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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2003
OR
( ) TRANSITION REPORT UNDER 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)
(915) 563-3974
(Issuer's Telephone number)
N/A
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(Former name, former address and former fiscal year,
if changed since last report)
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
Yes 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 April 30, 2003
----------------------------- -----------------------------
Common Stock, $.001 par value 4,857,632
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Transitional Small Business Disclosure Format (Check one): Yes No X
--- ---
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NATURAL GAS SERVICES GROUP, INC.
Commission File Number: 1-31398
Quarter Ended March 31, 2003
FORM 10-QSB
Part I - FINANCIAL INFORMATION
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
Management's Discussion and Analysis or Plan of Operation................Page 6
Control and Procedures...................................................Page 10
Part II - OTHER INFORMATION
Changes in Securities and Use of Proceeds................................Page 10
Exhibits and Reports on Form 8-K.........................................Page 11
Signatures...............................................................Page 11
Natural Gas Services Group, Inc.
Consolidated Balance Sheet
(unaudited)
March 31, 2003
ASSETS
Current Assets:
Cash and cash equivalents $ 1,611,244
Accounts receivable - trade 981,398
Lease receivable - net 100,143
Inventory 2,204,467
Prepaid expenses 45,038
-----------
Total current assets 4,942,290
Property, plant and equipment, net 18,443,470
Goodwill, net 2,589,655
Patents, net 134,555
Lease receivable net 87,198
Other assets 113,423
-----------
Total assets $26,310,591
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long term debt and capital lease $ 2,224,133
Accounts payable and accrued liabilities 848,809
Unearned Income 423,946
-----------
Total current liabilities 3,496,888
Long term portion, less current portion and capital lease 7,110,375
Subordinated notes, net 1,360,626
Deferred income tax payable 1,254,856
-----------
Total liabilities 13,222,745
SHAREHOLDERS' EQUITY
Preferred stock 3,817
Common stock 48,576
Paid in capital 10,968,733
Retained earnings 2,066,720
-----------
Total shareholders' equity 13,087,846
-----------
Total liabilities and shareholders' equity $26,310,591
===========
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 March 31,
----------------------------
2003 2002
----------- -----------
Revenue:
Sales $ 565,272 $ 1,349,017
Service and maintenance income 377,310 341,862
Leasing income 1,401,163 999,517
----------- -----------
2,343,745 2,690,396
Cost of revenue:
Cost of sales 433,173 1,065,152
Cost of service and maintenance 335,301 333,148
Cost of leasing 360,917 282,535
----------- -----------
1,129,391 1,680,835
----------- -----------
Gross Margin 1,214,354 1,009,561
Operating Cost:
Selling expense 138,947 124,667
General and administrative expense 380,166 273,541
Amortization and depreciation 361,966 254,404
----------- -----------
881,079 652,612
----------- -----------
Operating income 333,275 356,949
Interest expense (154,083) (257,360)
Equity in earnings of joint venture -- 83,452
Other income 22,547 1,698
----------- -----------
Income before income taxes 201,739 184,739
Provision for income tax 83,856 88,563
----------- -----------
Net income 117,883 96,176
Preferred dividends 31,010 44,185
----------- -----------
Net income available to common shareholders $ 86,873 $ 51,991
=========== ===========
Earnings per share:
Basic $ 0.02 $ 0.02
Diluted $ 0.02 $ 0.01
Weighted average Shares:
Basic 4,857,632 3,357,632
Diluted 5,059,456 3,798,176
The accompanying notes are an integral part of the consolidated income
statements.
2
Natural Gas Services Group, Inc.
