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| ☒ | QUARTERLY REPORT | ||||
FOR THE QUARTERLY PERIOD ENDED September
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| ☐ | TRANSITION REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
FOR THE TRANSITION PERIOD FROM TO
AMERICAN ELECTRIC TECHNOLOGIES,
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Florida | 59-3410234 | |||||
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1250 Wood Branch Park Drive,
(713) 644-8182
offices, including zip code)
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| Common Stock, $.001 par value | SLNG | The Nasdaq Stock Market LLC | ||||||||||||
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |||||||||||||||||||||
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| Emerging growth company | ☐ | |||||||||||||||||||||||
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September 30, December 31, 2017 2016 Assets (unaudited) Current assets: Cash and cash equivalents $ 1,098 $ 1,618 Restricted short-term investments 50 507 Accounts receivable-trade, net of allowance of $89 and $204 at September 30, 2017 and December 31, 2016 7,822 6,717 Inventories, net of allowance of $134 and $60 at September 30, 2017 and December 31, 2016 1,169 1,181 Cost and estimated earnings in excess of billings on uncompleted contracts 7,477 5,829 Prepaid expenses and other current assets 233 349 Total current assets 17,849 16,201 Property, plant and equipment, net 6,936 7,298 Advances to and investments in foreign joint ventures 10,546 10,663 Retainage receivable 772 649 Intangibles 476 527 Other assets 107 46 Total assets $ 36,686 $ 35,384 Liabilities, Convertible Preferred Stock and Stockholders’ Equity Current liabilities: Revolving line of credit $ - $ 1,500 Current portion of long-term note payable - 300 Short-term note payable 238 - Accounts payable and other accrued expenses 11,528 9,798 Accrued payroll and benefits 1,188 1,093 Billings in excess of costs and estimated earnings on uncompleted contracts 3,003 208 Total current liabilities 15,957 12,899 Long-term note payable, net 6,132 3,900 Deferred compensation 225 260 Deferred income taxes 2,805 2,824 Total liabilities 25,119 19,883 Convertible preferred stock: Redeemable convertible preferred stock, Series A, net of discount of $576 at September 30, 2017 and $617 at December 31, 2016; $0.001 par value, 1,000,000 shares authorized, issued and outstanding at September 30, 2017 and December 31, 2016 4,424 4,383 Stockholders’ equity: Common stock; $0.001 par value, 50,000,000 shares authorized, 8,799,948 and 8,499,508 shares issued and 8,619,066 and 8,335,968 shares outstanding at September 30, 2017 and December 31, 2016 9 8 Treasury stock, at cost 180,882 and 163,540 shares at September 30, 2017 and December 31, 2016 (916 ) (863 ) Additional paid-in capital 13,277 12,613 Accumulated other comprehensive income 272 (2 ) Retained Deficit; including accumulated statutory reserves in equity method investments of $2,887 at September 30, 2017 and December 31, 2016 (5,499 ) (638 ) Total stockholders’ equity 7,143 11,118 Total liabilities, convertible preferred stock and stockholders’ equity $ 36,686 $ 35,384 Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 Net sales $ 13,268 $ 8,673 $ 34,258 $ 28,415 Cost of sales 12,192 9,124 32,922 27,549 Gross margin 1,076 (451 ) 1,336 866 Operating expenses: Research and development 55 145 237 864 Selling and marketing 646 466 1,952 1,759 General and administrative 1,125 1,587 3,116 3,914 Total operating expenses 1,826 2,198 5,305 6,537 Loss from operations (750 ) (2,649 ) (3,969 ) (5,671 ) Net equity income from foreign joint ventures’ operations: Equity income from foreign joint ventures’ operations 98 215 284 367 Foreign joint ventures’ operations related expenses (67 ) (53 ) (195 ) (202 ) Net equity income from foreign joint ventures’ operations 31 162 89 165 Loss from operations and net equity income from foreign joint ventures’ operations (719 ) (2,487 ) (3,880 ) (5,506 ) Other income (expense): Interest expense and other, net (332 ) (78 ) (797 ) 200 Income (loss) before income taxes (1,051 ) (2,565 ) (4,677 ) (5,306 ) Provision for (benefit from) income taxes (11 ) 59 (83 ) 50 Net income (loss) before dividends on redeemable convertible preferred stock (1,040 ) (2,624 ) (4,594 ) (5,356 ) Dividends on redeemable convertible preferred stock (89 ) (89 ) (267 ) (265 ) Net income (loss) attributable to common stockholders $ (1,129 ) $ (2,713 ) $ (4,861 ) $ (5,621 ) Earnings (loss) per common share: Basic $ (0.13 ) $ (0.33 ) $ (0.57 ) $ (0.68 ) Diluted $ (0.13 ) $ (0.33 ) $ (0.57 ) $ (0.68 ) Weighted - average number of common shares outstanding: Basic 8,598,461 8,327,009 8,478,848 8,294,268 Diluted 8,598,461 8,327,009 8,478,848 8,294,268 Three Months Ended September 30, 2017 2016 Net income (loss) before dividends on redeemable convertible preferred stock $ (1,040 ) $ (2,624 ) Other comprehensive income: Foreign currency translation gain (loss), net of deferred income taxes of ($89) and $21 for the three months ended September 30, 2017 and 2016 172 (41 ) Total comprehensive income (loss) $ (868 ) $ (2,665 ) Nine Months Ended September 30, 2017 2016 Net income (loss) before dividends on redeemable convertible preferred stock $ (4,594 ) $ (5,356 ) Other comprehensive income: Foreign currency translation gain (loss), net of deferred income taxes of ($142) and $54 for the nine months ended September 30, 2017 and 2016 274 (106 ) Total comprehensive income (loss) $ (4,320 ) $ (5,462 ) Nine Months Ended September 30, 2017 2016 Cash flows from operating activities: Net income (loss) $ (4,594 ) $ (5,356 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Deferred income tax provision (benefit) (162 ) (97 ) Equity income (loss) from foreign joint ventures’ operations (284 ) (367 ) Depreciation and amortization 640 660 Stock based compensation 280 366 Gain on fixed asset disposal - (75 ) Bad debt expense 45 100 Obsolete inventory expense 66 35 Deferred compensation costs (36 ) (33 ) Amortization of debt issuance costs 59 - Change in operating assets and liabilities: Accounts receivable (1,496 ) (360 ) Inventories (54 ) (180 ) Costs and estimated earnings in excess of billings on uncompleted contracts (1,389 ) (3,049 ) Prepaid expenses and other current assets 61 79 Accounts payable 2,116 3,817 Billings in excess of costs and estimated earnings on uncompleted contracts 2,795 (1,288 ) Accrued liabilities and other current liabilities (127 ) 188 Net cash provided by (used in) operating activities (2,080 ) (5,560 ) Cash flows from investing activities: Proceeds from sale of property and equipment and other assets - 309 Purchases of property, plant and equipment and other assets (219 ) (572 ) Proceeds from foreign joint ventures' operations dividends 781 589 Redemption (purchase) of certificates of deposit 457 - Net cash provided by (used in) from investing activities 1,019 326 Cash flows from financing activities: Proceeds from sale of common stock, preferred stock, and warrants 10 13 Treasury stocks purchase (53 ) (71 ) Preferred stock cash dividend - (150 ) Proceeds from long-term notes payable 7,000 - Proceeds from short-term notes payable 200 - Payments on revolving credit facility (1,500 ) 457 Payments on long-term notes payable (4,200 ) (150 ) Payments on short-term notes payable (500 ) - Payments of debt issuance costs (427 ) - Net cash provided by (used in) financing activities 530 99 Effect of exchange rate on cash 11 49 Net increase (decrease) in cash and cash equivalents (520 ) (5,086 ) Cash and cash equivalents, beginning of period 1,618 7,989 Cash and cash equivalents, end of period 1,098 2,903 Supplemental disclosures of cash flow information: Interest paid $ 611 $ 162 Non-cash investing and financing transactions: Issuance of shares of common stock on accrued preferred dividends payables $ 375 $ - Three Months Ended Nine Months Ended September 30, September 30, 2017 2016 2017 2016 Weighted average basic shares 8,598,461 8,327,009 8,478,848 8,294,268 Dilutive effect of preferred stock, warrants, stock options and restricted stock units - - - - Total weighted average diluted shares 8,598,461 8,327,009 8,478,848 8,294,268 BOMAY Electric Industries Company, Ltd. (“BOMAY”), which builds electrical systems for sale in BOMAY MIEFE 2017 2016 2017 2016 Assets: Total current assets $ 53,015 $ 47,700 $ 179 $ 425 Total non-current assets 3,532 3,589 16 17 Total assets $ 56,547 $ 51,289 $ 195 $ 442 Liabilities and equity: Total liabilities $ 29,726 $ 24,196 $ 258 $ 551 Total joint ventures’ equity 26,821 27,093 (63 ) (109 ) Total liabilities and equity $ 56,547 $ 51,289 $ 195 $ 442 Three Months Ended September 30, BOMAY MIEFE 2017 2016 2017 2016 Revenue $ 6,076 $ 5,557 $ 46 $ 307 Gross Profit $ 1,160 $ 1,582 $ 10 $ 133 Earnings $ 245 $ 537 $ 11 $ 121 Nine Months Ended September 30, BOMAY MIEFE 2017 2016 2017 2016 Revenue $ 17,225 $ 29,544 $ 80 $ 1,147 Gross Profit $ 3,805 $ 4,844 $ 22 $ 451 Earnings $ 709 $ 1,602 $ 51 $ (498 ) September 30, 2017 BOMAY** MIEFE TOTAL (in thousands) Investments in foreign joint ventures: Balance at December 31, 2016 $ 10,450 $ 213 $ 10,663 Equity in earnings (loss) in 2017 284 - $ 284 Dividend distributions in 2017 (781 ) - $ (781 ) Foreign currency translation adjustment 382 (2 ) $ 380 Investments, end of period $ 10,335 $ 211 $ 10,546 Components of investments in foreign joint ventures: Investment in joint ventures $ 2,033 $ 14 $ 2,047 Undistributed earnings 7,816 (14 ) $ 7,802 Foreign currency translation 486 211 $ 697 Investments, end of period $ 10,335 $ 211 $ 10,546 value. The Company and the PPP Loan has been settled. The September 30, 2017 December 31, 2016 Raw materials $ 595 $ 513 Work-in-process 708 728 1,303 1,241 Less: allowance (134 ) (60 ) Total inventories $ 1,169 $ 1,181 audits. It is impossible to determine the ultimate liabilities that the Company may incur . During the six months ended June 30, 2021, the 34,706 RSAs vested. 15% of our net accounts payable balance. For the revenues. OPERATIONS. approximately 25 third-party production sources located throughout North America. We principal as of June 30, 2021 with the expected maturities as follows (in thousands). Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 Net sales $ 13,268 $ 8,673 $ 34,258 $ 28,415 Cost of sales 12,192 9,124 32,922 27,549 Gross margin 1,076 (451 ) 1,336 866 Operating expenses: Research and development 55 145 237 864 Selling and marketing 646 466 1,952 1,759 General and administrative 1,125 1,587 3,116 3,914 Total operating expenses 1,826 2,198 5,305 6,537 Loss from operations (750 ) (2,649 ) (3,969 ) (5,671 ) Net equity income from foreign joint ventures’ operations: Equity income from foreign joint ventures’ operations 98 215 284 367 Foreign joint ventures’ operations related expenses (67 ) (53 ) (195 ) (202 ) Net equity income from foreign joint ventures’ operations 31 162 89 165 Loss from operations and net equity loss from foreign joint ventures’ operations $ (719 ) $ (2,487 ) $ (3,880 ) $ (5,506 ) Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 Net income (loss) attributable to common stockholders $ (1,129 ) $ (2,713 ) $ (4,861 ) $ (5,621 ) Add: Depreciation and amortization 204 216 640 660 Interest expense 282 70 620 173 Provision for (benefit from) income taxes (11 ) 59 (83 ) 50 Dividend on redeemable preferred stock 89 89 267 265 EBITDA $ (565 ) $ (2,279 ) $ (3,417 ) $ (4,473 ) For the Three Months Ended September 30, 2017 and 2016 (in thousands) 2017 Oil & Gas Power Generation & Distribution Marine & Other Industrial Total Revenue $ 12,233 $ 499 $ 536 $ 13,268 Gross Profit 1,121 (22 ) (23 ) 1,076 Gross Profit as % of Revenue 9 % -4 % -4 % 8 % 2016 Revenue $ 3,639 $ 3,275 $ 1,759 $ 8,673 Gross Profit 292 (942 ) 199 (451 ) Gross Profit as % of Revenue 8 % -29 % 11 % -5 % For the Nine Months Ended September 30, 2017 and 2016 (in thousands) 2017 Oil & Gas Power Generation & Distribution Marine & Other Industrial Total Revenue $ 26,663 $ 4,647 $ 2,948 $ 34,258 Gross Profit 1,910 (321 ) (253 ) 1,336 Gross Profit as % of Revenue 7 % -7 % -9 % 4 % 2016 Revenue $ 14,376 $ 9,184 $ 4,855 $ 28,415 Gross Profit 1,080 (735 ) 521 866 Gross Profit as % of Revenue 8 % -8 % 11 % 3 % September 30, 2017 December 31, 2016 (in thousands except percentages and ratios) Working capital $ 1,892 $ 3,302 Current ratio 1.1 to 1 1.3 to 1 Debt as a percent of total capitalization 46 % 26 % 2021. PROCEEDINGS. EXHIBITS. Exhibit Description Exhibit Description By: /s/ PARTJune 30,
2021December 31, 2020 Assets Current assets: Cash and cash equivalents $ 3,313 $ 1,814 Accounts receivable 7,048 5,620 Inventories, net 159 226 Prepaid expenses and other current assets 3,564 3,111 Due from related parties 0 42 Total current assets 14,084 10,813 Property, plant and equipment: Cost 99,667 90,422 Less accumulated depreciation (42,628) (38,384) Property, plant and equipment, net 57,039 52,038 Right-of-use assets 602 786 Goodwill 4,453 4,453 Investments in foreign joint ventures 11,608 11,897 Other noncurrent assets 328 326 Total assets $ 88,114 $ 80,313 Liabilities and Stockholders’ Equity Current liabilities: Current portion of long-term notes payable $ 127 $ 680 Current portion of long-term notes payable - related parties 3,496 3,351 Current portion of finance lease obligation 17 0 Current portion of finance lease obligation - related parties 0 648 Current portion of operating lease obligations 271 362 Short-term notes payable 0 432 Accrued liabilities 5,930 4,361 Accounts payable 3,969 4,395 Total current liabilities 13,810 14,229 Long-term notes payable, net of current portion 6,797 682 Long-term notes payable, net of current portion - related parties 1,441 2,726 Long-term portion of finance lease obligations 71 0 Long-term portion of operating lease obligations 393 490 Deferred compensation 31 59 Deferred income taxes 91 97 Total liabilities 22,634 18,283 Commitments and contingencies (Note 12) 0 0 Stockholders’ Equity: Common stock; $0.001 par value, 37,500,000 shares authorized, 17,497,910 and 16,896,626 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively 18 17 Additional paid-in capital 95,356 91,278 Accumulated other comprehensive income 322 122 Accumulated deficit (30,216) (29,387) Total stockholders’ equity 65,480 62,030 Total liabilities and stockholders’ equity $ 88,114 $ 80,313 Three Months Ended
June 30,Six Months Ended
June 30,2021 2020 2021 2020 Revenue LNG product $ 11,812 $ 2,884 $ 23,507 $ 12,015 Rental, service and other 2,580 1,143 7,005 4,540 Power delivery 1,660 976 3,204 2,286 Total revenues 16,052 5,003 33,716 18,841 Operating expenses: Costs of LNG product 9,354 2,551 18,166 8,648 Costs of rental, service and other 1,491 902 3,732 2,573 Costs of power delivery 1,292 888 2,452 2,135 Selling, general and administrative expenses 3,815 2,368 7,040 5,554 Gain from disposal of fixed assets (24) 0 (24) (11) Depreciation expense 2,218 2,266 4,443 4,536 Total operating expenses 18,146 8,975 35,809 23,435 Loss from operations before equity income (2,094) (3,972) (2,093) (4,594) Net equity income from foreign joint ventures' operations: Income from equity investments in foreign joint ventures 538 1,001 959 887 Foreign joint ventures' operations related expenses (63) (53) (130) (113) Net equity income from foreign joint ventures' operations 475 948 829 774 Loss from operations (1,619) (3,024) (1,264) (3,820) Other income (expense): Interest expense, net (77) (15) (94) (26) Interest expense, net - related parties (148) (242) (321) (482) Other income (loss) 1,023 (13) 1,113 25 Total other income (expense) 798 (270) 698 (483) Loss before income tax expense (821) (3,294) (566) (4,303) Income tax expense 183 169 263 210 Net loss $ (1,004) $ (3,463) $ (829) $ (4,513) Common Stock Data: Net income (loss) per common share: Basic and diluted $ (0.06) $ (0.21) $ (0.05) $ (0.27) Weighted average number of common shares outstanding: Basic and diluted 17,129,253 16,887,194 17,013,582 16,853,438 Three Months Ended
June 30,Six Months Ended
June 30,2021 2020 2021 2020 Net loss $ (1,004) $ (3,463) $ (829) $ (4,513) Foreign currency translation adjustment 402 84 200 (535) Total comprehensive loss $ (602) $ (3,379) $ (629) $ (5,048) Common Stock Shares Amount Additional
Paid-in CapitalAccumulated
Other
Comprehensive
Income (Loss)Accumulated
DeficitTotal Balance at December 31, 2020 16,896,626 $ 17 $ 91,278 $ 122 $ (29,387) $ 62,030 Stock-based compensation — — 162 — — 162 Net income — — — — 175 175 Other comprehensive loss — — — (202) — (202) Balance at March 31, 2021 16,896,626 17 91,440 (80) (29,212) 62,165 Common stock issued 101,284 — — — — — Stock-based compensation — — 122 — — 122 Shares issued in asset acquisition 500,000 1 3,794 — — 3,795 Net loss — — — — (1,004) (1,004) Other comprehensive income — — — 402 — 402 Balance at June 30, 2021 17,497,910 $ 18 $ 95,356 $ 322 $ (30,216) $ 65,480 Common Stock Shares Amount Additional
Paid-in CapitalAccumulated
Other
Comprehensive
Income (Loss)Accumulated
DeficitTotal Balance at December 31, 2019 16,800,612 $ 17 $ 90,748 $ (291) $ (22,631) $ 67,843 Common stock issued 34,706 — — — — — Stock-based compensation — — 19 — — 19 Net loss — — — — (1,050) (1,050) Other comprehensive loss — — — (619) — (619) Balance at March 31, 2020 16,835,318 17 90,767 (910) (23,681) 66,193 Common stock issued 61,308 — — — — — Stock-based compensation — — 139 — — 139 Net loss — — — — (3,463) (3,463) Other comprehensive income — — — 84 — 84 Balance at June 30, 2020 16,896,626 $ 17 $ 90,906 $ (826) $ (27,144) $ 62,953 Six Months Ended
June 30,2021 2020 Cash flows from operating activities: Net loss $ (829) $ (4,513) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 4,443 4,536 Deferred income tax expense (benefit) (6) 28 Stock-based compensation expense 284 158 Bad debt expense 0 144 Gain on disposal of fixed assets (24) (11) Gain on extinguishment of debt (1,086) 0 Income from equity investment in joint venture (959) (887) Distributions from equity investment in joint venture 1,387 2,054 Deferred compensation costs (28) 87 Amortization of debt issuance costs 10 0 Change in operating assets and liabilities, net of acquisitions: Accounts receivable (1,428) 4,316 Due to (from) related parties 42 0 Inventories 92 28 Prepaid expenses and other current assets (453) 920 Accounts payable and accrued liabilities 1,150 (2,537) Other 16 0 Net cash provided by operating activities 2,611 4,323 Cash flows from investing activities: Acquisition of fixed assets (5,917) (281) Proceeds on sales of fixed assets 258 12 Net cash used in investing activities (5,659) (269) Cash flows from financing activities: Proceeds on long-term borrowings 7,087 1,080 Payments on long-term borrowings and financed leases from related parties (1,701) (1,694) Payments on short-term notes payable (448) (201) Payment of debt issuance costs (420) 0 Net cash provided by (used in) financing activities 4,518 (815) Effect of exchange rate changes on cash 29 (162) Net increase in cash and cash equivalents 1,499 3,077 Cash and cash equivalents, beginning of period 1,814 3,979 Cash and cash equivalents, end of period $ 3,313 $ 7,056 Supplemental disclosure of cash flow information: Interest paid $ 380 $ 474 Income taxes paid 169 210 Non-cash investing and financing activities: Common stock issued to acquire fixed assets $ 3,795 $ 0 Equipment acquired under capital leases 104 0 4American Electric Technologies, Inc. and SubsidiariesCondensed Consolidated Statements of OperationsUnaudited(in thousands, except share and per share data)The accompanying notes are an integral part of the condensed consolidated financial statements5American Electric Technologies, Inc. and SubsidiariesCondensed Consolidated Statements of Comprehensive Income (Loss)(Unaudited)(in thousands)The accompanying notes are an integral part of the condensed consolidated financial statements6American Electric Technologies, Inc. and SubsidiariesCondensed Consolidated Statements of Cash FlowsUnaudited(in thousands)The accompanying notes are an integral part of the condensed consolidated financial statements7AMERICAN ELECTRIC TECHNOLOGIES,STABILIS SOLUTIONS, INC. AND SUBSIDIARIESAmerican Electric Technologies, Inc.our subsidiaries and, its wholly-owned subsidiaries (“AETI”, “the Company”, “our”, “we”, “us”) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, certain information and disclosures normally included in the notes to condensed consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“("U.S. GAAP”GAAP") for interimhave been condensed or omitted. We believe that the presentation and disclosures herein are adequate to make the information not misleading. The unaudited condensed consolidated financial information and includestatements reflect all adjustments which, in the opinion(consisting of management, are necessary for fair financial statement presentation. All adjustments are of a normal recurring nature.adjustments) for a fair presentation of the interim periods. The results of operations for the interim periodsperiod are not necessarily indicative of the results of operations to be expected for athe full year. Certain information and footnote disclosures normally included in theThe accompanying unaudited condensed consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The statements should be read in conjunction with the Company’saudited consolidated financial statements included in our Annual Report on Form 10-Kas of and for the year ended December 31, 2016, which was2020 included in the Company's Annual Report on Form 10-K, as filed on March 30, 2017. 16, 2021.disclosedin tabulations are in thousands, unless otherwise indicated.footnotes are statednormal course of business. The Company is required to make certain disclosures if it concludes that there is substantial doubt about the entity’s ability to continue as a going concern within one year from the date of the issuance of these financial statements. The Company has incurred recurring operating losses. The Company is subject to business risks and uncertainties inherent in thousands.2. Earnings per Common ShareBasic earnings per sharethe current LNG industry. There is computedno assurance that the Company will be able to generate sufficient revenues in the future to sustain itself or to support future growth.dividing net income (loss) attributablemanagement to common stockholders bydetermine if there was substantial doubt as to the weighted average numberCompany’s ability to continue as a going concern. Management concluded that its plan to address the Company’s liquidity issues would allow it to continue as a going concern. The Company has recently experienced its highest ever revenue year to date, including a resumption of sharesactivity with existing customers as well as new revenue opportunities, particularly in Mexico and with power generation customers. On April 8, 2021, the Company obtained a new advancing loan facility, pursuant to the United States Department of common stockAgriculture, Business & Industry Loan Program, in the aggregate principal amount of up to $10.0 million, of which $7.0 millionthreenext 12 months.nine months ended September 30, 2017assumptions that affect the reported amounts of assets and 2016 .Diluted earnings per share is computed by dividing net income (loss) attributable to common stockholders, byliabilities and disclosure of contingent assets and liabilities at the sumdate of (1) the weighted-average numberfinancial statements and the reported amounts of shares of common stock outstandingrevenues and expenses during the period, (2)reporting period. Significant items subject to such estimates include the dilutive effectcarrying amount of contingencies, valuation allowances for receivables, inventories, and deferred income tax assets, valuations assigned to assets and liabilities in business combinations, and impairments of long-lived assets. Actual results could differ from those estimates, and these differences could be material to the assumed exercise of convertible instruments and (3) the dilutive effect of the exercise of stock options and other stock units to our common stock.For the three and nine months ended September 30, 2017, common stock equivalents from convertible instruments, stock options and other stock units have been excluded from the calculation of weighted average diluted shares because all such instruments were anti-dilutive. The following table sets forth the computation of basic and diluted weighted average common shares.3. Recently IssuedMay 2014,December 2019, 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 reflects2019-12, “Simplifying the consideration to which an entity expects to be entitledAccounting for those goods or services. Income Taxes” (“ASU No. 2014-09 defines a five step process2019-12”), which simplifies the accounting for income taxes by removing certain exceptions to achieve this core principlethe general principles of Topic 740, Income Taxes and in doing so, more judgmentalso improves consistent application by clarifying and estimates may be required underamending 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 adoptingguidance. ASU No. 2014-09 recognized at2019-12 was adopted by the dateCompany effective January 1, 2021. The adoption of adoption (which includes additional footnote disclosures). this standard had no impact on our unaudited condensed consolidated financial position or results of operations.July 2015,March 2020, the FASB issued ASU No. 2015-142020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (“ASU No. 2020-04”), which delayedprovides guidance to alleviate the effective dateburden 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. 2014-09 by one year (effective for annual periods beginning after2020-04 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 15, 2017). AETI is31, 2022. We are currently evaluating the impact of ASU 2014-09 and currently expects that the standard will not have a material impactNo. 2020-04 on the Company’sour unaudited condensed consolidated financial statements other than enhanced disclosures related tostatements.Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 LNG Product $ 11,812 $ 2,884 $ 23,507 $ 12,015 Rental 1,940 385 5,327 3,275 Service 381 313 623 406 Power Delivery 1,660 976 3,204 2,286 Other 259 445 1,055 859 $ 16,052 $ 5,003 $ 33,716 $ 18,841 Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Revenues Brazil $ 1,660 $ 976 $ 3,204 $ 2,286 Mexico 2,081 16 3,697 49 United States 12,311 4,011 26,815 16,506 $ 16,052 $ 5,003 $ 33,716 $ 18,841 revenues from contracts with customers,revenue. Company’s performance obligations and any significant judgments. AETI intends to adopt the new standard using the modified retrospective method at the date of adoption. In July 2015, the FASB issued ASU No. 2015-11. Inventory (Topic 330): Simplifying the Measurement of Inventory, which is intended to converge U.S. GAAP on this topic with International Financial Reporting Standards (“IFRS”). ASU No. 2015-11 focuses on the premeasurement of inventory measured using any method other than LIFO, for example, average cost. Inventory within the scope of ASU No. 2015-11 is required to be measured at the lower of cost and net realizable value. When evidence exists that the net realizable value of inventory is lower than its cost, the difference shall be recognized as a loss in earnings in the period in which it occurs. That loss may be required, for example, due to damage, physical deterioration, obsolescence, changes in price levels, or other causes. For public business entities, the amendments in ASU No. 2015-11 are effective for fiscal years beginning after December 15,82016, including interim periods within those fiscal years. The adoption of ASU No. 2015-11 didhave not have a significant impact on the Company’s consolidated financial position, results of operations and disclosures.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. Management is currently evaluating the future impact of ASU No. 2016-01 on the Company’s consolidated financial position, results of operations and disclosures.In 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. Management is currently evaluating the future impact of ASU No. 2016-02 on the Company’s consolidated financial position, results of operations and disclosures.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. Management is currently evaluating the future impact of ASU No. 2016-10 on the Company’s consolidated financial position, results of operations and disclosures. Please refer to ASU No. 2014-09 above.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. Management is currently evaluating the future impact of ASU No. 2016-12 on the Company’s consolidated financial position, results of operations and disclosures. Please refer to ASU No. 2014-09 above.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 heldbeen fulfilled at the reporting date, based on historical experience, current conditions,resulting in deferred revenue. Contract liabilities are included in accrued liabilities in the accompanying unaudited condensed consolidated balance sheets. The following table presents the changes in the Company’s contract liabilities for the periods ended June 30, 2021 and reasonableDecember 31, 2020 (in thousands):June 30,
2021December 31,
2020Balance at beginning of period $ 357 $ 185 Cash received, excluding amounts recognized as revenue 228 777 Amounts recognized as revenue (347) (605) Balance at end of period $ 238 $ 357 supportable forecasts. In addition, ASU No. 2016-13 amendscontract costs.Three Months Ended June 30, 2021 Six Months Ended June 30, 2021 (in thousands) (in thousands) LNG Power Delivery Total LNG Power Delivery Total Revenues $ 14,392 $ 1,660 $ 16,052 $ 30,512 $ 3,204 $ 33,716 Depreciation 2,181 37 2,218 4,369 74 4,443 Loss from operations before equity income (1,840) (254) (2,094) (1,572) (521) (2,093) Net equity income from foreign joint ventures' operations 0 475 475 0 829 829 Income (loss) from operations (1,840) 221 (1,619) (1,572) 308 (1,264) Interest expense, net 63 14 77 70 24 94 Interest expense, net - related parties 148 0 148 321 0 321 Income tax expense (benefit) 219 (36) 183 263 0 263 Net income (loss) (1,247) 243 (1,004) (1,232) 403 (829) June 30, 2021 (in thousands) LNG Power Delivery Total Total assets $ 72,413 $ 15,701 $ 88,114 Three Months Ended June 30, 2020 Six Months Ended June 30, 2020 (in thousands) (in thousands) LNG Power Delivery Total LNG Power Delivery Total Revenues $ 4,027 $ 976 $ 5,003 $ 16,555 $ 2,286 $ 18,841 Depreciation 2,234 32 2,266 4,469 67 4,536 Loss from operations before equity income (3,531) (441) (3,972) (3,719) (875) (4,594) Net equity income from foreign joint ventures' operations 0 948 948 0 774 774 Income (loss) from operations (3,531) 507 (3,024) (3,719) (101) (3,820) Interest expense, net 1 14 15 5 21 26 Interest expense, net - related parties 242 0 242 482 0 482 Income tax expense (35) 204 169 0 210 210 Net income (loss) (3,740) 277 (3,463) (4,220) (293) (4,513) December 31, 2020 (in thousands) LNG Power Delivery Total Total assets $ 64,757 $ 15,556 $ 80,313 accounting for creditgains and losses on available-for-sale debt securitiesforeign currency remeasurement, and purchased financialinterest and dividend income, are included in the segments’ results.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 asconsisted of the beginningfollowing (in thousands):June 30,
2021December 31,
2020Prepaid LNG $ 86 $ 90 Prepaid insurance 403 734 Prepaid supplier expenses 276 299 Other receivables 2,242 1,521 Deposits 335 285 Other 222 182 Total prepaid expenses and other current assets $ 3,564 $ 3,111 first reporting periodfollowing (in thousands):June 30,
2021December 31,
2020Liquefaction plants and systems $ 47,118 $ 40,841 Real property and buildings 2,392 1,649 Vehicles and tanker trailers and equipment 49,358 47,179 Computer and office equipment 577 532 Construction in progress 191 191 Leasehold improvements 31 30 99,667 90,422 Less: accumulated depreciation (42,628) (38,384) $ 57,039 $ 52,038 which the guidance is effective. Management is currently evaluatingunaudited condensed consolidated statements of operations as its own and separate line item.future impact of ASU No. 2016-13Company closed 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 diversity in practice 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. Early adoption is permitted. Management does not expect the adoption of ASU No. 2016-15 to have a significant impact on the Company’s consolidated financial position, results of operations and disclosures because it on affects presentation of specific items within the cash flow statement.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 obligations in certain cases and require entities that use any of the new or previously existing optional exemptions 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, or corrects unintended application of the guidance. The effective date and transition requirements for ASU No. 2016-20 are the same as the effective date and transition requirements for ASU9No. 2014-09. Management is currently evaluating the future impact of ASU No. 2016-20 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 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. Management is currently evaluating the future impact of ASU No. 2017-01 on the Company’s consolidated financial position, results of operations and disclosures.In 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 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 impactpurchase of an update, thenLNG production facility in additionPort Allen, Louisiana. The acquisition included the LNG liquefaction facility, the related assets and real property. The Company paid consideration of $5.0 million in cash and 500,000 shares of Company common stock, subject to 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 standardsregistration rights agreement 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.4.valued at $3.8 million.We have intereststwo joint ventures, outside of the United States of America (“U.S.”) which are accounted for using the equity method:which the Company holds a 40% interest,China. The majority partner in this foreign joint venture is Baoji Oilfield Machinery Co., Ltd. (a subsidiary of China National Petroleum Corporation) holds a, which owns 51% interest, and. The remaining 9% is owned by AA Energies, Inc., holds a 9% interest. BOMAY was formed in 2006 in China with a term of 12 years and will expire in 2018. term of theCompany made 0 sales to its joint venture may be extended upon agreement of all parties. In such case,in the joint venture shall apply for the extension to the relevant Chinese authoritythree and six months before expiry of the venture. The companyended June 30, 2021 and 2020.working with our Joint Venture partners on extending the joint venture. At this time, AETI has no indication that the joint venture will not be extended beyond the 2018 expiration date; and,M&I Electric Far East, Ltd. ("MIEFE”), in which the Company currently owns 41% of the joint venture with our joint venture partner, Sonepar, owning 51% and MIEFE’s general manager owning the remaining 8%. In 2016, due to market conditions, the business suspended current operations and the investment in MIEFE was written down to zero excluding foreign currency translation.Sales to joint ventures totaled $0.00 and $0.02 for the three months ended September 30, 2017 and 2016. Sales to joint ventures totaled $0.01 million and $0.07 million for the nine months ended September 30, 2017 and 2016. Summary (unaudited)summary financial information of our foreign joint ventures in U.S. dollars was as followsfor BOMAY at SeptemberJune 30, 20172021 and December 31, 20162020, and operational results for the three and ninesix months ended SeptemberJune 30, 20172021 and 20162020 in U.S. dollars (in thousands)thousands, unaudited):June 30,
2021December 31, 2020 Assets: Total current assets $ 52,416 $ 51,811 Total non-current assets 6,740 7,136 Total assets $ 59,156 $ 58,947 Liabilities and equity: Total liabilities $ 27,291 $ 26,355 Total joint ventures’ equity 31,865 32,592 Total liabilities and equity $ 59,156 $ 58,947 Three Months Ended
June 30,Six Months Ended
June 30,2021 2020 2021 2020 Revenue $ 19,005 $ 18,647 $ 33,221 $ 27,203 Gross Profit 2,458 3,336 4,691 4,232 Earnings 1,265 2,283 2,235 1,999 June 30,
2021December 31, 2020 Initial investment $ 9,333 $ 9,333 Undistributed earnings: Balance at the beginning of the period 1,908 1,257 Equity in earnings 959 2,705 Dividend distributions (1,387) (2,054) Balance at end of period 1,480 1,908 Foreign currency translation: Balance at the beginning of the period 656 (69) Change during the period 139 725 Balance at end of period 795 656 Total investment in BOMAY at end of period $ 11,608 $ 11,897 the nine months ended September 30, 2017 (unaudited):**Accumulated statutory reserves of $2.89 million in equity method investments at both September 30, 2017 and December 31, 2016, 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.Underits investment in BOMAY using the equity method of accounting,accounting. Under the equity method, the Company’s share of the joint ventures’ operations’venture operations earnings or losslosses is recognized in the condensed consolidated statements of operations as equity income (loss) from foreign joint ventures’venture operations. Joint venture income increases the carrying value of the joint venture investment and joint venture losses as well as dividendsreduce the carrying value. Dividends received from the joint ventures,venture reduce the carrying value of the investment.reviewsconsiders dividend distributions received from its equity method investments for impairment wheneverwhich do not exceed cumulative equity in earnings subsequent to the date of investment to be a return on investment and classifies these distributions as operating activities in the accompanying condensed consolidated statements of cash flows. In accordance with our long-lived asset policy, when events or changes in circumstances indicate thatthe 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 investment may notlong-lived asset which exceeds the present value of estimated expected future cash flows) would be recoverable or the inabilityrecorded as a period expense. In making this evaluation, a variety of the investee to sustain an earnings capacity that would justify the carrying amount of the investment.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 analysis, there was no indication of impairment.5. Notes PayableSenior Secured Term NoteOn March 23, 2017,evaluation for this reporting period, the Company and its subsidiaries, M&I Electric Industries, Inc. and South Coast Electric Systems, LLC (collectively, the “Sellers”) issued and sold to HD Special-Situations III, L.P. (the “Purchaser”) a $7.00 million principal amount Senior Secured Term Note (the “Note”) with principal of $0.50 million due and paid ondoes not believe an impairment adjustment is necessary at June 30, 2017 with2021.balance due 4811months after issuance for cash at parfollowing (in thousands):June 30,
2021December 31,
2020Compensation and benefits $ 2,547 $ 1,745 Professional fees 360 408 LNG fuel and transportation 1,922 1,151 Accrued interest 35 21 Contract liabilities 238 357 Other taxes payable 435 328 Other accrued liabilities 393 351 Total accrued liabilities $ 5,930 $ 4,361 June 30,
2021December 31,
2020Unsecured promissory note $ 0 $ 1,080 Secured term note 6,590 0 Secured term note payable - related party 1,077 1,077 Secured promissory note - related party 3,859 5,000 Insurance and other notes payable 335 714 Less: amounts due within one year (3,623) (4,463) Total long-term debt $ 8,238 $ 3,408 a Note Purchase Agreementthe Paycheck Protection Program (the “Purchase Agreement”“PPP”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). Proceeds fromUnder the saleterms 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 bears interest at 11.5% per annum payable monthly in arrears. The Note is secured byPPP, all or a first-priority lien on substantially all existing and after-acquired personal property assets and real estate owned by the Sellers (with certain exceptions) and is subject to covenants restricting the Company’s ability to incur debt, grant liens, pay dividends, engage in transactions with affiliates and other customary covenants for financing of this type (subject to certain exceptions). The Note is subject to an interest “make-whole” provision such that any prepaymentportion of the principal thereundermay be forgiven if the PPP Loan proceeds are used for qualifying expenses as described in excess of $1.50 million (the “Prepayment Threshold”) within one yearthe CARES Act, such as payroll costs, benefits, rent, and utilities. In June 2021, the forgiveness of the date of issuance (the “Make-Whole Period”) shall be subject toPPP Loan was approved by the payment of a prepayment premium, on the date of such prepayment, in an amount based on an interest rate of 11.5% per annum of the prepayment amount in excess of the Prepayment Threshold for the portion of the Make-Whole Period that will remain after the date that the prepayment is made. After the one year Make- Whole Period the Note may be prepaid in part orSmall Business Administration in full with no penalty.Purchase Agreement contains representations and affirmative, negative and financial covenants usual and customary for financingCompany recognized a gain on forgiveness of this type, including covenants that place conditions upon the Company’s ability to merge or consolidate with other companies, sell any material part of their business or property, incur liens, and pay dividends on, make distributions on or redeem their equity interests. Other covenantsdebt in the Purchase Agreement require the Company to maintain minimum monthly revenue, maintain minimum monthly EBITDA, maintain minimum monthly cash on hand, maintain a minimum monthly debt service coverage ratio, maintain a maximum debt-to-EBITDA ratio, maintain a minimum monthly collateral coverage ratio and obtain consentamount of the Purchaser for certain capital expenditAs of September 30, 2017, the Company was not$1.1 million which is included in compliance with the minimum monthly EBITDA covenant but was granted a waiver for the period. There can be no assurances that covenants can be metother income (expense) in the future and if not met, waivers can be obtained. In the event that the Company fails to meet covenants in the future, the Company may not be able to obtain the necessary waivers or amendments to remain in compliance with the Purchase Agreement and the Purchaser may declare a default and cause allaccompanying condensed consolidated statements of the Company’s outstanding indebtedness under the Purchase Agreement to become immediately due and payable or otherwise subject to an additional rate of 4.0% per annum and scheduled amortization of principal.As of September 30, 2017, the Company was not in compliance with the minimum monthly EBITDA covenant but was granted a waiver for the period. There can be no assurances that covenants can be met in the future and if not met, waivers can be obtained. In the event that the Company fails to meet covenants in the future, the Company may not be able to obtain the necessary waivers or amendments to remain in compliance with the Purchase Agreement and the Purchaser may declare a default and cause all of the Company’s outstanding indebtedness under the Purchase Agreement to become immediately due and payable or otherwise subject to an additional rate of 4.0% per annum and scheduled amortization of principal.On November 13, 2017, the Company entered into an agreement modifying the terms of its Senior operations.Note. The modification included a waiver ofNoteEBITDA 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 which expire in November 2023.On June 6, 2017, the Company’s subsidiary, M&I Brazil, entered into a Loan Agreement (the “Loan Agreement”) with AmeriState Bank (“Lender”), as lender, pursuant to the former chairmanUnited States Department of AETI. TheAgriculture, Business & Industry Loan Agreement provides the Company with a $0.30 millionProgram, to provide for an advancing loan facility in the aggregate principal amount of up to $10.0 million (the “USDA Loan”), of which $0.20$7.0 million iswas drawn and is outstanding as of SeptemberJune 30, 2017 and with any balance outstanding due June 7, 2018. Under2021. The USDA Loan, which is in the loan agreement, the interest rate on theform of a term loan facility, is 10.0%,matures on April 8, 2031 and bears interest at 5.75% per annum through April 8, 2026, and the U.S. prime lending rate plus 2.5% per annum thereafter. The USDA Loan provides that proceeds from borrowings may be used for working capital purposes at the Company’s liquefaction plant in George West, Texas and related fees and costs associated with the USDA Loan.quarter.a wholly owned subsidiary of the Company (collectively, “Debtor”), entered into a Security Agreement and Assignment (the “Security Agreement”) in favor of the Lender. The loan facility is securedSecurity Agreement grants to Lender a first priority security interest in the collateral identified therein, which includes specific equipment collateral owned by the assets held by M&I Brazil.6. InventoriesInventories consistedCompany.June 30,
2021June 30,
2020Unsecured promissory note $ 0 $ 0 Secured term note 59 0 Secured term note payable - related party 20 42 Secured promissory note - related party 291 435 Insurance and other notes payable 30 27 Total interest expense on debt $ 400 $ 504 at Septembertable summarizes the supplemental balance sheet information related to lease assets and lease liabilities as of June 30, 2017 (unaudited)2021 and December 31, 20162020 (in thousands):Classification June 30,
2021December 31, 2020 Assets Operating lease assets Right-of-use assets $ 602 $ 786 Finance lease assets Property and equipment, net of accumulated depreciation 95 6,781 Total lease assets $ 697 $ 7,567 Liabilities Current Operating Current portion of operating lease obligations $ 271 $ 362 Finance Current portion of finance lease obligation 17 0 Finance Current portion of finance lease obligation - related parties 0 648 Noncurrent Operating Long-term portion of operating lease obligation 393 490 Finance Long-term portion of finance lease obligations 71 0 Total lease liabilities $ 752 $ 1,500 7. Income Taxestax provisionfollowing table summarizes the components of lease expense for the three and ninesix months ended SeptemberJune 30, 20172021 and 2016 reflect2020 (in thousands, unaudited):Lease Cost Classification Three Months Ended June 30, Six Months Ended
June 30,2021 2020 2021 2020 Operating lease cost Cost of sales $ 34 $ 41 $ 77 $ 80 Operating lease cost Selling, general and administrative expenses 46 90 123 181 Finance lease cost Amortization of leased assets Depreciation 6 292 9 585 Interest on lease liabilities Interest expense 3 135 15 296 Net lease cost $ 89 $ 558 $ 224 $ 1,142 34% U.S. tax36-month period at an annual rate of 10.7%. The leases include purchase options, which are reasonably certain to occur.Operating
LeasesFinance
LeasesTotal Remainder 2021 $ 204 $ 13 $ 217 2022 212 25 237 2023 145 25 170 2024 149 42 191 2025 25 0 25 Thereafter 0 0 0 Total lease payments 735 105 840 Less: Interest (71) (17) (88) Present value of lease liabilities $ 664 $ 88 $ 752 Lease Term and Discount Rate June 30,
2021Weighted-average remaining lease term (years) Operating leases 2.7 Finance leases 2.6 Weighted-average discount rate Operating leases 7.2% Finance leases 10.7% equitysix months ended June 30, 2021 and 2020:Other information June 30,
2021June 30,
2020(In thousands) Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from operating leases $ 187 $ 237 Financing cash flows from finance leases 668 1,694 Interest paid 30 235 Noncash activities from right-of-use assets obtained in exchange for lease obligations: Operating leases $ 0 $ 73 earnings from foreign joint ventures’ operations, net of dividends received and taxes paid on dividends from China, resulting in an effective rate of 1% and 2%, respectively. 128. Fair Value of Financial Instruments and Fair Value MeasurementsThe carrying amounts of cash and cash equivalents, trade accounts receivable and accounts payable approximate fair value as of Septemberon the unaudited condensed consolidated balance sheets at June 30, 20172021 and December 31, 2016 because2020, respectively. As of June 30, 2021 and December 31, 2020, the Company had $72 thousand and $121 thousand, respectively, due to ACT included in accounts payable on the unaudited condensed consolidated balance sheets.relatively short maturityModern Group and is deemed to jointly control The Modern Group with family members. During the six months ended June 30, 2021 and 2020, the Company made purchases of supplies and services from a subsidiary of The Modern Group totaling $721 thousand and $195 thousand, respectively. During the three months ended June 30, 2021 and 2020, the Company made purchases of supplies and services totaling $191 thousand and $162 thousand, respectively. There was 0 receivable due from a subsidiary of The Modern Group as of June 30, 2021 and December 31, 2020. As of June 30, 2021 and December 31, 2020, the Company had $760 thousand and $582 thousand, respectively, due to a subsidiary of The Modern Group included in accounts payable on the unaudited condensed consolidated balance sheets.instruments.carrying amountCompany does not, however, anticipate such an outcome and it believes the ultimate resolution of our long-term note payable approximates fair value as the interest ratethese matters will not have a material adverse effect on the note is based onCompany’s consolidated financial position, results of operations, or liquidity. Additionally, the Company currently expenses all legal costs as they are incurred.market rate.9. Redeemable Convertible Preferred Stockpredecessor in interest to the Company (“American Electric”) received notification of a potential liability of $4.3 million associated with an asset purchase agreement to sell substantially all of its U.S. business assets and Common StockRedeemable Convertible Preferred StockIn conjunction with the issuanceoperations to Myers Power Products, Inc. (“Myers”). The contractual terms of the Redeemable Convertible Preferredagreement included a provision for true-up of the net working capital, estimated as of the date of closing, to actual working capital as calculated by Myers and agreed to by American Electric. Any difference in the actual (conclusive) net working capital in relation to the estimated working capital at closing results in an adjustment to the purchase price. In response, American Electric disputed Myers’ claim and Myers’ working capital calculation. On November 5, 2020, the Company filed a petition in Harris County, Texas requesting a declaratory judgment in favor of the Company. During the six months ended June 30, 2021, the parties reached an amicable resolution of their differences and all claims regarding the net working capital were mutually released and the lawsuit was dismissed with prejudice to refiling same. Series AMay 2012, warrantsPort Allen, Louisiana. See Note 6—Property, Plant and Equipment, above, for additional information.325,00062,500 shares of our common stock as follows:Date of Issuance No. of Warrants Exercise Price Expiration Date Nov. 13, 2017 62,500 $18.08 Nov. 13, 2022 “Warrants”“2019 Plan”) were issued.initial value allocatedCompany granted 61,308 RSAs under the 2019 Plan to the Warrants wasindependent directors in April 2020. The Company recognized as a discount on the Series A Convertible Preferred Stock, with a corresponding charge to additional paid-in capital. The discount$17 thousand and $57 thousand in stock-based compensation costs related to the Warrants is accreted to retained earnings through the scheduled redemption date of the redeemable Series A Convertible Preferred Stock. Discount accretion totaled $0.01 millionRSAs for the threesix months ended SeptemberJune 30, for both 20172021 and 2016 . Discount accretion totaled $0.04 million for the nine months ended September 30 for both 2017 and 2016.The Series A Convertible Preferred Stock accrues cumulative dividends at a rate of 6% per annum payable quarterly in cash or with our Common Stock, at the option of the Company, based on the then current liquidation market price value of the Series A Convertible Preferred Common Stock which is currently $5.00 per share. Quarterly dividends not paid in cash or Common Stock accumulate without interest and must be fully paid before any dividend or other distribution can be paid on or declared and set apart for the Common Stock or conversion of the Series A Convertible Preferred Stock to Common Stock. At September 30, 2017 and December 31, 2016, the company had accrued but unpaid dividends totaling $0.08 million and $0.23 million,2020, respectively, which is included in accounts payablegeneral and other accruedadministrative expenses in the unaudited condensed consolidated balance sheet. Forstatements of operations. The Company recognized $38 thousand in stock-based compensation costs related to RSAs during the ninethree monthsSeptemberJune 30, 2017,2021198,416 common shares have been issued as payment101,284 awards vested.accrued preferred dividends in accordance with the terms of the preferred stock agreement. On or after AprilJune 30, 2017, the holders of a majority of the outstanding shares of the Series A Convertible Preferred Stock may require2021, the Company had $700 thousand of unrecognized compensation costs related to redeem the Series A Convertible Preferred Stock at675,381 outstanding RSUs, which is expected to be recognized over a redemption price equalweighted average period of less than two years. All units are expected to vest.lessorvaluation allowance for net deferred tax assets, the timing of (i)distributions on foreign investments from which foreign taxes are withheld, and changes to actual or forecasted permanent book to tax differences.liquidation preference per share (initially $5.00 per share, subject to adjustments for certain future equity transactions definedsix months ended June 30, 2021 and 2020 was 46.5% and 4.9%, respectively. The 2021 rate reflects state and foreign income taxes and the Company’s deferred federal income tax expense generated from an expected net operating income, offset by a change in the Securities Purchase Agreement) and (ii) the fair market valuevaluation allowance on net deferred tax assets.the Series A Convertible Preferred Stock per share, as determined in good faith by the Company’s Board of Directors. Credit RiskSeptemberJune 30, 20172021 and December 31, 2016, the redemption price per share was $5.00 in both years. The redemption price, plus any accrued2020, two customers comprised of 52% and unpaid dividends, shall be payable in 36 equal monthly installments plus interest at an annual rate of 6%.In connection with the issuance of the Company’s senior secured Term Note, described in Note 5, 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 an 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. In addition, Pursuant to the Repricing Agreement, the Series A Warrants sold to the Holder will be 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 will be 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%47% of our common stock or voting power outstanding tonet accounts receivable balance, respectively. During the Holder asthree months ended June 30, 2021, revenues from three customers represented 50% of total revenues. During the datethree months ended June 30, 2020, revenues from one customer represented 12% of total revenues. During 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 receivedsix months ended June 30, 2021 and the Holder were to convert all of its Series A Preferred Stock into common stockJune 30, 2020, revenues from two customers represented 38% and exercised all of its Common Stock Purchase Warrants for cash, the Holder would be issued more than 19.99%29% of our common stock and voting power astotal revenues, respectively.the dateJune 30, 2021, two vendors comprised of the Repricing Agreement.13This agreement was approved by a committee40% of the Boardour net accounts payable balance. As of DirectorsDecember 31, 2020, one vendor comprised solely of independent directors. Common Stockninethree months ended SeptemberJune 30, 2017,2021 no vendor exceeded 10% concentration. During the Company issued athree months ended June 30, 2020, cost of revenues from two vendors represented 28% of our total cost of 260,163 shares of common stock. The Company issued 198,416 shares of common stock as payment of accrued preferred dividends, as noted above, with the remaining 61,747 shares issued in connection with the Company’s Employee Stock Purchase Plan and upon vesting of restricted stock units.14ITEMOPERATIONSthethis Form 10-Q and the consolidated financial statements included in the 20162020 Annual Report on Form 10-K filed on March 30, 2017.16, 2021. Historical results and percentage relationships set forth in the condensed consolidated statements of operations and cash flows, including trends that might appear, are not necessarily indicative of future operations or cash flows.FORWARD-LOOKING STATEMENTSExcept for historicalfactual information, this document contains “forward-looking statements” within the meaningfueling solutions including providing natural gas and hydrogen to multiple end markets in North America. Our diverse customer base utilizes LNG and hydrogen solutions as a fuel source in a variety of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements that address activities, events or developments that we expect, believe or anticipate will or may occurapplications in the future,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 predictions of business outlookdiesel, fuel oil, and future financial performance. All forward-looking statements are based on assumptions made by us based on our experiencepropane, to reduce harmful environmental emissions and perception of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances.These statements, including statements regarding our capital needs, business strategy, expectations and intentions, are subject to numerous risks and uncertainties, many of which are beyond our control, including our ability to maintain key products’ sales or effectively react to other risks including those discussed in Part I, Item 1A, Risk Factors, of our 2016 Annual Report on Form 10-K filed on March 30, 2017. We urge you to consider that statements thatlower fuel costs. Our customers also use the terms “believe,” “do not believe,” “anticipate,” “expect,” “plan,” “estimate,” “intend” and similar expressions are intended to identify forward-looking statements. No forward-looking statement can be guaranteed, and actual results may differ materially from those projected. We undertake no obligation to publicly update any forward-looking statement, whetherLNG as a result of new information, future events“virtual pipeline” solution when natural gas pipelines are not available or otherwise.BUSINESSThe Company was incorporated on October 21, 1996 as a Florida corporation. On May 15, 2007, we completed a business combination (the “M&I Merger”)are curtailed.M&I Electric Industries, Inc. (“M&I”), a Texas corporation,safe, reliable and changedcost effective LNG and hydrogen fueling solutions and power delivery equipment and services. We provide multiple products and services to our name to American Electric Technologies, Inc. (“AETI”). M&I Electric was originally founded in 1946. Our principal executive offices are located at 1250 Wood Branch Park Drive, Suite 600, Houston, Texas 77079customers, including:our telephone number is 713-644-8182.Our corporate structure currently consists of American Electric Technologies, Inc.Hydrogen Salesowns 100% of M&I Electric Industries, Inc. including its wholly-owned subsidiaries, South Coast Electric Systems, LLC (“SCES”)convert natural gas into LNG through a multiple stage cooling process. We currently own and M&I Electric Brazil Sistemas e Servicios em Energia LTDA (“M&I Brazil”). The manufacturing operations of SCES were sold onoperate a liquefier that can produce up to 100,000 LNG gallons (379 cubic meters) per day. In June 24, 2016. AETI has retained2021 the entity along with the existing service organization.15Products and ServicesWe have provided custom-designed power distribution, power conversion, and automation and control systems for our customers since 1946. Our products are used to safely distribute and control the flow of electricity from a power generation source (e.g. a diesel generator, turbine or the utility grid) to whatever mechanical device utilizes the power (drilling machinery, motors, other process equipment, the utility grid, etc.) at low and medium voltages.Our power distribution products include low and medium voltage switchgearCompany purchased another LNG production facility that provides power distribution and protection for electrical systems from electrical faults. Our products include traditional low voltage and medium voltage switchgear, and our IntelliSafe™ medium voltage arc-resistant switchgear designed to increase end-user safety in case of an arc-flash explosion. IntelliSafe™ is designed for the downstream oil & gas sector, process industries and the power generation market, and was designed to be the safest arc-resistant product on the market. IntelliSafe™ meets key industry specifications and certifications. Our products are suitable for both American National Standards Institute (“ANSI”) and International Electrotechnical Commission (“IEC”) markets. Other power distribution products in our solution set include low voltage and medium voltage motor control centers, bus ducts, fuse and switch products, and other related power distribution equipment.can produce 30,000 gallons (114 cubic meters) per day. We also purchase LNG from third-party production sources which allows us to support customers in markets where we do not own liquefiers.integrate third party products intoLogistics Services—Stabilis offers our customers a “virtual natural gas pipeline” by providing them with turnkey solutions per our customer specifications including items such as battery backup power systemsLNG transportation and transformers.Our power conversion solutions include alternating current variable frequency drive (“AC VFD”) systems, analog systems and digital silicon controlled rectifier (“SCR”) products , that are used to adjust the speed and torque of an electric motor to match various user applications, primarilylogistics services in the land and offshore drilling and marine vessel markets.Our power distribution and control products are generally custom-designedNorth America. We deliver LNG to our customers’ specific requirements,work sites from both our own production facility and we do not maintain an inventoryour network of such products.haveown a fleet of LNG fueled trucks and cryogenic trailers to transport and deliver LNG. We also outsource similar equipment and transportation services for both LNG and hydrogen from qualified third-party providers as required to support our customer base.technical expertiselargest fleets of small-scale LNG equipment in North America. Our fleet consists primarily of trailer-mounted mobile assets, making delivery to and between customer locations more efficient. We deploy these assets on job sites to provide our solutionscustomers with the equipment required to transport, store, and consume LNG in compliance with a numbertheir fueling operations.applicable industry standards such as National Electrical Manufacturers Association (“NEMA”)LNG and ANSI or IEC equipment to meet American Bureau of Shipping (“ABS”), United States Coast Guard (“USCG”), Lloyd’s Register, a provider of marine certification services,hydrogen in multiple customer applications. We have also developed many processes and Det Norske Veritas (a leading certification body/registrar for management systems certification services) standards.Our automation and control solutions are designed for the management and control of power in a customer’s application. The DrillAssist™ is a control systemprocedures that enables the management of a land and offshore drilling rig’s operations. DrillAssist™ includes auto-drill capabilities and a driller’s chair and cabin where the drilling rig operator manages the rig. The Company’s Vessel Management system is a packaged control platform for management of vessel operations.Our Power Distribution Centers (“PDC”) are used to house our power distribution and power conversion products. Our PDCs can be manufactured over 100 ft. long and 40 ft. wide. The Company also manufactures VFD and SCR houses for land drilling and driller’s cabins for land and offshore deployment.We provide a variety of electrical services including the commissioning and maintenance ofwe believe improve our customers’ full electrical power infrastructure. We provide lowuse of LNG and medium voltage start-up/commissioning, preventative maintenance, emergency call out services,hydrogen in their operations. Our engineers help our customers design and breakerintegrate LNG and switchgear refurbishment services.We offer a full range of electricalhydrogen into their fueling operations and instrumentation constructionour field service technicians help our customers mobilize, commission and installation servicesreliably operate on the job site.markets. Thesecustomers. We also generate revenue by renting cryogenic equipment and providing engineering and field support services. We sell our products and services include new constructionseparately or as a bundle depending on the customer’s needs. LNG pricing depends on market pricing for natural gas and competing fuel sources (such as diesel, fuel oil, and propane among others), as well as electricalthe customer’s purchased volume, contract duration and instrumentation turnarounds, maintenancecredit profile.renovation projects. Applications include installation of switchgear, AChydrogen in their operations for multiple reasons, including lower and DC motors, drives, motor controls, lighting systemsmore stable fuel costs, reduced environmental emissions, and high voltage cable.The principal marketsimproved operating performance. We believe that we serve include:generation and distribution – the CompanyDelivery—Stabilis provides “turn-key” power delivery solutions for the power generationequipment and distribution market sectors.The Company works with engine-generator manufacturers and dealers, turbine manufacturers, Engineering, Procurement and Construction (“EPC”) firms, and other electrical engineering service companies to provide electric power delivery products and solutions. The Company also provides products and services for renewable power generation including biomass, geothermal and other renewable energy projects.The Company designs, manufactures, commissions and maintains our equipment for implementation in base-load, peaking power, cogeneration, and substation transmission facilities worldwide. Oil & 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 & gas transportation, including oil & gas pipelines and compression and pumping stations. The Company also has a customer base in natural gas fractionation (separation), cryo, natural gas to liquids, and other natural gas related plants.16Downstream oil and gas includes oil refining and petrochemical plants, as well as Liquefied Natural Gas (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.Foreign OperationsWe have three primary models for conducting our international business.First, in Brazil, we have a wholly-owned subsidiary, M&I Electric Brazil, with offices in Rio de Janeiro, Macaé and Belo Horizonte to serve this market. The M&I Electric Brazil team focuses primarily on services for the oil and gas, marine, vessel, power generation and broad industrial market segments in Brazil.Second,Brazil, and builds electrical systems for sale in certain international markets,China through our 40% interest in BOMAY.sell through foreign sales agentsoperate has been impacted by the recent downturn in the energy market as well as the outbreak of COVID-19 and its progression into a pandemic. Various containment measures, including large-scale travel bans, border closures, quarantines, shelter-in-place orders and business and government shutdowns, have resulted in the slowing of economic growth and a reduced demand for oil and natural gas and the disruption of global manufacturing supply chains. As the COVID-19 pandemic continues to evolve, governments, corporations and other authorities may continue to implement restrictions or policies that we have appointed in energy regions aroundadversely impact consumer spending, the world. Many of these international partners also provide local service and supporteconomy, commodity prices, demand for our products, in those overseas markets.Finally, where local market conditions dictate, we have formed joint ventureand our business, operations with local partners in markets such as China, where we can partner with the primary end-customer in that market, or there are local content requirements or a competitive advantage to using local manufacturing.We currently have interests in two joint ventures outsideand share price. The ultimate extent and long-term effects of the U. S. whichpandemic are accounted fordifficult to determine, but a prolonged period of market fluctuations and weak general economic conditions may have a material adverse effect on the equity method.BOMAY Electric Industries Company, Ltd. (“BOMAY”), in whichOn June 1, 2021 the Company holds a 40% interest, Baoji Oilfield Machinery Co., Ltd. (a subsidiaryclosed on the purchase of China National Petroleum Corporation) holds a 51% interest,an LNG production facility in Port Allen, Louisiana. The plant is capable of producing 30,000 gpd. The facility is strategically located and AA Energies, Inc., holds a 9% interest, and;M&I Electric Far East, Ltd. (“MIEFE”, as compared to the three months ended June 30, 2020 (the “Prior Year Quarter”):Three Months Ended June 30, Change % Change 2021 2020 (unaudited) (In thousands, excluding percentages) Revenue: LNG product $ 11,812 $ 2,884 $ 8,928 309.6 % Rental, service and other 2,580 1,143 1,437 125.7 Power delivery 1,660 976 684 70.1 Total revenues 16,052 5,003 11,049 220.8 Operating expenses: Costs of LNG product 9,354 2,551 6,803�� 266.7 Costs of rental, service and other 1,491 902 589 65.3 Costs of power delivery 1,292 888 404 45.5 Selling, general and administrative 3,815 2,368 1,447 61.1 Gain from disposal of fixed assets (24) — (24) 0.0 Depreciation 2,218 2,266 (48) (2.1) Total operating expenses 18,146 8,975 9,171 102.2 Loss from operations before equity income (2,094) (3,972) 1,878 (47.3) Net equity income from foreign joint ventures' operations: Income from investments in foreign joint ventures 538 1,001 (463) (46.3) Foreign joint venture's operations related expenses (63) (53) (10) 18.9 Net equity income from foreign joint ventures' operations 475 948 (473) (49.9) Loss from operations (1,619) (3,024) 1,405 (46.5) Other income (expense): Interest expense, net (77) (15) (62) 413.3 Interest expense, net - related parties (148) (242) 94 (38.8) Other income (expense) 1,023 (13) 1,036 (7,969.2) Total other income (expense) 798 (270) 1,068 (395.6) Loss before income tax expense (821) (3,294) 2,473 (75.1) Income tax expense 183 169 14 8.3 Net loss $ (1,004) $ (3,463) $ 2,459 (71.0) % which the Company holds a 41% interest; MIEFE’s general manager holds an 8% interestNorth America and Soneparprovides turnkey fuel solutions to help users of France, holds a 51% interest. In 2016, duepropane, diesel and other crude-based fuel products convert to market conditions, the business suspended current operationsLNG.Three Months Ended June 30, Change % Change 2021 2020 (unaudited) (In thousands, excluding percentages) Revenue: LNG product $ 11,812 $ 2,884 $ 8,928 309.6 % Rental, service and other 2,580 1,143 1,437 125.7 Total revenues 14,392 4,027 10,365 257.4 Operating expenses: Costs of LNG product 9,354 2,551 6,803 266.7 Costs of rental, service and other 1,491 902 589 65.3 Selling, general and administrative 3,230 1,871 1,359 72.6 Gain from disposal of fixed assets (24) — (24) — Depreciation 2,181 2,234 (53) (2.4) Total operating expenses 16,232 7,558 8,674 114.8 Income loss from operations before equity income $ (1,840) $ (3,531) $ 1,691 (47.9) % the investment in MIEFE was written down to zero excluding foreign currency translation.LocationsOur Company headquarters are located in Houston, Texas. We have domestic facilities and sales offices in Houston and Beaumont, Texas. We also have a service operation in Houma, Louisiana.We operate M&I Electric Brazil as a wholly-owned subsidiary with three locations (Macaé, Rio de Janiero and Belo Horizonte) in Brazil to offer our services to the global energy industry through our subsidiary in Brazil and our joint venture in China.Three Months Ended June 30, Change % Change 2021 2020 (unaudited) (In thousands, excluding percentages) Revenue: Power delivery $ 1,660 $ 976 $ 684 70.1 % Operating expenses: Costs of power delivery 1,292 888 404 45.5 Selling, general and administrative 585 497 88 17.7 Depreciation 37 32 5 15.6 Total operating expenses 1,914 1,417 497 35.1 Loss from operations before equity income (254) (441) 187 (42.4) Net equity income from foreign joint ventures' operations: Income from equity investments in foreign joint ventures 538 1,001 (463) (46.3) Foreign joint venture's operations related expenses (63) (53) (10) 18.9 Net equity income from foreign joint ventures' operations 475 948 (473) (49.9) Income from operations $ 221 $ 507 $ (286) (56.4) % vessel,customers resulting from the acquisition of our Port Allen Facility during the Current Quarter. Port Allen acquisition resulted in $0.3 million of additional revenue during the one month of June 2021.broad industrial markets.We also have minority interestshigher transportation costs and operating costs for the Port Allen facility acquired during the Current Quarter. The Port Allen facility acquisition resulted in $0.2 million in incremental costs from servicing new customers and $0.1 million incremental savings from servicing existing customers. As a percentage of LNG Product Revenue, these costs decrease from 88% in the Prior Year Quarter to 79% in the Current Quarter.Six Months Ended June 30, Change % Change 2021 2020 (unaudited) Revenue: LNG product $ 23,507 $ 12,015 $ 11,492 95.6 % Rental, service and other 7,005 4,540 2,465 54.3 Power delivery 3,204 2,286 918 40.2 Total revenues 33,716 18,841 14,875 79.0 Operating expenses: Costs of LNG product 18,166 8,648 9,518 110.1 Costs of rental, service and other 3,732 2,573 1,159 45.0 Costs of power delivery 2,452 2,135 317 14.8 Selling, general and administrative 7,040 5,554 1,486 26.8 Gain from disposal of fixed assets (24) (11) (13) 118.2 Depreciation 4,443 4,536 (93) (2.1) Total operating expenses 35,809 23,435 12,374 52.8 Loss from operations before equity income (2,093) (4,594) 2,501 (54.4) Net equity income from foreign joint ventures' operations: Income from investments in foreign joint ventures 959 887 72 8.1 Foreign joint venture's operations related expenses (130) (113) (17) 15.0 Net equity income from foreign joint ventures' operations 829 774 55 7.1 Loss from operations (1,264) (3,820) 2,556 (66.9) Other income (expense): Interest expense, net (94) (26) (68) 261.5 Interest expense, net - related parties (321) (482) 161 (33.4) Other income 1,113 25 1,088 4,352.0 Gain from disposal of assets — #DIV/0! Total other income (expense) 698 (483) 1,181 (244.5) Loss before income tax expense (566) (4,303) 3,737 (86.8) Income tax expense 263 210 53 25.2 Net loss $ (829) $ (4,513) $ 3,684 (81.6) % Six Months Ended
June 30,Change % Change 2021 2020 (unaudited) (In thousands, excluding percentages) Revenue: LNG product $ 23,507 $ 12,015 $ 11,492 95.6 % Rental, service and other 7,005 4,540 2,465 54.3 Total revenues 30,512 16,555 13,957 84.3 Operating expenses: Costs of LNG product 18,166 8,648 9,518 110.1 Costs of rental, service and other 3,732 2,573 1,159 45.0 Selling, general and administrative 5,841 4,595 1,246 27.1 Gain from disposal of fixed assets (24) (11) (13) 118.2 Depreciation 4,369 4,469 (100) (2.2) Total operating expenses 32,084 20,274 11,810 58.3 Loss from operations before equity income $ (1,572) $ (3,719) $ 2,147 57.7 % Six Months Ended
June 30,Change % Change 2021 2020 (unaudited) (In thousands, excluding percentages) Revenue: Power delivery $ 3,204 $ 2,286 $ 918 40.2 % Operating Expenses: Costs of power delivery 2,452 2,135 317 14.8 Selling, general and administrative 1,199 959 240 25.0 Depreciation 74 67 7 10.4 Total operating expenses 3,725 3,161 564 17.8 Loss from operations before equity income (521) (875) 354 (40.5) Net equity income from foreign joint ventures' operations: Income from equity investments in foreign joint ventures 959 887 72 8.1 Foreign joint venture's operations related expenses (130) (113) (17) 15.0 Net equity income from foreign joint ventures' operations 829 774 55 7.1 Income (loss) from operations $ 308 $ (101) $ 409 (405.0) % Six Months Ended June 30, 2021 2020 (unaudited) Net cash provided by (used in): Operating activities $ 2,611 $ 4,323 Investing activities (5,659) (269) Financing activities 4,518 (815) Effect of exchange rate changes on cash 29 (162) Net increase (decrease) in cash and cash equivalents 1,499 3,077 Cash and cash equivalents, beginning of period 1,814 3,979 Cash and cash equivalents, end of period $ 3,313 $ 7,056 Xian, China and Singapore.June 30, 2021 Remainder 2021 $ 2,271 2022 2,852 2023 131 2024 684 2025 1,000 Thereafter 5,333 $ 12,271 Debt issuance costs (410) Total long-term debt, including current maturities $ 11,861 We have adopted various critical accounting policies that govern the applicationaccounting principles generally accepted in the United Statesour financial condition and results of America (“U.S. GAAP”) in the preparation ofoperations are based on our condensed consolidated financial statements.statements, which have been prepared in accordance with U.S. GAAP. The preparation of these condensed 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 condensed consolidated financial statements and accompanying notes. Although thesethe reported amounts of revenues and expenses during the reporting period. We evaluate our estimates on an ongoing basis, based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. There can be no assurance that actual results will not differ from those estimates.management’s knowledgeprojections of current events and actions it may undertake in the future they may ultimately differ from actual results.Certain accounting policies involve significantoperating results; these projections contain estimates and assumptions by us that have a material impact on our condensed consolidated financial condition or operating performance. Management believes the following critical accounting policies reflect its most significant estimates and assumptions used in the preparation of our condensed 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”.Inventories – Inventories are stated at the lower of cost or market, with material value determined using an average cost method. Inventory costs for work-in-process include direct material, direct labor, production overhead and outside services. Indirect overhead is apportioned to work-in-process based on direct labor incurred.Allowance for Obsolete and Slow-Moving Inventory – The Company regularly reviews the value of inventoryfuture 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 handan ongoing basis using specific aging categories, and records a provision for obsolete and slow-moving inventory based on historical usage and estimated future usage. As actual future demand orexperience, business plans, overall market conditions, may vary from those projected, adjustments to our inventory17reserve may be required. Based on this assessment at September 30, 2017 and December 31, 2016, management believesother factors.inventory reserve is adequate.Allowance for Doubtful Accounts – The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inabilityexcess of 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 the financial condition of those specific customers. The Company also reviews historical experience with the customer, the general economic environment and the aging of receivables. The Company records an allowance to reduce receivables to the amount that is reasonably believed to be collectible. Based on this assessment at September 30, 2017 and December 31, 2016, management believes the allowance for doubtful accounts is adequate.Revenue Recognition – The Company reports earnings from fixed-price and modified fixed-price long-term contracts on the percentage-of-completion method. Earnings are accrued based on the ratio of costs incurred to total estimated costs. Costs include direct material, direct labor, and job related overhead. However, for our manufacturing activities we have determined that labor incurred, rather than total costs incurred, provides an improved measure of percentage-of-completion. For contracts with anticipated losses, estimated losses are charged to operations in the period such losses are determined. A contract is considered complete when all costs, except insignificant items, have been incurred and the project has been accepted by the customer. Revenue from non-time and material jobs of a short-term nature (typically less than one month) is recognized on the completed-contract method after considering the attributes of such contracts. This method is used because these contracts are typically completed in a short period of time and the financial position and results of operations do not vary materially from those which would result from use of the percentage-of-completion method. The asset, “Work-in-process,” which is included in inventories, represents the cost of labor, material,an acquired entity over the fair value of the identifiable assets acquired less liabilities assumed. Intangible assets are assets that lack physical substance (excluding financial assets). Goodwill acquired in a business combination and overhead on jobsintangible assets with indefinite useful lives are not amortized, and intangible assets with finite useful lives are amortized. Goodwill and intangible assets not subject to amortization are tested for impairment annually or more frequently if events or changes in circumstances indicate the assets carrying value may not be recoverable. We currently test goodwill for impairment annually in the third quarter unless we determine that a triggering event has occurred requiring an earlier test.completed-contractasset-and-liability method. For contracts accounted for under the percentage-of-completion method, the asset, “Costs and estimated earnings in excess of billings on uncompleted contracts,” represents revenue recognized in excess of amounts billed and the liability, “Billings in excess of costs and estimated earnings on uncompleted contracts,” represents billings in excess of revenue recognized.Foreign Currency Gains and Losses – Foreign currency translations are included as a separate component of comprehensive income. The Company has determined the local currency of its foreign joint ventures and foreign subsidiary, M&I Brazil, to be the functional currency. In accordance with ASC 830, theDeferred tax assets and liabilities of the foreign equity investees and M&I Brazil, 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 raterecognized for the period. Related translation adjustmentsfuture tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are reported as comprehensivemeasured using enacted tax rates expected to apply to taxable income net of deferred income taxes,in the years in which 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. Our ability to realize the 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 risebe realized.future benefitsbe sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the Company’s tax returns.Contingencies –period in which the change in judgment occurs. The Company records an estimated loss from a loss contingency when information indicatesinterest related to unrecognized tax benefits in interest expense and penalties in selling, general and administrative expenses.it is probablemaximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset has been impaired or a liability has been incurred and the amount of loss can be reasonably estimated. Contingencies are often resolved over long time periods, are based on unique facts and circumstances, and are inherently uncertain. The Company regularly evaluates the current information that is available to determine whether such accruals should be adjusted or other disclosures related to contingencies are required. The ultimate resolution of these matters, individually or in the aggregate, is not likely to have a material impact onprincipal or most advantageous market. When considering market participant assumptions in the Company’s consolidated financial position or results of operations.Duringfair value measurements, the quarter, the Company's business operationsfair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in Houston and Beaumont Texas were adversely impacted by Hurricane Harvey. Although the company’s facilities did not sustain any damage, operations were temporarily idled, delaying the schedules of customer projects resulting in a $2.5 million revenue impact. The Company maintains business interruption insurance and has filed a business interruption claim. It is anticipated that any proceeds resulting from this business interruption claim would be recorded no earlier than Q4 2017.Equity Income from Foreign Joint Ventures’ Operations – The Company accounts for its investments in foreign joint ventures’ using the equity method. Under the equity method, the Company records its pro-rata share of foreign joint ventures’ income or losses and adjusts the basis of its investment accordingly. Dividends received from the joint ventures, if any, are recorded as reductions to the investment balance.Carrying Value of Joint Venture Investments – The Company reviews its equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amountone of the investment may not be recoverable or the inability of the investee to sustain an earnings capacity that would justify the carrying amount of the investment. Based on the most recent review at September 30, 2017 and December 31, 2016, management believes the carrying value of investments in foreign joint ventures is recoverable.18Business OutlookAlthough the global energy market experienced a significant decline in 2015 and 2016 due to reduced oil and gas prices, the Company believes it has several potential areas of opportunity heading into 2018.First, the Company believes the availability of low cost natural gas in the United States is a big growth driver. Environmental and political pressure on utilities to move away from coal-fired power generation plants to natural gas based power plants will continue, enabling a strong market opportunity for new power plant projects for the Company. Low cost natural gas also creates opportunities in the midstream and downstream oil and gas market, where pipelines, gas processing plants, storage terminals and other infrastructure enable increased petrochem and LNG export facilities to begin production. Second, the Company sees continuing opportunities for its IntelliSafe™ medium voltage arc-resistant switchgear. Designed for the downstream oil and gas and the power generation and distribution sectors, IntelliSafe enables the Company to differentiate on safety for these new critical customer projects.Next, the Company believes that the recent oil price stability creates opportunities for the company to grow its land and offshore drilling and production business for both products and services. Internationally, the Company believes our global energy markets in China will remain flat at 2017following levels into 2018. There is still uncertainty in the Brazil market as the political and economic challenges facing Brazil continue to slow energy investments.The Company ended the quarter with a backlog of $23.53 million, which is an increase of approximately $0.86 million from the end of the second quarter and an increase of $10.03 million from December 31, 2016. We closely monitor our backlog and order activity and continue to adjust our cost structure and expenditures as conditions require. This backlog will be recognized in revenue during the remainder of 2017 and 2018.The Company continues to review its business and depending on cash needs may raise cash in the form of debt, equity, or a combination of both, subject to lender approval. 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.OVERALL RESULTS OF OPERATIONSThe following table represents revenue and income (loss) from consolidated operations and net equity income from foreign joint ventures’ operations, for the periods indicated (in thousands):Sales to foreign joint ventures are made on an arm’s length basis. See Footnote 4 in notes to condensed consolidated financial statements for detailed financial information on the foreign joint ventures.Non-U.S GAAP Financial MeasuresA non-U.S. GAAP financial measure is generally defined as one that purports to measure historical or future financial performance, financial position or cash flows, but excludes or includes amounts that would not be so adjusted in the most comparable U.S. GAAP measure. Please see the Company’s Annual Report on Form 10-K for 2016 filed on March 30, 2017 for a more in-depth19discussion of this indicator, earnings before interest, taxes, depreciation and amortization (“EBITDA”). Management believes it is useful in evaluating operating performance.Non-U.S. GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for our financial results prepared in accordance with U.S. GAAP. The table below showsGAAP:reconciliation of net income (loss) attributable to common stockholders to “EBITDA”reporting entity at the measurement date.three and nine months ended September 30, 2017 and 2016 (dollars in thousands):BacklogThe order backlog at September 30, 2017 and June 30, 2017 was $23.53 million and $22.67 million, respectively. This backlog will be recognized in revenue duringasset or liability, either directly or indirectly, for substantially the remainderfull term of 2017 and 2018.Business Sector DisclosuresOur financial results are reported in our three major market sectors. These sectors are Oil & Gas; Power Generation & Distribution and Marine & Other Industrial. The products we manufacture and the services we provide are consistent in application within all the sectors. This information is supplemental and provided to allow investors to follow our future trends in marketing to various customer groups.20Three Months Ended September 30, 2017 as Compared with the Three Months Ended September 30, 2016Revenue and Gross ProfitRevenues increased 53%,asset or $4.60 million, to $13.27 millionliability.three months ended September 30, 2017, comparedasset or liability used to measure fair value to the three months ended September 30, 2016. This growth was driven by the company’s continued sales progressextent that observable inputs are not available, thereby, allowing for situations in penetrating the midstream and downstream oil & gaswhich there is little, if any, market and increased ordersactivity for the company’s IntelliSafe™ medium voltage arc-resistant switchgear. Inasset or liability at the quarter, the company saw a 64% increase in revenues recognized from the previously announced technical products backlog. The Company’s operations in Beaumont were temporarily idled as a result of Hurricane Harvey with an estimated $2.45 million in lost revenue for the quarter.Gross profit increased 339%, or $1.53 million, to $1.08 million for the three months ended September 30, 2017, compared to the three months ended September 30, 2016. Gross profit as a percentage of revenues increased to 8% in the three months ended September 30, 2017, compared to (5%) in the three months ended September 30, 2016. This increase was primarily attributable to the increased revenue in both our technical products and services businesses in the quarter. The Company’s operations in Beaumont were temporarily idled as a result of Hurricane Harvey with an estimated $0.49 million in reduced gross profit for the quarter.Research and Development CostsResearch and development costs decreased by 62%, or $0.09 million, to $0.06 million for the three months ended September 30, 2017, compared to the three months ended September 30, 2016. This reduction is primarily related to the completion of the IntelliSafe™ medium voltage arc resistant switchgear product R&D efforts during 2016.Selling and Marketing ExpensesSelling and marketing costs increased by 39%, or $0.18 million, to $0.65 million for the three months ended September 30, 2017, compared to the three months ended September 30, 2016, due to expanded sales and marketing efforts in the oil and gas sector. Selling and marketing expenses, as a percentage of revenues, remained at 5% during the three months ended September 30, 2017 compared to the three months ended September 30, 2016.General and Administrative ExpensesGeneral and administrative expenses decreased by 29%, or $0.46 million, to $1.13 million during the three months ended September 30, 2017, when compared to the three months ended September 30, 2016, primarily due to M&A costs of $0.21 million and higher employee benefits of $0.29 million for the prior period. General and administrative expenses, as a percentage of revenues, decreased to 8% during the three months ended September 30, 2017, compared to 18% during the three months ended September 30, 2016.Foreign Joint Venture Equity IncomeNet equity from foreign joint venture operations decreased by 81%, or $0.13 million, to $0.03 million during the three months ended September 30, 2017, when compared to the three months ended September 30, 2016. The decrease is primarily due to a decrease in performance by our BOMAY joint venture in China.Other Income (Expense)Interest expense and other income (expense) increased $0.25 million to $0.33 million during the three months ended September 30, 2017, when compared to the three months ended September 30, 2016, due to increase interest expense of $0.28 million from new financing in 2017. Interest expense and other income (expense), as a percentage of revenues, decreased to 3% during the three months ended September 30, 2017 compared to 1% during the three months ended September 30, 2016. Income Tax ProvisionThe benefit from income taxes for the three months ended September 30, 2017 was $0.01 million which reflects the provision from taxes on our earnings from our foreign joint ventures net of dividends received, calculated using a tax rate of 34%.Net Income (Loss) Attributable to Common StockholdersIn the three months ended September 30, 2017, we recorded a net loss attributable to common stockholders of ($1.13) million, or ($0.13) of basic earnings per common share, compared to net loss attributable to common stockholders of ($2.71) million or ($0.33) of basic earnings per common share, in the three months ended September 30, 2016. See Note 2, Earnings per Common Share, in the accompanying notes to condensed consolidated financial statements.Nine Months Ended September 30, 2017 as Compared with the Nine Months Ended September 30, 2016Revenue and Gross ProfitRevenues increased 21%, or $5.84 million, to $34.26 million for the nine months ended September 30, 2017, compared to the nine months ended September 30, 2016. This growth was driven by the company’s continued sales progress in penetrating the21midstream and downstream oil & gas market and increased orders for the company’s IntellSafe™ medium voltage arc-resistant switchgear. The majority of the revenue growth came from backlog booked in the 1st half of 2017. The Company’s operations in Beaumont were temporarily idled as a result of Hurricane Harvey with an estimated $2.45 million revenue negative impact in the third quarter of 2017.Gross profit increased 54%, or $0.47 million, to $1.34 million for the nine months ended September 30, 2017, compared to the nine months ended September 30, 2016 . Gross profit as a percentage of revenues increased to 4% in the nine months ended September 30, 2017, compared to 3% in the nine months ended September 30, 2016. This increase was primarily attributable to the corresponding increase in revenue for the period. The Company’s operations in Beaumont were temporarily idled as a result of Hurricane Harvey with an estimated $0.49 million in reduced gross profit.Research and Development CostsResearch and development costs decreased by 73%, or $0.63 million to $0.24 million for the nine months ended September 30, 2017, compared to the nine months ended September 30, 2016, This reduction is primarily related to the completion of the IntelliSafe™ medium voltage arc resistant switchgear product R&D efforts during 2016.Selling and Marketing ExpensesSelling and marketing costs increased by 11%, or $0.20 million to $1.95 million for the nine months ended September 30, 2017, compared to the nine months ended September 30, 2016, due to expanded sales and marketing efforts in the oil and gas sector. Selling and marketing expenses as a percentage of revenues, decreased to 6% during the nine months ended September 30, 2017, compared to 7% during the nine months ended September 30, 2016.General and Administrative ExpensesGeneral and administrative expenses decreased by 20%, or $0.80 million, to $3.12 million during the nine months ended September 30, 2017, when compared to the nine months ended September 30, 2016, primarily due to the reversal of bad debt reserves previously accrued during the nine months ended September 30, 2017 and M&A costs of $0.21 million and higher employee benefits of $0.29 million for the prior period. General and administrative expenses as a percentage of revenues, decreased to 9% during the nine months ended September 30, 2017, compared to 14% during the nine months ended September 30, 2016.Foreign Joint Venture Equity IncomeNet equity from foreign joint venture operations decreased by 46%, or $0.08 million to $0.09 million during nine months ended September 30, 2017, when compared to the nine months ended September 30, 2016. The decrease is primarily due to a decrease in performance by our BOMAY joint venture in China.Other Income (Expense)Interest expense and other income increased $1.00 million to $0.80 million during the nine months ended September 30, 2017, when compared to the nine months ended September 30, 2016, primarily due to the gain on sale of South Coast Electric Systems manufacturing operations and the BP settlement from the 2010 gulf oil spill during 2016. Interest expense increased by $0.62 million from new financing in 2017. Interest expense and other income, as a percentage of revenues, increased to 2% during the nine months ended September 30, 2017 compared to 1% during the nine months ended September 30, 2016.Income Tax ProvisionThe benefit from income taxes for the nine months ended September 30, 2017 was $0.08 million which reflects the net benefit from taxes on our earnings from our foreign joint ventures net of dividends received, calculated using a tax rate of 34% and taxes paid on dividends from China.Net Income (Loss) Attributable to Common StockholdersIn the nine months ended September 30, 2017, we recorded a net loss attributable to common stockholders of ($4.86) million, or ($0.57) of basic earnings per common share, compared to loss of ($5.62) million, or ($0.68) of basic earnings per common share, in the nine months ended September 30, 2016. See Note 2, Earnings per Common Share, in the accompanying notes to the condensed consolidated financial statements.LIQUIDITY AND CAPITAL RESOURCES22Notes PayableOn March 23, 2017 the Company entered into a $7.00 million Senior Secured Term Note with a third-party lender. The Note is payable in monthly interest only payments in arrears at a fixed rate of 11.5%. Principal of $0.50 million was paid on June 30, 2017 with the balance due March 23, 2021.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, subject to lender approval. 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.Operating ActivitiesDuring the nine months ended September 30, 2017, the Company used cash of $2.08 million in operations as compared to using $5.56 million for the same period in 2016. This was primarily the result of the net loss from operations and a net increase in cash generated from advanced payments on two uncompleted projects as of September 30, 2017.Investing Activities During the nine months ended September 30, 2017, the Company’s investing activities provided cash of $1.02 million compared to providing $0.33 million for the comparable period in 2016. This was primarily the result of dividends received of $0.78 million from the BOMAY joint venture and $0.46 million from the release of certificates of deposit pledged as collateral on a customer contract.Financing ActivitiesDuring the nine months ended September 30, 2017, the Company’s financing activities provided cash of $0.53 million compared to providing $0.10 million in the comparable period in 2016. The increase is primarily attributable to $0.97 million in net proceeds from the issuance of debt.23ITEMRISKMarket RiskThe markets in which we participate are capital intensive and cyclical in nature. The volatility in customer demand in several of these markets 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 are traditionally awarded in competitive bid situations. Coordination of project start dates is matched to the customer requirements and projects may takeRISK.number of months to complete. Schedules also may change during the course of any particular project. For more information please see Item 2 of the Management Discussion and Analysis – Business Outlook.Liquidity RiskOur inability to borrow additional funds could negatively impact future working capital, capital expenditures, and acquisitions in addition to fulfilling our obligations and operating the business. While we would seek alternative funding sources through both debt and equity raises, there is 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.As of September 30, 2017, we had cash and cash equivalents of $1.10 million and total outstanding debt of $6.37 million. The Company had no availability for additional borrowings under our credit agreements. In the event that“smaller reporting company”, the Company failsis not required to meet covenants in the future, the Company may not be able to obtain the necessary waivers or amendments to remain in compliance with the Purchase Agreement and the Purchaser may declare a default and cause all of the Company’s outstanding indebtedness under the Purchase Agreement to become immediately due and payable.Interest Rate RiskOur interest rate sensitive items do not subject us to material risk exposures. Our senior secured term Note has a fixed interest rate of 11.50%.Foreign Currency Transaction RiskThe Company operates a subsidiary in Brazil and maintains equity method investments in its Singapore and Chinese joint ventures, MIEFE and BOMAY, respectively. The functional currencies of the Brazil subsidiary and the joint ventures are the Brazilian Real, Singapore Dollar and the 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, net of tax, in our condensed consolidated balance sheets. In the current nine months,provide this item increased from $0.00 million at December 31, 2016 to $0.27 million at September 30, 2017 due principally to the strengthening of the Brazilian Real and the Chinese Yuan versus the United States Dollar.Other than the aforementioned items, we do not believe we are exposed to significant foreign currency exchange risk because most of our net sales and purchases are denominated in United States Dollars.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 from our customers.PROCEDURESAn evaluation was carried outPROCEDURES.Principal Executive Officerprincipal executive officer and our Principal Accounting Officer,principal financial officer, the effectiveness of the effectivenessdesign and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2017.the end of the period covered by this report. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Based on thisupon the evaluation, our Principal Executive Officerprincipal executive officer and Principal Accounting Officerprincipal financial officer have concluded that theour disclosure controls and procedures were effective as of Septemberat June 30, 2017.werehave been no changes in our internal controlscontrol over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during theour last fiscal quarter ended September 30, 2017 that hashave materially affected or isare reasonably likely to materially affect our internal control over financial reporting.24PARTPROCEEDINGSFACTORSThere have been no material changes during the period ended September 30, 2017FACTORS.risk factors as set forth in item 1APart I. “Item 1A. Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2016.ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDSOur loan agreement prohibits2020 filed with the paymentSecurities and Exchange Commission on March 16, 2021 (“Form 10-K”), which could adversely affect our business, financial condition, results of operations, cash dividends onflows, and the trading price of our common stock.ITEM 3. DEFAULTS UPON SENIOR SECURITIESNone.ITEM 4. MINE SAFETY DISCLOSURESNot applicable.INFORMATIONOn November 13, 2017 the Company and its subsidiaries, M&I Electric Industries, Inc. and South Coast Electric Systems, LLC, entered into a Transaction Modification Agreement with HD Special-Situations III, LP (the “Lender”). The Transaction Modification Agreement relates to the term loan which was originally reported in the Company’s Current Report on Form 8-K filed March 27, 2017.The principal terms of the modification are:1. The Senior Secured Term Note was amended and restated to reflect a reduction in the principle amount to $6,500,000 from $7,000,000 reflecting the prior repayment of $500,000 by the Company and a new requirement for monthly principle amortization of $30,000 beginning April 2018.2. The financial covenants related to required minimum three month revenues and EBITA, minimum monthly debt service coverage ratios and maximum monthly debt/EBITA ratios were modified as of October 2017.3. Current non-compliance with financial covenants were waived.4. A five year warrant to purchase 500,000 shares of Company common stock for $2.26 per share, including cashless exercise rights, was issued to the Lender. Certain rights for registration of the shares underlying the warrant were provided to the Lender in a Registration Rights Agreement.The foregoing descriptions of the Transaction Modification Agreement, Amended and Restated Secured Term Note and Warrant to Purchase Common Stock and Registration Rights Agreement are summaries and are qualified in their entirety by reference to the definitive documents filed as exhibits to this Quarterly Report on Form 10-Q and incorporated herein by this reference.EXHIBITSExhibit No.Exhibit Description10.12.1 10.22.2 3.1 10.33.2 4.1 4.2 4.3 10.44.4 31.14.5 4.6 4.7 10.1 10.2 10.3 10.4 10.5 31.1 31.231.2 25Exhibit No.Exhibit Description32.132.1 101.INS101.INS 101.SCH101.SCH 101.CAL101.CAL 101.DEF101.DEF XBRL Taxonomy Extension Definition Linkbase Document. 101.LAB101.LAB XBRL Taxonomy Extension Labels Linkbase Document. 101.PRE101.PRE
SIGNATURESDate: November 14, 2017AMERICAN ELECTRIC TECHNOLOGIES, INC.Date: August 5, 2021 By:/s/ Charles M. DauberCharles M. DauberBy: /s/ James C. Reddinger James C. Reddinger President and Chief Executive Officer
(Principal Executive Officer)William B. BrodWilliam B. BrodAndrew L. Puhala Chief Financial Officer
(Principal Financial Officer)27