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 June 30, 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)
Common Stock, par value $0.01 per share	WLMSQ

* On July 24, 2023, the issuer’s common stock was suspended from trading on the NYSE American. Effective July 25, 2023, trades in the issuer’s common stock began being quoted on the OTC Pink Market under the symbol “WLMSQ.” On August 1, 2023, NYSE American filed a Form 25 to delist the issuer’s common stock and to remove it from registration under Section 12(b) of the Securities Exchange Act of 1934, as amended.

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 ⌧

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ◻ No 

As of August 11, 2023, there were 27,210,391 shares of common stock of Williams Industrial Services Group Inc. outstanding.

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WILLIAMS INDUSTRIAL SERVICES GROUP INC. AND SUBSIDIARIES

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Part I—FINANCIAL INFORMATION	2

Item 1. Financial Statements	2

Condensed Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022 (unaudited)	2

Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2023 and 2022 (unaudited)	3

Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2023 and 2022 (unaudited)	4

Condensed Consolidated Statements of Stockholders’ Equity (Deficit) for the Three and Six Months Ended June 30, 2023 and 2022 (unaudited)	5

Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 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	27

Item 3. Quantitative and Qualitative Disclosures about Market Risk	38

Item 4. Controls and Procedures	38

Part II—OTHER INFORMATION	40

Item 1. Legal Proceedings	40

Item 1A. Risk Factors	40

Item 6. Exhibits	42

SIGNATURES	44

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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)	June 30, 2023		December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	46	$	495
Restricted cash		467		468
Accounts receivable, net of allowance of $478 and $273, respectively		20,733		31,033
Contract assets		8,088		12,812
Other current assets		3,780		6,258
Total current assets		33,114		51,066

Property, plant, and equipment, net		838		1,257
Goodwill		—		35,400
Intangible assets		—		12,500
Deferred tax assets		127		—
Other long-term assets		6,748		8,275
Total assets	$	40,827	$	108,498

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	11,480	$	12,041
Accrued compensation and benefits		9,431		8,566
Contract liabilities		639		6,242
Short-term borrowings		9,022		17,399
Current portion of long-term debt		438		—
Other current liabilities		4,203		5,710
Current liabilities of discontinued operations		113		110
Total current liabilities		35,326		50,068
Long-term debt, net (Note 9)		30,881		23,360
Deferred tax liabilities		—		2,268
Other long-term liabilities		3,201		4,925
Long-term liabilities of discontinued operations		2,753		3,479
Total liabilities		72,161		84,100
Commitments and contingencies (Note 12)
Stockholders’ equity (deficit):
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		94,551		94,151
Accumulated other comprehensive loss		(248)		(404)
Accumulated deficit		(125,898)		(69,608)
Treasury stock, at par (321,673 and 321,673 common shares, respectively)		(5)		(5)
Total stockholders’ equity (deficit)		(31,334)		24,398
Total liabilities and stockholders’ equity (deficit)	$	40,827	$	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 June 30,				Six Months Ended June 30,
(in thousands, except per share data)	2023		2022		2023		2022
Revenue	$	83,343	$	56,059	$	186,813	$	125,618
Cost of revenue		87,293		53,778		183,072		117,628

Gross profit (loss)		(3,950)		2,281		3,741		7,990

Selling and marketing expenses		182		402		318		732
General and administrative expenses		5,976		6,294		11,905		12,365
Depreciation and amortization expense		43		46		98		112
Total operating expenses		6,201		6,742		12,321		13,209

Operating loss		(10,151)		(4,461)		(8,580)		(5,219)

Interest expense, net		1,971		1,261		3,764		2,480
Goodwill and intangible impairment expense		47,900		—		47,900		—
Income expense, net		(86)		(240)		(147)		(419)
Total other expense, net		49,785		1,021		51,517		2,061

Loss from continuing operations before income tax		(59,936)		(5,482)		(60,097)		(7,280)
Income tax expense (benefit)		(3,162)		(171)		(3,177)		58
Loss from continuing operations		(56,774)		(5,311)		(56,920)		(7,338)

Loss from discontinued operations before income tax		(44)		(47)		(88)		(47)
Income tax benefit		(721)		(640)		(718)		(623)
Income from discontinued operations		677		593		630		576

Net loss	$	(56,097)	$	(4,718)	$	(56,290)	$	(6,762)

Basic income (loss) per common share
Loss from continuing operations	$	(2.13)	$	(0.20)	$	(2.14)	$	(0.28)
Income from discontinued operations		0.03		0.02		0.02		0.02
Basic loss per common share	$	(2.10)	$	(0.18)	$	(2.12)	$	(0.26)

Diluted income (loss) per common share
Loss from continuing operations	$	(2.13)	$	(0.20)	$	(2.14)	$	(0.28)
Income from discontinued operations		0.03		0.02		0.02		0.02
Diluted loss per common share	$	(2.10)	$	(0.18)	$	(2.12)	$	(0.26)

See accompanying notes to condensed consolidated financial statements.

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WILLIAMS INDUSTRIAL SERVICES GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2023		2022		2023		2022
Net loss	$	(56,097)	$	(4,718)	$	(56,290)	$	(6,762)
Foreign currency translation adjustment		20		(169)		156		(27)
Comprehensive loss	$	(56,077)	$	(4,887)	$	(56,134)	$	(6,789)

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 (DEFICIT) (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
Restricted stock awards granted	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
Restricted stock units vested	169,255		—		—		—		—	26,865		—		—
Tax withholding on restricted stock units	—		2		(165)		—		—	—		—		(163)
Stock-based compensation	—		—		1,293		—		—	—		—		1,293
Foreign currency translation	—		—		—		(169)		—	—		—		(169)
Net loss	—		—		—		—		(4,718)	—		—		(4,718)
Balance, June 30, 2022	26,869,938	$	263	$	93,208	$	(122)	$	(62,692)	(442,303)	$	(6)	$	30,651


							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
Stock-based compensation	—		—		113		—		—	—		—		113
Foreign currency translation	—		—		—		20		—	—		—		20
Net loss	—		—		—		—		(56,097)	—		—		(56,097)
Balance, June 30, 2023	27,532,064	$	266	$	94,551	$	(248)	$	(125,898)	(321,673)	$	(5)	$	(31,334)

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)


	Six Months Ended June 30,
(in thousands)	2023		2022
Operating activities:
Net loss	$	(56,290)	$	(6,762)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Net income from discontinued operations		(630)		(576)
Deferred income tax provision (benefit)		(2,395)		3
Depreciation and amortization on plant, property, and equipment		98		112
Amortization of deferred financing costs		415		415
Amortization of debt discount		100		100
Loss on disposals of property, plant and equipment		86		—
Bad debt expense		(205)		(101)
Stock-based compensation		—		577
Paid-in-kind interest		883		—
Impairment expense		47,900		—
Changes in operating assets and liabilities:
Accounts receivable		10,505		2,137
Contract assets		4,724		(787)
Other current assets		2,478		177
Other assets		1,493		(2,219)
Accounts payable		(561)		(1,251)
Accrued and other liabilities		(1,872)		(601)
Contract liabilities		(5,603)		(1,122)
Net cash provided by (used in) operating activities, continuing operations		1,126		(9,898)
Net cash used in operating activities, discontinued operations		(94)		(365)
Net cash provided by (used in) operating activities		1,032		(10,263)
Investing activities:
Proceeds from sale of property, plant and equipment		235		—
Purchase of property, plant, and equipment		—		(438)
Net cash provided by (used in) investing activities		235		(438)
Financing activities:
Repurchase of stock-based awards for payment of statutory taxes due on stock-based compensation		(90)		(163)
Proceeds from short-term borrowings		196,675		144,220
Repayments of short-term borrowings		(205,052)		(134,673)
Proceeds from long-term debt		6,750		—
Repayments of long-term debt		—		(525)
Net cash (used in) provided by financing activities		(1,717)		8,859
Effect of exchange rate change on cash		—		16
Net change in cash, cash equivalents and restricted cash		(450)		(1,826)
Cash, cash equivalents and restricted cash, beginning of period		963		2,950
Cash, cash equivalents and restricted cash, end of period	$	513	$	1,124

Supplemental Disclosures:
Cash paid for interest	$	3,095	$	2,292
Cash paid for income taxes, net of refunds	$	44	$	—

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. 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.

In connection with the Company filing the Bankruptcy Petitions (as defined below), trading of the Company's common stock on the NYSE American LLC (the “NYSE American”) was suspended on July 22, 2023, and the delisting was effective August 11, 2023, 10 days after the NYSE American filed a Form 25 with the SEC. The Company's common stock is currently quoted on the OTC Pink Market operated by OTC Markets Group Company under the symbol "WLMSQ."

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

Going Concern

On July 22, 2023, the Company and its subsidiaries, Williams Industrial Services Group, L.L.C. (“WISG”), Williams Plant Services, LLC (“WPS”), Williams Specialty Services, LLC (“WSS”), Williams Industrial Services, LLC (“WIS”), WISG Electrical, LLC (“WISG Electrical”), Construction & Maintenance Professionals, LLC (“CMP”), Williams Global Services, Inc., Steam Enterprises, LLC, GPEG, LLC, Global Power Professional Services Inc., WISG Canada Ltd., WISG Nuclear Ltd. and WISG Electrical Ltd. (collectively with the Company, the “Debtors”), filed voluntary petitions (the “Bankruptcy Petitions”) under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the District of Delaware (such court, the “Court” and such cases, the “Cases”). The Cases are being jointly administered under the caption In re Williams Industrial Services Group Inc., et al. On July 25, 2023, the Bankruptcy Court issued orders approving "first-day" relief motions on an interim basis, granting the Company authorization for certain actions, including entering into a

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Superpriority Senior Secured Revolving Credit and Security Agreement and a Superpriority Senior Secured Term Loan, Guarantee, and Security Agreement (collectively the “DIP Credit Facilities”) and paying employee wages and benefits.

Despite the bankruptcy filing, the Debtors will continue their operations as "debtors-in-possession" under the jurisdiction of the Court and actively pursue a structured sale of the Transferred Assets (as defined below) through a competitive bidding and auction process under Section 363 of the Bankruptcy Code. The outcome of the Chapter 11 proceedings and the Company's ability to successfully execute the structured sale of the Transferred Assets remain uncertain and depend on various factors, including Court approvals, negotiations with creditors, and general economic conditions. After the sale, the Company anticipates the remaining business will undergo liquidation via a Chapter 11 plan or conversion to Chapter 7. As such, the financial statements do not include any adjustments that might result from the potential outcome of these uncertainties.

These significant events and developments raise substantial doubt about the Company's ability to continue as a going concern. Continuation as a going concern is dependent upon the Company’s ability to successfully continue its operations during the Chapter 11 process, negotiate a purchase agreement, and take other steps to manage its liquidity. If the Company's liquidity improvement plan and the above-mentioned DIP Credit Facilities do not have the intended effect of addressing the Company's liquidity problems through the Chapter 11 process, the Company may be required to liquidate under Chapter 7 of the Bankruptcy Code. For additional information regarding our ongoing liquidity constraints and the DIP Credit Facilities, see below under “Note 2—Liquidity” and “Note 9—Debt” to the unaudited condensed consolidated financial statements included in this Form 10-Q.

NOTE 2—LIQUIDITY

As mentioned above, the Company and its subsidiaries, filed the Bankruptcy Petitions with the Court under Chapter 11 of the Bankruptcy Code. The Cases are being jointly administered under the caption In re Williams Industrial Services Group Inc., et al. The Debtors will continue their operations in the ordinary course of business as debtors-in-possession and pursue a structured sale of the Transferred Assets (as defined below) pursuant to a competitive bidding and auction process under Section 363 of the Code.

