UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 001-16501

Williams Industrial Services Group Inc.

(Exact name of registrant as specified in its charter)



Delaware		73-1541378
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

200 Ashford Center North, Suite 425

Atlanta, GA 30338

(Address of principal executive offices) (Zip code)

(770) 879-4400

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	WLMS	NYSE American

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 (§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 May 8, 2023, there were 27,210,391 shares of common stock of Williams Industrial Services Group Inc. outstanding.

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Part I—FINANCIAL INFORMATION

Item 1. Financial Statements.

WILLIAMS INDUSTRIAL SERVICES GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)



(in thousands, except share data)	March 31, 2023		December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	48	$	495
Restricted cash		468		468
Accounts receivable, net of allowance of $225 and $273, respectively		33,091		31,033
Contract assets		18,257		12,812
Other current assets		5,689		6,258
Total current assets		57,553		51,066

Property, plant, and equipment, net		982		1,257
Goodwill		35,400		35,400
Intangible assets		12,500		12,500
Other long-term assets		8,026		8,275
Total assets	$	114,461	$	108,498

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	7,287	$	12,041
Accrued compensation and benefits		17,639		8,566
Contract liabilities		4,404		6,242
Short-term borrowings		16,425		17,399
Other current liabilities		6,361		5,710
Current liabilities of discontinued operations		112		110
Total current liabilities		52,228		50,068
Long-term debt, net		27,160		23,360
Deferred tax liabilities		2,253		2,268
Other long-term liabilities		4,689		4,925
Long-term liabilities of discontinued operations		3,501		3,479
Total liabilities		89,831		84,100
Commitments and contingencies (Note 11)
Stockholders’ equity:
Common stock, $0.01 par value, 170,000,000 shares authorized and 27,532,064 and 26,865,064 shares issued, respectively, and 27,210,391 and 26,543,391 shares outstanding, respectively		266		264
Paid-in capital		94,438		94,151
Accumulated other comprehensive loss		(268)		(404)
Accumulated deficit		(69,801)		(69,608)
Treasury stock, at par (321,673 and 321,673 common shares, respectively)		(5)		(5)
Total stockholders’ equity		24,630		24,398
Total liabilities and stockholders’ equity	$	114,461	$	108,498

See accompanying notes to condensed consolidated financial statements.

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WILLIAMS INDUSTRIAL SERVICES GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)


	Three Months Ended March 31,
(in thousands, except per share data)	2023		2022
Revenue	$	103,470	$	69,559
Cost of revenue		95,779		63,850

Gross profit		7,691		5,709

Selling and marketing expenses		136		330
General and administrative expenses		5,929		6,071
Depreciation and amortization expense		55		66
Total operating expenses		6,120		6,467

Operating income (loss)		1,571		(758)

Interest expense, net		1,793		1,219
Other income, net		(61)		(179)
Total other expense, net		1,732		1,040

Loss from continuing operations before income tax		(161)		(1,798)
Income tax expense (benefit)		(15)		229
Loss from continuing operations		(146)		(2,027)

Loss from discontinued operations before income tax		(44)		—
Income tax expense		3		17
Loss from discontinued operations		(47)		(17)

Net loss	$	(193)	$	(2,044)

Basic loss per common share
Loss from continuing operations	$	(0.01)	$	(0.08)
Loss from discontinued operations		—		—
Basic loss per common share	$	(0.01)	$	(0.08)

Diluted loss per common share
Loss from continuing operations	$	(0.01)	$	(0.08)
Loss from discontinued operations		—		—
Diluted loss per common share	$	(0.01)	$	(0.08)

See accompanying notes to condensed consolidated financial statements.

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WILLIAMS INDUSTRIAL SERVICES GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)


							Accumulated
	Common Shares						Other
	$0.01 Per Share				Paid-in		Comprehensive		Accumulated	Treasury Shares
(in thousands, except share data)	Shares		Amount		Capital		Income (Loss)		Deficit	Shares		Amount		Total
Balance, December 31, 2021	26,408,789	$	261	$	92,227	$	(95)	$	(55,930)	(469,168)	$	(6)	$	36,457
Issuance of restricted stock awards	291,894		—		—		—		—	—		—		—
Stock-based compensation	—		—		(147)		—		—	—		—		(147)
Foreign currency translation	—		—		—		142		—	—		—		142
Net loss	—		—		—		—		(2,044)	—		—		(2,044)
Balance, March 31, 2022	26,700,683	$	261	$	92,080	$	47	$	(57,974)	(469,168)	$	(6)	$	34,408


							Accumulated
	Common Shares						Other
	$0.01 Per Share				Paid-in		Comprehensive		Accumulated	Treasury Shares
(in thousands, except share data)	Shares		Amount		Capital		Income (Loss)		Deficit	Shares		Amount		Total
Balance, December 31, 2022	26,865,064	$	264	$	94,151	$	(404)	$	(69,608)	(321,673)	$	(5)	$	24,398
Issuance of restricted stock awards	514,926		—		—		—		—	—		—		—
Issuance of restricted stock units	152,074		—		—		—		—	—		—		—
Tax withholding on restricted stock units	—		2		(92)		—		—	—		—		(90)
Stock-based compensation	—		—		379		—		—	—		—		379
Foreign currency translation	—		—		—		136		—	—		—		136
Net loss	—		—		—		—		(193)	—		—		(193)
Balance, March 31, 2023	27,532,064	$	266	$	94,438	$	(268)	$	(69,801)	(321,673)	$	(5)	$	24,630

See accompanying notes to condensed consolidated financial statements.

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WILLIAMS INDUSTRIAL SERVICES GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


	Three Months Ended March 31,
(in thousands)	2023		2022
Operating activities:
Net loss	$	(193)	$	(2,044)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Net loss from discontinued operations		47		17
Deferred income tax provision (benefit)		(15)		5
Depreciation and amortization on plant, property, and equipment		55		66
Amortization of deferred financing costs		208		208
Amortization of debt discount		50		50
Loss on disposals of property, plant and equipment		52		—
Bad debt expense		48		(35)
Stock-based compensation		614		(31)
Paid-in-kind interest		387		—
Changes in operating assets and liabilities:
Accounts receivable		(2,106)		1,713
Contract assets		(5,445)		(153)
Other current assets		569		(27)
Other assets		290		(1,369)
Accounts payable		(4,754)		4,231
Accrued and other liabilities		9,253		619
Contract liabilities		(1,838)		(695)
Net cash provided by (used in) operating activities, continuing operations		(2,778)		2,555
Net cash used in operating activities, discontinued operations		(23)		(39)
Net cash provided by (used in) operating activities		(2,801)		2,516
Investing activities:
Proceeds from sale of property, plant and equipment		168		—
Net cash provided by investing activities		168		—
Financing activities:
Repurchase of stock-based awards for payment of statutory taxes due on stock-based compensation		(90)		—
Proceeds from short-term borrowings		98,660		66,618
Repayments of short-term borrowings		(99,634)		(67,294)
Proceeds from long-term debt		3,250		—
Repayments of long-term debt		—		(263)
Net cash provided by (used in) financing activities		2,186		(939)
Effect of exchange rate change on cash		—		201
Net change in cash, cash equivalents and restricted cash		(447)		1,778
Cash, cash equivalents and restricted cash, beginning of period		963		2,950
Cash, cash equivalents and restricted cash, end of period	$	516	$	4,728

Supplemental Disclosures:
Cash paid for interest	$	1,834	$	867
Cash paid for income taxes, net of refunds	$	45	$	36

See accompanying notes to condensed consolidated financial statements.

