UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, ~~2022~~2023

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 001-16501

Williams Industrial Services Group Inc.

(Exact name of registrant as specified in its charter)



Delaware		73-1541378
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

200 Ashford Center North, Suite 425

Atlanta, GA 30338

(Address of principal executive offices) (Zip code)

(770) 879-4400

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	~~Name of each exchange on which registered~~
Common Stock, par value $0.01 per share	~~WLMS~~WLMSQ	~~NYSE American~~

* On July 24, 2023, the issuer’s common stock was suspended from trading on the NYSE American. Effective July 25, 2023, trades in the issuer’s common stock began being quoted on the OTC Pink Market under the symbol “WLMSQ.” On August 1, 2023, NYSE American filed a Form 25 to delist the issuer’s common stock and to remove it from registration under Section 12(b) of the Securities Exchange Act of 1934, as amended.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	◻	Accelerated filer	☐
Non-accelerated filer	☒
~~Non-accelerated filer~~	◻	Smaller reporting company	☒
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ⌧

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ◻ No 

As of August ~~8, 2022,~~11, 2023, there were ~~26,422,761~~27,210,391 shares of common stock of Williams Industrial Services Group Inc. outstanding.

Table of Contents

WILLIAMS INDUSTRIAL SERVICES GROUP INC. AND SUBSIDIARIES

Table of Contents


Part I—FINANCIAL INFORMATION	2

Item 1. Financial Statements	2

Condensed Consolidated Balance Sheets as of June 30, ~~2022~~2023 and December 31, ~~2021~~2022 (unaudited)	2

Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, ~~2022~~2023 and ~~2021~~2022 (unaudited)	3

Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, ~~2022~~2023 and ~~2021~~2022 (unaudited)	4

Condensed Consolidated Statements of Stockholders’ Equity (Deficit) for the Three and Six Months Ended June 30, ~~2022~~2023 and ~~2021~~2022 (unaudited)	5

Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, ~~2022~~2023 and ~~2021~~2022 (unaudited)	6

Notes to Condensed Consolidated Financial Statements (unaudited)	7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	2327

Item 3. Quantitative and Qualitative Disclosures about Market Risk	3138

Item 4. Controls and Procedures	3138

Part II—OTHER INFORMATION	40

Item 1. Legal Proceedings	3240

Item 1A. Risk Factors	3240

Item 6. Exhibits	3342

SIGNATURES	3444

Table of Contents

Part I—FINANCIAL INFORMATION

Item 1. Financial Statements.

WILLIAMS INDUSTRIAL SERVICES GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except share data)

June 30, 2022

December 31, 2021
ASSETS




Current assets:

Cash and cash equivalents

$
656

$
2,482
Restricted cash

468

468
Accounts receivable, net of allowance of $327 and $427, respectively

33,267

35,204
Contract assets

13,483

12,683
Other current assets

10,812

11,049
Total current assets

58,686

61,886

Property, plant, and equipment, net

977

653
Goodwill

35,400

35,400
Intangible assets

12,500

12,500
Other long-term assets

7,640

5,712
Total assets

$
115,203

$
116,151

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$
10,939

$
12,168
Accrued compensation and benefits

9,182

12,388
Contract liabilities

2,289

3,412
Short-term borrowings

10,223

676
Current portion of long-term debt

1,050

1,050
Other current liabilities

10,226

11,017
Current liabilities of discontinued operations

104

316
Total current liabilities

44,013

41,027
Long-term debt, net (Note 8)

30,128

30,328
Deferred tax liabilities

2,445

2,442
Other long-term liabilities

4,443

1,647
Long-term liabilities of discontinued operations

3,523

4,250
Total liabilities

84,552

79,694
Commitments and contingencies (Note 10)

Stockholders’ equity:

Common stock, $0.01 par value, 170,000,000 shares authorized and 26,869,938 and 26,408,789 shares issued, respectively, and 26,427,635 and 25,939,621 shares outstanding, respectively

263

261
Paid-in capital

93,208

92,227
Accumulated other comprehensive loss

(122)

(95)
Accumulated deficit

(62,692)

(55,930)
Treasury stock, at par (442,303 and 469,168 common shares, respectively)

(6)

(6)
Total stockholders’ equity

30,651

36,457
Total liabilities and stockholders’ equity

$
115,203

$
116,151



(in thousands, except share data)	June 30, 2023		December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	46	$	495
Restricted cash		467		468
Accounts receivable, net of allowance of $478 and $273, respectively		20,733		31,033
Contract assets		8,088		12,812
Other current assets		3,780		6,258
Total current assets		33,114		51,066

Property, plant, and equipment, net		838		1,257
Goodwill		—		35,400
Intangible assets		—		12,500
Deferred tax assets		127		—
Other long-term assets		6,748		8,275
Total assets	$	40,827	$	108,498

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	11,480	$	12,041
Accrued compensation and benefits		9,431		8,566
Contract liabilities		639		6,242
Short-term borrowings		9,022		17,399
Current portion of long-term debt		438		—
Other current liabilities		4,203		5,710
Current liabilities of discontinued operations		113		110
Total current liabilities		35,326		50,068
Long-term debt, net (Note 9)		30,881		23,360
Deferred tax liabilities		—		2,268
Other long-term liabilities		3,201		4,925
Long-term liabilities of discontinued operations		2,753		3,479
Total liabilities		72,161		84,100
Commitments and contingencies (Note 12)
Stockholders’ equity (deficit):
Common stock, $0.01 par value, 170,000,000 shares authorized and 27,532,064 and 26,865,064 shares issued, respectively, and 27,210,391 and 26,543,391 shares outstanding, respectively		266		264
Paid-in capital		94,551		94,151
Accumulated other comprehensive loss		(248)		(404)
Accumulated deficit		(125,898)		(69,608)
Treasury stock, at par (321,673 and 321,673 common shares, respectively)		(5)		(5)
Total stockholders’ equity (deficit)		(31,334)		24,398
Total liabilities and stockholders’ equity (deficit)	$	40,827	$	108,498

See accompanying notes to condensed consolidated financial statements.

Table of Contents

WILLIAMS INDUSTRIAL SERVICES GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

Three Months Ended June 30,

Six Months Ended June 30,
(in thousands, except per share data)

2022

2021

2022

2021
Revenue

$
56,059

$
91,571

$
125,618

$
152,422
Cost of revenue

53,778

82,218

117,628

136,971

Gross profit

2,281

9,353

7,990

15,451

Selling and marketing expenses

402

231

732

442
General and administrative expenses

6,294

6,372

12,365

12,683
Depreciation and amortization expense

46

46

112

87
Total operating expenses

6,742

6,649

13,209

13,212

Operating income (loss)

(4,461)

2,704

(5,219)

2,239

Interest expense, net

1,261

1,213

2,480

2,506
Other income, net

(240)

(1,232)

(419)

(1,592)
Total other (income) expense, net

1,021

(19)

2,061

914

Income (loss) from continuing operations before income tax

(5,482)

2,723

(7,280)

1,325
Income tax expense (benefit)

(171)

77

58

262
Income (loss) from continuing operations

(5,311)

2,646

(7,338)

��
1,063

Income (loss) from discontinued operations before income tax

(47)

243

(47)

164
Income tax expense (benefit)

(640)

18

(623)

37
Income (loss) from discontinued operations

593

225

576

127

Net income (loss)

$
(4,718)

$
2,871

$
(6,762)

$
1,190

Basic loss per common share

Income (loss) from continuing operations

$
(0.20)

$
0.10

$
(0.28)

$
0.04
Income from discontinued operations

0.02

0.01

0.02

0.01
Basic income (loss) per common share

$
(0.18)

$
0.11

$
(0.26)

$
0.05

Diluted income (loss) per common share

Income (loss) from continuing operations

$
(0.20)

$
0.10

$
(0.28)

$
0.04
Income from discontinued operations

0.02

0.01

0.02

0.01
Diluted income (loss) per common share

$
(0.18)

$
0.11

$
(0.26)

$
0.05


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands, except per share data)	2023		2022		2023		2022
Revenue	$	83,343	$	56,059	$	186,813	$	125,618
Cost of revenue		87,293		53,778		183,072		117,628

Gross profit (loss)		(3,950)		2,281		3,741		7,990

Selling and marketing expenses		182		402		318		732
General and administrative expenses		5,976		6,294		11,905		12,365
Depreciation and amortization expense		43		46		98		112
Total operating expenses		6,201		6,742		12,321		13,209

Operating loss		(10,151)		(4,461)		(8,580)		(5,219)

Interest expense, net		1,971		1,261		3,764		2,480
Goodwill and intangible impairment expense		47,900		—		47,900		—
Income expense, net		(86)		(240)		(147)		(419)
Total other expense, net		49,785		1,021		51,517		2,061

Loss from continuing operations before income tax		(59,936)		(5,482)		(60,097)		(7,280)
Income tax expense (benefit)		(3,162)		(171)		(3,177)		58
Loss from continuing operations		(56,774)		(5,311)		(56,920)		(7,338)

Loss from discontinued operations before income tax		(44)		(47)		(88)		(47)
Income tax benefit		(721)		(640)		(718)		(623)
Income from discontinued operations		677		593		630		576

Net loss	$	(56,097)	$	(4,718)	$	(56,290)	$	(6,762)

Basic income (loss) per common share
Loss from continuing operations	$	(2.13)	$	(0.20)	$	(2.14)	$	(0.28)
Income from discontinued operations		0.03		0.02		0.02		0.02
Basic loss per common share	$	(2.10)	$	(0.18)	$	(2.12)	$	(0.26)

Diluted income (loss) per common share
Loss from continuing operations	$	(2.13)	$	(0.20)	$	(2.14)	$	(0.28)
Income from discontinued operations		0.03		0.02		0.02		0.02
Diluted loss per common share	$	(2.10)	$	(0.18)	$	(2.12)	$	(0.26)

See accompanying notes to condensed consolidated financial statements.

Table of Contents

WILLIAMS INDUSTRIAL SERVICES GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

							��
	Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2022		2021		2022			2021		2023		2022		2023		2022
Net income (loss)	$	(4,718)	$	2,871	$	(6,762)		$	1,190
Net loss										$	(56,097)	$	(4,718)	$	(56,290)	$	(6,762)
Foreign currency translation adjustment		(169)		30		(27)			34		20		(169)		156		(27)
Comprehensive income (loss)	$	(4,887)	$	2,901	$	(6,789)		$	1,224
Comprehensive loss										$	(56,077)	$	(4,887)	$	(56,134)	$	(6,789)

See accompanying notes to condensed consolidated financial statements.

Table of Contents

WILLIAMS INDUSTRIAL SERVICES GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) (UNAUDITED)


							Accumulated														Accumulated
	Common Shares						Other								Common Shares						Other
	$0.01 Per Share				Paid-in		Comprehensive		Accumulated	Treasury Shares					$0.01 Per Share				Paid-in		Comprehensive		Accumulated	Treasury Shares
(in thousands, except share data)	Shares		Amount		Capital		Income (Loss)		Deficit	Shares		Amount		Total	Shares		Amount		Capital		Income (Loss)		Deficit	Shares		Amount		Total
Balance, December 31, 2020	25,926,333	$	256	$	90,292	$	28	$	(58,673)	(589,891)	$	(8)	$	31,895
Balance, December 31, 2021															26,408,789	$	261	$	92,227	$	(95)	$	(55,930)	(469,168)	$	(6)	$	36,457
Restricted stock awards granted	164,388		—		—		—		—	—		—			291,894		—		—		—		—	—		—		—
Stock-based compensation															—		—		(147)		—		—	—		—		(147)
Foreign currency translation															—		—		—		142		—	—		—		142
Net loss															—		—		—		—		(2,044)	—		—		(2,044)
Balance, March 31, 2022															26,700,683	$	261	$	92,080	$	47	$	(57,974)	(469,168)	$	(6)	$	34,408
Restricted stock units vested	274,448		4		—		—		—	120,723		2		6	169,255		—		—		—		—	26,865		—		—
Tax withholding on restricted stock units	—		—		(545)		—		—	—		—		(545)	—		2		(165)		—		—	—		—		(163)
Stock-based compensation	—		—		625		—		—	—		—		625	—		—		1,293		—		—	—		—		1,293
Foreign currency translation	—		—		—		4		—	—		—		4	—		—		—		(169)		—	—		—		(169)
Net loss	—		—		—		—		(1,681)	—		—		(1,681)	—		—		—		—		(4,718)	—		—		(4,718)
Balance, March 31, 2021	26,365,169	$	260	$	90,372	$	32	$	(60,354)	(469,168)	$	(6)	$	30,304
Issuance of common stock	—		—		—		—		—	—		—		—
Restricted stock units vested	19,501		—		—		—		—	—		—		—
Tax withholding on restricted stock units	—		—		40		—		—	—		—		40
Stock-based compensation	—		—		424		—		—	—		—		424
Foreign currency translation	—		—		—		30		—	—		—		30
Net income	—		—		—		—		2,871	—		—		2,871
Balance, June 30, 2021	26,384,670	$	260	$	90,836	$	62	$	(57,483)	(469,168)	$	(6)	$	33,669
Balance, June 30, 2022															26,869,938	$	263	$	93,208	$	(122)	$	(62,692)	(442,303)	$	(6)	$	30,651


							Accumulated														Accumulated
	Common Shares						Other								Common Shares						Other
	$0.01 Per Share				Paid-in		Comprehensive		Accumulated	Treasury Shares					$0.01 Per Share				Paid-in		Comprehensive		Accumulated	Treasury Shares
(in thousands, except share data)	Shares		Amount		Capital		Income (Loss)		Deficit	Shares		Amount		Total	Shares		Amount		Capital		Income (Loss)		Deficit	Shares		Amount		Total
Balance, December 31, 2021	26,408,789	$	261	$	92,227	$	(95)	$	(55,930)	(469,168)	$	(6)	$	36,457
Restricted stock awards granted	291,894		—		—		—		—	—		—		—
Stock-based compensation	—		—		(147)		—		—	—		—		(147)
Foreign currency translation	—		—		—		142		—	—		—		142
Net loss	—		—		—		—		(2,044)	—		—		(2,044)
Balance, March 31, 2022	26,700,683	$	261	$	92,080	$	47	$	(57,974)	(469,168)	$	(6)	$	34,408
Issuance of common stock	—		—		—		—		—	—		—		—
Restricted stock units vested	169,255		—		—		—		—	26,865		—		—
Balance, December 31, 2022															26,865,064	$	264	$	94,151	$	(404)	$	(69,608)	(321,673)	$	(5)	$	24,398
Issuance of restricted stock awards															514,926		—		—		—		—	—		—		—
Issuance of restricted stock units															152,074		—		—		—		—	—		—		—
Tax withholding on restricted stock units	—		2		(165)		—		—	—		—		(163)	—		2		(92)		—		—	—		—		(90)
Stock-based compensation	—		—		1,293		—		—	—		—		1,293	—		—		379		—		—	—		—		379
Foreign currency translation	—		—		—		(169)		—	—		—		(169)	—		—		—		136		—	—		—		136
Net loss	—		—		—		—		(4,718)	—		—		(4,718)	—		—		—		—		(193)	—		—		(193)
Balance, June 30, 2022	26,869,938	$	263	$	93,208	$	(122)	$	(62,692)	(442,303)	$	(6)	$	30,651
Balance, March 31, 2023															27,532,064	$	266	$	94,438	$	(268)	$	(69,801)	(321,673)	$	(5)	$	24,630
Stock-based compensation															—		—		113		—		—	—		—		113
Foreign currency translation															—		—		—		20		—	—		—		20
Net loss															—		—		—		—		(56,097)	—		—		(56,097)
Balance, June 30, 2023															27,532,064	$	266	$	94,551	$	(248)	$	(125,898)	(321,673)	$	(5)	$	(31,334)

See accompanying notes to condensed consolidated financial statements.

Table of Contents

WILLIAMS INDUSTRIAL SERVICES GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Six Months Ended June 30,
(in thousands)

2022

2021
Operating activities:

Net income (loss)

$
(6,762)

$
1,190
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:

Net income from discontinued operations

(576)

(127)
Deferred income tax provision (benefit)

3

(25)
Depreciation and amortization on plant, property, and equipment

112

87
Amortization of deferred financing costs

415

415
Amortization of debt discount

100

100
Bad debt expense

(101)

(51)
Stock-based compensation

577

1,460
Changes in operating assets and liabilities:

Accounts receivable

2,137

(3,040)
Contract assets

(787)

(4,268)
Other current assets

177

(1,561)
Other assets

(2,219)

(175)
Accounts payable

(1,251)

1,546
Accrued and other liabilities

(601)

4,432
Contract liabilities

(1,122)

(1,246)
Net cash used in operating activities, continuing operations

(9,898)

(1,263)
Net cash used in operating activities, discontinued operations

(365)

(139)
Net cash used in operating activities

(10,263)

(1,402)
Investing activities:

Purchase of property, plant, and equipment

(438)

(418)
Net cash used in investing activities

(438)

(418)
Financing activities:

Repurchase of stock-based awards for payment of statutory taxes due on stock-based compensation

(163)

(501)
Proceeds from short-term borrowings

144,220

140,194
Repayments of short-term borrowings

(134,673)

(138,482)
Repayments of long-term debt

(525)

(525)
Net cash provided by financing activities

8,859

686
Effect of exchange rate change on cash

16

128
Net change in cash, cash equivalents and restricted cash

(1,826)

(1,006)
Cash, cash equivalents and restricted cash, beginning of period

2,950

9,184
Cash, cash equivalents and restricted cash, end of period

$
1,124

$
8,178

Supplemental Disclosures:

Cash paid for interest

$
2,292

$
1,887
Cash paid for income taxes, net of refunds

$
—

$
1,553


	Six Months Ended June 30,
(in thousands)	2023		2022
Operating activities:
Net loss	$	(56,290)	$	(6,762)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Net income from discontinued operations		(630)		(576)
Deferred income tax provision (benefit)		(2,395)		3
Depreciation and amortization on plant, property, and equipment		98		112
Amortization of deferred financing costs		415		415
Amortization of debt discount		100		100
Loss on disposals of property, plant and equipment		86		—
Bad debt expense		(205)		(101)
Stock-based compensation		—		577
Paid-in-kind interest		883		—
Impairment expense		47,900		—
Changes in operating assets and liabilities:
Accounts receivable		10,505		2,137
Contract assets		4,724		(787)
Other current assets		2,478		177
Other assets		1,493		(2,219)
Accounts payable		(561)		(1,251)
Accrued and other liabilities		(1,872)		(601)
Contract liabilities		(5,603)		(1,122)
Net cash provided by (used in) operating activities, continuing operations		1,126		(9,898)
Net cash used in operating activities, discontinued operations		(94)		(365)
Net cash provided by (used in) operating activities		1,032		(10,263)
Investing activities:
Proceeds from sale of property, plant and equipment		235		—
Purchase of property, plant, and equipment		—		(438)
Net cash provided by (used in) investing activities		235		(438)
Financing activities:
Repurchase of stock-based awards for payment of statutory taxes due on stock-based compensation		(90)		(163)
Proceeds from short-term borrowings		196,675		144,220
Repayments of short-term borrowings		(205,052)		(134,673)
Proceeds from long-term debt		6,750		—
Repayments of long-term debt		—		(525)
Net cash (used in) provided by financing activities		(1,717)		8,859
Effect of exchange rate change on cash		—		16
Net change in cash, cash equivalents and restricted cash		(450)		(1,826)
Cash, cash equivalents and restricted cash, beginning of period		963		2,950
Cash, cash equivalents and restricted cash, end of period	$	513	$	1,124

Supplemental Disclosures:
Cash paid for interest	$	3,095	$	2,292
Cash paid for income taxes, net of refunds	$	44	$	—

See accompanying notes to condensed consolidated financial statements.

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WILLIAMS INDUSTRIAL SERVICES GROUP INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1—BUSINESS AND BASIS OF PRESENTATION

Business

Williams Industrial Services Group Inc. (together with its wholly owned subsidiaries, “Williams,” the “Company,” “we,” “us” or “our,” unless the context indicates otherwise) was initially formed in 1998 as GEEG Inc., a Delaware corporation, and in 2001 changed its name to “Global Power Equipment Group Inc.,” and, as part of a reorganization, became the successor to GEEG Holdings, L.L.C., a Delaware limited liability company. Effective June 29, 2018, the Company changed its name to Williams Industrial Services Group Inc. to better align its name with the Williams ~~business, and the Company’s stock trades on the NYSE American LLC under the ticker symbol “WLMS.”~~business. Williams has been safely helping power plant owners and operators enhance asset value for more than 50 years. It provides a broad range of construction, maintenance, and support services to infrastructure customers in energy, power, and industrial end markets.

In connection with the Company filing the Bankruptcy Petitions (as defined below), trading of the Company's common stock on the NYSE American LLC (the “NYSE American”) was suspended on July 22, 2023, and the delisting was effective August 11, 2023, 10 days after the NYSE American filed a Form 25 with the SEC. The ~~Company’s mission~~Company's common stock is ~~to be~~currently quoted on the preferred provider of construction, maintenance, and specialty services through commitment to superior safety performance, focus on innovation, and dedication to delivering unsurpassed value to its customers.OTC Pink Market operated by OTC Markets Group Company under the symbol "WLMSQ."

Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) on a basis consistent with that used in the Annual Report on Form 10-K for the year ended December 31, ~~2021,~~2022, filed by the Company with the U.S. Securities and Exchange Commission (“SEC”) on March ~~16, 2022~~31, 2023 (the ~~“2021~~“2022 Report”). In the opinion of management, the unaudited condensed consolidated financial statements reflect all adjustments, including all normal recurring adjustments, necessary to present fairly the unaudited condensed consolidated balance sheets and statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for the periods indicated. All significant intercompany transactions have been eliminated. The December 31, ~~2021~~2022 condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by GAAP. These unaudited condensed consolidated interim financial statements and accompanying notes should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the ~~2021~~2022 Report. Accounting measurements at interim dates inherently involve greater reliance on estimates than at year-end. The results of operations for any interim period are not necessarily indicative of operations to be expected for the full year.

The Company reports on a fiscal quarter basis utilizing a “modified” 5-4-4 calendar (modified in that the fiscal year always begins on January 1 and ends on December 31). However, the Company has continued to label its quarterly information using a calendar convention. The effects of this practice are modest and only exist when comparing interim period results. The reporting periods and corresponding fiscal interim periods are as follows:



Reporting Interim Period	Fiscal Interim Period		Fiscal Interim Period
	2022	2021	2023	2022
Three Months Ended March 31	January 1, 2022 to April 3, 2022	January 1, 2021 to April 4, 2021	January 1, 2023 to April 2, 2023	January 1, 2022 to April 3, 2022
Three Months Ended June 30	April 4, 2022 to July 3, 2022	April 5, 2021 to July 4, 2021	April 3, 2023 to July 2, 2023	April 4, 2022 to July 3, 2022
Three Months Ended September 30	July 4, 2022 to October 2, 2022	July 5, 2021 to October 3, 2021	July 3, 2023 to October 1, 2023	July 4, 2022 to October 2, 2022

Going Concern

On July 22, 2023, the Company and its subsidiaries, Williams Industrial Services Group, L.L.C. (“WISG”), Williams Plant Services, LLC (“WPS”), Williams Specialty Services, LLC (“WSS”), Williams Industrial Services, LLC (“WIS”), WISG Electrical, LLC (“WISG Electrical”), Construction & Maintenance Professionals, LLC (“CMP”), Williams Global Services, Inc., Steam Enterprises, LLC, GPEG, LLC, Global Power Professional Services Inc., WISG Canada Ltd., WISG Nuclear Ltd. and WISG Electrical Ltd. (collectively with the Company, the “Debtors”), filed voluntary petitions (the “Bankruptcy Petitions”) under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the District of Delaware (such court, the “Court” and such cases, the “Cases”). The Cases are being jointly administered under the caption In re Williams Industrial Services Group Inc., et al. On July 25, 2023, the Bankruptcy Court issued orders approving "first-day" relief motions on an interim basis, granting the Company authorization for certain actions, including entering into a

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Superpriority Senior Secured Revolving Credit and Security Agreement and a Superpriority Senior Secured Term Loan, Guarantee, and Security Agreement (collectively the “DIP Credit Facilities”) and paying employee wages and benefits.