On July 22, 2023, prior to the filing of the Bankruptcy Petitions, the Company and certain subsidiaries (the “Sellers”) entered into a “stalking horse” Asset Purchase Agreement (the “Purchase Agreement”) with EnergySolutions Nuclear Services, LLC (“EnergySolutions”), pursuant to which, among other things, the Sellers will sell substantially all of their assets relating to (i) the business of providing a broad range of construction and maintenance services to customers in the nuclear, conventional power (fossil, hydro, natural gas), energy delivery, water and wastewater, pulp and paper, chemical and government industries, (ii) solely to the extent conducted pursuant to certain contracts of WIS, certain non-unionized pulp and paper operations, and (iii) the business as conducted by WPS and WSS (collectively, clauses (i) – (iii) are referred to as the “Business”, and the assets related to the Business and as more fully described in the Purchase Agreement, as the “Transferred Assets”). WIS will retain its water and wastewater business, the non-unionized pulp and paper business not included as part of the Business and its transmission and distribution business, and the Sellers will retain any other business not set forth in clauses (i) – (iii) above. The Purchase Agreement provides that the aggregate consideration to be paid by EnergySolutions for the sale of all of the Transferred Assets and the obligations of Sellers as set forth in the Purchase Agreement shall be an amount in cash equal to the sum of $60.0 million, less (i) any deductions on account of certain cure costs that may be required to be paid pursuant to the Bankruptcy Code in order to cure monetary defaults under certain contracts assumed and assigned to EnergySolutions and (ii) the aggregate amount of all overdue payables as of 11:59 p.m. E.T. on the day that is six business days prior to the closing date, subject to certain limitations. As additional consideration for the Transferred Assets, EnergySolutions will assume certain liabilities of the Sellers relating to the Business at the closing. The transactions are part of a sale process under Section 363 of the Bankruptcy Code that will be subject to approval by the Court and compliance with agreed upon and Court-approved bidding procedures allowing for the submission of higher or otherwise better offers and satisfaction of other agreed-upon conditions. In accordance with the sale process under Section 363 of the Bankruptcy Code, notice of the proposed sale to EnergySolutions was given to third parties and competing bids are being solicited. The Company will manage the bidding process and evaluate the bids, in consultation with its advisors and as overseen by the Court.

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In connection with filing the Bankruptcy Petitions and the entry by the Court of the Interim DIP Order on July 25, 2023, the Debtors entered into the DIP Credit Facilities. The DIP Revolving Credit Agreement allows the Debtors to access up to the lesser of the Borrowing Base (as defined in the DIP Revolving Credit Agreement) or $12.0 million, less the amount of all Prepetition Revolving Credit Obligations. The DIP Term Loan Agreement provides the Debtors with a secured superpriority debtor-in-possession term loan facility not to exceed $19.5 million, with an immediate availability of $14.0 million upon the entry of the Interim DIP Order and the balance of which will be available after entry of the final order by the Court, which has not been obtained at this time. Borrowings under the DIP Credit Facilities are senior secured obligations of the Debtors, secured by superpriority liens on the assets of the Debtors, subject to customary exceptions. The DIP Credit Agreements contain various customary covenants, as well as covenants mandating compliance by the Debtors with a 13-week budget, variance testing, and reporting requirements. The proceeds from the DIP Credit Facilities may be used for, among other things, post-petition working capital, expenses related to the bankruptcy proceedings, payment of court-approved adequate protection obligations, and other court-approved purposes.

In addition, the filing of the Bankruptcy Petitions constituted an event of default that accelerated the Company’s and the other Debtors’ obligations under its then-outstanding debt, including approximately $15.7 million under the Revolving Credit Facility, approximately $35.6 million under the Term Loan, and approximately $0.8 million under the Wynnefield Notes. These debt instruments provide that, as a result of the Bankruptcy Petitions, the principal, interest and any prepayment premiums due thereunder shall immediately become due and payable. Any efforts to enforce payment obligations under these debt instruments are automatically stayed as a result of the Bankruptcy Petitions, and the creditors’ rights of enforcement in respect of the debt instruments are subject to the applicable provisions of the Bankruptcy Code.

During the first six months ended June 30, 2023, the Company relied on borrowings under the Revolving Credit Facility, additional borrowings under the Term Loan and the Wynnefield Notes (each as defined in “Note 9—Debt”), and sought to diligently manage its working capital as its principal sources of liquidity prior to filing the Bankruptcy Petitions. Despite the positive cash flows from operations during this period, the Company experienced a significant increase in negative cash flows. As a result, the Company's cash position continued to decrease, leading to negative total cash flows for the six months ended June 30, 2023. These negative cash flows were primarily driven by the following factors:

●

Difficulties managing short-term negative cash flows that resulted from, among other things, having to fund significant weekly craft labor payrolls on large outage projects before those payrolls could be billed to the Company’s customers and collected.

●

Ongoing losses incurred on fixed price contracts in the Company's Florida and Texas water business.

●

Costs related to the Company’s exit from its Tampa, Florida-based transmission and distribution operations and its Norwalk, Connecticut-based transmission and distribution operations, both of which utilized cash resources and negatively impacted liquidity.

●

Costs related to exiting the Company’s chemical projects in Texas.

●

Challenges with the timing of billing and collecting cash from customers, particularly in periods with high revenues.