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WILLIAMS INDUSTRIAL SERVICES GROUP INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1—BUSINESS AND BASIS OF PRESENTATION

Business

Williams Industrial Services Group Inc. (together with its wholly owned subsidiaries, “Williams,” the “Company,” “we,” “us” or “our,” unless the context indicates otherwise) was initially formed in 1998 as GEEG Inc., a Delaware corporation, and in 2001 changed its name to “Global Power Equipment Group Inc.,” and, as part of a reorganization, became the successor to GEEG Holdings, L.L.C., a Delaware limited liability company. Effective June 29, 2018, the Company changed its name to Williams Industrial Services Group Inc. to better align its name with the Williams business, and the Company’s stock trades on the NYSE American LLC under the ticker symbol “WLMS.” Williams has been safely helping power plant owners and operators enhance asset value for more than 50 years. It provides a broad range of construction, maintenance, and support services to infrastructure customers in energy, power, and industrial end markets. The Company’s mission is to be the preferred provider of construction, maintenance, and specialty services through commitment to superior safety performance, focus on innovation, and dedication to delivering unsurpassed value to its customers.

Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) on a basis consistent with that used in the Annual Report on Form 10-K for the year ended December 31, 2022, filed by the Company with the U.S. Securities and Exchange Commission (“SEC”) on March 31, 2023 (the “2022 Report”). In the opinion of management, the unaudited condensed consolidated financial statements reflect all adjustments, including all normal recurring adjustments, necessary to present fairly the unaudited condensed consolidated balance sheets and statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for the periods indicated. All significant intercompany transactions have been eliminated. The December 31, 2022 condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by GAAP. These unaudited condensed consolidated interim financial statements and accompanying notes should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the 2022 Report. Accounting measurements at interim dates inherently involve greater reliance on estimates than at year-end. The results of operations for any interim period are not necessarily indicative of operations to be expected for the full year.

The Company reports on a fiscal quarter basis utilizing a “modified” 5-4-4 calendar (modified in that the fiscal year always begins on January 1 and ends on December 31). However, the Company has continued to label its quarterly information using a calendar convention. The effects of this practice are modest and only exist when comparing interim period results. The reporting periods and corresponding fiscal interim periods are as follows:



Reporting Interim Period	Fiscal Interim Period
	2023	2022
Three Months Ended March 31	January 1, 2023 to April 2, 2023	January 1, 2022 to April 3, 2022
Three Months Ended June 30	April 3, 2023 to July 2, 2023	April 4, 2022 to July 3, 2022
Three Months Ended September 30	July 3, 2023 to October 1, 2023	July 4, 2022 to October 2, 2022

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A variety of other factors can also affect the Company’s short- and long-term liquidity, the impact of which could be material, including, but not limited to: cash required generally for funding ongoing operations, projects and commitments relating to the Company’s status as a public company; matters relating to the Company’s contracts, including contracts billed based on milestones that may require the Company to incur significant expenditures prior to collections from its customers and others that allow for significant upfront billing at the beginning of a project, which temporarily increases liquidity in the near term; the outcome of potential contract disputes, which may be significant and involve liquidated damages and litigation; payment collection issues, including general payment slowdowns or other factors which can lead to credit deterioration of the Company’s customers; pension obligations requiring annual contributions to multiemployer pension plans; insurance coverage for contracts that require the Company to indemnify third parties; and issuances of letters of credit and bonding arrangements.

In connection with the preparation of the accompanying unaudited condensed consolidated financial statements, management assessed the Company’s financial condition and concluded that the above factors, taken in the aggregate, raised substantial doubt regarding the Company’s ability to continue as a going concern for the twelve-month period following the issuance of this Form 10-Q.

To address the negative cash flows in the Company’s business over recent quarters, the Company developed a liquidity plan, the implementation of which management believes may alleviate the substantial doubt about the Company’s ability to continue as a going concern during the twelve-month period following the issuance of this Form 10-Q.

The liquidity plan, which was developed and implemented in 2022 and continues to be refined as circumstances dictate, contemplates a number of key activities, including:

●

Amending the terms of the Company’s Revolving Credit Facility and Term Loan to provide for the incurrence of additional indebtedness and amendments to the Company’s financial covenants to provide covenant relief in 2023.

●

Exiting underperforming operations, including those in the transmission and distribution market, chemical market and water market, some of which have been completed and some of which are contemplated to be completed in the second half of 2023 with one project continuing until the first quarter of 2024.

●

Executing numerous initiatives to aggressively reduce operating expenses, such as deferring certain non-essential expenses including the Company’s investments in an enterprise reporting system and its information technology spend, reducing headcount, deferral of executive salaries and board of director fees, and reductions in certain professional fees.

●

Taking steps to lower the cost of services by, where possible, moving nonbillable labor resources to customer billable positions.

●

Shortening the collection cycle time on the Company’s accounts receivable.

●

Lengthening the payment cycle time on its accounts payable, to the extent reasonably possible.

The amendments to the Company’s Revolving Credit Facility and Term Loan involved the Company entering into two separate amendments to each of the Revolving Credit Facility and Term Loan in the third and fourth quarters of 2022, and an additional three separate amendments to such agreements during the first and second quarters of 2023. The first two amendments, among other things, revised certain terms contained in the Revolving Credit Facility and the Term Loan, respectively, and deferred principal payments on the Term Loan due on January 1, 2023 to January 9, 2023. The third and fourth amendments entered into during the first quarter of 2023, among other things, revised certain terms contained in the Revolving Credit Facility and the Term Loan and provided for delayed draw term loans under the Term Loan in an aggregate principal amount of $1.5 million, which were funded at the time the amendment was signed, and discretionary delayed draw term loans in an aggregate principal amount of $3.5 million, which were funded at the time of the fifth amendment. The fifth amendment to the Term Loan, entered into April 4, 2023, increased the amount of certain additional interest payable by the Company on the earlier to occur of certain stated events, including a prepayment or maturity of the loan obligations under the Term Loan, from 50% to 60% of the aggregate amount of all delayed draw term loans borrowed (including the discretionary delayed draw term loans borrowed). On the same date, the Company entered into a fee letter relating to the Revolving Credit Facility, pursuant to which the Company agreed to pay PNC an additional exit fee of $0.6 million, to be paid upon the earlier to occur of certain stated events, including a prepayment or maturity of the loan obligations under the Revolving Credit Facility. During the first quarter of 2023, the Company also issued two unsecured promissory notes (“Wynnefield Notes”) in favor of the Wynnefield Lenders (as defined below) in an aggregate principal amount of $400,000 and $350,000, respectively.

The Company believes that the amendments to the Term Loan and the Revolving Credit Facility, including the additional borrowings under the Term Loan, provided much needed support to the Company’s ongoing operations and have thus far permitted the Company to operate while it continues to engage in its process to explore strategic alternatives to maximize value for the Company and its shareholders and other stakeholders, but additional liquidity support is expected to be necessary.

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The Company’s initiatives to exit certain underperforming operations have been ongoing since 2022. The Company exited its underperforming transmission and distribution operations in Florida and completed some underperforming chemical projects in Texas. The Company is in the process of exiting the transmission and distribution market in Connecticut, which it anticipates will be complete during the second quarter. The Company has completed several underperforming water projects in Florida and continues its various activities to complete its pending contracts and then exit the water business entirely. Although the Company expects that it will not complete its strategy to exit underperforming operations until the first quarter of 2024, the Company believes its actions will lead to improved profitability for the businesses that remain in operation by the Company and therefore continues to implement the related aspects of its liquidity plan.

While the core nuclear and fossil business exceeded the Company’s revenue forecast for the first quarter, and is continuing to perform well in the second quarter, revenue is expected to fall in the second half of 2023, as the Company’s outage services for a large customer are concluded at the end of the second quarter. As a result of anticipated falling revenues in the second half, the Company’s borrowing base under the Revolving Credit Facility, which is based on the Company’s eligible accounts receivable, will contract and contribute to a tightening of the Company’s liquidity at the same time as the financial covenants in the Revolving Credit Facility and the Term Loan become more restrictive. This reduction in the amount of credit under the Revolving Credit Facility when combined with the ongoing cash costs associated with the exit from the Company’s remaining Florida water projects and the fees and expenses of professional advisors related to the Company’s review of strategic alternatives is expected to present further liquidity challenges to the Company in the second half of the year. Further funding will likely be necessary to address liquidity issues during 2023, possibly in the third quarter.

The Company’s ongoing process to review strategic alternatives has involved the Company paying fees and expenses to a number of professional advisors, including financial advisors and counsel. The Company has not disclosed a timetable for the conclusion of its review of strategic alternatives, nor has it made any decisions related to any further actions or possible strategic alternatives at this time. The Company does not intend to comment on the details of its review of strategic alternatives until it determines that further disclosure is appropriate or necessary. However, when the Company does start to pursue a particular outcome based on its review of strategic alternatives, the expenses required to be expended on the process may materially increase, further constraining the Company’s liquidity.

If the Company is unable to address any liquidity shortfalls that may arise based on any of the foregoing factors or others that may arise in the future, it will need to seek additional funding from third party sources, which may not be available on reasonable terms, if at all, and the Company’s inability to obtain this capital or execute an alternative solution to its liquidity needs could have a material adverse effect on the Company’s shareholders and creditors. Importantly, any such additional funding could only be obtained in compliance with the restrictions contained in the agreements governing the Company’s existing indebtedness. If the Company is unable to comply with its covenants under the agreements governing its indebtedness, or otherwise is unable to meet its obligations under such agreements, the Company’s liquidity would be further adversely affected. In addition, such occurrences could result in an event of default under such indebtedness and the potential acceleration of outstanding indebtedness thereunder and the potential foreclosure on the collateral securing such debt and would likely cause a cross-default under the Company’s other outstanding indebtedness or obligations.

The Company’s continuation as a going concern is dependent upon its ability to successfully build on its core nuclear and fossil business, implement its liquidity plan and take other steps to manage its liquidity, including, if necessary and available, by obtaining debt or equity financing to address the Company’s liquidity challenges and continue operations until the Company returns to generating positive cash flow or is otherwise able to execute a transaction pursuant to its review of strategic alternatives, including a potential sale of the Company.

If the Company’s liquidity improvement plan and the above-mentioned amendments to the Revolving Credit Facility and the Term Loan do not have the intended effect of addressing the Company’s liquidity problems through its review of strategic alternatives, the Company will continue to consider all strategic alternatives, including restructuring or refinancing its debt, seeking additional debt or equity capital, reducing or delaying the Company’s business activities and strategic initiatives, or selling assets, other strategic transactions and/or other measures, including obtaining relief under the U.S. Bankruptcy Code.

NOTE 3—RECENT ACCOUNTING PRONOUNCEMENTS

Recently Adopted Accounting Pronouncements

The Company did not implement any new accounting pronouncements during the first three months of 2023. However, the Company is currently evaluating the impact of future disclosures that may arise under recent SEC proposals.

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NOTE 4—LEASES

The Company primarily leases office space and related equipment, as well as equipment, modular units and vehicles directly used in providing services to its customers. The Company’s leases have remaining lease terms of one to ten years. Most leases contain renewal options for varying periods, which are at the Company’s sole discretion and included in the expected lease term if they are reasonably certain of being exercised. In accordance with ASU 2016-02, the Company accounts for lease components, such as fixed payments including rent, real estate taxes, and insurance costs, separately from the non-lease components, such as common area maintenance costs.

In accordance with ASU 2016-02, for leases with terms greater than twelve months, the Company records the related right-of-use assets and lease liabilities at the present value of the fixed lease payments over the lease term at the lease commencement date. The Company uses its incremental borrowing rate to determine the present value of the lease as the rate implicit in the lease is typically not readily determinable.

Short-term leases (leases with an initial term of twelve months or less or leases that are cancelable by the lessee and lessor without significant penalties) are expensed on a straight-line basis over the lease term. The majority of the Company’s short-term leases relate to equipment used in delivering services to its customers. These leases are entered into at agreed upon hourly, daily, weekly, or monthly rental rates for an unspecified duration and typically have a termination for convenience provision. Such equipment leases are considered short-term in nature unless it is reasonably certain that the equipment will be leased for a term greater than twelve months.

