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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2004
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File Number 1-31398
NATURAL GAS SERVICES GROUP, INC.
(Exact name of small business issuer as specified in its charter)
Colorado 75-2811855
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2911 SCR 1260
Midland, Texas 79706
(Address of principal executive offices)
(432) 563-3974
(Issuer's Telephone number, including area code)
N/A
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period than the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
--- ----
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
Outstanding at
Class August 4, 2004
---------------------------- ----------------------------
Common Stock, $.01 par value 5,961,709
Transitional Small Business Disclosure Format (Check one): Yes No X
--- ---
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NATURAL GAS SERVICES GROUP, INC.
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
-----------------------------
Unaudited Consolidated Balance Sheet.....................................Page 1
Unaudited Consolidated Income Statements.................................Page 2
Unaudited Consolidated Statements of Cash Flows..........................Page 3
Notes to Unaudited Consolidated Financial Statements.....................Page 4
Item 2. Management's Discussion and Analysis or Plan of Operation.......Page 7
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Item 3. Control and Procedures..........................................Page 11
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Item 4. Submission of Matters to a Vote of Security Holders.............Page 12
Part II - OTHER INFORMATION
Item 1. Legal Proceedings...............................................Page 12
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Item 5. Other Information...............................................Page 12
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Item 6. Exhibits and Reports on Form 8-K................................Page 13
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Signatures...............................................................Page 16
Natural Gas Services Group, Inc.
Consolidated Balance Sheet
(unaudited)
June 30, 2004
ASSETS
Current Assets:
Cash and cash equivalents $ 227,305
Accounts receivable - trade 1,310,624
Inventory 3,503,907
Prepaid expenses 154,908
-----------
Total current assets 5,196,744
Lease equipment, net 23,311,862
Other property, plant and equipment, net 3,016,092
Goodwill, net 2,589,655
Patents, net 100,199
Other assets 100,000
-----------
Total assets $34,314,552
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long term debt and capital lease $ 2,742,739
Line of Credit 361,377
Accounts payable and accrued liabilities 2,023,323
Unearned Income 13,104
-----------
Total current liabilities 5,140,543
Long term debt and capital lease, less current portion 8,672,736
Subordinated notes, net 1,416,821
Deferred income tax payable 2,323,622
-----------
Total liabilities 17,553,722
SHAREHOLDERS' EQUITY
Common stock 54,121
Paid in capital 11,334,452
Retained earnings 5,372,257
-----------
Total shareholders' equity 16,760,830
-----------
Total liabilities and shareholders' equity $34,314,552
===========
The accompanying notes are an integral part of the consolidated balance sheet
1
Natural Gas Services Group, Inc.
Consolidated Income Statements
(unaudited)
Three months ended June 30, Six months ended June 30,
---------------------------- ----------------------------
2004 2003 2004 2003
------------ ------------ ------------ ------------
Revenue:
Sales $ 852,255 $ 939,838 $ 1,742,220 $ 1,505,110
Service and maintenance income 510,120 516,573 933,722 893,883
Leasing income 2,419,690 1,764,404 4,674,474 3,165,567
------------ ------------ ------------ ------------
3,782,065 3,220,815 7,350,416 5,564,560
Cost of revenue:
Cost of sales 601,275 713,624 1,247,669 1,146,797
Cost of service and maintenance 355,605 335,928 691,855 671,229
Cost of leasing 762,051 406,867 1,330,460 767,784
------------ ------------ ------------ ------------
1,718,931 1,456,419 3,269,984 2,585,810
------------ ------------ ------------ ------------
Gross Margin 2,063,134 1,764,396 4,080,432 2,978,750
Operating Cost:
Selling expense 225,221 185,604 402,610 324,551
General and administrative expense 454,966 410,838 943,225 791,004
Depreciation and amortization 582,349 417,589 1,109,034 779,555
------------ ------------ ------------ ------------
1,262,536 1,014,031 2,454,869 1,895,110
------------ ------------ ------------ ------------
Operating income 800,598 750,365 1,625,563 1,083,640
Interest expense (193,943) (175,706) (374,551) (329,789)
Other income (7,057) (21,760) 1,494,023 787
------------ ------------ ------------ ------------
Income before income taxes 599,598 552,899 2,745,035 754,638
Provision for income tax 233,843 237,747 485,541 321,603
------------ ------------ ------------ ------------
Net income 365,755 315,152 2,259,494 433,035
Preferred dividends 25,355 31,010 53,277 62,020
------------ ------------ ------------ ------------
Net income available to common shareholders $ 340,400 $ 284,142 $ 2,206,217 $ 371,015
============ ============ ============ ============
Earnings per share:
Basic $0.06 $0.06 $0.42 $0.08
Diluted $0.06 $0.06 $0.39 $0.07
Weighted average Shares:
Basic 5,396,527 4,875,324 5,230,927 4,866,527
Diluted 5,611,115 5,024,774 5,598,747 5,116,332
The accompanying notes are an integral part of the consolidated income
statements.
