What changed in this filing

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Item 1A. Risk Factors

2024-03-01 compared with 2023-03-16 · 115 added, 73 removed, 208 unchanged (47% of the section changed)

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Risk Factors Relating to Our Business

We may be unable to obtain sufficient bonding capacity for our contracts and the need for performance and surety bonds may adversely affect our business.

As more fully described in “Insurance and Bonding” under “Item 1.

Business,” we are generally required to post bonds in connection with government and certain private sector contracts to ensure job completion.

We have entered into bonding agreements with two large multinational surety companies, which act as surety, issue bid bonds, performance bonds and payment bonds, and obligate themselves upon other contracts of guaranty required by us in the day-to-day operations of our business.

However, our sureties are not obligated under the bonding agreements to issue bonds for us, and bonding decisions are made on a case-by-case basis.

We are currently near our bonding capacity limits and may not be able to maintain a sufficient level of bonding capacity in the future, which could preclude us from being able to bid for certain contracts and successfully contract with certain customers, or cause us to have to increase our letter of credit utilization in lieu of bonds, thereby reducing available borrowing capacity under our Credit Agreement (as defined below, in Risk Factors Relating to Our Indebtedness).

In addition, the conditions of the bonding market may change, increasing our costs of bonding or restricting our ability to get new bonding, which could have a material adverse effect on our business, operating results and financial condition

We rely on highly competitive and highly regulated government contracts.

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Reduced levels of, or delays in, government funding cause delays in project lettings and result in intense competition and pricing pressure for such projects.

In addition, government contracts are subject to specific procurement regulations, contract provisions and a variety of regulatory requirements relating to their formation, administration, performance and accounting.

In addition, government contracts are subject to specific procurement regulations, contract provisions and a variety of regulatory requirements relating to their formation,

administration, performance and accounting.

Many of these contracts include express or implied certifications of compliance with applicable laws and contract provisions.

Any violations of these regulations could bring about litigation,

including the possibility of qui tam (“whistleblower”) litigation brought by private individuals on behalf of the government under the Federal Civil False Claims Act, and could cause termination of other existing government contracts and result in the loss of future government contracts.

Due to the significant competition in the marketplace and the level of regulations on government contracts, we could suffer reductions in new projects and see lower revenues and profit margins on those projects, which could have a material adverse effect on the business, operating results and financial condition.

Any violations of these regulations could bring about litigation, including the possibility of qui tam (“whistleblower”) litigation brought by private individuals on behalf of the government under the Federal Civil False Claims Act, and could cause termination of other existing government contracts and result in the loss of future government contracts.

Due to the significant competition in the marketplace and the level of regulations on government contracts, we could suffer reductions in new projects and see lower revenues and profit margins on those projects, which could have a material adverse effect on our business, operating results and financial condition.

Our operations are susceptible to a variety of adverse conditions including weather conditions, natural disasters, health epidemics or pandemics or other contagious outbreaks and terrorist attacks that could negatively impact the markets in which we operate.

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Repercussions of severe weather conditions could cause significant interruption of projects in process and have safety implications to personnel at those sites.

Our business, operating results and financial condition could be materially and adversely affected if a public health epidemic or pandemic or other contagious outbreak, such as the recent coronavirus (“COVID-19”) pandemic (as discussed in greater detail below), interferes with our ability, or that of our employees, contractors, suppliers, customers and other business partners to perform our and their respective responsibilities and obligations relative to the conduct of our business.

Our business, operating results and financial condition could be materially and adversely affected if a public health epidemic or pandemic or other contagious outbreak, such as the coronavirus (“COVID-19”) pandemic, interferes with our ability, or that of our employees, contractors, suppliers, customers and other business partners to perform our and their respective responsibilities and obligations relative to the conduct of our business.

Terrorist attacks, targeted at ports, marine facilities, shipping or metropolitan areas could affect the markets in which we operate our business and our expectations.

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Demand for our services may decrease due to economic recession or a reduction of demand in end markets of our customers.

Our concrete segment depends on continued growth in population in our geographic market areas in Texas to support residential and nonresidential construction.

A growing population generates economic growth and expansion in construction for retail, office buildings, etc.