On September 2, 2021, the Company made the decision to relocate its corporate headquarters to Atlanta, Georgia and entered into a ten-year lease agreement. The Company completed its relocation in March 2022. The lease is presented as a right-of-use asset and lease liability and the lease liability amounts to $3.3 million with a present value of $2.3 million over the life of the contract. If the Company defaults, the landlord has the right to use the security deposit for rent or other payments due to other damages, injury, expense or liability as defined in the lease agreement. Although the security deposit shall be deemed the property of the landlord, any remaining balance of the security deposit shall be returned by the landlord to the Company after termination of the lease as the Company’s obligations under the lease have been fulfilled. The Company subleased a portion of its former office space and collected $15,000 of sublease income during the three months ended March 31, 2023. The lease on the Company’s former office space expired on March 31, 2023.

The components of lease expense were as follows:


	Three Months Ended March 31,
Lease Cost/(Sublease Income) (in thousands)	2023		2022
Operating lease cost	$	542	$	546
Short-term lease cost		2,691		1,617
Sublease income		(15)		(15)
Total lease cost	$	3,218	$	2,148

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Lease cost related to finance leases was not significant for the three months ended March 31, 2023 and 2022.

Information related to the Company’s right-of-use assets and lease liabilities were as follows:


Lease Assets/Liabilities (in thousands)	Balance Sheet Classification	March 31, 2023		December 31, 2022
Lease Assets
Right-of-use assets	Other long-term assets	$	3,957	$	4,223

Lease Liabilities
Short-term lease liabilities	Other current liabilities	$	1,472	$	1,603
Long-term lease liabilities	Other long-term liabilities		2,785		3,010
Total lease liabilities		$	4,257	$	4,613

Supplemental information related to the Company’s leases were as follows:


		Three Months Ended March 31,
(dollars in thousands)	2023		2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash used by operating leases	$	632	$	651
Right-of-use assets obtained in exchange for new operating lease liabilities		179		2,678
Weighted-average remaining lease term - operating leases		5.23 years		5.47 years
Weighted-average remaining lease term - finance leases		0.98 years		1.98 years
Weighted-average discount rate - operating leases		9%		9%
Weighted-average discount rate - finance leases		9%		9%

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Total remaining lease payments under the Company’s operating and finance leases were as follows:


	Operating Leases		Finance Leases

Three Months Ended March 31, 2023	(in thousands)
Remainder of 2023	$	1,390	$	4
2024		1,076		1
2025		562		-
2026		435		-
2027		391		-
Thereafter		1,483		-
Total lease payments	$	5,337	$	5
Less: interest		(1,085)		-
Present value of lease liabilities	$	4,252	$	5

NOTE 5—CHANGES IN BUSINESS

Discontinued Operations

Electrical Solutions

During the fourth quarter of 2017, the Company made the decision to exit and sell its Electrical Solutions segment (which was comprised solely of Koontz-Wagner Custom Controls Holdings LLC (“Koontz-Wagner”), a wholly owned subsidiary of the Company) in an effort to reduce the Company’s outstanding term debt. The Company determined that the decision to exit this segment met the definition of a discontinued operation. As a result, this segment has been presented as a discontinued operation for all periods presented.

On July 11, 2018, Koontz-Wagner filed a voluntary petition for relief under Chapter 7 of Title 11 of the Bankruptcy Code with the U.S. Bankruptcy Court for the Southern District of Texas. The filing was for Koontz-Wagner only, not for the Company as a whole, and was completely separate and distinct from the Williams business and operations. As a result of the July 11, 2018 bankruptcy of Koontz-Wagner, the Company recorded a pension withdrawal liability of $2.9 million related to Koontz-Wagner’s International Brotherhood of Electrical Workers Local Union 1392 (“IBEW”) multi-employer pension plan. The pension liability is expected to be satisfied by annual cash payments of $0.3 million each, paid in quarterly installments, through 2038.

Mechanical Solutions

During the third quarter of 2017, the Company made the decision to exit and sell substantially all of the operating assets and liabilities of its Mechanical Solutions segment and determined that the decision to exit this segment met the definition of a discontinued operation. As a result, this segment has been presented as a discontinued operation for all periods presented.

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As of March 31, 2023 and December 31, 2022, the Company did not have any assets related to its Electrical Solutions’ and Mechanical Solutions’ discontinued operations. The following table presents a reconciliation of the carrying amounts of major classes of liabilities of Electrical Solutions’ and Mechanical Solutions’ discontinued operations:



(in thousands)	March 31, 2023		December 31, 2022
Liabilities:
Other current liabilities	$	112	$	110
Current liabilities of discontinued operations		112		110
Liability for pension obligation		2,264		2,244
Liability for uncertain tax positions		1,237		1,235
Long-term liabilities of discontinued operations		3,501		3,479
Total liabilities of discontinued operations	$	3,613	$	3,589

The following table presents a reconciliation of the major classes of line items constituting the net income (loss) from discontinued operations. In accordance with GAAP, the amounts in the table below do not include an allocation of corporate overhead.


	Three Months Ended March 31,
(in thousands)	2023		2022
General and administrative expenses	$	—	$	—
Interest expense		44		—
Loss from discontinued operations before income tax		(44)		—
Income tax expense		3		17
Loss from discontinued operations	$	(47)	$	(17)

NOTE 6—REVENUE

Disaggregation of Revenue

The Company’s contracts generally include a single performance obligation for which revenue is recognized over time, as performance obligations are satisfied, due to the continuous transfer of control to the customer. For cost-plus contracts, the Company recognizes revenue when services are performed and contractually billable based upon the hours incurred and agreed-upon hourly rates. Revenue on fixed-price contracts is recognized and invoiced over time using the cost-to-cost percentage-of-completion method. To the extent a contract is deemed to have multiple performance obligations, the Company allocates the transaction price of the contract to each performance obligation using its best estimate of the standalone selling price of each distinct good or service in the contract. The Company does not adjust the price of the contract for the effects of a significant financing component. Change orders are generally not distinct from the existing contract due to the significant integration service provided in the context of the contract and are accounted for as a modification of the existing contract and performance obligation. The Company believes these methods of revenue recognition most accurately reflect the economics of the transactions with its customers.

The Company’s contracts may include several types of variable consideration, including change orders, rate true-up provisions, retainage, claims, incentives, penalties, and liquidated damages. The Company estimates the amount of revenue to be recognized on variable consideration using estimation methods that best predict the amount of consideration to which the Company expects to be entitled. The Company includes variable consideration in the estimated transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur or when the uncertainty associated with the variable consideration is resolved. The Company’s estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based on an assessment of its anticipated performance and all information (historical, current, and forecasted) that is reasonably available. The Company updates its estimate of the transaction price each reporting period and the effect of variable consideration on the transaction price is recognized as an adjustment to revenue on a cumulative catch-up basis. In circumstances where the Company cannot reasonably determine the outcome of a contract, it recognizes revenue over time as the work is performed, but only to the extent of recoverable costs incurred (i.e. zero margin). A loss provision is recorded for the amount of any estimated unrecoverable costs in excess of total estimated revenue on a contract as soon as the Company becomes aware. The Company generally provides a limited warranty for a term of two years or less following completion of services performed under its contracts. Historically, warranty claims have not resulted in material costs incurred.

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Disaggregated revenue by type of contract was as follows:


	Three Months Ended March 31,
(in thousands)	2023		2022
Cost-plus reimbursement contracts	$	90,073	$	54,255
Fixed-price contracts		13,397		15,304
Total	$	103,470	$	69,559

Disaggregated revenue by the geographic area where the work was performed was as follows:


	Three Months Ended March 31,
(in thousands)	2023		2022
United States	$	103,470	$	64,057
Canada		-		5,502
Total	$	103,470	$	69,559

Contract Balances

The Company enters into contracts that allow for periodic billings over the contract term that are dependent upon specific advance billing terms, as services are provided, or as milestone billings based on completion of certain phases of work. Projects with performance obligations recognized over time that have costs and estimated earnings recognized to date in excess of cumulative billings are reported in the Company’s unaudited condensed consolidated balance sheets as contract assets. Projects with performance obligations recognized over time that have cumulative billings in excess of costs and estimated earnings recognized to date are reported in the Company’s unaudited condensed consolidated balance sheets as contract liabilities. At any point in time, each project in process could have either contract assets or contract liabilities.

The following table provides information about contract assets and contract liabilities from contracts with customers:


	Three Months Ended March 31,
(in thousands)	2023		2022
Costs incurred on uncompleted contracts	$	95,648	$	63,850
Earnings recognized on uncompleted contracts		7,822		5,709
Total		103,470		69,559
Less—billings to date		(89,617)		(59,438)
Net	$	13,853	$	10,121
Contract assets	$	18,257	$	12,838
Contract liabilities		(4,404)		(2,717)
Net	$	13,853	$	10,121

For the three months ended March 31, 2023, the Company recognized revenue of approximately $4.1 million on approximately $6.2 million that was included in the corresponding contract liability balance on December 31, 2022.

Remaining Performance Obligations

The following table includes estimated revenue expected to be recognized in the future related to performance obligations that were unsatisfied (or partially unsatisfied) as of March 31, 2023:


(in thousands)	Remainder of 2023		2024		2025		Thereafter		Total
Remaining performance obligations	$	87,390	$	46,068	$	64,736	$	36,733	$	234,927

NOTE 7—EARNINGS (LOSS) PER SHARE

As of March 31, 2023, the Company’s 27,210,391 shares outstanding included 514,926 shares of contingently issued but unvested restricted stock. As of March 31, 2022, the Company’s 26,231,515 shares outstanding included 321,142 shares of contingently issued but unvested restricted stock. Restricted stock is excluded from the calculation of basic weighted average shares outstanding, but its impact, if dilutive, is included in the calculation of diluted weighted average shares outstanding.

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Basic earnings (loss) per common share are calculated by dividing net income (loss) by the weighted average common shares outstanding during the period. Diluted earnings (loss) per common share are based on the weighted average common shares outstanding during the period, adjusted for the potential dilutive effect of common shares that would be issued upon the vesting and release of restricted stock awards and units.

Basic and diluted earnings (loss) per common share from continuing operations were calculated as follows:


	Three Months Ended March 31,
(in thousands, except share data)	2023		2022
Loss from continuing operations	$	(146)	$	(2,027)

Basic loss per common share:
Weighted average common shares outstanding		26,425,405		25,838,562

Basic loss per common share	$	(0.01)	$	(0.08)

Diluted loss per common share:
Weighted average common shares outstanding		26,425,405		25,838,562

Diluted effect:
Unvested portion of restricted stock units and awards		—		—
Weighted average diluted common shares outstanding		26,425,405		25,838,562

Diluted loss per common share	$	(0.01)	$	(0.08)

The weighted average number of shares outstanding used in the computation of basic and diluted earnings (loss) per common share does not include the effect of the following potential outstanding common stock. The effects of the potentially outstanding service-based restricted stock and restricted stock unit awards were not included in the calculation of diluted earnings (loss) per common share because the effect would have been anti-dilutive. The effects of the potentially outstanding performance- and market-based restricted stock unit awards were not included in the calculation of diluted earnings (loss) per common share because the performance and/or market conditions had not been satisfied as of March 31, 2023 and 2022.


	Three Months Ended March 31,
	2023	2022
Unvested service-based restricted stock and restricted stock unit awards	410,689	281,243
Unvested performance- and market-based restricted stock unit awards	634,896	1,923,002

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NOTE 8—INCOME TAXES

The effective income tax rate for continuing operations for the three months ended March 31, 2023 and 2022 was as follows:


	Three Months Ended March 31,
	2023	2022
Effective income tax rate for continuing operations	9.0%	(12.7)%

The effective income tax rate differs from the statutory federal income tax rate of 21% primarily because of the partial valuation allowances recorded on the Company’s deferred tax assets and the Canadian income tax provision.

For the three months ended March 31, 2023, the Company recorded income tax benefit from continuing operations of $14,567, or 9.0% of pretax loss from continuing operations, compared with income tax expense from continuing operations of $0.2 million, or (12.7)% of pretax loss from continuing operations, in the corresponding period of 2022. The $0.2 million decrease in income tax provision from continuing operations for the three months ended March 31, 2023, compared with the corresponding period in 2022, was primarily related to the decrease in the Canadian income tax provision.

The Company’s net deferred balance was primarily composed of indefinite lived deferred tax liabilities attributable to goodwill and trade names, and the indefinite lived deferred tax assets related to the post 2017 net operating losses and Section 163(j) interest addback. A full valuation allowance was applied to most of the remaining deferred balances. The indefinite lived deferred tax assets enabled the release of the valuation allowance to the extent that it can offset the indefinite lived deferred tax liabilities. Because all indefinite lived deferred tax liabilities are part of continued operations, and the release of valuation allowance is attributable to the future taxable income related to these deferred tax liabilities, the entire valuation allowance released was recorded in continuing operations according to ASC 740-20-45-3. As of March 31, 2023, the Company had $2.3 million net deferred tax liabilities, mainly composed of $12.4 million indefinite lived deferred tax liabilities attributable to goodwill and trade names, partially offset by $6.7 million indefinite lived deferred tax assets attributable to post 2017 net operating losses and $3.4 million indefinite lived deferred tax assets attributable to Section 163(j) interest addback.

As of March 31, 2023 and 2022, the Company would have needed to generate approximately $313.6 million and $288.8 million, respectively, of future taxable income in order to realize its deferred tax assets.

The Company’s foreign subsidiaries may generate earnings that are not subject to U.S. income taxes so long as they are permanently reinvested in its operations outside of the U.S. Pursuant to ASC 740-30, undistributed earnings of foreign subsidiaries that are no longer permanently reinvested become subject to deferred income taxes. As of March 31, 2023, the Company’s Canadian subsidiary had approximately $0.7 million undistributed earnings projected for the end of 2023 that is expected to be repatriated back to the United States within the next 12 months.

The Company formed the Canadian subsidiary in 2018 without significant capital input, and the majority of the undistributed earnings was expected to be repatriated as dividends to the United States at the U.S.-Canada treaty rate of 5%. As a result, less than $0.1 million income tax liability was accrued with respect to the foreign withholding tax associated with the remaining distribution from the Canadian subsidiary.

As of March 31, 2023, the Company provided for a total liability of $2.4 million, compared to $3.0 million for corresponding period in 2022, of which $1.2 million related to discontinued operations, compared to $1.9 million for the corresponding period in 2022, for unrecognized tax benefits related to various federal, foreign, and state income tax matters, which were included in long-term liabilities of discontinued operations and other long-term liabilities. If recognized, the entire amount of the liability would affect the effective tax rate. As of March 31, 2023, the Company accrued approximately $1.1 million, of which $0.5 million related to discontinued operations, in long-term liabilities of discontinued operations and other long-term liabilities for potential payment of interest and penalties related to uncertain income tax positions.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was enacted and signed into U.S. law to provide economic relief to individuals and businesses facing economic hardship as a result of the COVID-19 pandemic. The Company has incorporated the impact of the CARES Act to the tax provision. In addition, the Company deferred payments of federal employer payroll taxes of approximately $4.9 million, as permitted by the CARES Act. The first half of the deferred amounts were paid in December 2021, and the second half were paid in December 2022.

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NOTE 9—DEBT

The following table provides information about the Company’s debt, net of unamortized deferred financing costs:


(in thousands)	March 31, 2023		December 31, 2022
Revolving Credit Facility	$	16,425	$	17,399
Current debt	$	16,425	$	17,399

Term loan, noncurrent portion of long-term debt	$	28,169	$	25,282
Unsecured Promissory Note with Wynnefield Partners Small Cap Value, LP I		400		-
Unsecured Promissory Note with Wynnefield Partners Small Cap Value, LP		350		-
Unamortized debt discount from refinancing		(541)		(591)
Unamortized deferred financing costs		(1,218)		(1,331)
Long-term debt, net	$	27,160	$	23,360

Total debt, net	$	43,585	$	40,759

Debt Refinancing

On December 16, 2020 (the “Closing Date”), the Company and certain of its subsidiaries refinanced and replaced its prior revolving credit facility and term loan facility and entered into (i) the Term Loan Agreement (as defined below), which provided for senior secured term loan facilities in an aggregate principal amount of up to $50.0 million (collectively, the “Term Loan”), consisting of a $35.0 million closing date term loan facility (the “Closing Date Term Loan”) and up to $15.0 million of borrowings under a delayed draw facility (the “Delayed Draw Term Loan Facility”) with EICF Agent LLC, as agent, and CION Investment Corporation, as a lender and a co-lead arranger, and the other lenders party thereto; and (ii) a senior secured asset-based revolving line of credit of up to $30.0 million (the “Revolving Credit Facility”) with PNC Bank, National Association (“PNC”). The Delayed Draw Term Loan Facility expired in June 2022. In connection with the refinancing, the Company repaid the outstanding balance of the prior facilities and all interest in full.

As of March 31, 2023, the Company had $16.4 million outstanding debt under the Revolving Credit Facility, $28.2 million outstanding (including both the noncurrent and current portion of the Term Loan) under the Term Loan and $0.8 million outstanding under the Wynnefield Notes. Total liquidity (the sum of unrestricted cash and availability under the Revolving Credit Facility) was $6.2 million at the end of the first quarter of 2023. As of March 31, 2023, the Company was in compliance with all debt covenants, as amended.

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The Revolving Credit Facility

On the Closing Date, the Company and certain of its subsidiaries (the “Revolving Loan Borrowers”) entered into the Revolving Credit and Security Agreement with PNC, as agent for the lenders, and the lenders party thereto (the “Revolving Credit Agreement”), which provides for the Revolving Credit Facility. As part of the Revolving Credit Facility, the Company may access a letter of credit sublimit in an amount up to $2.0 million, a swing loan sublimit in an aggregate principal amount of up to $3.0 million, and a Canadian dollar sublimit in an aggregate principal amount of up to $5.0 million. The Revolving Credit Agreement matures on December 16, 2025.

As of March 31, 2023, borrowings under the Revolving Credit Facility bore interest, at the Company’s election, at either (1) the base commercial lending rate of PNC, as publicly announced, plus 1.25%, payable in cash on a monthly basis, (2) the Term SOFR Rate (as defined in the Revolving Credit Agreement, as amended) based on the secured overnight financing rate (“SOFR”), subject to a minimum SOFR floor of 1.00%, plus 2.25%, payable in cash on the last day of each interest period, or (3) with respect to Canadian dollar loans, the Canadian Dollar Offered Rate (“CDOR”), subject to a minimum CDOR rate of 1.00%, plus 2.25%, payable in cash on a monthly basis. In addition, upon the occurrence of an event of default, and for so long as such event of default continues, default interest equal to 2.00% per year in excess of the rate otherwise applicable will be payable.

The Revolving Loan Borrowers’ Obligations (as defined in the Revolving Credit Agreement) are guaranteed by certain of the Company’s material, wholly owned subsidiaries, subject to customary exceptions (the “Revolving Loan Guarantors” and, together with the Revolving Loan Borrowers, the “Revolving Loan Credit Parties”). The Revolving Loan Credit Parties’ obligations are secured by first-priority security interests on substantially all of the Revolving Loan Credit Parties’ accounts receivable and a second-priority security interest in substantially all other assets of the Revolving Loan Credit Parties, subject to the terms of the Intercreditor Agreement between PNC and EICF Agent LLC, as the Revolving Loan Agent and the Term Loan Agent, respectively (as each such term is defined in the Intercreditor Agreement), as described below (the “Intercreditor Agreement”).