2
Natural Gas Services Group, Inc.
Consolidated Statements of Cash Flows
(unaudited)
Six Months Six Months
Ended Ended
June 30, 2004 June 30, 2003
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 2,259,495 $ 433,035
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization 1,109,034 779,555
Deferred taxes 481,116 321,573
Amortization of debt issuance costs 32,478 32,478
Gain on disposal of assets 8,137 10,547
Changes in operating assets and liabilities:
Trade and other receivables (494,029) (836,812)
Inventory (949,668) (746,248)
Prepaid expenses and other (47,878) 92,146
Accounts payable and accrued liabilities 951,771 270,867
Deferred income (194,111) 270,446
Other (19,746) (91,341)
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NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 3,136,599 536,246
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (5,651,754) (4,465,223)
Acquisition of remaining interest in joint venture, net of cash acquired -- 242,753
Proceeds from sale of property and equipment 28,000 112,500
Decrease in lease receivable -- 210,512
Distribution from equity method investment -- 49,090
------------- -------------
NET CASH USED IN INVESTING ACTIVITIES (5,623,754) (3,850,368)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from bank loans and line of credit 3,995,177 2,438,997
Repayments of long term debt and line of credit (1,533,092) (1,000,489)
Proceeds from exercised warrants and stock options 129,450
200,000
Dividends paid on preferred stock (53,277) (62,020)
------------- -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,538,258 1,576,488
------------- -------------
NET CHANGE IN CASH AND CASH EQUIVALENTS 51,103
(1,737,634)
CASH AT BEGINNING OF PERIOD 176,202 2,713,638
------------- -------------
CASH AT END OF PERIOD $ 227,305 $ 976,004
============= =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 374,551 $ 329,789
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The accompanying notes are an integral part of the consolidated statements of
cash flows.
3
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
The accompanying unaudited financial statements present the
consolidated results of our company taken from our books and records. In our
opinion, such information includes all adjustments, consisting of only normal
recurring adjustments, which are necessary to make our financial position at
June 30, 2004 and the results of our operations for the six month periods ended
June 30, 2004 and 2003 not misleading. As permitted by the rules and regulations
of the Securities and Exchange Commission (SEC) the accompanying financial
statements do not include all disclosures normally required by accounting
principles generally accepted in United States of America. These financial
statements should be read in conjunction with the financial statements included
in our Annual Report on Form 10-KSB for the year ended December 31, 2003 on file
with the SEC. In our opinion, the consolidated financial statements are a fair
presentation of the financial position, results of operations and cash flows for
the periods presented.
The results of operations for the six months ended June 30, 2004 are
not necessarily indicative of the results of operations to be expected for the
full fiscal year ending December 31, 2004.
(2) Stock-based Compensation
Statement of Financial Accounting Standards No. 123, ("SFAS 123")
"Accounting for Stock-Based Compensation," encourages, but does not require, the
adoption of a fair value-based method of accounting for employee stock-based
compensation transactions. We have elected to apply the provisions of Accounting
Principles Board Opinion No. 25 ("Opinion 25"), "Accounting for Stock Issued to
Employees," and related interpretations, in accounting for our employee
stock-based compensation plans. Under Opinion 25, compensation cost is measured
as the excess, if any, of the quoted market price of our stock at the date of
the grant above the amount an employee must pay to acquire the stock.
