What changed in this filing

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Item 1. Financial Statements

2023-05-11 compared with 2022-11-08 · 321 added, 487 removed, 657 unchanged (55% of the section changed)

4 unchanged sentences

(in thousands, except share and per share data)

September 30,

CURRENT ASSETS:

$ 1,729  

$ 12,732  

Accounts receivable, net

1 unchanged sentence

17,018  

Employee retention credit receivable

Contract assets

10 unchanged sentences

45,319  

Operating lease right-of-use assets

Operating lease right-of-use assets, net

15,946  

16,396  

AMP credit receivable

Intangible assets, net

3 unchanged sentences

CURRENT LIABILITIES:

Line of credit and other notes payable

Line of credit and current portion of long-term debt

$ 18,089  

8 unchanged sentences

21,751  

34,550  

Total current liabilities

17 unchanged sentences

30,000,000 shares authorized;

20,944,873 and 19,859,650 shares issued as of September 30, 2022, and December 31, 2021, respectively

Treasury stock, at cost, 273,937 shares as of September 30, 2022 and December 31, 2021

21,191,937 and 21,127,130 shares issued as of March 31, 2023, and December 31, 2022, respectively

Treasury stock, at cost, 273,937 shares as of March 31, 2023 and December 31, 2022

( 1,842 )  

15 unchanged sentences

(in thousands, except per share data)

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

$ 48,873  

$ 41,844  

Cost of sales

41,897  

39,832  

OPERATING EXPENSES:

2 unchanged sentences

Total operating expenses

Operating loss

Operating income (loss)

OTHER (EXPENSE) INCOME, net:

Paycheck Protection Program loan forgiveness

Interest expense, net

( 488 )  

Total other (expense) income, net

Net (loss) income before provision for income taxes

( 490 )  

Net income (loss) before provision for income taxes

Provision for income taxes

NET (LOSS) INCOME

NET (LOSS) INCOME PER COMMON SHARE—BASIC:

Net (loss) income

NET INCOME (LOSS)

NET INCOME (LOSS) PER COMMON SHARE—BASIC:

Net income (loss)

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING—BASIC

NET (LOSS) INCOME PER COMMON SHARE—DILUTED:

Net (loss) income

20,869  

19,708  

NET INCOME (LOSS) PER COMMON SHARE—DILUTED:

Net income (loss)

$ 0.04  

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING—DILUTED

21,387  

19,708  

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

5 unchanged sentences

BALANCE, December 31, 2021

19,859,650  

( 273,937 )  

$ ( 1,842 )  

$ 395,372  

$ ( 339,416 )  

$ 54,134  

Stock issued for restricted stock

480,595  

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

146,790  

Share-based compensation

Shares withheld for taxes in connection with issuance of restricted stock

Sale of common stock, net

( 194,962 )  

( 411 )  

( 2,404 )  

BALANCE, March 31, 2022

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, June 30, 2021

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, 2021

20,292,073  

( 273,937 )  

$ ( 1,842 )  

$ 395,435  

$ ( 341,820 )  

$ 51,793  

BALANCE, December 31, 2022

Stock issued for restricted stock

21,127,130  

( 273,937 )  

$ ( 1,842 )  

$ 397,240  

$ ( 349,146 )  

$ 46,273  

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

64,807  

Share-based compensation

Shares withheld for taxes in connection with issuance of restricted stock

BALANCE, March 31, 2023

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

BALANCE, June 30, 2022

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, 2022

21,191,937  

( 273,937 )  

$ ( 1,842 )  

$ 397,720  

$ ( 348,377 )  

$ 47,522  

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

3 unchanged sentences

(in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

Net (loss) income

Net income (loss)

Adjustments to reconcile net cash used in operating activities:

Depreciation and amortization expense

Paycheck Protection Program loan forgiveness

Deferred income taxes

Change in fair value of interest rate swap agreements

Stock-based compensation

Share-based compensation

Allowance for doubtful accounts

Common stock issued under defined contribution 401(k) plan

Loss (gain) on disposal of assets

Loss on disposal of assets

Changes in operating assets and liabilities:

Accounts receivable

( 8,841 )  

AMP credit receivable

( 3,162 )  

Employee retention credit receivable

Contract assets

( 4,281 )  

Prepaid expenses and other current assets

Accounts payable

( 784 )  

10,538  

Accrued liabilities

Customer deposits

( 12,799 )  

Other non-current assets and liabilities

Net cash used in operating activities

( 25,984 )  

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property and equipment

Proceeds from disposals of property and equipment

( 1,065 )  

Net cash used in investing activities

( 1,065 )  

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from line of credit, net

Payments for deferred financing costs

16,945  

Proceeds from long-term debt

Payments on long-term debt

( 634 )  

Principal payments on finance leases

( 265 )  

Shares withheld for taxes in connection with issuance of restricted stock

Proceeds from sale of common stock, net

Net cash provided by financing activities

NET INCREASE (DECREASE) IN CASH

16,046  

NET DECREASE IN CASH

( 11,003 )  

CASH beginning of the period

12,732  

CASH end of the period

$ 1,729  

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

14 unchanged sentences

Operating results for the 

three and nine months ended September 30, 2022 are not necessarily indicative of the results that may be expected for the twelve months ending December 31, 2022, 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, 2021 .

three months ended March 31, 2023 are not necessarily indicative of the results that may be expected for the twelve months ending December 31, 2023, 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, 2022  and as supplemented by the risk factors set forth in Part II, Item 1A, “Risk Factors,”

of this Quarterly Report on Form 10 -Q.

The December 31, 2022 condensed consolidated balance sheet was derived from audited financial statements, but does not include all disclosures required by GAAP.

1 unchanged sentence

There have been no material changes in the Company’s significant accounting policies during the 

nine months ended September 30, 2022 as compared to the significant accounting policies described in the Company’s Annual Report on Form 10 -K for the year ended December 31, 2021 .

three months ended March 31, 2023 as compared to the significant accounting policies described in the Company’s Annual Report on Form 10 -K for the year ended December 31, 2022 .

Company Description   

2 unchanged sentences

The Company’s capabilities include, but are not limited to the following:

heavy fabrications, welding, metal rolling, coatings, gear cutting and shaping, gearbox repair, heat treatment, assembly, engineering and packaging solutions.

heavy fabrications, welding, metal rolling, coatings, gear cutting and shaping, gearbox manufacturing and repair, heat treatment, assembly, engineering and packaging solutions.

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

wind energy industry, which accounted for 50 % and 53 % of the Company’s revenue during the first  

nine months of 2022  and 2021, respectively. 

The Company typically meets its short term liquidity needs through cash generated from operations, its available cash balances, the 2016 Credit Facility and the 2022 Credit Facility, as applicable (each, as defined in Note 7, “Debt and Credit Agreements,”

of these condensed consolidated financial statements 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).

three months of 2023  and 2022, respectively. 

The Company typically meets its short term liquidity needs through cash generated from operations, its available cash balances, the 2022 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 8, “Debt and Credit Agreements,”

of these condensed consolidated financial statements for a description of the 2016 Credit Facility, the 2022 Credit Facility and the Company’s other debt. 

Total debt and finance lease obligations at 

September 30, 2022 totaled $ 28,966 , which includes current outstanding debt and finance leases totaling $ 17,596 .

The Company's revolving line of credit balance is included in the “Line of credit and other notes payable”

of these condensed consolidated financial statements for a description of the 2022 Credit Facility and the Company’s other debt. 

Debt and finance lease obligations at 

March 31, 2023 totaled $ 30,591 , which includes current outstanding debt and finance leases totaling $ 19,752 .

The Company’s outstanding debt includes $ 16,945  outstanding from the senior secured revolving credit facility under the 2022 Credit Facility.

The Company had $ 6,947  drawn on the senior secured revolving term loan as of March 

The Company’s revolving line of credit balance is included in the “Line of credit and current portion of long-term debt”

line item in the Company's condensed consolidated balance sheet. 

4 unchanged sentences

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. 

On March 9, 2021, the Company 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, the Company issued 1,897,697  

shares of the Company’s common stock, par value $ 0.001 per share, thereunder during the first two quarters of 

The net proceeds (before upfront costs) to the Company from the sale of such shares were approximately $ 9,725  

after deducting commissions paid of approximately $ 275  

and before deducting other expenses of $ 411 . 

On September 12, 2022, the Company entered into a Sales Agreement (the “Sales Agreement”) with Roth Capital Partners, LLC and HC Wainwright & Co., LLC (collectively, the “Agents”).

2 unchanged sentences

The Company will pay a commission to the Agents of 2.75 % of the gross proceeds of the sale of the shares sold under the Sales Agreement and reimburse the Agents for the expenses incident to the performance of their obligations under the Sales Agreement.

During the quarter ended September 30, 2022, the Company issued 100,379 shares of the Company’s common stock under the Sales Agreement and the net proceeds (before upfront costs) to the Company from the sale of the Company’s common stock were approximately $ 323 after deducting commissions paid of approximately $ 9 and before deducting other expenses of $ 93 .

As of September 30, 2022, shares of the Company’s common stock having a value of approximately $ 11,667  remained available for issuance under the Sales Agreement.

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 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.

The maximum tax credit that could be claimed by an eligible employer in 2021 was $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, which were recorded in “Other income (expense), net”

in the Company’s condensed consolidated statement of operations.

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

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

line item in the Company’s condensed consolidated balance sheet at December 

The remaining $ 497 for the uncollected ERC benefit was collected during January 2022.

During the year ended December 31, 2022, the Company issued 100,379 shares of the Company’s common stock under the Sales Agreement and the net proceeds (before upfront costs) to the Company from the sale of the Company’s common stock were approximately $ 323 after deducting commissions paid of approximately $ 9 and before deducting other expenses of $ 93 .

No shares of the Company’s common stock were issued under the Sales Agreement during the three months ended March 31, 2023.

As of March 

31, 2023, shares of the Company’s common stock having a value of approximately $ 11,667  remained available for issuance under the Sales Agreement.

The Company also utilizes supply chain financing arrangements as a component of its funding for working capital, which accelerates receivable collections and helps to better manage cash flow.

3 unchanged sentences

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

During the three  and nine  months ended September 

30, 2022, the Company sold account receivables totaling $ 30,662  and $ 77,099 , respectively, related to supply chain financing arrangements, of which customers’

financial institutions applied discount fees totaling $ 615  and $ 1,110 , respectively.

During the three and nine  months ended September 

30, 2021, the Company sold account receivables totaling $ 23,998  and $ 78,661 , respectively, related to supply chain financing arrangements, of which customers’

financial institutions applied discount fees totaling $ 47  and $ 183 , respectively.

During the three months ended March 

31, 2023 and March 31, 2022, the Company sold account receivables totaling $ 9,614  and $ 15,925 , respectively, related to supply chain financing arrangements, of which customers’

financial institutions applied discount fees totaling $ 131  and $ 78 , respectively. 

The Company anticipates that current cash resources, amounts available under the 2022 Credit Facility, cash to be generated from operations and equipment financing, potential proceeds from the sale of Company securities under the Sales Agreement 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 receipt of customer deposits and revenues generated from new customer orders, are materially inconsistent with management’s expectations, particularly in light of the COVID- 19 pandemic, emerging variants and its effects on domestic and global economies, the Company may in the future encounter cash flow and liquidity issues.

If assumptions regarding the Company’s production, sales and subsequent collections from certain of the Company’s large customers, as well as receipt of customer deposits and revenues generated from new customer orders, are materially inconsistent with management’s expectations, the Company may in the future encounter cash flow and liquidity issues.

If the Company’s operational performance deteriorates significantly, it may be unable to comply with existing financial covenants, and could lose access to the 2022 Credit Facility.

2 unchanged sentences

While the Company believes that it will continue to have sufficient cash available to operate its businesses and to meet its financial obligations and debt covenants, there can be no assurances that its operations will generate sufficient cash, or that credit facilities will be available in an amount sufficient to enable the Company to meet these financial obligations.

Reclassifications

Certain prior year amounts, which are not material, have been reclassified to conform to current year presentation in the condensed consolidated financial statements and the notes to the condensed consolidated financial statements.  

Management’s Use of Estimates

1 unchanged sentence

Significant estimates, among others, include revenue recognition, future cash flows, inventory reserves, warranty reserves, impairment of long-lived assets, allowance for doubtful accounts, health insurance reserves, and valuation allowances on deferred taxes.

Although these estimates are based upon management’s best knowledge of current events and actions that the Company may undertake in the future, actual results could differ from these estimates, particularly in light of the COVID- 19 pandemic.

Although these estimates are based upon management’s best knowledge of current events and actions that the Company may undertake in the future, actual results could differ from these estimates.

NOTE 2 —

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 and nine months ended September 30, 2022 and 2021 :

Three Months Ended September 30,

Nine Months Ended September 30,

The following table presents the Company’s revenues disaggregated by revenue source for the three months ended March 31, 2023 and 2022 :

Three Months Ended March 31,

Heavy Fabrications

3 unchanged sentences

10,584  

10,190  

30,890  

20,315  

Industrial Solutions

2 unchanged sentences

$ 41,844  

( 819 )  

$ 44,843  

$ 40,389  

$ 136,699  

$ 119,608  

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.

5 unchanged sentences

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

Within the Gearing segment, the Company recognized revenue over time of $ 499  

During the three  months ended March 

2023  and 2022, the Company recognized a portion of revenue 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.

Within the Heavy Fabrications segment, the Company recognized revenue over time of $ 1,858  

and $ 2,471  

for the three and nine  months ended September 

2021, respectively, 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 Company’s projects are labor intensive, the Company uses labor hours as the input measure of progress for the applicable contracts.

During the fourth quarter of 2021, the Company ceased recording revenue over time within the Gearing segment due to a change in terms.

During the nine  months ended September 

2022 and 2021, the Company recognized a portion of revenue 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.

Within the Heavy Fabrications segment, the Company recognized revenue over time of $ 5,927  and $ 13,336  for the three and nine  months ended September 

30, 2022, respectively and recognized revenue over time of $ 1,791  

and $ 4,220  for the three and nine  months ended September 

30, 2021, respectively.

The Company also uses labor hours as the input measure of progress for the applicable Heavy Fabrications contracts since the projects are labor intensive.

for the three  months ended March 

31, 2023 and March 31, 2022, respectively.

The Company uses labor hours as the input measure of progress for the applicable Heavy Fabrications contracts because the projects are labor intensive.

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

7 unchanged sentences

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, 2022 and 2021 , as follows: 

The following table presents a reconciliation of basic and diluted earnings per share for the three months ended March 31, 2023 and 2022 , as follows: 

Three Months Ended

Nine Months Ended

September 30,

Basic earnings per share calculation:

Net (loss) income

$ ( 1,772 )  

$ ( 2,105 )  

$ ( 6,879 )  

$ 6,937  

Net income (loss)

Weighted average number of common shares outstanding

1 unchanged sentence

19,707,815  

20,155,548  

18,460,444  

Basic net (loss) income per share

$ ( 0.09 )  

$ ( 0.11 )  

$ ( 0.34 )  

Basic net income (loss) per share

$ 0.04  

Diluted earnings per share calculation:

Net (loss) income

$ ( 1,772 )  

$ ( 2,105 )  

$ ( 6,879 )  

$ 6,937  

Net income (loss)

Weighted average number of common shares outstanding

1 unchanged sentence

19,707,815  

20,155,548  

18,460,444  

Common stock equivalents:

4 unchanged sentences

19,707,815  

20,155,548  

19,218,420  

Diluted net (loss) income per share

$ ( 0.09 )  

$ ( 0.11 )  

$ ( 0.34 )  

Diluted net income (loss) per share

$ 0.04  

( 1 ) Restricted stock units granted and outstanding of 811,342  as of September 

30, 2022, 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 and nine  months ended September 

( 1 ) Restricted stock units granted and outstanding of 623,191  as of March 

31, 2022, 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 

NOTE 4 —

INVENTORIES  

The components of inventories as of September 30, 2022 and December 31, 2021 are summarized as follows:

September 30,

The components of inventories as of March 31, 2023 and December 31, 2022 are summarized as follows:

Raw materials

13 unchanged sentences

NOTE 5 —

AMP CREDITS

During the first quarter of 2023, the Company recognized Advanced Manufacturing Production tax credits (“AMP credits”) totaling $ 3,162 within the Heavy Fabrications segment.

These AMP credits were introduced as part of the Inflation Reduction Act (“IRA”) which was enacted on August 16, 2022. 

The IRA includes advanced manufacturing tax credits for manufacturers of eligible components, including wind and solar components.

Manufacturers of wind components qualify for the AMP credits based on the total rated capacity, expressed on a per watt basis, of the completed wind turbine for which such component is designed.

The credit applies to each component produced and sold in the U.S.

starting in 2023 through 2032.

 Wind towers within the Company’s Heavy Fabrications segment are eligible for credits of $ 0.03 per watt for each wind tower produced. In calculating the eligible credit, the Company relied on the megawatt rating provided by the customer.

Manufacturers can apply to the Internal Revenue Service for cash refunds of the AMP credits for up to five years. After the first five years, the AMP credits are transferable and can be sold to third parties for cash.

The Company recognized the AMP credits as a reduction to cost of sales in the Company’s condensed consolidated statements of operations for the three months ended 

March 31, 2023.

The assets related to the AMP credits are recognized as a long-term asset in the “AMP credit receivable”

line item in the Company's condensed consolidated balance sheets as of March 31, 2023. 

There are currently several critical and complex aspects of the IRA pending technical guidance and regulations from the Internal Revenue Service and the U.S.

Treasury Department.

Any modifications to the law or its effects arising, for example, through technical guidance and regulations from the Internal Revenue Service and the U.S.

Treasury Department could result in changes to the expected and/or actual benefits in the future, which could have a material effect on the Company, results of operations, financial performance and future development efforts.

NOTE 6 —

INTANGIBLE ASSETS

1 unchanged sentence

Intangible assets are amortized on a straight-line basis over their estimated useful lives, with a remaining life range from 0  

As of September 30, 2022 and December 31, 2021 , the cost basis, accumulated amortization and net book value of intangible assets were as follows:

September 30, 2022

As of March 31, 2023 and December 31, 2022 , the cost basis, accumulated amortization and net book value of intangible assets were as follows:

March 31, 2023

December 31, 2022

21 unchanged sentences

$ 2,728  

As of September 30, 2022 , estimated future amortization expense was as follows:

2027 and thereafter

As of March 31, 2023 , estimated future amortization expense was as follows:

$ 2,560  

2 unchanged sentences

ACCRUED LIABILITIES

Accrued liabilities as of September 30, 2022 and December 31, 2021 consisted of the following: 

September 30,

Accrued liabilities as of March 31, 2023 and December 31, 2022 consisted of the following: 

Accrued payroll and benefits

1 unchanged sentence

$ 3,110  

Fair value of interest rate swap

Accrued property taxes

3 unchanged sentences

Self-insured workers compensation reserve

Long term incentive plan accrual

Accrued other

4 unchanged sentences

DEBT AND CREDIT AGREEMENTS

The Company’s outstanding debt balances as of September 30, 2022 and December 31, 2021 consisted of the following:

September 30,

The Company’s outstanding debt balances as of March 31, 2023 and December 31, 2022 consisted of the following:

Line of credit

$ 16,945  

$ 6,350  

Current portion of term loan

Other notes payable

4 unchanged sentences

$ 6,863  

$ 7,141  

Credit Facility

On October 26, 2016, the Company established a three -year secured revolving line of credit with CIBC Bank USA (“CIBC”).

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 “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 “2016 Credit Facility”).

The obligations under the 2016 Credit Facility were 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 Amended and Restated Loan Agreement, 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 London Interbank Offering Rate (“LIBOR”) rate loans and 0.00 % and 0.75 % for base rate loans, and extending the term of the 2016 Credit Facility to 

On February 23, 2021, the Company executed the Second Amendment to the Amended and Restated Loan Agreement, which waived testing of the fixed charge coverage covenant for the quarters ended March 31, 2021 and June 20, 2021, added a new liquidity covenant applicable to the quarter ended March 31, 2021 and new minimum EBITDA covenants applicable to the quarters ended March 31, 2021 and June 30, 2021.

As of September 30, 2021, the Company transitioned back to a fixed charge coverage covenant.

On November 8, 2021, the Company 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, the Company 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 to $ 2,500 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.

In conjunction with the 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 fixed the interest rate on LIBOR borrowings for the entire original term of the 2016 Credit Facility at 2.13 %, before considering the Company’s risk premium.

The interest rate swap is accounted for using mark-to-market accounting.

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 

December 31, 2021 .

The interest rate swap expired in 

February 2022. 

On August 4, 2022, the Company entered into a credit agreement (the “2022 Credit Agreement”) with Wells Fargo Bank, National Association, as lender (“Wells Fargo”), providing the Company and its subsidiaries with a $ 35,000  senior secured revolving credit facility (which may be further increased by up to an additional $ 10,000  upon the request of the Company and at the sole discretion of Wells Fargo) and a $ 7,578 senior secured term loan (collectively, the “2022 Credit Facility”).

On August 4, 2022, the Company entered into a credit agreement (the “2022 Credit Agreement”) with Wells Fargo Bank, National Association, as lender (“Wells Fargo”), which replaced its prior credit facility and provided the Company and its subsidiaries with a $ 35,000  senior secured revolving credit facility (which may be further increased by up to an additional $ 10,000  upon the request of the Company and at the sole discretion of Wells Fargo) and a $ 7,578 senior secured term loan (collectively, the “2022 Credit Facility”).

The proceeds of the 2022 Credit Facility are available for general corporate purposes, including strategic growth opportunities.

The 2022 Credit Facility replaced the 2016 Credit Facility.

All obligations outstanding under the 2016 Credit Facility were refinanced by the 2022 Credit Facility on August 5, 2022.

The 2022 Credit Facility contains customary covenants limiting the Company’s and its subsidiaries’

ability to, among other things, incur liens, make investments, incur indebtedness, merge or consolidate with others or dispose of assets, change the nature of its business, and enter into transactions with affiliates. 

In addition, the 2022 Credit Facility contains financial covenants requiring the Company to have a Fixed Charge Coverage Ratio (as defined in the 2022 Credit Facility) (i) as of the twelve -month period ending July 31, 2023 through and including December 31, 2023 of 1.0 to 1.0;

and (ii) as of each twelve -month period thereafter to be greater than 1.1 to 1.0 and minimum EBITDA (as defined in the 2022 Credit Facility) on a month-end basis of $ 0 for the six month period ending June 30, 2022, $ 1,500  for the nine -month period ending September 30, 2022, $ 2,500  for the twelve -month period ending December 31, 2022, $ 3,600  for the twelve -month period ending March 31, 2023, and $ 5,100  for the twelve -month period ending June 30, 2023.

The initial term of the revolving credit facility matures August 4, 2027.

In connection with the 2022 Credit Facility, the Company incurred deferred financing costs in the amount of $ 479  primarily related to the revolving credit loan, which is net of accumulated amortization of $ 64 . These costs are included in the “Other assets”

line item of the Company's condensed consolidated financial statements as of March 

On February 8, 2023, the Company executed Amendment No.

1 to Credit Agreement and Limited Waiver which waived the Company’s fourth quarter minimum EBITDA (as defined in the 2022 Credit Agreement) requirement for the period ended December 31, 2022, amended the Fixed Charge Coverage Ratio (as defined in the 2022 Credit Agreement) requirements for the twelve -month period ending January 31, 2024 through and including June 30, 2024 and each twelve -month period thereafter, and amended the minimum EBITDA requirements applicable to the twelve -month periods ending March 31, 2023, June 30, 2023, September 30, 2023, and December 31, 2023.

The 2022 Credit Agreement, as amended, contains customary covenants limiting the Company’s and its subsidiaries’

The term loan also matures on August 4, 2027, with monthly payments based on an 84 -month amortization.

Borrowings under the 2022 Credit Facility bear interest at the following rates depending on the classification of the borrowing:

term loan - Daily Simple SOFR (a rate per annum equal to the secured overnight financing rate published by the SOFR administrator on the website of the Federal Reserve Bank of New York or any successor source), plus an applicable margin of 2.50%;

revolving credit loan - Daily Simple SOFR, plus an applicable margin of 2.00 % to 2.50 % depending on the excess availability on the revolving loan facility.

The 2022 Credit Agreement also contains customary events of default including, without limitation, non-payment of obligations, non-performance of covenants and obligations, material judgments, bankruptcy or insolvency, change of control, breaches of representations and warranties, limitation or termination of any guarantee with respect to the 2022 Credit Agreement or unenforceability of documentation related to the 2022 Credit Agreement.

The Company is allowed to prepay in whole or in part advances under the 2022 Credit Facility without penalty or premium.

The obligations under the 2022 Credit Agreement are secured by, subject to certain exclusions, (i) a 

first  priority security interest in all accounts, inventory, equipment, general intangibles, intellectual property, money and investment property, and (ii) a deed of trust, assignment of leases and rents and security agreement and fixture filing on the Abilene, Texas facility.

In connection with the 2022 Credit Facility, on August 4, 2022, the Company and its subsidiaries (collectively, the “Guarantors”) entered into a guaranty (the “Guaranty”) in favor of Wells Fargo, whereby the Guarantors guaranteed the full payment of all the obligations of the Company and its subsidiaries under the 2022 Credit Facility.

Each of the Company’s additional subsidiaries, if any, upon becoming a direct or indirect subsidiary, will be required to become a party to the Guaranty.

Additionally, in connection with the 2022 Credit Facility, the Company incurred deferred financing costs in the amount of $ 470 primarily related to the revolving credit loan. These costs are included in the “Other assets”

line item of the Company's condensed consolidated financial statements as of September 30, 2022. 

As of September 30, 2022 , there was $ 21,893  

As of March 31, 2023 , there was $ 23,892  

of outstanding indebtedness under the 2022  Credit Facility, with the ability to borrow an additional $ 10,567 .

As of September 30, 2022, the Company was in compliance with all financial covenants under the 2022  Credit Facility.

In 2016, the Company entered into a $ 570 loan agreement with the Development Corporation of Abilene which is included in the “Line of credit and other notes payable”

line item of the Company’s condensed consolidated financial statements as of September 30, 2022 and December 31, 2021 .

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

During each of the years 2021, 2020, 2019, and 2018, $ 114 of the loan was forgiven.

As of September 30, 2022 , the loan balance was $ 114 .

In addition, the Company has outstanding notes payable for capital expenditures in the amount of $ 2,111  and $ 363  as of September 30, 2022 and December 31, 2021 , respectively, with $ 26  and $ 186  included in the “Line of credit and other notes payable”

line item of the Company’s condensed consolidated financial statements as of September 30, 2022 and December 31, 2021 .

As of March 

31, 2023, the Company was in compliance with all financial covenants under the 2022  Credit Facility. As of March 

31, 2023, the effective interest rate of the senior secured revolving credit facility was 6.83 % and the effective rate of the senior secured term loan was 7.33 %. As of December 

31, 2022, the effective interest rate of the senior secured revolving credit facility was 6.55 % and the effective rate of the senior secured term loan was 6.80 %. 

 In addition, the Company has outstanding notes payable for capital expenditures in the amount of $ 1,060  and $ 1,094  as of March 31, 2023 and December 31, 2022 , respectively, with $ 62  and $ 88  included in the “Line of credit and current portion of long-term debt”

line item of the Company’s condensed consolidated financial statements as of March 31, 2023 and December 31, 2022 , respectively.

The notes payable have monthly payments that range from $ 3  to $ 16  and an interest rate of approximately 5 %.

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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, 2022  and 2021, the Company had additional operating leases that resulted in right-of-use assets obtained in exchange for lease obligations of $ 187  and $ 907 , respectively.

Additionally, during the 

nine months ended September 30, 2022  and 2021, the Company had additional finance leases that resulted in property, plant, and equipment obtained in exchange for lease obligations of $ 1,773  

During the three months ended March 31, 2023  and 2022, the Company did not have additional operating leases that resulted in right-of-use assets obtained in exchange for lease obligations.

During the 

three months ended March 31, 2023  and 2022, the Company had additional finance leases that resulted in property, plant, and equipment obtained in exchange for lease obligations of $ 0  

and $ 92 , respectively. 

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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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( 48 )  

( 47 )  

( 143 )  

Total operating lease costs

2 unchanged sentences

$ 1,396  

$ 4,256  

$ 4,281  

Supplemental cash flow information related to our operating leases is as follows for the nine months ended September 30, 2022 and 2021:

Supplemental cash flow information related to our operating leases is as follows for the three months ended March 31, 2023 and 2022:

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

Operating cash outflow from operating leases

$ 2,609  

$ 2,722  

Weighted-average remaining lease term-finance leases at end of period (in years)

3 unchanged sentences

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, 2022 , future minimum lease payments under finance leases and operating leases were as follows:

As of March 31, 2023 , future minimum lease payments under finance leases and operating leases were as follows:

$ 1,679  

$ 2,588  

$ 4,267  

2028 and thereafter

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Based upon interest rates currently available to the Company for debt with similar terms, the carrying value of the Company’s long-term debt is approximately equal to its fair value. 

The Company entered into an interest rate swap in June 2019 to mitigate the exposure to the variability of LIBOR for its floating rate debt described in Note 7, “Debt and Credit Agreements,”

of these condensed consolidated financial statements.

The fair value of the interest rate swap is reported in “Accrued liabilities”

and the change in fair value is reported in “Interest expense, net”

of these condensed consolidated financial statements.

The fair value of the interest rate swap is estimated as the net present value of projected cash flows based on forward interest rates at the balance sheet date. The interest rate swap expired in February 2022. 

The Company is required to provide disclosure and categorize assets and liabilities measured at fair value into one of three different levels depending on the assumptions (i.e., inputs) used in the valuation.

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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, 2022 and December 31, 2021 :

September 30, 2022

Liabilities measured on a recurring basis:

Interest rate swap

Total liabilities at fair value

December 31, 2021

Liabilities measured on a recurring basis:

Interest rate swap

Total liabilities at fair value

The fair value of the Company’s financial assets and liabilities as of March 31, 2023 and December 31, 2022 was $ 0 .

NOTE 11 —

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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, 2022 , the Company has a full valuation allowance recorded against deferred tax assets.

During the nine months ended September 30, 2022 , the Company recorded a provision for income taxes of $ 36 , compared to a provision for income taxes of $ 101  during the nine months ended September 30, 2021 . 

As of March 31, 2023 , the Company has a full valuation allowance recorded against deferred tax assets.

During the three months ended March 31, 2023 , the Company recorded a provision for income taxes of $ 23 , compared to a provision for income taxes of $ 7  during the three months ended March 31, 2022 . On 

August 16, 2022, Congress enacted the IRA which includes advanced manufacturing tax credits for manufacturers of eligible components, including wind and solar components produced and sold in the U.S.

starting in 

2023 through 2032.

No  rulings have been made on the taxability of these credits.

Due to the uncertainty of the credits, the Company assumed no tax impact for the three months ended March 31, 2023. 

The Company files income tax returns in U.S.

federal and state jurisdictions.

As of September 30, 2022 , open tax years in federal and some state jurisdictions date back to 1996 due to the taxing authorities’

As of March 31, 2023 , open tax years in federal and some state jurisdictions date back to 1996 due to the taxing authorities’

ability to adjust operating loss carryforwards.

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Section 

382 of the IRC in 2010, the Company determined that aggregate changes in stock ownership have triggered an annual limitation on NOL carryforwards and built-in losses available for utilization, thereby currently limiting annual NOL usage to $ 14,284 per year.

382 of the IRC in 2010, the Company determined that aggregate changes in stock ownership triggered an annual limitation on NOL carryforwards and built-in losses available for utilization, thereby currently limiting annual NOL usage to $ 14,284 per year.

Further limitations may occur, depending on additional future changes in stock ownership.

3 unchanged sentences

382 of the IRC.

On February 7, 2019, the Board of Directors (the “Board”) approved an amendment extending the Rights Plan for an additional three years, which was subsequently approved by the Company’s stockholders at the 2019 Annual Meeting of Stockholders held on April 23, 2019. 

On February 3, 2022, the Board approved an amendment which included an extension of the Rights Plan for an additional three years, which was subsequently approved at the 

2022 Annual Meeting of Stockholders held on 

April 26, 2022. 

On February 7, 2019 and February 3, 2022, the Board of Directors (the “Board”) approved amendments extending the Rights Plan for an additional three years. 

The Rights Plan is intended to act as a deterrent to any person or group, together with its affiliates and associates, becoming the beneficial owner of 4.9 % or more of the Company’s common stock and thereby triggering a further limitation of the Company’s available NOL carryforwards.

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12, 2013 will not trigger the preferred share purchase rights unless they acquire additional shares after that date. 

As of September 30, 2022 , the Company had no unrecognized tax benefits.

As of March 31, 2023 , 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, 2022 .

The Company had no accrued interest and penalties as of March 31, 2023 .

NOTE 12 —

SHARE-BASED COMPENSATION  

There was no  stock option activity during the nine months ended September 30, 2022  and no  stock options were outstanding as of September 30, 2022 .

During the three months ended September 30, 2022, the Company recorded share-based compensation expense in the amount of $ 425 for liability awards that will be settled in shares in 2023.

The liability is recognized in the “Accrued liabilities”

line item of the Company’s condensed consolidated balance sheet and has a balance of $ 425 as of 

September 30, 2022. 

The following table summarizes the Company’s restricted stock unit and performance award activity during the nine months ended September 30, 2022 : 

There was no  stock option activity during the three months ended March 31, 2023  and no  stock options were outstanding as of March 31, 2023 . 

The following table summarizes the Company’s restricted stock unit and performance award activity during the three months ended March 31, 2023 : 

Weighted Average

4 unchanged sentences

$ 3.43  

$ 1.75  

( 815,734 )  

$ 2.23  

( 25,449 )  

$ 2.60  

Unvested as of September 30, 2022

Unvested as of March 31, 2023

824,135  

1 unchanged sentence

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

For the nine  months ended September 

30, 2022, 280,175  shares were withheld to cover $ 546  of tax obligations. 

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, 2022 and 2021 , as follows: 

Nine Months Ended September 30,

For the three  months ended March 31, 2023, no  shares were withheld to cover 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, 2023 and 2022 , as follows: 

Three Months Ended March 31,

Share-based compensation expense:

2 unchanged sentences

Net effect of share-based compensation expense on net income

$ 1,185  

Reduction in earnings per share:

6 unchanged sentences

NOTE 13 —

LEGAL PROCEEDINGS AND OTHER MATTERS

Legal Proceedings

3 unchanged sentences

It is possible that if one or more of such matters were decided against the Company, the effects could be material to the Company’s results of operations in the period in which the Company would be required to record or adjust the related liability and could also be material to the Company’s financial condition and cash flows in the periods the Company would be required to pay such liability.

Other Matters

The Company received a notice dated January 18, 2023 from WM Argyle Fund, LLC (“WM Argyle”), which allegedly owned approximately 1.0% of the Company’s outstanding shares at the time of submission nominating a slate of six candidates for election as directors at the Company's 

2023 Annual Meeting of Stockholders.

WM Argyle later reduced its slate from six nominees to three nominees and has filed a definitive proxy statement with the SEC in connection with the 2023 Annual Meeting of Stockholders. The Company remains open to ongoing engagement with WM Argyle. However, if the Company and WM Argyle cannot reach an agreement in connection with its nomination, there will be a contested election at the Company’s 2023 Annual Meeting of Stockholders and up to three of the Company’s incumbent directors could be replaced by WM Argyle’s nominees.

NOTE 14 —

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Although some of the accounting standards issued or effective in the current fiscal year may be applicable to it, the Company believes that none of the new standards have a significant impact on its condensed consolidated financial statements.

In June 2016, the Financial Accounting Standards Board issued Accounting Standards Update 

2016 - 13, “Financial Instruments-Credit Losses (Topic 326 ),”

which replaces the current incurred loss impairment methodology for most financial assets with the current expected credit loss (“CECL”) methodology.

The series of new guidance amends the impairment model by requiring entities to use a forward-looking approach based on expected losses rather than incurred losses to estimate credit losses on certain types of financial instruments, including trade receivables and contract assets.

The guidance should be applied on either a prospective transition or modified-retrospective approach depending on the subtopic.

The guidance is effective for annual periods beginning after December 15, 2022, including interim periods within those fiscal years, with early adoption permitted.

The Company implemented CECL during the three months ended March 31, 2023.

The impact on the Company's financial statements was not material. See Note 16, “Commitments and Contingencies,”

of these condensed consolidated financial statements for a further discussion of CECL. 

NOTE 15—

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of these condensed consolidated financial statements.

Summary financial information by reportable segment for the three and nine months ended September 30, 2022 and 2021 is as follows:

Heavy Fabrications

Industrial Solutions

For the Three Months Ended September 30, 2022

Revenues from external customers

$ 30,640  

$ 10,190  

$ 4,013  

$ 44,843  

Intersegment revenues

30,640  

10,190  

44,843  

Operating income (loss)

( 191 )  

( 1,322 )  

Depreciation and amortization

Capital expenditures

Heavy Fabrications

Industrial Solutions

For the Three Months Ended September 30, 2021

Revenues from external customers

$ 28,675  

$ 7,562  

$ 4,152  

$ 40,389  

Intersegment revenues

( 61 )  

28,675  

( 61 )  

40,389  

Operating (loss) income

( 445 )  

( 219 )  

( 108 )  

( 1,248 )  

Depreciation and amortization

Capital expenditures

Summary financial information by reportable segment for the three months ended March 31, 2023 and 2022 is as follows:

Heavy Fabrications

Industrial Solutions

For the Nine Months Ended September 30, 2022

For the Three Months Ended March 31, 2023

Revenues from external customers

9 unchanged sentences

48,873  

136,699  

Operating loss

( 11 )  

( 73 )  

( 368 )  

Operating income (loss)

( 2,711 )  

3 unchanged sentences

Industrial Solutions

For the Nine Months Ended September 30, 2021

For the Three Months Ended March 31, 2022

Revenues from external customers

9 unchanged sentences

41,844  

119,608  

Operating loss

6 unchanged sentences

Total Assets as of

September 30,

Heavy Fabrications

19 unchanged sentences

Allowance for Doubtful Accounts  

Based upon past experience and judgment, the Company establishes an allowance for doubtful accounts with respect to accounts receivable.

The Company’s standard allowance estimation methodology considers a number of factors that, based on its collections experience, the Company believes will have an impact on its credit risk and the collectability of its accounts receivable.

These factors include individual customer circumstances, history with the Company, the length of the time period during which the account receivable has been past due and other relevant criteria. 

 Beginning January 1, 2023, the Company assessed and recorded an allowance for credit losses using the CECL model.

The adjustment for credit losses to management’s current estimate is recorded in net income as credit loss expense.

All credit losses were on trade receivables and/or contract assets arising from the Company's contracts with customers.  

The Company selected a loss-rate method for the CECL model, based on the relationship between historical write-offs of receivables and the underlying sales by major customer.

Utilizing this model, a historical loss-rate is applied against the amortized cost of applicable assets, at the time the asset is established.

The loss rate reflects the Company’s current estimate of the risk of loss (even when that risk is remote) over the expected remaining contractual life of the assets.

The Company’s policy is to deduct write-offs from the allowance for credit losses account in the period in which the financial assets are deemed uncollectible.

The adjustment for credit losses using this CECL model on accounts receivable and contract assets during the three months ended March 31, 2023 was 

not material.  

The allowance for credit losses for prior periods was prepared in accordance with legacy GAAP.

Based upon past experience and judgment, the Company established an allowance for doubtful accounts with respect to accounts receivable.

The Company’s standard allowance estimation methodology considered a number of factors that, based on its collections experience, the Company believed would have an impact on its credit risk and the collectability of its accounts receivable.

These factors included individual customer circumstances, history with the Company, the length of the time period during which the account receivable had been past due and other relevant criteria.  

The Company monitors its collections and write-off experience to assess whether or not adjustments to its allowance estimates are necessary.

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, 2022 and 2021 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, 2023 and 2022 consisted of the following: 

For the Three Months Ended March 31,

Balance at beginning of period

Other adjustments

( 10 )  

Bad debt expense

Balance at end of period

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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, 2022 or December 31, 2021. 

There was no reserve for liquidated damages at 

March 31, 2023  and 

December 31, 2022. 

Item 2.  

Management’s Discussion and Analysis of Financial Condition and Results of Operations  

3 unchanged sentences

at the end of Item 2.

Actual results may differ materially from these expectations due to inaccurate assumptions and known or unknown risks and uncertainties including those arising as a result of, or amplified by, the COVID-19 pandemic.

Actual results may differ materially from these expectations due to inaccurate assumptions and known or unknown risks and uncertainties.

As used in this Quarterly Report on Form 10-Q, the terms “we,”

9 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Net (loss) income

Net income (loss)

Adjusted EBITDA (1)

4 unchanged sentences

Book-to-bill (5)

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.

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

Our management uses adjusted EBITDA when it internally evaluates the performance of our business, reviews financial trends and makes operating and strategic decisions.

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

Our backlog at September 30, 2022 and 2021 is net of revenue recognized over time. 

Our backlog at March 31, 2023 and 2022 is net of revenue recognized over time. 

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

1 unchanged sentence

Three Months Ended

Nine Months Ended

September 30,

Net (loss) income

Net income (loss)

Interest expense

2 unchanged sentences

Share-based compensation and other stock payments

Proxy contest-related expenses

Adjusted EBITDA

Changes in operating working capital

Employee retention credit receivable

Capital expenditures

Proceeds from disposal of property and equipment

Free Cash Flow

OUR BUSINESS  

Third Quarter Overview  

We booked $84,457 in new orders in the third quarter of 2022, up significantly from $42,597 in the third quarter of 2021.

Within our Heavy Fabrications segment, wind tower orders increased 223% compared to the prior year quarter as tower customers secured 2022 and 2023 production capacity to support ongoing wind turbine tower installation projects.

Partially offsetting the increase in tower orders within the Heavy Fabrication segment was a 41% decrease in industrial fabrication orders.

Gearing segment orders increased 34% compared to the prior year quarter primarily due to higher demand from oil and gas (“O&G”), industrial, and mining customers. Orders within our Industrial Solutions segment increased by 34% as compared to the prior year quarter, primarily due to an increase in new gas turbine orders. 

We recognized revenue of $44,843 in the third quarter of 2022, up 11% compared to the third quarter of 2021, primarily due to a 95% increase in industrial fabrications product line revenue within the Heavy Fabrications segment and a 35% increase in Gearing segment revenue. The increase in industrial fabrication revenue is primarily attributable to strong recent order intake from industrial customers and revenue recognized on our Pressure Reducing Systems (“PRS”) units.

This increase was partially offset by a 26% decrease in tower sections sold.

The Gearing revenue increase was primarily driven by strong order intake in recent quarters from O&G customers, partially offset by a decrease in aftermarket wind revenue. Industrial Solutions segment revenue decreased 5% compared to the prior year quarter, primarily due to global logistics delays.

We recorded a net loss of $1,772 or $0.09 per share in the third quarter of 2022, compared to a net loss $2,105 or $0.11 per share in the third quarter of 2021.This decrease in net loss was due primarily to higher sales, partially offset by higher material costs and increased interest expense. 

COVID-19 Pandemic

The COVID-19 pandemic has disrupted business, trade, commerce and financial markets in the U.S.

and globally.

Through September 30, 2022, we experienced an adverse impact to our business, operations and financial results as a result of the COVID-19 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.

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.

First Quarter Overview  

We booked $39,602 in new orders in the first quarter of 2023, down from $52,693 in the first quarter of 2022. Within our Heavy Fabrications segment, wind tower orders decreased 63% compared to the prior year quarter primarily due to the timing of tower orders as a major wind tower customer secured relatively longer-term capacity during the fourth quarter of 2022 instead of ordering in more regular intervals as was the case in the prior year. Partially offsetting this decrease was a 113% increase in industrial fabrication orders primarily due to improved demand from industrial customers and demand for our Pressure Reducing Systems (“PRS”) units. Gearing segment orders decreased 12% from the prior year period primarily due to reduced demand from O&G customers. Orders within our Industrial Solutions segment increased by 56% as compared to the prior year quarter, primarily due to improved demand for new gas turbine content. 

We recognized revenue of $48,873 in the first quarter of 2023, up 17% compared to the first quarter of 2022. 

Within the Heavy Fabrications segment wind tower revenue increased 12% primarily as a result of 

less customer supplied materials in the current year quarter and increased steel content, which is generally a pass-through to customers. Industrial fabrication revenue within the Heavy Fabrications segment increased 31% primarily due to increased demand from mining customers and our PRS units in the current year quarter.

Gearing segment revenue increased 13% relative to the comparable prior year period primarily due to higher order intake in recent quarters from industrial customers, partially offset by a decrease in other markets served.

Industrial Solutions segment revenue increased by 33% from the prior year period primarily due to the timing of revenue recognized from international customers.

We recorded net income of $769 or $0.04 per share in the first quarter of 2023, compared to a net loss $2,404 or $0.12 per share in the first quarter of 2022.This increase in net income was primarily due to higher sales and the $3,162 recognized from the AMP credits (discussed below).

This was partially offset by higher medical costs and proxy contest-related expenses. 

During the first quarter of 2023, we were able to recognize advanced manufacturing tax credits (“AMP credits”) of $3,162 within the Heavy Fabrications segment.

The AMP credits were a part of the Inflation Reduction Act (“IRA”) which was enacted on August 16, 2022. The IRA includes advanced manufacturing tax credits for manufacturers of eligible components, including wind and solar components.

Manufacturers qualify for the AMP credits based on the total rated capacity, expressed on a per watt basis, of the completed wind turbine for which such component is designed.

The credit is applicable for each component produced and sold in the U.S.

starting in 2023 through 2032.

Wind towers within our Heavy Fabrications segment were eligible for credits of $0.03 per watt for each wind tower produced.

RESULTS OF OPERATIONS  

Three months ended September 30, 2022, Compared to Three months ended September 30, 2021  

The condensed consolidated statement of operations table below should be read in connection with a review of the following discussion of our results of operations for the three months ended September 30, 2022, compared to the three months ended September 30, 2021.

Three Months Ended September 30,

Three months ended March 31, 2023, Compared to Three months ended March 31, 2022  

The condensed consolidated statement of operations table below should be read in connection with a review of the following discussion of our results of operations for the three months ended March 31, 2023, compared to the three months ended March 31, 2022.

Three Months Ended March 31,

Cost of sales

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Total operating expenses

Operating loss

Operating income (loss)

Other (expense) income, net

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Total other (expense) income, net

Net loss before provision for income taxes

Net income (loss) before provision for income taxes

Provision for income taxes

Net income (loss)

Consolidated  

Revenues increased by $4,454 versus the prior year quarter.

This increase was primarily due to a 95% increase in industrial fabrications product line revenue within the Heavy Fabrications segment compared to the prior year quarter primarily as a result of strong recent order intake from industrial customers and revenue recognized on our PRS units.

This increase was partially offset by a 26% decrease in tower sections sold compared to the prior year quarter. Gearing segment revenue was up 35% from the third quarter of 2021, primarily driven by higher recent order intake from O&G customers, partially offset by a decrease in aftermarket wind revenue.

Industrial Solutions segment revenue decreased by 5% from the third quarter of 2021 primarily due to global logistics delays. 

Gross profit increased by $1,674 when compared to the prior year quarter, primarily due to the higher sales volumes within the Gearing and Heavy Fabrications segments, partially offset by higher material costs. 

Due primarily to higher revenue levels, operating expenses as a percentage of sales decreased to 9.5% in the current-year quarter from 10.1% in the prior year quarter.

Net loss was $1,772 during the three months ended September 30, 2022, compared to a net loss of $2,105 during the three months ended September 30, 2021.

This decrease in net loss was primarily due to the factors described above, partially offset by higher interest expense.

Revenues increased by $7,029 versus the prior year quarter primarily due to an increase in wind tower revenue by 12% as a result of less customer supplied materials in the current year quarter and increased steel content, which is generally a pass-through to customers. Industrial fabrication revenue within the Heavy Fabrications segment increased 31% primarily due to increased demand from mining customers and for our PRS units in the current year quarter.

Industrial Solutions segment revenue increased by 33% from the prior year period primarily due to the timing of revenue recognized from international customers.

Gross profit increased by $4,964 when compared to the prior year quarter, primarily due to the higher sales volumes within all segments and the $3,162 recognized from the AMP credits.

Due primarily to higher medical costs and proxy-contest related expenses, operating expenses as a percentage of sales increased to 11.7% in the current-year quarter from 9.8% in the prior year quarter.

Net income was $769 during the three months ended March 31, 2023, compared to a net loss of $2,404 during the three months ended March 31, 2022.

This increase in net income was primarily due to the factors described above.

Heavy Fabrications Segment  

Three Months Ended

September 30,

Tower sections sold

Operating income

Operating income (loss)

Operating margin

Wind tower orders increased 223% compared to the prior year quarter as tower customers secured 2022 and 2023 production capacity to support ongoing wind turbine tower installation projects.

Industrial fabrications product line orders decreased 41% from the prior year quarter primarily due to lower mining demand. Heavy Fabrications segment revenues increased 7% compared to the prior year primarily due to a 95% increase in industrial fabrication line revenues, which was partially offset by a 26% decrease in tower sections sold. 

Heavy Fabrications segment operating income increased by $817 compared to the prior year quarter.

The quarter-over-quarter improvement in operating performance is primarily a result of higher sales volumes and labor efficiencies, partially offset by higher material costs. Operating margin was 1.2% during the three months ended September 30, 2022, an increase from (1.6)% during the three months ended September 30, 2021.

Within our Heavy Fabrications segment, wind tower orders decreased 63% compared to the prior year quarter primarily due to the timing of tower orders as a major wind tower customer secured relatively longer-term capacity during the fourth quarter of 2022 instead of ordering in more regular intervals as was the case in the prior year. Partially offsetting this decrease in orders was a 113% increase in industrial fabrication orders primarily due to improved demand from industrial customers and demand for our PRS units. 

Segment revenues increased by 16% during the three months ended March 31, 2023 primarily due to a 12% increase in wind tower revenue as a result of 

Heavy Fabrications segment operating results improved by $3,251 as compared to the prior year quarter.

The improvement in operating performance was primarily a result of reduced tower costs as a result of the AMP credits recognized of $3,162 and higher industrial fabrication revenues recognized in the current year quarter. Operating profit margin was 8.8% during the three months ended March 31, 2023 compared to (1.7%) during the three months ended March 31, 2022. 

Gearing Segment

Three Months Ended

September 30,

Operating income (loss)

Operating margin

Gearing segment orders increased 34% from the prior year period primarily due to increased demand from industrial, mining, and O&G customers.

Gearing revenue was up 35% relative to the comparable prior year period primarily due to higher order intake in recent quarters from O&G customers, partially offset by a decrease in aftermarket wind revenue.

Gearing segment orders decreased 12% from the prior year period primarily due to reduced demand from O&G customers. Gearing revenue was up 13% relative to the comparable prior year period primarily due to higher order intake in recent quarters from industrial customers, partially offset by a decrease in mining and aftermarket wind revenue.

Gearing segment operating income improved by $693 from the prior year period.

This improvement was primarily attributable to higher sales partially offset by increased fixed costs to support volumes.

Operating margin was 6.1% during the three months ended September 30, 2022, an improvement from (2.9)% during the three months ended September 30, 2021, driven primarily by the items identified above.

This improvement was primarily attributable to higher sales, the absence of ramp-up costs incurred in the prior year, and a more profitable mix of product sold.

Operating margin was 4.9% during the three months ended March 31, 2023, an improvement from (1.1)% during the three months ended March 31, 2022, driven primarily by the items identified above.

Industrial Solutions Segment  

Three Months Ended

September 30,

Operating loss

Operating margin

Industrial Solutions segment orders increased by 34% from the prior year period primarily due to the timing of orders associated with new gas turbine orders.

Segment revenue decreased by 5% from the prior year period primarily due to global logistics delays.

Operating loss increased versus the prior-year quarter primarily as a result of lower sales and  

higher freight and packaging costs. 

Corporate and Other  

Corporate and Other expenses during the three months ended September 30, 2022 increased from the prior year period primarily due to higher compensation-related expenses. 

Nine months ended September 30, 2022, Compared to Nine months ended September 30, 2021  

The condensed consolidated statement of operations table below should be read in connection with a review of the following discussion of our results of operations for the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021.

Nine Months Ended September 30,

Cost of sales

Operating expenses

Selling, general and administrative expenses

Intangible amortization

Total operating expenses

Operating loss

Other (expense) income, net

Paycheck Protection Program loan forgiveness

Interest expense, net

Total other (expense) income, net

Net (loss) income before provision for income taxes

Provision for income taxes

Net (loss) income

Consolidated  

Revenues increased by $17,091 versus the prior year period. 

Gearing segment revenue was up 52% from 2021, primarily driven by strong recent order intake from O&G, mining, and industrial customers, partially offset by a decrease in aftermarket wind revenue.

Heavy Fabrications segment revenues increased by 7% as lower tower demand was more than offset by a 101% increase in industrial fabrications product line revenue.

The industrial fabrications product line revenue increase was primarily attributable to higher recent order intake from industrial and mining customers, in addition to revenue recognized on our PRS units.

Industrial Solutions segment revenue increased by 6%, primarily due to an increase in revenue from aftermarket projects, partially offset by a decrease in revenue from new gas turbine projects.

Gross profit increased by $3,600 when compared to the prior year period primarily due to higher sales volumes in the Gearing and the Heavy Fabrications segments, partially offset by higher material costs and ramp-up costs. As a result, gross margin increased to 6.0% during the nine months ended September 30, 2022, from 3.8% during the nine months ended September 30, 2021.

Due primarily to higher revenue levels and reduced legal and professional fees, operating expenses as a percentage of sales decreased to 9.3% in the current-year period from 11.0% in the prior year period.

Net loss was $6,879 during the nine months ended September 30, 2022, compared to net income of $6,937 during the nine months ended September 30, 2021 primarily due to the factors described above and the absence of the $6,965 employee retention credit (“ERC”) benefit and the $9,151 Payroll Protection Program (“PPP”) loan forgiveness recorded in the prior year. 

Heavy Fabrications Segment  

Nine Months Ended

September 30,

Tower sections sold

Operating loss

Operating margin

Wind tower orders increased 106% versus the prior year period as tower customers secured 2022 and 2023 production capacity to support ongoing wind turbine tower installation projects.

Industrial fabrications product line orders increased 10% from the prior year period primarily due to increased demand for PRS units and industrial products, partially offset by a reduction in mining demand.

Heavy Fabrications segment revenues increased 7% primarily due to a 101% increase in industrial fabrication revenue primarily due to higher recent order intake from industrial and mining customers, in addition to revenue recognized from our PRS units in the current year.

The increase in industrial fabrications revenue was partially offset by a 29% decrease in tower sections sold. 

Heavy Fabrications segment operating loss improved by $1,862 compared to the prior year period.

The improvement in operating performance was primarily a result of higher sales in the current year and the absence of one-time events that occurred during the prior year period including a weather-related event and a customer driven project delay, partially offset by higher material costs and costs associated with transitioning a portion of the workforce to support growth in the industrial fabrications product line.

Operating margin was 0.0% during the nine months ended September 30, 2022, an improvement from (2.1)% during the nine months ended September 30, 2021.

Gearing Segment

Nine Months Ended

September 30,

Operating loss

Operating margin

Gearing segment orders increased 31% from the prior year period primarily due to increased demand from O&G, mining, and industrial customers.

Gearing revenue was up 52% relative to the comparable prior year period primarily due to higher order intake in recent quarters from O&G, industrial, and mining customers, partially offset by a decrease in aftermarket wind revenue.

Gearing segment operating loss improved by $2,017 from the prior year period.

This improvement was primarily attributable to higher sales, partially offset by higher material costs, ramp-up costs, and increased fixed costs to support higher volumes.

Operating margin was (0.2)% during the nine months ended September 30, 2022, an improvement from (10.3)% during the nine months ended September 30, 2021, driven primarily by the items identified above.

Industrial Solutions Segment  

Nine Months Ended

September 30,

Operating loss

Operating income (loss)

Operating margin

Industrial Solutions segment orders increased by 24% from the prior year period primarily due to the timing of orders associated with aftermarket projects. Segment revenue increased by 6% from the prior year period primarily due to an increase in revenue from aftermarket projects.

The increased operating loss versus the prior year was primarily a result of higher variable expenses including freight costs. 

Industrial Solutions segment orders increased by 56% from the prior year period primarily due to improved demand for new gas turbine content.

Segment revenue increased by 33% from the prior year period primarily due to revenue recognized from international customers.

Operating income increased versus the prior-year quarter primarily as a result of higher sales and a more profitable mix of product sold. 

Corporate and Other  

Corporate and Other expenses during the nine months ended September 30, 2022 decreased from the prior year period primarily due to lower salaries and benefits.

Corporate and Other expenses during the three months ended March 31, 2023 increased from the prior year period primarily due to higher medical costs and increased professional fees associated with the contested proxy election. 

LIQUIDITY, FINANCIAL POSITION AND CAPITAL RESOURCES  

As of September 30, 2022, cash totaled $1,509, an increase of $657  

On August 4, 2022, we entered into a credit agreement (the “2022 Credit Agreement”) with Wells Fargo Bank, National Association, as lender (“Wells Fargo”), providing the Company and its subsidiaries with a $35,000 senior secured revolving credit facility (which may be further increased by up to an additional $10,000 upon the request of the Company and at the sole discretion of Wells Fargo) and a $7,578 senior secured term loan (collectively, the “2022 Credit Facility”).

The proceeds of the 2022 Credit Facility are available for general corporate purposes, including strategic growth opportunities.

As of March 31, 2023, cash totaled $1,729, a decrease of $11,003  

from December 31, 2022.

Cash balances remain limited as operating receipts and disbursements flow through our 2022 Credit Facility (as defined in Note 7, “Debt and Credit Agreements,”

in the notes to our condensed consolidated financial statements), which was in a drawn position as of September 30, 2022.

Debt and finance lease obligations at September 30, 2022 totaled $28,966.

As of September 30, 2022, we had the ability to borrow up to an additional $13,315 un der the 2022 Credit Facility. In addition to the 2022 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.

Debt and finance lease obligations at March 31, 2023 totaled $30,591.

As of March 31, 2023, we had the ability to borrow up to an additional $10,567 un der the 2022 Credit Facility. 

In addition to the 2022 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.

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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 (the “Manager”).

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 August 18, 2020, we 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.

This shelf registration statement, which includes a base prospectus, allows us at any time to offer any combination of securities described in the prospectus in one or more offerings.

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

On September 12, 2022, we entered into a Sales Agreement (the “Sales Agreement”) with Roth Capital Partners, LLC and HC Wainwright & Co., LLC (collectively, the “Agents”).

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We will pay a commission to the Agents of 2.75% of the gross proceeds of the sale of the shares sold under the Sales Agreement and reimburse the Agents for the expenses incident to the performance of their obligations under the Sales Agreement.

During the quarter ended September 30, 2022, we issued 100,379 shares of our common stock under the Sales Agreement and the net proceeds (before upfront costs) to us from the sale of our common stock were approximately $323 after deducting commissions paid of approximately $9.

As of September 30, 2022, shares of our common stock having a value of approximately $11,667 remained available for issuance under the Sales Agreement.

On August 4, 2022, we executed the 2022 Credit Agreement (as defined in Note 7, “Debt and Credit Agreements”

in the notes to our condensed consolidated financial statements) with Wells Fargo Bank, National Association, as lender (“Wells Fargo”), providing us with a $35,000 senior secured revolving credit facility (which may be further increased by up to an additional $10,000 upon our request and at the sole discretion of Wells Fargo) and a $7,578 senior secured term loan (collectively, the “2022 Credit Facility”).

The proceeds of the 2022 Credit Facility are available for general corporate purposes, including strategic growth opportunities.

The 2022 Credit Facility replaces the 2016 Credit Facility (as defined in Note 7, “Debt and Credit Agreements”

in the notes to our condensed consolidated financial statements). All obligations outstanding under the 2016 Credit Facility were refinanced by the 2022 Credit Facility on August 5, 2022.

For more information on the 2022 Credit Facility, please see Note 7, “Debt and Credit Agreement”

in the notes to our condensed consolidated financial statements.

During the year ended December 31, 2022, we issued 100,379 shares of our common stock under the Sales Agreement and the net proceeds (before upfront costs) to us from the sale of our common stock were approximately $323 after deducting commissions paid of approximately $9.

No shares of the Company’s common stock were issued under the Sales Agreement during the three months ended March 31, 2023. As of March 31, 2023, shares of our common stock having a value of approximately $11,667 remained available for issuance under the Sales Agreement.

We anticipate that current cash resources, amounts available under the 2022 Credit Facility, cash to be generated from operations and equipment financing, proceeds from the sale of securities under the Sales Agreement and any potential proceeds from the sale of further securities under the Form S-3 will be adequate to meet our liquidity needs for at least the next twelve months.

If assumptions regarding our production, sales and subsequent collections from certain of our large customers, as well as receipt of 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 emerging variants, and its effects on domestic and global economies, we may encounter cash flow and liquidity issues.

If our operational performance deteriorates, we may be unable to comply with existing financial covenants, and could lose access to the 2022 Credit Facility.

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Sources and Uses of Cash  

The following table summarizes our cash flows from operating, investing, and financing activities for the nine months ended September 30, 2022 and 2021:

Nine Months Ended

September 30,

The following table summarizes our cash flows from operating, investing, and financing activities for the three months ended March 31, 2023 and 2022:

Three Months Ended

Total cash (used in) provided by:

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Financing activities

Net increase (decrease) in cash

Net decrease in cash

Operating Cash Flows  

During the nine months ended September 30, 2022, net cash used in operating activities totale d $10,271 com pared to net cash used in operating activities of $10,823 during the prior year period. The decrease in net cash used was primarily due to improved operating performance in the current year and less operating working capital build, partially offset by the ERC and PPP loan forgiveness benefits which were recognized in the prior year period.

During the three months ended March 31, 2023, net cash used in operating activities totaled $25,984 compared to net cash used in operating activities of $6,005 during the prior year period.

The increase in net cash used during the current year period was primarily due to an increase in accounts receivable and inventory, combined with a decrease in customer deposits, as expected and consistent with the updated terms with a major customer.

Increases in accounts receivable and inventory were also driven by increased production levels when compared to the prior year period.

Investing Cash Flows  

During the nine months ended September 30, 2022, net cash used in investing activities tot aled $2,757, comp ared to net cash used in investing activities of $1,336 during the prior year period.

The increase in net cash used in investing activities as compared to the prior-year period was primarily due to an increase in net purchases of property and equipment.

During the three months ended March 31, 2023, net cash used in investing activities tot aled $1,065, comp ared to net cash used in investing activities of $492 during the prior year period.

The increase in net cash used in investing activities as compared to the prior-year period was primarily due to an increase in purchases of property and equipment.

Financing Cash Flows  

During the nine months ended September 30, 2022, net cash provided by financing activities tot aled $13,685, co mpared to net cash provided by financing activities of $11,122 during the prior year period.

The increase was primarily due to increased net borrowings under our 2022 Credit Facility in the current year, partially offset by the proceeds from the sale of securities under the Equity Distribution Agreement received in the prior year. 

In 2016, we entered into a $570 loan agreement with the Development Corporation of Abilene which is included in the “Line of credit and other notes payable” line item of our condensed consolidated financial statements as of September 30, 2022 and December 31, 2021.

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

During each of the years 2021, 2020, 2019 and 2018, $114 of the loan was forgiven.

As of September 30, 2022, the loan balance was $114.

During the three months ended March 31, 2023, net cash provided by financing activities tot aled $16,046, co mpared to net cash provided by financing activities of $6,418 during the prior year period.

The increase was primarily due to increased net borrowings under the 2022 Credit Facility in the current year period. 

In addition, we have outstanding notes payable for capital expenditures in the amount of $1,060  

and $363 as of September 30, 2022 and December 31, 2021, respectively, with $26  

and $186 included in the “Line of Credit and other notes payable”

line item of our condensed consolidated financial statements as of September 30, 2022 and December 31, 2021.

and $1,094 as of March 31, 2023 and December 31, 2022, respectively, with $62  

and $88 included in the “Line of Credit and current portion of long-term debt”

line item of our condensed consolidated financial statements as of March 31, 2023 and December 31, 2022, respectively.

The notes payable have monthly payments that range from $3 to $16 and an interest rate of approximately 5%.

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The outstanding notes payable mature in September 2028.

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) provided for the ERC, which is a refundable tax credit against certain employment taxes. 

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.

The maximum tax credit that could be claimed by an eligible employer in 2021 was $7,000 per employee per calendar quarter.

In the first and second quarters of 2021, we received ERC benefits of $3,372 and $3,593, respectively, which were recorded in “Other income (expense), net”

in our condensed consolidated statement of operations.

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

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

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

The remaining balance of $497 for the uncollected ERC benefit was collected during January 2022.

CRITICAL ACCOUNTING ESTIMATES

There have been no material changes in our critical accounting estimates during the three months ended September 30, 2022 as compared to the critical accounting estimates described in our Annual Report on Form 10-K for the year ended December 31, 2021. 

There have been no material changes in our critical accounting estimates during the three months ended March 31, 2023 as compared to the critical accounting estimates described in our Annual Report on Form 10-K for the year ended December 31, 2022. 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS  

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Forward looking statements include any statement that does not directly relate to a current or historical fact.

Our forward-looking statements may include or relate to our beliefs, expectations, plans and/or assumptions with respect to the following, many of which are, and will be, amplified by the COVID-19 pandemic:

(i) the impact of global health concerns, including the impact of the current COVID-19 pandemic on the economies and financial markets and the demand for our products;

(ii) state, local and federal regulatory frameworks affecting the industries in which we compete, including the wind energy industry, and the related extension, continuation or renewal of federal tax incentives and grants and state renewable portfolio standards as well as new or continuing tariffs on steel or other products imported into the United States;

Our forward-looking statements may include or relate to our beliefs, expectations, plans and/or assumptions with respect to the following: (i) the impact of global health concerns  

on the economies and financial markets and the demand for our products;

(ii) state, local and federal regulatory frameworks affecting the industries in which we compete, including the wind energy industry, and the related extension, continuation or renewal of federal tax incentives and grants, including the advanced manufacturing tax credits (which remain subject to further technical guidance and regulations), and state renewable portfolio standards as well as new or continuing tariffs on steel or other products imported into the United States;

(iii) our customer relationships and our substantial dependency on a few significant customers and our efforts to diversify our customer base and sector focus and leverage relationships across business units;

(iv) the economic and operational stability of our significant customers and suppliers, including their respective supply chains, and the ability to source alternative suppliers as necessary, in light of the COVID-19 pandemic;

(v) our ability to continue to grow our business organically and through acquisitions, and the impairment thereto by the impact of the COVID-19 pandemic;

(iv) the economic and operational stability of our significant customers and suppliers, including their respective supply chains, and the ability to source alternative suppliers as necessary;

(v) our ability to continue to grow our business organically and through acquisitions;

(vi) the production, sales, collections, customer deposits and revenues generated by new customer orders and our ability to realize the resulting cash flows;

(vii) information technology failures, network disruptions, cybersecurity attacks or breaches in data security, including with respect to any remote work arrangements implemented in response to the COVID-19 pandemic;

(vii) information technology failures, network disruptions, cybersecurity attacks or breaches in data security;

(viii) the sufficiency of our liquidity and alternate sources of funding, if necessary;

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(x) our ability to operate our business efficiently, comply with our debt obligations, manage capital expenditures and costs effectively, and generate cash flow;

(xi) the economy, including its stability in light of the COVID-19 pandemic, and the potential impact it may have on our business, including our customers;

(xi) the economy and the potential impact it may have on our business, including our customers;

(xii) the state of the wind energy market and other energy and industrial markets generally and the impact of competition and economic volatility in those markets;

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under Section 382 of the Internal Revenue Code of 1986, as amended;

(xviii) our ability to utilize various relief options enabled by the CARES Act;

(xix) the limited trading market for our securities and the volatility of market price for our securities;

and (xx) the impact of future sales of our common stock or securities convertible into our common stock on our stock price.

(xviii) the limited trading market for our securities and the volatility of market price for our securities;

and (xix) the impact of future sales of our common stock or securities convertible into our common stock on our stock price.

These statements are based on information currently available to us and are subject to various risks, uncertainties and other factors that could cause our actual growth, results of operations, financial condition, cash flows, performance, business prospects and opportunities to differ materially from those expressed in, or implied by, these statements including, but not limited to, those set forth under the caption “Risk Factors”

in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2021.

in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022, as supplemented by the risk factors set forth under the caption “Risk Factors”

in Part II, Item IA of this Quarterly Report on Form 10-Q.

We are under no duty to update any of these statements.

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Accordingly, forward-looking statements should not be relied upon as a predictor of actual results.

Item 3.  

Quantitative and Qualitative Disclosures About Market Risk  

We are a smaller reporting company as defined by Item 10(f)(1) of Regulation S-K under the Securities Act and as such are not required to provide information under this Item pursuant to Item 305I of Regulation S-K. 

Item 4.  

Controls and Procedures  

Evaluation of Disclosure Controls and Procedures  

We seek to maintain disclosure controls and procedures (as defined in Rules 13a-15I and 15d-15I under the Exchange Act) that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

This information is also accumulated and communicated to management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosure.

Our management, under the supervision and with the participation of our CEO and CFO, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the most recent fiscal quarter reported on herein.

Based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of March 31, 2023.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the three months ended March 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II.   OTHER INFORMATION  

Legal Proceedings  

The information required by this item is incorporated herein by reference to Note 13, “Legal Proceedings And Other Matters”

of the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q. 

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