The Revolving Loan Borrowers may from time to time voluntarily prepay outstanding amounts, plus any accrued but unpaid interest on the aggregate amount being prepaid, under the Revolving Credit Facility, in whole or in part. There is no required minimum prepayment amount. If at any time the amount outstanding under the Revolving Credit Agreement exceeds the borrowing base, or any sublimit, in effect at such time, the excess amount will be immediately due and payable. Subject to the Intercreditor Agreement, the Revolving Credit Agreement also requires mandatory prepayment of outstanding amounts in the event the Revolving Loan Borrowers receive proceeds from certain events and activities, including, among others, certain asset sales and casualty events, the issuance of indebtedness and equity interests, and the recovery of any proceeds from certain specified arbitration proceedings.

The Revolving Credit Agreement provides for (1) a closing fee of $0.2 million, which was paid on the Closing Date, (2) a customary unused line fee equal to 0.25% per year on the unused portion of the Revolving Credit Facility, which is payable on a quarterly basis, and (3) a collateral monitoring fee of $2,500, which is payable on a monthly basis. The Revolving Credit Agreement also provides for an early termination fee (the “Early Termination Fee”), payable to the revolving lenders thereunder upon (1) any acceleration of the Obligations and termination of the Revolving Credit Agreement and the obligation of the revolving lenders to make advances thereunder following the occurrence of an Event of Default (as defined in the Revolving Credit Agreement), or (2) any other termination of the Revolving Credit Agreement and the obligation of revolving lenders to make advances thereunder for any reason (the “Early Termination Date”). The Early Termination Fee is calculated as follows: if the Early Termination Date occurred on or prior to the first anniversary of the Closing Date, the Early Termination Fee would have been 2.00% of the Revolving Credit Facility; and if prepayment occurred after the first anniversary of the Closing Date and on or prior to the second anniversary of the Closing Date, the Early Termination Fee would have been 1.00% of the Revolving Credit Facility. While any letter of credit is outstanding under the Revolving Credit Facility, the Revolving Loan Borrowers must pay a letter of credit fronting fee at a rate equal to 0.25% per year, payable quarterly, in addition to any other customary fees required by the issuer of the letter of credit.

The Revolving Credit Agreement contains customary representations and warranties, as well as customary affirmative and negative covenants, in each case, with certain exceptions, limitations and qualifications. The Revolving Credit Agreement also requires the Revolving Loan Borrowers to regularly provide certain financial information to the lenders thereunder, maintain a springing minimum fixed charge coverage ratio, and comply with certain limitations on capital expenditures.

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Events of default under the Revolving Credit Agreement include, but are not limited to, a breach of certain covenants or any representations or warranties, failure to timely pay any amounts due and owing, the commencement of any bankruptcy or other insolvency proceeding, judgments in excess of certain acceptable amounts, the occurrence of a change in control, certain events related to ERISA matters, impairment of security interests in collateral or invalidity of guarantees or security documents, or a default or event of default under the Term Loan Agreement or the Intercreditor Agreement, in each case, with customary exceptions, limitations, grace periods and qualifications. If an event of default occurs, the revolving lenders may, among other things, declare all Obligations outstanding under the Revolving Credit Facility to be immediately due and payable, together with accrued interest and fees, and exercise remedies under the collateral documents relating to the Revolving Credit Agreement.

On August 3, 2022, the Company entered into an Amendment to the Revolving Credit Agreement (the “Revolving Credit Amendment”) that, among other things, (i) amended the calculation of EBITDA (as defined in the Revolving Credit Agreement), effective as of June 30, 2022, to include (or “add back”) certain non-recurring losses and expenses relating to projects executed in Jacksonville, Florida, one-time costs and expenses incurred in connection with the Company’s transmission and distribution business unit start-up, and costs and expenses arising out of the Company’s litigation with a designated former executive and his employer (in each case, subject to certain specified dollar limits), (ii) permitted advances against certain eligible receivables of one of the Company’s joint ventures (also subject to specified dollar limits), (iii) included provisions that replaced the London Interbank Offered Rate (LIBOR) interest rate with customary provisions based on SOFR, and (iv) provided for the payment of a $25,000 amendment fee, plus applicable fees and expenses. The $25,000 amendment fee was expensed as incurred in the third quarter of 2022.

On January 9, 2023, the Company entered into the third amendment to the Revolving Credit Agreement (the “Third Revolving Credit Amendment”). The Third Revolving Credit Amendment, among other things, (i) modified the financial covenants to require that the Company achieve certain designated minimum levels of trailing twelve-month EBITDA (as defined in the Revolving Credit Agreement) as of the end of each fiscal month beginning on February 5, 2023, and ending December 31, 2023; (ii) amended the calculation of EBITDA to include (or “add back”) certain non-recurring losses and expenses incurred in connection with projects executed by the Company’s Jacksonville, Florida office, one-time costs and expenses incurred in connection with the Company’s transmission and distribution business segment start-up, non-recurring costs and expenses arising out of the implementation of a new enterprise resource planning (“ERP”) system, and non-recurring costs and expenses arising out of pro forma headcount reductions implemented by the Company and certain litigation with a former executive and a competitor of the Company that was settled in the fourth quarter of 2022 (in each case, subject to certain specific dollar limits for certain fiscal quarters commencing in the second fiscal quarter of 2021 and ending December 31, 2022); (iii) provided temporary reserve relief of up to $1.0 million from the date of the Third Revolving Credit Amendment until June 30, 2023; (iv) reduced the Eligible Unbilled Receivables (as defined in the Revolving Credit Agreement) sublimit from $7.5 million to $5.5 million; (v) increased the Applicable Margin (as defined in the Revolving Credit Agreement) by 2%; and (vi) provided for an amendment fee of $0.3 million payable when the loan obligations under the Revolving Credit Agreement are repaid or, if earlier, June 30, 2023, and an exit fee of $0.3 million to be paid upon the occurrence of certain stated events, including a prepayment or maturity of the loan obligations under the Revolving Credit Agreement.

On February 21, 2023, the Company entered into the fourth amendment to the Revolving Credit Agreement (the “Fourth Revolving Credit Amendment”). The Fourth Revolving Credit Amendment, among other things, provided for the consent of PNC to the Fourth Term Loan Amendment (as defined below) and incorporated into the Revolving Credit Agreement certain of the conditions and covenants provided for in the Fourth Term Loan Amendment, including the conditions to the Delayed Draw Term Loans (as defined below), the minimum liquidity covenant and the additional reporting obligations.