Had compensation costs for options granted to our employees been
determined based on the fair value at the grant dates consistent with the method
proscribed by SFAS No. 123, our net income and earnings per share would have
been reduced to the pro forma amounts listed below:
Three Months Ended Six Months Ended
June 30 June 30
2004 2003 2004 2003
----------- ----------- ----------- -----------
Pro forma impact of fair value method
Income applicable to common shares, as reported $ 340,401 $ 284,142 $ 2,206,218 $ 371,015
Pro-forma stock-based compensation costs under
the fair value method, net of related tax (10,000) (7,683) (20,000) (15,365)
----------- ----------- ----------- -----------
Pro-forma income applicable to common shares
under the fair-value method $ 330,401 $ 276,459 $ 2,186,218 $ 355,650
Earnings per common share
Basic earnings per share reported $0.06 $0.06 $0.42 $0.08
Diluted earnings per share reported $0.06 $0.06 $0.39 $0.07
Pro-forma basic earnings per share under the fair
value method $0.06 $0.06 $0.42 $0.07
Pro-forma diluted earnings per share under the
fair value method $0.06 $0.05 $0.39 $0.07
4
Weighted average Black-Scholes fair value
assumptions:
Risk free rate 4.0%-5.2%
Expected life 5-10 yrs
Expected volatility 50.0%
Expected dividend yield 0.0%
(3) Merger
On January 1, 2004, we merged our subsidiaries, Rotary Gas Systems Inc,
NGE Leasing Inc, and Great Lakes Compression Inc. with the parent Company,
Natural Gas Services Group Inc. This had no effect on our consolidated financial
position or results of operations, with the exception of a small impact on our
state tax expenses.
(4) Preferred Stock Conversion
In accordance with the provisions of the Convertible Series A Preferred
Stock of Natural Gas Services Group, Inc., on March 26, 2004 each share of
Preferred Stock automatically converted to one share of Common Stock. The
conversion occurred after the closing market price of the stock was equal to or
higher than $6.50 for 20 consecutive trading days. 315,154 Preferred shares were
converted at that time. Dividends payable at the conversion date were
approximately $25,355.
(5) Common Stock Private Placement
On July 20, 2004, Natural Gas Services Group, Inc. and CBarney
Investments, Ltd. entered into a Securities Purchase Agreement. Under this
agreement, Natural Gas Services Group issued and sold 649,574 shares of its
common stock to CBarney at $7.69736 per share. The per share price was
determined by multiplying (x) $8.747, the average closing market price of the
common stock on the American Stock Exchange for the twenty consecutive trading
days ended July 15, 2004, times (y) eighty-eight percent. Natural Gas Services
Group received aggregate gross proceeds of $5,000,000.
We plan to use the net proceeds from the sale of the stock to advance the growth
of our rental fleet of natural gas compressors, working capital and general
corporate purposes, including possible acquisition of strategically located
compressor companies.
(6) Earnings per common share
The following table reconciles the numerators and denominators of the
basic and diluted earnings per share computation.
Three Months Ended Six Months Ended
June 30, June 30,
2004 2003 2004 2003
----------- ----------- ----------- -----------
Basic earnings per share Numerator:
Net income $ 365,756 $ 315,152 $ 2,259,4925 $ 433,035
Less: dividends on preferred shares (25,355) (31,010) (53,277) (62,020)
Net income available to common shareholders $ 340,401 $ 284,142 $ 2,206,218 $ 371,015
5
Denominator -
Weighted average common shares outstanding 5,396,527 4,875,324 5,230,927 4,866,527
Basic earnings per share $ 0.06 $ 0.06 $ 0.42 $ 0.08
Diluted earnings per share
Numerator:
Net income $ 365,756 $ 315,152 $ 2,259,495 $ 433,035
Less: dividends on preferred shares (1) (25,355) (31,010) (53,277) (62,020)
Net income available to common shareholders $ 340,401 $ 284,142 $ 2,206,218 $ 371,015
Denominator :
Weighted average common shares outstanding 5,396,527 4,875,324 5,230,927 4,866,527
Dilutive effect of common stock options
and warrants 214,588 149,450 367,820 249,805
5,611,115 5,024,774 5,598,747 5,116,332
Diluted earnings per share $ 0.06 $ 0.06 $ 0.39 $ 0.07
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(1) Preferred shares were anti-dilutive for the three and six months ended June
30, 2004 and 2003
(7) Other Income
On March 15, 2004 the President and C.E.O. of our company, Mr. Wayne L.
Vinson, passed away after a battle with cancer. The Company held 2 life
insurance policies on him, 1 for $1,000,000 and 1 for $500,000, with the Company
as the beneficiary. The proceeds of $1,500,000 were recorded as other income.
6
Item 2. Management's Discussion and Analysis, or Plan of Operation
Overview
Our company provides products and services to the oil and gas industry
and is engaged in (1) the manufacture, service, sale, and rental of natural gas
compressors to enhance the productivity of oil and gas wells, and (2) the
manufacture, sale and rental of flares and flare ignition systems for plant and
production facilities.
