What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2023-03-31 compared with 2022-03-29 · 73 added, 66 removed, 128 unchanged (52% of the section changed)

14 unchanged sentences

In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in the 2013 Internal Control-Integrated Framework .

Management has excluded the DanChem operations from its assessment of internal control over financial reporting as of December 31, 2021 because this material acquisition closed in the fourth quarter of 2021.

Total assets of $42.0 million and total revenue of $5.7 million associated with the DanChem operations represent approximately 58% and 2% respectively, of the related financial amounts of the Specialty Chemicals Segment as of, and for the year ended December 31, 2021.

Based on its evaluation, management has concluded that the Company’s internal control over financial reporting was not effective at the reasonable assurance level as of December 31, 2022.

2 unchanged sentences

Management has determined that the Company had the following material weaknesses in its internal control over financial reporting:

• Entity Level Activities - Management did not maintain appropriately designed entity-level controls impacting the control environment, risk assessment procedures, and effective monitoring activities to prevent or detect potential material misstatements to the financial statements.

• Entity Level Activities - Management did not maintain appropriately designed entity-level controls impacting the control environment and effective monitoring activities to prevent or detect potential material misstatements to the financial statements.

These deficiencies were attributed to:

• Lack of structure and responsibility, insufficient number of qualified resources due to significant turnover in key personnel leading to insufficient oversight and accountability over the performance of controls;

• Insufficient identification and assessment of risks impacting the design and implementation of internal controls over financial reporting;

• Insufficient evaluation and determination as to whether the components of internal control were present and functioning based upon evidence maintained for certain management review controls and activity level controls across a significant portion of the Company's financial statement areas.

• Control Activities - Management did not have effective policies and procedures or adequate selection and development of effective control activities, which resulted in the following additional material weaknesses:

• Inventory - Management did not maintain effectively designed and implemented controls over the balances recorded within inventory, including controls over physical inventory counts performed during an interim period and the review for obsolescence of inventories.

• Revenue recognition – Management did not maintain effectively designed and implemented controls over recorded revenue and accounts receivable, including procedures over the existence and accuracy of data input for price and quantity as well as appropriate allocation of transaction price across identified performance obligations within the Company's contracts with customers.

• Period-end financial reporting, journal entries, reconciliations, and account analyses - Management did not maintain effectively designed and implemented controls to detect potential material misstatements to period-end financial statements and related footnote disclosures through review of account reconciliations and account analyses as well as other aspects of the financial statement preparation and review process.

• Inventory - Management did not appropriately design and implement controls over the existence, accuracy, completeness and valuation of inventory.

• Revenue recognition – Management did not maintain effectively designed and implemented controls over recorded revenue and accounts receivable, including procedures over the existence and accuracy of data input for price and quantity, review of sales contracts, as well as appropriate allocation of transaction price across identified performance obligations within the Company's contracts with customers.

• Period-end financial reporting, journal entries, reconciliations, and account analyses - Management did not maintain effectively designed and implemented controls to detect potential material misstatements to period-end financial statements through review of account reconciliations and account analyses on a timely basis as well as other aspects of the financial statement preparation and review process.

Additionally, management did not maintain effectively designed and implemented controls over the review of journal entries.

• Complex Accounting - Management did not appropriately design and implement management review controls at a sufficient level of precision around complex accounting areas including goodwill impairment, long-lived asset impairment and income taxes.

• Information Technology - Management did not fully design, implement and monitor general information technology controls in the areas of user access, cyber-security and segregation of duties for systems supporting many of the Company's internal control processes.

As a result of those segregation of duties deficiencies the related manual business process controls were determined to be ineffective.

While there were no material misstatements in 2022, these material weaknesses, individually or in the aggregate, could result in misstatements of accounts or disclosures in the consolidated financial statements that would not be prevented or detected on a timely basis.

6 unchanged sentences

• Providing relevant training on internal controls over financial reporting to control owners and control preparers

• Hiring accounting and finance resources with public company experience

• Evaluating and realigning roles and responsibilities of management

• Enhancing/designing/implementing controls over physical inventory counts and inventory valuation

• Enhancing/designing/implementing controls over revenue recognition and accounts receivable

• Enhancing/designing/implementing controls over period-end financial reporting, account reconciliation and account analyses processes

• Evaluating and realigning roles and responsibilities of control owners and control prepares to maintain segregation of duties

• Enhancing/designing/implementing controls over the inventory, revenue recognition and accounts receivable, period-end financial reporting, account analyses, and journal entry processes

• Enhancing/designing/implementing controls over accounting for complex areas

• Enhancing/designing/implementing controls over general information technology controls, including user access provisioning and cyber-security

As the Company continues to evaluate the control deficiencies that gave rise to the material weaknesses, the Company may determine additional remediation measures are necessary.

