What changed in this filing

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Item 1. Financial Statements

2021-05-07 compared with 2020-11-04 · 101 added, 158 removed, 380 unchanged (41% of the section changed)

4 unchanged sentences

(in thousands, except share and per share data)

September 30,

CURRENT ASSETS:

Accounts receivable, net

Employee retention credit receivable

Contract assets

27 unchanged sentences

30,000,000 shares authorized;

17,211,498 and 16,830,930 shares issued as of September 30, 2020, and December 31, 2019, respectively

Treasury stock, at cost, 273,937 shares as of September 30, 2020 and December 31, 2019

18,474,170 and 17,211,498 shares issued as of March 31, 2021, and December 31, 2020, respectively

Treasury stock, at cost, 273,937 shares as of March 31, 2021 and December 31, 2020

Additional paid-in capital

7 unchanged sentences

(in thousands, except per share data)

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Cost of sales

Restructuring

OPERATING EXPENSES:

3 unchanged sentences

Operating (loss) income

OTHER EXPENSE, net:

OTHER INCOME (EXPENSE), net:

Interest expense, net

Total other expense, net

Total other income (expense), net

Net (loss) income before provision for income taxes

13 unchanged sentences

Treasury Stock

BALANCE, Balance at December 31, 2018

Stock issued for restricted stock

Stock issued under defined contribution 401(k) retirement savings plan

Share-based compensation

BALANCE, March 31, 2019

Stock issued for restricted stock

Stock issued under defined contribution 401(k) retirement savings plan

Share-based compensation

BALANCE, June 30, 2019

Stock issued for restricted stock

Stock issued under defined contribution 401(k) retirement savings plan

Share-based compensation

BALANCE, September 30, 2019

BALANCE, December 31, 2019

2 unchanged sentences

BALANCE, March 31, 2020

Stock issued for restricted stock

Share-based compensation

BALANCE, June 30, 2020

BALANCE, December 31, 2020

Stock issued for restricted stock

Stock issued under defined contribution 401(k) retirement savings plan

Share-based compensation

Shares withheld for taxes in connection with issuance of restricted stock

Sale of common stock, net

BALANCE, September 30, 2020

BALANCE, March 31, 2021

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

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(in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)

Adjustments to reconcile net cash (used in) provided by operating activities:

Net (loss) income

Adjustments to reconcile net cash used in operating activities:

Depreciation and amortization expense

7 unchanged sentences

Accounts receivable

Employee retention credit receivable

Contract assets

4 unchanged sentences

Other non-current assets and liabilities

Net cash (used in) provided by operating activities

Net cash used in operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

8 unchanged sentences

Principal payments on finance leases

Shares withheld for taxes in connection with issuance of restricted stock

Proceeds from sale of common stock, net

Net cash provided by (used in) financing activities

NET INCREASE (DECREASE) IN CASH

Net cash provided by financing activities

NET (DECREASE) INCREASE IN CASH

CASH beginning of the period

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars are presented in thousands, except share and per share data or unless otherwise stated)

(Dollars are presented in thousands, except share, per share and per employee data or unless otherwise stated)

NOTE 1 — BASIS OF PRESENTATION

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In the opinion of management, all adjustments, including normal recurring accruals, considered necessary for a fair presentation have been included.

Operating results for the three and nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the twelve months ending December 31, 2020, or any other interim period, which may differ materially due to, among other things, the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2019 , as supplemented by the risk factor set forth on our Current Report on Form 8-K filed April 17, 2020 and the risk factors set forth in Part II, Item 1A, “Risk Factors,” of this Quarterly Report, particularly in light of the novel coronavirus (COVID-19) pandemic and its effects on domestic and global economies.

To limit the spread of COVID-19, governments have imposed, and may continue to impose, among other things, travel and business operation restrictions and stay-at-home orders and social distancing guidelines, causing some businesses to adjust, reduce or suspend operating activities.

These disruptions and restrictions have, and may continue in the future to, adversely affect our operating results due to, among other things, reduced demand as a result of our customers having to adjust, reduce or suspend operating activities.

For more information, refer to the statements included in Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of this Quarterly Report under the caption “COVID-19 Pandemic.”

Operating results for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the twelve months ending December 31, 2021, or any other interim period, which may differ materially due to, among other things, the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2020 .

The December 31, 2020 condensed consolidated balance sheet was derived from audited financial statements, but does not include all disclosures required by GAAP.

This financial information should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 .

There have been no material changes in the Company’s significant accounting policies during the nine months ended September 30, 2020 as compared to the significant accounting policies described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 .

There have been no material changes in the Company’s significant accounting policies during the three months ended March 31, 2021 as compared to the significant accounting policies described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 .

Company Description

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The Company’s most significant presence is within the U.S.

wind energy industry, which accounted for 72% of the Company’s revenue during the first nine months of 2020 .

The Company meets its short term liquidity needs through cash generated from operations, its available cash balances, the Credit Facility (as defined below), equipment financing, and access to the public or private debt and equity markets and has the option to raise capital under the Company’s Form S-3 (as discussed below).

wind energy industry, which accounted for 63% and 74% of the Company’s revenue during the first three months of 2021 and 2020, respectively.

The Company typically meets its short term liquidity needs through cash generated from operations, its available cash balances, the Credit Facility (as defined below), equipment financing, and access to the public or private debt and/or equity markets, including the option to raise capital from the sale of our securities under the Form S-3 (as discussed below).

See Note 7, “Debt and Credit Agreements,” of these condensed consolidated financial statements for a complete description of the Credit Facility and the Company’s other debt.

Total debt and finance lease obligations at September 30, 2020 totaled $20,703, which includes current outstanding debt and finance leases totaling $9,350.

Total debt and finance lease obligations at March 31, 2021 totaled $17,803, which includes current outstanding debt and finance leases totaling $6,532.

The current outstanding debt includes $4,468 outstanding under the Company’s revolving line of credit.

Long-term debt includes $9,151 of Payroll Protection Program loans (“PPP Loans”), which may be forgiven if the Company meets certain requirements.

See Note 7, “Debt and Credit Agreements,” of these condensed consolidated financial statements for a complete description of the PPP Loans.

On August 18, 2020, the Company filed a “shelf” registration statement on Form S-3, which was declared effective by the Securities and Exchange Commission (the “SEC”) on October 13, 2020 (the “Form S-3”) and expires on October 12, 2023.

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Unless otherwise specified in the prospectus supplement accompanying the base prospectus, the Company would use the net proceeds from the sale of any securities offered pursuant to the shelf registration statement for general corporate purposes.

The Company's registration statement on Form S-3 filed on August 11, 2017, which was declared effective by the SEC on October 10, 2017 expired on October 10, 2020.

On July 31, 2018, the Company entered into an At Market Issuance Sales Agreement (the “ATM Agreement”) with Roth Capital Partners, LLC (the “Agent”).

Pursuant to the terms of the ATM Agreement, the Company may sell from time to time through the Agent shares of the Company’s common stock, par value $0.001 per share with an aggregate sales price of up to $10,000.

The Company will pay a commission to the Agent of 3% of the gross proceeds of the sale of the shares sold under the ATM Agreement and reimburse the Agent for the expenses of its counsel.

The Company did not issue any shares of its common stock under the ATM Agreement in 2019.

During the quarter ended September 30, 2020, the Company reinstated the ATM Agreement and issued 91,481 shares of the Company’s common stock thereunder.

The net proceeds (before upfront costs) to the Company from the sale of such shares were approximately $321 after deducting commissions paid of approximately $10.

The ATM Agreement was terminated in accordance with its terms on October 12, 2020.

In April 2020, the Company received $9,530 in funds under the U.S.

Paycheck Protection Program (“PPP”) and made repayments of $379 on May 13, 2020.

Refer to Note 7, “Debt and Credit Agreements,” of these condensed consolidated financial statements for more information, including information regarding potential forgiveness of the PPP Loans.

The Company anticipates that current cash resources (which includes proceeds from the PPP Loans), amounts available under the Credit Facility, cash to be generated from operations and any potential proceeds from the sale of further Company securities under the Form S-3 will be adequate to meet the Company’s liquidity needs for at least the next twelve months.

On March 9, 2021, the Company entered into an Equity Distribution Agreement (the “Equity Distribution Agreement”) with Craig-Hallum Capital Group, LLC (the “Manager”).

Pursuant to the terms of the Equity Distribution Agreement, the Company may sell from time to time through the Manager shares of the Company’s common stock, par value $0.001 per share with an aggregate sales price of up to $10,000.

The Company will pay a commission to the Manager of 2.75% of the gross proceeds of the sale of the shares sold under the Equity Distribution Agreement and reimburse the Manager for all expenses incident to the performance of its obligations under the Equity Distribution Agreement.

During the quarter ended March 31, 2021, the Company issued 1,100,000 shares of the Company’s common stock thereunder.

The net proceeds (before upfront costs) to the Company from the sale of such shares were approximately $6,436 after deducting commissions paid of approximately $182 and before deducting other expenses of $335.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law providing numerous tax provisions and other stimulus measures, including an employee retention credit (“ERC”), which is a refundable tax credit against certain employment taxes.

The Taxpayer Certainty and Disaster Tax Relief Act of 2020 and the American Rescue Plan Act of 2021 extended and expanded the availability of the ERC.

The ERC is available through December 31, 2021 and is equal to 70% of qualified wages (which includes employer qualified health plan expenses) paid to employees.

During each quarter in 2021, a maximum of $10,000 in qualified wages for each employee is eligible for the ERC.

Therefore, the maximum tax credit that can be claimed by an eligible employer in 2021 is $7,000 per employee per calendar quarter.

The Company qualified for the ERC in the first quarter of 2021 because it had a gross receipts decrease of more than 20% from the first quarter of 2019, the relevant criteria for the ERC.

As a result of the Company averaging 500 or fewer full-time employees in 2019, all wages paid to employees were eligible for the ERC (rather than just wages paid to employees not providing services).

During the three months ended March 31, 2021, the Company recorded a benefit of $3,372 in Other income (expense), net in the Company’s condensed consolidated statement of operations which is included in the line titled Employee retention credit receivable in the Company’s condensed consolidated balance sheet at March 31, 2021.

The Company anticipates that current cash resources (which includes proceeds from the PPP Loans), expected cash proceeds or savings from the ERC, amounts available under the Credit Facility, cash to be generated from operations and any potential proceeds from the sale of further Company securities under the Form S-3 will be adequate to meet the Company’s liquidity needs for at least the next twelve months.

If assumptions regarding the Company’s production, sales and subsequent collections from certain of the Company’s large customers, as well as customer deposits and revenues generated from new customer orders, are materially inconsistent with management’s expectations, particularly in light of the COVID-19 pandemic and its effects on domestic and global economies, the Company may in the future encounter cash flow and liquidity issues.

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NOTE 2 — REVENUES

Revenues are recognized when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.

The following table presents the Company’s revenues disaggregated by revenue source for the three and nine months ended September 30, 2020 and 2019 :

Three Months Ended September 30,

Nine Months Ended September 30,

Revenues are recognized when the promised goods or services are transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.

The following table presents the Company’s revenues disaggregated by revenue source for the three months ended March 31, 2021 and 2020 :

Three Months Ended March 31,

Heavy Fabrications

Industrial Solutions

Revenue within the Company’s Gearing and Industrial Solutions segments, as well as industrial fabrication product line revenues within the Heavy Fabrications segment, are generally recognized at a point in time, typically when control of the promised goods or services is transferred to its customers in an amount that reflects the consideration it expects to be entitled to in exchange for those goods or services.

Revenue within the Company’s Gearing and Industrial Solutions segments, as well as industrial fabrication product line revenues within the Heavy Fabrications segment, are generally recognized at a point in time, typically when the promised goods or services are physically transferred to its customers in an amount that reflects the consideration it expects to be entitled to in exchange for those goods or services.

A performance obligation is a promise in a contract to transfer a distinct product or service to the customer.

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Assuming these required revenue recognition criteria are met, revenue is recognized upon completion of product manufacture and customer acceptance.

During the three months ended September 30, 2020, the Company recognized $1,475 of revenue from one customer within the Gearing segment over time as the products had no alternative use to the Company and the Company had an enforceable right to payment, including profit, upon termination of the contract.

The Company uses labor hours as the input measure of progress for the contract.

During the three months ended March 31, 2021, the Company recognized $172 of revenue within the Gearing segment and $1,153 within the Heavy Fabrications segment over time, as the products had no alternative use to the Company and the Company had an enforceable right to payment, including profit, upon termination of the contracts.

Since the projects are labor intensive, the Company uses labor hours as the input measure of progress for the applicable contracts.

Contract assets are recorded when performance obligations are satisfied but the Company is not yet entitled to payment.

The Company recognized $1,475 of contract assets associated with this revenue which represents the Company's rights to consideration for work completed but not billed at the end of the period.

The Company did not recognize any revenue over time during the three or nine months ended September 30, 2019.

The Company recognized $269 of net contract assets during the first quarter associated with this revenue which represents the Company’s rights to consideration for work completed but not billed at the end of the period.

The Company did not recognize any revenue over time during the quarter ended March 31, 2020.

The Company generally expenses sales commissions when incurred.

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NOTE 3 — EARNINGS PER SHARE

The following table presents a reconciliation of basic and diluted earnings per share for the three and nine months ended September 30, 2020 and 2019 , as follows:

The following table presents a reconciliation of basic and diluted earnings per share for the three months ended March 31, 2021 and 2020 , as follows:

Three Months Ended

Nine Months Ended

September 30,

Basic earnings per share calculation:

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Diluted net (loss) income per share

Stock options and restricted stock units granted and outstanding of 1,323,217 and 1,502,196 as of September 30, 2020 and September 30, 2019 , respectively, are excluded from the computation of diluted earnings due to the anti-dilutive effect as a result of the Company’s net loss for the three months ended September 30, 2020 and the three and nine months ended September 30, 2019.

Restricted stock units granted and outstanding of 1,171,093 as of March 31, 2021, are excluded from the computation of diluted earnings due to the anti-dilutive effect as a result of the Company’s net loss for the three months ended March 31, 2021.

NOTE 4 — INVENTORIES

The components of inventories as of September 30, 2020 and December 31, 2019 are summarized as follows:

September 30,

The components of inventories as of March 31, 2021 and December 31, 2020 are summarized as follows:

Raw materials

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Intangible assets are amortized on a straight-line basis over their estimated useful lives, with a remaining life range from 2 to 7 years.

As of September 30, 2020 and December 31, 2019 , the cost basis, accumulated amortization and net book value of intangible assets were as follows:

September 30, 2020

As of March 31, 2021 and December 31, 2020 , the cost basis, accumulated amortization and net book value of intangible assets were as follows:

March 31, 2021

December 31, 2020

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Intangible assets

As of September 30, 2020 , estimated future amortization expense is as follows:

As of March 31, 2021 , estimated future amortization expense was as follows:

2026 and thereafter

NOTE 6 — ACCRUED LIABILITIES

Accrued liabilities as of September 30, 2020 and December 31, 2019 consisted of the following:

September 30,

Accrued liabilities as of March 31, 2021 and December 31, 2020 consisted of the following:

Accrued payroll and benefits

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NOTE 7 — DEBT AND CREDIT AGREEMENTS

The Company’s outstanding debt balances as of September 30, 2020 and December 31, 2019 consisted of the following:

September 30,

The Company’s outstanding debt balances as of March 31, 2021 and December 31, 2020 consisted of the following:

Line of credit

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This line of credit has been amended from time to time.

On February 25, 2019, the line of credit was expanded and extended for three years when the Company and its subsidiaries entered into an Amended and Restated Loan and Security Agreement (the “2016 Amended and Restated Loan Agreement”), with CIBC as administrative agent and sole lead arranger and the other financial institutions party thereto (the “Lenders”), providing the Company and its subsidiaries with a $35,000 secured credit facility (the “Credit Facility”).

The Credit Facility is an asset-based revolving credit facility, pursuant to which the Lenders advance funds against a borrowing base consisting of approximately (a) 85% of the face value of eligible receivables of the Company and its subsidiaries, plus (b) the lesser of (i) 50% of the lower of cost or market value of eligible inventory of the Company, (ii) 85% of the orderly liquidation value of eligible inventory and (iii) $12.5 million, plus (c) the lesser of (i) the sum of (A) 75% of the appraised net orderly liquidation value of the Company’s eligible machinery and equipment plus (B) 50% of the fair market value of the Company’s mortgaged property and (ii) $12 million.

On February 25, 2019, the line of credit was expanded and extended for three years when the Company and its subsidiaries entered into an Amended and Restated Loan and Security Agreement (the “2016 Amended and Restated Loan Agreement”), with CIBC as administrative agent and sole lead arranger and the other financial institutions party thereto, providing the Company and its subsidiaries with a $35,000 secured credit facility (as amended to date, the “Credit Facility”).

The obligations under the Credit Facility are secured by, subject to certain exclusions, (i) a first priority security interest in all accounts receivable, inventory, equipment, cash and investment property, and (ii) a mortgage on the Abilene, Texas tower and Pittsburgh, Pennsylvania gearing facilities.

On October 29, 2020, the Company executed the First Amendment to the 2016 Amended and Restated Loan Agreement (the “First Amendment”), implementing a payoff of a syndicated lender and a pricing grid based on the Company’s trailing twelve month EBITDA under which applicable margins range from 2.25% to 2.75% for LIBOR rate loans and 0.00% and 0.75% for base rate loans, and extending the term of the Credit Facility to July 31, 2023.

The Credit Facility is an asset-based revolving credit facility, pursuant to which the CIBC advances funds against a borrowing base consisting of approximately (a) 85% of the face value of eligible receivables of the Company and the subsidiaries, plus (b) the lesser of (i) 50% of the lower of cost or market value of eligible inventory of the Company, (ii) 85% of the orderly liquidation value of eligible inventory and (iii) $12.5 million, plus (c) the lesser of (i) the sum of (A) 75% of the appraised net orderly liquidation value of the Company’s eligible machinery and equipment plus (B) 50% of the fair market value of the Company’s mortgaged property and (ii) $12 million.

Subject to certain borrowing base conditions, the aggregate Credit Facility limit under the 2016 Amended and Restated Loan Agreement is $35 million with a sublimit for letters of credit of $10 million.

Borrowings under the Credit Facility bear interest at a per annum rate equal to, at the option of the Company, the one, two or three-month LIBOR rate or the base rate, plus a margin.

The initial applicable margin was 5.50% for LIBOR rate loans and 3.50% for base rates loans.

Upon certain pay downs, a pricing grid based on the Company’s trailing twelve month fixed charge coverage ratio has become effective under which applicable margins would now range from 2.25% to 2.75% for LIBOR rate loans and 0.00% to 0.75% for base rate loans.

The Company must also pay an unused facility fee equal to 0.50% per annum on the unused portion of the Credit Facility along with other standard fees.

The initial term of the 2016 Amended and Restated Loan Agreement ends on February 25, 2022.

With the exception of the balance impacted by the interest rate swap (as defined below), the Company is allowed to prepay in whole or in part advances under the Credit Facility without penalty or premium other than customary “breakage” costs with respect to LIBOR loans.

The 2016 Amended and Restated Loan Agreement contains customary representations and warranties applicable to the Company and its subsidiaries.

With the exception of the balance impacted by the interest rate swap (as described below), the Company is allowed to prepay in whole or in part advances under the Credit Facility without penalty or premium other than customary “breakage” costs with respect to LIBOR loans.

The Credit Facility contains customary representations and warranties applicable to the Company and the subsidiaries.

It also contains a requirement that the Company, on a consolidated basis, maintain a minimum quarterly fixed charge coverage ratio, along with other customary restrictive covenants, certain of which are subject to materiality thresholds, baskets and customary exceptions and qualifications.

The Company was in compliance with all financial covenants as of September 30, 2020 .

The Company was in compliance with all financial covenants as of September 30, 2020.

In June 2019, in conjunction with the 2016 Amended and Restated Loan Agreement, the Company entered into a floating to fixed interest rate swap with CIBC.

The Company was in compliance with all covenants under the Credit Facility as of March 31, 2021.

On February 23, 2021, the Company executed the Second Amendment to the 2016 Amended and Restated Loan Agreement (the “Second Amendment”) which waived testing of the fixed charge coverage covenant for the quarters ending March 31, 2021 and June 30, 2021, added a new liquidity covenant applicable to the quarter ending March 31, 2021, and new minimum EBITDA covenants applicable to the quarters ending March 31, 2021 and June 30 2021.

In conjunction with the 2016 Amended and Restated Loan Agreement, during June 2019, the Company entered into a floating to fixed interest rate swap with CIBC.

The swap agreement has a notional amount of $6,000 and a schedule matching that of the underlying loan that synthetically fixes the interest rate on LIBOR borrowings for the entire term of the Credit Facility at 2.13%, before considering the Company’s risk premium.

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Accordingly, changes in the fair value of the swap each reporting period are adjusted through earnings, which may subject the Company’s results of operations to non-cash volatility.

The interest rate swap liability is included in the “Accrued liabilities” line item of the Company’s condensed consolidated financial statements as of September 30, 2020 and December 31, 2019 .

As of September 30, 2020 , there was $7,649 of outstanding indebtedness under the Credit Facility, with the ability to borrow an additional $19,214, under the Credit Facility.

On October 29, 2020, the Company executed the First Amendment to the 2016 Amended and Restated Loan Agreement (the “First Amendment”), implementing a payoff of a syndicated lender and a pricing grid based on the Company's trailing twelve month EBITDA under which applicable margins range from 2.25% to 2.75% for LIBOR rate loans and 0.00% and 0.75% for base rate loans, and extending the term of the Credit Facility to July 31, 2023.

In 2016, the Company entered into a $570 loan agreement with the Development Corporation of Abilene which is included in the “Long-term debt, less current maturities” line item of our condensed consolidated financial statements as of September 30, 2020 and December 31, 2019 .

The interest rate swap liability is included in the “Accrued liabilities” line item of the Company’s condensed consolidated financial statements as of March 31, 2021 and December 31, 2020 .

As of March 31, 2021 , there was $4,468 of outstanding indebtedness under the Credit Facility, with the ability to borrow an additional $18,640, under the Credit Facility.

The loan is forgivable upon the Company meeting and maintaining specific employment thresholds.

During each of the years 2020, 2019, and 2018, $114 of the loan was forgiven.

As of September 30, 2020 , the loan balance was $342.

In addition, the Company has outstanding notes payable for capital expenditures in the amount of $531 and $1,563 as of September 30, 2020 and December 31, 2019 , respectively, with $527 and $1,400 included in the “Line of credit and other notes payable” line item of the Company’s condensed consolidated financial statements as of September 30, 2020 and December 31, 2019 , respectively.

As of March 31, 2021 , the loan balance was $228.

In addition, the Company has outstanding notes payable for capital expenditures in the amount of $609 and $163 as of March 31, 2021 and December 31, 2020 , respectively, with $609 and $161 included in the “Line of credit and other notes payable” line item of the Company’s condensed consolidated financial statements as of March 31, 2021 and December 31, 2020 , respectively.

The notes payable have monthly payments that range from $1 to $36 and an interest rate of approximately 5%.

The equipment purchased is utilized as collateral for the notes payable.

The outstanding notes payable have maturity dates that range from February 2021 to August 2022.

On April 15, 2020, the Company received funds under notes and related documents (“PPP Loans”) with CIBC, under the Paycheck Protection Program (the “PPP”) which was established under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) enacted on March 27, 2020 in response to the COVID-19 pandemic and is administered by the U.S.

The outstanding notes payable have maturity dates that range from May 2021 to August 2022.

On April 15, 2020, the Company received funds under notes and related documents with CIBC, under the Paycheck Protection Program (the “PPP”) which was established under the CARES Act enacted on March 27, 2020 in response to the COVID-19 pandemic and is administered by the U.S.

Small Business Administration (the “SBA”).

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Subject to the terms and conditions applicable to loans administered by the SBA under the PPP, as amended by the Flexibility Act, the unforgiven portion of a PPP Loan is payable over a two year period at an interest rate of 1.00%, with a deferral of payments of principal, interest and fees until the date on which the SBA remits the loan forgiveness amount to the lender (or notifies the lender that no loan forgiveness is allowed), provided that the borrower applies for forgiveness within 10 months after the last day of the covered period (and if not, payment of principal and interest shall commence 10 months after the last day of the covered period).

The Company used at least 60% of the amount of the PPP Loans proceeds to pay for payroll costs and the balance on other eligible qualifying expenses that the Company believes to be consistent with the terms of the PPP and plans to submit its forgiveness applications to CIBC during the fourth quarter of 2020.

The Company used at least 60% of the amount of the PPP Loans proceeds to pay for payroll costs and the balance on other eligible qualifying expenses that the Company believes to be consistent with the terms of the PPP and submitted its forgiveness applications to CIBC during the first quarter of 2021.

While the Company currently believes that its use of the loan proceeds will meet the conditions for forgiveness of the PPP Loans, the Company cannot provide assurance that it has not taken and will not take actions that could cause the Company to be ineligible for forgiveness of the PPP Loans, in whole or in part.

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The Company has elected to apply the short-term lease exception to all leases of one year or less.

During the nine months ended September 30, 2020 , the Company had an additional operating lease that resulted in right-of-use assets obtained in exchange for lease obligations of $4,380.

Additionally, during the three and nine months ended September 30, 2020 , the Company had additional finance leases that resulted in property, plant, and equipment obtained in exchange for lease obligations of $473 and $2,253, respectively.

During the three months ended March 31, 2021 and March 31, 2020, the Company had an additional operating lease that resulted in right-of-use assets obtained in exchange for lease obligations of $907 and $4,380, respectively.

Additionally, during the three months ended March 31, 2021 , the Company had additional finance leases that resulted in property, plant, and equipment obtained in exchange for lease obligations of $263.

Some of the Company’s facility leases include options to renew.

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Quantitative information regarding the Company’s leases is as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Components of lease cost

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Total lease cost

Supplemental cash flow information related to our operating leases is as follows for the nine months ended September 30, 2020 and 2019:

Supplemental cash flow information related to our operating leases is as follows for the three months ended March 31, 2021 and 2020:

Cash paid for amounts included in the measurement of lease liabilities:

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Variable lease costs consist primarily of taxes, insurance, utilities, and common area or other maintenance costs for the Company’s leased facilities and equipment.

As of September 30, 2020 , future minimum lease payments under finance leases and operating leases were as follows:

As of March 31, 2021 , future minimum lease payments under finance leases and operating leases were as follows:

2026 and thereafter

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Level 2 — Valuations are based on quoted prices for similar assets or liabilities in active markets, or quoted prices in markets that are not active for which significant inputs are observable, either directly or indirectly.

For the Company’s corporate and municipal bonds, although quoted prices are available and used to value said assets, they are traded less frequently.

Level 3 — Valuations are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement.

Inputs reflect management’s best estimate of what market participants would use in valuing the asset or liability at the measurement date.

The following tables represent the fair values of the Company’s financial liabilities as of September 30, 2020 and December 31, 2019 :

September 30, 2020

The following tables represent the fair values of the Company’s financial liabilities as of March 31, 2021 and December 31, 2020 :

March 31, 2021

Liabilities measured on a recurring basis:

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Effective tax rates differ from federal statutory income tax rates primarily due to changes in the Company’s valuation allowance, permanent differences and provisions for state and local income taxes.

As of September 30, 2020 , the Company has a full valuation allowance recorded against deferred tax assets.

During the nine months ended September 30, 2020 , the Company recorded a provision for income taxes of $103, compared to a provision for income taxes of $62 during the nine months ended September 30, 2019 .

As of March 31, 2021 , the Company has a full valuation allowance recorded against deferred tax assets.

During the three months ended March 31, 2021 , the Company recorded a provision for income taxes of $32, compared to a provision for income taxes of $52 during the three months ended March 31, 2020 .

The Company files income tax returns in U.S.

federal and state jurisdictions.

As of September 30, 2020 , open tax years in federal and some state jurisdictions date back to 1996 due to the taxing authorities’ ability to adjust operating loss carryforwards.

As of March 31, 2021 , open tax years in federal and some state jurisdictions date back to 1996 due to the taxing authorities’ ability to adjust operating loss carryforwards.

As of December 31, 2020 , the Company had federal and unapportioned state net operating loss (“NOL”) carryforwards of $260,598 of which $227,781 will generally begin to expire in 2026.

16 unchanged sentences

Stockholders who owned 4.9% or more of the outstanding shares of the Company’s common stock as of February 12, 2013 will not trigger the preferred share purchase rights unless they acquire additional shares after that date.

As of September 30, 2020 , the Company had no unrecognized tax benefits.

As of March 31, 2021 , the Company had no unrecognized tax benefits.

The Company recognizes interest and penalties related to uncertain tax positions as income tax expense.

The Company had no accrued interest and penalties as of September 30, 2020 .

The Company had no accrued interest and penalties as of March 31, 2021 .

NOTE 11 — SHARE-BASED COMPENSATION

The following table summarizes stock option activity during the nine months ended September 30, 2020 :

Weighted Average

Exercise Price

Outstanding as of December 31, 2019

Outstanding as of September 30, 2020

Exercisable as of September 30, 2020

The following table summarizes the Company’s restricted stock unit and performance award activity during the nine months ended September 30, 2020 :

There was no stock option activity during the three months ended March 31, 2021 and no stock options were outstanding as of March 31, 2021.

The following table summarizes the Company’s restricted stock unit and performance award activity during the three months ended March 31, 2021 :

Weighted Average

1 unchanged sentence

Unvested as of December 31, 2020

Unvested as of September 30, 2020

The following table summarizes share-based compensation expense included in the Company’s condensed consolidated statements of operations for the nine months ended September 30, 2020 and 2019 , as follows:

Nine Months Ended September 30,

Unvested as of March 31, 2021

Under certain situations, shares are withheld from issuance to cover taxes for the vesting of restricted stock units and performance awards.