Critical Accounting Policies and New Accounting Pronouncements
See our December 31, 2003 Form 10-KSB on file with the SEC for a
discussion of our critical accounting policies and new accounting
pronouncements. There have been no substantive changes since that time.
Liquidity and Capital Resources
We have funded our operations through public and private offerings of
our common and preferred stock, subordinated debt and bank debt. Proceeds were
primarily used to pay debt and to fund the manufacture and fabrication of
additional units for our rental fleet of natural gas compressors.
At June 30, 2004, we had cash and cash equivalents of approximately
$227,300, working capital of $56,200 and non-subordinated debt of $11,415,000 of
which approximately $2,742,000 was classified as current. We had positive net
cash flow from operating activities of approximately $3,136,600 during the first
six months of 2004. This was primarily from net income of $2,259,000 plus
depreciation and amortization of $1,109,000 an increase in deferred taxes of
$481,000, an increase in accounts payable and accrued liabilities of $952,000,
offset by an increase in accounts receivable-trade of $494,000, a decrease in
deferred income of $194,000, and an increase in inventory of $950,000.
On November 24, 2003 we completed a new $10 million senior credit
facility with a $7 million initial borrowing base. The credit facility is a
Multiple Advance Term Promissory Note arranged by Western National Bank,
Midland, Texas. The interest rate is one percent over Wall Street prime rate.
Funds have been drawn under this line as of June 30, 2004 totaling $3,615,000.
Our line of credit for $750,000 with interest at 1% over prime for one
year expired March 15, 2004 but was renewed on May 28, 2004. Funds have been
drawn under the line of credit as of June 30, 2004 totaling $361,000.
In accordance with the provisions of the Convertible Series A Preferred
Stock of Natural Gas Services Group, Inc., on March 26, 2004 each share of
Preferred Stock automatically converted to one share of Common Stock. The
conversion occurred after the closing market price of the stock was equal to or
higher than $6.50 for 20 consecutive trading days. 315,154 Preferred shares were
converted at that time. As a result the conversion we will have a reduction in
expected dividend payments of approximately $68,000 for the remainder of the
year 2004.
On July 20, 2004, Natural Gas Services Group, Inc. and CBarney
Investments, Ltd. entered into a Securities Purchase Agreement. Under this
agreement, Natural Gas Services Group agreed to issue and sell 649,574 shares of
its common stock to CBarney at $7.69736 per share. The per share price was
determined by multiplying (x) $8.747, the average closing market price of the
common stock on the American Stock Exchange for the twenty consecutive trading
days ended July 15, 2004, times (y) eighty-eight percent. Natural Gas Services
Group will receive aggregate gross proceeds of $5,000,000. We plan to use the
net proceeds from the sale of the stock to advance the growth of our rental
fleet of natural gas compressors, working capital and general corporate
purposes, including possible acquisition of strategically located compressor
companies.
7
Results of Operations
Six Months Ended June 30, 2004, Compared to the Six Months Ended June 30, 2003.
Sales revenue from outside sources increased from $1,505,000 to
$1,742,000, or 16% for the six months ended June 30, 2004 compared to the same
period ended June 30, 2003. This increase was mainly the result of an
improvement in the sale of compressors and flare units compared to the same
period in 2003. Because our products are custom-built, fluctuations in revenue
from outside sources is not unusual.
Service and maintenance revenue increased from $894,000 to $934,000, or
4% for the six months ended June 30, 2004 compared to the same period ended June
30, 2003.
Leasing revenue increased from $3,166,000 to $4,674,000, or 48% for the
six months ended June 30, 2004 compared to the same period ended June 30, 2003.
This increase was the result of additional units added to our rental fleet and
leased to third parties. The company ended the period with 488 compressor
packages in its rental fleet, up from 399 units at December 31, 2003 and 354
units at June 30, 2003.
8
The gross margin percentage increased from 54% for the six months ended
June 30, 2003, to 56% for the same period ended June 30, 2004. This improvement
resulted mainly from the relative increase in leasing revenue as a percentage of
the total revenue. Our rental fleet carries a gross margin averaging 70%, and
increases in rented units improves our gross margin.
Selling, general and administrative expense increased from $1,116,000
to $1,346,000 or 21% for the six months ended June 30, 2004, as compared to the
same period ended June 30, 2003. This was mainly the result of the increase in
commissions from additional leasing contracts on gas compressors to third
parties and legal expenses related to an internal investigation concerning an
employee matter that was settled in April 2004.