Consolidated Statements of Cash Flows
(unaudited)
Three Months Three Months
Ended Ended
March 31, 2003 March 31, 2002
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 117,883 $ 96,176
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization 361,966 254,404
Deferred taxes 83,856 88,563
Amortization of debt issuance costs 16,239 16,239
Equity in earnings of joint venture -- (83,452)
Gain on disposal of assets (14,979) --
Changes in operating assets and liabilities:
Trade and other receivables (335,448) (375,592)
Inventory (658,519) (255,626)
Prepaid expenses and other 128,264 21,233
Accounts payable and accrued liabilities 146,651 188,612
Deferred income 106,385 27,143
Other (85,659) (55,507)
-------------- --------------
NET CASH USED IN OPERATING ACTIVITIES (133,361) (77,807)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (3,143,155) (782,522)
Acquisition of remaining interest in LLC net of cash acquired 241,953 --
Proceeds from sale of property and equipment 105,000 --
Decrease in lease receivable 23,171 20,115
Distribution from equity method investee 49,890 57,839
-------------- --------------
NET CASH USED IN INVESTING ACTIVITIES (2,723,141) (704,568)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from bank loans and line of credit 2,225,623 675,000
Repayments of long term debt (440,505) (231,581)
Proceeds from stock offering, net of offering cost -- 12,724
Dividends paid on preferred stock (31,010) (44,185)
-------------- --------------
NET CASH USED IN INVESTING ACTIVITIES 1,754,108 411,958
-------------- --------------
NET CHANGE IN CASH AND CASH EQUVALENTS (1,102,394) (370,417)
CASH AT BEGINNING OF PERIOD 2,713,638 506,669
-------------- --------------
CASH AT END OF PERIOD $ 1,611,244 $ 136,252
============== ==============
SUPPLEMENTAL DICLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 154,083 $ 257,360
Income taxes paid $ -- $ --
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 and its wholly-owned subsidiaries 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 March 31, 2003 and the results of
our operations for the three months periods ended March 31, 2003 and 2002 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 principals 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 on file with the SEC. Investments in joint ventures in which our company
does not have majority voting control are accounted for by the equity method.
All intercompany balances and transactions have been eliminated in
consolidation. 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 three months ended March 31, 2003 are
not necessarily indicative of the results of operations to be expected for the
full fiscal year ending December 31, 2003
(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 its 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 pro forma net income and earnings per share would have been
reduced to the pro forma amounts listed below:
Three Months Ended
March 31,
2003 2002
--------- ---------
Pro forma impact of fair value method
Income applicable to common shares, as reported 86,873 51,991
Pro-forma stock-based compensation costs under the fair value
method, net of related tax (7,683)
Pro-forma income applicable to common shares under the
fair-value method 79,190 51,991
Earnings per common share
Basic earnings per share reported 0.02 0.02
Diluted earnings per share reported 0.02 0.01
Pro-forma basic earnings per share under the fair value method 0.02 0.02
Pro-forma diluted earnings per share under the fair value method 0.02 0.01
Weighted average Black-Scholes fair value assumptions:
Risk free rate 4.0%-5.2% 4.0%-5.2%
Expected life 5-10 yrs 5-10 yrs
Expected volatility 50.0% 50.0%
Expected dividend yield 0.0% 0.0%
4
(3) Acquisitions
On February 28, 2003 we entered into an agreement with Hy-Bon
Engineering Company, Inc. ("Hy-Bon") pursuant to which we agreed to purchase and
Hy-Bon agreed to sell 28 of it's compressor packages. The adjusted purchase
price amounted to approximately $2,140,000. As part of the purchase and sale
agreement, Hy-Bon will withdraw as a member of Hy-Bon Rotary Compression, L.L.C.
effective as of January 1, 2003. We, as the other member of Hy-Bon Rotary
Compression, L.L.C., will retain all assets of Hy-Bon Rotary Compression, L.L.C.
that as of December 31, 2002, had an unaudited aggregate value of $346,511. We
plan to dissolve Hy-Bon Rotary Compression, L.L.C. and have agreed not to
operate under the name Hy-Bon.
(4) Long Term Debt
We entered into a new loan agreement with our bank, as of March 26,
2003 that included new borrowing of $2,150,000 in the form of a term loan with
monthly principal payments of $35,833 with interest at 1% over prime for 60
months. The proceeds from this new borrowing were used to purchase the 28 gas
compressors from Hy-Bon Engineering Company Inc. The new loan agreement also
included the renewal of our line of credit for $750,000 with interest at 1% over
prime for one year.
(5) Segment information
FAS No. 131, Disclosures about Segments of an Enterprise and Related
Information, establishes standards for public companies relating to the
reporting of information about their operating segments in financial statements.
Operating segments are components of an enterprise about which separate
financial information is available that is evaluated regularly by chief
operating decision-makers in deciding how to allocate resources and in assessing
performance.
Our segment information is set forth in the following table:
Natural Gas
(in thousands) Rotary NGE Great Lakes Services
Gas Leasing Compression Group Total
Three Months Ended ----------- ----------- ----------- ----------- -----------
March 31, 2003
Revenue $ 444 $ 859 $ 1,041 $ -- $ 2,344
Inter-segment revenue 1,407 17 5 -- 1,429
Net Income (43) 333 129 (301) 118
Segment Assets 4,201,698 12,793,607 8,852,262 463,024 26,310,591
Natural Gas
(in thousands) Rotary NGE Great Lakes Services
Gas Leasing Compression Group Total
Three Months Ended ----------- ----------- ----------- ----------- -----------
March 31, 2002
Revenue $ 867 $ 499 $ 1,324 $ -- $ 2,690
Inter-segment revenue 1,417 -- 1,417
Net Income 17 233 54 (208) 96
Segment Assets 2,496,603 5,628,512 9,127,166 2,316,022 19,568,303
5
(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
March 31,
--------------------------
2003 2002
----------- -----------
Basic earnings per share Numerator:
Net income $ 117,883 $ 96,176
Less: dividends on preferred shares (31,010) (44,185)
----------- -----------
Net income available to common shareholders $ 86,873 $ 51,991
=========== ===========
Denominator -
Common shares outstanding 4,857,632 3,357,632
=========== ===========
Basic earnings per share $ 0.02 $ 0.02
=========== ===========
Diluted earnings per share Numerator:
Net income $ 117,883 $ 96,176
Less: dividends on preferred shares (1) (31,010) (44,185)
----------- -----------
Net income available to common shareholders $ 86,873 $ 51,991
=========== ===========
Denominator :
Common shares outstanding 4,857,632 3,357,632
Common stock options and warrants 201,824 440,544
Conversion of preferred shares (1) -- --
----------- -----------
5,059,456 3,798,176
=========== ===========
Diluted earnings per share $ 0.02 $ 0.01
=========== ===========
(1) preferred shares were anti-dilutive for the three months ended March 31,
2003 and 2002
Management's Discussion and Analysis
Overview
We include the operations of Rotary Gas Systems, NGE Leasing and Great
Lakes Compression. These entities provide products and services to the oil and
gas industry and are 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. We are the parent company and provide
administrative and management support and, therefore, have expenses associated
with that activity.
6
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 gas compressors.
At March 31, 2003, we had cash and cash equivalents of $1,611,000,
working capital of $1,445,000 and non-subordinated debt of $9,334,000 of which
approximately $2,224,000 was classified as current. We had negative net cash
flow from operating activities of approximately $133,000 during the first three
months of 2003. This was primarily from net income of $118,000 plus depreciation
and amortization of $362,000, an increase in accounts payable and accrued
liabilities of $147,000, an increase in deferred taxes of $84,000 and an
increase in deferred income of $106,000 offset by an increase in inventory of
$658,000 and receivable of $335,000.
On October 24, 2002 we paid off the note of $6,952,464 payable to
Dominion Michigan, used for the acquisition of the compression related assets of
Great Lakes Compression. $3,452,464 of the funds to pay the note came from the
proceeds of our initial public offering, and $3,500,000 came from additional
bank financing to be amortized over 60 months at prime plus 1%.
We entered into a new loan agreement with our bank, dated as of March
26, 2003. This included new borrowing of $2,150,000 in the form of a term loan
with monthly principal payments of $35,833 with interest at 1% over prime for 60
months. The proceeds from this new borrowing were used to purchase the 28 gas
compressors from Hy-Bon. The new loan agreement also included the renewal of our
line of credit for $750,000 with interest at 1% over prime for one year. No
funds have been drawn under the line of credit as of March 31, 2003
Funds from the initial public offering, which closed on October 24,
2002, will permit us to actively pursue adding gas compressors to our rental
fleet. We expect to fund additional rental units though the use of the offering
proceeds, additional bank debt and cash flow from operations.
A summary of the use of proceeds from our initial public offering as of
March 31, 2003 is as follows:
o $3,452,464 million to reduce indebtedness;
o $1,801,714 for the manufacture of gas compressors to be placed
in our rental fleet, and
o $1,268,992 in temporary investments.
Results of Operations
Three Months Ended March 31, 2003 Compared to the Three Months Ended March 31,
2002
Natural Gas
(in thousands) Rotary NGE Great Lakes Services
Gas Leasing Compression Group Total
----------- ----------- ----------- ----------- -----------
Three Months Ended
March 31, 2003
Revenue $ 444 $ 859 $ 1,041 $ -- $ 2,344
Inter-segment revenue 1,407 17 5 -- 1,429
Gross margin 203 631 380 -- 1,214
Selling, general and administrative
expense 210 41 65 204 520
Depreciation and amortization
Expense 34 164 158 5 361
Operating income (loss) (41) 426 157 (209) 333
Interest expense 1 100 45 8 154
Other income or (expense) (1) 7 17 23
Provision for income tax 84 84
----------- ----------- ----------- ----------- -----------
Net Income (loss) $ (43) $ 333 $ 129 $ (301) $ 118
=========== =========== =========== =========== ===========
7
Three Months Ended
March 31, 2002
Revenue 867 499 $ 1,324 $ -- $ 2,690
Inter-segment revenue 1,417 -- 1,417
Gross margin 246 362 402 -- 1,010
Selling, general and administrative
expense 199 38 61 101 399
Depreciation and amortization
expense 29 86 130 9 254
Operating income (loss) 18 238 211 (110) 357
Interest expense 2 89 157 9 257
Equity in earnings from joint venture 83 83
Other income or (expense) 1 1 2
Provision for income tax 89 89
----------- ----------- ----------- ----------- -----------
Net income (loss) 17 $ 233 54 $ (208) $ 96
=========== =========== =========== =========== ===========
----------------------------
Rotary Gas Systems Operations
Revenue from outside sources decreased $423,000 or 49% for the three
months ended March 31, 2003 compared to the same period ended March 31, 2002.
Because our products are custom-built, fluctuations in revenue from outside
sources are expected. This decrease was the result of a reduction in the sale of
compressor and flare units to third parties.
The gross margin percentage increased from 28% for the three months
ended March 31, 2002, to 46% for the same period ended March 31, 2003. This
increase resulted mainly from a change in the sales product mix. Our product mix
in the three months ended March 31, 2003 included a larger percentage of
rebuild, parts and service which have a greater margin than compressor unit
sales.
Selling, general and administrative expense increased from $199,000 to
$210,000 or 6% for the three months ended March 31, 2002, as compared to the
same period ended March 31, 2003. This was mainly the result of the increase in
advertising and other selling expenses.
Depreciation expense increased 17% from $29,000 to $34,000 for the
three months ended March 31, 2002, compared to the same period ended March 31,
2003. This increase was mainly due to the purchase of additional service
vehicles, shop and office equipment.
There was a slight decrease in interest expense for the three months
ended March 31, 2003 compared to the same period ended March 31, 2002, mainly
due to the reduction in loan balances on vehicles.
NGE Leasing Operations
Revenue from our rental of natural gas compressors increased 72% for
the three months ended March 31, 2003, compared to the same period in 2002. This
increase is the result of units added to our rental fleet. From March 31, 2002
to March 31, 2003 we added 128 gas compressor units to our rental fleet, which
included the 28 units we purchased from Hy-Bon as of February 28, 2003.
8
The gross margin percentage remained constant at 73% for three months
ending March 31, 2002 as compared to the same period ending 2003.
Selling, general and administrative expense increased from $38,000 to
$41,000 for the three months ended March 31, 2003, as compared to the same
period in 2002. This was mainly the result of an increase in sales commissions
from increased rental revenue.
Depreciation expense increased 91% from $86,000 to $164,000 for the
three months ended March 31, 2002, compared to the same period ended March 31,
2003. This increase was the result of new gas compressor rental units being
added to the rental fleet during the period.
There was an increase in interest expense from $89,000 to $100,000 for
the three months ended March 31, 2003 as compared to the same period ended March
31, 2002. This is mainly as a result of an increase in bank debt used to build
equipment for the rental fleet.
Great Lakes Compression
Revenue decreased 21% for the three months ended March 31, 2003,
compared to the same period in 2002. This decrease resulted from a decrease in
the sales of compression units to third parties. In the period ended March 31,
2002 we had unit sales of approximately $148,000 to third parties while in the
same period 2003 we had zero unit sales to third parties. Because our products
are custom-built, fluctuations in revenue from outside sources are expected.
The gross margin percentage increased from 30% for the three months
ending March 31, 2002 to 37% for the same period in 2003. The cost of revenue is
comprised of expenses associated with the maintenance of the gas compressor
rental activity, service, parts and manufacturing expenses. This increase
resulted mainly from a change in the sales product mix.
Selling, general and administrative expense increased from $61,000 to
$65,000 for the three months ended March 31, 2002, as compared to the same
period in 2003. This is mainly the result of a increase in selling expense.
Depreciation expense increased from $130,000 to $158,000 for the three
months ended March 31, 2002, compared to the same period ended March 31, 2003.
The increase is the result of equipment that was added to the rental fleet.
There was a decrease in interest expense from $157,000 to $45,000 for
the three months ended March 31, 2002 as compared to the same period ended March
31, 2003. This decrease resulted from a reduction of the debt owed to Dominion
Michigan. Part of the proceeds from our initial public offering was used to
reduce debt in the amount of $3,452,464 and our bank financed the remaining
balance.
Natural Gas Services Group
Selling, general and administrative expense increased from $101,000 to
$204,000 or 103% for the three months ended March 31, 2002, as compared to the
same period ended March 31, 2003. This was mainly the result of an added expense
for being a publicly held company such as legal fees, auditor fees, underwriters
and public relations fees.
Amortization and depreciation expense decreased from $9,000 to $5,000
or 44% for the three months ended March 31, 2002 compared to the same period
ended March 31, 2003. This mainly resulted from vehicles that were moved to our
subsidiary, Great Lakes Compression.
9
Interest expense decreased from $9,000 to $8,000 or 11% for the three
months ended March 31, 2002 compared to the same period ended March 31, 2003.
This decrease resulted from a reduction in interest rate.
Provision of income tax is accounted for on a consolidated basis.
Therefore, the tax for all companies is included in the Provision for income tax
for Natural Gas Services Group. Provision for income tax decreased $5,000 or 6%
which is consistent with and pursuant to changes in state and federal tax
statutes.
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 a date (the "Evaluation Date") within 90 days prior to the filing
date of this report. Based upon that evaluation, our chief executive officer and
chief financial officer concluded that, as of the Evaluation Date, our
disclosure controls and procedures are effective in timely alerting them to the
material information relating to us and our consolidated subsidiaries required
to be included in our periodic filings with the SEC.
(b) Changes in internal controls.
There were no significant changes made in our internal controls during the
period covered by this report or, to our knowledge, in other factors that could
significantly affect these controls subsequent to the date of their evaluation.
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
On October 21, 2002, our Registration Statement (File No. 333-88314) was
declared effective.
Since October 21, 2002, we have incurred an aggregate of approximately
$1,345,830 of expenses in connection with the offering, including underwriting
discounts ($708,750), expenses paid to or for the underwriter ($157,500), and
other expenses of the offering ($479,680). Such amounts were not paid directly
or indirectly to the directors, the officers or to persons owning 10% or more of
any class of our equity securities or to our affiliates. Rather, such payments
were to others. After deducting the total expenses, we received net offering
proceeds of approximately $6,529,170. Through March 31, 2003, the net offering
proceeds have been used for:
o $3,458,464 to reduce indebtedness;
o $1,801,714 for the manufacture of gas compressors to be placed
in our rental fleet and leased over the next one to two years;
and
o $1,268,992 the remainder for working capital.
10
NATURAL GAS SERVICES GROUP, INC.
Commission File Number: 1-31398
Quarter Ended March 31, 2003
Form 10-QSB
Exhibits and Reports on Form 8-K
(a) Exhibits
2.1 Purchase and Sale Agreement by and between Hy-Bon Engineering
Company, Inc. and NGE Leasing, Inc. (previously filed as
Exhibit 2.1 to Natural Gas Services Group, Inc. Current Report
on Form 8-K filed on March 6, 2003, File No. 1-31398, and
incorporated herein by reference)
10.1 First Amended and Restated Loan Agreement between Natural Gas
Services Group, Inc. and Western National Bank (previously
filed as Exhibit 10.1 to Natural Gas Services Group, Inc.
Current Report on Form 8-K filed on April 14, 2003, File No.
1-31398, and incorporated herein by reference)
99.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C.
Sections 1350
99.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C.
Sections 1350
(b) Reports on Form 8-K
On March 6, 2003, we filed a Current Report on Form 8-K dated
February 28,2003, with the Securities Exchange Commission
under Item 5. Other Events to report our purchase of assets
and LLC interest from Hy-Bon Engineering Company, Inc.
On April 14, 2003, we filed a Current Report on Form 8-K dated
March 27, 2003, with the Securities Exchange Commission under
Item 5. Other Events to report the execution of the First
Amended a Restated Loan Agreement with Western National Bank.
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/ Wayne L. Vinson
---------------------
Wayne L. Vinson
President and Chief Executive
Officer
By: /s/ Earl R. Wait
---------------------
Earl R. Wait
Chief Financial Officer
And Treasurer
May ___, 2003
11
NATURAL GAS SERVICES GROUP, INC.
CERTIFICATION
I, Wayne L. Vinson, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Natural Gas
Services Group, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
(a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: May ___, 2003 /s/WayneL. Vinson
--------------------------------
Wayne L. Vinson
Title: Chief Executive Officer
12
NATURAL GAS SERVICES GROUP, INC.
CERTIFICATION
I, Earl R. Wait, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Natural Gas
Services Group, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
(a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: May __, 2003 /s/Earl R. Wait
------------------------------
Earl R. Wait
Title: Chief Financial Officer
13
EXHIBIT INDEX
2.1 Purchase and Sale Agreement by and between Hy-Bon Engineering Company,
Inc. and NGE Leasing, Inc. (previously filed as Exhibit 2.1 to Natural
Gas Services Group, Inc. Current Report on Form 8-K filed on March 6,
2003, File No. 1-31398, and incorporated herein by reference)
10.1 First Amended and Restated Loan Agreement between Natural Gas Services
Group, Inc. and Western National Bank (previously filed as Exhibit 10.1
to Natural Gas Services Group, Inc. Current Report on Form 8-K filed on
April 14, 2003, File No. 1-31398, and incorporated herein by reference)
99.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section
1350
99.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section
1350
14