slng20240630

slng20240630_10q.htm

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 June 30, 2024

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

For the transition period from to

Commission file number. 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 August 7, 2024, there were 18,585,014 outstanding shares of our common stock, par value $.001 per share.

Table of Contents

STABILIS SOLUTIONS, INC. AND SUBSIDIARIES

FORM 10-Q Index

For the Quarterly Period Ended June 30, 2024

		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	17
Item 4.	Controls and Procedures	23
Part II. Other Information
Item 1.	Legal Proceedings	23
Item 1A.	Risk Factors	23
Item 5.	Other Information	23
Item 6.	Exhibits	24
Signatures		25

Table of Contents

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (“this Report”) includes statements that constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements represent intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks and uncertainties and other factors. 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, 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 necessary estimates reflecting the best judgment of senior management, not guarantees of future performance. Many of the factors that impact forward-looking statements are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements as described in Part I. “Item 1A. Risk Factors” of the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission ("the SEC") on March 7, 2024, as well as any additional risk factors identified and described in Part II. “Item 1A. Risk Factors” of this Report.

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 Report, 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.

Table of Contents

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

Stabilis Solutions, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

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

	*June 30,*			*December 31,*
	*2024*			*2023*
*Assets*
Current assets:
Cash and cash equivalents	$	11,483		$	5,374
Accounts receivable, net		5,933			7,752
Inventories, net		155			169
Prepaid expenses and other current assets		1,325			1,677
Total current assets		18,896			14,972
Property, plant and equipment:
Cost		110,426			110,646
Less accumulated depreciation		(62,057	)		(61,167	)
Property, plant and equipment, net		48,369			49,479
Goodwill		4,314			4,314
Investments in foreign joint ventures		10,541			12,009
Right-of-use assets and other noncurrent assets		453			525
Total assets	$	82,573		$	81,299
*Liabilities and Stockholders’ Equity*
Current liabilities:
Accounts payable	$	6,607		$	5,707
Accrued liabilities		3,614			4,166
Current portion of long-term notes payable		1,216			1,682
Current portion of finance and operating lease obligations		82			164
Total current liabilities		11,519			11,719
Long-term notes payable, net of current portion and debt issuance costs		7,378			7,747
Long-term portion of finance and operating lease obligations		—			21
Total liabilities		18,897			19,487
Commitments and contingencies (Note 10)
Stockholders’ Equity:
Preferred stock; $0.001 par value, 1,000,000 shares authorized, no shares issued and outstanding at June 30, 2024 and December 31, 2023		—			—
Common stock; $0.001 par value, 37,500,000 shares authorized, 18,585,014 and 18,573,391 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively		19			19
Additional paid-in capital		102,839			102,057
Accumulated other comprehensive loss		(432	)		(18	)
Accumulated deficit		(38,750	)		(40,246	)
Total stockholders’ equity		63,676			61,812
Total liabilities and stockholders’ equity	$	82,573		$	81,299

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

Table of Contents

Stabilis Solutions, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

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

	*Three Months Ended*						*Six Months Ended*
	*June 30,*						*June 30,*
	*2024*			*2023*			*2024*			*2023*
Revenues:
Revenues	$	18,598		$	12,907		$	38,368		$	39,749
Operating expenses:
Cost of revenues		13,550			10,585			27,064			30,855
Change in unrealized (gain) loss on natural gas derivatives		(82	)		(224	)		(334	)		(55	)
Selling, general and administrative expenses		3,331			3,043			6,787			6,422
Gain from disposal of fixed assets		(72	)		—			(199	)		—
Depreciation expense		1,768			1,992			3,568			4,003
Total operating expenses		18,495			15,396			36,886			41,225
Income (loss) from operations before equity income		103			(2,489	)		1,482			(1,476	)
Net equity income from foreign joint venture operations:
Income from equity investment in foreign joint venture		340			741			587			1,134
Foreign joint venture operating related expenses		(45	)		(56	)		(95	)		(104	)
Net equity income from foreign joint venture operations		295			685			492			1,030
Income (loss) from operations		398			(1,804	)		1,974			(446	)
Other income (expense):
Interest income (expense), net		28			(147	)		24			(297	)
Interest (expense), net - related parties		—			(24	)		—			(56	)
Other (expense), net		26			(40	)		5			(124	)
Total other income (expense)		54			(211	)		29			(477	)
Net income (loss) before income tax expense		452			(2,015	)		2,003			(923	)
Income tax expense		425			159			507			167
Net income (loss)	$	27		$	(2,174	)	$	1,496		$	(1,090	)

