What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2022-03-02 compared with 2021-02-25 · 264 added, 6 removed, 17 unchanged (94% of the section changed)

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is traded on the NASDAQ Capital Market (“NASDAQ”) under the symbol “BWEN.” The following table sets forth the high and low bid prices of our common stock traded on the NASDAQ.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is traded on the NASDAQ Capital Market (“NASDAQ”) under the symbol “BWEN.”

The following table sets forth the high and low bid prices of our common stock traded on the NASDAQ.

First quarter

6 unchanged sentences

Fourth quarter

The closing price for our common stock as of February 19, 2021 was $9.14.

As of February 19, 2021, there were 44 holders of record of our common stock.

The closing price for our common stock as of February 22, 2022 was $1.76.

As of February  

22, 2022, there were 43 holders of record of our common stock.

We have never paid cash dividends on our common stock and have no current plan to do so in the foreseeable future.

2 unchanged sentences

The current policy of our Board is to reinvest cash generated in our operations to promote future growth and to fund potential investments.

There were no repurchases of our equity securities under our repurchase program made during the years ended December 31, 2020 and 2019 .

There were no repurchases of our equity securities made during the years ended December 31, 2021 and 2020.

Unregistered Sales of Equity Securities

1 unchanged sentence

Securities Authorized for Issuance Under Equity Compensation Plans

See Part III, Item 12 “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” of this Annual Report on Form 10-K for information as of December 31, 2020 with respect to shares of our common stock that may be issued under our existing share-based compensation plans.

See Part III, Item 12 “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters”

of this Annual Report on Form 10-K for information as of December 31, 2021 with respect to shares of our common stock that may be issued under our existing share-based compensation plans.

SELECTED FINANCIAL DATA

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

As used in this Annual Report, the terms “we,”

“us,”

“our,”

“Broadwind,”

and the “Co mpany”

refer to Broadwind , Inc., a Delaware corporation headquartere d in Cicero, Illinois, and its S ubsidiaries.

(Dollar amounts are presented in thousands, except per share data and unless otherwise stated)

We booked $159,025 in net new orders in 2021, up from $148,882 in 2020.

Gearing segment orders increased 83% compared to 2020 primarily due to increased demand from O&G and mining customers. This increase was partially offset by the timing of aftermarket wind gearing orders, which can fluctuate based on customer order patterns and market conditions.

Industrial fabrication product line orders, included in the Heavy Fabrications segment, increased 72% as compared to 2020 primarily due to increased demand in all end markets.

Orders within our Industrial Solutions segment increased 10% as compared to 2020 primarily due to the timing of orders associated with new gas turbine projects, partially offset by the timing of orders associated with aftermarket projects. These increases were partially offset by a 27% decrease in wind tower orders in our Heavy Fabrications segment as wind customers paused and delayed orders due to uncertainty regarding the timing and likelihood of potential wind energy incentives provided by the federal government and elevated steel prices.

At December 31, 2021, total backlog was $106,383, up 15% from $92,854 at December 31, 2020 primarily due to the aforementioned increase in gearing and industrial fabrication product line orders.

We recognized revenue of $145,619  

in 2021, down  

27% from revenue of $198,496 in 2020. Within the Heavy Fabrications segment, tower revenue decreased $50,064 primarily due to a 35% decrease in tower sections sold, a result of the aforementioned pause in wind tower orders.

Additionally, within the Heavy Fabrications segment, industrial fabrication product line revenues decreased 16% from 2020, primarily as a result of lower order intake in mining markets during the second half of 2020. Industrial Solutions revenue was down $2,897 or 16% from 2020 primarily due to the timing of new gas turbine and aftermarket installations in addition to supply chain constraints. Gearing revenue was up $3,447 or 14% from 2020, driven primarily by increased order intake in recent quarters from O&G and mining customers, partially offset by decreased demand from industrial customers. 

We reported net income of $2,847, or $0.15 per share in 2021, compared to a net loss of $1,487 or $0.09 per share in 2020.

The improvement in earnings was primarily due to income of $9,151 recognized from the PPP loan forgiveness and a $6,965 ERC benefit (described below).

Both of these items were recognized in “Other Income (expense), net” in our consolidated statement of operations for the year ended December 31, 2021.

This increase was partially offset by the volume related decreases discussed above. 

On March 27, 2020, the CARES Act was signed into law providing numerous tax provisions and other stimulus measures, including the 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.

As amended, the ERC is available for wages paid through September 30, 2021 and is equal to 70% of qualified wages (which includes employer qualified health plan expenses) paid to employees.

During each quarter of 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.

We qualified for the ERC in the first quarter of the year because we experienced a reduction in gross receipts of more than 20% for the first quarter of 2021 compared to the first quarter of 2019, the relevant criteria for the ERC. Since we qualified for the ERC in the first quarter of 2021, we automatically qualified for the ERC in the second quarter of 2021.

In the first and second quarters of 2021, we received ERC benefits of $3,372 and $3,593, respectively, and under analogy to IAS 20 “Accounting for Government Grants and Disclosure of Government Assistance”

were recorded in “Other income (expense), net”

in our consolidated statement of operations. During the third quarter of 2021 due to relatively higher revenues in 2021 as compared to the third quarter of 2019, we did not qualify for the ERC benefit.

The receivable for the remaining uncollected ERC benefit is $497 as of December 31, 2021 and is included in the “Employee retention credit receivable”

line item in our consolidated balance sheet at December 31, 2021.

The $497 receivable balance was collected during January 2022.  

We use our credit facility to fund working capital requirements and believe that our credit facility, together with the operating cash generated by our businesses, and any potential proceeds from access to the public or private debt or equity markets, are sufficient to meet all cash obligations over the next twelve months.

On December 31, 2021, we had $6,350 drawn under our $30,000 line of credit, and $852 of cash on hand, resulting in $14,889 of available liquidity.

For a further discussion of our capital resources and liquidity, including a description of recent amendments and waivers under our credit facility, please see the discussion under “Liquidity, Financial Position and Capital Resources”

in this Annual Report on Form 10-K.

COVID-19 Pandemic

In March 2020, the World Health Organization recognized a novel strain of coronavirus (COVID-19) as a pandemic.

In response to this pandemic, the United States and various foreign, state and local governments have, among other actions, imposed travel and business restrictions and required or advised communities in which we do business to adopt stay-at-home orders and social distancing guidelines, causing some businesses to adjust, reduce or suspend operating activities.

The pandemic and the various governments’

response have caused significant and widespread uncertainty, volatility and disruptions in the U.S.

and global economies, including in the regions in which we operate. 

Our facilities continued to operate as essential businesses in light of the customers and markets served. However, through December 31, 2021, we have experienced an adverse impact to our business, operations and financial results as a result of this pandemic due in part to a decline in order activity levels, manufacturing inefficiencies associated with supply chain disruptions and employee staffing constraints due to the spread of the COVID-19 pandemic. In response to the pandemic, we continue to right-size our workforce and delay certain capital expenditures.

In future periods, we may experience weaker customer demand, requests for extended payment terms, customer bankruptcies, additional supply chain disruption, employee staffing constraints and difficulties, government restrictions or other factors that could negatively impact the Company and its business, operations and financial results.

As we cannot predict the duration or scope of the pandemic, including in light of the emerging variants, or its impact on economic and financial markets, any negative impact to our results cannot be reasonably estimated, but it could be material.

Although the long-term effects of COVID-19 remain unknown, there have been some lifting of the related restrictions due to the increased availability of vaccinations and government stimulus programs.

However, we continue to monitor closely the Company’s financial health and liquidity and the impact of the pandemic on the Company, including emerging variants.

We have been able to serve the needs of our customers while taking steps to protect the health and safety of our employees, customers, partners, and communities.

Among these steps, we follow the guidance provided by the U.S.

Centers for Disease Control and Prevention.

KEY METRICS USED BY MANAGEMENT TO MEASURE PERFORMANCE

In addition to measures of financial performance presented in our consolidated financial statements in accordance with generally accepted accounting principles (“GAAP”), we use certain other financial measures to analyze our performance.

These non-GAAP financial measures primarily consist of adjusted EBITDA and free cash flow which help us evaluate growth trends, establish budgets, assess operational efficiencies, oversee our overall liquidity, and evaluate our overall financial performance.

Key Financial Measures

Net income (loss)

Adjusted EBITDA (1)

Capital expenditures

Free cash flow (2)

Operating working capital (3)

Total debt (4)

Backlog at end of period (5)

Book-to-bill (6)

We provide non-GAAP adjusted EBITDA (earnings before interest, income taxes, depreciation, amortization, share based compensation, and other stock payments, restructuring costs, impairment charges, and other non-cash gains and losses) as supplemental information regarding our business performance.

Our management uses adjusted EBITDA when they internally evaluate the performance of our business, review financial trends and make operating and strategic decisions.

We believe that this non-GAAP financial measure is useful to investors because it provides a better understanding of our past financial performance and future results, and it allows investors to evaluate our performance using the same methodology and information as used by our management.

Our definition of adjusted EBITDA may be different from similar non-GAAP financial measures used by other companies and/or analysts.

We define free cash flow as adjusted EBITDA plus or minus changes in operating working capital less capital expenditures net of any proceeds from disposals of property and equipment.

We believe free cash flow is a useful measure for investors because it portrays our ability to generate cash from our business for purposes such as repaying maturing debt and funding business acquisitions.

We define operating working capital as accounts receivable and inventory net of accounts payable and customer deposits.

Total debt at December 31, 2020 includes PPP loans totaling $9,151.

Our backlog at December 31, 2021 and 2020 is net of revenue recognized over time.

We define book-to-bill as the ratio of new orders we received, net of cancellations, to revenue during a period.

The following table reconciles our non-GAAP key financial measures to the most directly comparable GAAP measure:

Net income (loss) from continuing operations

Interest expense

Income tax provision

Depreciation and amortization

Share-based compensation and other stock payments

Adjusted EBITDA

Changes in operating working capital

Capital expenditures

Proceeds from disposal of property and equipment

Free Cash Flow

RESULTS OF OPERATIONS

Year Ended December 31, 2021 Compared to Year Ended December 31, 2020

The summary of selected financial data table below should be referenced in connection with a review of the following discussion of our results of operations for the year ended December 31, 2021 compared to the year ended December 31, 2020.

Year Ended December 31,

Cost of sales

Operating expenses

Selling, general and administrative expenses

Intangible amortization

Total operating expenses

Operating (loss) income

Other income (expense), net

Paycheck Protection Program loan forgiveness

Interest expense, net

Total other income (expense), net

Net income (loss) before provision for income taxes

Provision for income taxes

Net income (loss)

Revenues decreased by $52,877 during the year ended December 31, 2021 primarily due to a 35% decrease in tower sections sold as wind customers paused and delayed orders due to uncertainty regarding the timing and likelihood of potential wind energy incentives provided by the federal government and elevated steel prices.

Within our other segments, Gearing revenues increased as a result of increased order intake in recent quarters from O&G and mining customers, but was partially offset by decreased Industrial Solutions revenue due to the timing of new gas turbine and aftermarket installations in addition to supply chain constraints.

Gross profit decreased by $12,490 during the year ended December 31, 2021.

The decrease in gross profit reflects lower sales volumes and manufacturing inefficiencies caused by supply chain disruptions, and a temporary shut-down of our Abilene, Texas plant due to a weather event in the first quarter of 2021. As a result, our gross margin decreased from 9.1% for the year ended December 31, 2020, to  

3.8% for the year ended December 31, 2021.

Due to lower revenue levels, higher commission expenses, and an increase in professional expenses, operating expenses as a percentage of sales increased to 12.4% in 2021 from 8.9% in 2020.

Net income  

improved from a loss $1,487 for the year ended December 31, 2020 to net income of $2,847  

for the year ended December 31, 2021.The improvement in net income was primarily due to income of $9,151 recognized from the PPP loan forgiveness and a $6,965 ERC benefit.

Both of these items were recognized in “Other Income (expense), net” in our consolidated statement of operations for the year ended December 31, 2021.

This increase was partially offset by the volume related decreases discussed above. 

Heavy Fabrications Segment

The following table summarizes the Heavy Fabrications segment operating results for the twelve months ended December 31, 2021 and 2020:

Tower sections sold

Operating (loss) income

Operating margin

Heavy Fabrications orders decreased by 12% versus the prior year as tower customers paused and delayed orders due to uncertainty regarding the timing and likelihood of potential federal wind energy incentives and elevated U.S.

steel prices.

This decrease was partially offset by a 72% increase in industrial fabrication product line orders as customers within all markets served resumed capital spending and inventory purchases.

Segment revenues decreased by 34% during the year ended December 31, 2021 primarily due to the aforementioned pause in wind tower orders. 

Heavy Fabrications segment operating results decreased by $13,599 versus the prior year.

The degradation reflects the adverse volume impacts described previously, the underutilization of plant capacity, manufacturing inefficiencies caused by supply chain disruptions and a temporary shut-down of our Abilene, Texas plant due to a weather event in the first quarter of 2021.

Operating profit margin was (3.2%) during the year ended December 31, 2021 compared to 6.7% during the year ended December 31, 2020.

Gearing Segment

The following table summarizes the Gearing segment operating results for the twelve months ended December 31, 2021 and 2020:

Operating loss

Operating margin

Gearing segment orders for the year ended December 31, 2021 increased $20,964 compared to the year ended December 31, 2020 primarily due to increased demand from O&G and mining customers, partially offset by the timing of aftermarket wind gearing orders, which can fluctuate based on customer order patterns and market conditions. Revenues increased 14% during the year ended December 31, 2021 primarily due to increased O&G and mining demand, partially offset by a reduction in demand from industrial customers. 

The Gearing segment's operating loss narrowed by $1,290  

during the year ended December 31, 2021 primarily due to increased sales volume and improved manufacturing efficiencies.

Operating margin was (9.1)% for the year ended December 31, 2021 compared to (15.4)% during the year ended December 31, 2020.

Industrial Solutions Segment

The following table summarizes the Industrial Solutions segment operating results for the twelve months ended December 31, 2021 and 2020.

Operating (loss) income

Operating margin

Industrial Solutions segment orders increased by 10% in 2021 primarily due to an increase in orders associated with new gas turbine projects, partially offset by a decrease in orders associated with aftermarket projects.

Segment revenue decreased 16% primarily due to the timing of new gas turbine and aftermarket installations in addition to supply chain constraints.

The decrease in operating income  

during the year ended December 31, 2021 was a result of the revenue decrease and a lower margin sales mix sold during the year. The operating margin decreased from 4.8% during the year ended December 31, 2020, to (2.5)% during the year ended December 31, 2021.

Corporate and Other

Corporate and Other expenses decreased by $552 during the year ended December 31, 2021.

The decrease was primarily attributable to reduced incentive compensation and marketing expenses. 

SUMMARY OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The methods, estimates and judgments that we use in applying our critical accounting policies have a significant impact on the results that we report in our financial statements.

Some of our accounting policies require us to make difficult and subjective judgments, often as a result of the need to make estimates regarding matters that are inherently uncertain.

We have identified the accounting policies listed below to be critical to obtain an understanding of our consolidated financial statements.

This section should also be read in conjunction with Note 1, “Description of Business and Summary of Significant Accounting Policies”

in the notes to our consolidated financial statements for further discussion of these and other significant accounting policies.

Revenue Recognition

We recognize revenue 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.

Customer deposits and other receipts are deferred and recognized when the revenue is realized and earned.

Cash payments to customers, like those made for liquidated damages, are presumed to be classified as reductions of revenue in our statement of operations.

In many instances within our Heavy Fabrications segment, wind towers are sold under terms included in bill and hold sales arrangements that result in different timing for revenue recognition versus shipment, due to our customers’

preference to ship products in batches to support efficient construction of wind farms.

We recognize revenue under these arrangements when there is a substantive reason for the arrangement (i.e., the buyer requests the arrangement), the ordered goods are segregated from inventory and not available to fill other orders, the goods are currently ready for physical transfer to the customer, and we do not have the ability to use the product or to direct it to another customer.

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

During 2021 and 2020, we also recognized revenue over time, versus point in time, when products in the Gearing and Heavy Fabrications segments had no alternative use to us and we had an enforceable right to payment, including profit, upon termination of the contract by the customer.

Since the projects are labor intensive, we use labor hours as the input measure of progress for the contract.

Contract assets are recorded when performance obligations are satisfied but we are not yet entitled to payment.

We recognize contract assets associated with this revenue which represents our rights to consideration for work completed but not billed at the end of the period.  

Warranty Liability

We provide warranty terms that generally range from one to five years for various products relating to workmanship and materials supplied by us.

In certain contracts, we have recourse provisions for items that would enable us to seek recovery from third parties for amounts paid to customers under warranty provisions.

We estimate the warranty accrual based on various factors, including historical warranty costs, current trends, product mix and sales.

Inventories consist of raw materials, work-in-process and finished goods.

Raw materials consist of components and parts for general production use.

Work-in-process consists of labor and overhead, processing costs, purchased subcomponents, and materials purchased for specific customer orders.

Finished goods consist of components purchased from third parties as well as components manufactured by us.

Inventories are stated at the lower of cost or net realizable value.

Where necessary, we have recorded a reserve for the excess of cost over net realizable value in our inventory allowance.

Net realizable value of inventory, and management’s judgment concerning the need for reserves, encompasses consideration of many business factors including physical condition, inventory holding period, contract terms and usefulness.

Inventories are valued based either on actual cost or using a first-in, first out method.

Long-Lived Assets

We review property and equipment and other long-lived assets (“long-lived assets”) for impairment whenever events or circumstances indicate that their carrying amounts may not be recoverable.

Due to triggering events identified within our segments, we continue to evaluate the recoverability of certain of the long-lived assets.

During November 2021, we identified triggering events associated with the Gearing segment and the Heavy Fabrications segment. In accordance with GAAP, we compared the carrying value of the segment asset groups to the forecast undiscounted cash flows associated with the respective asset groups.

Based on the analyses performed, the forecast undiscounted cash flows exceeded the carrying values resulting in no recorded impairment of these groups. 

We account for income taxes based upon an asset and liability approach.

Deferred tax assets and liabilities represent the future tax consequences of the differences between the financial statement carrying amounts of assets and liabilities versus the tax basis of assets and liabilities.

Under this method, deferred tax assets are recognized for deductible temporary differences, and operating loss and tax credit carryforwards.

Deferred tax liabilities are recognized for taxable temporary differences.

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

The impact of tax rate changes on deferred tax assets and liabilities is recognized in the year that the change is enacted.

In connection with the preparation of our consolidated financial statements, we are required to estimate our income tax liability for each of the tax jurisdictions in which we operate.

This process involves estimating our actual current income tax expense and assessing temporary differences resulting from differing treatment of certain income or expense items for income tax reporting and financial reporting purposes.

We also recognize the expected future income tax benefits of NOL carryforwards as deferred income tax assets.

In evaluating the realizability of deferred income tax assets associated with NOL carryforwards, we consider, among other things, expected future taxable income, the expected timing of the reversals of existing temporary reporting differences, and the expected impact of tax planning strategies that may be implemented to prevent the potential loss of future income tax benefits.

Changes in, among other things, income tax legislation, statutory income tax rates or future taxable income levels could materially impact our valuation of income tax assets and liabilities and could cause our income tax provision to vary significantly among financial reporting periods.

We also account for the uncertainty in income taxes related to the recognition and measurement of a tax position taken or expected to be taken in an income tax return.

We follow the applicable pronouncement guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition related to the uncertainty in these income tax positions.

LIQUIDITY, FINANCIAL POSITION AND CAPITAL RESOURCES

As of December 31, 2021, cash totaled $852, a decrease of $2,520  

from December 31, 2020.

We have in place a line of credit with CIBC Bank (the “Credit Facility”) under which we can borrow up to $30,000, depending on our borrowing base.

Debt and finance lease obligations at December 31, 2021 totaled $11,368, and we had the ability to borrow up to $14,037 under the Credit Facility.

In addition to the Credit Facility, we also utilize supply chain financing arrangements as a component of our funding for working capital, which accelerates receivable collections and helps to better manage cash flow.

Under these agreements, we have agreed to sell certain of our accounts receivable balances to banking institutions who have agreed to advance amounts equal to the net accounts receivable balances due, less a discount as set forth in the respective agreements.

The balances under these agreements are accounted for as sales of accounts receivable, as they are sold without recourse.

Cash proceeds from these agreements are reflected as operating activities included in the change in accounts receivable in the consolidated statements of cash flows.

Fees incurred in connection with the agreements are recorded as interest expense.

On March 9, 2021, we entered into a $10,000 Equity Distribution Agreement (the “Equity Distribution Agreement”) with Craig-Hallum Capital Group, LLC.

Pursuant to the terms of the Equity Distribution Agreement, we issued 1,897,697 shares of the Company's common stock thereunder during the first two quarters of 2021.

The net proceeds (before upfront costs) to the Company from the sales of such shares were approximately $9,725 after deducting commissions paid of approximately $275 and before deducting other expense of $411. 

On November 8, 2021, we executed the Third Amendment to the Amended and Restated Loan Agreement (the “Third Amendment”) which waived the fixed charge coverage ratio default for the quarter ended September 30, 2021, suspended testing of the fixed charge coverage ratio covenant through September 30, 2022, added a minimum EBITDA covenant applicable to the three-month period ending December 31, 2021, the six-month period ending March 31, 2022, the nine-month period ending June 30, 2022 and the twelve-month period ending September 30, 2022 and added a reserve of $5,000 to the Revolving Loan Availability through December 31, 2022.

On February 28, 2022, we executed the Fourth Amendment to the Amended and Restated Loan Agreement (the “Fourth Amendment”) which reduced the line of credit from $35,000 to $30,000, extended the maturity date until January 31, 2024, waived the minimum EBITDA covenant for the three-month period ended December 31, 2021, revised the fixed charge coverage ratio covenant as of December 31, 2022 for the trailing nine-month period after March 31, 2022, revised the minimum EBITDA covenant applicable to the three-month period ending March 31, 2022, the six-month period ending June 30, 2022 and the nine-month period ending September 30, 2022, revised the liquidity reserve and amended certain other provisions in connection with the discontinuation of LIBOR and replacement with the forward-looking term Secured Overnight Financing Rate (Term SOFR) administered by CME Group, Inc.

For a more detailed description of the Fourth Amendment refer to Item 9B of this Form 10-K.

On March 27, 2020, the CARES Act was signed into law providing numerous tax provisions and other stimulus measures, including an 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.

As amended, the ERC is available for wages paid through September 30, 2021 and is equal to 70% of qualified wages (which includes employer qualified health plan expenses) paid to employees.

During each quarter of 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.

In the first and second quarters of 2021, the Company received ERC benefits of $3,372 and $3,593, respectively, and under analogy to IAS 20 “Accounting for Government Grants and Disclosure of Government Assistance”

were recorded in “Other income (expense), net”

in our consolidated statement of operations. The Company qualified for the ERC in the first quarter of 2021 because it experienced a reduction in gross receipts of more than 20% for the first quarter of 2021 compared to the first quarter of 2019, the relevant criteria for the ERC.

Since the Company qualified for the ERC in the first quarter of 2021, it automatically qualified for the ERC in the second quarter of 2021.

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 only wages paid to employees not providing services).

During the third quarter of 2021 due to relatively higher revenues in 2021 as compared to the third quarter of 2019, the Company did not qualify for the ERC benefit.

The receivable for the remaining uncollected ERC benefit is $497 as of December 31, 2021 and is included in the “Employee retention credit receivable”

line item in the Company’s consolidated balance sheet at December 31, 2021. The $497 receivable balance was collected during January 2022.  

We anticipate that we will be able to satisfy the cash requirements associated with, among other things, working capital needs, capital expenditures and lease commitments through at least the next twelve months primarily through cash generated from operations, available cash balances, our Credit Facility, additional equipment financing, and access to the public or private debt and/or equity markets, including the option to raise additional capital from the sale of our securities under a “shelf”

registration statement on Form S-3.

In 2016, we entered into a $570 unsecured loan agreement with the Development Corporation of Abilene which is included in long-term debt, less current maturities.

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

During each of the years ended December 31, 2021 and 2020, $114 of the loan was forgiven.

As of December 31, 2021, the loan balance was $114.

In addition, we have outstanding notes payable for capital expenditures in the amount of $186 and $163 as of December 31, 2021 and 2020, respectively, with $186 and $161 included in the “Line of credit and other notes payable”

line item of our consolidated financial statements as of December 31, 2021 and 2020, respectively.

The notes payable have monthly payments that range from $1 to $16 and an interest rate of 4%.

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

The outstanding notes payable have maturity dates that range from March  

2022 to September 2028.

Sources and Uses of Cash

The following table summarizes our cash flows from operating, investing, and financing activities for the years ended December 31, 2021 and 2020:

Total cash provided by (used in):

Operating activities

Investing activities

Financing activities

Net (decrease) increase in cash

Operating Cash Flows

During the year ended December 31, 2021, net cash used in operations was $12,826 compared to net cash provided by operating activities of $5,330 for the year ended December 31, 2020.

The increase in net cash used in operating activities was primarily due to  

our operating performance (excluding the PPP loan forgiveness), the timing of accruals and an increase in operating working capital in the current year period.

Investing Cash Flows

During the year ended December 31, 2021, net cash used in investing activities was $1,674 compared to net cash used in investing activities of $1,547 for the year ended December 31, 2020.

The increase was primarily due to an increase in net purchases of property and equipment.

Financing Cash Flows

During the year ended December 31, 2021, net cash provided by financing activities totaled $11,980 compared to net cash used in financing activities of $2,827 for the year ended December 31, 2020.

The increase was primarily due to proceeds from the sale of securities under the Equity Distribution Agreement and increased net borrowings under our Credit Facility in the current year, partially offset by the absence of the PPP Loan proceeds received in 2020. 

Contractual Obligations

We enter into a variety of contractual obligations as part of our normal operations in addition to capital expenditures.

As of December 31, 2021, we have (i) debt obligations related to our Credit Facility and other notes payable as described in Note 9, “Debt and Credit Agreements”

of our consolidated financial statements and includes cash principal payments of $6,650 due in 2022, $28 in 2023, $29 in 2024, $30 in 2025, $32 in 2026 and $58 in 2027 and thereafter (ii) cash payments for operating and finance lease obligations that total $34,896 and are described in Note 10, “Leases”

of our consolidated financial statements and (iii) purchase obligations made in the normal course of business.

We expect to fund these cash requirements primarily through cash generated from operations, available cash balances, our Credit Facility, additional equipment financing, and access to the public or private debt and/or equity markets, including the option to raise additional capital from the sale of our securities under a “shelf”

registration statement on Form S-3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and as such are not required to provide information under this item.

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 5. Market for Registrant’s Common Equity