For the three months ended March 31, 2021, 105,399 of such shares were withheld to cover $847 of tax obligations.

The following table summarizes share-based compensation expense included in the Company’s condensed consolidated statements of operations for the three months ended March 31, 2021 and 2020 , as follows:

Three Months Ended March 31,

Share-based compensation expense:

27 unchanged sentences

The Company has expanded production capabilities and leveraged manufacturing competencies, including welding, lifting capacity and stringent quality practices, into aftermarket and original equipment manufacturer (“OEM”) components utilized in surface and underground mining, construction, material handling, oil and gas (“O&G”) and other infrastructure markets.

The Company provides gearing and gearboxes to a broad set of customers in diverse markets including;

onshore and offshore O&G fracking and drilling, surface and underground mining, defense, wind energy, steel, material handling and other infrastructure markets.

For nearly a century, the Company has manufactured loose gearing, gearboxes and systems, and provided heat treatment services for aftermarket and OEM applications.

The Company provides gearing and gearboxes to a broad set of customers in diverse markets including; onshore and offshore O&G fracking and drilling, surface and underground mining, wind energy, steel, material handling and other infrastructure markets.

The Company has manufactured loose gearing, gearboxes and systems, and provided heat treat services for aftermarket and OEM applications for nearly a century.

The Company uses an integrated manufacturing process, which includes machining and finishing processes in Cicero, Illinois, and heat treatment in Neville Island, Pennsylvania.

4 unchanged sentences

The accounting policies of the reportable segments are the same as those referenced in Note 1, “Basis of Presentation” of these condensed consolidated financial statements.

Summary financial information by reportable segment for the three and nine months ended September 30, 2020 and 2019 is as follows:

Heavy Fabrications

Industrial Solutions

For the Three Months Ended September 30, 2020

Revenues from external customers

Intersegment revenues

Operating profit (loss)

Depreciation and amortization

Capital expenditures

Heavy Fabrications

Industrial Solutions

For the Three Months Ended September 30, 2019

Revenues from external customers

Intersegment revenues

Operating profit (loss)

Depreciation and amortization

Capital expenditures

Summary financial information by reportable segment for the three months ended March 31, 2021 and 2020 is as follows:

Heavy Fabrications

Industrial Solutions

For the Nine Months Ended September 30, 2020

For the Three Months Ended March 31, 2021

Revenues from external customers

Intersegment revenues

Operating profit (loss)

Operating loss

Depreciation and amortization

2 unchanged sentences

Industrial Solutions

For the Nine Months Ended September 30, 2019

For the Three Months Ended March 31, 2020

Revenues from external customers

Intersegment revenues

Operating profit (loss)

2 unchanged sentences

Total Assets as of

September 30,

Heavy Fabrications

6 unchanged sentences

Third parties may also make claims against owners or operators of sites and users of disposal sites for personal injuries and property damage associated with releases of hazardous substances from those sites.

Warranty Liability

The Company warrants its products for terms that range from one to five years.

In certain contracts, the Company has recourse provisions for items that would enable recovery from third parties for amounts paid to customers under warranty provisions.

As of September 30, 2020 and 2019 , estimated product warranty liability was $42 and $183, respectively, and is recorded within accrued liabilities in the Company’s condensed consolidated balance sheets.

The changes in the carrying amount of the Company’s total product warranty liability for the nine months ended September 30, 2020 and 2019 were as follows:

For the Nine Months Ended September 30,

Balance, beginning of period

Reduction of warranty reserve

Warranty claims

Other adjustments

Balance, end of period

Allowance for Doubtful Accounts

4 unchanged sentences

Changes in trends in any of the factors that the Company believes may impact the collectability of its accounts receivable, as noted above, or modifications to its credit standards, collection practices and other related policies may impact the Company’s allowance for doubtful accounts and its financial results.

The activity in the accounts receivable allowance liability for the nine months ended September 30, 2020 and 2019 consisted of the following:

For the Nine Months Ended September 30,

The activity in the accounts receivable allowance liability for the three months ended March 31, 2021 and 2020 consisted of the following:

For the Three Months Ended March 31,

Balance at beginning of period

7 unchanged sentences

The Company does not believe that this potential exposure will have a material adverse effect on the Company’s consolidated financial position or results of operations.

There was no reserve for liquidated damages as of September 30, 2020 or December 31, 2019

There was no reserve for liquidated damages as of March 31, 2021 or December 31, 2020.

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-Q

Item 1. Financial Statements