Stabilis Energy, Inc. (Form: 10-Q, Received: 11/12/2019 17:20:34)

M/G FINANCE CO., LTD.

By: MGFC, LLC, its general partner

Stabilis Energy Services, LLC

a TX Limited Liability Company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

____________________

FORM 10-Q

____________________



☒	QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED September 30, 2019



☐	TRANSITION REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

Commission File No. 000-24575

____________________

STABILIS ENERGY, INC.

(Exact name of registrant as specified in its charter)

____________________



Florida	59-3410234
(State or other jurisdiction of incorporation)	(I.R.S. Employer Identification No.)

10375 Richmond Avenue, Suite 700, Houston, TX 77042

(Address of principal executive offices)

(832) 456-6500

(Registrant’s telephone number)



Title of each class	Trading symbol	Name of each exchange on which registered
Common Stock, $.001 par value per share	SLNG	The OTCQX Best Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (S. 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:



Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☒

Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 11, 2019, there were 16,800,612 outstanding shares of our common stock, par value $.001 per share.

STABILIS ENERGY, INC. AND SUBSIDIARIES

FORM 10-Q Index

For the Quarterly Period Ended September 30, 2019



		Page
	Part I. Financial Information
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Operations	5
	Condensed Consolidated Statements of Comprehensive Loss	6
	Condensed Consolidated Statements of Stockholders’ Equity	7
	Condensed Consolidated Statements of Cash Flows	8
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	38
Item 4.	Controls and Procedures	39
	Part II. Other Information
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 5.	Other Information	40
Item 6.	Exhibits	40
Signatures		44

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This document includes statements that constitute forward-looking statements within the meaning of the federal securities laws. These statements are subject to risks and uncertainties. These statements may relate to, but are not limited to, information or assumptions about us, our capital and other expenditures, dividends, financing plans, capital structure, cash flow, our recent business combination, pending legal and regulatory proceedings and claims, including environmental matters, future economic performance, operating income, cost savings, and management’s plans, strategies, goals and objectives for future operations and growth. These forward-looking statements generally are accompanied by words such as “intend,” “anticipate,” “believe,” “estimate,” “expect,” “should,” “seek,” “project,” “plan” or similar expressions. Any statement that is not a historical fact is a forward-looking statement. It should be understood that these forward-looking statements are necessarily estimates reflecting the best judgment of senior management, not guarantees of future performance. They are subject to a number of assumptions, risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statements. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements described in Part II. “Item 1A. Risk Factors” in this document.

Forward-looking statements represent intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. In addition to the risk factors and other cautionary statements described in Part II. “Item 1A. Risk Factors” in this document, the factors include:


•	our ability to execute our business strategy;


•	our limited operating history;


•	our ability to obtain additional financing to effect our strategy;


•	loss of one or more of our customers;


•	cyclical or other changes in the demand for and price of LNG and natural gas;


•	operational, regulatory, environmental, political, legal and economic risks pertaining to the construction and operation of our facilities;


•	hurricanes or other natural or man-made disasters;


•	dependence on contractors for successful completions of our energy related infrastructure;


•	reliance on third party engineers;


•	competition from third parties in our business;


•	failure of LNG to be a competitive source of energy in the markets in which we operate, and seek to operate;


•	increased labor costs, and the unavailability of skilled workers or our failure to attract and retain qualified personnel;


•	a major health and safety incident relating to our business;


•	failure to obtain and maintain approvals and permits from governmental and regulatory agencies including with respect to our planned operational expansion in Mexico;


•	changes to health and safety, environmental and similar laws and governmental regulations that are adverse to our operations;


•	volatility of the market price of our common stock; and


•	our ability to integrate successfully the businesses of Stabilis Energy, LLC and American Electric Technologies, Inc. (as defined below) and additional acquisitions in the expected timeframe.

Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in the forward-looking statements contained herein. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. All forward-looking statements included in this document are expressly qualified in their entirety by the cautionary statements contained or referred to in this document. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue.

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Stabilis Energy, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands, except share and per share data)



	September 30, 2019			December 31, 2018
Assets
Current assets:
Cash and cash equivalents	$	4,516		$	1,247
Accounts receivable, net	4,707			4,359
Inventories, net	107			106
Prepaid expenses and other current assets	3,868			2,115
Due from related parties	1			22
Total current assets	13,199			7,849
Property, plant and equipment, net	62,617			66,606
Right-of-use assets	1,002			—
Goodwill	4,960			—
Investments in foreign joint ventures	9,268			—
Other noncurrent assets	402			250
Total assets	$	91,448		$	74,705
Liabilities and Equity
Current liabilities:
Current portion of long-term notes payable	$	1,000		$	2,500
Current portion of finance lease obligation - related parties	4,662			3,879
Current portion of operating lease obligations	340			—
Short-term notes payable	831			121
Accrued liabilities	5,395			2,913
Accounts payable and other accrued expenses	4,298			2,684
Total current liabilities	16,526			12,097
Long-term notes payable, net of current portion	1,077			6,577
Long-term notes payable, net of current portion - related parties	5,000			—
Finance lease obligations, net of current portion - related parties	3			3,367
Long-term portion of operating lease obligations	682			—
Total liabilities	23,288			22,041
Commitments and contingencies (Note 14)
Equity:
Preferred Stock; $0.001 par value, 1,000,000 shares authorized, no shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively (Note 17)	—			—
Stockholders’ equity:
Common stock; $0.001 par value, 37,250,000 shares authorized, 16,800,612 and 13,178,750 shares issued and 16,800,612 and 13,178,750 shares outstanding at September 30, 2019 and December 31, 2018, respectively (Note 15)	17			13
Additional paid-in capital	90,748			68,244
Accumulated other comprehensive loss	(530		)	—
Accumulated deficit	(22,075		)	(16,916		)
Total stockholders’ equity	68,160			51,341
Noncontrolling interest	—			1,323
Total Equity	68,160			52,664
Total liabilities and equity	$	91,448		$	74,705

The accompanying notes are an integral part of the condensed consolidated financial statements.

Stabilis Energy, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)

(in thousands, except share and per share data)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Revenue
LNG product	$	7,919		$	6,914		$	26,872		$	21,812
Rental, service and other	2,595			1,087			7,712			4,754
Total revenues	10,514			8,001			34,584			26,566
Operating expenses:
Cost of LNG product	5,191			5,098			18,289			17,046
Cost of rental, service and other	2,436			1,121			5,546			3,476
Selling, general and administrative expenses	3,834			1,607			8,037			4,667
Depreciation expense	2,307			2,190			6,892			6,573
Total operating expenses	13,768			10,016			38,764			31,762
Loss from operations before equity income	(3,254		)	(2,015		)	(4,180		)	(5,196		)
Net equity income from foreign joint ventures' operations:
Income from equity investments in foreign joint ventures	187			—			187			—
Foreign joint ventures' operations related expenses	(52		)	—			(52		)	—
Net equity income from foreign joint ventures' operations	135			—			135			—
Loss from operations	(3,119		)	(2,015		)	(4,045		)	(5,196		)
Other income (expense):
Interest expense, net	(339		)	(1,202		)	(947		)	(3,482		)
Other income	124			—			61			352
Gain from disposal of fixed assets	17			—			17			162
Total other income (expense)	(198		)	(1,202		)	(869		)	(2,968		)
Loss before income tax expense	(3,317		)	(3,217		)	(4,914		)	(8,164		)
Income tax expense	38			—			38			—
Net loss	(3,355		)	(3,217		)	(4,952		)	(8,164		)
Net income (loss) attributable to noncontrolling interests	—			(130		)	207			(84		)
Net loss attributable to controlling interests	$	(3,355	)	$	(3,087	)	$	(5,159	)	$	(8,080	)

Common Stock Data:
Net loss per common share:
Basic and diluted	$	(0.22	)	$	(0.82	)	$	(0.37	)	$	(2.14	)
Weighted average number of common shares outstanding:
Basic and diluted	15,070,733			3,767,674			13,816,341			3,767,674

The accompanying notes are an integral part of the condensed consolidated financial statements.

Stabilis Energy, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Loss

(Unaudited)

(in thousands)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Net loss	$	(3,355	)	$	(3,217	)	$	(4,952	)	$	(8,164	)
Foreign currency translation adjustment	(530		)	—			(530		)	—
Total comprehensive loss	$	(3,885	)	$	(3,217	)	$	(5,482	)	$	(8,164	)

The accompanying notes are an integral part of the condensed consolidated financial statements.

Stabilis Energy, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

(in thousands, except share data)



	Common Stock
	Shares	Amount		Additional Paid-in Capital		Accumulated Other Comprehensive Loss			Accumulated Deficit			Non-controlling Interest			Total
Balance at December 31, 2018	13,178,750	$	13	$	68,244	$	—		$	(16,916	)	$	1,323		$	52,664
Net income (loss)	—	—		—		—			(738		)	179			(559		)
Balance at March 31, 2019	13,178,750	13		68,244		—			(17,654		)	1,502			52,105
Net income (loss)	—	—		—		—			(1,066		)	28			(1,038		)
Balance at June 30, 2019	13,178,750	13		68,244		—			(18,720		)	1,530			51,067
Recapitalization due to reverse merger	1,466,092	1		12,618		—			—			(1,530		)	11,089
Shares issued in extinguishment of debt	1,470,807	2		6,887		—			—			—			6,889
Shares issued in acquisition of Diversenergy	684,963	1		2,999		—			—			—			3,000
Net loss	—	—		—		—			(3,355		)	—			(3,355		)
Other comprehensive loss	—	—		—		(530		)	—			—			(530		)
Balance at September 30, 2019	16,800,612	$	17	$	90,748	$	(530	)	$	(22,075	)	$	—		$	68,160



	Common Stock
	Shares	Amount		Additional Paid-in Capital		Accumulated Other Comprehensive Income		Accumulated Deficit			Non-controlling Interest			Total
Balance at December 31, 2017	3,767,674	$	4	$	19,510	$	—	$	(5,872	)	$	1,365		$	15,007
Net loss	—	—		—		—		(1,704		)	203			(1,501		)
Balance at March 31, 2018	3,767,674	4		19,510		—		(7,576		)	1,568			13,506
Net loss	—	—		—		—		(3,287		)	(157		)	(3,444		)
Balance at June 30, 2018	3,767,674	4		19,510		—		(10,863		)	1,411			10,062
Net loss	—	—		—		—		(3,087		)	(130		)	(3,217		)
Balance at September 30, 2018	3,767,674	$	4	$	19,510	$	—	$	(13,950	)	$	1,281		$	6,845

The accompanying notes are an integral part of the condensed consolidated financial statements.

Stabilis Energy, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)



	Nine Months Ended September 30,
	2019			2018
Cash flows from operating activities:
Net loss	$	(4,952	)	$	(8,164	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	6,892			6,573
Gain on disposal of fixed assets	(17		)	(162		)
Bad debt expense	147			—
Gain on extinguishment of debt	(116		)	—
Income from equity investment in joint venture	(187		)	—
Interest expense restructured to debt	—			3,258
Change in operating assets and liabilities, net of acquisitions:
Accounts receivable	1,823			(55		)
Due to/(from) related parties	113			(2,148		)
Inventories	67			(28		)
Prepaid expenses and other current assets	(1,184		)	(590		)
Accounts payable and accrued liabilities	1,117			(199		)
Other	18			45
Net cash provided by (used in) operating activities	3,721			(1,470		)
Cash flows from investing activities:
Acquisition of fixed assets	(2,103		)	(819		)
Proceeds on sales of fixed assets	125			800
Acquisition of American Electric, net of cash received	(1,876		)	—
Acquisition of Diversenergy, net of cash received	611			—
Net cash used in investing activities	(3,243		)	(19		)
Cash flows from financing activities:
Proceeds on long-term borrowings from related parties	5,000			4,603
Payments on long-term borrowings from related parties	(2,582		)	(1,233		)
Payments on long-term borrowings	—			(2,420		)
Proceeds from short-term notes payable	767			408
Payments on short-term notes payable	(394		)	(452		)
Net cash provided by financing activities	2,791			906
Net increase (decrease) in cash and cash equivalents	3,269			(583		)
Cash and cash equivalents, beginning of period	1,247			1,488
Cash and cash equivalents, end of period	$	4,516		$	905

Supplemental disclosure of cash flow information:
Interest paid	$	1,108		$	1,121
Income taxes paid	—			—
Non-cash investing and financing activities:
Extinguishment of long-term debt	$	7,000		$	—
Equipment acquired under capital leases	—			1,335

The accompanying notes are an integral part of the condensed consolidated financial statements

STABILIS ENERGY, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

1. Overview and Basis of Presentation

Overview

Stabilis Energy, Inc. and its subsidiaries (the “Company”, “Stabilis”, “our”, “us” or “we”) produce, market, and sell liquefied natural gas (“LNG”). The Company also resells liquefied natural gas from third parties and provides services, transportation, and equipment to customers.

The Company is a supplier of LNG to the industrial, midstream, and oilfield sectors in North America and provides turnkey fuel solutions to help industrial users of propane, diesel and other crude-based fuel products convert to LNG, which may result in reduced fuel costs and improved environmental footprint. Stabilis opened its 120,000 gallons per day ("gpd") LNG production facility in George West, Texas in January 2015 to service industrial and oilfield customers in Texas and the greater Gulf Coast region. The Company owns a second liquefaction plant capable of producing 25,000 gpd that is being relocated and currently not in operation. Stabilis is vertically integrated from LNG production through distribution including cryogenic equipment rental and field services.

As a result of the business combination with American Electric Technologies, Inc. (“American Electric”) discussed below, we also provide power delivery solutions to the global energy industry through our wholly-owned subsidiary in Brazil, M&I Electric Brazil Sistemas e Servicios em Energia LTDA (“M&I Brazil”) and our joint venture in China, BOMAY Electric Industries Co., Ltd. (“BOMAY”) with a subsidiary of China National Petroleum Company.

On July 26, 2019 (the “Effective Date”), the Share Exchange with American Electric and its subsidiaries was completed. In the Share Exchange, American Electric acquired directly 100% of the outstanding limited liability company membership interests of Stabilis Energy, LLC (“Stabilis LLC”) from LNG Investment Company, LLC ("LNG Investment") and 20% of the outstanding limited liability membership interests of PEG Partners, LLC ("PEG") from AEGIS NG LLC ("AEGIS"). AEGIS owned a 20% noncontrolling interest of PEG. The remaining 80% of the outstanding limited liability company interests of PEG were owned directly by Stabilis LLC. As a result, Stabilis became a direct 100% owned subsidiary of American Electric and Prometheus became an indirectly-owned 100% subsidiary of American Electric. Under the Share Exchange Agreement entered into on December 17, 2018 and amended on May 8, 2019, (as amended, the “Share Exchange Agreement”), American Electric issued 13,178,750 post-split shares of common stock to acquire Stabilis LLC, which represented approximately 90% of the total amount of common stock of American Electric which was issued and outstanding as of July 26, 2019. The proposed transaction was approved by the shareholders of American Electric at a Special Meeting of Stockholders. The Share Exchange resulted in a change of control of American Electric to control by Casey Crenshaw by virtue of his beneficial ownership of 88.4% of the common stock of American Electric to be outstanding as of July 26, 2019.

Immediately following the Effective Date, the Company effectuated a reverse stock split of its outstanding common stock at a ratio of one-for-eight, American Electric changed its name to Stabilis Energy, Inc., and our common stock began trading under the ticker symbol “SLNG”.

Because the former owners of Stabilis LLC own 88.4% of the voting stock of the combined company and certain other factors including that directors designated by LNG Investment will constitute a majority of the board of directors, Stabilis LLC is considered to be acquiring American Electric in the Share Exchange for accounting purposes. As a result, the Share Exchange will be treated by American Electric as a reverse acquisition under the purchase method of accounting in accordance with United States generally accepted accounting principles (“US GAAP”). In addition, the Company’s shares outstanding now reflect a one-for-eight reverse split. Unless otherwise noted, any share or per share amounts in the accompanying unaudited condensed consolidated financial statements and related notes give retroactive effect to the reverse stock split. For further information regarding this transaction, see Note 3.

Basis of Presentation

The financial information represents the historical results of Stabilis for periods prior to the transaction. The operations of American Electric are included in our financial statements from the completion of the Share Exchange on July 26, 2019. The accompanying interim unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to state fairly the Company’s consolidated financial position as of September 30, 2019, and results of operations for the three and nine months ended September 30, 2019 and 2018, and cash flows for the nine months ended September 30, 2019 and 2018. All

intercompany accounts and transactions have been eliminated in consolidation. The results of operations for the nine-month periods ended September 30, 2019 and 2018 are not necessarily indicative of the results to be expected for the year ending December 31, 2019 or for any other interim period or for any future year.

Certain information and disclosures normally included in the notes to consolidated financial statements have been condensed or omitted, but the resultant disclosures contained herein are in accordance with US GAAP as they apply to interim reporting. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the year ended December 31, 2018 included in the Company's Current Report filed as Form 8-K/A on October 7, 2019.

The accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40), effective January 1, 2017, which requires the Company to make certain disclosures if it concludes that there is substantial doubt about the entity’s ability to continue as a going concern within one year from the date of the issuance of these financial statements. The Company has incurred recurring operating losses and has negative working capital. The Company is subject to substantial business risks and uncertainties inherent in the current LNG industry. There is no assurance that the Company will be able to generate sufficient revenues in the future to sustain itself or to support future growth.

These factors were reviewed by management to determine if there was substantial doubt as to the Company’s ability to continue as a going concern. Management concluded that its plan to address the Company’s liquidity issues would allow it to continue as a going concern. Those plans include projected positive cash flows from operations and steps to reduce the Company's debt.

Cash flows from operations have continued to improve due to sales volumes. Management believes that its business will continue to grow and will generate sufficient cash flows to fund future operations.

On November 30, 2018, related party debt holders converted $48.7 million of debt to equity to improve the Company’s financial position and reduce its future debt service requirements. In August 2017 the Company negotiated and amended to its promissory note to Chart Industries, Inc. (“Chart”). This amendment reduced and extended its mandatory debt service payments to provide future payments that management believes are sustainable based on current and projected operating performance. On August 5, 2019, we entered into an exchange agreement with Chart for the satisfaction of indebtedness in the principal amount of $7 million in exchange for shares of our common stock. Additionally, on August 16, 2019, the Company issued a Secured Promissory Note to M/G Finance Co., Ltd. in the principal amount of $5 million,

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates include the carrying amount of contingencies, valuation allowances for receivables, inventories, and deferred income tax assets, and valuations assigned to assets and liabilities in business combinations. Actual results could differ from those estimates, and these differences could be material to the consolidated financial statements.

Reclassifications

Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation. Such reclassifications had no effect on the Company’s financial position, results of operations or cashflows.

2. Recent Accounting Pronouncements

In July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842): Targeted Improvements. ASU No. 2018-11 provides entities with an additional (and optional) transition method to adopt the new lease standard. Under this new transition method, an entity initially applies the new leases standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Consequently, an entity’s reporting for the comparative periods presented in the financial statements in which it adopts the new leases standard will continue to be in accordance with current U.S. GAAP (Topic 840, Leases). ASU No. 2018-11 also provide lessors with a practical expedient, by class of underlying asset, to not separate non-lease components from the associated lease component and, instead, to account for those components as a single component if the

non-lease components otherwise would be accounted for under the new revenue guidance (Topic 606) and certain criteria are met: If the non-lease component or components associated with the lease component are the predominant component of the combined component, an entity is required to account for the combined component in accordance with Topic 606. Otherwise, the entity must account for the combined component as an operating lease in accordance with Topic 842. The amendments in ASU No. 2018-11 are effective at the same time as the amendments in ASU No. 2016-02 discussed below.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. ASU No. 2017-01 clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of a business or as acquisitions (or disposals) of assets. ASU No. 2017-01 is effective for annual periods beginning after December 15, 2018, with early adoption permitted under certain circumstances. The amendments of ASU No. 2017-01 were adopted by the Company effective January 1, 2019. The adoption of this standard had no impact on our consolidated financial position or results of operations, as the adoption is applied on a prospective basis.

In February 2016, the FASB issued ASU No. 2016-02, Leases, which requires lessees to recognize the following for all leases (with the exception of short-term leases) at the commencement date: (1) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) a right-of- use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Under this new guidance, lessees are required to recognize assets and liabilities on the balance sheet for the rights and obligations created by all leases with lease terms of more than 12 months. We adopted this new standard as of January 1, 2019 using the modified retrospective transition method, applying the new standard to leases in place as of the adoption date. Prior periods have not been adjusted. The adoption of the new lease standard resulted in the recognition of lease liabilities and corresponding right-of-use assets of $0.2 million, on the condensed consolidated balance sheet as of January 1, 2019 for real and personal property operating leases. The adoption of ASU 2016-02 did not have a material impact on our consolidated results of operations and cash flows.

3. Acquisitions

American Electric. On July 26, 2019, we completed the Share Exchange with American Electric and its subsidiaries and began operating under the name Stabilis Energy, Inc. Because the former owners of Stabilis LLC own approximately 88.4% of the voting stock of the combined company and certain other factors, including that directors designated by LNG Investment, parent of Stabilis LLC, will constitute a majority of the board of directors, Stabilis is considered to be acquiring American Electric in the Share Exchange for accounting purposes. As a result, the Share Exchange will be treated by American Electric as a reverse acquisition under the purchase method of accounting in accordance with US GAAP. In addition, the Company’s shares outstanding now reflect a one-for-eight reverse split.

The completion of the Share Exchange positions the Company to become a leading North American small-scale LNG production and distribution company focused on consolidating existing LNG assets, as well as investing in new assets in the United States, Mexico, and Canada.

The aggregate consideration paid in connection with the Share Exchange was allocated to American Electric’s tangible and intangible assets and liabilities based on their fair market values at the time of the completion of the Share Exchange. The assets and liabilities and results of operations of American Electric are consolidated into the results of operations of Stabilis as of the completion of the Share Exchange.

The total purchase price of the Share Exchange is as follows:



Number of shares of the combined company to be owned by AETI stockholders	1,466,092
Multiplied by the fair value per share of AETI Common Stock	$	7.12
Cash	$	650,000
Purchase price	$	11,088,573

On July 26, 2019, American Electric had 1,173,914 shares of common stock outstanding. The number of shares of American Electric common stock includes the 1,173,914 outstanding, 276,549 shares to be issued prior to the completion of the Share Exchange for conversion of 1,000,000 shares of outstanding Series A Convertible Preferred Stock and 15,629 shares related to restricted stock units and deferred shares. The fair value of American Electric common stock used in determining the purchase price was $7.12 per share based on the closing price of American Electric’s common stock on July 26, 2019.

Consistent with the purchase method of accounting, the total purchase price is allocated to the acquired tangible and intangible assets and assumed liabilities of American Electric based on their estimated fair values as of the Share Exchange closing date. The excess of the purchase price over the fair value of the acquired assets and liabilities assumed is reflected as goodwill and is attributable to strategic advantages gained from the acquisition of a public entity with access to LNG markets in Brazil and China. All of the goodwill is assigned to the Power Delivery segment and is not expected to be deductible for income tax purposes.

The allocation of the purchase price for the acquired assets and liabilities of the proposed merger is as follows (in thousands):



Total purchase price	$	11,089
Current Assets	3,611
Property, plant and equipment, net	532
Investment in foreign joint venture	9,333
Other noncurrent assets	410
Total identifiable assets	13,886
Accounts payable and other accrued expenses	(3,221		)
Accrued liabilities and other current liabilities	(138		)
Other Liabilities	(84		)
Total liabilities assumed	(3,443		)
Goodwill	$	646

The following table presents summarized financial information of American Electric since July 26, 2019, the acquisition date.



	July 27 - September 30,
	2019
Revenue	$	1,371
Loss before income tax expense	(145		)
Net loss from continuing operations	(145		)

The following table presents preliminary unaudited pro forma results of operations reflecting the acquisition of American Electric as if the acquisition had occurred as of January 1, 2018. This information has been compiled from current and historical financial statements and is not necessarily indicative of the results that actually would have been achieved had the transaction occurred at the beginning of the periods presented or that may be achieved in the future.



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Revenue	$	11,302		$	9,934		$	38,543		$	32,451
Loss from operations	(3,335		)	(2,137		)	(4,862		)	(7,126		)
Net loss	(3,557		)	(3,450		)	(5,846		)	(10,328		)
Loss per common share - basic and diluted:	(0.24		)	(0.24		)	(0.40		)	(0.71		)

Diversenergy, LLC (“Diversenergy"). On August 20, 2019, we completed our acquisition of privately held Diversenergy and its subsidiaries. We purchased all of the issued and outstanding membership interests of Diversenergy for total consideration of 684,963 shares of Company common stock valued as of the closing date and $2 million in cash, subject to adjustments for Diversenergy’s net working capital as of the closing date. Diversenergy specializes in virtual LNG distribution systems, providing LNG to customers which use it as a fuel in mobile high horsepower applications and to customers which do not have natural gas pipeline access. The completion of the acquisition will expand the Company's presence in the distributed LNG and compressed natural gas (“CNG”) markets in Mexico.

Consistent with the purchase method of accounting, the total purchase price is allocated to the acquired tangible and intangible assets and assumed liabilities of Diversenergy based on their estimated fair values as of the closing date. The excess of the purchase price over the fair value of the acquired assets and liabilities assumed is reflected as goodwill and is attributable to the strategic

opportunities to grow the Company's LNG and CNG business in Mexico. All of the goodwill is assigned to the LNG segment and is not expected to be deductible for income tax purposes.

The aggregate consideration paid in connection with the acquisition has been allocated to Diversenergy's tangible and intangible assets and liabilities based on their fair market values at the time of the completion of the acquisition. The assets and liabilities and results of operations of Diversenergy are consolidated into the results of operations of Stabilis as of the completion of the Share Exchange.

The total purchase price of the Diversenergy acquisition is as follows:



Estimated number of shares issued to Diversenergy stockholders	684,963
Multiplied by the fair value per share of Stabilis Common Stock	$	4.38
Cash	$	2,000,000
Purchase price	$	5,000,000

The following table summarizes the preliminary allocation of the purchase price to the fair value of the respective assets and liabilities acquired (in thousands). The purchase price allocations were prepared on a preliminary basis and are subject to change as additional information becomes available concerning the fair value and tax basis of the assets acquired and liabilities assumed. Any measurement period adjustments to the purchase price allocation will be made as soon as practicable but no later than one year from the date of acquisition.



Total purchase price	$	5,000
Current Assets	164
Property, plant and equipment, net	507
Other noncurrent assets	114
Total identifiable assets	785
Current liabilities	(99		)
Total liabilities assumed	(99		)
Goodwill	$	4,314

Pro forma results of operations reflecting the Diversenergy acquisition as if it occurred as of the beginning of the periods presented in this report do not materially differ from actual reported results.

Energía Superior. On August 20, 2019, we established Energía Superior Gas Natural LLC (“Energía Superior”), as a joint venture with CryoMex Investment Group LLC (“CryoMex”), to pursue investments in distributed natural gas production and distribution assets in Mexico. CryoMex is led by Grupo CLISA, a Monterrey, Mexico-based developer and operator of businesses in multiple end markets including energy. We own a 50% interest in Energía Superior.

The Joint Venture plans to invest in LNG and compressed natural gas production, transportation, storage, and regasification assets that serve multiple end markets throughout Mexico, including the industrial, mining, pipeline, utility, marine, and over-the-road transportation markets.

See Note 9 for discussion of our investment in Energía Superior.

4. Revenue Recognition

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. This ASU supersedes the revenue recognition requirements in FASB ASC Topic 605, “Revenue Recognition”, and most industry-specific guidance and creates ASC Topic 606. This ASU provides guidance that an entity should recognize revenue to depict the 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 and services. On January 1, 2018, the Company adopted ASC 606 on a modified retrospective basis and applied the guidance to all of its contracts. As a result of the Company’s adoption, there were no changes to the timing of the recognition or measurement

of revenue, and there was no cumulative effect of adoption as of January 1, 2018. Therefore, the only changes to the financial statements related to the adoption is in the footnote disclosures as included herein.

Revenue is measured as consideration specified in a contract with a customer and excludes any sales incentives and amounts collected on behalf of third parties. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer. Amounts are billed upon completion of service or transfer of a product and are generally due within 30 days.

Revenues from contracts with customers are disaggregated into (1) LNG product and (2) Rental, service, and other.

LNG Product revenue generated includes the revenue from the product and delivery of the LNG to our customer’s location. The Company acts as a principal when using third party transportation companies and therefore recognizes the gross revenue for the delivery of LNG. Product contracts are established by agreeing on a sales price or transaction price for the related item. Revenue is recognized when the customer has taken control of the product. Payment terms for product contracts are generally within thirty days from the receipt of the invoice. Product revenue is recognized upon delivery of the related item 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 delivery of LNG.

Rental and Service revenue generated by the Company includes equipment and people provided to the customer to support the use of LNG and power delivery solutions in their application. Rental contracts are established by agreeing on a rental price or transaction price for the related piece of equipment and the rental period which is generally daily or monthly. The Company has the ability to substitute alternative assets throughout the period of use (i.e., the customer cannot prevent the Company from substituting an asset), and alternative assets are readily available and could be sourced within a reasonable period of time. 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. Payment terms for rental contracts are generally within thirty days from the receipt of the invoice. Performance obligations for rental revenue are considered to be satisfied as the rental period is completed based upon the terms of the related contract. LNG Service revenue generated by the Company consists of mobilization and demobilization of equipment and onsite technical support while customers are consuming LNG in their applications. Power Delivery Service revenue is generated from time and material projects and consulting services. Service revenue is billed based on contractual terms that can be based on an event (i.e. mobilization or demobilization) or an hourly rate. Revenue is recognized as the event is completed or work is done. Payment terms for service contracts are generally within thirty days from the receipt of the invoice. Performance obligations for service revenue are considered to be satisfied as the event is completed or work is done per the terms of the related contract. Other revenues include the resale of electrical and instrumentation equipment billed upon delivery and are generally due within thirty days from the receipt of the invoice.

All outstanding accounts receivable, net of allowance, on the consolidated balance sheet are typically due and collected within the next 30 days for our LNG business and 12 months for our Power Delivery business. Additionally, each month end the Company records unbilled revenue (a contract asset) related to our Power Delivery business based upon completed and partially completed performance obligations through month end providing the Company an unconditional right to payment for the services performed or products sold for the related period. The Company has no other material contract assets or liabilities and contract costs.

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

The table below presents revenue disaggregated by source, for the three and nine months ended September 30, 2019 and 2018 (in thousands):



	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
LNG Product	$	7,919	$	6,914	$	26,872	$	21,812
Rental, services and other	2,595		1,087		7,712		4,754
	$	10,514	$	8,001	$	34,584	$	26,566

5. Business Segments

The Company’s revenues are derived from two operating segments: LNG and Power Delivery. The LNG segment supplies LNG to the industrial, midstream, and oilfield sectors in North America and provides turnkey fuel solutions to help users of propane,

diesel and other crude-based fuel products convert to LNG. The Power Delivery segment provides power delivery solutions to the global energy industry through our wholly-owned subsidiary in Brazil and our joint venture in China.



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Revenues
LNG	$	9,143		$	8,001		$	33,213		$	26,566
Power Delivery	1,371			—			1,371			—
Total	10,514			8,001			34,584			26,566
Operating Income (Loss)
LNG	(2,988		)	(2,015		)	(3,914		)	(5,196		)
Power Delivery	(266		)	—			(266		)	—
Total	(3,254		)	(2,015		)	(4,180		)	(5,196		)
Depreciation
LNG	2,277			2,190			6,862			6,573
Power Delivery	30			—			30			—
Total	2,307			2,190			6,892			6,573
Income from equity investments in foreign joint ventures
LNG	—			—			—			—
Power Delivery	187			—			187			—
Total	$	187		$	—		$	187		$	—

							September 30, 2019			December 31, 2018
Assets
LNG							$	77,866		$	74,705
Power Delivery							13,582			—
Total							$	91,448		$	74,705

For the purposes of the operating segment disclosure, the Company presents operating income as it is the most comparable measure to the amounts presented on the condensed consolidated statement of operations.

Our operating segments offer different products and services and are managed separately as business units. Cash, cash equivalents and investments are not managed centrally, so the gains and losses on foreign currency remeasurement, and interest and dividend income, are included in the segments’ results.

6. Prepaid Expenses and Other Current Assets

The Company’s prepaid expenses and other current assets consisted of the following (in thousands):



	September 30, 2019		December 31, 2018

Prepaid LNG	$	105	$	367
Prepaid insurance	876		174
Other Receivables	1,649		672
Deposits	579		578
Other	659		324
Total Prepaid expenses and other current assets	$	3,868	$	2,115

7. Property, Plant and Equipment

The Company’s property, plant and equipment consisted of the following (in thousands):



	September 30, 2019			December 31, 2018

Liquefaction plants and systems	$	40,573		$	39,679
Real property and buildings	1,765			1,396
Vehicles and tanker trailers and equipment	46,329			44,878
Computer and office equipment	364			238
Construction in progress	829			1,071
Leasehold improvements	1			1
	89,861			87,263
Less: accumulated depreciation	(27,244		)	(20,657		)
	$	62,617		$	66,606

Depreciation expense for the nine months ended September 30, 2019 and 2018 totaled $6.9 million and $6.6 million respectively, of which all is included in the consolidated statements of operations as its own and separate line item.

8. Goodwill

The following presents changes in goodwill during 2019 (in thousands):



	Goodwill

December 31, 2018	$	—
Acquisition of American Electric	646
Acquisition of Diversenergy	4,314
September 30, 2019	$	4,960

See Note 3 for discussion of the acquisitions.

9. Investments in Foreign Joint Ventures

BOMAY. As a result of the completion of the Share Exchange on July 26, 2019, the Company holds a 40% interest in BOMAY Electric Industries Company, Ltd. (“BOMAY”) which builds electrical systems for sale in China. The majority partner in this foreign joint venture is Baoji Oilfield Machinery Co., Ltd. (a subsidiary of China National Petroleum Corporation).

The Company made no sales to its joint venture in the three months ended September 30, 2019.

Below is summary financial information for BOMAY at September 30, 2019 and operational results for the period from July 27, 2019 to September 30, 2019 in U.S. dollars (in thousands, unaudited):



	September 30, 2019
Assets:
Total current assets	$	73,075
Total non-current assets	3,304
Total assets	$	76,379
Liabilities and equity:
Total liabilities	$	50,713
Total joint ventures’ equity	25,666
Total liabilities and equity	$	76,379



	July 27 - September 30,
	2019

Revenue	$	8,466
Gross Profit	1,668
Earnings	467

The following is a summary of activity in our investment in BOMAY for the period from July 27, 2019 to September 30, 2019 in U.S. dollars (in thousands, unaudited):



	September 30, 2019
Investments in BOMAY⁽¹⁾
Balance at July 26, 2019	$	9,333
Undistributed earnings:
Balance at July 26, 2019	—
Equity in earnings	187
Dividend distributions	—
Balance at end of period	187
Foreign currency translation:
Balance at July 26, 2019	—
Change during the period	(252		)
Balance at end of period	(252		)
Total investment in BOMAY at September 30, 2019⁽²⁾	$	9,268

________

Accumulated statutory reserves in equity method investments of $2.81 million at September 30, 2019 is included in our investment in BOMAY. In accordance with the People’s Republic of China, (“PRC”), regulations on enterprises with foreign ownership, an enterprise established in the PRC with foreign ownership is required to provide for certain statutory reserves, namely (i) General Reserve Fund, (ii) Enterprise Expansion Fund and (iii) Staff Welfare and Bonus Fund, which are appropriated from net profit as reported in the enterprise’s PRC statutory accounts. A non-wholly-owned foreign invested enterprise is permitted to provide for the above allocation at the discretion of its board of directors. The aforementioned reserves can only be used for specific purposes and are not distributable as cash dividends.


2.	At September 30, 2019, the Company’s investment in BOMAY of $9.3 million differs from the Company’s 40% share of BOMAY’s equity of $10.3 million. The basis difference of approximately $1.0 million will be accreted over the remaining nine year life of the joint venture.

The Company accounts for its investment in BOMAY using the equity method of accounting. Under the equity method, the Company’s share of the joint venture operations earnings or losses is recognized in the consolidated statements of operations as equity income (loss) from foreign joint venture operations. Joint venture income increases the carrying value of the joint venture and joint venture losses reduce the carrying value. Dividends received from the joint venture reduce the carrying value. In accordance with our long-lived asset policy, when events or circumstances indicate the carrying amount of an asset may not be recoverable, management tests long-lived assets for impairment. If the estimated future cash flows are projected to be less than the carrying amount, an impairment write-down (representing the carrying amount of the long-lived asset which exceeds the present value of estimated expected future cash flows) would be recorded as a period expense. In making this evaluation, a variety of quantitative and qualitative factors are considered including national and local economic, political and market conditions, industry trends and prospects, liquidity and capital resources and other pertinent factors. Based on this evaluation for this reporting period, the Company does not believe an impairment adjustment is necessary at September 30, 2019.

Energía Superior. On August 20, 2019, we completed the formation of Energía Superior, a joint venture with CryoMex, to pursue investments in distributed natural gas production and distribution assets in Mexico. CryoMex is controlled by Grupo CLISA,

a Monterrey, Mexico-based developer and operator of businesses in multiple end markets including energy. We own a 50% interest in Energía Superior.

As of September 30, 2019, the Company has not made any material investments in Energía Superior.

10. Accrued Liabilities

The Company’s accrued liabilities consisted of the following (in thousands):



	September 30, 2019		December 31, 2018

Compensation and benefits	$	2,475	$	907
Professional fees	619		827
LNG fuel and transportation	1,146		612
Accrued interest	59		220
Other taxes payable	311		100
Other operating expenses	785		247
Total Accrued Liabilities	$	5,395	$	2,913

11. Debt

The Company’s carrying value of debt consisted of the following (in thousands):



	September 30, 2019			December 31, 2018

Secured Term Note Payable	$	7,077		$	9,077
Insurance and Other Notes Payable	831			121
Less: Amounts due within one year	(1,831		)	(2,621		)
Total Long-Term Debt	$	6,077		$	6,577

Secured Term Note Payable

On September 30, 2013, Stabilis LNG Eagle Ford, LLC ("Stabilis LNG EF") entered into a Secured Term Note Payable with Chart Energy & Chemicals, Inc. (“Chart E&C”), a Delaware corporation and subsidiary of Chart, in connection with a Master Sales Agreement whereby Chart E&C agreed to sell Stabilis LNG EF certain equipment for its liquefaction plant. The total value of the agreement was not to exceed $20.5 million and was billed in advances based on a “Milestone Payment Schedule”. The note contained various covenants that limit the Stabilis LNG EF’s ability to grant certain lines, incur additional indebtedness, guarantee or become contingently liable for obligations of any person except for those allowed by Chart E&C, merge or consolidate into or with a third party or engage in certain asset dispositions and acquisitions, pay dividends or make distributions, transact with affiliates, prepayment of indebtedness, and issue additional equity interests. Further, the Master Sales Agreement was secured by a $20.0 million equity interest and first lien on all plant assets including land. Borrowings bear interest on the outstanding principal at the rate of 3.0% plus the London interbank offered rate.

The Secured Term Note Payable was amended on August 21, 2017 whereby only the payment terms of principal and interest were modified to be payable in eight installments as follows: (i) $2.5 million plus accrued interest due on August, 24, 2017, (ii) $2.5 million plus accrued interest due on August 24, 2018, (iii) $2.5 million plus accrued interest due on August 24, 2019, (iv) four equal payments of $1.5 million plus accrued interest on each anniversary date of August 24, 2019 thereafter, (v) and $0.6 million plus accrued interest on the remaining unpaid balance of the Amended Secured Term Note Payable on August 24, 2024. In the event all principal and interest is paid in full by August 24, 2023, an additional payment of $2.2 million is to be forgiven.

On August 5, 2019, we entered into an exchange agreement (the “Exchange Agreement”) with Chart E&C, Stabilis LLC, and Stabilis LNG EF for the satisfaction of indebtedness of Stabilis LNG to Chart E&C in the principal amount of $7 million (the “Exchanged Indebtedness”) in exchange for unregistered shares of our common stock (such transactions, the “Chart Transaction”).

We issued to Chart E&C 1,470,807 shares of Company common stock, based on the per share price of Company common stock of 90% of the average of the dollar volume-weighted average prices per share of the common stock as calculated by Bloomberg for each of the five consecutive trading days ending on and including the third trading day immediately preceding the closing date, which took place on August 30, 2019. At closing, Stabilis LNG EF also paid to Chart E&C an amount in cash equal to the accrued and unpaid interest on the Exchanged Indebtedness due through the closing, plus a cash amount to be paid in lieu of the issuance of fractional shares of our Common Stock. Management determined the modifications to be substantial and pursuant to ASC 470, the transaction was treated as a debt extinguishment for accounting purposes. Accordingly, the Company recognized a gain on extinguishment of debt of $0.1 million, which is included in Other Income in the accompanying Condensed Consolidated Statement of Operations.

On September 11, 2019, we entered into Amendment No. 1 to the Exchange Agreement, which eliminated the right of Chart E&C to elect an additional exchange of all or any portion of the balance of the unpaid principal amount of the Note. The Exchange Agreement previously provided for Chart E&C to elect an additional exchange, on a second closing date, of all or any portion of the balance of the unpaid principal amount of the Note, for additional shares of our common stock based on the foregoing pricing calculation related to the closing date.

Secured Promissory Note

On August 16, 2019, the Company issued a Secured Promissory Note to M/G Finance Co., Ltd., a related party, in the principal amount of $5 million, at an interest rate per annum of 6% until December 10, 2020, and 12% thereafter. The debt payments are interest only through December 2020 followed by monthly principal and interest payments through December of 2022. The debt is secured by certain pieces of the Company’s equipment valued at $5 million. See Note 13 for further discussion of the Promissory Note.

Insurance Notes Payable

The Company finances its annual commercial insurance premiums for its business and operations with a finance company. The dollar amount financed was $0.5 million for the 2019 to 2020 policy. The outstanding principal balance on the premium finance note was $0.1 million at December 31, 2018 and $0.5 million at September 30, 2019. The renewal occurred in August 2019 and covers a period of up to one year. The Company makes equal monthly payments of principal and interest over the term of the notes which are generally 10 months in term. The interest rate for the 2018 to 2019 insurance policy was 5.4%. The interest rate for the 2019 to 2020 insurance policy is 6.2%. The note is unsecured.

Term Loan Facility

In connection with the acquisition of American Electric (see Note 3), the Company assumed a Loan Facility between M&I Brazil, a subsidiary, and an employee and current director of the Company. The Loan Agreement provides the Company with a $0.3 million loan facility of which $0.2 million is drawn and is outstanding as of September 30, 2019. All outstanding amounts, including accrued but unpaid interested, are due in June 2020. Under the loan agreement, the interest rate on the loan facility is 10.0%, per annum, payable each quarter. The loan facility is secured by the assets held by M&I Brazil.

Unsecured Term Note Payable

The Company also assumed a short-term financing arrangement between M&I Brazil and Santander Bank, which was used to finance project expenditures. The loan is due March 2020, with an interest rate of 11.88%. At September 30, 2019, the outstanding balance is $0.2 million .

12. Leases

We determine if an arrangement is a lease at inception. Leases with an initial term of 12 months or less are not recorded in our condensed consolidated balance sheet unless it is reasonably certain we will renew the lease. All leases with an initial term greater than 12 months, whether classified as operating or finance, are recorded to our condensed consolidated balance sheet based on the present value of lease payments over the lease term, determined at lease commencement. Determination of the present value of lease payments requires discount rate. We use the implicit rate in the lease agreement when available. Most of our leases do not provide an implicit interest rate: therefore, we use a weighted average borrowing rate based on the information available at the commencement date.

Our lease portfolio primarily consists of operating leases for certain, facilities, office spaces and equipment. Our leases have remaining terms of 1 year to 5 years and may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. The operating lease asset also includes any upfront lease payments made and excludes lease incentives and initial direct cost incurred. Lease expense for operating leases is recognized on a straight-line basis over the lease term.

The following table summarized the supplemental balance sheet information related to lease assets and lease liability obligations as of September 30, 2019 (in thousands, unaudited):



	Classification	September 30, 2019
Assets
Operating lease assets	Operating lease right-of-use assets	$	1,002
Finance lease assets	Property and equipment, net of accumulated depreciation	9,595
Total lease assets		10,597
Liabilities
Current
Operating	Current portion of operating lease obligations	340
Finance	Current portion of finance lease obligation	4,662
Noncurrent
Operating	Operating lease liabilities	682
Finance	Finance lease obligations,—related parties, net of current portion	3
Total lease liabilities		$	5,687

The following table summarizes the components of lease expenses for the three and nine months ended September 30, 2019 (in thousands, unaudited):



Lease Cost	Classification	Three Months Ended September 30,				Nine Months Ended September 30,
Lease Cost	Classification	2019		2018		2019		2018
Operating lease cost	Cost of sales and Selling, general and administrative expenses	$	203	$	—	$	298	$	—
Finance lease cost
Amortization of leased assets	Cost of operations	274		261		858		759
Interest on lease liabilities	Interest expense	170		176		510		542
Net lease cost		$	647	$	437	$	1,666	$	1,301

In 2014, the Company entered into a five year non-cancelable operating lease for an office in Denver, Colorado. In January 2019, the Company amended its operating lease for the Denver, Colorado office relocating to a smaller office suite and reducing the lease expense for the remainder of the term. The total rent expense incurred under the lease for the nine months ended September 30, 2019 and 2018 totaled $74 thousand and $175 thousand, respectively. In February of 2018, the Company began to sublease a portion of the office space to a subsidiary of TMG for $5 thousand a month through December 2018 and $2 thousand a month beginning January 2019 (see Note 13, Related Party Transactions for further discussion).

In December 2018, the Company entered into a one year lease for equipment used at our liquefaction plant in George West, Texas. The lease called for monthly payments of $13 thousand through December 31, 2019.

In January 2019, the Company extended its lease for one year for yard space from an unrelated party in Fort Lupton, Colorado. The lease called for monthly payments of $2 thousand through December 31, 2019. The Company subleased the yard space to a subsidiary of TMG during 2018 (see Note 13, Related Party Transactions for further discussion).

The Company leases certain buildings and facilities, including office space in Bellevue, Washington; Houston, Texas; and certain equipment under non-cancellable operating leases expiring at various dates through 2022. M&I Brazil leases offices and facilities in three cities in Brazil that are under operating lease agreements. The leases expire at various dates through January 2022. The assets and liabilities are recognized at the commencement date based on the present value of remaining lease payments based on Brazil’s General Market Price Index rate. Brazil also has multiple short-term equipment leases which are less than twelve months and have no cancellation penalties, therefore they are not recorded in the balance sheet.

The following schedule presents the future minimum lease payments for our operating and finance obligations at September 30, 2019 (in thousands):



	Operating Leases			Finance Leases			Total
Remainder 2019	$	80		$	1,108		$	1,188
2020	420			3,879			4,299
2021	221			—			221
2022	144			—			144
Thereafter	321			—			321
Total lease payments	1,186			4,987			6,173
Less: Interest	(164		)	(322		)	(486		)
Present value of lease liabilities	$	1,022		$	4,665		$	5,687

Lease term and discount rates for our operating and finance lease obligations are as follows:



Lease Term and Discount Rate	September 30, 2019
Weighted-average remaining lease term (years)
Operating leases	3.8
Finance leases	0.7
Weighted-average discount rate
Operating leases	7.2	%
Finance leases	9.9	%

The following table summarizes the supplemental cash flow information related to leases as of September 30, 2019:



Other information	September 30, 2019
	(In thousands)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	298
Financing cash flows from finance leases	2,582
Interest paid	510
Noncash activities from right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	1,173

13. Related Party Transactions

Finance Lease Obligations

During 2017, Stabilis LLC refinanced its’ lease agreement with a subsidiary of The Modern Group, Ltd. (“The Modern Group”) for equipment purchases totaling approximately $10.1 million. The following individuals serve in various leadership capacities for The Modern Group: Casey Crenshaw (our Executive Chairman and Chairman of our Board) as President, Will Crenshaw (a member of our Board) as Chairman and Chief Executive Officer, and Ben Broussard (a member of our Board) as Director of Finance and as COO of M/G Finance Co., Ltd., a subsidiary of The Modern Group. Casey Crenshaw is the beneficial owner of 25% of the Modern Group and is deemed to jointly control The Modern Group with a sibling. Under the terms of the lease agreement, the Company’s monthly payments were interest-only for the first 12 months at an annual rate of 6%. The

Company is repaying 80% of the outstanding lease obligation over the remaining term of 36 months at an annual interest rate of 10%.

During 2018, Stabilis LLC entered into lease agreements with a subsidiary of The Modern Group to finance vehicles and machinery and equipment totaling approximately $1.5 million. Under the terms of the leases, the balance is due in equal monthly installments over 24 months at annual interest rate of 10%.

The Company’s carrying value of finance lease obligations to related parties consisted of the following (in thousands):



	September 30, 2019			December 31, 2018
Finance Lease Obligations with subsidiary of The Modern Group, Ltd	$	4,665		$	7,246
Less: Amounts due within one year	(4,662		)	(3,879		)
Total Long Term Finance Lease Obligations to Related Parties	$	3		$	3,367

Secured Promissory Note

On August 16, 2019, the Company issued a Secured Promissory Note to M/G Finance Co., Ltd. in the principal amount of $5 million. Casey Crenshaw, our Executive Chairman and Chairman of our Board, serves as the President of M/G Finance Co., Ltd. M/G Finance Co. Ltd. is a subsidiary of The Modern Group. See Note 11 for further discussion of the Promissory Note.

Term Loan Facility

Operating Leases

The Company subleases land in Fort Lupton, Colorado to a subsidiary of The Modern Group. During both the nine months ended September 30, 2019 and 2018, amounts billed to The Modern Group under the agreement totaled $9 thousand. During both the three months ended September 30, 2019 and 2018, amounts billed to TMG under the agreement totaled $3 thousand.

The Company subleases space in Denver, Colorado to a subsidiary of The Modern Group. During the nine months ended September 30, 2019 and 2018, the Company billed $18 thousand and $40 thousand, respectively, to The Modern Group under the agreement. During the three months ended September 30, 2019 and 2018, the Company billed $6 thousand and $15 thousand, respectively, to TMG under the agreement.

Payroll and Benefits

The Company utilizes payroll and benefit resources from The Modern Group. During the nine months ended September 30, 2019 and 2018, the Company incurred expenses of $4 thousand and $10 thousand for processing and administrative charges associated with payroll processing. During the three months ended September 30, 2018, the Company incurred expenses of $3 thousand for processing and administrative charges associated with payroll processing. There were no expenses incurred for processing and administrative charges during the three months ended September 30, 2019 due to a transition to a third party.

Other Purchases

The Company has issued a purchase order to Applied Cryo Technologies, Inc. (“ACT”), a company owned 51% by Crenshaw Family Holdings International, Inc., for equipment totaling $302 thousand. The Company expects to take delivery of equipment late in 2019. The Company also paid ACT $110 thousand thousand for equipment repairs and services.

The Company purchases supplies and services from a subsidiary of The Modern Group. During the nine months ended September 30, 2019 and 2018, purchases from The Modern Group totaled $44 thousand and $88 thousand, respectively. During

the three months ended September 30, 2018, purchases from The Modern Group totaled $53 thousand. There were no purchases of supplies and services during the three months ended September 30, 2019.

14. Commitments and Contingencies

Environmental Matters

The Company is subject to federal, state and local environmental laws and regulations. The Company does not anticipate any expenditures to comply with such laws and regulations that would have a material impact on the Company’s consolidated financial position, results of operations or liquidity. The Company believes that its operations comply, in all material respects, with applicable federal, state and local environmental laws and regulations.

Litigation, Claims and Contingencies

The Company may become party to various legal actions that arise in the ordinary course of its business. The Company is also subject to audit by tax and other authorities for varying periods in various federal, state and local jurisdictions, and disputes may arise during the course of these audits. It is impossible to determine the ultimate liabilities that the Company may incur resulting from any of these lawsuits, claims, proceedings, audits, commitments, contingencies and related matters or the timing of these liabilities, if any. If these matters were to ultimately be resolved unfavorably, it is possible that such an outcome could have a material adverse effect upon the Company’s consolidated financial position, results of operations, or liquidity. The Company, does not, however, anticipate such an outcome and it believes the ultimate resolution of these matters will not have a material adverse effect on the Company’s consolidated financial position, results of operations, or liquidity. Additionally, the Company currently expenses all legal costs as they are incurred.

In August 2018, American Electric received notification of a potential liability of $4.3 million associated with an asset purchase agreement to sell substantially all of its U.S. business assets and operations to Myers Power Products, Inc. ("Myers"). The contractual terms of the agreement included a provision for true-up of the net working capital, estimated as of the date of closing, to actual working capital as calculated by Myers and agreed to by American Electric. Any difference in the actual (conclusive) net working capital in relation to the estimated working capital at closing results in an adjustment to the purchase price. In October 2018, American Electric received notification from Myers of their actual working capital calculation. In the notification, Myers communicated a decrease of approximately $4.3 million in net working capital, in comparison to the estimated working capital used at contract closing. The contractual terms of the transaction provided that in the event Myers and American Electric could not agree to a conclusive net working capital adjustment, then all items remaining in dispute shall be submitted by either one of the parties within thirty (30) calendar days after the expiration of the resolution period to a national or regional independent accounting firm mutually acceptable to Myers and American Electric (the "Neutral Arbitrator"). The Neutral Arbitrator shall act as an arbitrator to determine the conclusive net working capital. The conclusive net working capital, once determined, may result in a purchase price adjustment due to Myers or to the Company. As of September 30, 2019, there have not been any updates to the potential liability. The Company is working with legal counsel to resolve the matter.

15. Stockholders’ Equity

On November 28, 2018, Stabilis LLC's members and related party creditors entered into a two-step Contribution and Exchange Agreement to form LNG Investment and restructure the capitalization of Stabilis LLC which resulted in the following transactions.

On November 30, 2018, Stabilis LLC's members contributed 1,000 membership units in Stabilis LLC having a carrying amount of $20 million to LNG Investment in exchange for 2,000 Class B units having a carrying amount of $20 million in LNG Investment. An aggregate of 2,000 Class B units were issued by LNG Investment to Stabilis LLC having a carrying amount of $20 million. The contribution and exchange of units resulted in Stabilis LLC becoming a wholly owned subsidiary of LNG Investment. Subsequently, Stabilis LLC's members and related party creditors, holders of an aggregate net carrying amount of $48.7 million of indebtedness, contributed their individual indebtedness to LNG Investment in exchange for Class A units in proportion to their percentage of indebtedness in total. An aggregate of 4,874.28 Class A units were issued by LNG Investment to the related party creditors of the Company having a carrying amount of $48.7 million.

On December 17, 2018, the Stabilis LLC entered into a definitive share exchange agreement with American Electric to enter into a business combination transaction. Under the terms of the agreement, Stabilis LLC’s owners were to contribute 100% of their outstanding membership units to American Electric in exchange for American Electric common stock resulting in Stabilis LLC and its subsidiaries becoming a wholly-owned subsidiary of American Electric.

On July 26, 2019, we completed the Share Exchange by which American Electric acquired 100% of the outstanding limited liability company interests of Stabilis LLC from LNG Investment and 20% of the outstanding limited liability company interests of PEG from AEGIS. The remaining 80% of the outstanding limited liability company interests of PEG are owned directly by Stabilis LLC. As a result, Stabilis LLC became a 100% directly-owned subsidiary and PEG became a 100% indirectly-owned subsidiary of American Electric. Under the Share Exchange Agreement entered into on December 17, 2018 and amended on May 8, 2019, American Electric issued 13,178,750 shares of common stock to acquire Stabilis LLC, which represented 90% of the total amount of the common stock of American Electric which was issued and outstanding as of July 26, 2019. The Share Exchange resulted in a change of control of American Electric to be controlled by Casey Crenshaw by virtue of his beneficial ownership of 88.4% of the common stock of American Electric to be outstanding as of July 26, 2019.

The Condensed Consolidated Statements of Stockholders’ Equity presents the historical equity of Stabilis, retrospectively adjusted to the equity structure of American Electric prior to the reverse merger. The share amounts presented reflect the restated number of shares using the exchange ratio established in the Share Exchange Agreement.

On August 20, 2019, we issued 684,963 shares of our common stock valued at $3.0 million to Diversenergy as partial consideration for the completion of our acquisition of Diversenergy.

On August 30, 2019, we issued 1,470,807 shares of our common stock to Chart E&C in exchange for the satisfaction of indebtedness in the principal amount of $7 million.

16. Issuance of Common Stock and Warrants

Except as otherwise noted, all issuance of common stock and warrants reflect the 1:8 reverse stock split effective July 29, 2019.

As of September 30, 2019, we had outstanding Warrants to purchase 103,125 shares of our common stock as follows:



Date of Issuance	No. of Warrants	Exercise Price	Expiration Date
May 2, 2012	15,625	$21.76	May 22, 2020
May 2, 2012	25,000	$25.36	May 23, 2020
Nov. 13, 2017	62,500	$18.08	Nov. 13, 2022

The 2012 Warrants were issued in connection with the purchase of $5 million of the Company’s Series A Convertible Preferred Stock, since converted to common stock, by an affiliate of Casey Crenshaw and they are beneficially owned by Mr. Crenshaw. The 2017 Warrants were issued to an unaffiliated party in connection with a financing transaction. All of the Warrants have a cashless exercise option. The 2012 Warrants have an anti-dilution feature that may result in a lower exercise price in the event the Company engages in certain stock issuances at a lower price than the current Warrant exercise price, including in connection with certain acquisition transactions.

As a result of the completion of the Share Exchange, we issued approximately 14,644,842 shares of Stabilis Energy, Inc. common stock (such issuances reflecting shares of common stock after to the reverse stock split effective July 29, 2019). The former holders of Stabilis LLC and its subsidiaries own approximately 90% of the combined company and the former American Electric stockholders own 10% of the combined company. We issued 12,564,733 shares of common stock to LNG Investment and 614,017 shares of common stock to AEGIS. The remaining shares were issued to American Electric stockholders.

On August 20, 2019, we issued 684,963 shares of our common stock valued at $3.0 million to Diversenergy as partial consideration for the completion of our acquisition of Diversenergy.

On August 30, 2019, we issued 1,470,807 shares of our common stock to Chart E&C in exchange for the satisfaction of indebtedness in the principal amount of $7 million.

17. Redeemable Convertible Preferred Stock

As a result of the completion of the Share Exchange, our Board of Directors has the authority, without stockholder approval, to issue up to 1,000,000 shares of Preferred Stock, $.001 par value. The authorized Preferred Stock may be issued by the Board of Directors in one or more series and with the rights, privileges and limitations of the Preferred Stock determined by the Board of Directors. The rights, preferences, powers and limitations of different series of Preferred Stock may differ with respect to dividend rates, amounts payable on liquidation, voting rights, conversion rights, redemption provisions, sinking fund provisions, and other matters. As of September 30, 2019, we have no Preferred Stock outstanding.

18. Employee Benefits

The Company has established a savings plan ("Savings Plan") which is qualified under Section 401(k) of the Internal Revenue Code. Eligible employees may elect to make contributions to the Savings Plan through salary deferrals of up to 90% of their base pay, subject to Internal Revenue Code limitations. The Company contributes to the Savings Plans, subject to limitations. For the nine months ended September 30, 2019 and 2018 the Company contributed $95 thousand and $38 thousand, respectively, in matching contributions to the Savings Plan. For the three months ended September 30, 2019 and 2018 the Company contributed $40 thousand and $13 thousand, respectively, in matching contributions to the Savings Plan.

19. Income Taxes

The components for income tax expense included in the accompanying statement of operations for the nine months ended September 30, 2019 and full year 2018 are as follows (in thousands):



	September 30, 2019		December 31, 2018
Current state income tax expense	$	38	$	—
Deferred federal income tax expense	—		—
Total income tax expense	$	38	$	—

A reconciliation of income taxes computed using the 21% U.S. federal statutory rate to the amount reflected in the accompanying consolidated statement of operations for the nine months ended September 30, 2019 and full year 2018 is as follows (in thousands):



	September 30, 2019			December 31, 2018
Income tax benefit using U.S. federal statutory rate	$	1,005		$	2,328
State Income Tax Expense	(30		)	—
Non-deductible expenses	(10		)	17
Impact of change in statutory rate
Change in valuation allowance	(683		)	(2,311		)
RTP/Other Adjustments	(320		)	(34		)
	$	(38	)	$	—

The effects of temporary differences and carryforwards that give rise to deferred tax assets (liabilities) are as follows (in thousands):



	September 30, 2019			December 31, 2018
Federal net operating loss carryforward	$	11,202		$	10,876
Federal Sec. 382 net operating loss carryforward	3,642			—
Accrued interest to related parties, not deductible until paid	259			334
Stock options	614			—
Accrued compensation	39			—
Basis of intangible assets	332			221
Basis in foreign entity	509			—
Valuation allowance	(9,438		)	(3,950		)
Total deferred tax assets	7,159			7,481

Basis of property, plant and equipment	6,969			7,447
Bad debt expense	39			34
Prepaid expenses	151			—
Total deferred tax liabilities	7,159			7,481
Net deferred tax liabilities	$	—		$	—

At September 30, 2019 the Company has net operating loss carry forwards of approximately $53.6 million which may be used to offset future taxable income. The net operating loss carryforwards includes $42.8 million of losses arising prior to December 31, 2017 that expire in 2028 through 2037. Those arising in tax years after 2017 can be carried forward indefinitely. Also, for losses arising in taxable years beginning after December 31, 2017 the operating loss deduction is limited to 80% of taxable income (determined without regard to the deduction). Since the Company has not yet generated significant taxable income, a valuation allowance has been established to fully reserve the Company's net deferred tax assets at September 30, 2019. A change in ownership eliminated substantially all net operating loss carryforwards of an acquired subsidiary at July 26, 2019. The elimination of those loss carryforwards is shown above as a section 382 limitation.

The Company recognizes the tax benefit or obligation from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based not only on the technical merits of the tax position based on tax law, but also past administrative practices and precedents of the taxing authority. The tax benefits or obligations are recognized in our financial statements if there is a greater than 50% likelihood of the tax benefit or obligation being realized upon ultimate resolution. As of nine months ended September 30, 2019 and year ended December 31, 2018, the Company had no uncertain tax positions that required recognition.

As of September 30, 2019, the Company's tax returns for years 2015 to 2018 remain subject to examination for both federal and state filings.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto included elsewhere in this Form 10-Q and the financial statements and pro forma financial information filed on Form 8-K/A on October 7, 2019. Historical results and percentage relationships set forth in the condensed consolidated statements of operations and cash flows, including trends that might appear, are not necessarily indicative of future operations or cash flows.

Overview

Stabilis is a vertically integrated provider of small-scale LNG production, distribution and fueling services to multiple end markets in North America. Our diverse customer base utilizes LNG as a fuel source in a variety of applications in the industrial, energy, mining, utilities and pipelines, commercial, and high horsepower transportation markets. Our customers use LNG as an alternative to traditional fuel sources, such as diesel, fuel oil, and propane, and as a means to lower fuel costs and reduce their environmental footprint. Our customers also use LNG as a “virtual pipeline” solution when natural gas pipelines are not available or are curtailed.

Stabilis seeks to provide our customers with safe, reliable and cost effective LNG fueling and power delivery solutions. We provide multiple products and services to our customers, including:

LNG Production and Sales—Stabilis builds and operates cryogenic natural gas processing facilities, called “liquefiers”, that convert natural gas into LNG through a multiple stage cooling process. We currently own and operate a liquefier that can produce up to 120,000 LNG gallons (455 cubic meters) per day. We also purchase LNG from third-party production sources which allows us to support customers in markets where we do not own liquefiers. We define “small-scale” LNG production to include liquefiers that produce less than 1,000,000 LNG gallons per day (3,788 cubic meters per day).

Transportation and Logistics Services—Stabilis offers our customers a “virtual natural gas pipeline” by providing them with turnkey LNG transportation and logistics services in North America. We deliver LNG to our customers’ work sites from both our own production facility and our network of 25 third-party production sources located throughout North America. We own a fleet of LNG fueled trucks and cryogenic trailers to transport and deliver LNG. We also outsource similar equipment and transportation services from qualified third-party providers as required to support our customer base. We define “small-scale” LNG distribution to include distribution by trailer or tank container (up to 15,000 LNG gallons) or marine vessels that carry less than 8,000,000 LNG gallons (approximately 30,000 cubic meters).

Cryogenic Equipment Rental—Stabilis owns and operates a rental fleet of 150 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 fueling operations.

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 fueling operations and our field service technicians help our customers mobilize, commission and reliably operate on the job site.

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

Stabilis’ customers use natural gas in their operations for multiple reasons, including lower fuel cost, more stable fuel costs, reduced environmental emissions, and improved operating performance. We serve customers in a variety of end markets, including industrial, energy, mining, commercial, utilities and pipelines, and high horsepower transportation. We believe that LNG consumption will continue to increase in these end markets in the future.

Power Delivery Solutions—As a result of the business combination with American Electric, Stabilis provides power deliver services and products for the oil and gas, marine vessel, power generation and broad industrial market segments in Brazil, and builds electrical systems for sale in China through our 40% interest in BOMAY.

Recent Developments

On July 26, 2019, the Share Exchange transaction with American Electric and its subsidiaries was completed. The Share Exchange and its related proposals, which included a company name change and a reverse stock split, were approved by American Electric stockholders at a Special Meeting of Stockholders on July 17, 2019. On July 29, 2019, the company began operating under the name Stabilis Energy, Inc. and our common stock began trading under the ticker symbol “SLNG”. Because the former owners of Stabilis LLC own approximately 90% of the voting stock of the combined company and certain other factors including that directors designated by LNG Investment constitute a majority of the board of directors, Stabilis LLC is considered to be acquiring American Electric in the Share Exchange for accounting purposes. As a result, the Share Exchange will be treated by American Electric as a reverse acquisition under the purchase method of accounting in accordance with United States generally accepted accounting principles (“US GAAP”). In addition, the company’s shares outstanding now reflect a one-for-eight reverse split. Unless otherwise noted, any share or per share amounts give retroactive effect to the reverse stock split. For further information regarding this transaction, see Note 3, Acquisitions to our Condensed Consolidated Financial Statements.

Results of Operations

Three Months Ended September 30, 2019 Compared to Three Months Ended September 30, 2018

The following table reflects line items from the accompanying Consolidated Statements of Operations for the three months ended September 30, 2019 (the “Current Quarter”) as compared to the three months ended September 30, 2018 (the “Prior Year Quarter”):

Stabilis Energy, Inc.

Consolidated Statements of Operations



	Three Months Ended September 30,						Change			% Change
	2019			2018			Change			% Change
	(unaudited)
	(In thousands, excluding percentages)
Revenue:
LNG product	$	7,919		$	6,914		$	1,005		14.5	%
Rental, service and other	2,595			1,087			1,508			138.7
Total revenues	10,514			8,001			2,513			31.4
Operating expenses:
Costs of LNG product	5,191			5,098			93			1.8
Costs of rental, service and other	2,436			1,121			1,315			117.3
Selling, general and administrative	3,834			1,607			2,227			138.6
Depreciation	2,307			2,190			117			5.3
Total operating expenses	13,768			10,016			3,752			37.5
Loss from operations before equity income	(3,254		)	(2,015		)	(1,239		)	61.5
Net equity income from foreign joint ventures' operations:
Income from investments in foreign joint ventures	187			—			187			—
Foreign joint venture's operations related expenses	(52		)	—			(52		)	—
Net equity income from foreign joint ventures' operations	135			—			135			—
Loss from operations	(3,119		)	(2,015		)	(1,104		)	54.8
Other income (expense):
Interest expense, net	(339		)	(1,202		)	863			(71.8	)
Other income	124			—			124			0.0
Gain from disposal of assets	17			—			17			0.0
Total other income (expense)	(198		)	(1,202		)	1,004			(83.5	)
Loss before income tax expense	(3,317		)	(3,217		)	(100		)	3.1
Income tax expense	38			—			38			0.0
Net loss	(3,355		)	(3,217		)	(138		)	4.3
Net income (loss) attributable to noncontrolling interests	—			(130		)	130			(100.0	)
Net loss attributable to controlling interests	$	(3,355	)	$	(3,087	)	$	(268	)	8.7	%

Revenue

LNG Product Revenue. During the Current Quarter LNG Product revenues increased $1.0 million or 14.5% versus the Prior Year Quarter. This increase was primarily attributable to growth in LNG product production sales of $1.6 million, as a result of an expanding customer base in sand drying applications and increased demand from existing customers in Mexico. The increase in production sales was partially offset by lower distribution sales revenue of $0.6 million related to a reduction of business with oilfield customers.

Rental, Service, and Other Revenue. Rental and service revenues increased by $1.5 million in the Current Quarter relative to Prior Year Quarter primarily due to the completion of the Share Exchange transaction with American Electric. Revenue related to the acquired business of $1.4 million is included in our results of operations following the completion of the Share Exchange on July 26, 2019.

Operating Expenses

Costs of LNG Product. Cost of product in the Current Quarter increased $0.1 million or 1.8%. Cost of LNG product related to the Company’s production business increased by $0.5 million or 19% due to higher production volumes. As a percentage of revenue, cost of product related to the production business declined by 13% primarily due to cost efficiencies achieved through higher utilization rates from Stabilis’ liquefaction plant. Distribution cost of product declined by $0.4 million related to a reduction in demand from oilfield customers.

Costs of Rental, Service, and Other Revenue. Costs increased $1.3 million in the Current Quarter, primarily a result of the completion of the Share Exchange with American Electric. Costs related to the acquired business of $1.1 million are included in our results of operations following the completion of the Share Exchange on July 26, 2019.

Selling, general and administrative. Selling, general and administrative expense increased $2.2 million during the Current Quarter as compared to the Prior Year Quarter. This increase was partially driven by audit, legal and consulting fees of $0.9 million associated with the business combination with American Electric. Expenses related to the acquired business of $0.5 million are included in our results of operations following the completion of the Share Exchange on July 26, 2019. Business development fees and increased costs of the consolidated business accounted for $0.8 million of the increase.

Depreciation. Depreciation expense increased $0.1 million or 5.3% during the Current Quarter as compared to the Prior Year Quarter due to the upgrade of mobile equipment.

Net Equity Income From Foreign Joint Ventures' Operations

Income from Investments in Foreign Joint Ventures. As a result of the completion of the Share Exchange transaction with American Electric, income from Investments in Foreign Joint Ventures increased $0.2 million. Equity income of the acquired joint venture, BOMAY, is included in our results of operations following the completion of the Share Exchange on July 26, 2019.

Operating expenses related to foreign joint ventures. Operating expenses related to BOMAY were $0.1 million for the period following the completion of the Share Exchange on July 26, 2019.

Other Income (Expense)

Interest expense. Interest expense decreased $0.9 million during the Current Quarter as compared to the Prior Year Quarter. This decrease was attributable to debt being converted to equity in November of 2018 and a $2.4 million debt repayment.

Other Income. Other income increased $0.1 million in the Current Quarter. The increase is due to a $0.1 million gain on debt being converted to equity.

Gain (loss) on the disposal of fixed assets. The Company sold equipment in the Current Quarter resulting in a net gain of $17 thousand. There were no asset sales in the Prior Year Quarter.

Income tax expense. The Company incurred state income tax expense of $38 thousand during the Current Quarter. No income tax expense was incurred in the Prior Year Quarter.

Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018

The following table reflects line items from the accompanying Consolidated Statements of Operations for the nine months ended September 30, 2019 (the “Current Year”) as compared to the nine months ended September 30, 2018 (the “Prior Year”):

Stabilis Energy, Inc.

Consolidated Statements of Operations



	Nine Months Ended September 30,						Change			% Change
	2019			2018			Change			% Change
	(unaudited)
	(In thousands, excluding percentages)
Revenue:
LNG product	$	26,872		$	21,812		$	5,060		23.2	%
Rental, service and other	7,712			4,754			2,958			62.2
Total revenues	34,584			26,566			8,018			30.2
Operating expenses:
Costs of LNG product	18,289			17,046			1,243			7.3
Costs of rental, service and other	5,546			3,476			2,070			59.6
Selling, general and administrative	8,037			4,667			3,370			72.2
Depreciation	6,892			6,573			319			4.9
Total operating expenses	38,764			31,762			7,002			22.0
Loss from operations before equity income	(4,180		)	(5,196		)	1,016			(19.6	)
Net equity income from foreign joint ventures' operations:
Income from investments in foreign joint ventures	187			—			187			—
Foreign joint venture's operations related expenses	(52		)	—			(52		)	—
Net equity income from foreign joint ventures' operations	135			—			135			—
Loss from operations	(4,045		)	(5,196		)	1,151			(22.2	)
Other income (expense):
Interest expense	(947		)	(3,482		)	2,535			(72.8	)
Other income	61			352			(291		)	(82.7	)
Gain (loss) from disposal of assets	17			162			(145		)	(89.5	)
Total other income (expense)	(869		)	(2,968		)	2,099			(70.7	)
Loss before income tax expense	(4,914		)	(8,164		)	3,250			(39.8	)
Income tax expense	38			—			38			—
Net loss	(4,952		)	(8,164		)	3,212			(39.3	)
Net income (loss) attributable to noncontrolling interests	207			(84		)	291			(346.4	)
Net loss attributable to controlling interests	$	(5,159	)	$	(8,080	)	$	2,921		(36.2	)%

Revenue

LNG Product Revenue. During the Current Year LNG Product revenues increased $5.1 million or 23.2% versus the Prior Year primarily attributable to growth in LNG plant product sales of $5.0 million. Key factors behind this growth were expansion of our customer base in sand drying applications and increased demand from existing customers in Mexico. LNG product revenue from distribution sales increased $0.1 million.

Rental, Service, and Other Revenue. Rental, service and other revenues increased by $3.0 million or 62.2% in the Current Year compared to Prior Year primarily due to the completion of the Share Exchange transaction with American Electric. Revenue related to the acquired business of $1.4 million is included in our results of operations following the completion of the Share Exchange

on July 26, 2019. Equipment rental in oilfield and winter peaking projects accounted for an increase in revenues of $1.0 million. Additionally, other revenues increased due to a project cancellation fee of approximately $0.6 million.

Operating Expenses

Costs of LNG Product. Cost of product in the Current Year increased $1.2 million or 7.3%. As a percentage of product revenue, overall cost of product decreased from 78% to 68% primarily due to higher utilization of our liquefaction facility and a reduction in gas prices. As a percentage of LNG product revenue, LNG product cost from the plant was reduced from 78% in 2018, to 58% in 2019. Cost of LNG product related to distribution sales remained the same.

Costs of Rental, Service, and Other Revenue. This cost increased $2.1 million or 59.6% in the Current Year consistent with the increase in rental, service, and other revenue. The increase in costs is primarily a result of the completion of the Share Exchange with American Electric. Costs related to the acquired business of $1.1 million are included in our results of operations following the completion of the Share Exchange on July 26, 2019. Costs related to the LNG business increased by $0.9 million, consistent with the increase in rental, service, and other revenue.

Selling, general and administrative. Selling, general and administrative expense increased $3.4 million or 72.2% during the Current Year as compared to the Prior Year. This increase was primarily driven by audit, legal and consulting fees of $1.6 million associated with the business combination with American Electric. Expenses related to the acquired business of $0.5 million are included in our results of operations following the completion of the Share Exchange on July 26, 2019. Business development fees and increased costs of the consolidated business accounted for $1.3 million of the increase.

Depreciation. Depreciation expense increased $0.3 million or 4.9% during the Current Year as compared to the Prior Year due to the upgrade of mobile equipment.

Net Equity Income From Foreign Joint Ventures' Operations

Operating expenses related to foreign joint ventures. Operating expenses related to BOMAY were $0.1 million for the period following the completion of the Share Exchange on July 26, 2019.

Other Income (Expense)

Interest expense. Interest expense decreased $2.5 million during the Current Year as compared to the Prior Year. This decrease was attributable to debt being converted to equity in November of 2018 and a $2.4 million debt repayment.

Other income. Other income decreased $0.3 million in the Current Year. This change was primarily due to Alternative Fuel excise tax credits received in the Prior Year.

Gain / (loss) on the disposal of fixed assets. The gain from disposal of fixed assets decreased $0.1 million due to a Prior Year sale of equipment.

Income tax expense. The Company incurred state income tax expense of $38 thousand during the Current Year. No income tax expense was incurred in the Prior Year.

Segment Results

The Company’s revenues are derived from two operating segments: LNG and Power Delivery. The Company evaluates the performance of its segments based primarily on segment operating income. The following financial information includes the results of American Electric since July 26, 2019 and Diversenergy since August 20, 2019, the respective acquisition dates.

LNG

Three Months Ended September 30, 2019 Compared to Three Months Ended September 30, 2018



	Three Months Ended September 30,						Change			% Change
	2019			2018			Change			% Change
	(unaudited)
	(In thousands, excluding percentages)
Revenue:
LNG product	$	7,919		$	6,914		$	1,005		14.5	%
Rental, service and other	1,224			1,087			137			12.6
Total revenues	9,143			8,001			1,142			14.3
Operating expenses:
Costs of LNG product	5,191			5,098			93			1.8
Costs of rental, service and other	1,292			1,121			171			15.3
Selling, general and administrative	3,371			1,607			1,764			109.8
Depreciation	2,277			2,190			87			4.0
Total operating expenses	12,131			10,016			2,115			21.1
Loss from operations before equity income	$	(2,988	)	$	(2,015	)	$	(973	)	48.3	%

Revenue

Rental, Service, and Other Revenue. Rental and service revenues increased by $0.1 million in the Current Quarter relative to Prior Year Quarter primarily due to revenue from pipeline and utility customers.

Operating Expenses

Costs of LNG Product. Cost of product in the Current Quarter increased $0.1 million or 1.8%. Cost of LNG product related to the Company’s production business increased by $0.5 million and 19%. As a percentage of revenue, cost of product related to the production business declined by 13% primarily due to cost efficiencies achieved through higher utilization rates from Stabilis’ liquefaction plant. Distribution cost of product decreased by $0.4 million related to a reduction in demand with oilfield customers.

Costs of Rental, Service, and Other Revenue. Costs increased $0.2 million or 15.3% in the Current Quarter consistent with the increase in rental, service, and other revenue.

Selling, general and administrative. Selling, general and administrative expense increased $1.8 million during the Current Quarter as compared to the Prior Year Quarter. This increase was partially driven by audit, legal and consulting fees of $1.5 million associated with the business combination with American Electric. Business Development and expenses related to transitioning to public company accounted for the balance of the increase.

Depreciation. Depreciation expense increased $0.1 million or 4.0% during the Current Quarter as compared to the Prior Year Quarter due to the upgrade of mobile equipment.

Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018



	Nine Months Ended September 30,						Change		% Change
	2019			2018			Change		% Change
	(unaudited)
	(In thousands, excluding percentages)
Revenue:
LNG product	$	26,872		$	21,812		$	5,060	23.2	%
Rental, service and other	6,341			4,754			1,587		33.4
Total revenues	33,213			26,566			6,647		25.0
Operating expenses:
Costs of LNG product	18,289			17,046			1,243		7.3
Costs of rental, service and other	4,402			3,476			926		26.6
Selling, general and administrative	7,574			4,667			2,907		62.3
Depreciation	6,862			6,573			289		4.4
Total operating expenses	37,127			31,762			5,365		16.9
Loss from operations before equity income	$	(3,914	)	$	(5,196	)	$	1,282	(24.7	)%

Revenue

LNG Product Revenue. During the Current Year, LNG Product revenues increased $5.1 million or 23.2% versus the Prior Year. This increase was primarily attributable to growth in LNG plant production sales of $4.9 million compared to the Prior Year. Key factors behind this growth were expansion of customer base in sand drying applications and increased demand from existing customers in Mexico. LNG product revenue from distribution sales increased $0.1 million related to increased demand from oilfield customers and winter peaking projects in the first half of 2019.

Rental, Service, and Other Revenue. Rental and service revenues increased by $1.6 million in the Current Year relative to Prior Year. In the distribution business, equipment rentals in oilfield and winter peaking projects accounted for an increase in revenues of $1.0 million. Additionally, other revenues increased due to a project cancellation fee of approximately $0.6 million.

Operating Expenses

Costs of LNG Product. Cost of product in the Current Year increased $1.2 million or 7.3%. As a percentage of product revenue, overall cost of product decreased from 78% to 68%. As a percentage of LNG product revenue, LNG product cost from the plant was reduced from 78% in 2018, to 58% in 2019. Cost of LNG product related to distribution sales remained the same.

Costs of Rental, Service, and Other Revenue. Costs increased $0.9 million or 26.6% in the Current Year consistent with the increase in rental, service, and other revenue.

Selling, general and administrative. Selling, general and administrative expense increased $2.9 million or 62.3% during the Current Year as compared to the Prior Year. This increase was partially driven by audit, legal and consulting fees associated with the business combination with American Electric.

Depreciation. Depreciation expense increased $0.3 million or 4.4% during the Current Year as compared to the Prior Year due to the upgrade of mobile equipment.

Power Delivery

Three and Nine Months Ended September 30, 2019 Compared to Three and Nine Months Ended September 30, 2018



	Three and Nine Months Ended September 30,					Change			% Change
	2019			2018		Change			% Change
	(unaudited)
	(In thousands, excluding percentages)
Revenue:
Rental, service and other	$	1,371		$	—	$	1,371		—
Total revenues	1,371			—		1,371			—
Operating expenses:
Costs of rental, service and other	1,144			—		1,144			—
Selling, general and administrative	463			—		463			—
Depreciation	30			—		30			—
Total operating expenses	1,637			—		1,637			—
Loss from operations before equity income	(266		)	—		(266		)	—
Net equity income from foreign joint ventures' operations:
Income from equity investments in foreign joint ventures	187			—		187			—
Foreign joint venture's operations related expenses	(52		)	—		(52		)	—
Net equity income from foreign joint ventures' operations	135			—		135			—
Loss from operations	(131		)	—		(131		)	—

Our Power Delivery segment is comprised of our wholly-owned subsidiary in Brazil and our joint venture in China acquired in the Share Exchange with American Electric. As previously discussed, results related to the acquired business are included in our results of operations following the completion of the Share Exchange on July 26, 2019.

Liquidity and Capital Resources

Overview

As of September 30, 2019, we had $4.5 million in cash and cash equivalents on hand and $12.6 million in outstanding debt and finance lease obligations (of which $6.5 million is due in the next twelve months).

We have historically funded the business primarily through cash flows from operations, short-term notes payable, debt from finance companies and related parties, and capital contributions. We have used a portion of our cash flows to invest in fixed assets to support growth. We have also used cash to pay interest and principal amounts outstanding under our borrowings.

The Company is subject to substantial business risks and uncertainties inherent in the LNG industry. 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 concluded positive cash flows from operations are attainable primarily due to the following: (i) recent increases in sales volumes, (ii) the conversion in 2018 of $48.7 million of our existing related party debt to equity, (iii) the August 2019 cancellation of $7.0 million of Chart Industries indebtedness in exchange for Stabilis common stock.

Improved cash flow projections are supported by the recent increase in sales, and the reduction of operating costs as a percent of sales. Accordingly, management believes the business will generate sufficient cash flows from its operations to fund the business for the next 12 months.

Cash Flows

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



	Nine Months Ended September 30,
	2019			2018
	(unaudited)
	(In thousands)
Net cash provided by (used in):
Operating activities	$	3,721		$	(1,470	)
Investing activities	(3,243		)	(19		)
Financing activities	2,791			906
Net increase (decrease) in cash and cash equivalents	3,269			(583		)
Cash and cash equivalents, beginning of period	$	1,247		$	1,488
Cash and cash equivalents, end of period	4,516			905

Operating Activities

Net cash provided by operating activities totaled $3.7 million for the nine months ended September 30, 2019 compared to $1.5 million used in operating activities for the same period 2018, respectively. The increase in net cash provided by operating activities of $5.2 million as compared to the Prior Year was primarily attributable to reduced operating losses and net working capital.

Investing Activities

Net cash used in investing activities totaled $3.2 million and $19 thousand for the nine months ended September 30, 2019 and 2018, respectively. The change was driven by the acquisitions of American Electric and Diversenergy. The Company also purchased $2.0 million of equipment during the nine months ended September 30, 2019, partially offset by proceeds from sales of equipment of $0.1 million.

Financing Activities

Net cash provided by financing activities totaled $2.8 million and $0.9 million for the nine months ended September 30, 2019 and 2018, respectively. The increase of $1.9 million compared to the Prior Year was primarily attributable to:


•	a $2.4 million debt payment in 2018, and


•	a $0.4 million net increase in proceeds from short-term notes payable, partially offset by


•	a decrease in net proceeds of $0.9 million from related party long-term borrowings in 2019.

