What changed in this filing

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Item 1. Financial Statements

2022-05-11 compared with 2021-11-12 · 626 added, 430 removed, 566 unchanged (65% of the section changed)

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(in thousands, except share and per share data)

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

ASSETS (unaudited)

Current assets:

Cash and cash equivalents $ 53,698 $ 65,315

Receivables, net 204,294 194,066

Accounts receivable, net of allowance of $ 8,170 and $ 8,912 , respectively

207,779 188,772

Inventory 36,436 35,754

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Goodwill 25,249 25,243

Defined benefit pension asset 4,007 2,902

Deferred income taxes 262 792

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Operating lease obligations 45,742 49,221

Defined benefit pension liability 1,674 5,282

Deferred income taxes 2,837 4,185

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Additional paid-in capital 444,747 444,824

Retained deficit ( 332,531 ) ( 189,565 )

Accumulated deficit ( 404,222 ) ( 375,584 )

Accumulated other comprehensive loss ( 26,386 ) ( 26,732 )

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Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Revenues $ 218,576 $ 194,618

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Restructuring and other related charges, net 16 1,877

Goodwill impairment charge 55,837 — 55,837 191,788

Operating income (loss) ( 70,526 ) 2,297 ( 100,820 ) ( 215,001 )

Operating loss ( 16,203 ) ( 24,300 )

Interest expense, net ( 18,605 ) ( 9,396 )

Other expense, net ( 1,760 ) ( 655 ) ( 3,754 ) ( 1,292 )

Other income (expense) 2,702 ( 950 )

Loss before income taxes ( 32,106 ) ( 34,646 )

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Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Net loss $ ( 32,462 ) $ ( 34,291 )

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Foreign currency translation adjustment 346 217

Foreign currency hedge — ( 610 ) — ( 627 )

Other comprehensive income (loss), before tax 346 217

Tax (provision) benefit attributable to other comprehensive income (loss) — 102

Other comprehensive income (loss), net of tax ( 2,393 ) 2,510 ( 1,674 ) ( 3,531 )

Other comprehensive loss, net of tax 346 319

Total comprehensive loss $ ( 32,116 ) $ ( 33,972 )

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Balance at December 31, 2021 31,215 $ 9,359 $ 444,824 $ ( 375,584 ) $ ( 26,732 ) $ 51,867

Adjustments for prior periods from adopting ASU 2020-06 $ ( 5,651 ) 3,824 — ( 1,827 )

Issuance of common stock 11,905 3,572 6,196 — — 9,768

Net loss — — — ( 32,462 ) — ( 32,462 )

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Balance at March 31, 2022 43,122 12,931 444,747 ( 404,222 ) ( 26,386 ) 27,070

Net loss — — — ( 17,493 ) — ( 17,493 )

Foreign currency translation adjustment, net of tax — — — — 400 400

Non-cash compensation — — 2,138 — — 2,138

Net settlement of vested stock awards 86 26 ( 26 ) — — —

Balance at June 30, 2021 30,979 $ 9,289 $ 426,924 $ ( 241,349 ) $ ( 26,959 ) $ 167,905

Net loss — — — ( 91,182 ) — ( 91,182 )

Foreign currency translation adjustment, net of tax — — — — ( 2,393 ) ( 2,393 )

Non-cash compensation — — 1,108 — — 1,108

Net settlement of vested stock awards 1 — ( 1 ) — — ( 1 )

Balance at September 30, 2021 30,980 $ 9,289 $ 428,031 $ ( 332,531 ) $ ( 29,352 ) $ 75,437

Balance at December 31, 2020 30,874 $ 9,257 $ 422,589 $ ( 189,565 ) $ ( 27,678 ) $ 214,603

Adoption of new accounting principle, net of tax — — — ( 1,034 ) — ( 1,034 )

Net loss — — — ( 34,291 ) — ( 34,291 )

Foreign currency translation adjustment, net of tax — — — — 319 319

Foreign currency hedge, net of tax — — — — 200 200

Non-cash compensation — — 2,330 — — 2,330

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Balance at March 31, 2021 30,893 $ 9,263 $ 424,812 $ ( 223,856 ) $ ( 27,359 ) $ 182,860

Net loss — — — ( 13,528 ) — ( 13,528 )

Foreign currency translation adjustment, net of tax — — — — 3,832 3,832

Foreign currency hedge, net of tax — — — — ( 212 ) ( 212 )

Non-cash compensation — — 1,415 — — 1,415

Balance at June 30, 2020 30,628 $ 9,183 $ 411,600 $ ( 165,616 ) $ ( 36,231 ) $ 218,936

Net loss — — — ( 9,073 ) — ( 9,073 )

Foreign currency translation adjustment, net of tax — — — — 2,970 2,970

Foreign currency hedge, net of tax — — — — ( 460 ) ( 460 )

Non-cash compensation — — 1,128 — — 1,128

Net settlement of vested stock awards — — ( 1 ) — — ( 1 )

Balance at September 30, 2020 30,628 $ 9,183 $ 412,727 $ ( 174,689 ) $ ( 33,721 ) $ 213,500

See accompanying notes to unaudited condensed consolidated financial statements.

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(in thousands)

Nine Months Ended

September 30,

Three Months Ended March 31,

Cash flows (used in) provided by operating activities:

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Depreciation and amortization 10,031 10,959

Write-off of deferred loan costs 2,748 —

Amortization of deferred loan costs and debt discounts 8,397 2,040

Allowance for credit losses 67 352

Foreign currency losses 4,274 1,628

Foreign currency (gains) losses ( 185 ) 1,122

Deferred income taxes ( 799 ) ( 920 )

Loss on asset disposals 17 938

Goodwill impairment charges 55,837 191,788

Non-cash compensation costs 5,576 4,073

Gain on asset disposals ( 2,306 ) ( 18 )

Non-cash compensation (credits) costs ( 624 ) 2,330

Other, net ( 1,216 ) ( 1,219 )

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Income taxes ( 319 ) ( 821 )

Net cash (used in) provided by operating activities ( 35,861 ) 20,165

Net cash used in operating activities ( 50,006 ) ( 17,183 )

Cash flows (used in) provided by investing activities:

Capital expenditures ( 7,068 ) ( 3,413 )

Business acquisitions, net of cash acquired — ( 1,013 )

Proceeds from disposal of assets 3,026 29

Other — ( 53 )

Net cash used in investing activities ( 4,042 ) ( 3,384 )

Cash flows (used in) provided by financing activities:

Borrowings under Credit Facility revolver, net — 10,802

Borrowings under ABL Credit Agreement, gross 104,924 —

Payments under ABL Credit Agreement, gross ( 235 ) —

Borrowings under ABL Facility, net — 28,000

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Payments under ABL Facility, gross ( 72,300 ) ( 56,000 )

Payments under Credit Facility term loan — ( 3,750 )

Payments for debt issuance costs ( 10,345 ) ( 2,027 )

Taxes paid related to net share settlement of share-based awards — ( 101 )

Issuance of common stock 9,767 —

Other ( 145 ) ( 64 )

1 unchanged sentence

Effect of exchange rate changes on cash and cash equivalents 465 1,517

Net (decrease) increase in cash and cash equivalents ( 7,614 ) 7,436

Net decrease in cash and cash equivalents ( 11,617 ) ( 2,242 )

Cash and cash equivalents at beginning of period 65,315 24,586

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Description of Business.

Unless otherwise indicated, the terms “Team, Inc.,” “Team,” “we,” “our” and “us” are used in this report to refer to Team, Inc., to one or more of its consolidated subsidiaries or to all of them taken as a whole.

Unless otherwise indicated, the terms “we” “our” and “us” are used in this report to refer to either Team, Inc., to one or more of its consolidated subsidiaries or to all of them taken as a whole.

We are a global leading provider of integrated, digitally-enabled asset performance assurance and optimization solutions.

We deploy conventional to highly specialized inspection, condition assessment, maintenance and repair services that result in greater safety, reliability and operational efficiency for our client’s most critical assets.

We conduct operations in three segments:

Inspection and Heat Treating (“IHT”), Mechanical Services (“MS”) and Quest Integrity.

Through the capabilities and resources in these three segments, we believe that Team is uniquely qualified to provide integrated solutions involving in their most basic form:

Through the capabilities and resources in these three segments, we believe that we are uniquely qualified to provide integrated solutions:

inspection to assess condition;

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In addition, we are capable of escalating with the client’s needs, as dictated by the severity of the damage found and the related operating conditions, from standard services to some of the most advanced services and integrated asset integrity and reliability management solutions available in the industry.

We also believe that Team is unique in its ability to provide services in three distinct client demand profiles:

We also believe that we are unique in our ability to provide services in three distinct client demand profiles:

(i) turnaround or project services, (ii) call-out services and (iii) nested or run-and-maintain services.

IHT provides integrity management and performance solutions, conventional and advanced non-destructive testing (“NDT”) services, heat treating and thermal services, tank management solutions, and pipeline integrity solutions, as well as associated engineering and condition assessment services.

IHT provides conventional and advanced non-destructive testing (“NDT”) services primarily for the process, pipeline and power sectors, pipeline integrity management services, and field heat treating and thermal services, tank management solutions, and pipeline integrity solutions, as well as associated engineering and condition assessment services.

These services can be offered while facilities are running (on-stream), during facility turnarounds or during new construction or expansion activities.

MS provides machining, bolting, and vapor barrier weld testing services, hot tap and line intervention services, valve management solutions, and emission control services primarily as call-out and turnaround services under both on-stream and off-line/shut down circumstances.

On-stream services offered by MS represent the services offered while plants are operating and under pressure.

Turnaround services are project-related and demand is a function of the number and scope of scheduled and unscheduled facility turnarounds as well as new industrial facility construction or expansion activities.

IHT also provides advanced digital imaging including remote digital video imaging, laser scanning and laser profilometry-enabled reformer care services.

MS provides solutions designed to serve clients’ unique needs during both the operational (onstream) and off-line states of their assets.

Our onstream services include our range of standard to custom-engineered leak repair and composite solutions;

emissions control and compliance;

hot tapping and line stopping;

and on-line valve insertion solutions, which are delivered while assets are in an operational condition, which maximizes client production time.

Asset shutdowns can be planned, such as a turnaround maintenance event, or unplanned, such as those due to component failure or equipment breakdowns.

Our specialty maintenance, turnaround and outage services are designed to minimize client downtime and are primarily delivered while assets are off-line and often through the use of cross-certified technicians, whose multi-craft capabilities deliver the production needed to achieve tight time schedules.

These critical services include on-site field machining;

bolted-joint integrity;

vapor barrier plug testing;

and valve management solutions.

Quest Integrity provides integrity and reliability management solutions for the process, pipeline and power sectors.

These solutions encompass three broadly-defined disciplines including (1) highly specialized in-line inspection services for historically unpiggable process piping and pipelines using proprietary in-line inspection tools and analytical software;

(2) advanced engineering and condition assessment services through a multi-disciplined engineering team and related lab support;

and (3) advanced digital imaging including remote digital video imaging, laser scanning and laser profilometry-enabled reformer care services.

We market our services to companies in a diverse array of industries which include:

• Energy (refining, power, and nuclear);

• Energy Transition (liquefied natural gas, hydrogen, carbon capture & sequestration, biofuels, and renewable power);

These solutions encompass two broadly-defined disciplines:

(1) highly specialized in-line inspection services for historically unpiggable process piping and pipelines using proprietary in-line inspection tools and analytical software;

and (2) advanced engineering and condition assessment services through a multi-disciplined engineering team and related lab support.

We market our services to companies in a diverse array of heavy industries which include:

• Energy (refining, power, renewables, nuclear and liquefied natural gas);

• Manufacturing and Process (chemical, petrochemical, pulp and paper industries, manufacturing, automotive and mining);

• Upstream, Midstream and Others (valves, terminals and storage, pipeline and offshore oil and gas);

• Midstream and Others (valves, terminals and storage, pipeline and offshore oil and gas);

• Public Infrastructure (amusement parks, bridges, ports, construction and building, roads, dams and railways);

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Recent Financing Transactions.

On November 9, 2021, we entered into a credit agreement with Corre Credit Fund, LLC, as agent, and the lenders party thereto (the “Subordinated Term Loan Credit Agreement”) providing for an unsecured $ 50.0 million delayed draw subordinated term loan facility (the “Subordinated Term Loan”).

Pursuant to the Subordinated Term Loan Credit Agreement, we borrowed $ 22.5 million on November 9, 2021, and we expect to borrow an additional $ 27.5 million on December 8, 2021, subject to certain conditions.

The Subordinated Term Loan matures, and all outstanding amounts become due and payable, on the earlier of December 31, 2026 and the date that is two weeks later than the maturity or full repayment of the Term Loan (as defined in Note 11 - Long-Term Debt).

The stated interest rate on the Subordinated Term Loan is 12 %.

Under the Subordinated Term Loan Credit Agreement, we are required to, among other things, (i) subject to certain conditions, issue the lenders a warrant providing for the purchase of an aggregate of 5,000,000 shares of our common stock, exercisable at the holder’s option at any time, in whole or in part, until the seventh anniversary of the issue date, at an exercise price of $ 1.50 per share (the “New Warrants”), (ii) amend our charter, bylaws, and all other necessary corporate governance documents to reduce the size of our Board of Directors to seven directors, one of whom shall be our Chief Executive Officer, and (iii) reconstitute our Board of Directors.

The Subordinated Term Loan also contains other customary prepayment provisions, events of default and covenants.

In connection with our entry into the Subordinated Term Loan Credit Agreement, on November 9, 2021, we also entered into Amendment No.

3 (the “Third Amendment”) to the Term Loan Credit Agreement (as defined below).

The Third Amendment to the Term Loan Credit Agreement, among other things, (i) waives certain covenants until September 30, 2022 and modifies covenants thereafter to provide us with additional flexibility and (ii) requires us to seek shareholder approval (or an exception therefrom) to issue additional warrants to APSC Holdco II, L.P.

(“APSC”), providing for the purchase of an aggregate of 1,417,051 shares of our common stock, and to amend the Warrants (as defined in Note 11 - Long-Term Debt) currently held by APSC, to provide for, an exercise price of $ 1.50 per share.

Our entry into the Subordinated Term Loan Credit Agreement, the Third Amendment and related transactions are referred to collectively herein as the “Recent Financing Transactions.”

On February 11, 2022, we entered into a credit agreement with the lender parties thereto, and Eclipse Business Capital, LLC, a Delaware limited liability company, as agent, (“Eclipse”) (such agreement, the “ABL Credit Agreement”).

Available funding commitments to the Company under the ABL Credit Agreement, subject to certain conditions, include a revolving credit line in an amount of up to $ 130.0 million to be provided by certain affiliates of Eclipse (the “Revolving Credit Loans”), with a $ 35.0 million sublimit for swingline borrowings and a $ 26.0 million sublimit for issuances of letters of credit, and an incremental delayed draw term loan of up to $ 35.0 million (the “Delayed Draw Term Loans”) to be provided by Corre (as defined below) (collectively the “ABL Credit Facility”).

The ABL Credit Facility matures

and all outstanding amounts become due and payable on February 11, 2025.

The proceeds of the loans under the ABL Credit Agreement were used to, among other things, pay off the amounts owed under the Citi Credit Agreement (as defined in Note 11 - Long-Term Debt) dated as of December 18, 2020 (as amended from time to time), among the Company, the lenders party thereto and Citibank, N.A.

as agent, which was repaid and terminated in full on February 11, 2022.

In connection with the transactions contemplated by the ABL Credit Agreement, Corre Partners Management, LLC and certain of its affiliates (collectively, “Corre”), agreed to provide the Company with incremental financing (the “Incremental Financing”), totaling approximately $ 55.0 million, consisting of (i) $ 35.0 million Delayed Draw Term Loans under the ABL Credit Facility as discussed above;

(ii) $ 10.0 million from Corre in the form of the February 2022 Delayed Draw Term Loan (as defined in the Subordinated Term Loan Credit Agreement (as defined below)) on a pari passu basis with the existing loans issued pursuant to the Subordinated Term Loan Credit Agreement;

and (iii) $ 10.0 million through an issuance of 11,904,762 shares (the “PIPE Shares”) of our common stock, to Corre Opportunities Qualified Master Fund, LP, Corre Horizon Fund, LP and Corre Horizon II Fund, LP (collectively, the “Corre Holders”) at a price of $ 0.84 per share (the “Equity Issuance”).

On May 6, 2022, we entered into separate amendments on certain of our credit facilities as follows:

• ABL Credit Agreement:

On May 6, 2022, we entered into Amendment No.

1 (the “ABL Credit Agreement Amendment No.

1”) to the ABL Credit Agreement.

The ABL Credit Agreement Amendment No.

1, among other things, modifies the Maturity Reserve Trigger Date (as defined in the ABL Credit Agreement) such that the date on which a reserve must, subject to certain conditions, be put into place with respect to the outstanding principal amount of the 5.00 % Convertible Senior Notes due 2023 (the”Notes”) is 75 days prior to their maturity date, instead of 120 days prior to their maturity date.

• Atlantic Park Term Loan:

On May 6, 2022, we entered into Amendment No.

7 (the “Seventh Amendment”) to the Term Loan Credit Agreement dated December 18, 2020, between the Company and Atlantic Park Strategic Capital Fund, L.P., as agent (“APSC”), as lender (the “Term Loan Credit Agreement”).

The Seventh Amendment, among other things and subject to the terms thereof, (i) modifies the Maturity Trigger Date (as defined in the Term Loan Credit Agreement) such that the date on which the maturity of the Term Loan Credit Agreement is triggered as a result of there being an aggregate principal amount of more than $ 10.0 million outstanding under the Notes is 75 days prior to their maturity date instead of 120 days prior to their maturity date, and (ii) amends the financial covenants, such that the maximum net leverage ratio to be tested for the fiscal quarter ending March 31, 2023 will be increased from 7.00 to 1.00 to 12.00 to 1.00.

• Subordinated Term Loan Credit Agreement:

On May 6, 2022, we entered into Amendment No.

6 (the “Corre Amendment No.

6”) with the lenders from time to time party thereto (including Corre), and Cantor Fitzgerald Securities, as agent to the Subordinated Term Loan Credit Agreement dated November 9, 2021, by and among the Company, Corre Credit Fund, LLC (“Corre Fund”), as agent, and the lenders party thereto (the “Subordinated Term Loan Credit Agreement”).

The Corre Amendment No.

6, among other things, amends the financial covenants, such that the maximum net leverage ratio to be tested for the fiscal quarter ending March 31, 2023 will be increased from 7.00 to 1.00 to 12.00 to 1.00.

Ongoing Effects of COVID-19.

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However, we believe the increased availability and administration of COVID-19 vaccines, easing of pandemic related restrictions, reopening of economies, and increasing commodity prices are positive signs of broader economic recovery.

The extent of COVID’s effect on our operational and financial performance will depend on future developments, including the duration, spread and intensity of the pandemic (including any resurgences), impact of the new COVID variants and the rollout of COVID vaccines, and the level of social and economic restrictions imposed in the United States and abroad in an effort to curb the spread of the virus, all of which are uncertain and difficult to predict considering the rapidly evolving landscape.

The extent of COVID-19’s effect on our operational and financial performance will depend on future developments, including the duration, spread and intensity of the pandemic (including any resurgences), the impact of the new COVID-19 variants, the continued rollout and acceptance of COVID-19 vaccines, and the level of social and economic restrictions imposed in the United States and abroad in an effort to curb the spread of the virus, all of which are uncertain and difficult to predict considering the rapidly evolving landscape.

Under the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), we qualified to defer the employer portion of social security taxes incurred through the end of calendar 2020.

As of March 31, 2022, we have deferred employer payroll taxes of $ 7.1 million.

As of December 31, 2021 we had $ 14.1 million outstanding and we paid $ 7.0 million of the deferred payroll taxes in January 2022, the remaining balance of $ 7.1 million is due at the end of 2022.

Additionally, other governments in jurisdictions where we operate passed legislation to provide employers with relief programs, which include wage subsidy grants, deferral of certain payroll related expenses and tax payments and other benefits.

We elected to treat qualified government subsidies from Canada and other governments as offsets to the related expenses.

We recognized

$ 0.6 million and $ 0.1 million as a reduction to operating expenses and selling, general and administrative expenses, respectively, during the three months ended March 31, 2022 and $ 2.0 million and $ 0.4 million as a reduction for operating expenses and selling, general and administrative expenses, respectively, during the three months ended March 31, 2021.

Basis for presentation.

In the opinion of management, these unaudited interim condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of results for such periods.

In the opinion of management, these unaudited condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of results for such periods.

The results of operations for any interim period are not necessarily indicative of results for the full year.

Certain disclosures have been condensed or omitted from the interim financial statements included in this report.

These financial statements should be read in conjunction with the consolidated financial statements and notes contained in our Annual Report on Form 10-K for the year ended December 31, 2020 as filed with the Securities and Exchange Commission (“the 2020 Form 10-K”).

These financial statements should be read in conjunction with the consolidated financial statements and notes contained in our Annual Report on Form 10-K for the year ended December 31, 2021 as filed with the Securities and Exchange Commission.

Consolidation.

The condensed consolidated financial statements include the accounts of our subsidiaries where we have control over operating and financial policies.

All material intercompany accounts and transactions have been eliminated in consolidation.

Related Party Transactions.

A related party transaction is any transaction, arrangement or relationship or series of similar transactions, arrangements or relationships (including the incurrence or issuance of any indebtedness or the guarantee of indebtedness) in which (1) the Company or any of its subsidiaries is a participant, and (2) any Related Party (as defined herein) has or will have a direct or indirect material interest.

A Related Party is any person who is, or, at any time since the beginning of the Company’s last fiscal year, was (1) an executive officer, director or nominee for election as a director of the Company or any of its subsidiaries, (2) a person with greater than five percent (5%) beneficial interest in the Company, (3) an immediate family member of any of the individuals or entities identified in (1) or (2) of this paragraph, and (4) any firm, corporation or other entity in which any of the foregoing individuals or entities is employed or is a general partner or principal or in a similar position or in which such person or entity has a five percent (5%) or greater beneficial interest.

Immediate family members includes a person’s spouse, parents, stepparents, children, stepchildren, siblings, mothers- and fathers-in-law, sons- and daughters-in-law, brothers- and sisters-in-law and anyone residing in such person’s home, other than a tenant or employee.

Going Concern.

The financial statements have been prepared on a going concern basis, which contemplates the recoverability of assets and the satisfaction of liabilities in the normal course of business.

In evaluating our ability to continue as a going concern, we have considered conditions and events that could raise substantial doubt about our ability to continue as a going concern for one year following the date that our financial statements are issued.

These conditions and evaluations included our current financial condition and liquidity sources, including current cash and cash equivalents balances, forecasted cash flows, our obligations due within twelve months of the date these financial statements are issued, including our obligations described in Note 11 - Long-Term Debt, and the other conditions and events described below.

We have suffered recurring operating losses related to the COVID pandemic and related economic repercussions, and difficult market conditions.

During the quarter, revenues and margins continued to decline along with margin pressures from inflationary costs including labor, materials, and transportation resulting in further operating losses.

We are in compliance with our debt covenants, however, our current financial forecasts indicate insufficient cash flows from operations to maintain compliance with our ABL covenants and repay our outstanding debt if it were to come due.

Subsequent to quarter-end, we had limited borrowing capacity to fund our increasing working capital needs.

As of September 30, 2021, if an accelerated triggering event had occurred, the Company would not be able to be in compliance with the Fixed Charge Coverage Ratio (“FCCR”) requirement.

These factors raise substantial doubt about our ability to continue as a going concern.

In response to the above, (i) we have entered into the Recent Financing Transactions to address our near-term liquidity needs;

(ii) we have taken definitive actions to reduce costs, improve operations, profitability, and liquidity, and position the Company for future growth;

and (iii) we are actively pursuing other strategic alternatives.

While the Recent Refinancing Transactions provide us with additional funding to meet our short-term liquidity needs, there can be no assurance that we will generate adequate liquidity to fund operations and meet our debt service obligations in the future or that our lenders will continue to provide amendments to the Company.

These unaudited condensed consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities with respect to our ability to continue as a going concern.

However, we have provided incremental valuation allowances related to our net deferred tax assets as their recoverability was no longer considered more likely than not.

These condensed consolidated financial statements have been prepared in accordance with U.S.

generally accepted accounting principles (GAAP) assuming the Company will continue as a going concern.

As of March 31, 2022, we are in compliance with our debt covenants.

As discussed above, the Company successfully negotiated amendments to our credit facilities including the financial covenants contained therein.

In addition, we evaluated the Company’s liquidity within one year after the date of issuance of these condensed consolidated financial statements to determine if there is substantial doubt about the Company’s ability to continue as a going concern.

In the preparation of this liquidity assessment, we applied judgment to estimate the projected cash flows of the Company, including the following:

(i) projected cash outflows, (ii) projected cash inflows, and (iii) excess availability level under the Company’s existing debt arrangements.

The cash flow projections were based on known or planned cash requirements for operating and financing costs.

We believe, based on the Company’s forecast and the amendments entered in May 2022, that current working capital and capital expenditure financing is sufficient to fund the operations, maintain compliance with our debt covenants (as amended), and satisfy the Company’s obligations as they come due within one year after the date of issuance of these condensed consolidated financial statements.

Our ability to maintain compliance with the financial covenants contained in the ABL Credit Facility, Term Loan Credit Agreement, and Subordinated Term Loan Credit Agreement is dependent upon our future operating performance and future financial condition, both of which are subject to various risks and uncertainties.

Under the terms of our amended financing arrangements, each of the Maturity Reserve Trigger Date (as defined in the ABL Credit Agreement) and the Maturity Trigger Date (as defined in the Term Loan Credit Agreement) (collectively, the “Trigger Date”) is now May 18, 2023.

While our lenders agreed on an extension and amended the financial covenants contained therein, there can be no assurance that our lenders will provide additional waivers or amendments in the event of future non-compliance with our debt covenants, or other possible events of default that could happen.

Use of estimates.

Our accounting policies conform to Generally Accepted Accounting Principles in the United States (“GAAP”).

Our accounting policies conform to GAAP.

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and judgments that affect our reported financial position and results of operations.

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Uncertainties with respect to such estimates and judgments are inherent in the preparation of financial statements.

Estimates and judgments are used in, among other things, (1) aspects of revenue recognition, (2) valuation of acquisition related tangible and intangible assets and assessments of all long-lived assets for possible impairment, (3) estimating various factors used to accrue liabilities for contingencies, workers’ compensation, auto, medical, and general liability, (4) establishing an allowance for credit losses, (5) estimating the useful lives of our assets, (6) assessing future tax exposure and the realization of tax assets, (7) selecting assumptions used in the measurement of costs and liabilities associated with defined benefit pension plans, (8) assessments of fair value and (9) managing our foreign currency risk in foreign operations.

of our assets, (6) assessing future tax exposure and the realization of tax assets, (7) selecting assumptions used in the measurement of costs and liabilities associated with defined benefit pension plans, (8) assessments of fair value and (9) managing our foreign currency risk in foreign operations.

Our most significant accounting policies are described below.

Fair value of financial instruments .

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Our financial instruments consist primarily of cash, cash equivalents, accounts receivable, accounts payable and debt obligations.

The carrying amount of cash, cash equivalents, accounts receivable and accounts payable are representative of their respective fair values due to the short-term maturity of these instruments.

The fair value of our ABL Facility and Term Loan (each defined in Note 11) is representative of the carrying value based upon the variable terms and management’s opinion that the current rates are available to us with the same maturity and security structure are equivalent to that of the debt.

The fair value of our 5 % Convertible Senior Notes due 2023 (the “Notes”) as of September 30, 2021 and December 31, 2020 is $ 88.2 million and $ 91.9 million, respectively, (inclusive of the fair value of the conversion option) and is a “Level 2” measurement, determined based on the observed trading price of these instruments.

For additional information regarding our ABL Facility, Term Loan and Notes, see Note 11.

The carrying amount of cash, cash equivalents, trade accounts receivable and trade accounts payable are representative of their respective fair values due to the short-term maturity of these instruments.

The fair value of our ABL Credit Facility and Term Loans defined below is representative of the carrying value based upon the variable terms and management’s opinion that the current rates available to us with the same maturity and security structure are equivalent to that of the debt.

The fair value of our 5.00 % Convertible Senior Notes due 2023 (the “Notes”) as of March 31, 2022 and December 31, 2021 is $ 86.1 million and $ 84.0 million, respectively, (inclusive of the fair value of the conversion option) and are a “Level 2” measurement, determined based on the observed trading price of these instruments.

For additional information regarding our ABL Credit Facilities, Atlantic Park Term Loan, Subordinated Term Loan and Notes, see Note 11 - Long-Term Debt.

Cash and cash equivalents .

Cash and cash equivalents consist of all deposits and funds invested in highly liquid short-term investments with original maturities of three months or less.

Except for certain inventories that are valued based on weighted-average cost, we use the first-in, first-out method to value our inventory.

Inventory includes material, labor, and certain fixed overhead costs.

Inventory is stated at the lower of cost and net realizable value.

Inventory quantities on hand are reviewed periodically and carrying cost is reduced to net realizable value for inventories for which their cost exceeds their utility.

The cost of inventories consumed or products sold are included in operating expenses.

Property, plant and equipment.

Property, plant and equipment are stated at cost less accumulated depreciation and amortization.

Leasehold improvements are amortized over the shorter of their respective useful life or the lease term.

Depreciation and amortization of assets are computed by the straight-line method over the following estimated useful lives of the assets:

Classification Useful Life

Buildings 20 - 40 years

Enterprise Resource Planning (“ERP”) System 15 years

Leasehold improvements 2 - 15 years

Machinery and equipment 2 - 12 years

Furniture and fixtures 2 - 10 years

Computers and computer software 2 - 5 years

Automobiles 2 - 5 years

Goodwill and intangible assets.

We allocate the purchase price of acquired businesses to their identifiable tangible assets and liabilities, such as accounts receivable, inventory, property, plant and equipment, accounts payable and accrued liabilities.

We also allocate a portion of the purchase price to identifiable intangible assets, such as client relationships, non-compete agreements, trade names, technology, and licenses.

Allocations are based on estimated fair values of assets and liabilities.

We use all available information to estimate fair values including quoted market prices, the carrying value of acquired assets, and

widely accepted valuation techniques such as discounted cash flows.

Certain estimates and judgments are required in the application of the fair value techniques, including estimates of future cash flows, selling prices, replacement costs, economic lives, and the selection of a discount rate, as well as the use of “Level 3” measurements as defined in ASC 820.

Deferred taxes are recorded for any differences between the assigned values and tax bases of assets and liabilities.

Estimated deferred taxes are based on available information concerning the tax bases of assets acquired and liabilities assumed and loss carryforwards at the acquisition date, although such estimates may change in the future as additional information becomes known.

Any remaining excess of cost over allocated fair values is recorded as goodwill.

We typically engage third-party valuation experts to assist in determining the fair values for both the identifiable tangible and intangible assets.

The judgments made in determining the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, could materially impact our results of operations.

Goodwill and intangible assets acquired in a business combination determined to have an indefinite useful life are not amortized, but are instead tested for impairment, and assessed for potential triggering events, at least annually in accordance with the provisions of the ASC 350 Intangibles—Goodwill and Other (“ASC 350”).

Intangible assets with estimated useful lives are amortized over their respective estimated useful lives to their estimated residual values and reviewed for impairment in accordance with ASC 350.

We assess goodwill for impairment at the reporting unit level, which we have determined to be the same as our operating segments.

Each reporting unit has goodwill relating to past acquisitions.

If the carrying value of a reporting unit exceeds its fair value, we measure any goodwill impairment losses as the amount by which the carrying amount of a reporting unit exceeds its fair value, not to exceed the total amount of goodwill allocated to that reporting unit.

Our goodwill annual test date is December 1 of each year.

Income taxes.

We follow the guidance of ASC 740 Income Taxes (“ASC 740”), which requires that we use the asset and liability method of accounting for deferred income taxes and provide deferred income taxes for all significant temporary differences.

As part of the process of preparing our consolidated financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate.

This process involves estimating our actual current tax payable or receivable and related tax expense or benefit together with assessing temporary differences resulting from differing treatment of certain items, such as depreciation, for tax and accounting purposes.

These differences can result in deferred tax assets and liabilities, which are included within our consolidated balance sheets.

In accordance with ASC 740, we are required to assess the likelihood that our deferred tax assets will be realized and, to the extent we believe it is more likely than not (a likelihood of more than 50%) that some portion or all of the deferred tax assets will not be realized, we must establish a valuation allowance.

We consider all available evidence to determine whether, based on the weight of the evidence, a valuation allowance is needed.

Evidence used includes the reversal of existing taxable temporary differences, taxable income in prior carryback years if carryback is permitted by tax law, information about our current financial position and our results of operations for the current and preceding years, as well as all currently available information about future years, including our anticipated future performance and tax planning strategies.

We regularly assess whether it is more likely than not that we will realize the deferred tax assets in the jurisdictions in which we operate.

Management believes future sources of taxable income, reversing temporary differences and other tax planning strategies will be sufficient to realize the deferred tax assets for which no valuation allowance has been established.

Our valuation allowance primarily relates to net operating loss carryforwards.

While we have considered these factors in assessing the need for additional valuation allowance, there can be no assurance that additional valuation allowance would not need to be established in the future if information about future years change.

Any changes in valuation allowance would impact our income tax provision and net income (loss) in the period in which such a determination is made.

Significant judgment is required in assessing the timing and amounts of deductible and taxable items for tax purposes.

In accordance with ASC 740-10, we establish reserves for uncertain tax positions when, despite our belief that our tax return positions are supportable, we believe that it is not more likely than not that the position will be sustained upon challenge.

When facts and circumstances change, we adjust these reserves through our provision for income taxes.

To the extent interest and penalties may be assessed by taxing authorities on any related underpayment of income tax, such amounts have been accrued and are classified as a component of income tax expense (benefit) in our consolidated statements of operations.

Workers’ compensation, auto, medical and general liability accruals.

In accordance with ASC 450 Contingencies (“ASC 450”), we record a loss contingency when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated.

We review our loss contingencies on an ongoing basis to ensure that we have appropriate reserves recorded on our balance sheet.

These reserves are based on historical experience with claims incurred but not received, estimates and judgments made by management, applicable insurance coverage for litigation matters, and are adjusted as circumstances warrant.

For workers’ compensation, our self-insured retention is $ 1.0 million and our automobile liability self-insured retention is currently $ 1.0 million per occurrence.

For general liability claims, we have an effective self-insured

retention of $ 1.0 million and a deductible of $ 2.0 million per occurrence.

For medical claims, our self-insured retention is $ 400,000 per individual claimant determined on an annual basis.

For environmental liability claims, our self-insured retention is $ 1.0 million per occurrence.

We maintain insurance for claims that exceed such self-retention limits.

The insurance is subject to terms, conditions, limitations, and exclusions that may not fully compensate us for all losses.

Our estimates and judgments could change based on new information, changes in laws or regulations, changes in management’s plans or intentions, or the outcome of legal proceedings, settlements, or other factors.

If different estimates and judgments were applied with respect to these matters, it is likely that reserves would be recorded for different amounts.

Allowance for credit losses.

In the ordinary course of business, a portion of our accounts receivable are not collected due to billing disputes, customer bankruptcies, dissatisfaction with the services we performed and other various reasons.

We establish an allowance to account for those accounts receivable that we estimate will eventually be deemed uncollectible.

The allowance for credit losses is based on a combination of our historical experience and management’s review of long outstanding accounts receivable.

Concentration of credit risk.

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Earnings (loss) per share.

Basic earnings (loss) per share (“EPS”) is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the period.

Diluted EPS is computed by dividing net income (loss) by the sum of the weighted-average number of shares of common stock outstanding during the period and, if dilutive, the assumed exercise or conversion of (1) outstanding share-based compensation, (2) our Notes and (3) outstanding Warrants (defined in Note 11).

The impact of share-based compensation, the Notes and warrants are calculated using the treasury stock method.

Our intent is to settle the principal amount of the Notes in cash upon conversion.

If the conversion value exceeds the principal amount, we may elect to deliver shares of our common stock with respect to the remainder of our conversion obligation in excess of the aggregate principal amount.

Amounts used in basic and diluted earnings per share, for the three and nine months ended September 30, 2021 and 2020, are as follows (in thousands):

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

(unaudited) (unaudited) (unaudited) (unaudited)

Weighted-average number of basic shares outstanding 30,980 30,628 30,933 30,599

Stock options, stock units and performance awards — — — —

Notes — — — —

Warrants — — — —

Total shares and dilutive securities 30,980 30,628 30,933 30,599

For the three and nine months ended September 30, 2021 and 2020, all outstanding share-based compensation awards and the Warrants were excluded from the calculation of diluted EPS as their inclusion would be antidilutive due to the net loss in both periods.

Also, for the three and nine months ended September 30, 2021 and 2020, the Notes were excluded from diluted EPS as the conversion price exceeded the average price of our common stock during those periods.

For information on our Notes and Warrants, refer to Note 11.

For information on our share-based compensation awards, refer to Note 14.

Newly Adopted Accounting Principles

Basic earnings (loss) per share is computed by dividing income (loss) from continuing operations, income (loss) from discontinued operations or net income (loss) by the weighted-average number of shares of common stock outstanding during the year.

Diluted earnings (loss) per share is computed by dividing income (loss) from continuing operations, income (loss) from discontinued operations or net income (loss) by the sum of (1) the weighted-average number of shares of common stock outstanding during the period, (2) the dilutive effect of the assumed exercise of share-based compensation using the treasury stock method and (3) the dilutive effect of the assumed conversion of our Notes under the treasury stock method.

Our current intent is to settle the principal amount of our Notes in cash upon conversion.

Accordingly, the conversion spread is included in the denominator for the computation of diluted earnings per common share using the treasury stock method and the numerator is adjusted for any recorded gain or loss, net of tax, on the embedded derivative associated with the conversion feature.

For the three months ended March 31, 2022 and 2021, all outstanding share-based compensation awards were excluded from the calculation of diluted loss per share because their inclusion would be antidilutive due to the loss from continuing operations in those periods.

Also, for the three months ended March 31, 2022 and 2021, the Notes were excluded from the calculation of diluted earnings (loss) per share since the conversion price exceeded the average price of our common stock during the applicable periods.

For information regarding our Notes and our share-based compensation awards, refer to Note 11 and Note 14, respectively.

Non-cash investing and financing activities.

Non-cash investing and financing activities are excluded from the consolidated statements of cash flows and are as follows (in thousands):

Three Months Ended March 31,

Assets acquired under finance lease $ 23 $ 22

Also, we had $ 3.6 million and $ 2.4 million of accrued capital expenditures as of March 31, 2022 and March 31, 2021, respectively, which are excluded from the consolidated statements of cash flows until paid.

Foreign currency .

For subsidiaries whose functional currency is not the U.S.

Dollar, assets and liabilities are translated at period ending rates of exchange and revenues and expenses are translated at period average exchange rates.

Translation adjustments for the asset and liability accounts are included as a separate component of accumulated other comprehensive loss in stockholders’ equity.

Foreign currency transaction gains and losses are included in our statements of operations.

We have historically executed a foreign currency hedging program to mitigate the foreign currency risk in countries where we have significant assets and liabilities denominated in currencies other than the functional currency.

We historically utilized monthly foreign currency swap contracts to reduce exposures to changes in foreign currency exchange rates related to our largest exposures including, but not limited to the Brazilian Real, British Pound, Canadian Dollar, Euro, Malaysian Ringgit, Mexican Peso and Singapore Dollar.

There were no foreign currency swap contracts outstanding during the three months ended March 31, 2022, and the impact from swap contracts was not material for the three months ended March 31, 2021.

Defined benefit pension plans.

Pension benefit costs and liabilities are dependent on assumptions used in calculating such amounts.

The primary assumptions include factors such as discount rates, expected investment return on plan assets, mortality rates and retirement rates.

These rates are reviewed annually and adjusted to reflect current conditions.

These rates are determined based on reference to yields.

The expected return on plan assets is derived from detailed periodic studies, which include a review of asset allocation strategies, anticipated future long-term performance of individual asset classes, risks (standard deviations) and correlations of returns among the asset classes that comprise the plans’ asset mix.

While the studies give appropriate consideration to recent plan performance and historical returns, the assumptions are primarily long-term, prospective rates of return.

Mortality and retirement rates are based on actual and anticipated plan experience.

In accordance with GAAP, actual results that differ from the assumptions are accumulated and are subject to amortization over future periods and, therefore, generally affect recognized expense in future periods.

While we believe that the assumptions used are appropriate, differences in actual experience or changes in assumptions may affect the pension obligation and future expense.

Reclassifications.

Certain amounts in prior periods have been reclassified to conform to the current year presentation.

Such reclassifications did not have any effect on our financial condition or results of operations as previously reported.

Newly Adopted Accounting Standards

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes , that simplifies the accounting for income taxes by eliminating some exceptions to the general approach in ASC 740, Income Taxes as well as clarifies aspects of existing guidance to promote more consistent application.

The adoption of ASU No.

2019-12 as of January 1, 2021 had no impact in the period ended September 30, 2021.

Accounting Principles Not Yet Adopted

ASU 2019-12 clarifies and amends existing guidance related to intraperiod tax allocation and calculations, recognition of deferred taxes for change in ownership group, evaluation of a step-up in the tax basis of goodwill and other clarifications.

Our adoption of this ASU as of January 1, 2021 did not have a material impact to our consolidated financial statements.

In August 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity , which simplifies the accounting for convertible instruments by eliminating certain separation models and will generally be reported as a single liability at its amortized cost.

In addition, ASU 2020-06 eliminates the treasury stock method to calculate diluted earnings per share for convertible instruments and requires the use of the if-converted method.

On January 1, 2022, we adopted the ASU using the modified retrospective method.

We recognized a cumulative effect of initially applying the ASU as an adjustment to the January 1, 2022 opening accumulated deficit balance.

The prior period consolidated financial statements have not been retrospectively adjusted and continue to be reported under the accounting standards in effect for those periods.

Refer to Note 11 - Long-Term Debt for impact on the adoption of this ASU as of January 1, 2022.

Accounting Standards Not Yet Adopted

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848):

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While we are currently determining whether we will elect the optional expedients, we do not expect our adoption of these ASU’s to have a significant impact on our consolidated financial position, results of operations, and cash flows.

In addition, ASU 2020-06 eliminates the treasury stock method to calculate diluted EPS for convertible instruments and requires the use of the if-converted method.

We expect to adopt ASU 2020-06 beginning January 1, 2022, at which time we would utilize the if-converted method, which would require us to assume the Notes would be settled entirely in shares of common stock for purposes of calculating diluted EPS, if the effect would be dilutive.

We are still evaluating the other impacts this ASU may have on our consolidated financial position, results of operations, and cash flows.

In accordance with ASC 606, Revenue from Contracts with Customers , we follow a five-step process to recognize revenue:

In accordance with ASC Topic 606, Revenue from Contracts with Customers , (“ASC 606”) we follow a five-step process to recognize revenue:

1) identify the contract with the customer, 2) identify the performance obligations, 3) determine the transaction price, 4) allocate the transaction price to the performance obligations, and 5) recognize revenue when the performance obligations are satisfied.

The majority of our contracts with customers are short-term in nature and billed on a time and materials basis, while certain other contracts are at a fixed price.

Most of our contracts with customers are short-term in nature and billed on a time and materials basis, while certain other contracts are at a fixed price.

Certain contracts may contain a combination of fixed and variable elements.

We act as a principal and have performance obligations to provide the service itself or oversee the services provided by any

subcontractors.

We act as a principal and have performance obligations to provide the service itself or oversee the services provided by any subcontractors.

Revenue is measured based on consideration specified in a contract with a customer and excludes amounts collected on behalf of third parties, such as taxes assessed by governmental authorities.

In contracts where the amount of consideration is variable, we consider our experience with similar contracts in estimating the amount to which we will be entitled and recognize revenues accordingly.

As most of our contracts contain only one performance obligation, the allocation of a contract’s transaction price to multiple performance obligations is generally not applicable.

Generally, in contracts where the amount of consideration is variable, the amount is determinable each period based on our right to invoice (as discussed further below) the customer for services performed to date.

As most of our contracts contain only one performance obligation, the allocation of a contract transaction price to multiple performance obligations is generally not applicable.

Customers are generally billed as we satisfy our performance obligations and payment terms typically range from 30 to 90 days from the invoice date.

Billings under certain fixed-price contracts may be based upon the achievement of specified milestones, while some arrangements may require advance customer payment.

Billings under certain

fixed-price contracts may be based upon the achievement of specified milestones, while some arrangements may require advance customer payment.

Our contracts do not include significant financing components since the contracts typically span less than one year.

Contracts generally include an assurance type warranty clause to guarantee that the services comply with agreed specifications.

The warranty period typically is 12 months or less from the date of service.

Warranty expenses were not material for the three and nine months ended September 30, 2021 and 2020.

The warranty period typically is twelve months or less from the date of service.

Revenue is recognized as (or when) the performance obligations are satisfied by transferring control over a service or product to the customer.

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Disaggregation of revenue.

Essentially all of our revenues are associated with contracts with customers.

A disaggregation of our revenue from contracts with customers by geographic region, by reportable operating segment and by service type is presented below (in thousands):

Geographic area:

Three Months Ended September 30, 2021 Three Months Ended September 30, 2020

(unaudited) (unaudited)

United States and Canada Other Countries Total United States and Canada Other Countries Total

IHT $ 98,812 $ 2,664 $ 101,476 $ 94,414 $ 2,223 $ 96,637

MS 63,885 32,518 96,403 73,204 28,534 101,738

Quest Integrity 11,421 8,110 19,531 12,382 8,336 20,718

Total $ 174,118 $ 43,292 $ 217,410 $ 180,000 $ 39,093 $ 219,093

Nine Months Ended September 30, 2021 Nine Months Ended September 30, 2020

Three Months Ended March 31, 2022 Three Months Ended March 31, 2021

(unaudited) (unaudited)

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Total $ 171,998 $ 46,578 $ 218,576 $ 158,326 $ 36,292 $ 194,618

Operating segment and service type:

Three Months Ended September 30, 2021

Non-Destructive Evaluation and Testing Services Repair and Maintenance Services Heat Treating Other Total

IHT $ 80,553 $ 56 $ 11,928 $ 8,939 $ 101,476

MS — 95,560 71 772 96,403

Quest Integrity 19,531 — — — 19,531

Total $ 100,084 $ 95,616 $ 11,999 $ 9,711 $ 217,410

Three Months Ended September 30, 2020

Non-Destructive Evaluation and Testing Services Repair and Maintenance Services Heat Treating Other Total

IHT $ 77,323 $ — $ 12,667 $ 6,647 $ 96,637

MS — 101,032 221 485 101,738

Quest Integrity 20,718 — — — 20,718

Total $ 98,041 $ 101,032 $ 12,888 $ 7,132 $ 219,093

Nine Months Ended September 30, 2021

Three Months Ended March 31, 2022

Non-Destructive Evaluation and Testing Services Repair and Maintenance Services Heat Treating Other Total

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Total $ 105,989 $ 91,794 $ 13,896 $ 6,897 $ 218,576

Nine Months Ended September 30, 2020

Three Months Ended March 31, 2021

Non-Destructive Evaluation and Testing Services Repair and Maintenance Services Heat Treating Other Total

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The timing of revenue recognition, billings and cash collections results in trade accounts receivable, contract assets and contract liabilities on the consolidated balance sheets.

Trade accounts receivable include billed and unbilled

amounts currently due from customers and represent unconditional rights to receive consideration.

Trade accounts receivable include billed and unbilled amounts currently due from customers and represent unconditional rights to receive consideration.

The amounts due are stated at their net estimated realizable value.

Refer to Note 3 for additional information on the allowance for credit losses and our trade receivables.

Refer to Notes 1 and 3 for additional information on our trade receivables and the allowance for credit losses.

Contract assets include unbilled amounts typically resulting from sales under fixed-price contracts when the cost-to-cost method of revenue recognition is utilized, the revenue recognized exceeds the amount billed to the customer and the right to payment is conditional on something other than the passage of time.

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Contract assets and contract liabilities are generally classified as current.

Trade accounts receivable, contract assets and contract liabilities consisted of the following (in thousands):

September 30, 2021 December 31, 2020

The following table provides information about trade accounts receivable, contract assets and contract liabilities as of March 31, 2022 and December 31, 2021 (in thousands):

March 31, 2022 December 31, 2021 Change

Trade accounts receivable, net 1

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3 Included in the “Other accrued liabilities” line of the condensed consolidated balance sheets.

The $ 3.8 million decrease in our contract assets from December 31, 2020 to September 30, 2021 is due to less fixed price contracts in progress at September 30, 2021 as compared to December 31, 2020.

Contract liabilities as of September 30, 2021 are associated with contracts under which customers had paid for all or a portion of the consideration in advance of the work being performed.

The $ 0.6 million decrease in our contract assets from December 31, 2021 to March 31, 2022 is due to less fixed price contracts in progress at March 31, 2022 as compared to December 31, 2021.

Contract liabilities increased by $ 1.3 million as of March 31, 2022.

The increase is associated with contracts under which customers have paid for all or a portion of the consideration in advance of the work being performed.

Due to the short-term nature of our contracts, contract liability balances as of the end of any period are generally recognized as revenue in the following quarter.

Accordingly, essentially all of the contract liability balance at December 31, 2021 was recognized as revenue during the quarter ended March 31, 2022.

Contract costs.

We recognize the incremental costs of obtaining contracts as selling, general and administrative expenses when incurred if the amortization period of the asset that otherwise would have been recognized is one year or less.

Assets recognized for costs to obtain a contract were not material as of September 30, 2021.

Costs to fulfill a contract are recorded as assets if they relate directly to a contract or a specific anticipated contract, the costs generate or enhance resources that will be used in satisfying performance obligations in the future and the costs are expected to be recovered.

Costs to fulfill a contract recognized as assets primarily consist of labor and materials costs and generally relate to engineering and set-up costs incurred prior to the satisfaction of performance obligations.

Assets recognized for costs to fulfill a contract are included in the “Prepaid expenses and other current assets” line of the condensed consolidated balance sheets and were not material as of September 30, 2021.

Costs to fulfill a contract are recorded as assets if they relate directly to a contract or a specific anticipated contract, the costs to generate or enhance resources that will be used in satisfying performance obligations in the future and the costs are expected to be recovered.

Costs to fulfill recognized as assets primarily consist of labor and materials costs and generally relate to engineering and set-up costs incurred prior to the satisfaction of performance obligations begins.

Such assets are recognized as expenses as we transfer the related goods or services to the customer.

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Remaining performance obligations.

As of September 30, 2021, there were no material amounts of remaining performance obligations that are required to be disclosed.

As permitted by ASC 606, we have elected not to disclose information about remaining performance obligations where (i) the performance obligation is part of a contract that has an original expected duration of one year or less or (ii) when we recognize revenue from the satisfaction of the performance obligation in accordance with the right-to-invoice practical expedient.

Accounts receivable consisted of the following (in thousands):

September 30, 2021 December 31, 2020

As of March 31, 2022 and 2021, there were no material amounts of remaining performance obligations that are required to be disclosed.

As permitted by ASC 606, we have elected not to disclose information about remaining performance obligations where (i) the performance obligation is part of a contract that has an

original expected duration of one year or less or (ii) when we recognize revenue from the satisfaction of the performance obligation in accordance with the right-to-invoice practical expedient.

A summary of accounts receivable as of March 31, 2022 and December 31, 2021 is as follows (in thousands):

March 31, 2022 December 31, 2021

Trade accounts receivable $ 170,654 $ 161,751

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Total $ 207,779 $ 188,772

Topic 326 - Financial Instruments - Credit Losses (“ASC 326”), which we adopted January 1, 2020, applies to financial assets measured at amortized cost, including trade and unbilled accounts receivable, and requires immediate recognition of lifetime expected credit losses.

Significant factors that affect the expected collectability of our receivables include macroeconomic trends and forecasts in the oil and gas, refining, power, and petrochemical markets and changes in our results of

operations and forecasts.

ASC 326, Credit Losses , applies to financial assets measured at amortized cost, including trade and unbilled accounts receivable, and requires immediate recognition of lifetime expected credit losses.

For unbilled receivables, we consider them as short-term in nature as they are normally converted to trade receivables within 90 days, thus future changes in economic conditions will not have a significant effect on the credit loss estimate.

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Customer accounts with different risk characteristics are separately identified and a specific reserve is determined for these accounts based on the assessed credit risk.

We have also identified the following geographic regions in which we distinguish our trade receivables:

We have also identified the following geographic regions in which to distinguish our trade receivables:

the (i) United States, (ii) Canada, (iii) the European Union, (iv) the United Kingdom, and (v) other countries.

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The following table shows a rollforward of the allowance for credit losses (in thousands):

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Balance at beginning of period $ 8,912 $ 9,918

Adoption of accounting pronouncement ASC 326 1

Provision for expected credit losses 66 2,193

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Balance at end of period $ 8,170 $ 8,912

_________________

1 Due to the initial adoption of ASC 326 as of January 1, 2020.

Inventory consisted of the following (in thousands):

September 30, 2021 December 31, 2020

A summary of inventory as of March 31, 2022 and December 31, 2021 is as follows (in thousands):

March 31, 2022 December 31, 2021

Raw materials $ 8,050 $ 7,641

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PREPAID AND OTHER CURRENT ASSETS

Prepaid and other current assets consisted of the following (in thousands):

September 30, 2021 December 31, 2020

A summary of prepaid and other current assets as of March 31, 2022 and December 31, 2021 is as follows (in thousands):

March 31, 2022 December 31, 2021

Insurance receivable $ 39,000 $ 39,000

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The prepaid expenses primarily relate to prepaid insurance and other expenses that have been paid in advance of the coverage period.

The other current assets primarily include items such as contract assets and other accounts receivables.

The other current assets primarily include items such as contract assets, receivable from third party, and other accounts receivables.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consisted of the following (in thousands):

September 30, 2021 December 31, 2020

A summary of property, plant and equipment as of March 31, 2022 and December 31, 2021 is as follows (in thousands):

March 31, 2022 December 31, 2021

Land $ 5,208 $ 5,743

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Property, plant and equipment, net $ 160,189 $ 161,359

Included in the table above are assets under finance leases of $ 6.7 million and $ 5.7 million, net of accumulated amortization of $ 1.4 million and $ 0.9 million as of September 30, 2021 and December 31, 2020, respectively.

Depreciation expense for the three months ended September 30, 2021 and 2020 was $ 6.7 million and $ 7.9 million, respectively.

Depreciation expense for the nine months ended September 30, 2021 and 2020 was $ 21.0 million and $ 23.8 million, respectively.

Included in the table above are assets under finance leases of $ 6.7 million and $ 6.7 million, net of accumulated amortization of $ 1.7 million and $ 1.6 million as of March 31, 2022 and December 31, 2021, respectively.

Depreciation expense for the three months ended March 31, 2022 and 2021 was $ 6.5 million and $ 7.5 million, respectively.

INTANGIBLE ASSETS

Intangible assets consisted of the following (in thousands):

September 30, 2021 December 31, 2020

A summary of intangible assets as of March 31, 2022 and December 31, 2021 is as follows (in thousands):

March 31, 2022 December 31, 2021

Amount Accumulated

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Total $ 214,030 $ ( 127,458 ) $ 86,572 $ 214,095 $ ( 124,197 ) $ 89,898

Amortization expense of intangible assets for the three months ended September 30, 2021 and September 30, 2020 was $ 3.4 million and $ 3.6 million, respectively.

Amortization expense of intangible assets for the nine months ended September 30, 2021 and September 30, 2020 was $ 10.5 million and $ 10.9 million, respectively.

Amortization expense to be recognized for the remainder of 2021 is approximately $ 3 million and approximately $ 13 million per year from 2022 through 2025.

Amortization expense of intangible assets for the three months ended March 31, 2022 and March 31, 2021 was $ 3.5 million and $ 3.4 million, respectively.

Amortization expense for intangible assets is forecast to be approximately $ 13 million per year from 2022 through 2025.

The weighted-average amortization period for intangible assets subject to amortization was 13.7 years as of March 31, 2022 and December 31, 2021.

GOODWILL AND IMPAIRMENT CHARGES

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We test for impairment of our reporting units annually on December 1, and between annual tests if we become aware of an event or a change in circumstances that would indicate the carrying value may be impaired.

During the three months ended March 31, 2020, we recognized a non-cash goodwill impairment charge of $ 191.8 million for the IHT operating segment.

These charges were a result of an interim goodwill impairment test that was triggered due to certain impairment indicators that were present during the first quarter of 2020, primarily due to the decline in operating results due to COVID, lower oil prices and related impacts on the IHT operating segment.

We also performed our annual impairment test as of December 1, 2020 and concluded that there was no impairment based upon a qualitative assessment to determine if it was more likely than not (that is, a likelihood of more than 50 percent) that the fair values of the reporting units were less than their respective carrying values as of the reporting date.

We further evaluated if there have been any events that would require an interim assessment of the carrying value of goodwill until June 30, 2021, and concluded that there was no impairment, however, after June 30, 2021, our stock price saw sustained declines continuing through September 2021 and our forecasted revenues and earnings continued to decline.

As a result, we determined that a triggering event had occurred as it was more likely than not that the carrying values of our reporting units exceeded their fair values.

Our revenue growth and profitability are influenced by several industry trend factors, including end markets capital spending levels, supply and demand levels and technology.

With oil prices and demand increasing, refiners (represents approximately 40 % of our customers) are slowly recovering, as capital expenditures have not fully recovered resulting in lower current activity and pricing pressure for our products and services, primarily in our IHT and MS reporting units, which we expect to continue.

In line with disruption to our business since the beginning of the pandemic, our market capitalization also deteriorated during the third quarter of 2021.

The related continued curtailment of operations, decline in our forecast, continued declines in our stock price, reporting unit operating losses, and continued declines in the reporting units’ net sales compared to forecast, collectively, indicated that the reporting units had experienced a triggering event and the need to perform a quantitative interim evaluation of goodwill.

Accordingly, we performed a quantitative assessment of the fair value of goodwill as of September 30, 2021.

We determined the fair value for each reporting unit in our goodwill impairment assessment using both a discounted cash flow analysis and a multiples-based market approach for comparable companies.

We utilized third-party valuation advisors to assist us with these valuations.

These analyses included significant judgment, including short-term and long-term forecast of operating performance, discount rates based on our weighted average cost of capital, revenue growth rates, profitability margins, capital expenditures and the timing of future cash flows.

These impairment assessments incorporate inherent uncertainties, including supply and demand for our services, utilization forecasts, pricing forecasts and future market conditions, which are difficult to predict in volatile economic environments and could result in impairment charges in future periods if actual results materially differ from the assumptions utilized in our forecasts.

Based upon our impairment assessment, we determined the carrying amount of our MS reporting unit exceeded the fair value.

As a result, in the three months ended September 30, 2021, we recorded $ 55.8 million in goodwill impairment charges on our MS reporting unit.

There was $ 34.2 million of goodwill at September 30, 2021 and $ 91.4 million at December 31, 2020.

The following table presents a rollforward of goodwill for the nine months ended September 30, 2021 as follows (in thousands):

Management did not become aware of an event or a change in circumstances that would indicate the carrying value may be impaired for the period ended March 31, 2022.

We will continue to evaluate our goodwill and long-lived assets for potential triggering events as conditions warrant.

During 2021, we determined that a triggering event had occurred as it was more likely than not that the carrying values of our reporting units exceeded their fair values as a result of the curtailment of operations and sustained declines in our stock price through September 30, 2021.

Based upon our 2021 impairment assessment, we determined the carrying amount of our MS reporting unit exceeded the fair value in 2021.

As a result, we recorded $ 55.8 million in goodwill impairment charges on our MS reporting unit during the three months ended September 30, 2021.

The fair value of the Quest Integrity reporting unit exceeded its carrying value at September 30, 2021.

Our IHT reporting unit has no goodwill associated as it was determined to be fully impaired on March 31, 2020.

Additionally, based on the annual quantitative assessment performed on December 1, 2021, we concluded that the carrying amount of our Quest Integrity reporting unit exceeded the fair value.

As a result, we recorded $ 8.8 million in goodwill impairment charges on our Quest Integrity reporting unit during the three months ended December 31, 2021.

There was $ 25.2 million of goodwill at March 31, 2022 and December 31, 2021.

The following table presents a rollforward of goodwill for the three months ended March 31, 2022 as follows (in thousands):

IHT MS Quest Integrity Consolidated

2 unchanged sentences

FX Adjustments — — — — — — 6 — 6 6 — 6

Impairment charge — — — — ( 55,837 ) ( 55,837 ) — — — — ( 55,837 ) ( 55,837 )

Balance at September 30, 2021 $ 212,928 $ ( 212,928 ) $ — $ 109,938 $ ( 109,938 ) $ — $ 34,181 $ — $ 34,181 $ 357,047 $ ( 322,866 ) $ 34,181

Balance at March 31, 2022 $ 212,928 $ ( 212,928 ) $ — $ 109,938 $ ( 109,938 ) $ — $ 34,044 $ ( 8,795 ) $ 25,249 $ 356,910 $ ( 331,661 ) $ 25,249

OTHER ACCRUED LIABILITIES

Other accrued liabilities consisted of the following (in thousands):

September 30, 2021 December 31, 2020

A summary of other accrued liabilities as of March 31, 2022 and December 31, 2021 is as follows (in thousands):

March 31, 2022 December 31, 2021

Legal and professional accruals $ 47,073 $ 46,762

7 unchanged sentences

Legal and professional accruals include accruals for legal and professional fees as well as accrued legal claims, refer to Note 16.

Certain legal claims are covered by insurance and the related insurance receivable for these claims is recorded in prepaid expenses and other current assets, refer to Note 5.

Certain legal claims are covered by insurance and the related insurance receivable for these claims is recorded in

prepaid expenses and other current assets, refer to Note 5.

Payroll and other compensation expenses include all payroll related accruals including, among others, accrued vacation, severance, and bonuses.

3 unchanged sentences

Other accrued liabilities includes items such as contract liabilities and other accrued expenses.

We recorded an income tax provision of $ 8.9 million and $ 9.4 million for the three and nine months ended September 30, 2021, respectively, compared to an income tax provision of $ 3.0 million and a benefit of $ 15.8 million for the three and nine months ended September 30, 2020.

The effective tax rate, inclusive of discrete items, was a provision of 10.9 % for the three

months ended September 30, 2021, compared to a provision of 48.4 % for the three months ended September 30, 2020.

For the nine months ended September 30, 2021, our effective tax rate, inclusive of discrete items, was a provision of 7.1 %, compared to a benefit of 6.6 % for the nine months ended September 30, 2020.

Our three and nine months ended September 30, 2021 effective tax rate differs from the statutory tax rate due to tax losses in jurisdictions in which the tax benefits have been offset by valuation allowances, the goodwill impairment loss and an increase in valuation allowance on the net deferred tax assets of subsidiaries that were previously more likely than not realizable.

The effective tax rate in the prior year periods was impacted by the tax benefits recognized related to the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), the goodwill impairment loss and a change in the valuation allowance.

The goodwill impairment charge of $ 55.8 million taken during this quarter was largely non-deductible for tax purposes.

Any tax benefit realized as a result of the impairment has been offset by a valuation allowance.

While several subsidiaries have historically been profitable and for which future income was a material factor in assessing the realizability of their deferred tax assets, the substantial doubt about the Company’s ability to continue as a going concern basis casts doubt on our ability to estimate and generate future income.

As a result, the Company included a charge of $ 5.6 million in income tax expense for the valuation allowance required to offset the remaining net deferred tax assets.

The $ 5.6 million charge is primarily attributable to our UK, Germany, Australia and Canada subsidiaries.

We recorded an income tax provision of $ 0.4 million for the three months ended March 31, 2022 compared to a benefit of $ 0.4 million for the three months ended March 31, 2021.

The effective tax rate, inclusive of discrete items, was a provision of 1.1 % for the three months ended March 31, 2022, compared to a benefit of 1.0 % for the three months ended March 31, 2021.

Our three months ended March 31, 2022 and 2021 effective tax rate differs from the statutory tax rate due to tax losses in jurisdictions in which the tax benefits have been offset by valuation allowances.

LONG-TERM DEBT

Long-term debt consisted of the following (in thousands):

September 30, 2021 December 31, 2020

ABL Facility $ 54,100 $ 9,000

216,877 213,809

As of March 31, 2022 and December 31, 2021, our long-term debt and finance obligations are summarized as follows (in thousands):

March 31, 2022 December 31, 2021

ABL Facilities $ 104,689 $ 62,000

Term Loan 216,043 214,191

Subordinated Term Loan 38,758 36,358

Total $ 359,490 $ 312,549

Convertible notes 1

Convertible Debt 1

91,485 87,662

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1 Comprised of principal amount outstanding, less unamortized discount and issuance costs.

On December 18, 2020, we entered into an asset-based credit agreement (the “ABL Facility”) led by Citibank, N.A., as agent, which provides for available borrowings up to $ 150 million.

The ABL Facility matures and all outstanding amounts become due and payable on December 18, 2024, subject to certain conditions.

The ABL Facility includes a $ 50 million sublimit for letters of credit issuance and $ 35 million sublimit for swingline borrowings.

Additionally, subject to certain conditions, including obtaining additional commitments, the ABL Facility may be increased by an amount not to exceed $ 50 million.

Our obligations under the ABL Facility are guaranteed by certain of our direct and indirect subsidiaries, as set forth in the ABL Facility agreement.

The ABL Facility is secured on a first priority basis by, among other things, our accounts receivable, deposit accounts, securities accounts and inventory, including those of our direct and indirect subsidiary guarantors, and on a second priority basis by substantially all other assets of our direct and indirect subsidiary guarantors.

Borrowing availability under the ABL Facility is based on a percentage of the value of accounts receivable and inventory, reduced for certain reserves.

Borrowings under the ABL Facility bear interest through maturity at a variable rate based upon, at our option, an annual rate of either a base rate (“Base Rate”) or a LIBOR rate, plus an applicable margin.

Borrowings made through a Base Rate do not have a stated maturity date, however, LIBOR borrowings are typically issued with terms of 90 days or less.

For purposes of classification of borrowings and payments made under the ABL Facility in the Statement of Cash Flows, we report Base Rate borrowings on a gross basis, while LIBOR borrowings (and swingline borrowings, which are due on demand) are presented on a net basis.

At September 30, 2021, we had $ 17.0 million of cash on hand, of which, about $ 4.0 million of cash is located in countries where currency restrictions exist.