Depreciation and amortization expense increased 42% from $780,000 to
$1,109,000 for the six months ended June 30, 2004, compared to the same period
ended June 30, 2003. This increase was the result of 134 new gas compressor
rental units being added to rental equipment from June 30, 2003 to June 30,
2004.
Other income and expense increased approximately $1,493,000 for the six
months ended June 30, 2004 compared to the same period ended June 30, 2003. This
increase was due mainly from the receipt of $1,500,000 in life insurance payable
on Mr. Wayne L. Vinson, our former President and C.E.O. His death on March 15,
2004 left the company as the beneficiary of two life insurance policies, one for
$1,000,000, and one for $500,000.
Interest expense increased 14% for the six months ended June 30, 2004
compared to the same period ended June 30, 2003, mainly due to the increased
loan balances on vehicles and rental equipment.
Provision for income tax increased $164,000 or 51%, primarily due to
the increase in net taxable income. The income from the life insurance proceeds
described above is not subject to federal income tax.
9
Three Months Ended June 30, 2004, Compared to the Three Months Ended June 30,
2003.
Sales revenue from outside sources decreased from $940,000 to $852,000,
or 9% for the three months ended June 30, 2004 compared to the same period ended
June 30, 2003. This decrease was mainly the result of a reduction in the sales
of compressor units and parts. Because our products are custom-built,
fluctuations in compressor unit revenue from outside sources is not unusual. The
reduction in parts sales is the result of a change in our discount status with a
major supplier in Northern Michigan. We expect this to be a temporary situation.
Service and maintenance revenue decreased from $517,000 to $510,000, or
1% for the three months ended June 30, 2004 compared to the same period ended
June 30, 2003. This revenue source is subject to seasonable change and we expect
this to increase in the third quarter of 2004.
Leasing revenue increased from $1,764,000 to $2,420,000, or 37% for the
three months ended June 30, 2004 compared to the same period ended June 30,
2003. This increase was the result of additional units added to our rental unit
fleet and leased to third parties. The company added 44 gas compressors to its
rental fleet in the quarter ended June 30, 2004.
The gross margin percentage remained stable at 55% for the three months
ended June 30, 2003 and also for the same period ended June 30, 2004. Although
we expect our margins to increase as our rental revenue increases because our
rental fleet carries a gross margin averaging 70%, changes in the product mix
during the quarter help to average out the gross margin company wide.
10
Selling, general and administrative expense increased from $596,000 to
$680,000 or 14% for the three months ended June 30, 2004, as compared to the
same period ended June 30, 2003. This was mainly the result of the increase in
commissions from additional leasing contracts on gas compressors to third
parties and an increase in sales and administration salary expense.
Depreciation and amortization expense increased 39% from $418,000 to
$582,000 for the three months ended June 30, 2004, compared to the same period
ended June 30, 2003. This increase was the result of 44 new gas compressor
rental units being added to rental equipment during the three months ended June
30, 2004.
There was a slight increase in interest expense for the three months
ended June 30, 2004 compared to the same period ended June 30, 2003, was mainly
due to the increase in loan balances for rental equipment.
Provision for income tax decreased $4,000, or 2%, primarily due from a
change in our effective tax rate. The effective tax rate changed because of a
reduction in our state taxes as a result the merger of our subsidiaries
effective January 1, 2004.
Item 3. Controls and Procedures
(a) Evaluation of disclosure controls and procedures.
Under the supervision and with the participation of our management,
including our chief executive officer and chief financial officer, we evaluated
the effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Rule 13a-14(c) under the Securities Exchange Act of
1934) as of the end of the period covered by this report. Based upon that
evaluation, our chief executive officer and chief financial officer concluded
that, as of the end of the period covered by this report, our disclosure
controls and procedures are effective in timely alerting them to the material
information relating to us that are required to be included in our periodic
filings with the SEC.
11
(b) Changes in internal controls.
There were no changes made in our internal controls during the period
covered by this report that have materially affected or are reasonably likely to
materially affect our internal controls over financial reporting. In addition,
to our knowledge there were no changes, in other factors that could
significantly affect these controls subsequent to the date of their evaluation.
PART II - OTHER INFORMATION
NATURAL GAS SERVICES GROUP, INC.
Item 1. Legal Proceedings
From time to time, we are a party to ordinary routine litigation
incidental to our business. We are not currently a party to any pending
litigation, and we are not aware of any threatened litigation.
Item 4. Submission of Matters to a Vote of Security Holders
On June 15, 2004, we held our Annual Meeting of Shareholders. At the
Annual Meeting of Shareholders, Richard L. Yadon was elected for a term expiring
at the Annual Meeting of Shareholders to be held in 2007 and Wallace C. Sparkman
and William F. Hughes, Jr. were elected for a term expiring at the Annual
Meeting of Shareholders to be held in 2006. The terms of Charles G. Curtis,
Wallace O. Sellers and Gene A. Strasheim as directors continued after the Annual
Meeting of Shareholders until the Annual Meetings of Shareholders to be held in
2005.
Voting for Richard L. Yadon
For: 5,120,796 Withheld: 9,420 Abstentions: 0
---- --------- -------------
Voting for Wallace C. Sparkman
For: 5,120,796 Withheld: 9,420 Abstentions: 0
---- --------- ------------
Voting for William F. Hughes, Jr.
For: 5,124,696 Withheld: 5,520 Abstentions: 0
---- --------- ------------
Item 5. Other Information
The Nominating Committee of our Board of Directors will consider a
candidate for director proposed by a stockholder. A candidate must be highly
qualified in terms of business experience and be both willing and expressly
interested in serving on the Board. A stockholder wishing to propose a candidate
for the Committee's consideration should forward the candidate's name and
information about the candidate's qualifications to Natural Gas Services Group,
Inc., Nominating Committee, 2911 South County Road 1260, Midland, Texas 79706,
12
Attn.: Charles G. Curtis, Chairman. Submissions must include sufficient
biographical information concerning the recommended individual, including age,
employment history for at least the past five years indicating employer's names
and description of the employer's business, educational background and any other
biographical information that would assist the Committee in determining the
qualifications of the individual. The Committee will consider recommendations
received by a date not later than 120 calendar days before the date our proxy
statement is released to shareholders in connection with the prior year's annual
meeting for nomination at that annual meeting. The Committee will consider
nominations received beyond that date at the annual meeting subsequent to the
next annual meeting.
The Committee evaluates nominees for directors recommended by
stockholders in the same manner in which it evaluates other nominees for
directors. Minimum qualifications include the factors discussed above.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description
----------- -----------
2.1 Purchase and Sale Agreement by and between Hy-Bon
Engineering Company, Inc. and NGE Leasing, Inc.(2)
3.1 Articles of incorporation.(3)
3.2 Amendment to articles of incorporation dated March 31, 1999,
and filed on May 25, 1999.(3)
3.3 Amendment to articles of incorporation dated July 25, 2001,
and filed on July 30, 2001.(3)
3.4 Amendment to articles of incorporation dated June 18, 2003,
and filed on June 19, 2003.(3)
3.5 Articles of Merger filed on December 30, 2003 to be
effective January 1, 2004 merging NGE Leasing, Inc into
Natural Gas Services Group, Inc.(6)
3.6 Articles of Merger filed on December 30, 2003 to be
effective January 1, 2004 merging Rotary Gas Systems, Inc.
into Natural Gas Services Group, Inc.(6)
3.7 Articles of Merger filed on December 30, 2003 to be
effective January 1, 2004 merging Great Lakes Compression,
Inc. into Natural Gas Services Group, Inc.(6)
3.8 Bylaws.(3)
4.1 Form of warrant certificate.(3)
4.2 Form of warrant agent agreement.(3)
4.3 Form of lock-up agreement.(3)
4.4 Form of representative's option for the purchase of common
stock.(3)
4.5 Form of representative's option for the purchase of
warrants.(3)
10.1 1998 Stock Option Plan.(3)
13
Exhibit No. Description
----------- -----------
10.2 Asset Purchase Agreement between Natural Gas Acquisition
Corporation and Great Lakes Compression, Inc. dated January
1, 2001.(3)
10.3 Amendment to Guaranty Agreement between Natural Gas Services
Group, Inc. and Dominion Michigan Production Services,
Inc.(3)
10.4 Form of Series A 10% Subordinated Notes due December 31,
2006.(3)
10.5 Form of Five-Year Warrants to Purchase Common Stock.(3)
10.6 Warrants issued to Berry-Shino Securities, Inc.(3)
10.7 Warrants issued to Neidiger, Tucker, Bruner, Inc.(3)
10.8 Form of warrant issued in March 2001 for guaranteeing
debt.(3)
10.9 Form of warrant issued in April 2002 for guaranteeing
debt.(3)
10.10 Exhibits 3(c)(1), 3(c)(2), 3(c)(3), 3(1)(4), 13(d)(1),
13(d)(2) and 13(d)(3) to Asset Purchase Agreement between
Natural Gas Acquisition Corporation and Great Lakes
Compression, Inc. dated January 1, 2001.(3)
10.11 Articles of Organization of Hy-Bon Rotary Compression,
L.L.C. dated April 17, 2000 and filed on April 20, 2001.(3)
10.12 Regulations of Hy-Bon Rotary Compression, L.L.C.(3)
10.13 First Amended and Restated Loan Agreement between Natural
Gas Services Group, Inc. and Western National Bank(4)
10.14 Termination of Employment Agreement Letter relating to the
Employment Agreement of Alan Kurus(5)
10.15 Termination of Employment Agreement Letter relating to the
Employment Agreement of Wayne Vinson(5)
10.16 Termination of Employment Agreement Letter relating to the
Employment Agreement of Earl R. Wait(5)
10.17 Lease Agreement dated June 1, 2003 with Steven J. &
Katherina L. Winer(6)
10.18 Lease Agreement dated June 19, 2003 with Wise Commercial
Properties(6)
10.19 Lease Agreement dated April 1, 2004 with the City of Midland
(1)
10.20 Second Amended and Restated Loan Agreement, dated November
3, 2003, between Natural Gas Services Group, Inc. and
Western National Bank (1)
10.21 Securities Purchase Agreement between the Registrant and
CBarney Investments (7)
31.1 Certification of Chief Executive Officer required by Section
302 of the Sarbanes-Oxley Act of 2002. (1)
31.2 Certification of Chief Financial Officer required by Section
302 of the Sarbanes-Oxley Act of 2002. (1)
14
Exhibit No. Description
----------- -----------
32.1 Certification required by Section 906 of the Sarbanes-Oxley
Act of 2002. (1)
32.2 Certification required by Section 906 of the Sarbanes-Oxley
Act of 2002. (1)
--------------------------------------------------------------------------------
(1) Filed herewith.
(2) Exhibit 2.1 is incorporated by reference to Exhibit 2.1
filed as an exhibit to our Current Report on Form 8-K dated
February 28, 2003
(3) Exhibits 3.1 through 3.4 and 3.8 through 10.12 are
incorporated by reference to the exhibits filed as exhibits
to our Registration Statement No. 333-88314
(4) Exhibit 10.13 is incorporated by reference to our Current
Report on Form 8-K filed on April 14, 2003
(5) Exhibits 10.14, 10.15 and 10.16 are incorporated by
reference to exhibits 10.25, 10.26 and 10.27 to our Annual
Report on Form 10-KSB for the year ended December 31, 2002
(6) Exhibits 3.5, 3.6, 10.17, and 10.18 are incorporated by
reference to the same exhibits filed with our Annual Report
on Form 10-KSB for the year ended December 31, 2003.
(7) Exhibit 10.21 is incorporated by reference to the same
Exhibit 4.1 to our Current Report on Form 8-K dated July 27,
2004.
(b) Reports on Form 8-K
On April 4, 2004, under Item 5 of Form 8-K, we announced the automatic
conversion of our outstanding 10% Convertible Series A Preferred Stock
into 315,154 shares of our common stock.
15
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
NATURAL GAS SERVICES GROUP, INC.
By: /s/ Wallace Sparkman
------------------------------------
Wallace Sparkman
President and Chief Executive
Officer
By: /s/ Earl R. Wait
------------------------------------
Earl R. Wait
Chief Financial Officer
And Treasurer
August 11, 2004
16
INDEX TO EXHIBITS:
Exhibit No. Description
----------- -----------
2.1 Purchase and Sale Agreement by and between Hy-Bon
Engineering Company, Inc. and NGE Leasing, Inc.(2)
3.1 Articles of incorporation.(3)
3.2 Amendment to articles of incorporation dated March 31, 1999,
and filed on May 25, 1999.(3)
3.3 Amendment to articles of incorporation dated July 25, 2001,
and filed on July 30, 2001.(3)
3.4 Amendment to articles of incorporation dated June 18, 2003,
and filed on June 19, 2003.(3)
3.5 Articles of Merger filed on December 30, 2003 to be
effective January 1, 2004 merging NGE Leasing, Inc into
Natural Gas Services Group, Inc.(6)
3.6 Articles of Merger filed on December 30, 2003 to be
effective January 1, 2004 merging Rotary Gas Systems, Inc.
into Natural Gas Services Group, Inc.(6)
3.7 Articles of Merger filed on December 30, 2003 to be
effective January 1, 2004 merging Great Lakes Compression,
Inc. into Natural Gas Services Group, Inc.(6)
3.8 Bylaws.(3)
4.1 Form of warrant certificate.(3)
4.2 Form of warrant agent agreement.(3)
4.3 Form of lock-up agreement.(3)
4.4 Form of representative's option for the purchase of common
stock.(3)
4.5 Form of representative's option for the purchase of
warrants.(3)
10.1 1998 Stock Option Plan.(3)
10.2 Asset Purchase Agreement between Natural Gas Acquisition
Corporation and Great Lakes Compression, Inc. dated January
1, 2001.(3)
10.3 Amendment to Guaranty Agreement between Natural Gas Services
Group, Inc. and Dominion Michigan Production Services,
Inc.(3)
10.4 Form of Series A 10% Subordinated Notes due December 31,
2006.(3)
10.5 Form of Five-Year Warrants to Purchase Common Stock.(3)
10.6 Warrants issued to Berry-Shino Securities, Inc.(3)
10.7 Warrants issued to Neidiger, Tucker, Bruner, Inc.(3)
10.8 Form of warrant issued in March 2001 for guaranteeing
debt.(3)
10.9 Form of warrant issued in April 2002 for guaranteeing
debt.(3)
17
Exhibit No. Description
----------- -----------
10.10 Exhibits 3(c)(1), 3(c)(2), 3(c)(3), 3(1)(4), 13(d)(1),
13(d)(2) and 13(d)(3) to Asset Purchase Agreement between
Natural Gas Acquisition Corporation and Great Lakes
Compression, Inc. dated January 1, 2001.(3)
10.11 Articles of Organization of Hy-Bon Rotary Compression,
L.L.C. dated April 17, 2000 and filed on April 20, 2001.(3)
10.12 Regulations of Hy-Bon Rotary Compression, L.L.C.(3)
10.13 First Amended and Restated Loan Agreement between Natural
Gas Services Group, Inc. and Western National Bank(4)
10.14 Termination of Employment Agreement Letter relating to the
Employment Agreement of Alan Kurus(5)
10.15 Termination of Employment Agreement Letter relating to the
Employment Agreement of Wayne Vinson(5)
10.16 Termination of Employment Agreement Letter relating to the
Employment Agreement of Earl R. Wait(5)
10.17 Lease Agreement dated June 1, 2003 with Steven J. &
Katherina L. Winer(6)
10.18 Lease Agreement dated June 19, 2003 with Wise Commercial
Properties(6)
10.19 Lease Agreement dated April 1, 2004 with the City of Midland
(1)
10.20 Second Amended and Restated Loan Agreement, dated November
3, 2003, between Natural Gas Services Group, Inc. and
Western National Bank (1)
10.21 Securities Purchase Agreement between the Registrant and
CBarney Investments (7)
31.1 Certification of Chief Executive Officer required by Section
302 of the Sarbanes-Oxley Act of 2002. (1)
31.2 Certification of Chief Financial Officer required by Section
302 of the Sarbanes-Oxley Act of 2002. (1)
32.1 Certification required by Section 906 of the Sarbanes-Oxley
Act of 2002. (1)
32.2 Certification required by Section 906 of the Sarbanes-Oxley
Act of 2002. (1)
18
--------------------------------------------------------------------------------
(1) Filed herewith.
(2) Exhibit 2.1 is incorporated by reference to Exhibit 2.1
filed as an exhibit to our Current Report on Form 8-K dated
February 28, 2003
(3) Exhibits 3.1 through 3.4 and 3.8 through 10.12 are
incorporated by reference to the exhibits filed as exhibits
to our Registration Statement No. 333-88314
(4) Exhibit 10.13 is incorporated by reference to our Current
Report on Form 8-K filed on April 14, 2003
(5) Exhibits 10.14, 10.15 and 10.16 are incorporated by
reference to exhibits 10.25, 10.26 and 10.27 to our Annual
Report on Form 10-KSB for the year ended December 31, 2002
(6) Exhibits 3.5, 3.6, 10.17, and 10.18 are incorporated by
reference to the same exhibits filed with our Annual Report
on Form 10-KSB for the year ended December 31, 2003.
(7) Exhibit 10.21 is incorporated by reference to the same
Exhibit 4.1 to our Current Report on Form 8-K dated July 27,
2004.
19