3 unchanged sentences

The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their cost.

Pursuant to Regulation S-K Item 308(b), this Annual Report on Form 10-K does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting.

c) Changes in Internal Control over Financial Reporting

Other than the material weaknesses described above, there were no changes in the Company’s internal controls over financial reporting during the fiscal quarter ended December 31, 2022 that materially affected, or are reasonably likely to have a materially affect, on our internal control over financial reporting.

BDO USA, LLP, our independent registered public accounting firm, has issued their report on our internal control over financial reporting as of December 31, 2022, which is included in Item 8 under the heading “Report of Independent Registered Public Accounting Firm."

Other Information

6 unchanged sentences

The Company's Board of Directors has adopted a Code of Conduct that applies to the Company's Chief Executive Officer, Chief Financial Officer and corporate and divisional controllers.

The Code of Conduct is available on the Company's website at www.synalloy.com .

The Code of Conduct is available on the Company's website at www.ascentco.com .

Any amendment to, or waiver from, this Code of Conduct will be posted on the Company's website.

2 unchanged sentences

The members of the Audit Committee are Henry L.

Guy, Benjamin Rosenzweig and John P.

Mazzaferro, Jr.

Audit Committee Financial Expert.

4 unchanged sentences

Executive Compensation

In accordance with General Instruction G(3), information called for by Part III, Item 11, is incorporated herein by reference from the information appearing under the caption "Board of Directors and Committees - Compensation Committee Interlocks and Insider Participation," "Director Compensation," "Discussion of Executive Compensation" and "Compensation Committee Report" in the definitive Proxy Statement for the 2022 Annual Meeting of Stockholders, which definitive Proxy Statement will be filed electronically with the SEC pursuant to Regulation 14A.

and Insider Participation," "Director Compensation," "Discussion of Executive Compensation" and "Compensation Committee Report" in the definitive Proxy Statement for the 2023 Annual Meeting of Stockholders, which definitive Proxy Statement will be filed electronically with the SEC pursuant to Regulation 14A.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

9 unchanged sentences

Total 118,142 $ 13.66 668,523

1 Represents shares remaining available for issuance under the 2015 Stock Awards Plan

1 Represents shares remaining available for issuance under the 2022 Omnibus Equity Incentive Plan

Non-employee directors are paid an annual retainer of $102,000, and each director has the opportunity to elect to receive 100% of the retainer in restricted stock, which vest quarterly over a one year period.

The number of restricted shares is determined by the average of the high and low sale price of the Company's stock on the day prior to the Annual Meeting of Shareholders.

On May 20, 2021, the Company issued an aggregate of 22,026 shares of restricted stock to non-employee directors in lieu of $214,000 of their annual cash retainer fees.

On May 25, 2021, the Company also issued an aggregate of 20,000 additional shares of restricted stock to the Company's new Chairman of the Board due to the increased responsibilities of the role.

Issuance of the shares granted to the directors is not registered under the Securities Act of 1933 and the shares are subject to forfeiture in whole or in part upon the occurrence of certain events.

The above table does not reflect these shares issued to non-employee directors.

In 2022, the Company issued an aggregate of 17,173 shares of restricted stock to non-employee directors in lieu of $0.3 million of their annual cash retainer fees.

The Company also issued an aggregate of 65,000 additional shares of restricted stock to the Company's Executive Chairman of the Board consisting of 15,000 restricted stock units and 50,000 performance stock units.

The restricted stock units will vest 50% on the first and second anniversary of the award while the performance stock units vest upon the achievement of specific 30-day volume weighted average price targets of the Company's common stock.

Certain Relationships and Related Transactions, and Director Independence

1 unchanged sentence

Principal Accounting Fees and Services

Independent Registered Public Accounting Firm" in the definitive Proxy Statement for the 2022 Annual Meeting of Shareholders, which definitive Proxy Statement will be filed electronically with the SEC pursuant to Regulation 14A.

In accordance with General Instruction G(3), information called for by Part III, Item 14, is incorporated by reference from the information appearing under the caption "Independent Registered Public Accounting Firm - Fees Paid to Independent Registered Public Accounting Firm" and "– Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm" in the definitive Proxy Statement for the 2023 Annual Meeting of Shareholders, which definitive Proxy Statement will be filed electronically with the SEC pursuant to Regulation 14A.

Exhibits and Financial Statement Schedules

1 unchanged sentence

Financial Statements:

The following consolidated financial statements of Synalloy Corporation are included in Part II, Item 8:

The following consolidated financial statements of Ascent Industries Co.

are included in Part II, Item 8:

Consolidated Balance Sheets as of December 31, 2022 and 2021

Consolidated Statements of Operations for the years ended December 31, 2021 and 2020

Consolidated Statements of Income for the years ended December 31, 2022 and 2021

Consolidated Statements of Cash Flows for the years ended December 31, 2022 and 2021

2 unchanged sentences

Financial Statements Schedule:

The following consolidated financial statements schedule of Synalloy Corporation is included in Item 15:

The following consolidated financial statements schedule of Ascent Industries Co.

is included in Item 15:

Schedule II - Valuation and Qualifying Accounts

7 unchanged sentences

Deducted from asset account:

Allowance for credit losses $ 496 $ ( 68 ) $ 118 (a)

$ ( 330 ) $ 216

Inventory reserves $ 718 $ 1,649 $ 216 (a)

$ ( 1,311 ) $ 1,272

Inventory reserves $ 1,272 $ 3,052 $ — $ ( 627 ) $ 3,697

Year ended December 31, 2021

Deducted from asset account:

Allowance for credit losses $ 70 $ 440 $ 450 (b)

Inventory reserves $ 718 $ 1,649 $ 216 (a)

$ ( 1,311 ) $ 1,272

Inventory reserves $ 747 $ 271 $ — $ ( 300 ) $ 718

(a) DanChem acquired reserve on October 22, 2021

(b) Amount charged to retained earnings upon adoption of ASC 326 on January 1, 2020.

Exhibit Index

Regulation S-K

Stock Purchase Agreement, dated as of October 22, 2021, by and between the Company and DanChem Holdings, LLC, incorporated by reference to Registrant’s Form 8-K filed October 25, 2021†

Incorporated by Reference

Exhibit Number Exhibit Description

Form File No.

Exhibit Filing Date

Stock Purchase Agreement, dated as of October 22, 2021, by and between the Company and DanChem Holdings, LLC.†

8-K 001-05200 2.1 October 25, 2021

Amended and Restated Certificate of Incorporation of Registrant

Amended and Restated Bylaws of Registrant, incorporated by reference to Registrant's Form 8-K filed March 21, 2022

Form of Common Stock Certificate, incorporated by reference to Registrant's Form 10-Q for the period ended March 31, 2001

8-K 001-05200 3.1 August 10, 2022

Amended and Restated Bylaws of Registrant

8-K 001-05200 3.2 August 10, 2022

Description of Common Stock

Amended and Restated Synalloy Corporation 2015 Stock Awards Plan, incorporated by reference to Registrants's Form 10-Q for the period ended June 30, 2021

2011 Long-Term Incentive Stock Option Plan, incorporated by reference to Registrant's Proxy Statement for the 2011 Annual Meeting of Shareholders

Agreement between Registrant's Bristol Metals, LLC subsidiary and the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union Local 5852-22, dated March 12, 2018, but effective January 6, 2018, incorporated by reference to Registrant's Form 10-K for the year ended December 31, 2017

Agreement between Registrant's Bristol Metals, LLC subsidiary and the United Steelworkers of America Local 4586, dated August 1, 2019, incorporated by reference to Registrant's Form 10-K for the period ended December 31, 2019

10-K 001-05200 4.2 March 29, 2022

Amended and Restated Synalloy Corporation 2015 Stock Awards Plan

10-Q 001-05200 10.2 August 9, 2021

2011 Long-Term Incentive Stock Option Plan

DEF 14A 000-19687 A March 25, 2011

2022 Omnibus Equity Incentive Plan

DEF 14A 001-05200 A April 27, 2022

10-K 000-19687 10.11 March 13, 2018

Agreement between Registrant's Bristol Metals, LLC subsidiary and the United Steelworkers of America Local 4586, dated August 1, 2019

10-K 000-19687 10.31 March 6, 2020

Agreement between Registrant’s Specialty Pipe & Tube, Inc.

subsidiary and the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union Local 1375-18, dated July 1, 2020, incorporated by reference to Registrant's Form 10-K for the year ended December 31, 2020

Credit Agreement, dated as of January 15, 2021, between Registrant and BMO Harris Bank N.A., incorporated by reference to Registrant’s Form 8-K filed on January 19, 2021

Joinder Agreement, dated November 5, 2021, between Registrant and BMO Harris Bank N.A., incorporated by reference to Registrant's Form 10-Q for the period ended September 30, 2021

Employment Agreement, dated as of October 26, 2020, between Registrant and Christopher G.

Hutter, incorporated by reference to Registrant’s Form 8-K filed on October 28, 2020

Employment Agreement, dated as of February 5, 2021, between Registrant and Sally M.

Cunningham, incorporated by reference to Registrant's Form 8-K filed on February 5, 2021

Offer Letter, dated as of August 1, 2021, between Registrant and Aaron Tam, incorporated by reference to Registrant’s Form 8-K filed on August 30, 2021

Confidential Separation and Release Agreement, dated as of May 14, 2021, between Registrant and J.

Greg Gibson, incorporated by reference to Registrant's Form 10-Q for the period ended June 30, 2020

Confidential Separation and Release Agreement, dated as of August 27, 2021, between Registrant and Sally M.

Asset Purchase Agreement, dated as of June 29, 2018, but with a closing effective date of July 1, 2018, between Marcegaglia USA, Inc.

and Registrant's Bristol Metals, LLC subsidiary, incorporated by reference to Registrant's Form 10-Q for the period ended June 30, 2018

Asset Purchase Agreement, dated as of November 30, 2018, between American Stainless Tubing, Inc.

(now HLM Legacy Group, Inc.) and Registrant's ASTI Acquisition, LLC (now American Stainless Tubing, LLC) subsidiary, incorporated by reference to Registrant's Form 10-K for the period ended December 31, 2018.

Third Amended and Restated Master Lease Agreement, dated as of September 10, 2020, between Registrant and Store Master Funding XII, LLC, incorporated by reference to Registrant’s Form 10-Q for the period ending September 30, 2020

subsidiary and the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union Local 1375-18, dated July 1, 2020

10-K 001-05200 10.9 March 9, 2021

Credit Agreement, dated as of January 15, 2021, between Registrant and BMO Harris Bank N.A.

8-K 001-05200 99.1 January 19, 2021

Joinder Agreement, dated November 5, 2021, between Registrant and BMO Harris Bank N.A.

10-Q 001-05200 10.1 November 9, 2021

Employment Agreement between Registrant and Christopher G.

8-K 001-05200 99.3 October 28, 2020

Offer Letter, dated as of August 1, 2021, between Registrant and Aaron Tam.

8-K 001-05200 10.1 August 30, 2021

Incorporated by Reference

Exhibit Number Exhibit Description

Form File No.

Exhibit Filing Date

Third Amended and Restated Master Lease Agreement, dated as of September 10, 2020, between Registrant and Store Master Funding XII, LLC

10-Q 001-05200 10.1 November 9, 2020

Subsidiaries of the Registrant

Consent of BDO USA LLP, independent registered public accounting firm

Consent of KPMG LLP, independent registered public accounting firm

Rule 13a-14(a)/15d-14(a) Certifications of Chief Executive Officer

12 unchanged sentences

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SYNALLOY CORPORATION

By /s/ Christopher G.

ASCENT INDUSTRIES CO.

/s/ Christopher G.

Christopher G.

2 unchanged sentences

March 31, 2023

Chief Financial Officer

(Principal Financial and Accounting Officer)

March 31, 2023

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

3 unchanged sentences

March 31, 2023

March 29, 2022

Mazzaferro, Jr.

March 29, 2022

/s/ Christopher G.

2 unchanged sentences

March 31, 2023

Chief Financial Officer

(Principal Financial and Accounting Officer)

March 31, 2023

/s/ Aldo J Mazzaferro, Jr.

Mazzaferro, Jr.

March 31, 2023

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures