Annual Report for Fiscal Year Ending 12-31, 2025 (Form 10-K)

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the consolidated financial statements and notes thereto included in Item 8. Financial Statements and Supplementary Data of this Form 10-K. Historical results and percentage relationships set forth in the consolidated statements of operations and cash flows, including trends that might appear, are not necessarily indicative of future operations or cash flows.

OVERVIEW

Stabilis Solutions, Inc. and its subsidiaries provide turnkey clean energy production, storage, transportation and fueling solutions using liquefied natural gas ("LNG") to multiple end markets. We have safely delivered over 580 million gallons of LNG through more than 60,000 truck deliveries during our 22 year operating history, which we believe makes us one of the largest and most experienced small-scale LNG providers in North America. We provide LNG solutions to customers in diverse end markets, including aerospace, agriculture, industrial, marine bunkering, mining, oil and gas, pipeline, remote power and utility markets. LNG can be used to replace a variety of fuels, including distillate fuel oil, such as diesel and marine gas oil, and propane, among others, to provide environmental and economic benefits. LNG can also be used to deliver natural gas to locations where pipeline service is unavailable, has been interrupted, or needs to be supplemented. Increasingly, LNG is being utilized as a transportation fuel in the marine industry and as a propellant in the private rocket launch sector. Additionally, LNG can be used to generate electrical power for data centers where the data center either does not have adequate access to the electrical grid, a gas pipeline, or as a redundant source of power. We believe that these fuel markets are large and provide significant opportunities for LNG usage. We believe that LNG provides an important balance between environmental sustainability, security and accessibility, and economic viability when compared to both renewables and other traditional hydrocarbon-based fuels and will play a key role in the energy transition.

The Company also builds power and control systems for the energy industry in China through its 40% owned Chinese joint venture, BOMAY. BOMAY is accounted for under the equity method of accounting.

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

LNG Production and Sales-Stabilis builds and operates cryogenic natural gas processing facilities, called "liquefiers," which convert natural gas into LNG through a purification and multiple stage cooling process. We currently own and operate a liquefier that can produce up to 100,000 LNG gallons per day in George West, Texas and a liquefier that can produce up to 30,000 LNG gallons per day in Port Allen, Louisiana. The Company continues to seek expansion of its own liquefaction capacity as described in "Current Events and Expansion Efforts" below. We also purchase LNG from third-party production sources which allows us to support customers in markets where we do not own liquefiers. We make the determination of LNG supply sources based on the cost of LNG, the transportation cost to deliver to regional customer locations, and the reliability of the supply source. Revenues earned from the production and sales of LNG are included within LNG Product revenue.

Transportation and Logistics Services-Stabilis offers our customers a "virtual natural gas pipeline" by providing turnkey LNG transportation and logistics services in North America. We deliver LNG to our customers' work sites from both our own production facilities and our network of approximately 31 third-party production sources located throughout North America. We own a fleet of cryogenic trailers to transport and deliver LNG. We also outsource similar equipment and transportation services for LNG from qualified third-party providers as required to support our customer base. Revenues earned from the transportation and logistical services of LNG to our customers are included within LNG Product revenue.

Cryogenic Equipment Rental-Stabilis operates a fleet of over 170 mobile LNG storage and vaporization assets, including: transportation trailers, electric and gas-fired vaporizers, ambient vaporizers, storage tanks, and mobile vehicle fuelers. We also own several stationary storage and regasification assets. We believe this is one of the largest fleets of small-scale LNG equipment in North America. Our fleet consists primarily of trailer-mounted mobile assets, making delivery to and between customer locations more efficient. We deploy these assets on job sites to provide our customers with the equipment required to transport, store, and consume LNG in their operations. Revenues earned from cryogenic equipment rental are included within Rental revenue.

Engineering and Field Support Services-Stabilis has experience in the safe, cost effective, and reliable use of LNG in multiple customer applications. We have also developed many processes and procedures that we believe improve our customers' use of LNG in their operations. Our engineers help our customers design and integrate LNG into their operations and our field service technicians help our customers mobilize, commission and reliably operate on the job site. Revenues earned from engineering and field support services are included within Service revenue.