●

Funding certain of the Company’s past due accounts payable, the balances for which had become larger than the Company’s vendors were willing to accept. For this reason, the Company had to make payments to certain vendors to either reduce the amounts that were past due or otherwise bring such vendors current.

●

The Company has been operating with a high level of borrowings as it has had to, among other things, fund prior period losses, and therefore when revenues were growing significantly in the first six months of 2023, largely as a result of increased nuclear business due to a significant customer outage, the Company had to enter into amendments to the Revolving Credit Facility and the Term Loan to access additional funding to compensate for its working capital requirements.

●

The Company’s borrowings under the Revolving Credit Facility and Term Loan both bore higher rates of interest than were in effect in prior periods and these higher interest charges need to be funded by the Company, to the extent not deferred.

●

The amendments to the Revolving Credit Facility and the Term Loan in the first half of 2023 involved the incurrence by the Company of out-of-pocket counsel fees, both for the Company and for each of the lender groups involved, as well as to the Company’s financial advisors.

●

The Company incurred expenses in the first and second quarter of 2023 in connection with its ongoing review of strategic alternatives. These expenses included the fees and expenses of the Company’s financial advisors, tax advisors, and counsel.

●

Notwithstanding the Company’s materially higher revenues in the first six months of 2023, the Company was unable to convert pipeline opportunities into revenue sufficient to fund the losses and costs referred to above as well as fund its working capital requirements.

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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: costs related to the Chapter 11 Cases; cash required generally for funding ongoing operations, projects and commitments; 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.

To address the negative cash flows in the Company’s business over recent quarters, the Company conducted a comprehensive strategic alternatives process while concurrently taking aggressive steps to improve its liquidity and profitability. The implementation of these initiatives was part of a comprehensive liquidity plan, developed and implemented in 2022, which ultimately was unable to resolve ongoing liquidity issues and resulted in the Company filing the Bankruptcy Petitions.

Following the anticipated completion of the sale of the Business, the remainder of the Company is currently expected to undergo liquidation under a Chapter 11 plan or conversion to Chapter 7 of the Bankruptcy Code. The Company cannot provide any assurance that it will be able to successfully complete a sale of the Business or that it will be able to continue to fund its operations throughout the Chapter 11 process.

The Company made significant amendments to its Revolving Credit Facility (as defined below) and Term Loan (as defined below) during 2022 and 2023. In the third and fourth quarters of 2022, as well as the first and second quarters of 2023, the Company entered into a total of five separate amendments to these agreements. The first two amendments deferred principal payments on the Term Loan from January 1, 2023, to January 9, 2023, and revised certain terms in both the Revolving Credit Facility and the Term Loan. During the first quarter of 2023, the third and fourth amendments provided for delayed draw term loans under the Term Loan, with $1.5 million in immediate funding and an additional $3.5 million funded at the time of the fifth amendment. The fifth amendment, executed on April 4, 2023, increased the interest payable by the Company on certain stated events related to the Term Loan. Additionally, on the same date, the Company agreed to pay PNC an additional exit fee of $0.6 million related to the Revolving Credit Facility. Furthermore, during the first quarter of 2023, the Company issued two unsecured promissory notes (“Wynnefield Notes") totaling $750,000 to the Wynnefield Lenders (as defined in “Note 9—Debt”).

The Company's liquidity plan, including the utilization of DIP Credit Facilities and the implementation of various strategic initiatives, is intended to support the Company's ongoing operations during the Chapter 11 process. The Company has been diligently working on exiting certain underperforming operations since 2022, including the discontinuation of water projects in Florida and Texas, as well as exiting transmission and distribution operations in Florida and Connecticut, and underperforming chemical projects in Texas. These measures, coupled with the filing for Chapter 11 bankruptcy protection, are expected to enable the Company to continue operating in the ordinary course of business during the Chapter 11 process.

While the core nuclear and fossil business exceeded the Company’s revenue forecast for the first half of 2023, and is continuing to perform well, revenue is expected to fall in the second half of 2023, as the Company’s outage services for a large customer concluded at the end of the second quarter. This anticipated revenue decline poses greater liquidity challenges, despite the availability of DIP Revolving Credit Agreement and DIP Term Loan Agreement funding. As noted above, EnergySolutions and the Company signed the Purchase Agreement (as defined above) pursuant to which EnergySolutions will acquire the Business, which sale is being facilitated through Section 363 of the Chapter 11 Bankruptcy Code. However, if the Company is unable to complete the sale of the business pursuant to the Section 363 sale process and 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, the Company may be required to liquidate under Chapter 7 of the Bankruptcy Code.

