What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-11-09 compared with 2023-08-10 · 259 added, 263 removed, 506 unchanged (51% of the section changed)

3 unchanged sentences

(in thousands, except share and per share data)

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

ASSETS (unaudited)

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Common stock, par value $ 0.30 per share, 12,000,000 shares authorized;

4,368,422 and 4,342,909 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively

4,368,422 and 4,342,909 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively

Additional paid-in capital 457,924 457,133

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(in thousands, except per share data)

Three Months Ended June 30, Six Months Ended

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

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Restructuring and other related charges, net — — — 16

Operating income (loss) 4,596 ( 10,794 ) ( 3,150 ) ( 33,201 )

Operating loss ( 1,258 ) ( 1,729 ) ( 4,408 ) ( 34,929 )

Interest expense, net ( 10,067 ) ( 26,653 ) ( 43,499 ) ( 63,708 )

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Net loss $ ( 12,134 ) $ ( 22,873 ) $ ( 52,598 ) $ ( 76,887 )

Other comprehensive income (loss) before tax:

Other comprehensive loss before tax:

Foreign currency translation adjustment ( 3,366 ) ( 7,035 ) ( 1,311 ) ( 12,152 )

Other comprehensive income (loss), before tax 1,277 ( 5,463 ) 2,055 ( 5,117 )

Tax provision attributable to other comprehensive income ( 23 ) — ( 46 ) —

Other comprehensive income (loss), net of tax 1,254 ( 5,463 ) 2,009 ( 5,117 )

Other comprehensive loss, before tax ( 3,366 ) ( 7,035 ) ( 1,311 ) ( 12,152 )

Tax provision attributable to other comprehensive loss

11 — ( 35 ) —

Other comprehensive loss, net of tax ( 3,355 ) ( 7,035 ) ( 1,346 ) ( 12,152 )

Total comprehensive loss $ ( 15,489 ) $ ( 29,908 ) $ ( 53,944 ) $ ( 89,039 )

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AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)

(in thousands)

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Shareholders’

Equity (Deficit)

Shares Amount

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Balance at June 30, 2023 4,368 $ 1,311 $ 457,692 $ ( 342,143 ) $ ( 36,988 ) $ 79,872

Net loss — — — ( 12,134 ) — ( 12,134 )

Foreign currency translation adjustment, net of tax — — — — ( 3,355 ) ( 3,355 )

Non-cash compensation — — 232 — — 232

Balance at September 30, 2023 4,368 $ 1,311 $ 457,924 $ ( 354,277 ) $ ( 40,343 ) $ 64,615

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

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Balance at June 30, 2022 4,322 $ 1,296 $ 456,876 $ ( 425,774 ) $ ( 31,849 ) $ 549

Net loss — — — ( 22,873 ) — ( 22,873 )

Foreign currency translation adjustment, net of tax — — — — ( 7,035 ) ( 7,035 )

Non-cash compensation — — 629 — — 629

Balance at September 30, 2022 4,322 $ 1,296 $ 457,505 $ ( 448,647 ) $ ( 38,884 ) $ ( 28,730 )

See accompanying notes to unaudited condensed consolidated financial statements.

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(in thousands)

Six Months Ended

Nine Months Ended September 30,

Cash flows from operating activities:

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Write-off of deferred loan costs — 2,748

Write-off of software cost

Loss on debt extinguishment 1,585 —

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Gain on asset disposal ( 268 ) ( 4,296 )

Non-cash compensation costs (credits) 627 ( 59 )

Non-cash compensation costs 859 571

Other, net ( 3,282 ) ( 3,469 )

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Inventory ( 2,513 ) ( 3,076 )

Prepaid expenses and other current assets ( 2,043 ) ( 3,305 )

Prepaid expenses and other assets

( 5,207 ) ( 7,048 )

Accounts payable 363 ( 6,038 )

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Repayment of APSC Term Loan ( 37,092 ) —

Repayment of Convertible Debt ( 41,161 ) —

Borrowings under ME/RE Loans 27,398 —

Payments under ME/RE Loans ( 847 ) —

Borrowings under Corre Incremental Term Loans 42,500 —

Borrowings under 2022 ABL Credit Facility (Delayed Draw Term Loan) — 35,000

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Other ( 746 ) ( 615 )

Net cash provided by financing activities 483 64,786

Net cash provided by (used in) financing activities

( 7,395 ) 63,288

Effect of exchange rate changes on cash ( 109 ) ( 1,373 )

Net increase (decrease) in cash and cash equivalents ( 27,638 ) 2,131

Net (decrease) increase in cash and cash equivalents

( 36,592 ) 1,713

Cash and cash equivalents at beginning of period 58,075 65,315

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_________________

1 Condensed consolidated statement of cash flows for the six months ended June 30, 2022 includes discontinued operations.

1 Condensed consolidated statement of cash flows for the nine months ended September 30, 2022 includes discontinued operations.

See accompanying notes to unaudited condensed consolidated financial statements.

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

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

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

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

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

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

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

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No fractional shares were issued in connection with the Reverse Stock Split.

Recent Refinancing Transactions.

On June 16, 2023, we entered into the following separate amendments / agreements with our lenders.

Corre Amended and Restated Term Loan Credit Agreement.

On June 16, 2023, we entered into an amendment and restatement of that certain subordinated term loan credit agreement dated as of November 9, 2021 (as amended and restated, the “A&R Term Loan Credit Agreement”).

Available funding commitments under the A&R Term Loan Credit Agreement, subject

to certain conditions, include a $ 57.5 million senior secured first lien term loan (the “Incremental Term Loan”) provided by Corre Partners Management, LLC (“Corre”) and certain of its affiliates, consisting of a $ 37.5 million term loan tranche and a $ 20.0 million delayed draw term loan tranche.

Amounts outstanding under the existing subordinated term loan credit agreement (the “Uptiered Loan”) have become senior secured obligations of the Company and the A&R Term Loan Guarantors, secured on a pari passu basis with the Incremental Term Loans.

All outstanding amounts in respect of the Incremental Term Loan under the A&R Term Loan Credit Agreement mature and become due and payable on December 31, 2026.

All outstanding amounts in respect of the Uptiered Loan under the A&R Term Loan Credit Agreement mature and become due and payable on December 31, 2027;

provided that, if greater than $ 50.0 million (including amounts in respect of payments in kind) of the Uptiered Loan is outstanding on December 31, 2026, then all outstanding amounts in respect of the Uptiered Loan under the A&R Term Loan Credit Agreement become due and payable on December 31, 2026.

As discussed in Note 11 - Debt , $ 42.5 million of the $ 57.5 million Incremental Term Loan under the A&R Term Loan Credit Agreement was drawn down and the proceeds thereof were used to repay the Notes (as defined below) that matured on August 1, 2023.

Eclipse Amendment No.

3 to Credit Agreement .

On June 16, 2023, we also entered into Amendment No.

3 (“ABL Amendment No.

3”) to that certain credit agreement with Eclipse (defined below), dated as of February 11, 2022 (as amended by Amendment No.

1 dated as of May 6, 2022 and Amendment No.

2 dated as of November 1, 2022 and ABL Amendment No.3, the “ABL Credit Agreement”).

The ABL Amendment No.

3 amended the ABL Credit Agreement to, among other things,

(i) provide the Company with a new $ 27.4 million term loan (the “ME/RE Loans”) secured by a first priority lien and mortgage on certain real estate and machinery and equipment of the Company and the ABL Guarantors, as defined below, (the “Specified RE/ME”),

(ii) increase borrowing base availability under the revolving credit facility by an additional $ 2.5 million,

(iii) extend the maturity date for the entire facility under the ABL Credit Agreement to August 11, 2025,

(iv) amend the financial maintenance covenant therein to match the maximum unfinanced capital expenditures covenant included in the A&R Term Loan Credit Agreement, and

(v) amend provisions applicable to the $ 35.0 million delayed draw term loans under the ABL Credit Agreement to remove the ability of the Company to repay and reborrow such loans, to remove the ability to pay any portion of the interest on such loans in PIK (as defined below) and add a mandatory prepayment with respect to such loan in relation to any sale of certain collateral principally supporting such loans.

The ME/RE Loans were drawn in full on the closing date and were used to pay off the amounts owed under the existing term loan credit agreement dated as of December 18, 2020 (as amended from time to time), among the Company, the lenders party thereto and Atlantic Park Strategic Capital Fund, L.P., as agent, which was repaid and terminated in full on June 16, 2023.

See Note 11 - Debt for additional information.

Liquidity and Going Concern.

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

As discussed above, we successfully negotiated amendments to existing debt instruments (including to the financial covenants contained therein) and / or entered into new agreements with our lenders.

These actions removed the substantial doubt about our ability to continue as a going concern that previously existed and had been disclosed in prior periods.

In addition, as of June 30, 2023, we are in compliance with our debt covenants.

Based on the Company’s forecast and the amendments/new agreements entered in June 2023, we believe that our current working capital including cash on hand, our capital expenditure financing and the remaining borrowing availability under our various debt agreements is sufficient to fund our operations, maintain compliance with our debt covenants (as amended), and satisfy the Company’s obligations as they come due within one year after the date of issuance of these unaudited condensed consolidated financial statements.

Our ability to maintain compliance with the financial covenants contained in the various debt agreements is dependent upon our future operating performance and future financial condition, both of which are subject to various risks and uncertainties.

While our lenders agreed to amend the financial covenants contained therein and, in the case of the ABL Credit Agreement, to extend the maturity, there can be no assurance that our lenders will provide additional waivers or amendments in the event of future non-compliance with our debt covenants, or other possible events of default that could happen.

Basis for presentation.

Basis of presentation.

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

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

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

These condensed consolidated financial statements should be read

in conjunction with the consolidated financial statements and notes contained in our Annual Report on Form 10-K for the year ended December 31, 2022 as filed with the Securities and Exchange Commission.

Certain disclosures have been condensed or omitted

from the interim financial statements included in this report.

These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes contained in our Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the Securities and Exchange Commission (“our Annual Report on Form 10-K”).

Consolidation.

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Significant Accounting Policies.

Our significant accounting policies are disclosed in Note 1 - Summary of Significant Accounting Policies and Practices in our Annual Report on Form 10-K for the year ended December 31, 2022.

Our significant accounting policies are disclosed in Note 1 - Summary of Significant Accounting Policies and Practices in our Annual Report on Form 10-K.

On an ongoing basis, we evaluate the estimates and assumptions, including among other things, those related to long-lived assets.

Since the date of our Annual Report on Form 10-K for the year ended December 31, 2022, there have been no material changes to our significant accounting policies.

Since the date of our Annual Report on Form 10-K, there have been no material changes to our significant accounting policies.

Discontinued operations.

On November 1, 2022, we completed the sale of Quest Integrity (the “Quest Integrity Transaction”).

The criteria for reporting Quest Integrity as a discontinued operation were met during the third quarter of 2022 pursuant to that certain Equity Purchase Agreement by and between us and Baker Hughes Holdings LLC, dated as of August 14, 2022 (the “Sale Agreement”), and, as such, the prior year amounts presented in this Quarterly Report on Form 10-Q have been recast to present Quest Integrity as a discontinued operation.

The criteria for reporting Quest Integrity as a discontinued operation were met during the third quarter of 2022 pursuant to that certain Equity Purchase Agreement by and between us and Baker Hughes Holdings LLC, dated as of August 14, 2022 (the “Sale Agreement”), and, as such, the prior year amounts related to Quest Integrity are presented as a discontinued operation.

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

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Refer to Note 1 – Description of Business and Basis of Presentation for additional details regarding our IHT and MS operating segments.

Our condensed consolidated statements of operations for the three and six months ended June 30, 2022 report discontinued operations separate from continuing operations.

Our condensed consolidated statements of comprehensive loss and statements of shareholders’ equity for the three and six months ended June 30, 2022 as well as statements of cash flows for the six months ended June 30, 2022 combine continuing and discontinued operations.

Our condensed consolidated statements of operations for the three and nine months ended September 30, 2022 report discontinued operations separate from continuing operations.

Our condensed consolidated statements of comprehensive loss and statements of shareholders’ equity (deficit) for the three and nine months ended September 30, 2022, as well as statements of cash flows for the nine months ended September 30, 2022, combine continuing and discontinued operations.

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

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Three Months Ended

June 30, 2022 (unaudited) Six Months Ended

June 30, 2022 (unaudited)

September 30, 2022 (unaudited) Nine Months Ended

September 30, 2022 (unaudited)

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

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Income from discontinued operations before income taxes 5,804 17,732

Benefit from income taxes 423 593

Provision for income taxes ( 2,057 ) ( 1,464 )

Net income from discontinued operations $ 3,747 $ 16,268

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

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

Cash flows provided by operating activities of discontinued operations:

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Geographic area:

Three Months Ended June 30, 2023 Three Months Ended June 30, 2022

Three Months Ended September 30, 2023 Three Months Ended September 30, 2022

(unaudited) (unaudited)

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Total $ 168,086 $ 38,629 $ 206,715 $ 184,144 $ 34,195 $ 218,339

Six Months Ended June 30, 2023 Six Months Ended June 30, 2022

Nine Months Ended September 30, 2023 Nine Months Ended September 30, 2022

(unaudited) (unaudited)

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Revenue by Operating segment and service type (in thousands):

Three Months Ended June 30, 2023

Three Months Ended September 30, 2023

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

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Total $ 83,207 $ 101,663 $ 13,001 $ 8,844 $ 206,715

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

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

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Total $ 87,267 $ 106,795 $ 16,482 $ 7,795 $ 218,339

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

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

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Total $ 259,118 $ 323,745 $ 42,935 $ 22,686 $ 648,484

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

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

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Contract balances .

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

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

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

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Assets recognized for

costs to fulfill a contract are included in the “Prepaid expenses and other current assets” line of the condensed consolidated balance sheets and were not material as of June 30, 2023 and December 31, 2022.

costs to fulfill a contract are included in the “Prepaid expenses and other current assets” line of the condensed consolidated balance sheets and were not material as of September 30, 2023 and December 31, 2022.

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

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As permitted by ASC 606, Revenue from Contracts with Customers , 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, 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.

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 June 30, 2023 and December 31, 2022.

A summary of accounts receivable as of June 30, 2023 and December 31, 2022 is as follows (in thousands):

June 30, 2023 December 31, 2022

A summary of accounts receivable as of September 30, 2023 and December 31, 2022 is as follows (in thousands):

September 30, 2023 December 31, 2022

Trade accounts receivable $ 141,303 $ 160,572

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

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

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

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Balance at end of period $ 5,326 $ 5,262

A summary of inventory as of June 30, 2023 and December 31, 2022 is as follows (in thousands):

June 30, 2023 December 31, 2022

A summary of inventory as of September 30, 2023 and December 31, 2022 is as follows (in thousands):

September 30, 2023 December 31, 2022

Raw materials $ 9,819 $ 8,978

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PREPAID AND OTHER CURRENT ASSETS

A summary of prepaid and other current assets as of June 30, 2023 and December 31, 2022 is as follows (in thousands):

June 30, 2023 December 31, 2022

A summary of prepaid expenses and other current assets as of September 30, 2023 and December 31, 2022 is as follows (in thousands):

September 30, 2023 December 31, 2022

Insurance receivable $ 39,000 $ 39,000

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

The other current assets primarily include items such as software implementation costs, other receivables, and other accounts receivables.

The other current assets primarily include items such as software implementation costs, deferred financing charges and other receivables.

PROPERTY, PLANT AND EQUIPMENT

A summary of property, plant and equipment as of June 30, 2023 and December 31, 2022 is as follows (in thousands):

June 30, 2023 December 31, 2022

A summary of property, plant and equipment as of September 30, 2023 and December 31, 2022 is as follows (in thousands):

September 30, 2023 December 31, 2022

Land $ 4,006 $ 4,006

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Property, plant and equipment, net $ 127,714 $ 138,099

Included in the table above are assets under finance leases of $ 8.2 million and $ 7.4 million, and related accumulated amortization of $ 2.6 million and $ 2.3 million as of June 30, 2023 and December 31, 2022, respectively.

Depreciation expense for the three months ended June 30, 2023 and 2022 was $ 5.5 million and $ 5.7 million, respectively.

Depreciation expense for the six months ended June 30, 2023 and 2022 was $ 11.1 million and $ 11.8 million, respectively.

Included in the table above are assets under finance leases of $ 8.3 million and $ 7.4 million, and related accumulated amortization of $ 2.9 million and $ 2.3 million as of September 30, 2023 and December 31, 2022, respectively.

Depreciation expense for the three months ended September 30, 2023 and 2022 was $ 5.4 million and $ 5.5 million, respectively.

Depreciation expense for the nine months ended September 30, 2023 and 2022 was $ 16.5 million and $ 17.3 million, respectively.

INTANGIBLE ASSETS

A summary of intangible assets as of June 30, 2023 and December 31, 2022 is as follows (in thousands):

June 30, 2023

A summary of intangible assets as of September 30, 2023 and December 31, 2022 is as follows (in thousands):

September 30, 2023

Amount Accumulated

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Intangible assets $ 189,341 $ ( 113,934 ) $ 75,407

Amortization expense of intangible assets for the three months ended June 30, 2023 and 2022 was $ 3.2 million and $ 3.2 million, respectively.

Amortization expense of intangible assets for the six months ended June 30, 2023 and 2022 was $ 6.4 million and $ 6.4 million, respectively.

The weighted-average amortization period for intangible assets subject to amortization was 13.7 years as of June 30, 2023 and December 31, 2022.

Amortization expense of intangible assets for the three months ended September 30, 2023 and 2022 was $ 3.2 million and $ 3.4 million, respectively.

Amortization expense of intangible assets for the nine months ended September 30, 2023 and 2022 was $ 9.6 million and $ 10.2 million, respectively.

The weighted-average amortization period for intangible assets subject to amortization was 13.7 years as of September 30, 2023 and December 31, 2022.

OTHER ACCRUED LIABILITIES

A summary of other accrued liabilities as of June 30, 2023 and December 31, 2022 is as follows (in thousands):

June 30, 2023 December 31, 2022

A summary of other accrued liabilities as of September 30, 2023 and December 31, 2022 is as follows (in thousands):

September 30, 2023 December 31, 2022

Legal and professional accruals $ 49,223 $ 46,665

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Total $ 104,750 $ 119,267

Legal and professional accruals include accruals for legal and professional fees as well as accrued legal claims, refer to Note 14 - 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 Assets .

Legal and professional accruals include accruals for legal and professional fees as well as accrued legal claims, refer to Note 14 - Commitments and Contingencies for legal claims information.

Certain legal claims are covered by our third-party insurance providers 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 Assets .

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

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Other accruals include various business accruals.

We recorded an income tax provision of $ 2.1 million and $ 2.9 million for the three and six months ended June 30, 2023 compared to a provision of $ 2.2 million and $ 2.7 million for the three and six months ended June 30, 2022.

The effective tax rate, inclusive of discrete items, was a provision of 15.3 % for the three months ended June 30, 2023, compared to a provision of 8.5 % for the three months ended June 30, 2022.

For the six months ended June 30, 2023, our effective tax rate, inclusive of discrete items, was a provision of 7.7 %, compared to a provision of 4.2 % for the six months ended June 30, 2022.

We recorded an income tax provision of $ 1.1 million and $ 4.0 million for the three and nine months ended September 30, 2023, compared to a provision of $ 1.5 million and $ 4.2 million for the three and nine months ended September 30, 2022.

The effective tax rate, inclusive of discrete items, was a provision of 9.7 % for the three months ended September 30, 2023, compared to a provision of 5.8 % for the three months ended September 30, 2022.

For the nine months ended September 30, 2023, our effective tax rate, inclusive of discrete items, was a provision of 8.3 %, compared to a provision of 4.7 % for the nine months ended September 30, 2022.

The effective tax rate differed from the statutory tax rate due to changes in the valuation allowance in certain jurisdictions.

As of June 30, 2023 and December 31, 2022, our total long-term debt and finance lease obligations are summarized as follows (in thousands):

June 30, 2023 December 31, 2022

As of September 30, 2023 and December 31, 2022, our total long-term debt and finance lease obligations are summarized as follows (in thousands):

September 30, 2023 December 31, 2022

2022 ABL Credit Facility $ 110,915 $ 99,916

APSC Term Loan 1

Uptiered Loan 1

122,416 107,905

ME/RE Loans 1

Uptiered Loan / Subordinated Term Loan 1

125,588 107,905

Incremental Term Loan 1

APSC Term Loan 1

Total 295,276 239,383

Convertible Debt 1

41,161 40,650

Finance lease obligations 5,804 5,902

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_________________

1 Net carrying balances of the loans are presented below (in thousands):

June 30, 2023 December 31, 2022

Principal balance Debt issuance cost and discount, net of accumulated amortization Net carrying balance Principal balance Debt issuance cost and discount, net of accumulated amortization Net carrying balance

APSC Term Loan $ — $ — $ — $ 35,510 $ ( 3,948 ) $ 31,562

Uptiered Loan 123,129 ( 713 ) 122,416 115,443 ( 7,538 ) 107,905

ME/RE Loans $ 27,398 $ ( 1,909 ) $ 25,489 $ — $ — $ —

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

See Convertible Debt section below for additional information.

See below for additional information.

2022 ABL Credit 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 Amendment No.

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, (the “ABL Agent”) (such agreement, as amended by Amendment No.

1 dated as of May 6, 2022, Amendment No.

2 dated as of November 1, 2022 and Amendment No.3 (described below) dated June 16, 2023, 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 2022 ABL Credit Facility was originally scheduled to mature in February 2025 but is now extended to August 2025 by Amendment No.3 as described below.

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.

2 dated as of November 1, 2022 and Amendment No.3 dated June 16, 2023, 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 the ABL Agent (the “Revolving Credit Loans”), with a $ 35.0 million sublimit for swingline borrowings, 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”).

Our obligations under the 2022 ABL Credit Agreement are guaranteed by certain of our direct and 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 is based on a percentage of the value of qualifying accounts receivable and inventory, reduced by certain reserves.

After the execution of Amendment No.3, described below, Revolving Credit Loans under the 2022 ABL Credit Facility bear interest through maturity at a variable rate based upon an Adjusted Term Secured Overnight Financing Rate (SOFR) (or a base rate if the SOFR Rate is unavailable for any reason), plus an applicable margin (“SOFR Loan” and “Base Rate Loan,” respectively).

Prior to Amendment No.3, as described below, the rate utilized was LIBOR.

The “base rate” is a fluctuating interest rate equal to the greatest of (1) 2.00 %, (2) the federal funds rate plus 0.50 %, (3) Term SOFR for a one-month tenor in effect on such day plus 1.00 %, and (4) Wells Fargo Bank, National Association’s prime 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 SOFR Loans with a 1.00 % SOFR 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 Loan bears interest through maturity at a rate of the Adjusted Term SOFR Rate plus 10.0 %, provided that, in the event that Adjusted Term SOFR is unavailable for any reason, then such rate shall be a rate per annum equal to the sum of the Base Rate, plus 9.00 % per annum.

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

Interest under the 2022 ABL Credit Facility is payable monthly.

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

The terms of the 2022 ABL Credit Facility are described in the table below (dollar amounts are presented in thousands):

Revolving Credit Loans Delayed Draw Term Loan

Original maturity date 2/11/2025 2/11/2025

Amended maturity date 8/11/2025 8/11/2025

Original stated interest rate LIBOR + applicable margin (base + applicable margin) LIBOR+ 10 % (Base+ 9 %)

Amended interest rate SOFR + applicable margin (base + applicable margin) SOFR + 10 % (Base + 9 %)

Actual interest rate:

9/30/2023 10.09 % 15.44 %

9/30/2022 7.21 % 12.56 %

Interest payments monthly monthly

Cash paid for interest

YTD 9/30/2023 $ 4,932 $ 3,951

YTD 9/30/2022 $ 3,656 $ 1,683

Unamortized balance of deferred financing cost

9/30/2023 $ 227 $ —

12/31/2022 $ 2,312 $ 798

Available amount at 9/30/2023 $ 4,911 $ —

The “applicable margin” in the table above 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 Adjusted Term Secured Overnight Financing Rate (“SOFR”) loans with a 1.00 % SOFR floor, in each case depending on the amount of EBITDA (as defined in ABL Amendment No.

3 to the 2022 ABL Credit Facility) as of the most recent measurement period as reported in a monthly compliance certificate.

The fee for undrawn revolving amounts is 0.50 %.

We incurred additional $ 0.3 million of financing cost related to the 2022 ABL Credit Facility in connection with Amendment No.

3 thereto (“ABL Amendment No.

3”) dated June 16, 2023.

These costs were capitalized and amortized on a straight-line basis over the new term of the 2022 ABL Credit Facility.

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.

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Amounts repaid under the Delayed Draw Term Loan cannot be re-borrowed.

Certain permanent repayments of the 2022 ABL Credit Facility loans are subject to the payment of a premium of 1.00 % from the ABL Amendment No.3 Effective Date (defined below) until August 11, 2024, and 0.50 % after August 11, 2024 until August 11, 2025.

The 2022 ABL Credit Agreement contains customary conditions to borrowings and covenants, including covenants that restrict our ability to sell assets, make changes to the nature of our business, engage in mergers or acquisitions, incur, assume or permit to exist additional indebtedness and guarantees, create or permit to exist liens, pay dividends, issue equity instruments, make distributions or redeem or repurchase capital stock or make other investments, engage in transactions with affiliates and make payments in respect of certain debt.

The 2022 ABL Credit Agreement following the execution of Amendment No.3, as described below, also requires that we will not exceed $ 15.0 million in unfinanced capital expenditures in any CapEx Test Period (as defined therein);

provided the Company shall be permitted to make up to $ 25.0 million in unfinanced capital expenditures in any CapEx Test Period (as defined therein) if we maintain a net leverage ratio of less than or equal to 2.00 to 1.00 on a pro forma basis immediately after giving effect to each such unfinanced capital expenditures in excess of the $ 15.0 million maximum annual capital expenditure limit.

In addition, the 2022 ABL Credit Agreement includes customary events of default, the occurrence of which may require that we pay an additional 2.00 % interest on the outstanding loans under the 2022 ABL Credit Facility and that the debt becomes payable immediately.

Amendment No.3

On June 16, 2023 (the “ABL Amendment No.3 Effective Date”), the Company entered into Amendment No.

3 (“ABL Amendment No.

3”) among the Company, as borrower, the lenders from time-to-time party thereto and Eclipse, as agent (the “ABL Agent”).

Certain permanent repayments of the 2022 ABL Credit Facility loans are subject to the payment of a premium of 1.00 % from June 16, 2023 until August 11, 2024, and 0.50 % after August 11, 2024 until August 11, 2025.

The 2022 ABL Credit Agreement contains customary conditions to borrowings and covenants, as described therein.

As of September 30, 2023, we are in compliance with the covenants.

As of September 30, 2023, $ 10.1 million in letters of credit was issued under the 2022 ABL Credit Agreement.

Such amounts remain undrawn and are off-balance sheet.

The ABL Amendment No.

3 amended the 2022 ABL Credit Agreement to, among other things,

(ii) increase borrowing base availability under the revolving credit facility by an additional $ 2.5 million,

(iii) extend the maturity date for the entire facility under the 2022 ABL Credit Agreement to August 11, 2025,

(iv) amend the financial maintenance covenant with respect to the maximum unfinanced capital expenditures, and

(iv) amend provisions applicable to the $ 35.0 million delayed draw term loans under the 2022 ABL Credit Agreement to remove the ability of the Company to repay and re-borrow such loans, to remove the ability to pay any portion of the interest on

such loans in PIK (as defined below) and add a mandatory prepayment with respect to such loan in relation to any sale of certain collateral principally supporting such loans.

The interest rate after the execution of Amendment No.3 as of June 30, 2023 was 9.92 % for Revolving Credit Loans and 15.27 % for the Delayed Draw Term Loan.

The interest rate as of June 30, 2022 was 5.71 % for Revolving Credit Loans and 11.06 % for the Delayed Draw Term Loan.

Cash interest paid on Revolving Credit Loans amounted to $ 3.0 million and $ 2.0 million for the six months ended June 30, 2023 and 2022, respectively.

Cash interest paid on the Delayed Draw Term Loan amounted to $ 2.6 million and $ 0.8 million for the six months ended June 30, 2023 and 2022, respectively.

Direct and incremental costs associated with the issuance of the 2022 ABL Credit Facility excluding Amendment No.3 were approximately $ 8.4 million and were capitalized as deferred financing costs.

These costs were fully amortized as of June 16, 2023 due to the Maturity Reserve Trigger Date provision that was previously applicable.

We incurred additional $ 0.3 million of financing cost related to the existing ABL Credit Facility in connection with the ABL Amendment No.

These costs were capitalized and amortized on a straight-line basis over the new term of the 2022 ABL Credit Facility.

As described above, on June 16, 2023, we entered into ABL Amendment No.

3 that, provided us with $ 27.4 million of new ME/RE Loans.

3, in addition to making certain other changes to the 2022 ABL Credit Facility, provided us with $ 27.4 million of new term loans (the “ME/RE Loans”).

Our obligations in respect of the ME/RE Loans are guaranteed by certain direct and indirect material subsidiaries of the Company (the “ABL Guarantors” and, together with the Company, the “ABL Loan Parties”).

The ME/RE Loans under the 2022 ABL Credit Agreement are secured on a first priority basis by, among other things, the Specified RE/ME, accounts receivable, deposit accounts, securities accounts and inventory of the ABL Loan Parties (the “ABL Priority Collateral”) and on a second priority basis by substantially all of the other assets of the ABL Loan Parties, subject to the terms of the Intercreditor Agreement.

The ME/RE Loans under the 2022 ABL Credit Agreement are secured on a first priority basis by, among other things, certain real estate and machinery and equipment (the “Specified ME/RE Collateral”), accounts receivable, deposit accounts, securities accounts and inventory of the ABL Loan Parties (collectively, the “ABL Priority Collateral”) and on a second priority basis by substantially all of the other assets of the ABL Loan Parties, subject to the terms of the Intercreditor Agreement (as defined below).

The ME/RE Loans were drawn in full on June 16, 2023 and were used to pay off the amounts owed under the existing APSC Term Loan, discussed below.

The ME/RE Loans bear interest at an annual rate of the SOFR, plus a credit spread adjustment of 0.11 % per annum and a margin of 5.75 % per annum and is payable monthly.

Amounts outstanding under the ME/RE Loans amortize each month in aggregate installments of $ 0.3 million, subject to certain adjustments.

The Company may make voluntary prepayments of the ME/RE Loans from time to time, and mandatory prepayment is required in certain instances related to asset sales of the Specified RE/ME and with annual excess cash flow (as defined in the 2022 ABL Credit Agreement), subject to certain prepayment premiums (subject to certain exceptions), plus accrued and unpaid interest.

The effective interest rate of the ME/RE Loans as of June 30, 2023 was approximately 16.54 % and consisted of the 11.02 % stated interest rate and an additional 5.51 % due to amortization of the related debt issuance cost.

No interest was paid during the six months ended June 30, 2023.

The terms of ME/RE Loans are described in the table below (dollar amounts are presented in thousands):

Original maturity date 8/11/2025

Original stated interest rate SOFR + 5.75 % + 0.11 % credit spread adjustment

Principal payments $ 254 monthly

Effective interest rate

9/30/2023 16.75 %

9/30/2022 N/A

Actual interest rate

9/30/2023 11.19 %

9/30/2022 N/A

Interest payments monthly

Cash paid for interest

YTD 9/30/2023 $ 640

YTD 9/30/2022 N/A

Balances at 9/30/2023

Principal balance $ 26,551

Unamortized balance of debt issuance cost $( 1,812 )

Net carrying balance $ 24,739

Available amount at 9/30/2023 $ —

The Company may make voluntary prepayments of the ME/RE Loans from time to time.

Mandatory prepayments are required in certain instances when sales of assets are completed that are related to the Specified ME/RE Collateral, and with annual excess cash flow (as defined in the 2022 ABL Credit Agreement), subject to certain prepayment premiums (subject to certain exceptions), plus accrued and unpaid interest.

The remaining unpaid principal balance of the ME/RE loans at maturity will be $ 21.0 million.

Direct and incremental costs associated with the issuance of the ABL Amendment No.

3 were approximately $ 2.1 million and were deferred and presented as a direct deduction from the carrying amount of the related debt and are amortized on a straight-line basis over the term of the ME/RE Loans.

Unamortized debt issuance cost amounted to $ 1.9 million as of June 30, 2023.

As of June 30, 2023, we had $ 80.9 million of Revolving Credit Loans outstanding and $ 35.0 million outstanding under the Delayed Draw Term Loan.

There were $ 10.1 million outstanding in letters of credit secured by these instruments, which are off-balance sheet.

As of June 30, 2023, subject to the applicable sublimit and other terms and conditions, $ 21.8 million was available for loans or for issuance of new letters of credit.

APSC Term Loan

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

1, dated as of October 19, 2021, Amendment No.

2, dated as of October 29, 2021, Amendment No.

3, dated as of November 8, 2021, Amendment No.

4, dated as of December 2, 2021, Amendment No.

5, dated as of December 7, 2021 Amendment No.

6, dated as of February 11, 2022, Amendment No.

7, dated as of May 6, 2022, Amendment No.

8, dated as of November 1, 2022 and Amendment No.

9, dated as of November 4, 2022, 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 had an original maturity date of December 18, 2026.

On June 16, 2023, we used the proceeds from the ME/RE Loans and borrowings under the 2022 ABL Credit Facility to repay the total outstanding Term Loan balance of $ 35.5 million plus the applicable prepayment premium of $ 1.4 million and related accrued interest, resulting in a loss on debt extinguishment of $ 1.6 million.

As of June 30, 2022, the effective interest amounted to 23.85 % and consisted of a 9.00 % variable interest rate paid in cash and an additional 14.85 % due to the acceleration of the amortization of the related debt issuance costs.

The unamortized

balance of debt discounts, warrant discount and debt issuance cost amounted to $ 3.9 million at December 31, 2022.

Cash interest paid amounted to $ 2.9 million and $ 5.5 million for the six months ended June 30, 2023 and 2022, respectively.

Subordinated Term Loan Credit Agreement / Amended and Restated Term Loan Credit Agreement

On June 16, 2023, we used the proceeds from the ME/RE Loans and borrowings under the 2022 ABL Credit Facility to repay the total outstanding APSC Term Loan balance of $ 35.5 million plus the applicable prepayment premium, resulting in a loss on debt extinguishment of $ 1.6 million.

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

The terms of APSC Term Loan are described in the table below (dollar amounts are presented in thousands):

Original maturity date 12/18/2026

Original stated interest rate variable

Effective interest rate

9/30/2023 N/A

9/30/2022 25.72 %

Actual interest rate:

9/30/2023 N/A

9/30/2022 10.24 %

Interest payments Quarterly

Cash paid for interest

YTD 9/30/2023 $ 2,849

YTD 9/30/2022 $ 9,693

PIK interest added to principal

YTD 9/30/2023 $ —

YTD 9/30/2022 $ 6,627

Balances at 12/31/2022

Principal balance $ 35,510

Unamortized balance of debt issuance cost $( 3,948 )

Net carrying balance $ 31,562

Amended and Restated Term Loan Credit Agreement - Uptiered Loan / Subordinated Term Loan and Incremental Term Loan

On November 9, 2021, we entered into a credit agreement (as amended by Amendment No.

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11 dated as of November 21, 2022 and Amendment No.

12 dated as of March 29, 2023, the “Subordinated Term Loan Credit Agreement”) with Cantor Fitzgerald Securities, as agent, and the lenders party thereto providing for an unsecured approximately $ 123.1 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.

On October 4, 2022, an additional approximately $ 57.0 million was added to the outstanding principal amount under the Subordinated Term Loan Credit Agreement in exchange for an equivalent amount of the Company’s Notes held by Corre (as defined below).

On June 16, 2023, the Company, entered into an amendment and restatement of that certain subordinated term loan credit agreement dated as of November 9, 2021 (as amended and restated, the “A&R Term Loan Credit Agreement”) among the Company, as borrower, the guarantors party thereto, the lenders from time to time party thereto and Cantor Fitzgerald Securities, as agent (the “A&R Term Loan Agent”).

Additional funding commitments to the Company under the A&R Term Loan Credit Agreement, subject to certain conditions, included a $ 57.5 million senior secured first lien term loan (the “Incremental Term Loan”) provided by Corre Partners Management, LLC (“Corre” or the “Investor Representative”) and certain of its affiliates, consisting of a $ 37.5 million term loan tranche and a $ 20.0 million delayed draw term loan tranche.

Additional funding commitments to the Company under the A&R Term Loan Credit Agreement, subject to certain conditions, included a $ 57.5 million senior secured first lien term loan (the “Incremental Term Loan”) provided by Corre and certain of its affiliates, consisting of a $ 37.5 million term loan tranche and a $ 20.0 million delayed draw tranche.

Amounts outstanding under the existing subordinated term loan credit agreement (the “Uptiered Loan”) have become senior secured obligations of the Company and the A&R Term Loan Guarantors (as defined below) and are secured on a pari passu basis with the Incremental Term Loan, on the terms described below.

As of the closing date of the A&R Term Loan Credit Agreement (the “Closing Date”), the aggregate principal amount of the Uptiered Loan was $ 123.1 million.

All outstanding amounts in respect of the Incremental Term Loan under the A&R Term Loan Credit Agreement mature and become due and payable on December 31, 2026.

All outstanding amounts in respect of the Uptiered Loan under the A&R Term Loan Credit Agreement mature and become due and payable on December 31, 2027;

On July 31, 2023, $ 42.5 million, made up of $ 37.5 million of the term loan tranche and $ 5.0 million of the delayed draw tranche, of the $ 57.5 million Incremental Term Loan under the A&R Term Loan Credit Agreement was drawn down and the proceeds thereof were used to repay the Notes that matured on August 1, 2023.

The remaining availability of the delayed draw tranche of $ 15.0 million will be used, subject to certain maximum liquidity conditions, for working capital purposes.

The Company’s obligations under the A&R Term Loan Credit Agreement are guaranteed by certain direct and indirect material subsidiaries of the Company (the “A&R Term Loan Guarantors” and, together with the Company, the “A&R Term Loan Parties”).

The obligations of the A&R Term Loan Parties are secured on a second priority basis by the ABL Priority Collateral and on a first priority basis by substantially all of the other assets of the A&R Term Loan Parties, subject to the terms of an intercreditor agreement (the “Intercreditor Agreement”) between the A&R Term Loan Agent, the ABL Agent and the A&R Term Loan Parties, that sets forth the priorities in respect of the collateral and certain related agreements with respect thereto.

Incremental Term Loans borrowed under the A&R Term Loan Credit Agreement bear interest at an annual rate of 12.00 %, payable in cash.

The Uptiered Loan under the A&R Term Loan Credit Agreement bear interest at an annual rate of 12.00 %, paid-in-kind (noncash) (“PIK”) from the Closing Date through December 31, 2023, and thereafter a split between cash and PIK, with the cash portion ranging from 2.50 % per annum to 12.00 % per annum, and the PIK portion ranging from 9.50 % per annum to 0.00 % per annum, depending on the Company’s Net Leverage Ratio (as defined in the A&R Term Loan Credit Agreement).

Cash interest under the A&R Term Loan Credit Agreement is payable quarterly, and PIK interest is payable monthly.

In addition, if certain minimum liquidity thresholds set forth in the A&R Term Loan Credit Agreement are not met for an applicable interest payment date, all interest in respect of the Uptiered Loan payable on such interest payment date will be PIK, irrespective of the Net Leverage Ratio at such time.

Amounts outstanding under the Incremental Term Loan amortize in quarterly installments of 0.75 % of the original principal amount borrowed.

The Company may make voluntary prepayments of the loans under the A&R Term Loan Credit Agreement from time to time, and the Company is required in certain instances related to change of control, asset sales, equity issuances, non-permitted debt issuances and with annual excess cash flow (as defined in the A&R Term Loan Credit Agreement), to make mandatory prepayments of the loans under the A&R Term Loan Credit Agreement, subject to certain prepayment premiums as specified in the A&R Term Loan Credit Agreement (subject to certain exceptions), plus accrued and unpaid interest.

The A&R Term Loan Credit Agreement contains certain customary conditions to borrowings, events of default and affirmative, negative, and financial covenants (as described in the A&R Term Loan Credit Agreement).

As of September 30, 2023, we are in compliance with the covenants.

Further, the A&R Term Loan Credit Agreement includes certain customary events of default, the occurrence of which may require an additional 2.00 % interest on the outstanding loans and other obligations under the A&R Term Loan Credit Agreement and the debt may become payable immediately.

The terms of Uptiered Loan / Subordinated Term Loan and Incremental Term Loan are described in the table below (dollar amounts are presented in thousands):

Uptiered Loan / Subordinated Term Loan

Incremental Term Loan

Maturity date 12/31/2027 (12/31/2026 if outstanding balance is greater than $ 50 million)

Stated interest rate 12 % PIK through 12/31/2023, then cash and PIK split as described below

12 % paid in cash

Principal payments at maturity $ 300 quarterly

Effective interest rate

9/30/2023 12.86 % 23.69 %

9/30/2022 46.79 % N/A

Interest payments cash quarterly/PIK monthly quarterly

PIK interest added to principal

YTD 9/30/2023 $ 10,829 N/A

YTD 9/30/2022 $ 4,596 N/A

Balances at 9/30/2023

Principal balance 1

$ 126,272 $ 43,371

Unamortized balance of debt issuance cost $( 684 ) $( 9,337 )

Net carrying balance $ 125,588 $ 34,034

Balances at 12/31/2022

Principal balance 1

$ 115,443 N/A

Unamortized balance of debt issuance cost $( 7,538 ) N/A

Net carrying balance $ 107,905 N/A

Available amount at 9/30/2023 2

1 The principal balance of the Uptiered Loan / Subordinated Term Loan is made up of $ 22.5 million drawn on November 9, 2021, $ 27.5 million drawn on December 8, 2021, and $ 57.0 million added as part of the exchange agreement on October 4, 2022.

In addition, the principal balance also includes PIK interest recorded to date of $ 18.2 million and $ 7.4 million as of September 30, 2023 and December 31, 2022, respectively, and, with respect to the Incremental Term Loan, PIK fees of $ 0.9 million.

2 $ 5.0 million was drawn from the available balance on October 6, 2023.

The Uptiered Loan under the A&R Term Loan Credit Agreement bears interest at an annual rate of 12.00 %, paid-in-kind (noncash) (“PIK”) from June 16, 2023 through December 31, 2023, and thereafter a split between cash and PIK, with the cash portion ranging from 2.50 % per annum to 12.00 % per annum, and the PIK portion ranging from 9.50 % per annum to 0.00 % per annum, depending on the Company’s Net Leverage Ratio (as defined in the A&R Term Loan Credit Agreement).

In addition, if certain conditions related to repayments in respect of the Incremental Term Loan are not met, certain additional quarterly fees (not to exceed 4 such fees) plus a 150 basis point increase to the applicable interest rate will be payable to the lenders under the A&R Term Loan Credit Agreement in cash or common stock of the Company, at the Company’s option.

The A&R Term Loan Credit Agreement contains certain conditions to borrowings, events of default and affirmative, negative and financial covenants, including covenants that restrict the Company’s ability to sell assets, make changes to the nature of the Company’s business, engage in mergers or acquisitions, incur, assume or permit to exist additional indebtedness and guarantees, create or permit to exist liens, pay dividends, make distributions or redeem or repurchase capital stock or make investments, engage in transactions with affiliates and make payments in respect of certain debt.

The A&R Term Loan Credit Agreement also requires that the Company will not exceed $ 15.0 million in unfinanced capital expenditures in any four-fiscal quarter period, tested as of the end of the second and fourth fiscal quarters of each calendar year starting with the period ending December 31, 2023;

provided that such amount shall increase to $ 25.0 million if the Company’s Total Leverage Ratio (as defined in the A&R Term Loan Credit Agreement) is less than or equal to 2.00 to 1.00 on a pro forma basis for such additional expenditure.

In addition, the A&R Term Loan Credit Agreement requires that the Company not exceed a maximum Net Leverage Ratio, tested as of the end of each fiscal quarter, beginning at 9.25 to 1.00 for the fiscal quarter ending June 30, 2023 and stepping down each quarter to a ratio of 4.75 to 1.00 for the fiscal quarters ending March 31, 2026 and thereafter.

Further, the A&R Term Loan Credit Agreement includes certain customary events of default, the occurrence of which may require that we pay an additional 2.00 % interest on the outstanding loans and other obligations under the A&R Term Loan Credit Agreement and the debt becomes payable immediately.

As of June 30, 2023, following the execution of the A&R Term Loan Credit Agreement, the effective interest rate on the Uptiered Term Loan amounted to 12.86 %.

At June 30, 2022, the effective interest rate of 46.79 % consisted of the 12.00 % stated interest and an additional 34.79 % due to the accelerated amortization of the related debt issuance costs due to the Trigger Date provision.

The unamortized debt issuance cost amounted to $ 0.7 million and $ 7.5 million as of June 30, 2023 and December 31, 2022, respectively.

PIK interest added to principal amounted to $ 7.7 million and $ 3.0 million for the six months ended June 30, 2023 and 2022, respectively.

On July 31, 2023, $ 42.5 million, made up of $ 37.5 million of the term loan tranche and $ 5.0 million of the delayed draw term loan tranche, of the $ 57.5 million Incremental Term Loan under the A&R Term Loan Credit Agreement was drawn down and the proceeds thereof were used to repay the Notes that matured on August 1, 2023.

The remaining availability of the delayed draw term loan tranche of $ 15.0 million will be used, subject to certain maximum liquidity conditions, for working capital purposes.

As of June 30, 2023 and December 31, 2022, we had the following warrants outstanding:

Original After Reverse Stock Split (Effective date December 22, 2022)

Holder Date Number of shares Exercise price Expiration date Number of shares Exercise price Expiration date

APSC Holdco II, LP

Original, as awarded 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 12/8/2028

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

Total warrants 10,000,000 1,000,000

As of September 30, 2023 and December 31, 2022, APSC Holdco II, L.P.

held 500,000 warrants and certain Corre holders collectively held 500,000 warrants in each case providing for the purchase of one share of the Company’s common stock per warrant at an exercise price of $ 15.00 .

The warrants will expire on December 8, 2028.

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.

Convertible Notes

Description of the Notes

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”).

Description of Convertible Notes

On July 31, 2023, $ 42.5 million of the $ 57.5 million under the Incremental Term Loan was drawn down and the proceeds thereof were used to repay the principal and accrued interest of the outstanding Notes on their maturity date of August 1, 2023.

On July 31, 2017, we issued $ 230.0 million principal amount of 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”).

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 a previous credit facility.

The Notes bore 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.

After a series of Note repurchases by the Company since issuance and the exchange by Corre in October 2022 of Notes totaling approximately $ 57.0 million for an equivalent amount of principal added to borrowings under the Subordinated Term Loan Credit Agreement, there was approximately $ 41.2 million of Notes outstanding at June 30, 2023.

As noted above, on July 31, 2023, $ 42.5 million of the $ 57.5 million Incremental Term Loan was drawn down and the proceeds thereof were used to repay the principal and accrued interest of the outstanding Notes that matured on August 1, 2023.

Accounting Treatment of the Notes

As of June 30, 2023 and December 31, 2022, the Notes were recorded in our condensed consolidated balance sheet as follows (in thousands):

June 30, 2023 December 31, 2022

Liability component:

Principal $ 41,161 $ 41,162

Unamortized issuance costs — ( 377 )

Unamortized discount — ( 135 )

Net carrying amount of the liability component 1

$ 41,161 $ 40,650

Equity component:

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

$ 37,276 $ 37,276

_________________

1 Included in the “Long-term debt and finance lease obligation” line for June 30, 2023 and “Current portion of long-term debt and finance lease obligations” line for December 31, 2022 of the condensed consolidated balance sheets.

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

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

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

Cash interest paid amounted to $ 2.1 million and $ 2.1 million for the nine months ended September 30, 2023 and 2022, respectively.

PIK interest of $ 4.2 million was added to principal during the nine months ended September 30, 2022.

There was no PIK interest in 2023.

Fair Value of Debt

The fair value of our 2022 ABL Credit Facility, Uptiered Loans and ME/RE Loans are representative of the carrying value based upon the variable interest rate 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 June 30, 2023 and December 31, 2022 was $ 41.0 million and $ 37.5 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.

The fair value of our 2022 ABL Credit Facility, Uptiered Loan, Incremental Term Loan and ME/RE Loans are representative of the carrying value based upon the variable interest rate 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 was $ 37.5 million, (inclusive of the fair value of the conversion option) and a “Level 2” measurement, determined based on the observed trading price of these instruments.

The Notes were fully paid off on August 1, 2023.

1970 Group Substitute Insurance Reimbursement Facility

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 policies (the “Insurance Policies”).

On September 29, 2022, 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 policies (the “Insurance Policies”).

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.

The Substitute Insurance Reimbursement Facility Agreement was renewed on August 29, 2023 to update the letters of credit limit up to approximately $ 24.9 million with the termination date on the earlier of (i) the expiration or termination of our Insurance Policies or (ii) September 29, 2024.

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 there is a 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 to interest expense over the term of the arrangement.

As of June 30, 2023, all fees were fully amortized.

As of June 30, 2023, we had $ 25.0 million of unrestricted cash and cash equivalents and $ 5.4 million of restricted cash.

International cash balances as of June 30, 2023 were $ 10.4 million, and approximately $ 0.6 million of such cash is located in countries where currency restrictions exist.

As of June 30, 2023, excluding availability dedicated to repayment of Notes as part of the A&R Term Loan Credit Agreement as described above, we had approximately $ 36.8 million of available borrowing capacity under our various credit agreements, consisting of $ 21.8 million available under the Revolving Credit Loans and $ 15.0 million available under the Incremental Term Loan under the A&R Term Loan Credit Agreement.

We have $ 33.7 million in letters of credit and $ 2.2 million in surety bonds outstanding and $ 0.7 million in miscellaneous cash deposits securing leases or other required obligations.

The fees paid by us periodically under this arrangement are deferred and amortized to interest expense over the term of the arrangement.

As of September 30, 2023, we had approximately $ 2.8 million of unamortized deferred fees.

As of September 30, 2023, we had $ 16.5 million of unrestricted cash and cash equivalents and $ 5.0 million of restricted cash.

International cash balances as of September 30, 2023 were $ 11.2 million, and approximately $ 0.7 million of such cash is located in countries where currency restrictions exist.

As of September 30, 2023, we had approximately $ 19.9 million of available borrowing capacity under our various credit agreements, consisting of $ 4.9 million available under the Revolving Credit Loans and $ 15.0 million available under the Incremental Term Loan under the A&R Term Loan Credit Agreement.

We have $ 37.6 million in letters of credit and $ 1.7 million in surety bonds outstanding and $ 2.1 million in miscellaneous cash

deposits securing leases or other required obligations.

Our cash and cash equivalents as of December 31, 2022 totaled $ 58.1 million including $ 1.4 million of cash located in countries where currency restrictions existed.

2 unchanged sentences

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

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

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

2023 2022 2023 2022

10 unchanged sentences

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

Plan for 2023, of which $ 1.9 million has been contributed through June 30, 2023.

STOCKHOLDERS’ EQUITY

Plan for 2023, of which $ 2.8 million has been contributed through September 30, 2023.

SHAREHOLDERS’ 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.

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 as of such date 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 June 30, 2023 there were 4,368,422 shares of our common stock outstanding and 12,000,000 shares authorized at $ 0.30 par value per share.

As of June 30, 2023 we had 500,000 authorized shares of preferred stock, none of which had been issued.

As of September 30, 2023 there were 4,368,422 shares of our common stock outstanding and 12,000,000 shares authorized at $ 0.30 par value per share.

As of September 30, 2023 we had 500,000 authorized shares of preferred stock, none of which had been issued.

Accumulated Other Comprehensive Income (loss)

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

Six Months Ended

June 30, 2023 Six Months Ended

June 30, 2022

Nine Months Ended

September 30, 2023 Nine Months Ended

September 30, 2022

(unaudited) (unaudited)

5 unchanged sentences

$ ( 28,859 ) $ ( 10,474 ) $ 336 $ ( 38,997 ) $ ( 23,286 ) $ ( 3,277 ) $ ( 169 ) $ ( 26,732 )

Other comprehensive income (loss) 2,055 — ( 46 ) 2,009 ( 5,117 ) — — ( 5,117 )

Other comprehensive loss

( 1,311 ) — ( 35 ) ( 1,346 ) ( 12,152 ) — — ( 12,152 )

Balance, end of period $ ( 30,170 ) $ ( 10,474 ) $ 301 $ ( 40,343 ) $ ( 35,438 ) $ ( 3,277 ) $ ( 169 ) $ ( 38,884 )

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We believe that the likelihood that the amount of the judgment will be affirmed is not probable.

We currently estimate a range of possible outcomes between $ 13.0 million and approximately $ 51.0 million, and as of June 30, 2023 we have recorded a receivable from our third-party insurance providers in other current assets with a corresponding liability of the same amount in other accrued liabilities at an amount we believe is the most likely estimate for a probable loss on this matter.

We currently estimate a range of possible outcomes between $ 13.0 million and approximately $ 51.0 million, and as of September 30, 2023 we have recorded a receivable from our third-party insurance providers in other current assets with a corresponding liability of the same amount in other accrued liabilities at an amount we believe is the most likely estimate for a probable loss on this matter.

Such amounts are treated as non-cash operating activities.

2 unchanged sentences

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.

Accordingly, for all matters discussed above, we have accrued in the aggregate approximately $ 41.2 million as of June 30, 2023, of which approximately $ 2.2 million is not covered by our various insurance policies.

Accordingly, for all matters discussed above, we have accrued in the aggregate approximately $ 40.7 million as of September 30, 2023, of which approximately $ 1.7 million is not covered by our various insurance policies.

In addition to legal matters discussed above, we are subject to various lawsuits, claims and proceedings encountered in the normal conduct of business (“Other Proceedings”).

5 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

4 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

4 unchanged sentences

Corporate and shared support services ( 14,152 ) ( 16,774 ) ( 44,486 ) ( 63,119 )

Total Operating income (loss) $ 4,596 $ ( 10,794 ) $ ( 3,150 ) $ ( 33,201 )

Total Operating loss

$ ( 1,258 ) $ ( 1,729 ) $ ( 4,408 ) $ ( 34,929 )

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

8 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

6 unchanged sentences

Separate measures of our assets by operating segment are not produced or utilized by management to evaluate segment performance.

A geographic breakdown of our revenues for the three and six months ended June 30, 2023 and 2022 is as follows (in thousands):

A geographic breakdown of our revenues for the three and nine months ended September 30, 2023 and 2022 is as

follows (in thousands):

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

14 unchanged sentences

SUBSEQUENT EVENTS

As of August 10, 2023, the filing date of this Quarterly Report on Form 10-Q, management evaluated the existence of events occurring subsequent to the quarter ended June 30, 2023, 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 except as described in Note 11 - Debt .

As of November 9, 2023, the filing date of this Quarterly Report on Form 10-Q, management evaluated the existence of events occurring subsequent to the quarter ended September 30, 2023 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 except as described in Note 11- Debt .

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

What changed 10-Q

Item 1. Financial Statements