What changed in this filing

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Item 9A. Controls and Procedures

2024-04-01 compared with 2023-03-31 · 76 added, 54 removed, 147 unchanged (47% of the section changed)

17 unchanged sentences

A material weakness, as defined in the standards established by the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

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 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 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 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.

We previously identified material weaknesses in our internal control over financial reporting that continue to exist as of December 31, 2023:

• Information Technology - Management did not design and maintain effective information technology (IT) general controls in the areas of user access, change management, segregation of duties, and cyber-security for systems supporting many of the Company's key financial reporting processes.

As a result, IT application controls and business process controls that are dependent on the ineffective IT general controls, or that rely on data produced from systems impacted by the ineffective IT general controls, are also deemed ineffective, which affects substantially all financial statement account balances and disclosures within the Company.

• Inventory - Management did not appropriately design and maintain effective controls over inventory.

• Revenue recognition – Management did not design and maintain effective controls over revenue and accounts receivable.

• Period-end financial reporting, journal entries, reconciliations, and account analyses - Management did not design and maintain effective controls to detect potential material misstatements to period-end financial statements through review of account reconciliations and account analyses on a timely basis.

Additionally, management did not design and maintain effective controls over the review of journal entries.

• Complex Accounting - Management did not design and maintain management review controls at a sufficient level of precision around complex accounting areas such as income taxes.

While there were no material misstatements in 2023, 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.

Accordingly, management has concluded that these control deficiencies constitute material weaknesses.

Management’s Plan to Remediate the Material Weakness

Management plans to implement measures designed to ensure that we improve our internal controls over financial reporting and remediate the material weaknesses.

The remediation actions planned include development of policies and procedures and design and enhancement of internal controls over our financial reporting process as well as monitoring of the effectiveness of these controls.

Remediation Plan

In response to the identified deficiencies that aggregated to the aforementioned material weaknesses, management, with oversight from the Company's Audit Committee, is in the process of developing a detailed plan for remediation, including:

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

• Evaluating and realigning roles and responsibilities of management

• 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

Management’s Plan to Remediate the Remaining Material Weakness

This plan includes engaging an external advisor to assist with enhancing, designing, and implementing general information technology controls, including user access provisioning, cyber-security, and segregation of duties.

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.

Remediation of Previously Reported Material Weaknesses

Three material weaknesses reported in the prior year were remediated in 2023.

These material weaknesses were as follows:

• Entity Level Activitie s – 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:

◦ Management did not have an appropriate structure and assignment of responsibility, including an insufficient number of qualified resources due to significant turnover in key personnel leading to insufficient oversight and accountability over the performance of controls.

◦ Management had an 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.

• 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 and long-lived assets.

To respond to these material weaknesses, we have provided relevant training on internal controls over financial reporting to control owners and control preparers.

We have also engaged third-party consultants and advisors to assist us in designing and implementing controls necessary to remediate these material weaknesses, including thorough review and rationalization of our existing control and the completion of a robust risk assessment.

The new measures have been determined to have operated effectively for a sufficient period of time to conclude that the material weaknesses previously identified have been remediated as of December 31, 2023.

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, 2023 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."

Moss Adams, LLP, our independent registered public accounting firm, has issued their report on our internal control over financial reporting as of December 31, 2023, which is included in Item 8 under the heading “Report of Independent Registered Public Accounting Firm."

Other Information

Not applicable.

Our directors and officers (as defined in Section 16 of the Exchange Act ("Section 16") may from time to time enter into plans for the purchase or sale of Ascent stock that are intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act.

Any 10b5-1 trading arrangements adopted are precleared in accordance with Ascent's Insider Trading Policy and actual purchase or sale transactions made pursuant to such trading arrangements will be publicly disclosed in future Section 16 filings with the SEC.

No director or officer adopted , modified and/or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement" as defined in Item 408 under Regulation S-K of the Exchange Act, during the last fiscal quarter.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

16 unchanged sentences

Executive Compensation

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.

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 2024 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

10 unchanged sentences

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.

Non-employee directors are paid an annual retainer of $115,000.

Each non-employee director appointed to serve as a chairperson of a standing board committee receives the following annual retainer:

Audit Committee:

Compensation Committee:

Nominating and Corporate Governance Committee:

The committee chairperson retainer is in addition to the board retainer.

Each director has the opportunity to elect to receive 100% of the retainer in restricted stock with a minimum of $30,000 of the retainer in restricted stock.

The amount of the retainer elected to be paid in restricted stock vests 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.

In 2023, the Company issued an aggregate of 27,432 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

8 unchanged sentences

Consolidated Balance Sheets as of December 31, 2023 and 2022

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

Consolidated Statements of Income (Loss) for the years ended December 31, 2023 and 2022

Consolidated Statements of Cash Flows for the years ended December 31, 2023 and 2022

10 unchanged sentences

Schedule II Valuation and Qualifying Accounts

(in thousands) Balance at Beginning of Period Charged to (Reduction of) Cost and Expenses Other Deductions Balance at End of Period

(in thousands) Balance at Beginning of Period Charged to (Reduction of) Cost and Expenses Deductions Balance at End of Period

Year ended December 31, 2023

3 unchanged sentences

Deducted from asset account:

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

$ ( 1,311 ) $ 1,272

(a) DanChem acquired reserve on October 22, 2021

Inventory reserves $ 943 $ 2,615 $ ( 588 ) $ 2,970

Incorporated by Reference

4 unchanged sentences

8-K 001-05200 2.1 October 25, 2021

Asset Purchase Agreement by and among Specialty Pipe & Tube Operations LLC, Specialty Pipe & Tube, Inc., and Ascent Industries Co., as the sole shareholder of Specialty Pipe & Tube, Inc.

dated as of December 22, 2023

8-K 001-05200 2.1 December 29, 2023

Amended and Restated Certificate of Incorporation of Registrant

21 unchanged sentences

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

2 unchanged sentences

Exhibit Filing Date

Limited Consent, Second Amendment to Credit Agreement and Omnibus Amendment to Loan Documents with BMO Bank N.A.

and the other lenders party thereto dated as of December 22, 2023

8-K 001-05200 2.1 December 29, 2023

Employment Agreement between Registrant and Christopher G.

8-K 001-05200 99.3 October 28, 2020

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

Transition Services Agreement between Specialty Pipe & Tube Operations LLC and Ascent Industries Co.

dated as of December 22, 2023

8-K 001-05200 2.1 December 29, 2023

Employee Leasing Transition Services Agreement between Specialty Pipe & Tube Operations LLC and Ascent Industries Co.

dated as of December 22, 2023

8-K 001-05200 2.1 December 29, 2023

Subsidiaries of the Registrant

Consent of BDO USA LLP, independent registered public accounting firm

Consent of Moss Adams LLP, independent registered public accounting firm

Consent of BDO USA , P .C.

, independent registered public accounting firm

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

1 unchanged sentence

Certifications Pursuant to 18 U.S.C.

Ascent Industries Co.

Clawback Policy

101.INS* XBRL Instance Document

4 unchanged sentences

101.DEF* XBRL Taxonomy Extension Definition Linkbase

Incorporated by Reference

Exhibit Number Exhibit Description

Form File No.

Exhibit Filing Date

104 Cover Page Interactive Data File (formatted as Inline XBRL document and included in Exhibit 101*)

* In accordance with Regulation S-T, the XBRL-related information in Exhibit 101 to this Annual Report on Form 10-K shall be deemed "furnished" and not "filed."

** Constitutes management contract or compensatory plans

† Portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K.

2 unchanged sentences

ASCENT INDUSTRIES CO.

/s/ Christopher G.

Christopher G.

President and Chief Executive Officer

Bryan Kitchen

President, Chief Executive Officer and Director

(principal executive officer)

March 31, 2023

April 1, 2024

/s/ Ryan Kavalauskas

Ryan Kavalauskas

Chief Financial Officer

(Principal Financial and Accounting Officer)

March 31, 2023

(principal accounting and financial officer)

April 1, 2024

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.

2 unchanged sentences

Executive Chairman of the Board

March 31, 2023

April 1, 2024

/s/ Christopher G.

Christopher G.

Chief Executive Officer and Director

March 31, 2023

/s/ Aldo J Mazzaferro, Jr.

April 1, 2024

Mazzaferro, Jr.

March 31, 2023

Mazzaferro, Jr.

April 1, 2024

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