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The Description of Business section and other parts of this Annual Report on Form 10-K (“Form 10-K”) contain
represent intentions, plans, expectations, assumptions and beliefs about future oilevents and gas commodity prices;
future government regulations,•our limited operating history;
•the effects of current and future worldwide economic conditions (particularly in developing countries) and demand for oil and natural gas and power system equipment and services;
•public health crises, such as the effectsongoing COVID-19 outbreak, which could further deteriorate economic conditions;
future energy industry fundamentals, including future demand for power system equipment•increased labor costs, and services;
future benefits•major health and safety incidents relating to our customersbusiness;
•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;
future growth rates for our services and products;
Our business is subject to significant risks and uncertainties of which you should be aware before making an investment decision in our business. Below is a bulleted summary of our principal risk factors, however this list does not fully represent all of our known risk factors. You should take time to carefully review and consider the degreefull discussion of our risk factors (See Item 1A. Risk Factors).
expectations regarding end-users purchasing•We expect to be dependent on our more technologically-advanced servicesprimary building contractor and products;
anticipated timing•We are relying on third party engineers to estimate the future rated capacity and success of commercialization andperformance capabilities of servicesour existing and products under developmentfuture facilities, and related start-upthese estimates may prove to be inaccurate;
future opportunities for new products•Competition in the LNG industry is intense, and projected research and development expenses;
future levelssome of our capital expenditures;
deferred tax assets;
anticipated results•A major health and safety incident involving LNG or the energy industry more broadly or relating to our business may lead to more stringent regulation of LNG operations or the energy business generally, could result in greater difficulties in obtaining permits, including under environmental laws, on favorable terms, and may otherwise lead to significant liabilities and reputational damage;
future cash needs•Existing and future availabilityenvironmental, health and safety laws and regulations could result in increased compliance costs or additional operating costs or construction costs and restrictions;
expected net revenues, income from•We may incur losses over the next several years and may never achieve or maintain profitability;
expected gross margins•Following the Share Exchange, the market price of our common stock declined, and we expect the stock price of our common stock to continue to be volatile;
changing tax regulations both domestic and foreign;
2
is not expected to have access in the near-term so LNG can be used to provide energy to these areas. We believe we are currently one of the largest small-scale LNG exporters to Mexico with multiple truckloads crossing the border from our George West Liquefier daily. Primary end markets for LNG in Mexico include the industrial, mining, and commercial sectors. We believe that the demand for LNG will continue to grow as the population and economy grow. Year Ended December 31, 2018 Year Ended December 31, 2017 BOMAY MIEFE BOMAY MIEFE Investment at the beginning of year $ 10,737 $ 210 $ 10,450 $ 213 Equity income (loss) 953 - 434 - Loss on liquidation of investment - (210 ) - - Distributions received from joint ventures (1,127 ) - (780 ) - Foreign currency translation (583 ) - 633 (3 ) Investment at the end of year $ 9,980 $ - $ 10,737 $ 210 AETI sales to joint ventures $ - $ - $ 12 $ - Mexico. We off-pipeline natural gas requirements throughout North America is unique among LNG providers. We believe our Canada, Stabilis maintains an import and export license from the United States Department of Energy (“DOE”) and from the National Energy Board of Canada (“NEB”). We maintain an Emergency Response Action Plan (“ERAP”) with Transport Canada. In support of our business in Mexico, we maintain an export license natural gas. Location General Description Approximate Approximate Square Owned/Leased Houston, Texas Company headquarters, administration 0.1 500 Leased Brazil - Macaé M&I Brazil offices and shop services 0.6 24,756 Leased Rio M&I Brazil offices and shop services 0.15 6,460 Leased Belo Horizonte M&I Brazil offices 0.1 2,152 Leased Foreign joint venture operations: Xian, Shaanxi, China BOMAY Electric Industries offices and manufacturing 4.1 100,000 Owned “SLNG.” Prior to the Share Exchange, it traded under the symbol “AETI.” Plan Category Number of securities to be issued upon exercise of outstanding rights (1) Weighted-average exercise price of outstanding options (2) Number of Securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (1)) (3) (a) Equity compensation plans approved by security holders 5,031 $ - 586,018 Equity compensation plans not approved by security holders - - - Total 5,031 $ - 586,018 The following discussion BOMAY MIEFE 2018 2017 2018 2017 Assets: (in thousands) (in thousands) Total current assets $ 59,124 $ 50,000 $ - $ 121 Total non-current assets 5,742 3,457 - 15 Total assets $ 64,866 $ 53,457 $ - $ 136 Liabilities and equity: Total liabilities 38,732 25,598 - 198 Total joint ventures’ equity 26,134 27,859 - (62 ) Total liabilities and equity $ 64,866 $ 53,457 $ - $ 136 BOMAY MIEFE 2018 2017 2018 2017 (in thousands) (in thousands) Revenue $ 37,244 $ 26,168 $ - $ 89 Gross Profit $ 7,878 $ 5,654 $ - $ 23 Earnings $ 2,381 $ 1,084 $ - $ 55 BOMAY MIEFE 2018 2017 2018 2017 Investments in foreign joint ventures: (in thousands) (in thousands) Balance at beginning and end of year $ 2,033 $ 2,033 $ - $ - Undistributed earnings: Balance at beginning of year 7,967 8,313 - - Equity in earnings (loss) 953 434 - - Dividend distributions (1,127 ) (780 ) - - Balance at end of year 7,793 7,967 - - Foreign currency translation: Balance at beginning of year 737 104 210 213 Change during the year (583 ) 633 (210 ) (3 ) Balance at end of year 154 737 - 210 Total investments at end of year $ 9,980 $ 10,737 $ - $ 210 Year Ended December 31 2018 2017 Net revenues $ 7,591 $ 5,716 Cost of revenue 5,677 4,566 Gross Profit 1,914 1,150 Operating Expenses: General and administrative 3,335 4,194 Selling 410 490 Total operating expenses 3,745 4,684 Foreign joint ventures: Equity income from joint ventures 953 656 Loss on liquidation of investment in MIEFE (210 ) - Joint venture operations' related expenses (142 ) (250 ) Net equity income from foreign joint venture operations 601 406 Loss from operations (1,230 ) (3,128 ) Other income (expense): Interest expense (24 ) (50 ) Other, net (116 ) 26 Total other expense (140 ) (24 ) Loss from continuing operations before income tax expense (benefit) (1,370 ) (3,152 ) Income tax provision (benefit) 291 (2,955 ) Net loss from continuing operations (1,661 ) (197 ) Loss from discontinued operations, including gain on the sale of $4,521 (896 ) (2,031 ) Net loss (2,557 ) (2,228 ) Dividend and accretion of discount on redeemable convertible preferred stock (360 ) (356 ) Net loss attributable to common stockholders $ (2,917 ) $ (2,584 ) December 31, 2018 December 31, 2017 (in thousands, except percentages and ratios) Working capital $ 1,201 $ 1,032 Current ratio 1.4 to 1 1.1 to 1 Total Debt $ 200 $ 6,148 Debt as a percent of total capitalization 3 % 38 % Consolidated net worth* $ 11,716 $ 14,521 Year Ending December 31, Amount (In thousands) 2019 $ 216 2020 224 2021 233 2022 200 $ 873 future. To the Board of Directors and December 31, December 31, 2018 2017 Assets Current assets: Cash and cash equivalents $ 2,124 $ 2,289 Accounts receivable-trade, net 911 794 Inventories, net 69 2 Contract assets 344 592 Prepaid expenses and other current assets 433 151 Current assets held for sale - 12,866 Total current assets 3,881 16,694 Property, plant and equipment, net 552 598 Advances to and investments in foreign joint ventures 9,980 10,947 Other assets 146 116 Assets held for sale - 7,566 Total assets $ 14,559 $ 35,921 Liabilities, Convertible Preferred Stock and Stockholders’ Equity Current liabilities: Current portion of long-term note payable $ - $ 270 Short-term note payable 202 203 Accounts payable and accrued liabilities 2,478 1,719 Liabilities held for sale - 13,471 Total current liabilities 2,680 15,663 Long-term note payable - 5,524 Deferred compensation 163 213 Total liabilities 2,843 21,400 Commitments and contingencies (Note 13) Convertible preferred stock: Redeemable convertible preferred stock, Series A, net of discount of $502 at December 31, 2018 and $562 at December 31, 2017; $0.001 par value, 1,000,000 shares authorized, issued and outstanding at December 31, 2018 and December 31, 2017 4,498 4,438 Stockholders’ equity: Common stock; $0.001 par value, 50,000,000 shares authorized, 9,413,245 and 8,850,532 shares issued and 9,219,270 and 8,669,650 shares outstanding at December 31, 2018 and December 31, 2017 9 9 Treasury stock, at cost 225,608 and 180,882 shares at December 31, 2018 and December 31, 2017 (965 ) (916 ) Additional paid-in capital 14,014 13,455 Accumulated other comprehensive (loss) income (417 ) 401 Accumulated deficit; including accumulated statutory reserves in equity method investments of $2,809 at both December 31, 2018 and December 31, 2017 (5,423 ) (2,866 ) Total stockholders’ equity 7,218 10,083 Total liabilities, convertible preferred stock and stockholders’ equity $ 14,559 $ 35,921 Year Ended December 31, 2018 2017 Net revenues $ 7,591 $ 5,716 Cost of revenue 5,677 4,566 Gross profit 1,914 1,150 Operating expenses: General and administrative 3,335 4,194 Selling 410 490 Total operating expenses 3,745 4,684 Foreign joint ventures: Equity income from joint ventures 953 656 Loss on liquidation of investment in MIEFE (210 ) - Joint venture operations' related expenses (142 ) (250 ) Net equity income from foreign joint venture operations 601 406 Loss from operations (1,230 ) (3,128 ) Other income (expense): Interest expense (24 ) (50 ) Other income (expense) (116 ) 26 Total other expense (140 ) (24 ) Loss from continuing operations before income tax expense (benefit) (1,370 ) (3,152 ) Income tax provision (benefit) 291 (2,955 ) Net loss from continuing operations (1,661 ) (197 ) Loss from discontinued operations, including gain on the sale of $4,521 (896 ) (2,031 ) Net loss (2,557 ) (2,228 ) Dividend and accretion of discount on redeemable convertible preferred stock (360 ) (356 ) Net loss attributable to common stockholders $ (2,917 ) $ (2,584 ) Loss per common share - basic and diluted: Continuing operations $ (0.23 ) $ (0.06 ) Discontinued operations (0.10 ) (0.24 ) Consolidated operations $ (0.33 ) $ (0.30 ) Weighted - average number of common shares outstanding: Basic and diluted 8,892,585 8,525,645 Year Ended December 31, 2018 2017 Net loss $ (2,557 ) $ (2,228 ) Foreign currency translation adjustments (1,028 ) 403 Reclassification adjustment for loss on liquidation of investment in MIEFE 210 - Total comprehensive loss $ (3,375 ) $ (1,825 ) Common Stock Shares Amount Treasury Stock Additional Paid-in Capital Accumulated Other Comprehensive Income Accumulated Deficit Total Stockholders’ Equity Balance at December 31, 2016 8,335,968 $ 8 $ (863 ) $ 12,613 $ (2 ) $ (638 ) $ 11,118 Common stock issued to ESPP 7,151 - 13 - - 13 Common stock issued for accrued dividends on preferred stock 82,268 - - 150 - - 150 Common stock issued as payment of preferred stock 164,535 1 - (1 ) - - - Accretion of discount on preferred stock - - - (56 ) - - (56 ) Treasury stock purchase (17,342 ) - (53 ) - - - (53 ) Restricted stock units 97,070 - - 371 - - 371 Net loss - - - - - (2,228 ) (2,228 ) Warrants issued as part of debt refinancing - - - 365 - - 365 Other comprehensive income - - - - 403 - 403 Balance at December 31, 2017 8,669,650 $ 9 $ (916 ) $ 13,455 $ 401 $ (2,866 ) $ 10,083 Common stock issued to ESPP 7,614 - - 10 - - 10 Common stock issued as payment of preferred stock 281,858 - - - - - - Accretion of discount on preferred stock - - - (60 ) - - (60 ) Treasury stock purchase (44,726 ) (49 ) - - - (49 ) Restricted stock units 304,874 - - 609 - - 609 Net loss - - - - (2,557 ) (2,557 ) Other comprehensive income - - - (818 ) - (818 ) Balance at December 31, 2018 9,219,270 $ 9 (965 ) $ 14,014 $ (417 ) $ (5,423 ) $ 7,218 Year Ended December 31, 2018 2017 Cash flows from operating activities: Net loss $ (2,557 ) $ (2,228 ) Adjustments to reconcile net loss to net cash used in operating activities: Gain on sale of discontinued operations (4,521 ) - Distributions in excess of equity in income from joint ventures 174 125 Depreciation and amortization 517 841 Stock based compensation 609 373 Deferred income taxes - (3,033 ) Deferred compensation costs (50 ) (47 ) Provision for bad debts 37 (127 ) Loss on liquidation of investment in MIEFE 210 - Gain on disposal of property, plant and equipment 154 - Amortization of debt issuance costs and debt discounts 706 86 Provision for obsolescence of inventory - 66 Change in operating assets and liabilities: Accounts receivable, net 2,654 750 Inventories 125 (212 ) Contract assets 2,885 (787 ) Prepaid expenses and other current assets (164 ) (208 ) Accounts payable and accrued liabilities (5,057 ) 2,915 Contract liabilities 960 1,584 Net cash used in operating activities (3,318 ) 98 Cash flows from investing activities: Purchases of property, plant and equipment and other assets (257 ) (410 ) Net cash proceeds from sale of assets of M&I Electric 10,118 - Redemption of certificates of deposit - 457 Net cash provided by investing activities 9,861 47 Cash flows from financing activities: Proceeds from sale of common stock, preferred stock, and warrants 10 10 Treasury stocks purchase (49 ) (53 ) Proceeds from long-term notes payable - 7,000 Proceeds from short-term notes payable - 200 Payments on revolving credit facility - (1,500 ) Payments on long-term notes payable (6,500 ) (4,200 ) Payments on short-term notes payable - (500 ) Other financing activities, net - (427 ) Net cash (used in) provided by financing activities (6,539 ) 530 Effect of exchange rates on cash (169 ) (4 ) Net increase (decrease) in cash and cash equivalents (165 ) 671 Cash and cash equivalents, beginning of period 2,289 1,618 Cash and cash equivalents, end of period $ 2,124 $ 2,289 Supplemental disclosures of cash flow information: Interest paid $ 616 $ 772 Income taxes paid $ 291 $ 78 Non-cash investing and financing transactions: Warrants issued as part of debt refinancing $ - $ 365 Issuance of shares of common stock on accrued preferred dividends payables $ 300 $ 450 July 26, 2019. The accompanying consolidated financial statements include the accounts of In the Notes to Consolidated Financial Statements, all dollar amounts in tabulations are in thousands, unless otherwise indicated. in the Preparation of the Consolidated Financial Statements (o) Foreign Currency Gains and Losses subsidiaries, denominated in foreign currency, are translated into United States dollars at exchange rates in effect at the consolidated balance sheet date and net sales and expenses are translated at the average exchange rate for the period. Related translation adjustments are reported as comprehensive income (loss), net of deferred income taxes, which is a separate component of stockholders’ equity, whereas gains and losses resulting from foreign currency transactions are included in results of operations. adoption is applied on a prospective basis. December 31, 2018 December 31, 2017 (in thousands) Raw materials $ 53 $ 2 Work-in-process $ 16 $ - Total inventories $ 69 $ 2 Category Estimated 2018 2017 (in thousands) Buildings and improvements 15 – 25 $ 146 $ 54 Office equipment and furniture 2 – 7 133 112 Automobiles and trucks 2 – 5 28 33 Machinery and shop equipment 2 – 10 476 568 Total $ 783 $ 767 Less: accumulated depreciation and amortization (231 ) (169 ) Total $ 552 $ 598 2018 2017 Continuing Operations: (in thousands) Cost of revenue $ 146 $ 84 General and administrative expenses 133 113 Discontinued operations 238 644 $ 517 $ 841 2020. The Company BOMAY MIEFE 2018 2017 2018 2017 Assets: (in thousands) (in thousands) Total current assets $ 59,124 $ 50,000 $ - $ 121 Total non-current assets 5,742 3,457 - 15 Total assets $ 64,866 $ 53,457 $ - $ 136 Liabilities and equity: Total liabilities 38,732 25,598 - 198 Total joint ventures’ equity 26,134 27,859 - (62 ) Total liabilities and equity $ 64,866 $ 53,457 $ - $ 136 BOMAY MIEFE 2018 2017 2018 2017 (in thousands) (in thousands) Revenue $ 37,244 $ 26,168 $ - $ 89 Gross Profit $ 7,878 $ 5,654 $ - $ 23 Earnings $ 2,381 $ 1,084 $ - $ 55 BOMAY* MIEFE 2018 2017 2018 2017 Investments in foreign joint ventures: (in thousands) (in thousands) Balance at beginning and end of year $ 2,033 $ 2,033 $ - $ - Undistributed earnings: Balance at beginning of year 7,967 8,313 - - Equity in earnings (loss) 953 434 - - Dividend distributions (1,127 ) (780 ) - - Balance at end of year 7,793 7,967 - - Foreign currency translation: Balance at beginning of year 737 104 210 213 Change during the year (583 ) 633 (210 ) (3 ) Balance at end of year 154 737 - 210 Total investments at end of year $ 9,980 $ 10,737 $ - $ 210 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 is necessary at December 31, December 31, 2018 2017 (in thousands) United States $ (2,990 ) $ (3,556 ) Foreign 1,620 404 Discontinued operations (896 ) (2,031 ) $ (2,266 ) $ (5,183 ) December 31, 2018 2017 (in thousands) Current provision: Federal $ - $ - State - - Foreign 291 78 Total current provision $ 291 $ 78 Deferred benefit: Federal $ - $ (3,033 ) State - - Foreign - - Total deferred benefit - (3,033 ) $ 291 $ (2,955 ) December 31, 2018 2017 (in thousands) Deferred tax assets: Accrued liabilities $ 11 $ 136 Deferred compensation 642 520 Allowance for doubtful accounts - 71 Inventory - 73 Net operating loss 3,430 2,783 Property and equipment - 71 Equity in foreign earnings - - Deferred tax assets 4,083 3,654 Valuation allowance (4,083 ) (3,654 ) Net deferred tax assets $ - $ - December 31, 2018 2017 (in thousands) Benefit from U. S. federal statutory rate $ 287 $ 1,071 Effect of discontinued operations 188 691 Change in valuation allowance (429 ) 4,734 Accrual to return adjustments and other - 235 Foreign income taxes included in equity earnings (113 ) 496 Foreign income taxes (178 ) - Non-deductible business meals and entertainment expenses (46 ) (45 ) Effect of state income taxes - 32 Change in enacted tax rate - (4,259 ) $ (291 ) $ 2,955 2018 2017 (In thousands) Short-term note payable $ 202 $ 203 Current portion of long-term notes payable - 270 Long-term notes payable - 6,230 Principal balance of notes payable 202 6,703 Warrants issued as part of debt refinancing - (365) Loan cost capitalization - (341) Total notes payable, net $ 202 $ 5,997 Number of warrants 500,000 Exercise price $ 2.26 Expected volatility of underlying stock 72 % Risk-free interest rate 2.08 % Dividend yield 0 % Expected life of warrants 5 years Weighted-average fair value of warrants $ 0.73 Expiration date November 13, 2022 through 2025. M&I Brazil leases offices and facilities in Year Ending December 31, Amount (In thousands) 2019 $ 216 2020 224 2021 233 2022 200 $ 873 Units Weighted Average Fair Value Per RSU Unvested restricted stock units at December 31, 2016 218,412 4.28 Awarded 56,759 1.48 Vested (112,340 ) 3.99 Forfeited (2,289 ) 4.41 Unvested restricted stock units at December 31, 2017 165,120 $ 3.40 Awarded 91,000 1.35 Vested (154,874 ) 2.87 Forfeited (96,215 ) 2.51 Unvested restricted stock units at December 31, 2018 5,031 $ 2.92 An upfront fee payment of $131 thousand became due July 1, 2020 and the remaining outstanding lease obligation of approximately $648 thousand is due by January 25, 2021. The Number of warrants 325,000 Exercise price $ 6.62 Expected volatility of underlying stock 74 % Risk-free interest rate 1.62 % Dividend yield 0 % Expected life of warrants 8 years Weighted-average fair value of warrants $ 3.11 Expiration date May 2, 2020 Year Ended December 31, 2018 2017 Convertible preferred stock 2,212,389 2,212,389 Stock warrants 825,000 825,000 Restricted units 5,031 165,210 3,042,420 3,202,509 Intangible Assets at December 31, 2017 Useful Cost Accumulated Net Value (in thousands) Intellectual property 3 $ 322 $ 322 $ - License 5 358 118 240 License - 218 - 218 $ 898 $ 440 $ 458 The contractual terms of the Current assets: Accounts receivable-trade, net $ 5,266 Inventories, net 1,325 Contract assets 5,841 Prepaid expenses and other current assets 434 Total current portion of assets held for sale 12,866 Property, plant and equipment, net 6,323 Intangibles 458 Retainage receivables 785 Total non-current assets held for sale 7,566 Total assets held for sale $ 20,432 Liabilities Current liabilities: Accounts payable and accrued liabilities $ 11,616 Short-term note payable 150 Contract liabilities 1,792 Total liabilities held for sale $ 13,558 Company. The following Year ended December 31, 2018 2017 Net sales $ 17,899 $ 41,414 Cost of sales 20,358 40,136 Selling, general and administrative expenses 1,660 2,255 Interest expense 1,298 1,054 Loss from discontinued operations (5,417 ) (2,031 ) Gain on sale of discontinued operations 4,521 - Loss from discontinued operations $ (896 ) $ (2,031 ) Earnings (loss) per share information: Basic and diluted $ (0.10 ) $ (0.24 ) Assets sold: Current assets: Accounts receivable-trade, net $ 3,360 Inventories, net 1,145 Contract assets 2,957 Prepaid expenses and other current assets 117 Total current portion of assets held for sale 7,579 Property, plant and equipment, net 5,937 Intangibles 497 Total non-current assets held for sale 6,506 Total assets held for sale $ 14,013 Liabilities assumed: Current liabilities: Accounts payable and accrued liabilities $ 5,664 Contract liabilities 2,752 Total current liabilities 8,416 Net assets sold 5,597 Proceeds received after payment of transaction costs of $2,180 10,118 Gain on disposition $ 4,521 2018 2017 (in thousands) Depreciation $ 238 $ 644 Capital expenditures 85 738 January 1, 2020 through January 31, 2021. Under the terms and conditions of the agreement, Mr. Aivalis receives an annualized base salary of $325,000 and an annual bonus for 2019 service equal to $260,000 payable in 2020. Mr. Aivalis is also eligible to receive an annual bonus for 2020 service set as 50% of his base salary on meeting performance objectives set by the Board of Directors, with and opportunity of receiving a stretch bonus in excess of the target amount. Mr. Aivalis will also receive a car allowance of $750 per month, a term life insurance policy, a professional network fee, and employee benefits available to the Company's other executive employees. 2018 2017 (in thousands) Services $ 6,455 $ 5,093 Products 1,136 623 $ 7,591 $ 5,716 2018 2017 (in thousands) Trade accounts payable $ 260 $ 668 Other accounts payable 187 136 Accrued salaries and compensation 647 454 Accrued payroll taxes 121 120 Other accrued non-income related taxes 89 67 Accrued legal and professional fees 979 156 Deferred revenue 60 27 Other accrued liabilities 135 91 $ 2,478 $ 1,719 Background and Corporate StructureAmerican Electric Technologies,“AETI”“Stabilis”, “our”, “us” or “we”) was incorporated on October 21, 1996are an energy transition company that provides turnkey clean energy production, storage, transportation and fueling solutions including using liquefied natural gas (“LNG”) and hydrogen to multiple end markets across North America. We have safely delivered over 250 million gallons of LNG through more than 25,000 truck deliveries during our 16-year operating history, which we believe makes us one of the largest and most experienced small-scale LNG providers in North America. We define “small-scale” LNG production to include liquefiers that produce less than 1,000,000 LNG gallons per day (3,788 cubic meters per day) and “small-scale” LNG distribution to include distribution by trailer or tank container (up to 15,000 LNG gallons) or marine vessels that carry less than 8,000,000 LNG gallons (approximately 30,000 cubic meters). We provide 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. Our customers use LNG and hydrogen as a Florida corporation. On May 15, 2007, we completedpartner fuel for renewable energy, and as an alternative to traditional fuel sources, such as distillate fuel oil and propane, to reduce harmful environmental emissions and lower fuel costs. Our customers also use LNG as a business combination (the “M&I Merger”) with M&I Electric Industries, Inc. (“M&I”“virtual pipeline” solution when natural gas pipelines are not available or “M&I Electric”), a Texas corporation,are curtailed.changed our name to American Electric Technologies, Inc. Our principal executive offices are located at 6575 West Loop, Suite 500, Houston Texas 77401 and our telephone number is 832-241-6330.Our corporate structure currently consists of American Electric Technologies, Inc., which owns 100% of M&I Electric Industries, Inc., including its wholly-owned subsidiary, South Coast Electric Systems, LLC (“SCES”) and M&I Electric Brazil Sistemas e Servicios em Energia LTDA (“M&I Brazil”). On August 12, 2018, all of the U.S. business operations of M&I Electric Industries, Inc. based in the United States (“U.S.”) were sold to an affiliate of Myers Power Products, Inc. (“Myers”) Accordingly, 100% of the company’s ongoing business is from international operations. See Note 16 of the Notes to Consolidated Financial Statements for further discussion on this transaction. Our operations are currently conducted through our Brazilian subsidiary, and our interest in a Chinese joint venture and corporate operations in Houston, Texas.Products and ServicesWe have provided maintenanceinstrumentation construction, installation and repairs our customersservice to the marine, power generation, oil and gas, and broad industrial market segments in Brazil since 2014.Brazil. Our products are used to safely distribute and control the flow of electricity from a power generation source (e.g.to mechanical devices utilizing the power. We also offer a range of electrical and instrumentation turnarounds, maintenance and renovation projects.generator, turbinefuel and other fuel oils) and propane, among others to provide both environmental and economic benefits. We believe that these alternative fuel markets are large and provide significant opportunities for LNG substitution. EIA
Reported
Gallons
(Billions)Cubic
Meters
(Millions)LNG Gallon
Equivalent
(Billions)2018
(Billions)% 2018
Combined% 2030
CombinedDistillate Fuel Oil 63.4 408 107.7 Propane 13.1 54.7 14.4 Combined 76.5 462.7 122.1 0.5 0.4% 1.9 1.6% 
grid)owned peak shaving plants, 2) natural gas/helium processing facilities, and 3) other merchant LNG production facilities similar to whatever mechanical deviceour George West Liquefier. We have contracts with these production sources that allow us to purchase LNG for our customers as required and without firm or long-term volume commitments. We can also purchase hydrogen from sources across the country. We believe that our third-party supply network is the largest and most complete in North America allowing us access to approximately 500 million LNG gallons (1.9 million cubic meters) of capacity annually on an as required basis. Occasionally the LNG or hydrogen we obtain from third parties may be purchased under take-or-pay contracts that require us to purchase minimum volumes. In situations where firm take or pay contracts are required, we try to support them with back-to-back customer purchase agreements. As of December 31, 2020, we do not have take-or-pay LNG or hydrogen supply contracts matched to contracted customer demand. As of December 31, 2019, we had one firm take-or-pay LNG supply contract. In 2020, we purchased approximately 43% of our LNG from third-party suppliers and we produced the remainder at the George West Liquefier.Asset Type Qty Description Mobile Storage and Vaporization Units 93 Located on customer sites for storage and delivery of LNG fuel Transport Trailers 41 Deliver LNG from production sources to customer sites Mobile Truck Fuelers 7 Mobile fueling station used to fill heavy duty trucks Other Cryogenic Assets 9 Includes hose reels, pump skids, generators, and other Total 150 (drilling machinery, motors,providers can also utilizes LNG to provide clean distributed power when access to an electrical grid is limited, additional power is needed during times of peak load, or power infrastructure is damaged due to storms such as hurricanes or wildfires. LNG usage in utility and pipeline applications varies significantly by project type. Hydrogen and methane blends are currently being tested by pipelines as a method of reducing emissions from pipeline gas.process equipment,high horsepower engine equipment. In addition to fuel cost benefits, LNG can help reduce emissions at mines that are often located in environmentally sensitive areas. Based on our experience, power generation and heating applications at mines can consume 10,000 to 100,000 LNG gallons per day.grid, etc.) at lowsites. However, a large portion of Mexico does not have access to these pipelines and medium voltages.markets.customers. These services include new construction as well as electrical and instrumentation turnarounds, maintenance and renovation projects. Applications include installation of switchgear, AC and DC motors, drives, motor controls, lighting systems and high voltage cable.The principal markets that we serve in Brazil include:Upstream oil and gas refers to the exploration and production of oil and natural gas. The Company serves customers primarily in the offshore production segment of the market.Midstream oil and gas is primarily related to oil and gas transportation, including oil and gas pipelines and compression and pumping stations. The Company also has a potential customer base in natural gas fractionation (separation), cryo, natural gas to liquids, and other natural gas related plants.Downstream oil and gas includes oil refining and petrochemical plants, as well as Liquefied Natural Gas (LNG) plants, export facilities, and storage facilities.Marine including Floating Production Storage and Offloading such as platform supply vessels offshore supply vessels, tankers and other various work boats, typically up to 300 ft. in length.Industrial, including non-oil and gas industrial markets such as steel, mining and power generation.Foreign Joint VentureWe use a foreign joint venture to accommodate business in China. We believe Through our foreign joint venture provides a prudent way to diversify and reduce the risk of international expansion, capitalize on the strengths and the relationships of our foreign joint venture partners with potential customers, and achieve competitive advantages. Our ownership interests in our foreign joint venture is accounted for under the equity method of accounting and results reported in equity income.China. In March 2006, M&I Electric entered into a joint venture agreement with Baoji Oilfield Machinery Co., Ltd., (“BOMCO”), a wholly-owned subsidiary of the China National Petroleum Corporation, and AA Energies, Inc. of Houston, Texas, which markets oilfield equipment, to form BOMAY Electric Industries Co., Ltd. (“BOMAY”), as an equity joint venture limited liability company organized in China. M&I is a 40% interest owner in BOMAY, with 51% being owned by BOMCO and the remaining 9% owned by AA Energies, Inc. BOMAY manufactureswe provide power and control systems for the land drilling rigs. M&I has invested 16 million Yuan (approximately $2 million USD)market in this joint venture in which M&I provides technologyChina.servicesenvironmentally attractive product. Stabilis believes that many of our customers use LNG because it can significantly reduce harmful carbon dioxide, nitrogen oxide, sulfur, particulate matter, and other emissions as compared to BOMAY. Eachother hydrocarbon-based fuels. LNG is also an important partner fuel for renewables such as solar and wind power and will be a key component of the BOMAY investors mayenergy transition to more sustainable sources of energy. We also believe that the combination of cost benefits and environmental benefits makes LNG a compelling fuel source for many energy consumers. We believe that LNG can be requireddelivered to guaranteecustomers at prices that are lower and more stable than what they would pay for distillate fuels or propane. In addition, several of our customers have reported that LNG as a fuel decreases their operating costs by reducing equipment maintenance requirements and providing more consistent burn characteristics.bank loansmost experienced in the small-scale LNG industry. We believe that we can leverage this proven LNG execution experience to grow our business in existing markets and expand our business into new markets including the nascent hydrogen market. The production and distribution of BOMAYhydrogen shares many attributes with LNG and we believe hydrogen will be a safe fuel and increasingly cost effective as acceptance grows.proportiona program that is tailored to their investment. No guarantees have been provided by The Company at this time. The joint venture had an initial 12-year term which expired in 2018. In March 2018, BOMAY’s Board of Directors approved a ten-year extensionconsumption needs. We believe we own one of the joint venture agreement.3In November 2017, the Company executedlargest fleets of cryogenic transportation, storage, and vaporization equipment in North America. We can provide our customers LNG and related services for a letterwide variety of intent to divest of its ownership interest in M&I Electric Far East PTE Ltd. (“MIEFE”), a joint venture established in Singapore. The divestiture was completed in 2018.The following is selected financial information of the Company’s investmentapplications almost anywhere in the foreign joint venture as ofUnited States, Canada and for the years ended December 31, 2018 and 2017:incurred approximately $0.14 million and $0.25 million of employee costs relatedbelieve that our ability to managing our foreign joint ventures during the years ended December 31, 2018 and 2017, respectively. We have included such costs in Foreign Joint Ventures Operation’s Related Expenses in the accompanying consolidated statements of operations.International SalesDuring 2018 and 2017, 100% of the Company’s revenues from continuing operations relates to services provided and systems sold or shipped into international markets from Brazil. M&I Brazil’s sales are generally transacted in Brazilian Reals.Marketing Our business is generally obtained throughbe a competitive bid process where the lowest bid from pre-qualified suppliers is awarded the project. Depending on the market segment, we either sell directly to the end user or owner, a shipyard or rig user, or, sell to an Engineering, Procurement, and Construction (EPC) firm representing the end project owner or an offshore vessel company.CompetitionOur products and services are sold in highly competitive South American markets. We compete in“one stop shop” for all of our markets and regions with a number of companies, some of which have financial and other resources comparable to or greater than us. Due to the demanding operating conditions in the energy sector and the high costs associated with project delays and equipment failure, we believe customers in this industry prefer suppliers with a track record of proven, reliable performance in their specific energy related project type. We seek to build strong long-term relationships with our customers by providing high-quality, efficient and reliable products and services, developing new products and services and responding promptly to our customers’ needs.The principal competitive factors in our markets are product and service quality, reliability, lead time, price, technical expertise and reputation.principal competitive strengths include the following:Our powerLNG experience allows us to expand our comprehensive offerings using hydrogen.controlcapabilities into new markets. Stabilis believes that our experience producing and drive systemsdistributing LNG can be custom-designedleveraged to grow into new geographic and are builtservice end markets. Since our founding we have expanded our service area across the United States, northern Mexico, and western Canada. We have also expanded our industry coverage to include multiple new end markets and customers. We accomplished this expansion into new markets by leveraging our LNG production and distribution expertise, in combination with our cryogenic engineering and project development capabilities, to meet new customer needs.customers’ specific requirements.Our commitmentshareholders by becoming the leading vertically integrated small-scale LNG solution provider in the Americas. We intend to providing quality productsaccomplish this objective by implementing the following growth strategies:services, fair pricing, innovationmarkets we serve could benefit from localized LNG supply sourcing. To this end, we believe that expanding our LNG liquefaction footprint throughout North America will enhance our competitive position by lowering our delivered cost and customerby creating a comprehensive and reliable supply network for our customers. We intend to leverage our liquefier development, construction, and operations experience to develop new liquefiers in markets that require LNG supply. We plan to both build new liquefiers and acquire existing liquefiers based on whichever offers the best service isto our customers and returns to our investors.foundationUnited States and parts of Mexico and Canada. We plan to expand our distribution capabilities by adding equipment to our fleet, including the long-standing customer relationshipshigh-flow, high pressure vaporization equipment required by pipelines and turbine powered pressure pumping spreads. In addition, we plan to explore opportunities that expand our geographic reach and industry expertise, including acquisitions of companies that alreadyenjoyplan to explore opportunities to expand into the compressed natural gas (“CNG”) and hydrogen markets to provide comprehensive energy transition solutions to our customers.an attractive customer base.Our operationsour strategy to expand our LNG production business, Stabilis will focus the expansion of our LNG distribution business in Brazil are led by an experienced management team with a proven track record.the United States and Mexico. We believe that supporting our liquefiers with our distribution capabilities optimizes our asset base and our ability to service our customers. We also plan to expand our third-party LNG supply network in these markets so we can provide our customers with comprehensive and reliable service.experiencedevelopment of our management team provides usthe infrastructure required to deliver LNG directly to their power generation and other assets. We expect that these markets will require some combination of LNG production or sourcing, local logistics, distribution services and field support, paired with an in-depth understanding of our customers’ needs and enhancesStabilis-owned power generation assets in some instances.customer-driven solutions.Hydrogen to our customers. Stabilis believes that the market opportunity for zero emissions hydrogen fuel is growing. We are engaged with customers to use hydrogen and hydrogen/methane blends (“Hythane”) in applications including marine power generation, distributed power generation, and pipelines. We will continue to build our technical and operating expertise to bring safe and reliable hydrogen fueling solutions to our customers. We will also seek to add hydrogen capable production, transportation, and distribution assets to our equipment fleet to support our customers.management has fosteredbusiness strategies.culturevariety of loyalty, resultingfactors, including, among others, cost, supply, availability, quality, emissions, and safety of the fuel. Location is often a primary competitive factor as transportation costs limit the distance LNG can be hauled at competitive prices. We believe we compare favorably with many of our competitors on the basis of these factors; however, some of our competitors have longer operating histories and market-based experience, larger customer bases, more expansive brand recognition, deeper market penetration and substantially greater financial, marketing and other resources than our business. As a result, they may be able to respond more quickly to changes in high employee retention rates for our professionalcustomer preferences, legal requirements or other industry or regulatory trends, devote greater resources to the development, promotion and technical employees.The Company has multiplesale of their products, adopt more aggressive pricing policies, dedicate more effort to infrastructure and systems development in support of their business or product development activities and exert more influence on the regulatory landscape that impacts the natural gas fuel market. Additionally, utilities and their affiliates typically have unique competitive advantages, for our productsincluding a lower cost of capital, substantial and services:Technically trained service personnel;ISO 9000Ex certified motor repair facility;Established, close working foreign relationships;Able to provide integrated solution by self-performing our technical products and electrical & instrumentation construction work;4We had a number of trademarks and trade names utilized withStabilis markets our products and services that were written offprimarily through our direct sales force, which includes sales representatives covering all of our major geographic and customer markets, as well as attendance at trade shows and participation in industry conferences and events. Our technical, sales and marketing teams also work closely with the sale of the U.S operations in 2018.Environmental LawsWe are subject to various foreign,federal, state and local laws enactedgovernment agencies to provide education about the value of natural gas as a fuel and to keep abreast of proposed and newly adopted regulations that affect our industry.protectionlocal distribution infrastructure in the United States and Mexico to support utilities during times of peak heating demand from November through March. Revenues are generally lower from April to October during the environment.months when heating demand is seasonally lower.such laws.all environmental and other governmental regulations. Our compliance has, to date, had no material effect on our capital expenditures, earnings, or competitive position.ResearchDevelopment CostsNo researchOperation of LNG Liquefaction Plants.development costs were incurredoperate LNG liquefaction plants, Stabilis must apply for facility permits or licenses that address many factors, including storm water and wastewater discharges, waste handling, and air emissions related to develop new productsproduction activities and equipment operation. The construction of LNG plants must also be approved by local planning boards and fire departments.energy-related marketsbusiness in Brazil.2018, we2020, Stabilis had 98 full time268 employees, 220 of whom were full-time employees. We believe our relations with employees are satisfactory. None of our employees are currently subject to a collective bargaining agreement.Brazil plus 4 employeesthe United States, specifically a non-provisional patent application for the use of natural gas for well-enhancement and a non-provisional patent application for natural gas deliquification. The Company has four pending foreign patent applications (two in Canada and two in Mexico). Additionally, the Company owns or has exclusive license to five U.S. and one foreign (Mexico) patents. The last patent to expire in the U.S. Part-time employees are hired as necessary basedwill expire in January 2031, absent any adjustments or extensions. The Company has ten U.S. trademark registrations and one foreign trademark registration (Canada). The Company has no pending trademark applications.the work requirements. No employees are covered by a collective bargaining agreement, and we consider our relations with our employees to be satisfactory.Proposed Share Exchange TransactionOn December 17, 2018, we entered into a Share Exchange Agreement with LNG Investment Company, LLC, a Texas limited liability company (“Holdings”), AEGIS NG LLC, a Texas limited liability company (“AEGIS”), Stabilis Energy, LLC, a Texas limited liability company (“Stabilis”), PEG Partners, LLC, a Delaware limited liability company (“PEG”), and Prometheus Energy Group, Inc., a Delaware corporation (“Prometheus”). In the share exchange, Stabilis will become our direct 100% owned subsidiary and Prometheus will become our indirectly-owned 100% subsidiary. In the share exchange we will issue such number of shares of our common stock which is equal to approximately 90% of our outstanding common stock as of the completion of the share exchange.Completion of the Share Exchange will result in a change in control of the Company to control by Casey Crenshaw, who is a member of our Board of Directors, by virtue of his beneficial ownership of more than 50% of our common stock to be outstanding after completion of the share exchange. If approved, the transaction will be accounted for as a reverse merger, whereby Stabilis Energy, LLC will be considered the accounting acquirer.Closing of the Share Exchange transaction is subject to certain closing conditions, including approval of the issuance of AETI common stock to acquire Stabilis and other transaction-related matters by the holders of AETI’s outstanding common stock and Series A Convertible Preferred Stock voting as a combined group. Accordingly, there can be no assurance that the Share Exchange will be completed.For further information about the proposed Share Exchange, investors are referred to the Company’s Current ReportForm 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, filed on December 24, 2018.Additional Information about the Proposed Share Exchange TransactionThe proposed transaction has been approved by the board of directors of AETI and the owners of Stabilis, and will be submittedamendments to shareholders of AETI for approval of the issuance of AETI common stock in connection with the transactionthose reports and other transaction-related matters at a Special Meeting of shareholders. In connectioninformation filed with that Special Meeting, AETI intends to file with the Securities and Exchange Commission (“SEC”) a proxy statement containing information about the proposed transaction and the respective businesses of Stabilis and AETI. Upon SEC approval, AETI will mail a definitive proxy statement and other relevant documents to its shareholders. AETI shareholders are urged to read the preliminary proxy statement and any amendments thereto and the definitive proxy statement in connection with AETI’s solicitation of proxies for the Special Meeting to approve the transaction-related matters, because these documents will contain important information about Stabilis, AETI and the proposed transaction. The definitive proxy statement will be mailed to shareholders of AETI as of a record date to be established for voting on the matters relatedor furnished to the proposed transaction. Shareholders will also be able to obtain a free copy of the proxy statement, as well as other filings containing information about AETI, without charge, at the SEC website (www.sec.gov). Copies of the AETI proxy statement can also be obtainedavailable, free of charge, by directing a request to Peter Menikoff, CEO of AETI, at (832) 241-6330 or by e-mail to investorrelations@aeti.com.Participants in the SolicitationAETI and its directors and executive officersthrough our website, as soon as reasonably practicable after those reports and other persons may be deemed to be participants in the solicitation of proxies from AETI’s shareholdersinformation are electronically filed with respector furnished to the proposed transaction. Information regarding AETI’s directors and executive officersSEC. The reference to Stabilis’ website is available in its Proxy Statement fornot intended to incorporate the 2018 Annual Meetinginformation on the website into this report or any of Stockholder filedour filings with the SEC on April 23, 2018. Additional information regarding the participants in the proxy solicitation relating to the proposed transaction and a description of their direct and indirect interests will be contained in the proxy statement when it becomes available.5Stabilis and its managers, directors and executive officers may also be deemed to be participants in the solicitation of proxies from the shareholders of AETI in connection with the proposed transaction. A list of the names of such managers, directors and executive officers and information regarding their interests in the proposed transaction will be included in the proxy statement for the AETI Special Meeting of shareholders related to the proposed transaction when available.DisclaimerThis Annual Report is not a proxy statement or a solicitation of a proxy, consent or authorization with respect to any securities or in respect of the proposed share exchange transaction. This Annual Report shall also not constitute an offer to sell or the solicitation of an offer to buy any securities.eachthe risks described below with all of the following risks associated withother information included in this report in evaluating an investment in our common stock and allstock. If any of the other information in this 2018 Annual Report on Form 10-K. Ourfollowing risks were to occur, our business, may alsofinancial condition, results of operations, and cash flows could be materially adversely affected byaffected. In that case, the trading price of our common stock could decline and you could lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial. If any of the events contemplated by the following discussion of risks should occur,deem immaterial may also impair our business prospects, financial conditionoperations.resultsadversely affected by many known and unknown factors.operationsthese projects and other relevant approvals, and obtain long-term capital appreciation and liquidity with respect to such investments. Our strategy may suffer.The lackalso be affected by future governmental laws and regulations. It also assumes that we will be able to enter into strategic relationships with energy end-users, power utilities, LNG providers, shipping companies, infrastructure developers, financing counterparties and other partners. These assumptions are subject to significant economic, competitive, regulatory and operational uncertainties, contingencies and risks, many of willingnesswhich are beyond our control. Additionally, in furtherance of our vendorsbusiness strategy, we may acquire operating businesses or other assets in the future. Any such acquisitions would be subject to dosignificant risks and contingencies, including the risk of integration, and we may not be able to realize the benefits of any such acquisitions.with us or to provide adequate payment terms could negatively impact our liquidity and/or reduce the accessibility of products or services we seek to acquire.We depend on our vendors to provide us with credit terms on our purchases of materialsstrategy is uncertain, and services. Our vendors could seek to limit the availability of vendor credit to us or modify terms under which they sell to us, or both, thereby adversely impacting our liquidity. As of the date of this report, we have not experienced any significant disruption in our access to materials, services or our operations; however, thereit can be no assuranceexpected that one or more of our vendorsassumptions will prove to be incorrect and that we will face unanticipated events and circumstances that may adversely affect our business. Any one or more of the following factors may have a material adverse effect on our ability to implement our proposed strategy and achieve our targets:slowbe successful, and if unsuccessful, we may be unable to modify it in a timely and successful manner. We cannot give you any assurance that we will be able to implement our strategy on a timely basis, if at all, or cease shipmentsachieve our internal model or requirethat our assumptions will be accurate. Accordingly, your investment in our company is speculative and subject to a high degree of risk, and you should understand that there is a possibility of the loss of your entire investment. Our limited history also means that we continue to develop and implement various policies and procedures including those related to data privacy and other matters.the sale or shipmentresults of materialsoperations may be adversely affected. Our ability to raise additional capital will depend on new paymentfinancial, economic and market conditions and other factors, many of which are beyond our control. We cannot assure you that such additional funding will be available on acceptable terms, or at all.assurances. Such circumstancesliquidity needs. We may rely on borrowings under debt instruments to fund our capital expenditures. If any of the lenders under these potential debt instruments were unable to perform on its commitments, we may need to seek replacement financing, which may not be available as needed, or may be available in more limited amounts or on more expensive or otherwise unfavorable terms.cannot predict whetherexpect to be dependent on our plansprimary building contractor and other contractors for the successful completion of our energy-related infrastructure. enhance our financial flexibility and liquidity to fund our operations will be successful.We continue to pursue our business growth plansstrategy and potential initiativesis highly dependent on the performance of our primary building contractor and subcontractors. The ability of our primary building contractor and our other contractors to enhance our financial flexibility and liquidity. We have experienced significant losses and incurred negative operating cash flows for the past several years, and accordingly we have takenperform successfully under their agreements with us is dependent on a number of actionsfactors, including the contractor’s ability to:fund our operationsoperate in accordance with specifications;obligations. We also expectplanned schedule and projected total costs for a project, we are subject to pursuepotential fluctuations in construction costs and other near-term actionsrelated project costs. Although some agreements may provide for liquidated damages if the contractor fails to support liquidityperform in the manner required with respect to certain of its obligations, the events that trigger a requirement to pay liquidated damages may delay or impair the operation of the applicable facility, and any liquidated damages that we receive may be delayed or insufficient to cover the damages that we suffer as a result of any such delay or impairment. The obligations of our primary building contractor and other contractors to pay liquidated damages under their agreements with us are subject to caps on liability, as set forth therein. Furthermore, we may have disagreements with our contractors about different elements of the construction process, which could lead to the assertion of rights and remedies under our contracts and increase the cost of the applicable facility or result in a contractor’s unwillingness to perform further described under Useswork. If any contractor is unable or unwilling to perform according to the negotiated terms and Sourcestimetable of Liquidity. However, ifits respective agreement for any reason or terminates its agreement for any reason, we continue to incur losses, additional actions maywould be required to further enhanceengage a substitute contractor, which could be particularly difficult in certain of the markets in which we operate or plan to operate. This would likely result in significant project delays and increased costs, which could have a material adverse effect on our business, contracts, financial condition, operating results, cash flow, liquidityflexibility. The achievementcondition, operating results, cash flow, liquidity and prospects.initiatives is subjectability to risks and uncertainties in relation to market conditions and other factors that may causepurchase a sufficient amount of LNG or significantly increases our actual performance andcosts for purchasing LNG, our business, operating results, to differ materially from our plans. We cannot assure that cash flows and other internalliquidity could be materially and external sources of liquidity will at all times be sufficient for our cash requirements. We may need to consider actions to improve our cash position, mitigate any potential liquidity shortfall, pursue additional sources of liquidity, and reduce costs.adversely affected. There can be no assuranceassurances that such actions wouldwe will be successful, and we cannot predict the outcome of any actions to generate liquidity, whether such actions would generate the expected liquidity as currently planned, or the availability of additional debt financing. The specific actions taken, the timing, and the overall amount will depend on a variety of factors, including market conditions, interest in specific assets, valuations of those assets and the underlying operating performance. If we continue to incur operating losses and/or we are not able to generate additional liquidity, the company could be negatively impacted in relation to access to materialssupply our customers with LNG produced at our own facilities.services that are important to the operation of our business.Our sales may fluctuate for a variety of reasons, which could adversely affect our results of operations.Our business is sensitive to customers' spending patterns, which in turn are subject to prevailing economic conditions. Our sales and results of operations have fluctuated in the past, and we expect them to continue to fluctuate in the future. A variety of other factors affect our sales and financial performance, including: actions by our competitors; changes in our product strategy and mix; and impacts due to extreme weather events.Accordingly, our results for any one quarter are not necessarily indicative of the results to be expected for any other quarter and comparable sales for any particular future period may increase or decrease.6Our failure to comply with federal, state, local and international laws, or changes in these laws, could adversely affect our results of operations.wide arraymaterial adverse effect on our business, contracts, financial condition, operating results, cash flow, liquidity and prospects. Factors which may negatively affect potential demand for natural gas from our business are diverse and include, among others:laws and regulations. If we failLNG for market supply;complymaintain current price equilibrium with applicable laws and regulations, we could be subjectrespect to legal risk and government enforcement action that could increase oursupply;doing business. ChangesLNG;regulatory environment regarding topicscost of competing sources of natural gas, LNG or alternate fuels such as product safetycoal, heavy fuel oil and environmental protectiondiesel; andalso cause our compliance costs to increasematerially and adversely affect our business, ability to realize benefits from future projects, results of operations, financial condition, liquidity and prospects.Our performance could alsoIn addition, each of the applicable regulatory requirements and limitations is subject to change, either through new regulations enacted on the federal, state or local level, or by new or modified regulations that may be impacted by trade policiesimplemented under existing law. The nature and agreements,extent of any changes in these laws, rules, regulations and permits may be unpredictable and may have material effects on our business. Future legislation energy and environmental standards,regulations or changes in existing legislation and taxregulations, or interpretations thereof, such as those relating to the liquefaction, storage, or regasification of LNG, or its transportation, exportation, or importation could cause additional expenditures, restrictions and delays in connection with our operations as well as other future projects, the extent of which cannot be predicted and which may require us to limit substantially, delay or cease operations in some circumstances. Revised, reinterpreted or additional laws and regulations. Additionally, future legislationregulations that result in increased compliance costs or regulations, including environmental matters, product certification, product liability, tariffs, and other matters, may impact our results of operations and liquidity.Customers in the oil and gas industry account for a significant portion of our sales. Reduced expenditures by customers in this industry are likely to reduce demand for our products and services.Customers related to the upstream, midstream and downstream oil and gas industry accounted for approximately 64% and 78% of our net sales in 2018 and 2017, respectively. Brazil operations has invested in plant expansion and personnel over the past several years to pursue the oil and gas production, marine and industrial markets to reduce our reliance on upstream oil & gas (offshore production). Our business is still sensitive to cyclical commodity oil and natural gas prices that impact product demand and prices.Our products include complex systems for energy and industrial markets which are subject to operational and liability risks.We are engaged in the installation of complex power distribution and control systems for the energy and industrial markets. These systems are frequently complex and susceptible to unique engineering elements that are not tested in the actual operating environment until commissioned. As a result, we may incur unanticipated additional operating costs and warranty expenses that were not anticipated when the fixed-price contracts were estimated and executed resulting in reduced profit margins on such projects.The industries in which we operate are highly competitive, which may result in a loss of market share or decrease in net sales or profit margin.Our products and services are provided in a highly competitive environment and we are subject to competition from a number of similarly sized or larger businesses which may have greater financial and other resources than are available to us. Factors that affect competition include timely delivery of products and services, reputation, manufacturing capabilities, price, performance and dependability. Any failure to adapt to a changing competitive environment may result in a loss of market share and a decrease in net sales and profit margins.We have a risk of loss to a disputed working capital adjustment in the sale of M&IThe contractual terms of the sale of U.S. assets to Myers Power Products, Inc. (the “Buyer”) in August included a provision to true-up the net working capital, estimated as of the date of closing, to the actual working capital as calculated by the Buyer and agreed to by the Seller. Any difference in actual (conclusive) net working capital in relation to the estimated working capital at closing could result in an adjustment to the purchase price. Subsequent to September 30, 2018, the Company received notification from the Buyer of their actual working capital calculation. In the notification, the Buyer has communicated a decrease of approximately $4.3 million dollars in net working capital, in comparison to the estimated working capital used at the contract closing. In the event the Buyer and Seller cannot agree to a conclusive net working capital adjustment, then all items remaining in dispute shall be submitted by either one of the parties within thirty (30) calendar days after the expiration of the resolution period to a national or regional independent accounting firm mutually acceptable to Buyer and Seller (the "Neutral Arbitrator"). The Neutral Arbitrator shall act as an arbitrator to determine the conclusive net working capital. The conclusive net working capital, once finally determined, may result in a purchase price adjustment due to the Buyer or to the Company as Seller.As of the date of the filing of the 10-K for the period ended December 31, 2018, the Company disagrees with the buyers working capital calculation and has not received documentation sufficient to support the Buyer’s position. As such, no adjustments have been considered in determining the gain on the sale of assets reported as of December 31, 2018. The resulting purchase price adjustment based on the conclusive net working capital adjustment, if any, would be reflected in the future period if it is required. Management believes there is minimal changes to the estimated net working capital.We rely on a few key employees whose absence or loss could disrupt our operations or be adverse to our business.Our continued success is dependent on the continuity of several key management, operating and technical personnel. The loss of these key employees could have a negative impact on our future growth and profitability.Our results of operations and financial condition may be adversely impacted by economic uncertainty and global recession.The consequences of a prolonged recession could include a lower level of economic activity and uncertainty regarding commodity and capital markets. The lack of a sustained economic recoveryrestrictions could have an adverse effect on our business, our ability to expand our business, including into new markets, results of operations, financial condition, liquidity and prospects.flows flow, liquidity and prospects.7losscharge to earnings in our consolidated financial statements during a period in which such impairment is determined to exist, which may negatively impact our operating results.net salesLNG operations or profitability.Ourthe energy business generally, could result in greater difficulties in obtaining permits, including under environmental laws, on favorable terms, and may otherwise lead to significant liabilities and reputational damage.provide high-quality productsobtain permits and servicesapprovals, and otherwise jeopardize our reputation or the reputation of our industry as well as our relationships with relevant regulatory agencies and local communities. Individually or collectively, these developments could adversely impact our ability to expand our business, including into new markets. Similarly, such developments could have a material adverse effect on our business, contracts, financial condition, operating results, cash flow, liquidity and prospects.requiresand failure to obtain and maintain any of these permits, approvals or authorizations could have a material adverse effect on our business, financial condition, operating results, liquidity and prospects. Moreover, many of these permits, approvals and authorizations are subject to administrative and judicial challenges, which can delay and protract the process for obtaining and implementing permits and can also add significant costs and uncertainty.employcannot predict. Revised, reinterpreted or additional laws and regulations that result in increased compliance costs or additional operating or construction costs and restrictions could have a material adverse effect on our business, contracts, financial condition, operating results, cash flow, liquidity and prospects.adequate numberinternational treaty with the goal of skilled personnel. Accordingly,limiting global warming to below 2 degrees Celsius as compared to pre-industrial levels.increasepursue future growth opportunities; andproductivitycustomers or joint venture partners, or attempts by customers or third parties to invoke force majeure contractual clauses as a result of delays or other disruptions.profitabilityother measures to adjust to anticipated activity levels and maintain adequate liquidity. However, there can be no assurance that these steps will be limitedsufficient mitigate the impact of the COVID-19 pandemic. The Company will continue to monitor the developments relating to COVID-19 and will follow health and safety guidelines as they evolve. Management may implement further similar cost control measures, as necessary, but there can be no assurances that such measures will be effective.employ, trainraise capital, maintain our existing business operations and retain skilled personnel necessarydevelopment efforts, expand our business or continue our operations and may require us to meetraise additional capital that may dilute the ownership interest of common stock holders. A decline in the value of the Company could also cause stockholders to lose all or part of their investment.requirements. existing business operations and development efforts.an adequate skilled labor force necessarypre-existing business relationships, or enter into or maintain new business relationships, on acceptable terms, if at all. The failure to operate efficiently and to support our growth strategy or that our labor expenses will not increase as a result of a shortage in the supply of skilled personnel.Natural disasters, terrorism, acts of war, international conflicts or other disruptions could harm our business and operations.Natural disasters acts or threats of war or terrorism, international conflicts, and the actions taken by the United States and other governments in response to such events could cause damage to or disrupt our business operations or those of our customers, any of whichmaintain important pre-existing third-party relationships could have ana material adverse effect on our business.We install products and operate in Brazil. Extreme weatherbusiness, financial condition or results of operations.could result in disruption or delay of customer projects and production and delivery of materials and products inmay adversely affect our supply chain. In addition, natural disasters such as hurricanes, tornadoes, or a combination of these or other factors could damage or destroy our facilities negatively affecting ourindustry, ability to access capital, business and results of operationsoperations.wellexisting and potential trade wars and other events beyond our control, such as causing usthe COVID-19 pandemic, can increase levels of political and economic unpredictability globally and increase the volatility of global financial markets. Weakened global macro-economic conditions could cause the demand for and price of our products to incur significant expensesdecrease. In addition, restricted credit conditions could limit our ability to repair or replace such facilities. We carry insurance to minimizeaccess capital on favorable terms, if at all. A deterioration in the macro-economic could have a material adverse effect on our risk of loss; however, actual losses may exceed insurance limits. Additionally, the costs associated with a slowdownbusiness, financial position, results of operations caused by aand liquidity.supply chain may not be covered.We generate mostdisruption of our net sales from internationalbusiness operations. As cyber threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any cyber vulnerabilities. A cyber incident could lead to losses of sensitive information, critical infrastructure, personnel, or capabilities essential to our operations and are subject to the risks of doingcould have a material adverse effect on our reputation, business, outside of the United States.Approximately 100% of our net sales in 2018 were generated from projects and business operations outside of the United States, primarily provided to the oil and gas production and marine industries in Brazil and Argentina. The oil and gas industry operate in both remote and potentially politically unstable locations, and numerous risks and uncertainties affect our non-United States operations. These risks and uncertainties include changes in political, economic and social environments, local labor conditions, changes in laws, regulations and policies of foreign governments, as well as United States laws affecting activities of United States companies abroad, including tax laws and enforcement of contract and intellectual property rights. In addition, the costs of providing our services can be adversely and/or unexpectedly impacted by the remoteness of the locations and other logistical factors.The marketplace may not accept and utilize our newly developed products and services, the effect of which would prevent us from successfully commercializing our proposed products or services and may adversely affect our financial condition and results of operations.Ourmarketoperate its business could be harmed.commercialize our new productsaccounting controls and services dependsprocedures in place so that we can produce accurate financial statements on the acceptance of such productsa timely basis is a costly and services by the industry.Our stock price has been and may continuetime-consuming effort that needs to be volatile.The market pricere-evaluated frequently. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. GAAP.commonfinancial reporting, and our stock has fluctuated substantially and may continue to do so. Future announcements or disclosures concerning us or any of our competitors, our strategic initiatives, our sales and profitability, any quarterly variations in actual or anticipated operating results or comparable sales, any failure to meet analysts' expectations and sales of large blocks of our common stock, among other factors, could cause the market price, of our common stock to fluctuate substantially. Our common stock could be delisted from NASDAQ if we do not comply with NASDAQ’s listing standards.Our common stock is currently listed for quotation on the NASDAQ Capital Market. On October 15, 2018, the Company received a deficiency letter from the Listing Qualifications Department of the NASDAQ Capital Market notifying the Company that, for the last 30 consecutive business days prior to the date of the letter, the bid price for its common stock had closed below the minimum $1.00 per share requirement for continued inclusion on the NASDAQ Capital Market. The Company was provided an initial period of 180 calendar days, or until April 15, 2019, to regain compliance with the listing requirements. We have committed to NASDAQ to undertake a reverse stock split in order to comply with the minimum listing requirement and we are awaiting response from them which may grant us additional time to do so. Under certain circumstances, NASDAQ could require that the minimum bid price exceed $1.00 for more than ten consecutive days before determining that our common stock complies with NASDAQ’s continued listing standards.If our common stock is delisted by NASDAQ, our common stock may be eligible to trade on the OTC Bulletin Board or another over-the-counter market. Any such alternative would likely result in it being more difficult for the Company to raise additional capital through the public or private sale of equity securities and for investors to dispose of, or obtain accurate quotations as to the market value of the common stock and could result in a decrease in the trading price of the Company’s common stock. In addition, there can be no assurance that the common stock would be eligible for trading on any such alternative exchange or markets.8Joint Venture limited life risk.The joint venture, BOMAY, was formed in 2006 in China with limited life term of 12 years. The joint venture may be terminated earlier for valid business reasons including Force Majeure. In the event the joint venture is to be terminated, either party may acquire the other parties’ interests and continue the operations of the joint venture. The joint venture agreement includes provisions for extending the life of BOMAY agreement of all parties. In such case, the joint venture shall apply for the extension to the relevant Chinese authority six months before expiry of the venture. In March 2018, BOMAY’s Board of Directors approved a ten year extension of the term of the joint venture agreement to 2028; however, the Company remains subject to the risks associated with a limited life business venture.Risk related to our Chinese Joint Venture.We maintain a significant investment in a joint venture with a Chinese energy company. We may encounter risks pertaining to a weakening Chinese economic environment. We may encounter unforeseen or unexpected operating, financial, political or cultural factors that could impact its business plans and the expected profitability from such investment. We will face risks if China loses normal trade relations with the United States and it may be adversely affected by the diplomatic and political relationships between the United States and China. We may also face additional risk with respect to the protection of our intellectual property in China. Changes in China’s political and economic policies could adversely affect our investment and business opportunities in China.Risk from Restricted U.S. Government Access to Audit Documents in China.The audit of BOMAY for the fiscal years ended December 31, 2018 and 2017 was conducted in China by a Chinese audit firm not registered with the Public Company Accounting Oversight Board (“PCAOB”) under the direction of the Company’s independent auditor. The Company’s independent auditor has directed additional procedures to comply with auditing standards prescribed by the PCAOB. Under the laws of the United States, auditors of public companies are to undergo regular inspections by the PCAOB and to make all requested work papers available for the SEC and the PCAOB inspection. However, due to laws of the People’s Republic of China applicable to auditors, the SEC and the PCAOB are currently unable to conduct such inspections on work papers prepared in China without the approval of the Chinese government authorities.As a result, the SEC or PCAOBwe may be unable to conduct inspections ofmaintain compliance with the BOMAY audit work papers. The Company’s stockholdersapplicable stock exchange listing requirements.deprived ofeffective in maintaining the benefits of PCAOB inspections and may lose confidence in our reported financial information and procedures and the quality of portionsadequacy of our internal controls, and any failure to maintain that adequacy, or consequent inability to produce accurate financial statements.Our international operationsstatements on a timely basis, could increase operating costs and harm the business. In addition, investors’ perceptions that our internal controls are generally subject to a number of risks. These include:foreign laws and business practicesinadequate or that favor localcompetition;dependence on local channelpartners;compliance with multiple, conflicting and changing government laws andregulations;longer salescycles;difficulties in managing and staffing foreignoperations;foreigncurrencyexchangeratefluctuations;politicalandeconomicstability;greater difficulty in hiring qualified personnel;anddifficulties with financial reporting in foreigncountries.Joint Venture Centralized Government RisksSince the centralized government of China controls most of the petroleum industry and related manufacturing through annual planning and budgets, the financial results realized by the Company’s joint venture, BOMAY, will reflect the government’s decisions on production levels for oil and gas equipment. The Company further understands that the value of BOMAY’s assets, including inventory, may not be fully realized if demand for these products is reduced significantly because of economic policy decisions or other organizational changes in the Chinese petroleum industry.Market RiskThe markets in which we participate are capital intensive and cyclical in nature. The volatility in customer demand is greatly driven by the change in the price of oil and gas. These factors influence the release of new capital projects by our customers, which are9traditionally awarded in competitive bid situations. Coordination of project start dates is matched to the customer requirements and projects may take a number of months to complete; schedules also may change during the course of any particular project.Foreign Currency Transaction RiskThe Company operates a subsidiary in Brazil and maintains equity method investment in its Chinese joint venture, BOMAY. The functional currencies of the Brazilian subsidiary and the Chinese joint venture are the Brazilian Real and Chinese Yuan, respectively. Investments are translated into United States Dollars at the exchange rate in effect at the end of each quarterly reporting period. The resulting translation adjustment is recorded as accumulated other comprehensive income in our consolidated balance sheets. The translation adjustment at December 31, 2018 was an accumulated loss $0.4 million due principally to the weakening of the Chinese Yuan versus the United States Dollar.Commodity Price RiskWe are subject to commodity price risk from fluctuating market prices of certain raw materials. While such materials are typically available from numerous suppliers, commodity raw materials are subject to price fluctuations. We endeavor to recoup these price increases from our customers on an individual contract basis to avoid operating margin erosion. Although historically we have not entered into any contracts to hedge commodity risk, we may do so in the future. Commodity price changes can have a material impact on our prospective earnings and cash flows. Copper, steel and aluminum represent a significant element of our material cost. Significant increases in the prices of these materials could reduce our estimated operating margins if we are unable to recover such increases fromproduce accurate financial statements on a timely basis may harm our customers.Interest Rate RiskOur interest rate sensitive items do not subject us to material risk exposures. We have no material debt except for the Brazil note payable to our previous chairman.ITEM 1B.ITEM 2.PROPERTIESFacility Location Use Size Leased or Owned Expiration of Lease Houston, TX Office 8,583 sq. ft. Leased January 31, 2025 George West, TX LNG Plant 3,400 sq. ft. on 31.04 acres Owned N/A Bellevue, WA Office 1,610 sq. ft. Leased June 30, 2022 Hudson, CO Storage Site On 2 acres Leased May 31, 2021 Macaé, Brazil Offices and shop services 24,756 sq. ft. Leased January 14, 2022 Rio de Janeiro, Brazil Offices and shop services 6,460 sq. ft. Leased July 31, 2022 Belo Horizonte, Brazil Offices and manufacturing 10,764 sq. ft. Leased April 1, 2023 The following table describes the materialof AETIare adequate for our operations and its subsidiaries, including its foreign joint venture, as of December 31, 2018:their locations allow us to efficiently serve our customers.
Acres
Feet of BuildingITEM 3.LEGAL PROCEEDINGS.iswill not expected to have a material effect on our consolidated financial position or results of operations.16, Discontinued Operations13—Commitments and Contingencies of Notes to Consolidated Financial Statements for a discussion of outstanding issues associated with the sale of the U.S. operations to Myers in August 2018.legal matters.ITEM 4.MINE SAFETY DISCLOSURES.Not applicable.10ITEM 5.MARKET FOR THE REGISTRANT’S COMMON STOCK, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIESThestock tradesshares commenced trading on The NASDAQ Stockthe OTCQX Best Market under the symbol “AETI”.As of March 7, 2019, there were 48 shareholders of record of our common stock. 20182020 or 2017. Dividends were paid on our Series A Convertible Preferred Stock.2019. The Company anticipates that, for the foreseeable future, it will retain any earnings for use in the operations of its business.EQUITY COMPENSATION PLAN INFORMATIONThe following table summarizes information about outstanding equity plans asDecember 31, 2018. The 2007 Employee Stock Incentive Plan, as amended, has been approved to issue up to 2,200,000March 9, 2021, we had 25 holders of record of our common stock and 16,896,626 shares of common stock outstanding, based on information provided by our transfer agent. We also have outstanding warrants to purchase 62,500 shares of our Common Stock.Company’s common stock.
Company's equity compensation plans required by Item 5 is included in Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters contained herein.(1)Includes shares of common stock issuable upon vesting of outstanding restricted stock units (RSUs).(2)The weighted average exercise price does not take into account the shares issuable upon vesting of outstanding RSUs, which convert to common stock on a one-to-one basis. No options were outstanding.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS(3)Consists of the shares available for future issuance under 2007 Employee Stock Incentive Plan for services by eligible employees, board members, independent contractors and consultants.(a)See Note 9 in the Notes to Consolidated Financial Statements included in this 10-K for the year ended December 31, 2018 for further information.11 and analysis should be read in conjunction with the consolidated financial statements and accompanying notes appearing elsewherethereto included in Item 8. Financial Statements and Supplementary Data of this Form 10-K. This discussion contains forward-looking statements, based on current expectations related to future eventsHistorical results and AETI’s future financial performance that involves risks and uncertainties. AETI’s actual results may differ materially from those anticipated in these forward-looking statements as a result of many important factors, including thosepercentage relationships set forth in the section entitled “Risk Factors” in this Form 10-K.OverviewOur corporate structure currently consists of American Electric Technologies, Inc., which owns 100% of M&I Electric Industries, Inc., its wholly-owned subsidiary, South Coast Electric Systems, LLC and M&I Electric Brazil Sistemas e Servicios em Energia LTDA (“M&I Brazil”). As a result of the sale of South Coast Electric Systems operations in 2016 and M&I Electric (“M&I”) operations in 2018, results from continuing operations include the operations of our Brazilian subsidiary, our interest in a Chinese joint venture and our corporate operations in Houston, Texas. Our foreign joint venture is accounted for by the equity method.The principal markets that we serve include:Oil and gas – the Company provides “turn-key” power delivery solutions for the upstream, midstream and downstream oil and natural gas sectors.Upstream oil and gas refers to the exploration and production of oil and natural gas. The Company serves customers in the land drilling, offshore drilling, land-based production, and offshore production segments of the market.Midstream oil and gas is primarily related to oil and gas transportation, including oil and gas pipelines and compression and pumping stations. The Company also has a limited customer base in natural gas fractionation (separation), cryo, natural gas to liquids, and other natural gas related-plants.Downstream oil and gas includes oil refining and petrochemical plants, as well as LNG plants, export facilities, and storage facilities.Marine and industrialMarine applications includes blue water vessels such as platform supply vessels (PSV), offshore supply vessels (OSV), tankers and other various work boats, typically up to 300 ft. in length. The Company also provides solutions to brown water vessels such as barges, dredges and other river and inland water vessels.Industrial, including non-oil & gas industrial markets such as steel, paper, heavy commercial, and other non-oil & gas applications.Business Sectors DisclosuresOur financial results are primarily from sales to the Oil and Gas Industry. This information is supplemental and provided to allow investors to follow our future trends in marketing to the Oil and Gas Industry.Year EndedDecember 31, 2018 and 2017Oil & Gas Industry2018Net sales as a % of total sales64%Oil & Gas Industry2017Net sales as a % of total sales78%12Summary financial information of BOMAY in U.S. dollars was as follows at December 31, 2018 and 2017:The Company’s investments in and advances to its foreign joint venture’s operations were as follows as of December 31, 2018 and 2017 in U.S. Dollars:*Accumulated statutory reserves in equity method investments of $2.8 million at both December 31, 2018 and 2017, respectively, are included in AETI’s consolidated retained earnings. 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.The Company accounts for its investments in foreign joint venture operations using the equity method of accounting. Under the equity method, the Company’s share of the joint venture operations earnings or loss is recognized in the consolidated statements of operations and cash flows, including trends that might appear, are not necessarily indicative of future operations or cash flows.equity income (loss)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.foreign joint venture operations. Joint venture income increases the carrying valuethird-party production sources which allows us to support customers in markets where we do not own liquefiers.joint ventureslargest fleets of small-scale LNG equipment in North America. Our fleet consists primarily of trailer-mounted mobile assets, making delivery to and joint venture losses reducebetween customer locations more efficient. We deploy these assets on job sites to provide our customers with the carrying value. Dividends received fromequipment required to transport, store, and consume LNG in their fueling operations.joint ventures reducesafe, 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 carrying value.13Company’soil 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.BOMAY joint venture for 2018 and 2017 was $0.95 million vs. $0.43 million.Historically,determination of LNG supply sources based on the operating resultscost of BOMAY have appeared almost seasonal as budgets were established for new years in MarchLNG, the transportation cost to deliver to regional customer locations, and the company workedreliability of the supply source. The following table summarizes the volume of LNG gallons delivered to complete productionour customers.Gallons Delivered (unaudited in thousands) Years Ended December 31, 2020 2019 George West Liquefier 20,004 25,418 3rd Party 15,243 17,115 Total Gallons Delivered 35,247 42,533 meet targets. Most of BOMAY’s productionassess operational output at our George West Liquefier. Utilization is for BOMCO forcalculated as actual gallons produced at the Chinese National Petroleum Corporation, (“CNPC”), for land drilling in China and in other international markets where BOMCO or CNPC have relationships.At December 31, 2018, there were inventories and work in progress at BOMAY of approximately $25.58 million compared to approximately $17.88 million at December 31, 2017. We expect much of this will be invoiced in 2019 after new budgets are established and products accepted. Additionally, new international orders will be completed and recognized. BOMAY has addressedfacility divided by capacity. For the recent downturn in the Chinese market with reduced staff and other cost cutting measures.Results of OperationsThe table below summarizes our consolidated operations for the years ended December 31, 2018 and 2017 (dollars in thousands):14Year ended December 31, 2018 compared to year ended December 31, 2017Revenue and Gross ProfitBrazil Revenue increased 33%2020, utilization was 54.5%, or $1.9 million,compared to $7.6 million69.6% for the year ended December 31, 2018,2019. The decrease was primarily the result of reduced customer activity during the 2nd and 3rd quarters of 2020 due to the ongoing COVID-19 pandemic.2017. This growth was driven by2019 (the “Prior Year”):Years Ended December 31, Change % Change 2020 2019 Revenue: LNG product $ 27,339 $ 34,244 $ (6,905) (20.2) % Rental, service and other 8,951 9,406 (455) (4.8) Power Delivery 5,260 3,421 1,839 53.8 Total revenues 41,550 47,071 (5,521) (11.7) Operating expenses: Costs of LNG product 20,362 24,496 (4,134) (16.9) Costs of rental, service and other 5,230 4,726 504 10.7 Costs of power delivery 4,419 2,649 1,770 66.8 Selling, general and administrative 10,764 11,359 (595) (5.2) Depreciation 9,041 9,271 (230) (2.5) Total operating expenses 49,816 52,501 (2,685) (5.1) Loss from operations before equity income (8,266) (5,430) (2,836) 52.2 Net equity income from foreign joint ventures’ operations: Income from investments in foreign joint ventures 2,705 1,257 1,448 115.2 Foreign joint venture’s operations related expenses (249) (124) (125) 100.8 Net equity income from foreign joint ventures’ operations 2,456 1,133 1,323 116.8 Loss from operations (5,810) (4,297) (1,513) 35.2 Other income (expense): Interest expense, net (45) (33) (12) 36.4 Interest expense, net - related parties (871) (1,175) 304 (25.9) Other income (expense) (57) 97 (154) (158.8) Gain from disposal of assets 283 16 267 1,668.8 Total other income (expense) (690) (1,095) 405 (37.0) Loss before income tax expense (6,500) (5,392) (1,108) 20.5 Income tax expense 256 116 140 120.7 Net loss (6,756) (5,508) (1,248) 22.7 Net income attributable to noncontrolling interests — 207 (207) (100.0) Net loss attributable to Stabilis Solutions, Inc. $ (6,756) $ (5,715) $ (1,041) 18.2 % Company’s Brazil’s sales progressperformance of its segments based primarily on segment operating income.downstream oilNorth America and gas market.Gross profit increased 66%, or $0.8 million,provides turnkey fuel solutions to $1.9 million for the year ended December 31, 2018, comparedhelp users of propane, diesel and other crude-based fuel products convert to LNG.Years Ended December 31, Change % Change 2020 2019 (In thousands, excluding percentages) Revenue: LNG product $ 27,339 $ 34,244 $ (6,905) (20.2) % Rental, service and other 8,951 9,406 (455) (4.8) Total revenues 36,290 43,650 (7,360) (16.9) Operating expenses: Costs of LNG product 20,362 24,496 (4,134) (16.9) Costs of rental, service and other 5,230 4,726 504 10.7 Selling, general and administrative 8,602 10,317 (1,715) (16.6) Depreciation 8,911 9,127 (216) (2.4) Total operating expenses 43,105 48,666 (5,561) (11.4) Loss from operations before equity income $ (6,815) $ (5,016) $ (1,799) 35.9 % year ended December 31, 2017. Gross profit as a percentage of revenues increasedglobal energy industry through our subsidiary in Brazil and our joint venture in China.Years Ended December 31, Change % Change 2020 2019 (In thousands, excluding percentages) Revenue: Power Delivery $ 5,260 $ 3,421 $ 1,839 53.8 % Operating expenses: Costs of power delivery 4,419 2,649 1,770 66.8 Selling, general and administrative 2,162 1,042 1,120 107.5 Depreciation 130 144 (14) (9.7) Total operating expenses 6,711 3,835 2,876 75.0 Loss from operations before equity income (1,451) (414) (1,037) 250.5 Net equity income from foreign joint ventures’ operations: Income from equity investments in foreign joint ventures 2,705 1,257 1,448 115.2 Foreign joint venture’s operations related expenses (249) (124) (125) 100.8 Net equity income from foreign joint ventures’ operations 2,456 1,133 1,323 116.8 Income from operations $ 1,005 $ 719 $ 286 39.8 % 25% forPrior Yearyear ended December 31, 2018, compared to 20% for the year ended December 31, 2017. This increase was primarily attributable to the corresponding increase in revenue for the period.Selling and Marketing ExpensesSelling and marketing expenses decreased 16%, or less than $0.1 million, to $0.4 million for the year ended December 31, 2018, compared to the year ended December 31, 2017. Selling and marketing expenses, as a percentage ofCurrent Year LNG Product revenues decreased 5% for$6.9 million or 20.2% versus the year ended December 31, 2018, compared to the year ended December 31, 2017.General and Administrative ExpensesGeneral and administrative expenses decreased by 20%, or $0.9 million, to $3.3 million for the year ended December 31, 2018, compared to the year ended December 31, 2017,Prior Year primarily due to lower payrollreduced activity with mining, oilfield, and related expenses totaling $0.6million compared to the prior period. General and administrative expenses, as a percentage of revenues, decreased 29% to 44% for the year ended December 31, 2018, compared to the year ended December 31, 2017.Foreign Joint Venture EquityNet equity income from the foreign joint venture increased 48%, or $0.2 million, to $0.6 million for the year ended December 31, 2018, compared to the year ended December 31, 2017, primarily due to an increase in revenues at our Chinese foreign joint venture, partially offset by the loss on the disposal of MIEFE.Income Tax ProvisionsThe Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017. The Act reduced the U.S. federal corporate tax rate from 35% to 21%, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred, and creates new taxes on certain foreign sourced earnings. The most significant impact of the legislation for the Company was a $2.87 million reduction of the value of net deferred tax liabilityother customers as a result of the one-timeCOVID-19 pandemic and the related impact on overall economic activity, particularly oil and gas exploration and production activity.taxto a public company in the second half of 2019.cumulative valuedisposal of earnings and profits that were previously not repatriated for U.S. income tax purposes, netfixed assets. The gain from disposal of net operating loss carryforward. No additional income taxes have been provided for any remaining undistributed foreign earnings not subject torolling stock was $283 thousand in the transition tax, or any additional outside basis difference inherent in these entities, as these amounts continue to be indefinitely reinvested in foreign operations.At December 31, 2018, we recorded a provision for income taxes of $0.3 millionCurrent Year compared to a benefit from income taxes of $2.96 million$16 thousand in 2017. These amounts reflect the revaluation of the Company’s deferredPrior Year.liability using the enacted rate of 21%, as well as the one-time transition tax in 2017. expense2018Company incurred state and foreign income tax expense of $0.3 million representsduring the Current Year primarily related to foreign income taxes paid in Brazilconnection with the cash dividend received from our BOMAY joint venture. The Company incurred state income and taxes paidforeign tax expense of $0.1 million in the Prior Year.Years Ended December 31, 2020 2019 Net cash provided by (used in): Operating activities $ 1,336 $ 4,111 Investing activities (256) (3,243) Financing activities (3,202) 1,940 Effect of exchange rate changes on cash (43) (76) Net (decrease)increase in cash and cash equivalents (2,165) 2,732 Cash and cash equivalents, beginning of period 3,979 1,247 Cash and cash equivalents, end of period $ 1,814 $ 3,979 BOMAY.our BOMAY joint venture. In addition, the Company obtained equipment financing from MG Finance, a related party, and received the PPP Loan of $1.1 million. The Company is evaluating additional financing alternatives, however, there is no guarantee that additional financing will be available or available at terms that would be beneficial to shareholders.2021 $ 4,464 2022 3,360 2023 47 2024 — 2025 — Thereafter — Total long-term debt, including current maturities $ 7,871 Payments Due By Period Total 2021 2022 2023 2024 2025 Thereafter (In thousands) Note Payable to Chart Energy & Chemicals Inc.(1) $ 1,077 $ 1,000 $ 77 $ — $ — $ — $ — Interest—Chart Energy & Chemicals Inc.(1) 43 39 4 — — — — Related Party Debt & Cap Leases(2) 5,646 2,997 2,649 — — — — Interest—Related Party Debt & Cap Leases(2) 649 474 175 — — — — Operating Lease Obligations(3) 949 406 223 145 150 25 — Total $ 8,364 $ 4,916 $ 3,128 $ 145 $ 150 $ 25 $ — 6 Income Taxes,13—Commitments and Contingencies to our Notes to Consolidated Financial Statements.thefinancial condition, revenues or expenses, results of operations, liquidity, cash requirements or capital resources.further details.LIQUIDITYinformation on new accounting standards.CAPITAL RESOURCESESTIMATES*“Consolidated Net Worth” represents the Company’s consolidated total assets less consolidated total liabilities.See Note 7, Notes Payable in the Notes to Consolidated Financial Statements included elsewhere in this report forThe discussion of recent financing activity.15On March 23, 2017 the Company entered into a $7.00 million Senior Secured Term Note (“the Note”) with a third-party lender. The Note is payable in monthly interest only payments in arrears at a fixed rate of 11.50%. Principal of $0.50 million was paid on June 30, 2017. The Note was amended November 13, 2017 requiring minimum principal reductions of $30,000 per month beginning in April 2018 and with the remaining balance due March 23, 2021. This debt was repaid in full from proceeds received on the Sale of the Company’s U.S. operations in August 2018.The Company continues to monitor its liquidity position closely and depending on the business needs may raise cash in the form of debt, equity or a combination of both. However, there can be no assurance that additional capital can be obtained or that it can be obtained at terms that are favorable to us and our existing stockholders.Uses and Sources of LiquidityOur primary need for liquidity is to fund working capital requirementsanalysis of our businesses, capital expendituresfinancial condition and for general corporate purposes. We have incurred losses and experienced negative operating cash flows for the past several years, and accordingly, the Company has taken a numberresults of actions to continue to support its operations and meet its obligations.During 2017, the Company refinanced its outstanding loans which at that time provided approximately $1.0 million of working capital. In addition, the Board of Directors of the Company created a special committee to address strategic initiatives that include addressing liquidity. In 2018, we concluded the sale of our U.S. operations to an affiliate of Myers. We expect to continue to optimize our international operations including expansion of our service business in Brazil and diversification of our joint venture operation in China.Operating ActivitiesDuring the twelve months ended December 31, 2018, the Company’s operating activities used cash of $3.3 million as compared to providing cash of less than $0.1 million during 2017. This was primarily related to costs associated with the sale of the Company’s U.S. operations.Investing ActivitiesDuring the twelve months ended December 31, 2018, the Company’s investing activities provided $9.9 million in cash as compared to providing nil for the comparable period in 2017. This was primarily the result of $10.1 million in cash received from the sale of the Company’s U.S. operations.Financing ActivitiesDuring the twelve months ended December 31, 2018, the Company’s financing activities used cash of $6.5 million as compared to providing cash of $0.5 million in the comparable period in 2017. The increase in cash used in 2018 is primarily payments of debt in conjunction with the sale of the company’s U.S. operations.LiquidityWe periodically evaluate our liquidity requirements, capital needs and availability of resources in view of operating cash needs. To meet our short and long-term liquidity requirements, we rely primarilyare based on cash from operations and distributions from our China joint venture. We have experienced high expenses in connection with the previously disclosed Share Exchange Agreement to acquire Stabilis Energy, LLC which may require us to seek short term financing to cover such expenses.Operating Lease Commitments BrazilThe following is a schedule of future minimum rental payments required under operating leases that have initial or remaining non-cancelable lease terms in excess of one year as of December 31, 2018:16We experienced minimal increases in our material prices in 2018. The Company has been generally successful in recovering these increases from its customers in the form of increased prices. Future inflationary pressures will likely be largely dependent on the worldwide demand for these basic materials which cannot be predicted at this time.Commitments and ContingenciesThe Company is party to a number of legal proceedings in the normal course of business for which appropriate provisions have been made if it is believed an ultimate loss is probable.Critical Accounting Policies and EstimatesWe have adopted various critical accounting policies that govern the application of accounting principles under U.S. GAAP in the preparation of our consolidated financial statements.statements, which have been prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements in conformity with U.S. GAAP requires managementus to make estimates and assumptions that affect the reported amounts reported inof assets and liabilities, disclosures of contingent assets and liabilities known to exist at the date of the consolidated financial statements and accompanying notes. Although thesethe reported amounts of revenues and expenses during the reporting period. We evaluate our estimates areon an ongoing basis, based on management’s knowledge of current eventshistorical experience and actions it may undertake inon various other assumptions that are believed to be reasonable under the future, they may ultimatelycircumstances. There can be no assurance that actual results will not differ from actual results.Certain accounting policies involve significant estimates and assumptions by us that havethose estimates.material impact on our consolidated financial condition or operating performance. Management believescustomer has control of the following critical accounting policies reflect its most significant estimates and assumptions used in the preparation of our consolidated financial statements. We do not have off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as “special purpose entities”, nor do we have any “variable interest entities.”Revenue Recognition – Prior to January 1, 2018,asset, the Company recognized revenue upon shipmentprimarily considers whether the transfer of goods or performancelegal 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, provided that collection oftransportation and equipment to customers is recognized as the receivable was probable, persuasive evidence of a contract existed, and the price was fixed or determinable.On January 1, 2018 the Company adopted ASC 606 on a modified retrospective basis and applied the guidance to all of its contracts. As a result of the Company’s adoption, there were no changes to the timing of the recognition or measurement of revenue, and there was no cumulative effect of adoption as of January 1, 2018.Under ASC 606, revenueservice is performed.Service revenue is generated time and material projects and consulting services. The Company generally establishes a master services agreement with each customer and provides associated services on a work order basis, generally by the hour for services performed. The majority of the Company’s contracts with customers are short-term in naturedisaggregated into (1) LNG product (2) rental, service, and areother, and (3) power delivery.asupon delivery of the services are performed, as the transfer of controlrelated item to the customer, at which point the customer controls the product and the Company’sCompany has an unconditional right to payment corresponds directly to the services performed to date, at all times throughout completion of the contract.Product revenue is generated from the resell of electrical and instrumentation equipment.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. ProductThe Company acts as a principal when using third party transportation companies and therefore recognizes the gross revenue for the delivery of LNG.deliverythe terms of the related itemcontract. 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 customer, at which pointevent is completed or work is done per the customer controlsterms of the productrelated contract.Company hasresale of electrical and instrumentation equipment. Revenue is billed based on contractual terms that can be based on an unconditional right to payment.Foreign Currency Gains and Losses – Foreign currency translationsevent or an hourly rate. Revenue is recognized as the event is completed or work is done. Payment terms for service contracts are included as a separate componentgenerally within thirty days from the receipt of comprehensive income. The Company has determined the local currency of its foreign subsidiary and its foreign joint ventureinvoice. Performance obligations for service revenue are considered to be satisfied as the functional currency. In accordance with Accounting Standards Codification “ASC” 830,event is completed or work is done per the assets and liabilitiesterms of the foreign equity investeesrelated contract. The resale of electrical and M&I Brazil, denominated in foreign currency,instrumentation equipment is billed upon delivery and are translated into United States dollars at exchange rates in effect atgenerally due within thirty days from the receipt of the invoice.dateare typically due and net salescollected within the next 30 days for our LNG business and expenses12 months for our Power Delivery business.translated atreviewed 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 average exchange ratecarrying value for the period. Related translation adjustmentsasset 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 reportedbased 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.comprehensive income, net of deferredSeptember 30, 2020 and no impairments were identified.is a separate component of stockholders’ equity, whereas gains and losses resulting from foreign currency transactionsthose temporary differences are included in results of operations.Federal Income Taxes –expected to be recovered or settled. The liability method is used in accounting for federal income taxes. Under this method,effect on deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacteda change in tax rates and lawsis recognized in income in the period that will be in effect whenincludes the differences are expected to reverse. The realizability of deferred tax assets are evaluated annually and aenactment date. A valuation allowance is provided ifrecorded when it is more likely than not that the deferred tax assetsasset will not give rise to future benefits in the Company’s tax returns. As of December 31, 2018 and 2017, management believed there was uncertainty regarding the future realizability of deferred tax assets and a valuation allowance was established for the entire deferred tax asset balance. 17records an estimated loss from a loss contingency when information indicates that it is probable that an asset has been impaired, or a liability has been incurred andrecognizes the amounteffect of loss canincome tax positions only if those positions are more likely than not to be reasonably estimated. Contingenciessustained. Recognized income tax positions are often resolved over long time periods, are based on unique facts and circumstances, and are inherently uncertain. The Company regularly evaluatesmeasured at the current informationlargest amount that is available to determine whether such accruals should be adjusted,greater than 50% likely of being realized. Changes in recognition or other disclosures related to contingenciesmeasurement are required. The Company is a party to a number of legal proceedingsreflected in the normal course of business for which appropriate provisions have been made if it is believed an ultimate loss is probable. The ultimate resolution of these matters, individually or in the aggregate, is not likely to have a material impact on the Company’s consolidated financial position or results of operations.Equity Income from Foreign Joint Venture Operations – The Company accounts for its investment in the foreign joint venture using the equity method. Under the equity method, the Company records its pro-rata share of the foreign joint venture income or losses and adjusts the basis of its investment accordingly. Dividends received from the joint venture, if any, are recorded as reductions to the investment balance.Carrying Value of Joint Venture Investment – The Company evaluates the carrying value of its equity method investment to determine whether an impairment adjustment may be necessary. In making this evaluation, a variety of quantitative and qualitative factors are considered including international, national and local economic, political and market conditions, industry trends and prospects, liquidity and capital resources and other pertinent factors. Based on the most recent review at December 31, 2018 and December 31, 2017, management believes the carrying value of its investment in foreign joint venture is recoverable.Recently Issued Accounting PronouncementsIn May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU No. 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU No. 2014-09 defines a five-step process to achieve this core principle and, in doing so, more judgment and estimates may be required under existing U.S. GAAP. The standard is effective for annual periods beginning after December 15, 2016, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU No. 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). In July 2015, the FASB issued ASU No. 2015-14 which delayed the effective date of ASU No. 2014-09 by one year (effective for annual periods beginning after December 15, 2017). The Company adopted ASU 2014-09, effective January 1, 2018, using the modified retrospective method. The adoption of the standard did not have a material impact on the Company’s revenue recognition policies, other than enhanced disclosures related to the disaggregation of revenues from contracts with customers, the Company’s performance obligations and any significant judgments.In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. ASU No. 2016-01 requires (1) an entity to measure equity instruments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) at fair value with changes in fair value recognized in net income; (2) entities to use the exit price notation when measuring the fair value of financial instruments for disclosure purposes; (3) separate presentation of financial assets and financial liabilities by measurement category and form of financial asset; and (4) elimination of the requirement to disclose the methods and significant assumptions used to estimate fair value that is required to be disclosed for financial instruments measured at amortized cost. ASU No. 2016-01 is effective for fiscal years beginning after December 15, 2017 with early adoption permitted. The adoption of ASU No. 2016-01, effective January 1, 2018, did not have a material impact on the Company’s consolidated financial position, results of operations and disclosures.18In February 2016, the FASB issued ASU No. 2016-02, Leases, which requires lessees to recognize the following for all leases (with the exception of short-term leases) at the commencement date: (1) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Under ASU No. 2016-02, lessor accounting is largely unchanged. ASU No. 2016-02 is effective for fiscal years beginning after December 15, 2018 with early application permitted. Lessees and lessors must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases expiring before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. The Company adopted ASU No. 2016-02 on January 1, 2019. As of the date of this filing, management is refining its estimates and assumptions, however, anticipates the implementation of this standard will result in an increase in assets and liabilities of approximately $0.6 million to $0.8 million. In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, to clarify two aspects of Topic 606: (i) identifying performance obligations; and (ii) the licensing implementation guidance. The amendments do not change the core principle of the guidance in Topic 606. The effective date and transition requirements for ASU No. 2016-10 are the same as the effective date and transition requirements for ASU No. 2014-09. This standard was adopted effective January 1, 2018, see ASU No. 2014-09 above for additional information.In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients. ASU No. 2016-12 provides narrow-scope improvements to the guidance on collectability, noncash consideration, and completed contracts at transition. The amendment also provides a practical expedient for contract modifications at transition and an accounting policy election related to the presentation of sales taxes and other similar taxes collected from customers and are expected to reduce the judgment necessary to comply with Topic 606. The effective date and transition requirements for ASU No. 2016-12 are the same as the effective date and transition requirements for ASU No. 2014-09. This standard was adopted effective January 1, 2018. See ASU No. 2014-09 above for additional information.In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU No. 2016-13 eliminates the probable initial recognition threshold in current U.S. GAAP and, instead, requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. In addition, ASU No. 2016-13 amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. ASU No. 2016-13 is effective for annual periods beginning after December 15, 2019, with early application permitted in annual periods beginning after December 15, 2018. The amendments of ASU No. 2016-13 should be applied through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. Management is currently evaluatingchange in judgment occurs. The Company records interest related to unrecognized tax benefits in interest expense and penalties in selling, general and administrative expenses.future impactuse of ASU No. 2016-13observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on the Company’s consolidated financial position, results of operations and disclosures.In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. ASU No. 2016-15 addresses eight specific cash flow issues and is intended to reduce diversityassumptions that market participants would use in practice in how certain cash receipts and cash payments are presented and classifiedpricing an asset or liability in the statement of cash flows. ASU No. 2016-15 is effective for reporting periods beginning after December 15, 2017. Early adoption is permitted. The adoption of ASU No. 2016-15, effective January 1, 2018, did not have a significant impact onprincipal or most advantageous market. When considering market participant assumptions in the Company’s consolidated financial position, results of operationsfair value measurements, the fair value hierarchy distinguishes between observable and disclosures.In December 2016, the FASB issued ASU No. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers. ASU No. 2016-20 allows entities not to make quantitative disclosures about remaining performance obligationsunobservable inputs, which are categorized in certain cases and require entities that use anyone of the newfollowing levels in accordance with U.S. GAAP:previously existing optional exemptionsliabilities accessible to expand their qualitative disclosures. The amendment also clarifies narrow aspects of ASC 606, including contract modifications, contract costs, and the balance sheet classification of items as contract assets versus receivables,reporting entity at the measurement date.corrects unintended applicationliability, either directly or indirectly, for substantially the full term of the guidance. The effective date and transition requirementsasset or liability.ASU No. 2016-20the 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 same as the effective date and transition requirements for ASU No. 2014-09. The adoption of ASU No. 2016-20, effective January 1, 2018, did not have a material impact on the Company’s consolidated financial position, results of operations and disclosures. Please refer to ASU No. 2014-09 above.In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. ASU No. 2017-01 clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of a businessasset or as acquisitions (or disposals) of assets. ASU No. 2017-01 is effective for annual periods beginning after December 15, 2018, with early adoption permitted under certain circumstances. The amendments of ASU No. 2017-01 should be applied prospectively as of the beginning of the period of adoption. The Company adopted ASU No. 2017-01 on January 1, 2019. The adoption of this standard had no impact on the Company’s consolidated financial position, results of operations and disclosures, as the adoption is applied on a prospective basis.19In January 2017, the FASB issued ASU No. 2017-03, Accounting Changes and Error Corrections (Topic 250) and Investments – Equity Method and Joint Ventures (Topic 323): Amendments to SEC Paragraphs Pursuant to Staff Announcementsliability at the September 22, 2016 and November 17, 2016 EITF Meetings. The amendments in this update relate to disclosures of the impact of recently issued accounting standards. The SEC staff’s view that a registrant should evaluate ASC updates that have not yet been adopted to determine the appropriate financial disclosures about the potential material effects of the updates on the financial statements when adopted. If a registrant does not know or cannot reasonably estimate the impact of an update, then in addition to making a statement to that effect, the registrant should consider additional qualitative financial statement disclosures to assist the reader in assessing the significance of the impact. The staff expects the additional qualitative disclosures to include a description of the effect of the accounting policies expected to be applied compared to current accounting policies. Also, the registrant should describe the status of its process to implement the new standards and the significant implementation matters yet to be addressed. The amendments specifically addressed recent ASC amendments to ASU No. 2016-13, Financial Instruments – Credit Losses, ASU No. 2016-02, Leases, and ASU No. 2014-09, Revenue from Contracts with Customers, although, the amendments apply to any subsequent amendments to guidance in the ASC. ASU No. 2017-03 is effective upon issuance and did not have a significant impact on the Company’s consolidated financial position, results of operations and disclosures.ITEM 7A.marketsindex rate pricing for natural gas may increase or decrease in which we participatethe future based upon market conditions.capital intensive and cyclicalable to limit our exposure to fluctuations in nature. Thenatural gas prices by structuring our contract pricing with customers so that it mirrors the volatility in customer demand is greatly driven byour supply cost with vendors. Our exposure to market risk associated with LNG price changes may adversely impact our business. We do not currently have any derivative arrangements to protect against fluctuations in commodity prices, but to mitigate the changeeffect of fluctuations in LNG prices on our operations, we may enter into various derivative instruments in the price of oil and gas. These factors influence the release of new capital projects by our customers, which are traditionally awarded in competitive bid situations. Coordination of project start dates is matched to the customer requirements and projects may take a number of months to complete; schedules also may change during the course of any particular project. For more information please see Outlook for Fiscal 2019, contained within Item 7, Management Discussion and Analysis of Financial Condition and Results of Operations.As of December 31, 2018, we had cash and cash equivalents of $2.1 million and outstanding debt in Brazil totaling $0.2 million owed to the previous chairman of AETI.Interest RatesOur interest rate sensitive items do not subject us to material risk exposures.Foreign Currency Transaction RiskAETI operates a subsidiary in Brazil and maintains equity method investment in its Chinese joint venture, BOMAY. The functional currencies of the Brazilian subsidiary and the joint venture are the Brazilian Real and Chinese Yuan. Investments are translated into United States Dollars at the exchange rate in effect at the end of each quarterly reporting period. The resulting translation adjustment is recorded as accumulated other comprehensive income, net of taxes, in our consolidated balance sheets and was an accumulated loss of $0.4 million at December 31, 2018 primarily due to the weakening of the Chinese Yuan against the United States Dollar.Commodity Price Riskmaterials.materials related to power delivery equipment and services. While such materials are typically available from numerous suppliers, commodity raw materials are subject to price fluctuations. We endeavor to recoup these price increases from our customers on an individual contract basis to avoid operating margin erosion. Although historically we have not entered into any contracts to hedge commodity risk, we may do so in the future. Commodity price changes can have a material impact on our prospective earnings and cash flows. Copper, steel and aluminum represent a significant element of our material cost. Significant increases in the prices of these materials could reduce our estimated operating margins if we are unable to recover such increases from our customers.20Referencemadecalculated under the terms of the Note Payable based on a calculation of 3% plus the London interbank offered rate at the end of each month. Following the August 30, 2019 debt exchange with Chart E&C, a 1% increase or decrease in the interest rate would have a de minimis impact on annual interest expense. See Note 10—Debt to the Table of Contents on page F-2 of ourNotes to Consolidated Financial Statements included elsewhere in this report for information on the terms of the Note Payable.Notes thereto contained herein.None.Disclosure controlsMexico and proceduresUndermaintain an equity method investment in our Chinese joint venture, BOMAY. The functional currency of the directionBrazilian and Mexican subsidiaries are the Brazilian Real and Mexican Peso, respectively. The functional currency of the Chinese joint venture is the Chinese Yuan. The assets and liabilities of the foreign equity investees and foreign subsidiaries, denominated in foreign currency, are translated into United States dollars at exchange rates in effect at the consolidated balance sheet date and net sales and expenses are translated at the average exchange rate for the period. The resulting cumulative translation adjustment totaling $122 thousand has been recorded as Accumulated Other Comprehensive Income (Loss), net of taxes, in our Principal Executive Officer and Principal Financial Officer, we evaluated our disclosure controls and procedures asConsolidated Balance Sheet at December 31, 2020.2018. Our Principal Executive Officer2020, we had a non-U.S. dollar denominated working capital balance of approximately $971 thousand. An adverse change of 10% in the underlying foreign currency exchange rate would reduce our working capital balance by approximately $97 thousand.Principal Financial Officer concluded thatcyclical in nature. The volatility in customer demand is greatly driven by the change in the price of oil and gas. These factors influence the release of new capital projects by our disclosure controls and procedures were not effective ascustomers, which are traditionally awarded in competitive bid situations. Coordination of December 31, 2018 dueproject start dates is matched to the material weakness identified below.Management’s annual report on internal control over financial reportingOur management is responsible for establishingcustomer requirements and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) under the Exchange Act. Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2018. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission on Internal Control-Integrated Framework. Our management has concluded that our internal control over financial reporting was not effective as of December 31, 2018 and that a material weakness existed as more fully described below.A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. In managements’ assessment of the effectiveness of internal control over financial reported as of December 31, 2018, we determined the following weaknesses in internal control constitute a material weakness:Failure to achieve and maintain effective internal control over financial reporting and effective disclosure controls and procedures in accordance with rules of the Securities and Exchange Commission promulgated under Section 404 of the SarbanesOxley Act could harm our business and operating results and/or result in a loss of investor confidence in our financial reports, which could in turn have a material adverse effect on our business and stock price.Under rules of the SEC promulgated under Section 404 of the SarbanesOxley Act of 2002, we are required to furnish a report by our management on our internal control over financial reporting and an evaluation of our disclosure controls and procedures in this Annual Report on Form 10-K. In the course of our assessment of the effectiveness of our internal control over financial reporting as of December 31, 2018, which assessment was conducted during the fourth quarter of 2018 and the first quarter of 2019 in connection with the preparation of 2018 audited financial statements and our Annual Report on Form 10K for 2018, we identified a material weakness in our internal control over financial reporting resulting from the combination of a limited accounting staff and the transitional status of our Chief Financial Officer. This material weakness in our internal control over financial reporting, as described below, could harm our business and operating results, and could result in adverse publicity and a loss in investor confidence in the accuracy and completeness of our financial reports, which in turn could have a material adverse effect on our stock price, and, if such weaknesses are not properly remediated, could adversely affect our ability to report our financial results on a timely and accurate basis.We determined in the fourth quarter of 2018 that a material weakness in our internal control over financial reporting as of December 31, 2018 existed. As a part of our assessment of the effectiveness of our internal control over financial reporting as of December 31, 2018, we had considered both the composition and the limited size of our accounting department and their effect on the design of the controls established over our financial reporting process. In connection with the sale of the U.S. assets of our M&I Electric Industries in the third quarter of 2018,projects may take a number of our accounting employees leftmonths to work for the purchaser of the M&I assets. Also, in December 2018 our then Chief Financial Officer announced his resignation to pursue another career opportunity and he was replaced with our current CFO. We determined that the Company’s accounting personnel was reduced to a level that does not provide for sufficient segregation of duties, oversight of work performed and compensating controls in the Company’s accounting department. This material weakness was identified primarily because a number of deficiencies in controls and errors were detected by the current CFO and our independent registered public accounting firm. These errors were detected during the performance and completion of the Section 404 testing during the fourth quarter 2018 andcomplete; schedules also may change during the course of the annual audit (from January 2019 through early March 2019). While it was determined that, individually and collectively, these errors were not material, and in all cases the Company’s financial statements were corrected during the completion of our 2018 audit in February and March 2019, such that our independent registered public accounting firm expressed an unqualified opinion on our December 31, 2018 financial statements, we concluded that in light of these ineffective controls as of December 31, 2018, there was more than a remote likelihood that a material misstatement of our annual or interim financial statements would not be prevented or detected, and that, therefore, there was a “material weakness” in our internal control over financial reporting as of December 31, 2018.21We have recognized the need to hire additional accounting personnel to provide additional supervision, approval and review of accounting transactions and also provide our Chief Financial Officer with the necessary time to perform oversight and supervisory functions. We also recognize in our transition planning for the completion of the proposed share exchange transaction described elsewhere herein, which completion cannot be assured, that we will have a full complement of accounting staff under the leadership of an experienced Chief Financial Officer which we believe will remediate the material weakness described above. We are currently seeking to hire additional accounting staff at the present time to remediate this material weakness reported. This Annual Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to section 404(c) of the Sarbanes-Oxley Act of 2002, as amended, that permits the Company, as a smaller reporting company, to provide only management’s report in this Annual Report.Changes in internal control over financial reportingManagement regularly reviews our system of internal control over financial reporting to ensure we maintain an effective internal control environment. With the exception of the event leading to the material weakness described above, there were no changes in our internal control over financial reporting that occurred during the year that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.DirectorsInformation required by this Item is incorporated by reference to the information contained in the Proxy Statement for the 2019 Annual Meeting of Stockholders to be filed within 120 days after our December 31, 2018 fiscal year end.The information required by this Item is incorporated by reference to our Proxy Statement for the 2019 Annual Meeting of Stockholders to be filed within 120 days after our December 31, 2018 fiscal year end.ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSThe additional information required by this Item is incorporated by reference to our Proxy Statement for the 2019 Annual Meeting of Stockholders to be filed within 120 days after our December 31, 2018 fiscal year end.The information required by this Item is incorporated by reference to the “Director Independence” and “Certain Relationships and Related Transactions” sections of our Proxy Statement for the 2019 Annual Meeting of Stockholders to be filed within 120 days after our December 31, 2018 fiscal year end.The information required by this Item is incorporated by reference to our Proxy Statement for the 2019 Annual Meeting of Stockholders to be filed within 120 days after our December 31, 2018 fiscal year end.23(a) The following documents are filed as part of this report:1. Consolidated Financial Statements and Report of Independent Registered Public Accounting FirmSee Index on page F-2.2. Financial Statement SchedulesAll financial statement schedules have been omitted, since the required information is not applicable or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the Consolidated Financial Statements and Notes thereto.3. ExhibitsA list of exhibits filed or furnished with this report on Form 10-K (or incorporated by reference to exhibits previously filed or furnished by us) is provided in the Exhibit Index immediately following the signature pages of this report.None24
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 3.1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 3.425 10.26Deferred Compensation Plan for executives. (Incorporated by reference to Exhibit 10.25 to the Registrant’s Annual Report on Form 10-K filed March 27, 2009)*101.INSXBRL Instance Document.101.SCHXBRL Taxonomy Extension Schema Document101.CALXBRL Taxonomy Extension Calculation Linkbase Document.101.DEFXBRL Taxonomy Extension Definition Linkbase Document.101.LABXBRL Taxonomy Extension Labels Linkbase Document.101.PREXBRL Extension Presentation Linkbase Document.(1)Exhibits and schedules to the Share Exchange Agreement 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.(2)Schedules to the Asset Purchase Agreement 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 schedules upon request by the U.S. Securities and Exchange Commission.*Indicates a management contract or compensatory plan or arrangement.26Pursuant to the requirements of Section 13 or 15(d) 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.Dated: April 16, 2019AMERICAN ELECTRIC TECHNOLOGIES, INC.By:/s/ Peter MenikoffPeter Menikoff(Chief Executive Officer)(Principal Executive Officer)Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.SignatureTitle(s)Date/s/ Peter MenikoffChief Executive Officer, DirectorApril 16, 2019Peter Menikoff(Principal Executive Officer)/s/ Don W. BoydChief Financial OfficerApril 16, 2019Don W. Boyd(Principal Financial and Accounting Officer)/s/ Charles M. DauberApril 16, 2019Charles M. DauberDirector/s/ Neal M. DikemanNeal M. DikemanDirectorApril 16, 2019/s/ J. Hoke Peacock IIJ. Hoke Peacock IIDirectorApril 16, 2019/s/ Casey CrenshawCasey CrenshawDirectorApril 16, 2019/s/ Edward KuntzEdward KuntzDirectorApril 16, 201929AMERICAN ELECTRIC TECHNOLOGIES, INC.AND SUBSIDIARIESConsolidated Financial StatementsWith Report of Independent Registered Public Accounting FirmDecember 31, 2018 and 2017F-1American Electric Technologies, Inc. and SubsidiariesConsolidated Financial StatementsDecember 31, 2018 and 2017Table of ContentsF-3Consolidated Financial Statements:F-4F-5F-6F-7F-8F-9F-2Report of Independent Registered Public Accounting FirmStockholdersAmerican Electric Technologies,Shareholders and SubsidiariesAmerican Electric Technologies,Stabilis Solutions, Inc. (the “Company”) and Subsidiaries (collectively, the "Company")subsidiaries as of December 31, 20182020 and 2017,2019, and the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, comprehensive loss and cash flows for each of the two years thenin the period ended December 31, 2020, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as ofat December 31, 20182020 and 2017,2019, and the results of its operations and itstheir cash flows for each of the two years thenin the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.auditsaudit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal controls over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.respondedrespond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provideprovided a reasonable basis for our opinion.the Company'sStabilis Energy, Inc.’s auditor since 2007.April 16, 2019F-3American Electric Technologies,December 31, 2020 December 31, 2019 Assets Current assets: Cash and cash equivalents $ 1,814 $ 3,979 Accounts receivable 5,620 5,945 Inventories, net 226 209 Prepaid expenses and other current assets 3,111 3,583 Due from related parties 42 0 Total current assets 10,813 13,716 Property, plant and equipment: Cost 90,422 89,901 Less accumulated depreciation (38,384) (29,538) Property, plant and equipment, net 52,038 60,363 Right-of-use assets 786 965 Goodwill 4,453 4,453 Investments in foreign joint ventures 11,897 10,521 Other noncurrent assets 326 308 Total assets $ 80,313 $ 90,326 Liabilities and Equity Current liabilities: Current portion of long-term notes payable $ 680 $ 0 Current portion of long-term notes payable - related parties 3,351 1,000 Current portion of finance lease obligation - related parties 648 3,440 Current portion of operating lease obligations 362 364,000 Short-term notes payable 432 558 Accrued liabilities 4,361 5,018 Accounts payable 4,395 4,728 Total current liabilities 14,229 15,108 Long-term notes payable, net of current portion 682 0 Long-term notes payable, net of current portion - related parties 2,726 6,077 Finance lease obligations, net of current portion - related parties 0 648 Long-term portion of operating lease obligations 490 650 Deferred compensation 59 0 Deferred income taxes 97 0 Total liabilities 18,283 22,483 Commitments and contingencies (Note 13) 0Stockholders’ Equity: Preferred Stock; $0.001 par value, 1,000,000 shares authorized, 0 shares issued and outstanding at December 31, 2020 and December 31, 2019, respectively (Note 17) 0 0 Common stock; $0.001 par value, 37,500,000 shares authorized, 16,896,626 and 16,800,612 shares issued and outstanding at December 31, 2020 and December 31, 2019, respectively (Note 15) 17 17 Additional paid-in capital 91,278 90,748 Accumulated other comprehensive income (loss) 122 (291) Accumulated deficit (29,387) (22,631) Total stockholders’ equity 62,030 67,843 Total liabilities and equity $ 80,313 $ 90,326 F-4American Electric Technologies,Year Ended December 31, 2020 2019 Revenue LNG product $ 27,339 $ 34,244 Rental, service and other 8,951 9,406 Power delivery 5,260 3,421 Total revenues 41,550 47,071 Operating expenses: Costs of LNG product 20,362 24,496 Costs of rental, service and other 5,230 4,726 Costs of power delivery 4,419 2,649 Selling, general and administrative expenses 10,764 11,359 Depreciation expense 9,041 9,271 Total operating expenses 49,816 52,501 Loss from operations before equity income (8,266) (5,430) Net equity income from foreign joint ventures’ operations: Income from equity investments in foreign joint ventures 2,705 1,257 Foreign joint ventures’ operations related expenses (249) (124) Net equity income from foreign joint ventures’ operations 2,456 1,133 Loss from operations (5,810) (4,297) Other income (expense): Interest expense, net (45) (33) Interest expense, net - related parties (871) (1,175) Other income (expense) (57) 97 Gain from disposal of fixed assets 283 16 Total other income (expense) (690) (1,095) Loss before income tax expense (6,500) (5,392) Income tax expense 256 116 Net loss (6,756) (5,508) Net income attributable to noncontrolling interests 0 207 Net loss attributable to Stabilis Solutions, Inc. $ (6,756) $ (5,715) Common Stock Data: Net loss per common share: Basic and diluted $ (0.40) $ (0.39) Weighted average number of common shares outstanding: Basic and diluted 16,875,150 14,558,618 F-5American Electric Technologies,Year Ended
December 31,2020 2019 Net loss $ (6,756) $ (5,508) Foreign currency translation adjustment Foreign currency translation adjustment 413 (291) Total comprehensive loss (6,343) (5,799) Total comprehensive income attributable to noncontrolling interest Total comprehensive income attributable to noncontrolling interest 0 207 Total comprehensive loss attributable to Stabilis Solutions, Inc. Total comprehensive loss attributable to Stabilis Solutions, Inc. $ (6,343) $ (6,006) F-6American Electric Technologies,Common Stock Shares Amount Additional
Paid-in CapitalAccumulated
Other
Comprehensive
LossAccumulated
DeficitNon-controlling Interest Total Balance at December 31, 2017 3,767,674 $ 4 $ 19,510 $ 0 $ (5,872) $ 1,365 $ 15,007 Net loss — — — — (11,044) 207 (10,837) Contribution of notes payable by members 9,411,076 9 48,734 — — — 48,743 Balance at December 31, 2018 13,178,750 13 68,244 0 (16,916) 1,323 52,664 Recapitalization due to reverse merger 1,466,092 1 12,618 — — (1,530) 11,089 Shares issued in extinguishment of debt 1,470,807 2 6,887 — — — 6,889 Shares issued in acquisition of Diversenergy 684,963 1 2,999 — — — 3,000 Net loss — — — — (5,715) 207 (5,508) Other comprehensive loss — — — (291) — — (291) Balance at December 31, 2019 16,800,612 17 90,748 (291) (22,631) 0 67,843 Common stock issued to directors 96,014 — — — — — — Stock-based compensation — — 530 — — — 530 Net loss — — — — (6,756) — (6,756) Other comprehensive income — — — 413 — — 413 Balance at December 31, 2020 16,896,626 $ 17 $ 91,278 $ 122 $ (29,387) $ 0 $ 62,030 F-7American Electric Technologies,Year Ended December 31, 2020 2019 Cash flows from operating activities: Net loss $ (6,756) $ (5,508) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 9,041 9,271 Stock-based compensation expense 530 0 Bad debt expense 144 80 Gain on disposal of fixed assets (283) (16) Gain on extinguishment of debt 0 (111) Income from equity investment in joint venture (2,705) (1,257) Distributions from equity investment in joint venture 2,054 0 Deferred compensation costs 59 0 Change in operating assets and liabilities, net of acquisitions: Accounts receivable (328) (897) Due to related parties 0 131 Inventories (54) (34) Prepaid expenses and other current assets 87 523 Accounts payable and accrued liabilities (575) 1,741 Other 122 188 Net cash provided by operating activities 1,336 4,111 Cash flows from investing activities: Acquisition of fixed assets (768) (2,116) Proceeds from sales of fixed assets 512 138 Acquisition of American Electric, net of cash received 0 611 Acquisition of Diversenergy, net of cash received 0 (1,876) Net cash used in investing activities (256) (3,243) Cash flows from financing activities: Proceeds on long-term borrowings 1,224 0 Payments on long-term borrowings (1,000) 0 Proceeds on long-term borrowings from related parties 0 5,000 Payments on long-term borrowings from related parties (3,440) (3,159) Proceeds from short-term notes payable 776 767 Payments on short-term notes payable (752) (668) Other financing activities, net (10) 0 Net cash provided by (used in) financing activities (3,202) 1,940 Effect of exchange rate changes on cash (43) (76) Net increase (decrease) in cash and cash equivalents (2,165) 2,732 Cash and cash equivalents, beginning of period 3,979 1,247 Cash and cash equivalents, end of period $ 1,814 $ 3,979 Supplemental disclosure of cash flow information: Interest paid $ 910 $ 1,208 Income taxes paid 210 93 Non-cash investing and financing activities: Extinguishment of long-term debt through issuance of common stock 0 6,889 statement.F-8American Electric Technologies, Inc. and Subsidiaries
1. Basis of Presentation and Summary of Significant Accounting Policies(1)Organization and Nature of BusinessTechnologies, Inc.and its subsidiaries. In the Share Exchange, American Electric acquired directly 100% of the outstanding limited liability company membership interests of Stabilis Energy, LLC (“AETI” orStabilis LLC”) from LNG Investment Company, LLC (“LNG Investment”) and 20% of the “Company”outstanding limited liability membership interests of PEG Partners, LLC (“PEG”) isfrom AEGIS NG LLC (“AEGIS”). AEGIS owned a 20% noncontrolling interest of PEG. The remaining 80% of the surviving financial reporting entity fromoutstanding limited liability company interests of PEG were owned directly by Stabilis LLC. As a reverse acquisitionresult, Stabilis LLC became a direct 100% owned subsidiary of American Access Technologies, Inc.Electric and PEG became an indirectly-owned 100% subsidiary of American Electric. Under the Share Exchange Agreement, American Electric issued 13,178,750 post-split shares of common stock to acquire Stabilis LLC, which represented approximately 90% of the total amount of common stock of American Electric which was issued and outstanding as of July 26, 2019. The transaction was approved by the shareholders of M&IAmerican Electric Industries,at a Special Meeting of Stockholders. The Share Exchange resulted in a change of control of American Electric to control by Casey Crenshaw by virtue of his beneficial ownership of 88.4% of the common stock of American Electric to be outstanding as of July 26, 2019.M&I”U.S. GAAP”) on May 17, 2007. Immediately upon. For further information regarding this transaction, see Note 2—Acquisitions.reverse acquisition, American Access Technologies, Inc. changed its name to American Electric Technologies, Inc. AETI is a Florida corporation and M&I, AETI’s wholly-owned subsidiary is a Texas corporation. M&I has a wholly-owned subsidiary, South Coast Electric Systems, LLC (“SCES”), and joint venture interests in China and formerly had a joint venture in Singapore. The Singapore joint venture wrapped up in operations in 2018 and was sold.In 2014, the Company formed a wholly-owned subsidiary in Brazil (“M&I Brazil”), which is owned 20% by AETI and 80% by M&I. The Company has a U.S. corporate office in Texas; Brazil facilities and sales offices in Macaé, Rio and Belo Horizonte; and a foreign joint venture in Xian, China. The Company leases offices in Houston, Texas and internationally in Rio, Macaé and Belo Horizonte, Brazil.M&I’s wholly-owned subsidiary, SCES, is a Delaware Limited Liability Company organizedShare Exchange on February 20, 2003 and is currently inactive. Substantially all M&I’s assets and liabilities were sold or settled in 2018 and M&I currently has only activity with China and BrazilM&I has a foreign joint venture interest in BOMAY Electrical Industries Company, Ltd. (“BOMAY”) and previously held an interest in M&I Electric Far East PTE Ltd. (“MIEFE”) that was liquidated in 2018. BOMAY provides electrical systems primarily for land and marine based drilling rigs in China and is accounted for using the equity method of accounting.(2)Summary of Significant Accounting PoliciesPrinciples of Consolidation AETIthe Company and its wholly-owned subsidiaries, M&I and M&I Brazil. Significantsubsidiaries. All intercompany accounts and transactions arehave been eliminated in consolidation.accounting principles generally accepted in the United States of America (“U.S. GAAP”)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 net salesrevenues 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. The most significant estimates made by management include:(1)Estimates of the provision for doubtful accounts(2)Estimated useful lives of property and equipment(3)Valuation allowances related to deferred tax assetsAs future events and their effects cannot be determined with absolute certainty, actual results may differ from the estimates used in preparing the accompanying consolidated financial statements. Significant estimates, and assumptions are required as part of determining inventory and accounts receivable valuation, estimating depreciation, amortization and recoverability of long-lived assets, establishing self-insurance, warranty, legal and other reserves, performing intangible impairment analyses, and in establishing valuation allowances on deferred income tax assets and reserves for tax examination exposures.Financial InstrumentsThe Company includes fair value information in the notesthese differences could be material to the consolidated financial statementsstatements.itsthe assets acquired less liabilities assumed. Intangible assets are assets that lack physical substance (excluding financial instruments is different fromassets). 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 book value. Whenassets carrying value may not be recoverable. Business acquisitions during the book value approximatesthird quarter of 2019 accounted for the balance of goodwill. We currently test goodwill for impairment annually in the third quarter unless we determine that a triggering event has occurred in another quarter. See Note 2—Acquisitions and Note 7—Goodwill for further discussion.disclosure is made, which isshares that would have been outstanding if the case for financial instruments outstandingpotential shares had been issued and were dilutive. The calculation of diluted EPS excluded warrants to purchase 62,500 and 103,125 shares of common stock, and 778,500 and NaN unvested restricted stock units as of December 31, 20182020 and 2017. 2019, respectively, because their inclusion would have had an antidilutive effect.assumesutilizes valuation techniques that maximize the bookuse 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 following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels in accordance with U.S. GAAP:those financial instruments that are classified as currentcash and cash equivalents, accounts receivable, inventory, accounts payable and accrued liabilities approximate their respective fair values due to their relative short maturities. The carrying value of the Company’s notes payable and finance lease obligations approximates fair value because of the short maturity of these instruments. For non-current financial instruments,related interest rates approximate rates currently available to the Company usesCompany.instruments.Cash and Cash EquivalentsCash equivalents consist of liquid investments with original maturities of three months or less. Cash balances, which routinely exceed Federal Deposit Insurance Corporation limits, are maintained in JP Morgan Chase Bank and Frost Bank. These institutions were selected by management based on their financial stability. The company has experienced no losses on deposits. F-9Short-term investments consist of any fund held in certificates of deposits with original maturities greater than three months and investments in debt and equity securities with maturity of one year or less.Accounts Receivable and Allowance for Bad DebtsThe Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. The estimate is based on management’s assessment of the collectability of specific customer accounts and includes consideration for credit worthiness and financial condition of those specific customers. The Company also reviews historical experience with the customer, the general economic environment and the aging of its receivables. The Company records an allowance to reduce receivables to the amount it reasonably believes to be collectible. Based on this assessment, management believes the allowance for doubtful accounts is adequate.InventoriesInventories are stated at the lower of cost or market, with material value determined using an average cost method. At December 31, 2018 and 2017, inventory is primarily raw materials for use on service jobs in Brazil.Property, Plant and EquipmentProperty, plant and equipment are stated at cost. Expenditures for repairs and maintenance are expensed as incurred while renewals and betterments are capitalized. Depreciation is calculated on the straight-line basis over the estimated useful lives of the assets after giving effect to salvage values.Long-lived AssetsIf events or circumstances indicate the carrying amount of an asset may not be recoverable, including intangible assets, 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. Events that would trigger an impairment test include the following:A significant decrease in the market price of a long-lived asset.A significant change in the use of long-lived assets or in its physical condition.A significant change in the business climate that could affect an assets value.An accumulation of cost significantly greater than the amount originally expected to acquire or construct a long-lived asset.A current period operating or cash flow loss combined with a history of such losses or a forecast demonstrating continued losses associated with the use of a long-lived asset.An expectation to sell or otherwise dispose of a long-lived asset significantly before the end of its estimated useful life.Based on management’s reviews during each of the years ended December 31, 2018 and 2017, there were no events or circumstances that caused management to believe that impairments were necessary.Income TaxesThe Company uses the asset and liability method to account for income taxes. Under this method of accounting for income taxes, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using the enacted tax rates and laws that will be in effect when the differences are expected to be reported to the taxing authority. The Company also records any financial statement recognition and disclosure requirements for uncertain tax positions taken or expected to be taken in its tax return. Financial statement recognition of the tax position is dependent on an assessment of a 50% or greater likelihood that the tax position will be sustained upon examination, based on the technical merits of the position. Any interest and penalties related to uncertain tax positions are recorded as interest expense in the accompanying consolidated statements of operations.subsidiarysubsidiaries and foreign joint ventures to be the functional currency. In accordance with Accounting Standards Codification (ASC 830), the assets and liabilities of the foreign equity investees and foreign subsidiary,F-10Revenue Recognitionrecords net sales from its time and material projectsaccounts for stock-based compensation in accordance with ASC Topic 718, Compensation — Stock Compensation (“ASC 718”). Compensation expense for stock-based awards expected to vest is recognized on a completedstraight-line basis over the requisite service basis after customer acknowledgement that the service has been completed and accepted. In addition, the Company sells certain purchased parts and products. These net sales are recorded when the product is shipped and title passes to the customer. On January 1, 2018, the Company adopted ASC 606 on a modified retrospective basis and applied the guidance to all of its contracts. As a resultperiod of the Company’s adoption, there were no changes to the timing of the recognition or measurement of revenue, and there was no cumulative effect of adoption as ofaward based on their grant date fair value.1, 2018. See Note 17, Revenue Recognition (ASC 606) for the Company’s policy effective January 1, 2018.Shipping and Handling Fees and CostsShipping and handling fees, if billed to customers, are included in net sales. Shipping and handling costs associated with inbound freight are expensed as incurred. Shipping and handling costs associated with outbound freight are classified as cost of sales.Uses and Sources of LiquidityThe Company’s primary need for liquidity is to fund working capital requirements of the Company’s businesses, capital expenditures and for general corporate purposes, including debt repayment. The Company has incurred losses and experienced negative operating cash flows for the past several years, and accordingly, the Company has taken a number of actions to continue to support its operations and meet its obligations.During 2017, the Company refinanced its outstanding loans which at that time provided approximately $1.0 million of working capital. In addition, the Board of Directors of the Company created a special committee to address strategic initiatives that include addressing liquidity. During 2018, the Company continued to face a challenging competitive environment and while it continues to focus on its overall profitability, including managing expenses, it reported a loss in 2018 and was required to fund cash used in operating activities with cash from investing and financing activities. Going forward, the Company expects to generate additional liquidity from strategic initiatives including monetization of assets and additional debt and equity financing actions. The Company expects that these actions will be executed in alignment with the anticipated timing of its liquidity needs. In August the Company closed on a sale of its U.S. operations. The Company expects to continue to optimize international operations including expansion of its service business in Brazil and diversification of its joint venture operations in China.In December 2018, the Company signed an agreement to acquire Stabilis Energy for stock, pending stock holder approval in 2019. The Company’s historical operating results indicate substantial doubt exists related to its ability to continue as a going concern. However, the Company believes it is probable that the actions discussed above will occur and mitigate the substantial doubt raised by its historical operating results and satisfy its estimated liquidity needs 12 months from the issuance of the financial statements. However, the Company cannot predict, with certainty, the outcome of its actions to generate liquidity, including the availability of additional debt financing, or whether such actions would generate the expected liquidity as currently planned. In addition, Redeemable Preferred Stock contains certain limitations on our ability to sell assets, which could impact our ability to complete asset sale transactions or our ability to use proceeds from those transactions to fund our operations. Therefore, any planned actions must take into account the ability to transact within any applicable restrictions under these agreements. If the Company continues to experience operating losses and is not able to generate additional liquidity through the mechanisms described above or through some combination of other actions, while not expected, it may not be able to access additional liquidity and we might need to secure additional sources of funds, which may or may not be available to us. Additionally, a failure to generate additional liquidity could negatively impact the Company’s access to materials or services that are important to the operation of its business.Concentration of Market RiskFinancial instruments that potentially subject the Company to concentrations of credit risk consist primarily of trade accounts receivable. The Company’s market risk is dependent primarily on the strength of the oil and gas and energy-related industries. The Company grants credit to customers and does not generally require security for credit granted except in the case of certain international contracts. Procedures are in effect to monitor the credit worthiness of its customers. During 2018, two customers accounted for approximately 23% of net revenue and 56% of net accounts receivable – trade. During 2017, no customers accounted for more than 10% of total revenue and three customers accounted for 53% of net accounts receivable – trade.ReclassificationsF-11Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation. Such reclassifications had no effect on the Company’s financial position, results of operations or cashflows. See Note 16 for additional information.Recently Issued Accounting PronouncementsIn May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU No. 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU No. 2014-09 defines a five-step process to achieve this core principle and, in doing so, more judgment and estimates may be required under existing U.S. GAAP. The standard is effective for annual periods beginning after December 15, 2016, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU No. 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). In July 2015, the FASB issued ASU No. 2015-14 which delayed2017-04, “Intangibles – Goodwill and Other: Simplifying the effective dateTest for Goodwill Impairment” (“ASU No. 2017-04”). The new guidance simplifies the subsequent measurement of goodwill by removing the second step of the two-step impairment test. The amendment requires an entity to perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The amendments of ASU No. 2014-092017-04 were adopted by one year (effective for annual periods beginning after December 15, 2017). Thethe Company adopted ASU 2014-09, effective January 1, 2018, using the modified retrospective method.2020. The adoption of thethis standard did not have a materialhad no impact on our condensed consolidated financial position or results of operations, as the Company’s revenue recognition policies, other than enhanced disclosures related to the disaggregation of revenues from contracts with customers, the Company’s performance obligations and any significant judgments. See Note 17, Revenue Recognition (ASC 606).February 2016,December 2019, the FASB issued ASU No. 2016-02, Leases,2019-12, Simplifying the Accounting for Income Taxes (ASU 2019-12), which requires lesseessimplifies the accounting for income taxes by removing certain exceptions to recognize the following for all leases (with the exceptiongeneral principles of short-term leases) at the commencement date: (1) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis;Topic 740, Income Taxes and (2) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Underalso improves consistent application by clarifying and amending existing guidance. ASU No. 2016-02, lessor accounting is largely unchanged. ASU No. 2016-022019-12 is effective for fiscal years beginning after December 15, 20182020, with early applicationadoption permitted. We are currently evaluating the impact of this guidance on our financial statements.February 2018, FASB issued ASU 2018-01, Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842. The amendment clarifies that land easements are within the scope of the new leases standard (ASC 842) and introduces a new transition practical expedient allowing a company to not assess whether existing and expired land easements that were not previously accounted for as leases under current U.S. GAAP (ASC 840) are or contain leases under ASC 842.In April 2016,March 2020, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers2020-04, “Reference Rate Reform (Topic 606)848): Identifying Performance Obligations and Licensing, to clarify two aspects of Topic 606: (i) identifying performance obligations; and (ii) the licensing implementation guidance. The amendments do not change the core principleFacilitation of the guidance in Topic 606. The effective date and transition requirements for Effects of Reference Rate Reform on Financial Reporting” (“ASU No. 2016-102020-04”), 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 sameimpact of ASU No. 2020-04 on our condensed consolidated financial statements.effective dateacquiror of American Electric in the Share Exchange for accounting purposes. As a result, the Share Exchange is treated by American Electric as a reverse acquisition under the purchase method of accounting in accordance with US GAAP.transition requirements for ASU No. 2014-09. This standard was adopted effective January 1, 2018, see ASU No. 2014-09 above for additional information.In July 2018, FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases. The amendment provides improvements that clarify specific aspectsintangible assets and liabilities based on their fair values at the time of the guidancecompletion of the Share Exchange. The assets and liabilities and results of operations of American Electric are consolidated into the results of operations of Stabilis as of the completion of the Share Exchange.Number of shares of the combined company to be owned by American Electric stockholders 1,466,092 Multiplied by the fair value per share of American Electric Common Stock $ 7.12 Cash $ 650,000 Purchase price $ 11,088,573 ASU 2016-02. In August 2018, FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements.determining the purchase price was $7.12 per share based on the closing price of American Electric’s common stock on July 26, 2019.amendment provides entities with an additional (and optional) transition methodexcess of the purchase price over the fair value of the acquired assets and liabilities assumed is reflected as goodwill and is attributable to adopt the new leases standard and provides lessors with a practical expedient, by class of underlying asset, to not separate non-lease componentsstrategic advantages gained from the associated lease componentacquisition of a public entity with access to LNG markets in Brazil and instead, to account for those components as a single component if certain criteria are met. The Company adopted ASU 2016-02 on January 1, 2019. AsChina. All of the dategoodwill is assigned to the Power Delivery segment and is not expected to be deductible for income tax purposes.this filing, the Company is refining its estimate and anticipatespurchase price for the implementation of this standard will result in an increase toacquired assets and liabilities of approximately between $0.60 millionAmerican Electric is as follows (in thousands):Total purchase price $ 11,089 Current Assets 3,611 Property, plant and equipment, net 532 Investment in foreign joint venture 9,333 Other noncurrent assets 410 Total identifiable assets 13,886 Accounts payable and other accrued expenses (2,714) Accrued liabilities and other current liabilities (138) Other Liabilities (84) Total liabilities assumed (2,936) Goodwill $ 139 $0.80 million onare included in the accompanying Consolidated Statement of Operations for the year ended December 31, 2019.July 27 - December 31, 2019 Revenue $ 3,421 Income before income tax expense 769 Net income from continuing operations 691 In May 2016, This information has been compiled from current and historical financial statements and is not necessarily indicative of the FASBresults that actually would have been achieved had the transaction occurred at the beginning of the periods presented or that may be achieved in the future.Years Ended December 31, 2019 Revenue $ 50,898 Net loss (7,389) ASU No. 2016-12, Revenue from Contractsand outstanding membership interests of Diversenergy for total consideration of 684,963 shares of Company common stock valued at $3.0 million as of the closing date and $2.0 million in cash, subject to adjustments for Diversenergy’s net working capital as of the closing date. Diversenergy specializes in virtual LNG distribution systems, providing LNG to customers who use it as a fuel in mobile high horsepower applications and to customers who do not have natural gas pipeline access. The completion of the acquisition will expand the Company's presence in the distributed LNG and compressed natural gas (“CNG”) markets in Mexico. Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients. ASU No. 2016-12 provides narrow-scope improvementsthe purchase method of accounting, the total purchase price is allocated to the guidanceacquired tangible and intangible assets and assumed liabilities of Diversenergy based on collectability, noncash consideration,their estimated fair values as of the closing date. The excess of the purchase price over the fair value of the acquired assets and completed contracts at transition. The amendment also provides a practical expedient for contract modifications at transitionliabilities assumed is reflected as goodwill and an accounting policy election relatedis attributable to the presentationstrategic opportunities to grow the Company's LNG and CNG business in Mexico. All of sales taxes and other similar taxes collected from customersthe goodwill is assigned to the LNG segment and is not expected to reducebe deductible for income tax purposes.judgment necessaryacquisition has been allocated to comply with Topic 606. The effective dateDiversenergy's tangible and transition requirements for ASU No. 2016-12 are the same as the effective dateintangible assets and transition requirements for ASU No. 2014-09. This standard was adopted effective January 1, 2018, see ASU No. 2014-09 above for additional information.In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Lossesliabilities based on Financial Instruments. ASU No. 2016-13 eliminates the probable initial recognition threshold in current U.S. GAAP and, instead, requires the measurement of all expected credit losses for financial assets heldtheir fair market values at the reportingtime of the completion of the acquisition. The assets and liabilities and results of operations of Diversenergy are consolidated into the results of operations of Stabilis as of the acquisition date.Number of shares issued to Diversenergy stockholders 684,963 Multiplied by the fair value per share of Stabilis Common Stock $ 4.38 Cash $ 2,000,000 Purchase price $ 5,000,000 based on historical experience, current conditions, and reasonable and supportable forecasts. In addition, ASU No. 2016-13 amendsof acquisition.Total purchase price $ 5,000 Current Assets 164 Property, plant and equipment, net 507 Other noncurrent assets 114 Total identifiable assets 785 Current liabilities (99) Total liabilities assumed (99) Goodwill $ 4,314 accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. ASU No. 2016-13 is effective for annual periods beginning after December 15, 2019, with early application permitted in annual periods beginning after December 15, 2018. The amendments of ASU No. 2016-13 should be applied through a cumulative-effect adjustment to retainedF-12earningsDiversenergy acquisition as if it occurred as of the beginning of the first reportingperiods presented in this report do not materially differ from actual reported results.Years Ended December 31, 2020 2019 LNG Product $ 27,339 $ 34,244 Rental 6,338 6,569 Service 1,128 991 Power Delivery 5,260 3,421 Other 1,485 1,846 $ 41,550 $ 47,071 guidance is effective. Management is currently evaluatingperformance obligations have not been fulfilled at the future impact of ASU No. 2016-13 on the Company’s consolidated financial position, results of operations and disclosures.In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. ASU No. 2016-15 addresses eight specific cash flow issues and is intended to reduce diversityreporting date, resulting in practicedeferred revenue. Contract liabilities are included in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU No. 2016-15 is effective for reporting periods beginning after December 15, 2017. The Company adopted the provisions of ASU 2016-15 on January 1, 2018. The Company made the accounting policy election to classify dividends received from its equity method investment using the cumulative earnings approach. Accordingly, dividends received are classified as operating cash flows until such time that cumulate dividends exceed cumulative equity in earnings. The adoption of the standard has been applied on a retrospective basisaccrued liabilities in the accompanying Consolidated Statement of Cash Flows.Inunaudited condensed consolidated balance sheets. The following table presents the changes in the Company’s contract liabilities for the years ended December 2016, the FASB issued ASU No. 2016-20, Technical Corrections31, 2020 and Improvements to Topic 606, Revenue from Contracts with Customers. ASU No. 2016-20 allows entities not to make quantitative disclosures about remaining performance obligations in certain cases and requires entities that use any of the new or previously existing optional exemptions to expand their qualitative disclosures. 2019 (in thousands):December 31, 2020 2019 Balance at beginning of period $ 185 $ 93 Cash received, excluding amounts recognized as revenue 777 185 Amounts recognized as revenue (605) (93) Balance at end of period $ 357 $ 185 amendment also clarifies narrow aspects of ASC 606, including contract modifications, contract costs, and the balance sheet classification of items asCompany has no other material contract assets versus receivables, or corrects unintended applicationliabilities and contract costs.Year Ended December 31, 2020 (in thousands) LNG Power Delivery Total Revenues $ 36,290 $ 5,260 $ 41,550 Depreciation 8,911 130 9,041 Loss from operations before equity income (6,815) (1,451) (8,266) Net equity income from foreign joint ventures’ operations 0 2,456 2,456 Income (loss) from operations (6,815) 1,005 (5,810) Interest expense, net 26 19 45 Interest expense, net - related parties 871 0 871 Income tax expense 46 210 256 Net income (loss) (7,567) 811 (6,756) Total Assets $ 64,757 $ 15,556 $ 80,313 Year Ended December 31, 2019 (in thousands) LNG Power Delivery Total Revenues $ 43,650 $ 3,421 $ 47,071 Depreciation 9,127 144 9,271 Operating loss (5,016) (414) (5,430) Net equity income from foreign joint ventures' operations 0 1,133 1,133 Income (loss) from operations (5,016) 719 (4,297) Interest expense, net 19 14 33 Interest expense, net - related parties 1,175 0 1,175 Income tax expense 38 78 116 Net loss (6,194) 686 (5,508) Total Assets $ 75,883 $ 14,443 $ 90,326 guidance. The adoption of ASU No. 2016-20 as of January 1, 2018 did not have a material impactgains and losses on the Company’s consolidated financial position, results of operations or disclosures.In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. ASU No. 2017-01 clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of a business or as acquisitions (or disposals) of assets. ASU No. 2017-01 is effective for annual periods beginning after December 15, 2018, with early adoption permitted under certain circumstances. The amendments of ASU No. 2017-01 should be applied prospectively as of the beginning of the period of adoption. The Company adopted ASU No. 2017-01 on January 1, 2019. The adoption of this standard had no impact on the Company’s consolidated financial position, results of operationsforeign currency remeasurement, and disclosures, as the adoption is applied on a prospective basis.In January 2017, the FASB issued ASU No. 2017-03, Accounting Changesinterest and Error Corrections (Topic 250) and Investments – Equity Method and Joint Ventures (Topic 323): Amendments to SEC Paragraphs Pursuant to Staff Announcements at the September 22, 2016 and November 17, 2016 EITF Meetings. The amendments in this update relate to disclosures of the impact of recently issued accounting standards. The SEC staff’s view that a registrant should evaluate ASC updates that have not yet been adopted to determine the appropriate financial disclosures about the potential material effects of the updates on the financial statements when adopted. If a registrant does not know or cannot reasonably estimate the impact of an update, then in addition to making a statement to that effect, the registrant should consider additional qualitative financial statement disclosures to assist the reader in assessing the significance of the impact. The staff expects the additional qualitative disclosures to include a description of the effect of the accounting policies expected to be applied compared to current accounting policies. Also, the registrant should describe the status of its process to implement the new standards and the significant implementation matters yet to be addressed. The amendments specifically addressed recent ASC amendments to ASU No. 2016-13, Financial Instruments – Credit Losses, ASU No. 2016-02, Leases, and ASU No. 2014-09, Revenue from Contracts with Customers, although, the amendments apply to any subsequent amendments to guidancedividend income, are included in the ASC. ASU No. 2017-03 is effective upon issuancesegments’ results.Years Ended December 31, (in thousands) 2020 2019 Revenues Brazil $ 5,260 $ 3,421 Mexico 4,085 131 United States 32,205 43,519 $ 41,550 $ 47,071 Years Ended December 31, (in thousands) 2020 2019 Assets Brazil $ 3,659 $ 3,276 China 11,897 11,167 Mexico 5,307 4,916 United States 59,450 70,967 $ 80,313 $ 90,326 did not have a significant impact on theOther Current Assetsconsolidated financial position, results of operationsprepaid expenses and disclosures.(3)InventoriesInventoriesother current assets consisted of the following at December 31, 2018(in thousands):December 31, 2020 2019 Prepaid LNG $ 90 $ 189 Prepaid insurance 734 698 Prepaid supplier expenses 299 229 Other receivables 1,521 1,655 Deposits 285 347 Other 182 465 Total prepaid expenses and other current assets $ 3,111 $ 3,583 2017.EquipmentF-13Property, The Company’s property, plant and equipment consisted of the following at(in thousands):December 31, Estimated
Useful Life
(years)2020 2019 Liquefaction plants and systems 10 - 15 $ 40,841 $ 40,617 Real property and buildings 3 - 25 1,649 1,794 Vehicles and tanker trailers and equipment 2 - 10 47,179 46,597 Computer and office equipment 2 - 7 532 453 Construction in progress — 191 409 Leasehold improvements — 30 31 90,422 89,901 Less: accumulated depreciation (38,384) (29,538) $ 52,038 $ 60,363 20182020 and 2017:
Useful Lives
(years)Depreciation expense recognized2019 totaled $9.0 million and $9.3 million respectively, of which all is included in the year endedconsolidated statements of operations as its own and separate line item.2020 2019 Beginning of period $ 4,453 $ 0 Acquisition of American Electric 0 139 Acquisition of Diversenergy 0 4,314 End of period $ 4,453 $ 4,453 2018 and 2017 is as follows:(5)Advances to and Investments in Foreign Joint Venture Operationshas a foreign joint venture agreementperforms an impairment test for goodwill annually or more frequently if indicators of potential impairment exist. We completed our annual goodwill impairment test as of September 30, 2020 and no impairments were identified.a Chinese company, BOMAY Electric Industries Company, Ltd. (“BOMAY”), which builds electrical systems for sale in China. The majority partner in this foreign joint venture is aBaoji Oilfield Machinery Co., Ltd. (a subsidiary of a major Chinese oil company. M&IChina National Petroleum Corporation), who owns 51%. The remaining 9% is owned by AA Energies, Inc.an initial investment of $1.00 million in 2006 and made an additional $1.00 million investment in 2007. The Company’s equity income/loss from the foreign0 sales to its joint venture was $0.95 millionduring 2020 and $0.43 million2019. the years ended December 31, 2018 and 2017, respectively. During the years ended December 31, 2018 and 2017, the Company received $1.1 million and $0.78 million, respectively, in dividends from BOMAY. There were no accounts receivable from BOMAY at December 31, 20182020 and $0.04 million at2019 and operational results for the year ended December 31, 2017.F-14During 20182020 and 2017,for the Company also recognized approximately $0.14 million and $0.25 million for each year, respectively, for employee related expenses directly attributableperiod from July 27, 2019 to the foreign joint ventures.Summary financial information of BOMAYDecember 31, 2019 in U.S. dollars was as follows at(in thousands):December 31, 2020 2019 Assets: Total current assets $ 51,811 $ 81,247 Total non-current assets 7,136 5,775 Total assets $ 58,947 $ 87,022 Liabilities and equity: Total liabilities $ 26,355 $ 58,176 Total joint ventures’ equity 32,592 28,846 Total liabilities and equity $ 58,947 $ 87,022 December 31, July 27- December 31, 2020 2019 Revenue $ 66,260 $ 50,421 Gross Profit 12,066 7,182 Earnings 6,521 3,143 20182020 and 2017:The Company’s investments in and advancesfor the period from July 27, 2019 to its foreign joint venture operations were as follows as of December 31, 2018 and 2017:December 31, July 27- December 31, 2020 2019 Initial investment $ 9,333 $ 9,333 Undistributed earnings: Balance at beginning of period 1,257 0 Equity in earnings 2,705 1,257 Dividend distributions (2,054) 0 Balance at end of period 1,908 1,257 Foreign currency translation: Balance at beginning of period (69) 0 Change during the period 725 (69) Balance at end of period 656 (69) Total investment in BOMAY at end of period $ 11,897 $ 10,521 *$2.8$2.66 million at both December 31, 20182020 and 2017, respectively, are2019 is included in AETI’s consolidated retained earnings.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 Welfareforeign joint venture operationsBOMAY 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 consolidated statements of operations as equity income (loss) from foreign joint venturesventure operations. Joint venture income increases the carrying value of the joint venturesventure 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 valueF-152018 or 2017.(6)Income TaxesThe componentsEnergía Superior. On August 20, 2019, we completed the formation of loss before income taxesEnergía Superior, a joint venture with CryoMex, to pursue investments in distributed natural gas production and dividends on preferred stock for the years ended December 31, 2018distribution assets in Mexico. CryoMex is controlled by Grupo CLISA, a Monterrey, Mexico-based developer and 2017 were as follows:The componentsoperator of the provision (benefit) for income taxes by taxing authority for the years ended December 31, 2018 and 2017 were as follows:The Company files income tax returnsbusinesses in the United States Federal jurisdiction and various state jurisdictions. The Company is subject to examination by federal and state tax authorities for fiscal years 2014 through 2018.Significant components of the Company’s deferred federal income taxes at December 31, 2018 and 2017 were as follows:F-16The Company’s deferred tax assets are primarily related to net operating loss carry forwards. A valuation allowance was established at December 31, 2018 and 2017 due to uncertainty regarding future realization of deferred tax assets. Our total valuation allowance asAs of December 31, 20182020 and 20172019, the Company has not made any material investments in Energía Superior.December 31, 2020 2019 Compensation and benefits $ 1,745 $ 2,641 Professional fees 408 131 LNG fuel and transportation 1,151 1,582 Accrued interest 21 134 Contract liabilities 357 185 Other taxes payable 328 163 Other accrued liabilities 351 182 Total accrued liabilities $ 4,361 $ 5,018 December 31, 2020 2019 Unsecured promissory note $ 1,080 $ 0 Secured term note payable - related party 1,077 2,077 Secured promissory note - related party 5,000 5,000 Insurance and other notes payable 714 558 Less: amounts due within one year (4,463) (1,558) Total long-term debt $ 3,408 $ 6,077 $4.1 million and $3.65 million, respectively. The difference between the effective income tax rate reflected in the provision for income taxes and the amounts, which would be determined by applying the statutory income tax rateform of 21% and 34% at December 31, 2018 and 2017, respectively, is summarized as follows:(7)Notes PayableThe components of notes payable and long-term debt at December 31, 2018 and 2017 are as follows:Principal payments of the short-term notes payable are due in 2019.On March 23, 2017,a promissory note, dated May 8, 2020, between the Company and its subsidiaries, M&I Electric Industries, Inc. and South Coast Electric Systems, LLC (collectively,Cadence Bank, N.A. as the “Sellers”) issued and sold to HD Special-Situations III, L.P. (the “Purchaser”) a $7.00 million principal amount Senior Secured Term Notelender (the “Note”) with principal of $0.50 million due, matures on May 8, 2022 and paid on June 30, 2017 with the balance due 48 months after issuance for cash at par pursuant to a Note Purchase Agreement (the “Purchase Agreement”). Proceeds from the sale of the Note were used to fully repay and terminate the Company’s prior revolving credit facilities with approximately $1.00 million being available for the Company’s working capital and general business purposes. The Note borebears interest at 11.5%a fixed rate of 1.0% per annum, payable monthly commencing on December 2, 2020. There is no prepayment penalty. Under the terms of the PPP, all or a portion of the principal may be forgiven if the Loan proceeds are used for qualifying expenses as described in arrearsthe CARES Act, such as payroll costs, benefits, rent, and utilities. While no assurance is provided that the Company will obtain forgiveness of the Loan in whole or in part, management believes we currently meet the requirements and the Company intends to apply for forgiveness. With respect to any portion of the Loan that is not forgiven, the Loan will be subject to customary provisions for a loan of this type, including customary events of default relating to, among other things, payment defaults and breaches of the provisions of the Note.first-priority$20.0 million equity interest and first lien on substantially all existing and after-acquired personal propertyplant assets and real estate owned byincluding land. Borrowings bear interest on the Sellers (with certain exceptions)outstanding principal at the rate of 3.0% plus the London interbank offered rate (3.15% at December 31, 2020).subject to an interest “make-whole” provision under which any prepaymentamended on August 21, 2017 whereby only the payment terms of principal and interest were modified to be payable in excess8 installments as follows: (i) $2.5 million plus accrued interest due on August, 24, 2017, (ii) $2.5 million plus accrued interest due on August 24, 2018, (iii) $2.5 million plus accrued interest due on August 24, 2019, (iv) 4 equal payments of $1.50$1.5 million plus accrued interest on each anniversary date of August 24, 2019 thereafter, (v) and $0.6 million plus accrued interest on the remaining unpaid balance of the Amended Secured Term Note Payable on August 24, 2024. In the event all principal and interest is paid in full by August 24, 2023, an additional payment of $2.2 million is to be forgiven.“Prepayment Threshold”“Exchanged Indebtedness”) within one yearin exchange for unregistered shares of our common stock (such transactions, the “Chart Transaction”). We issued to Chart E&C 1,470,807 shares of Company common stock, based on the per share price of Company common stock of 90% of the average of the dollar volume-weighted average prices per share of the common stock as calculated by Bloomberg for each of the 5 consecutive trading days ending on and including the third trading day immediately preceding the closing date, which took place on August 30, 2019. At closing, Stabilis LNG EF also paid to Chart E&C an amount in cash equal to the accrued and unpaid interest on the Exchanged Indebtedness due through the closing, plus a cash amount to be paid in lieu of the issuance of fractional shares of our Common Stock. Management determined the modifications to be substantial and pursuant to ASC 470, the transaction was treated as a debt extinguishment for accounting purposes. Accordingly, the Company recognized a gain on extinguishment of debt of $0.1 million, which is included in Other Income in the accompanying Consolidated Statement of Operations. The exchange agreement released certain collateral (including the Company’s LNG plant) and removed certain covenants of the original Note Payable.issuance (the “Make-Whole Period”) would have been subjectall or any portion of the balance of the unpaid principal amount of the Note, for additional shares of our common stock based on the foregoing pricing calculation related to the payment premium based onclosing date.11.5% per year6% until December 10, 2020, and 12% thereafter. The debt payments are interest only through December 2020 followed by monthly principal and interest payments through December 2022. The debt is secured by certain pieces of the prepayment amount in excessCompany’s equipment valued at $5 million. See Note 12—Related Party Transactions for further discussion of the Prepayment ThresholdPromissory Note.remaining portion2020 to 2021 policy. The outstanding principal balance on the premium finance note was $0.3 million at December 31, 2019 and $0.4 million at December 31, 2020. The renewal occurred in August 2020 and covers a period of up to one year. The Company makes equal monthly payments of principal and interest over the term of the Make-Whole Period that would have remained afternotes which are generally 10 months in term. The interest rate for the prepayment2019 to 2020 insurance policy was made. 6.2%. The interest rate for the 2020 to 2021 insurance policy is 5.45%. The note is secured.Transaction described inacquisition of American Electric (see Note 16, after the Make-Whole Period on August 12, 2018,2—Acquisitions), the Company was required to repay the Notesassumed a loan facility between M&I Brazil, a subsidiary, and all accrued and unpaid interest totaling $6.4 million. The repayment resulted in an immediate recognition of unamortized loan costs of $0.3 million and unamortized debt discount related to warrants issued in a debt modification, as described below, of $0.4 million, into interest expense totaling $0.7 million.On November 13, 2017, the Company entered into an agreement modifying the termsemployee of the Note.Company. The modification included a waiver of an EBITDA covenant violation as of September 30, 2017 and revisions to the original revenue and EBITDA covenants along with the requirement of minimum principal reductions of $30,000 per month beginning in April 2018. In consideration for the modified terms, the Company issued 500,000 warrants to purchase the Company’s common stock at an exercise price of $2.26 that expire in November 2022.F-17The fair value assigned to the warrants of approximately $0.4 million was recognized as an increase in additional paid-in-capital with a corresponding discount on the Note. The discount was originally accreted through interest expense over the remaining term of the Note; however, as described above, the unamortized discount was immediately recognized as interest expense upon repayment of the Note on August 12, 2018. The fair value of the warrants was calculated using the Black Scholes-Merton pricing model using the following weighted average assumptions, at the grant date:On June 6, 2017, the Company’s subsidiary, M&I Brazil, entered into a Loan Agreement with the former chairman of AETI. The Loan Agreement providesloan facility provided the Company with a $0.30$0.3 million loan facility of which $0.20$0.2 million iswas drawn and is outstanding as of December 31, 2018.2019. All outstanding amounts, including accrued but unpaid interest areinterested, became due at maturityand was paid in full in June 2019.2020. Under the loan agreement, the interest rate on the loan facility iswas 10.0%, per annum, payable each quarter. The loan facility iswas secured by the assets held by M&I Brazil.
Unsecured Term Note Payable(8)LeasesCorporate Office LeaseIn December 2013, the Company executed an office lease that covers approximately 13,000 square feet of office space at 1250 Wood Branch Park Drive in Houston, Texas. The term of the lease is 64 months and commenced upon completion of tenant improvements in March 2014.December 31, 2020 2021 $ 4,464 2022 3,360 2023 47 2024 0 2025 0 Thereafter 0 Total long-term debt, including current maturities $ 7,871 December 31, 2020 2019 Unsecured promissory note $ 6 $ 0 Secured term note payable - related party 66 365 Secured promissory note - related party 308 140 Insurance and other notes payable 38 32 Total interest expense $ 418 $ 537 equipment (principally trucksassets.forklifts) underoffice spaces, and financing leases for equipment. Our leases have remaining terms of 1 year to 5 years and may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. The operating lease agreements that expireasset also includes any upfront lease payments made and excludes lease incentives and initial direct cost incurred. Lease expense for operating leases is recognized on a straight-line basis over the lease term.December 31, Classification 2020 2019 Assets Operating lease assets Right-of-use assets $ 786 $ 965 Finance lease assets Property and equipment, net of accumulated depreciation 6,781 9,302 Total lease assets 7,567 10,267 Liabilities Current Operating Current portion of operating lease obligations 362 364 Finance Current portion of finance lease obligation - related parties 648 3,440 Noncurrent Operating Long-term portion of operating lease obligation 490 650 Finance Finance lease obligations, net of current portion - related parties 0 648 Total lease liabilities $ 1,500 $ 5,102 Lease Cost Classification December 31, 2020 2019 Operating lease cost Cost of sales $ 164 $ 155 Operating lease cost Selling, general and administrative expenses 253 240 Finance lease cost Amortization of leased assets Depreciation expense 1,171 1,171 Interest on lease liabilities Interest expense 497 644 Net lease cost $ 2,085 $ 2,210 to 2021. All operating leases in the U.S. were assumed by the purchaser of the U.S assets and operations in August 2018 (See Note 16).three3 cities in Brazil that are under operating lease agreements. The leases expire at various dates through 2022. During both years December 31, 2018January 2023. The assets and 2017,liabilities are recognized at the company recognized rent expense of approximately $0.2 million. Following is a schedule of future minimum rental payments required under operating leases that have initial or remaining non-cancelable lease terms in excess of one year as of December 31, 2018:(9)Stock and Stock-based CompensationEmployee Stock Purchase PlanThe Company has adopted an Employee Stock Purchase Plan (“ESPP”) that, as amended and approved bycommencement date based on the Stockholders in May 2011, allows the Company to sell up to 125,000 shares of common stock to employees. The employee stock purchases are achieved through accumulated payroll deductions, and are transacted at 95% of the fair marketpresent value of the shares, under terms describedremaining lease payments based on Brazil’s General Market Price Index rate. Brazil also has multiple short-term equipment leases which are less than twelve months and have no cancellation penalties, therefore they are not recorded in the ESPP. During the years ended December 31, 2018balance sheet.2017, the Company issued 7,614 and 7,151 shares of common stock, respectively, in connection with the ESPP.F-18The Company has also adopted the 2007 Employee Stock Incentive Plan (“ESIP”) for the benefit of its employees. The Stockholders’ made available up to 2,200,000 shares of common stock under ESIP, as amended in June 2018. Awards under the ESIP are granted as restricted stock units (“RSUs”) and the number of RSUs awarded is generally subject to the substantial achievement of budgeted performance and other metrics in the year granted. The RSUs do not include the voting rights of the Company’s common stock, and the shares of common stock underlying the RSUs are not considered issued and outstanding until actually vested and issued. In general, the RSU awards convert to common stock on a one to one basis in 25% increments over four years from the grant date subject to a continuing employment obligation.In connection with the sale of the Company’s U.S. operations in August 2018, as discussed in Note 16, most of the Company’s U.S. employees, with the exception of certain key members of management, became employees of Myers Power Products, Inc. (the “Buyer”). Effective with the sale, all RSUs held by employees that continued employment with the Buyer immediately vested.The following table summarizes the activity for unvested restricted stock units$298 thousand for the years ended December 31, 2020 and 2019, respectively.2017:Compensation expense of approximately $0.52 million and $0.30 million was recordedthe assets are now owned outright. These assets are included in the years endedCompany'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.20182020 (in thousands):Operating
LeasesFinance
LeasesTotal 2021 $ 405 $ 648 $ 1,053 2022 223 0 223 2023 145 0 145 2024 150 0 150 2025 25 0 25 Thereafter 0 0 0 Total lease payments 948 648 1,596 Less: Interest (96) 0 (96) Present value of lease liabilities $ 852 $ 648 $ 1,500 2017, respectively,discount rates for our operating and finance lease obligations are as follows:December 31, Lease Term and Discount Rate 2020 2019 Weighted-average remaining lease term (years) Operating leases 3.1 3.7 Finance leases 0.1 1.0 Weighted-average discount rate Operating leases 7.3% 7.3% Finance leases 8.9% 9.1% reflect the fair value of the original RSU’s granted or anticipated to be granted less forfeitures, amortized over the portion of the vesting period occurring during the period. The fair value of the RSUs was based on the closing price of our common stockleases as reported on the NASDAQ Stock Market on the grant date. Based upon the fair value on the grant date of the number of shares awarded or expected to be awarded, it is anticipated that approximately $20,000 of additional compensation cost will be recognized in future periods through 2021. The weighted average period over which this additional compensation cost will be expensed is 3 years.Board of Directors Deferred CompensationDirectors who are not employees of the Company and who do not have a compensatory agreement providing for service as a director of the Company receive a retainer fee payable quarterly. Eligible directors may elect to defer 50% to 100% of their retainer fee, which may be used to acquire common stock of the Company at the fair market value on the date the retainer fee would otherwise be paid, or be paid in cash.. Compensation expense of approximately $0.2 million and $0.08 million was recorded in the years ended December 31, 2018 and 2017 respectively, which is included in general and administrative expenses in the consolidated statements of operations.(10)Redeemable Convertible Preferred StockOn April 13, 2012, the Company signed a securities purchase agreement (the “Securities Purchase Agreement”) with a private investor for the sale (the “Preferred Stock Financing”) of 1,000,000 shares of the Company’s Series A Convertible Preferred Stock (the “Series A Convertible Preferred Stock”) at $5.00 per share and 325,000 warrants to purchase shares of the Company’s common stock expiring in May 2020. The Series A Convertible Preferred Stock shares are initially convertible into 1,000,000 shares of the Company’s common stock at a conversion price of $5.00 per share. The warrants were issued in two tranches with 125,000 of such warrants at an initial exercise price of $6.00 per share and 200,000 of such warrants at an initial exercise price of $7.00 per share. On May 2, 2012, the Company completed the issuance of the Series A Convertible Preferred Stock and warrants.On April 30, 2012, the Company filed an Articles of Amendment to its Articles of Incorporation designating 1,000,000 shares of the Company’s authorized preferred stock as Series A Convertible Preferred Stock. The Company also entered into a Registration Rights Agreement and Investor Rights Agreement with the private investor.F-19The Series A Convertible Preferred Stock ranks senior to all other equity instruments of the Company, including the Company’s common stock. The Series A Convertible Preferred Stock accrues cumulative dividends at a rate of 6% per annum, whether or not dividends have been declared by the Board of Directors and whether or not there are profits, surplus or other funds available for the payment of such dividends. The Company may pay such dividends in shares of the Company’s common stock based on the then current market price of the common stock. Prior to the repricing agreement discussed below, at any time following a material default by the Company, as defined in the Securities Purchase Agreement, or April 30, 2017, the holders of a majority of the outstanding shares of the Series A Convertible Preferred Stock may require the Company to redeem the Series A Convertible Preferred Stock at a redemption price equal to the lessor of (i) the liquidation preference per share (initially $5.00 per share, subject to adjustments for certain future equity transactions defined in the Securities Purchase Agreement) and (ii) the fair market value of the Series A Convertible Preferred Stock per share, as determined in good faith by the Company’s Board of Directors. As of December 31, 20182020 and 2017,2019:Other information December 31, 2020 December 31, 2019 (In thousands) Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from operating leases $ 399 $ 298 Financing cash flows from finance leases 3,439 3,491 Interest paid 374 644 Noncash activities from right-of-use assets obtained in exchange for lease obligations: Operating leases $ 1,159 $ 1,208 redemption price per share was $5.00 in both years.Company refinanced its lease agreement with a subsidiary of The redemption price, plus any accruedModern Group, Ltd. (“The Modern Group”) for equipment purchases totaling approximately $3.2 million. Under the terms of the lease agreement, the Company’s monthly principal and unpaid dividends, shall be payable in 36 equal monthly installments plus interest payments were $232 thousand for the 12 month term at an annual rate of 6%8.9%.preferred stockfollowing individuals serve in various leadership capacities for The Modern Group: Casey Crenshaw (our Executive Chairman and warrants were issued forChairman of our Board) as President and Ben Broussard (a member of our Board) as Director of Finance and as COO of M/G Finance Co., Ltd., a totalsubsidiary of $5.0 million. This amount was allocated toThe Modern Group. Casey Crenshaw is the preferred stock and warrants based on their relative fair values. The fair valuebeneficial owner of 25% of the warrants was calculated usingModern Group and is deemed to jointly control The Modern Group with family members. Stacey Crenshaw (a member of our Board) is the Black Scholes-Merton pricing model using the following weighted average assumptions, at the grant date:Based on these calculations and the actual consideration, the warrants were valued at $840,000 and the Series A Convertible Preferred Stock was valued at $4,160,000.The initial values allocated to the warrants were recognized as a discount on the Series A Convertible Preferred Stock,corresponding chargesubsidiary of The Modern Group to additional paid-in capital. The discount related to the warrants is accreted to retained earnings through the scheduled redemption date of the mandatorily redeemable Series A Convertible Preferred Stock. Discount accretion for both years ended December 31, 2018finance vehicles and 2017 was approximately $0.06 million.At both December 31, 2018machinery and December 31, 2017, the Company had accrued but unpaid dividends totaling $0.08 million, respectively, which is included in the accounts payable and other accrued expenses in the consolidated balance sheets.In connection with the issuance of the Company’s senior secured Term Note, described in Note 7, the Company has agreed with the Purchaser of the Term Note and the holder of the Preferred Stock (the “Holder”) not to declare, authorize or pay any cash dividends on the Preferred Stock until the earlier of (i) March 22, 2018, or (ii) the date the obligations under the Note Purchase Agreement have been paid in full (the “Standstill Period”), without the prior written consent of the Purchaser. Following the expiration of the Standstill Period, for so long as the obligations under the Note Purchase Agreement remain outstanding, the Company may, at its sole discretion, declare, authorize or pay dividends in cash on the Preferred Stock so long as no event of default exists under the Term Note or would result therefrom. The Holder also agreed that it shall not exercise its rights to require the Company to redeem any of the Preferred Stock during the Standstill Period. Following the expiration of the Standstill Period, so long as the obligations under the Note Purchase Agreement remain outstanding, the Holder may compel the Company to redeem shares of Preferred Stock provided no event of default exists under the Term Note or would result from such redemption. In consideration for the Holder’s consent to the foregoing restrictions on the payment of cash dividends on or redemption of the Preferred Stock, the Company entered into a repricing agreement with the Holder (the “Repricing Agreement”) on August 1, 2017. Pursuant to the repricing agreement, each share of Series A Preferred Stock will be initially convertible, at the option of the holder, into one (1) share of common stock at a conversion price of $2.26 per share of common stock, so that the Series A Preferred Stock sold to the Holder are currently convertible into an aggregate of 2,212,389 shares of common stock as of December 31, 2017. In addition, Pursuant to the Repricing Agreement, the Series A Warrants sold to the Holder is exercisable for 125,000 shares of common stock at an initial exercise price of $2.72 per share and the Series B Warrants sold to the Holder is exercisable for 200,000 shares of common stock at an initial exercise price of $3.17 per share. In order to comply with the rules of the NASDAQ Stock Market, the Repricing Agreement prohibits the issuance of more than 19.99% of our common stock or voting power outstanding to the Holder as of the date of the Repricing Agreement without stockholder approval. The Company has agreed to seek the approval of its stockholders as soon as practicable. In the event that stockholder approval is received and the Holder were to convert all of its Series A Preferred Stock into common stock and exercised all of its Common Stock Purchase Warrants for cash, the Holder would be issued more than 19.99% of our common stock and voting power as of the date of the Repricing Agreement.F-20This agreement was approved by a committee of the Board of Directors comprised solely of independent directors. (11)Employee Benefit and Bonus PlansThe employees of the Company are eligible to participate in a 401(k) plan sponsored by the Company. The plan is a defined contribution 401(k) Savings and Profit Sharing Plan (the “Plan”) that covers all full-time employees who meet certain age and service requirements. The Company may provide discretionary contributions to the Plan as determined by the Board of Directors. For the years ended December 31, 2018 and 2017, the Company made no contributions to the Plan.The Company maintains an “Executive Performance” bonus plan, which covers approximately 4 key employees. Under the plan, the participants receive a percentage of a bonus pool based primarily on pre-tax income in relation to budget. The Board of Directors approves the Executive Performance plan at the beginning of each year. During the years ended December 31, 2018 and 2017, the Company recorded approximately $0.40 million and $0.30 million under the plan, respectively.(12)Related Party TransactionsDuring 2018 and 2017, the Company received legal advice on various Company matters from a law firm related to a director of the Company. The Company incurred expensesequipment totaling approximately $0.02 million and $0.04 million related to these services during 2018 and 2017, respectively, which is included in general and administrative expenses in the accompanying Consolidated Statements of Operations. As of December 31, 2018 and 2017, the outstanding payable balance for services rendered by this law firm was $0.05 million and $0.04 million, respectively. In August 2018, the Board of Directors approved the issuance of 150,000 shares to a director of the Company as compensation for additional work performed in regard to potential corporate transactions. During 2018, the Company recognized approximately $0.07 million of compensation expense related to this issuance.The Company, upon approval from the Board, has an employment agreement with the former Executive Chairman of the Board of Directors (“Executive Chairman”), whereby the Company compensated the Executive Chairman $0.15 million and $0.09 million during 2018 and 2017, respectively.$1.5 million. Under the terms of the agreement,leases, the balance is due in equal monthly installments over 24 months at an annual interest rate of 10%. The finance lease agreements included purchase options, which were reasonably certain to occur. During 2020, the Company exercised its purchase options on these 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.December 31, 2020 2019 Finance lease obligations with subsidiary of The Modern Group, Ltd $ 648 $ 4,088 Less: amounts due within one year (648) (3,440) Total long term finance lease obligations to related parties $ 0 $ 648 will assist in international joint venture relations and operations, technical developments, manufacturing and transformative business development projects and other special projects assigned byChairman of our Board, serves as the Company.On June 6, 2017,President of M/G Finance Co., Ltd. M/G Finance Co. Ltd. is a subsidiary of The Modern Group. See Note 10—Debt for further discussion of the Company’s subsidiary,Promissory Note.entered into a Loan Agreement withsubsidiary, and an employee of the former Executive Chairman of AETI.Company. The Loan Agreement providesloan facility provided the Company with a $0.30$0.3 million loan facility of which $0.20$0.2 million iswas drawn and is outstanding as of December 31, 2018.2019. All outstanding amounts, including accrued but unpaid interest areinterested, became due at maturity in June 2019, however the note has not been repaid and is considered due on demand.2020. Under the loan agreement, the interest rate on the loan facility iswas 10.0%, per annum, payable each quarter. The loan facility iswas secured by the assets held by M&I Brazil.
Operating Leases(13)Commitments and ContingenciesOn September 1, 1999,created a group medicalbilled $8 thousand and hospitalization minimum premium insurance program. For$24 thousand, respectively, to The Modern Group under the policyagreement.August 2017,December 31, 2019, the Company is liableincurred expenses of $4 thousand for all claims eachprocessing and administrative charges associated with payroll processing. There were 0 expenses incurred for processing and administrative charges during the year upended December 31, 2020 due to $70,000 per insured, or $1.7 million ina transition to a third party.aggregate. An outside insuranceyears ended December 31, 2020 and 2019, the Company paid Applied Cryo Technologies, Inc. (“ACT”), a company insures any claims in excessowned 51% by Crenshaw Family Holdings International, Inc., $516 thousand and $447 thousand, respectively, for equipment, repairs, and services. The Company also sold $2 thousand and $4 thousand of these amounts. The Company’s expense for this minimum premium insurance totaled $0.6 million and $0.9 millionLNG to ACT during the years ended December 31, 20182020 and 2017. Insurance reserves2019, respectively. As of December 31, 2020 and 2019, respectively, we had $2 thousand and $4 thousand due from ACT included in accounts receivable on the consolidated balance sheets. As of December 31, 2020 and 2019, respectively, we had $121 thousand and $24 thousand due to ACT included in accounts payable on the consolidated balance sheets.accrued liabilities atservices from a subsidiary of The Modern Group. During the years ended December 31, 2017 consolidated balance sheet2020 and 2019, purchases from The Modern Group totaled $650 thousand and $175 thousand, respectively. The Company also sold $52 thousand of supplies and services to The Modern Group in 2019. There were 0 sales in 2020. There was approximately $0.13 million. After the sale of the U.S. operations of M&I Electric in August 2018 discussed in Note 16 below, the majority of the Company’s U.S. employees became employees of the Buyer. At that time the Company changed to a fully-insured insurance program therefore there is no further uninsured exposure0 receivable due from The Modern Group as of December 31, 2018.In2020 and 2019. As of December 31, 2020 and 2019, respectively, we had $582 thousand and $22 thousand due to The Modern Group included in accounts payable on the fourth quarterconsolidated balance sheets.2018,our outstanding common stock. The Company purchases services from Chart E&C. During the years ended December 31, 2020 and 2019, purchases from Chart E&C totaled $23 thousand and $80 thousand. As of December 31, 2020 and 2019, we had $14 thousand and $8 thousand due to Chart E&C included in accounts payable on the consolidated balance sheets.thean asset purchase agreement completed in August 2018. Please see Note 16 for further explanation of this possible obligation.(14)Loss Per Common ShareBasic earnings (loss) per common share is based on the weighted average number of common shares outstanding for the year ended December 31, 2018 and 2017. Diluted earnings (loss) per common share is based on the weighted average number of common shares outstanding, plus the incremental shares that would have been outstanding upon the assumed exercise of all potentially dilutive stock options and other units subject to anti-dilution limitations. Potentially dilutive securities not considered in the calculation of diluted earnings per share because losses caused their effect is anti-dilutive, are as follows at December 31, 2018 and 2017:F-21(15)Intangible Assets
Lives
(Years)
AmortizationIn 2018, the intangible assets were sold with the U.S. assets as part of the asset purchase agreement referred to below.(16)Discontinued OperationsOn August 12, 2018 the Company soldsell substantially all of theits U.S. business assets and operations of M&I Electric (“M&I) to a newly formed subsidiary of Myers Power Products, Inc. (“Buyer”("Myers"). The newly formed subsidiary was established by the Buyer to acquire the assets of M&I pursuant to the Asset Purchase Agreement (the “Transaction”) between the Company and the Buyer. The Transaction included a total purchase price of approximately $18.5 million based on $10.1 million of cash consideration plus debt assumed by the buyer of $8.4 million. Under the terms of the Transaction, the Company transferred $740,000 into an escrow account to provide security for certain of the Company’s indemnification obligations for a six-month period following closing. A portion of the funds provided by the Transaction were required to be used to repay the Note and related accrued interest totaling approximately $6.5 million. Transaction includeagreement 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 the BuyerMyers and agreed to by the Seller.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 October 2018, the Company received notification from the Buyer of their actualresponse, American Electric disputed Myers’ claim and Myers’ working capital calculation. InOn November 5, 2020, the notification, the Buyer has communicatedCompany filed a decrease of approximately $4.3 millionpetition in net working capital,Harris County, Texas requesting a declaratory judgment in comparison to the estimated working capital used at contract closing. The contractual termsfavor of the Transaction provide that in the event the Buyer and Seller cannot agree to a conclusive net working capital adjustment, then all items remaining in dispute shall be submitted by either one of the parties within thirty (30) calendar days after the expiration of the resolution period to a national or regional independent accounting firm mutually acceptable to Buyer and Seller (the "Neutral Arbitrator"). The Neutral Arbitrator shall act as an arbitrator to determine the conclusive net working capital. The conclusive net working capital, once determined, may result in a purchase price adjustment due to the Buyer or to the Company as Seller.The Company and the Buyer of M&I electric currently have a significant disagreement with regard to the working capital adjustment calculation and the Company has not received documentation sufficient to support the Buyer’s position.Company. As such, no adjustments have been considered in determining the gain on the sale of assets reported as of December 31, 2018. Any purchase price adjustment related2020, the company was engaged in settlement discussions with Myers to resolve the conclusive determinationmatter. In early 2021 the parties reached an amicable resolution of their differences and all claims regarding the net working capital adjustment, if any, will be reflected atwere mutually released and the datelawsuit was dismissed with prejudice to refiling same.such determination. Any legal fees incurred related to this disagreement will be expensed as incurred.At December 31, 2017, the assets and liabilities sold in the Transaction have been reclassified and reflected as held for sale inRisksConsolidated Balance Sheets. The operating results and cash flowsbusiness is dependent on a few customers, the loss of which could have a material adverse effect on the business sold have also been reclassified and reflected as discontinued operations in the Company’s Consolidated Statements of Operations and Consolidated Statements of Cash Flows for all periods presented.Following is an analysis of assets and liabilities of M&I reclassified as held for sale at December 31, 2017:F-22is an analysistable presents customers representing greater than 10% of the resultstotal revenues and/or outstanding receivable as of operations of the discontinued business of M&Iand for the years ended December 31, 20182020 and 2017:F-23The following is an analysis of assets sold and liabilities assumed by the Buyer and the related gain on the sale from the Transaction:Consolidated % Accounts
Receivable% 2020: Customer 1 $ 4,915 12 % $ 1,423 25 % Customer 2 3,535 9 1,192 21 $ 8,450 21 % $ 2,615 46 % 2019: Customer 1 $ 9,270 20 % $ 1,172 19 % $ 9,270 20 % $ 1,172 19 % Following is an analysis of supplemental cashflow informationLNG Segment % Accounts
Receivable% 2020: Customer 1 $ 4,915 12 % $ 1,423 28 % Customer 2 3,535 9 1,192 24 $ 8,450 21 % $ 2,615 52 % 2019: Customer 1 $ 9,270 21 % $ 1,172 23 % Customer 2 4,206 10 0 0 $ 13,476 31 % $ 1,172 23 % Power Delivery Segment % Accounts
Receivable% 2020: Customer 1 $ 527 10 % $ 1 1 % Customer 2 96 2 112 18 Customer 3 131 3 89 14 $ 754 15 % $ 202 33 % 2019: Customer 1 $ 472 14 % $ 51 6 % Customer 2 407 12 103 11 $ 879 26 % $ 154 17 % discontinued business of M&ICompany’s total revenue for the years ended December 31, 2020 and 2019. Based upon the expected collectability of our accounts receivable, management believed all balances were fully collectible such that no allowance for doubtful accounts was deemed necessary.2017:(17) Revenue Recognition (ASC 606)Inamended on May 2014,8, 2019, American Electric issued 13,178,750 shares of common stock to acquire Stabilis LLC, which represented 90% of the FASBtotal amount of the common stock of American Electric which was issued ASU No. 2014-09, “Revenue from Contracts with Customers,” which outlinesand outstanding as of July 26, 2019. The Share Exchange resulted in a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. This ASU supersedes the revenue recognition requirements in FASB ASC Topic 605, “Revenue Recognition,” and most industry-specific guidance and creates ASC Topic 606. This ASU provides guidance that an entity should recognize revenue to depict the transferchange of promised goods or services to customers in an amount that reflects the consideration to which the entity expectscontrol of American Electric to be entitledcontrolled by Casey Crenshaw by virtue of his beneficial ownership of 88.4% of the common stock of American Electric to be outstanding as of July 26, 2019.those goodsthe satisfaction of indebtedness in the principal amount of $7 million.services.warrants reflect the 1:8 reverse stock split effective July 29, 2019.Date of Issuance No. of Warrants Exercise Price Expiration Date Nov. 13, 2017 62,500 $18.08 Nov. 13, 2022 January 1, 2018May, 22, 2020, warrants to purchase 40,625 shares of our common stock expired unexercised.ASC 606the 2019 Long Term Incentive Plan (the “2019 Plan”). The 2019 Plan provides for the award of Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Stock Awards, Dividend Equivalents, Other Stock-Based Awards, Cash Awards, Substitute Awards and Performance Awards. Awards may be granted under the 2019 Plan to employees, officers and directors of the Company and our Affiliates, and any other person who provides services to the Company or any of our Affiliates. modified retrospective basisweighted-average grant date fair value of $3.67 per award. The Company recognized $133 thousand in stock-based compensation costs for the year ended December 31, 2020, which is included in general and appliedadministrative expenses in the guidancecondensed consolidated statements of operations.allour Board of its contracts. Directors grants, which is expected to be recognized over a weighted average period of less than one year.Company’s adoption, there were nocompletion of the Share Exchange, our Board of Directors has the authority, without stockholder approval, to issue up to 1,000,000 shares of Preferred Stock, $.001 par value. The authorized Preferred Stock may be issued by the Board of Directors in one or more series and with the rights, privileges and limitations of the Preferred Stock determined by the Board of Directors. The rights, preferences, powers and limitations of different series of Preferred Stock may differ with respect to dividend rates, amounts payable on liquidation, voting rights, conversion rights, redemption provisions, sinking fund provisions, and other matters. As of December 31, 2020, we have 0 Preferred Stock outstanding.December 31, 2020 December 31, 2019 Current state income tax expense $ 45 $ 38 Current foreign income tax expense 211 78 Deferred federal income tax expense 0 0 Total income tax expense $ 256 $ 116 December 31, 2020 December 31, 2019 Income tax benefit using U.S. federal statutory rate $ 1,352 $ 1,397 State income tax expense (35) (30) Foreign income tax expense (210) (78) Foreign tax rate difference (29) 0 Non-deductible expenses 26 (66) Change in valuation allowance (1,383) (1,306) Other 23 (33) $ (256) $ (116) December 31, 2020 December 31, 2019 Federal net operating loss carryforward $ 12,203 $ 11,468 Accrued interest to related parties, not deductible until paid 570 449 Accrued compensation 69 101 Basis of intangible assets 309 368 Valuation allowance (6,639) (5,256) Total deferred tax assets 6,512 7,130 Basis of property, plant and equipment 6,000 6,821 Bad debt expense 0 0 Prepaid expenses 155 138 Basis in foreign entity 357 171 Total deferred tax liabilities 6,512 7,130 Net deferred tax liabilities $ 0 $ 0 the timingnet operating loss carryforwards and carrybacks, and a repeal of the recognition or measurementcorporate alternative minimum tax. The legislation reduced the U.S. corporate tax rate from 35% to 21%.revenue, and there was no cumulative effectapproximately $59.9 million which may be used to offset future taxable income. The net operating loss carryforwards includes $42.8 million of adoption aslosses arising prior to December 31, 2017 that expire in 2028 through 2037. Those arising in tax years after 2017 can be carried forward indefinitely. Also, for losses arising in taxable years beginning after December 31, 2017 the operating loss deduction is limited to 80% of January 1, 2018. Therefore, the only changestaxable income (determined without regard to the deduction). Since the Company has not yet generated significant taxable income, a valuation allowance has been established to fully reserve the Company's net deferred tax assets at December 31, 2020. A change in ownership eliminated substantially all net operating loss carryforwards of an acquired subsidiary at July 26, 2019.adoptionOctober 2018 notification of a potential liability, and all claims regarding the net working capital were mutually released and the lawsuit was dismissed with prejudice to refiling same. See Note 13—Commitments and Contigencies for further discussion.footnote disclosures as included herein.Revenuerules 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 December 31, 2020 at the reasonable assurance level.measured as consideration specified in a contract with a customerresponsible for establishing and excludes any sales incentives and amounts collected on behalf of third parties. The Company recognizes revenue when it satisfies a performance obligation by transferringmaintaining adequate internal control over a product or service to a customer. Amounts are billed upon completionfinancial reporting, as defined in Rule 13a-15(f) under the Exchange Act. Our management assessed the effectiveness of service or transferour internal control over financial reporting as of a product and are generally due within 30 days.Revenues from contracts with customers are disaggregated intoDecember 31, 2020. In making this assessment, our management used the following primary sources: services and products.Service revenue is generated from time and material projects and consulting services. The Company generally establishes a master services agreement with each customer and provides associated services on a work order basis, generallycriteria set forth by the hour for services performed. The majorityCommittee of Sponsoring Organizations of the Company’s contractsTreadway Commission on Internal Control-Integrated Framework. Our management has concluded that our internal control over financial reporting was effective as of December 31, 2020 based on these criteria. This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to section 404(c) of the Sarbanes-Oxley Act of 2002, as amended, that permits the Company, as a smaller reporting company, to provide only management’s report in this annual report.customersthe policies or procedures may deteriorate.short-term in naturereasonably likely to materially affect our internal control over financial reporting.are recognizedExecutive Officers of Stabilis Solutions, Inc.Name Age Position J. Casey Crenshaw 46 Executive Chairman of the Board of Directors James C. Reddinger 49 President, Chief Executive Officer and Director Andrew L. Puhala 51 Chief Financial Officer Mushahid Khan 53 Director Ben J. Broussard 41 Director James G. Aivalis 62 Director Edward L. Kuntz 76 Director Peter C. Mitchell 65 Director Stacey B. Crenshaw 44 Director services are performed,Executive Chairman of the Board of Directors of Stabilis Energy, LLC since November 2018. Mr. Crenshaw previously served as President of Stabilis Energy, LLC from its formation in February 2013 until November 2018. Mr. Crenshaw also serves as President and a member of the transferBoard of controlDirectors of The Modern Group, Ltd, a privately owned diversified manufacturing, parts and distribution, rental/leasing and finance business headquartered in Beaumont, Texas. Mr. Crenshaw has held various executive positions with The Modern Group since 1997, including over 10 years as CFO. Prior to the customer and the Company’s right to payment corresponds directly to the services performed to date, at all times throughout completion of the contract.Product revenueShare Exchange, Mr. Crenshaw was a director of American Electric from 2012. Mr. Crenshaw holds a BA in Finance from Texas A&M University. Mr. Crenshaw is generatedthe spouse of Stacey B. Crenshaw.resellJL Kellogg School of electricalManagement at Northwestern University.instrumentation equipment. Product contracts are established by agreeingVP of Finance for The Modern Group, Ltd in August 2017. From September 2015 to June 2017 he served as Chief Financial Officer of ERA Group Inc. (NYSE:ERA), a provider of helicopter transport services primarily to the energy industry. Mr. Puhala served as Chief Financial Officer of American Electric from January 2013 to September 2015 and Chief Financial Officer of AccessESP from 2011- 2012. Mr. Puhala held a variety of senior financial roles at Baker Hughes, Inc. from 1996 through 2011 including VP Finance - Middle East Region, Division Controller and Assistant Treasurer. Mr. Puhala is a Certified Public Accountant and received a BBA in Accounting and an MPA from the University of Texas at Austin.sales price or transaction priceDirector and CEO of Alchemy Industrial, a technology based contract manufacturing firm in Houston, Texas. From May 2019 until February 2021, Mr. Khan served as President of the NOW Network, a technology firm digitizing and automating the final mile of energy logistics. Mr. Khan has also been the President and Chief Executive Officer of APS Plastics and Manufacturing (APS), a full-service custom plastic component manufacturer since January 2016. Mr. Khan acquired APS in 2016, in partnership with Framework Capital Partners. Mr. Khan has also provided consulting services since 2015. From 2014 until 2015, Mr. Khan served as Chief Executive Officer of Ringers Gloves, a global industrial safety glove company. From 2002 until 2014, he served as President and Chief Operating Officer of O’Rourke Petroleum, an industrial distribution company. Mr. Khan is also active in community service. He currently holds a board position with TXRX Labs, KIPP Houston Public Schools and Connect Communities, and is past board chair of Crisis Intervention of Houston as well as Devereaux Texas Treatment Centers. He is also an active member of Young Presidents Organization (YPO), Greater Houston Partnership’s advanced manufacturing workgroup, and Houston Exponential’s advanced manufacturing workgroup. Mr. Khan holds an MBA from The University of Houston (Clear Lake), and a BS in Mechanical Engineering from Louisiana State University.related item. RevenueCollege of Engineering and Sciences. Mr. Aivalis holds a Bachelor of Science degree in Ocean Engineering from Florida Institute of Technology, has authored six patents focused on well construction and optimization technologies, and is recognized when the customer has taken controla long-standing member of theF-24product. Payment termsproduct contracts are generally thirty daysinvestor relations, financial planning and analysis, financial reporting, information technology, tax and compliance, in addition to serving as a key team member on the Company’s acquisition and divestiture activities and leading all capital markets activity in multiple equity and debt financings. Previously, he held executive leadership positions in finance and operations with a variety of U.S. and Canadian companies both public and private equity sponsored, among them Taseko Mines Ltd., Vatterott Education Centers, Von Hoffmann Corporation and Crown Packaging Ltd. He is a former member of the Board of Directors and Audit Committee Chair for Northern Dynasty Minerals Ltd and is currently a member of the Board of Directors and Audit Committee Chairman of Northcliff Resources Ltd., Taseko Mines Limited and Montage Gold Limited. He is also the Audit Committee Chair of these companies. He earned a BA in Economics from Western University, an MBA from the receiptUniversity of British Columbia, is a Chartered Accountant (CPA-CA).invoice. Product revenueArt Museum of Southeast Texas. Ms. Crenshaw received a Bachelor of Liberal Arts degree in Journalism from Texas A&M University and a Doctor of Jurisprudence degree from the University of Houston Law Center. Ms. Crenshaw is recognized upon deliverythe spouse of J. Casey Crenshaw.related itemOTC Markets and SEC.customer, atNASDAQ listing requirements, our Board uses the independence standards under NASDAQ. The NASDAQ definition of independence includes a series of objective tests, such as that the director is not an employee of the Company and has not engaged in various types of business dealings involving the Company, which pointwould prevent a director from being independent. The Board has determined that Messrs. Peter C. Mitchell, Mushahid Khan, and Edward L. Kuntz are currently the customer controlsCompany’s independent directors as defined by the productrules and regulations of NASDAQ and the CompanySEC.an unconditional rightdetermined that Mr. Mitchell satisfies the definition of “audit committee financial expert.”payment.All outstanding accounts receivable, netthe Board, including the selection of allowance, onour independent registered public accounting firm, the consolidated balance sheet are typically duescope of our annual audits, fees to be paid to the independent registered public accounting firm, the performance of our independent registered public accounting firm and collected withinour accounting practices. In addition, the next 12 months. Additionally, each month end the Company records unbilled revenue (a contract asset) based upon completedAudit Committee oversees our compliance programs relating to legal and partially completed performance obligations through month end providing the Company an unconditional right to payment for the services performed or products sold for theregulatory requirements. The Audit Committee also reviews any potential related period. The Company has no other material contract assets or liabilities and contract costs.Taxes assessed by a governmental authority that are directly imposed on revenue-producingparty transactions between the Company and its customers,executive officers and directors.sales, useapplicable, the granting of stock options, restricted stock, stock units and value-added taxes,other awards, the review of performance goals established for the relevant plan year, and the determination of performance compared to the goals at the end of the plan year). None of our executive officers served as a director or member of the Compensation Committee of any entity that has one or more executive officers serving on our Board.excludedalso intended to support the achievement of our strategic objectives by aligning the interests of our executive officers with those of our shareholders through operational and financial performance goals and equity-based compensation. We expect that our compensation program will continue to be focused on building long-term shareholder value by attracting, motivating and retaining talented, experienced executives and other key employees. Currently, our Principal Executive Officer oversees the compensation programs for our executive officers.Principal Position James Reddinger Chief Executive Officer, President Koby Knight SVP Operations Andrew Puhala Chief Financial Officer Chief Operating Officer Name and Principal Position Salary
($)Bonus
($)(1)Stock Awards ($)(2) All other
compensation
($)(3)Total
($)James Reddinger, 2020 $ 420,835 $ — $ 875,000 $ — $ 1,295,835 Chief Executive Officer 2019 500,000 — — — 500,000 Koby Knight, 2020 $ 343,334 $ — $ 175,000 $ 12,000 $ 530,334 SVP Operations 2019 400,000 — — 12,000 412,000 Andrew Puhala 2020 $ 262,501 $ 100,000 $ 35,000 $ — 397,501 Chief Financial Officer 2019 — — — — James Aivalis, 2020 $ 283,080 $ 260,000 $ — $ 9,000 $ 552,080 Chief Operating Officer 2019 356,288 155,910 — 9,000 521,198 Name Number of shares or units of stock that have not vested (#) Market value of shares or units stock that have not vested ($) Equity incentive plan awards: Number of unearned shares or units of stock that have not vested (#) Equity incentive plan awards: Market value of unearned shares or units stock that have not vested ($) James Reddinger — $ — 500,000 $ 875,000 Koby Knight — — 100,000 175,000 Andrew Puhala — — 20,000 35,000 James Aivalis — — — — revenue.Name Fees Earned or Paid in Cash ($) Stock Awards ($) All Other Compensation ($) Total ($) Edward Kuntz $ 50,000 $ 50,000 $ — $ 100,000 Peter Mitchell 50,000 50,000 — 100,000 Mushahid “Mush” Khan 50,000 50,000 — 100,000 Total $ 150,000 $ 150,000 $ — $ 300,000 presents revenue disaggregatedsets forth information, as of March 9, 2021, the amount and percentage of our outstanding shares of common stock beneficially owned by source,(i) each person known by us to own beneficially more than 5% of our outstanding common stock, (ii) each director, (iii) each of our executive officers, and (iv) all of our directors and executive officers as a group. Unless otherwise noted, the following table is based on 16,896,626 shares outstanding as of March 9, 2021.Name(4) Number of
SharesPercent of
ClassCasey Crenshaw(1) 12,960,319 76.7 % Stacey Crenshaw(1) 12,960,319 76.7 % LNG Investment Company, LLC(2) 12,580,808 74.5 % Andrew Puhala 830 * Chart Energy & Chemicals, Inc.(3) 1,470,807 8.7 % James Reddinger 2,252 * Mushahid “Mush” Khan 21,336 * Ben Broussard 1,000 * James Aivalis 1,100 * Edward Kuntz 23,066 * Peter Mitchell 21,436 * All directors and officers as a group of (9) persons 13,031,339 77.1 % Plan Category Number of securities to be issued upon exercise of outstanding rights (1) Weighted-average exercise price of outstanding options (2) Number of securities remaining available under equity compensation plans (excluding securities reflected in column (1)) (3)(a) Equity compensation plans approved by security holders — $ — — Equity compensation plans not approved by security holders — — 786,180 Total — $ — 786,180 December 31, 2020 2019 Finance lease obligations with subsidiary of The Modern Group, Ltd $ 648 $ 4,088 Less: amounts due within one year (648) (3,440) Total long term finance lease obligations to related parties $ — $ 648 20182020 and 2017:2019, the Company billed $8 thousand and $24 thousand, respectively, to The Modern Group under the agreement.Year Ended December 31, Types of Fees 2020 2019 Audit Fees (1) $ 230,710 $ 221,650 Audit-Related Fees (2) — — Tax Fees (3) — — Other Fees (4) — — Total Fees $ 230,710 $ 221,650 (18)Accounts PayableExhibit No. Exhibit Description 2.1 2.2 3.1 3.2 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 10.1 10.2 10.3 10.4 Accounts payableExhibit No. Exhibit Description 10.5 10.6 10.7 10.8 10.9 10.10 10.11 10.12 10.13 10.14 10.15 10.16 10.17 10.18 10.19 10.20 10.21 10.22 10.23 10.24 Exhibit No. Exhibit Description 10.25 10.26 21.1 23.1 31.1 31.2 32.1 101.INS 101.SCH 101.CAL 101.DEF XBRL Taxonomy Extension Definition Linkbase Document. 101.LAB XBRL Taxonomy Extension Labels Linkbase Document. 101.PRE accrued liabilities consistschedules to the Share Exchange Agreement and Amendment have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company hereby undertakes to furnish supplemental copies of any of the omitted exhibits and schedules upon request by the U.S. Securities and Exchange Commission.Date: March 15, 2021 STABILIS SOLUTIONS, INC. By: /s/ James C. Reddinger James C. Reddinger President and Chief Executive Officer
(Principal Executive Officer)By: /s/ Andrew L. Puhala Andrew L. Puhala Chief Financial Officer
(Principal Financial Officer)at December 31, 2018persons on behalf of the registrant and 2017:in the capacities and on March 15, 2021.Signature Title /s/ Casey Crenshaw Executive Chairman & Chairman of the Board Casey Crenshaw /s/ James Reddinger President, Chief Executive Officer and Director James Reddinger (Principal Executive Officer) /s/ Andrew Puhala Senior Vice President and Chief Financial Officer Andrew Puhala (Principal Financial Officer and Principal Accounting Officer) /s/ James G. Aivalis Director James G. Aivalis /s/ Ben Broussard Director Ben Broussard /s/ Stacey B. Crenshaw Director Stacey B. Crenshaw /s/ Mushahid Khan Director Mushahid Khan /s/ Edward Kuntz Director Edward Kuntz /s/ Peter Mitchell Director Peter Mitchell F-25