What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-08-14 compared with 2023-07-06 · 145 added, 81 removed, 389 unchanged (37% of the section changed)

5 unchanged sentences

Three Months Ended

March 31, Six Months Ended

2023 2022 2023 2022

Net sales $ 19,242 $ 24,568 $ 40,541 $ 43,815

3 unchanged sentences

Amortization of intangible assets 63 65 124 190

Gain on disposal of operating assets ( 11 ) —

Loss (gain) on disposal of operating assets 14 ( 2 ) 3 ( 2 )

Operating loss ( 2,206 ) ( 1,284 ) ( 4,275 ) ( 4,936 )

Interest expense, net 339 193 614 307

Foreign currency exchange (gain) loss, net ( 3 ) 5

Other expense (income), net 182 ( 32 )

Loss before income tax expense (benefit) ( 2,523 ) ( 3,740 )

Gain on debt extinguishment — ( 5,106 ) — ( 5,106 )

Foreign currency exchange loss, net 12 3 9 9

Other income, net ( 218 ) ( 36 ) ( 35 ) ( 68 )

(Loss) income before income tax expense (benefit) ( 2,339 ) 3,662 ( 4,863 ) ( 78 )

Income tax expense (benefit) 28 23 93 ( 26 )

Net loss $ ( 2,589 ) $ ( 3,691 )

Net loss per share

Net (loss) income $ ( 2,367 ) $ 3,639 $ ( 4,956 ) $ ( 52 )

Net (loss) income per share

Basic $ ( 0.40 ) $ 0.62 $ ( 0.84 ) $ ( 0.01 )

8 unchanged sentences

Three Months Ended

Net loss $ ( 2,589 ) $ ( 3,691 )

March 31, Six Months Ended

2023 2022 2023 2022

Net (loss) income $ ( 2,367 ) $ 3,639 $ ( 4,956 ) $ ( 52 )

Other comprehensive (loss) income:

2 unchanged sentences

Other — — 1 —

Comprehensive loss $ ( 2,168 ) $ ( 3,695 )

Comprehensive (loss) income $ ( 2,219 ) $ 3,622 $ ( 4,387 ) $ ( 73 )

See notes to unaudited consolidated condensed financial statements.

8 unchanged sentences

17,395 16,515

Insurance receivable 1 3,000 —

Contract assets 10,636 10,172

17 unchanged sentences

Total current liabilities 38,978 32,589

Long-term debt, net of current maturities 3,542 3,508

Long-term debt, net of current maturities, net of unamortized debt issuance costs 3,309 3,508

Long-term operating lease liabilities, net of short-term 14,416 14,786

Deferred income taxes 145 137

Deferred income taxes, net 72 137

Pension liability 4,815 4,812

3 unchanged sentences

Common shares, par value $ 1 per share, authorized 10,000 shares;

issued and outstanding shares 6,072 at December 31, 2022 and 6,040 at September 30, 2022

issued and outstanding shares 6,108 at March 31, 2023 and 6,040 at September 30, 2022

Additional paid-in capital 11,455 11,387

4 unchanged sentences

See notes to unaudited consolidated condensed financial statements.

1 See Note 12, Commitments & Contingencies on Note 13, Subsequent Events

SIFCO Industries, Inc.

2 unchanged sentences

(Unaudited, Amounts in thousands)

Three Months Ended

Six Months Ended

Cash flows from operating activities:

Net loss $ ( 4,956 ) $ ( 52 )

Adjustments to reconcile net loss to net cash provided by operating activities:

Adjustments to reconcile net loss to net cash used for operating activities:

Depreciation and amortization 3,198 3,210

Amortization of debt issuance costs 20 20

Gain on disposal of operating assets ( 11 ) —

Loss (gain) on disposal of operating assets 3 ( 2 )

Loss on insurance proceeds received for non-property claim 110 —

2 unchanged sentences

Inventory valuation accounts ( 1,657 ) ( 189 )

Gain on extinguishment of debt — ( 5,106 )

Other long-term liabilities ( 256 ) ( 107 )

9 unchanged sentences

Accrued income and other taxes 178 ( 20 )