In conclusion, the significant events and developments, including the negative cash flows, Chapter 11 bankruptcy filing, potential sale of assets, and liquidity challenges, raise substantial doubt about the Company's ability to continue as a going concern. The Company remains focused on continuing its operations during the Chapter 11 process and successfully completing the sale of the Business.

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NOTE 3—RECENT ACCOUNTING PRONOUNCEMENTS

Recently Adopted Accounting Pronouncements

The Company did not implement any new accounting pronouncements during the first six months of 2023.

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 $3.2 million with a present value of $2.2 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 first six months of 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 June 30,				Six Months Ended June 30,
Lease Cost/(Sublease Income) (in thousands)	2023		2022		2023		2022
Operating lease cost	$	513	$	573	$	1,055	$	1,119
Short-term lease cost		1,535		1,611		4,226		3,228
Sublease income		—		(15)		(15)		(30)
Total lease cost	$	2,048	$	2,169	$	5,266	$	4,317

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Lease cost related to finance leases was not significant for the three and six months ended June 30, 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	June 30, 2023		December 31, 2022
Lease Assets
Right-of-use assets	Other long-term assets	$	3,485	$	4,223

Lease Liabilities
Short-term lease liabilities	Other current liabilities	$	1,301	$	1,603
Long-term lease liabilities	Other long-term liabilities		2,818		3,010
Total lease liabilities		$	4,119	$	4,613

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


		Six Months Ended June 30,
(dollars in thousands)	2023		2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash used by operating leases	$	1,145	$	1,211
Right-of-use assets obtained in exchange for new operating lease liabilities		504		2,854
Weighted-average remaining lease term - operating leases		5.33 years		5.70 years
Weighted-average remaining lease term - finance leases		0.73 years		1.73 years
Weighted-average discount rate - operating leases		9%		9%
Weighted-average discount rate - finance leases		9%		9%

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


	Operating Leases		Finance Leases

Six Months Ended June 30,	(in thousands)
Remainder of 2023	$	910	$	3
2024		1,172		1
2025		658		-
2026		531		-
2027		463		-
Thereafter		1,483		-
Total lease payments	$	5,217	$	4
Less: interest		(1,102)		-
Present value of lease liabilities	$	4,115	$	4

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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.

As of June 30, 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)	June 30, 2023		December 31, 2022
Liabilities:
Current liabilities of discontinued operations	$	113	$	110
Liability for pension obligation		2,242		2,244
Liability for uncertain tax positions		511		1,235
Long-term liabilities of discontinued operations		2,753		3,479
Total liabilities of discontinued operations	$	2,866	$	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 June 30,				Six Months Ended June 30,
(in thousands)	2023		2022		2023		2022
Loss on disposal - Electrical Solutions		—		17		—		17
Interest expense		44		30		88		30
Loss from discontinued operations before income tax		(44)		(47)		(88)		(47)
Income tax benefit		(721)		(640)		(718)		(623)
Income from discontinued operations	$	677	$	593	$	630	$	576

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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.

On July 20, 2023, the Company made a strategic decision to exit the water projects business in Florida and Texas. This led to the discontinuation of a significant portion of WIS's business and operations in the water projects division. As a result of the exit, the Company made financial adjustments, reducing its contract liability by $3.5 million and revenue by $0.6 million for the three-month and six-month periods ending June 30, 2023. The Company will continue to focus on non-union pulp and paper mill maintenance and repair activities under WIS. Additionally, on July 25, 2023, the Company took steps to reject the customer contracts associated with the water projects by filing motions with the Court. The Court will assess these motions at a hearing scheduled for August 17, 2023.

Disaggregated revenue by type of contract was as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2023		2022		2023		2022
Cost-plus reimbursement contracts	$	77,244	$	39,771	$	167,317	$	94,026
Fixed-price contracts		6,099		16,288		19,496		31,592
Total	$	83,343	$	56,059	$	186,813	$	125,618

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


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2023		2022		2023		2022
United States	$	83,343	$	56,059	$	186,813	$	120,116
Canada		-		-		-		5,502
Total	$	83,343	$	56,059	$	186,813	$	125,618

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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: