BROADWIND, INC. 10-Q

Item 1. Financial Statements BROADWIND, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (in thousands, except share and per share data) June 30, December 31, 2024 2023 ASSETS CURRENT ASSETS: Cash $ 938 $ 1,099 Accounts receivable, net 14,172 19,231 AMP credit receivable 1,691 7,051 Contract assets 1,157 1,460 Inventories 38,802 37,405 Prepaid expenses and other current assets 2,390 3,500 Total current assets 59,150 69,746 LONG-TERM ASSETS: Property and equipment, net 46,266 47,123 Operating lease right-of-use assets, net 14,748 15,593 Intangible assets, net 1,733 2,064 Other assets 636 630 TOTAL ASSETS $ 122,533 $ 135,156 LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES: Line of credit and current maturities of long-term debt $ 12,012 $ 5,903 Current portion of finance lease obligations 2,098 2,153 Current portion of operating lease obligations 1,987 1,851 Accounts payable 15,950 20,728 Accrued liabilities 4,347 6,477 Customer deposits 2,772 16,500 Total current liabilities 39,166 53,612 LONG-TERM LIABILITIES: Long-term debt, net of current maturities 5,945 6,250 Long-term finance lease obligations, net of current portion 3,481 3,372 Long-term operating lease obligations, net of current portion 14,872 15,888 Other 17 15 Total long-term liabilities 24,315 25,525 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS’ EQUITY: Preferred stock, $ 0.001 par value; 10,000,000 shares authorized; no shares issued or outstanding — — Common stock, $ 0.001 par value; 45,000,000 shares authorized; 22,259,496 and 21,840,301 shares issued as of June 30, 2024, and December 31, 2023, respectively (1) 22 22 Treasury stock, at cost, 273,937 shares as of June 30, 2024 and December 31, 2023 ( 1,842 ) ( 1,842 ) Additional paid-in capital 400,377 399,336 Accumulated deficit ( 339,505 ) ( 341,497 ) Total stockholders’ equity 59,052 56,019 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 122,533 $ 135,156 (1) Refer to Note 17 “Capitalization”, for additional information regarding the calculation of the number of shares of common stock authorized. The accompanying notes are an integral part of these condensed consolidated financial statements. ​ 1 Table of Contents BROADWIND, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (in thousands, except per share data) Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Revenues $ 36,452 $ 50,843 $ 74,068 $ 99,716 Cost of sales 30,886 42,510 61,865 84,407 Gross profit 5,566 8,333 12,203 15,309 OPERATING EXPENSES: Selling, general and administrative 4,143 5,952 8,537 11,478 Intangible amortization 166 165 331 333 Total operating expenses 4,309 6,117 8,868 11,811 Operating income 1,257 2,216 3,335 3,498 OTHER EXPENSE, net: Interest expense, net (726) (751) (1,258) (1,239) Other, net 4 (22) 7 (24) Total other expense, net (722) (773) (1,251) (1,263) Net income before provision for income taxes 535 1,443 2,084 2,235 Provision for income taxes 53 28 92 51 NET INCOME 482 1,415 1,992 2,184 NET INCOME PER COMMON SHARE—BASIC: Net income $ 0.02 $ 0.07 $ 0.09 $ 0.10 WEIGHTED AVERAGE COMMON SHARES OUTSTANDING—BASIC 21,783 21,091 21,689 20,981 NET INCOME PER COMMON SHARE—DILUTED: Net income $ 0.02 $ 0.07 $ 0.09 $ 0.10 WEIGHTED AVERAGE COMMON SHARES OUTSTANDING—DILUTED 22,003 21,409 21,904 21,390 The accompanying notes are an integral part of these condensed consolidated financial statements. 2 Table of Contents BROADWIND, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED) (in thousands, except share data) Common Stock Treasury Stock Additional Shares Issued Issued Paid-in Accumulated Issued Amount Shares Amount Capital Deficit Total BALANCE, December 31, 2022 21,127,130 $ 21 ( 273,937 ) $ ( 1,842 ) $ 397,240 $ ( 349,146 ) $ 46,273 Stock issued under defined contribution 401(k) retirement savings plan 64,807 — — — 302 — 302 Share-based compensation — — — — 178 — 178 Net income — — — — — 769 769 BALANCE, March 31, 2023 21,191,937 $ 21 ( 273,937 ) $ ( 1,842 ) $ 397,720 $ ( 348,377 ) $ 47,522 Stock issued for restricted stock 408,436 1 — — — — 1 Stock issued under defined contribution 401(k) retirement savings plan 71,536 — — — 346 — 346 Share-based compensation — — — — 231 — 231 Shares withheld for taxes in connection with issuance of restricted stock ( 92,984 ) — — — ( 117 ) — ( 117 ) Sale of common stock, net — — — — — — — Net income — — — — — 1,415 1,415 BALANCE, June 30, 2023 21,578,925 $ 22 ( 273,937 ) $ ( 1,842 ) $ 398,180 $ ( 346,962 ) $ 49,398 BALANCE, December 31, 2023 21,840,301 $ 22 ( 273,937 ) $ ( 1,842 ) $ 399,336 $ ( 341,497 ) $ 56,019 Stock issued under defined contribution 401(k) retirement savings plan 107,305 — — — 287 — 287 Share-based compensation — — — — 225 — 225 Net income — — — — — 1,510 1,510 BALANCE, March 31, 2024 21,947,606 $ 22 ( 273,937 ) $ ( 1,842 ) $ 399,848 $ ( 339,987 ) $ 58,041 Stock issued for restricted stock 240,397 — — — — — — Stock issued under defined contribution 401(k) retirement savings plan 118,161 — — — 308 — 308 Share-based compensation — — — — 351 — 351 Shares withheld for taxes in connection with issuance of restricted stock ( 46,668 ) — — — ( 130 ) — ( 130 ) Net income — — — — — 482 482 BALANCE, June 30, 2024 22,259,496 $ 22 ( 273,937 ) $ ( 1,842 ) $ 400,377 $ ( 339,505 ) $ 59,052 The accompanying notes are an integral part of these condensed consolidated financial statements. ​ 3 Table of Contents BROADWIND, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (in thousands) Six Months Ended June 30, 2024 2023 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 1,992 $ 2,184 Adjustments to reconcile net cash used in operating activities: Depreciation and amortization expense 3,314 3,167 Deferred income taxes 2 ( 5 ) Share-based compensation 576 409 Allowance for credit losses ( 2 ) 16 Common stock issued under defined contribution 401(k) plan 595 648 (Gain) loss on disposal of assets ( 114 ) 48 Changes in operating assets and liabilities: Accounts receivable 5,061 ( 11,794 ) AMP credit receivable 5,360 ( 6,729 ) Contract assets 302 ( 273 ) Inventories ( 1,397 ) ( 4,293 ) Prepaid expenses and other current assets 1,111 147 Accounts payable ( 4,328 ) 1,776 Accrued liabilities ( 2,130 ) 1,367 Customer deposits ( 13,728 ) ( 4,190 ) Other non-current assets and liabilities ( 41 ) 75 Net cash used in operating activities ( 3,427 ) ( 17,447 ) CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment ( 2,534 ) ( 3,977 ) Proceeds from disposals of property and equipment 159 15 Net cash used in investing activities ( 2,375 ) ( 3,962 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from line of credit, net 5,914 11,991 Proceeds from long-term debt 1,421 618 Payments on long-term debt ( 681 ) ( 607 ) Payments on finance leases ( 883 ) ( 1,113 ) Shares withheld for taxes in connection with issuance of restricted stock ( 130 ) ( 117 ) Net cash provided by financing activities 5,641 10,772 NET DECREASE IN CASH ( 161 ) ( 10,637 ) CASH beginning of the period 1,099 12,732 CASH end of the period $ 938 $ 2,095 The accompanying notes are an integral part of these condensed consolidated financial statements. ​ 4 Table of Contents BROADWIND, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Dollars are presented in thousands, except share, per share and per employee data or unless otherwise stated) NOTE 1 — BASIS OF PRESENTATION The unaudited condensed consolidated financial statements presented herein include the accounts of Broadwind, Inc. (the “Company”) and its wholly-owned subsidiaries Broadwind Heavy Fabrications, Inc. (“Broadwind Heavy Fabrications”), Brad Foote Gear Works, Inc. (“Brad Foote”) and Broadwind Industrial Solutions, LLC (“Broadwind Industrial Solutions”). All intercompany transactions and balances have been eliminated. The financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and in accordance with the instructions to Form 10 -Q and Article 10 of Regulation S- X. Accordingly, the financial statements do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments, including normal recurring accruals, considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for the twelve months ending December 31, 2024, 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, 2023 . The December 31, 2023 condensed consolidated balance sheet was derived from audited financial statements, but does not include all disclosures required by GAAP. This financial information should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10 -K for the year ended December 31, 2023 . There have been no material changes in the Company’s significant accounting policies during the six months ended June 30, 2024 as compared to the significant accounting policies described in the Company’s Annual Report on Form 10 -K for the year ended December 31, 2023 . Company Description Through its subsidiaries, the Company is a precision manufacturer of structures, equipment and components for clean technology and other specialized applications. The Company provides technologically advanced high value products to customers with complex systems and stringent quality standards that operate in energy, mining and infrastructure sectors, primarily in the United States of America (the “U.S.”). The Company’s capabilities include, but are not limited to, the following: heavy fabrications, welding, metal rolling, coatings, gear cutting and shaping, gearbox manufacturing and repair, heat treatment, precision machining, assembly, engineering and packaging solutions. The Company’s most significant presence is within the U.S. wind energy industry, which accounted for 40 % and 50 % of the Company’s revenue during the first six months of 2024 and 2023, respectively. Liquidity 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, access to the public and private debt and/or equity markets, and has the option to raise capital from the sale of the Company’s securities under the Company’s registration statement on Form S- 3 (as discussed below), and proceeds from sales of Advanced Manufacturing Production tax credits (“AMP credits”) (discussed in Note 5 “AMP Credits” of these condensed consolidated financial statements). See Note 8, “Debt and Credit Agreements,” 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 June 30, 2024 totaled $ 23,536 , which includes current outstanding debt and finance leases totaling $ 14,110 . The Company’s outstanding debt includes $ 5,593 outstanding from the senior secured term loan under the 2022 Credit Facility. During the six months ended June 30, 2024, the Company borrowed on the revolving line of credit and repaid such borrowings during the period. The Company had $ 10,571 drawn on the revolving line of credit as of June 30, 2024. The Company’s revolving line of credit balance, if any, is included in the “Line of credit and current maturities of long-term debt” line item in the Company's condensed consolidated balance sheet. On September 22, 2023, the Company filed a shelf registration statement on Form S- 3, which was declared effective by the Securities and Exchange Commission (the “SEC”) on October 12, 2023 ( the “Form S- 3” ), replacing a prior shelf registration statement which expired on October 12, 2023. This shelf registration statement, which includes a base prospectus, allows the Company 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, 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 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”). Pursuant to the terms of the Sales Agreement, the Company may sell from time to time through the Agents shares of the Company’s common stock, par value $ 0.001 per share with an aggregate sales price of up to $ 12,000 . 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. No shares of the Company’s common stock were issued under the Sales Agreement during the year ended December 31, 2023 or during the six months ended June 30, 2024. As of June 30, 2024, shares of the Company’s common stock having a value of approximately $ 11,667 remained available for issuance under the Sales Agreement. Any additional shares offered and sold under the Sales Agreement are to be issued pursuant to the Form S- 3 and a 424 (b) prospectus supplement. 5 Table of Contents 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. Under these agreements, the Company has agreed to sell certain of its accounts receivable balances to banking institutions who have agreed to advance amounts equal to the net accounts receivable balances due, less a discount as set forth in the respective agreements. The balances under these agreements are accounted for as sales of accounts receivable, as they are sold without recourse. Cash proceeds from these agreements are reflected as operating activities included in the change in accounts receivable in the Company's consolidated statements of cash flows. Fees incurred in connection with the agreements are recorded as interest expense by the Company. During the three and six months ended June 30, 2024, the Company sold account receivables totaling $ 13,234 and $ 20,039 , respectively, related to supply chain financing arrangements, of which customers’ financial institutions applied discount fees totaling $ 352 and $ 516 , respectively. During the three and six months ended June 30, 2023, the Company sold account receivables totaling $ 9,495 and $ 18,807 , respectively, related to supply chain financing arrangements, of which customers’ financial institutions applied discount fees totaling $ 184 and $ 315 , respectively. In January 2023, the Company announced that it had entered into a supply agreement for wind tower purchases valued at approximately $ 175 million with a leading global wind turbine manufacturer. Under the terms of the supply agreement, order fulfillment is to occur beginning in 2023 through year-end 2024. In early November 2023, the parties discussed their joint intent to shift approximately half of the contracted tower section orders initially planned for 2024 into 2025, while maintaining the total number of tower sections stipulated under the supply agreement. The Company anticipates that current cash resources, amounts available under the 2022 Credit Facility, sales of shares under the Sales Agreement, cash to be generated from operations and equipment financing, access to the public and private debt and/or equity markets, any potential proceeds from the sale of further Company securities under the Form S- 3, and proceeds from sales of AMP credits 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, the Company’s ability to finalize the terms of the remaining obligations under a supply agreement with a leading global wind turbine manufacturer, 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, the Company may be unable to comply with existing financial covenants, and could lose access to the 2022 Credit Facility. This could limit the Company’s operational flexibility, require a delay in making planned investments and/or require us to seek additional equity or debt financing. Any attempt to raise equity through the public markets could have a negative effect on the Company’s stock price, making an equity raise more difficult or more dilutive. Any additional equity financing or equity-linked financing, if available, will be dilutive to stockholders, and additional debt financing, if available, would likely require new financial covenants or impose other operating and financial restrictions on the Company. While management believes that the Company will continue to have sufficient cash available to operate its businesses and to meet the Company’s financial obligations and debt covenants, there can be no assurances that the Company’s operations will generate sufficient cash, or that credit facilities or equity or equity-linked financings will be available in an amount sufficient to enable the Company to meet these financial obligations. Reclassifications Certain prior year amounts 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 The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities as of the date of the financial statements and reported amounts of revenues and expenses during the reported period. Significant estimates, among others, include inventory reserves, warranty reserves, impairment of long-lived assets, allowance for credit losses, 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. NOTE 2 — REVENUES 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 six months ended June 30, 2024 and 2023 : Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Heavy Fabrications $ 19,611 $ 33,944 $ 41,628 $ 65,537 Gearing 10,454 10,977 18,791 22,943 Industrial Solutions 6,463 6,270 14,456 11,692 Eliminations ( 76 ) ( 348 ) ( 807 ) ( 456 ) Consolidated $ 36,452 $ 50,843 $ 74,068 $ 99,716 6 Table of Contents Revenue within the Company’s Gearing and Industrial Solutions segments, as well as industrial fabrication product line revenues within the Heavy Fabrications segment, are generally recognized at a point in time, typically when the promised goods or services are physically transferred to its customers in an amount that reflects the consideration it expects to be entitled to in exchange for those goods or services. A performance obligation is a promise in a contract to transfer a distinct product or service to the customer. The Company measures revenue based on the consideration specified in the purchase order and revenue is recognized when the performance obligations are satisfied. If applicable, the transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as the customer receives the benefit of the performance obligation. For many tower sales within the Company’s Heavy Fabrications segment, products are sold under terms included in bill and hold sales arrangements that result in different timing for revenue recognition. The Company recognizes revenue under these arrangements only when there is a substantive reason for the agreement, the ordered goods are identified separately as belonging to the customer and not available to fill other orders, the goods are currently ready for physical transfer to the customer, and the Company does not have the ability to use the product or to direct it to another customer. Assuming these required revenue recognition criteria are met, revenue is recognized upon completion of product manufacture and customer acceptance. During the six months ended June 30, 2024 and 2023, 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 for contracts that meet over time criteria of $ 2,067 and $ 2,347 for the three and six months ended June 30, 2024, respectively. Within the Heavy Fabrications segment, the Company recognized revenue over time of $ 3,076 and $ 6,744 for the three and six months ended June 30, 2023, 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. Contract assets represent the Company’s rights to consideration for work completed but not billed at the end of the period. The Company generally expenses sales commissions when incurred. These costs are recorded within selling, general and administrative expenses. Customer deposits, deferred revenue and other receipts are deferred and recognized when the revenue is realized and earned. Cash payments to customers are classified as reductions of revenue in the Company’s statement of operations. The Company does not disclose the value of the unsatisfied performance obligations for contracts with an original expected length of one year or less. NOTE 3 — EARNINGS PER SHARE The following table presents a reconciliation of basic and diluted earnings per share for the three and six months ended June 30, 2024 and 2023 , as follows: Three Months Ended Six Months Ended June 30, June 30, 2024 2023 2024 2023 Basic earnings per share calculation: Net income $ 482 $ 1,415 $ 1,992 $ 2,184 Weighted average number of common shares outstanding 21,783,219 21,091,496 21,688,941 20,980,880 Basic net income per share $ 0.02 $ 0.07 $ 0.09 $ 0.10 Diluted earnings per share calculation: Net income $ 482 $ 1,415 $ 1,992 $ 2,184 Weighted average number of common shares outstanding 21,783,219 21,091,496 21,688,941 20,980,880 Common stock equivalents: Non-vested stock awards 219,859 317,031 215,515 409,351 Weighted average number of common shares outstanding 22,003,078 21,408,527 21,904,456 21,390,231 Diluted net income per share $ 0.02 $ 0.07 $ 0.09 $ 0.10 NOTE 4 — INVENTORIES The components of inventories as of June 30, 2024 and December 31, 2023 are summarized as follows: June 30, December 31, 2024 2023 Raw materials $ 20,028 $ 24,651 Work-in-process 13,372 10,390 Finished goods 7,467 4,595 40,867 39,636 Less: Reserve ( 2,065 ) ( 2,231 ) Net inventories $ 38,802 $ 37,405 7 Table of Contents ​ NOTE 5 — AMP CREDITS During the three and six months ended June 30, 2024, the Company recognized gross AMP credits totaling $ 1,848 and $ 3,720 , respectively, within the Heavy Fabrications segment. During the three and six months ended June 30, 2023, the Company recognized AMP credits totaling $ 3,567 and $ 6,729 , respectively, 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 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. beginning 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 customers. Manufacturers who qualify for the AMP credits can apply to the Internal Revenue Service for cash refunds of the AMP credits, sell the AMP credits to third parties for cash, or apply the AMP credits against taxable income. 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 and six months ended June 30, 2024 and June 30, 2023. The assets related to the AMP credits are recognized as current assets in the “AMP credit receivable” line item in the Company’s condensed consolidated balance sheets as of June 30, 2024 and December 31, 2023. On December 21, 2023, the Company entered into an agreement to sell 2023 and 2024 AMP credits to a third party. At that time, the Company sold a portion of the gross 2023 credits in the amount of $ 6,952 and recognized a 6.5 % discount on the sale in the amount of $ 452 which was recognized in cost of sales. In addition, the Company wrote down the remaining receivable of $ 7,541 to net realizable value and recorded the expected loss on sale of $ 490 in cost of sales. The remaining 2023 AMP credit receivable was collected during the first quarter of 2024. The Company also incurred other miscellaneous administrative costs related to selling the credits in the amount of $ 254 , $ 197 of which has been recorded as cost of sales, with the remaining capitalized and included in the “Prepaid expenses and other current assets” line item of the Company’s condensed consolidated financial statements at December 31, 2023. During the six months ended June 30, 2024, the Company recognized gross AMP credits totaling $ 3,720 and recognized a 6.5 % discount on the credits totaling $ 242 , which was recognized in cost of sales. The Company also incurred other miscellaneous administrative costs related to the credits in the amount of $ 65 , which have been recorded as cost of sales. Additionally, costs totaling $ 28 are included in the “Prepaid expenses and other current assets” line item of the Company’s condensed consolidated financial statements at June 30, 2024. NOTE 6 — INTANGIBLE ASSETS Intangible assets represent the fair value assigned to definite-lived assets such as trade names and customer relationships as part of the Company’s acquisition of Brad Foote completed in 2007 as well as the noncompetition agreements, trade names and customer relationships that were part of the Company’s acquisition of Red Wolf Company, LLC completed in 2017. Intangible assets are amortized on a straight-line basis over their estimated useful lives, with a remaining life range from 2 to 3 years. As of June 30, 2024 and December 31, 2023 , the cost basis, accumulated amortization and net book value of intangible assets were as follows: June 30, 2024 December 31, 2023 Remaining Remaining Weighted Weighted Accumulated Net Average Accumulated Net Average Cost Accumulated Impairment Book Amortization Accumulated Impairment Book Amortization Basis Amortization Charges Value Period Cost Amortization Charges Value Period Intangible assets: Noncompete agreements $ 170 $ ( 170 ) $ — $ — — $ 170 $ ( 170 ) $ — $ — — Customer relationships 15,979 ( 7,973 ) ( 7,592 ) 414 1.6 15,979 ( 7,842 ) ( 7,592 ) 545 2.1 Trade names 9,099 ( 7,780 ) — 1,319 3.3 9,099 ( 7,580 ) — 1,519 3.8 Intangible assets $ 25,248 $ ( 15,923 ) $ ( 7,592 ) $ 1,733 2.9 $ 25,248 $ ( 15,592 ) $ ( 7,592 ) $ 2,064 3.3 ​ As of June 30, 2024 , estimated future amortization expense was as follows: 2024 $ 331 2025 661 2026 422 2027 319 Total $ 1,733 ​ ​ NOTE 7 — ACCRUED LIABILITIES Accrued liabilities as of June 30, 2024 and December 31, 2023 consisted of the following: June 30, December 31, 2024 2023 Accrued payroll and benefits $ 3,151 $ 5,051 Accrued property taxes 411 — Income taxes payable 80 254 Accrued professional fees 62 140 Accrued warranty liability 277 322 Self-insured workers compensation reserve 47 21 Accrued sales tax 1 310 Accrued other 318 379 Total accrued liabilities $ 4,347 $ 6,477 8 Table of Contents NOTE 8 — DEBT AND CREDIT AGREEMENTS The Company’s outstanding debt balances as of June 30, 2024 and December 31, 2023 consisted of the following: June 30, December 31, 2024 2023 Line of credit $ 10,571 $ 4,657 Other notes payable 1,793 1,361 Long-term debt 5,593 6,135 Total debt 17,957 12,153 Less: current maturities ( 12,012 ) ( 5,903 ) Long-term debt, net of current maturities $ 5,945 $ 6,250 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. At June 30, 2024, deferred financing costs related to the 2022 Credit Facility were $ 308 primarily related to the revolving credit loan, which is net of accumulated amortization of $ 192 . At December 31, 2023, deferred financing costs related to the 2022 Credit Facility were $ 359 which is net of accumulated amortization of $ 141 . These costs are included in the “Other assets” line item of the Company's condensed consolidated financial statements at June 30, 2024 and December 31, 2023. 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’ 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. The initial term of the revolving credit facility matures August 4, 2027. The term loan also matures on August 4, 2027, with monthly payments based on an 84 -month amortization. As of June 30, 2024 , there was $ 16,164 of outstanding indebtedness under the 2022 Credit Facility, with the ability to borrow an additional $ 17,509 . As of June 30, 2024, the Company was in compliance with all financial covenants under the 2022 Credit Facility. As of June 30, 2024, the effective interest rate of the senior secured revolving credit facility was 7.59 % and the senior secured term loan was 7.84 %. As of December 31, 2023, the effective interest rate of the senior secured revolving credit facility was 7.64 % and the effective rate of the senior secured term loan was 7.89 %. Other In addition, the Company has outstanding notes payable for capital expenditures in the amount of $ 1,793 and $ 1,361 as of June 30, 2024 and December 31, 2023 , respectively, with $ 359 and $ 163 included in the “Line of credit and current maturities of long-term debt” line item of the Company’s condensed consolidated financial statements as of June 30, 2024 and December 31, 2023 , respectively. The notes payable have monthly payments that range from $ 1 to $ 20 and an interest rate of approximately 7 %. The equipment purchased is utilized as collateral for the notes payable. The outstanding notes payable have maturity dates that range from September 2028 to May 2029. NOTE 9 — LEASES The Company leases certain facilities and equipment. The leases are accounted for under Accounting Standard Update 2016 - 02, Leases (“Topic 842” ), and the Company elected to apply each available practical expedient. The discount rates used for the leases are based on an interest rate yield curve developed for the leases in the Company’s lease portfolio. The Company has elected to apply the short-term lease exception to all leases of one year or less. During the six months ended June 30, 2024 and 2023, the Company had an additional operating lease that resulted in right-of-use assets obtained in exchange for lease obligations in the amount of $ 29 and $ 0 , respectively. During the six months ended June 30, 2024 and 2023, the Company had additional finance leases associated with property, plant, and equipment of $ 880 and $ 0 , respectively. Some of the Company’s facility leases include options to renew. The exercise of the renewal options is typically at the Company’s discretion. The Company regularly evaluates the renewal options and includes them in the lease term when the Company is reasonably certain to exercise them. 9 Table of Contents Quantitative information regarding the Company’s leases is as follows: Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Components of lease cost Finance lease cost components: Amortization of finance lease assets $ 370 $ 369 $ 728 $ 739 Interest on finance lease liabilities 121 86 228 184 Total finance lease costs 491 455 956 923 Operating lease cost components: Operating lease cost 703 689 1,345 1,393 Short-term lease cost 54 78 100 167 Variable lease cost (1) 384 178 753 523 Sublease income ( 49 ) ( 49 ) ( 99 ) ( 97 ) Total operating lease costs 1,092 896 2,099 1,986 Total lease cost $ 1,583 $ 1,351 $ 3,055 $ 2,909 Supplemental cash flow information related to our operating leases is as follows for the six months ended June 30, 2024 and 2023: Cash paid for amounts included in the measurement of lease liabilities: Operating cash outflow from operating leases $ 1,679 $ 1,727 Weighted-average remaining lease term-finance leases at end of period (in years) 2.8 3.1 Weighted-average remaining lease term-operating leases at end of period (in years) 6.6 7.7 Weighted-average discount rate-finance leases at end of period 5.4 % 5.1 % Weighted-average discount rate-operating leases at end of period 8.9 % 8.8 % ( 1 ) 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 June 30, 2024 , future minimum lease payments under finance leases and operating leases were as follows: ​ Finance Operating Leases Leases Total 2024 $ 1,637 $ 1,683 $ 3,320 2025 1,477 3,454 4,931 2026 1,220 3,449 4,669 2027 929 3,151 4,080 2028 6 3,160 3,166 2029 and thereafter 1,014 7,802 8,816 Total lease payments 6,283 22,699 28,982 Less—portion representing interest ( 704 ) ( 5,840 ) ( 6,544 ) Present value of lease obligations 5,579 16,859 22,438 Less—current portion of lease obligations ( 2,098 ) ( 1,987 ) ( 4,085 ) Long-term portion of lease obligations $ 3,481 $ 14,872 $ 18,353 ​ NOTE 10 — FAIR VALUE MEASUREMENTS Fair Value of Financial Instruments The carrying amounts of the Company’s financial instruments, which include cash, accounts receivable, accounts payable and customer deposits, approximate their respective fair values due to the relatively short-term nature of these instruments. 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. 10 Table of Contents 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. Level 1 provides the most reliable measure of fair value while Level 3 generally requires significant management judgment. Financial assets and liabilities are classified in their entirety based on the lowest level of input significant to the fair value measurement. Financial instruments are assessed quarterly to determine the appropriate classification within the fair value hierarchy. Transfers between fair value classifications are made based upon the nature and type of the observable inputs. The fair value hierarchy is defined as follows: Level 1 — Valuations are based on unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 — Valuations are based on quoted prices for similar assets or liabilities in active markets, or quoted prices in markets that are not active for which significant inputs are observable, either directly or indirectly. Level 3 — Valuations are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. Inputs reflect management’s best estimate of what market participants would use in valuing the asset or liability at the measurement date. NOTE 11 — INCOME TAXES 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 June 30, 2024 , the Company has a full valuation allowance recorded against deferred tax assets. During the six months ended June 30, 2024 , the Company recorded a provision for income taxes of $ 92 , compared to a provision for income taxes of $ 51 during the six months ended June 30, 2023 . On August 16, 2022, Congress enacted the IRA which includes advanced manufacturing tax credits for manufacturers of eligible components, including wind components produced and sold in the U.S. beginning in 2023 through 2032. These credits will have no impact on income tax expense. The Company files income tax returns in U.S. federal and state jurisdictions. As of June 30, 2024 , open tax years in federal and some state jurisdictions date back to 1996 due to the taxing authorities’ ability to adjust operating loss carryforwards. As of December 31, 2023 , the Company had federal and unapportioned state net operating loss (“NOL”) carryforwards of $ 290,233 of which $ 227,781 will generally begin to expire in 2026. The majority of the NOL carryforwards will expire in various years from 2028 through 2037. NOLs generated after January 1, 2018 will not expire. Since the Company has no unrecognized tax benefits, they will not have an impact on the condensed consolidated financial statements as a result of the expiration of the applicable statues of limitations within the next twelve months. In addition, Section 382 of the Internal Revenue Code of 1986, as amended (the “IRC”), generally imposes an annual limitation on the amount of NOL carryforwards and associated built-in losses that may be used to offset taxable income when a corporation has undergone certain changes in stock ownership. The Company’s ability to utilize NOL carryforwards and built-in losses may be limited, under Section 382 of the IRC or otherwise, by the Company’s issuance of common stock or by other changes in stock ownership. Upon completion of the Company’s analysis of Section 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. To the extent the Company’s use of NOL carryforwards and associated built-in losses is significantly limited in the future, the Company’s income could be subject to U.S. corporate income tax earlier than it would be if the Company were able to use NOL carryforwards and built-in losses without such limitation, which could result in lower profits and the loss of benefits from these attributes. In February 2013, the Company adopted a Stockholder Rights Plan, which was approved by the Company’s stockholders and extended in 2016, 2019 and 2022 for additional three -year periods (as amended, the “Rights Plan”), designed to preserve the Company’s substantial tax assets associated with NOL carryforwards under Section 382 of the IRC. 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. In connection with the adoption of the Rights Plan, the Board declared a non-taxable dividend of one preferred share purchase right (a “Right”) for each outstanding share of the Company’s common stock to the Company’s stockholders of record as of the close of business on February 22, 2013. Each Right entitles its holder to purchase from the Company one one -thousandth of a share of the Company’s Series A Junior Participating Preferred Stock at an exercise price of $ 7.26 per Right, subject to adjustment. As a result of the Rights Plan, any person or group that acquires beneficial ownership of 4.9 % or more of the Company’s common stock without the approval of the Board would be subject to significant dilution in the ownership interest of that person or group. Stockholders who owned 4.9 % or more of the outstanding shares of the Company’s common stock as of February 12, 2013 will not trigger the preferred share purchase rights unless they acquire additional shares after that date. As of June 30, 2024 , 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 June 30, 2024 . 11 Table of Contents NOTE 12 — SHARE-BASED COMPENSATION ​ There was no stock option activity during the six months ended June 30, 2024 and June 30, 2023 and no stock options were outstanding as of June 30, 2024 or June 30, 2023. The following table summarizes the Company’s restricted stock unit and performance award activity during the six months ended June 30, 2024 : Weighted Average Number of Grant-Date Fair Value Shares Per Share Unvested as of December 31, 2023 687,206 $ 3.03 Granted 456,370 $ 2.72 Vested ( 240,397 ) $ 3.41 Forfeited ( 46,418 ) $ 2.98 Unvested as of June 30, 2024 856,761 $ 2.76 Under certain situations, shares are withheld from issuance to cover taxes for the vesting of restricted stock units and performance awards. For the six months ended June 30, 2024 and 2023, 46,668 and 92,984 shares, respectively, 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 six months ended June 30, 2024 and 2023 , as follows: Six Months Ended June 30, 2024 2023 Share-based compensation expense: Cost of sales $ 64 $ 69 Selling, general and administrative 512 340 Net effect of share-based compensation expense on net income $ 576 $ 409 Reduction in earnings per share: Basic earnings per share $ 0.03 $ 0.02 Diluted earnings per share $ 0.03 $ 0.02 NOTE 13 — LEGAL PROCEEDINGS AND OTHER MATTERS Legal Proceedings The Company is party to a variety of legal proceedings that arise in the normal course of its business. On an ongoing basis, the Company is often the subject of, or party to, various legal claims by other parties against the Company, by the Company against other parties, or involving the Company, which arise in the normal course of its business, including the claims described in Note 17, “Capitalization” of these condensed consolidated financial statements. While the results of these legal proceedings or claims cannot be predicted with certainty, management believes that the final outcome of these proceedings or claims will not have a material adverse effect, individually or in the aggregate, on the Company’s results of operations, financial condition or cash flows. Due to the inherent uncertainty of litigation, there can be no assurance that the resolution of any particular claim or proceeding would not have a material adverse effect on the Company’s results of operations, financial condition or cash flows. 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. 12 Table of Contents NOTE 14 — RECENT ACCOUNTING PRONOUNCEMENTS The Company reviews new accounting standards as issued. 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 November 2023, the Financial Accounting Standards Board issued Accounting Standards Update No. 2023 - 07, “Segment Reporting (Topic 280 ): Improvements to Reportable Segment Disclosures,” which requires additional disclosure of significant segment expenses on an annual and interim basis. This guidance will be applied retrospectively and will be effective for the annual periods beginning the year ended December 31, 2024, and for interim periods beginning January 1, 2025. The Company does not expect the adoption of this guidance to have a material impact on its consolidated financial statements. In December 2023, the Financial Accounting Standards Board issued Accounting Standards Update No. 2023 - 09, “Income Taxes (Topic 740 ): Improvements to Income Tax Disclosures,” which improves the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the effective tax rate reconciliation and income taxes paid disaggregated by jurisdiction. This guidance will be effective for the annual periods beginning the year ended December 31, 2025. The Company does not expect the adoption of this guidance to have a material impact on the Company's consolidated financial statements. NOTE 15— SEGMENT REPORTING The Company is organized into reporting segments based on the nature of the products offered and business activities from which it earns revenues and incurs expenses for which discrete financial information is available and regularly reviewed by the Company’s chief operating decision maker. The Company’s segments and their product and service offerings are summarized below: Heavy Fabrications The Company provides large, complex and precision fabrications to customers in a broad range of industrial markets. The Company’s most significant presence is within the U.S. wind energy industry, although it has diversified into other industrial markets in order to improve capacity utilization, reduce customer concentrations, and reduce exposure to uncertainty related to governmental policies currently impacting the U.S. wind energy industry. Within the U.S. wind energy industry, the Company provides steel towers and adapters primarily to wind turbine manufacturers. Production facilities, located in Manitowoc, Wisconsin and Abilene, Texas, are situated in close proximity to the primary U.S. domestic wind energy and equipment manufacturing hubs. The two facilities have a combined annual tower production capacity of up to approximately 550 towers ( 1,650 tower sections), sufficient to support turbines generating more than 1,500 MW of power. The Company has expanded its production capabilities and leveraged manufacturing competencies, including welding, lifting capacity and stringent quality practices, into aftermarket and original equipment manufacturer (“OEM”) components utilized in surface and underground mining, construction, material handling, oil and gas (“O&G”) and other infrastructure markets. The Company has designed and manufactures a mobile, modular pressure reducing system for the compressed natural gas virtual pipeline market. The Company manufactures components for buckets, shovels, car bodies, drill masts and other products that support mining and construction markets. In other industrial markets, the Company provides crane components, pressure vessels, frames and other structures. Gearing The Company provides gearing, gearboxes and precision machined components to a broad set of customers in diverse markets including surface and underground mining, wind energy, steel, material handling, infrastructure, onshore and offshore oil and gas fracking and drilling, marine, defense, and other industrial markets. The Company has manufactured loose gearing, gearboxes and systems, and provided heat treat services for aftermarket and OEM applications for a century. The Company uses an integrated manufacturing process, which includes machining and finishing processes in addition to gearbox repair in Cicero, Illinois, and heat treatment and gearbox repair in Neville Island, Pennsylvania. Industrial Solutions The Company provides supply chain solutions, light fabrication, inventory management and kitting and assembly services, primarily serving the combined cycle natural gas turbine market. The Company has recently expanded into the U.S. wind power generation market, by providing tower internals kitting solutions for on-site installations, as OEMs domesticate their supply chain due to lead time and reliability issues. The Company leverages a global supply chain to provide instrumentation and controls, valve assemblies, sensor devices, fuel system components, electrical junction boxes and wiring, and electromechanical devices. The Company also provides packaging solutions and fabricates panels and sub-assemblies to reduce customers’ costs and improve manufacturing velocity and reliability. 13 Table of Contents Corporate “Corporate” includes the assets and selling, general and administrative expenses of the Company’s corporate office. “Eliminations” comprises adjustments to reconcile segment results to consolidated results. The accounting policies of the reportable segments are the same as those referenced in Note 1, “Basis of Presentation” of these condensed consolidated financial statements. Summary financial information by reportable segment for the three and six months ended June 30, 2024 and 2023 is as follows: Heavy Fabrications Gearing Industrial Solutions Corporate Eliminations Consolidated For the Three Months Ended June 30, 2024 Revenues from external customers $ 19,611 $ 10,454 $ 6,387 $ — $ — $ 36,452 Intersegment revenues — — 76 — ( 76 ) — Net revenues 19,611 10,454 6,463 — ( 76 ) 36,452 Operating income (loss) 1,557 482 623 ( 1,405 ) — 1,257 Depreciation and amortization 1,022 553 105 38 — 1,718 Capital expenditures 370 280 123 17 — 790 Heavy Fabrications Gearing Industrial Solutions Corporate Eliminations Consolidated For the Three Months Ended June 30, 2023 Revenues from external customers $ 33,944 $ 10,977 $ 5,922 $ — $ — $ 50,843 Intersegment revenues — — 348 — ( 348 ) — Net revenues 33,944 10,977 6,270 — ( 348 ) 50,843 Operating income (loss) 3,867 348 843 ( 2,845 ) 3 2,216 Depreciation and amortization 856 556 92 58 — 1,562 Capital expenditures 2,156 739 — 17 — 2,912 Heavy Fabrications Gearing Industrial Solutions Corporate Eliminations Consolidated For the Six Months Ended June 30, 2024 Revenues from external customers $ 41,628 $ 18,791 $ 13,649 $ — $ — $ 74,068 Intersegment revenues — — 807 — ( 807 ) — Net revenues 41,628 18,791 14,456 — ( 807 ) 74,068 Operating income (loss) 3,601 508 2,390 ( 3,164 ) — 3,335 Depreciation and amortization 1,933 1,093 205 83 — 3,314 Capital expenditures 831 1,348 338 17 — 2,534 Heavy Fabrications Gearing Industrial Solutions Corporate Eliminations Consolidated For the Six Months Ended June 30, 2023 Revenues from external customers $ 65,537 $ 22,943 $ 11,236 $ — $ — $ 99,716 Intersegment revenues — — 456 — ( 456 ) — Net revenues 65,537 22,943 11,692 — ( 456 ) 99,716 Operating income (loss) 6,657 929 1,465 ( 5,556 ) 3 3,498 Depreciation and amortization 1,714 1,152 186 115 — 3,167 Capital expenditures 2,818 1,124 18 17 — 3,977 Total Assets as of June 30, December 31, Segments: 2024 2023 Heavy Fabrications $ 40,558 $ 46,931 Gearing 45,730 48,599 Industrial Solutions 14,602 16,295 Corporate 60,100 58,487 Eliminations ( 38,457 ) ( 35,156 ) $ 122,533 $ 135,156 NOTE 16 — COMMITMENTS AND CONTINGENCIES Environmental Compliance and Remediation Liabilities The Company’s operations and products are subject to a variety of environmental laws and regulations in the jurisdictions in which the Company operates and sells products governing, among other things, air emissions, wastewater discharges, the use, handling and disposal of hazardous materials, soil and groundwater contamination, employee health and safety, and product content, performance and packaging. Certain environmental laws may impose the entire cost or a portion of the cost of investigating and cleaning up a contaminated site, regardless of fault, upon any one or more of a number of parties, including the current or previous owners or operators of the site. These environmental laws also impose liability on any person who arranges for the disposal or treatment of hazardous substances at a contaminated site. Third parties may also make claims against owners or operators of sites and users of disposal sites for personal injuries and property damage associated with releases of hazardous substances from those sites. Allowance for Credit Losses  Beginning January 1, 2023, the Company assessed and recorded an allowance for credit losses using the current expected credit loss (“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 adjustment for credit losses using this CECL model on accounts receivable and contract assets during the six months ended June 30, 2024 and 2023 was not material.  14 Table of Contents 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, or modifications to its credit standards, collection practices and other related policies may impact the Company’s allowance for credit losses and its financial results. The activity in the accounts receivable allowance liability for the six months ended June 30, 2024 and 2023 consisted of the following: For the Six Months Ended June 30, 2024 2023 Balance at beginning of period $ 99 $ 17 Bad debt expense — 16 Other adjustments ( 2 ) — Balance at end of period $ 97 $ 33 Collateral In select instances, the Company has pledged specific inventory and machinery and equipment assets to serve as collateral on related payable or financing obligations. Liquidated Damages In certain customer contracts, the Company has agreed to pay liquidated damages in the event of qualifying delivery or production delays. These damages are typically limited to a specific percentage of the value of the product in question and/or are dependent on actual losses sustained by the customer. 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 a reserve for liquidated damages of $ 84 at June 30, 2024 and December 31, 2023. 15 Table of Contents NOTE 17 — CAPITALIZATION The Company’s authorized capital stock at June 30, 2024 consisted of 45,000,000 shares of common stock, par value $ 0.001 per share and 10,000,000 shares of undesignated stock, par value $ 0.001 per share. At June 30, 2024, 21,985,559 shares of common stock were outstanding and no shares of preferred stock were issued and outstanding. On March 18, 2024, the Board of Directors of the Company (the “Board”) approved an amendment to the Company’s Certificate of Incorporation to increase the number of shares of our common stock from thirty million ( 30,000,000 ) to forty-five million ( 45,000,000 ) (the “Share Increase Amendment”), subject to the approval of such amendment by the stockholders. On May 16, 2024, an annual meeting of the stockholders was convened (the “Annual Meeting”). In the definitive proxy statement dated April 2, 2024 filed by the Company with the SEC in respect of the Annual Meeting (the “Proxy Statement”), the Board solicited the vote of the stockholders in favor of the Share Increase Amendment. The Proxy Statement stated that broker non-votes in respect of the Share Increase Amendment would be counted as votes against the amendment. However, under relevant stock exchange rules, brokers, banks and/or other nominees had discretionary authority to vote shares held in their name on behalf of beneficial owners in favor of the Share Increase Amendment if the broker, bank and/or other nominee had not received voting instruction from the beneficial owners. As such, brokers, banks and/or other nominees that had not received voting instructions from the beneficial owners of such shares may have voted in favor of the Share Increase Amendment at the Annual Meeting. Such votes, and others cast by the Company’s stockholders, were tabulated by the Company’s inspector of elections in accordance with the applicable New York Stock Exchange rules (which also applies to Nasdaq-listed companies) and based on the tabulation, the inspector of elections determined that the proposal to approve the Share Increase Amendment was adopted by the requisite vote of stockholders and certified that the proposal had passed. Following this approval, the Company filed the Share Increase Amendment with the Secretary of State on May 16, 2024, and it became effective on the same date. Following the Annual Meeting, the Company received letters from two stockholders claiming that disclosures in the Proxy Statement regarding the authority of brokers, banks and/or other nominees to vote on the Share Increase Amendment in the absence of instructions from the beneficial owners of the applicable shares were inconsistent with how votes were tabulated and counted or that the Company mistabulated uninstructed votes of brokers, banks and/or other nominees as votes in favor of the Share Increase Amendment. The stockholders requested that the Board deem the Share Increase Amendment ineffective and make appropriate disclosure of such determination or seek valid stockholder approval of the Share Increase Amendment. The Company believes it was and is appropriate to include the affirmative votes cast by brokers, banks and/or other nominees pursuant to their discretionary authority in the tabulation of votes in favor of the Share Increase Amendment and, thus, that the Share Increase Amendment was properly approved and is effective. However, to avoid potential future litigation risk, and to eliminate any uncertainty as to the Share Increase Amendment and the validity of shares of Common Stock that in the future may be issued by virtue of the Share Increase Amendment, the Board has determined that it is advisable and in the best interests of the Company to solicit stockholders to ratify the Share Increase Amendment at a stockholder meeting. No specific transaction was contemplated in connection with the Share Increase Amendment, and as of the date of the filing of this Form 10 -Q, none of the shares authorized by the Share Increase Amendment have been issued. Further information about such meeting will be provided in a Definitive Proxy Statement to be filed with the Securities and Exchange Commission. 16 Table of Contents