Current Events and Expansion Efforts

Conclusion of Two, Multi-year LNG Supply Contracts

During the fourth quarter of 2025, two multi-year customer contracts concluded in accordance with their terms. The completed contracts were for temporary remote power in Louisiana, and the Company's truck-to-vessel LNG marine bunkering services in Galveston, Texas. The marine customer elected not to extend the agreement due to the unavailability of suitable Jones Act-compliant LNG bunker vessels during the contemplated extension period. The two contracts accounted for approximately 19% and 32% of 2025 revenues, respectively.

Proposed Galveston LNG Liquefaction Facility

RESULTS OF OPERATIONS

The comparative tables below reflect our consolidated operating results for the year ended December 31, 2025 (the "Current Year") as compared to the year ended December 31, 2024 (the "Prior Year") (amounts in thousands, except for percentages).

Consolidated Results		Year Ended December 31,
		2025				2024				$ Change				% Change
Revenues:
LNG Product		$	57,213			$	57,351			$	(138	)			(0.2	)%
Increase / (decrease) in gallons delivered			(6,164	)
Rental			5,349				7,273				(1,924	)			(26.5	)
Service			5,016				7,436				(2,420	)			(32.5	)
Other			667				1,233				(566	)			(45.9	)
Total revenues			68,245				73,293				(5,048	)			(6.9	)
Operating expenses:
Cost of revenues			50,229				52,069				(1,840	)			(3.5	)
Change in unrealized gain on natural gas derivatives			(24	)			(310	)			286				(92.3	)
Selling, general and administrative expenses			13,189				11,763				1,426				12.1
Loss (gain) from disposal of fixed assets			24				(761	)			785				N/A
Depreciation expense			7,345				7,146				199				2.8
Total operating expenses			70,763				69,907				856				1.2
Income (loss) from operations before equity income			(2,518	)			3,386				(5,904	)			N/A
Net equity income from foreign joint venture operations			1,242				1,564				(322	)			(20.6	)
Income (loss) from operations			(1,276	)			4,950				(6,226	)			(125.8	)
Other income (expense):
Interest income, net			42				112				(70	)			(62.5	)
Other income (expense), net			(66	)			22				(88	)			N/A
Total other income (expense)			(24	)			134				(158	)			(117.9	)
Net income (loss) before income tax expense			(1,300	)			5,084				(6,384	)			N/A
Income tax expense			54				485				(431	)			(88.9	)
Net income (loss)		$	(1,354	)		$	4,599			$	(5,953	)			N/A

Revenue

During the Current Year revenues decreased $5.0 million, or 6.9%, compared to the Prior Year. The decrease in revenues primarily related to:

•

Decreased rental, service and other revenues during the Current Year compared to the Prior Year due to customers requiring less rental equipment within existing contracts as well as other contracts concluding in accordance with their terms within the Current Year, resulting in a decrease in revenue of $4.9 million;

•

Decreased LNG delivered to customers of 6.1 million gallons during the Current Year compared to the Prior Year, resulting in a decrease in revenue of $3.5 million; and

•

Unfavorable customer mix during the Current Year compared to the Prior Year resulted in a decrease in revenue of $0.9 million;

•

The above decreases were partially offset by an increase in natural gas prices during the Current Year compared to the Prior Year, resulting in an increase in revenue of $3.9 million; and

•

Increase in revenues from minimum take-or-pay contracts of $0.4 million.

Operating Expenses

Costs of revenues. Cost of revenues decreased $1.8 million, or 3.5%, in the Current Year compared to the Prior Year. As a percentage of revenue, these costs were 73.6% and 71.0% in the Current Year and the Prior Year, respectively. The decrease in cost of revenues was attributable to:

•

Decreased LNG delivered to customers of 6.1 million gallons during the Current Year compared to the Prior Year, resulting in decreased costs of revenues of $2.4 million;

•

Decrease in rental, service and other costs of $2.2 million during the Current Year compared to the Prior Year primarily related to reduced travel and labor costs;

•

Decreased net liquefaction and transportation costs of $0.6 million during the Current Year compared to the Prior Year; and

•

Lower take-or-pay costs in the Current Year compared to the Prior Year, resulting in decreased cost of revenues of $0.1 million.

•

The above decreases were partially offset by higher average natural gas pricing in the Current Year compared to the Prior Year, resulting in increased costs of revenues of $3.5 million.

Change in unrealized loss (gain) on natural gas derivatives. The Company incurred a gain of $24 thousand on the change in unrealized gain associated with the Company's natural gas derivatives in the Current Year compared to a gain of $0.3 million in the Prior Year. The gains in both periods were due to offsetting amortization and the maturity of natural gas derivatives.

Selling, general and administrative. Selling, general and administrative expense increased $1.4 million, or 12.1%, during the Current Year as compared to the Prior Year. The increase is primarily attributable to Mr. Ballard's severance related expenses of $2.1 million and higher office lease cost in the Current Year, partially offset by lower compensation expense.

Loss (gain) on the disposal of fixed assets. The Company recorded a loss on the disposal of fixed assets of $24 thousand in the Current Year primarily related to an asset disposition, partially offset by a gain from the disposition of a damaged trailer. Proceeds of $0.2 million were received on the disposition of the damaged trailer. In the Prior Year, a gain of $0.8 million on the disposal of assets was recorded, in which proceeds of $0.8 million were received on the sale of certain assets, consisting of vaporizers and storage tanks.

Depreciation. Depreciation expense in the Current Year increased $0.2 million compared to the Prior Year primarily due to new mobile assets and other capital expenditures in the Current Year. The increase was partially offset by other assets reaching the end of their depreciable lives.

Net Equity Income From Foreign Joint Ventures' Operations. Income from investments in foreign joint ventures decreased by $0.3 million, or 20.6%, in the Current Year compared to the Prior Year due to lower net profits from our China joint venture.

Other Income (Expense)

Interest income (expense), net. Interest income, net was $42 thousand in the Current Year compared to $0.1 million the Prior Year. In both periods, interest income related to interest earned on the Company's cash balance. Interest income was slightly lower in the Current Year due to lower cash balances in the Current Year and a lower average interest rate on cash balances in the Current Year.

Other income (expense). Change in other expense was primarily related to miscellaneous and foreign exchange transactions.

Income tax expense. The Company incurred state and foreign income tax expense of $0.1 million during the Current Year primarily related to state income taxes and foreign taxes paid in connection with the cash dividend received from our BOMAY joint venture. The Company incurred state income and foreign tax expense of $0.5 million in the Prior Year. No U.S. federal income tax expense was recorded for the Current Year or Prior Year as the Company had sufficient deferred tax assets to offset any U.S. federal taxes which were fully offset by a change in the Company's valuation allowance on utilized deferred tax assets.

SEASONALITY AND INFLATION

Seasonality

We did not experience significant variations in volume of LNG delivered to our customers resulting from seasonal variations during 2025. However, our revenues are susceptible to variations due to changes in the price of natural gas. The price of natural gas can fluctuate at any time during the year due to isolated factors, but generally, natural gas prices tend to be higher in peak winter and peak summer months when heating and cooling demand is seasonally higher.

Inflation

The Company continued to experience inflationary pressure during 2025. Specifically, costs for fuel, repairs, maintenance, electricity, wages for skilled labor and insurance continue to increase. We have responded with increasing our pricing to our customers. While we pass a significant portion of the cost of natural gas and transportation on to our customers, we are not able to pass through all costs. No assurances can be made about future price trends; the ultimate extent and effects of these impacts are difficult to estimate; however, continued periods of increasing costs could adversely impact our future results and operating cash flows.

LIQUIDITY AND CAPITAL RESOURCES

The Company's principal sources of liquidity in the Current Year have consisted of cash provided by our operations, cash on hand, and distributions from our BOMAY joint venture. The Company used its liquidity to invest in fixed assets to support growth as well as to pay interest and principal amounts outstanding under our debt agreements.

On March 27, 2025 the Company, entered into a Modification Agreement to the existing Loan Agreement with Cadence Bank. Under the Agreement the $10.0 million Revolving Credit Facility maturity date was extended to June 9, 2028. Additionally, the Agreement amended the Fixed Charge Coverage Ratio terms primarily related to the inclusion of excess cash. The three-year Revolving Credit Facility, as amended, contains a maximum aggregate amount of $10.0 million, subject to a borrowing base of 80% of eligible accounts receivable. The Company may request an increase in the maximum aggregate amount under the Revolving Credit Facility by up to $5.0 million, subject to the approval of Cadence Bank. All borrowings under the Revolving Credit Facility are secured by the Borrowers' accounts receivable and deposit accounts. Borrowings under the Revolving Credit Facility incur interest at the Prime Rate published by the Wall Street Journal. Any unused portion is subject to a quarterly unused commitment fee of 0.5% per annum. As of December 31, 2025, no amounts have been drawn under the Revolving Credit Facility. The Revolving Credit Facility contains various restrictions and covenants. As of December 31, 2025, the Company was in compliance with all its covenants related to the Revolving Credit Facility.

As of December 31, 2025, we had $7.5 million in cash and cash equivalents on hand and $8.8 million in outstanding debt (net of debt issuance costs) and lease obligations (of which $2.3 million is due in 2026). The Company has total availability under the Revolving Credit Facility and the AmeriState Secured Term Loan Facility of $2.7 million at December 31, 2025. Further, the Company had made no draw downs on its Revolving Credit Facility or Secured Term Loan facility during the year ended December 31, 2025.

The Company is subject to substantial business risks and uncertainties inherent in the LNG industry and there is no assurance that the Company will be able to generate sufficient cash flows in the future to sustain itself or to support future growth. Management believes the business will generate sufficient cash flows from its operations along with availability under the Company's debt agreements to fund its ongoing business for the next twelve months. While we believe we have sufficient liquidity and capital resources to fund our ongoing operations and repay our debt, we will require additional capital to fund our expansion. Our current expansion efforts include the construction of the proposed Galveston LNG liquefaction facility and ramp up of operations to service our multi-year on-site power generation customer at a data center beginning in 2027 which will require construction expenditures, additional equipment and rolling stock and near-term working capital as the Company ramps up its operations during 2026.

As of December 31, 2025, the Company was in compliance with all financial covenants under its debt agreements, including its minimum consolidated debt service ratio under its AmeriSate Secured Term Loan Facility. The Company's efforts to expand its business include anticipated significant capital expenditures, the successful deployment of a marine bunkering vessel with a time charter that commences in 2026, and a successful financing transaction associated with the proposed Galveston LNG liquefaction facility, all of which are yet to occur. The Company believes it is probable that it will continue to maintain compliance with its covenants, however, in the event the Company is unable to maintain minimum profitability in accordance with its forecast and historical trends, it is reasonably possible that the Company could fail to maintain compliance with its consolidated debt service ratio which, if not cured or waived, would give AmeriState Bank the right to accelerate repayment of outstanding borrowings under the AmeriState Secured Term Loan Facility, which totaled $7.2 million as of December 31, 2025. Such acceleration could adversely effect our liquidity, our ability to continue expansion efforts and continue normal operations.

We will continue to monitor covenant compliance closely and evaluate additional actions which may include reducing discretionary capital expenditures, delaying certain growth initiatives, or seeking alternative sources of financing if needed. The Company believes that its relations with its lenders are good and that a waiver could be obtained in the event a violation occurred; however, there can be no assurance that additional actions taken by the Company, if required, could prevent a possible covenant violation or that the Company would be successful in obtaining a covenant waiver in the event a covenant violation occurred.

Cash Flows

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

		Year Ended December 31,
		2025				2024
Net cash provided by (used in):
Operating activities		$	8,603			$	13,693
Investing activities			(7,704	)			(8,120	)
Financing activities			(2,446	)			(1,914	)
Effect of exchange rate changes on cash			19				(46	)
Net increase (decrease) in cash and cash equivalents			(1,528	)			3,613
Cash and cash equivalents, beginning of year			8,987				5,374
Cash and cash equivalents, end of year		$	7,459			$	8,987

Operating Activities

Net cash provided by operating activities totaled $8.6 million and $13.7 million for the twelve months ended December 31, 2025 and 2024, respectively. The decrease in net cash provided by operating activities of $5.1 million as compared to the Prior Year was primarily attributable to the net loss incurred in the Current Year compared to net income recognized in the Prior Year.

Investing Activities

Net cash used in investing activities totaled $7.7 million and $8.1 million for the twelve months ended December 31, 2025 and 2024, respectively. In both the Current Year and the Prior Year, cash used in investing was primarily for investment in growth initiatives. During the Current Year, investments primarily consisted of expansion efforts related to the proposed Galveston LNG liquefaction facility and Jones Act-compliant marine bunkering vessel. In the Prior Year, investments were made for the acquisition of liquefaction assets and their subsequent deployment. During the years ended December 31, 2025 and 2024, proceeds received from the disposal of assets were $0.2 million and $0.8 million, respectively.

Financing Activities

Net cash used in financing activities totaled $2.4 million for the twelve months ended December 31, 2025 compared to $1.9 million for 2024. Cash used in financing activities in both years was primarily attributable to the repayment of debt. The increase in cash used by financing activities compared to the Prior Year is primarily due to increased principal payments on the AmeriState loan in the Current Year compared to Prior Year. No draws on the AmeriState Bank or Revolving Credit Facility were made in the Current Year.

Future Cash Requirements

Uses of Liquidity and Capital Resources

We require cash to fund our operating expenses and working capital requirements, including costs associated with fuel sales, capital expenditures, debt repayments, equipment purchases, maintenance of LNG production facilities, mergers and acquisitions (if any), pursuing market expansion, supporting sales and marketing activities and other general corporate purposes. Our current expansion efforts include the construction of the proposed Galveston LNG liquefaction facility and Jones Act-compliant marine bunkering vessel and the ramp up of operations for the multi-year on-site power generation customer for a data center all beginning in 2027 (discussed below). We may elect to pursue additional financing activities such as refinancing existing debt, obtaining new debt, or debt or equity offerings to provide flexibility with our cash management. Certain of these alternatives may require the consent of current lenders or stockholders, and there is no assurance that we will be able to execute any of these alternatives on acceptable terms or at all.

Capital Expenditures

Capital expenditures for the year ended December 31, 2025 were $8.1 million and primarily related to the preliminary work and ordering long lead time items related to the Company's proposed Galveston LNG liquefaction facility, refurbishments and upgrades to existing assets and rolling stock. Other future capital expenditures will be dependent upon business needs, value-adding investment opportunities, as well as the availability of additional capital at favorable terms which is difficult to predict. At December 31, 2025, the Company had open purchase orders and commitments related to capital expenditures of approximately $3.8 million. However, the Company anticipates future additional expenditures related to its proposed Galveston LNG liquefaction facility and Jones Act-compliant marine bunkering vessel and its multi-year on-site power generation contract for a data center. See additional discussion regarding the Company's potential expansion efforts below.

Proposed Galveston LNG Liquefaction Facility

The Company continues to advance its proposed Galveston liquefaction facility along with a Jones Act-compliant LNG bunkering vessel toward an expected FID. The Company has secured customer commitments for approximately 56% of the project's proposed 350,000 gallons-per-day capacity and is engaged in late-stage discussions with multiple potential customers to secure the remaining available offtake.

Additional investment in the Company's proposed Galveston liquefaction facility is estimated at $350 million to $400 million. The financing and structure of the proposed Galveston liquefaction facility is anticipated to be in the form of a separate entity with a combination of third-party equity and debt that would be nonrecourse to the Company. The financing is progressing with counterparties conducting detailed due diligence and active negotiations on definitive documentation and key commercial terms. The Company does not intend to commit to the use of significant additional funds related to the proposed Galveston LNG liquefaction facility without securing the financing. However, there is no guarantee that additional financing will be available or available at terms that would be beneficial to the Company.

The Company entered into a time charter agreement for the time charter of a liquefied natural gas bunkering vessel, the Garibaldi, for a period of two years commencing in 2026. The time charter represents an operating lease and includes an option to lease the vessel for an additional year and/or purchase the Garibaldi at the conclusion of the initial or extended term.

Debt Level and Debt Compliance

We had total indebtedness, excluding leases, of $7.9 million ($7.9 million, net of debt issuance costs of $0.2 million) as of December 31, 2025. Expected maturities excluding debt issuance costs at December 31, 2025 are as follows (in thousands).

2026			1,847
2027			1,188
2028			1,303
2029			1,429
2030			1,567
Thereafter			555
Total long-term debt, including current maturities and excluding debt issuance costs		$	7,889

We expect our total interest payment obligations relating to the above indebtedness to be approximately $0.5 million for the year ending December 31, 2026. Certain of the agreements governing our outstanding debt, which are discussed in Note 8 of our Consolidated Financial Statements, require compliance with certain financial covenants. As of December 31, 2025, we were in compliance with all of these covenants.

CONTRACTUAL OBLIGATIONS

We are committed to make cash payments in the future pursuant to certain of our contracts. The following table summarizes certain contractual obligations in place as of December 31, 2025 (in thousands):

		Payments Due By Period
		Total				2026				2027				2028				2029				2030				Thereafter
Term Loan to AmeriState Bank (1)		$	7,164			$	1,122			$	1,188			$	1,303			$	1,429			$	1,567			$	555
Interest - AmeriState Bank (1)			1,848				533				509				395				269				131				11
Finance Lease Obligations			220				220				-				-				-				-				-
Operating Lease Obligations			922				197				368				354				3				-				-
Insurance note payable			725				725				-				-				-				-				-
Total		$	10,879			$	2,797			$	2,065			$	2,052			$	1,701			$	1,698			$	566

(1)

Obligation with AmeriState Bank to provide for an advancing term loan facility for working capital needs for our LNG liquefaction plant in Texas in the aggregate principal amount of up to $10.0 million. The term loan facility matures on April 8, 2031 and bears interest at 5.75% per annum through April 8, 2026, and changes to a variable interest rate of the U.S. prime lending rate plus 2.5% per annum thereafter. The above table estimates interest based on the most recent U.S. prime lending rate of 6.75%.

See additional discussion of our debt and lease obligations in Notes 8 and 9 of the Notes to Consolidated Financial Statements.

Contingencies

In the normal course of our business, we become involved in various litigation matters. In addition, from time to time we are involved in tax and other disputes with various government agencies. Management has used estimates in determining our potential exposure to these matters and has recorded reserves in our financial statements related thereto as appropriate. It is possible that a change in estimate related to these exposures could occur, but we do not expect such changes in the estimated costs would have a material effect on our business, consolidated financial position or results of operations. See Note 12 to the Notes to Consolidated Financial Statements for further discussion of our contingencies.

Off-Balance Sheet Arrangements

As of December 31, 2025, we had no transactions that met the definition of off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, cash requirements or capital resources.

NEW ACCOUNTING STANDARDS

See Note 1 of the Notes to Consolidated Financial Statements for further information related to new accounting standards.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities known to exist at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Critical accounting policies are those policies that the Company believes are the most important to the portrayal of the Company's financial condition and results, and require difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain. 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. The Company has identified the following critical accounting policies as they require significant judgments, estimates or are inherently complex.

Revenue Recognition

The Company recognizes revenue from our contracts in accordance with Accounting Standards Codification ("ASC"), Topic 606 "Revenue from Contracts with Customers" ("Topic 606"). Topic 606 requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Our contracts may contain multiple performance obligations dependent upon the customer.

The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer. Revenue associated with the sale of LNG is recognized at the point in time when the customer obtains control of the asset. In evaluating when a customer has control of the asset, the Company primarily considers whether the transfer of legal title and physical delivery has occurred, whether the customer has significant risks and rewards of ownership, and whether the customer accepted delivery and a right of payment exists. Revenues from the providing of services, transportation and equipment to customers is recognized as the service is performed. Amounts are billed upon completion of service or transfer of a product and are generally due within 30 days from receipt of the invoice. Revenue excludes any sales incentives and amounts collected on behalf of third parties. Revenues from contracts with customers are disaggregated into (1) LNG Product (2) rental (3) service and (4) other.

LNG Product revenues:

LNG Product revenues represent the sale of LNG from both produced and purchased sources as well as the transportation performed to deliver the LNG to our customer location. LNG Product revenues are recognized upon delivery of the LNG to the customer, at which point the customer controls the product and the Company has an unconditional right to payment. The Company acts as a principal when using third party transportation companies and therefore recognizes the gross revenue for the supply of LNG. The Company does not differentiate between the revenue from the sale of LNG production and purchased LNG as the criteria for revenue recognition are identical. Some of our contracts contain minimum take-or-pay amounts where a customer has agreed to source a minimum volume of LNG under the contract. Take or pay revenues are only recognized when the customer has failed to take the minimum contracted volumes upon completion of the time period specified within the contract and the Company has the unconditional right to receive payment for the take or pay amount. LNG product sales agreements may include both fixed and variable fees per gallon, but is representative of the stand-alone selling price for LNG at the time the contract was negotiated. We have concluded that the variable LNG fees meet the exception for allocating variable consideration to specific parts of the contract. As such, the variable consideration for these contracts is allocated to each distinct gallon of LNG and recognized when that distinct gallon of LNG is delivered to the customer. Certain of our sales contracts contain provisions that may meet the criteria of a derivative in the event delivery is not made. These contracts are accounted for under the normal purchase normal sales exclusion under U.S. GAAP and are not measured at fair value each reporting period. Our LNG contracts are generally one to 24 months in duration.

Rental revenues

Rental revenues are generated from the rental of cryogenic equipment to our customers. Rental revenues are not dependent upon the gallons delivered but based upon day rates or monthly rates for the use of equipment as specifically established within the contract and are disaggregated from LNG Product revenues. Revenues related to rental of equipment are recognized under Topic 606 and not ASC 842: Leases, as the Company maintains control of the equipment that the customer uses and can replace the rented equipment with similar equipment should the rented equipment become inoperable or the Company chooses to replace the equipment for maintenance purposes. Revenue is recognized as the rental period is completed and for periods that cross month end, revenue is recognized for the portion of the rental period that has been completed to date. Performance obligations for rental revenue are considered to be satisfied as the rental period is completed based upon the terms of the related contract. The stated rental rates within each contract are representative of the stand-alone rental rates at the time the contract was negotiated.

Service revenues

Service revenues are generated from engineering and field support services and represent the human resources provided to the customer to support the use of LNG at the customer's job site. These include support and costs for mobilization and demobilization of equipment at customer sites as well as onsite technical support while customers are consuming LNG. Service revenues are not dependent upon the gallons delivered or rental period but based upon the specific contractual terms and can be based on an event (i.e. mobilization or demobilization) or an hourly rate as specifically established within the contract and are disaggregated from LNG Product revenues and Rental revenues. Service revenue is recognized as the event is completed or work is done. The stated hourly labor rates in each contract are representative of the stand-alone hourly rates at the time the contract was negotiated. Certain of our contracts may include rental or services that may vary upon the customer demands at stated rates within the contract and are satisfied as the work is authorized by the customer and performed by the Company.

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

Variable and other Revenue Components

Certain of our contracts may include rental or services that may vary upon the customer demands at stated rates within the contract and are satisfied as the work is authorized by the customer and performed by the Company. LNG product sales agreements may include both fixed and variable fees per gallon of LNG, but is representative of the stand-alone selling price for LNG at the time the contract is negotiated. We have concluded that the variable LNG fees meet the exception for allocating variable consideration to specific parts of the contract. As such, the variable consideration for these contracts is allocated to each distinct gallon of LNG and recognized when that distinct gallon of LNG is delivered to the customer.

Taxes assessed by a governmental authority that are directly imposed on revenue-producing transactions between the Company and its customers, such as sales, use and value-added taxes, are excluded from revenue.

Impairment of Long-Lived Assets and Goodwill

The determination and calculation of impairment requires significant judgment regarding estimates of fair value and the projection of future cash flows.

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

Goodwill represents the excess of the cost of an acquired entity over the fair value of the identifiable assets acquired less liabilities assumed. Intangible assets are assets that lack physical substance (excluding financial assets). Goodwill acquired in a business combination and intangible assets with indefinite useful lives are not amortized, and intangible assets with finite useful lives are amortized. Goodwill and intangible assets not subject to amortization are tested for impairment annually or more frequently if events or changes in circumstances indicate the assets carrying value may not be recoverable. We currently test goodwill for impairment annually in the third quarter unless we determine that a triggering event has occurred requiring an earlier test. We completed our annual assessment of goodwill during 2025 and 2024, and determined no impairment of goodwill was warranted.

Income Taxes

The calculation of income taxes is inherently complex. Additionally, the determination of the adequacy of any needed valuation allowance requires significant judgment. Deferred income taxes are accounted for under the asset-and-liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recorded when it is more likely than not that the deferred tax asset will not be realized.

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

Fair Value Measurements

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

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

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

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

Derivatives

The Company recognizes all of its derivative instruments as either assets or liabilities which are recorded at fair value on its Consolidated Balance Sheet. The accounting for changes in the fair value of a derivative instrument depends on whether it qualifies for and has been designated as a hedge and the type of hedge. The Company did not hold any natural gas derivatives at December 31, 2025; however did have natural gas derivatives at December 31, 2024 and for portions of the year for both 2025 and 2024. The Company has not designated its derivative instruments as hedges under U.S. GAAP and all resulting gains and losses from changes in the fair value of its derivative instruments are included within the Consolidated Statements of Operations. The Company determined the fair value of its natural gas derivatives at December 31, 2024 predominantly from broker quotes and are considered a level 2 fair value measurement. The Company did not enter into any derivative transactions for speculative purposes.

The Company enters into forward sales contracts for the delivery of LNG to its customers. Certain of these sales contracts contain provisions that may meet the criteria of a derivative in the event delivery is not made. These contracts are accounted for under the normal purchase normal sales exclusion under U.S. GAAP and are not measured at fair value each reporting period.

Fixed Assets and Capitalization of Costs

Fixed assets are recorded at historical cost and depreciated over their useful lives on a straight-line basis. The determination of when and what amount of costs associated with the purchase or construction of new fixed assets that should be capitalized as fixed assets can be subjective. The Company's policy is to capitalize direct costs related to the purchase or construction of a fixed asset when the acquisition or completion of the asset as intended is believed probable and when construction of the asset is considered both technically feasible and economically beneficial to the Company. Direct costs for constructed fixed assets include (but are not limited to) materials, equipment, engineering designs, transportation, contractor costs (and related subcontractors), internal and external labor costs and benefits, and interest expense on qualifying debt that are directly related to the construction of the asset. Direct costs for purchased assets include the fair value of the consideration paid to the seller as well as any other legal or closing costs, brokers' fees and commissions, closing fees; transportation costs. and other fees directly incurred to buy and install the asset for its intended use.

Indirect costs including general and administrative costs and overhead costs related to support functions, including executive management, accounting, purchasing, administration, marketing, human resources, and information systems are expensed as incurred.

Capitalization of additional direct costs made for existing assets already in use occurs if the cost meets one of the following criteria:

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The cost enhances/improves the productivity or efficiency of the asset resulting in a reconditioned or modified asset with superior performance capabilities and/or improved efficiencies;

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The cost extends the life of the useful asset beyond its current useful life; or

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The cost is for required periodic inspections/maintenance that are for a period of longer than one year such as certifications and pressure tests which the Company capitalizes and amortizes over the shorter of the certification period or useful life of the asset.

Repairs and maintenance to maintain the fixed asset in its original operating condition are not capitalized to fixed assets, but expensed as incurred.

Capitalization continues from when the acquisition or construction of the asset is deemed probable until the asset has been placed in service or until the Company determines that acquisition or completion of the asset is no longer probable. Once a fixed asset is placed into service, the fixed asset is depreciated over its useful life on a straight-line basis. See also Note 5 of the Notes to Consolidated Financial Statements for the general categories of fixed assets, their useful lives and total cost.

If the construction or acquisition of a fixed asset that was previously believed to be probable of completion is then determined to no longer be probable, any capitalization of future costs ceases and the asset is assessed for impairment.