Sources of Liquidity and Capital Resources

Our principal sources of liquidity have consisted of cash on hand, cash provided by our operations, and proceeds from asset sales. In addition, the Company secured financing from a key vendor and obtained equipment financing from MG Finance, a related party.

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 and repurchases, equipment purchases, maintenance of LNG production facilities, mergers and acquisitions (if any), pursuing market expansion, supporting sales and marketing activities, support of legislative and regulatory initiatives, and other general corporate purposes. While we believe we have sufficient liquidity and capital resources to fund our operations and repay our debt, we may elect to pursue additional financing activities such as refinancing existing debt, or debt or equity offerings to provide flexibility with our cash management.

Debt Level and Debt Compliance

We had total indebtedness of $7.9 million in principal as of September 30, 2019 with the expected maturities as follows.



	September 30, 2019
Remainder 2019	$	231
2020	1,600
2021	3,430
2022	2,647
2023	—
Thereafter	—
Total long-term debt, including current maturities	$	7,908

We expect our total interest payment obligations relating to our indebtedness to be approximately $1.1 million for the year ending December 31, 2019. Certain of the agreements governing our outstanding debt, which are discussed in Note 11, Debt to our Condensed Consolidated Financial Statements, have certain non-financial covenants with which we must comply. As of September 30, 2019, we were in compliance with all of these covenants.

Off-Balance Sheet Arrangements

As of September 30, 2019, we had no transactions that met the definition of off-balance sheet arrangements that may have a current or future material effect on our consolidated financial position or operating results.

NEW ACCOUNTING STANDARDS

See Note 2 to the Notes to Condensed Consolidated Financial Statements included elsewhere in this report for information on new accounting standards.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The discussion and analysis of our financial condition and results of operations are based on our condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these condensed 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 condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. We evaluate our estimates on an ongoing basis, based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. There can be no assurance that actual results will not differ from those estimates.

Critical Accounting Policies

Revenue Recognition

The Company recognizes revenue associated with the sale of LNG 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.

Revenues from contracts with customers are disaggregated into (1) LNG product and (2) rental, service, and other.

delivery of LNG. Product contracts are established by agreeing on a sales price or transaction price for the related item. Revenue is recognized when the customer has taken control of the product. Payment terms for product contracts are generally within thirty days from the receipt of the invoice. Product revenue is recognized upon delivery of the related item 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 delivery of LNG.

Rental and Service revenue generated by the Company includes equipment and people provided to the customer to support the use of LNG and power delivery solutions in their application. Rental contracts are established by agreeing on a rental price or transaction price for the related piece of equipment and the rental period which is generally daily or monthly. 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. Payment terms for rental contracts are generally within thirty days from the receipt of the invoice. Performance obligations for rental revenue are considered to be satisfied as the rental period is completed based upon the terms of the related contract. LNG Service revenue generated by the Company consists of mobilization and demobilization of equipment and onsite technical support while customers are consuming LNG in their applications. Power Delivery Service revenue is generated from time and material projects and consulting services. Service revenue is billed based on contractual terms that can be based on an event (i.e. mobilization or demobilization) or an hourly rate. Revenue is recognized as the event is completed or work is done. Payment terms for service contracts are generally within thirty days from the receipt of the invoice. Performance obligations for service revenue are considered to be satisfied as the event is completed or work is done per the terms of the related contract. Other revenues include the resale of electrical and instrumentation equipment billed upon delivery and are generally due within thirty days from the receipt of the invoice.

Impairment of Long-Lived Assets

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.

Income Taxes

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.

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 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 following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels in accordance with US 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 measurement date.

Recently Adopted Accounting Changes and Recently Issued and Adopted Accounting Standards.

For descriptions of recently adopted and issued accounting standards, see Note 2 to the Notes to Condensed Consolidated Financial Statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Quantitative and Qualitative Disclosures about Market Risk

In the normal course of business, the Company encounters several significant types of market risks including commodity and interest rate risks.

Commodity Price Risk

Due to the nature of the LNG distribution business, the Company has short term agreements with suppliers to contract for LNG purchases. These contracts extend for various period and minimums. The index rate pricing for natural gas may increase or decrease in the future based upon market conditions.

Commodity price risk is the risk of loss arising from adverse changes in market rates and prices. We are able to limit our exposure to fluctuations in natural gas prices by structuring our contract pricing with customers so that it mirrors the volatility in our supply cost with vendors. Our exposure to market risk associated with LNG price changes may adversely impact our business. We do not currently have any derivative arrangements to protect against fluctuations in commodity prices, but to mitigate the effect of fluctuations in LNG prices on our operations, we may enter into various derivative instruments.

We are subject to market risk from fluctuating market prices of certain raw materials related to power delivery solutions. While such materials are typically available from numerous suppliers, commodity raw materials are subject to price fluctuations. We endeavor to recoup these price increases from our customers on an individual contract basis to avoid operating margin erosion. Although historically we have not entered into any contracts to hedge commodity risk, we may do so in the future. Commodity price changes can have a material impact on our prospective earnings and cash flows. Copper, steel and aluminum represent a significant element of our material cost. Significant increases in the prices of these materials could reduce our estimated operating margins if we are unable to recover such increases from our customers.

Interest Rate Risk

On September 30, 2013, the Company entered into a Secured Term Note Payable with Chart E&C. This Note Payable bears interest at a variable rate and exposes us to interest rate risk. Interest is calculated under the terms of the Note Payable based on a calculation of 3% plus the London interbank offered rate at the end of each month. Assuming the $9.1 million principal amount at December 31, 2018 remains outstanding, the impact on interest expense of a 1% increase or decrease in the interest rate would be approximately $0.1 million per year. Following the August 30, 2019 debt exchange with Chart E&C, a 1% increase or decrease in the interest rate would have a de miminis impact on annual interest expense. See Note 11 to the Notes to Condensed Consolidated Financial Statements included elsewhere in this report for information on the terms of the Note Payable.

We do not currently have or intend to enter into any derivative arrangements to protect against fluctuations in interest rates applicable to our outstanding indebtedness.

Foreign Currency Exchange Rate Risk

We operate a subsidiary in Brazil and Mexico and maintain equity method investments in our Chinese joint venture, BOMAY and Mexican joint venture, Energía Superior. The functional currency of the Brazilian and Mexican subsidiaries are the Brazilian Real and Mexican Peso, respectively. The functional currency of the Chinese joint venture is the Chinese Yuan. Investments are translated into United States Dollars at the exchange rate in effect at the end of each quarterly reporting period. The resulting translation adjustment has been an accumulated loss of $530 thousand and is recorded as accumulated other comprehensive loss, net of taxes, in our consolidated balance sheet at September 30, 2019.

As of September 30, 2019, we had a non-U.S. dollar denominated working capital balance of approximately $0.9 million. An adverse change of 10% in the underlying foreign currency exchange rate would reduce our working capital balance by approximately $90 thousand.

We do not currently have or intend to enter into any derivative arrangements to protect against such fluctuations.

Market Risk

The markets in which our power delivery operations participate are capital intensive and cyclical in nature. The volatility in customer demand is greatly driven by the change in the price of oil and gas. These factors influence the release of new capital projects by our customers, which are traditionally awarded in competitive bid situations. Coordination of project start dates is matched to the customer requirements and projects may take a number of months to complete; schedules also may change during the course of any particular project.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

With the participation of our Principal Executive Officer and Principal Financial Officer, management evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of September 30, 2019. Based on their evaluation, our principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures were not effective in providing reasonable assurance that material information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, including ensuring that such material information is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure, as of September 30, 2019.

Prior to the completion of the Share Exchange transaction with American Electric, management identified the existence of the material weakness in internal controls over financial reporting described below.

Material Weakness in Internal Control Over Financial Reporting

In connection with its evaluation of the internal control over financial reporting for the year ended December 31, 2018, management identified deficiencies which collectively represent a material weakness in our internal controls over financial reporting. It was determined that American Electric's accounting personnel was reduced to a level that did not provide for sufficient segregation of duties, oversight of work performed and compensating controls in the accounting department. While these issues did not result in any material misstatements on our consolidated financial statements, they did collectively represent a material weakness in internal control over financial reporting.

Remediation Process

Management is in the process of remediating the material weakness and has implemented additional controls, including hiring additional accounting personnel to provide additional supervision, approval and review of accounting transactions under the direction of an experienced Chief Financial Officer which we believe will remediate the material weakness described above.

While we believe the remediation measures described above will remediate this material weakness going forward, the implementation of these controls is ongoing, and as we continue to evaluate and work to improve our internal control over financial reporting, management may determine to take additional measures to address this material weakness or determine to modify the

remediation steps described above. We expect the remediation and testing of the additional controls noted above to be completed by the end of 2019 and believe the remediation measures will strengthen our internal control over financial reporting and remediate the material weakness identified.

Changes in internal control over financial reporting

There were no changes in our internal control over financial reporting that occurred during the three months ended September 30, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company becomes involved in various legal proceedings and claims in the normal course of business. In management’s opinion, the ultimate resolution of these matters will not have a material effect on our financial position or results of operations.

ITEM 1A. RISK FACTORS

Our operations and financial results are subject to various risks and uncertainties, including those described in the “Risk Factors” section of our Registration Statement on Form S-1/A filed with the Securities and Exchange Commission on October 22, 2019, which could adversely affect our business, financial condition, results of operations, cash flows, and the trading price of our common stock.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following provides information concerning all sales of securities which we made during the three months ended September 30, 2019 which were not registered under the Securities Act of 1933, as amended (the “Act”). Except as otherwise noted, all issuance of common stock and warrants reflect the 1:8 reverse stock split effective July 29, 2019.

In connection with the Share Exchange, on the July 26, 2019, we issued 12,564,733 shares of common stock to LNG Investment and 614,017 shares of common stock (such issuances reflecting shares of common stock following the reverse stock split effective July 29, 2019) to AEGIS without registration under the Act, pursuant to rules governing limited offers and sales without registration pursuant to the exemption available for sales without registration under Section 4(a)(2) of the Act.

On July 26, 2019 we issued 276,548 shares of our common stock to the holder of our Series A Convertible Preferred Stock, JCH Crenshaw Holdings, LLC, upon the conversion of such preferred stock by the holder in accordance with the terms of the preferred stock. The issuance of such common stock was exempt from registration under the Act pursuant to Section 3(a)(9) thereof.

On August 20, 2019, we issued 684,963 shares of our common stock to Diversenergy, without registration under the Act, pursuant to rules governing limited offers and sales without registration pursuant to the exemption available for sales without registration under Section 4(a)(2) of the Act.

On August 30, 2019, we issued 1,470,807 shares of our common stock to Chart E&C, without registration under the Act, pursuant to rules governing limited offers and sales without registration pursuant to the exemption available for sales without registration under Section 4(a)(2) of the Act.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

(a) Index to Exhibits



Exhibit No.		Exhibit Description

2.1		Share Exchange Agreement, dated December 17, 2018, by and among American Electric Technologies, Inc., LNG Investment Company, LLC, AEGIS NG LLC, Stabilis Energy, LLC, and PEG Partners, LLC (Incorporated by reference to Registrant’s Current Report on Form 8-K filed December 24, 2018)

2.2		Amendment dated May 8, 2019 to the Share Exchange Agreement concerning the business combination with Stabilis (Incorporated by reference to Exhibit 2.1 to Registrant’s Current Report on Form 8-K filed May 9, 2019)

3.1		Restated Articles of Incorporation of the Registrant (Incorporated by Reference to Exhibit 3.1 to Registrant’s Current Report on Form 8-K filed May 12, 2008)

3.2		Articles of Amendment to Registrant’s Articles of Incorporation filed April 30, 2012 (Incorporated by Reference to Exhibit 3.1 to Registrant’s Current Report on Form 8-K filed May 4, 2012)

3.3		Articles of Amendment to Registrant’s Articles of Incorporation filed August 25, 2017 (Incorporated by Reference to Exhibit 3.1 to Registrant’s Current Report on Form 8-K filed August 14, 2017)

3.4		Articles of Amendment to Registrant’s Articles of Incorporation filed July 18, 2019 (Incorporated by Reference to Exhibit 3.1 to Registrant’s Current Report on Form 8-K filed July 22, 2019)

3.5		Articles of Amendment to Registrant’s Articles of Incorporation effective July 29, 2019 (Incorporated by Reference to Exhibit 3.1 to Registrant’s Current Report on Form 8-K filed August 1, 2019)

3.6		Amended and Restated Bylaws of the Registrant (Incorporated by Reference to Exhibit 3.2 to Registrant’s Current Report on Form 8-K filed February 9, 2009)

4.1		Warrant to purchase 125,000 shares of Registrant’s common stock dated May 2, 2012 (Incorporated by reference to Exhibit 4.1 to Registrant’s Quarterly Report on Form 10-Q filed on August 14, 2012)

4.2		Warrant to purchase 200,000 shares of Registrant’s common stock dated May 2, 2012 (Incorporated by reference to Exhibit 4.2 to Registrant’s Quarterly Report on Form 10-Q filed on August 14, 2012)

4.3		Investors Rights Agreement between Registrant and JCH Crenshaw Holdings, LLC dated May 2, 2012 (Incorporated by reference to Exhibit 4.3 to Registrant’s Quarterly Report on Form 10-Q filed on August 14, 2012)

4.4		Registration Rights Agreement between Registrant and JCH Crenshaw Holdings, LLC dated May 2, 2012 (Incorporated by reference to Exhibit 4.4 to Registrant’s Quarterly Report on Form 10-Q filed on August 14, 2012)

4.5		Warrant to Purchase Common Stock dated November 13, issued to HD Special-Situations III, LP (Incorporated by reference to Exhibit 10.3 to Registrant’s Quarterly Report on Form 10-Q filed on November 14, 2017)

4.6		Registration Rights Agreement dated November 13, 2017 between Registrant and HD Special-Situations III, LP (Incorporated by reference to Exhibit 10.4 to Registrant’s Quarterly Report on Form 10-Q filed on November 14, 2017)

4.7		Voting Agreement, dated as of December 17, 2018, by and among JCH Crenshaw Holdings, LLC and certain stockholders of Registrant (Incorporated by reference to Exhibit B of Amendment No. 8 to Schedule 13D filed by JCH Crenshaw Holdings, LLC and J. Casey Crenshaw on December 28, 2018)

4.8		Registration Rights Agreement dated July 26, 2019, by and among Registrant, LNG Investment Company, LLC, and AEGIS NG LLC (Incorporated by Reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed August 1, 2019)

4.9		*Registration Rights Agreement dated as of August 20, 2019, by and among Registrant and the Investors named therein

10.1		Note Purchase Agreement dated March 23, 2017 by and among Registrant and its subsidiaries, M&I Electric Industries, Inc. and South Coast Electric Systems, LLC and HD Special-Situations III, L.P. (Incorporated by Reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed March 27, 2017)



Exhibit No.		Exhibit Description
10.2		Transaction Modification Agreement dated November 13, 2017 among Registrant, M&I Electric Industries, Inc., South Coast Electric Systems, LLC and HD Special-Situations III, LP. (Incorporated by reference to Exhibit 10.1 to Registrant’s Quarterly Report on Form 10-Q filed on November 14, 2017)

10.3		Senior Secured Term Note dated March 23, 2017 issued by the Company and its subsidiaries, M&I Electric Industries, Inc. and South Coast Electric Systems, LLC (Incorporated by Reference to Exhibit 10.2 to Registrant’s Current Report on Form 8-K filed March 27, 2017)

10.4		Amended and Restated Senior Secured Term Loan dated November 13, 2017 in the amount of $6,500,000 issued to HD Special-Situations III, LP (Incorporated by reference to Exhibit 10.2 to Registrant’s Quarterly Report on Form 10-Q filed on November 14, 2017)

10.5		Security Agreement of the Company dated March 23, 2017 (Incorporated by Reference to Exhibit 10.3 to Registrant’s Current Report on Form 8-K filed March 27, 2017)

10.6		Security Agreement of M&I Electric Industries, Inc. dated March 23, 2017 (Incorporated by Reference to Exhibit 10.4 to Registrant’s Current Report on Form 8-K filed March 27, 2017)

10.7		Security Agreement of South Coast Electric Systems, LLC dated March 23, 2017 (Incorporated by Reference to Exhibit 10.5 to Registrant’s Current Report on Form 8-K filed March 27, 2017)

10.8		Amended 2007 Employee Stock Incentive Plan (Incorporated by reference to Exhibit 10.3 to the Registrant’s Annual Report on Form 10-K filed March 31, 2015) †

10.9		Non-Employee Directors’ Deferred Compensation Plan (Incorporated by reference to Exhibit 10.4 to the Registrant’s report on Form 10-QSB filed November 14, 2007) †

10.10		2007 Employee Stock Purchase Plan (Incorporated by reference to Exhibit 10.5 to the Registrant’s report on Form 10-QSB filed November 14, 2007) †

10.11		Summary of Non-Employee Director compensation effective January 1, 2016 (Incorporated by reference to Exhibit 10.15 to the Registrant’s Annual Report on Form 10-K filed March 30, 2015) †

10.12		Form of Employee Stock Option Award Agreement under 2007 Employee Stock Incentive Plan (Incorporated by reference to Exhibit 10.25 to the Registrant’s Annual Report on Form 10-K filed March 31, 2008) †

10.13		Form of Restricted Stock Unit Award Agreement under 2007 Employee Stock Incentive Plan (Incorporated by reference to Exhibit 10.26 to the Registrant’s Annual Report on Form 10-K filed March 31, 2008) †

10.14		Securities Purchase Agreement between Registrant and JCH Crenshaw Holdings, LLC dated April 13, 2012 (Incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed April 19, 2012)

10.15		Letter Agreement dated March 22, 2017 between the Company and JCH Crenshaw Holdings, LLC (Incorporated by Reference to Exhibit 10.6 to Registrant’s Current Report on Form 8-K filed March 27, 2017)

10.16		Repricing Agreement dated August 1, 2017 between the Company and JCH Crenshaw Holdings, LLC (Incorporated by Reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed August 3, 2017)

10.17		Deferred Compensation Plan for executives (Incorporated by reference to Exhibit 10.25 to the Registrant’s Annual Report on Form 10-K filed March 27, 2009) †

10.18		Exchange Agreement dated August 5, 2019, by and among Chart Energy & Chemicals, Inc., Stabilis Energy, Inc., Stabilis Energy, LLC and Stabilis LNG Eagle Ford LLC (Incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed August 9, 2019)

10.19		*Amendment No. 1 to Exchange Agreement dated September 11, by and among Chart Energy & Chemicals, Inc., Stabilis Energy, Inc., Stabilis Energy, LLC and Stabilis LNG Eagle Ford LLC.

10.20		*Secured Promissory Note dated August 16, 2019, by and between the Registrant and M/G Finance Co., Ltd.

10.21		*Pledge and Security Agreement dated August 16, 2019, by and between the Registrant and M/G Finance Co., Ltd.

10.22		*Sublease Agreement dated February 28, 2017



Exhibit No.		Exhibit Description
10.23		*Master Lease Agreement dated February 2, 2018

10.24		*Master Lease Agreement dated August 30, 2018

10.25		*Master Lease Agreement dated August 30, 2018

10.26		*Master Lease Agreement dated September 25, 2018

31.1		Rule 13a-14(a) / 15d-14(a) Certification of Principal Executive Officer.

31.2		Rule 13a-14(a) / 15d-14(a) Certification of Principal Financial Officer.

32.1		Section 1350 Certifications of Principal Executive Officer and Principal Financial Officer.

101.INS		XBRL Instance Document.

101.SCH		XBRL Taxonomy Extension Schema Document.

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB		XBRL Taxonomy Extension Labels Linkbase Document.

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document.


(1)	Exhibits and schedules to the Share Exchange Agreement and Amendment have been omitted pursuant to Item 601(b)(2) of Regulation S-K. Registrant hereby undertakes to furnish supplemental copies of any of the omitted exhibits and schedules upon request by the U.S. Securities and Exchange Commission.

* Filed herewith.

† Indicates management contract or compensatory plan, contract or arrngement.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



Date: November 12, 2019

STABILIS ENERGY, INC.

By:	/s/ James C. Reddinger
	James C. Reddinger
	President and Chief Executive Officer (Principal Executive Officer)

By:	/s/ Andrew L. Puhala
	Andrew L. Puhala
	Chief Financial Officer (Principal Financial Officer)

Exhibit 4.9

REGISTRATION RIGHTS AGREEMENT

This Registration Rights Agreement (this “Agreement”) is made and entered into as of August 20, 2019 among Stabilis Energy, Inc., a Texas corporation (the “Company”), and the persons identified on Schedule A hereto (collectively, the “Investors” and, each individually, an “Investor”).

WHEREAS, this Agreement is made pursuant to that certain Membership Interest Purchase and Sale Agreement, dated as of even date herewith, by and among the Company and the Investors (the “Purchase Agreement”);

WHEREAS, pursuant to the Purchase Agreement, the Company will issue shares of common stock (as defined below) to the Investors, in exchange for the outstanding membership interests of Target then held by the Investors; and

WHEREAS, in connection with the consummation of the transactions contemplated by the Purchase Agreement, and pursuant to the terms of the Purchase Agreement, the parties hereto desire to enter into this Agreement in order to grant certain registration rights to the Investors as set forth below.

NOW, THEREFORE, in consideration of the foregoing and the mutual and dependent covenants hereinafter set forth, the parties hereto agree as follows:

1. Defined Terms. As used in this Agreement, the following terms shall have the following meanings:

“Affiliate” of a Person means any other Person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, such Person. The term “control” (including the terms “controlling”, “controlled by” and “under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise.

“Agreement” has the meaning set forth in the preamble.

“Board” means the board of directors (or any successor governing body) of the Company.

“Closing Date” means the date of closing of the transactions contemplated by the Purchase Agreement.

“Commission” means the Securities and Exchange Commission or any other federal agency administering the Securities Act and the Exchange Act at the time.

“Common Stock” means the common stock, par value $0.001 per share, of the Company and any other shares of stock issued or issuable with respect thereto (whether by way of a stock dividend or stock split or in exchange for or upon conversion of such shares or otherwise in connection with a combination of shares, distribution, recapitalization, merger, consolidation, other corporate reorganization or other similar event with respect to the Common Stock).

“Company” has the meaning set forth in the preamble and includes the Company’s successors by merger, acquisition, reorganization or otherwise.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

“Governmental Authority” means any federal, state, local or foreign government or political subdivision thereof, or any agency or instrumentality of such government or political subdivision, or any self-regulated organization or other non-governmental regulatory authority or quasi-governmental authority (to the extent that the rules, regulations or orders of such organization or authority have the force of law), or any arbitrator, court or tribunal of competent jurisdiction.

“Investors” has the meaning set forth in the preamble.

“Person” means an individual, corporation, partnership, joint venture, limited liability company, Governmental Authority, unincorporated organization, trust, association or other entity.

“Piggyback Registration” has the meaning set forth in Section 3(a).

“Piggyback Registration Statement” has the meaning set forth in Section 3(a).

“Prospectus” means the prospectus or prospectuses included in any Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective Registration Statement in reliance on Rule 430A under the Securities Act or any successor rule thereto), as amended or supplemented by any prospectus supplement with respect to the terms of the offering of any portion of the Registrable Securities covered by such Registration Statement and by all other amendments and supplements to the prospectus, including post-effective amendments and all material incorporated by reference in such prospectus or prospectuses.

“Purchase Agreement” has the meaning set forth in the recitals.

“Registrable Securities” means the Shares; provided, however, that Registrable Securities shall not include: (i) any Shares that have been registered under the Securities Act and disposed of pursuant to an effective Registration Statement, (ii) any Shares that are sold or disposed of in accordance with Rule 144 under the Securities Act, (iii) any Shares that become eligible for sale pursuant to Rule 144 without volume or manner-of-sale restrictions and without the requirement for the Company to be in compliance with the current public information requirement under Rule 144(c)(1), as set forth in a written opinion letter to such effect, addressed, delivered and reasonably acceptable to the applicable transfer agent, (iv) Shares that are otherwise transferred, or (v) any Shares have ceased to be outstanding (whether as a result of repurchase and cancellation, or otherwise).

“Registration Statement” means any registration statement of the Company, including the Prospectus, amendments and supplements to such registration statement, including post-effective amendments, all exhibits and all material incorporated by reference in such registration statement.

“Rule 144” means Rule 144 under the Securities Act or any successor rule thereto.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“Selling Expenses” means all underwriting discounts, underwriting or selling commissions and stock transfer taxes applicable to the sale of Registrable Securities, any out-of-pocket expenses of the holders of Registrable Securities (or the agents who manage their accounts) or the fees and disbursements of any underwriter, and fees and disbursements of counsel for any holder of Registrable Securities, except for the fees and disbursements of counsel for the holders of Registrable Securities required to be paid by the Company pursuant to Section 5.

“Shares” means the shares of Common Stock issued or issuable to the Investors pursuant to the Purchase Agreement, including any shares of Common Stock issued or issuable with respect to such Shares by way of a stock dividend or stock split or otherwise in connection with a combination of shares, distribution, recapitalization, merger, consolidation, other reorganization or other similar event with respect to the Common Stock.

“Shelf Registration Statement” has the meaning set forth in Section 2(a).

“Suspension Event” means any of the Company Board shall have determined in good faith that (i)(a) the offer or sale of any Registrable Securities pursuant to the Registration Statement would materially impede, delay or interfere with any proposed financing, offer or sale of securities, acquisition, disposition, merger, tender offer, business combination, corporate reorganization or other significant transaction involving the Company; or (b) the sale of Registrable Securities pursuant to the Registration Statement would require the disclosure of material non-public information not otherwise required to be disclosed under applicable law; provided that, in the case of either clause (a) or (b), (1) the Company has a bona fide business purpose for preserving confidentiality of the proposed transaction or information, (2) disclosure would be materially detrimental to the Company or its ability to consummate the proposed transaction, or (3) the proposed transaction renders the Company unable to comply with Commission requirements; or (ii) after the advice of counsel, the Company is required by law, rule or regulation, or it is in the best interests of the Company, to supplement the Registration Statement or file a post-effective amendment to the Registration Statement in order to incorporate information into the Registration Statement for the purpose of (a) reflecting in the Prospectus included in the Registration Statement any facts or events arising after the effective date of the Registration Statement (or of the most-recent post-effective amendment) that, individually or in the aggregate, represents a fundamental change in the information set forth in the Prospectus; (b) including in the Prospectus included in the Registration Statement any material information with respect to the plan of distribution not disclosed in the Registration Statement or any material change to such information; or (c) updating the Prospectus included in the Registration Statement in accordance with Section 10(a)(3) of the Securities Act.

2. Shelf Registration.

(a) The Company (A) shall prepare and file, no later than ninety (90) days following the Closing Date, a Shelf Registration Statement on Form S-1 (or any successor form or other appropriate form under the Securities Act) (the “Shelf Registration Statement”) to permit pursuant to Rule 415 the public resale of all of the Registrable Securities in accordance with the terms of this Agreement and (B) shall use commercially reasonable efforts to cause the Shelf Registration Statement to be declared effective under the Securities Act as promptly as practicable, but in any event no later than the earlier of (i) one hundred twenty (120) days (or one hundred fifty (150) days if the Commission notifies the Company that it will “Review” the Shelf Registration Statement) following the Closing Date and (ii) ten (10) Business Days following the date the Commission notifies (orally or in writing, whichever is earlier) the Company that it will not “Review” the Shelf Registration Statement or that the Shelf Registration Statement will not be subject to further review. The Company shall use commercially reasonable efforts, as soon as it is permitted to do so, to convert such Shelf Registration Statement from a Form S-1 to a Form S-3 or any successor form thereto. The Company shall only be required to file one Registration Statement with respect to the Registrable Securities pursuant to this Section 2(a).

(b) For so long as any Registrable Securities remain outstanding, the Company shall use its commercially reasonable efforts to qualify and remain qualified to register the offer and sale of securities under the Securities Act pursuant to a Registration Statement on Form S-3 or any successor form thereto.

3. Piggyback Registration.

(a) Whenever the Company proposes to register the offer and sale of any shares of its Common Stock under the Securities Act in connection with the public offering of such securities solely for cash (other than a registration (i) pursuant to a Registration Statement on Form S-8 (or other registration solely relating to an offering or sale to employees or directors of the Company pursuant to any employee stock plan or other employee benefit arrangement), (ii) pursuant to a Registration Statement on Form S-4 (or similar form that relates to a transaction subject to Rule 145 under the Securities Act or any successor rule thereto), (iii) on any form that does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities, (iv) in which the only Common Stock being registered is Common Stock issuable upon conversion of debt securities that are also being registered, or (v) in connection with any dividend or distribution reinvestment or similar plan), whether for its own account or for the account of one or more stockholders of the Company and the form of Registration Statement (a “Piggyback Registration Statement”) to be used may be used for any registration of Registrable Securities (a “Piggyback Registration”), the Company shall give prompt written notice to the holders of Registrable Securities who hold at least 33% of the Registrable Securities initially issued or issuable to the Investors pursuant to the Purchase Agreement of its intention to effect such a registration and, subject to Section 3(b), shall include in such registration all Registrable Securities with respect to which the Company has received written requests for inclusion from the holders of Registrable Securities within two (2) days after the Company’s notice has been given to each such holder; provided, however, the obligations of this Section 3(a) shall not apply with respect to Registrable Securities included in an effective registration statement. The Company may postpone or withdraw the filing or the effectiveness of a Piggyback Registration at any time in its sole discretion.

(b) If in connection with any Piggyback Registration involving an underwriting of shares of the Company’s Common Stock pursuant to Section 3(a), and the managing underwriter(s) for such offering advise the Company that in their reasonable opinion the number of securities requested to be included in such offering exceeds the number which can be sold in an orderly manner in such offering within a price range acceptable to the Company, the Company shall only include in such offering the number which can be so sold in the following order of priority: (i) first, if applicable, the securities the Company proposes to sell, and (ii) second, if there remains availability for additional shares of Common Stock to be included in such offering, pro rata among holders of Registrable Securities and any other holders of shares of Common Stock entitled to participate in such offering, if applicable, based on the relative number of shares of Common Stock then held by each such stockholder.

(c) If connection with any Piggyback Registration, the Company shall select the investment banking firm or firms to act as the managing underwriter or underwriters in connection with such offering.

4. Registration Procedures. The procedures to be followed by the Company and each holder of Registrable Securities electing to sell Registrable Securities in a Registration Statement pursuant to this Agreement, and the respective rights and obligations of the Company and such holder of Registrable Securities, with respect to the preparation, filing and effectiveness of such Registration Statement, are as follows:

(a) Subject to the limitations contained in this Agreement, the Company will use commercially reasonable efforts to prepare and file with the Commission such amendments, post-effective amendments and supplements to the Shelf Registration Statement and the Prospectus used

in connection therewith as may be necessary to keep such Shelf Registration Statement effective for a period of not less than five (5) years, or if earlier, until all of such Registrable Securities have been disposed of and to comply with the provisions of the Securities Act with respect to the disposition of such Registrable Securities in accordance with the intended methods of disposition set forth in such Registration Statement;

(b) The Company will at least three (3) business days before filing the Registration Statement, Prospectus or amendments or supplements thereto (other than, after effectiveness of the Registration Statement, any filing made under the Exchange Act that is incorporated by reference into the Registration Statement) with the Commission pursuant to Section 2(a), furnish to one counsel selected by holders of a majority of such Registrable Securities copies of such documents proposed to be filed, which documents shall be subject to the review, comment and approval of such counsel;

(c) The Company will notify each selling holder of Registrable Securities, promptly after the Company receives notice thereof, of the time when such Registration Statement has been declared effective or a supplement to any Prospectus forming a part of such Registration Statement has been filed with the Commission;

(d) The Company will furnish to each selling holder of Registrable Securities such number of copies of the Prospectus included in such Registration Statement (including each preliminary Prospectus) and any supplement thereto (in each case including all exhibits and documents incorporated by reference therein), and such other documents as such seller may request in order to facilitate the disposition of the Registrable Securities owned by such seller;

(e) The Company will use its commercially reasonable efforts to register or qualify such Registrable Securities under such other securities or “blue sky” laws of such jurisdictions as any selling holder reasonably (in light of the intended plan of distribution) requests and do any and all other acts and things which may be reasonably necessary or advisable to enable such holders to consummate the disposition in such jurisdictions of the Registrable Securities owned by such holders; provided, that the Company shall not be required to qualify generally to do business, subject itself to general taxation or consent to general service of process in any jurisdiction where it would not otherwise be required to do so but for this Section 4(e);

(f) The Company will notify each selling holder of such Registrable Securities, at any time when a Prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event that would cause the Prospectus included in such Registration Statement to not be compliant with applicable securities laws or to contain an untrue statement of a material fact or omit any fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading, and, the Company shall as soon as reasonably practicable prepare a supplement or post-effective-amendment to such Registration Statement or the related Prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such Prospectus shall be compliant with applicable securities laws or shall not contain an untrue statement of a material fact or omit to state any fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, as applicable;

(g) The Company will provide a transfer agent and registrar (which may be the same entity) for all such Registrable Securities not later than the effective date of such registration;

(h) The Company will enter into customary agreements (including, if applicable, an underwriting agreement in customary form) and take such other actions as are reasonably required in order to expedite or facilitate the disposition of such Registrable Securities;

(i) The Company will furnish to each underwriter, if any, with (i) a written legal opinion of the Company’s outside counsel, dated the closing date of the offering, in form and substance as is customarily given in opinions of the Company’s counsel to underwriters in underwritten registered offerings; and (ii) at the pricing and closing of the offering, dated the respective dates of delivery thereof, a “comfort” letter signed by the Company’s independent certified public accountants in form and substance as is customarily given in accountants’ letters to underwriters in underwritten registered offerings;

(j) The Company will use its commercially reasonable efforts to cause such Registrable Securities to be registered with or approved by such other governmental agencies or authorities as may be necessary by virtue of the business and operations of the Company to enable the holders of such Registrable Securities to consummate the disposition of such Registrable Securities in accordance with their intended method of distribution thereof; provided, that the Company shall not be required to qualify generally to do business, subject itself to general taxation or consent to general service of process in any jurisdiction where it would not otherwise be required to do so but for this Section 4(j);

(k) The Company will, as soon as reasonably practicable after the filing of a Registration Statement, notify the holders of Registrable Securities included in such Registration Statement of such filing, and shall further notify such holders as soon as reasonably practicable and confirm such advice in writing, in all events within two (2) business days of the occurrence of any of the following: (i) when such Registration Statement becomes effective; (ii) when any post-effective amendment to such Registration Statement becomes effective; and (iii) any request by the Commission for any amendment or supplement to such Registration Statement or any prospectus relating thereto or for additional information or of the occurrence of an event requiring the preparation of a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of the securities covered by such Registration Statement, such prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and promptly make available to the holders of Registrable Securities included in such Registration Statement any such supplement or amendment;

(l) The Company will advise the holders of Registrable Securities, as soon as reasonably practicable, but in any event no later than two (2) business days, after it shall receive notice or obtain knowledge thereof, of the issuance of any stop order by the Commission suspending the effectiveness of such Registration Statement or the initiation or threatening of any proceeding for such purpose and promptly use its commercially reasonable efforts to prevent the issuance of any stop order or to obtain its withdrawal at the earliest possible moment if such stop order should be issued;

(m) Notwithstanding any other provision of this Agreement, the Company shall not be required to file a registration statement (or any amendment thereto) or effect any offering for so long as, (i) any event of the kind described in Section 4(f) or (ii) a Suspension Event, is occurring; provided, however, the Company shall not be entitled to exercise its right of suspension or postponement, as the case may be, pursuant to this Section 4(m) for more than an aggregate of 120 calendar days in any 12-month period;

(n) Each holder of Registrable Securities agrees that, upon receipt of any notice from the Company of the happening of (i) any event of the kind described in Section 4(f) or (ii) a Suspension Event, each holder of Registrable Securities will forthwith discontinue disposition of Registrable Securities pursuant to the applicable Registration Statement until such holder’s receipt of the copies of the supplemental or amended prospectus contemplated by Section 4(f) or written notice from the Company that such Registration Statement is effective again and no amendment or supplement is needed.

It shall be a condition precedent to the obligations of the Company to take any action to register the resale of the Registrable Securities that holders of Registrable Securities shall furnish the Company with such information regarding the holders of Registrable Securities that is pertinent to the disclosure requirements (including, without limitation, information to correct or prevent a material misstatement or omission of material fact) relating to the registration and the distribution of the Registrable Securities as the Company may from time to time reasonably request.

5. Expenses. All expenses (other than Selling Expenses) incurred by the Company in complying with its obligations pursuant to this Agreement and in connection with the registration and disposition of Registrable Securities shall be paid by the Company, including, without limitation, all (i) registration and filing fees (including, without limitation, any fees relating to filings required to be made with, or the listing of any Registrable Securities on, any securities exchange or over-the-counter trading market on which the Registrable Securities are listed or quoted); (ii) expenses of any audits incident to or required by any such registration; (iii) fees and expenses of complying with securities and “blue sky” laws (including, without limitation, fees and disbursements of counsel for the Company in connection with “blue sky” qualifications or exemptions of the Registrable Securities); (iv) printing expenses; (v) messenger, telephone and delivery expenses; (vi) fees and expenses of the Company’s counsel and accountants; (vii) Financial Industry Regulatory Authority, Inc. filing fees (if any); and (viii) fees and expenses of one counsel for the holders of Registrable Securities participating in such registration as a group (selected by, in the case of a registration under Section 2(a), the holders of a majority of the Registrable Securities initially requesting such registration, and, in the case of all other registrations hereunder, the holders of a majority of the Registrable Securities included in the registration). In addition, the Company shall be responsible for all of its internal expenses incurred in connection with the consummation of the transactions contemplated by this Agreement (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties) and the expense of any annual audits. All Selling Expenses relating to the offer and sale of Registrable Securities registered under the Securities Act pursuant to this Agreement shall be borne and paid by the holders of such Registrable Securities, in proportion to the number of Registrable Securities included in such registration for each such holder.

6. Indemnification.

(a) The Company shall indemnify and hold harmless, to the fullest extent permitted by law, each holder of Registrable Securities, such holder’s officers, directors, managers, members, partners, stockholders and Affiliates, and each Person, if any, who controls such holder of Registrable Securities within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, against all losses, claims, actions, damages, liabilities and expenses, joint or several, to which any of the foregoing Persons may become subject under the Securities Act or otherwise, insofar as such losses, claims, actions, damages, liabilities or expenses arise out of or are based upon any untrue or alleged untrue statement of a material fact contained in any Registration Statement, Prospectus, preliminary Prospectus, free writing prospectus (as defined in Rule 405 under the Securities Act or any successor rule thereto) or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of a Prospectus, preliminary Prospectus or

free writing prospectus, in light of the circumstances under which they were made) not misleading; except insofar as the same arise out of or are based upon any information furnished in writing to the Company by such holder or on such holder’s behalf expressly for use therein or by such holder’s failure to deliver a copy of the Registration Statement, Prospectus, preliminary Prospectus, free writing prospectus (as defined in Rule 405 under the Securities Act or any successor rule thereto) or any amendments or supplements thereto (if the same was required by applicable law to be so delivered). This indemnity shall be in addition to any liability the Company may otherwise have.

(b) Each holder of Registrable Securities shall furnish to the Company in writing such information as the Company reasonably requests for use in connection with any Registration Statement or Prospectus and, to the fullest extent permitted by law, shall indemnify and hold harmless, each other holder of Registrable Securities, the Company, and each Person, if any, who controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act and the officers, directors, managers, members, partners, stockholders and Affiliates of the Company, each other holder of Registrable Securities and each such controlling Person to the same extent as the foregoing indemnity from the Company to such holder of Registrable Securities, but only with respect to information furnished in writing to the Company by such holder or on such holder’s behalf expressly for use therein or by such holder’s failure to deliver a copy of the Registration Statement, Prospectus, preliminary Prospectus, free writing prospectus (as defined in Rule 405 under the Securities Act or any successor rule thereto) or any amendments or supplements thereto (if the same was required by applicable law to be so delivered). The liability of any holder of Registrable Securities under this Section 6(b) shall be limited to the aggregate cash and property received by such holder pursuant to the sale of Registrable Securities covered by such Registration Statement or Prospectus. This indemnity shall be in addition to any liability the selling holder may otherwise have.

(c) Promptly after receipt by an indemnified party of notice of the commencement of any action involving a claim referred to in this Section 6, such indemnified party shall, if a claim in respect thereof is made against an indemnifying party, give written notice to the latter of the commencement of such action. The failure of any indemnified party to notify an indemnifying party of any such action shall not (unless such failure shall have a material adverse effect on the indemnifying party) relieve the indemnifying party from any liability in respect of such action that it may have to such indemnified party hereunder. In case any such action is brought against an indemnified party, the indemnifying party shall be entitled to participate in and to assume the defense of the claims in any such action that are subject or potentially subject to indemnification hereunder, jointly with any other indemnifying party similarly notified to the extent that it may wish, with counsel reasonably satisfactory to such indemnified party, and after written notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be responsible for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof; provided, that, if any indemnified party shall have reasonably concluded that there may be one or more legal or equitable defenses available to such indemnified party which are additional to or conflict with those available to the indemnifying party, the indemnifying party shall not have the right to assume the defense of such action on behalf of such indemnified party without such indemnified party’s prior written consent (but, without such consent, shall have the right to participate therein with counsel of its choice) and such indemnifying party shall reimburse such indemnified party and any controlling Person of such indemnified party for that portion of the fees and expenses of any counsel retained by the indemnified party which is reasonably related to the matters covered by the indemnity provided hereunder. If such defense is assumed, the indemnifying party shall not be subject to any liability for any settlement made by the indemnified party without its consent (but such consent will not be unreasonably withheld). If the indemnifying party is not entitled to, or elects not to,

assume the defense of a claim, it shall not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim. In such instance, the conflicting indemnified parties shall have a right to retain one separate counsel, chosen by the holders of a majority of the Registrable Securities included in the registration, at the expense of the indemnifying party.

(d) If the indemnification provided for hereunder is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, claim, damage, liability or action referred to herein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amounts paid or payable by such indemnified party as a result of such loss, claim, damage, liability or action in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions which resulted in such loss, claim, damage, liability or action as well as any other relevant equitable considerations; provided, that the maximum amount of liability in respect of such contribution shall be limited, in the case of each holder of Registrable Securities, to an amount equal to the aggregate cash and property received by such holder pursuant to the sale of Registrable Securities covered by such Registration Statement or Prospectus. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party, whether the violation of the Securities Act or any other similar federal or state securities laws or rule or regulation promulgated thereunder applicable to the Company and relating to action or inaction required of the Company in connection with any applicable registration, qualification or compliance was perpetrated by the indemnifying party or the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The parties agree that it would not be just and equitable if contribution pursuant hereto were determined by pro rata allocation or by any other method or allocation which does not take account of the equitable considerations referred to herein. No Person guilty or liable of fraudulent misrepresentation within the meaning of Section 11(f) of the Securities Act shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.

7. Participation in Underwritten Registrations. No Person may participate in any registration hereunder which is underwritten unless such Person (a) agrees to sell such Person’s securities on the basis provided in any underwriting arrangements approved by the Person or Persons entitled hereunder to approve such arrangements, including, without limitation, any applicable lock-up period, and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements.

8. Rule 144 Compliance. With a view to making available to the holders of Registrable Securities the benefits of Rule 144 and any other rule or regulation of the Commission that may at any time permit a holder to sell securities of the Company to the public without registration, the Company agrees that it will use commercially reasonable efforts to:

(a) file in a timely manner all reports and other documents required, if any, to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted thereunder;

(b) make and keep public information available, as those terms are understood and defined in Rule 144, at all times after the date of this Agreement required to enable such holder of Registrable Securities to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by Rule 144, as such rules may be amended from time to time or any other rules or regulations now existing or hereafter adopted by the Commission; and

(c) furnish to any holder so long as the holder owns Registrable Securities, promptly upon reasonable request, a written statement by the Company as to its compliance (or the reasons for non-compliance) with the reporting requirements of Rule 144 and of the Securities Act and the Exchange Act.

9. Termination. The provisions of this Agreement shall terminate with respect to any holder of Registrable Securities and be of no further force or effect when all Registrable Securities held by such holder no longer constitute Registrable Securities; provided, that the provisions of Section 5 and Section 6 of this Agreement shall survive for any sales of Registrable Securities prior to such date. Notwithstanding anything to the contrary in this Agreement, this Agreement shall terminate and be of no further force and effect on or after the tenth anniversary of the date hereof.

10. Notices. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by facsimile or e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient; or (d) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective parties at the addresses indicated below (or at such other address for a party as shall be specified in a notice given in accordance with this Section 10).




If to the Company:		Stabilis Energy, Inc.
		10375 Richmond Ave., Suite 700
		Houston, Texas 77042
		Attention: James C. Reddinger, CEO
		Email:jim.reddinger@stabilisenergy.com

with a copy to:		Thompson & Knight LLP
		811 Main Street, Suite 2500
		Houston, Texas 77002
		Attention: Stephen Wayne Grant, Jr.
		Email: stephen.grant@tklaw.com

If to any Investor, to such Investor’s address as set forth on Schedule A hereto.

11. Entire Agreement. This Agreement, together with the Purchase Agreement and any related exhibits and schedules thereto, constitutes the sole and entire agreement of the parties to this Agreement with respect to the subject matter contained herein, and supersedes all prior and contemporaneous understandings and agreements, both written and oral, with respect to such subject matter. Notwithstanding the foregoing, in the event of any conflict between the terms and provisions of this Agreement and those of the Purchase Agreement, the terms and conditions of this Agreement shall control.

12. Successor and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. The Company may assign this Agreement at any time in connection with a sale or acquisition of the Company, whether by merger, consolidation, sale of all or substantially all of the Company’s assets, or similar transaction, without the consent of the Investors; provided, that the successor or acquiring Person agrees in writing to assume all of the Company’s rights and obligations under this Agreement. Each Investor may assign its rights hereunder to any purchaser or transferee of Registrable Securities; provided, that such purchaser or transferee shall, as a condition to the effectiveness of such assignment, be required to execute a counterpart to this Agreement agreeing to be treated as an Investor whereupon such purchaser or transferee shall have the benefits of, and shall be subject to the restrictions contained in, this Agreement as if such purchaser or transferee was originally included in the definition of an Investor herein and had originally been a party hereto.

13. No Third-Party Beneficiaries. This Agreement is for the sole benefit of the parties hereto and their respective successors and permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever, under or by reason of this Agreement; provided, however, the parties hereto hereby acknowledge that the Persons set forth in Section 6 are express third-party beneficiaries of the obligations of the parties hereto set forth in Section 6.

14. Headings. The headings in this Agreement are for reference only and shall not affect the interpretation of this Agreement.

15. Amendment, Modification and Waiver. The provisions of this Agreement may only be amended, modified, supplemented or waived with the prior written consent of the Company and the holders of a majority of the Registrable Securities. No waiver by any party or parties shall operate or be construed as a waiver in respect of any failure, breach or default not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver. Except as otherwise set forth in this Agreement, no failure to exercise, or delay in exercising, any right, remedy, power or privilege arising from this Agreement shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

16. Severability. If any term or provision of this Agreement is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction. Upon such determination that any term or other provision is invalid, illegal or unenforceable, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.

17. Remedies. Each holder of Registrable Securities, in addition to being entitled to exercise all rights granted by law, including recovery of damages, shall be entitled to specific performance of its rights under this Agreement. The Company acknowledges that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement and the Company hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate.

18. Governing Law; Submission to Jurisdiction. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Texas without giving effect to any choice or conflict of law provision or rule (whether of the State of Texas or any other jurisdiction). Any legal suit, action or proceeding arising out of or based upon this Agreement or the transactions contemplated hereby may be instituted in the federal courts of the United States or the courts of the State of Texas in each case located in the city of Houston and County of Harris, and each party irrevocably submits to the exclusive jurisdiction of such courts in any such suit, action or proceeding. Service of process, summons, notice or other document by mail to such party’s address set forth herein shall be effective service of process for any suit, action or other proceeding brought in any such court. The parties irrevocably and unconditionally waive any objection to the laying of venue of any suit, action or any proceeding in such courts and irrevocably waive and agree not to plead or claim in any such court that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.

19. Waiver of Jury Trial. Each party acknowledges and agrees that any controversy which may arise under this Agreement is likely to involve complicated and difficult issues and, therefore, each such party irrevocably and unconditionally waives any right it may have to a trial by jury in respect of any legal action arising out of or relating to this Agreement or the transactions contemplated hereby. Each party to this Agreement certifies and acknowledges that (a) no representative of any other party has represented, expressly or otherwise, that such other party would not seek to enforce the foregoing waiver in the event of a legal action, (b) such party has considered the implications of this waiver, (c) such party makes this waiver voluntarily, and (d) such party has been induced to enter into this Agreement by, among other things, the mutual waivers and certifications in this Section 19.

20. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Agreement delivered by facsimile, e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.

21. Further Assurances. Each of the parties to this Agreement shall, and shall cause their Affiliates to, execute and deliver such additional documents, instruments, conveyances and assurances and take such further actions as may be reasonably required to carry out the provisions hereof and to give effect to the transactions contemplated hereby.

[Signature Pages Follow]

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first written above.




	COMPANY:

	STABILIS ENERGY, INC.

	By	/s/ James Reddinger
	Name: James Reddinger
	Title: Chief Executive Officer and President

[Signature Page to Registration Rights Agreement]




		INVESTORS:

	/s/ John Michael Howard
	John Michael Howard

	/s/ Lee L. Kellough III
	Lee L. Kellough III

	S3G HOLDINGS, LLC




	By:	/s/ Stage Marroquin
	Name:	Stage Marroquin
	Title:	Manager

[Signature Page to Registration Rights Agreement]

SCHEDULE A

John Michael Howard

17806 IH-10 West, Suite 210

San Antonio, Texas 78257

S3G Holdings, LLC

3126 Dos Reoles Loop

Laredo, Texas 78045

Lee L. Kellough III

27726 Tiverton Court

Spring, Texas 77386

Exhibit 10.19

AMENDMENT NO. 1 TO EXCHANGE AGREEMENT

This Amendment No. 1 to Exchange Agreement (this “Amendment”) is dated as of September 11, 2019 (the “Effective Date”), by and among Chart Energy & Chemicals, Inc., a Delaware corporation and subsidiary of Chart Industries, Inc. (“Chart E&C”), Stabilis Energy, Inc., a Florida corporation (“SEI”), Stabilis Energy, LLC, a Texas limited liability company and subsidiary of SEI (“Stabilis”), and Stabilis LNG Eagle Ford LLC, a Delaware limited liability company and subsidiary of Stabilis (“Stabilis LNG”).

RECITALS

WHEREAS, on August 5, 2019, the parties hereto entered into that certain Exchange Agreement (the “Original Agreement”; with the capitalized terms used herein and not otherwise defined being as defined in the Original Agreement);

WHEREAS, the Initial Closing occurred on August 30, 2019, and at such closing, Chart E&C exchanged the Exchanged Indebtedness for 1,470,807 shares of Common Stock of SEI;

WHEREAS, the parties desire to amend the Original Agreement to eliminate Chart E&C’s right to exchange additional Indebtedness following the Initial Closing, subject to the terms and conditions of this Amendment;

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby agreed and acknowledged, the parties hereby agree as follows:

AGREEMENT

1. Amendments to the Original Agreement.

(a) Section 1.2 of the Original Agreement is hereby amended and restated to delete all text therein and replace such text with the following reference: “[Intentionally reserved.]”

(b) The Original Agreement is further amended such that all references to the “Additional Exchange” (including any general references to Chart E&C’s right to exchange any additional Indebtedness), the “Additional Closing,” the “Additional Closing Date” and the “Additional Relevant Cash Amount” are deleted.

(c) In furtherance of the foregoing amendments, the parties hereto acknowledge and agree that, notwithstanding anything to the contrary in the Original Agreement, all provisions therein that previously contained the references deleted hereby shall be interpreted, construed and enforced such that (i) Chart E&C has no additional right to cause any further exchange of Indebtedness under the Original Agreement, as amended hereby and (ii) the Initial Closing, which occurred on August 30, 2019, is the sole closing under the Original Agreement, as amended hereby.

2. Miscellaneous. The provisions of the Original Agreement shall remain in full force and effect except as amended and modified by this Amendment. This Amendment shall be governed by and interpreted, construed and enforced in accordance with the laws of the State of Delaware without regard to any choice of law principles. This Amendment may be executed in

one or more counterparts, each of which shall be deemed an original and all of which shall constitute but one and the same document. A signed copy of this Amendment delivered by facsimile, e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Amendment.

[Signature Pages Follow]

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective authorized signatories as of the date first indicated above.




	STABILIS ENERGY, INC.
	By:	/s/ James Reddinger
	Name: James Reddinger
	Title: Chief Executive Officer
	STABILIS ENERGY, LLC
	By:	/s/ James Reddinger
	Name: James Reddinger
	Title: Authorized Signatory
	STABILIS LNG EAGLE FORD LLC
	By:	/s/ James Reddinger
	Name: James Reddinger
	Title: Authorized Signatory

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective authorized signatories as of the date first indicated above.




	CHART ENERGY & CHEMICALS, INC.
	By:	/s/ Jillian Evanko
	Name: Jillian Evanko
	Title: CEO

Exhibit 10.20

SECURED PROMISSORY NOTE

PN274

Maker: Stabilis Energy, Inc., a Florida corporation

Maker’s Mailing Address:

10375 Richmond Avenue

Suite 700

Houston, TX 77042

Payee: M/G Finance Co., Ltd.

Place for Payment (including county):

1655 Louisiana

Beaumont, Jefferson County, Texas 77701

Principal Amount: $5,000,000

Loan Origination Date: August 16, 2019

Annual Interest Rate on Unpaid Principal: Six percent (6%) per annum beginning on the Loan Origination Date and continuing until 12/10/2020. Twelve percent (12%) thereafter. If an Event of Default has occurred and is not cured by Maker within ten days of receiving written notice from Payee, Payee may increase the interest rate to eighteen percent (18%) per annum, or the highest amount allowed by law, whichever is less.

Interest on the debt evidenced by this Secured Promissory Note (this “Note”) shall not exceed the maximum amount of non-usurious interest that may be contracted for, taken, reserved, charged, or received under law; any interest in excess of that maximum amount shall be credited on the principal of the debt or, if that has been paid, refunded. Interest will accrue daily. Unpaid and overdue interest will be compounded monthly, and as such, will be added to principal amount due with interest accruing on such compounded amount. On any acceleration or required or permitted prepayment, any excess interest shall be canceled automatically as of the acceleration or prepayment or, if already paid, credited on the principal of the debt or, if the principal of the debt has been paid, refunded. This provision overrides other provisions in this and all other instruments concerning the debt.

Terms of Payment (principal and interest):

Maker will make a one-time upfront payment to Payee (“Up-Front Fee”) of $125,000 as consideration for Payee advancing the Principal amount. This Up-Front Fee is not a repayment of Principal.

Note – PN274 | Page 1

Maker will also make thirty-six (36) monthly installment payments according to this section under the following terms until the whole of this Note, both the Principal Amount and interest are paid in full:



Payment#	Date	Principal	Interest	Payment		Payment#	Date	Principal	Interest	Payment
1	1/10/2020	—	120,821.92	$	120,821.92	19	7/10/2021	196,771.19	38,596.17	$	235,367.36
2	2/10/2020	—	25,479.45	25,479.45		20	8/10/2021	198,738.90	36,628.46	235,367.36
3	3/10/2020	—	23,835.62	23,835.62		21	9/10/2021	200,726.29	34,641.07	235,367.36
4	4/10/2020	—	25,479.45	25,479.45		22	10/10/2021	202,733.55	32,633.81	235,367.36
5	5/10/2020	—	24,657.53	24,657.53		23	11/10/2021	204,760.89	30,606.47	235,367.36
6	6/10/2020	—	25,479.45	25,479.45		24	12/10/2021	206,808.50	28,558.86	235,367.36
7	7/10/2020	—	24,657.53	24,657.53		25	1/10/2022	208,876.58	26,490.78	235,367.36
8	8/10/2020	—	25,479.45	25,479.45		26	2/10/2022	210,965.35	24,402.01	235,367.36
9	9/10/2020	—	25,479.45	25,479.45		27	3/10/2022	213,075.00	22,292.36	235,367.36
10	10/10/2020	—	24,657.53	24,657.53		28	4/10/2022	215,205.75	20,161.61	235,367.36
11	11/10/2020	—	25,479.45	25,479.45		29	5/10/2022	217,357.81	18,009.55	235,367.36
12	12/10/2020	—	24,657.53	24,657.53		30	6/10/2022	219,531.39	15,835.97	235,367.36
13	1/10/2021	185,367.36	50,000.00	235,367.36		31	7/10/2022	221,726.70	13,640.66	235,367.36
14	2/10/2021	187,221.03	48,146.33	235,367.36		32	8/10/2022	223,943.97	11,423.39	235,367.36
15	3/10/2021	189,093.25	46,274.12	235,367.36		33	9/10/2022	226,183.41	9,183.95	235,367.36
16	4/10/2021	190,984.18	44,383.18	235,367.36		34	10/10/2022	228,445.24	6,922.12	235,367.36
17	5/10/2021	192,894.02	42,473.34	235,367.36		35	11/10/2022	230,729.69	4,637.67	235,367.36
18	6/10/2021	194,822.96	40,544.40	235,367.36		36	12/10/2022	233,036.99	2,330.37	235,367.36

Interest will be calculated on the unpaid principal to the date of each payment. Each payment will be credited first to the accrued interest and then to reduction of principal. Maker may prepay this Note at any time in whole or in part.

Promise to Pay:

FOR VALUE RECEIVED, including but not limited to extension of credit, credit accommodation, and Payee’s sale of the Collateral (as defined below) securing this Note, Maker promises to pay to the order of Payee at the place for payment and according to the terms of payment, the principal amount plus interest at the rates and under the terms stated above. All unpaid amounts shall be due by the final scheduled payment date. Payee may at its sole option and discretion and only in writing extend any of the requirements in the Terms of Payment section above without waiving any rights or remedies hereunder.

Security for Payment:

This Note is hereby secured by all of the Collateral (as defined in that certain Pledge and Security Agreement, dated as of the date hereof, by and between Maker and Payee (the “Pledge and Security Agreement”)).

This security interest will continue for so long as Maker remains indebted to Payee under this Note, including any renewals, modifications, extensions, and substitutions thereof, and for so long as Maker has any outstanding and unsatisfied obligations under this Note. This security interest will terminate automatically upon payment in full of the principal and interest due on this Note and performance of all and singular the terms, conditions, covenants and agreements in this

Note – PN274 | Page 2

Note and the Pledge and Security Agreement. Promptly after such termination, upon Maker’s request, the Payee, shall execute and deliver to the Maker such documents as Maker may reasonably request to evidence the release of the Collateral from the security interest granted under the Pledge and Security Agreement.

Commercial Agreement:

Maker represents and warrants that it is entering into this Note for commercial purposes and that the security given for this Note is property used for commercial purposes. Maker is not entering into this Note for purposes of acquiring any consumer goods or services or for conducting any consumer activities.

Default:

Each of the following constitutes an Event of Default under this Agreement:

(a) Default in Payment. The failure, refusal or neglect of Maker or any Obligated Party (as defined under the Pledge and Security Agreement) to make any payment of principal or interest on the Indebtedness, or any portion thereof, as the same shall become due and payable under this Note or the Pledge and Security Agreement; or

(b) Non-Performance of Covenants. The failure of Maker or any Obligated Party to timely and properly observe, keep or perform any covenant, agreement, warranty or condition required herein or in any other Loan Documents, to the extent such Default shall not have been remedied or waived within the earlier of (i) 30 days after the knowledge of any officer of the Maker of such breach or failure and (ii) 10 days from the date the Payee gives Maker written notice of the Default; or

(c) False Representation. Any representation contained herein made by Maker or any Obligated Party is false or misleading in any material respect as of the date made or deemed made; or

(d) Default to Third Party. The occurrence of any event which permits the acceleration of the maturity of any material indebtedness owing by Maker or any Obligated Party to any third party under any agreement or undertaking; or

(e) Maker’s Secured Bankruptcy or Insolvency. If Maker or any Obligated Party: (i) becomes insolvent, or makes a transfer in fraud of creditors, or makes an assignment for the benefit of creditors, or admits in writing its inability to pay its debts as they become due; (ii) generally is not paying its debts as such debts become due; (iii) has a receiver, trustee or custodian appointed for, or take possession of, all or substantially all of the assets of such party or any of the Collateral, either in a proceeding brought by such party or in a proceeding brought against such party and such

Note – PN274 | Page 3

appointment is not discharged or such possession is not terminated within sixty (60) days after the effective date thereof or such party consents to or acquiesces in such appointment or possession; files a petition for relief under the United States Secured Bankruptcy Code or any other present or future federal or state insolvency, bankruptcy or similar laws (all of the foregoing hereinafter collectively called “Applicable Secured Bankruptcy Law”) or an involuntary petition for relief is filed against such party under any Applicable Secured Bankruptcy Law and such involuntary petition is not dismissed within sixty (60) days after the filing thereof, or an order for relief naming such party is entered under any Applicable Secured Bankruptcy Law, or any composition, rearrangement, extension, reorganization or other relief of debtors now or hereafter existing is requested or consented to by such party; (iv) fails to have discharged within a period of sixty (60) days any attachment, sequestration or similar writ levied upon any property of such party; or (v) fails to pay within thirty (30) days any final money judgment against such party in a principal amount in excess of $5,000,000; or

(f) Execution on Collateral. The Collateral or any portion thereof is taken on execution or other process of law in any action against Maker; or

(g) Loss of Collateral. Loss, theft, substantial damage, or destruction of the Collateral, that is not repaired or replaced by equivalent property or insurance proceeds within one hundred and twenty (120) days of such loss, theft, substantial damage, or destruction; or

(h) Sale of Collateral. Sale of all or a portion of the Collateral without Payee’s express written consent; or

(i) Liquidation and Related Events. The liquidation, dissolution, merger or consolidation of Maker; provided that a merger or consolidated is permitted if Maker is the surviving entity

IF MAKER DEFAULTS ON THIS NOTE, AND THE DEFAULT IS NOT CURED WITHIN TEN (10) DAYS OF WRITTEN NOTICE FROM PAYEE, PAYEE MAY DECLARE THE UNPAID PRINCIPAL BALANCE AND EARNED INTEREST ON THIS NOTE IMMEDIATELY DUE, AND MAKER HEREBY WAIVES ANY RIGHT TO NOTICE OF ACCELERATION OF THE DEBT. PAYEE MAY FURTHER, AND WITHOUT LIMITING ANY OTHER RIGHTS OR REMEDIES AVAILABLE TO PAYEE, EXERCISE ONE OR MORE OF THE RIGHTS AND REMEDIES PROVIDED IN THE PLEDGE AND SECURITY AGREEMENT, AS DESCRIBED THEREIN.

Time is of the Essence:

Time is of the essence for this Note and the performance of all obligations under this Note.

Choice of Law and Venue:

Maker agrees to pay to Payee the amount of any and all reasonable and documented out- of-pocket costs and expenses, which Payee may incur in connection with and reasonable and

Note – PN274 | Page 4

necessary attorneys’ fees related to: (i) the repossession, custody, preservation, use or operation of, or the sale of, collection from, or other realization upon, the Collateral, (ii) the exercise or enforcement of any of the rights of Payee under the Loan Documents, or (iii) the failure by Maker to perform or observe any of the provisions hereof. This Note shall be governed by and construed in accordance with the laws of the State of Texas, and applicable federal laws, except to the extent perfection and the effect of perfection or non-perfection of the security interest granted hereunder, in respect of any particular collateral, are governed by the laws of a jurisdiction other than the State of Texas. MAKER ACKNOWLEDGES THAT THIS NOTE IS IN EXCESS OF ONE-MILLION DOLLARS, AND THEREFORE CONSTITUTES A MAJOR TRANSACTION UNDER SECTION 15.020 OF TEXAS CIVIL PRACTICES AND REMEDIES CODE. MAKER FURTHER ACKNOWLEDGES THAT THIS NOTE WAS NEGOTIATED IN AND IS PERFORMABLE IN PART IN JEFFERSON COUNTY, TEXAS. MAKER THEREBY AGREES THAT THE TEXAS OR FEDERAL COURTS OF APPLICABLE SUBJECT MATTER JURISDICTION SITTING IN JEFFERSON COUNTY, TEXAS WILL BE THE EXCLUSIVE VENUE FOR ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE, AND MAKER IRREVOCABLY AGREES TO SUBMIT TO THE JURISDICTION OF SUCH COURTS.

Disclaimer of Warranties and Representations:

Maker represents and warrants that Maker has entered into this transaction and executed these documents relying solely and exclusively on its own judgment and investigation. Maker has either received the advice of counsel of its own choice or has had the opportunity to seek counsel and chosen not to do so regarding the terms and conditions of this Note. Maker expressly disclaims any reliance on any representation of Payee or any employee or representative of Payee or its parent company or any subsidiary or affiliate of Payee or its parent company, regarding the terms and conditions of this Note.

THIS NOTE REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

EXECUTED and made EFFECTIVE as of August 16, 2019.




MAKER: STABILIS ENERGY, INC.

By:		/s/ Andrew L. Puhala
		Andrew L. Puhala
Its:		Senior Vice President, Chief Financial Officer and Secretary

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Exhibit 10.21

PLEDGE AND SECURITY AGREEMENT

THIS PLEDGE AND SECURITY AGREEMENT (the “Agreement”) is made as of August 16, 2019, by STABILIS ENERGY, INC., a Florida corporation (“Pledgor”), whose chief executive office(as defined in the Code) is located at 10375 Richmond Avenue, Suite 700, Houston, TX 77042, in favor of M/G FINANCE CO., LTD., a Texas limited partnership (“Secured Party”), whose address is 1655 Louisiana St., Beaumont, Texas 77701. Pledgor and Secured Party hereby agree as follows:

1. Definitions. As used in this Agreement, the following terms shall have the meanings indicated below:

(a) “Collateral” shall mean the personal property of Pledgor specifically described on Schedule A attached hereto and made a part hereof. The term Collateral, as used herein, shall also include (i) all certificates, instruments and other documents evidencing the foregoing, (ii) all renewals, replacements, and substitutions of all of the foregoing, (iii) all accessions or modifications to the foregoing, and (iv) all products and proceeds of all of the foregoing. The designation of proceeds does not authorize Pledgor to sell, transfer, or otherwise convey any of the foregoing property. The delivery at any time by Pledgor to Secured Party of any property as a pledge to secure payment or performance of any indebtedness or obligation whatsoever shall also constitute a pledge of such property as Collateral hereunder.

(b) “Code” shall mean the Texas Business and Commerce Code as in effect in the State of Texas on the date of this Agreement or as it may hereafter be amended from time to time. All words and phrases used herein which are expressly defined in Section 1.201, Chapter 8 or Chapter 9 of the Code shall have the meaning provided for therein. Other words and phrases defined elsewhere in the Code shall have the meaning specified therein except to the extent such meaning is inconsistent with a definition in Section 1.201, Chapter 8 or Chapter 9 of the Code.

(c) “Default” shall mean a condition or event under Section 10 that, after notice or lapse of time or both, would constitute an Event of Default.

(d) “Event of Default” shall mean the conditions or events set forth in Section 10, to the extent they have not been remedied after notice or lapse of time as provided therein.

(e) “GAAP” means, subject to the limitations on the application thereof set forth in Section 1.3, United States generally accepted accounting principles in effect as of the date of determination thereof. For the avoidance of doubt, except as otherwise expressly provided herein, all accounting terms not otherwise defined herein shall have the meanings assigned to them in conformity with GAAP. If at any time any change in GAAP would affect any requirement set forth in any Loan Document, and Pledgor or the Secured Party shall so request, the Secured Party and Pledgor shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in

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light of such change in GAAP; provided that, until so amended, such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and Pledgor shall provide to the Secured Party reconciliation statements requested by Secured Party in connection therewith.

(f) “Indebtedness” shall mean (i) all indebtedness, obligations and liabilities of Pledgor to Secured Party of any kind or character, now existing or hereafter arising, whether direct, indirect, related, unrelated, fixed, contingent, liquidated, unliquidated, joint, several or joint and several, incurred under the Note, (ii) all accrued but unpaid interest on any of the indebtedness described in (i) above, (iii) all obligations of Pledgor to Secured Party under any documents evidencing, securing, governing or pertaining to all or any part of the indebtedness described in (i) and (ii) above, (iv) to the extent owed hereunder or under the Note, all costs and expenses incurred by Secured Party in connection with the collection and administration of all or any part of the indebtedness and obligations described in (i), (ii), and (iii) above or the protection or preservation of, or realization upon, the collateral securing all or any part of such indebtedness and obligations, including without limitation all reasonable attorneys’ fees, and (v) all renewals, extensions, modifications, replacements and rearrangements of the indebtedness and obligations described in (i), (ii), (iii) and (iv) above.

(g) “Loan Documents” shall mean this Agreement and the Note.

(h) “Material Adverse Effect” shall mean a material adverse effect on and/or material developments with respect to (a) the business operations, properties, assets, and condition (financial or otherwise) of the Obligated Parties and their Subsidiaries taken as a whole; (b) the ability of the Obligated Parties and their Subsidiaries taken as a whole to fully and timely perform their obligations under this Agreement and/or the Loan Documents; (c) the legality, validity, binding effect or enforceability against an Obligated Party of a Loan Document; (d) the security interests held by the Secured Party on the Collateral or the priority of such liens; or (e) the rights, remedies and benefits available to, or conferred upon, the Secured Party under any Loan Document.

(i) “Note” shall mean that certain promissory note identified as PN274 dated as of the date hereof (the “Note”), by Pledgor in favor of Secured Party in the principal amount of $5,000,000, with interest thereon at six percent (6%) per annum beginning on the Loan Origination Date and continuing until 12/10/2020 and twelve percent (12%) thereafter, payable in thirty six (36) monthly installments with whole of the debt, both principal and interest being due on December 10, 2022.

(j) “Obligated Party” shall mean (i) Pledgor and (ii) any other party other than Pledgor who guarantees or is otherwise obligated to pay all or any portion of the Indebtedness.

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(k) “Person” shall mean and shall include natural persons, corporations, limited partnerships, general partnerships, limited liability companies, limited liability partnerships, joint stock companies, joint ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and governmental authorities.

(l) “Subsidiary” shall mean, with respect to any Person, any corporation, partnership, limited liability company, association, joint venture or other business entity the accounts of which would be consolidated with those of such Person in such Person’s consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, partnership, limited liability company, association, joint venture or other business entity of which more than fifty percent (50%) of the total voting power of shares of stock or other ownership interests entitled (without regard to the occurrence of any contingency) to vote in the election of the Person or Persons (whether directors, managers, trustees or other Persons performing similar functions) having the power to direct or cause the direction of the management and policies thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof; provided, in determining the percentage of ownership interests of any Person controlled by another Person, no ownership interest in the nature of a “qualifying share” of the former Person shall be deemed to be outstanding.

2. Security Interest. As security for the Indebtedness, Pledgor, for value received, hereby grants to Secured Party a continuing security interest in the Collateral.

3. [Reserved].

4. [Reserved].

5. Maintenance of Collateral.

(a) Secured Party. Other than the exercise of reasonable care to assure the safe custody of any Collateral in Secured Party’s possession from time to time and the accounting for moneys actually received by it hereunder, Secured Party does not have any obligation, duty or responsibility with respect to the Collateral. Without limiting the generality of the foregoing, Secured Party shall not have any obligation, duty or responsibility to do any of the following: (a) [reserved]; (b) fix, preserve or exercise any right, privilege or option (whether conversion, redemption or otherwise) with respect to the Collateral unless (i) Pledgor makes written demand to Secured Party to do so, (ii) such written demand is received by Secured Party in sufficient time to permit Secured Party to take the action demanded in the ordinary course of its business, and (iii) Pledgor provides additional collateral, reasonably acceptable to Secured Party; (c) collect any amounts payable in respect of the Collateral (Secured Party being liable to account to Pledgor only for what Secured Party may actually receive or collect thereon); (d) sell all or any portion of the Collateral to avoid market loss; (e) sell all or any portion of the Collateral unless and until (i) Pledgor makes

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written demand upon Secured Party to sell the Collateral, and (ii) Pledgor provides additional collateral, reasonably acceptable to Secured Party; or (f) hold the Collateral for or on behalf of any party other than Pledgor.

(b) Pledgor. Pledgor will keep the Collateral in good working order and repair in accordance with prudent industry standards. Pledgor will not use the Collateral in violation of any statute, ordinance or regulation which could reasonably be expected to have a Material Adverse Effect on the value of the Collateral. Pledgor agrees that Secured Party or such Person as Secured Party may designate will have the right to inspect the Collateral at reasonable times, and Pledgor will fully cooperate in such inspections.

6. Representations and Warranties. Pledgor hereby represents and warrants the following to Secured Party as of the date hereof:

(a) Accuracy of Information. All written information heretofore, herein or hereafter supplied to Secured Party by or on behalf of Pledgor with respect to the Collateral is true and correct in all material respects, when taken as a whole, as of the date such information is provided.

(b) Enforceability. This Agreement and the other Loan Documents constitute legal, valid and binding obligations of Pledgor, enforceable in accordance with their respective terms, except as limited by bankruptcy, insolvency or similar laws of general application relating to the enforcement of creditors’ rights and except to the extent specific remedies may generally be limited by equitable principles.

(c) Ownership and Liens. Pledgor has good and marketable title to the Collateral free and clear of all liens, security interests, encumbrances or adverse claims, except for the security interest created by this Agreement. No dispute, right of setoff, counterclaim or defense exists with respect to all or any part of the Collateral. Pledgor has not executed any other security agreement currently affecting the Collateral and no effective financing statement or other instrument similar in effect covering all or any part of the Collateral is on file in any recording office except as may have been executed or filed in favor of Secured Party.

(d) No Conflicts or Consents. Neither the ownership, the intended use of the Collateral by Pledgor, the grant of the security interest by Pledgor to Secured Party herein nor the exercise by Secured Party of its rights or remedies hereunder, will (i) conflict with any provision of any agreement, judgment or order applicable to or binding upon Pledgor, or (ii) result in or require the creation of any lien, charge or encumbrance upon any assets or properties of Pledgor or of any person. No material consent, approval, authorization or order of, notice to or filing with, any court, governmental authority or third party is required in connection with the grant by Pledgor of the security interest herein or the exercise by Secured Party of its rights and remedies hereunder, except where the failure to obtain such consent, approval, authorization or order could not reasonably be expected to have a Material Adverse Effect.

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(e) Security Interest. Pledgor has full right, power and authority to grant a first priority security interest in the Collateral to Secured Party in the manner provided herein, free and clear of any lien, security interest or other charge or encumbrance. This Agreement creates a legal, valid and binding security interest in favor of Secured Party in the Collateral. Pledgor represents and warrants that no other person has or claims a security interest in the Collateral that is greater or higher priority than that of Secured Party. It is further stipulated that the intent of the Secured Party and Pledgor is to create a purchase money security interest in favor of Secured Party, and it is acknowledged that the Indebtedness secured by the Collateral arises from Pledgor’s purchase of the Collateral from Secured Party. In the event any Person claims a greater or higher priority security interest in the Collateral than that of Secured Party and which has not been permitted by Secured Party in writing, Pledgor will take all action as is necessary to terminate such claimed security interest.

(f) Location/Identity. Pledgor’s principal residence or place of business and chief executive office (as those terms are used in the Code), as the case may be, is located at the address set forth on the first page hereof.

(g) Solvency of Pledgor. As of the date hereof, and after giving effect to this Agreement and the completion of all other transactions contemplated by Pledgor at the time of the execution of this Agreement, (i) Pledgor and its Subsidiaries, when taken as a whole, are and will be solvent within the meaning given that term and similar terms under applicable laws related to fraudulent transfers and conveyances, (ii) the fair saleable value of the present assets of Pledgor and its consolidated Subsidiaries exceeds and will continue to exceed the liabilities (both fixed and contingent) of Pledgor and its consolidated Subsidiaries, and (iii) Pledgor and its consolidated Subsidiaries have not incurred and do not intend to incur, or believe (nor should they reasonable believe) that they will incur debts beyond their ability to pay such debts as they mature.

(h) [Reserved].

7. Affirmative Covenants. Pledgor will comply with the covenants contained in this Section at all times during the period of time this Agreement is effective unless Secured Party shall otherwise consent in writing.

(a) Ownership, Taxes and Liens. Pledgor will maintain good and marketable title to all Collateral free and clear of all liens, security interests, encumbrances or adverse claims, except for the security interest created by this Agreement and the security interests and other encumbrances expressly permitted herein. Pledgor will not permit any dispute, right of setoff, counterclaim or defense to exist with respect to all or any part of the Collateral. Pledgor will cause any financing statement or other security instrument with respect to the Collateral not otherwise permitted hereunder to be terminated, except as may exist or as may have been filed in

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favor of Secured Party or as otherwise permitted hereunder. Pledgor agrees to timely pay all taxes or assessments levied on or assessed against the Collateral or for use of the Collateral, except those which are being actively contested by such Person in good faith and by appropriate proceedings; provided such reserves or other appropriate provisions, if any, as shall be required in conformity with GAAP shall have been made or provided for. In the event Pledgor fails or refuses to timely pay any such taxes or assessments, fifteen days after providing written notice to Pledgor, Secured Party may at its sole discretion pay such taxes or assessments, and Pledgor will reimburse Secured Party the amount paid within fifteen days of notice from Secured Party.

(b) Inspection of Books and Records. Pledgor will keep adequate records concerning the Collateral prepared in accordance with GAAP and will permit Secured Party and all representatives and agents appointed by Secured Party to inspect Pledgor’s books and records of or relating to the Collateral at any time upon reasonable notice to Pledgor during normal business hours, to make and take away photocopies, photographs and printouts thereof and to write down and record any such information.

(c) Adverse Claim. Pledgor covenants and agrees to promptly notify Secured Party of any material claim, action or proceeding affecting title to the Collateral, or any part thereof, or the security interest created hereunder and, at Pledgor’s expense, defend Secured Party’s security interest in the Collateral against the claims of any third party. Pledgor also covenants and agrees to promptly deliver to Secured Party a copy of all written notices received by Pledgor with respect to the Collateral.

(d) Further Assurances. Pledgor will contemporaneously with the execution hereof and from time to time thereafter at its expense promptly execute and deliver all further instruments and documents and take all further action necessary or appropriate that Secured Party may reasonably request in order (i) to perfect and protect the security interest created or purported to be created hereby and the first priority of such security interest, to enable Secured Party to exercise and enforce its rights and remedies hereunder in respect of the Collateral, and (ii) to otherwise effect the purposes of this Agreement, including, without limitation, executing and filing any financing or continuation statements, or any amendments thereto.

(e) [Reserved].

(f) Insurance. Pledgor shall provide and maintain at its sole cost and expense with financially sound and reputable insurers, such casualty insurance, public liability insurance, and third party property all risk damage insurance, in each case, with respect to liabilities, losses or damage in respect of the assets, properties and businesses of Pledgor with minimum policy limits, through any combination of primary and excess policies, of $5,000,000.00, and giving effect to reasonable self-insurance which comports with the requirements of this Section; and provided that adequate reserves therefor are maintained in accordance with GAAP, with such deductibles, covering such risks and otherwise on such terms and conditions as shall

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be customary. Each of the foregoing policies will name Secured Party or its assign as an additional insured, and any payment of insurance proceeds for the loss, theft, damage or destruction of the Collateral will be made payable jointly to Secured Party and Pledgor. Each policy shall expressly provide that said insurance will not be canceled without 30 days (10 days for non payment) prior written notice to Secured Party or its assigns. Pledgor shall furnish to Secured Party at its address stated above a certificate or certificates of insurance from the insurer(s) as requested by Secured Party in writing, in a form and containing such matters as reasonably required by Secured Party to evidence the existence of the required coverages. Neither Secured Party nor its assigns shall have any obligation to ascertain the existence of or provide any insurance coverage for the Collateral or for Pledgor’s benefit. Any failure of Secured Party to insist on the provision of a certificate of insurance shall not be deemed a waiver of any rights hereunder and shall not excuse or release Pledgor’s obligation to procure and provide such insurance. It is further understood and agreed that the insurance coverage provided by Pledgor shall operate independent and apart from any indemnity obligations imposed on Pledgor under this Agreement and will be primary to any other insurance maintained by or available to Secured Party notwithstanding any “other insurance” provisions or similar language. If Pledgor fails to procure or maintain said insurance within ten days of receiving notice from Secured Party, Secured Party shall have the right, but shall not be obligated, to effect such insurance. In that event, Secured Party shall notify Pledgor of such payment and Pledgor shall repay to Secured Party the cost thereof within 15 days after such notice is mailed to Pledgor. In the event Pledgor fails to timely remit payment, the cost of such insurance procured by Secured Party will be added to the principal balance on the Indebtedness with interest to accrue thereon in accordance with the terms and provisions of the Loan Documents.

8. Negative Covenants. Pledgor will comply with the covenants contained in this Section at all times during the period of time this Agreement is effective, unless Secured Party shall otherwise consent in writing.

(a) Transfer or Encumbrance. Pledgor will not (i) sell, assign (by operation of law or otherwise) or transfer Pledgor’s rights in any of the Collateral without the prior written consent of the Secured Party, (ii) grant a lien or security interest in or execute, authorize, file or record any financing statement or other security instrument with respect to the Collateral to any party other than Secured Party, or deliver actual or constructive possession of any certificate, instrument or document evidencing or representing any of the Collateral to any party other than Secured Party.

(b) Impairment of Security Interest. Pledgor will not take or allow any action to be taken which would materially impair the value or enforceability of Secured Party’s security interest in any Collateral.

(d) [Reserved].

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(e) Financing Statement Filings. Pledgor recognizes that financing statements pertaining to the Collateral have been or may be filed in one or more of the following jurisdictions: the location of Pledgor’s chief executive office, or other such place as Pledgor may be “located” under the provisions of the Code; where Pledgor maintains the Collateral, or has its records concerning the Collateral, as the case may be. Without limitation of any other covenant herein, Pledgor will neither cause nor permit any change in the location of (i) any Collateral or (ii) any records concerning any Collateral without providing written notice to Secured Party within 30 days’ after such change. Without limiting Secured Party’s rights hereunder, Pledgor authorizes Secured Party to file financing statements and amendments related to the Collateral under the provisions of the Code as amended from time to time.

9. Rights of Secured Party. Upon the occurrence and during the continuance of an Event of Default, Secured Party shall have the rights contained in this Section at all times during the period of time this Agreement is effective.

(a) Power of Attorney. Pledgor hereby appoints Secured Party as Pledgor’s attorney-in-fact, such power of attorney being coupled with an interest, with full authority in the place and stead of Pledgor and in the name of Pledgor, for the sole and limited purpose of taking any action, and to execute any instrument which Secured Party may from time to time in Secured Party’s reasonable discretion deem necessary or appropriate to accomplish the purposes of this Agreement, including without limitation, the following action: (i) transfer any instrument, documents or certificates pledged as Collateral in the name of Secured Party or its nominee; (ii) use any interest, premium, or principal payments or other cash proceeds received in connection with any Collateral to reduce any of the Indebtedness or (iii) to file any claims or take any action or institute any proceedings which Secured Party may deem necessary or appropriate for the collection or preservation of the Collateral or otherwise to enforce the rights of Secured Party with respect to the Collateral.

(b) Performance by Secured Party. If Pledgor fails to perform any agreement or obligation provided herein, Secured Party may itself perform, or cause performance of, such agreement or obligation, and the reasonable and documented out-of-pocket expenses of Secured Party incurred in connection therewith shall be a part of the Indebtedness, secured by the Collateral and payable by Pledgor. Notwithstanding any other provision herein to the contrary, Secured Party does not have any duty to exercise or continue to exercise any of the foregoing rights and shall not be responsible for any failure to do so or for any delay in doing so.

10. Default. Each of the following constitutes an “Event of Default” under this Agreement and under the Note:

(a) Default in Payment. The failure, refusal or neglect of Debtor or any Obligated Party to make any payment of principal or interest on the Indebtedness, or any portion thereof, as the same shall become due and payable; or

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(b) Non-Performance of Covenants. The failure of Pledgor or any Obligated Party to timely and properly observe, keep or perform any covenant, agreement, warranty or condition required herein or in any other Loan Documents, to the extent such Default shall not have been remedied or waived within 30 days after the earlier of the knowledge of any officer of the Pledgor of such breach or failure and the date the Secured Party gives Pledgor written notice of the Default; or

(c) False Representation. Any representation contained herein made by Pledgor or any Obligated Party is false or misleading in any material respect as of the date made or deemed made; or

(d) Default to Third Party. The occurrence of any event which permits the acceleration of the maturity of any material indebtedness owing by Pledgor or any Obligated Party to any third party under any agreement or undertaking; or

(e) Pledgor’s Secured Bankruptcy or Insolvency. If Pledgor or any Obligated Party: (i) becomes insolvent, or makes a transfer in fraud of creditors, or makes an assignment for the benefit of creditors, or admits in writing its inability to pay its debts as they become due; (ii) generally is not paying its debts as such debts become due; (iii) has a receiver, trustee or custodian appointed for, or take possession of, all or substantially all of the assets of such party or any of the Collateral, either in a proceeding brought by such party or in a proceeding brought against such party and such appointment is not discharged or such possession is not terminated within sixty (60) days after the effective date thereof or such party consents to or acquiesces in such appointment or possession; files a petition for relief under the United States Secured Bankruptcy Code or any other present or future federal or state insolvency, bankruptcy or similar laws (all of the foregoing hereinafter collectively called “Applicable Secured Bankruptcy Law”) or an involuntary petition for relief is filed against such party under any Applicable Secured Bankruptcy Law and such involuntary petition is not dismissed within sixty (60) days after the filing thereof, or an order for relief naming such party is entered under any Applicable Secured Bankruptcy Law, or any composition, rearrangement, extension, reorganization or other relief of debtors now or hereafter existing is requested or consented to by such party; (iv) fails to have discharged within a period of sixty (60) days any attachment, sequestration or similar writ levied upon any property of such party; or (v) fails to pay within thirty (30) days any final money judgment against such party in a principal amount in excess of $5,000,000; or

(f) Execution on Collateral. The Collateral or any portion thereof is taken on execution or other process of law in any action against Pledgor; or

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(h) Sale of Collateral. Sale of all or a portion of the Collateral without Secured Party’s express written consent; or

(i) [Reserved].

(j) Liquidation and Related Events. The liquidation, dissolution, merger or consolidation of Pledgor; provided that a merger or consolidated is permitted if Pledgor is the surviving entity.

(k) [Reserved].

11. Remedies and Related Rights. If an Event of Default shall have occurred and be continuing, and without limiting any other rights and remedies provided herein or otherwise available to Secured Party, Secured Party may exercise one or more of the rights and remedies provided in this Section, each shall be cumulative of every other right or remedy given herein or now or hereafter existing by law or equity or by statute or otherwise, and may be enforced concurrently therewith or from time to time. No single or partial exercise by Secured Party of any right or remedy hereunder shall preclude any other or further exercise of any other right or remedy.

(a) Remedies. Secured Party may from time to time at its discretion, without limitation and without notice:

(i) exercise in respect of the Collateral all the rights and remedies of a secured party under the Code (whether or not the Code applies to the affected Collateral);

(ii) reduce its claim to judgment or foreclose or otherwise enforce, in whole or in part, the security interest granted hereunder by any available judicial or non-judicial procedure;

(iii) require Pledgor to assemble the Collateral and make it available to Secured Party at any place to be designated by Secured Party that is reasonably convenient to both parties;

(iv) enter upon the premises where the Collateral may be and take possession thereof and remove it to a location of Secured Party’s choice, or render the Collateral unusable wherever it may be found;

(v) sell or otherwise dispose of, at Secured Party’s office, on the premises of Pledgor, or elsewhere, the Collateral, as a unit or in parcels, by public or private proceedings, and by way of one or more contracts (it being agreed that the sale or other disposition of any part of the Collateral shall not exhaust Secured Party’s power of sale, but sales or other dispositions may be made from time to time until all of the Collateral has been sold or disposed of or until the Indebtedness has been paid and performed in full), and at any such sale or other disposition it shall not be necessary to exhibit any of the Collateral; buy the Collateral, or any portion thereof, at any public sale;

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(vi) buy the Collateral, or any portion thereof, at any private sale if the Collateral is of a type customarily sold in a recognized market or is of a type which is the subject of widely distributed standard price quotations;

(vii) apply for the appointment of a receiver for the Collateral, and Pledgor hereby consents to any such appointment; and

(viii) at its option, retain the Collateral in satisfaction of the Indebtedness whenever the circumstances are such that Secured Party is entitled to do so under the Code or otherwise, to the full extent permitted by the Code, Secured Party shall be permitted to elect whether such retention shall be in full or partial satisfaction of the Indebtedness.

In the event Secured Party shall elect to sell the Collateral, Secured Party may sell the Collateral without giving any warranties as and shall be permitted to specifically disclaim any warranties of title or the like. Further, if Secured Party sells any of the Collateral on credit, Pledgor will be credited only with payments actually made by the purchaser, received by Secured Party and applied to the Indebtedness. In the event the purchaser fails to pay for the Collateral, Secured Party may resell the Collateral and Pledgor shall be credited with the proceeds of the sale. Pledgor agrees that in the event Pledgor or any Obligated Party is entitled to receive any notice under the Code, as it exists in the state governing any such notice, of the sale or other disposition of any Collateral, reasonable notice shall be deemed given when such notice is deposited in a depository receptacle under the care and custody of the United States Postal Service, postage prepaid, at such party’s address set forth on the first page hereof, ten (10) days prior to the date of any public sale, or after which a private sale, of any of such Collateral is to be held. Secured Party shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. Secured Party may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. Pledgor further acknowledges and agrees that the redemption by Secured Party of any certificate of deposit pledged as Collateral shall be deemed to be a commercially reasonable disposition under Section 9.610 of the Code.

(b) [Reserved].

(c) Application of Proceeds. If any Event of Default shall have occurred, Secured Party may at its discretion apply or use any cash held by Secured Party as Collateral, and any cash proceeds received by Secured Party in respect of any sale or other disposition of, collection from, or other realization upon, all or any part of the Collateral as follows in such order and manner as Secured Party may elect:

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(i) to the repayment or reimbursement of the reasonable and documented out-of-pocket costs and expenses incurred by Secured Party in connection with and reasonable and necessary attorneys’ fees related to: (A) the administration of the Loan Documents, (B) the custody, preservation, use or operation of, or the sale of, collection from, or other realization upon, the Collateral, and (C) the exercise or enforcement of any of the rights and remedies of Secured Party hereunder;

(ii) to the payment or other satisfaction of any liens and other encumbrances upon the Collateral;

(iii) to the satisfaction of the Indebtedness;

(iv) by holding such cash and proceeds as Collateral;

(v) to the payment of any other amounts required by applicable law (including without limitation, Section 9.615(a)(3) of the Code or any other applicable statutory provision); and

(vi) by delivery to Pledgor or any other party lawfully entitled to receive such cash or proceeds whether by direction of a court of competent jurisdiction or otherwise.

(d) Deficiency. In the event that the proceeds of any sale of, collection from, or other realization upon, all or any part of the Collateral by Secured Party are insufficient to pay all amounts to which Secured Party is legally entitled, Pledgor, each Obligated Party and any party who guaranteed or is otherwise obligated to pay all or any portion of the Indebtedness shall be liable for the deficiency, together with interest thereon as provided in the Loan Documents, to the full extent permitted by the Code.

(e) Non-Judicial Remedies. In granting to Secured Party the power to enforce its rights hereunder without prior judicial process or judicial hearing, Pledgor expressly waives, renounces and knowingly relinquishes any legal right which might otherwise require Secured Party to enforce its rights by judicial process. Pledgor recognizes and concedes that non-judicial remedies are consistent with the usage of trade, are responsive to commercial necessity and are the result of a bargain at arm’s length. Nothing herein is intended to prevent Secured Party or Pledgor from resorting to judicial process at either party’s option.

(f) Other Recourse. Pledgor waives any right to require Secured Party to proceed against any third party, exhaust any Collateral or other security for the Indebtedness, or to have any third party joined with Pledgor in any suit arising out of the Indebtedness or any of the Loan Documents, or pursue any other remedy available to Secured Party. Pledgor further waives any and all notice of acceptance of this Agreement and of the creation, modification, rearrangement, renewal or extension of the Indebtedness. Pledgor further waives any defense arising by reason of any disability or other defense of any third party

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or by reason of the cessation from any cause whatsoever of the liability of any third party. Until all of the Indebtedness shall have been paid in full, Pledgor shall have no right of subrogation and Pledgor waives the right to enforce any remedy which Secured Party has or may hereafter have against any third party, and waives any benefit of and any right to participate in any other security whatsoever now or hereafter held by Secured Party. Pledgor authorizes Secured Party, and without notice or demand and without any reservation of rights against Pledgor and without affecting Pledgor’s liability hereunder or on the Indebtedness, to (i) take or hold any other property of any type from any third party as security for the Indebtedness, and exchange, enforce, waive and release any or all of such other property, (ii) apply such other property and direct the order or manner of sale thereof as Secured Party may in its discretion determine, (iii) renew, extend, replace, accelerate, modify, compromise, settle or release any of the Indebtedness or other security for the Indebtedness, (iv) waive, enforce or modify any of the provisions of any of the Loan Documents executed by any third party, and release or substitute any third party.

(g) [Reserved].

12. INDEMNITY. PLEDGOR HEREBY INDEMNIFIES AND AGREES TO HOLD HARMLESS SECURED PARTY, AND ITS OFFICERS, DIRECTORS, MANAGERS, EMPLOYEES, AGENTS AND REPRESENTATIVES (EACH AN “INDEMNIFIED PERSON”) FROM AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, CLAIMS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS OF ANY KIND OR NATURE (COLLECTIVELY, THE “CLAIMS”) WHICH MAY BE IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST, ANY INDEMNIFIED PERSON ARISING IN CONNECTION WITH THE LOAN DOCUMENTS, THE INDEBTEDNESS OR THE COLLATERAL (INCLUDING WITHOUT LIMITATION, THE ENFORCEMENT OF THE LOAN DOCUMENTS AND THE DEFENSE OF ANY INDEMNIFIED PERSON’S ACTIONS OR INACTIONS IN CONNECTION WITH THE LOAN DOCUMENTS), REGARDLESS OF WHETHER THE CLAIMS ARE BASED IN WHOLE OR IN PART ON THE NEGLIGENCE, STRICT LIABILITY, BREACH OF CONTRACT OR OTHER FAULT OR LIABILITY OF THE INDEMNIFIED PERSON. THE INDEMNIFICATION PROVIDED FOR IN THIS SECTION SHALL SURVIVE THE TERMINATION OF THIS AGREEMENT AND SHALL EXTEND AND CONTINUE TO BENEFIT EACH INDIVIDUAL OR ENTITY WHO IS OR HAS AT ANY TIME BEEN AN INDEMNIFIED PERSON HEREUNDER; EXCEPT TO THE EXTENT SUCH ACTION OR OMISSION CONSTITUTES GROSS NEGLIGENCE OR WILLFUL MISCONDUCT ON THE PART OF SUCH INDEMNIFIED PERSON, AS DETERMINED BY A COURT OF COMPETENT JURISDICTION IN A FINAL, NONAPPEALABLE ORDER.

13. Miscellaneous.

(a) Waiver by Secured Party. Secured Party may waive any Default or Event of Default without waiving any other prior or subsequent Default or Event of

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Default. Secured Party may remedy any Default without waiving the Event of Default remedied. Neither the failure by Secured Party to exercise, nor the delay by Secured Party in exercising, any right or remedy upon any Event of Default shall be construed as a waiver of such Event of Default or as a waiver of the right to exercise any such right or remedy at a later date. No single or partial exercise by Secured Party of any right or remedy hereunder shall exhaust the same or shall preclude any other or further exercise thereof, and every such right or remedy hereunder may be exercised at any time. No waiver of any provision hereof or consent to any departure by Pledgor therefrom shall be effective unless the same shall be in writing and signed by Secured Party and then such waiver or consent shall be effective only in the specific instances, for the purpose for which given and to the extent therein specified. No notice to or demand on Pledgor in any case shall of itself entitle Pledgor to any other or further notice or demand in similar or other circumstances.

(b) Notices. Any notices or other communications required or permitted to be given by under this Agreement must be given in writing and must be personally delivered, sent by prepaid certified or registered mail to the party to whom such notice or communication is directed at the address of such party as follows:


(i)	Pledgor:

Stabilis Energy, Inc.

10375 Richmond Avenue

Suite 700

Houston, TX 77042


(ii)	Secured Party:

M/G Finance Co., Ltd.

PO Box 790

Beaumont, Texas 77704

Attention: Casey Crenshaw

and Charles B. Childress

(c) Entire Agreement. This Agreement, along with the Loan Documents, constitutes the entire agreement of Secured Party and Pledgor with respect to the Collateral. If the parties hereto are parties to any prior agreement, either written or oral, relating to the Collateral, the terms of this Agreement shall amend and supersede the terms of such prior agreements as to transactions on or after the effective date of this Agreement, but all security agreements, financing statements, guaranties, other contracts and notices for the benefit of Secured Party shall continue in full force and effect to secure the Indebtedness unless Secured Party specifically releases its rights thereunder by separate release.

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(d) Amendment. No amendment or waiver of any provision of this Agreement nor consent to any departure by Pledgor therefrom shall in any event be effective unless the same shall be in writing and signed by Secured Party, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

(e) Actions by Secured Party. The lien, security interest and other security rights of Secured Party hereunder shall not be impaired by (i) any renewal, extension, replacement, increase or modification with respect to the Indebtedness, (ii) any surrender, compromise, release, renewal, extension, exchange or substitution which Secured Party may grant with respect to the Collateral, or (iii) any release or indulgence granted to any endorser, guarantor or surety of the Indebtedness. The taking of additional security by Secured Party shall not release or impair the lien, security interest or other security rights of Secured Party hereunder or affect the obligations of Pledgor hereunder.

(f) Costs and Expenses. Pledgor will pay to Secured Party the amount of any and all reasonable and documented out-of-pocket costs and expenses, which Secured Party may incur in connection with and reasonable and necessary attorneys’ fees related to: (i) the repossession, custody, preservation, use or operation of, or the sale of, collection from, or other realization upon, the Collateral, (ii) the exercise or enforcement of any of the rights of Secured Party under the Loan Documents, or (iii) the failure by Pledgor to perform or observe any of the provisions hereof.

(g) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND APPLICABLE FEDERAL LAWS, EXCEPT TO THE EXTENT PERFECTION AND THE EFFECT OF PERFECTION OR NON-PERFECTION OF THE SECURITY INTEREST GRANTED HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL, ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF TEXAS.

(h) VENUE. PLEDGOR ACKNOWLEDGES THAT THIS AGREEMENT SECURES AN INDEBTEDNESS IN EXCESS OF ONE-MILLION DOLLARS, AND THEREFORE CONSTITUTES A MAJOR TRANSACTION UNDER SECTION 15.020 OF TEXAS CIVIL PRACTICES AND REMEDIES CODE. PLEDGOR FURTHER ACKNOWLEDGES THAT THIS AGREEMENT WAS NEGOTIATED IN AND EXECUTED MADE IN JEFFERSON COUNTY, TEXAS, AND IS PERFORMABLE IN PART IN JEFFERSON COUNTY, TEXAS. PLEDGOR THEREBY AGREES THAT THE TEXAS OR FEDERAL COURTS SITTING IN JEFFERSON COUNTY, TEXAS WILL BE THE EXCLUSIVE VENUE FOR ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND PLEDGOR IRREVOCABLY AGREES TO SUBMIT TO THE JURISDICTION OF SUCH COURTS.

(i) Severability. If any provision of this Agreement is held by a court of competent jurisdiction to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable, shall not impair or invalidate the remainder of this Agreement and the effect thereof shall be confined to the provision held to be illegal, invalid or unenforceable.

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(j) Binding Effect and Assignment. This Agreement (i) creates a continuing security interest in the Collateral and the terms, provisions, covenants and conditions hereof, (ii) shall be binding upon Pledgor and the successors and permitted assigns of Pledgor and (iii) shall inure to the benefit of Secured Party and all successors and permitted assignees of Secured Party. Without limiting the generality of the forgoing, Secured Party may pledge, assign or otherwise transfer the Indebtedness and its rights under this Agreement to any other party without the Pledgor’s prior written consent. Pledgor’s rights and obligations hereunder may not be assigned or otherwise transferred without the prior written consent of Secured Party.

(k) Effective Date. This Agreement is entered into and made effective as of the date set forth at the beginning of this Agreement, notwithstanding the date it may have been signed by the either Secured Party or Pledgor.

(l) Cumulative Rights. All rights and remedies of Secured Party hereunder are cumulative of each other and of every other right or remedy which Secured Party may otherwise have at law or in equity or under and the exercise of one or more of such rights or remedies shall not prejudice or impair the concurrent or subsequent exercise of any other rights or remedies. Further, except as specifically noted as a waiver herein, no provision of this Agreement is intended by the parties to this Agreement to waive any rights, benefits or protection afforded to Secured Party under the Code.

(m) Gender, Enforceability. Within this Agreement, words of any gender shall be held and construed to include any other gender and words in the singular number shall be held and construed to include the plural and words in the plural number shall be held and construed to include the singular, unless the context otherwise requires. A determination that any provision of this Agreement is unenforceable or invalid shall not affect the enforceability or validity of any other provision and any determination that the application of any provision of this Agreement to any person or circumstance is illegal or unenforceable shall not affect the enforceability or validity of such provision as it may apply to any other persons or circumstances.

(n) Counterparts, Electronic Transmission. This Agreement may be separately executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to constitute one and the same agreement, and each being deemed an original document. This Agreement may be validly executed and delivered by facsimile or other electronic transmission.

(o) Descriptive Headings. The headings in this Agreement are for convenience only and shall in no way enlarge, limit or define the scope or meaning of the various and several provisions hereof.

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(p) Authority. Pledgor and each of those executing this Agreement on behalf of Pledgor represent and warrant to Secured Party that all necessary or appropriate consents or resolutions for Pledgor to enter into this Agreement have been procured and made and that those executing this Agreement on behalf of Pledgor have full and unconditional authority to enter into this Agreement and bind Pledgor to the terms hereof.

(q) NO ORAL AGREEMENTS, NO RELIANCE. THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. PLEDGOR, IN ENTERING INTO THIS AGREEMENT, HEREBY STIPULATES THAT IT IS NOT RELYING ON ANY STATEMENT OR REPRESENTATION MADE BY OR ON BEHALF OF THE SECURED PARTY OTHER THAN THOSE SPECIFICALLY SET FORTH IN WRITING IN THIS AGREEMENT. PLEDGOR IS RELYING SOLELY AND ONLY ON ITS OWN EVALUATION AND JUDGMENT OF THE AGREEMENT AND THE TRANSACTION.

* * * Signatures follow on the next page. * * *

* * * The remainder of this page is left blank intentionally. * * *

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EXECUTED and effective as of the date first written above.




PLEDGOR: STABILIS ENERGY, INC.
By:		/s/ Andrew L. Puhala
		Andrew L. Puhala
Its:		Senior Vice President, Chief Financial Officer and Secretary
SECURED PARTY: M/G FINANCE CO., LTD.
By:		/s/ Charles B. Childress
		Charles B. Childress
Its:		Senior Vice-President

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Exhibit 10.22

SUBLEASE AGREEMENT

THIS SUBLEASE AGREEMENT (this “Sublease”) is made and entered into as of February 28, 2017, but effective as of January 1, 2017, by and between PEG PARTNERS, LLC, a Delaware limited liability company (“Lessor”), and PROMETHEUS ENERGY GROUP, INC., a Delaware corporation (“Lessee”).

RECITALS:

A. Pursuant to that certain Master Lease Agreement No. CW/1216-1 (the “Prime Lease”), M/G FINANCE CO., LTD., a Texas limited partnership (“Prime Lessor”), as lessor, has agreed to lease to Lessor, as lessee, certain items of personal property set forth in each Equipment Schedule (individually and collectively, a “Schedule”, and the equipment described in each Schedule, collectively, the “Equipment”) entered into, from time to time, pursuant to the Prime Lease.

B. Lessor desires to sublease to Lessee all of the Equipment (the “Subleased Equipment”), and Lessee desires to sublease the Subleased Equipment from Lessor, pursuant to the terms of this Sublease.

NOW, THEREFORE, in consideration of $10.00 and other consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

Section 1. Subleased Equipment; Prime Lease.

A. Lessor hereby subleases the Subleased Equipment to Lessee, and Lessee hereby subleases the Subleased Equipment from Lessor subject to the terms and conditions of the Prime Lease, except as otherwise provided herein.

B. Except as otherwise provided herein, with respect to the Subleased Equipment, Lessee shall have all of the rights and privileges that Lessor has as lessee under the Prime Lease during the Term (defined below) hereof. Notwithstanding the foregoing and unless mutually agreed among Lessee, Lessor and Prime, Lessor under no circumstance shall Lessee be entitled to extend the term of the Prime Lease, increase or decrease the amount of Equipment leased under the Prime Lease, or otherwise increase Lessor’s obligations with respect to the Prime Lease or the Equipment. Lessee shall not undertake or perform any action or omission which will constitute a breach of the Prime Lease or cause Lessor to breach any covenant or obligation under the Prime Lease.

C. In those instances under the Prime Lease in which the Prime Lessor has reserved certain rights with respect to the Subleased Equipment, Lessor shall be entitled to exercise all of such rights as against the Subleased Equipment and Lessee with the same force and effect as if all of such rights of the Prime Lessor had been expressly set forth in the provisions of this Sublease.

D. The following provisions of the Prime Lease are specifically agreed to be inapplicable as between Lessor and Lessee: Section 6 (Rent Payments), Section 9 (Use; Maintenance), Section 12 (Renewal), Section 15 (Indemnification), and Section 16 (Assignment By Lessee Prohibited).

E. In the event of a conflict between the Prime Lease and the provisions of this Sublease, the applicable provision which is more restrictive on Lessee, or which imposes the greater obligation on Lessee, shall control.

Section 2. Term.

If there are multiple Schedules incorporated into the Prime Lease establishing varying terms, then this Sublease will have varying terms and each such term (individually and collectively, the “Term”) will be conterminous with the terms specified in the respective Schedules, and the Term of this Sublease shall likewise expire, unless sooner terminated, on the date specified in the corresponding Schedule. If there is only one Schedule, then this Sublease will be conterminous with the term specified in such Schedule, and the Term of this Sublease shall likewise expire, unless sooner terminated, on the date specified in such Schedule.

Section 3. Rent.

The rent for the Subleased Equipment shall be due and payable to Lessor on the dates and in the amounts set forth in the Schedule. This Sublease is a net lease and Lessee agrees that its obligation to pay all rent and other sums payable hereunder are absolute and unconditional and shall not be subject to any abatement, reduction, setoff, defense, counterclaim or recoupment for any reason whatsoever. If any payment, whether for rent or otherwise, is not paid when due, Lessor may charge interest on the amount past due at a rate of 1.5% per month (or the maximum amount permitted by applicable law if less). Payments thereafter received shall be applied first to delinquent installments and then to current installments.

Section 4. Prime Lessor Obligations.

With respect to obligations to be performed by the Prime Lessor under the Prime Lease, if any, Lessor shall have no obligation with respect to the performance of such obligations, and shall have no liability to Lessee by reason of Prime Lessor’s failure to perform the same; however, in the event Prime Lessor shall breach such obligations, Lessor agrees to cooperate with Lessee (at Lessee’s expense) to cause Prime Lessor to perform such obligations.

Section 5. Insurance; Waiver of Subrogation.

Lessee shall maintain the insurance required to be maintained by Lessor as specified in Section 14 of the Prime Lease. With respect to such liability insurance coverage, Prime Lessor and Lessor shall be shown as additional insureds. Lessor and Lessee and all parties claiming by, through or under them, mutually release and discharge each other from all claims and liabilities arising from or caused by any damage covered or required hereunder or under the Prime Lease to be covered in whole or in part by insurance on the Subleased Equipment (including, without limitation, the other’s negligence) and waive any right of subrogation which might otherwise exist in or accrue to any person on account thereof and further agree to evidence such waiver endorsement to the required insurance policies.

Section 6. Indemnity.

A. Lessor shall indemnify, defend and hold harmless Lessee and Lessee’s officers, directors, representatives and employees from and against all losses, damages, injuries, death claims, demands and expenses, of whatsoever nature (i) arising out of the manufacture, purchase, ownership, delivery, lease, possession, use, misuse, condition, repair, storage or operation of any Subleased Equipment, regardless of where, how and by whom operated; (ii) arising out of negligence, tort, warranty, strict liability or any other cause of action with respect to the Subleased Equipment; (iii) arising out of any encumbrance being asserted against the Subleased Equipment; and (iv) arising out of the assessment, payment, non-payment or partial payment of any sales, use or other taxes pertaining to the Subleased Equipment. Such indemnification shall survive the expiration, cancellation, or termination of this Sublease. IT IS THE EXPRESS INTENT OF LESSOR AND LESSEE THAT THIS INDEMNITY PROVISION SHALL COVER AND INCLUDE ANY CLAIMS ASSERTING THAT ANY PERSON TO BE INDEMNIFIED HEREUNDER WAS NEGLIGENT IN WHOLE OR IN PART OR OTHERWISE CAUSED OR CONTRIBUTED TO THE CAUSE OF THE LOSS, DAMAGES, INJURIES, DEATH, OR EXPENSES.

B. Lessee shall indemnify, defend and hold harmless Lessor and Lessor’s officers, directors, representatives and employees from and against all losses, damages, injuries, death claims, demands and expenses, of whatsoever nature (i) arising out of the manufacture, purchase, ownership, delivery, lease, possession, use, misuse, condition, repair, storage or operation of any Subleased Equipment, regardless of where, how and by whom operated; (ii) arising out of negligence, tort, warranty, strict liability or any other cause of action with respect to the Subleased Equipment; (iii) arising out of any encumbrance being asserted against the Subleased Equipment; and (iv) arising out of the assessment, payment, non-payment or partial payment of any sales, use or other taxes pertaining to the Subleased Equipment. Such indemnification shall survive the expiration, cancellation, or termination of this Sublease. IT IS THE EXPRESS INTENT OF LESSOR AND LESSEE THAT THIS INDEMNITY PROVISION SHALL COVER AND INCLUDE ANY CLAIMS ASSERTING THAT ANY PERSON TO BE INDEMNIFIED HEREUNDER WAS NEGLIGENT IN WHOLE OR IN PART OR OTHERWISE CAUSED OR CONTRIBUTED TO THE CAUSE OF THE LOSS, DAMAGES, INJURIES, DEATH, OR EXPENSES. Lessee’s indemnity obligation to Lessor does not preclude Lessor from making any claim against Prime Lessor intended to be made by Lessor under the Prime Lease.

Section 7. Assignment and Subletting.

Lessee shall not pledge, mortgage, hypothecate, assign or in any way encumber this Sublease, or further sublet the Subleased Equipment, or any part thereof, without the prior written consent of Lessor and Prime Lessor in each instance, which shall be given or withheld at Lessor’s or Prime Lessor’s sole discretion. Notwithstanding any assignment or subletting, Lessee shall remain fully liable under this Sublease and shall not be relieved from performing any of its obligations hereunder.

Section 8. Use and Maintenance.

Lessee shall use the Subleased Equipment for those purposes permitted under the Prime Lease and for no other use or purpose. Lessee shall maintain and repair the Subleased Equipment in accordance with the terms and conditions of the Prime Lease. Lessee shall comply with all applicable laws and codes governing the Subleased Equipment and Lessee’s particular use thereof.

Section 9. Condition; Alterations; Surrender.

A. Lessee shall accept the Subleased Equipment in their “as is” condition, it being agreed by Lessee that neither Lessor nor any party acting on Lessor’s behalf, has made any representation or warranty with respect to the condition of the Subleased Equipment, nor with respect to its fitness or suitability for any particular purpose.

B. Without the written permission of Lessor and except as otherwise provided in the Prime Lease, Lessee shall not make any alterations or additions to the Subleased Equipment.

C. Upon the expiration or earlier termination of this Sublease for any reason whatsoever, Lessee shall promptly and peaceably surrender the Subleased Equipment to Lessor in accordance with the terms and conditions of the Prime Lease.

Section 10. Default.

Lessee agrees that it will not do or permit to be done any act or thing which will cause or constitute a breach the Prime Lease or which would otherwise give Prime Lessor the right to cancel or terminate the Prime Lease. Lessor shall not voluntarily terminate the Prime Lease or enter into an agreement with Prime Lessor to terminate or amend the Prime Lease which has an effective date of such termination during the Term hereof. In the event of litigation between the parties arising out of the terms and obligations of this Sublease, the prevailing party shall recover its reasonable attorneys’ fees from the other party.

If Lessee shall default in the fulfillment of any of its covenants and agreements set forth herein or under the Prime Lease, and Lessee shall fail to cure the default within any applicable cure periods, Lessor shall have the same rights and remedies with respect to such default as provided to Prime Lessor under the Prime Lease.

Section 11. Notices.

In lieu of the first sentence of Section 30 of the Prime Lease, all notices and demands which are required or permitted to be given hereunder shall be given by personal delivery or by sending such notice or demand by United States registered or certified mail, postage prepaid, return receipt requested. All notices shall be effective two days after being deposited in the United States mail in the manner required by this Section. All notices shall be sent to the address of the respective party set forth below or to such other address as said party shall be specify in writing:




Lessor:		Prometheus Energy Group, Inc. 10370 Richmond Ave., Suite 450 Houston, Texas, 77450
		Attn: CEO
		Attn: Legal

Lessee:		PEG Partners, LLC 10370 Richmond Avenue #450 Houston, Texas 77042 Attn: Legal

Section 12. Miscellaneous Provisions.

A. This Sublease, together with any exhibits hereto, constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes any prior representations or understandings. This Sublease may not be modified except in writing signed by the parties hereto.

B. All obligations of Lessee which by their nature involve performance after the expiration or sooner termination of this Sublease, or which cannot be ascertained to have been fully performed until such time, shall survive the expiration or sooner termination of this Sublease.

C. Upon written request by Lessor, Lessee shall provide Lessor access to the Subleased Equipment to determine that Lessee is in compliance with the terms and provisions of this Sublease.

D. Subject to the provisions of Section 7 above, this Sublease shall be binding upon and inure to the benefit of the parties hereto, their respective heirs, successors, legal representatives and assigns.

E. Except as otherwise expressly stated herein, whenever Lessor is entitled under the terms of this Sublease to give or withhold its consent, such consent shall be given or withheld in Lessor’s sole discretion.

F. Any capitalized terms not defined herein shall have the meaning ascribed to them in the Prime Lease.

G. In the event either party receives a notice from Prime Lessor, the receiving party agrees to immediately forward a copy of such notice to the other party.

[End of text; signature page follows.]

IN WITNESS WHEREOF, the parties have executed this instrument, or caused the same to be executed, the day and year first above written.

LESSOR:

PEG PARTNERS, LLC,

a Delaware limited liability company




By:		/s/ James G. Aivalis
Name:		James G. Aivalis
Title:		Manager

LESSEE:

PROMETHEUS ENERGY GROUP, INC.,

a Delaware corporation




By:		/s/ James G. Aivalis
Name:		James G. Aivalis
Title:		CEO and President

SIGNATURE PAGE

SUBLEASE AGREEMENT

PRIME LESSOR’S CONSENT

The undersigned Prime Lessor hereby consents to the provisions contained in this Sublease Agreement dated as of February 28, 2017, between PROMETHEUS ENERGY GROUP, INC., a Delaware corporation, and PEG PARTNERS, LLC, a Delaware limited liability company.

M/G FINANCE CO., LTD.,

a Texas limited partnership




By:		MGFC, LLC,
		a Texas limited liability company its general partner




By:		/s/ Casey Crenshaw
Name:		6/1/2017
Title:		President

PRIME LESSOR’S CONSENT

SUBLEASE AGREEMENT

Exhibit 10.23

CERTIFICATE OF ACCEPTANCE

MASTER LEASE AGREEMENT NO.: CW/1261-1

EQUIPMENT LEASE SCHEDULE NO.: CW/1261-1-A

This Certificate of Acceptance is attached to and made a part of Equipment Lease Schedule No. CW/1261-1-A (the “Schedule”) by and between M/G Finance Co., Ltd., a Texas limited partnership as Lessor and the Lessee set forth below and relating to the Lease of the Equipment described therein.

Lessee hereby acknowledges and agrees that:



1	Lessee has received the Equipment described in the Equipment Lease Schedule in good condition and repair.



2	Lessee has inspected the equipment.



3	The Equipment has been delivered and is satisfactory in all respects for all of the Lessee’s intended uses and purposes.



4	Lessee hereby accepts the Equipment unconditionally and irrevocably.

By Lessee’s signature below, Lessee authorizes and requests Lessor to make payment to the supplier of the equipment. Lessee also agrees that the equipment has not been delivered, installed or accepted on a trial basis.

With the delivery of this Certificate to Lessor, Lessee acknowledges and agrees that the Lessee’s obligations to Lessor become absolute and irrevocable in accordance with the Schedule and the Lease.

Dated as of Feb 2, 2018.

LESSEE:

PEG Partners, LLC

a Delaware Limited Liability Company




By:		/s/ James G. Aivalis
Name:		James G. Aivalis
Title:		CEO

ONLY THE COUNTERPART OF AN EQUIPMENT LEASE SCHEDULE MARKED “LESSOR’S ORIGINAL COPY” SHALL BE DEEMED TO BE THE ORIGINAL LEASE AGREEMENT FOR PURPOSES OF CONSTITUTING CHATTEL PAPER OR COLLATERAL, AND POSSESSION OF ANY COPY OF THE MASTER LEASE AGREEMENT DESCRIBED HEREIN SHALL BE WITHOUT FORCE AND EFFECT FOR PURPOSES OF CONSTITUTING CHATTEL PAPER OR COLLATERAL.

EQUIPMENT LEASE SCHEDULE NO. CW/1261-1-A

This Equipment Lease Schedule No. CW/1261-1-A is hereby incorporated in and made a part of that certain Master Lease Agreement No. CW1261-1 (the “Lease”), by and between M/G Finance Co., Ltd., a Texas limited partnership (“Lessor”) and PEG Partners, LLC., a Delaware Limited Liability Company, (“Lessee”). Capitalized terms not defined herein shall have the meanings set forth in the Lease.




1.	Equipment:	See Exhibit A attached hereto and incorporated by reference.

2.	Location:	10375 Richmond Ave., Suite 825
		Houston, TX 77042 and such other various locations as necessary for Lessee’s use of the Equipment in Lessee’s ordinary course of business.

3.	Term:	The Term of this Lease shall begin on the Installation Date and shall continue, unless sooner terminated as provided herein, for twenty-nine (29) consecutive months plus the residual following the Commencement Date. The Residual will be due within the thirty days following the date of the last scheduled lease payment. The Commencement Date of this Lease is January 1, 2018.

4.	Rent:	The rent due and owing hereunder shall be

		•$200,000.00 per month for months 1-12

		•$302,000.00 per months for months 13-29

		The first payment will be due and payable on January 25, 2018 and like payments being due and payable on the twenty-fifth (25th) day of each month thereafter during the Initial Lease Term.




5.	Freight, FET and Taxes:	Taxes, if any will be due to Lessor at closing.

6.	Closing Costs:	Lessor will be due nothing at closing.

7.	Purchase Option:	See Exhibit B attached hereto and incorporated by reference.

8.	Addresses for Notice and Billing:
		Lessee: PEG Partners, LLC
		10375 Richmond Ave, Suite 825 Houston, TX 77042
		Attn: Notices – CEO
		Attn: Billing – Accounts Payable

		Lessor: Payments
		P.O. Box 704, Beaumont, TX 77702
		Notices
		1655 Louisiana Street, Beaumont TX 77701
		Attn: Casey or Will Crenshaw

		Addresses for notice and billing may be changed by written notice to the other party as provided in the Lease.

9.	Delivery and Acceptance:	Lessee shall acknowledge delivery and acceptance of the Equipment by the execution and delivery to Lessor of a Certificate of Acceptance in form acceptable to Lessor, and such Certificate of Acceptance shall be attached to and become a part of this Schedule.

10.	Special Provisions:	In addition to and with each monthly payment of rent due and owing hereunder, Lessee shall pay (a) any sales taxes due and owing and relating to the rent and (b) at the sole discretion of Lessor, one-twelfth (1/12th) of Lessor’s current estimate of the property taxes to be due and owing on the





				Equipment. Lessee represents and warrants to Lessor that the Equipment is not, and the Equipment will not be used in such a manner so as to constitute, inventory as such term is defined in the Uniform Commercial Code as enacted in the State of Texas. If any amount payable to Lessor by Lessee under this Lease is not paid within 10 days of due date, Lessor may charge interest on the amount past due at a rate of 1.5% per month (or the maximum amount permitted by applicable law if less). All monthly payments associated with this lease will be made by the electronic transfer of funds (ACH).

11. THIS EQUIPMENT LEASE SCHEDULE IS ENTERED INTO PURSUANT TO THE MASTER LEASE AGREEMENT IDENTIFIED ABOVE. ALL OF THE TERMS AND CONDITIONS OF THE MASTER LEASE AGREEMENT ARE HEREBY INCORPORATED HEREIN AND MADE A PART HEREOF. BY EXECUTING THIS EQUIPMENT LEASE SCHEDULE, THE PARTIES HEREBY REAFFIRM ALL OF THE TERMS AND CONDITIONS OF THE MASTER LEASE AGREEMENT EXCEPT AS MODIFIED HEREBY.




LESSOR:						LESSEE:

M/G FINANCE CO., LTD.						PEG Partners, LLC
By: MGFC, LLC, its general partner						a Delaware Limited Liability Company





By:	/s/ Charles B. Childress	By:	/s/ James G. Aivalis
Name:	Charles B. Childress	Name:	James G. Aivalis
Title:	Sr. Vice President	Title:	CEO
Date:	2/4/2018	Date:	2/2/2018

EXHIBIT A

(Equipment Listing)

This Exhibit A is to be attached to and become a part of Equipment Lease Schedule CW/1261-1-A, by and between M/G Finance Co., Ltd. as Lessor and PEG Partners, LLC as Lessee:




VENDOR:		Dragon Products

QUANTITY		DESCRIPTION

See the attached Schedule of Equipment to this Exhibit A for equipment detail.

The Schedule of Equipment is hereby verified correct and the undersigned Lessee acknowledges receipt of a copy.




LESSOR:						LESSEE:

M/G Finance Co., Ltd.,						PEG Partners, LLC
By: MGFC, LLC, its general partner						a Delaware Limited Liability Company



By:	/s/ Charles B. Childress Sr.	By:	/s/ James G. Aivalis
Name:	Charles B. Childress Sr.	Name:	James G. Aivalis
Title:	Vice President	Title:	CEO
Date:	2/4/2018	Date:	2/2/2018

EXHIBIT A - SCHEDULE OF EQUIPMENT

CW1261

PEG Partners, LLC



YEAR	DESCRIPTION	SERIAL NUMBER	VIN
2013	Cryo tank Trailer, ACT-LNG-1370		1A9A44820BH939017
2013	Queen Re-Gas Units, All units Standard Electric Vaporizer; Add Flanged inlet connection at discharge line, add 171’ ambient PBU	16,001	1A9A45324BH939051
2013	Queen Re-Gas Units, All units Standard Electric Vaporizer; Add Flanged inlet connection at discharge line, add 171’ ambient PBU	16,002	1A9A45326BH939052
2013	Queen Re-Gas Units, All units Standard Electric Vaporizer; Add Flanged inlet connection at discharge line, add 171’ ambient PBU	16,003	1A9A45328BH939053
2013	Queen Re-Gas Units, All units Standard Electric Vaporizer; Add Flanged inlet connection at discharge line, add 171’ ambient PBU	16,004	1A9A4532XBH939054
2013	Queen Re-Gas Units, All units Standard Electric Vaporizer; Add Flanged inlet connection at discharge line, add 171’ ambient PBU	16,005	1A9A45321BH939055
2014	Cryo Tank Trailers ACT-LNG 1370, w/pump	13,047	IA9A44829BH939047
2013	Cryo Tank Trailers ACT-LNG 1370, w/pump	13,049	1A9A44822BH939049
2014	Cryo tank Trailer, ACT-LNG-1370	13,052	1A9A44828BH939072
2014	Cryo tank Trailer, ACT-LNG-1370 Rook IMO/Trailer Combo on Chassis	13,054	1A9A44821BH939074 LJRC4126XE1001448
2014	Queen Re-Gas Unit	16,011	1A9A45327BH939061
2014	Queen Re-Gas Unit	16,013	1A9A45320BH939063
2014	Queen Re-Gas Unit	16,014	1A9A45322BH939064
2014	LNG-150K Gas Fired Vaporized Unit		1A9A54425CH939101
2013	40’ LNG ISO Pump Manifold Unit	Container SN 12005	LJRC41260E1000521
2014	LNG-150K Gas Fired Vaporizer Unit		1A9A54427CH939102
2014	LNG-150K Gas Fired Vaporizer Unit		1A9A54429CH939103
2013	40’ LNG ISO Pump Manifold Unit	Container SN 12006	LJRC4I260E1000518
2013	40’ LNG ISO Pump Manifold Unit	Container SN 12008	LJRC41269E1000520

EXHIBIT B

PURCHASE OPTION RIDER TO LEASE EQUIPMENT SCHEDULE

MASTER LEASE AGREEMENT NO.: CW/1261-1

EQUIPMENT LEASE SCHEDULE NO.: CW/1261-1-A

This Purchase Option Rider (“Rider”) is attached and made a part of that Equipment Lease Schedule No. CW/1261-1-A (“Schedule”) by and between the Lessee and Lessor set forth below:



1	SUBJECT TO THE PROVISIONS SET FORTH HEREIN, AT THE EXPIRATION OF THE INITIAL LEASE TERM, AS SET FORTH IN THE SCHEDULE, LESSEE SHALL HAVE THE OPTION, WHICH OPTION SHALL NOT BE ASSIGNABLE, TO PURCHASE, AS-IS-WHERE-IS AND WITHOUT ANY WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, ALL, BUT NOT LESS THAN ALL, OF THE LEASED EQUIPMENT COVERED BY THE SCHEDULE FOR A PURCHASE PRICE EQUAL TO THE GREATER OF (A) THE, THEN, FAIR MARKET VALUE OF THE LEASED EQUIPMENT, OR (B) $1,542,426.73 THE AMOUNT SET FORTH IN SUBPART (B) OF THE IMMEDIATELY PRECEDING SENTENCE REFLECTS A GOOD FAITH ATTEMPT BY LESSOR AND LESSEE TO ESTIMATE THE FAIR MARKET VALUE OF THE EQUIPMENT AT THE EXPIRATION OF THE INTITAL LEASE TERM. LESSEE’S DETERMINATION OF FAIR MARKET VALUE WILL BE ACCEPTED BY LESSOR.



2	Lessee’s right to purchase the Equipment pursuant to such options is Conditioned upon (a) Lessee’s having performed all of the terms and conditions of the Lease and Schedule at the time and in the manner required therein; (b) Lessor having received written notice of Lessee’s exercise of said option at least ninety (90) days prior to the expiration date of the Initial Lease Term, and (c) Lessee’s payment to Lessor of said purchase price, together with all taxes on or measured by such purchase price, in immediately available funds.



3	If Lessee, for any reason, does not purchase the leased Equipment in Accordance with Paragraph 1 hereof, Lessee shall be obligated to return the leased Equipment to Lessor in accordance with the terms of the Lease and Schedule.

EXECUTION PAGE FOLLOWS:

The parties have executed and delivered this Rider as set forth below:




LESSOR:		LESSEE:

M/G Finance Co., LTD.		PEG Partners, LLC
By: MGFC, LLC, its general partner		a Delaware Limited Liability Company

By:	/s/ Charles B. Childress	By:	/s/ James G. Aivalis
Name:	Charles B. Childress	Name:	James G. Aivalis
Title:	Sr. Vice President	Title:	CEO
Date:	2/4/2018	Date:	February 2, 2018

EXHIBIT C

ADDITIONAL COLLATERAL

This Exhibit C is to be attached to and become a part of Equipment Lease Schedule CW/1261-1-A, by and between M/G Finance Co., Ltd. as Lessor and PEG Partners, LLC as Lessee.

Lessee hereby pledges as Additional Collateral to secure the debts and obligations arising under Master Lease Agreement CW/1261-1 and Equipment Lease Schedule CW/1261-1-A, all of the following, property, whether real, personal, or intangible and all accessions, substitutions, and replacements thereto, and all of Lessee’s interest therein, and all rents, proceeds, and products thereof, and grants a security interest in the same in accordance with the terms and provision contained in the Master Lease Agreement:

See the attached Schedule of Additional Collateral to this Exhibit C for equipment detail.

Lessor may be supplement, modify or amend this Exhibit after execution to correct or further identify or describe the Additional Collateral, provided that a true and correct copy of the supplemented, amended or modified Exhibit is provided to Lessee. This Exhibit is hereby verified correct and the undersigned Lessee acknowledges receipt of a copy.




LESSOR:		LESSEE:

M/G Finance Co., Ltd.,		PEG Partners, LLC
By: MGFC, LLC, its general partner		a Delaware Limited Liability Company

By:	/s/ Charles B. Childress	By:	/s/ James G. Aivalis
Name:	Charles B. Childress	Name:	James G. Aivalis
Title:	Sr. Vice President	Title:	CEO
Date:	2/4/2018	Date:	2/2/2018

EXHIBIT C - SCHEDULE OF ADDITIONAL COLLATERAL

CW1261

PEG Partners, LLC




YEAR	DESCRIPTION	VIN
2012	Comm - Chart Tank Trailer	1C9ST482XCN792026
2012	Comm - Chart Tank Trailer	1C9ST4821CN792030
2013	Comm - LNG Chart Tanker Trailer	1C9ST482XDT792007
2011	CVA ISO Trailer - Flatbed mount	1GRDM96276M701483
2006	CVA ISO Trailer - Flatbed mount	1UYFS24886A768409
2012	Chart Queen - 300G Vap Capacity	1C9ST552CN792008
2012	Chart Queen - 300G Vap Capacity	1C9ST5526CN792017
2012	Chart Queen - 300G Vap Capacity	1C9ST5528CN792021
2013	Chart SS - 140 LNG Regas - 300 Vap Capacity	1C9ST5526DT792001
2012	Chart Queen - 600G Vap Capacity	1C9ST5525CT792005
2014	ACD LNG Refueling Skid 3,000 gal/h	193581
2010	Boiler Skid and heat exchanger 2.478 MMCscfd/30,000 gpd capacity 103,250 scfh/1,250 gph (aka Roswell kit)	VARIOUS

MASTER LEASE AGREEMENT

NO. CW/1261-1

THIS MASTER LEASE AGREEMENT, by and between M/G FINANCE CO., LTD., a Texas limited partnership (“Lessor”), with its address for notice hereunder being 1655 Louisiana St., Beaumont, Texas 77701 and PEG PARTNERS, LLC, a Delaware Limited Liability Corporation (“Lessee”) with its principal office located at 10375 Richmond Avenue, Suite 825, Houston, TX 77042 and its billing address and address for notice hereunder being 10375 Richmond Avenue, Suite 825, Houston, TX 77042, replaces and substitutes lease CW/1105-1 between Lessor and Lessee, and Lessor and Lessee hereby agree as follows:

1. LEASE. Lessor hereby leases to Lessee and Lessee hereby leases from Lessor, subject to the terms and conditions hereinafter set forth, the items of personal property (“Equipment”) described in each Equipment Schedule (“Schedule”) entered into, from time to time, pursuant to this Master Lease Agreement. This Master Lease Agreement is intended to be incorporated by reference into one or more Equipment Schedules from time to time. As to Equipment leased pursuant to any such individual Equipment Schedule, the terms of such Schedule shall prevail over the terms hereof in case of conflict. Each Schedule shall constitute a separate and distinct individual lease contract and the manually executed copy of such Schedule marked “Lessor’s Original Copy” shall be the instrument in which a security interest may be acquired by any assignee of Lessor. The rights, remedies, powers and privileges of the Lessor or its assignee under each such Schedule shall be interpreted separately and apart from any other Schedule. Notwithstanding any other provision hereof or of any other document involving a transfer, assignment, financing, granting of a security interest, or otherwise, any reference to this Master Lease Agreement shall mean, shall deemed to mean and shall be limited to, this Master Lease Agreement as the same is incorporated under any particularly identified specific Equipment Schedule(s). The term “Lease” as used hereinafter shall refer to an individual Schedule which incorporates this Master Lease Agreement. Until a Schedule is signed by Lessor, an Equipment Schedule signed by Lessee constitutes an irrevocable offer by Lessee to lease from Lessor.




Master Lease Agreement Rev. 08-04-2017 Page 1

assignment of any existing purchase order therefore. Lessee agrees to inspect the Equipment and to execute a Certificate of Acceptance (set forth in the Schedule) after the Equipment has been delivered and after Lessee is satisfied that the Equipment is satisfactory in every respect. Lessee hereby authorizes Lessor to insert in the Schedule identifying data with respect to the Equipment. In addition to the other amounts due and owing hereunder, Lessee shall pay for all transportation, insurance, rigging, drayage and any other charges with respect to delivery and installation of the Equipment. Lessee will provide a suitable place of installation for use of the Equipment as specified by the manufacturer. Lessee agrees that the Equipment Location shall at all times comply with applicable state and local codes. Lessor shall not be liable for any failure or delay in supplying the Equipment from any cause not subject to the direct control of Lessor.

3. DISCLAIMER OF WARRANTIES AND CLAIMS; LIMITATION OF REMEDIES. THERE ARE NO WARRANTIES BY OR ON BEHALF OF LESSOR. Lessee acknowledges and agrees by his signature below as follows:


(a)	LESSOR, NOT BEING THE MANUFACTURER OF THE EQUIPMENT NOR THE MANUFACTURER’S AGENT, MAKES NO WARRANTIES EITHER EXPRESS OR IMPLIED AS TO THE CONDITION OF THE EQUIPMENT, ITS MERCHANTABILITY, ITS FITNESS OR SUITABILITY FOR ANY PARTICULAR PURPOSE, ITS DESIGN, ITS CAPACITY, ITS QUALITY, OR WITH RESPECT TO ANY CHARACTERISTICS OF THE EQUIPMENT;


(b)	Lessee has fully inspected the Equipment which it has requested Lessor to acquire and lease to Lessee, and the Equipment is in good condition and to Lessee’s complete satisfaction;


(c)	Lessee leases the Equipment “AS IS” and with all faults.


(d)	Lessee specifically acknowledges that the Equipment is leased to Lessee solely for commercial or business purposes and not for personal, family or household purposes;


(e)	If the Equipment is not properly installed, does not operate as represented or warranted by the supplier or manufacturer, or is unsatisfactory for any reason, regardless of cause or consequence, Lessee’s only remedy, if any, shall be against the supplier or manufacturer of the Equipment and not against Lessor;




Master Lease Agreement Rev. 08-04-2017 Page 2

(f)

Lessor acknowledges that any manufacturer’s and/or seller’s warranties are for the benefit of both Lessor and Lessee. Lessee is entitled under Chapter 2A of the Texas Business and Commerce Code to the promises and warranties, including those of any third party, provided to Lessor by the person supplying the equipment in connection with or as part of the contract by which the Lessor acquired the goods, and Lessee may communicate with the person supplying the equipment to Lessor and receive an accurate and complete statement of those promises and warranties, including any disclaimers and limitations of them or of remedies. NOTWITHSTANDING THE FOREGOING, LESSEE’S OBLIGATIONS TO PAY THE RENTS OR OTHERWISE UNDER THIS LEASE SHALL BE AND ARE ABSOLUTE AND UNCONDITIONAL AND WITHOUT OFFSET FOR ANY REASON. To the extent permitted by the manufacturer or seller, and provided Lessee is not in default under this Lease, Lessor assigns to Lessee any warranties made by the supplier or the manufacture of the Equipment.


(g)	LESSEE SHALL HAVE NO REMEDY FOR CONSEQUENTIAL OR INCIDENTAL DAMAGES AGAINST LESSOR; AND


(h)	NO DEFECT, DAMAGE OR UNFITNESS OF THE EQUIPMENT FOR ANY PURPOSE SHALL RELIEVE LESSEE OF THE OBLIGATION TO PAY RENT OR RELIEVE LESSEE OF ANY OTHER OBLIGATION UNDER THIS LEASE.

LESSEE ACKNOWLEDGES RECEIPT PRIOR TO THE EXECUTION OF THIS LEASE OF AN ACCURATE AND COMPLETE STATEMENT DESIGNATING THE PROMISES AND WARRANTIES, AND ANY DISCLAIMERS OF WARRANTIES, LIMITATIONS OR MODIFICATIONS OF REMEDIES, OR LIQUIDATED DAMAGES, INCLUDING THOSE OF A THIRD PARTY, SUCH AS THE MANUFACTURER OF THE EQUIPMENT, THAT WERE PROVIDED TO LESSOR BY THE SELLER OF THE EQUIPMENT.




Master Lease Agreement Rev. 08-04-2017 Page 3

Lessor has not selected, manufactured, or supplied the Equipment. Without limiting the foregoing, and in addition to any other provisions of this Lease, Lessor shall be entitled to the benefits of Sections 2A-209, 2A-211(2), 2A-212(1), 2A-213, 2A-219(1), 2A-220(1)(a), 2A-221, 2A-405(c), 2A-407, 2A-504, 2A-516(2), and 2A-517(1) and (2) of Chapter 2A, whether or not this Lease qualifies as a statutory finance lease. If this Lease does not qualify as a statutory finance lease under Chapter 2A, no rights or remedies referred to in Chapter 2A will be conferred upon Lessee unless expressly granted in this Lease or as required by applicable law.

5. TERM. This Master Lease Agreement shall be effective when signed by both parties and shall continue in effect until all obligations of Lessee under each Schedule are fully discharged. The Lease term for each Schedule shall commence on the Installation Date and continue from the Commencement Date for the number of months set forth in the Equipment Schedule (“Initial Lease Term”). The Installation Date shall be the applicable of (i) the date the Equipment is installed at the location set forth in the Schedule (“Equipment Location”) and declared acceptable for maintenance by the manufacturer or if Lessee causes a delay in installation and acceptance, seven (7) days after delivery of the Equipment; or (ii) if the Equipment is already in place under lease from another party and is being purchased by Lessor for lease to Lessee hereunder, the date Lessor pays for the Equipment. Lessee shall promptly sign and deliver to Lessor a Certificate of Acceptance in the form attached hereto as Exhibit A as of the Installation Date. The Commencement Date shall be the first day of the month following the month in which the Installation Date occurs or the Installation Date if such date is the first day of the month. Lessee hereby authorizes Lessor to insert the Commencement Date on the Equipment Schedule.

6. RENT PAYMENTS. The rent for the Equipment described in each Schedule shall be due and payable on the dates set forth therein. Such rents shall be payable at Lessor’s address set forth above unless Lessor otherwise designates. Lessee shall also pay Lessor an administrative fee of $150.00 for each Lease entered into pursuant to this Master Lease Agreement. This Lease is a net lease and Lessee agrees that its obligation to pay all rent and other sums payable hereunder are absolute and unconditional and shall not be subject to any abatement, reduction, setoff, defense, counterclaim or recoupment for any reason whatsoever. If any payment, whether for rent or otherwise, is not paid when due, Lessor may charge interest on the amount past due at a rate of 1.5% per month (or the maximum amount permitted by applicable law if less). Payments thereafter received shall be applied first to delinquent installments and then to current installments.




Master Lease Agreement Rev. 08-04-2017 Page 4

7. ADVANCE PAYMENT. Any Advance Payment set forth in the Acceptance Certificate or any Schedule shall be held as security for the performance of this Lease. Lessor may apply Advance Payments to cure any default under this Lease in whole or in part at the sole discretion of Lessor. On the expiration or earlier termination of each Schedule to this Lease or any extension or renewal thereof, provided Lessee has paid all of the rent called for and fully performed all other provisions of this Lease, Lessor will return to the Lessee any then remaining balance of the Advance Payment with respect to such Lease, without interest. Said Advance Payment may be commingled with Lessor’s other funds.

8. LOCATION. The Equipment shall be kept at the Equipment Location specified in the applicable Schedule, or, if none is specified, at Lessee’s billing address set forth above and shall not be removed without Lessor’s prior written consent. Upon Lessor’s request, Lessee shall provide Lessor or its agents access to (a) the Equipment at all reasonable times for the purpose of inspection, and (b) Lessee’s books and records relating to the Equipment at all reasonable times for the purpose of verifying Lessee’s compliance with its obligations under this Lease. Lessee shall not part with possession or control of or suffer or allow to pass out of its possession or control any item of the Equipment or change the location of the Equipment or any part thereof from the address shown in the applicable Schedule. Lessor may at its sole discretion and either before or after delivery to Lessee, install or have installed Global Position Satellite (“GPS”) tracking systems on any or all of the Equipment. Lessee hereby agrees to Lessor’s installation and use of such GPS tracking systems, and Lessee will fully cooperate with Lessor for the installation, maintenance, use of such systems. Any intentional destruction, removal, disabling, or other interference of Lessor’s installation and use of the GPS systems will be deemed a default and material breach of this Master Lease Agreement. In the event Lessee becomes sixty (60) days or more overdue in rent owed under this or any other Master Lease Agreement with Lessor or any schedule made in connection therewith, then the costs of procuring and installing the GPS tracking systems and all fees Lessor may incur to use such system to track the Equipment will be charged to and paid by Lessee as additional rent due hereunder.

9. USE; MAINTENANCE. Lessee shall use the Equipment in a careful manner, shall comply with all laws relating to its possession, use or maintenance, and shall not make any alterations, additions, or improvements to the Equipment without Lessor’s prior written consent. All additions, repairs or improvements made to the Equipment shall belong to Lessor. Lessee agrees to purchase, at its expense, all licenses which may be necessary for the use or operation of the Equipment. Lessee shall, at its sole expense, keep the Equipment in good repair, condition and working order.




Master Lease Agreement Rev. 08-04-2017 Page 5

10. OWNERSHIP; PERSONALTY; REGISTRATION OF TITLE. The Equipment is, and shall remain, the property of Lessor, and Lessee shall have no right, title or interest therein or thereto except as expressly set forth in this Lease. The parties expressly agree that the Equipment is and shall remain personal property even though installed in or attached to real property and shall not be deemed to be a fixture or appurtenant thereto. The Equipment shall be severable from any real estate to which it may be attached and shall remain the property of Lessor, free of any and all claims of anyone, including Lessee, having or hereafter acquiring any interest in such real estate. Lessee shall affix tags, decals, or plates provided by Lessor to the Equipment indicating Lessor’s ownership and shall not permit their removal or concealment. Any Equipment requiring registration of title with a governmental entity, may, at Lessor’s sole option be registered under the laws of the State of Texas. Lessee shall have the obligations to (a) determine any requirement to register the title of the Equipment with any governmental entity, (b) bear all costs of registration and applicable costs and taxes arising under the laws of the State of Texas or otherwise and (c) indemnify and hold Lessor harmless from and against such obligations, taxes and costs upon demand therefore.

11. SURRENDER. By this Lease, Lessee acquires no ownership rights in the Equipment and has no right to purchase the Equipment, except as may be provided in the applicable Schedule. Upon the expiration or earlier termination of this Lease, or in the event of default under this Lease, Lessee agrees to return the Equipment in good repair, ordinary wear and tear from proper use thereof alone excepted, by delivering it to such place or carrier as Lessor may specify at Lessee’s sole cost and expense. In the event Lessee fails to return the Equipment to Lessor as directed, Lessor is entitled to charge and Lessee shall be obligated to pay, rent to Lessor in the same periodic amounts as indicated on the Schedule to which the Equipment relates, until the Equipment is returned to Lessor.

12. RENEWAL. Upon the expiration or earlier termination or cancellation of this Lease, or in the event of default under Paragraph 19 hereof, Lessee agrees to pay a termination fee of $150.00 and Lessee shall return the Equipment in accordance with Paragraph 11 hereof. At Lessor’s option, this Lease may be continued on a month-to-month basis until 30 days after Lessee returns the Equipment to Lessor. In the event the Lease is so continued, Lessee shall be assessed and agrees to pay a renewal fee of $150.00 and, in addition, shall pay to Lessor rents in the same periodic amounts indicated on the Schedule to which the Equipment relates.




Master Lease Agreement Rev. 08-04-2017 Page 6

shall alter or relieve Lessee of any obligation under this Lease, which shall continue in full force and effect. Lessee agrees to give Lessor prompt notice of any damage to or loss of the Equipment. In the event of damage to any part of the Equipment, Lessee shall immediately place the same in good repair at Lessee’s expense. In the event of damage to or loss of the Equipment or any item thereof, and irrespective of payment from any insurance coverage maintained by the Lessee, but applying full credit therefor, Lessee shall, at the option of Lessor, (a) place the Equipment in good repair, condition and working order or (b) replace the Equipment with identical equipment in good repair, condition and working order and transfer clear title to such replacement equipment to Lessor, whereupon such replacement equipment shall be deemed the Equipment for all purposes hereof, or (c) pay Lessor in cash the following: (i) all amounts due by Lessee to Lessor with respect to this Lease up to the date of the loss; plus (ii) the total amounts due for the remaining term of this Lease attributable to said items; plus (iii) Lessor’s estimate of Lessor’s residual interest in the Equipment as of the Commencement Date (the “Residual Value”), which will be determined at Lessor’s sole discretion. Upon Lessor’s receipt of such payment, this Lease shall terminate only with respect to such Equipment so paid for, and Lessee shall become entitled to title thereto, AS IS, WHERE IS, and without any warranty whatsoever, express or implied. Proceeds of insurance shall be paid to Lessor with respect to such repairable damage to the Equipment and shall, at the election of Lessor, be applied either to the repair of the Equipment by payment by Lessor directly to the party completing the repairs, or to the reimbursement of Lessee for the cost of such repairs; provided, however, that Lessor shall have no obligation to make such payment or any part thereof until receipt of such evidence as Lessor shall deem satisfactory that such repairs have been completed and further provided that Lessor may apply such proceeds to the payment of any rent or other sum due or to become due hereunder if at the time such proceeds are received by Lessor there shall have occurred any Event of Default or any event which with lapse of time or notice, or both, would become and Event of Default.




Master Lease Agreement Rev. 08-04-2017 Page 7

neglect of Lessee and cannot be canceled without 30 days prior written notice to Lessor and/or its assigns. As to each policy, Lessee shall furnish to Lessor and/or each of its assigns a certificate or certificates of insurance from the insurer(s) on the Commencement Date and thereafter as requested by Lessor and/or its assigns, in form and containing such matters as reasonably required by Lessor. Neither Lessor nor its assigns shall have any obligation to ascertain the existence of or provide any insurance coverage for the Equipment or for Lessee’s benefit. Any failure of Lessor to insist on Lessee’s provision of a certificate of insurance shall not be deemed a waiver of any rights hereunder and shall not excuse or release Lessee’ of its obligation to procure and provide such insurance. It is further understood and agreed that the insurance coverage provided by Lessee shall operate independent and apart from any indemnity obligations imposed on Lessee under this agreement. Lessee shall keep the Equipment free and clear of all levies, liens, and encumbrances. Lessee shall pay all charges and taxes (local, state, and federal) which may now or hereafter be imposed upon the ownership, leasing, rental, sale, purchase, possession, or use of the Equipment, excluding, however, all taxes on or measured by Lessor’s net income. If Lessee fails to procure or maintain said insurance or to pay said charges or taxes, Lessor shall have the right, but shall not be obligated, to effect such insurance, or pay such charges or taxes. In that event, Lessor shall notify Lessee of such payment and Lessee shall repay to Lessor the cost thereof within 15 days after such notice is mailed to Lessee. Lessor shall file personal property returns with respect to the Equipment, and Lessee shall pay to Lessor, in advance and at the time(s) required by Lessor, the taxes Lessor anticipates will be due during the year. Lessee acknowledges that Lessor may require a monthly payment of such anticipated taxes and any deficiency shall be paid by Lessee upon demand by Lessor.

15. INDEMNIFICATION. Lessee shall indemnify, defend and hold harmless the Lessor, and Lessor’s officers, directors, representatives and employees from and against all losses, damages, injuries, death claims, demands and expenses, of whatsoever nature (i) arising out of the manufacture, purchase, ownership, delivery, lease, possession, use, misuse, condition, repair, storage or operation of any Equipment, regardless of where, how and by whom operated; (ii) arising out of negligence, tort, warranty, strict liability or any other cause of action with respect to the leased Equipment; (iii) arising out of any encumbrance being asserted against the Equipment; and (iv) arising out of the assessment, payment, non-payment or partial payment of any sales, use or other taxes pertaining to the equipment. Such indemnification shall survive the expiration, cancellation, or termination of this Lease. IT IS THE EXPRESS INTENT OF THE LESSOR AND LESSEE THAT THIS INDMENITY PROVISION SHALL COVER AND INCLUDE ANY CLAIMS ASSERTING THAT ANY PERSON TO BE INDEMNIFIED HEREUNDER WAS NEGLIGENT IN WHOLE OR INPART OR OTHERWISE CAUSED OR CONTRIBUTED TO THE CAUSE OF THE LOSS, DAMAGES, INJURIES, DEATH, OR EXPENSES.




Master Lease Agreement Rev. 08-04-2017 Page 8

16. ASSIGNMENT BY LESSEE PROHIBITED. Lessee shall keep the Equipment free and clear of all claims, liens, and encumbrances, except for those placed thereon by Lessor. Without the prior written consent of Lessor, Lessee shall not assign or otherwise encumber this Lease, the Equipment or any of its rights hereunder or sublease or lend the Equipment. Upon any permitted assignment or sublease, Lessee shall sign and deliver to Lessor, or any assignee of Lessor, at Lessee’s expense, such documentation as Lessor or such assignee may require, including but not limited to documentation to evidence and put third parties on notice of Lessor’s or its assignee’s interest in the Equipment. No permitted assignment or sublease shall relieve Lessee of any of its obligations hereunder, which obligations shall remain those of a principal and not a surety or guarantor.

17. ASSIGNMENT BY LESSOR. Lessor may sell or assign its rights and interests or grant a security interest in this Lease and the Equipment for purposes of securing loans to Lessor or otherwise, and may also sell and assign its title and interest as owner of the Equipment and/or as Lessor under this Lease. Lessee hereby (a) consents to such sales or assignments; (b) agrees to promptly sign and deliver such further acknowledgments and other documents as may be reasonably requested by Lessor to effect such sales or assignments; (c) agrees that any security assignee shall have all the rights, but none of the obligations, of Lessor under this Lease, except Lessor’s obligation not to disturb Lessee’s quiet possession and use of the Equipment, provided Lessee is not in default hereunder; and (d) upon written notice from Lessor, agrees to pay all rent and other sums payable under this Lease to such assignee designated by Lessor (or to any other party subsequently designated by such assignee) without any abatement, reduction, setoff, defense or counterclaim that Lessee may have against Lessor, Lessee’s sole remedy therefor being a claim for damages or injunctive relief against Lessor.

18. TIME OF ESSENCE. Time is of the essence of this Lease, and this provision shall not be impliedly waived by the acceptance on occasion of late or defective performance.




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thereafter; (b) Lessee fails to observe, keep, or perform any provision of this Lease or any other Master Lease Agreement, Equipment Schedule, Lease or other agreement between Lessee and/or its affiliates and Lessor and/or its affiliates or any other liability, debt, or other duty of Lessee and/or its affiliates to Lessor and/or its affiliates, whether now existing or later incurred, matured or unmatured, direct or contingent, and any renewals, extensions, and substitutions of the same; (c) Lessee or any guarantor becomes insolvent or makes an assignment for the benefit of creditors or ceases doing business as a going concern; (d) a receiver, trustee, conservator, or liquidator of Lessee or any guarantor is appointed with or without the application or approval of Lessee or such guarantor; (e) the filing by or against Lessee or any guarantor of a petition under the Bankruptcy Code or any amendment thereto; or under any other insolvency law or laws providing for, but not limited to, the benefit of debtors or; (f) any false or misleading representation or statement made or furnished to Lessor by or on behalf of Lessee or any guarantor; (g) Lessee or any guarantor dissolves, liquidates, or suspends its business or any individual Lessee or individual guarantor dies; (h) Lessee or any guarantor enters into any merger, consolidation or similar re-organization; (i) Lessee or any guarantor transfers all or any substantial part of its operations or assets; (j) without thirty (30) days advance written notice to Lessor, Lessee or any guarantor changes its name or principal place of business; (k) when Lessor believes in good faith that the prospect for performance of the terms and conditions of this Lease by Lessee or any guarantor is impaired; or (1) Lessee, or any guarantor of the Lease shall suffer an adverse material change in its financial condition from the date hereof, and as a result thereof Lessor deems itself or any of the Equipment to be insecure.

20. REMEDIES. If an event of default occurs under this Lease or under any other Master Lease Agreement, Equipment Schedule, Lease or other agreement between Lessee and/or its affiliates and Lessor and/or its affiliates or any other liability, debt, or other duty of Lessee and/or its affiliates to Lessor and/or its affiliates, whether now existing or later incurred, matured or unmatured, direct or contingent, and any renewals, extensions, and substitutions of the same, then Lessor, with or without notice to Lessee (except as set forth below), shall have the right to exercise any one or more of the following remedies, concurrently or separately, in any order and without any election of remedies being deemed to have been made:

(a)

Lessor may enter upon Lessee’s premises and without any court order or other process of law may repossess and remove the Equipment, or render the Equipment unusable without removal, either with or without notice to Lessee (Lessee hereby waives any trespass or right of action for damages by reason of such entry, removal, or disabling, any such repossession shall not constitute a termination of this Lease unless Lessor so notifies Lessee in writing);




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(b)	Lessor may require Lessee, at Lessee’s expense, to return the Equipment in good repair, ordinary wear and tear resulting from proper use thereof alone excepted, by delivering it, packed and ready for shipment, to such place or carrier as Lessor may specify;


(c)	Lessor may cancel or terminate this Lease and may retain any and all prior payments paid by Lessee;


(d)	Lessor may re-lease or sell the Equipment, without notice to Lessee at private or public sale, at which sale Lessor may be the purchaser;

(e)

Lessor may declare as immediately due and payable and recover from Lessee, as liquidated damages and not as a penalty (Lessor and Lessee agreeing that such liquidated damages are reasonable in light of the anticipated harm to be caused to Lessor by any such event of default, including, without limitation, the loss of tax benefits), the sum of the following amounts (such sum being referred to herein as “Lessor’s Loss”): (i) all unpaid rents and other payments due under this Lease then accrued, plus (ii) the remaining rents through the end of the Term, plus (iii) the Residual Value in the Equipment, which shall be determined by Lessor in its sole discretion, less (iv) the fair market value, which shall be determined by Lessor in its sole discretion, of any item of Equipment, if any, Lessor in its sole discretion accepts as a return or repossesses.

(f)

Lessor may recover all costs, expenses and damages relating to this Lease and the event of default, including, without limitation, any collection agency and attorney’s fees and expenses; Lessor may recover interest on the unpaid balance of Lessor’s Loss plus any amounts recoverable under clauses (e) (f) and (g) of this paragraph 20 from the date it becomes payable until fully paid at the rate of the lesser of 18% per annum or the highest rate permitted by law.


(g)	Lessor may pursue any other remedy available at law, by statute or in equity, including, without limitation, any rights and remedies available to lessors under Chapter 2A, whether or not Chapter 2A is applicable to this Lease.

Upon return or repossession of the Equipment, Lessor may at its sole discretion sell or lease each item of Equipment in such manner and upon such terms as Lessor may in its sole discretion determine. The proceeds of such sale or lease shall be applied to reimburse Lessor for Lessor’s Loss and any additional amounts due under clauses (e), (f) or (g).




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No right or remedy herein conferred upon or reserved to Lessor is exclusive of any other right or remedy herein, or by law or by equity provided or permitted, but each shall be cumulative of every other right or remedy given herein or now or hereafter existing by law or equity or by statute or otherwise, and may be enforced concurrently therewith or from time to time. No single or partial exercise by Lessor of any right or remedy hereunder shall preclude any other or further exercise of any other right or remedy.

21. LIMITED PREARRANGED AMENDMENTS; LIMITED POWER OF ATTORNEY. In the event it is necessary to amend the terms of this Lease or the terms of any Schedule to reflect a change in one or more of the following conditions: (a) Lessor’s actual cost of procuring the Equipment, or (b) Lessor’s actual cost of providing the Equipment to Lessee, or (c) a change in rent payments as a result of (a) or (b) above, or (d) description of the Equipment, then Lessee agrees that any such amendment shall be described in a letter from Lessor to Lessee, and unless within 15 days after the date of such letter Lessee objects in writing to Lessor, this Lease shall be deemed amended and such amendments shall be incorporated in this Lease herein as if originally set forth. Lessee grants to Lessor a specific power of attorney for Lessor to use and hereby authorizes Lessor as follows: (1) Lessor may sign and/or file on Lessee’s behalf or on Lessor’s behalf any document Lessor deems necessary to perfect or protect Lessor’s interest in the Equipment, including a UCC-1 Financing Statement or any other document pursuant to the Uniform Commercial Code; and (2) Lessor may sign, endorse or negotiate for Lessor’s benefit any instrument representing proceeds from any policy of insurance covering the Equipment. Lessee hereby ratifies all action of Lessor in executing and/or filing UCC financing statements prior to the execution of this Lease or any Schedule,

22. MULTIPLE LESSEES. Lessor may, with the consent of any one of the Lessees hereunder modify, extend, or change any of the terms hereof without the consent or knowledge of the others, without in any way releasing, waiving, or impacting any right granted to Lessor against the others. Lessees and each of them are jointly and severally responsible and liable to Lessor under this Lease.

23. EXPENSES OF ENFORCEMENT. In the event of any legal action with respect to this Lease, the prevailing party in any such action shall be entitled to reasonable attorney fees, including, without limitation, actions at the trial level, actions in bankruptcy court, on appeal or review, or incurred without action, suits, or proceedings, together with all costs and expenses incurred in pursuit thereof.




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24. ENTIRE AGREEMENT; NO ORAL MODIFICATIONS; NO WAIVER. This instrument constitutes the entire agreement between Lessor and Lessee. No provision of this Lease shall be modified or rescinded unless in writing signed by a representative of Lessor. Waiver by Lessor of any provision hereof in one instance shall not constitute a waiver as to any other instance.

25. SEVERABILITY. This Lease is intended to constitute a valid and enforceable legal instrument, and no provision of this Lease that may be deemed unenforceable shall in any way invalidate any other provision or provisions hereof, all of which shall remain in full force and effect.

26. ADDITIONAL SECURITY. In the event that this Master Lease Agreement or any Lease entered into pursuant to this Master Lease Agreement, is not deemed to be a true lease under Chapter 2A, then solely in that event and for that limited purpose, (a) it shall be deemed a security agreement and, in that regard, Lessee hereby grants to Lessor a purchase money security interest in the Equipment, and all accessions, substitutions and replacements thereto, and all of Lessee’s interest therein, and all proceeds and products thereof to secure Lessee’s prompt payment and performance as and when due of all of Lessee’s obligations and indebtedness to Lessor under this Lease or under any other Master Lease Agreement, Equipment Schedule, Lease or other agreement between Lessee and/or its affiliates and Lessor and/or its affiliates or any other liability, debt, or other duty of Lessee and/or its affiliates to Lessor and/or its affiliates, whether now existing or later incurred, matured or unmatured, direct or contingent, and any renewals, extensions, and substitutions of the same, and (b) the aggregate of all consideration that constitutes interest under applicable law that is taken, reserved, contracted for, charged or received hereunder or under any other agreements or otherwise in connection with this Lease shall under no circumstances exceed the maximum amount of interest allowed by applicable law, and any excess shall be credited on this note by the holder hereof (or if such obligations shall have been paid in full, refunded to Lessee ); and in the event of an event of default hereunder, or in the event of any required or permitted prepayment, then such consideration that constitutes interest may never include more than the maximum amount allowed by applicable law, and excess interest, if any, provided for in this note or otherwise shall be canceled automatically as of the date of such acceleration or prepayment and, if theretofore prepaid, shall be credited to such obligation (or if such obligations shall have been paid in full, refunded to Lessee).

27. FINANCIAL REPORTS. Upon Lessor’s request, Lessee and Guarantor agrees to furnish within sixty (60) days after Lessee’s and Guarantor’s first three fiscal quarters and within one hundred twenty (120) days after each of its fiscal year-ends during the Term of this Lease, its balance sheet as of the end of each such period and the related statements of income and retained earnings. In the case of year-end statements, the reports shall be audited, if available, and in any event reviewed, by Lessee’s and Guarantor’s then acting certified public accounting firm.




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28. NO ORAL AGREEMENTS. THIS AGREEMENT AND THE RELATED TRANSACTION DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN OR AMONG THE PARTIES, AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

29. ONE ORIGINAL. Only one original counterpart of this Master Lease Agreement and each Schedule shall be executed by the parties and the original counterpart of each such document shall be marked as “LESSOR’S ORIGINAL COPY”. No security interest may be created in a Schedule through the transfer or possession of any counterpart other than the sole original counterpart marked as “LESSOR’S ORIGINAL COPY”, together with a certified copy of the original counterpart of this Master Lease Agreement marked as “LESSOR’S ORIGINAL COPY”. All other counterparts shall be copies and marked as “DUPLICATE”.

30. MISCELLANEOUS. Notices provided for herein shall be in writing and sent by certified or registered mail, postage prepaid, to the parties at the addresses for notice set forth in each Schedule, and such notices shall be deemed received three (3) business days after such deposit in the U. S. Mail. Except as provided herein, this Lease shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Lessee shall provide Lessor with such documents as Lessor may request from time to time including, but not limited to, corporate resolutions, opinions of counsel, financial statements, and UCC Financing Statements. Any provision of this Lease which may be prohibited or unenforceable in any jurisdiction shall not, as to such jurisdiction, invalidate the remaining provisions hereof and shall not invalidate or render unenforceable such provision in any other jurisdiction. This Lease shall be governed by and construed in accordance with the laws of the State of Texas, without reference to its internal choice of law principles. Lessee agrees that this will be deemed executed in Jefferson County, Texas and is performable in Jefferson County, Texas and should any legal action, suit, or proceeding be initiated by any party to this Agreement with regard to, or arising out of, this Lease or the Equipment covered hereby, such action shall be brought only in the Courts of applicable jurisdiction for the State of Texas located in Jefferson County, Texas, and all parties consent to the jurisdiction of such Courts as to all such actions. LESSEE HEREBY WAIVES ANY RIGHT TO A JURY TRIAL WITH RESPECT TO ANY MATTER ARISING UNDER OR IN CONNECTION WITH THIS LEASE.




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31. TAX INDEMNITY. Lessee represents warrants and covenants as follows:

(a)

This Lease shall be a lease for federal and state income tax purposes. Lessee shall be treated as the lessee of the Equipment for federal and applicable state income tax purposes and Lessor shall be treated as the purchaser, owner, lessor and original user of the Equipment for federal and applicable state income tax purposes and shall be entitled to such deductions, credits and other benefits as are provided an owner of property (the Tax Benefits ), including but not limited to:

(i)

the maximum depreciation deductions with respect to each item of Equipment as provided by Section 167(a) of the Internal Revenue Code of 1986, as amended (the Code), determined under Section 168 of the Code by using the applicable depreciation method, the applicable recovery period, and the applicable convention, all as may be specified on the applicable Schedule for the Equipment, and Lessor shall also be entitled to corresponding state depreciation deductions; and

(ii)

For purposes of determining depreciation deductions, the Equipment shall have an income tax basis equal to Lessor’s cost for the Equipment specified on the applicable Schedule, plus such expenses of the transaction incurred by Lessor as may be included in basis under Section 1012 of the Code, and shall be placed in service (and certified as such by Lessee) by the last business day of the same calendar year in which the Schedule for such Equipment is executed.

(b)

If, with respect to any item of Equipment, Lessee’s representations, warranties and/or covenants contained herein or in any other agreement or document entered into relating to the Equipment are or are determined to be incorrect and Lessor shall determine that it shall not have the right to claim all or any portion of the Tax Benefits or if all or any portion of the Tax Benefits shall be disallowed or recaptured (hereinafter referred to as a Tax Benefit Loss ), then subject to the exceptions set forth below and at the sole discretion of Lessor, Lessee shall, within thirty (30) days after written notice from Lessor that a Tax Benefit Loss has occurred, pay to Lessor at Lessor’s option, either a lump-sum payment or an increase to the remaining monthly payments due under this Lease in an amount which, after taking into account the effects of interest, penalties and additional




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	taxes payable by Lessor as a result of the Tax Benefit Loss and the receipt of payment hereunder, will cause Lessor’s net effective after-tax return over the term of this Lease to equal the net effective after-tax return which would have been available if Lessor had been entitled to the utilization of all the Tax Benefits.


(c)	For purposes hereof a Tax Benefit Loss shall occur upon the earliest of (i) the happening of an event which causes such Tax Benefit Loss, (ii) the payment by Lessor to the Internal Revenue Service or the applicable state revenue office of the tax increase resulting from such Tax Benefit Loss, or (iii) the adjustment of the tax return of Lessor to reflect such Tax Benefit Loss.

(d)

Notwithstanding the foregoing, Lessor shall not be entitled to receive a payment hereunder on account of any Tax Benefit Loss directly attributable to any of the following: (i) any act on the part of Lessor which causes a Tax Benefit Loss; (ii) the failure of Lessor to have sufficient taxable income or tax liability to utilize such Tax Benefits; or (iii) the happening of any other event with respect to Lessor (such as a disqualifying change in Lessor’s business) which causes a Tax Benefit Loss.

(e)

This paragraph is expressly made for the benefit of, and shall be enforceable by Lessor, any person, firm, corporation or other entity to which Lessor transfers title to all or a portion of the Equipment and their successors and assigns (Owner). For purposes hereof, the term Owner shall include an affiliated group (within the meaning of the Code) of which it is a member for any year in which a consolidated income tax return is filed for such affiliated group. Lessee agrees to indemnify and hold any such Owner harmless from any Tax Benefit Loss on the same as if said Owner were the Lessor hereunder. All of Lessor’s rights and privileges arising from the indemnities contained herein shall survive the expiration or other termination of this Lease.

Signatures page to follow:




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EXECUTED effective as of the date signed by both parties.




LESSOR:		LESSEE:

M/G FINANCE CO., LTD.		PEG Partners, LLC
By: MGFC, LLC, its general partner		a Delaware Limited Liability Company

By:	/s/ Charles B. Childress	By:	/s/ James G. Aivalis
Name:	Charles B. Childress	Name:	James G. Aivalis
Title:	Sr. Vice President	Title:	CEO
Date:	2/4/2018	Date:	2/2/2018




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Exhibit 10.24

CERTIFICATE OF ACCEPTANCE

MASTER LEASE AGREEMENT NO.: CW/1291-1

EQUIPMENT LEASE SCHEDULE NO.: CW/1291-1-A

This Certificate of Acceptance is attached to and made a part of Equipment Lease Schedule No. CW/1291-1-A (the “Schedule”) by and between M/G Finance Co., Ltd., a Texas limited partnership as Lessor and the Lessee set forth below and relating to the Lease of the Equipment described therein.

Lessee hereby acknowledges and agrees that:



1	Lessee has received the Equipment described in the Equipment Lease Schedule in good condition and repair.



2	Lessee has inspected the equipment.



3	The Equipment has been delivered and is satisfactory in all respects for all of the Lessee’s intended uses and purposes.



4	Lessee hereby accepts the Equipment unconditionally and irrevocably.

Dated as of , 20 .

LESSEE:

Stabilis Energy Services, LLC

a TX Limited Liability Company




By:		/s/ Casey Crenshaw



Name:		Casey Crenshaw



Title:		President

EQUIPMENT LEASE SCHEDULE NO. CW/1291-1-A

This Equipment Lease Schedule No. CW/1291-1-A is hereby incorporated in and made a part of that certain Master Lease Agreement No. CW1291-1 (the “Lease”), by and between M/G Finance Co., Ltd., a Texas limited partnership (“Lessor”) and STABILIS ENERGY SERVICES, LLC, a TX Limited Liability Company, (“Lessee”). Capitalized terms not defined herein shall have the meanings set forth in the Lease.




1.	Equipment:	See Exhibit A attached hereto and incorporated by reference.

2.	Location:	1655 Louisiana Street Beaumont, TX 77701

3.	Term:	The Term of this Lease shall begin on the Installation Date and shall continue, unless sooner terminated as provided herein, for twenty-four (24) consecutive months plus the residual following the Commencement Date. The Commencement Date of this Lease is August 25th.