Net cash provided by operating activities 292 1,239

Net cash used for operating activities ( 373 ) ( 3,196 )

Cash flows from investing activities:

9 unchanged sentences

Short-term debt repayments ( 2,856 ) ( 1,755 )

Net cash provided by (used for) financing activities 116 ( 358 )

(Decrease) increase in cash and cash equivalents ( 127 ) 415

Net cash provided by financing activities 816 4,482

Decrease in cash and cash equivalents ( 976 ) ( 205 )

Cash and cash equivalents at the beginning of the period 1,175 346

3 unchanged sentences

Cash paid for interest $ ( 550 ) $ ( 249 )

Cash paid for income taxes, net $ ( 16 ) $ ( 15 )

Non-cash investing activities:

5 unchanged sentences

(Unaudited, Amounts in thousands )

Three Months Ended

December 31, 2022

Six Months Ended

March 31, 2023

Common Additional

5 unchanged sentences

Balance - September 30, 2022 6,040 $ 6,040 $ 11,387 $ 31,956 $ ( 8,693 ) $ 40,690

Comprehensive income (loss) — — — ( 2,589 ) 421 ( 2,168 )

Comprehensive (loss) income — — — ( 4,956 ) 569 ( 4,387 )

Performance and restricted share expense — — 207 — — 207

Share transactions under equity-based plans 68 68 ( 139 ) — — ( 71 )

Balance - December 31, 2022 6,072 $ 6,072 $ 11,406 $ 29,367 $ ( 8,272 ) $ 38,573

Balance - March 31, 2023 6,108 $ 6,108 $ 11,455 $ 27,000 $ ( 8,124 ) $ 36,439

Three Months Ended

December 31, 2021

March 31, 2023

Common Additional

4 unchanged sentences

Shares Amount

Balance - December 31, 2022 6,072 $ 6,072 $ 11,406 $ 29,367 $ ( 8,272 ) $ 38,573

Comprehensive (loss) income — — — ( 2,367 ) 148 ( 2,219 )

Performance and restricted share expense — — 85 — — 85

Share transactions under equity-based plans 36 36 ( 36 ) — — —

Balance - March 31, 2023 6,108 $ 6,108 $ 11,455 $ 27,000 $ ( 8,124 ) $ 36,439

Six Months Ended

March 31, 2022

Common Additional

Capital Retained

Earnings Accumulated

Comprehensive

Shareholders’

Shares Amount

Balance - September 30, 2021 5,987 $ 5,987 $ 11,118 $ 41,596 $ ( 9,079 ) $ 49,622

2 unchanged sentences

Share transactions under equity-based plans 53 53 ( 160 ) — — ( 107 )

Balance - March 31, 2022 6,040 $ 6,040 $ 11,264 $ 41,544 $ ( 9,100 ) $ 49,748

Three Months Ended

March 31, 2022

Common Additional

Capital Retained

Earnings Accumulated

Comprehensive

Shareholders’

Shares Amount

Balance - December 31, 2021 6,003 $ 6,003 $ 11,156 $ 37,905 $ ( 9,083 ) $ 45,981

Comprehensive income (loss) — — — 3,639 ( 17 ) 3,622

Performance and restricted share expense — — 145 — — 145

Share transactions under equity-based plans 37 37 ( 37 ) — — —

Balance - March 31, 2022 6,040 $ 6,040 $ 11,264 $ 41,544 $ ( 9,100 ) $ 49,748

See notes to unaudited consolidated condensed financial statements.

20 unchanged sentences

A summary of the Company’s significant accounting policies is included in Note 1 to the audited consolidated financial statements of the Company's Annual Report on Form 10-K for the year ended September 30, 2022.

Net Loss per Share

The Company’s net loss per basic share has been computed based on the weighted-average number of common shares outstanding.

Net (Loss) Income per Share

The Company’s net (loss) income per basic share has been computed based on the weighted-average number of common shares outstanding.

During a period of net loss, zero restricted and performance shares are included in the calculation of diluted earnings per share because the effect would be anti-dilutive.

