What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-08-15 compared with 2022-05-11 · 376 added, 450 removed, 742 unchanged (53% of the section changed)

3 unchanged sentences

(in thousands, except share and per share data)

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

ASSETS (unaudited)

30 unchanged sentences

Common stock, par value $ 0.30 per share, 60,000,000 shares authorized;

43,121,579 and 31,214,714 shares issued

43,223,879 and 31,214,714 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively

Additional paid-in capital 445,210 444,824

8 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

Revenues $ 251,265 $ 238,873 $ 469,841 $ 433,491

7 unchanged sentences

Loss before income taxes ( 19,784 ) ( 16,636 ) ( 51,890 ) ( 51,282 )

(Provision) benefit for income taxes ( 356 ) 355

Provision for income taxes ( 1,768 ) ( 857 ) ( 2,124 ) ( 502 )

Net loss $ ( 21,552 ) $ ( 17,493 ) $ ( 54,014 ) $ ( 51,784 )

9 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

Net loss $ ( 21,552 ) $ ( 17,493 ) $ ( 54,014 ) $ ( 51,784 )

2 unchanged sentences

Other comprehensive income (loss), before tax ( 5,463 ) 657 ( 5,117 ) 874

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

Other comprehensive loss, net of tax 346 319

Tax provision attributable to other comprehensive income (loss) — ( 257 ) — ( 155 )

Other comprehensive income (loss), net of tax ( 5,463 ) 400 ( 5,117 ) 719

Total comprehensive loss $ ( 27,015 ) $ ( 17,093 ) $ ( 59,131 ) $ ( 51,065 )

17 unchanged sentences

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

Net loss — — — ( 21,552 ) — ( 21,552 )

Issuance of Common Stock 102 31 ( 102 ) ( 71 )

Foreign currency translation adjustment, net of tax — — — — ( 5,463 ) ( 5,463 )

Non-cash compensation — — 565 — — 565

Balance at June 30, 2022 43,224 $ 12,962 $ 445,210 $ ( 425,774 ) $ ( 31,849 ) $ 549

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

4 unchanged sentences

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

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

See accompanying notes to unaudited condensed consolidated financial statements.

2 unchanged sentences

(in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows (used in) provided by operating activities:

2 unchanged sentences

Depreciation and amortization 19,609 21,306

Write-off of deferred loan costs 2,748 —

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

Write-off of deferred financing costs 2,748 —

Amortization of deferred financing costs, debt issuance costs, and debt warrant discounts 12,077 4,154

Paid-in-kind interest 9,962 —

Allowance for credit losses 30 965

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

Foreign currency losses 569 2,341

Deferred income taxes ( 357 ) ( 2,318 )

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

(Gain) loss on asset disposals ( 3,532 ) 309

Non-cash compensation (credits) costs ( 59 ) 4,468

13 unchanged sentences

Cash flows (used in) provided by financing activities:

Borrowings under ABL Credit Agreement, gross 104,924 —

Payments under ABL Credit Agreement, gross ( 235 ) —

Borrowings under ABL Facility, net — 28,000

Borrowings under ABL Facility, gross 10,300 47,000

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

Borrowings under ABL Credit Facility (Eclipse) 104,641 —

Payments under ABL Credit Facility (Eclipse) ( 1,588 ) —

Borrowings under Corre Delayed Draw Term Loans (ABL Credit Facility (Corre)) 25,000 —

Borrowings under ABL Facility (Citibank), net — 49,300

Borrowings under ABL Facility (Citibank), gross 10,300 95,200

Payments under ABL Facility (Citibank), gross ( 72,300 ) ( 104,200 )

Payments for debt issuance costs ( 10,640 ) ( 2,326 )

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

Issuance of common stock 9,696 —

Taxes paid related to net share settlement of share-based awards — ( 102 )

Other ( 323 ) ( 206 )

1 unchanged sentence

Effect of exchange rate changes on cash and cash equivalents ( 382 ) 73

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

Net increase (decrease) in cash and cash equivalents 2,131 ( 6,231 )

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

15 unchanged sentences

and mechanical services to repair, rerate or replace based upon the client’s election.

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.

In addition, we are capable of scaling 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 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 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.

IHT provides conventional and advanced non-destructive testing (“NDT”) services primarily for the process, pipeline and power sectors, and 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.

21 unchanged sentences

• Aerospace and Defense.

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.

The impact of the COVID-19 pandemic continues to affect our workforce and operations, as well as the operations of our clients, suppliers and contractors.

During this period, we have continued to focus on the following key priorities:

• the health and safety of our employees and business continuity;

• the alignment of our business to the near-term market dynamics and demand for our services;

• our end market revenue diversification strategy.

The ultimate duration and economic impact of the COVID-19 pandemic remains unclear.

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-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.

The COVID-19 pandemic has impacted our workforce and operations, as well as the operations of our clients, suppliers and contractors.

We continue to be affected by the direct and indirect impact of the pandemic and global economic conditions on operating expenses, staffing and supply chain management.

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.

As of December 31, 2021 we had $ 14.1 million of deferred employer payroll taxes outstanding and we paid $ 7.0 million of the deferred payroll taxes in January 2022, the

remaining balance at June 30, 2022 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.

We recognized no reduction to either our operating expenses or our selling, general and administrative expenses during the three months ended June 30, 2022, compared to $ 1.8 million and $ 0.3 million, respectively, during three months ended June 30, 2021.

We recognized a reduction of $ 0.6 million and $ 0.1 million to our operating expenses and our selling, general and administrative expenses, respectively, during the six months ended June 30, 2022, and $ 3.8 million and $ 0.7 million, respectively during the six months ended June 30, 2021.

Inflation rates and currency exchange rates continue to have an effect on worldwide economies and, consequently, on the way the Company operates.

The Company continues to monitor these situations and take appropriate actions.

In the face of increasing costs, the Company strives to maintain its profit margins through cost reduction programs, productivity improvements and periodic price increases.

We are carefully monitoring impacts from inflation, supply chain challenges and slowing economic conditions.

For further information regarding the risks we face relating to inflation, see "Risk Factors - We may experience inflationary pressures in our operating costs and cost overruns on our projects" in our Annual Report on Form 10-K for the year ended December 31, 2021.

Ukraine Conflict.

The Company does not have employees or operations in Russia or Ukraine.

Sanctions and other trade controls imposed by the United States and other governments in response to Russia’s military operations in Ukraine could impact our supply chain in future periods.

While it is difficult to estimate the impact of current or future sanctions on the Company’s business and financial position, these sanctions could adversely impact the Company’s sales, cost of procuring raw materials, or distribution costs in future periods.

Basis for presentation.

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

generally accepted accounting principles (GAAP).

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.

1 unchanged sentence

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, 2021 as filed with the Securities and Exchange Commission.

These financial statements should be read in conjunction with the condensed 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.

2 unchanged sentences

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 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 below) 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.

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.

Liquidity and Going Concern.

These condensed consolidated financial statements have been prepared in accordance with GAAP and assuming the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business for the twelve-month period following the issue date of these unaudited condensed consolidated financial statements.

Our ability to continue as a going concern is dependent on many factors, including among other things, our ability to comply with the covenants in our debt agreements, our ability to cure any defaults that occur under our debt agreements, or forbearances with respect to any such defaults, and our ability to pay, retire, amend, replace or refinance our indebtedness as defaults occur or as interest and principal payments come due.

Liquidity risk is the risk that we will be unable to meet our financial obligations as they become due.

Our liquidity may be affected by improvements and declines in commodity prices, our segments operational performance, and our ability to access capital and credit markets.

We evaluated the Company’s liquidity within one year after the date of issuance of these unaudited 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.

The cash flow projections were based on known or planned cash requirements for operating and financing costs and include management’s best estimate regarding future customer activity levels, pricing for its services and for its supplies and other factors.

Actual results could vary significantly from those projections.

We do not believe, based on the Company’s forecast that current working capital, cash flow from operations, 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 5.00 % Convertible Senior Notes are due on August 1, 2023 (the "Notes") and have a principal balance of $ 95.2 million.

We are exploring alternatives to reduce or refinance the Notes outstanding balance, including extending the maturity.

However, there is no assurance that we will be able to execute a reduction, extension, or refinancing of the Notes or that the terms of any replacement financing would be as favorable as the terms of the Notes prior to the maturity date.

Under the terms of our amended financing arrangements that were entered into during 2022, the Maturity Reserve Trigger Date, as defined in the ABL Credit Agreement (as defined herein), and the Maturity Trigger Date as defined in the Term Loan Credit Agreement (as defined herein), collectively referred to as the “Trigger Date” is now May 18, 2023.

Therefore, the Notes balance must be paid down to $ 10.0 million by May 18, 2023, or the Company must have equivalent cash on hand to pay down the Notes to $ 10.0 million.

The failure to pay down the Notes by the Trigger Date would be an event of default under our Term Loan Credit Agreement (as defined herein), Subordinated Term Loan Credit Agreement, ABL Credit Facility, and Corre Delayed Draw Term Loan (as defined herein) since these instruments contain cross default provisions, resulting in these debt instruments becoming payable on demand.

Refer to Note 11 - Debt for more information on the terms and maturity dates of our debt that may affect our future liquidity.

As of June 30, 2022, we are in compliance with our debt covenants.

However, without the consummation of a refinancing transaction or agreement to extend the Notes maturity date, there is a risk that the Company could be, among other things, unable to make principal payments on the Notes to satisfy the Trigger Date provision.

Failure to pay down the principal on the Notes to $ 10.0 million by May 18, 2023 will result in an event of default and the associated cross defaults noted above under the Company’s other debt instruments.

As a result of our current financial resources and no guarantee that we will be able to obtain an extension or amend the financial covenants contained therein, we intend to refinance the Notes.

Any such refinancing may include the issuance of additional notes, common or preferred stock or a combination thereof.

However, there is no assurance that we will be able to execute this refinancing or repayment prior to the Trigger Date, and as such, substantial doubt exists that we have the ability to continue as a going concern.

We are evaluating and will continue to explore strategic alternatives to a refinancing transaction or the reduction of the debt, including negotiating amendments to our credit facilities and the financial covenants contained therein, the sale of assets, or other alternative financing transactions.

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

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

On August 15, 2022, Team announced it has executed a definitive purchase and sale agreement with Baker Hughes to sell Quest Integrity for $ 280.0 million, before customary post-closing adjustments.

Post-closing of this transaction Team’s expects its liquidity and debt profile to be significantly improved, refer to Note 20 - Subsequent Events for additional details regarding this transaction.

Use of estimates.

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.

We review significant estimates and judgments affecting our consolidated financial statements on a recurring basis and record the effect of any necessary adjustments prior to their publication.

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

We review significant estimates and judgments affecting our condensed consolidated financial statements on a recurring basis and record the effect of any necessary adjustments prior to their publication.

Estimates and judgments are based on information available at the time such estimates and judgments are made.

1 unchanged sentence

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

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.

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 workers’ compensation, auto, medical, and general liability, (4) establishing an allowance for uncollectible accounts receivable, (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.

Our most significant accounting policies are described below.

7 unchanged sentences

We are able to classify fair value balances based on the observability of those inputs.

ASC 820 establishes a fair value hierarchy such that “Level 1” measurements include unadjusted quoted market prices for identical assets or liabilities in an active market, “Level 2” measurements include quoted market prices for identical assets or liabilities in an active market which have been adjusted for items such as effects of restrictions for transferability and those that are not quoted but are observable through corroboration with observable market data, including quoted market prices for similar assets, and “Level 3” measurements include those that are unobservable and of a highly subjective measure.

ASC 820 establishes a fair value hierarchy such that “Level 1” measurements include unadjusted quoted market prices for identical assets or liabilities in an active market, “Level 2” measurements include quoted market prices for identical assets or liabilities in an active market which have been adjusted for items such as effects of restrictions for transferability and those that are not quoted but are observable through corroboration with observable market data, including quoted market prices for similar assets, and “Level 3” measurements include inputs that are unobservable and of a highly subjective measure.

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

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.

The fair value of our ABL Credit Facility and Term Loans 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 Notes as of June 30, 2022 and December 31, 2021 is $ 95.2 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 - Debt .

Cash and cash equivalents .

21 unchanged sentences

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.

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.

4 unchanged sentences

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.

Intangible assets with finite lives are amortized over their respective estimated useful lives to their estimated residual values and reviewed for impairment in accordance with ASC 360- 10 Impairment or Disposal of Long-Lived Assets (“ASC 360”).

There was no impairment recorded for long-lived assets as of June 30, 2022.

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.

As of June 30, 2022, the only Company segment with goodwill was Quest Integrity, which goodwill is related to historical 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.

We test our goodwill for impairment annually on December 1 of each year and whenever we become aware of an event or a change in circumstances that would indicate the carrying value may be impaired.

There was no goodwill impairment recorded for the six-month period ended June 30, 2022.

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.

As part of the process of preparing our condensed 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.

14 unchanged sentences

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.

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 $ 2.0 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 general liability claims, we have an effective self-insured retention of $ 6.0 million per occurrence.

For medical claims, our self-insured retention is $ 0.4 million per individual claimant determined on an annual basis.

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

11 unchanged sentences

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.

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

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 (the “conversion spread”).

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.

For the three and six months ended June 30, 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 and six months ended June 30, 2022 and 2021, potential shares issuable upon the conversion of 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 - Debt and Note 14 - Employee Benefit Plans , 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,

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

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

Assets acquired under finance lease $ 77 $ 384 $ 100 $ 406

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.

Also, we had $ 3.0 million and $ 1.5 million of accrued capital expenditures as of June 30, 2022 and June 30, 2021, respectively, which are excluded from the condensed consolidated statements of cash flows until paid.

Foreign currency .

4 unchanged sentences

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.

There were no foreign currency swap contracts outstanding during the three and six months ended June 30, 2022.

Defined benefit pension plans.

1 unchanged sentence

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 discount rates, expected investment return on plan assets, mortality rates and retirement rates are determined based on reference to yields, and are reviewed annually and considered for adjustment to reflect current market conditions.

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.

7 unchanged sentences

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.

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.

3 unchanged sentences

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.

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

Accounting Standards Not Yet Adopted

4 unchanged sentences

The amendments in ASU 2020-04 are effective for all entities as of March 12, 2020 through December 31, 2022.

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.

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

We do not expect our adoption of these ASUs to have a significant impact on our consolidated financial position, results of operations, and cash flows.

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

7 unchanged sentences

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.

12 unchanged sentences

Geographic area:

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

Three Months Ended June 30, 2022 Three Months Ended June 30, 2021

(unaudited) (unaudited)

4 unchanged sentences

Total $ 207,858 $ 43,407 $ 251,265 $ 196,617 $ 42,256 $ 238,873

Three Months Ended March 31, 2022

Six Months Ended June 30, 2022 Six Months Ended June 30, 2021

(unaudited) (unaudited)

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

IHT $ 204,919 $ 4,802 $ 209,721 $ 204,059 $ 4,542 $ 208,601

MS 141,614 59,243 200,857 125,349 59,214 184,563

Quest Integrity 33,324 25,939 59,263 25,535 14,792 40,327

Total $ 379,857 $ 89,984 $ 469,841 $ 354,943 $ 78,548 $ 433,491

Operating segment and service type:

Three Months Ended June 30, 2022

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

3 unchanged sentences

Total $ 121,426 $ 106,846 $ 15,843 $ 7,150 $ 251,265

Three Months Ended March 31, 2021

Three Months Ended June 30, 2021

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

3 unchanged sentences

Total $ 116,535 $ 97,356 $ 17,275 $ 7,707 $ 238,873

For additional information on our reportable operating segments and geographic information, refer to Note 17.

Six Months Ended June 30, 2022

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

IHT $ 168,152 $ 139 $ 29,626 $ 11,804 $ 209,721

MS — 198,501 113 2,243 200,857

Quest Integrity 59,263 — — — 59,263

Total $ 227,415 $ 198,640 $ 29,739 $ 14,047 $ 469,841

Six Months Ended June 30, 2021

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

IHT $ 163,820 $ 288 $ 30,722 $ 13,771 $ 208,601

MS — 183,125 697 741 184,563

Quest Integrity 40,327 — — — 40,327

Total $ 204,147 $ 183,413 $ 31,419 $ 14,512 $ 433,491

For additional information on our reportable operating segments and geographic information, refer to Note 17 - Segment and Geographic Disclosures .

Contract balances.

2 unchanged sentences

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

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

Refer to Note 1 - Summary of Significant Accounting Policies and Practices and Note 3 – Receivables 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.

3 unchanged sentences

Contract assets and contract liabilities are generally classified as current.

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

The following table provides information about trade accounts receivable, contract assets and contract liabilities as of June 30, 2022 and December 31, 2021 (in thousands):

June 30, 2022 December 31, 2021 Change

Trade accounts receivable, net 1

6 unchanged sentences

1 Includes billed and unbilled amounts, net of allowance for credit losses.

See Note 3 for details.

See Note 3 - Receivables for details.

2 Included in the “Prepaid expenses and other current assets” line on the condensed consolidated balance sheets.

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

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.

The $ 0.5 million decrease in our contract assets from December 31, 2021 to June 30, 2022 is due to less fixed price contracts in progress at June 30, 2022 as compared to December 31, 2021.

Contract liabilities increased by $ 1.0 million as of June 30, 2022.

The increase is associated with contracts under which customers have paid 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.

Accordingly, essentially all of the contract liability balance at December 31, 2021 was recognized as revenue by the six months ended June 30, 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.

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.

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 March 31, 2022 and December 31, 2021.

Costs to fulfill a contract are recorded as assets if they relate directly to a contract or a specific anticipated contract, the costs are 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 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.

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

1 unchanged sentence

Remaining performance obligations.

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

As of June 30, 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 June 30, 2022 and December 31, 2021 is as follows (in thousands):

June 30, 2022 December 31, 2021

Trade accounts receivable $ 178,174 $ 161,751

27 unchanged sentences

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

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

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

3 unchanged sentences

Balance at end of period $ 6,747 $ 8,912

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

March 31, 2022 December 31, 2021

A summary of inventory as of June 30, 2022 and December 31, 2021 is as follows (in thousands):

June 30, 2022 December 31, 2021

Raw materials $ 8,233 $ 7,641

3 unchanged sentences

PREPAID AND OTHER CURRENT ASSETS

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

A summary of prepaid and other current assets as of June 30, 2022 and December 31, 2021 is as follows (in thousands):

June 30, 2022 December 31, 2021

Insurance receivable $ 39,000 $ 39,000

2 unchanged sentences

Total $ 70,424 $ 59,868

The insurance receivable relates to the receivable from our third-party insurance providers for a legal claim that is recorded in other accrued liabilities, refer to Note 9.

The insurance receivable relates to the receivable from our third-party insurance providers for a legal claim that is recorded in other accrued liabilities, refer to Note 9 - Other Accrued Liabilities .

These receivables will be covered by our third-party insurance providers for a litigation matter that has been settled, or are pending settlements where the deductibles have been satisfied.

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, receivable from third party, and other accounts receivables.

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

As of June 30, 2022 the other current assets also includes the deferred financing cost amounting to $ 6.6 million due to all long term debts now classified as current (see Note 11 - Debt for additional details), and a portion of the MS segment’s land, building and leasehold improvement assets held for sale with a net book value of $ 0.9 million with anticipated sale closing prior to December 31, 2022.

Historically these assets were presented in the other assets, net, and property, plant and equipment section respectively of the balance sheet, and comparative periods were not adjusted.

PROPERTY, PLANT AND EQUIPMENT

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

A summary of property, plant and equipment as of June 30, 2022 and December 31, 2021 is as follows (in thousands):

June 30, 2022 December 31, 2021

Land $ 4,552 $ 5,743

9 unchanged sentences

Property, plant and equipment, net $ 157,039 $ 161,359

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.

Included in the table above are assets under finance leases of $ 6.2 million and $ 6.7 million, and accumulated amortization of $ 1.8 million and $ 1.6 million as of June 30, 2022 and December 31, 2021, respectively.

Depreciation expense for the three months ended June 30, 2022 and 2021 was $ 6.2 million and $ 6.8 million, respectively.

Depreciation expense for the six months ended June 30, 2022 and 2021 was $ 12.8 million and $ 14.3 million, respectively.

INTANGIBLE ASSETS

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

A summary of intangible assets as of June 30, 2022 and December 31, 2021 is as follows (in thousands):

June 30, 2022 December 31, 2021

Amount Accumulated

8 unchanged sentences

Total $ 213,445 $ ( 130,229 ) $ 83,216 $ 214,095 $ ( 124,197 ) $ 89,898

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 of intangible assets for the three months ended June 30, 2022 and June 30, 2021 was $ 3.4 million and $ 3.6 million, respectively.

Amortization expense of intangible assets for the six months ended June 30, 2022 and June 30, 2021 was $ 6.8 million and $ 7.0 million, respectively.

Amortization expense for intangible assets is forecast to be approximately $ 13.1 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

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.

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.

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):

The weighted-average amortization period for intangible assets subject to amortization was 13.7 years as of June 30, 2022 and December 31, 2021.

The following table presents a rollforward of goodwill for the six months ended June 30, 2022 as follows (in thousands):

IHT MS Quest Integrity Consolidated

2 unchanged sentences

FX Adjustments — — — — — — ( 696 ) — ( 696 ) ( 696 ) — ( 696 )

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

Balance at June 30, 2022 $ 212,928 $ ( 212,928 ) $ — $ 109,938 $ ( 109,938 ) $ — $ 33,342 $ ( 8,795 ) $ 24,547 $ 356,208 $ ( 331,661 ) $ 24,547

See Note 1 - Summary of Significant Accounting Policies and Practices for further information.

OTHER ACCRUED LIABILITIES

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

A summary of other accrued liabilities as of June 30, 2022 and December 31, 2021 is as follows (in thousands):

June 30, 2022 December 31, 2021

Legal and professional accruals $ 46,334 $ 46,762

6 unchanged sentences

Total $ 128,757 $ 121,099

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.

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

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 - Prepaid and Other Current Assets .

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 $ 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

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

We recorded an income tax provision of $ 1.8 million and $ 2.1 million for the three and six months ended June 30, 2022 compared to a provision of $ 0.9 million and $ 0.5 million for the three and six months ended June 30, 2021.

The effective tax rate, inclusive of discrete items, was a provision of 9.0 % for the three months ended June 30, 2022, compared to a provision of 5.1 % for the three months ended June 30, 2021.

For the six months ended June 30, 2022, our effective tax rate, inclusive of discrete items, was a provision of 4.1 %, compared to a provision of 1.0 % for the six months ended June 30, 2021.

Our effective tax rate differed from the statutory tax rate due to an increase in the valuation allowance in certain foreign jurisdictions.

The effective tax rate in the prior year was also impacted by the tax benefits recognized related to the CARES Act.

The lack of going concern basis applicable for our second quarter financial statements generally requires a valuation allowance for all deferred tax assets that are not realizable through the reversal of existing timing differences or taxable income in carryback years.

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 generate future income.

As a result, the Company included a charge of $ 0.8 million in income tax expense for the valuation allowance required to offset the remaining net deferred tax assets.

The $ 0.8 million charge is primarily attributable to our Germany and Canada subsidiaries.

Refer to Note 1 - Summary of Significant Accounting Policies and Practices for additional liquidity and going concern discussion.

For the period ended June 30, 2022 debt with original maturities greater than one year are classified as current due to the Trigger Date provision.

This provision did not impact classification of debt for the period ended December 31, 2021.

Refer to Note 1 - Summary of Significant Accounting Policies and Practices for additional liquidity and going concern discussion.

Team’s current and long-term debt obligations consisted of the following (in thousands):

June 30, 2022 December 31, 2021

ABL Facilities $ 128,053 $ 62,000

Term Loan 216,043 214,191

Atlantic Park Term Loan 224,473 214,191

Subordinated Term Loan

41,845 36,358

Total $ 394,371 $ 312,549

Convertible Debt 1

92,178 87,662

6 unchanged sentences

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.

On August 15, 2022, Team announced it has executed a definitive purchase and sale agreement with Baker Hughes to sell Quest Integrity for $ 280.0 million, before customary post-closing adjustments.

Post-closing of this transaction Team’s expects its liquidity and debt profile to be significantly improved, refer to Note 20 - Subsequent Events for additional details regarding this transaction.

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.

On February 11, 2022, we entered into a new 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 us 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 “Corre Delayed Draw Term Loans”) to be provided by Corre Partners Management, LLC and certain of its affiliates (“Corre”) (collectively, the “ABL Credit Facility”).

The proceeds of the loans under the ABL Credit Facility were used to, among other things, pay off the amounts owed under that certain asset-based credit agreement (such agreement, as amended, restated, supplemented or otherwise modified from time to time, the “Citi Credit Agreement”) led by Citibank, N.A.

(“Citibank”), as agent, which was repaid and terminated in full on February 11, 2022.

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.

However, the ABL Credit Facility is subject to the Trigger Date as noted above in Note 1 - Summary of Significant Accounting Policies and Practices .

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, as defined in the ABL Credit Agreement.

The interest rate at June 30, 2022 was 5.71 % for Eclipse and 11.06 % for the Corre Delayed Draw Term Loans.

Direct and incremental costs associated with the issuance of the ABL Credit Facility were approximately $ 8.3 million and were capitalized as deferred financing costs.

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

Unamortized deferred financing cost amounted to $ 6.6 million and $ 2.9 million at June 30, 2022 and December 31, 2021, respectively.

Additionally, the amortization period for deferred financing costs and debt discounts and issuance cost was updated to reflect the revised maturity date associated with the Trigger date provision and the related reclassification of debt as current.

Refer to Note 1 - Summary of Significant Accounting Policies and Practices for additional liquidity and going concern discussion.

At June 30, 2022, Team had $ 103.1 million outstanding under the Revolving Credit Loans and $ 25.0 million outstanding under the Corre Delayed Draw Term Loans.

As of June 30, 2022, subject to the applicable sublimit and other terms and conditions, the remaining $ 4.5 million of available commitments under the ABL Credit Facility was available for loans or for issuance of new letters of credit.

Amendments in 2022.

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.

1 which, among other things, modified the Maturity Reserve Trigger Date (as defined in the ABL Credit Agreement and Note 1 - Summary of Significant Accounting Policies and Practices ) 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 rather than 120 days.

Under the terms of our amended financing arrangements the “Trigger Date” is now May 18, 2023, by which date, the Notes balance must be paid down to $ 10.0 million, or the Company must have equivalent cash on hand to pay down the Notes to $ 10.0 million.

Atlantic Park 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.

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.

On December 18, 2020, we entered into certain Term Loan Credit Agreement (the “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, such that total proceeds received were $ 242.5 million.

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 under certain conditions, 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, 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 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.

The effective interest rate on the Term Loan at June 30, 2022 and December 31, 2021 was 23.85 % and 20.90 %, respectively.

The increase in the effective interest rate of 2.95 % for the six months ended June 30, 2022 is due to the acceleration of the debt issuance costs triggered by the reclassification of the long term debt to current.

The unamortized balances of debt discounts, warrant discount and debt issuance cost amounted to $ 31.7 million and $ 35.8 million at June 30, 2022 and December 31, 2021, respectively.

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 Trigger Date, in which case the Term Loan will terminate on the Trigger Date.

The debt is classified as current due to the Trigger Date noted above.

Amendments in 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;

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 required 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 would 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.

1 unchanged sentence

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

Subordinated Term Loan Credit Agreement

The Seventh Amendment, among other things and subject to the terms thereof, (i) modified 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 is increased from 7.00 to 1.00 to 12.00 to 1.00.

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 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.

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 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.

Effective interest rate at June 30, 2022 and December 31, 2021 was 46.79 % and 19.73 %, respectively.

The increase in the effective interest rate of 27.06 % for the six months ended June 30, 2022 is due to the acceleration of the debt issuance costs triggered by the reclassification of the long term debt to current.

The unamortized debt issuance cost amounted to $ 11.6 million and $ 13.9 million at June 30, 2022 and December 31, 2021, respectively.

Amendments in 2022.

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;

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, that, among other things, provided for an additional commitment of $ 10.0 million in subordinated delayed draw term loans to be available for borrowing by the Company until October 31, 2022 (as amended by Amendment No.

7 as described further below).

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.

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

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

On June 27, 2022, we entered into Amendment No.

7 to the Subordinated Term Loan Credit Agreement with the lenders from time to time party thereto (including Corre), and Cantor Fitzgerald Securities, as agent, that, among other things, extended availability date for additional commitment of $ 10.0 million in subordinated delayed draw term loans from July 1, 2022 to October 31, 2022.

On December 18, 2020, in connection with the execution of the Term Loan, we issued to APSC warrants 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”).

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.

2021, providing for the purchase of an aggregate of 1,417,051 shares of our common stock) and to reduce the exercise price to $ 1.50 per share.

As of June 30, 2022 no warrants have been exercised.

Subscription 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”).

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.

Holders may convert their Notes at their option prior to the close of business on the business day immediately preceding May 1, 2023, but only under the following circumstances:

• during any calendar quarter commencing after the calendar quarter ending on December 31, 2017 (and only during such calendar quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price on each applicable trading day;

• during the five -business day period after any five consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of Notes for each trading day of such measurement period was less than 98 % of the product of the last reported sale price of our common stock and the conversion rate on such trading day;

• if we call any or all of the Notes for redemption, at any time prior to the close of business on the business day immediately preceding the redemption date;

• upon the occurrence of specified corporate events described in the indenture governing the Notes.

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.

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.

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

Pursuant to and subject to the terms and conditions of the Subscription Agreement, our Board of Directors (the “Board”) 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.

This nominee has been appointed to the Board and this condition will remain active as long as the Subscription Agreements remains outstanding.

Amendments in 2022.

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 $ 52.0 million in aggregate principal amount of the Notes (such modified Notes, the “PIK Securities”).

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

In December 2020, we retired $ 136.9 million par value of our Notes, and as of June 30, 2022, the principal amount outstanding was $ 95.2 million.

As of June 30, 2022 and December 31, 2021, the Notes were recorded in our condensed consolidated balance sheets as follows (in thousands):

June 30, 2022 December 31, 2021

Liability component:

9 unchanged sentences

_________________

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

1 Included in the “Current portion of 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 (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

(unaudited) (unaudited)

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

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

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

Coupon interest $ 1,595 $ 1,164 $ 3,177 $ 2,328

4 unchanged sentences

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 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.

14 unchanged sentences

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.

The impact of adoption on our consolidated statements of operations for the six months ended June 30, 2022 was primarily to decrease net interest expense by $ 0.6 million.

This had the effect of decreasing our basic and diluted net loss per share of common stock attributable to common stockholders for the six months ended June 30, 2022 by $ 0.01 .

Deferred Financing Costs, Debt and Warrant Discounts and Debt Issuance Cost

As referenced above, all debt with original maturities greater than one year are classified as current as of June 30, 2022 due to the Trigger Date provisions.

As of June 30, 2022 and December 31, 2021, capitalized deferred financing costs, inclusive of debt issuance costs and discounts, net of accumulated amortization, related to Team’s outstanding debt were $ 53.0 million and $ 58.0 million.

Due to the Trigger Date provisions, the amortization period for deferred financing costs, debt and warrant discounts and debt issuance costs was updated to reflect the accelerated maturity dates.

This resulted in additional amortization charges of $ 4.6 million during the six months ended June 30, 2022.

Refer to Note 1 - Summary of Significant Accounting Policies and Practices for additional liquidity and going concern discussion.

At June 30, 2022, we had $ 41.1 million of unrestricted cash and cash equivalents and $ 26.3 million of restricted cash held as collateral for letters of credit and commercial card programs.

International cash balance at June 30, 2022 was $ 21.8 million, and approximately $ 1.5 million of cash is located in countries where currency restrictions exist.

We had approximately $ 24.5 million in additional borrowing capacity, consisting of $ 4.5 million of available under the ABL Credit Facility, $ 10.0 million available under the incremental delayed draw term loan (the “Delayed Draw Term Loans”), and $ 10.0 million available under the Subordinated Term Loan.

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

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

Refer to Note 1 - Summary of Significant Accounting Policies and Practices for additional liquidity and going concern discussion.

Refer to Note 20 - Subsequent Events for draw activity occurring subsequent to the period ended June 30, 2022.

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

10 unchanged sentences

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

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.

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 March 31,

(unaudited) (unaudited)

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

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

Operating lease costs $ 6,334 $ 7,021 $ 13,021 $ 14,260

5 unchanged sentences

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

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

Supplemental cash flow information:

(unaudited) (unaudited)

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

Cash paid for amounts included in the measurement of lease liabilities

6 unchanged sentences

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

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Operating Leases:

4 unchanged sentences

Property, plant and equipment, net $ 4,412 $ 5,123

Current portion of long-term debt and finance lease obligations 670 669

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

Current portion of long-term finance lease obligations 655 669

Long-term finance lease obligations 4,656 4,980

Weighted average remaining lease term:

4 unchanged sentences

Finance leases 6.5 % 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):

As of June 30, 2022, we have no material additional operating and finance leases that have not yet commenced.

As of June 30, 2022, future minimum lease payments under non-cancellable leases (including short-term leases) are as follows (in thousands):

Operating Leases Finance Leases

9 unchanged sentences

Present value of lease liabilities $ 57,479 $ 5,311

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 (“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.

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 at the time of grant and may vary.

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

We have adopted stock incentive plans and other arrangements pursuant to which 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 June 30, 2022, there were approximately 1.2 million restricted stock units, performance awards and stock options outstanding to officers, directors and key employees.

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 the Board at the time of grant and may vary.

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

Equity Incentive Plan (the “2018 Plan”).

1 unchanged sentence

Equity Incentive Plan.

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

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

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

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.

Compensation expense related to share-based compensation totaled $ 0.6 million and $ 2.1 million for the three months ended June 30, 2022 and 2021, respectively.

Compensation expense related to share-based compensation totaled a credit of $ 0.1 million and an expense of $ 4.4 million for the six months ended June 30, 2022 and 2021, respectively.

The Company incurred a credit in the period related to unvested share-based compensation associated with executive departures which exceeded the total costs expensed for the six month period ended June 30, 2022.

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

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.

At June 30, 2022, $ 2.9 million of unrecognized compensation expense related to share-based compensation is expected to be recognized over a remaining weighted-average period of 1.4 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.

2 unchanged sentences

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

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

There were no stock awards granted to directors during the three and six months ended June 30, 2022.

Compensation expense related to stock units and director stock grants totaled $ 1.2 million and $ 3.3 million for the six months ended June 30, 2022 and 2021.

Transactions involving our stock units and director stock grants for the six months ended June 30, 2022 are summarized below:

Six Months Ended

June 30, 2022

Units Weighted

12 unchanged sentences

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.

There were no LTPSU awards granted during the three and six months ended June 30, 2022.

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.

6 unchanged sentences

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 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

Compensation expense related to performance awards totaled a credit of $ 1.3 million and expense of $ 1.1 million for the six months ended June 30, 2022 and 2021, respectively.

Transactions involving our performance awards during the six months ended June 30, 2022 are summarized below:

Six Months Ended

June 30, 2022

Performance Units Subject to Market Conditions Performance Units Not Subject to Market Conditions

11 unchanged sentences

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.

There was no compensation expense related to stock options for the periods ended June 30, 2022 or December 31, 2021.

Our options typically vest in equal annual installments over a four-year service period.

1 unchanged sentence

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 .

No stock options were granted during the six month periods ended June 30, 2022 or June 30, 2021, and no options were exercised, a total of 7,210 options cancelled during the period consisting of 434 forfeited, and 6,776 expired during the six month period ended June 30, 2022.

Approximately 10 thousand options were exercisable at June 30, 2022 had a weighted-average remaining contractual life of 1.1 years, and exercise price of $ 35.59 .

EMPLOYEE BENEFIT PLANS

1 unchanged sentence

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

Three Months Ended March 31,

(unaudited) (unaudited)

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

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

Interest cost $ 390 $ 326 813 $ 648

6 unchanged sentences

We expect to contribute $ 3.7 million to the U.K.

Plan for 2022, of which $ 1.0 million has been contributed through March 31, 2022.

Plan for 2022, of which $ 1.9 million has been contributed through June 30, 2022.

ACCUMULATED OTHER COMPREHENSIVE LOSS

A summary of changes in accumulated other comprehensive loss included within shareholders’ equity is as follows (in thousands):

Three Months Ended

March 31, 2022 Three Months Ended

March 31, 2021

Six Months Ended

June 30, 2022 Six Months Ended

June 30, 2021

(unaudited) (unaudited)

10 unchanged sentences

The following table represents the related tax effects allocated to each component of other comprehensive income (loss) (in thousands):

Three Months Ended

March 31, 2022 Three Months Ended

March 31, 2021

Six Months Ended

June 30, 2022 Six Months Ended

June 30, 2021

(unaudited) (unaudited)

29 unchanged sentences

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.

The parties anticipate court approval of the settlement agreement in the fourth quarter of 2022 or first quarter of 2023.

Notice of Potential Environmental Violation - On April 20, 2021, Team Industrial Services, Inc.

7 unchanged sentences

On June 1, 2021, the jury rendered a verdict against Team for $ 222.0 million in compensatory damages.

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.

We believe that the jury verdict is not supported by the facts of the case or applicable law, is the result of significant trial error, and there are strong grounds for appeal.

3 unchanged sentences

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 March 31, 2022.

We currently estimate a range of possible outcomes between $ 13.0 million and approximately $ 51.0 million, and we have

accrued a liability as of June 30, 2022.

which is the amount we believe is the most likely estimate for a probable loss on this matter.

2 unchanged sentences

The Most litigation is covered by our general liability and excess insurance policies which are occurrence based and subject to an aggregate $ 3.0 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 $ 3.0 million self-insured retention and deductible.

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.

Accordingly, for all matters discussed above, we have accrued in the aggregate approximately $ 44.0 million as of June 30, 2022, of which approximately $ 5.0 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 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:

ASC 280, Segment Reporting , requires we disclose certain information about our operating segments.

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.

1 unchanged sentence

Three Months Ended

(unaudited) (unaudited)

June 30, Six Months Ended

2022 2021 2022 2021

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

IHT $ 114,124 $ 117,462 $ 209,721 $ 208,601

3 unchanged sentences

Three Months Ended

(unaudited) (unaudited)

Operating income (loss):

June 30, Six Months Ended

2022 2021 2022 2021

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

Operating loss:

IHT $ 5,514 $ 7,395 $ 5,648 $ 7,759

MS 6,984 2,328 7,497 2,443

Quest Integrity 8,014 5,702 14,218 5,450

2 unchanged sentences

Three Months Ended

(unaudited) (unaudited)

June 30, Six Months Ended

2022 2021 2022 2021

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

Capital expenditures 1 :

IHT $ 3,326 $ 2,457 $ 8,097 $ 5,171

MS 1,621 1,367 2,434 2,519

Quest Integrity 1,333 974 2,342 1,380

5 unchanged sentences

Three Months Ended

(unaudited) (unaudited)

June 30, Six Months Ended

2022 2021 2022 2021

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

Depreciation and amortization:

5 unchanged sentences

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):

A geographic breakdown of our revenues and our total long-lived assets for the three and six months ended June 30, 2022 and 2021 is as follows (unaudited, in thousands):

Three Months Ended June 30, 2022 Three Months Ended June 30, 2021

Long-lived Assets 2

Three months ended March 31, 2022

Long-lived Assets 2

United States $ 171,665 $ 258,559 $ 162,465 $ 282,706

3 unchanged sentences

Total $ 251,265 $ 299,326 $ 238,873 $ 329,210

Three months ended March 31, 2021

Six Months Ended June 30, 2022 Six Months Ended June 30, 2021

Long-lived Assets 2

United States $ 323,346 $ 258,559 $ 304,296 $ 282,706

6 unchanged sentences

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 for the periods ended March 31, 2022 and 2021 are summarized by segment as follows (in thousands):

Three Months Ended

(unaudited) (unaudited)

Operating Group Reorganization and other continuing restructuring measures

Severance and related costs

IHT $ 16 $ 283

Quest Integrity 233

Corporate and shared support services — 1,222

Total $ 16 $ 1,877

Operating Group Reorganization.

In January 2021, we announced a new strategic organizational structure to better position ourselves for the recovery, continue sector diversification, and enhance client value (the “Operating Group Reorganization”).

SEVERANCE AND OTHER CHARGES

For the six months ended June 30, 2022, we incurred severance charges of $ 2.4 million, which represents costs incurred in 2022 as a result of ongoing cost reduction efforts.

In January 2021, we announced a new strategic organizational structure to better position ourselves for recovery post pandemic, continue sector diversification, and enhance client value (the “Operating Group Reorganization”).

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 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):

Three Months Ended

March 31, 2022

For the twelve months ended December 31, 2021, we incurred severance charges of $ 2.9 million as a result of the Operating Group Reorganization.

A rollforward of our accrued severance liability associated with our ongoing cost reduction efforts is presented below (in thousands):

Six Months Ended

June 30, 2022

Balance, beginning of period $ 712

Charges 2,370

Payments ( 866 )

1 unchanged sentence

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.

Alvarez & Marsal provided certain consulting services to the Company in connection with our former Interim Chief Financial Officer position and other corporate support costs.

Effective June 12, 2022 the Interim Chief Financial Officer position ended as the Company named a permanent Chief Financial Officer prior to end of the period ended June 30, 2022.

The Company paid $ 8.0 million in fees to Alvarez & Marsal for the year ended December 31, 2021, and $ 6.0 million for the year to date period ended June 30, 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 - Debt .

SUBSEQUENT EVENTS

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.

During July 2022, our Board approved management’s recommendation to place Quest Integrity up for sale.

Accordingly Quest Integrity will be treated as held for sale in reporting periods subsequent to June 30, 2022.

On August 15 2022, Team announced it executed a definitive purchase and sale agreement with Baker Hughes to sell Quest Integrity for $ 280.0 million, before customary post-closing adjustments.

The sale is subject to ordinary closing conditions, regulatory approvals, and other adjustments, and is expected to close in the fourth quarter of 2022.

The Company expects the net proceeds from the Quest Integrity Sale to be used to pay down debt and for general corporate purposes, thereby reducing the Company’s future debt service obligations and leverage and improving its liquidity and capital resources.

The consummation of the Quest Integrity Sale will allow the Company to focus on improving its core IHT and MS businesses.

Quest Integrity represented approximately 15 % of the Company’s consolidated total assets as of June 30, 2022 and approximately 13 % of the Company’s consolidated revenue for the six months ended June 30, 2022.

During July 2022, the Company drew down $ 10.0 million in cash proceeds from the Corre Delayed Draw Term Loan for general corporate purposes.

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