We also had approximately $ 27.0 million of available borrowing capacity under the ABL Facility.

Borrowing availability under the ABL Facility is based on a percentage of the value of accounts receivable and inventory, subject to eligibility criteria and customary reserves which may be modified in the agent’s permitted discretion.

The ABL Facility also provides for the issuance of letters of credit, which further reduce the borrowing capacity thereunder.

There were $ 24.4 million in letters of credit outstanding under the credit facility.

The ABL Facility also contains a financial covenant which requires the Company to maintain a minimum FCCR of 1.0 :1.0 upon the occurrence of an event of default or any date upon which excess availability is less than the greater of (a) 10 % of the line cap and (b) $ 15.0 million, all of which we were in compliance with at September 30, 2021.

In the event that our excess availability is less than the greater of $ 18.75 million and 12.5 % of the line cap for five consecutive business days, then the Company is in a cash dominion period where the agent may have control of all funds deposited in certain blocked accounts.

In the event excess availability is below $ 15.0 million then certain covenant requirements must be maintained including the requirement to maintain compliance with a FCCR of at least 1.00 :1.00.

As of September 30, 2021, if an accelerated triggering event had occurred, the Company would not be able to be in compliance with the FCCR requirement.

In order to secure our casualty insurance programs we are required to post letters of credit generally issued by a bank as collateral.

A letter of credit commits the issuer to remit specified amounts to the holder, if the holder demonstrates that we failed to meet our obligations under the letter of credit.

If this were to occur, we would be obligated to reimburse the issuer for any payments the issuer was required to remit to the holder of the letter of credit.

We were contingently liable for outstanding stand-by letters of credit totaling $ 24.4 million at September 30, 2021 and $ 19.5 million at December 31, 2020.

Outstanding letters of credit reduce amounts available under our ABL Facility and are considered as having been funded for purposes of calculating our financial covenants.

See Convertible Debt section below for additional information.

Future contractual maturities of long-term debt, excluding finance leases, are as follows (in thousands):

Total $ 501,495

For information on our finance lease obligations, see footnote 12.

ABL Facilities

On December 18, 2020, we entered into an asset-based credit agreement (such agreement, as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”) led by Citibank, N.A., (“Citibank”), as agent, which provided for available borrowings up to $ 150.0 million (the “ABL Facility”).

The ABL Facility was expected to mature and all outstanding amounts were to become due and payable on December 18, 2024.

The Citi ABL Facility included a $ 50.0 million sublimit for letters of credit issuance and $ 35.0 million sublimit for swingline borrowings.

Additionally, subject to certain conditions, including obtaining additional commitments, the Citi ABL Facility could have been increased by an amount not to exceed $ 50.0 million.

On December 7, 2021, the Company entered into Amendment No.

2 (the “Citi ABL Amendment No.

2”) to the Citi Credit Agreement.

Citi ABL Amendment No.

2, among other things, (i) revised the applicable margin to 4.25 % for LIBOR rate advances, (ii) provided that at all times beginning on the effective date of the Citi ABL Amendment No.

2 and ending on the date Citibank shall have received and approved the borrowing base certificate for the calendar month ending December 31, 2021, the borrowing base shall not exceed the lesser of (a) the borrowing base calculated as set forth in the borrowing base certificate for the calendar month ending December 31, 2021 and (b) $ 108,500,000 , (iii) establishes an interest reserve account for certain payments due under the Term Loan Credit Agreement, (iv) provides that after giving effect to any borrowing and any disbursements to be made by the Company with the proceeds of such borrowing, within one business day of such borrowing, the Company and its U.S.

subsidiaries may not have more than $ 5 million cash on hand, (v) provides for weekly variance testing to be delivered to Citibank, (vi) requires the Company to have used all of the proceeds borrowed under the Subordinated Term Loan Credit Agreement prior to borrowing under the Citi Credit Agreement, and (vii) increases the amount of subordinated debt available to be incurred by the Company to account for (a) the additional $ 27.5 million borrowed under the Subordinated Term Loan Credit Agreement, (b) any additional amount borrowed under the Subordinated Term Loan Credit Agreement not to exceed $ 75 million in the aggregate, and (c) the payment of interest in the form of payment-in-kind interest with respect to the Initial Term Loans (as defined in the Subordinated Term Loan Credit Agreement).

Our obligations under the Citi ABL Facility were guaranteed by certain of our direct and indirect subsidiaries, as set forth in the Citi ABL Facility agreement.

The Citi ABL Facility was secured on a first priority basis by, among other things, our accounts receivable, deposit accounts, securities accounts and inventory, including those of our direct and indirect subsidiary guarantors, and on a second priority basis by substantially all other assets of our direct and indirect subsidiary guarantors.

Borrowing availability under the ABL Facility was based on a percentage of the value of accounts receivable and inventory, reduced for certain reserves.

Borrowings under the Citi ABL Facility bore interest through maturity at a variable rate based upon, at our option, an annual rate of either a base rate (“Base Rate”) or a LIBOR rate, plus an applicable margin.

The Base Rate is defined as a fluctuating interest rate equal to the greatest of (i) the federal funds rate plus 0.50 %, (ii) Citibank’s prime rate, and (iii) the one-month LIBOR rate plus 1.00 %.

The applicable margin for LIBOR borrowings was 4.25 % and for Base Rate borrowings was 3.25 %.

The all-in Base Rate floor was 1.75 % and for LIBOR rate borrowings, the LIBOR rate, exclusive of spread, had a 0.75 % LIBOR rate floor.

Interest was payable either (i) monthly for Base Rate borrowings or (ii) the last day of the interest period for LIBOR rate borrowings, as set forth in the Citi ABL Facility agreement.

The fee for undrawn amounts ranged from 0.375 % to 0.5 %, depending on usage and was due quarterly.

The Citi ABL Facility contained customary conditions to borrowings, events of default and covenants, including, but not limited to, covenants that restricted our ability to sell assets, make changes to the nature of our business, engage in mergers and acquisitions, incur, assume or permit to exist additional indebtedness and guarantees, create or permit to exist liens, pay dividends, issue equity instruments, make distribution or redeem or repurchase capital stock.

In the event that our excess availability was less than the greater of (i) $ 15.0 million and (ii) 10.00 % of the lesser of (1) the current borrowing base and (2) the commitments under the Citi ABL Facility then in effect, a consolidated fixed charge coverage ratio of at least 1.00 to 1.00 was required to be maintained.

Upon the occurrence of certain events of default, an additional 2.0 % interest could have been required on the outstanding loans under the Citi ABL Facility.

On February 11, 2022, we entered into the ABL Credit Agreement.

Available funding commitments to us under the ABL Credit Agreement, subject to certain conditions, include the Revolving Credit Loans in an amount of up to $ 130.0 million, with a $ 35.0 million sublimit for swingline borrowings and a $ 26.0 million sublimit for issuances of letters of credit, and incremental Delayed Draw Term Loans of up to $ 35.0 million to be provided by Corre.

We had approximately $ 10.0 million of available borrowing capacity under the Delayed Draw Term Loans.

The ABL Credit Facility matures and all outstanding amounts become due and payable on February 11, 2025.

The proceeds of the loans under the ABL Credit Facility were used to, among other things, pay off the amounts owed under the Citi Credit Agreement, which was repaid and terminated in full on February 11, 2022.

At March 31, 2022, we had $ 32.9 million of cash and cash equivalents and $ 20.8 million of restricted cash held as collateral for letters of credit and commercial card programs.

About $ 2.3 million of cash is located in countries where currency restrictions exist.

We had approximately $ 8.8 million of available borrowing capacity under the ABL Credit Facility.

Direct and incremental costs associated with the issuance of the ABL Credit Facility were approximately $ 8.1 million and were capitalized as debt issuance costs.

These costs are being amortized on a straight-line basis over the term of the ABL Facility.

On May 6, 2022, we entered into the ABL Credit Agreement Amendment No.

1 which, among other things, modifies the Maturity Reserve Trigger Date (as defined in the ABL Credit Agreement) such that the date on which a reserve must, subject to certain conditions, be put into place with respect to the outstanding principal amount of the 5.00 % Convertible Senior Notes due 2023 (the “Notes”) is 75 days prior to their maturity date instead of 120 days prior to their maturity date.

Our obligations under the ABL Credit Agreement are guaranteed by certain of our direct and indirect subsidiaries (other than certain excluded subsidiaries) (the “ABL Guarantors” and, together with the Company, the “ABL Loan Parties”).

Our obligations under the ABL Credit Facility are secured on a first priority basis by, among other things, accounts receivable, deposit accounts, securities accounts and inventory of the ABL Loan Parties and are secured on a second priority basis by substantially all of the other assets of the ABL Loan Parties.

Availability under the revolving credit line under ABL Credit Facility is based on the percentage of the value of accounts receivable and inventory, as reduced by certain reserves.

Revolving Credit Loans under the ABL Credit Facility bear interest through maturity at a variable rate based upon an annual rate of a LIBOR Rate (or a Base Rate (as defined below) if the LIBOR Rate is unavailable for any reason), plus an applicable margin (“LIBOR Rate Loan” and “Base Rate Loan”, respectively).

The “Base Rate” is defined as a fluctuating interest rate equal to the greatest of (1) the federal funds rate plus 0.50 %, (2) Wells Fargo Bank, National Association’s prime rate, and (3) the one-month LIBOR Rate.

The “applicable margin” is defined as a rate of 3.15 %, 3.40 % or 3.65 % for Base Rate Loans with a 2.00 % Base Rate floor and a rate of 4.15 %, 4.40 % or 4.65 % for LIBOR Rate Loans with a 1.00 % LIBOR floor, in each case depending on the amount of EBITDA as of the most recent measurement period, as reported in a monthly compliance certificate.

The Delayed Draw Term Loans shall bear interest through maturity at a rate of the LIBOR Rate plus 10.0 %, with a 1.00 % LIBOR floor.

The fee for undrawn revolving amounts is 0.50 % and the fee for undrawn Delayed Draw Term Loan amounts is 3.00 %.

Interest under the ABL Credit Facility is payable monthly.

The Company will also be required to pay customary letter of credit fees, as necessary.

The Company may make voluntary prepayments of the loans under the ABL Credit Facility from time to time, subject, in the case of the Delayed Draw Term Loans, to certain conditions.

Mandatory prepayments are also required in certain circumstances, including with respect to the Delayed Draw Term Loan, if the ratio of aggregate value of the collateral under the ABL Credit Facility to the sum of the delayed draw term loans plus revolving facility usage outstanding is less than 130 %.

Amounts repaid may be re-borrowed, subject to compliance with the borrowing base and the other conditions set forth in the ABL Credit Agreement, subject, in the case of the Delayed Draw Term Loan s to a maximum of four such borrowings in any 12-month period.

Certain permanent repayments of the ABL Credit Facility loans are subject to the payment of a premium of 2.00 % during the first year of the facility, 1.00 % during the second year of the facility, and 0.50 % in the last year of the facility.

The ABL Credit Agreement contains customary conditions to borrowings and covenants, including covenants that restrict our ability to sell assets, make changes to the nature of our business, engage in mergers or acquisitions, incur, assume or permit to exist additional indebtedness and guarantees, create or permit to exist liens, pay dividends, issue equity instruments, make distributions or redeem or repurchase capital stock or make other investments, engage in transactions with affiliates and make payments in respect of certain debt.

The ABL Credit Agreement also requires that we will not exceed $ 20.0 million in unfinanced capital expenditures in any calendar year;

provided that this requirement will not apply if we maintain a net leverage ratio of less than or equal to 4.00 to 1.00 as of the end of the second and fourth fiscal quarter of each calendar year.

In addition, the ABL Credit Agreement includes customary events of default, the occurrence of which may require that we pay an additional 2.0 % interest on the outstanding loans under the ABL Credit Agreement.

Atlantic Park Term Loan

On December 18, 2020, we also entered into a credit agreement with Atlantic Park Strategic Capital Fund, L.P., as agent, and APSC, as lender (the “Term Loan Credit Agreement”), pursuant to which we borrowed a $ 250.0 million term loan (the “Term Loan”).

On December 18, 2020, we also entered that certain Term Loan Credit Agreement with Atlantic Park Strategic Capital Fund, L.P., as agent (“APSC”), as lender (the “Term Loan Credit Agreement”), pursuant to which we borrowed a $ 250.0 million term loan (the “Term Loan”).

The Term Loan was issued with a 3 % original issuance discount (“OID”), such that total proceeds received were $ 242.5 million.

The Term Loan matures, and all outstanding amounts become due and payable on December 18, 2026, subject to certain conditions.

The Term Loan is secured by substantially all of our assets, other than those secured on a first lien basis by the ABL Facility, and we may increase the Term Loan by an amount not to exceed $ 100 million.

The effective interest rate on the Term Loan at September 30, 2021 was 11.95 %.

The Term Loan contains prepayment provisions, events of default and covenants, all of which we were in compliance with at September 30, 2021.

The Term Loan matures, and all outstanding amounts become due and payable on December 18, 2026.

However, certain conditions could result in an earlier maturity, including if the Notes have an aggregate principal amount outstanding of $ 10.0 million or more on the Maturity Trigger Date, in which case the Term Loan will terminate on the Maturity Trigger Date.

As set forth in the Term Loan Credit Agreement, the Term Loan is secured by substantially all assets, other than those secured on a first lien basis by the ABL Credit Facility, and we may increase the Term Loan by an amount not to exceed $ 100.0 million.

The Term Loan bears an interest through maturity at a variable rate based upon, at our option, an annual rate of either a Base rate or a LIBOR rate, plus an applicable margin.

The Base rate is defined as a fluctuating interest rate equal to the greatest of (i) the federal funds rate plus 0.50 %, (ii), the prime rate as specified in the Term Loan Credit Agreement, and (iii) one-month LIBOR rate plus 1.00 %.

The applicable margin is defined as a rate of 6.50 % for Base rate borrowings with a 2.00 % Base rate floor and 7.50 % for LIBOR rate borrowings with a 1.00 % LIBOR rate floor.

Interest is payable either (i) monthly for Base rate borrowings or (ii) the last day of the interest period for LIBOR rate borrowings, as set forth in the Term Loan Credit Agreement.

The loans under the Term Loan were issued with an original issue discount of 3.00 %, and are, in whole or in part, prepayable any time and from time to time, at a prepayment premium (including a make whole during the first two years ) specified in the Term Loan Credit Agreement (subject to certain exceptions), plus accrued and unpaid interest.

The effective interest rate on the Term Loan at March 31, 2022 and December 31, 2021 was 12.22 % and 20.90 %, respectively.

The Term Loan contains customary payment penalties, events of default and covenants, including but not limited to, covenants that restrict our ability to sell assets, make changes to the nature of our business, engage in mergers or acquisitions, incur additional indebtedness and guarantees, pay dividends, issue equity instruments and make distributions or redeem or repurchase capital stock.

On October 19, 2021, we entered into Amendment No.

1 (the “First Amendment”) to the Term Loan Credit Agreement with the financial institutions party thereto from time to time (the “Lenders”) and APSC, as agent.

The First Amendment to the Term Loan Credit Agreement, among other things, (i) defers an October 19, 2021 interest payment of $ 5.4 million until October 29, 2021;

(ii) requires that the Company use commercially reasonable efforts to appoint an additional independent director to our Board of Directors who is acceptable to the agent;

(iii) provides the Lenders with additional information rights;

and (iv) tightens certain negative covenants included in the Term Loan Credit Agreement until the deferred interest is made current.

The First Amendment, among other things, (i) deferred an October 19, 2021 interest payment until October 29, 2021;

(ii) required that the Company use commercially reasonable efforts to appoint an additional independent director to our Board of Directors who is acceptable to the agent;

(iii) provided the Lenders with additional information rights;

and (iv) tightened certain negative covenants included in the Term Loan Credit Agreement until the deferred interest is made current.

On October 29, 2021, we entered into Amendment No.

2 (the “Second Amendment”) to the Term Loan Credit Agreement with the Lenders and the Agent.

The Second Amendment to the Term Loan Credit Agreement, among other things, (i) further defers an October 29, 2021 interest payment until November 15, 2021;

(ii) contains certain milestones;

(iii) provides the Lenders with a 10-day right of first refusal regarding any refinancing of the Company’s obligations under the ABL Facility;

(iv) obligates the Company to establish, pursuant to a charter to be adopted by the our Board of Directors and reasonably acceptable to the Agent, a special committee that shall have exclusive responsibility and authority to make recommendations to our Board of Directors regarding certain transactions;

and (v) provides that the Company will not permit a covenant trigger event under the ABL Facility to occur.

The deferred interest payment including catch up interest and fee totaling $ 7.0 million was paid on November 9, 2021.

On November 9, 2021, as part of the Recent Financing Transactions, we entered into Third Amendment to the Term Loan Credit Agreement.

The Third Amendment to the Term Loan Credit Agreement, among other things, (i) waives certain covenants until September 30, 2022 and modifies covenants thereafter to provide us with more flexibility and (ii) requires us to seek shareholder approval (or an exception therefrom) to issue additional warrants to APSC, providing for the purchase of an

aggregate of 1,417,051 shares of our common stock, and to amend the Warrants currently held by APSC, to provide for, an exercise price of $ 1.50 per share.

2 (the “Second Amendment”) to the Term Loan Credit Agreement with the Lenders and ASPC, as agent.

The Second Amendment, among other things, (i) further deferred an October 29, 2021 interest payment until November 15, 2021;

(ii) contained certain milestones;

(iii) provided the Lenders with a ten-day right of first refusal regarding any refinancing of the Company’s obligations under the ABL Facility;

(iv) obligated the Company to establish, pursuant to a charter to be adopted by the our Board of Directors and reasonably acceptable to the Agent, a special committee that shall have exclusive responsibility and authority to make recommendations to our Board of Directors regarding certain transactions;

and (v) provided that the Company will not permit a covenant trigger event under the ABL Facility to occur.

On November 8, 2021, we entered into Amendment No.3 (the “Third Amendment”) to the Term Loan Credit Agreement.

The Third Amendment, among other things, (i) waived certain covenants until September 30, 2022 and modified covenants thereafter to provide us with more flexibility and (ii) required us to seek shareholder approval (or an exception therefrom) to issue additional warrants to APSC, providing for the purchase of an aggregate of 1,417,051 shares of our common stock (the “APSC Warrants”), and to amend the warrants issued in December 2020 to APSC to purchase up to 3,582,949 shares of our common stock, which was initially exercisable at the holder’s option at any time, in whole or in part, until June 14, 2028, at an exercise price of $ 7.75 per share (the “Existing Warrant”), to provide for, an exercise price of $ 1.50 per share.

The Third Amendment also reduced the amount of principal outstanding on the Notes on the Maturity Trigger Date from $ 50.0 million to $ 10.0 million.

On December 2, 2021, and December 7, 2021, respectively, we entered into Amendment No.

4 (the “Fourth Amendment”) to the Term Loan Credit Agreement and Amendment No.

5 (the “Fifth Amendment”) to the Term Loan Credit Agreement.

The Fourth Amendment and the Fifth Amendment extended the date upon which the Company must issue the APSC Warrants to December 7, 2021, and December 8, 2021, respectively.

The business purpose of these amendments was to further extend the Company’s liquidity runway while asset based lending field audit exams were completed in connection with the refinancing transactions completed on February 11, 2022.

On February 11, 2022, we entered into Amendment No.

6 (the “Sixth Amendment”) to the Term Loan Credit Agreement.

The Sixth Amendment, among other things and subject to the terms thereof, (i) permitted the entry into the ABL Credit Agreement, (ii) permitted certain interest payments due under the Term Loan Credit Agreement to be paid in kind, (iii) permitted certain asset sales and requires certain related mandatory prepayments, subject to an applicable prepayment premium, and (iv) amended the financial covenants, such that the maximum net leverage ratio of 7.00 to 1.00 will not be tested until the fiscal quarter ending March 31, 2023, and the Company is not permitted to exceed $ 20.0 million in unfinanced capital expenditures in any calendar year;

provided, that such unfinanced capital expenditures limitation will not apply if the Company maintains a net leverage ratio of less than or equal to 4.00 to 1.00 as of the end of the second and fourth fiscal quarter of each calendar year.

On May 6, 2022, we entered into Amendment No.

7 (the “Seventh Amendment”) to the Term Loan Credit Agreement.

Subordinated Term Loan Credit Agreement

On November 9, 2021, we entered into the Subordinated Term Loan Credit Agreement providing for the Subordinated Term Loan.

On November 9, 2021, we entered into a credit agreement (the “Subordinated Term Loan Credit Agreement”) with Corre Credit Fund, LLC (“Corre Fund”), as agent, and the lenders party thereto providing for an unsecured $ 50.0 million delayed draw subordinated term loan facility (the “Subordinated Term Loan”).

Pursuant to the Subordinated Term Loan Credit Agreement, we borrowed $ 22.5 million on November 9, 2021, and an additional $ 27.5 million on December 8, 2021.

The stated interest rate on the Subordinated Term Loan is 12 %.

Under the Subordinated Term Loan Credit Agreement, we are required to, among other things, (i) subject to certain conditions, issue the lenders New Warrants, (ii) amend our charter, bylaws, and all other necessary corporate governance documents to reduce the size of our Board of Directors to seven directors, one of whom will include our Chief Executive Officer, and (iii) reconstitute our Board of Directors.

The Subordinated Term Loan also contains other customary prepayment provisions, events of default and covenants.

On December 18, 2020, in connection with the execution of the Term Loan, we issued to APSC a warrant to purchase up to 3,582,949 shares of our common stock (the “Warrants”), which was initially exercisable at the holder’s option at any time, in whole or in part, until June 14, 2028, at an exercise price of $ 7.75 per share.

On November 9, 2021, in connection with the Recent Financing Transactions, the Warrants were amended and restated to provide for the purchase of up to 4,082,949 shares of our common stock and to reduce the exercise price to $ 1.50 per share.

The exercise price and the number of shares of common stock issuable on exercise of the Warrants are subject to certain anti-dilution adjustments.

Convertible Notes

On July 31, 2017, we issued $ 230.0 million principal amount of 5.00 % Convertible Senior Notes due 2023 in a private offering to qualified institutional buyers (as defined in the Securities Act of 1933) pursuant to Rule 144A under the Securities Act.

In December 2020, we retired $ 136.9 million par value of the Notes, and as of September 30, 2021, the principal amount outstanding was $ 93.1 million.

The Notes bear interest at a rate of 5.0 % per year, payable semiannually in arrears on February 1 and August 1 of each year.

The Notes will mature on August 1, 2023 unless repurchased, redeemed or converted in accordance with their terms prior to such date.

The Notes will be convertible at an initial conversion rate of 46.0829 shares of our common stock per $1,000 principal amount of the Notes, which is equivalent to an initial conversion price of approximately $ 21.70 per share.

Under the Subordinated Term Loan Credit Agreement, we are required to, among other things, (i) subject to certain conditions, issue the lenders Corre Warrants (described below), (ii) amend our charter, bylaws, and all other necessary corporate governance documents to reduce the size of our Board of Directors to seven directors, one of whom will include our Chief Executive Officer, and (iii) reconstitute our Board of Directors.

The Subordinated Term Loan Credit Agreement also contains other customary prepayment provisions, events of default and covenants.

On November 30, 2021, we entered into Amendment No.

1 (the “Corre Amendment 1”) to the Subordinated Term Loan Credit Agreement.

The Corre Amendment 1 (i) extended the payment date for interest in the form of payment-in-kind interest (“PIK Interest”)with respect to the Initial Term Loans (as defined in the Subordinated Term Loan Credit Agreement), (ii) extended the date upon which the Company must deliver a fully executed ABL Consent (as defined in the Subordinated Term Loan Credit Agreement) to, in each case, 11:59 P.M.

on December 6, 2021, and (iii) extended the date upon which we must issue the Corre Warrants to 11:59 P.M.

on December 7, 2021.

On December 6, 2021, we entered into Amendment No.

2 (the “Corre Amendment 2”) to the Subordinated Term Loan Credit Agreement.

The Corre Amendment 2 (i) extended the payment date in the form of PIK Interest with respect to the Initial Term Loans, and (ii) extended the date upon which we must deliver a fully executed ABL Consent to, in each case, 11:59 P.M.

on December 7, 2021.

On December 7, 2021, we entered into Amendment No.

3 (the “Corre Amendment 3”) to the Subordinated Term Loan Credit Agreement.

The Corre Amendment 3, among other things, (i) extended the payment date for interest in the form of PIK Interest with respect to the Initial Term Loans, (ii) extended the date upon which we must deliver a fully executed ABL Consent and (iii) extended the date upon which we must issue the Corre Warrants to, in each case, 11:59 P.M.

on December 8, 2021.

The business purpose of each of Corre Amendment 1, Corre Amendment 2 and Corre Amendment 3 was to further extend the liquidity runway of the Company and support ongoing negotiations of the financing transactions completed on February 11, 2022.

On December 8, 2021, we entered into Amendment No.

4 (the “Corre Amendment 4”) to the Subordinated Term Loan Credit Agreement.

The Corre Amendment 4 appointed Cantor Fitzgerald Securities as successor Agent.

In connection with the transactions contemplated by the ABL Credit Agreement on February 11, 2022, Corre, agreed to provide the Company with the Incremental Financing, totaling approximately $ 55.0 million, consisting of (i) $ 35.0 million Delayed Draw Term Loans under the ABL Credit Facility;

(ii) $ 10.0 million from Corre in the form of the February 2022 Delayed Draw Term Loan (as defined in the Subordinated Term Loan Credit Agreement) on a pari passu basis with the existing loans issued pursuant to the Subordinated Term Loan Credit Agreement;

and (iii) $ 10.0 million through an issuance the PIPE Shares to the Corre Holders at a price of $ 0.84 per share.

On February 11, 2022, we entered into Amendment No.

5 (the “Corre Amendment 5”) to the Subordinated Term Loan Credit Agreement with the lenders from time to time party thereto (including Corre), and Cantor Fitzgerald Securities, as agent.

The Corre Amendment 5, among other things, (i) provided for an additional commitment of $ 10.0 million in subordinated delayed draw term loans to be available for borrowing by the Company until July 1, 2022, (ii) permitted the entry into the ABL Credit Facility, (iii) permitted certain asset sales and requires certain related mandatory prepayments, subject to an applicable prepayment premium, and (iv) amended the financial covenants, such that the maximum net leverage ratio of 7.00 to 1.00 will

not be tested until the fiscal quarter ending March 31, 2023, and the Company is not permitted to exceed $ 20.0 million in unfinanced capital expenditures in any calendar year;

On May 6, 2022, we entered into Amendment No.

6 (the “Corre Amendment No.

6”) to the Subordinated Term Loan Credit Agreement with the lenders from time to time party thereto (including Corre), and Cantor Fitzgerald Securities, as agent.

The Corre Amendment No.

Our ability to maintain compliance with the financial covenants contained in the ABL Credit Agreement, the Term Loan Credit Agreement and the Subordinated Term Loan Credit Agreement is dependent upon our future operating performance and future financial condition, both of which are subject to various risks and uncertainties.

The effects of the COVID-19 pandemic and the resulting economic repercussions could have a significant adverse effect on our financial position and business condition, as well as our clients and suppliers.

Additionally, these events may, among other factors, impact our ability to generate cash flows from operations, access the capital markets on acceptable terms or at all, and affect our future need or ability to borrow under our ABL Credit Facility.

In addition to our current sources of funding our business, the effects of such events may impact our liquidity or our need to revise our allocation or sources of capital, implement further cost reduction measures and/or change our business strategy.

Although the COVID-19 pandemic and resulting economic repercussions could have a broad range of effects on our liquidity sources, the effects will depend on future developments and cannot be predicted at this time.

In order to secure our casualty insurance programs, and certain other obligations we are required to post letters of credit generally issued by a bank as collateral.

A letter of credit commits the issuer to remit specified amounts to the holder, if the holder demonstrates that we failed to meet our obligations under the letter of credit.

If this were to occur, we would be obligated to reimburse the issuer for any payments the issuer was required to remit to the holder of the letter of credit.

Related to our domestic operations, we were contingently liable for outstanding stand-by letters of credit totaling $ 23.5 million at December 31, 2021, but due to the closing of the ABL Credit Facility on February 11, 2022 those letters of credit are now cash secured as of March 31, 2022, with cash funded at closing from draws on the ABL Credit Facility.

As of March 31, 2022 we have no letters of credit outstanding under the ABL Credit Facility.

Outstanding letters of credit reduce amounts available under our ABL Credit Facility and are considered as having been funded for purposes of calculating our financial covenants.

Internationally we have letters of credit outstanding in the amount of $ 0.3 million.

Additionally, we have $ 1.2 million in Surety bonds outstanding and an additional $ 1.5 million in miscellaneous cash deposits securing leases or other required bank guarantees.

On December 18, 2020, in connection with the execution of the Term Loan, we issued to APSC the Existing Warrant.

In connection with execution of the Subordinated Term Loan Credit Agreement and Third Amendment, on November 9, 2021, we entered into an Amended and Restated Common Stock Purchase Warrant (the “A&R Warrant”) with APSC Holdco II, L.P.

(“APSC Holdco”) pursuant to which the Existing Warrant was amended and restated to provide for the purchase of up to 4,082,949 shares of our common stock (which includes 500,000 of the shares of common stock issuable pursuant to the APSC Warrant) and to reduce the exercise price to $ 1.50 per share.

In connection with execution of the Subordinated Term Loan Credit Agreement and the amendments to the Term Loan Credit Agreement, on December 8, 2021 we entered into the Second Amended and Restated Common Stock Purchase Warrant No.

1 (the “Second A&R Warrant”) with APSC Holdco, pursuant to which the A&R Warrant was amended and restated to provide for the purchase of up to 5,000,000 shares of our common stock (including 4,082,949 shares of our common stock issuable pursuant to the A&R Warrant) exercisable at the holder’s option at any time, in whole or in part, until December 8, 2028, at an exercise price of $ 1.50 per share, and (ii) entered into the Common Stock Purchase Warrants (together with the Second A&R Warrant, the “Warrants”) with each of Corre Opportunities Qualified Master Fund, LP, Corre Horizon Fund, LP, and Corre Horizon Fund II, LP providing for the purchase of an aggregate of 5,000,000 shares of our common stock, exercisable at such holder’s option at any time, in whole or in part, until December 8, 2028, at an exercise price of $ 1.50 per share.

The exercise price and the number of shares of our common stock issuable on exercise of the Warrants are subject to certain antidilution adjustments, including for stock dividends, stock splits, reclassifications, noncash distributions, cash dividends, certain equity issuances and business combination transactions.

In connection with the Subscription Agreement discussed below, on February 11, 2022, the Company, the Corre Holders and APSC Holdco entered into those certain Team, Inc.

Waivers of Anti-Dilution Adjustments and Cash Transaction Exercise (collectively, the “Warrant Waivers”) with respect to each of the Warrants.

Pursuant to the Warrant Waivers, the Corre Holders and APSC Holdco agreed with respect to such holders’ Warrant, subject to certain terms and conditions set forth therein (and for only so long as the applicable provisions remain in effect), among other things, (i) to irrevocably waive certain anti-dilution adjustments set forth in such Warrant in connection with the Proposed Equity Financing (as defined in the Warrant Waivers);

(ii) to not exercise such Warrant, in whole or in part, if the Company determines that such exercise will cause an ownership change within the meaning of Section 382 of the Internal Revenue Code of 1986, as amended (assuming, among other things, that the ownership change threshold is 47% rather than 50%);

and (iii) to only exercise such Warrant in a “cashless” or “net-issue” exercise.

Subscription Agreement

In connection with the Incremental Financing and Equity Issuance, on February 11, 2022, we entered into a common stock subscription agreement (the “Subscription Agreement”) with the Corre Holders, pursuant to which the Company issued and sold the PIPE Shares to the Corre Holders on February 11, 2022.

Pursuant to the Subscription Agreement, subject to certain exceptions, each of the Corre Holders has agreed not to sell its portion of the PIPE Shares until the earliest to occur of (i) the date that is 180 days from the date of the Subscription Agreement, and (ii) such date on which the Company completes a liquidation, merger, stock exchange, reorganization or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of our Common Stock for cash, securities or other property, without consent of the Company.

Pursuant to and subject to the terms and conditions of the Subscription Agreement, our Board of Directors is required to create a vacancy for one qualified nominee of the Corre Holders to the Board, who shall be designated by the Corre Holders and qualify as an independent director (a “Board Nominee”), and the Board is required to appoint such initial Board Nominee as a Class II director within seven business days of the date of the Subscription Agreement.

For so long as the Corre Holders and their affiliates collectively beneficially own at least 10 % of the outstanding shares of our common stock, pursuant to and subject to the terms and conditions of the Subscription Agreement, we will nominate the initial Board Nominee, or a successor Board Nominee chosen by the Corre Holders, for re-election as a Class II director at the first annual meeting of the Company’s stockholders to be held after the Equity Issuance and at the end of each subsequent term of such Board Nominee.

If at any time, the Corre Holders and their affiliates beneficially own less than 10 % of the outstanding shares of our common stock, then, if requested by the Company, the Board Nominee then on the Board will resign from his or her directorship, effective as of our next annual meeting of stockholders or such earlier date reasonably requested by the Company.

Convertible Debt

Description of the Notes

On July 31, 2017, we issued $ 230.0 million principal amount of senior unsecured 5.00 % Convertible Senior Notes due 2023 in a private offering to qualified institutional buyers (as defined in the Securities Act of 1933 (the “Securities Act”)) pursuant to Rule 144A under the Securities Act (the “Offering”).

In December 2020, we retired $ 136.9 million par value of our Notes, and as of March 31, 2022, the principal amount outstanding was $ 95.2 million.

The Notes bear interest at rate of 5.0 % per year, payable semiannually in arrears on February 1 and August 1 of each year, beginning on February 1, 2018.

The Notes mature on August 1, 2023 unless repurchased, redeemed or converted in accordance with their terms prior to such date.

The Notes are convertible at an initial conversion rate of 46.0829 shares of our common stock per $1,000 principal amount of the Notes, which is equivalent to an initial conversion price of approximately $ 21.70 per share, which represents a conversion premium of 40 % to the last reported sale price of $ 15.50 per share on the NYSE on July 25, 2017, the date the pricing of the Notes was completed.

The conversion rate, and thus the conversion price, may be adjusted under certain circumstances as described in the indenture governing the Notes.

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On or after May 1, 2023 until the close of business on the business day immediately preceding the maturity date, holders may, at their option, convert their Notes at any time, regardless of the foregoing circumstances.

As a result of the redemption and extinguishment of the Notes in December 2020, the Notes are convertible into 4,291,705 shares of our common stock.

The Notes were initially convertible into 10,599,067 shares of common stock.

Previously, because the Notes could be convertible in full into more than 19.99 % of our outstanding common stock, we were required by the listing rules of the NYSE to obtain the approval of the holders of our outstanding shares of common stock before the Notes could be converted.

At our annual shareholders’ meeting, held on May 17, 2018, our shareholders approved the issuance of shares of common stock upon conversion of the Notes.

As a result of the redemption and extinguishment of the Notes in discussed above, the Notes are convertible into 4,291,705 shares of common stock.

The Notes will be convertible into, subject to various conditions, cash or shares of our common stock or a combination of cash and shares of our common stock, in each case, at our election.

If holders elect to convert the Notes in connection with certain fundamental change transactions described in the indenture governing the Notes, we will, under certain circumstances described in the indenture governing the Notes, increase the conversion rate for the Notes so surrendered for conversion.

We have the option to redeem all or any portion of the Notes on or after August 5, 2021, if certain conditions (including that our common stock is trading at or above 130 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive)), including the trading day immediately preceding the date on which we provides notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which we provides notice of redemption at a redemption price equal to 100 % of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

As of September 30, 2021 and December 31, 2020, the Notes were recorded in our condensed consolidated balance sheets as follows (in thousands):

September 30, 2021 December 31, 2020

As per the agreement, we may not redeem the Notes prior to August 5, 2021.

The agreement noted that we will have the option to redeem all or any portion of the Notes on or after August 5, 2021, if certain conditions are met (including that our common stock is trading at or above 130 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which we provide notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption) at a redemption price equal to 100 % of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

Net proceeds received from the Offering were approximately $ 222.3 million after deducting discounts, commissions and expenses and were used to repay outstanding borrowings under the Credit Facility.

On January 13, 2022, we entered into a supplemental indenture with Truist Bank, as trustee, (the “Supplemental Indenture”) to the indenture (the “Indenture”) governing the Notes to effect certain amendments (the “Amendments”) to the Indenture and to modify the Notes held by consenting holders (the “Consenting Holders”) of $ 51,969,000 in aggregate principal amount of the Notes (such modified Notes, the “PIK Securities”).

The Supplemental Indenture amends the Indenture to, among other things:

(i) allow for interest payable on the PIK Securities on February 1, 2022 to be paid in PIK Interest (as defined in the Supplemental Indenture) and on subsequent interest payment dates to be payable, at the Company’s option, at a rate of 5.00 % per annum entirely in cash or at a rate of 8.00 % per annum in PIK Interest;

(ii) provide for additional changes to the Indenture to allow for the payment of PIK Interest and for the PIK Securities to be issued in denominations of $ 1,000 and integral multiples thereof (or if PIK Interest has been paid with respect to the PIK Securities, in minimum denominations of $ 1.00 and integral multiples of $ 1.00 in excess thereof);

(iii) clarify that the unmodified Notes and PIK Securities will be treated as a single series of Notes for all purposes under the Indenture, other than the option of the Company to pay PIK Interest on the PIK Securities;

and (iv) make certain conforming changes, including conforming modifications to certain definitions and cross-references as a result of such amendments.

Notes held by holders other than the Consenting Holders were not modified and interest on such Notes will continue to be paid in cash at a rate of 5.00 % per annum as set forth in the Indenture.

As of March 31, 2022 and December 31, 2021, the Notes were recorded in our condensed consolidated balance sheets as follows (in thousands):

March 31, 2022 December 31, 2021

Liability component:

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Carrying amount of the equity component, net of issuance costs 2

$ 7,969 $ 7,969

Carrying amount of the equity component, net of issuance costs 3

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1 Included in the “Long-term debt and finance lease obligations” line of the condensed consolidated balance sheets.

2 Relates to the portion of the Notes accounted for under ASC 470-20 and is included in the “Additional paid-in capital” line of the condensed consolidated balance sheets.

2 Relates to the portion of the Notes accounted for under ASC 815-15 and is included in the “Additional paid-in capital” line of the condensed consolidated balance sheets.

2 Relates to the portion of the Notes accounted for under ASC 470-20 (defined below) and is included in the “Additional paid-in capital” line of the condensed consolidated balance sheets.

3 Relates to the portion of the Notes accounted for under ASC 815-15 (defined below) and is included in the “Additional paid-in capital” line of the condensed consolidated balance sheets.

Under ASC 470-20, Debt with Conversion and Other Options , (“ASC 470-20”), an entity must separately account for the liability and equity components of convertible debt instruments that may be settled entirely or partially in cash upon conversion (such as the Notes) in a manner that reflects the issuer’s economic interest cost.

However, entities must first consider the guidance in ASC 815-15, Embedded Derivatives (“ASC 815-15”), to determine if an instrument contains an embedded feature that should be separately accounted for as a derivative.

As the Notes were initially convertible into more than 19.99 % of our outstanding common stock and shareholder approval in accordance with the NYSE rules (as described above) had not yet been obtained at the time the Notes were issued, we concluded that embedded derivative accounting under ASC 815-15 was applicable to approximately 60 % of the Notes, while the remaining 40 % of the Notes were subject to ASC 470-20.

As a result of obtaining shareholder approval on May 17, 2018, the embedded derivative met the criteria to be classified in stockholders’ equity, effective on the date of the approval.

Accordingly, we recorded the change in fair value of the embedded derivative liability in our results of operations through May 17, 2018 and then reclassified the embedded derivative liability, which totaled $ 45.4 million to stockholders’ equity during the second quarter of 2018.

The related income tax effects of the reclassification charged directly to stockholders’ equity were $ 7.8 million.

As a result of the reclassification to stockholders’ equity, the embedded derivative is no longer marked to fair value each period.

Losses on the embedded derivative liability recognized in the consolidated statements of operations were $ 24.8 million for the twelve months ended December 31, 2018 (incurred in the first and second quarters of 2018).

The following table sets forth interest expense information related to the Notes (dollars in thousands):

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

(unaudited) (unaudited) (unaudited) (unaudited)

(unaudited) (unaudited)

Coupon interest $ 1,568 $ 1,164

Amortization of debt discount and issuance costs 627 766

Total interest expense on Notes $ 1,955 $ 4,660 $ 5,818 $ 13,849

Total interest expense $ 2,195 $ 1,930

Effective interest rate 9.75 % 9.12 %

As of September 30, 2021, the remaining amortization period for the debt discount and issuance costs is 22 months.

ASU 2020-06 Adoption

In August 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity .

The ASU simplifies the accounting for convertible instruments by removing certain separation models in ASC

470-20, Debt—Debt with Conversion and Other Options, for convertible instruments.

The ASU updates the guidance on certain embedded conversion features that are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging , or that do not result in substantial premiums accounted for as paid-in capital, such that those features are no longer required to be separated from the host contract.

The convertible debt instruments will be accounted for as a single liability measured at amortized cost.

This will also result in the interest expense recognized for convertible debt instruments to be typically closer to the coupon interest rate when applying the guidance in Topic 835, Interest.

Further, the ASU made amendments to the EPS guidance in Topic 260 for convertible debt instruments, the most significant impact of which is requiring the use of the if-converted method for diluted EPS calculation, and no longer allowing the net share settlement method.

The ASU also made revisions to Topic 815-40, which provides guidance on how an entity must determine whether a contract qualifies for a scope exception from derivative accounting.

The amendments to Topic 815-40 change the scope of contracts that are recognized as assets or liabilities.

The ASU is effective for interim and annual periods beginning after December 15, 2021, with early adoption permitted for periods beginning after December 15, 2020.

Adoption of the ASU can either be on a modified retrospective or full retrospective basis.

On January 1, 2022, we adopted the ASU using the modified retrospective method.

We recognized a cumulative effect of initially applying the ASU as an adjustment to the January 1, 2022 opening balance of accumulated deficit.

The prior period consolidated financial statements have not been retrospectively adjusted and continue to be reported under the accounting standards in effect for those periods.

Accordingly, the cumulative effect of the changes made on our January 1, 2022 condensed consolidated balance sheet for the adoption of the ASU was as follows (in thousands):

Balances at December 31, 2021 Adjustments from Adoption of ASU 2020-06 Balances at January 1, 2022

Long-term debt and finance lease obligations $ 405,191 $ 1,827 $ 407,018

Additional paid-in capital $ 444,824 $ ( 5,651 ) $ 439,173

Accumulated deficit $ ( 375,584 ) $ 3,824 $ ( 371,760 )

The impact of adoption on our consolidated statements of operations for the three months ended March 31, 2022 was primarily to decrease net interest expense by $ 0.3 million.

This had the effect of decreasing our basic and diluted net loss per share of common stock attributable to common stockholders for the three months ended March 31, 2022 by $ 0.01 .

The change in methodology by requiring the use of the if-converted method to determine the denominator used in the calculation of diluted net income per share of common stock attributable to common stockholders did not have an impact on the diluted EPS as the shares of common stock issuable upon conversion were not included in denominator because of antidilutive effect.

We adopted ASC 842, Leases, effective January 1, 2019 and elected the modified retrospective transition method.

We determine if an arrangement is a lease at inception.

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Operating lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

Variable lease payments and short-term lease payments (leases with initial terms less than 12 months) are expensed as incurred.

Variable lease payments and short-term lease payments (leases with initial terms less than twelve months) are expensed as incurred.

We have lease agreements with lease and non-lease components for certain equipment, office, and vehicle leases.

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We have operating and finance leases primarily for equipment, real estate, and vehicles.

Our leases have remaining lease terms of 1 year to 15 years, some of which may include options to extend the leases for up to 10 years, and some of which may include options to terminate the leases within 1 year.

Our leases have remaining

lease terms of 1 year to 14 years, some of which may include options to extend the leases for up to 10 years, and some of which may include options to terminate the leases within 1 year.

The components of lease expense are as follows (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

(unaudited) (unaudited) (unaudited) (unaudited)

Three Months Ended March 31,

(unaudited) (unaudited)

Operating lease costs $ 6,687 $ 7,239

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Other information related to leases are as follows (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

Three Months Ended March 31,

Supplemental cash flow information:

(unaudited) (unaudited) (unaudited) (unaudited)

Cash paid for amounts included in measurement of lease liabilities

(unaudited) (unaudited)

Cash paid for amounts included in the measurement of lease liabilities

Operating cash flows from operating leases $ 5,405 $ 5,356

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Amounts recognized in the condensed consolidated balance sheet are as follows (in thousands):

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Operating Leases:

2 unchanged sentences

Operating lease obligations (non-current) 45,742 49,221

Weighted average remaining lease term 6.0 years 6.0 years

Weighted average discount rate 6.8 % 6.7 %

September 30, 2021 December 31, 2020

Finance Leases:

2 unchanged sentences

Long-term debt and finance lease obligations 4,840 4,980

Weighted average remaining lease term 10.0 years 12.0 years

Weighted average remaining lease term:

Operating leases 6.0 years 6.0 years

Finance leases 10.0 years 10.0 years

Weighted average discount rate:

As of September 30, 2021, we have no material additional operating and finance leases that have not yet commenced.

As of September 30, 2021, future minimum lease payments under non-cancellable leases (excluding short-term leases) are as follows (in thousands):

Operating leases 6.9 % 6.8 %

Finance leases 6.4 % 6.4 %

As of March 31, 2022, we have no material additional operating and finance leases that have not yet commenced.

As of March 31, 2022, future minimum lease payments under non-cancellable leases (including short-term leases) are as follows (in thousands):

Operating Leases Finance Leases

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Present value of lease liabilities $ 61,048 $ 5,510

EMPLOYEE BENEFIT PLANS

We have a defined benefit pension plan covering certain United Kingdom employees (the “U.K.

Net periodic pension credit includes the following components (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

(unaudited) (unaudited) (unaudited) (unaudited)

Interest cost $ 322 $ 443 970 $ 1,310

Expected return on plan assets ( 504 ) ( 580 ) ( 1,515 ) $ ( 1,715 )

Amortization of prior service cost 9 8 26 $ 24

Net periodic pension credit $ ( 173 ) $ ( 129 ) $ ( 519 ) $ ( 381 )

The expected long-term rate of return on invested assets is determined based on the weighted average of expected returns on asset investment categories for the U.K.

Plan as follows:

2.1 % overall, 4.6 % for equities and 1.4 % for debt securities.

expect to contribute $ 4.1 million to the U.K.

Plan for 2021, of which $ 3.1 million has been contributed through September 30, 2021.

Total rent expense resulting from operating leases, including short-term leases, for the quarter ended March 31, 2022 and December 31, 2021 were $ 20.1 million and $ 39.4 million, respectively.

SHARE-BASED COMPENSATION

We have adopted stock incentive plans and other arrangements pursuant to which our Board of Directors may grant awards which include, but are not limited to, stock options, stock units, common stock or performance awards to officers, directors and key employees.

At September 30, 2021, there were approximately 1.8 million restricted stock units, performance awards and stock options outstanding.

The exercise price, terms and other conditions applicable to each form of share-based compensation under our plans are generally determined by the Compensation Committee of our Board of Directors at the time of grant and may vary.

We have adopted stock incentive plans and other arrangements pursuant to which our Board of Directors (“the Board”) may grant stock options, restricted stock, stock units, stock appreciation rights, common stock or performance awards to officers, directors and key employees.

At March 31, 2022, there were approximately 1.1 million restricted stock units, performance awards and stock options outstanding to officers, directors and key employees.

In May 2021, our shareholders approved the amendment and restatement to the 2018 Team, Inc.

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Equity Incentive Plan.

The amendment and restatement to the 2018 Plan increased the shares available for issuance by 3.0 million shares.

The amendment and restatement to the 2018 Plan increased the shares available for issuance by 3.0 million shares of Common Stock.

Shares issued in connection with our share-based compensation are issued out of authorized but unissued common stock.

Compensation expense related to all share-based awards totaled $ 5.6 million and $ 4.1 million for the nine months ended September 30, 2021 and 2020, respectively.

Compensation expense related to share-based compensation totaled a credit of $ 0.6 million and $ 2.3 million for the three months ended March 31, 2022 and 2021, respectively.

The Company incurred a credit in the current period related to unvested share-based compensation associated with executive departures which exceeded the total costs expensed for the three month period ended March 31, 2022.

Share-based compensation expense reflects an estimate of expected forfeitures.

At September 30, 2021, $ 9.0 million of unrecognized compensation expense related to share-based compensation is expected to be recognized over a remaining weighted-average period of 1.7 years.

At March 31, 2022, $ 3.7 million of unrecognized compensation expense related to share-based compensation is expected to be recognized over a remaining weighted-average period of 1.5 years.

Stock units are settled with common stock upon vesting unless it is not legally feasible to issue shares, in which case the value of the award is settled in cash.

We determine the fair value of each stock unit based on the market price on the date of grant.

Stock units generally vest in annual installments over three to four years and the expense associated with the units is recognized over the same vesting period.

Stock units generally vest in annual installments over three or four years and the expense associated with the units is recognized over the same vesting period.

We also grant common stock to our directors, which typically vests immediately.

Compensation expense related to stock units and director stock grants totaled $ 3.6 million and $ 3.0 million for the nine months ended September 30, 2021 and 2020.

Transactions involving our stock units and director stock grants during the nine months ended September 30, 2021 are summarized below:

Nine Months Ended

September 30, 2021

Compensation expense related to stock units and director stock grants totaled $ 0.6 million and $ 1.5 million for the three months ended March 31, 2022 and 2021.

The weighted-average grant date fair value related to stock units and director stock grants during the periods ended March 31, 2022 and 2021 was $ 1.64 and $ 0.00 , respectively, as no stock units were granted during the prior year period.

Transactions involving our stock units and director stock grants for the three months ended March 31, 2022 are summarized below:

Three Months Ended

March 31, 2022

Units Weighted

(in thousands)

Stock and stock units, beginning of period 854 $ 12.55

Stock and stock units, beginning of year 804 $ 7.27

Changes during the period:

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Settlement occurs with common stock as soon as practicable following the vesting date.

LTPSU awards are subject to a two-year performance period and a concurrent two-year service period.

The performance goals are separated into two independent performance factors based on (i) relative shareholder return (“RTSR”) as measured against a designated peer group and (ii) results of operations over the two-year performance period, with possible payouts ranging from 0 % to 200 % of the target awards for each of the two performance factors.

The LTPSU awards granted in 2019 vested as of March 15, 2021 at the RTSR performance target level of 25 % and the results of operations performance metric at 0 % of the target level.

A total of 19,048 shares, net of shares withheld for taxes, were issued in connection with the achievement of the 25 % performance target.

LTPSU awards granted in 2019 (the “2019 Awards”), in 2020 (the “2020 Awards”) and in 2021 (the “2021 Awards”) are subject to a two-year performance period and a concurrent two-year service period.

For the LTPSU awards, the performance goal is separated into two independent performance factors based on (i) relative shareholder return (“RTSR”) as measured against a designated peer group and (ii) results of operations over the two-year performance period, with possible payouts ranging from 0 % to 200 % of the target awards for each of the two performance factors.

The 2019 Awards vested as of March 15, 2021 at the RTSR performance target level of 25 % and the results of operations performance metric at 0 % of the target level.

The RTSR and the stock price milestone factors are considered to be market conditions under GAAP.

For performance units subject to market conditions, we determine the fair value of the performance units based on the results of a Monte Carlo

simulation, which uses market-based inputs as of the date of grant to simulate future stock returns.

For performance units subject to market conditions, we determine the fair value of the performance units based on the results of a Monte Carlo simulation, which uses market-based inputs as of the date of grant to simulate future stock returns.

Compensation expense for awards with market conditions is recognized on a straight-line basis over the longer of (i) the minimum required service period and (ii) the service period derived from the Monte Carlo simulation, separately for each vesting tranche.

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For these awards, we recognize compensation expense over the vesting term on a straight-line basis based upon the performance target that is probable of being met, subject to adjustment for changes in the expected or actual performance outcome.

Compensation expense related to performance awards totaled $ 1.9 million and $ 1.1 million for the nine months ended September 30, 2021 and 2020, respectively.

Transactions involving our performance awards during the nine months ended September 30, 2021 are summarized below:

Nine Months Ended

September 30, 2021

Compensation expense related to performance awards totaled a credit of $ 1.2 million and $ 0.8 million for the three months ended March 31, 2022 and 2021, respectively.

Transactions involving our performance awards during the three months ended March 31, 2022 are summarized below:

Three Months Ended

March 31, 2022

Performance Units Subject to Market Conditions Performance Units Not Subject to Market Conditions

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Vested and settled — $ — — $ —

Forfeited and cancelled ( 387 ) $ 14.91 ( 135 ) $ 16.65

Cancelled ( 653 ) $ 6.04 ( 188 ) $ 9.61

Performance stock units, end of period 31 $ 11.69 31 $ 11.69

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1 Performance units with variable payouts are shown at target level of performance.

Stock Options.

We determine the fair value of each stock option at the grant date using a Black-Scholes model and recognize the resulting expense of our stock option awards over the period during which an employee is required to provide services in exchange for the awards, usually the vesting period.

There was no compensation expense related to stock options for the periods ended March 31, 2022 or December 31, 2021.

Our options typically vest in equal annual installments over a four-year service period.

Expense related to an option grant is recognized on a straight-line basis over the specified vesting period for those options.

Stock options generally have a ten-year term.

No stock options were granted during the periods ended March 31, 2022 or March 31, 2021, and no options were exercised, cancelled, or expired during the period ended March 31, 2022.

Approximately 17 thousand options were exercisable at March 31, 2022 had a weighted-average remaining contractual life of 0.8 years, and exercise price of $ 37.27 .

EMPLOYEE BENEFIT PLANS

We have a defined benefit pension plan covering certain United Kingdom employees (the “U.K.

Net periodic pension credit includes the following components (in thousands):

Three Months Ended March 31,

(unaudited) (unaudited)

Interest cost $ 422 $ 322

Expected return on plan assets ( 629 ) ( 504 )

Amortization of prior service cost 8 9

Net periodic pension credit $ ( 199 ) $ ( 173 )

The expected long-term rate of return on invested assets is determined based on the weighted average of expected returns on asset investment categories for the U.K.

Plan as follows:

2.1 % overall, 4.6 % for equities and 1.4 % for debt securities.

We expect to contribute $ 3.9 million to the U.K.

Plan for 2022, of which $ 1.0 million has been contributed through March 31, 2022.

ACCUMULATED OTHER COMPREHENSIVE LOSS

A summary of changes in accumulated other comprehensive loss included within shareholders’ equity is as follows (in thousands):

Nine Months Ended

September 30, 2021 Nine Months Ended

September 30, 2020

Three Months Ended

March 31, 2022 Three Months Ended

March 31, 2021

(unaudited) (unaudited)

7 unchanged sentences

$ ( 23,287 ) $ — $ ( 3,277 ) $ ( 169 ) $ ( 26,732 ) $ ( 23,045 ) $ 2,988 $ ( 8,021 ) $ 400 $ ( 27,678 )

Other comprehensive income (loss) ( 2,210 ) — — 536 ( 1,674 ) ( 2,978 ) ( 627 ) — 74 ( 3,531 )

Other comprehensive loss 346 — — — 346 217 — — 102 319

Balance, end of period $ ( 22,940 ) $ — $ ( 3,277 ) $ ( 169 ) $ ( 26,386 ) $ ( 22,828 ) $ 2,988 $ ( 8,021 ) $ 502 $ ( 27,359 )

The following table represents the related tax effects allocated to each component of other comprehensive income (loss) (in thousands):

Nine Months Ended

September 30, 2021 Nine Months Ended

September 30, 2020

Three Months Ended

March 31, 2022 Three Months Ended

March 31, 2021

(unaudited) (unaudited)

Foreign currency translation adjustments 346 — 346 217 102 319

Foreign currency hedge — — — ( 627 ) 155 ( 472 )

Total $ 346 $ — $ 346 $ 217 $ 102 $ 319

COMMITMENTS AND CONTINGENCIES

Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to Team, but which will only be resolved when one or more future events occur or fail to occur.

Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company, which will only be resolved when one or more future events occur or fail to occur.

Team’s management and its legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment.

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If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in our financial statements.

If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed.

If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated,

then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed.

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the nature of the guarantee would be disclosed.

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Plaintiff’s motion for remand was denied, and these matters remain in federal court.

We have established a liability at September 30, 2021 for a probable settlement on this matter.

No assurances can be provided as to the timing, ultimate liability, outcome, or the impact these matters may have on our consolidated financial statements.

In November 2021, the parties agreed in principle to settle all claims in this litigation and all parties entered into a formal settlement agreement in March 2022.

As part of the settlement agreement, the parties have agreed to remand the case to the Los Angeles Superior Court for approval of the settlement.

All class action settlements of this nature are subject to approval of the court, which can take several months after the final settlement agreement is executed by the parties.

The parties anticipate court approval of the settlement agreement in the third quarter of 2022.

Notice of Potential Environmental Violation - On April 20, 2021, Team Industrial Services, Inc.

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Environmental Protection Agency (“EPA”) alleging noncompliance with various waste determination, reporting, training, and planning obligations under the Resource Conservation and Recovery Act at seven of our facilities located in Texas and Louisiana.

Although the matter is at an early stage, we understand the allegations will largely relate to spent film developing solutions generated through our mobile radiographic inspection services and that the claims relate to the characterization and quantities of those wastes and related notices, reporting, training, and planning.

actively engaged with the EPA on this issue but we are unable at this time to estimate any ultimate monetary penalties associated with these preliminary allegations.

The allegations largely relate to spent film developing solutions generated through our mobile radiographic inspection services and that the claims relate to the characterization and quantities of those wastes and related notices, reporting, training, and planning.

On February 9, 2022, TEAM and the EPA agreed to settle all the claims related to this matter and the formal settlement agreement was finalized in April 2022 with our agreement to pay penalties totaling $ 0.2 million.

Kelli Most Litigation - On November 13, 2018, Kelli Most filed a lawsuit against Team Industrial Services, Inc., individually and as a personal representative of the estate of Jesse Henson, in the 268th District Court of Fort Bend County, Texas (the “Most litigation”).

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We have taken into consideration the events that have occurred after the reporting period and before the financial statements were issued.

We currently estimate a range of possible outcomes between $ 13 million and approximately $ 51 million, and we have accrued a liability as of September 30, 2021 which is the amount we believe is the most likely estimate for a probable loss on this matter.

We currently estimate a range of possible outcomes between $ 13 million and approximately $ 51 million, and we have accrued a liability as of March 31, 2022.

which is the amount we believe is the most likely estimate for a probable loss on this matter.

We have also recorded a related receivable from our third-party insurance providers in other current assets with the corresponding liability of the same amount in other accrued liabilities.

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The Most litigation is covered by our general liability and excess insurance policies which are occurrence based and subject to an aggregate $ 3 million self-insured retention and deductible.

All retentions and deductibles have been met, accordingly, we believe pending the final settlement, all further claims will be fully funded by our insurance policies.

All retentions and deductibles have been met, accordingly, we

believe pending the final settlement, all further claims will be fully funded by our insurance policies.

We will continue to evaluate the possible outcomes of this case in light of future developments and their potential impact on factors relevant to our assessment of any possible loss.

On January 25, 2022, the trial court signed a final judgment in favor of the plaintiff and against Team Industrial Services, Inc.

Post-judgment motions challenging the judgment were filed on February 24, 2022 and were denied by the court on April 22, 2022.

A notice of appeal was filed on April 25, 2022, and this case is currently pending in the Court of Appeals for the First District of Texas, in Houston.

Simon, Vige, and Roberts Matter – On February 19, 2019, a personal injury claim was filed by the plaintiffs against several counterparties including Team Industrial Services Inc., in the 295th District Court of Harris County, Texas.

2 unchanged sentences

This claim is covered by our general liability and excess insurance policies which are occurrence based and subject to an aggregate $ 3 million self-insured retention and deductible.

All retentions and deductibles have been met, accordingly this claim has been fully funded by our insurance policies.

Accordingly, for all matters discussed above, we have accrued in the aggregate approximately $ 44 million as of September 30, 2021, of which approximately $ 5 million is not covered by our various insurance policies.

Accordingly, for all matters discussed above, we have accrued in the aggregate approximately $ 44 million as of March 31, 2022, of which approximately $ 5 million is not covered by our various insurance policies.

In addition to legal matters discussed above, we are subject to various lawsuits, claims and proceedings encountered in the normal conduct of business (“Other Proceedings”).

1 unchanged sentence

SEGMENT AND GEOGRAPHIC DISCLOSURES

ASC 280, Segment Reporting , requires us to disclose certain information about our operating segments where operating segments are defined as “components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance.” We conduct operations in three segments:

ASC 280, Segment Reporting , requires we disclose certain information about our operating segments where operating segments are defined as “components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance.” We conduct operations in three segments:

IHT, MS and Quest Integrity.

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Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

(unaudited) (unaudited) (unaudited) (unaudited)

(unaudited) (unaudited)

IHT $ 95,595 $ 91,139

3 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

(unaudited) (unaudited) (unaudited) (unaudited)

(unaudited) (unaudited)

Operating income (loss):

$ 3,065 $ 7,720 $ 10,824 $ ( 179,690 )

( 53,242 ) 9,581 ( 50,799 ) 20,502

IHT $ 134 $ 364

Quest Integrity 6,204 ( 252 )

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Total $ ( 16,203 ) $ ( 24,300 )

_________________

1 Includes goodwill impairment charge for IHT as discussed in Note 8 that impacted operating income (loss) for the nine months ended September 30, 2020.

1 Includes goodwill impairment charge for MS as discussed in Note 8 that impacted operating income (loss) for the nine months ended September 30, 2021.

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

(unaudited) (unaudited) (unaudited) (unaudited)

(unaudited) (unaudited)

Capital expenditures 1 :

IHT $ 4,771 $ 2,714

MS 741 657 3,260 6,720

Quest Integrity 1,009 406

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_____________

1 Totals may vary from amounts presented in the condensed consolidated statements of cash flows due to the timing of cash payments.

1 Excludes finance leases.

Totals may vary from amounts presented in the consolidated statements of cash flows due to the timing of cash payments.

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

(unaudited) (unaudited) (unaudited) (unaudited)

(unaudited) (unaudited)

Depreciation and amortization:

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Total $ 10,031 $ 10,959

Separate measures of Team’s assets by operating segment are not produced or utilized by management to evaluate segment performance.

A geographic breakdown of our revenues for the three and nine months ended September 30, 2021 and 2020 is as follows (in thousands):

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

(unaudited) (unaudited) (unaudited) (unaudited)

Total Revenues:

Separate measures of our assets by operating segment are not produced or utilized by management to evaluate segment performance.

A geographic breakdown of our revenues and our total long-lived assets for the three months ended March 31, 2022 and 2021 is as follows (unaudited, in thousands):

Long-lived Assets 2

Three months ended March 31, 2022

United States $ 151,679 $ 264,946

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Total $ 218,576 $ 307,770

Three months ended March 31, 2021

United States $ 141,832 $ 289,790

Canada 16,494 9,804

Europe 25,711 26,253

Other foreign countries 10,581 9,134

Total $ 194,618 $ 334,981

______________

1 Revenues attributable to individual countries/geographic areas are based on the country of domicile of the legal entity that performs the work.

2 Excludes goodwill, intangible assets not being amortized that are to be held and used, financial instruments and deferred tax assets.

RESTRUCTURING AND OTHER RELATED CHARGES

Our restructuring and other related charges, net are summarized by segment as follows (in thousands):

Our restructuring and other related charges, net for the periods ended March 31, 2022 and 2021 are summarized by segment as follows (in thousands):

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

(unaudited) (unaudited) (unaudited) (unaudited)

(unaudited) (unaudited)

Operating Group Reorganization and other continuing restructuring measures

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IHT $ 16 $ 283

MS 139 — 484 —

Quest Integrity 233

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In connection with the Operating Group Reorganization, we announced certain executive leadership changes and the appointment of experienced new talent to our leadership team.

For the nine months ended September 30, 2021, we incurred severance charges of $ 2.6 million, which represents all costs cumulatively incurred to date as a result of the Operating Group Reorganization.

We expect expenses related to the Operating Group Reorganization to continue through the end of 2021.

For the three months ended March 31, 2022, we incurred severance charges of $ 0.02 million, which represents costs incurred in 2022 as a result of the Operating Group Reorganization.

For the twelve months ended December 31, 2021, we incurred severance charges of $ 2.9 million, which brings the cumulative costs incurred to date as a result of the Operating Group Reorganization of $ 2.9 million.

A rollforward of our accrued severance liability associated with this reorganization is presented below (in thousands):

Nine Months Ended

September 30, 2021

Three Months Ended

March 31, 2022

Balance, beginning of period $ 712

Charges 2,614

Payments ( 371 )

Balance, end of period $ 357

For the three and nine months ended September 30, 2021, we also incurred professional fees of $ 0.2 million and $ 1.7 million associated with the Operating Group Reorganization.

OneTEAM Program

Beginning in 2017, we undertook a project (“OneTEAM”) to assess all aspects of our business for improvement and cost saving opportunities.

We did no t incur any severance costs under OneTEAM during the three and nine months ended September 30, 2021.

During the three and nine months ended September 30, 2020, we incurred $ 0.3 million and $ 3.4 million, respectively, in severance charges associated with OneTEAM.

We have incurred $ 11.8 million of OneTEAM severance charges cumulatively to date, and do not expect any further severance costs under this program.

As of September 30, 2021, we had no remaining severance liability outstanding under OneTEAM.

RELATED PARTY TRANSACTIONS

Alvarez & Marsal provides certain consulting services to the Company in connection with our Interim CFO position and other corporate support costs.

The Company paid $ 8.0 million in fees to Alvarez & Marsal for the year ended December 31, 2021, and $ 3.8 million for the quarter ended March 31, 2022.

In connection with the Company’s debt transactions, the Company engaged in transactions with Corre and Atlantic Park to provide funding as described in Note 11.

SUBSEQUENT EVENTS

Refer to Note 1 for information on the Recent Financing Transactions and Note 11 for information on the amendments to the Term Loan Credit Agreement that we entered into on October 19, 2021, October 29, 2021 and November 9, 2021, and the amendment to the Warrants that we entered into on November 9, 2021.

Refer to Note 1 for information on the Recent Financing Transactions and Note 11 for information on the amendments to the various credit facilities we entered on May 6, 2022.

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