On April 4, 2023, the Company entered into a fee letter relating to the Revolving Credit Facility, pursuant to which the Company agreed to pay PNC an additional exit fee of $0.6 million, to be paid upon the earlier to occur of certain stated events, including a prepayment or maturity of the loan obligations under the Revolving Credit Agreement.

EICF Agent LLC, as the Term Loan Agent, and PNC, as the Revolving Loan Agent, entered into an Intercreditor Agreement, dated as of the Closing Date, to which the Term Loan Credit Parties (as defined below) and Revolving Loan Credit Parties consented. The Intercreditor Agreement, among other things, specifies the relative lien priorities of the Term Loan Agent and Revolving Loan Agent in the relevant collateral, and contains customary provisions regarding, among other things, the rights of the Term Loan Agent and Revolving Loan Agent to take enforcement actions against the relevant collateral and certain limitations on amending the documentation governing each of the Term Loan and Revolving Credit Facility.

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On February 24, 2023, the Company entered into a fourth amendment to the Term Loan Agreement (the “Fourth Term Loan Amendment”). The Fourth Term Loan Amendment provided for delayed draw term loans in an aggregate principal amount of $1.5 million, which were funded at the time the Fourth Term Loan Amendment was signed, and discretionary delayed draw term loans in an aggregate principal amount of $3.5 million, which will be funded at the lenders’ discretion (together, the “Delayed Draw Term Loans”), subject to the conditions set forth in the Term Loan Agreement, as amended by the Fourth Term Loan Amendment. In addition to interest being payable on the same basis as existing borrowings under the Term Loan Agreement, on the earlier to occur of the maturity date or the termination date of the Term Loan Agreement or any acceleration of the obligations under the Term Loan Agreement, additional interest equal to 50% (which was increased to 60% pursuant to a fifth amendment to the Term Loan, as described below) of the aggregate amount of the Delayed Draw Term Loans borrowed will be payable. The Fourth Term Loan Amendment also includes a minimum liquidity covenant. The Delayed Draw Term Loans are conditioned upon, amount other things, the Company using commercially reasonable best efforts to actively receive net cash proceeds from issuances of subordinated debt or equity of at least $0.5 million on terms acceptable to EICF Agent LLC and the lenders under the Term Loan Agreement, continuing its publicly announced review of strategic alternatives and, subject to the exercise by the Board of Directors of the Company of its fiduciary obligations, using commercially reasonable best efforts to conduct such review in accordance with a customary indicative timeline. The Fourth Term Loan Amendment also imposed certain additional reporting obligations on the Company, including the weekly delivery of a 13-week cash flow forecast.

On February 21, 2023, the Company received a $1.0 million advance pursuant to the then-existing terms of the Term Loan Agreement and, on February 24, 2023, the Company received $1.5 million principal amount related to the delayed draw term loans allowed from the Fourth Term Loan Amendment. In addition to interest being payable on the same basis as existing borrowing under the Term Loan Agreement, on the earlier to occur of the maturity date or the termination date of the Term Loan Agreement or any acceleration of the obligations under the Term Loan Agreement, additional interest equal to $0.5 million will be payable in respect of this $1.0 million advance.

On April 4, 2023, the Company entered into a fifth amendment to the Term Loan Agreement, which increased the amount of certain additional interest payable by the Company on the earlier to occur of certain stated events, including a prepayment or maturity of the loan obligations under the Term Loan Agreement, from 50% to 60% of the aggregate amount of all Delayed Draw Term Loans borrowed (including the discretionary delayed draw term loans borrowed). Additionally, the Company received the remaining $3.5 million discretionary Delayed Draw Term Loan.

The Wynnefield Notes

The Wynnefield Notes consist of (i) an Unsecured Promissory Note by and among the Company, as borrower, certain of its subsidiaries, as guarantors under a separate Guaranty Agreement, and Wynnefield Partners Small Cap Value, LP I in the aggregate principal amount of $400,000 and (ii) an Unsecured Promissory Note by and among the Company, as borrower, certain of its subsidiaries, as guarantors under a separate Guaranty Agreement, and Wynnefield Partners Small Cap Value, LP (together with Wynnefield Partners Small Cap Value, LP I, the “Wynnefield Lenders”) in the aggregate principal amount of $350,000. All principal and interest will be due on the maturity date of the Wynnefield Notes, which will be the earliest of (i) December 23, 2025; (ii) a change in control of the Company; (iii) a refinancing or maturity extension of either of the Term Loan Agreement or the Revolving Credit Agreement; or (iv) an acceleration following the occurrence of an event of default (as defined in the Wynnefield Notes, and which includes any default under the Term Loan Agreement or the Revolving Credit Agreement). The Wynnefield Notes bear interest at the fixed rate of (i) 8.0% per annum from the closing date; (ii) 13.0% per annum from and after the maturity date; and (iii) 13.0% per annum from and after an event of default (as defined in the Wynnefield Notes, and which includes any default under the Term Loan Agreement or the Revolving Credit Agreement). The Wynnefield Notes are subject to an aggregate exit fee of $100,000, payable upon the earlier of an event of default or payment in full of all obligations due under the Wynnefield Notes. In connection with the Wynnefield Notes, the Company, certain of its subsidiaries, the Wynnefield Lenders and the agents under each of the Revolving Credit Agreement and the Term Loan Agreement have entered into two Subordination and Intercreditor Agreements, pursuant to which the Wynnefield Lenders have agreed, on the terms and subject to the conditions set forth therein, to subordinate the Wynnefield Notes to the obligations of the Company under the Revolving Credit Agreement and the Term Loan Agreement.

The Wynnefield Lenders, together with their affiliates, are the Company’s largest equity investor. Nelson Obus, a member of the Company’s Board of Directors, is a managing member of Wynnefield Capital Management, LLC, the general partner of the Wynnefield Lenders.


Part I—FINANCIAL INFORMATION	2

Item 1. Financial Statements	2

Condensed Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022 (unaudited)	2

Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2023 and 2022 (unaudited)	3

Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2023 and 2022 (unaudited)	4

Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2023 and 2022 (unaudited)	5

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2023 and 2022 (unaudited)	6

Notes to Condensed Consolidated Financial Statements (unaudited)	7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	28

Item 3. Quantitative and Qualitative Disclosures about Market Risk	37

Item 4. Controls and Procedures	38

Part II—OTHER INFORMATION

Item 1. Legal Proceedings	39

Item 1A. Risk Factors	39
Item 6. Exhibits	40

SIGNATURES	42