In a period of net income, the net income per diluted share reflects the effect of the Company's outstanding restricted shares and performance shares under the treasury method.

In a period of net income, the net income per diluted share reflects the effect of the Company's outstanding restricted shares and performance shares under the treasury stock method.

The dilutive effect is as follows:

Three Months Ended

Net loss $ ( 2,589 ) $ ( 3,691 )

March 31, Six Months Ended

2023 2022 2023 2022

Net (loss) income $ ( 2,367 ) $ 3,639 $ ( 4,956 ) $ ( 52 )

Weighted-average common shares outstanding (basic and diluted) 5,940 5,840 5,918 5,819

Net loss per share – basic and diluted:

Effect of dilutive securities:

Restricted shares — 100 — —

Performance shares — 21 — —

Weighted-average common shares outstanding (diluted) 5,940 5,961 5,918 5,819

Net (loss) income per share – basic:

$ ( 0.40 ) $ 0.62 $ ( 0.84 ) $ ( 0.01 )

Net (loss) income per share – diluted:

$ ( 0.40 ) $ 0.61 $ ( 0.84 ) $ ( 0.01 )

Anti-dilutive weighted-average common shares excluded from calculation of diluted earnings per share 196 196 186 307

2 unchanged sentences

The accompanying consolidated condensed financial statements have been prepared assuming the Company will continue as a going concern.

The Company has debt maturing in February 2024 and is currently under a Forbearance Agreement ending August 15, 2023 with its lender as a result of default under the Company’s Credit Agreement to provide (i) timely borrowing base certificates and monthly financial reports for the periods of December 2022, January 2023 and February 2023 and (ii) failure to maintain a fixed charge coverage ratio ("FCCR") not less than 1.1 to 1.0 for the periods of December 2022, January 2023, February 2023 and March 2023.

These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

The Company is evaluating available financial alternatives, including obtaining acceptable alternative financing as well as seeking additional waivers, forbearances or amendments to the covenants and/or other provisions of the current Credit Agreements and an extension of the forbearance period.

The Company cannot provide assurances that it will be successful in negotiating such a waiver or extension of the forbearance period, restructuring of existing debt obligations, obtaining capital or entering into a strategic alternative transaction which provides sufficient funding for the refinancing of its outstanding indebtedness prior to the expiration of the forbearance period or prior to the maturity date of its obligations under the Credit Agreements.

The Company has debt maturing in December 2023 and an alternate financing arrangement has yet to be executed.

This condition raises substantial doubt about the Company’s ability to continue as a going concern.

The Company is evaluating available financial alternatives, including obtaining acceptable alternative financing.

The Company cannot provide assurances that it will be able to provide the post closing deliverables as established under the Seventh Amendment of the Credit Agreement or be successful in restructuring of existing debt obligations, obtaining capital or entering into a strategic alternative transaction which provides sufficient funding for the refinancing of its outstanding indebtedness prior to the maturity date of its obligations under the Credit Agreements.

The consolidated condensed financial statements do not include any adjustments to the carrying amount and classification of assets, liabilities, and reported expense that may be necessary if the Company was unable to continue as a going concern.

22 unchanged sentences

Certain amounts in prior years have been reclassified to conform to the fiscal 2023 consolidated condensed statement presentation.

In fiscal 2023, the Company revised its classification within the consolidated condensed statements of cash flows by moving a prior year amount of $ 239 of inventories from changes in operating assets and liabilities to adjustments to reconcile net loss to net cash provided by operating activities to conform to current period presentation.

In fiscal 2023, the Company revised its classification within the consolidated condensed statement of cash flows by moving a prior year amount of $ 189 of inventories from changes in operating assets and liabilities to adjustments to reconcile net loss to net cash used for operating activities to conform to current period presentation.

Inventories consist of:

5 unchanged sentences

For a portion of the Company's inventory, cost is determined using the last-in, first-out ("LIFO") method.

Approximately 26 % and 42 % of the Company’s inventories at December 31, 2022 and September 30, 2022, respectively, use the LIFO method.

actual valuation of inventory under the LIFO method is made at the end of each fiscal year based on the inventory levels and costs existing at that time.

Approximately 21 % and 42 % of the Company’s inventories at March 31, 2023 and September 30, 2022, respectively, use the LIFO method.

An actual valuation of inventory under the LIFO method is made at the end of each fiscal year based on the inventory levels and costs existing at that time.

Accordingly, interim LIFO calculations must be based on management’s estimates of expected year-end inventory levels and costs.

1 unchanged sentence

The first-in, first-out (“FIFO”) method is used for the remainder of the inventories, which are stated at the lower of cost or net realizable value ("NRV").

If the FIFO method had been used for the inventories for which cost is determined using the LIFO method, inventories would have been $ 10,202 and $ 9,939 higher than reported at December 31, 2022 and September 30, 2022, respectively.

If the FIFO method had been used for the inventories for which cost is determined using the LIFO method, inventories would have been $ 9,741 and $ 9,939 higher than reported at March 31, 2023 and September 30, 2022, respectively.

Net realizable value is the estimated selling price in the ordinary course of business less reasonably predictable costs of completion, disposal, and transportation.

The Company estimates excess and obsolescence and shrink reserves for its inventory based upon historical experience, historical and projected sales trends and the age of inventory on hand.

As of December 31, 2022 and September 30, 2022, our inventory valuation allowances were $ 4,567 and $ 5,084 , respectively.

The Company estimates net realizable value, excess and obsolescence and shrink reserves for its inventory based upon historical experience, historical and projected sales trends and the age of inventory on hand.

As of March 31, 2023 and September 30, 2022, our inventory valuation allowances were $ 3,753 and $ 5,084 , respectively.

Long-lived Assets

1 unchanged sentence

This review is performed using estimates of future undiscounted cash flows, which include proceeds from disposal of the asset group.

As required by ASC 360 ("Topic 360"), should the carrying value of an asset group exceed the estimated undiscounted future cash flows, then the asset group is considered impaired and an impairment charge is recorded for the amount by which the carrying value of the asset group exceeds its fair value.

As required by ASC 360 ("Topic 360"), should the carrying value of a asset group exceed the estimated undiscounted future cash flows, then the asset group is considered impaired and an impairment charge is recorded for the amount by which the carrying value of the asset group exceeds its fair value.

The Company continuously monitors for indicators of impairment to determine if further testing is necessary.

In the first quarter, the Company evaluated triggering events and did not identify any indicators that the asset groups might be impaired.

In the second quarter, the Company evaluated triggering events and did not identify any indicators that the asset groups might be impaired.

The Company tests its goodwill for impairment in the fourth fiscal quarter, and in interim periods if certain events occur indicating that the carrying amount of goodwill may be impaired.

In the first quarter, the Company determined that interim testing was not required.

In the second quarter, the Company evaluated triggering events and determined interim testing was not required.

Accumulated Other Comprehensive Loss

7 unchanged sentences

Three Months Ended

March 31, Six Months Ended

2023 2022 2023 2022

Finance lease expense:

5 unchanged sentences

The following table presents the impact of leasing on the consolidated condensed balance sheet.

Classification in the consolidated condensed balance sheets December 31,

Classification in the consolidated condensed balance sheets March 31,

2023 September 30,

10 unchanged sentences

Supplemental cash flow and other information related to leases were as follows:

2022 December 31,

2023 March 31,

Other Information

3 unchanged sentences

Financing cash flows from finance leases 30 15

Right-of-use assets obtained in exchange for new lease liabilities:

Operating leases 60 —

2023 September 30,

5 unchanged sentences

Operating leases 5.9 % 5.9 %

Future minimum lease payments under non-cancellable leases at December 31, 2022 were as follows:

Future minimum lease payments under non-cancellable leases at March 31, 2023 were as follows:

Finance Leases Operating Leases

Year ending September 30,

2023 (excluding the three months ended December 31, 2022) $ 55 $ 1,249

2023 (excluding the six months ended March 31, 2023) $ 35 $ 833

2024 68 1,686

19 unchanged sentences

On March 23, 2022, the Company entered into the Sixth Amendment (the "Sixth Amendment") to the Credit Agreement and the Second Amendment (the "Second Amendment") to the Export Credit Agreement with its lender.

The total collateral at December 31, 2022 and September 30, 2022 was $ 21,646 and $ 22,711 , respectively, and the revolving commitment was $ 35,000 for both periods.

Total availability at December 31, 2022 and September 30, 2022 was $ 8,130 and $ 9,403 , respectively, which exceeds both the collateral and total commitment threshold.

Since the availability was greater than 10.0 % of the revolving commitment as of December 31, 2022 and September 30, 2022, no covenant calculations were required.

The Company has a letter of credit balance of $ 1,970 as of December 31, 2022 and September 30, 2022, respectively.

The Credit Agreement has a maturity date of February 19, 2024.

The Sixth Amendment amends the Credit Agreement to, among other things, (i) revise the fixed coverage ratio to exclude the first $ 1,500 of unfunded capital expenditures through April 20, 2023, (ii) increase the letter of credit sub-limit from $ 2,000 to $ 3,000 , (iii) modify the reference rate from the London interbank offered rate ("LIBOR") to the secured overnight financing rate ("SOFR") and (iv) revise the property, plant and equipment component of the borrowing base under the Credit Agreement.

The total collateral at March 31, 2023 and September 30, 2022 was $ 21,304 and $ 22,711 , respectively, and the revolving commitment was $ 35,000 for both periods.

Total availability at March 31, 2023 and September 30, 2022 was $ 2,524 and $ 9,403 , respectively, which exceeds both the collateral and total commitment threshold.

Since the availability was greater than 10.0 % of the revolving commitment as of September 30, 2022, no covenant calculations were required.

As of March 31, 2023, the Company was not in compliance with covenant requirements as a result of the Event of Default described below.

The Company has a letter of credit balance of $ 1,970 as of March 31, 2023 and September 30, 2022, respectively.

The Credit Agreement under the Sixth Amendment had a maturity date of February 19, 2024.

The maturity is modified to December 31, 2023 under the Seventh Amendment (the "Seventh Amendment") to the Credit Agreement, which is discussed below.

The Sixth Amendment amended the Credit Agreement to, among other things, (i) revise the fixed charge coverage ratio ("FCCR") to exclude the first $ 1,500 of unfunded capital expenditures through April 20, 2023, (ii) increase the letter of credit sub-limit from $ 2,000 to $ 3,000 , (iii) modify the reference rate from the London interbank offered rate ("LIBOR") to the secured overnight financing rate ("SOFR") and (iv) revise the property, plant and equipment component of the borrowing base under the Credit Agreement.

The Second Amendment amends the Export Credit Agreement to replace the reference rate from LIBOR to SOFR under the Export Credit Agreement.

The revolving credit agreement (or "revolver"), as amended, has a rate based on SOFR plus a 2.25 % spread, which was 6.5 % at December 31, 2022 and a rate based on LIBOR plus a 2.25 % spread, which was 4.9 % at September 30, 2022.

The Export Credit Agreement as amended has a rate based on SOFR plus a 1.75 % spread, which was 6.0 % at December 31, 2022 and a rate based on LIBOR plus a 1.75 % spread, which was 4.4 % at September 30, 2022.

The revolving credit agreement (or "revolver"), as amended, has a rate based on SOFR plus a 2.25 % spread, which was 7.0 % at March 31, 2023 and a rate based on LIBOR plus a 2.25 % spread, which was 4.9 % at September 30, 2022.

The Export Credit Agreement as amended has a rate based on SOFR plus a 1.75 % spread, which was 6.5 % at March 31, 2023 and a rate based on LIBOR plus a 1.75 % spread, which was 4.4 % at September 30, 2022.

The Company also has a commitment fee of 0.25 % under the Credit Agreement as amended to be incurred on the unused balance of the revolver.

10 unchanged sentences

in respect to the Event of Default under the Credit Agreement.

Pursuant to the Forbearance Agreement, during the forbearance period defined therein:

(i) the Reserves under the Borrowing Base in the ABL Credit Agreement are reduced to $ 2,000 ;

Pursuant to the Forbearance Agreement, (i) the Reserves under the Borrowing Base in the ABL Credit Agreement are reduced to $ 2,000 ;

(ii) the aggregate outstanding principal balance of the Revolving Exposure under the ABL Credit Agreement and Export Revolving Loan may not at any time exceed the lesser of $ 19,000 and the Borrowing Base.

On August 9, 2023, the Company entered into the Seventh Amendment to the Credit Agreement and the Third Amendment (the "Third Amendment") to the Export Credit Agreement with its lender.

The Seventh Amendment amends the Credit Agreement to, among other things, (i) reduce the Revolving Credit Agreement to $ 23,000 , thereby reducing the total revolving commitment to $ 30,000 ;

(ii) advances the loan maturity date to December 31, 2023;

(iii) provides a waiver of Existing Defaults and concludes the forbearance period as described under the Forbearance Agreement dated April 28, 2023;

(iv) the aggregate outstanding principal balance of the Revolving Exposure under the ABL Credit Agreement and Export Revolving Loan may not at any time exceed the lesser of Revolving Commitment, less the Availability Block, if applicable, the Borrowing Base, and in combination with the Export Revolving Loan under the Export Credit Agreement to $ 18,000 through September 30, 2023 and $ 19,000 thereafter;

(v) the Reserves under the Borrowing Base in the ABL Credit Agreement are reduced to $ 1,500 through September 30, 2023 and $ 2,000 thereafter.

The Second Amendment amends the Export Credit Agreement to (i) modify the loan maturity date to December 31, 2023 and (ii) provides waiver of Existing Defaults and concludes the forbearance period as described under the Forbearance Agreement dated April 28, 2023.

Lender’s agreement is subject to satisfaction of certain post closing deliverables, including:

(i) one or more proposed term sheets which provide for the refinancing of all of the Obligations, in each case in an amount sufficient to repay the Obligations in full, by no later than September 19, 2023;

(ii) a Confidential Information Memorandum, by no later than September 20, 2023;

and (iii) a duly executed term sheet providing for the refinancing of all of the Obligations in an amount sufficient to repay the Obligations in full, by no later than October 8, 2023.

Foreign subsidiary borrowings in USD

9 unchanged sentences

Interest rates on foreign borrowings are based on Euribor rates, which range from 0.5 % to 6.4 %.

The Company's Maniago, Italy ("Maniago") location obtained borrowings from one lender in the first three months of fiscal 2022.

The Company's Maniago, Italy ("Maniago") location obtained borrowings from one lender in the first six months of fiscal 2022.

The loan was for $ 1,141 with repayment terms of six years .

3 unchanged sentences

Debt issuance costs

The Company had debt issuance costs of $ 86 , which are included in the consolidated condensed balance sheets as a deferred charge in other current assets, net of amortization of $ 53 and $ 46 at December 31, 2022 and September 30, 2022, respectively.

The Company had debt issuance costs of $ 86 , which are included in the consolidated condensed balance sheets as a deferred charge in other current assets, net of amortization of $ 60 and $ 46 at March 31, 2023 and September 30, 2022, respectively.

On April 10, 2020, the Company entered into an unsecured promissory note under the Paycheck Protection Program (the “PPP Loan”).

3 unchanged sentences

As such, the Company derecognized the liability in the second quarter of fiscal 2022 when the loan was forgiven.

As of December 31, 2022 and September 30, 2022 the PPP loan balance was $ 0 .

As of March 31, 2023 and September 30, 2022 the PPP loan balance was $ 0 .

For each interim reporting period, the Company makes an estimate of the effective tax rate it expects to be applicable for the full fiscal year for its operations.

This estimated effective rate is used in providing for income taxes on a year-to-date basis.

The Company’s effective tax rate through the first three months of fiscal 2023 was ( 2.6 )%, compared with 1.3 % for the same period of fiscal 2022.

The Company’s effective tax rate through the first six months of fiscal 2023 was ( 1.9 )%, compared with 33.3 % for the same period of fiscal 2022.

The decrease in the effective rate was primarily attributable to changes in jurisdictional mix of income in fiscal 2023 compared with the same period of fiscal 2022.

9 unchanged sentences

Three Months Ended

March 31, Six Months Ended

2023 2022 2023 2022

Service cost $ 6 $ 11 $ 12 $ 21

3 unchanged sentences

Net periodic pension cost (benefit) $ 80 $ ( 32 ) $ 160 $ ( 65 )

During the three months ended December 31, 2022 and 2021, the Company made $ 8 and $ 0 in contributions, respectively to its defined benefit pension plans.

During the six months ended March 31, 2023 and 2022, the Company made $ 13 and $ 0 in contributions, respectively, to its defined benefit pension plans.

The Company anticipates making $ 43 in cash contributions to fund its defined benefit pension plans for the balance of fiscal 2023, and will use carryover balances from previous periods that have been available for use as a credit to reduce the amount of cash contributions that the Company is required to make to certain defined benefit plans in fiscal 2023.

3 unchanged sentences

The Company has outstanding equity awards under the Company's 2007 Long-Term Incentive Plan (the "2007 Plan") and the Company's 2007 Long-Term Incentive Plan (Amended and Restated as of November 16, 2016) (as further amended, the "2016 Plan"), and awards performance and restricted shares under the 2016 Plan.

In fiscal 2023, the Company granted 86 shares under the 2016 Plan to certain key employees.

In the first six months of fiscal 2023, the Company granted 86 shares under the 2016 Plan to certain key employees.

The awards were split into two tranches, comprised of 27 performance-based shares and 59 time-based restricted shares, with a grant date fair value of $ 2.84 per share.

The awards vest over three years .

There were zero shares forfeited during the three month period ended December 31, 2022.

If all outstanding share awards are ultimately earned and vest at the target number of shares, there are approximately 387 shares that remain available for award at December 31, 2022.

There were 3 shares forfeited during the six month period ended March 31, 2023.

In the first six months of fiscal 2023, the Company granted its non-employee directors 38 restricted shares under the 2016 Plan, with a grant date fair value of $ 3.48 per share, which vest over one year .

One award for 42 restricted shares vested in January 2023.

If all outstanding share awards are ultimately earned and vest at the target number of shares, there are approximately 300 shares that remain available for award at March 31, 2023.

If any of the outstanding share awards are ultimately earned and vest at greater than the target number of shares, up to a maximum of 150 % of such target, then a fewer number of shares would be available for award.

Stock-based compensation under the 2016 Plan was $ 122 and $ 161 during the first three months of fiscal 2023 and 2022, respectively.

As of December 31, 2022, there was $ 395 of total unrecognized compensation cost related to the performance shares and restricted shares awarded under the 2016 Plan.

Stock-based compensation under the 2016 Plan was $ 207 and $ 306 during the first six months of fiscal 2023 and 2022, respectively.

As of March 31, 2023, there was $ 436 of total unrecognized compensation cost related to the performance shares and restricted shares awarded under the 2016 Plan.

The Company expects to recognize this cost over the next 1.4 years.

17 unchanged sentences

Three Months Ended

March 31, Six Months Ended

2023 2022 2023 2022

Commercial revenue $ 11,361 $ 9,506 $ 21,542 $ 17,866

3 unchanged sentences

Three Months Ended

March 31, Six Months Ended

Net Sales 2023 2022 2023 2022

7 unchanged sentences

Three Months Ended

March 31, Six Months Ended

Net Sales 2023 2022 2023 2022

2 unchanged sentences

Total $ 19,242 $ 24,568 $ 40,541 $ 43,815

In addition to the disaggregated revenue information provided above, approximately 54 % and 57 % of total net sales for the three months ended December 31, 2022 and 2021, respectively, was recognized on an over-time basis because of the continuous transfer of control to the customer, with the remainder recognized at a point in time.

In addition to the disaggregated revenue information provided above, approximately 49 % and 62 % of total net sales for the six months ended March 31, 2023 and 2022, respectively, was recognized on an over-time basis because of the continuous transfer of control to the customer, with the remainder recognized at a point in time.