4.	Rent:	The rent due and owing hereunder shall be $51,713.59 per month for twenty-four (24) months, with the first payment due and payable on September 25th, and like payments being due and payable on the twenty-fifth (25th) day of each month thereafter during the Initial Lease Term.

5.	Freight, FET and Taxes:	Taxes, if any will be due to Lessor at closing.




6.	Closing Costs:	No closing costs will be due.

7.	Purchase Option:	See Exhibit B attached hereto and incorporated by reference.

8.	Addresses for Notice and Billing:	Lessee: 1655 Louisiana Street Beaumont, TX 77701 Lessor: Payments P.O. Box 704 Beaumont, TX 77702 Notices 1655 Louisiana Street Beaumont TX 77701 Attn: Casey or Will Crenshaw Addresses for notice and billing may be changed by written notice to the other party as provided in the Lease.

9.	Delivery and Acceptance:	Lessee shall acknowledge delivery and acceptance of the Equipment by the execution and delivery to Lessor of a Certificate of Acceptance in form acceptable to Lessor, and such Certificate of Acceptance shall be attached to and become a part of this Schedule.

10.	Special Provisions:	In addition to and with each monthly payment of rent due and owing hereunder, Lessee shall pay (a) any sales taxes due and owing and relating to the rent and (b) at the sole discretion of Lessor, one-twelfth (l/12th) of Lessor’s current estimate of the property taxes to be due and owing on the Equipment. Lessee represents and warrants to Lessor that the Equipment is not, and the Equipment will not be used in such a manner so as to constitute, inventory as such term is defined in the Uniform Commercial Code as enacted in the State of Texas. If any amount payable to Lessor by




				Lessee under this Lease is not paid within 10 days of due date, Lessor may charge interest on the amount past due at a rate of 1.5% per month (or the maximum amount permitted by applicable law if less). All monthly payments associated with this lease will be made by the electronic transfer of funds (ACH).
11. THIS EQUIPMENT LEASE SCHEDULE IS ENTERED INTO PURSUANT TO THE MASTER LEASE AGREEMENT IDENTIFIED ABOVE. ALL OF THE TERMS AND CONDITIONS OF THE MASTER LEASE AGREEMENT ARE HEREBY INCORPORATED HEREIN AND MADE A PART HEREOF. BY EXECUTING THIS EQUIPMENT LEASE SCHEDULE, THE PARTIES HEREBY REAFFIRM ALL OF THE TERMS AND CONDITIONS OF THE MASTER LEASE AGREEMENT EXCEPT AS MODIFIED HEREBY.



By:	By:	/s/ Casey Crenshaw



Name:	Name:	Casey Crenshaw



Title:	Title:	President



Date:	Date:	8/30/2018

EXHIBIT A

(Equipment Listing)

This Exhibit A is to be attached to and become a part of Equipment Lease Schedule CW/1291-1-A, by and between M/G Finance Co., Ltd. as Lessor and Stabilis Energy Services, LLC as Lessee:

VENDOR: Dragon Products

See the attached Schedule of Equipment to this Exhibit A for equipment detail.

The Schedule of Equipment is hereby verified correct and the undersigned Lessee acknowledges receipt of a copy.



By:	By:	/s/ Casey Crenshaw



Name:	Name:	Casey Crenshaw



Title:	Title:	President



Date:	Date:	8/30/2018

EXHIBIT A - SCHEDULE OF EQUIPMENT

CW1291

STABILIS ENERGY SERVICES, LLC



COUNT	YEAR	DESCRIPTION	SERIAL NUMBER
1	2011	QUEEN RE-GAS UNIT	16015
2	2011	QUEEN RE-GAS UNIT	16016
3	2011	QUEEN RE-GAS UNIT	16017

EXHIBIT B

PURCHASE OPTION RIDER TO LEASE EQUIPMENT SCHEDULE

MASTER LEASE AGREEMENT NO.: CW/1291-1

EQUIPMENT LEASE SCHEDULE NO.: CW/1291-1-A

This Purchase Option Rider (“Rider”) is attached and made a part of that Equipment Lease Schedule No. CW/1291-1-A (“Schedule”) by and between the Lessee and Lessor set forth below:



1	SUBJECT TO THE PROVISIONS SET FORTH HEREIN, AT THE EXPIRATION OF THE INITIAL LEASE TERM, AS SET FORTH IN THE SCHEDULE, LESSEE SHALL HAVE THE OPTION, WHICH OPTION SHALL NOT BE ASSIGNABLE, TO PURCHASE, AS-IS-WHERE-IS AND WITHOUT ANY WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, ALL, BUT NOT LESS THAN ALL, OF THE LEASED EQUIPMENT COVERED BY THE SCHEDULE FOR A PURCHASE PRICE EQUAL TO THE GREATER OF (A) THE, THEN, FAIR MARKET VALUE OF THE LEASED EQUIPMENT, OR (B) $269,258.19. THE AMOUNT SET FORTH IN SUBPART (B) OF THE IMMEDIATELY PRECEDING SENTENCE REFLECTS A GOOD FAITH ATTEMPT BY LESSOR AND LESSEE TO ESTIMATE THE FAIR MARKET VALUE OF THE EQUIPMENT AT THE EXPIRATION OF THE INTITAL LEASE TERM. LESSEE’S DETERMINATION OF FAIR MARKET VALUE WILL BE ACCEPTED BY LESSOR.



2	Lessee’s right to purchase the Equipment pursuant to such options is Conditioned upon (a) Lessee’s having performed all of the terms and conditions of the Lease and Schedule at the time and in the manner required therein; (b) Lessor having received written notice of Lessee’s exercise of said option at least ninety (90) days prior to the expiration date of the Initial Lease Term, and (c) Lessee’s payment to Lessor of said purchase price, together with all taxes on or measured by such purchase price, in immediately available funds.



3	If Lessee, for any reason, does not purchase the leased Equipment in Accordance with Paragraph 1 hereof, Lessee shall be obligated to return the leased Equipment to Lessor in accordance with the terms of the Lease and Schedule.

EXECUTION PAGE FOLLOWS:

The parties have executed and delivered this Rider as set forth below:



By:	By:	/s/ Casey Crenshaw



Name:	Name:	Casey Crenshaw



Title:	Title:	President



Date:	Date:	8/30/2018

MASTER LEASE AGREEMENT

NO. CW/1291-1

THIS MASTER LEASE AGREEMENT, by and between M/G FINANCE CO., LTD., a Texas limited partnership (“Lessor”), with its address for notice hereunder being 1655 Louisiana St., Beaumont, Texas 77701 and STABILIS ENERGY SERVICES, LLC, a Texas Limited Liability Company (“Lessee”) with its principal office located at 1655 Louisiana Street Beaumont, TX 77701 and its billing address and address for notice hereunder being 1655 Louisiana Street Beaumont, TX 77701.

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identifying data with respect to the Equipment. In addition to the other amounts due and owing hereunder, Lessee shall pay for all transportation, insurance, rigging, drayage and any other charges with respect to delivery and installation of the Equipment. Lessee will provide a suitable place of installation for use of the Equipment as specified by the manufacturer. Lessee agrees that the Equipment Location shall at all times comply with applicable state and local codes. Lessor shall not be liable for any failure or delay in supplying the Equipment from any cause not subject to the direct control of Lessor.

3. DISCLAIMER OF WARRANTIES AND CLAIMS; LIMITATION OF REMEDIES. THERE ARE NO WARRANTIES BY OR ON BEHALF OF LESSOR. Lessee acknowledges and agrees by his signature below as follows:


(a)	LESSOR, NOT BEING THE MANUFACTURER OF THE EQUIPMENT NOR THE MANUFACTURER’S AGENT, MAKES NO WARRANTIES EITHER EXPRESS OR IMPLIED AS TO THE CONDITION OF THE EQUIPMENT, ITS MERCHANTABILITY, ITS FITNESS OR SUITABILITY FOR ANY PARTICULAR PURPOSE, ITS DESIGN, ITS CAPACITY, ITS QUALITY, OR WITH RESPECT TO ANY CHARACTERISTICS OF THE EQUIPMENT;


(b)	Lessee has fully inspected the Equipment which it has requested Lessor to acquire and lease to Lessee, and the Equipment is in good condition and to Lessee’s complete satisfaction;


(c)	Lessee leases the Equipment “AS IS” and with all faults.


(d)	Lessee specifically acknowledges that the Equipment is leased to Lessee solely for commercial or business purposes and not for personal, family or household purposes;


(e)	If the Equipment is not properly installed, does not operate as represented or warranted by the supplier or manufacturer, or is unsatisfactory for any reason, regardless of cause or consequence, Lessee’s only remedy, if any, shall be against the supplier or manufacturer of the Equipment and not against Lessor;

(f)

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	receive an accurate and complete statement of those promises and warranties, including any disclaimers and limitations of them or of remedies. NOTWITHSTANDING THE FOREGOING, LESSEE’S OBLIGATIONS TO PAY THE RENTS OR OTHERWISE UNDER THIS LEASE SHALL BE AND ARE ABSOLUTE AND UNCONDITIONAL AND WITHOUT OFFSET FOR ANY REASON. To the extent permitted by the manufacturer or seller, and provided Lessee is not in default under this Lease, Lessor assigns to Lessee any warranties made by the supplier or the manufacture of the Equipment.


(g)	LESSEE SHALL HAVE NO REMEDY FOR CONSEQUENTIAL OR INCIDENTAL DAMAGES AGAINST LESSOR; AND


(h)	NO DEFECT, DAMAGE OR UNFITNESS OF THE EQUIPMENT FOR ANY PURPOSE SHALL RELIEVE LESSEE OF THE OBLIGATION TO PAY RENT OR RELIEVE LESSEE OF ANY OTHER OBLIGATION UNDER THIS LEASE.

4. STATUTORY FINANCE LEASE. Lessee agrees and acknowledges that it is the intent of both parties to this Lease that it qualify as a statutory finance lease under Chapter 2A of the Texas Business and Commerce Code, as amended and corresponding provisions of subsequent law (“Chapter 2A”). Lessee acknowledges and agrees that Lessee has selected both: (1) the Equipment; and (2) the supplier from whom Lessor is to purchase the Equipment. Lessee acknowledges that Lessor has not participated in any way in Lessee’s selection of the Equipment or of the supplier, and Lessor has not selected, manufactured, or supplied the Equipment. Without limiting the foregoing, and in addition to any other provisions of this Lease, Lessor shall be entitled to the benefits of Sections 2A-209, 2A-211(2), 2A-212(1), 2A-213, 2A-219(1), 2A-220(1)(a), 2A-221, 2A-405(c), 2A-407, 2A-504, 2A-516(2), and 2A-517(1) and (2) of Chapter 2A, whether or not this Lease qualifies as a statutory finance lease. If this Lease does not qualify as a statutory’ finance lease under Chapter 2A, no rights or remedies referred to in Chapter 2A will be conferred upon Lessee unless expressly granted in this Lease or as required by applicable law.

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8. LOCATION. The Equipment shall be kept at the Equipment Location specified in the applicable Schedule, or, if none is specified, at Lessee’s billing address

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set forth above and shall not be removed without Lessor’s prior written consent. Upon Lessor’s request, Lessee shall provide Lessor or its agents access to (a) the Equipment at all reasonable times for the purpose of inspection, and (b) Lessee’s books and records relating to the Equipment at all reasonable times for the purpose of verifying Lessee’s compliance with its obligations under this Lease. Lessee shall not part with possession or control of or suffer or allow to pass out of its possession or control any item of the Equipment or change the location of the Equipment or any part thereof from the address shown in the applicable Schedule. Lessor may at its sole discretion and either before or after delivery to Lessee, install or have installed Global Position Satellite (“GPS”) tracking systems on any or all of the Equipment. Lessee hereby agrees to Lessor’s installation and use of such GPS tracking systems, and Lessee will fully cooperate with Lessor for the installation, maintenance, use of such systems. Any intentional destruction, removal, disabling, or other interference of Lessor’s installation and use of the GPS systems will be deemed a default and material breach of this Master Lease Agreement. In the event Lessee becomes sixty (60) days or more overdue in rent owed under this or any other Master Lease Agreement with Lessor or any schedule made in connection therewith, then the costs of procuring and installing the GPS tracking systems and all fees Lessor may incur to use such system to track the Equipment will be charged to and paid by Lessee as additional rent due hereunder.

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11. SURRENDER. By this Lease, Lessee acquires no ownership rights in the Equipment and has no right to purchase the Equipment, except as may be provided in the applicable Schedule. Upon the expiration or earlier termination of this Lease, or in the event of default under this Lease, Lessee agrees to return the Equipment in good repair, ordinary wear and tear from proper use thereof alone excepted, by delivering it to such place or carrier as Lessor may specify at Lessee’s sole cost and expense. In the event Lessee fails to return the Equipment to Lessor as directed. Lessor is entitled to charge and Lessee shall be obligated to pay, rent to Lessor in the same periodic amounts as indicated on the Schedule to which the Equipment relates, until the Equipment is returned to Lessor.

13. LOSS AND DAMAGE. Lessee hereby assumes the entire risk of damage to or loss of the Equipment or any item thereof from any cause whatsoever, whether or not insured against, from and after the date the Equipment is delivered to the Equipment Location until returned to Lessor. No loss, theft, damage or destruction of the Equipment shall alter or relieve Lessee of any obligation under this Lease, which shall continue in full force and effect. Lessee agrees to give Lessor prompt notice of any damage to or loss of the Equipment. In the event of damage to any part of the Equipment, Lessee shall immediately place the same in good repair at Lessee’s expense. In the event of damage to or loss of the Equipment or any item thereof, and irrespective of payment from any insurance coverage maintained by the Lessee, but applying full credit therefor, Lessee shall, at the option of Lessor, (a) place the Equipment in good repair, condition and working order or (b) replace the Equipment with identical equipment in good repair, condition and working order and transfer clear title to such replacement equipment to Lessor, whereupon such replacement equipment shall be deemed the Equipment for all purposes hereof, or (c) pay Lessor in cash the following: (i) all amounts due by Lessee to Lessor with respect to this Lease up to the date of the loss; plus (ii) the total amounts due for the remaining term of this Lease attributable to said items; plus (iii) Lessor’s estimate of Lessor’s residual interest in the Equipment as of the Commencement Date (the “Residual Value”), which will be determined at Lessor’s sole discretion. Upon Lessor’s receipt of such payment, this Lease shall terminate only with respect to such Equipment

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so paid for, and Lessee shall become entitled to title thereto, AS IS, WHERE IS, and without any warranty whatsoever, express or implied. Proceeds of insurance shall be paid to Lessor with respect to such repairable damage to the Equipment and shall, at the election of Lessor, be applied either to the repair of the Equipment by payment by Lessor directly to the party completing the repairs, or to the reimbursement of Lessee for the cost of such repairs; provided, however, that Lessor shall have no obligation to make such payment or any part thereof until receipt of such evidence as Lessor shall deem satisfactory that such repairs have been completed and further provided that Lessor may apply such proceeds to the payment of any rent or other sum due or to become due hereunder if at the time such proceeds are received by Lessor there shall have occurred any Event of Default or any event which with lapse of time or notice, or both, would become and Event of Default.

14. INSURANCE; LIENS; TAXES. Lessee shall provide and maintain at its sole cost and expense insurance against loss, theft, damage, or destruction of the Equipment in an amount not less that the full replacement value of the Equipment, with loss payable to Lessor. Lessee also shall provide and maintain at its sole cost and expense comprehensive general all-risk liability insurance including but not limited to, product liability coverage, insuring Lessor and Lessee, with a severability of interest endorsement, or its equivalent, against any and all loss or liability for all damages, either to persons or property or otherwise, which might result from or happen in connection with the condition, use or operation of the Equipment, with such limits and with an insurer satisfactory to Lessor, but not less than $1,000,000.00 and naming Lessor and/or each of its assigns as an additional insured. Each policy shall expressly provide that said insurance as to Lessor and/or its assigns shall not be invalidated by any act, omission, or neglect of Lessee and cannot be canceled without 30 days prior written notice to Lessor and/or its assigns. As to each policy, Lessee shall furnish to Lessor and/or each of its assigns a certificate or certificates of insurance from the insurer(s) on the Commencement Date and thereafter as requested by Lessor and/or its assigns, in form and containing such matters as reasonably required by Lessor. Neither Lessor nor its assigns shall have any obligation to ascertain the existence of or provide any insurance coverage for the Equipment or for Lessee’s benefit. Any failure of Lessor to insist on Lessee’s provision of a certificate of insurance shall not be deemed a waiver of any rights hereunder and shall not excuse or release Lessee’ of its obligation to procure and provide such insurance. It is further understood and agreed that the insurance coverage provided by Lessee shall operate independent and apart from any indemnity obligations imposed on Lessee under this agreement. Lessee shall keep the Equipment free and clear of all levies, liens, and encumbrances. Lessee shall pay all charges and taxes (local, state, and federal) which may now or hereafter be imposed upon the ownership, leasing, rental, sale, purchase, possession, or use of the Equipment, excluding, however, all taxes on or measured by Lessor’s net income. If Lessee fails to procure or maintain said insurance or to pay said charges or taxes, Lessor shall have the right, but shall not be obligated, to effect such insurance, or pay such charges or taxes. In that event, Lessor shall notify

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Lessee of such payment and Lessee shall repay to Lessor the cost thereof within 15 days after such notice is mailed to Lessee. Lessor shall file personal property returns with respect to the Equipment, and Lessee shall pay to Lessor, in advance and at the time(s) required by Lessor, the taxes Lessor anticipates will be due during the year. Lessee acknowledges that Lessor may require a monthly payment of such anticipated taxes and any deficiency shall be paid by Lessee upon demand by Lessor.

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effect such sales or assignments; (c) agrees that any security assignee shall have all the rights, but none of the obligations, of Lessor under this Lease, except Lessor’s obligation not to disturb Lessee’s quiet possession and use of the Equipment, provided Lessee is not in default hereunder; and (d) upon written notice from Lessor, agrees to pay all rent and other sums payable under this Lease to such assignee designated by Lessor (or to any other party subsequently designated by such assignee) without any abatement, reduction, setoff, defense or counterclaim that Lessee may have against Lessor, Lessee’s sole remedy therefor being a claim for damages or injunctive relief against Lessor.

18. TIME OF ESSENCE. Time is of the essence of this Lease, and this provision shall not be impliedly waived by the acceptance on occasion of late or defective performance.

19. DEFAULT. Any of the following events or conditions shall constitute an event of default hereunder, (a) Lessee fails to pay any amount due and owing hereunder or under any other Master Lease Agreement, Equipment Schedule, Lease or any other agreement between Lessee and/or its affiliates and Lessor and/or its affiliates or any other liability, debt, or other duty of Lessee and/or its affiliates to Lessor and/or its affiliates, whether now existing or later incurred, matured or unmatured, direct or contingent, and any renewals, extensions, and substitutions of the same, when due or within ten (10) days thereafter; (b) Lessee fails to observe, keep, or perform any provision of this Lease or any other Master Lease Agreement, Equipment Schedule, Lease or other agreement between Lessee and/or its affiliates and Lessor and/or its affiliates or any other liability, debt, or other duty of Lessee and/or its affiliates to Lessor and/or its affiliates, whether now existing or later incurred, matured or unmatured, direct or contingent, and any renewals, extensions, and substitutions of the same; (c) Lessee or any guarantor becomes insolvent or makes an assignment for the benefit of creditors or ceases doing business as a going concern; (d) a receiver, trustee, conservator, or liquidator of Lessee or any guarantor is appointed with or without the application or approval of Lessee or such guarantor; (e) the filing by or against Lessee or any guarantor of a petition under the Bankruptcy Code or any amendment thereto; or under any other insolvency law or laws providing for, but not limited to, the benefit of debtors or; (f) any false or misleading representation or statement made or furnished to Lessor by or on behalf of Lessee or any guarantor; (g) Lessee or any guarantor dissolves, liquidates, or suspends its business or any individual Lessee or individual guarantor dies; (h) Lessee or any guarantor enters into any merger, consolidation or similar re-organization; (i) Lessee or any guarantor transfers all or any substantial part of its operations or assets; (j) without thirty (30) days advance written notice to Lessor, Lessee or any guarantor changes its name or principal place of business; (k) when Lessor believes in good faith that the prospect for performance of the terms and conditions of this Lease by Lessee or any guarantor is impaired; or (1) Lessee, or any guarantor of the Lease shall suffer an adverse material change in its financial condition from the date hereof, and as a result thereof Lessor deems itself or any of the Equipment to be insecure.

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(a)


(b)	Lessor may require Lessee, at Lessee’s expense, to return the Equipment in good repair, ordinary wear and tear resulting from proper use thereof alone excepted, by delivering it, packed and ready for shipment, to such place or carrier as Lessor may specify;


(c)	Lessor may cancel or terminate this Lease and may retain any and all prior payments paid by Lessee;


(d)	Lessor may re-lease or sell the Equipment, without notice to Lessee at private or public sale, at which sale Lessor may be the purchaser;

(e)

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(f)


(g)	Lessor may pursue any other remedy available at law, by statute or in equity, including, without limitation, any rights and remedies available to lessors under Chapter 2A, whether or not Chapter 2A is applicable to this Lease.

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22. MULTIPLE LESSEES. Lessor may, with the consent of any one of the Lessees hereunder modify, extend, or change any of the terms hereof without the consent or knowledge of the others, without in any way releasing, waiving, or impacting any right granted to Lessor against the others. Lessees and each of them arc jointly and severally responsible and liable to Lessor under this Lease.

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permitted prepayment, then such consideration that constitutes interest may never include more than the maximum amount allowed by applicable law, and excess interest, if any, provided for in this note or otherwise shall be canceled automatically as of the date of such acceleration or prepayment and, if theretofore prepaid, shall be credited to such obligation (or if such obligations shall have been paid in full, refunded to Lessee).

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executed in Jefferson County, Texas and is performable in Jefferson County, Texas and should any legal action, suit, or proceeding be initiated by any party to this Agreement with regard to, or arising out of, this Lease or the Equipment covered hereby, such action shall be brought only in the Courts of applicable jurisdiction for the State of Texas located in Jefferson County, Texas, and all parties consent to the jurisdiction of such Courts as to all such actions. LESSEE HEREBY WAIVES ANY RIGHT TO A JURY TRIAL WITH RESPECT TO ANY MATTER ARISING UNDER OR IN CONNECTION WITH THIS LEASE.

31. TAX INDEMNITY. Lessee represents warrants and covenants as follows:

(a)

(i)

the maximum depreciation deductions with respect to each item of Equipment as provided by Section 167(a) of the Internal Revenue Code of 1986, as amended (the Code ), determined under Section 168 of the Code by using the applicable depreciation method, the applicable recovery period, and the applicable convention, all as may be specified on the applicable Schedule for the Equipment, and Lessor shall also be entitled to corresponding state depreciation deductions; and

(ii)


(b)	If, with respect to any item of Equipment, Lessee’s representations, warranties and/or covenants contained herein or in any other agreement or document entered into relating to the Equipment are or are determined to be incorrect and Lessor shall determine that it shall not have the right to claim all or any portion of the Tax Benefits or if all or any portion of the

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	Tax Benefits shall be disallowed or recaptured (hereinafter referred to as a Tax Benefit Loss ), then subject to the exceptions set forth below and at the sole discretion of Lessor, Lessee shall, within thirty (30) days after written notice from Lessor that a Tax Benefit Loss has occurred, pay to Lessor at Lessor’s option, either a lump-sum payment or an increase to the remaining monthly payments due under this Lease in an amount which, after taking into account the effects of interest, penalties and additional taxes payable by Lessor as a result of the Tax Benefit Loss and the receipt of payment hereunder, will cause Lessor’s net effective after-tax return over the term of this Lease to equal the net effective after-tax return which would have been available if Lessor had been entitled to the utilization of all the Tax Benefits.


(c)	For purposes hereof a Tax Benefit Loss shall occur upon the earliest of (i) the happening of an event which causes such Tax Benefit Loss, (ii) the payment by Lessor to the Internal Revenue Service or the applicable state revenue office of the tax increase resulting from such Tax Benefit Loss, or (iii) the adjustment of the tax return of Lessor to reflect such Tax Benefit Loss.

(d)

(e)

Signature page to follow:

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CONTINUING GUARANTY

CW/1291

1. GUARANTY; DEFINITIONS. In consideration of any lease, Master Lease Agreement, Equipment Schedule, credit or other financial accommodation, whether accompanying this Guaranty or made separately, now or hereafter extended or made to STABILIS ENERGY SERVICES, LLC (“Debtor”), or any of them, by M/G Finance Company, Ltd. (“Creditor”), and for other valuable consideration, the undersigned CASEY CRENSHAW (“Guarantor”), unconditionally guarantees to Creditor the full and prompt payment and performance when due of any and all Indebtedness, liabilities, debts and other duties of the Debtor to Creditor now existing or later incurred, matured or unmatured, direct or contingent, and any renewals, extensions and substitutions of the same. Guarantor represents and warrants that he/she/it has a direct financial interest in Debtor and that Guarantor will either directly or indirectly benefit from the extension of credit or other financial accommodation made to Debtor. The term “Indebtedness” is used herein in its most comprehensive sense and includes any and all advances, debts, obligations and liabilities of Debtor, or any of them heretofore, now or hereafter made, incurred or created, whether direct, indirect or contingent, voluntary or involuntary and however arising, whether due or to become due, absolute or contingent, liquidated or unliquidated, determined or undetermined, including under any loan agreement, note, lease, sale, security agreement, swap, derivative, foreign exchange, hedge, deposit, treasury management or other similar transaction or arrangement, and all modifications, extensions and renewals thereof, and whether Debtor may be liable individually or jointly with others, or whether recovery upon such Indebtedness may be or hereafter become unenforceable. This Guaranty is a guaranty of payment and not collection, and the obligations of Guarantor hereunder are independent of any obligations of Debtor under any instrument giving rise to Debtor’s Indebtedness to Creditor.

2. CONTINUING LIABILITY; SUCCESSIVE TRANSACTIONS; OBLIGATION UNDER OTHER GUARANTIES. This is a continuing guaranty and all rights, powers and remedies hereunder shall apply to all past, present and future Indebtedness of the Debtor to Creditor, including that arising under successive transactions which shall either continue the Indebtedness, increase or decrease it, or from time to time create new Indebtedness after all or any prior Indebtedness has been satisfied, and notwithstanding the death, incapacity, dissolution, liquidation or bankruptcy of the Debtor or Guarantor or any other event or proceeding affecting the Debtor or Guarantor. All guaranties, warranties, representations, covenants and agreements in this Guaranty shall bind the heirs, devisees, executors, administrators, personal representatives, trustees, beneficiaries, conservators, receivers, successors and assigns of Guarantor and shall benefit Creditor, its successors and assigns, and any holder of any part of the Indebtedness. The obligations of Guarantor hereunder shall be in addition to any obligations of Guarantor under any other guaranties of any liabilities or obligations of the Debtor or any other persons heretofore or hereafter given to Creditor unless said other guaranties are expressly modified or revoked in writing; and this Guaranty shall not, unless expressly herein provided, affect or invalidate any such other guaranties.

THIS AGREEMENT INCLUDES THE TERMS ON THE ATTACHED PAGE(S).

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3. OBLIGATIONS NOT AFFECTED. Guarantor’s covenants, agreements and obligations under this Guaranty shall in no way be released, diminished, reduced, impaired or otherwise affected by reason of the happening from time to time of any of the following things, for any reason, whether by voluntary act, operation of law or order of any competent governmental authority and whether or not Guarantor is given any notice or is asked for or gives any further consent (all requirements for which, however arising, Guarantor hereby WAIVES):

(a) Release or waiver of any obligation or duty to perform or observe any express or implied agreement, covenant, term or condition imposed under the Indebtedness by applicable law on Debtor.

(b) Extension of the time for payment of any part of the Indebtedness or any other sums payable under the Indebtedness, extension of the time for performance of any other obligation under or arising out of or in connection with the Indebtedness or change in the manner, place or other terms of such payment or performance.

(d) Renewal, supplementing, modification, rearrangement, amendment, restatement, replacement, cancellation, rescission, revocation or reinstatement (whether or not material) of any part of the Indebtedness or any obligations under the Indebtedness of Debtor (without limiting the number of times any of the foregoing may occur).

(e) Acceleration of the time for payment or performance of the Indebtedness or any other obligation under the Indebtedness or exercise of any other right, privilege or remedy under or in regard to the Indebtedness.

(f) Failure, omission, delay, neglect, refusal or lack of diligence by Creditor to assert, enforce, give notice of intent to exercise—or any other notice with respect to—or exercise any right, privilege, power or remedy conferred on Creditor under the Indebtedness or by law or action on the part of Creditor granting indulgence, grace, adjustment, forbearance or extension of any kind to Debtor.

(g) Release, surrender, exchange, subordination or loss of any security or lien priority in connection with the Indebtedness.

(h) Release, modification or waiver of, or failure, omission, delay, neglect, refusal or lack of diligence to enforce, any guaranty, pledge, mortgage, deed of trust, security agreement, lien, charge, insurance agreement, bond, letter of credit or other security device, guaranty, surety or indemnity agreement whatsoever.

(i) Taking or acceptance of any other security or guaranty for the payment or performance of any or all of the Indebtedness or the obligations of Debtor.

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(j) Release, modification or waiver of, or failure, omission, delay, neglect, refusal or lack of diligence to enforce, any right, benefit, privilege or interest under any contract or agreement, under which the rights of Debtor have been collaterally or absolutely assigned, or in which a security interest has been granted, to Creditor as direct or indirect security for payment of the Indebtedness or performance of any other obligations to—or at any time held by—Creditor.

(k) Death, legal incapacity, disability, voluntary or involuntary liquidation, dissolution, sale of any collateral, marshaling of assets and liabilities, change in corporate or organizational status, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of debt or other similar proceedings of or affecting Debtor or any of the assets of Debtor, even if any of the Indebtedness is thereby rendered void, unenforceable or uncollectible against Debtor.

(1) Occurrence or discovery of any irregularity, invalidity or unenforceability of any part of the Indebtedness or any defect or deficiency in any part of the Indebtedness, including the unenforceability of any provisions of the instruments or agreements related to the Indebtedness because entering into any such instrument or agreement was ultra vires or because anyone who executed them exceeded their authority.

(m) Failure to acquire, protect or perfect any lien or security interest in any collateral intended to secure any part of the Indebtedness or any other obligations under the Indebtedness or failure to maintain perfection.

(n) Failure by Creditor or any other person to notify—or timely notify—Guarantor of any default, event of default or similar event (however denominated) under the Indebtedness, any renewal, extension, supplementing, modification, rearrangement, amendment, restatement, replacement, cancellation, rescission, revocation or reinstatement (whether or not material) or assignment of any part of the Indebtedness, release or exchange of any security, any other action taken or not taken by Creditor against Debtor or any direct or indirect security for any part of the Indebtedness or other obligation of Debtor, any new agreement between Creditor and Debtor or any other event or circumstance. Creditor has no duty or obligation to give Guarantor any notice of any kind under any circumstances whatsoever with respect to or in connection with the Indebtedness.

(o) Occurrence of any event or circumstances which might otherwise constitute a defense available to, or a discharge of, Debtor, including failure of consideration, fraud by or affecting any person, usury, forgery, breach of warranty, failure to satisfy any requirement of the statute of frauds, running of any statute of limitation, accord and satisfaction and any defense based on election of remedies of any type.

(p) Receipt and/or application of any proceeds, credits or recoveries from any source, including any proceeds, credits, or amounts realized from the exercise of any of Creditor’s rights, remedies, powers or privileges under the Indebtedness, by law or otherwise available to Creditor.

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(q) Occurrence of any act, error or omission of Creditor, except behavior which is proven to be in bad faith to the extent (but no further) that Guarantor cannot effectively waive the right to complain.

4. OBLIGATIONS JOINT AND SEVERAL; SEPARATE ACTIONS; WAIVER OF STATUTE OF LIMITATIONS; REINSTATEMENT OF LIABILITY. The obligations hereunder are joint and several and independent of the obligations of Debtor, and a separate action or actions may be brought and prosecuted against Guarantor whether action is brought against the Debtor or any other person, or whether the Debtor or any other person is joined in any such action or actions. Guarantor acknowledges that this Guaranty is absolute and unconditional, there are no conditions precedent to the effectiveness of this Guaranty, and this Guaranty is in full force and effect and is binding on Guarantor as of the date written below, regardless of whether Creditor obtains collateral or any guaranties from others or takes any other action contemplated by Guarantor. Guarantor waives the benefit of any statute of limitations affecting Guarantor’s liability hereunder or the enforcement thereof. The liability of Guarantor hereunder shall be reinstated and revived and the rights of Creditor shall continue if and to the extent for any reason any amount at any time paid on account of any Indebtedness guaranteed hereby is rescinded, avoided or must otherwise be restored by Creditor, whether as a result of any proceedings in bankruptcy or reorganization or otherwise, all as though such amount had not been paid. The determination as to whether any amount so paid must be rescinded or restored shall be made by Creditor in its sole discretion; provided however, that if Creditor chooses to contest any such matter at the request of Guarantor, Guarantor agrees to indemnify and hold Creditor harmless from and against all costs and expenses, including reasonable attorneys’ fees, expended or incurred by Creditor in connection therewith, including without limitation, in any litigation with respect thereto.

5. AUTHORIZATIONS TO CREDITOR. Guarantor authorizes Creditor either before or after revocation hereof, without notice to or demand on Guarantor, and without affecting Guarantor’s liability hereunder, from time to time to: (a) alter, compromise, renew, extend, accelerate or otherwise change the time for payment of, or otherwise change the terms of the Indebtedness or any portion thereof, including increase or decrease of the rate of interest thereon; (b) exchange, enforce, waive, subordinate or release any security for the payment of this Guaranty or the indebtedness or any portion thereof; (c) apply such security and direct the order or manner of sale thereof, including without limitation, a non-judicial sale permitted by the terms of the controlling security agreement, lease, mortgage, or deed of trust, as Creditor in its discretion may determine; (d) release or substitute any one or more of the endorsers or any other guarantors of the Indebtedness, or any portion thereof, or any other party thereto; and (c) apply payments received by Creditor from the Debtor to any Indebtedness of the Debtor to Creditor, in such order as Creditor shall determine in its sole discretion, whether or not such Indebtedness is covered by this Guaranty, and Guarantor hereby waives any provision of

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law regarding application of payments which specifies otherwise. Creditor may without notice assign this Guaranty in whole or in part. Upon Creditor’s request, Guarantor agrees to provide to Creditor copies of Guarantor’s financial statements.

6. REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants to Creditor that: (a) this Guaranty is executed at Debtor’s request; (b) Guarantor shall not, without Creditor’s prior written consent, sell, lease, assign, encumber, hypothecate, transfer or otherwise dispose of all or a substantial or material part of Guarantor’s assets other than in the ordinary course of Guarantor’s business; (c) Creditor has made no representation to Guarantor as to the creditworthiness of the Debtor; (d) if the Guarantor is a partnership, corporation, limited liability company or other legal entity, the execution, delivery and performance of this Guaranty has been duly authorized by all necessary action on the part of the Guarantor and will not violate any provision of the Guarantor’s governing documents; and the person signing this Guaranty on behalf of the Guarantor is duly authorized.

7. GUARANTOR’S WAIVERS.

(a) Guarantor waives any right to require Creditor to: (i) make demand upon, assert claims against or proceed against any of the Debtor or any other person; (ii) marshal assets or proceed against or exhaust any security held from any of the Debtor or any other person; (iii) give notice of the terms, time and place of any public or private sale or other disposition of personal property security held from the Debtor or any other person; (iv) take any other action or pursue any other remedy in Creditor’s power; or (v) make any presentment or demand for performance, or give any notice of extensions, modifications or renewals of Indebtedness, any new transactions between Debtor and Creditor and/or any other Guarantor, presentment, nonperformance, protest, notice of default, notice of protest or notice of dishonor hereunder or in connection with any obligations or evidences of indebtedness held by Creditor as security for or which constitute in whole or in part the Indebtedness guaranteed hereunder, or in connection with the creation of new or additional Indebtedness.

(b) Guarantor waives any defense to its obligations hereunder based upon or arising by reason of: (i) any disability or other defense of the Debtor or any other person; (ii) the cessation or limitation from any cause whatsoever, other than payment in full, of the Indebtedness of the Debtor or any other person; (iii) any lack of authority of any officer, director, partner, agent or any other person acting or purporting to act on behalf of the Debtor which is a corporation, partnership or other type of entity, or any defect in the formation of any such Borrower; (iv) the application by the Debtor of the proceeds of any Indebtedness for purposes other than the purposes represented by Debtor to, or intended or understood by, Creditor or Guarantor; (v) any act or omission by Creditor which directly or indirectly results in or aids the discharge of any of the Debtor or any portion of the Indebtedness by operation of law or otherwise, or which in any way impairs or suspends any rights or remedies of Creditor against the Debtor; (vi) any impairment of the value of any interest in any security for the Indebtedness or any portion thereof, including without limitation, the failure to obtain or maintain perfection or

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recordation of any interest in any such security, the release of any such security without substitution, and/or the failure to preserve the value of, or to comply with applicable law in disposing of, any such security; (vii) or any requirement that Creditor give any notice of acceptance of this Guaranty. Until all Indebtedness shall have been paid in full, Guarantor shall have no right of subrogation, and Guarantor waives any right to enforce any remedy which Creditor now has or may hereafter have against the Debtor or any other person, and waives any benefit of, or any right to participate in, any security now or hereafter held by Creditor. Guarantor further waives all rights and defenses Guarantor may have arising out of (A) any election of remedies by Creditor, even though that election of remedies, such as a non-judicial foreclosure with respect to any security for any portion of the Indebtedness, destroys Guarantor’s rights of subrogation or Guarantor’s rights to proceed against the Debtor for reimbursement, or (B) any loss of rights Guarantor may suffer by reason of any rights, powers or remedies of the Debtor in connection with any anti-deficiency laws or any other laws limiting, qualifying or discharging Debtor’s Indebtedness, whether by operation of law or otherwise, including any rights Guarantor may have to a fair market value hearing to determine the size of a deficiency following any foreclosure sale or other disposition of any real property security for any portion of the Indebtedness.

(c) Guarantor WAIVES each and every right to which it may be entitled by virtue of any suretyship law, including any rights it may have pursuant to Rule 31 of the Texas Rules of Civil Procedure, §17.001 of the Texas Civil Practice and Remedies Code and Chapter 34 of the Texas Business and Commerce Code, as the same may be amended from time to time.

8. REMEDIES; NO WAIVER. All rights, powers and remedies of Creditor hereunder are cumulative. No delay, failure or discontinuance of Creditor in exercising any right, power or remedy hereunder shall affect or operate as a waiver of such right, power or remedy; nor shall any single or partial exercise of any such right, power or remedy preclude, waive or otherwise affect any other or further exercise thereof or the exercise of any other right, power or remedy. Any waiver, permit, consent or approval of any kind by Creditor of any breach of this Guaranty, or any such waiver of any provisions or conditions hereof, must be in writing and shall be effective only to the extent set forth in writing.

9. CREDITOR’S OFFSET RIGHTS. Creditor is hereby authorized at any time and from time to time, without notice to any person (and Guarantor hereby WAIVES any such notice) to the fullest extent permitted by law, to set-off and apply any and all monies, securities and other properties of Guarantor now or in the future in the possession, custody or control of Creditor, or otherwise owed to Guarantor by Creditor. Creditor’s rights under this Section are in addition to other rights and remedies (including other rights of set-off) which Creditor may have.

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Creditor in connection with the enforcement of any of Creditor’s rights, powers or remedies and/or the collection of any amounts which become due to Creditor under this Guaranty or to enforce or collect any of the Indebtedness, and the prosecution or defense of any action in any way related to this Guaranty.

11. SUCCESSORS; ASSIGNMENT. This Guaranty shall be binding upon and inure to the benefit of the heirs, executors, administrators, legal representatives, successors and assigns of the parties; provided however, that Guarantor may not assign or transfer any of its interests or rights hereunder without Creditor’s prior written consent. Guarantor acknowledges that Creditor has the right to sell, assign, transfer, negotiate or grant participations in all or any part of, or any interest in, any Indebtedness of Debtor to Creditor and any obligations with respect thereto, including this Guaranty. In connection therewith, Creditor may disclose all documents and information which Creditor now has or hereafter acquires relating to Guarantor and/or this Guaranty, whether furnished by Debtor, Guarantor or otherwise. Guarantor further agrees that Creditor may disclose such documents and information to Debtor.

12. MISCELLANEOUS. This Guaranty may be amended or modified only in writing signed by Creditor and Guarantor. In all cases where there is more than one Debtor named herein, the word “Debtor” shall mean all or any one or more of them as the context requires. If any waiver or other provision of this Guaranty shall be held to be prohibited by or invalid under applicable public policy or law, such waiver or other provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such waiver or other provision or any remaining provisions of this Guaranty. This Guaranty shall be governed by and construed in accordance with the laws of the State of Texas, without regard to its conflicts of laws principles. Creditor may in its sole discretion, accept a photocopy, electronically transmitted facsimile or other reproduction of this guaranty (a “Counterpart”) as the binding and effective record of this Guaranty whether or not an ink signed copy hereof is also received by creditor from the undersigned, provided, however, that if Creditor accepts a Counterpart as the binding and effective record hereof, the Counterpart acknowledged in writing by Creditor shall constitute the record hereof. The Guarantor agrees that such Counterpart received by Creditor, shall, when acknowledged in writing by Creditor, constitute an original document for the purposes of establishing the provisions thereof and shall be legally admissible under the best evidence rule and binding on and enforceable against the Guarantor. If Creditor accepts a Counterpart as the binding and effective record hereof only such Counterpart acknowledged in writing by Creditor shall be marked “Original” and a security interest may only be created in the Guaranty that bears Creditor’s ink signed acknowledgement and is marked “Original”.

13. Guarantor agrees that should any legal action, suit, or proceeding be initiated by any party to this Guaranty or any debt to which this Guaranty applies, such action shall be brought only in the Courts of applicable jurisdiction for the State of Texas located in Jefferson County, Texas, and all parties consent to the jurisdiction of such Courts as to all such actions.

Page 7 of 8 : Continuing Guaranty

14. WAIVER OF JURY TRIAL. THE PARTIES HERETO IRREVOCABLY WAIVE ANY RIGHT THEY MAY HAVE TO A JURY TRIAL WITH RESPECT TO A DISPUTE HEREUNDER.




Dated as of:		8/30/2018




	Social Security Number:

/s/ CASEY CRENSHAW
CASEY CRENSHAW		Principal place of business: STABILIS ENERGY SERVICES, LLC 1655 Louisiana Street Beaumont, TX 77701
		Phone:

Page 8 of 8 : Continuing Guaranty

Exhibit 10.25

CERTIFICATE OF ACCEPTANCE

MASTER LEASE AGREEMENT NO.: CW/1292-1

EQUIPMENT LEASE SCHEDULE NO.: CW/1292-1-A

This Certificate of Acceptance is attached to and made a part of Equipment Lease Schedule No. CW/1292-1-A (the “Schedule”) by and between M/G Finance Co., Ltd., a Texas limited partnership as Lessor and the Lessee set forth below and relating to the Lease of the Equipment described therein.

Lessee hereby acknowledges and agrees that:



1	Lessee has received the Equipment described in the Equipment Lease Schedule in good condition and repair.



2	Lessee has inspected the equipment.



3	The Equipment has been delivered and is satisfactory in all respects for all of the Lessee’s intended uses and purposes.



4	Lessee hereby accepts the Equipment unconditionally and irrevocably.

Dated as of , 20 .




LESSEE:

Stabilis Energy Services, LLC a TX Limited Liability Company



By:		/s/ Casey Crenshaw



Name:		Casey Crenshaw
Title:		President

EQUIPMENT LEASE SCHEDULE NO. CW/1292-1-A

This Equipment Lease Schedule No. CW/1292-1-A is hereby incorporated in and made a part of that certain Master Lease Agreement No. CW1292-1 (the “Lease”), by and between M/G Finance Co., Ltd., a Texas limited partnership (“Lessor”) and STABILIS ENERGY SERVICES, LLC, a TX Limited Liability Company, (“Lessee”). Capitalized terms not defined herein shall have the meanings set forth in the Lease.




1.	Equipment:	See Exhibit A attached hereto and incorporated by reference.

2.	Location:	1655 Louisiana Street Beaumont, TX 77701

3.	Term:	The Term of this Lease shall begin on the Installation Date and shall continue, unless sooner terminated as provided herein, for twenty-four (24) consecutive months plus the residual following the Commencement Date. The Commencement Date of this Lease is August 25th.

4.	Rent:	The rent due and owing hereunder shall be $9,668.33 per month for twenty-four (24) months, with the first payment due and payable on September 25th, and like payments being due and payable on the twenty-fifth (25th) day of each month thereafter during the Initial Lease Term.

5.	Freight, FET and Taxes:	Taxes, if any will be due to Lessor at closing.




6.	Closing Costs:	No closing costs will be due.

7.	Purchase Option:	See Exhibit B attached hereto and incorporated by reference.

8.	Addresses for Notice and Billing:	Lessee: 1655 Louisiana Street Beaumont, TX 77701 Lessor: Payments P.O. Box 704 Beaumont, TX 77702 Notices 1655 Louisiana Street Beaumont TX 77701 Attn: Casey or Will Crenshaw Addresses for notice and billing may be changed by written notice to the other party as provided in the Lease.

9.	Delivery and
	Acceptance:	Lessee shall acknowledge delivery and acceptance of the Equipment by the execution and delivery to Lessor of a Certificate of Acceptance in form acceptable to Lessor, and such Certificate of Acceptance shall be attached to and become a part of this Schedule.

10.	Special Provisions:	In addition to and with each monthly payment of rent due and owing hereunder, Lessee shall pay (a) any sales taxes due and owing and relating to the rent and (b) at the sole discretion of Lessor, one-twelfth (1/12th) of Lessor’s current estimate of the property taxes to be due and owing on the Equipment. Lessee represents and warrants to Lessor that the Equipment is not, and the Equipment will not be used in such a manner so as to constitute, inventory as such term is defined in the Uniform Commercial Code as enacted in the State of Texas. If any amount payable to Lessor by Lessee under this Lease is not paid within 10 days of due date, Lessor may charge interest on the amount past due at a rate of 1.5% per month (or the maximum amount permitted by applicable law if less). All monthly payments associated with this lease will be made by the electronic transfer of funds (ACH).




LESSOR:						LESSEE:

M/G FINANCE CO., LTD. By: MGFC, LLC, its general partner						Stabilis Energy Services, LLC a TX Limited Liability Company



By:	By:	/s/ Casey Crenshaw



Name:	Name:	Casey Crenshaw
Title:	Title:	President
Date:	Date:	8/30/2018

EXHIBIT A

(Equipment Listing)

This Exhibit A is to be attached to and become a part of Equipment Lease Schedule CW/1292-1-A, by and between M/G Finance Co., Ltd. as Lessor and Stabilis Energy Services, LLC as Lessee:




VENDOR:		Dragon Products

See the attached Schedule of Equipment to this Exhibit A for equipment detail.

The Schedule of Equipment is hereby verified correct and the undersigned Lessee acknowledges receipt of a copy.




LESSOR:						LESSEE:

M/G Finance Co., Ltd., By: MGFC, LLC, its general partner						STABILIS ENERGY SERVICES, LLC a TX Limited Liability Company




By:	By:	/s/ Casey Crenshaw



Name:	Name:	Casey Crenshaw
Title:	Title:	President
Date:	Date:	8/30/2018

EXHIBIT A - SCHEDULE OF EQUIPMENT

CW1292

STABILIS ENERGY SERVICES, LLC



COUNT	YEAR	DESCRIPTION	SERIAL NUMBER
1	2014	Ford F-150 Truck	IFTFW1EF6EKE80052
2	2017	CARGO TRAILER	4D6EB1 626HC04 6420
3	2014	GASIFICATION TRAILER	16VGX2027E2304935
4		3306NA/H302, 3 STAGE COMP ON TRAILER	129,686

EXHIBIT B

PURCHASE OPTION RIDER TO LEASE EQUIPMENT SCHEDULE

MASTER LEASE AGREEMENT NO.: CW/1292-1

EQUIPMENT LEASE SCHEDULE NO.: CW/1292-1-A

This Purchase Option Rider (“Rider”) is attached and made a part of that Equipment Lease Schedule No. CW/1292-1-A (“Schedule”) by and between the Lessee and Lessor set forth below:



1	SUBJECT TO THE PROVISIONS SET FORTH HEREIN, AT THE EXPIRATION OF THE INITIAL LEASE TERM, AS SET FORTH IN THE SCHEDULE, LESSEE SHALL HAVE THE OPTION, WHICH OPTION SHALL NOT BE ASSIGNABLE, TO PURCHASE, AS-IS-WHERE-IS AND WITHOUT ANY WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, ALL, BUT NOT LESS THAN ALL, OF THE LEASED EQUIPMENT COVERED BY THE SCHEDULE FOR A PURCHASE PRICE EQUAL TO THE GREATER OF (A) THE, THEN, FAIR MARKET VALUE OF THE LEASED EQUIPMENT, OR (B) $50,340.94. THE AMOUNT SET FORTH IN SUBPART (B) OF THE IMMEDIATELY PRECEDING SENTENCE REFLECTS A GOOD FAITH ATTEMPT BY LESSOR AND LESSEE TO ESTIMATE THE FAIR MARKET VALUE OF THE EQUIPMENT AT THE EXPIRATION OF THE INTITAL LEASE TERM. LESSEE’S DETERMINATION OF FAIR MARKET VALUE WILL BE ACCEPTED BY LESSOR.



2	Lessee’s right to purchase the Equipment pursuant to such options is Conditioned upon (a) Lessee’s having performed all of the terms and conditions of the Lease and Schedule at the time and in the manner required therein; (b) Lessor having received written notice of Lessee’s exercise of said option at least ninety (90) days prior to the expiration date of the Initial Lease Term, and (c) Lessee’s payment to Lessor of said purchase price, together with all taxes on or measured by such purchase price, in immediately available funds.



3	If Lessee, for any reason, does not purchase the leased Equipment in Accordance with Paragraph 1 hereof, Lessee shall be obligated to return the leased Equipment to Lessor in accordance with the terms of the Lease and Schedule.

EXECUTION PAGE FOLLOWS:

The parties have executed and delivered this Rider as set forth below:




LESSOR:	LESSEE:

M/G Finance Co., LTD. By: MGFC, LLC, its general partner	Stabilis Energy Services, LLC a TX Limited Liability Company

By:	By:	/s/ Casey Crenshaw
Name:	Name:	Casey Crenshaw
Title:	Title:	President
Date:	Date:	8/30/2018

MASTER LEASE AGREEMENT

NO. CW/1292-1

THIS MASTER LEASE AGREEMENT, by and between M/G FINANCE CO., LTD., a Texas limited partnership (“Lessor”), with its address for notice hereunder being 1655 Louisiana St., Beaumont, Texas 77701 and STABILIS ENERGY SERVICES, LLC, a Texas Limited Liability Company (“Lessee”) with its principal office located at 1655 Louisiana Street Beaumont, TX 77701 and its billing address and address for notice hereunder being 1655 Louisiana Street Beaumont, TX 77701.

2. SELECTION OF EQUIPMENT; ACCEPTANCE AND DELIVERY OF EQUIPMENT. Lessee will select the type, quantity and supplier of each item of Equipment designated in the appropriate Schedule, and in reliance thereon such Equipment will then be ordered by Lessor from such supplier or Lessor will accept an assignment of any existing purchase order therefore. Lessee agrees to inspect the Equipment and to execute a Certificate of Acceptance (set forth in the Schedule) after the Equipment has been delivered and after Lessee is satisfied that the Equipment is satisfactory in every respect. Lessee hereby authorizes Lessor to insert in the Schedule identifying data with respect to the Equipment. In addition to the other amounts due and owing hereunder, Lessee shall pay for all transportation, insurance, rigging, drayage and any other charges with respect to delivery and installation of the Equipment. Lessee will provide a suitable place of installation for use of the Equipment as specified by the manufacturer. Lessee agrees that the Equipment Location shall at all times comply with applicable state and local codes. Lessor shall not be liable for any failure or delay in supplying the Equipment from any cause not subject to the direct control of Lessor.




Master Lease Agreement Rev. 08-04-2017 Page 1

3. DISCLAIMER OF WARRANTIES AND CLAIMS; LIMITATION OF REMEDIES. THERE ARE NO WARRANTIES BY OR ON BEHALF OF LESSOR. Lessee acknowledges and agrees by his signature below as follows:


(a)	LESSOR, NOT BEING THE MANUFACTURER OF THE EQUIPMENT NOR THE MANUFACTURER’S AGENT, MAKES NO WARRANTIES EITHER EXPRESS OR IMPLIED AS TO THE CONDITION OF THE EQUIPMENT, ITS MERCHANTABILITY, ITS FITNESS OR SUITABILITY FOR ANY PARTICULAR PURPOSE, ITS DESIGN, ITS CAPACITY, ITS QUALITY, OR WITH RESPECT TO ANY CHARACTERISTICS OF THE EQUIPMENT;


(b)	Lessee has fully inspected the Equipment which it has requested Lessor to acquire and lease to Lessee, and the Equipment is in good condition and to Lessee’s complete satisfaction;


(c)	Lessee leases the Equipment “AS IS” and with all faults.


(d)	Lessee specifically acknowledges that the Equipment is leased to Lessee solely for commercial or business purposes and not for personal, family or household purposes;


(e)	If the Equipment is not properly installed, does not operate as represented or warranted by the supplier or manufacturer, or is unsatisfactory for any reason, regardless of cause or consequence, Lessee’s only remedy, if any, shall be against the supplier or manufacturer of the Equipment and not against Lessor;

(f)




Master Lease Agreement Rev. 08-04-2017 Page 2



	receive an accurate and complete statement of those promises and warranties, including any disclaimers and limitations of them or of remedies. NOTWITHSTANDING THE FOREGOING, LESSEE’S OBLIGATIONS TO PAY THE RENTS OR OTHERWISE UNDER THIS LEASE SHALL BE AND ARE ABSOLUTE AND UNCONDITIONAL AND WITHOUT OFFSET FOR ANY REASON. To the extent permitted by the manufacturer or seller, and provided Lessee is not in default under this Lease, Lessor assigns to Lessee any warranties made by the supplier or the manufacture of the Equipment.


(g)	LESSEE SHALL HAVE NO REMEDY FOR CONSEQUENTIAL OR INCIDENTAL DAMAGES AGAINST LESSOR; AND


(h)	NO DEFECT, DAMAGE OR UNFITNESS OF THE EQUIPMENT FOR ANY PURPOSE SHALL RELIEVE LESSEE OF THE OBLIGATION TO PAY RENT OR RELIEVE LESSEE OF ANY OTHER OBLIGATION UNDER THIS LEASE.

4. STATUTORY FINANCE LEASE. Lessee agrees and acknowledges that it is the intent of both parties to this Lease that it qualify as a statutory finance lease under Chapter 2A of the Texas Business and Commerce Code, as amended and corresponding provisions of subsequent law (“Chapter 2A”). Lessee acknowledges and agrees that Lessee has selected both: (1) the Equipment; and (2) the supplier from whom Lessor is to purchase the Equipment. Lessee acknowledges that Lessor has not participated in any way in Lessee’s selection of the Equipment or of the supplier, and Lessor has not selected, manufactured, or supplied the Equipment. Without limiting the foregoing, and in addition to any other provisions of this Lease, Lessor shall be entitled to the benefits of Sections 2A-209, 2A-211(2), 2A-212(1), 2A-213, 2A-219(1), 2A- 220(l)(a), 2A-221, 2A-405(c), 2A-407, 2A-504, 2A-516(2), and 2A-517(1) and (2) of Chapter 2A, whether or not this Lease qualifies as a statutory finance lease. If this Lease does not qualify as a statutory finance lease under Chapter 2A, no rights or remedies referred to in Chapter 2A will be conferred upon Lessee unless expressly granted in this Lease or as required by applicable law.




Master Lease Agreement Rev. 08-04-2017 Page 3




Master Lease Agreement Rev. 08-04-2017 Page 4




Master Lease Agreement Rev. 08-04-2017 Page 5




Master Lease Agreement Rev. 08-04-2017 Page 6




Master Lease Agreement Rev. 08-04-2017 Page 7




Master Lease Agreement Rev. 08-04-2017 Page 8

18. TIME OF ESSENCE. Time is of the essence of this Lease, and this provision shall not be impliedly waived by the acceptance on occasion of late or defective performance.




Master Lease Agreement Rev. 08-04-2017 Page 9

(a)


(b)	Lessor may require Lessee, at Lessee’s expense, to return the Equipment in good repair, ordinary wear and tear resulting from proper use thereof alone excepted, by delivering it, packed and ready for shipment, to such place or carrier as Lessor may specify;


(c)	Lessor may cancel or terminate this Lease and may retain any and all prior payments paid by Lessee;


(d)	Lessor may re-lease or sell the Equipment, without notice to Lessee at private or public sale, at which sale Lessor may be the purchaser;

(e)




Master Lease Agreement Rev. 08-04-2017 Page 10

(f)


(g)	Lessor may pursue any other remedy available at law, by statute or in equity, including, without limitation, any rights and remedies available to lessors under Chapter 2A, whether or not Chapter 2A is applicable to this Lease.




Master Lease Agreement Rev. 08-04-2017 Page 11

26. ADDITIONAL SECURITY. In the event that this Master Lease Agreement or any Lease entered into pursuant to this Master Lease Agreement, is not deemed to be a true lease under Chapter 2A, then solely in that event and for that limited purpose, (a) it shall be deemed a security agreement and, in that regard, Lessee hereby grants to Lessor a purchase money security interest in the Equipment, and all accessions, substitutions and replacements thereto, and all of Lessee’s interest therein, and all proceeds and products thereof to secure Lessee’s prompt payment and performance as and when due of all of Lessee’s obligations and indebtedness to Lessor under this Lease or under any other Master Lease Agreement, Equipment Schedule, Lease or other agreement between Lessee and/or its affiliates and Lessor and/or its affiliates or any other liability, debt, or other duty of Lessee and/or its affiliates to Lessor and/or its affiliates, whether now existing or later incurred, matured or unmatured, direct or contingent, and any renewals, extensions, and substitutions of the same, and (b) the aggregate of all consideration that constitutes interest under applicable law that is taken, reserved, contracted for, charged or received hereunder or under any other agreements or otherwise in connection with this Lease shall under no circumstances exceed the maximum amount of interest allowed by applicable law, and any excess shall be credited on this note by the holder hereof (or if such obligations shall have been paid in full, refunded to Lessee); and in the event of an event of default hereunder, or in the event of any required or




Master Lease Agreement Rev. 08-04-2017 Page 12




Master Lease Agreement Rev. 08-04-2017 Page 13

31. TAX INDEMNITY. Lessee represents warrants and covenants as follows:

(a)

(i)

(ii)


(b)	If, with respect to any item of Equipment, Lessee’s representations, warranties and/or covenants contained herein or in any other agreement or document entered into relating to the Equipment are or are determined to be incorrect and Lessor shall determine that it shall not have the right to claim all or any portion of the Tax Benefits or if all or any portion of the




Master Lease Agreement Rev. 08-04-2017 Page 14



	Tax Benefits shall be disallowed or recaptured (hereinafter referred to as a Tax Benefit Loss ), then subject to the exceptions set forth below and at the sole discretion of Lessor, Lessee shall, within thirty (30) days after written notice from Lessor that a Tax Benefit Loss has occurred, pay to Lessor at Lessor’s option, either a lump-sum payment or an increase to the remaining monthly payments due under this Lease in an amount which, after taking into account the effects of interest, penalties and additional taxes payable by Lessor as a result of the Tax Benefit Loss and the receipt of payment hereunder, will cause Lessor’s net effective after-tax return over the term of this Lease to equal the net effective after-tax return which would have been available if Lessor had been entitled to the utilization of all the Tax Benefits.


(c)	For purposes hereof a Tax Benefit Loss shall occur upon the earliest of (i) the happening of an event which causes such Tax Benefit Loss, (ii) the payment by Lessor to the Internal Revenue Service or the applicable state revenue office of the tax increase resulting from such Tax Benefit Loss, or (iii) the adjustment of the tax return of Lessor to reflect such Tax Benefit Loss.

(d)

(e)




Master Lease Agreement Rev. 08-04-2017 Page 15

Signature page to follow:

EXECUTED effective as of the date signed by both parties.




LESSOR:	LESSEE:

M/G FINANCE CO., LTD. By: MGFC, LLC, its general partner	STABILIS ENERGY SERVICES, LLC a TX Limited Liability Company

By:	By:	/s/ Casey Crenshaw
Name:	Name:	Casey Crenshaw
Title:	Title:	President
Date:	Date:	8/30/2018




Master Lease Agreement Rev. 08-04-2017 Page 16

CONTINUING GUARANTY

CW/1292

THIS AGREEMENT INCLUDES THE TERMS ON THE ATTACHED PAGE(S).

Page 1 of 8

(a) Release or waiver of any obligation or duty to perform or observe any express or implied agreement, covenant, term or condition imposed under the Indebtedness by applicable law on Debtor.

(f) Failure, omission, delay, neglect, refusal or lack of diligence by Creditor to assert, enforce, give notice of intent to exercise-or any other notice with respect to-or exercise any right, privilege, power or remedy conferred on Creditor under the Indebtedness or by law or action on the part of Creditor granting indulgence, grace, adjustment, forbearance or extension of any kind to Debtor.

(g) Release, surrender, exchange, subordination or loss of any security or lien priority in connection with the Indebtedness.

(i) Taking or acceptance of any other security or guaranty for the payment or performance of any or all of the Indebtedness or the obligations of Debtor.

Page 2 of 8: Continuing Guaranty

(l) Occurrence or discovery of any irregularity, invalidity or unenforceability of any part of the Indebtedness or any defect or deficiency in any part of the Indebtedness, including the unenforceability of any provisions of the instruments or agreements related to the Indebtedness because entering into any such instrument or agreement was ultra vires or because anyone who executed them exceeded their authority.

Page 3 of 8: Continuing Guaranty

Page 4 of 8: Continuing Guaranty

7. GUARANTOR’S WAIVERS.

Page 5 of 8: Continuing Guaranty

(c) Guarantor WAlVES each and every right to which it may be entitled by virtue of any suretyship law, including any rights it may have pursuant to Rule 31 of the Texas Rules of Civil Procedure, §17.001 of the Texas Civil Practice and Remedies Code and Chapter 34 of the Texas Business and Commerce Code, as the same may be amended from time to time.

9. CREDITOR’S OFFSET RIGHTS. Creditor is hereby authorized at any time and from time to time, without notice to any person (and Guarantor hereby WAlVES any such notice) to the fullest extent permitted by law, to set-off and apply any and all monies, securities and other properties of Guarantor now or in the future in the possession, custody or control of Creditor, or otherwise owed to Guarantor by Creditor. Creditor’s rights under this Section are in addition to other rights and remedies (including other rights of set-off) which Creditor may have.

Page 6 of 8: Continuing Guaranty

Creditor in connection with the enforcement of any of Creditors rights, powers or remedies and/or the collection of any amounts which become due to Creditor under this Guaranty or to enforce or collect any of the Indebtedness, and the prosecution or defense of any action in any way related to this Guaranty.

Page 7 of 8: Continuing Guaranty

14. WAIVER OF JURY TRIAL. THE PARTIES HERETO IRREVOCABLY WAIVE ANY RIGHT THEY MAY HAVE TO A JURY TRIAL WITH RESPECT TO A DISPUTE HEREUNDER.




Dated as of: 8/30/2018
/s/ CASEY CRENSHAW				Social Security Number:
CASEY CRENSHAW				Principal place of business:

				STABILIS ENERGY SERVICES, LLC
				1655 Louisiana Street
				Beaumont, TX 77701

				Phone:

Page 8 of 8: Continuing Guaranty

Exhibit 10.26

CERTIFICATE OF ACCEPTANCE

MASTER LEASE AGREEMENT NO.: CW/1296-1

EQUIPMENT LEASE SCHEDULE NO.: CW/1296-1-A

This Certificate of Acceptance is attached to and made a part of Equipment Lease Schedule No. CW/1296-1-A (the “Schedule”) by and between M/G Finance Co., Ltd., a Texas limited partnership as Lessor and the Lessee set forth below and relating to the Lease of the Equipment described therein.

Lessee hereby acknowledges and agrees that:



1	Lessee has received the Equipment described in the Equipment Lease Schedule in good condition and repair.



2	Lessee has inspected the equipment.



3	The Equipment has been delivered and is satisfactory in all respects for all of the Lessee’s intended uses and purposes.



4	Lessee hereby accepts the Equipment unconditionally and irrevocably.

Dated as of September 25, 2018.

LESSEE:

Stabilis Energy Services, LLC

a TX Limited Liability Company




By:		/s/ Casey Crenshaw
Name:		Casey Crenshaw
Title:		President

EQUIPMENT LEASE SCHEDULE NO. CW/1296-1-A

This Equipment Lease Schedule No. CW/1296-1-A is hereby incorporated in and made a part of that certain Master Lease Agreement No. CW1296-1 (the “Lease”), by and between M/G Finance Co., Ltd., a Texas limited partnership (“Lessor”) and STABILIS ENERGY SERVICES, LLC, a TX Limited Liability Company, (“Lessee”). Capitalized terms not defined herein shall have the meanings set forth in the Lease.





1.	Equipment:	See Exhibit A attached hereto and incorporated by reference.

2.	Location:	1655 Louisiana Street Beaumont, TX 77701

3.	Term:	The Term of this Lease shall begin on the Installation Date and shall continue, unless sooner terminated as provided herein, for twenty-four (24) consecutive months plus the residual following the Commencement Date. The Commencement Date of this Lease is September 25th.

4.	Rent:	The rent due and owing hereunder shall be $5,962.53 per month for twenty-four (24) months, with the first payment due and payable on October 25th, and like payments being due and payable on the twenty-fifth (25th) day of each month thereafter during the Initial Lease Term.

5.	Freight, FET and Taxes:	Taxes, if any will be due to Lessor at closing.




6.	Closing Costs:	No closing costs will be due.

7.	Purchase Option:	See Exhibit B attached hereto and incorporated by reference.

8.	Addresses for Notice and Billing:	Lessee: 1655 Louisiana Street
		Beaumont, TX 77701

		Lessor: Payments
		P.O. Box 704
		Beaumont, TX 77702
		Notices
		1655 Louisiana Street
		Beaumont TX 77701
		Attn: Casey or Will Crenshaw

		Addresses for notice and billing may be changed by written notice to the other party as provided in the Lease.

9.	Delivery and Acceptance:	Lessee shall acknowledge delivery and acceptance of the Equipment by the execution and delivery to Lessor of a Certificate of Acceptance in form acceptable to Lessor, and such Certificate of Acceptance shall be attached to and become a part of this Schedule.

10.	Special Provisions:	In addition to and with each monthly payment of rent due and owing hereunder, Lessee shall pay (a) any sales taxes due and owing and relating to the rent and (b) at the sole discretion of Lessor, one-twelfth (l/12th) of Lessor’s current estimate of the property taxes to be due and owing on the Equipment. Lessee represents and warrants to Lessor that the Equipment is not, and the Equipment will not be used in such a manner so as to constitute, inventory as such term is defined in the Uniform Commercial Code as enacted in the State of Texas. If any amount payable to Lessor by




		Lessee under this Lease is not paid within 10 days of due date, Lessor may charge interest on the amount past due at a rate of 1.5% per month (or the maximum amount permitted by applicable law if less). All monthly payments associated with this lease will be made by the electronic transfer of funds (ACH).




LESSOR:		LESSEE:

M/G FINANCE CO., LTD.		Stabilis Energy Services, LLC
By: MGFC, LLC, its general partner		a TX Limited Liability Company

By:	/s/ Charles B. Childress	By:	/s/ Casey Crenshaw
Name:	Charles B. Childress	Name:	Casey Crenshaw
Title:	Sr. Vice President	Title:	President
Date:	9/25/2018	Date:	9/25/2018

EXHIBIT A

(Equipment Listing)

This Exhibit A is to be attached to and become a part of Equipment Lease Schedule CW/1296-1-A, by and between M/G Finance Co., Ltd. as Lessor and Stabilis Energy Services, LLC as Lessee:

VENDOR: Dragon Products

See the attached Schedule of Equipment to this Exhibit A for equipment detail.

The Schedule of Equipment is hereby verified correct and the undersigned Lessee acknowledges receipt of a copy.




LESSOR:		LESSEE:

M/G Finance Co., Ltd.,		STABILIS ENERGY SERVICES, LLC
By: MGFC, LLC, its general partner		a TX Limited Liability Company

By:	/s/ Charles B. Childress	By:	/s/ Casey Crenshaw
Name:	Charles B. Childress	Name:	Casey Crenshaw
Title:	Sr. Vice President	Title:	President
Date:	9/25/2018	Date:	9/25/2018

EXHIBIT A—SCHEDULE OF EQUIPMENT

STABILIS ENERGY SERVICES, LLC

CW1296




YEAR	TYPE	DESCRIPTION	SERIAL NUMBER
2018	TR	3 STG COMP ON TRAILER	129,847

Total			1

EXHIBIT B

PURCHASE OPTION RIDER TO LEASE EQUIPMENT SCHEDULE

MASTER LEASE AGREEMENT NO.: CW/1296-1

EQUIPMENT LEASE SCHEDULE NO.: CW/1296-1-A

This Purchase Option Rider (“Rider”) is attached and made a part of that Equipment Lease Schedule No. CW/1296-1-A (“Schedule”) by and between the Lessee and Lessor set forth below:



1	SUBJECT TO THE PROVISIONS SET FORTH HEREIN, AT THE EXPIRATION OF THE INITIAL LEASE TERM, AS SET FORTH IN THE SCHEDULE, LESSEE SHALL HAVE THE OPTION, WHICH OPTION SHALL NOT BE ASSIGNABLE, TO PURCHASE, AS-IS-WHERE-IS AND WITHOUT ANY WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, ALL, BUT NOT LESS THAN ALL, OF THE LEASED EQUIPMENT COVERED BY THE SCHEDULE FOR A PURCHASE PRICE EQUAL TO THE GREATER OF (A) THE, THEN, FAIR MARKET VALUE OF THE LEASED EQUIPMENT, OR (B) $31,045.73. THE AMOUNT SET FORTH IN SUBPART (B) OF THE IMMEDIATELY PRECEDING SENTENCE REFLECTS A GOOD FAITH ATTEMPT BY LESSOR AND LESSEE TO ESTIMATE THE FAIR MARKET VALUE OF THE EQUIPMENT AT THE EXPIRATION OF THE INTITAL LEASE TERM. LESSEE’S DETERMINATION OF FAIR MARKET VALUE WILL BE ACCEPTED BY LESSOR.



2	Lessee’s right to purchase the Equipment pursuant to such options is Conditioned upon (a) Lessee’s having performed all of the terms and conditions of the Lease and Schedule at the time and in the manner required therein; (b) Lessor having received written notice of Lessee’s exercise of said option at least ninety (90) days prior to the expiration date of the Initial Lease Term, and (c) Lessee’s payment to Lessor of said purchase price, together with all taxes on or measured by such purchase price, in immediately available funds.



3	If Lessee, for any reason, does not purchase the leased Equipment in Accordance with Paragraph 1 hereof, Lessee shall be obligated to return the leased Equipment to Lessor in accordance with the terms of the Lease and Schedule.

EXECUTION PAGE FOLLOWS:

The parties have executed and delivered this Rider as set forth below:




LESSOR:		LESSEE:

M/G Finance Co., LTD. By: MGFC, LLC, its general partner		Stabilis Energy Services, LLC a TX Limited Liability Company

By:	/s/ Charles B. Childress	By:	/s/ Casey Crenshaw
Name:	Charles B. Childress	Name:	Casey Crenshaw
Title:	Sr. Vice President	Title:	President
Date:	9/25/2018	Date:	9/25/2018

MASTER LEASE AGREEMENT

NO. CW/1296-1

THIS MASTER LEASE AGREEMENT, by and between M/G FINANCE CO., LTD., a Texas limited partnership (“Lessor”), with its address for notice hereunder being 1655 Louisiana St., Beaumont, Texas 77701 and STABILIS ENERGY SERVICES, LLC, a Texas Limited Liability Company (“Lessee”) with its principal office located at 1655 Louisiana Street Beaumont, TX 77701 and its billing address and address for notice hereunder being 1655 Louisiana Street Beaumont, TX 77701.




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3. DISCLAIMER OF WARRANTIES AND CLAIMS; LIMITATION OF REMEDIES. THERE ARE NO WARRANTIES BY OR ON BEHALF OF LESSOR. Lessee acknowledges and agrees by his signature below as follows:


(a)	LESSOR, NOT BEING THE MANUFACTURER OF THE EQUIPMENT NOR THE MANUFACTURER’S AGENT, MAKES NO WARRANTIES EITHER EXPRESS OR IMPLIED AS TO THE CONDITION OF THE EQUIPMENT, ITS MERCHANTABILITY, ITS FITNESS OR SUITABILITY FOR ANY PARTICULAR PURPOSE, ITS DESIGN, ITS CAPACITY, ITS QUALITY, OR WITH RESPECT TO ANY CHARACTERISTICS OF THE EQUIPMENT;


(b)	Lessee has fully inspected the Equipment which it has requested Lessor to acquire and lease to Lessee, and the Equipment is in good condition and to Lessee’s complete satisfaction;


(c)	Lessee leases the Equipment “AS IS” and with all faults.


(d)	Lessee specifically acknowledges that the Equipment is leased to Lessee solely for commercial or business purposes and not for personal, family or household purposes;


(e)	If the Equipment is not properly installed, does not operate as represented or warranted by the supplier or manufacturer, or is unsatisfactory for any reason, regardless of cause or consequence, Lessee’s only remedy, if any, shall be against the supplier or manufacturer of the Equipment and not against Lessor;

(f)




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	receive an accurate and complete statement of those promises and warranties, including any disclaimers and limitations of them or of remedies. NOTWITHSTANDING THE FOREGOING, LESSEE’S OBLIGATIONS TO PAY THE RENTS OR OTHERWISE UNDER THIS LEASE SHALL BE AND ARE ABSOLUTE AND UNCONDITIONAL AND WITHOUT OFFSET FOR ANY REASON. To the extent permitted by the manufacturer or seller, and provided Lessee is not in default under this Lease, Lessor assigns to Lessee any warranties made by the supplier or the manufacture of the Equipment.


(g)	LESSEE SHALL HAVE NO REMEDY FOR CONSEQUENTIAL OR INCIDENTAL DAMAGES AGAINST LESSOR; AND


(h)	NO DEFECT, DAMAGE OR UNFITNESS OF THE EQUIPMENT FOR ANY PURPOSE SHALL RELIEVE LESSEE OF THE OBLIGATION TO PAY RENT OR RELIEVE LESSEE OF ANY OTHER OBLIGATION UNDER THIS LEASE.

4. STATUTORY FINANCE LEASE. Lessee agrees and acknowledges that it is the intent of both parties to this Lease that it qualify as a statutory finance lease under Chapter 2A of the Texas Business and Commerce Code, as amended and corresponding provisions of subsequent law (“Chapter 2A”). Lessee acknowledges and agrees that Lessee has selected both: (1) the Equipment; and (2) the supplier from whom Lessor is to purchase the Equipment. Lessee acknowledges that Lessor has not participated in any way in Lessee’s selection of the Equipment or of the supplier, and Lessor has not selected, manufactured, or supplied the Equipment. Without limiting the foregoing, and in addition to any other provisions of this Lease, Lessor shall be entitled to the benefits of Sections 2A-209, 2A-211(2), 2A-212(1), 2A-213, 2A-219(1), 2A-220(l)(a), 2A-221, 2A-405(c), 2A-407, 2A-504, 2A-516(2), and 2A-517(1) and (2) of Chapter 2A, whether or not this Lease qualifies as a statutory finance lease. If this Lease does not qualify as a statutory finance lease under Chapter 2A, no rights or remedies referred to in Chapter 2A will be conferred upon Lessee unless expressly granted in this Lease or as required by applicable law.




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18. TIME OF ESSENCE. Time is of the essence of this Lease, and this provision shall not be impliedly waived by the acceptance on occasion of late or defective performance.

19. DEFAULT. Any of the following events or conditions shall constitute an event of default hereunder, (a) Lessee fails to pay any amount due and owing hereunder or under any other Master Lease Agreement, Equipment Schedule, Lease or any other agreement between Lessee and/or its affiliates and Lessor and/or its affiliates or any other liability, debt, or other duty of Lessee and/or its affiliates to Lessor and/or its affiliates, whether now existing or later incurred, matured or unmatured, direct or contingent, and any renewals, extensions, and substitutions of the same, when due or within ten (10) days thereafter; (b) Lessee fails to observe, keep, or perform any provision of this Lease or any other Master Lease Agreement, Equipment Schedule, Lease or other agreement between Lessee and/or its affiliates and Lessor and/or its affiliates or any other liability, debt, or other duty of Lessee and/or its affiliates to Lessor and/or its affiliates, whether now existing or later incurred, matured or unmatured, direct or contingent, and any renewals, extensions, and substitutions of the same; (c) Lessee or any guarantor becomes insolvent or makes an assignment for the benefit of creditors or ceases doing business as a going concern; (d) a receiver, trustee, conservator, or liquidator of Lessee or any guarantor is appointed with or without the application or approval of Lessee or such guarantor; (e) the filing by or against Lessee or any guarantor of a petition under the Bankruptcy Code or any amendment thereto; or under any other insolvency law or laws providing for, but not limited to, the benefit of debtors or; (f) any false or misleading representation or statement made or furnished to Lessor by or on behalf of Lessee or any guarantor; (g) Lessee or any guarantor dissolves, liquidates, or suspends its business or any individual Lessee or individual guarantor dies; (h) Lessee or any guarantor enters into any merger, consolidation or similar re-organization; (i) Lessee or any guarantor transfers all or any substantial part of its operations or assets; (j) without thirty (30) days advance written notice to Lessor, Lessee or any guarantor changes its name or principal place of business; (k) when Lessor believes in good faith that the prospect for performance of the terms and conditions of this Lease by Lessee or any guarantor is impaired; or (l) Lessee, or any guarantor of the Lease shall suffer an adverse material change in its financial condition from the date hereof, and as a result thereof Lessor deems itself or any of the Equipment to be insecure.




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(a)


(b)	Lessor may require Lessee, at Lessee’s expense, to return the Equipment in good repair, ordinary wear and tear resulting from proper use thereof alone excepted, by delivering it, packed and ready for shipment, to such place or carrier as Lessor may specify;


(c)	Lessor may cancel or terminate this Lease and may retain any and all prior payments paid by Lessee;


(d)	Lessor may re-lease or sell the Equipment, without notice to Lessee at private or public sale, at which sale Lessor may be the purchaser;

(e)




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(f)


(g)	Lessor may pursue any other remedy available at law, by statute or in equity, including, without limitation, any rights and remedies available to lessors under Chapter 2A, whether or not Chapter 2A is applicable to this Lease.




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31. TAX INDEMNITY. Lessee represents warrants and covenants as follows:

(a)

(i)

the maximum depreciation deductions with respect to each item of Equipment as provided by Section 167(a) of the Internal Revenue Code of 1986, as amended (the Code ), determined under Section 168 of the Code by using the applicable depreciation method, the applicable recovery period, and the applicable convention, all as may be specified on the applicable Schedule for the Equipment, and Lessor shall also be entitled to corresponding state depreciation deductions; and

(ii)


(b)	If, with respect to any item of Equipment, Lessee’s representations, warranties and/or covenants contained herein or in any other agreement or document entered into relating to the Equipment are or are determined to be incorrect and Lessor shall determine that it shall not have the right to claim all or any portion of the Tax Benefits or if all or any portion of the




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	Tax Benefits shall be disallowed or recaptured (hereinafter referred to as a Tax Benefit Loss ), then subject to the exceptions set forth below and at the sole discretion of Lessor, Lessee shall, within thirty (30) days after written notice from Lessor that a Tax Benefit Loss has occurred, pay to Lessor at Lessor’s option, either a lump-sum payment or an increase to the remaining monthly payments due under this Lease in an amount which, after taking into account the effects of interest, penalties and additional taxes payable by Lessor as a result of the Tax Benefit Loss and the receipt of payment hereunder, will cause Lessor’s net effective after-tax return over the term of this Lease to equal the net effective after-tax return which would have been available if Lessor had been entitled to the utilization of all the Tax Benefits.


(c)	For purposes hereof a Tax Benefit Loss shall occur upon the earliest of (i) the happening of an event which causes such Tax Benefit Loss, (ii) the payment by Lessor to the Internal Revenue Service or the applicable state revenue office of the tax increase resulting from such Tax Benefit Loss, or (iii) the adjustment of the tax return of Lessor to reflect such Tax Benefit Loss.

(d)

(e)




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Signature page to follow:

EXECUTED effective as of the date signed by both parties.




LESSOR:		LESSEE:

M/G FINANCE CO., LTD. By: MGFC, LLC, its general partner		STABILIS ENERGY SERVICES, LLC a TX Limited Liability Company

By:	/s/ Charles B. Childress	By:	/s/ Casey Crenshaw
Name:	Charles B. Childress	Name:	Casey Crenshaw
Title:	Sr. Vice President	Title:	President
Date:	9/25/2018	Date:	9/25/2018




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CONTINUING GUARANTY

CW/1296

THIS AGREEMENT INCLUDES THE TERMS ON THE ATTACHED PAGE(S).

Page 1 of 8

(a) Release or waiver of any obligation or duty to perform or observe any express or implied agreement, covenant, term or condition imposed under the Indebtedness by applicable law on Debtor.

(g) Release, surrender, exchange, subordination or loss of any security or lien priority in connection with the Indebtedness.

(i) Taking or acceptance of any other security or guaranty for the payment or performance of any or all of the Indebtedness or the obligations of Debtor.

Page 2 of 8: Continuing Guaranty

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7. GUARANTOR’S WAIVERS.

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10. COSTS, EXPENSES AND ATTORNEYS’ FEES. Guarantor shall pay to Creditor immediately upon demand the full amount of all payments, advances, charges, costs and expenses, including reasonable attorneys’ fees, expended or incurred by Creditor in connection with the enforcement of any of Creditor’s rights, powers or remedies and/or the collection of any amounts which become due to Creditor under this Guaranty or to enforce or collect any of the Indebtedness, and the prosecution or defense of any action in any way related to this Guaranty.

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14. WAIVER OF JURY TRIAL. THE PARTIES HERETO IRREVOCABLY WAIVE ANY RIGHT THEY MAY HAVE TO A JURY TRIAL WITH RESPECT TO A DISPUTE HEREUNDER.




Dated as of: 9-25-2018

/s/ Casey Crenshaw						Social Security Number:
Casey Crenshaw						Principal place of business:

						STABILIS ENERGY SERVICES, LLC
						1655 Louisiana Street
						Beaumont, TX 77701
						Phone: 409-833-1115

Page 8 of 8: Continuing Guaranty

Exhibit 31.1

CERTIFICATIONS

I, James C. Reddinger, certify that:


1.	I have reviewed this Quarterly Report on Form 10-Q of Stabilis Energy, Inc.;


2.	Based on my knowledge, this 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 report;


3.	Based on my knowledge, the financial statements, and other financial information included in this 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 report;


4.	The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and l5d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;


(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


(c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and


(d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and


5.	The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):


(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and


(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.



Date:	November 12, 2019

By:	/s/ James C. Reddinger
	James C. Reddinger Principal Executive Officer

Exhibit 31.2

CERTIFICATIONS

I, Andrew L. Puhala, certify that:


1.	I have reviewed this Quarterly Report on Form 10-Q of Stabilis Energy, Inc.;


2.	Based on my knowledge, this 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 report;


3.	Based on my knowledge, the financial statements, and other financial information included in this 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 report;


4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and l5d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;


(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and


(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and


(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date:	November 12, 2019

By:	/s/ Andrew L. Puhala
	Andrew L. Puhala Principal Financial Officer

Exhibit 32.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, James C. Reddinger, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Stabilis Energy, Inc. on Form 10-Q for the quarter ended September 30, 2019 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in such Form 10-Q fairly presents in all material respects the financial condition and results of operations of Stabilis Energy, Inc.



Date:	November 12, 2019

By:	/s/ James C. Reddinger
	James C. Reddinger Principal Executive Officer

I, Andrew L. Puhala, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Stabilis Energy, Inc. on Form 10-Q for the quarter ended September 30, 2019 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in such Form l0-Q fairly presents in all material respects the financial condition and results of operations of Stabilis Energy, Inc.



Date:	November 12, 2019

By:	/s/ Andrew L. Puhala
	Andrew L. Puhala Principal Financial Officer