Net income (loss) per common share (Note 12):
Basic and diluted per common share	$	0.00		$	(0.12	)	$	0.08		$	(0.06	)

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

Table of Contents

Stabilis Solutions, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

(Unaudited, in thousands)

	*Three Months Ended*					*Six Months Ended*
	*June 30,*					*June 30,*
	*2024*		*2023*			*2024*			*2023*
Net income (loss)	$	27	$	(2,174	)	$	1,496		$	(1,090	)
Foreign currency translation adjustment, net of tax		52		(618	)		(414	)		(431	)
Total comprehensive income (loss)	$	79	$	(2,792	)	$	1,082		$	(1,521	)

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

Table of Contents

Stabilis Solutions, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited, in thousands, except share data)

							*Accumulated*
							*Other*
	*Common Stock*				*Additional*		*Comprehensive*			*Accumulated*
	*Shares*		*Amount*		*Paid-in Capital*		*Income*			*Deficit*			*Total*
Balance at December 31, 2022		18,420,067	$	19	$	100,137	$	82		$	(40,371	)	$	59,867
Common stock issued from vesting of stock-based awards		13,587		—		—		—			—			—
Stock-based compensation		—		—		589		—			—			589
Net income		—		—		—		—			1,084			1,084
Other comprehensive income, net of tax		—		—		—		187			—			187
Balance at March 31, 2023		18,433,654		19		100,726		269			(39,287	)		61,727
Common stock issued from vesting of stock-based awards		45,175		—		—		—			—			—
Stock-based compensation		—		—		593		—			—			593
Net loss		—		—		—		—			(2,174	)		(2,174	)
Other comprehensive loss, net of tax		—		—		—		(618	)		—			(618	)
Balance at June 30, 2023		18,478,829	$	19	$	101,319	$	(349	)	$	(41,461	)	$	59,528

									*Accumulated*
									*Other*
	*Common Stock*					*Additional*			*Comprehensive*			*Accumulated*
	*Shares*			*Amount*		*Paid-in Capital*			*loss*			*Deficit*			*Total*
Balance at December 31, 2023		18,573,391		$	19	$	102,057		$	(18	)	$	(40,246	)	$	61,812
Common stock issued from vesting of stock-based awards		13,588			—		—			—			—			—
Stock-based compensation		—			—		383			—			—			383
Employee tax payments from stock-based withholding		(1,965	)		—		(9	)		—			—			(9	)
Net income		—			—		—			—			1,469			1,469
Other comprehensive loss, net of tax		—			—		—			(466	)		—			(466	)
Balance at March 31, 2024		18,585,014			19		102,431			(484	)		(38,777	)		63,189
Stock-based compensation		—			—		408			—			—			408
Net income		—			—		—			—			27			27
Other comprehensive income, net of tax		—			—		—			52			—			52
Balance at June 30, 2024		18,585,014		$	19	$	102,839		$	(432	)	$	(38,750	)	$	63,676

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

Table of Contents

Stabilis Solutions, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited, in thousands)

	*Six Months Ended*
	*June 30,*
	*2024*			*2023*
Cash flows from operating activities:
Net income (loss) from operations	$	1,496		$	(1,090	)
Adjustments to reconcile net income (loss) from operations to net cash provided by operating activities:
Depreciation		3,568			4,003
Stock-based compensation expense		791			1,182
Bad debt expense		68			—
Gain from disposal of assets		(199	)		—
Income from equity investment in joint venture		(587	)		(1,134	)
Cash settlements from natural gas derivatives, net		(359	)		—
Realized and unrealized losses on natural gas derivatives, net		30			491
Distributions from equity investment in joint venture		1,716			813
Changes in operating assets and liabilities:
Accounts receivable		1,736			7,008
Prepaid expenses and other current assets		680			827
Accounts payable and accrued liabilities		(133	)		(8,385	)
Other		160			187
Net cash provided by operating activities		8,967			3,902
Cash flows from investing activities:
Acquisition of fixed assets		(2,249	)		(5,211	)
Proceeds from sale of assets		279			—
Net cash used in investing activities		(1,970	)		(5,211	)
Cash flows from financing activities:
Payments on short- and long-term notes payable		(875	)		(731	)
Payments on notes payable from related parties		—			(1,200	)
Employee tax payments from restricted stock withholdings		(9	)		(108	)
Net cash used in financing activities		(884	)		(2,039	)
Effect of exchange rate changes on cash		(4	)		18
Net increase (decrease) in cash and cash equivalents		6,109			(3,330	)
Cash and cash equivalents, beginning of period		5,374			11,451
Cash and cash equivalents, end of period	$	11,483		$	8,121

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements

Table of Contents

STABILIS SOLUTIONS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Description of Business

Stabilis Solutions, Inc. and its subsidiaries (the “Company”, “Stabilis”, “our”, “us” or “we”) is an energy transition company that provides turnkey clean energy production, storage, transportation and fueling solutions primarily using liquefied natural gas (“LNG”) to multiple end markets.

The Company serves customers in diverse end markets, including aerospace, agriculture, energy, industrial, marine bunkering, mining, pipeline, remote power and utility markets. LNG can be used to deliver natural gas to locations where pipeline service is unavailable, has been interrupted, or needs to be supplemented. Additionally, LNG can be used as a partner fuel for renewable energy, and as an alternative to traditional fuel sources, such as distillate fuel oil (including diesel fuel and other fuel oils) and propane, among others to provide both environmental and economic benefits. Increasingly, LNG is being utilized as a transportation fuel in the marine industry and as a propellant in the private rocket launch sector. We believe that these fuel markets are large and provide significant opportunities for LNG usage.

The Company also builds power and control systems for the energy industry in China through its 40% owned Chinese joint venture, BOMAY Electric Industries, Inc (“BOMAY”). BOMAY is accounted for under the equity method.

Basis of Presentation and Consolidation

The accompanying unaudited, interim 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 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 prevent the information presented herein from being misleading. The 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 periods presented are not necessarily indicative of the results of operations to be expected for the full year. The accompanying Condensed Consolidated Financial Statements should be read in conjunction with the audited consolidated financial statements as of and for the year ended December 31, 2023 included in the Company's Annual Report on Form 10-K, as filed on March 7, 2024.

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

Use of Estimates in the Preparation of the Consolidated Financial Statements

The preparation of the 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 fair value of natural gas derivatives, 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.

Reclassifications

The Company reclassified $4.2 million from accrued expenses to accounts payable at December 31, 2023, to conform to current presentation resulting in no effect to results of operations or cash flows.

Derivative Instruments

The Company had certain natural gas derivative instruments as of June 30, 2024 and December 31, 2023. At June 30, 2024 and December 31, 2023, the fair value of the Company's derivatives was $0.3 million and $0, respectively. The accounting for changes in the fair value of a derivative instrument depends on whether it qualifies for and has been designated as a hedge as well as the type of hedge. The Company has not designated its derivatives as hedges under U.S. GAAP. The Company did not enter into any derivative transactions for speculative purposes. Periodically, the Company enters into forward sales contracts for the delivery of LNG to its customers. Certain of these sales contracts contain provisions that may meet the criteria of a derivative in the event delivery is not made. These contracts are accounted for under the normal purchase normal sales exclusion under U.S. GAAP and are not measured at fair value each reporting period. See Note 3 for a further discussion of our derivatives.

Table of Contents

2. REVENUE RECOGNITION

We recognize revenues when the transfer of promised goods or services are delivered to our customers in accordance with the applicable customer contract and we are entitled to be paid by the customer. Revenues are measured as consideration specified in the contract and exclude any sales incentives and amounts collected on behalf of third parties. Certain contracts may include multiple goods or services such as the usage of equipment and delivery of field support services that are bundled into an all-in price to the customer for each gallon of LNG delivered. Revenue recognition under these contracts requires significant judgment by the Company in order to determine the appropriate accounting for these transactions, including whether performance obligations should be accounted for separately versus together, how the price should be allocated among the performance obligations, and when to recognize revenue for each performance obligation. The Company has determined that these contracts have multiple performance obligations and the Company allocates the contract price to each performance obligation using its best estimates of the respective standalone selling price of each distinct good or service at the time the contract was negotiated.

Revenues from contracts with customers are disaggregated into (1) LNG Product (2) rental (3) service and (4) other.

LNG Product revenues

LNG Product revenues represent the sale of LNG from both produced and purchased sources as well as the transportation performed to deliver the LNG to our customers' locations. LNG Product revenues are recognized upon delivery of the LNG to the customer, at which point the customer controls the product and the Company has an unconditional right to payment. The Company acts as a principal when using third party transportation companies and therefore recognizes the gross revenue for the supply of LNG. The Company does not differentiate between the revenue from the sale of LNG production and purchased LNG as the criteria for revenue recognition are identical. Some of our contracts contain minimum take-or-pay amounts where a customer has agreed to source a minimum volume of LNG under the contract. Take or pay revenues are only recognized when the customer has failed to take the minimum contracted volumes upon completion of the time period specified within the contract and the Company has the unconditional right to receive payment for the take or pay amount. Certain of our sales contracts contain provisions that may meet the criteria of a derivative in the event delivery is not made. These contracts are accounted for under the normal purchase normal sales exclusion under U.S. GAAP and are not measured at fair value each reporting period. Our LNG contracts are generally one to 24 months in duration.

Rental revenues

Rental revenues are generated from the rental of cryogenic equipment to our customers. Revenues related to rental of equipment are recognized under Topic 606 and not ASC 842: Leases, as 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. Rental revenues based upon day rates or monthly rates for the use of equipment as specifically established within the contract are 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. Performance obligations for rental revenue are considered to be satisfied as the rental period is completed based upon the terms of the related contract. Rental revenues from contracts with bundled pricing are based upon the fair value of the pricing components at the time the contract was negotiated and are recognized when the performance obligation has been satisfied in accordance with the contract. The stated rental rates within each contract are representative of the stand-alone rental rates at the time the contract was negotiated.

Service revenues

Service revenues are generated from engineering and field support services and represent the human resources provided to the customer to support the use of LNG at the customer’s job site. These include support and costs for mobilization and demobilization of equipment at customer sites as well as onsite technical support while customers are consuming LNG. Service revenues that are not dependent upon the gallons delivered or rental period but based upon the specific contractual terms and can be based on an event (i.e. mobilization or demobilization) or an hourly rate as specifically established within the contract and are recognized as the event is completed or work is done. Service revenues from contracts with bundled pricing are based upon the fair value of the pricing components at the time the contract was negotiated and are recognized when the performance obligation has been satisfied in accordance with the contract. The stated hourly labor rates in each contract are representative of the stand-alone hourly rates at the time the contract was negotiated.

Other revenues

Other revenues are items that, due to their nature, are disaggregated from the categories mentioned above such as expenses incurred by the Company on behalf of the customer that we contractually rebill to our customers on a cost-plus basis.

Disaggregated revenues

The table below presents revenue disaggregated by source, for the three and six months ended June 30, 2024 and 2023 (in thousands):

	*Three Months Ended*				*Six Months Ended*
	*June 30,*				*June 30,*
Revenues:	*2024*		*2023*		*2024*		*2023*
LNG Product	$	14,626	$	10,568	$	30,039	$	32,473
Rental		1,682		1,063		3,855		3,310
Service		1,693		1,100		3,617		3,166
Other		597		176		857		800
Total revenues	$	18,598	$	12,907	$	38,368	$	39,749

Table of Contents

The table below presents revenue disaggregated by geographic location, for the three and six months ended June 30, 2024 and 2023 (in thousands):

	*Three Months Ended*				*Six Months Ended*
	*June 30,*				*June 30,*
Revenues:	*2024*		*2023*		*2024*		*2023*
United States	$	17,373	$	11,162	$	35,880	$	35,185
Mexico		1,225		1,745		2,488		4,564
Total revenues	$	18,598

SEC Form 10-Q filed by Stabilis Solutions Inc.