Contract Balances

The following table contains a roll forward of contract assets and contract liabilities for the period ended December 31, 2022:

The following table contains a roll forward of contract assets and contract liabilities for the period ended March 31, 2023:

Contract assets - Beginning balance, October 1, 2022 $ 10,172

1 unchanged sentence

Less amounts billed to the customers ( 19,766 )

Contract assets - Ending balance, December 31, 2022 $ 11,522

Contract assets - Ending balance, March 31, 2023 $ 10,636

Contract liabilities (included within Accrued liabilities) - Beginning balance, October 1, 2022 $ ( 807 )

1 unchanged sentence

Performance obligations satisfied 1,019

Contract liabilities (included within Accrued liabilities) - Ending balance, December 31, 2022 $ ( 1,782 )

There were no impairment losses recorded on contract assets as of December 31, 2022 and September 30, 2022.

Contract liabilities (included within Accrued liabilities) - Ending balance, March 31, 2023 $ ( 1,216 )

There were no impairment losses recorded on contract assets as of March 31, 2023 and September 30, 2022.

Remaining performance obligations

As of December 31, 2022, the Company has $ 84,169 of remaining performance obligations, the majority of which are anticipated to be completed within the next twelve months.

As of March 31, 2023, the Company has $ 96,674 of remaining performance obligations, the majority of which are anticipated to be completed within the next twelve months.

Commitments and Contingencies

3 unchanged sentences

With the assistance of outside cyber security experts, the Company located and closed the unauthorized access to our systems and identified compromised information, and notified those impacted in accordance with state and federal requirements.

The Company undertook a number of other measures to demonstrate our continued support and commitment to data privacy and protection and coordinated with law enforcement.

Company undertook a number of other measures to demonstrate our continued support and commitment to data privacy and protection and coordinated with law enforcement.

The Company maintains $ 3,000 of cybersecurity insurance coverage to limit our exposure to losses such as those related to the Cyber Incident.

Included in the consolidated condensed balance sheets at December 31, 2022, the Company recorded a $ 3,110 liability within accounts payable for costs incurred related to the cyber attack and an insurance receivable of $ 3,000 to other expense (income), net within the consolidated condensed statements of operations.

The Company subsequently received the $ 3,000 insurance proceeds on February 20, 2023.

The Company recorded costs in selling, general and administrative expense associated with the Cyber Incident of $ 1,000 during the three months ended March 31, 2023.

The Company recorded costs of $ 110 to other expense (income), net of $ 3,000 insurance recovery and $ 1,000 to selling, general and administrative expense in the six months ended March 31, 2023, resulting in net costs of $ 1,000 and $ 1,110 in the three and six months ended March 31, 2023, respectively.

The Company received the $ 3,000 of insurance proceeds on February 20, 2023.

At March 31, 2023, the Company recorded $ 1,000 related to the Cyber Incident in accounts payable on the consolidated condensed balance sheets.

The Company has incurred, and may continue to incur, certain expenses related to this attack, including expenses associated with additional remediation measures and further investigation of this matter.

The Company will accrue these fees as incurred.

The Company will accrue these costs as incurred.

Subsequent Events

The Company has evaluated subsequent events through July 5, 2023, the date the financial statements were available to be issued, and has determined that the following subsequent events require disclosure in the financial statements.

Cyber Incident

On December 30, 2022, the Company became aware of a cyber security issue involving unauthorized access to the Company's systems.

The Company immediately initiated response protocols and an investigation, engaging cyber security experts to assist with the assessment of the incident and to help determine what data was impacted.

See Note 12, Commitments and Contingencies for more information.

The Company has evaluated subsequent events through August 14, 2023, the date the financial statements were available to be issued, and has determined that the following subsequent events require disclosure in the financial statements.

Forbearance Agreement

3 unchanged sentences

See Note 7, Debt and Subsequent Event for more information.

Credit Agreement Amendment

On August 9, 2023, the Company entered into the Seventh Amendment to the Credit Agreement and the Third Amendment to the Export Credit Agreement with its lender which waived the Event of Default, ended the forbearance period, and provided for further changes to the agreements.

See Note 7, Debt and Subsequent Event for more information.

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

What changed 10-Q

Item 1. Financial Statements