Our concrete segment depends on continued growth in population in our geographic market areas in Texas and most recently in Florida to support residential and nonresidential construction.

A growing population generates economic growth and expansion.

If the population decreases or slows in growth, it may adversely affect economic growth and ultimately limit the need for residential and nonresidential construction services in the areas we currently perform services.

Moreover, even when the underlying economic fundamentals that ordinarily drive the level of construction activity are strong, the level of economic activity in such markets may be suppressed during inflationary periods that are accompanied by increasing interest rates.

There is a risk that, if the Federal Reserve Board continues to increase interest rates to respond to inflation concerns, our concrete business could see a reduction in demand.

The timing of new contracts may result in volatility in our cash flow and profitability.

If the Federal Reserve Board resumes increasing interest rates to respond to re-emerging inflation concerns, our concrete business could see a reduction in demand.

Our marine segment depends on continued investment in and scheduled funding of port and marine infrastructure by federal, state, and local governmental authorities, as well as privately owned companies, which in turn may depend upon demand for marine vessels, including cruise ships and cargo ships, and other port-related activities.

If funding is diverted from port and marine infrastructure, including due to a reduced demand in the vessels to be serviced at those facilities, the demand for services within our marine segment may decrease.

A significant portion of our revenues may be concentrated among a small number of projects.

Due to the nature and timing of large projects, a significant percentage of our revenues in a given period may result from one or two specific contracts, customers or projects.

A reduction or delay in scheduled work or the termination of a contract for a particular project or the loss of a major customer could negatively impact our reputation and could have an adverse effect on our business, our revenue and results of operations.

For example, our portion of work as a dedicated subcontractor for the Pearl Harbor Project for the United States Navy totals $435.4 million, of which approximately $90.5 million was reported as revenue for the year ended December 31, 2023.

The timing and funding of new contracts may result in volatility in our cash flow and profitability.

These factors as well as others that may cause our actual financial results to vary from any publicly disclosed earnings guidance and forecasts are outside of our control.

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If an expected contract award or the related notice to proceed is delayed or not received, we could incur substantial costs without receipt of any corresponding revenues.

Delays by our customers in obtaining

required approvals and permits for their infrastructure projects may delay their awarding contracts for those projects and, once awarded, the ability to commence construction under those contracts.

Delays by our customers in obtaining required approvals and permits for their infrastructure projects may delay their awarding contracts for those projects and, once awarded, the ability to commence construction under those contracts.

Moreover, construction projects for which our services are contracted may require significant expenditures by us prior to receipt of relevant payments by a customer and may expose us to potential credit risk if such customer should encounter financial difficulties.

Such expenditures could reduce our cash flows and necessitate increased borrowings under our credit facility.

Such expenditures could reduce our cash flows and necessitate increased borrowings under our Credit Agreement.

Finally, the winding down or completion of work on significant projects that were active in previous periods will reduce our revenue and earnings if such significant projects have not been replaced in the current period.

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To the extent commodity prices decline or fluctuate and our customers defer new investments or cancel or delay existing projects, the demand for our services decreases, which may have a material adverse impact on the business, financial condition, and results of operations.

Additionally, rising interest rates may affect the cost of financing for our customers’ capital projects and investments.

Interest rates may affect the cost of financing for our customers’ capital projects and investments.

These increased costs may affect their capacity and willingness to undertake new investments, and may result in the delay or cancellation of projects they would otherwise undertake.

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Rising commodity prices can negatively impact the potential returns on projects that are planned, as well as those in progress, and result in customers deferring new investments or canceling or delaying existing projects.

The short-term nature of the majority of our projects typically protects us from these potential price increases, however, if we are unable to procure commodities for completion of our projects at estimated prices due to rising commodity prices, our margins may erode on certain in progress or future projects.

We may be unable to obtain sufficient bonding capacity for our contracts and the need for performance and surety bonds may adversely affect our business.

As more fully described in “Insurance and Bonding” under “Item 1.

Business,” we are generally required to post bonds in connection with government and certain private sector contracts to ensure job completion.

We have entered into a bonding agreement with a large multinational surety which acts as surety, issues bid bonds, performance bonds and payment bonds, and obligates itself upon other contracts of guaranty required by us in the day-to-day operations of our business.

However, our surety is not obligated under the bonding agreement to issue bonds for us and bonding decisions are made on a case-by-case basis.

We may not be able to maintain a sufficient level of bonding capacity in the future, which could preclude us from being able to bid for certain contracts and successfully contract with certain customers, or cause us to have to increase our letter of credit utilization in lieu of bonds, thereby reducing available borrowing capacity under our credit facility.

In addition, the conditions of the bonding market may change, increasing our costs of bonding or restricting our ability to get new bonding which could have a material adverse effect on our business, operating results and financial condition.

The short-term nature of the majority of our projects typically

protects us from these potential price increases, however, if we are unable to procure commodities for completion of our projects at estimated prices due to rising commodity prices, our margins may erode on certain in progress or future projects.

Our business depends on good customer relationships and our reputation in both the marine and concrete infrastructure markets, which is developed and maintained by our executives and key project managers.

Loss of any of our relationships, reputation or executives or key project managers could materially reduce our revenues and profits.

Our contracts are typically entered into on a project-by-project basis, so we generally do not have continuing contractual commitments with our customers beyond the terms of the current contract.

We benefit from key customer relationships

built over time and with both public and private entities.

Although we have master service agreements with numerous customers that generally define the contractual terms under which we would perform awarded work, contractual commitments are typically entered into on a project-by-project basis, so we generally do not have continuing contractual commitments with our customers beyond the terms of the current contract.

We benefit from key customer relationships built over time and with both public and private entities.

We also benefit from our reputation in the marine and concrete construction markets developed over years of successfully performing on projects.

Both of these aspects of our business were developed and are maintained through our executives and key project managers.

Both of these aspects of our business were developed and are maintained by our executives and key project managers.

Our inability to retain our executives and key project managers or inability to complete projects timely and successfully resulting in customer satisfaction could have a material adverse effect on our current customer relationships and reputation.

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As of December 31, 2023, we had a backlog of work to be completed on contracts totaling approximately $602.5 million in our marine segment and approximately $159.7 million in our concrete segment.

Backlog develops as a result of new awards, which represent the potential revenue value realizable pursuant to new project commitments received by us during a given period.

Backlog consists of awarded projects which have either (a) not yet been started or (b) are in progress but are not yet complete.

Backlog includes new awards, which represent the potential revenue value realizable pursuant to new project commitments received by us during a given period.

Backlog consists of awarded projects that have either (a) not yet been started or (b) are in progress but are not yet complete.

In the latter case, the revenue value reported in backlog is the remaining value related to work that has not yet been completed.

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● exacerbation of any one or more of these factors as projects grow in size and complexity.

These risks may increase if the project is of a long-term duration because of the elevated risk that the circumstances upon which we based our original bid will change in a manner that increases costs.

These risks may increase if the project is of a long-term duration because of the elevated risk that the circumstances that we based our original bid will change in a manner that increases costs.

In addition, we sometimes bear the risk of delays caused by unexpected conditions or events.

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If we are unable to hire qualified subcontractors or find qualified equipment manufacturers or suppliers, our ability to successfully complete a project could be impaired.

If we are not able to locate qualified third-party subcontractors or the amount we are required to pay for subcontractors or equipment and supplies exceeds what we have estimated, especially in a lump-sum or a fixed-price contract, we may suffer losses on these contracts.

If we are not able to locate or engage qualified third-party subcontractors or the amount we are required to pay for subcontractors or equipment and supplies exceeds what we have estimated, especially in a lump-sum or a fixed-price contract, we may suffer losses on these contracts.

If a subcontractor, supplier, or manufacturer fails to provide services, supplies or equipment as required under a contract for any reason, we may be required to source these services, equipment or supplies to other third parties on a delayed basis or on less favorable terms, which could impact contract profitability.

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The businesses of marine infrastructure construction, port maintenance, dredging and salvage are generally subject to a number of risks and hazards, including environmental hazards, industrial accidents, hurricanes, adverse weather conditions, collisions with fixed objects, cave-ins, encountering unusual or unexpected geological formations, disruption of transportation services and flooding.

These risks could result in damage to or destruction of, dredges, transportation vessels, other maritime structures and buildings, and could also result in personal injury or death, environmental damage, performance delays, monetary losses or legal liability.

These risks could result in damage to , destruction or loss of, dredges, transportation vessels, other maritime structures and buildings, and could also result in personal injury or death, environmental damage, performance delays, monetary losses or legal liability.

In the concrete segment, our workers are subject to the usual hazards associated with providing construction and related services on construction sites including environmental hazards, industrial accidents, hurricanes, adverse weather conditions, and flooding.

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If we were to experience insurance claims or costs above our estimates, we might be required to use working capital to satisfy these costs rather than to maintain or expand our operations.

To the extent that we experience a material increase in the frequency or severity of accidents or workers’ compensation and health claims, or unfavorable developments on existing claims, our operating results and financial condition could be materially and adversely affected.

To the extent that we experience a

material increase in the frequency or severity of accidents or workers’ compensation and health claims, or unfavorable developments on existing claims, our operating results and financial condition could be materially and adversely affected.

Our operations are subject to environmental laws and regulations that may expose us to significant costs and liabilities.

emissions, water quality, solid waste management, and protection of certain marine and bird species, their habitats, and wetlands.

Our marine infrastructure construction, salvage, demolition, dredging and dredge material disposal activities are subject to stringent and complex federal, state and local environmental laws and regulations, including those concerning air emissions, water quality, solid waste management, and protection of certain marine and bird species, their habitats, and wetlands.

We may incur substantial costs in order to conduct our operations in compliance with these laws and regulations.

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During downturns in the U.S.

or world economies, the anticipated port usage in our geographic markets may decline, resulting in less port construction, upgrading and maintenance.

or world economies, the

anticipated port usage in our geographic markets may decline, resulting in less port construction, upgrading and maintenance.

As a result, demand for our services could substantially decline for extended periods.

Restrictions on foreign ownership of our vessels could limit our ability to sell off any portion of our marine construction segment or result in the forfeiture of our vessels or in our inability to continue our operations in United States navigable waters.

The Foreign Dredge Act of 1906, the Merchant Marine Act of 1920 (the “Jones Act”), the Shipping Act of 1984 and the Vessel Documentation Act require vessels engaged in the transport of merchandise or passengers between two points in the United States or dredging in the navigable waters of the United States to be owned and controlled by United States citizens.

The Foreign Dredge Act of 1906, the Jones Act, the Shipping Act of 1984 and the Vessel Documentation Act require vessels engaged in the transport of merchandise or passengers between two points in the United States or dredging in the navigable waters of the United States to be owned and controlled by United States citizens.

The United States citizen ownership and control standards require the vessel-owning entity to be at least 75% U.S.

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As a result, the sales price for that portion of our marine segment may not attain the amount that could be obtained in an unregulated market.

The COVID-19 pandemic affected and may again adversely affect our business and results of operations and financial condition.

The COVID-19 pandemic and related governmental and business responses had and may again have an adverse effect on the markets we derive project opportunities from, our customers, and our operations.

The extent to which the COVID-19 pandemic could again impact us will depend on numerous evolving factors and future developments that are uncertain and that we are not able to predict, including:

the timing, extent, trajectory and duration of the pandemic;

the emergence of new variants;

the development, availability, distribution and effectiveness of vaccines and treatments;

the imposition of protective public safety measures;

and the impact of the pandemic on the global economy and demand for our products and services.

Although the COVID-19 pandemic has subsided, we could again experience adverse impacts to our business as a result of any related economic recession that occurred or may occur in the future from COVID-19 or other similar global pandemics.

Our marine segment operates in jurisdictions outside of the U.S.

and we intend to expand our operations to more jurisdictions outside of the U.S.

Our marine segment, which accounted for 55.6%, 45.3% and 43.9% of our contract revenues for the years ended December 31, 2023, 2022 and 2021, respectively, has a significant portion of those operations performed outside of the U.S.

For the years ended December 31, 2023, 2022 and 2021, our international operations generated approximately 5.1%, 0.9% and 0.5% of our contract revenues, respectively.

The Bahamas represented our largest international market outside of the U.S., with our Bahamian operations representing 5.1% of our contract revenues for the year ended December 31, 2023, including 11.0% of our total cash balance at December 31, 2023.

In addition, we intend to expand our operations to other areas outside the U.S.

in the future.

International operations are subject to a number of risks and uncertainties that could negatively impact our results from operations, including:

● difficulties and cost associated with complying with a wide variety of complex foreign laws, treaties, and regulations;

● uncertainties in or unexpected changes in regulatory environments or tax laws, including with respect to climate change;

● legal uncertainties, timing delays, and expenses associated with tariffs, export licenses, and other trade barriers;

● difficulties enforcing agreements and collecting receivables through foreign legal systems;

● risks associated with failing to comply with the U.S.

Foreign Corrupt Practices Act, as amended, various export laws, and other similar laws applicable to our operations in international markets;

● exchange controls or other limitations on international currency movements, including restrictions on the repatriation of funds to the U.S.

from certain countries;

● sanctions imposed by the U.S.

government that prevent us from engaging in business in certain countries or with certain counter-parties;

● expropriation or nationalization of assets;

● inability to obtain or preserve certain intellectual property rights in the foreign countries in which we operate;

● our inexperience in certain international markets;

● health emergencies or pandemics;

● fluctuations in foreign currency exchange rates;

● political and economic instability;

● wars, rebellions and acts of terrorism.

Our concrete segment is geographically concentrated in Texas.

Our concrete segment, which accounted for 44.4%, 54.7% and 56.1% of our contract revenues for the years ended December 31, 2023, 2022 and 2021, respectively, is concentrated in the metropolitan areas of the State of Texas, particularly Houston and Dallas.

Given this concentration, general economic conditions, regulatory changes, changes in demographics, material costs, labor conditions, competition and other conditions that affect those metropolitan areas or the State of Texas may have a disproportionate impact on the performance of our concrete segment.

In addition, our operations in Texas may make us more susceptible to natural disasters, including hurricanes, tornadoes and flooding.

Risk Factors Relating to Our Employees

If we fail to attract, retain and engage appropriately qualified employees, including employees in key positions, our operations and profitability may be harmed.

In addition, changes in market compensation rates may adversely affect our profitability.

Our performance is highly dependent on attracting, retaining and engaging appropriately qualified employees in our field and corporate offices.

Our strategy of offering high-quality services and products for our customers requires a highly trained and engaged workforce.

The turnover rate in the specialty construction industry is relatively high, and there is an ongoing need to recruit and train new employees.

Factors that affect our ability to maintain sufficient numbers of qualified employees include, for example, employee engagement, our reputation, unemployment rates, competition from other employers, availability of qualified personnel and our ability to offer appropriate compensation and benefit packages.

Failure to recruit or retain qualified employees in the future may impair our efficiency and effectiveness and our ability to pursue growth opportunities.

In addition, a significant amount of turnover of our executive team or other employees in key positions with specific knowledge relating to us, our operations and our industry may negatively impact our operations.

We operate in a competitive labor market and there is a risk that market increases in compensation and employer-provided benefits could have a material adverse effect on our profitability.

We may also be subject to continued market pressure to increase employee hourly wage rates and increased cost pressure on employer-provided benefits.

Our need to implement corresponding adjustments within our labor model and compensation and benefit packages could have a material adverse impact to the profitability of our business.

We may be subject to unionization, work stoppages, slowdowns or increased labor costs.

On February 4, 2022, U.S.

President Biden signed Executive Order 14063, which provided that, with certain exceptions, government contractors and subcontractors working on federal construction projects that are estimated to cost the U.S.

government at least $35 million must become a party to a project labor agreement with one or more appropriate labor organizations.

On December 22, 2023, the U.S.

Federal Acquisition Regulatory Council issued a final rule consistent with the executive order, which went into effect on January 22, 2024.

In the event our operations are determined not to satisfy any of the exceptions of the rule or the government otherwise determines that our operations with respect to any future federal project must comply with the rule, then we may be required to enter into project labor agreements which would be disruptive to our operations and could have a material adverse effect on our business, operating results and financial condition.

Only a small percentage of our marine segment workforce, located in the Pacific Northwest and Alaska, is currently unionized.

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In addition, we may be subject to disruptions by organized labor groups protesting our non-union status.

Any of these events would be disruptive to our operations and could have a material adverse effect on the business, operating results and financial condition.

Any of these events would be disruptive to our operations and could have a material adverse effect on our business, operating results and financial condition.

Our employees in the marine segment are covered by federal laws that provide seagoing employees remedies for job-related claims in addition to those provided by state laws.

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During 2023, we recorded $1.0 million of expense for our self-insured portion of these liabilities.

We believe our recorded self-insurance reserves

represent our best estimate of the outcomes of these claims.

Should negative trends persist;

we could continue to be negatively impacted in the future.

We believe our recorded self-insurance reserves represent our best estimate of the outcomes of these claims.

Should negative trends persist, we could be negatively impacted in the future.

Our failure to comply with immigration laws could result in significant liabilities, harm our reputation with our customers and disrupt our operations.

Although we take steps to verify the employment eligibility status of all of our employees, some of our employees may, without our knowledge, be unauthorized workers.

Unauthorized workers are subject to deportation and may subject us to fines or penalties and, if any of our workers are found to be unauthorized, we could experience adverse publicity that could make it more difficult to hire and retain qualified employees.

Termination of a significant number of unauthorized employees may disrupt our operations, cause temporary increases in our labor costs as we train new employees and result in additional adverse publicity.

We could also become subject to fines, penalties and other costs related to claims that we did not fully comply with all recordkeeping obligations of federal and state immigration laws.

If we fail to comply with these laws, our operations may be disrupted, and we may be subject to fines or, in extreme cases, criminal sanctions.

In addition, many of our customer contracts specifically require compliance with immigration laws, and, in some cases, our customers’ audit compliance with these laws.

Further, several of our customers require that we ensure that our subcontractors comply with these laws with respect to the workers that perform services for them.

A failure to comply with these laws or to ensure compliance by our subcontractors could damage our reputation and may cause our customers to cancel contracts with us or to not award future business to us.

These factors could adversely affect our operations and financial position.

General Risk Factors

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We rely on industry accepted security measures and technology to securely maintain all confidential and proprietary information on our computer systems, but they may still be vulnerable to these threats.

As a result, we may be required to expend significant resources to protect against the threat of these system disruptions and security breaches or to alleviate problems caused by these disruptions and breaches.

As a result, we may be required to expend significant

resources to protect against the threat of these system disruptions and security breaches or to alleviate problems caused by these disruptions and breaches.

Any of these events could damage our reputation and have a material adverse effect on our business, financial condition, results of operations and cash flows.

Risk Factors Relating to Our Indebtedness and Financing Plans

Adverse changes in tax laws both in the United States and abroad, changes in tax rates or exposure to additional income tax liabilities could have a material adverse effect on our results of operations.

On December 15, 2022, the European Union (EU) Member States formally adopted the EU’s Pillar Two Directive, which generally provides for a minimum effective tax rate of 15%, as established by the Organization for Economic Co-operation and Development (OECD) Pillar Two Framework that was supported by over 130 countries worldwide.

The EU’s Pillar Two Directive effective dates are January 1, 2024, and January 1, 2025, for different aspects of the directive.

On July 17, 2023, the OECD published Administrative Guidance proposing certain safe harbor rules that effectively extend certain effective dates to January 1, 2027.

EU Member States will still need to adopt the OECD Administrative Guidance in their local Pillar Two legislation for such safe harbor rules to apply.

A significant number of other countries are also considering implementing similar legislation.

We are continuing to evaluate the potential impact on future periods of the Pillar Two Framework, pending legislative adoption by additional individual countries, including those within the European Union.

At this time, we do not expect the impact to be significant.

Risk Factors Relating to Our Indebtedness

Our indebtedness includes covenants and obligations with regard to our business activities that may restrict our ability to take certain actions which may negatively affect our financial condition.

At December 31, 2022, our total indebtedness under the Credit Agreement was approximately $35.0 million.

At December 31, 2023, our total indebtedness under our three-year $103.0 million senior secured credit facility (the “Credit Agreement”), dated May 15, 2023, as amended, was approximately $38.0 million.

We must comply with various affirmative and negative covenants contained in our Credit Agreement, some of which may restrict the way in which we would like to conduct our business.

Among other things, our requirements under out debt instruments could potentially limit our ability to:

Among other things, our requirements under our debt instruments could potentially limit our ability to:

● incur additional indebtedness or liens;

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Failure to comply with the terms and conditions of any existing or future indebtedness, including current or prospective covenants, would constitute an event of default.

If an event of default occurs, the lenders will have the right to accelerate the maturity of such indebtedness and foreclose upon the collateral, if any, securing that indebtedness.

Our current Credit Agreement expires on July 31, 2023.

The Company’s ability to continue as a going concern is dependent upon obtaining sufficient liquidity to repay its existing credit facility through a combination of proceeds from new debt, proceeds from the sale of underutilized assets, and operating cash flow.

As the Company’s refinancing activities are ongoing, there can be no assurances that the Company will be able to secure financing on terms that are acceptable to the Company or at all.

An explanatory paragraph is included in the report of our independent registered public accounting firm contained in this Annual Report describing an uncertainty about our ability to continue as a going concern.

The inclusion of this explanatory paragraph related to going concern is considered an event of noncompliance with the Credit Agreement.

We have received a consent for this noncompliance with the Credit Agreement from our lenders.

We are negotiating with new financing sources to refinance the indebtedness under our Credit Agreement, which is due on July 31, 2023, but we cannot assure we will complete the refinancing before the maturity date or the expiration date of the lenders’ consent.

Our current Credit Agreement expires on July 31, 2023, and all amounts there under are due on such date.

The consent from our lenders expires on May 1, 2023.

The Company does not presently have sufficient cash or other sources of liquidity to repay the debt under Credit Agreement at maturity or the expiration date of the consent.

We are presently negotiating with financing sources to refinance the indebtedness under the Credit Agreement, but there is no assurance we will complete the financing before the maturity date, the expiration of the consent or at all.

Our negotiation with financing sources is a rapidly evolving situation.

Failure to secure a new credit facility before the maturity date of the Credit Agreement or expiration of the consent from the lenders could restrict our access to capital which could prevent us from repaying amounts borrowed under our existing credit facility, from funding our operations, or from engaging in certain transactions which might otherwise be considered beneficial to us.

In this event, we may be required to delay, limit, reduce, or terminate certain commercial efforts or strategies, may need to accelerate or add to planned disposals of certain equipment, real estate, or other assets, and may be prevented, or hindered from pursuing or performing contracts, all of which could adversely affect our business and stockholders.

As described in Note 11 of the Notes to the Consolidated Financial Statements beginning on page F-1 of this Annual Report on Form 10-K, we had $35.0 million of outstanding indebtedness under our Credit Facility as of December 31, 2022.

Because that Credit Agreement matures on July 31, 2023, and we have not yet completed the work necessary to refinance the outstanding indebtedness under the Credit Agreement, our independent registered public accounting firm included in its report covering our audited financial statements for the period ended December 31, 2022, an explanatory paragraph describing the uncertainty about our ability to continue as a going concern.

Please see the Notes to the Consolidated Financial Statements beginning on page F-10 of this Annual Report on Form 10-K.

event of default occurs, the lenders will have the right to accelerate the maturity of such indebtedness and foreclose upon the collateral, if any, securing that indebtedness.

Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.

Borrowings under the Credit Facility allow for loans at variable rates of interest and expose us to interest rate risk.

Borrowings under the Credit Agreement allow for loans at variable rates of interest and expose us to interest rate risk.

If interest rates increase, our debt service obligations on the variable rate indebtedness will increase even though the amount borrowed will remain the same, and our net income and operating cash flows, including cash available for servicing our indebtedness, will correspondingly decrease.

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Our inability to incur additional indebtedness could have a material adverse effect on our business, operating results and financial condition .

UNRESOLVED STAFF COMMENTS

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors