What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-03-14 compared with 2022-03-16 · 745 added, 656 removed, 985 unchanged (59% of the section changed)

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To the Shareholders and Board of Directors

Opinion on Internal Control Over Financial Reporting

We have audited Team, Inc.

and subsidiaries' (the Company) internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive loss, shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2021, and the related notes (collectively, the consolidated financial statements), and our report dated March 16, 2022 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Annual Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audit also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Houston, Texas

March 16, 2022

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Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Team, Inc.

and subsidiaries (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive loss, shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2021, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2021, in conformity with U.S.

and subsidiaries (the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2022, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2022, in conformity with U.S.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 16, 2022 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Going Concern

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

As discussed in Note 1 to the consolidated financial statements, the Company’s current liquidity position and projected noncompliance with financial covenants raise substantial doubt about its ability to continue as a going concern.

Management’s plans in regard to these matters are also described in Note 1.

The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Goodwill impairment analysis of the Quest Integrity reporting unit

As discussed in Note 8 to the consolidated financial statements, the Company has three reporting units and performs a goodwill impairment test at a reporting unit level on an annual basis on December 1 and whenever there are sufficient indicators that the carrying value of a reporting unit exceeds its fair value.

This involves estimating the fair value of the reporting units using discounted cash flow model analyses and market approaches for comparable companies.

The Company experienced forecasted revenue and earnings declines due to lower activity and pricing pressure for its products and services and sustained declines in their stock price.

Accordingly, the Company performed a quantitative goodwill impairment assessment on December 1, 2021.

The carrying amount of the Quest Integrity reporting unit exceeded its fair value and the Company recorded a partial goodwill impairment charge to the Quest Integrity reporting unit (“Quest”) of $8.8 million.

We identified the evaluation of the goodwill impairment analysis of Quest as a critical audit matter.

Evaluating the assumptions used in the discounted cash flow model analysis used to estimate the fair value of Quest required the involvement of valuation professionals and a high degree of auditor judgment.

Specifically, the forecasted revenue, revenue growth rates, and the discount rate assumptions used in the assessment of the fair value of Quest required

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Evaluation of accounting for income taxes

As discussed in Note 1 and Note 11 to the consolidated financial statements, the Company recognized $3.3 million of deferred tax liabilities, net as of December 31, 2022.

The Company’s provision for income taxes from continuing operations was $3.3 million for the year ended December 31, 2022.

The Company conducts business globally and consequently is subject to U.S.

federal, state, and foreign income taxes in the jurisdictions in which it operates.

The Company exercises judgment in the application of complex tax regulations in multiple jurisdictions.

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subjective auditor judgment as they are sensitive to variation based on future market and economic conditions and could have an effect on the Company’s determination of the impairment charge.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s goodwill impairment process.

This included controls related to the determination of the forecasted revenue, revenue growth rates, and discount rate assumptions used to determine the fair value of Quest.

To assess the Company’s ability to accurately forecast, we compared the Company’s historical forecasted revenue and revenue growth rates related to Quest to actual results.

We performed sensitivity analyses related to forecasted revenue assumptions to assess the impact of changes in those assumptions on the Company’s determination of fair value.

We involved valuation professionals with specialized skills and knowledge, who assisted in evaluating the Company’s discount rate by comparing it against a discount rate range that was independently developed using publicly available market data.

Assessment of the Company’s ability to continue as a going concern

As discussed in Note 1 to the consolidated financial statements, the Company prepares its consolidated financial statements on a going concern basis.

The Company has incurred recurring operating losses as a result of the COVID-19 pandemic, related economic repercussions, and difficult market conditions.

The Company has incurred losses of $186 million for the year ended December 31, 2021 and presented an accumulated deficit of $375 million as of December 31, 2021.

Management evaluated the Company’s liquidity within one year after the date of issuance of the 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 the liquidity assessment, management 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 levels under the Company’s existing debt arrangements.

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

Management believes, based on the Company’s forecast, that current working capital and capital expenditure financing is sufficient to fund operations and satisfy the Company’s obligations as they come due within one year after the date of issuance of the consolidated financial statements.

We identified the assessment of the Company’s ability to continue as a going concern and related disclosures as a critical audit matter.

There was a high degree of subjectivity and significant auditor judgment involved in assessing management’s cash flow forecast, specifically forecasted revenue and operating costs, and excess availability levels under the Company’s existing debt arrangements due to the uncertainty in the estimate of cash inflows and outflows.

We identified the evaluation of accounting for income taxes as a critical audit matter.

Evaluating the Company’s application of current tax regulations and the impact of those regulations on the U.S.

federal tax provision required complex auditor judgment and the use of tax professionals with specialized skills.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls related to management’s assessment of the Company’s ability to continue as a going concern, including controls related to the cash flow forecast and review of excess availability levels under the Company’s existing debt arrangements.

We assessed management’s ability to forecast revenue and operating costs by comparing prior years’ forecasts to actual results.

We performed sensitivity analyses over management’s forecasted revenue and operating costs used in the cash flow forecast and excess availability levels under various scenarios to assess the impact of changes in those assumptions on the Company’s assessment of its ability to continue as a going concern.

We compared management’s forecasts to the actual results of operations and excess availability levels for the available period after year-end.

We examined the related debt agreements to identify terms that may impact availability of funds.

We assessed the adequacy of the disclosures related to the application of the going concern assessment.

We involved tax professionals with specialized skills and knowledge, who assisted in evaluating the Company’s analyses over the application of current tax regulations and the Company’s interpretation of tax regulations.

We have served as the Company’s auditor since 2002.

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Cash and cash equivalents $ 58,075 $ 55,193

Receivables, net of allowance of $ 8,912 and $ 9,918

Accounts receivable, net of allowance of $ 5,262 and $ 7,843 , respectively

186,689 168,273

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Prepaid expenses and other current assets 65,679 56,063

Current assets associated with discontinued operations — 83,096

Total current assets 347,553 402,289

Property, plant and equipment, net 138,099 145,480

Intangible assets, net of accumulated amortization of $ 124,197 and $ 111,318

89,898 103,282

Intangible assets, net 75,407 88,318

Operating lease right-of-use assets 48,462 58,495

Goodwill 25,243 91,351

Defined benefit pension asset 398 2,902

Other assets, net 6,351 8,387

Deferred income taxes 792 6,790

Deferred tax asset 375 673

Total assets $ 616,645 $ 706,544

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Other accrued liabilities 119,267 111,736

Income tax payable 2,257 —

Current liabilities associated with discontinued operations — 16,396

Total current liabilities 448,864 188,267

Deferred income taxes 4,185 4,375

Long-term debt and finance lease obligations 4,942 405,184

Operating lease obligations 38,819 47,617

Defined benefit pension liability — 5,282

Deferred tax liabilities 3,661 3,812

Other long-term liabilities 2,599 9,797

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Twelve Months Ended

2021 2020 2019

Revenues $ 840,208 $ 794,197

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Loss on warrants — ( 59 )

Loss on debt extinguishment and modification — ( 2,224 ) ( 279 )

Loss on debt extinguishment ( 30,083 ) —

Other income (expense), net 8,156 ( 3,052 )

Loss before income taxes ( 146,781 ) ( 176,072 )

Benefit (provision) for income taxes (see Note 10) ( 11,209 ) 14,715 436

Net loss $ ( 186,019 ) $ ( 237,203 ) $ ( 32,417 )

Loss per common share:

Provision for income taxes (see Note 11) ( 3,306 ) ( 8,773 )

Net loss from continuing operations $ ( 150,087 ) $ ( 184,845 )

Discontinued operations:

Net income (loss) from discontinued operations, net of income tax 220,166 ( 1,174 )

Net income (loss) $ 70,079 $ ( 186,019 )

Basic and diluted net income (loss) per common share:

Loss from continuing operations ( 35.85 ) ( 59.67 )

Income (loss) from discontinued operations 52.58 ( 0.38 )

Total $ 16.73 $ ( 60.05 )

Weighted-average number of shares outstanding:

Basic and diluted 4,187 3,098

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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

Twelve Months Ended

2021 2020 2019

Net loss $ ( 186,019 ) $ ( 237,203 ) $ ( 32,417 )

Net income (loss) $ 70,079 $ ( 186,019 )

Other comprehensive income (loss) before tax:

Foreign currency translation adjustment ( 6,589 ) ( 2,213 )

Foreign currency hedge — ( 1,198 ) 282

Defined benefit pension plans:

Net actuarial gain (loss) arising during period 4,048 — ( 421 )

Net actuarial (loss) gain arising during period ( 6,632 ) 4,048

Settlement cost during period — 67

Amortization of prior service cost 31 33

Other comprehensive income (loss), before tax 1,935 2,499 3,985

Tax (provision) benefit attributable to other comprehensive income (loss) ( 989 ) 13 217

Other comprehensive income (loss), net of tax 946 2,512 4,202

Total comprehensive loss $ ( 185,073 ) $ ( 234,691 ) $ ( 28,215 )

Other comprehensive (loss) income, before tax ( 13,190 ) 1,935

Tax benefit (provision) attributable to other comprehensive income (loss) 925 ( 989 )

Other comprehensive (loss) income, net of tax ( 12,265 ) 946

Total comprehensive income (loss) $ 57,814 $ ( 185,073 )

See accompanying notes to consolidated financial statements.

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Shareholders’

Balance at December 31, 2018 30,184 9,053 $ 400,989 $ 81,450 $ ( 34,392 ) $ 457,100

Adoption of new accounting principles, net of tax — — — ( 360 ) — ( 360 )

Net loss — — — ( 32,417 ) — ( 32,417 )

Foreign currency translation adjustment, net of tax — — — — 4,258 4,258

Foreign currency hedge, net of tax — — — — 213 213

Defined benefit pension plans, net of tax — — — — ( 269 ) ( 269 )

Non-cash compensation — — 10,055 — — 10,055

Net settlement of vested stock awards 335 100 ( 2,010 ) — — ( 1,910 )

Balance at December 31, 2019 30,519 9,153 $ 409,034 $ 48,673 $ ( 30,190 ) $ 436,670

Adoption of new accounting principles, net of tax — — — ( 1,035 ) — ( 1,035 )

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

Net loss — — — ( 186,019 ) — ( 186,019 )

Foreign currency translation adjustment, net of tax — — — — ( 2,214 ) ( 2,214 )

Foreign currency hedge, net of tax — — — — ( 904 ) ( 904 )

Defined benefit pension plans, net of tax — — — — 3,160 3,160

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Net settlement of vested stock awards 340 102 ( 342 ) — — ( 240 )

Extinguishment of convertible debt — — ( 14,044 ) — — ( 14,044 )

Issuance of warrant, net — — 15,564 — — 15,564

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

Net loss — — — ( 186,019 ) — ( 186,019 )

Effect of reverse stock split ( 28,092 ) ( 8,423 ) 8,423 — — —

Balance as of December 31, 2021 3,122 936 453,247 ( 375,584 ) ( 26,732 ) 51,867

Net income — — — 70,079 — 70,079

Foreign currency translation adjustment, net of tax — — — — ( 6,589 ) ( 6,589 )

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Net settlement of vested stock awards 1,221 367 9,289 — — 9,656

Issuance of warrant, net — — 15,564 — — 15,564

Balance at December 31, 2021 31,214 9,359 $ 444,824 $ ( 375,584 ) $ ( 26,732 ) $ 51,867

Accounting pronouncement adjustment — — ( 5,650 ) 3,825 — ( 1,825 )

Balance as of December 31, 2022 4,343 $ 1,303 $ 457,133 $ ( 301,680 ) $ ( 38,996 ) $ 117,760

See accompanying notes to consolidated financial statements.

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Twelve Months Ended

2021 2020 2019

Cash flows from operating activities:

Net loss $ ( 186,019 ) $ ( 237,203 ) $ ( 32,417 )

Net income (loss) $ 70,079 $ ( 186,019 )

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Depreciation and amortization 37,595 41,518

Loss on debt extinguishment and modification 415 2,224 279

Write-off of deferred loan costs 2,748 —

Gain on sale of Quest Integrity ( 203,351 ) —

Loss on debt extinguishment 17,719 415

Loss on Warrants — 59

Amortization of debt issuance costs and debt discounts 35,509 13,784

Paid-in-kind interest 18,227 —

Allowance for credit losses 402 1,943

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Deferred income taxes 653 4,521

(Gain) loss on asset disposal ( 2,981 ) 1,161 ( 187 )

Gain on asset disposal ( 4,721 ) ( 2,981 )

Goodwill impairment charges — 64,632

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Income taxes 6,264 605

Net cash (used in) provided by operating activities ( 35,453 ) 52,764 58,836

Net cash used in operating activities ( 57,935 ) ( 35,453 )

Cash flows from investing activities:

Capital expenditures ( 24,690 ) ( 17,605 )

( 17,605 ) ( 19,958 ) ( 29,035 )

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

Net proceeds from sale of discontinued operations 260,841 —

Proceeds from disposal of assets 7,205 3,528

Net cash used in investing activities ( 14,077 ) ( 18,301 ) ( 28,101 )

Net cash (used in) provided by investing activities 243,356 ( 14,077 )

Cash flows from financing activities:

Net payments under Credit Facility revolver — ( 76,638 ) ( 82,396 )

Borrowings under ABL Facility, net 62,000 — —

Borrowings under 2020 ABL Facility, gross 10,300 128,000

Payments under 2020 ABL Facility, gross ( 72,300 ) ( 137,000 )

Net borrowings under Subordinated Term Loan 50,000 — —

Borrowings (payments) under Credit Facility term loan, net of debt discount — ( 50,000 ) 49,745

Borrowings under Term Loan, net of discount — 242,500 —

Repurchase of convertible debt — ( 135,501 ) —

Contingent consideration payments — — ( 428 )

Borrowings under 2022 ABL Credit Facility, gross 108,638 —

Payments under 2022 ABL Credit Facility, gross ( 43,722 ) —

Borrowings under Corre Delayed Draw Term Loan, gross 35,000 —

Borrowings under Subordinated Term Loan, gross — 50,000

Borrowings under 2020 ABL Credit Facility, net — 62,000

Payments under APSC Term Loan, gross ( 224,946 ) —

Payments for debt issuance costs ( 13,709 ) ( 10,457 )

Issuance of common stock, net of issuance costs 9,639 —

Taxes paid related to net share settlement of share-based awards 16 ( 240 )

Payments for debt extinguishment and equity reacquisition costs — ( 2,447 ) —

Other ( 887 ) ( 453 )

Net cash provided by (used in) financing activities 91,850 ( 23,461 ) ( 36,805 )

Net cash (used in) provided by financing activities ( 191,971 ) 91,850

Effect of exchange rate changes on cash ( 690 ) ( 1,591 )

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Income taxes $ ( 553 ) $ 5,829

_____________

1 Excludes accrued capital expenditures for the years ended December 31, 2021, 2020 and 2019.

See accompanying notes to consolidated financial statements.

1 Consolidated statements of cash flows include discontinued operations.

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Cash and cash equivalents from continuing operations $ 58,075 $ 55,193

Cash and cash equivalents from discontinued operations — 10,122

Total $ 58,075 $ 65,315

See accompanying notes to consolidated financial statements.

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

We conduct operations in three segments:

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

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

Prior to the sale of our Quest Integrity segment as discussed below, we conducted operations in three segments:

Inspection and Heat Treating, Mechanical Services and Quest Integrity.

We currently conduct operations in two segments.

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

inspection to assess condition;

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

On November 1, 2022, we completed the sale of all of the issued and outstanding equity interests of our wholly-owned subsidiary, TQ Acquisition Inc., a Texas corporation, to Baker Hughes Holdings LLC for an aggregate purchase price of approximately $ 279.0 million, after certain post-closing adjustments pursuant to that certain Equity Purchase Agreement by and among us and Baker Hughes, dated as of August 14, 2022.

TQ Acquisition and its subsidiaries constituted Quest Integrity, which provided integrity and reliability management solutions for the process, pipeline and power sectors.

In connection with the Quest Integrity Transaction, the credit support in the form of guarantees by and liens on assets, as applicable, of TQ Acquisition and its subsidiaries in respect of our existing debt arrangements were released.

We used approximately $ 238.0 million of the net proceeds from the Quest Integrity Transaction to pay down $ 225.0 million of our term loan debt, and certain fees associated with that repayment and related accrued interest, with the remainder reserved for general corporate purposes, thereby reducing our future debt service obligations and leverage, and improving our liquidity.

The criteria for reporting Quest Integrity as a discontinued operation were met as of completion of the Quest Integrity sale transaction and, as such, all periods presented in this Form 10-K have been recast to present Quest Integrity as a discontinued operation.

Unless otherwise specified, the financial information and discussion in this Form 10-K are based on our continuing operations (IHT and MS segments) and exclude any results of our discontinued operations (Quest Integrity).

Refer to Note 2 - Discontinued Operations for additional details.

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 services, 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.

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

IHT also provides advanced digital imaging including remote digital video imaging.

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

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and valve management solutions.

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

These solutions encompass three broadly-defined disciplines:

Prior to its sale, Quest Integrity provided integrity and reliability management solutions for the process, pipeline and power sectors.

These solutions encompass two broadly-defined disciplines:

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

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

As referenced previously, Quest Integrity is now reported as discontinued operations.

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

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• 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 Facility, 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).

The ABL Credit Facility matures and all outstanding amounts become due

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and payable on February 11, 2025, however, if our Notes, which mature on August 1, 2023, have an aggregate principal amount of $ 10 million or more outstanding 120 days prior to their maturity date (the “Trigger Date”), the ABL Credit Facility will be terminated as of the Trigger Date.

The proceeds of the loans under the ABL Credit Agreement were used to, among other things, pay off the amounts owed under the existing 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 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 (the “Corre Holders”) at a price of $ 0.84 per share (the “Equity Issuance”).

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), impact of the new COVID-19 variants and the continued rollout and acceptance of COVID-19 vaccines, and the level of social and economic restrictions imposed in the United States and abroad in an effort to curb the spread of the virus, all of which are uncertain and difficult to predict considering the rapidly evolving landscape.

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

As of December 31, 2021, we have deferred employer payroll taxes of $ 14.1 million.

We paid $ 7.0 million of the deferred payroll taxes in January 2022 with the remaining balance 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 and deferral of certain payroll related expenses and tax payments and other benefits.

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

We deferred total employer payroll taxes of $ 14.1 million.

We paid $ 7.0 million of the deferred payroll taxes in January 2022 and transferred $ 0.5 million of such obligation as part of the Quest Integrity sale transaction to the buyer.

The remaining amount of $ 6.6 million, outstanding as of December 31, 2022, was paid in January 2023.

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.

As a result, we recognized $ 6.2 million and $ 1.5 million as a reduction to operating expenses and selling, general and administrative expenses, respectively, during the twelve months ended December 31, 2021.

As of December 31, 2021, we also deferred certain payroll related expenses and tax payments of $ 3.2 million under other foreign government programs which will be due starting in 2022.

As these other governments review compliance with their relief programs, we may be required to return a portion of these funds.

We recognized $ 0.6 million and $ 0.1 million as a reduction to operating expenses and selling, general and administrative expenses, respectively, during the twelve months ended December 31, 2022.

We recognized $ 6.2 million and $ 1.5 million as a reduction to operating expenses and selling, general and administrative expenses, respectively, during the twelve months ended December 31, 2021.

We also deferred certain payroll related expenses and tax payments under other foreign government programs.

We had $ 2.1 million and $ 3.2 million as of December 31, 2022 and 2021, respectively, related to these foreign deferrals.

Reverse Stock Split .

On November 2, 2022, the Company’s shareholders approved a proposal to authorize the Board to implement a reverse stock split of the outstanding shares of the Company’s common stock at a ratio of one-for-ten.

The Board approved the Reverse Stock Split on December 9, 2022, which became effective on December 21, 2022.

As of the effective date, every ten issued and outstanding shares of common stock was converted into one share of common stock, The common stock began trading on a reverse split-adjusted basis on the NYSE at the opening of trading on December 22, 2022.

All issued and outstanding common stock and per share amounts contained in the financial statements have been retroactively adjusted to reflect this Reverse Stock Split for all periods presented.

In addition, a proportionate adjustment was made to the per share exercise price and the number of shares issuable upon the exercise and/or vesting of all outstanding stock options, restricted stock units and warrants to purchase shares of common stock.

A proportionate adjustment was also made to the number of shares reserved for issuance pursuant to the Company’s equity incentive compensation plans to reflect the Reverse Stock Split.

Any fraction of a share of common stock that was created as a result of the Reverse Stock Split was rounded up to the next whole share.

The common stock par value and additional paid-in-capital line items contained in the financial statements were adjusted to account for the Reverse Stock Split for all periods presented.

Basis for presentation.

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

generally accepted accounting principles (GAAP) and the rules and regulations of the Securities and Exchange Commission.

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

Consolidation.

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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,

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.

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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 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.

We have suffered recurring operating losses related to the COVID-19 pandemic, related economic repercussions, and difficult market conditions and prior to the Recent Financing Transactions discussed below, the Company required additional liquidity to continue its operations over the next twelve months.

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

As of December 31, 2021, we are in compliance with our debt covenants;

however, our financial forecasts as of December 31, 2021 indicated insufficient cash flows from operations to address our near-term liquidity needs and maintain compliance with our debt covenants within one year following the date that our financial statements are issued.

As discussed in Note 1 – Recent Financing Transactions, on February 11, 2022, the Company successfully closed on financing transactions that provided improved liquidity and runway to execute our business turnaround, support working capital needs and pursue potential strategic alternatives.

Following the Recent Financing Transactions, we evaluated the Company’s liquidity within one year after the date of issuance of these 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 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 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 our liquidity within one year after the date of issuance of these audited 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, that current working capital and capital expenditure financing is sufficient to fund the operations, maintain compliance with our debt covenants, and satisfy the Company’s obligations as they come due within one year after the date of issuance of these financial statements.

While the Recent Financing Transactions provide us with additional funding to meet our near-term liquidity needs and included a waiver of our debt covenants through March 31, 2023, there can be no assurance that (i) 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, or (ii) that we will generate adequate liquidity to fund our operations, or to satisfy the obligations under our convertible debt and potential acceleration of debt maturities that may become due on April 3, 2023 related to the Trigger Date.

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

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, expected availability under our existing credit agreements and capital expenditure financing is sufficient to fund the operations, maintain compliance with our debt covenants (as amended), and satisfy the Company’s obligations, specifically with respect to the Notes described below, as they come due within one year after the date of issuance of these consolidated financial statements.

Our Notes are due on August 1, 2023 and had a principal balance of $ 41.2 million as of December 31, 2022 following the exchanged transactions described in Note 12 - Debt.

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

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 2022 ABL Credit Agreement), and the Maturity Trigger Date (as defined in the Term Loan Credit Agreement) collectively referred to as the “Trigger Date” is June 17, 2023, see Note 12 - Debt for additional information.

Therefore, the Notes balance must be paid down to less than $ 10.0 million by June 17, 2023.

On October 4, 2022, we entered into Amendment No.

8 (“Corre Amendment 8”) to the Subordinated Term Loan Credit Agreement.

On November 1, 2022, we completed the Quest Integrity Transaction with Baker Hughes, as discussed above, for an aggregate purchase price of approximately $ 279.0 million, after certain post-closing adjustments, in accordance with the Sale Agreement.

On November 4, 2022, we entered into Amendment No.

9 (“Term Loan Amendment No.

9”) to the Term Loan Credit Agreement and Amendment No.

10 (“Corre Amendment 10”) to the Subordinated Term Loan Credit Agreement.

Refer to Note 12 - Debt for more information on the terms, maturity dates and amendments to our debt that may affect our future liquidity.

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

Without the execution of a refinancing transaction, an agreement to extend the Notes maturity date, and/or amendments to our existing debt agreements 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 or will be unable to pay off the Notes when they become due on August 1, 2023.

The failure to pay down the Notes to less than $ 10.0 million would (i) trigger the early maturity of our Term Loan Credit Agreement pursuant to the Trigger Date concept, and (ii) permit the administrative agent under the 2022 ABL Credit Agreement to implement a borrowing base reserve in an amount equal to the outstanding principal amount of the Notes on such date.

A required repayment of the Term Loan Credit Agreement in accordance with the Trigger Date concept would in turn trigger a requirement to repay the Subordinated Term Loans pursuant to the Subordinated Term Loan Credit Agreement 14 days after repayment in full of the Term Loan Credit Agreement.

There is no assurance that we would be able to make such payments, and failure to make such payments would result in events of default under the applicable credit facility and associated cross defaults under the Company’s other debt instruments.

Failure to pay the Notes off at the maturity date on August 1, 2023 will result in an event of default under the Notes and the associated cross defaults noted above under the Company’s other debt instruments.

Refer to Note 12 - Debt for more information on the terms and maturity dates of our debt that may affect our future liquidity.

Our ability to maintain compliance with the financial covenants contained in the 2022 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 lingering effects of COVID-19, threat of recession and 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 2022 ABL Credit Facility.

In addition to our current sources of funding our business,

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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.

Political economic repercussions could have a broad range of effects on our liquidity sources and will depend on future developments and cannot be predicted at this time.

As a result of our current liquidity condition and the potential inability to negotiate an extension or amend the financial covenants, substantial doubt about the Company’s ability to continue as a going concern is raised.

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.

As such, substantial doubt exists about our ability to continue as a going concern.

The 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.

Use of estimates.

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

Estimates and judgments are used in, among other things, (1) aspects of revenue recognition, (2) valuation of acquisition related tangible and intangible assets and assessments of all long-lived assets for possible impairment, (3) estimating various factors used to accrue liabilities for 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.

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

Our most significant accounting policies are described below.

Fair value of financial instruments .

As defined in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820 Fair Value Measurements and Disclosur e (“ASC 820”), fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

As defined in FASB ASC 820 Fair Value Measurements and Disclosur e (“ASC 820”), fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

We utilize market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique.

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

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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.

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

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.

Our financial instruments consist primarily of cash, cash equivalents, accounts receivable, accounts payable, pension assets 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 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 December 31, 2021 and 2020 was $ 84.0 million and $ 91.9 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 Facility, Atlantic Park Term Loan, Subordinated Term Loan and Notes, see Note 11- Long-Term Debt.

For additional information regarding our pension assets, see Note 16 - Employee Benefit plan .

The fair value of our 2022 ABL Credit Facility and Term Loans are 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 the Notes as of December 31, 2022 and 2021 was $ 37.5 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 2022 ABL Credit Facility, Term Loan, Subordinated Term Loan and Notes, see Note 12 - Debt .

Cash and cash equivalents .

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

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

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

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

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

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

Inventory quantities on hand are reviewed periodically and carrying value is reduced to net realizable

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value for inventories for which their cost exceeds their utility.

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

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Goodwill and intangible assets.

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

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

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

We use all available information to estimate fair values including quoted market prices, the carrying value of acquired assets, and widely accepted valuation techniques such as discounted cash flows.

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

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

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

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

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

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

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

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

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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”).

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

Each reporting unit has goodwill relating to past acquisitions.

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

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

As of December 31, 2022 and December 31, 2021, there was no goodwill on the Company’s balance sheets related to continuing operations.

The only segment with goodwill was Quest Integrity, which is part of discontinued operations.

During the year ended December 31, 2021, our assessment of qualitative indicators associated with our interim and annual goodwill impairment tests indicated a potential impairment existed.

The next step of goodwill assessment determined that an impairment existed as the carrying value of the MS segment exceeded its fair value.

As a result, we recorded goodwill impairment of $ 55.8 million during the year ended December 31, 2021.

We also recorded goodwill impairment of $ 8.8 million on our discontinued operations during the year ended December 31, 2021.

There was no goodwill impairment recorded during or as of December 31, 2022.

Impairment of Long-lived Assets.

The Company reviews its property and equipment, intangible assets subject to amortization and other long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset class may not be recoverable.

Indicators of potential impairment include:

an adverse change in legal factors or in the business climate that could affect the value of the asset;

an adverse change in the extent or manner in which the asset is used or is expected to be used, or in its physical condition;

and current or forecasted operating or cash flow losses that demonstrate continuing losses associated with the use of the asset.

If indicators of impairment are present, the asset is tested for recoverability by comparing the carrying value of the asset to the related estimated undiscounted future cash flows expected to be derived from the asset.

If the expected cash flows are less than the carrying value of the asset, then the asset is considered to be impaired and its carrying value is written down to fair value, based on the related estimated discounted cash flows.

There were no impairment charges in 2022 or 2021.

Income taxes.

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

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

Evidence used includes the reversal of existing taxable

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

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

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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 $ 350,000 per individual claimant determined on an annual basis.

For professional liability claims, our self-insured retention is $ 2.0 million.

For general liability claims, we have a self-insured retention of $ 1.0 million and a deductible of $ 4.0 million per occurrence.

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

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

For medical claims, our self-insured retention is $ 350,000 per individual claimant determined on an annual basis.

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

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Allowance for credit losses.

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

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

In the ordinary course of business, a portion of our accounts receivable are not collected due to billing disputes, customer bankruptcies or other various reasons.

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

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

Concentration of credit risk.

No single customer accounts for more than 10% of consolidated revenues.

No single customer accounted for more than 10% of consolidated revenues during the year ended December 31, 2022 or 2021.

Accounting for Warrants .

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”).

The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own ordinary shares, among other conditions for equity classification.

This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.

As of December 31, 2022 and 2021, we had equity-classified warrants that were issued in connection with our APSC Term Loan and Subordinated Term Loan Credit Agreement (see Note 12 - Debt ).

The warrants were accounted for as a component of additional paid-in capital and a debt warrant discount.

The warrant discount was being amortized over the term of the debt.

As of December 31, 2022 and 2021, an unamortized balance of warrant discount amounted to $ 3.3 million and $ 29.2 million, respectively.

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Earnings (loss) per share.

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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.

Amounts used in basic and diluted loss per share, for all periods presented, are as follows (in thousands):

Twelve Months Ended

2021 2020 2019

Weighted-average number of basic shares outstanding 30,975 30,638 30,310

Stock options, stock units and performance awards — — —

Convertible senior notes — — —

Total shares and dilutive securities 30,975 30,638 30,310

For the years ended December 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, the effect of our Notes was 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 on our Notes and our share-based compensation awards, refer to Note 11 and Note 13, respectively.

For information on our Notes and our share-based compensation awards, refer to Note 12 - Debt and Note 14 - Share-Based Compensation , respectively.

Non-cash investing and financing activities.

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Twelve Months Ended

2021 2020 2019

Assets acquired under finance lease $ 1,270 $ 1,011

Also, we had $ 4.1 million, $ 1.2 million, and $ 4.0 million of accrued capital expenditures as of December 31, 2021, 2020 and 2019, respectively, which are excluded from the consolidated statements of cash flows until paid.

Also, we had $ 2.4 million, and $ 3.9 million, of accrued capital expenditures as of December 31, 2022, and 2021 respectively, which are excluded from the consolidated statements of cash flows until paid.

Foreign currency .

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

We utilize 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 Australian Dollar, Canadian Dollar, Brazilian Real, British Pound, Euro, Malaysian Ringgit and Mexican Peso.

The impact from these swap contracts were not material as of December 31, 2021 or 2020 or for the years ended December 31, 2021, 2020 and 2019.

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.

Our hedging program ended in October 2021.

The impact from the foreign currency swap contracts was not material for the year ended December 31, 2022 or 2021.

Defined benefit pension plans .

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

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

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mortality rates and retirement rates.

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.

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Reclassifications .

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

Certain amounts in prior periods have been reclassified to conform to the current year presentation, including the separate presentation and reporting of discontinued operations.

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

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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 financial statements.

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

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

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

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

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

Refer to Note 12 - Debt for impact on the adoption of this ASU as of January 1, 2022.

Accounting Standards Not Yet Adopted

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

Facilitation of the Effects of Reference Rate Reform on Financial Reporting .

Facilitation of the Effects of Reference Rate Reform on Financial Reporting, (“ASU 2020-04”).

The guidance in ASU 2020-04 and ASU 2021-01, Reference Rate Reform (Topic 848) :

Scope , which was issued in January 2021, provides optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria that reference LIBOR or another rate that is expected to be discontinued.

Scope , which was issued in January 2021, provides optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria that reference the London Interbank Offered Rate, (“LIBOR”), or another rate that is expected to be discontinued.

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

On December 21, 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848) Deferral of the Sunset Date of Topic 848 which defers the sunset date of ASC 848, Reference Rate Reform , from December 31, 2022, to December 31, 2024.

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

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

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

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

We are still evaluating the other impacts this ASU may have on our financial statements.

DISCONTINUED OPERATIONS

On November 1, 2022, we completed the Quest Integrity Transaction with Baker Hughes for an aggregate purchase price of approximately $ 279.0 million, after certain post-closing adjustments, in accordance with the Sale Agreement.

We used approximately $ 238.0 million of the net proceeds from the sale of Quest Integrity to pay down $ 225.0 million of our term loan debt, and to pay certain fees associated with that repayment and related accrued interest, with the remainder reserved for general corporate purposes, thereby reducing our future debt service obligations and leverage, and improving our liquidity.

Quest Integrity previously represented a reportable segment.

Following the completion of the Quest Integrity Transaction, we now operate in two segments, IHT and MS.

Refer to Note 1 – Summary of Significant Accounting Policies and Practices for additional details regarding the Quest Integrity Transaction.

Our consolidated balance sheets and consolidated statements of operations report discontinued operations separate from continuing operations.

Our consolidated statements of comprehensive income (loss), statements of shareholders’ equity and statements of cash flows combine continuing and discontinued operations.

A summary of financial information related to our discontinued operations is presented in the tables below.

The table below represents major line items constituting net income (loss) from discontinued operations to the after-tax income from discontinued operations (in thousands):

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Major classes of line items constituting net income (loss) from discontinued operations

$ 101,418 $ 80,356

Operating expenses

( 45,044 ) ( 43,616 )

Selling, general and administrative expenses

( 32,230 ) ( 26,663 )

Goodwill impairment charge — ( 8,795 )

Restructuring and other related charges, net

Interest expense, net

( 108 ) ( 230 )

Other (expense) income

( 4,390 ) 591

Income before income taxes

Gain on sale of Quest transaction 203,351 —

Income before income taxes 222,997 1,262

Provision for income taxes

( 2,831 ) ( 2,436 )

Net income (loss) from discontinued operations

$ 220,166 $ ( 1,174 )

The table below represents the reconciliation of the major classes of assets and liabilities of discontinued operations to amounts presented separately in the consolidated balance sheet as of December 31, 2021 (in thousands).

We completed the sale of Quest Integrity on November 1, 2022, as a result there were no assets or liabilities in discontinued operations as of December 31, 2022.

Carrying amount of major classes of assets included as part of discontinued operations:

Cash and cash equivalents $ 10,122

Accounts receivable, net

Prepaid expenses and other current assets

Property, plant and equipment, net

Goodwill and intangible assets, net

Other classes of assets that are not major

Total assets associated with discontinued operations

Carrying amounts of major classes of liabilities included as part of discontinued operations:

Accounts payable $ 2,125

Income tax payable 1,939

Other accrued liabilities 9,363

Operating lease obligations 2,368

Other classes of liabilities that are not major 601

Total liabilities associated with discontinued operations $ 16,396

The assets and liabilities in discontinued operations are measured at the lower of their carrying value and fair value less cost to sell.

During the years ended December 31, 2022 and December 31, 2021, it was not necessary to write-down any assets or liabilities attributable to the disposal group in discontinued operations to fair value, less costs to sell.

Quest Integrity had $ 0.1 million of accrued capital expenditures as of December 31, 2021, which is excluded from the consolidated statements of cash flows until paid.

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The following table presents the depreciation and amortization and capital expenditures of Quest Integrity (in thousands):

Cash flows provided by operating activities of discontinued operations:

Depreciation and amortization

$ 1,141 $ 2,616

Cash flows provided by investing activities of discontinued operations:

Capital expenditures $ 4,146 $ 3,500

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

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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

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advance customer payment.

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

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

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

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

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

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For our time and materials contracts, we are generally able to elect the right-to-invoice practical expedient, which permits us to recognize revenue in the amount to which we have a right to invoice the customer if that amount corresponds directly with the value to the customer of our performance completed to date.

For our fixed price contracts, we typically recognize revenue using the cost-to-cost method, which measures the extent of progress towards completion based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation.

Under this method, revenue is recognized proportionately as costs are incurred.

For our fixed price contracts, as they are short term in nature, we recognize revenue as jobs are completed or costs are incurred.

For contracts where control is transferred at a point in time, revenue is recognized at the time control of the asset is transferred to the customer, which is typically upon delivery and acceptance by the customer.

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MS 296,151 121,495 417,646

Quest Integrity 47,511 32,845 80,356

Total $ 708,812 $ 131,396 $ 840,208

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Twelve Months Ended December 31, 2021

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MS 256,806 122,020 378,826

Quest Integrity 49,117 36,198 85,315

Total $ 661,813 $ 132,384 $ 794,197

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MS — 413,424 276 3,946 417,646

Quest Integrity 80,356 — — — 80,356

Total $ 336,821 $ 413,604 $ 61,802 $ 27,981 $ 840,208

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Twelve Months Ended December 31, 2021

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MS — 374,885 806 3,135 378,826

Quest Integrity 85,315 — — — 85,315

Total $ 325,204 $ 375,352 $ 60,661 $ 32,980 $ 794,197

_________________

For additional information on our reportable operating segments and geographic information, refer to Note 15.

For additional information on our reportable operating segments and geographic information, refer to Note 18 - Segment and Geographic Disclosures.

Contract balances .

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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.

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.

Refer to Note 1 - Summary of Significant Accounting Policies and Practices and Note 4 - Receivables for additional information on our trade receivables and the allowance for credit losses.

Contract assets include unbilled amounts when the revenue recognized exceeds the amount billed to the customer.

Amounts may not exceed their net realizable value.

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

December 31, 2021 December 31, 2020

Trade accounts receivable, net 1

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Contract assets 2

$ 1,602 $ 5,242

Contract liabilities 3

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

See Note 3 for details.

See Note 4 - Receivables for details.

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

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

The $ 0.6 million decrease in contract liabilities is due to our completion of performance obligations during the year ended December 31, 2021 associated with contracts under which customers had paid for all or a portion of the consideration in advance of the work being performed.

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

Accordingly, essentially all of the contract liability balance at December 31, 2020 was recognized as revenue during the year ended December 31, 2021.

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

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Contract costs .

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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.

Costs to fulfill recognized as assets primarily consist of labor and material costs and generally relate to engineering and set-up costs incurred prior to when 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 consolidated balance sheets and were not material as of December 31, 2022 and 2021.

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Remaining performance obligations .

As of December 31, 2021 and 2020, 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.

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As most of our contracts with customers are short-term in nature and billed on a time and material basis, there were no material amounts of remaining performance obligations as of December 31, 2022 and 2021.

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

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Allowance for credit losses ( 5,262 ) ( 7,843 )

Total $ 188,772 $ 194,066

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

Accounts receivable, net $ 186,689 $ 168,273

We measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts.

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

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

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We believe that the historical loss information we have compiled is a reasonable basis on which to determine expected credit losses for trade receivables because the composition of the trade receivables is consistent with that used in developing the historical credit-loss percentages as typically our customers and payment terms do not change significantly.

Generally, a longer outstanding receivable equates to a higher percentage of the outstanding balance as current expected credit losses.

Generally the longer a receivable is outstanding the higher the percentage of the outstanding balance is reported as current expected credit losses.

We update the historical loss information for current conditions and reasonable and supportable forecasts that affect the expected collectability of the trade receivable using a loss-rate approach.

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

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

These geographic regions are considered appropriate as they each operate in different economic environments with different foreign currencies, and therefore share similar economic risk characteristics.

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

These geographic regions are considered appropriate as they each operate in different economic environments with different foreign currencies, and therefore

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share similar economic risk characteristics.

For each geographic region we evaluate the historical loss information and determine credit-loss percentages to apply to each aging category and individual receivable with specific risk characteristics.

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In determining the current expected credit losses, we review macroeconomic conditions, market specific conditions, and internal forecasts to identify potential changes in our assessment.

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The following table shows a rollforward of the allowance for credit losses:

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

Twelve Months Ended

2021 2020 2019

Balance at beginning of period $ 7,843 $ 9,115

Adoption of account pronouncement ASC 326 1

Provision for expected credit losses 1,059 2,332

Recoveries collected ( 1,114 ) ( 369 )

Write-offs ( 2,479 ) ( 3,201 )

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Balance at end of period $ 5,262 $ 7,843

_________________

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

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

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Finished goods 24,408 25,074

Total $ 35,754 $ 36,854

Inventory $ 36,331 $ 35,375

PREPAID AND OTHER CURRENT ASSETS

A summary of p repaid and other current assets as of December 31, 2021 and 2020 is as follows (in thousands):

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

Insurance receivable $ 39,000 $ 39,000

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Other current assets 11,441 6,521

Total $ 59,868 $ 26,752

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.

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.

Prepaid expenses and other current assets $ 65,679 $ 56,063

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 10 - Other Accrued Liabilities .

These receivables will be covered by our third-party insurance providers for litigation matters that have been settled or are pending settlements and 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.

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As of December 31, 2022 the other current assets include deferred financing costs of $ 3.1 million due to all long-term debt now being classified as current.

Historically these assets were presented in “other assets, net” and comparative periods were not adjusted.

Other current assets also include deferred financing fees amounting to $ 1.8 million in connection with that certain Substitute Insurance Reimbursement Facility Agreement dated as of September 29, 2022 (the “Substitute Insurance Reimbursement Facility Agreement”) (see Note 12 - Debt for additional details).

PROPERTY, PLANT AND EQUIPMENT

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Included in the table above are assets under finance leases of $ 7.4 million and $ 6.7 million and accumulated amortization of $ 2.3 million and $ 1.6 million as of December 31, 2022 and 2021, respectively.

Depreciation expense for the years ended December 31, 2021, 2020 and 2019 was $ 27.6 million, $ 31.5 million and $ 34.4 million, respectively.

Depreciation expense for the years ended December 31, 2022 and 2021 was $ 22.9 million, and $ 25.4 million respectively.

Assets sold and disposed of for the twelve months ended December 31, 2022 and the twelve months ended December 31, 2021 had a carrying value of $ 2.5 million and $ 0.8 million, respectively, resulting in a gain on sale of $ 4.2 million and $ 0 million , respectively.

The assets sold for the twelve months ended December 31, 2022 primarily consisted of $ 1.3 million in land, $ 0.9 million in building and $ 0.3 million in machinery and equipment.

The assets sold for the twelve months ended December 31, 2021 consisted of $ 0.8 million in machinery and equipment.

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INTANGIBLE ASSETS

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Licenses 840 ( 830 ) 10

Total $ 214,095 $ ( 124,197 ) $ 89,898

Other 12,983 ( 12,983 ) —

Intangible assets $ 206,605 $ ( 131,198 ) $ 75,407

December 31, 2021

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Licenses 850 ( 774 ) 76

Total $ 214,600 $ ( 111,318 ) $ 103,282

Amortization expense on intangible assets for the years ended December 31, 2021, 2020 and 2019 was $ 13.9 million, $ 14.0 million and $ 14.3 million, respectively.

Other 12,988 ( 12,988 ) —

Intangible assets $ 206,897 $ ( 118,579 ) $ 88,318

Amortization expense on intangible assets for the years ended December 31, 2022 and 2021 was $ 12.9 million, and $ 12.9 million, respectively.

Amortization expense for intangible assets is forecast to be approximately $ 12.2 million per year from 2023 through 2027.

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

The weighted-average amortization period as of December 31, 2021 is 13.7 years for customer relationships, 5.0 years for non-compete agreements, 15.6 years for trade names, 10.0 years for technology and 10.5 years for licenses.

The weighted-average amortization period as of December 31, 2022 is 13.7 years for customer relationships, 13.2 years for trade names, 10.0 years for technology and 10.5 years for licenses.

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.

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

As a result of forecasted revenue and earnings declines and sustained declines in our stock price through September 30, 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.

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

With oil prices and demand increasing, refiners (represents approximately 40 % of our customers) are recovering;

however, as capital expenditures have not fully recovered resulting in lower current activity and pricing pressure for our products and services, primarily in our IHT and MS reporting units, accordingly, we performed a quantitative assessment of the fair value of goodwill as of September 30, 2021.

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

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

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

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

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

As a result, 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.

For our annual goodwill impairment test as of December 1, 2021, we elected to perform a quantitative assessment to determine if it was more likely than not (that is, a likelihood of more than 50 percent) that the fair value of our reporting unit was less than its carrying value as of the test date.

Based on the quantitative assessment, 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.

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

Following the sale of Quest Integrity, as discussed above, as of December 31, 2022 and December 31, 2021, there was no goodwill on the Company’s balance sheets related to continuing operations.

The only segment with goodwill was Quest Integrity, which is included in discontinued operations.

There was no goodwill impairment charge during the twelve months ended December 31, 2022, however, during the twelve months ended December 31, 2021, we recognized a non-cash goodwill impairment charge of $ 55.8 million in our MS operating segment and a non-cash goodwill impairment charge of $ 8.8 million in the discontinued operations of the Quest Integrity operating segment.

These charges were a result of a goodwill impairment test that was triggered as a result of certain impairment indicators present during the twelve months ended December 31, 2021, primarily related to the continued curtailment of operations, decline in our forecast, continued declines in our stock price, reporting unit operating losses, and continued declines in the reporting units’ net sales compared to forecast.

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There was $ 25.2 million and $ 91.4 million of goodwill at December 31, 2021 and 2020, respectively.

A summary of goodwill is as follows (in thousands):

IHT MS Quest Integrity Consolidated

Goodwill, Gross Accumulated Impairment Goodwill, Net Goodwill, Gross Accumulated Impairment Goodwill, Net Goodwill, Gross Accumulated Impairment Goodwill, Net Goodwill, Gross Accumulated Impairment Goodwill, Net

Balance at December 31, 2019 $ 214,356 $ ( 21,140 ) $ 193,216 $ 109,510 $ ( 54,101 ) $ 55,409 $ 33,381 $ — $ 33,381 $ 357,247 $ ( 75,241 ) $ 282,006

FX Adjustments ( 1,428 ) — ( 1,428 ) 1,211 — 1,211 854 — 854 637 — 637

Impairment charge — ( 191,788 ) ( 191,788 ) — — — — — — — ( 191,788 ) ( 191,788 )

Additions — — — — — — 496 — 496 496 — 496

Balance at December 31, 2020 $ 212,928 $ ( 212,928 ) $ — $ 110,721 $ ( 54,101 ) $ 56,620 $ 34,731 $ — $ 34,731 $ 358,380 $ ( 267,029 ) $ 91,351

FX Adjustments — — — ( 783 ) — ( 783 ) ( 693 ) — ( 693 ) ( 1,476 ) — ( 1,476 )

Impairment charge — — — — ( 55,837 ) ( 55,837 ) — ( 8,795 ) ( 8,795 ) — ( 64,632 ) ( 64,632 )

Additions — — — — — — — — — — — —

Balance at December 31, 2021 $ 212,928 $ ( 212,928 ) $ — $ 109,938 $ ( 109,938 ) $ — $ 34,038 $ ( 8,795 ) $ 25,243 $ 356,904 $ ( 331,661 ) $ 25,243

OTHER ACCRUED LIABILITIES

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Property, sales and other non-income related taxes 7,348 6,553

Accrued commission 1,111 1,048

Accrued interest 3,963 6,469

Other 7,141 7,475

Total $ 121,099 $ 73,144

Legal and professional accruals include accruals for legal and professional fees as well as accrued legal claims, refer to Note 15.

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.

Volume discount 2,050 1,902

Other accruals 3,251 3,270

Other accrued liabilities $ 119,267 $ 111,736

Legal and professional accruals include accruals for legal and professional fees as well as accrued legal claims, refer to Note 17 - 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 6 - Prepaid and Other Current Asset s.

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

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For the year ended December 31, 2022, our income tax provision resulted in an effective tax rate of 2.3 %.

For the years ended December 31, 2020 and 2019, our income tax benefit on the loss from continuing operations resulted in an effective tax rate of 5.8 % and 1.3 %, respectively.

Our income tax provision for the year ended December 31, 2021 was $ 11.2 million, and an income tax benefit for December 31, 2020 and 2019 was $ 14.7 million and $ 0.4 million, respectively, and includes federal, state and foreign taxes.

For the year ended December 31, 2021, our income tax provision resulted in an effective tax rate of 5.0 %.

Our income tax provision for the year ended December 31, 2022 was $ 3.3 million, our income tax provision for December 31, 2021 was $ 8.8 million and includes federal, state and foreign taxes.

The substantial doubt about the Company’s ability to continue as a going concern basis casts doubt on our ability to estimate and generate future income.

The lack of going concern basis applicable for our financial statements for the year ended December 31, 2022, 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 on a going concern basis casts doubt on our ability to generate future income.

As a result, the Company included a charge of $ 2.2 million in income tax expense for the valuation allowance required to offset the remaining net deferred tax assets.

The $ 2.2 million charge is primarily attributable to our German and Canadian subsidiaries.

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

The components of our tax provision and benefit on continuing operations were as follows (in thousands):

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Foreign jurisdictions 1,319 1,685 3,004

$ 6,400 $ 4,809 $ 11,209

Twelve months ended December 31, 2020:

Federal $ ( 14,853 ) $ ( 1,228 ) $ ( 16,081 )

State & local 1,113 ( 1,010 ) 103

Foreign jurisdictions 2,942 ( 1,679 ) 1,263

$ ( 10,798 ) $ ( 3,917 ) $ ( 14,715 )

Tax provision $ 1,621 $ 1,685 $ 3,306

Twelve months ended December 31, 2021:

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Foreign jurisdictions 2,494 5,716 8,210

$ 2,754 $ ( 3,190 ) $ ( 436 )

Tax provision $ 4,022 $ 4,751 $ 8,773

The components of pre-tax income (loss) from continuing operations for the years ended December 31, 2022 and 2021 were as follows (in thousands):

Twelve Months Ended

2021 2020 2019

Domestic $ ( 156,001 ) $ ( 171,299 )

Foreign 9,220 ( 4,773 )

$ ( 174,810 ) $ ( 251,918 ) $ ( 32,853 )

Pre-tax income (loss) from continuing operations $ ( 146,781 ) $ ( 176,072 )

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The income tax provision in 2021 and benefit in 2020 and 2019 attributable to the loss from continuing operations differed from the amounts computed by applying the U.S.

Federal income tax rate ( 21 % in 2021, 2020 and 2019) to pre-tax loss from continuing operations as a result of the following (in thousands):

The income tax provision in 2022 and provision in 2021 attributable to the loss from continuing operations, respectively, differed from the amounts computed by applying the U.S.

federal income tax rate 21 % in 2022, ( 21 % in 2021) to pre-tax loss from continuing operations as a result of the following (in thousands):

Twelve Months Ended

2021 2020 2019

Pre-tax loss from continuing operations $ ( 146,781 ) $ ( 176,072 )

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Non-deductible expenses 118 229

Non-deductible compensation ( 522 ) 89 559

Foreign withholding 693 1,078

Prior year tax adjustments 7 141

Convertible debt — ( 2,949 ) —

Goodwill impairment — 9,399

Valuation allowance 31,430 34,284

Cares Act rate benefit — ( 7,267 ) —

Rate change — ( 140 )

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Total expense (benefit) for income tax on continuing operations $ 3,306 $ 8,773

_____________

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The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below (in thousands):

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Goodwill and intangible costs 10,143 9,221

Convertible debt 1,780 —

Net operating loss carry forwards 38,860 68,972

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Net deferred tax asset (liability) 1

$ ( 3,286 ) $ ( 3,393 )

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________________

1 As of December 31, 2021, certain deferred tax balances associated with discontinued operations remain on the balance sheet and in the inventory of deferred taxes but are presented within current assets and current liabilities associated with discontinued operations.

Management evaluates all available evidence, both positive and negative, to determine whether sufficient future taxable income will be generated to allow for the realization of the existing deferred tax assets.

A valuation allowance is recognized if, based on the weight of available evidence, it is more likely than not that some portion of the deferred tax asset will not be realized.

A significant factor of negative evidence evaluated was the cumulative pre-tax loss incurred over the three-year period ended December 31, 2021.

A significant factor of negative evidence evaluated was the cumulative pre-tax loss incurred over the two-year period ended December 31, 2022.

This objective evidence limits the ability to consider other subjective positive evidence, such as our projections for future pre-tax income.

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The amount of deferred tax asset considered realizable could be adjusted if there are changes to net operating loss carryforward periods or there is a change to the weight assessed on various sources of positive and negative evidence.

The current year increase in the valuation allowance is primarily attributable to our U.S.

In the previous quarter, we did record a significant increase in the valuation allowance on certain foreign subsidiaries that historically were profitable.

In the current quarter, we were able to release $ 0.9 million of valuation allowance based on all available evidence, including forecasted income for these entities.

The release of the valuation allowance is primarily attributable to our UK, Germany and Canada subsidiaries.

At December 31, 2021, we had net operating loss carryforwards for U.S.

The current year increase in the valuation allowance is primarily attributable to our foreign operations.

In the current quarter, we were able to release $ 11.5 million of valuation allowance resulting from the realization of deferred tax assets for our U.S.

As of December 31, 2022, we had net operating loss carryforwards for U.S.

federal income tax purposes of $ 104.2 million.

Of this amount, $ 96.2 million expires in various dates through 2037 and $ 125.7 million has an indefinite carryforward period.

These carryforwards are available, subject to certain limitations, to offset future taxable income.

Of this amount, $ 3.7 million expires in various dates through 2037, which is subject to limitations under Section 382 of the U.S.

Internal Revenue Code of 1986 as a result of stock ownership changes from Quest Integrity business sale, and $ 100.5 million has an indefinite carryforward period.

These carryforwards are available, subject to certain limitations such as mentioned above, to offset future taxable income.

Further, we have state net operating loss carryforwards of $ 178.6 million with $ 156.5 million expiring on various dates through 2041 and $ 22.1 million with an indefinite carryforward period.

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As of December 31, 2022, we had interest expense carryforward for U.S.

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These carryforwards are available, subject to certain limitations, to offset future taxable income.

The Company has $ 3.3 million of tax credits that will expire on various dates through 2037 if not utilized.

As of December 31, 2022, the Company had $ 2.2 million of tax credits that will expire on various dates through 2037 if not utilized.

As of December 31, 2022, we had foreign net operating loss carryforwards totaling $ 25.1 million.

Of this amount, $ 1.8 million will expire in various dates through 2031 and $ 23.3 million has an unlimited carryforward period.

At December 31, 2021, none of our undistributed earnings of foreign operations were considered to be permanently reinvested overseas.

As of December 31, 2022, none of our undistributed earnings of foreign operations were considered to be permanently reinvested overseas.

As of December 31, 2022, the deferred tax liability related to undistributed earnings of foreign subsidiaries was $ 2.6 million.

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We are currently under audit in one of the states in which we do substantial business.

We have recorded a $ 0.5 million tax liability in our uncertain positions related to this audit due to retroactive changes included in final regulations issued by the state this quarter.

Certain Netherlands entities are also under audit.

We do not anticipate any material adjustments related to these examinations.

As of December 31, 2022, we recorded a $ 0.5 million tax liability in our uncertain positions related to this audit due to retroactive changes included in final regulations issued by the state.

Certain Dutch entities were also under audit.

We did not anticipate any material adjustments related to these examinations.

Periodic examinations of our tax filings occur by the taxing authorities for the jurisdictions in which we conduct business.

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We do not expect any material adjustments to result from positions taken on our income tax returns.

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The following table summarizes the Company’s reconciliation of gross unrecognized tax benefits, excluding penalties and interest, for the year ended December 31, 2022 and 2021 (in thousands):

Twelve Months Ended

2021 2020 2019

Unrecognized tax benefits - January 1 $ 1,285 $ 1,610

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Reductions based on tax positions related to prior years — —

Disposition of uncertain tax positions of discontinued operations ( 426 ) —

Settlements — —

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Unrecognized tax benefits - December 31 $ 1,097 $ 1,285

_____________

We have recorded the unrecognized tax benefits in other long-term liabilities in the consolidated balance sheets.

As of December 31, 2021, 2020 and 2019, the total amount of accrued interest and penalties related to unrecognized tax benefits was $ 0.6 million, $ 0.4 million and $ 0.3 million, respectively.

There were approximately $ 0.2 million, $ 0.1 million and $( 0.1 ) million, respectively, of interest and penalties related to unrecognized tax benefits that are recorded in income tax expense for the periods ended December 31, 2021, 2020 and 2019.

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LONG-TERM DEBT

As of December 31, 2021 and 2020, our long-term debt and finance lease obligations are summarized as follows (in thousands):

As of December 31, 2022 and 2021, the total amount of accrued interest and penalties related to unrecognized tax benefits was $ 0.6 million and $ 0.6 million, respectively.

There was approximately $ 0.0 million and $ 0.2 million, respectively, of interest and penalties related to unrecognized tax benefits that was recorded in income tax expense for the period ended December 31, 2022 and 2021 .

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

2020 ABL Facility $ — $ 62,000

Term Loan 214,191 213,809

2022 ABL Facility 99,916 —

APSC Term Loan 31,562 214,191

Subordinated Term Loan 107,905 36,358

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See Convertible Debt section below for additional information.

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

Total $ 455,345

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

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 provides for available borrowings up to $ 150 million (the “ABL Facility”).

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

However, if our Notes, which mature on August 1, 2023, have an aggregate principal amount of $ 10 million (updated from $ 50.0 million to $ 10.0 million as part of the Third Amendment to the Term Loan) or more outstanding 120 days prior to their maturity date (the “Trigger Date”), or if there are Notes in an aggregate principal amount of less than $ 10 million outstanding and we do not have sufficient availability of more than 20 % under the ABL Facility on the Trigger Date, the ABL Facility will terminate on the Trigger Date.

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

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

2 Excludes finance lease obligations associated with discontinued operations.

For information on our finance lease obligations, see Note 13 - Leases .

2020 ABL Facility

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 “Citi Credit Agreement”) led by Citibank, N.A.

(“Citibank”), as agent, which provided for available borrowings up to $ 150.0 million (the “2020 ABL Facility”).

The 2020 ABL Facility’s original maturity date was December 18, 2024.

The 2020 ABL Facility had a variable interest rate of either a base rate or a LIBOR rate, plus an applicable margin.

The 2020 ABL Facility was fully paid off on February 11, 2022.

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

2 (the “ABL Amendment No.

2”) to the Credit Agreement.

ABL Amendment No.

2, among other things, (i) revises the applicable margin to 4.25 % for LIBOR rate advances, (ii) provides that at all times beginning on the effective date of the 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 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 ABL Facility are guaranteed by certain of our direct and indirect subsidiaries, as set forth in the ABL Facility agreement.

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

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

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

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 is 4.25 % and for Base Rate borrowings is 3.25 %.

The all-in Base Rate floor is 1.75 % and for LIBOR rate borrowings, the LIBOR rate, exclusive of spread, has a 0.75 % 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 ABL Facility agreement.

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

The ABL Facility contains customary conditions to borrowings, events of default and covenants, including, but not limited to, covenants that restrict our ability to sell assets, makes 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 is 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 ABL Facility then in effect, a consolidated fixed charge coverage ratio of at least 1.00 to 1.00 must be maintained.

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

At December 31, 2021, we had $ 65.3 million of cash on hand, of which, $ 4.1 million was restricted for interest due on the Term Loan and about $ 4.0 million of cash is located in countries where currency restrictions exist.

We had approximately $ 4.2 million of available borrowing capacity under the ABL Facility.

Direct and incremental costs associated with the issuance of the ABL Facility were approximately $ 4.8 million and were capitalized as debt issuance costs.

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

On 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.

The ABL Credit Facility matures and all outstanding amounts become due and payable on February 11, 2025, however, the ABL Credit Facility is subject to the Trigger Date as noted above.

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

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”).

2022 ABL Facility

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, as amended by ABL Amendment No.

1 and ABL Amendment No.

2, the “2022 ABL Credit Agreement”).

Available funding commitments to us under the 2022 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 Loan”) provided by Corre Partners Management, LLC and certain of its affiliates (“Corre”) (collectively, the “2022 ABL Credit Facility”).

The proceeds of the loans under the 2022 ABL Credit Facility were used to, among other things, pay off and terminate the 2020 ABL Facility.

The 2022 ABL Facility matures in February 2025.

Our obligations under the 2022 ABL Credit Agreement are guaranteed by certain of our direct and certain indirect subsidiaries referenced below as the “ABL Guarantors” and, together with the Company, the “ABL Loan Parties”.

Our obligations under the 2022 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.

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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.

Availability under the revolving credit line under the 2022 ABL Credit Facility is based on a percentage of the value of accounts receivable and inventory, reduced by certain reserves.

Revolving credit loans under the 2022 ABL Credit Facility bear interest through maturity at a variable rate based upon a LIBOR Rate (or a base rate 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 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 Delayed Draw Term Loan bears 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 %.

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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.

The Company may make voluntary prepayments of the loans under the 2022 ABL Credit Facility from time to time, subject, in the case of the Delayed Draw Term Loan, 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 2022 ABL Credit Facility to the sum of the Delayed Draw Term Loan 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 2022 ABL Credit Agreement, subject, in the case of the Delayed Draw Term Loan to a maximum of four such borrowings in any 12-month period.

Certain permanent repayments of the 2022 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.

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

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

Atlantic Park Term Loan

On December 18, 2020, we also entered that certain Term Loan Credit Agreement (the “Term Loan Credit Agreement”) with Atlantic Park Strategic Capital Fund, L.P., as agent (“APSC”), 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.

In addition, the 2022 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 2022 ABL Credit Facility.

The interest rate as of December 31, 2022 was 8.77 % for Eclipse and 14.12 % for the Delayed Draw Term Loan.

Direct and incremental costs associated with the issuance of the 2022 ABL Credit Facility were approximately $ 8.4 million and were capitalized as deferred financing costs.

These costs are being amortized on a straight-line basis over the term of the 2022 ABL Credit Facility.

Unamortized deferred financing cost amounted to $ 3.1 million and $ 2.9 million as of December 31, 2022 and December 31, 2021, respectively.

Additionally, the amortization period for deferred financing costs and debt discounts and issuance cost was accelerated to reflect the revised Maturity Reserve Trigger Date (as defined in the 2022 ABL Credit Agreement) 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.

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On May 6, 2022, we entered into Amendment No.1 to the 2022 ABL Credit Agreement (“ABL Amendment No.

1”) which, among other things, modified the Maturity Reserve Trigger Date (as defined in the 2022 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 Notes was 75 days prior to their maturity date rather than 120 days or May 18, 2023, by which date, the Notes balance must be paid down to less than $ 10.0 million, or the Company must have equivalent cash on hand to pay down the Notes to $ 10.0 million.

In connection with the Quest Integrity Transaction, on November 1, 2022, we entered into Amendment No.

2 to the 2022 ABL Credit Agreement (“ABL Amendment No.

2”) which, among other things, (i) modified the Maturity Reserve Trigger Date 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 Notes is 45 days prior to the maturity date of the Notes rather than 75 days, or June 17, 2023, and (ii) made certain modifications to negative covenants and mandatory prepayment provisions.

As of December 31, 2022, we had $ 64.9 million outstanding under the Revolving Credit Loans and $ 35.0 million outstanding under the Delayed Draw Term Loans.

There were $ 8.7 million outstanding in letters of credit secured by these instruments, which are off-balance sheet.

As of December 31, 2022, subject to the applicable sublimit and other terms and conditions, $ 52.4 million was available for loans or for issuance of new letters of credit, consisting of $ 42.4 million available under the Revolving Credit Loans and $ 10.0 million available under the Delayed Draw Term Loan.

APSC Term Loan

On December 18, 2020, we entered into that certain Term Loan Credit Agreement (as amended by Term Loan Amendment No.

1, Term Loan Amendment No.

2, Term Loan Amendment No.

3, Term Loan Amendment No.

4, Term Loan Amendment No.

5, Term Loan Amendment No.

6, Term Loan Amendment No.

7, Term Loan Amendment No.

8 and Term Loan Amendment No.

9, the “Term Loan Credit Agreement”) with Atlantic Park Strategic Capital Fund, L.P., as agent (“APSC”), pursuant to which we borrowed $ 250.0 million (the “Term Loan”).

The Term Loan was issued with a 3 % original issuance discount, 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 million or more on the Trigger Date, in which case the Term Loan will terminate on the 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 Facility, and we may increase the Term Loan by an amount not to exceed $ 100 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 %.

However, certain conditions could result in an earlier maturity, including if, on the Maturity Trigger Date (45 days prior to the maturity date of the Notes (currently June 17, 2023)), (i) the maturity date of the Notes has not been extended past the date that is 91 days after the sixth anniversary of the closing date of the Term Loan Credit Agreement or (ii) the Notes have an aggregate principal amount outstanding of $ 10.0 million or more, 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 2022 ABL Credit Facility, and we may, subject to the terms and conditions in the Term Loan Credit Agreement, increase the Term Loan by an amount not to exceed $ 100.0 million.

The Term Loan bears 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 a fluctuating interest rate equal to the greater 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 December 31, 2021 was 20.90 %.

The Term Loan is prepayable in whole or in part, at any time and from time to time, subject to 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 as of December 31, 2022 and December 31, 2021 was 37.99 % and 20.90 %, respectively.

As of December 31, 2022, the effective interest consisted of a 11.73 % variable interest rate paid in cash and an additional 26.26 % due to the acceleration of the amortization of the related debt issuance costs.

As of December 31, 2021, the effective interest consisted of a 8.5 % variable interest rate paid in cash and an additional 12.4 % due to the acceleration of the amortization of the related debt issuance costs.

The unamortized balances of debt discounts, warrant discount and debt issuance cost amounted to $ 3.9 million and $ 35.8 million at December 31, 2022 and December 31, 2021, respectively.

Interest expense amounted to $ 21.8 million and $ 21.9 million for the years ended December 31, 2022 and 2021, 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

1 to the Term Loan Credit Agreement (“Term Loan Amendment No.

1”) with the financial institutions party thereto from time to time (the “Lenders”) and APSC, as agent.

Term Loan Amendment No.

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

(ii) required

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to the agent;

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;

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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;

2 to the Term Loan Credit Agreement (“Term Loan Amendment No.

2”) with the Lenders and APSC, as agent.

Term Loan Amendment No.

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

(ii) contained certain milestones;

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and (v) provided that the Company will not permit a covenant trigger event under the 2020 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 modifies 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 Trigger Date from $ 50 million to $ 10 million.

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

3 to the Term Loan Credit Agreement (“Term Loan Amendment No.

Term Loan Amendment No.

3, 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”) at an exercise price of $ 1.50 per share, 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.

Following the Reverse Stock Split, the APSC Warrants provide for the purchase of up to 500,000 shares of our common stock at an exercise price of $ 15.00 per share.

Term Loan Amendment No.

3 also reduced the required 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, respectively.

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

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.

4 to the Term Loan Credit Agreement (“Term Loan Amendment No.

4”) and Amendment No.5 to the Term Loan Credit Agreement (“Term Loan Amendment No.

5”), respectively.

Term Loan Amendment No.

4 extended the date upon which the Company must issue the APSC Warrants to December 7, 2021, and Term Loan Amendment No.

5 extended the date upon which the Company must issue the APSC Warrants to December 8, 2021.

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

provided, that this unfinanced capital expenditures requirement 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.

6 to the Term Loan Credit Agreement (“Term Loan Amendment No.

Term Loan Amendment No.

6, among other things, (i) permitted the entry into the 2022 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.

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

7 to the Term Loan Credit Agreement (“Term Loan Amendment No.

Term Loan Amendment No.

7, among other things, (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 the Notes maturity date instead of 120 days prior to their maturity date, and (ii) amended the financial covenants such that the maximum net leverage ratio to be tested for the fiscal quarter ending March 31, 2023 be increased from 7.00 to 1.00 to 12.00 to 1.00.

In connection with the Quest Integrity Transaction, on November 1, 2022, we, the guarantors party thereto, the lenders party thereto and APSC, as agent for the lenders and secured parties, entered into Amendment No.

8 to the Term Loan Credit Agreement (“Term Loan Amendment No.

8”) which, among other things, (i) modified mandatory prepayment requirements to allow us to retain up to $ 26.0 million of proceeds in connection with the Quest Integrity Transaction, subject to certain limitations, (ii) modified the Maturity Trigger Date 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 45 days prior to the maturity date of the Notes rather than 75 days, or June 17, 2023, and (iii) made certain modifications to negative covenants and mandatory prepayment provisions.

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On November 2, 2022, we used the net proceeds from the sale of Quest Integrity to pay down $ 225.0 million of debt under the Term Loan Credit Agreement and to pay certain fees associated with such repayment and related accrued interest, which reduced the principal balance to $ 35.5 million, with the remaining proceeds reserved for general corporate purposes, thereby reducing our future debt service obligations and leverage and improving our liquidity.

The transaction was treated as a partial debt extinguishment, and a loss in the amount of $ 30.1 million was recognized in the current income statement consisting of cash fees and premium paid in the amount of $ 12.4 million and the noncash write off of the related unamortized balance of deferred issuance cost and warrant and debt discounts in the amount of $ 17.7 million.

On November 4, 2022, we entered into Amendment No.

9 to the Term Loan Credit Agreement which amended the financial covenant to provide relief from the maximum net leverage ratio covenant thereunder such that it is not tested until the fiscal quarter ending June 30, 2023 and for each fiscal quarter thereafter at 7.00 to 1.00.

Subordinated Term Loan Credit Agreement

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”).

On November 9, 2021, we entered into a credit agreement (as amended by Corre Amendment 1, Corre Amendment 2, Corre Amendment 3, Corre Amendment 4, Corre Amendment 5, Corre Amendment 6, Corre Amendment 7, Corre Amendment 8, Corre Amendment 9, Corre Amendment 10 and Corre Amendment 11, and the related Springing Maturity Date (as defined below) provision (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.

The Subordinated Term Loan matures, and all outstanding amounts become due and payable, on the earlier of December 31, 2027 and the date that is two weeks following the maturity or full repayment of the Term Loan (the “Springing Maturity Date”).

The stated interest rate on the Subordinated Term Loan is 12.00 % which is payable in the form of paid-in-kind interest (“PIK Interest”).

The effective interest rate as of December 31, 2022 and December 31, 2021 was 29.23 % and 45.53 %, respectively.

As of December 31, 2022, the effective interest consisted of 12.00 % stated interest and an additional 17.23 % due to the acceleration of the amortization of the related debt issuance costs.

At December 31, 2021, the effective interest consisted of the 12.00 % stated interest and an additional 33.53 % due to the acceleration of the amortization of the related debt issuance costs.

The unamortized debt issuance cost amounted to $ 7.5 million and $ 13.9 million as of December 31, 2022 and December 31, 2021, respectively.

Interest expense amounted to $ 11.4 million and $ 0.6 million for the years ended December 31, 2022 and 2021, respectively.

Under the Subordinated Term Loan Credit Agreement, we were required to, among other things, (i) subject to certain conditions, issue the lenders warrants (as defined 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 included our Chief Executive Officer, and (iii) reconstitute our Board of Directors.

The Subordinated Term Loan Credit Agreement also contained 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.

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

Corre Amendment 1 (i) extended the payment date for interest in the form of 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.

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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.

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

Corre Amendment 2 (i) extended the payment date for interest 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.

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

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 the Corre Amendments 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;

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

Corre Amendment 4 appointed Cantor Fitzgerald Securities as successor agent.

In connection with the transactions contemplated by the 2022 ABL Credit Agreement on February 11, 2022, Corre, agreed to provide the Company with incremental financing (the “Incremental Financing”), totaling approximately $ 55.0 million, consisting of (i) a $ 35.0 million Delayed Draw Term Loan under the 2022 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.

and (iii) $ 10.0 million through the purchase of 11,904,762 PIPE Shares (the “PIPE Shares”) of our common stock to Corre

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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”).

The business purpose of the Corre Amendments was to further extend the liquidity runway of the Company and support ongoing negotiations of the financing transactions completed on February 11, 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) provides 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) permits the entry into the ABL Credit Facility, (iii) permits certain asset sales and requires certain related mandatory prepayments, subject to an applicable prepayment premium, and (iv) amends 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;

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.

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, we are required to post letters of credit generally issued by a bank as collateral.

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

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

We were contingently liable for outstanding stand-by letters of credit totaling $ 23.5 million at December 31, 2021 and $ 19.5 million at December 31, 2020.

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

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

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

(“APSC Holdco”) pursuant to which the Existing Warrant was amended and restated to provide for the purchase of up

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

Corre Amendment 5, which 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 entry into the 2022 ABL Credit Facility, (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 will not be tested until the fiscal quarter ending March 31, 2023, and the Company is not permitted to exceed $ 20.0 million in unfinanced capital expenditures in any calendar year;

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

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

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

Corre Amendment 6, among other things, amended 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.

On June 28, 2022, we entered into Amendment No.

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

On October 4, 2022, we entered into Corre Amendment No.

8 to the Subordinated Term Loan Credit Agreement (“Corre Amendment 8”) with the lenders from time to time party thereto (including Corre), and Cantor Fitzgerald Securities, as agent, that among other things, (i) increased the total principal amount outstanding under the Subordinated Term Loan Credit Agreement to approximately $ 112.7 million to give effect to the exchange of their convertible debt and (ii) extended the availability date for the additional commitment of $ 10.0 million in subordinated delayed draw term loans from October 31, 2022 to December 31, 2022.

See Convertible Debt below for impact of the amendment to the Notes outstanding.

On November 1, 2022, we entered into Amendment No.

9 to the Subordinated Term Loan Credit Agreement (“Corre Amendment 9”) with the guarantors party thereto, the lenders from time to time party thereto and Cantor Fitzgerald Securities, as agent.

Corre Amendment 9, among other things, (i) modified the mandatory prepayment requirements to allow us to retain up to $ 26.0 million of proceeds in connection with the Quest Integrity Transaction, subject to certain limitations and (ii) made certain modifications to negative covenants and mandatory prepayment provisions.

On November 4, 2022, we entered into Corre Amendment No.

10 to the Subordinated Term Loan Credit Agreement (“Corre Amendment 10”) with the lenders from time to time party thereto (including Corre), and Cantor Fitzgerald Securities, as agent, which amended the financial covenant to provide relief from the maximum net leverage ratio covenant thereunder such that it is not tested until the fiscal quarter ending June 30, 2023 and for each fiscal quarter thereafter at 7.00 to 1.00.

On November 21, 2022, we entered into Amendment No.

11 to the Subordinated Term Loan Credit Agreement (“Corre Amendment 11”) with the lenders from time to time party thereto (including Corre), and Cantor Fitzgerald Securities, as agent.

Corre Amendment 11 amended the Subordinated Term Loan Credit Agreement to, inter alia , (i) extend the stated maturity date from December 31, 2026 to December 31, 2027 (subject to the Springing Maturity Date), (ii) extend the availability date for the additional commitment of $ 10.0 million in Subordinated delayed draw term loans to the end of March 31, 2023 rather than December 31, 2022 and (iii) create a new tranche of term loans representing the increased principal amount of unsecured term loans (which loans are not subject to the springing maturity of 14 days after payment in full of the Term Loan created in connection with the exchange of the Notes pursuant to the Exchange Agreement (as defined below) dated as of October 4, 2022, by and among the Company and certain holders of the Notes.

There was no increase in the aggregate amount outstanding under the Subordinated Term Loan as a result of Corre Amendment 11.

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to 4,082,949 shares of Company 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 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.

As of December 31, 2022 and 2021, we held the following warrants:

Original After Reverse Stock Split (Effective date December 22, 2023)

Holder Date Number of shares Exercise price Expiration date Number of shares Exercise price Total value of stock Expiration date

APSC Holdco II, LP

Original 12/18/2020 3,582,949 $ 7.75 6/14/2028

Amended 11/9/2021 500,000 $ 1.50 6/14/2028

Amended 12/8/2021 917,051 $ 1.50 12/8/2028

Total APSC 5,000,000 $ 1.50 12/8/2028 500,000 $ 15.00 $ 7,500,000 12/8/2028

Corre 12/8/2021 5,000,000 $ 1.50 12/8/2028 500,000 $ 15.00 $ 7,500,000 12/8/2028

Total warrants 10,000,000 1,000,000 $ 15,000,000

On December 18, 2020, in connection with the execution of the Term Loan Credit Agreement, we issued to APSC warrants to purchase up to 3,582,949 shares of our common stock, which were 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.

In connection with execution of the Subordinated Term Loan Credit Agreement and Term Loan Amendment No.

3, 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 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 (i) 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 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) the Common Stock Purchase Warrants (collectively, the “Corre Warrants” and, 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.

Following the Reverse Stock Split, the Warrants provide for the purchase of up to 1,000,000 shares of our common stock at an exercise price of $ 15.00 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.

In connection with the Subscription Agreement (as defined 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.

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

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Subscription Agreement

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

Pursuant to the Subscription Agreement, subject to certain exceptions, each of the Corre Holders has agreed not to sell its portion of the PIPE Shares until the earliest to occur of (i) the date that is 180 days from the date of the Subscription Agreement, and (ii) such date on which the Company completes a liquidation, merger, stock exchange, reorganization or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of 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.

In connection with the Incremental Financing and Equity Issuance (referred above), 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.

In accordance with, and subject to the terms and conditions of the Subscription Agreement, the Board was 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 Agreement remains outstanding.

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.

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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) pursuant to Rule 144A under the Securities Act (the “Offering”).

As discussed above, in December 2020, we retired $ 136.9 million par value of our Notes, and as of December 31, 2020, the principal amount of Notes outstanding was $ 93.1 million.

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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.

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

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

As a result of the Reverse Stock Split, the Notes are convertible at a conversion rate of 4.6083 shares of our common stock per $1,000 principal amount of the Notes, which is equivalent to a conversion price of approximately $ 217.00 per share.

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

Pursuant to the Exchange Agreement, the Company agreed to exchange approximately $ 57.0 million of aggregate principal amount, plus accrued and unpaid PIK Interest, of the Notes beneficially owned by the Exchanging Holders (as defined below) for an equivalent increased principal amount of term loans under the Subordinated Term Loan Credit Agreement.

Following the closing of the Exchange Agreement and Corre Amendment No.

8, the Company has approximately $ 41.2 million in aggregate principal amount of Notes outstanding, which pay interest at a rate of 5.00 % per annum entirely in cash.

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:

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

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.

The Notes were initially convertible into 10,599,067 shares of pre-Reverse Split common shares.

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

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rules of the NYSE to obtain shareholder approval 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 discussed above, the Notes are convertible into 4,291,705 shares of common stock.

As a result of the redemption and extinguishment of the Notes discussed below, the execution of the Exchange Agreement described below as well as the Reverse Stock Split, the Notes are currently convertible into 189,682 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”).

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

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

The indenture governing the Notes provides that we have the option to redeem all or any portion of the Notes since 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 previous Credit Facility.

On January 13, 2022, we entered into a supplemental indenture (the “Supplemental Indenture”) with Truist Bank, as trustee, to the indenture governing the Notes (the “Indenture”) 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 amended 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;

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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.

On October 4, 2022, we entered into an exchange agreement (the “Exchange Agreement”) by and among us and certain holders (collectively, the “Exchanging Holders”) of the PIK Securities.

Pursuant to the Exchange Agreement, we agreed to exchange approximately $ 57.0 million of aggregate principal amount, plus accrued and unpaid PIK Interest, of PIK Securities beneficially owned by the Exchanging Holders for an equivalent increased principal amount of term loans (the “New Term Loans”) under the Subordinated Term Loan Credit Agreement.

Following the closing of the Exchange Agreement and Corre Amendment 8 to the Subordinated Term Loan Credit Agreement, we had approximately $ 41.2 million in aggregate principal amount of Notes outstanding, which pay interest at a rate of 5.00 % per annum entirely in cash.

The exchange of the Notes into the New Term Loans was treated as debt modification and the unamortized balance of debt issuance and discount in the amount of $ 1.4 million was added to the modified debt and is amortized over the term of the Term Loan using the new effective interest rate.

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Accounting Treatment of the Notes

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

$ 7,969 $ 7,969

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

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_________________

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

1 Included in the “Current portion of long-term debt and finance lease obligations” line of the 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 consolidated balance sheets.

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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).

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

Twelve Months Ended

Coupon interest $ 5,700 $ 4,657

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Effective interest rate 7.84 % 9.12 %

ASU 2020-06 Adoption.

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

ASU 2020-06 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.

ASU 2020-06 updates the guidance on certain embedded conversion features that are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging , or that do not result in substantial premiums accounted for as paid-in capital, such that those features are no longer required to be separated from the host contract.

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

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

Further, ASU 2020-06 made amendments to the EPS guidance in Topic 260 for convertible debt instruments, the most significant impact of which is requiring the use of the if-converted method for diluted EPS calculation, and no longer allowing the net share settlement method.

ASU 2020-06 also made revisions to Topic 815-40, which provides guidance on how an entity must determine whether a contract qualifies for a scope exception from derivative accounting.

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

ASU 2020-06 is effective for interim and annual periods beginning after December 15, 2021, with early adoption permitted for periods beginning after December 15, 2020.

Adoption of ASU 2020-06 can either be on a modified retrospective or full retrospective basis.

On January 1, 2022, we adopted ASU 2020-06 using the modified retrospective method.

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

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

Accordingly, the cumulative effect of the changes made on our January 1, 2022 consolidated balance sheet for the adoption of ASU 2020-06 was as follows (in thousands):

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

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

Additional paid-in capital $ 453,247 $ ( 5,651 ) $ 447,596

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

The impact of adoption on our consolidated statements of operations for the year ended December 31, 2022 was primarily to decrease net interest expense by $ 1.3 million.

This had the effect of decreasing our basic and diluted net loss per share of common stock attributable to common stockholders for the year ended December 31, 2022 by $ 0.31 .

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 the denominator because of the antidilutive effect.

1970 Group Substitute Insurance Reimbursement Facility

On September 29, 2022, we entered into the Substitute Insurance Reimbursement Facility Agreement with the 1970 Group (the “Substitute Insurance Reimbursement Facility Agreement”).

Under this agreement, the 1970 Group extended us credit in the form of a substitute reimbursement facility (the “Substitute Reimbursement Facility”) to provide up to approximately $ 21.4 million of letters of credit on our behalf in support of our workers’ compensation, commercial automotive and general liability insurance carriers for workers’ compensation, commercial automotive and/or general liability policies (the “Insurance Policies”).

Under the Substitute Insurance Reimbursement Facility Agreement, 1970 Group arranged for the issuance of letters of credit from financial institutions approved by the National Association of Insurance Commissioners.

Such letters of credit arranged by the 1970 Group permit the return of certain existing letters of credit for our account that are outstanding for the purpose of supporting the Insurance Policies and that are required to be collateralized, thereby providing us increased liquidity in the amount of approximately $ 21.3 million.

Under the Substitute Insurance Reimbursement Facility Agreement, we are required to reimburse the 1970 Group for any draws made under the letters of credit within five business days of notice of any such draw.

The Substitute Insurance Reimbursement Facility Agreement terminates upon the earlier of (i) the expiration or termination of our Insurance Policies or (ii) September 29, 2023.

This arrangement replaced certain existing letters of credit which allowed us to release $ 16.3 million out of a total of $ 25.7 million of restricted cash previously held as collateral for the replaced letters of credit as well as reduced the outstanding letters of credit under the 2022 ABL Credit Facility by $ 5.0 million thereby improving our liquidity.

The Agreement contained certain affirmative covenants, including for us to keep and maintain our Insurance Policies for the compliance in all material respects with applicable requirements.

The Agreement contains certain events of default, including, without limitation, our Company’s failure to reimburse 1970 Group for any draw or other financial obligation or our payment of 1970 Group’s fees.

Upon an event of default, 1970 Group has the option to declare all outstanding obligations immediately due within five (5) business days after our receipt of such notice from 1970 Group.

Our obligations under the Agreement are not guaranteed by any of our subsidiaries, are unsecured and are subordinated to our obligations to each of the lenders under each of (1) the Term Loan Credit Agreement, (2) the 2022 ABL Credit Agreement, and (3) the Subordinated Term Loan Credit Agreement.

According to the provisions of ASC 470 – Debt, the arrangement is a Substitute Insurance Reimbursement Facility limited to the amounts drawn under the letters of credit.

Therefore, until we use or draw on the Substitute Insurance Reimbursement Facility, the letters of credit are treated as an off-balance sheet credit arrangement.

The fees in the amount of $ 2.9 million paid by us are deferred and amortized over the term of the arrangement.

As of December 31, 2022, the unamortized balance in the amount of $ 1.8 million is included in other current assets.

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 December 31, 2022 due to the Trigger Date and the Maturity Reserve Trigger Date (as defined in the 2022 ABL Credit Agreement) provisions.

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As of December 31, 2022 and December 31, 2021, capitalized deferred financing costs, inclusive of debt issuance costs and discounts, net of accumulated amortization, related to our outstanding debt were $ 15.1 million and $ 58.0 million, respectively.

Due to the Trigger Date and the Maturity Reserve Trigger Date (as defined in the 2022 ABL Credit Agreement) provisions, the amortization period for deferred financing costs, debt and warrant discounts and debt issuance costs was updated to reflect the potential accelerated maturity dates.

This resulted in additional amortization charges of $ 21.8 million during the twelve months ended December 31, 2022.

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

Loss on Debt Extinguishment

Loss on debt extinguishment for the year ended December 31, 2022 represents a loss on partial payoff of the Term Loan in the amount of $ 30.1 million and consists of cash fees and premium in the amount of $ 12.4 million and non-cash write off of unamortized balance of deferred issuance cost and warrant and debt discounts in the amount of $ 17.7 million.

As of December 31, 2022, we had $ 51.1 million of unrestricted cash and cash equivalents and $ 7.0 million of restricted cash including $ 4.6 million of restricted cash held as collateral for letters of credit and commercial card programs.

International cash balances as of December 31, 2022 were $ 16.3 million, and approximately $ 1.4 million of such cash is located in countries where currency restrictions exist.

As of December 31, 2022, we had approximately $ 52.4 million of availability in additional borrowing capacity consisting of $ 42.4 million available under the Revolving Credit Loans and $ 10.0 million available under the Corre Delayed Draw Term Loan.

We have $ 33.3 million in letters of credit issued domestically.

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

Additionally, we have $ 1.6 million in surety bonds outstanding and an additional $ 0.5 million in miscellaneous cash deposits securing leases or other required obligations.

Our cash and cash equivalents as of December 31, 2021 totaled $ 55.2 million, of which $ 4.1 million was restricted for interest due on the Term Loan.

Additionally, $ 14.2 million of the $ 55.2 million of cash and cash equivalents was in foreign accounts, primarily in Europe, Canada and Australia including $ 2.4 million of cash located in countries where currency restrictions exist.

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

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

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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.

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

Twelve Months Ended

December 31, 2021 Twelve Months Ended December 31, 2020

Operating lease costs $ 25,116 $ 27,773

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Total lease cost $ 31,648 $ 34,329

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Lease cost - discontinued operations $ 841 $ 1,656

Lease cost - continuing operations $ 30,807 $ 32,673

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

Twelve Months Ended

December 31, 2021 Twelve Months Ended December 31, 2020

Supplemental cash flow information:

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Finance leases $ 1,270 $ 1,011

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

December 31, 2021 December 31, 2020

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

Operating Leases:

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

Twelve Months Ended December 31, Operating Leases Finance Lease

Twelve Months Ended December 31, Operating Leases Finance Leases

2023 $ 14,228 $ 1,179

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Present value of lease liabilities $ 52,642 $ 5,902

Total rent expense resulting from operating leases, including short-term leases, for the years ended December 31, 2021, 2020 and 2019 were $ 39.4 million, $ 38.8 million and $ 43.0 million, respectively.

Total rent expense resulting from operating leases, including short-term leases, for the years ended December 31, 2022 and 2021 were $ 37.3 million, $ 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 December 31, 2021, there were approximately 1.7 million restricted stock units, performance awards and stock options outstanding to officers, directors and key employees.

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

As of December 31, 2022, there were approximately 103,274 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.

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Equity Incentive Plan.

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

The amendment and restatement to the 2018 Plan increased the shares available for issuance by 3.0 million shares of Common Stock, before the reverse stock split discussed below.

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 $ 7.0 million, $ 6.3 million and $ 10.1 million for the years ended December 31, 2021, 2020 and 2019, respectively.

On December 21, 2022, we completed a reverse stock split of our outstanding common stock at a ratio of one-for-ten.

The Reverse Stock Split effected a proportionate reduction in shares available for issuance under our 2018 Plan.

We have made proportionate adjustments to the number of stock units outstanding and issuable upon exercise or vesting of our outstanding awards as well as the applicable exercise prices and weighted average fair value.

No fractional shares were issued in connection with the Reverse Stock Split.

Compensation expense related to share-based compensation totaled $ 0.2 million and $ 7.0 million for the years ended December 31, 2022 and 2021, respectively.

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

At December 31, 2021, $ 7.3 million of unrecognized compensation expense related to share-based compensation is expected to be recognized over a remaining weighted-average period of 1.6 years.

The recognized income tax benefit totaled $ 0.7 million, $ 0.4 million and $ 2.0 million for the years ended December 31, 2021, 2020 and 2019, respectively.

As of December 31, 2022, $ 1.4 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.

The recognized income tax benefit totaled $ 0.0 million and $ 0.7 million for the years ended December 31, 2022 and 2021, respectively.

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.

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

Compensation expense related to stock units and director stock grants totaled $ 4.4 million, $ 4.6 million, $ 5.8 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Transactions involving our stock units and director stock grants for the twelve months ended December 31, 2021 are summarized below:

Compensation expense related to stock units and director stock grants totaled $ 1.5 million and $ 4.4 million for the years ended December 31, 2022 and 2021, respectively.

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

Twelve Months Ended

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Stock and stock units, end of year 98 $ 19.55

The weighted-average grant date fair value related to stock units and director stock grants during the years ended December 31, 2020 and 2019 was $ 12.55 and $ 17.35 , respectively.

The intrinsic value of stock units and director stock grants vested during the years ended December 31, 2021, 2020 and 2019 was $ 1.2 million, $ 2.3 million and $ 5.7 million, respectively.

The intrinsic value of stock units and director stock grants vested during the years ended December 31, 2022 and 2021 was $ 0.5 million and $ 1.2 million, respectively.

We have a performance stock unit award program whereby we grant Long-Term Performance Stock Unit (“LTPSU”) awards to our executive officers.

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

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.

LTPSU awards granted 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 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.

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For these awards, we recognize compensation expense over the vesting term on a straight-line basis based upon the performance target that is probable of being met, subject to adjustment for changes in the expected or actual performance outcome.

Compensation expense related to performance awards totaled $ 2.6 million, $ 1.7 million and $ 4.3 million for the years ended December 31, 2021, 2020 and 2019, respectively.

For performance awards, we recorded income of $ 1.3 million and expense of $ 2.6 million for the years ended December 31, 2022 and 2021, respectively.

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Changes during the period:

Granted 575 $ 6.70 109 $ 11.69

Vested and settled ( 28 ) $ 25.24 — $ —

Cancelled ( 417 ) $ 14.68 ( 164 ) $ 15.50

Cancelled and forfeited ( 66 ) $ 62.08 ( 20 ) $ 96.23

Performance stock units, end of period 2 $ 149.60 2 $ 116.90

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1 Performance units with variable payouts are shown at target level of performance.

The weighted-average grant date fair value related to performance stock units during the year ended December 31, 2020 was $ 13.31 and during the year ended December 31, 2019 was $ 16.66 .

The intrinsic value of performance stock unit awards vested during the years ended December 31, 2021, 2020 and 2019 were $ 0.3 million, $ 1.3 million and $ 1.0 million, respectively.

The intrinsic value of performance stock unit awards vested during the year ended December 31, 2021 was $ 0.3 million.

There were no performance stock units vested during the year ended December 31, 2022.

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.

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Changes during the year:

Exercised — $ —

Cancelled — $ —

Expired ( 1 ) $ ( 277.13 )

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No stock options were granted during the years ended December 31, 2022 and 2021.

Options exercisable at December 31, 2021 had a weighted-average remaining contractual life of 1.6 years, and exercise prices ranging from $ 32.05 to $ 50.47 .

The intrinsic value of stock option awards exercised was insignificant for the years ended December 31, 2021, 2020 and 2019.

Options exercisable as of December 31, 2022 had a weighted-average remaining contractual life of 0.6 years, and exercise prices ranging from $ 320.50 to $ 504.70 .

There were no stock option awards exercised during the years ended December 31, 2022 and 2021 .

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STOCKHOLDERS’ EQUITY

Shareholder’s Equity and Preferred Stock

On December 21, 2022, we completed a reverse stock split of our outstanding common stock at a ratio of one-for-ten.

The Reverse Stock Split effected a proportionate reduction in our authorized shares of common stock from 120,000,000 shares to 12,000,000 shares and reduced the number of shares of common stock outstanding from approximately 43,429,089 shares to approximately 4,342,909 shares.

We have made proportionate adjustments to the number of common shares issuable upon exercise or conversion of our outstanding warrants, equity awards and convertible securities, as well as the applicable exercise prices and weighted average fair value of the equity awards.

No fractional shares were issued in connection with the Reverse Stock Split.

As of December 31, 2022 there were 4,342,909 shares of our Company common stock outstanding and 12,000,000 shares authorized at $ 0.30 par value per share.

As of December 31, 2022 we had 500,000 authorized shares of preferred stock, none of which had been issued.

In connection with the Amended Term Loan Credit Agreement and the Subordinated Term Loan Credit Agreement, we entered into Warrant Agreements and Waivers related to our common stock.

A detailed discussion of these transactions can be found in Note 12 - Debt.

Issuance of PIPE Shares

In connection with the 2022 ABL Credit Agreement and the Subscription Agreement, PIPE shares were issued and sold, subject to certain terms and conditions.

A detailed discussion of these transactions can be found in Note 12 - Debt.

Accumulated Other Comprehensive Income (loss)

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

Twelve Months Ended

December 31, 2022 Twelve Months Ended

December 31, 2021

Adjustments Foreign

Hedge Defined benefit pension plans Tax

Provision Total Foreign

Adjustments Foreign

Hedge Defined benefit pension plans Tax

Provision Total

Balance at beginning of year $ ( 25,258 ) $ 2,988 $ ( 3,873 ) $ ( 589 ) $ ( 26,732 ) $ ( 23,045 ) $ 2,988 $ ( 8,021 ) $ 400 $ ( 27,678 )

Other comprehensive income (loss) ( 6,589 ) — ( 6,601 ) 925 ( 12,265 ) ( 2,213 ) — 4,148 ( 989 ) 946

Balance at end of year $ ( 31,847 ) $ 2,988 $ ( 10,474 ) $ 336 $ ( 38,997 ) $ ( 25,258 ) $ 2,988 $ ( 3,873 ) $ ( 589 ) $ ( 26,732 )

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

Twelve Months Ended December 31,

Foreign currency translation adjustments $ ( 6,589 ) $ — $ ( 6,589 ) $ ( 2,213 ) $ ( 1 ) $ ( 2,214 )

Defined benefit pension plans ( 6,601 ) 925 ( 5,676 ) 4,148 ( 988 ) 3,160

Total $ ( 13,190 ) $ 925 $ ( 12,265 ) $ 1,935 $ ( 989 ) $ 946

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EMPLOYEE BENEFIT PLANS

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We did not incur any contribution expense in 2021 as forfeitures were used for the company match.

Our contributions for the plan years ended December 31, 2020 and 2019 were approximately $ 2.1 million and $ 9.8 million, respectively.

The decrease from 2019 to 2020 was due to the suspension of our matching contribution as of March 2020 due to the COVID-19 pandemic.

Our contribution for the plan year ended December 31, 2022 was approximately $ 3.3 million.

Defined benefit plans.

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Twelve Months Ended

2021 2020 2019

Service cost $ — $ — $ —

Interest cost $ 1,586 $ 1,282

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Amortization of prior service cost 31 32

Amortization of net actuarial (gain) loss — — —

Net pension cost (credit) $ ( 745 ) $ ( 622 )

The weighted-average assumptions used to determine benefit obligations at December 31, 2021 and 2020 are as follows:

The weighted-average assumptions used to determine benefit obligations as of December 31, 2022 and 2021 are as follows:

Discount rate 5.0 % 2.0 %

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The expected long-term rate of return on invested assets for 2022 is determined based on the weighted average of expected returns on asset investment categories as follows:

2.8 % overall, 4.9 % for equities and 2.1 % fo r debt securities.

6.4 % overall, 9.5 % for equities and 5.3 % for debt securities.

The following table sets forth the changes in the benefit obligation and plan assets for the years ended December 31, 2022 and 2021 (in thousands):

Twelve Months Ended December 31,

Twelve Months Ended

Projected benefit obligation:

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Benefits paid ( 5,028 ) ( 5,137 )

Prior service cost — —

Disposal of Norwegian Plan — —

Foreign currency translation adjustment and other ( 9,206 ) ( 890 )

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The accumulated benefit obligation for the U.K.

Plan was $ 91.3 million and $ 100.2 million at December 31, 2021 and 2020, respectively.

Plan was $ 56.2 million and $ 91.3 million as of December 31, 2022 and 2021, respectively.

The decrease in the accumulated benefit obligation was due to the increase in discount rate driven by higher interest rate during the period.

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At December 31, 2021, expected future benefit payments are as follows for the years ended December 31, (in thousands):

As of December 31, 2022, expected future benefit payments are as follows for the years ended December 31, (in thousands):

2028-2032 19,388

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(Level 1) Significant

(Level 2) (a) Significant

(Level 2) Significant

Cash $ 1,861 $ 1,861 $ — $ —

Equity securities:

Diversified growth fund (b) 23,582 — 23,582 —

Global equity fund (c) — — — —

Diversified growth fund (a) 15,285 — 4,848 10,437

Fixed income securities:

government fixed income securities (d) 9,487 — 9,487 —

government index-linked securities (e) 16,393 — 16,393 —

Global absolute return bond fund (f) 12,111 — 12,111 —

Corporate bonds (g) 30,297 — 30,297 —

government fixed income securities (b) 6,471 — 6,471 —

government index-linked securities (c) 7,942 — 7,942 —

Corporate bonds (e) 25,009 — 25,009 —

Total $ 56,568 $ 1,861 $ 44,270 $ 10,437

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Equity securities:

Diversified growth fund (b) 22,640 — 22,640 —

Global equity fund (c) 2,922 — 2,922 —

Diversified growth fund (a) 23,582 — 12,139 11,443

Fixed income securities:

government fixed income securities (d) 17,478 — 17,478 —

government index-linked securities (e) 15,331 — 15,331 —

Global absolute return bond fund (f) 12,235 — 12,235 —

Corporate bonds (g) 8,755 — 8,755 —

government fixed income securities (b) 9,487 — 9,487 —

government index-linked securities (c) 16,393 — 16,393 —

Global absolute return bond fund (d) 12,111 — 12,111 —

Corporate bonds (e) 30,297 — 30,297 —

Total $ 94,281 $ 2,411 $ 80,427 $ 11,443

______________________________

a) The net asset value of the commingled equity and fixed income funds are determined by prices of the underlying securities, less the funds’ liabilities, and then divided by the number of shares outstanding.

As the funds are not traded in active markets, the commingled funds are classified as Level 2 assets.

The net asset value is corroborated by observable market data (e.g., purchase or sale activities).

b) This category includes investments in a diversified portfolio of equity, bonds, alternatives and cash markets that aims to achieve capital growth returns.

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c) This category includes investments in a diversified portfolio of equity, bonds, money markets, alternatives and credit markets to achieve a return with downside protection through monthly put options.

d) This category includes investments in funds with the objective to provide a leveraged return to U.K.

government fixed income securities (gilts) that have maturity periods ranging from 2030 to 2060.

e) This category includes investments in funds with the objective to provide a leveraged return to various U.K.

a) This category includes investments in a diversified portfolio of equity, alternatives and cash markets that aims to achieve capital growth returns.

b) This category includes investments in funds with the objective to provide a leveraged return to U.K.

government fixed income securities (bonds) that have maturity periods ranging from 2030 to 2060.

c) This category includes investments in funds with the objective to provide a leveraged return to various U.K.

government indexed-linked securities (gilts), with maturity periods ranging from 2027 to 2062.

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government bonds and derivatives.

f) This category includes investments in funds predominantly in a wide range of fixed and floating rate investment grade and below investment grade debt instruments traded on regulated markets worldwide with the objective to achieve a return of 3 % above 1 month LIBOR over a 3 -year basis.

g) This category includes investments in a diversified pool of debt and debt like assets to generate capital and income returns.

d) This category includes investments in funds predominantly in a wide range of fixed and floating rate investment grade and below investment grade debt instruments traded on regulated markets worldwide with the objective to achieve a return of 3 % above 1 month LIBOR over a 3 -year basis.

e) This category includes investments in a diversified pool of debt and debt like assets to generate capital and income returns.

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Investment objectives for the U.K.

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government indexed-linked securities, global bonds, and corporate bonds.

The following table summarizes the changes in the fair value measurements of Level 3 investments for the pension plans (in thousands):

December 31, 2022 December 31, 2021

Balance at beginning of year $ 11,443 $ 9,752

Actual return on plan assets 195 1,790

Purchases/ sales/ settlements — —

Transfer in/out of level 3 — —

Changes due to foreign exchange ( 1,201 ) ( 99 )

Balance at end of year $ 10,437 $ 11,443

The following is a description of the valuation methodologies used to measure plan assets at fair value.

For equity securities and fixed income securities, fair value is based on observable inputs of comparable market transactions.

The valuation of certain alternative investments, such as limited partnerships, may require significant management judgment and involves a level of uncertainty.

The valuation is generally based on fair value as reported by the asset manager and adjusted for cash flows, if necessary.

In making such an assessment, a variety of factors are reviewed by management, including, but are not limited to, the timeliness of fair value as reported by the asset manager and changes in general economic and market conditions subsequent to the last fair value reported by the asset manager.

The use of different techniques or assumptions to estimate fair value could result in a different fair value measurement at the reporting date.

Cash and cash equivalents are valued based on cost, which approximates fair value.

Other than those assets that have quoted prices from an active market, investments are generally classified in Level 2 or Level 3 of the fair value hierarchy based on the lowest level input that is significant to the fair value measure in its entirety.

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Notwithstanding the uncertainty as to the outcome and while our insurance coverage might not be available or adequate to cover these claims, based upon the information currently available, we do not believe that any uninsured losses that might arise from these lawsuits and proceedings will have a materially adverse effect on our consolidated financial statements.

California Wage and Hour Litigation - On June 24, 2019 and August 26, 2020, two putative class action complaints were filed against Team Industrial Services, Inc.

in the Superior Court for the County of Los Angeles, California.

The plaintiff in the first filed action is Michael Thai (the “Thai action”).

The plaintiff in the second filed action is Alex Esqueda (the “Esqueda action”).

All of the claims pleaded in the Esqueda action were also pleaded in the Thai action.

Each of the plaintiffs assert claims for alleged wage and hour violations under the California Labor Code (for alleged unpaid wages, failure to provide meal and rest breaks, and derivative related claims).

The Thai action also asserts a putative class claim for violation of the Fair Credit Reporting Act.

Both cases were stayed shortly after filing to allow the parties to mediate the claims.

On February 23, 2021, the Los Angeles Superior Court designated the Thai and Esqueda actions as related cases.

While the parties mediated on March 18, 2021, the cases did not settle.

On April 16, 2021, Team Industrial Services, Inc.

moved both the Thai and Esqueda actions to the United States District Court for the Central District of California.

Plaintiff’s motion for remand was denied, and these matters remain in federal court.

In November 2021, the parties agreed in principle to settle all claims in this litigation.

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 on or before August 31, 2022.

California Wage and Hour Litigation - The Company was a defendant in a consolidated class and collective action, Michael Thai v.

Team Industrial Services, Inc., et al, pending in the U.S.

District Court for the Central District of California, originally filed by two separate plaintiffs as separate cases in the Superior Court for the County of Los Angeles, California in June 2019 and August 2020, respectively.

The Company settled the consolidated class and collective action in 2022 that resulted in the Company recording a pre-tax charge of $ 3.0 million in the third quarter of fiscal year 2022, and the Company paid the settlement in January 2023.

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

received Notices of Potential Violation from the U.S.

Environmental Protection Agency (“EPA”) alleging noncompliance with various waste determination, reporting, training, and planning obligations under the Resource Conservation and Recovery Act at seven of our facilities located in Texas and Louisiana.

Environmental Protection Agency alleging noncompliance with various waste determination, reporting, training, and planning obligations under the Resource Conservation and Recovery Act at seven of our facilities located in Texas and Louisiana.

The allegations largely relate to spent film developing solutions generated through our mobile radiographic inspection services and that the claims relate to the characterization and quantities of those wastes and related notices, reporting, training, and planning.

On February 9, 2022, TEAM and the EPA agreed to settle all the claims related to this matter.

The parties anticipate finalization of the settlement agreement on or before March 31, 2022.

On February 9, 2022, TEAM and the EPA agreed to settle all the claims related to this matter and the formal settlement agreement was finalized in April 2022 with our agreement to pay penalties totaling $ 0.2 million.

Kelli Most Litigation - On November 13, 2018, Kelli Most filed a lawsuit against Team Industrial Services, Inc., individually and as a personal representative of the estate of Jesse Henson, in the 268th District Court of Fort Bend County, Texas (the “Most litigation”).

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We 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.

We will seek to overturn the verdict in post-trial motions before the District

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Court and, if necessary, to appeal to the Court of Appeals for the State of Texas.

We intend to vigorously challenge the judgment through all appropriate post-trial motions and appeal processes.

As a result, we believe that the likelihood that the amount of the judgment will be affirmed is not probable.

We will seek to overturn the verdict in post-trial motions before the District Court and, if necessary, to appeal to the Court of Appeals for the State of Texas.

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 likelihood that the amount of the judgment will be affirmed is not probable.

We have taken into consideration the events that have occurred after the reporting period and before the financial statements were issued.

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We have also recorded a related receivable from our third-party insurance providers in other current assets with the corresponding liability of the same amount in other accrued liabilities.

Such amounts are treated as non-cash operating activities.

Such amounts are treated as non-cash operating

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

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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 judge entered a Final Judgment in this matter.

TEAM immediately filed a supersedeas bond, to prevent execution on the judgment, while it prepares to file motions to appeal the judgment.

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.

The plaintiffs filed the action seeking monetary damages for personal injury, and emotional and mental distress.

This matter was settled in July 2021.

This claim is covered by our general liability and excess insurance policies which are occurrence based and subject to an aggregate $ 3 million self-insured retention and deductible.

All retentions and deductibles have been met, accordingly this claim has been fully funded by our insurance policies.

Accordingly, for all matters discussed above, we have accrued in the aggregate approximately $ 42.3 million as of December 31, 2022, of which approximately $ 3.3 million is not covered by our various insurance policies.

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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:

IHT, MS and Quest Integrity.

Segment data for our three operating segments are as follows (in thousands):

On November 1, 2022, we completed the sale of Quest Integrity business.

The criteria for reporting Quest Integrity as a discontinued operation were met as of the sale and, as such, all periods presented in this Form 10-K have been recast to present Quest Integrity as a discontinued operation.

Refer to Note 2 - Discontinued Operations for additional details.

ASC 280, Segment Reporting , requires us to 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 two segments:

Historically Quest Integrity was a separate segment, but Quest Integrity is now part of discontinued operations.

Segment data for our two operating segments are as follows (in thousands):

Twelve Months Ended

2021 2020 2019

IHT $ 422,562 $ 415,371

MS 417,646 378,826

Quest Integrity 80,356 85,315 114,992

Total $ 874,553 $ 852,539 $ 1,163,314

Total Revenues $ 840,208 $ 794,197

Twelve Months Ended

2021 2020 2019

Operating income (loss):

$ 12,997 $ ( 174,638 ) $ 24,084

( 47,728 ) 25,879 55,385

Quest Integrity 3

IHT $ 17,093 $ 12,997

20,930 ( 47,728 )

Corporate and shared support services ( 77,825 ) ( 92,151 )

Total $ ( 125,982 ) $ ( 217,362 ) $ ( 2,146 )

Total Operating income (loss) $ ( 39,802 ) $ ( 126,882 )

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1 Includes goodwill impairment loss of $ 191.8 million for IHT for the year ended December 31, 2020.

1 Includes goodwill impairment loss of $ 55.8 million for MS for the year ended December 31, 2021.

3 Includes goodwill impairment loss of $ 8.8 million for Quest for the year ended December 31, 2021.

Twelve Months Ended

2021 2020 2019

Capital expenditures 1 :

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MS 5,013 3,692

Quest Integrity 3,600 3,743 4,550

Corporate and shared support services 84 1,464

Total $ 20,498 $ 17,667 $ 31,734

Total Capital expenditures $ 19,036 $ 16,898

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Twelve Months Ended

2021 2020 2019

Depreciation and amortization:

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MS 19,021 20,500

Quest Integrity 2,616 3,587 3,557

Corporate and shared support services 5,041 5,443

Total $ 41,518 $ 45,908 $ 49,059

Total Depreciation and amortization $ 36,453 $ 38,902

Separate measures of our assets by operating segment are not produced or utilized by management to evaluate segment performance.

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Total $ 794,197 $ 292,294

Twelve months ended December 31, 2019

United States $ 838,385 $ 328,832

Canada 127,574 8,625

Europe 126,794 32,517

Other foreign countries 70,561 6,044

Total $ 1,163,314 $ 376,018

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Twelve Months Ended December 31,

2021 2020 2019

Operating Group Reorganization and other continuing restructuring measures

Operating Group Reorganization and other restructuring measures

Severance and related costs

IHT $ 16 $ 459

Quest Integrity 381 — —

Corporate and shared support services — 1,562

Total $ 16 $ 2,535

Grand total $ 2,916 $ — $ —

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”).

During 2021, we completed a strategic organizational structure to better position ourselves for the recovery, 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 twelve months ended December 31, 2021, we incurred severance charges of $ 2.5 million, which represents all costs cumulatively incurred to date as a result of the Operating Group Reorganization.

A rollforward of our accrued severance liability associated with this reorganization is presented below (in thousands):

For the twelve months ended December 31, 2022 and 2021, we incurred professional fees of $ 0 and $ 1.9 million, respectively, associated with the Operating Group Reorganization.

Severance Charges.

As part of our ongoing cost reduction efforts, we incurred severance charges of $ 4.0 million for the twelve months ended December 31, 2022.

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

Twelve Months Ended

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Balance, end of period $ 1,939

For the twelve months ended December 31, 2021, we also incurred professional fees of $ 1.9 million associated with the Operating Group Reorganization.

OneTEAM Program

Beginning in 2017, we undertook a project (“OneTEAM”) to assess all aspects of our business for improvement and cost saving opportunities.

We did not incur any severance costs under OneTEAM during the twelve months ended December 31, 2021.

During the twelve months ended December 31, 2020, we incurred $ 3.4 million in severance charges associated with OneTEAM.

We have incurred $ 11.8 million of OneTEAM severance charges cumulatively to date, and do not expect any further severance costs under this program.

As of December 31, 2021, we had no remaining severance liability outstanding under OneTEAM.

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ACCUMULATED OTHER COMPREHENSIVE LOSS

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

Twelve Months Ended

December 31, 2021 Twelve Months Ended

December 31, 2020

Adjustments Foreign

Hedge Defined benefit pension plans Tax

Provision Total Foreign

Adjustments Foreign

Hedge Defined benefit pension plans Tax

Provision Total

Balance at beginning of year $ ( 23,045 ) $ 2,988 $ ( 8,021 ) $ 400 $ ( 27,678 ) $ ( 26,742 ) $ 4,186 $ ( 8,021 ) $ 387 $ ( 30,190 )

Other comprehensive income (loss) ( 2,213 ) — 4,148 ( 989 ) 946 3,697 ( 1,198 ) — 13 2,512

Balance at end of year $ ( 25,258 ) $ 2,988 $ ( 3,873 ) $ ( 589 ) $ ( 26,732 ) $ ( 23,045 ) $ 2,988 $ ( 8,021 ) $ 400 $ ( 27,678 )

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

Twelve Months Ended December 31,

2021 2020 2019

Foreign currency translation adjustments $ ( 2,213 ) $ ( 1 ) $ ( 2,214 ) $ 3,697 $ ( 340 ) $ 3,357 $ 3,865 $ 393 $ 4,258

Foreign currency hedge — — — ( 1,198 ) 294 ( 904 ) 282 ( 69 ) 213

Defined benefit pension plans 4,148 ( 988 ) 3,160 — 59 59 ( 162 ) ( 107 ) ( 269 )

Total $ 1,935 $ ( 989 ) $ 946 $ 2,499 $ 13 $ 2,512 $ 3,985 $ 217 $ 4,202

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.

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.

The Company paid $ 8.1 million and $ 8.0 million in consulting fees to Alvarez & Marsal for the years ended December 31, 2022 and 2021, respectively.

In connection with the Company’s debt transactions, the Company engaged in transactions with Corre and APSC to provide funding as described in Note 12 - Debt .

SUBSEQUENT EVENTS

Refer to Note 1 for information on the Recent Financing Transactions and Note 11 for information on the amendments to the ABL Credit Facility, Incremental Financing and Equity Issuance we entered into on February 11, 2022.

On March 7, 2022, the Company completed a transaction with Superior Plant Rentals (“SPR”) for the sale of certain assets for $ 3.0 million in cash.

As of March 14, 2023, the filing date of this Annual Report on Form 10-K, management evaluated the existence of events occurring subsequent to the end of fiscal year 2022, and determined that there were no events or transactions that would have a material impact on the Company’s results of operations or financial position.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

There have been no disagreements concerning accounting and financial disclosures with our independent accountants during any of the periods presented.

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data