses decreased due to the non-recurrence of $2.2 million for restricted common stock vesting and $0.8 million in severance and legal costs from the prior year's executive transition[128] - Other income (expense) shifted from $1.0 million income in the Prior Year to $0.1 million expense in the Current Year, primarily due to the $1.1 million Paycheck Protection Program loan forgiveness recognized in the Prior Year[134] Liquidity and Capital Resources The company's liquidity is sourced from cash, operations, debt facilities, and joint venture distributions - Principal sources of liquidity include cash on hand, cash provided by operations, proceeds from AmeriState Loan borrowings, and distributions from the BOMAY joint venture[137] - Management believes the business will generate sufficient cash flows from operations along with availability under its loan facility to fund the business for the next twelve months[139] - The Company has filed a shelf registration statement to provide flexibility to raise capital for working capital, debt repayment, and/or future transactions[138] Liquidity Position (as of Sep 30, 2022, in millions) | Metric | Value | | :--- | :--- | | Cash and cash equivalents | $11.1 | | Outstanding debt and lease obligations | $13.1 | | Debt due in next twelve months | $3.6 | | Available under AmeriState Loan facility | $1.0 | Cash Flows Cash flow from operations increased significantly, driven by customer deposits and improved profitability - The increase in net cash provided by operating activities was primarily attributable to deposits received from customers and improved profitability, excluding non-cash expenses and gains[142] - The decrease in net cash used in investing activities was primarily due to the acquisition of the Port Allen liquefaction facility in 2021 and proceeds from assets held for sale in 2022[143] - Net cash used in financing activities was primarily due to payments on short- and long-term notes payable, partially offset by proceeds from borrowings[144] Net Cash Flows (in thousands) | Activity | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | Change | | :--- | :--- | :--- | :--- | | Operating activities | $11,538 | $5,429 | $6,109 | | Investing activities | $69 | $(6,690) | $6,759 | | Financing activities | $(1,422) | $2,451 | $(3,873) | | Net increase in cash and cash equivalents | $10,192 | $1,114 | $9,078 | Future Cash Requirements Cash is required for operations, capital expenditures, debt service, and market expansion - Cash is required to fund operating expenses, working capital, capital expenditures, debt repayments, equipment purchases, maintenance of LNG production facilities, and market expansion[145] - Capital expenditures for the nine months ended September 30, 2022, were $1.7 million, primarily for operations in Mexico and the addition of rolling stock and replacement assets[146] - The Company had open purchase orders of approximately $1.5 - $2.0 million at September 30, 2022, for capital expenditures over the next twelve months[146] - The Company may elect to pursue additional financing activities, such as refinancing existing debt, obtaining new debt, or debt or equity offerings, to provide flexibility with cash management[145] Shelf Registration Statement The company filed a Form S-3 shelf registration to permit the issuance of up to $100 million in securities - On April 11, 2022, the Company filed a Form S-3 Shelf Registration, effective April 26, 2022, permitting the issuance of up to $100.0 million in common stock, preferred stock, warrants, or a combination[147] - As a smaller reporting company, sales under the Shelf Registration are limited to no more than one-third of its public float in any twelve-month period[147][148] - The Shelf Registration provides flexibility to raise capital to fund working capital requirements, repay debt, and/or fund future transactions[147] Off-Balance Sheet Arrangements The company had no material off-balance sheet arrangements as of September 30, 2022 - As of September 30, 2022, the Company had no transactions that met the definition of off-balance sheet arrangements that may have a current or future material effect on its consolidated financial position or operating results[149] Critical Accounting Policies and Estimates No significant changes were made to critical accounting policies and estimates during the period - The preparation of the Condensed Consolidated Financial Statements requires management to make estimates and assumptions in conformity with U.S. GAAP[150] - There have been no significant changes in the Company's critical accounting policies and estimates during the three and nine months ended September 30, 2022, from those disclosed in its 2021 Annual Report on Form 10-K[151] New Accounting Standards The company is evaluating the impact of new accounting standards related to reference rate reform and credit losses - The Company is currently evaluating the impact of ASU No 2020-04, 'Reference Rate Reform,' on its consolidated financial position and results of operations[37] - ASU 2016-13, 'Financial Instruments - Credit Losses,' will be effective for the Company in the first quarter of 2023, and its effect on consolidated financial statements is currently being evaluated[38] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of September 30, 2022 - The effectiveness of the design and operation of disclosure controls and procedures was evaluated and concluded to be effective at September 30, 2022[154] - There have been no changes in internal control over financial reporting that materially affected or are reasonably likely to materially affect internal control over financial reporting during the last fiscal quarter[155] Part II. Other Information This part includes information on legal proceedings, risk factors, exhibits, and other corporate matters Item 1. Legal Proceedings The company is involved in routine legal proceedings not expected to have a material financial impact - The Company becomes involved in various legal proceedings and claims in the normal course of business[157] - Management's opinion is that the ultimate resolution of these matters will not have a material effect on the Company's financial position or results of operations[157] Item 1A. Risk Factors No material changes to the company's previously disclosed risk factors were identified during the quarter - The Company's operations and financial results are subject to various risks and uncertainties, including those described in its Annual Report on Form 10-K for the year ended December 31, 2021, and prior Quarterly Reports on Form 10-Q[158] - During the three months ended September 30, 2022, there have been no material changes in the disclosed risk factors[158] Item 5. Other Information This section reports the completion of the sale of the company's Brazil Operations - On October 31, 2022, the Company closed on the sale of its Brazil Operations for approximately $0.9 million, consisting of a $0.2 million cash payment and a note receivable[159] - The Company does not expect to record a gain or loss on the sale due to the impairment loss recorded during the three and nine months ended September 30, 2022[159] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including organizational and legal documents - Exhibits include Amended and Restated Articles of Incorporation and Bylaws, various Registration Rights Agreements, Description of Securities, and certifications from Principal Executive and Financial Officers[161][163] - Interactive XBRL Instance Document and Cover Page Interactive Data File are filed herewith[163] Signatures The report is duly signed by the company's principal executive and financial officers - The report was duly signed on November 3, 2022, by Westervelt T Ballard, Jr, President and Chief Executive Officer, and Andrew L Puhala, Chief Financial Officer[165][166]