Despite the bankruptcy filing, the Debtors will continue their operations as "debtors-in-possession" under the jurisdiction of the Court and actively pursue a structured sale of the Transferred Assets (as defined below) through a competitive bidding and auction process under Section 363 of the Bankruptcy Code. The outcome of the Chapter 11 proceedings and the Company's ability to successfully execute the structured sale of the Transferred Assets remain uncertain and depend on various factors, including Court approvals, negotiations with creditors, and general economic conditions. After the sale, the Company anticipates the remaining business will undergo liquidation via a Chapter 11 plan or conversion to Chapter 7. As such, the financial statements do not include any adjustments that might result from the potential outcome of these uncertainties.

These significant events and developments raise substantial doubt about the Company's ability to continue as a going concern. Continuation as a going concern is dependent upon the Company’s ability to successfully continue its operations during the Chapter 11 process, negotiate a purchase agreement, and take other steps to manage its liquidity. If the Company's liquidity improvement plan and the above-mentioned DIP Credit Facilities do not have the intended effect of addressing the Company's liquidity problems through the Chapter 11 process, the Company may be required to liquidate under Chapter 7 of the Bankruptcy Code. For additional information regarding our ongoing liquidity constraints and the DIP Credit Facilities, see below under “Note 2—Liquidity” and “Note 9—Debt” to the unaudited condensed consolidated financial statements included in this Form 10-Q.

NOTE 2—LIQUIDITY

As mentioned above, the Company and its subsidiaries, filed the Bankruptcy Petitions with the Court under Chapter 11 of the Bankruptcy Code. The Cases are being jointly administered under the caption Inre Williams Industrial Services Group Inc., et al. The Debtors will continue their operations in the ordinary course of business as debtors-in-possession and pursue a structured sale of the Transferred Assets (as defined below) pursuant to a competitive bidding and auction process under Section 363 of the Code.

On July 22, 2023, prior to the filing of the Bankruptcy Petitions, the Company and certain subsidiaries (the “Sellers”) entered into a “stalking horse” Asset Purchase Agreement (the “Purchase Agreement”) with EnergySolutions Nuclear Services, LLC (“EnergySolutions”), pursuant to which, among other things, the Sellers will sell substantially all of their assets relating to (i) the business of providing a broad range of construction and maintenance services to customers in the nuclear, conventional power (fossil, hydro, natural gas), energy delivery, water and wastewater, pulp and paper, chemical and government industries, (ii) solely to the extent conducted pursuant to certain contracts of WIS, certain non-unionized pulp and paper operations, and (iii) the business as conducted by WPS and WSS (collectively, clauses (i) – (iii) are referred to as the “Business”, and the assets related to the Business and as more fully described in the Purchase Agreement, as the “Transferred Assets”). WIS will retain its water and wastewater business, the non-unionized pulp and paper business not included as part of the Business and its transmission and distribution business, and the Sellers will retain any other business not set forth in clauses (i) – (iii) above. The Purchase Agreement provides that the aggregate consideration to be paid by EnergySolutions for the sale of all of the Transferred Assets and the obligations of Sellers as set forth in the Purchase Agreement shall be an amount in cash equal to the sum of $60.0 million, less (i) any deductions on account of certain cure costs that may be required to be paid pursuant to the Bankruptcy Code in order to cure monetary defaults under certain contracts assumed and assigned to EnergySolutions and (ii) the aggregate amount of all overdue payables as of 11:59 p.m. E.T. on the day that is six business days prior to the closing date, subject to certain limitations. As additional consideration for the Transferred Assets, EnergySolutions will assume certain liabilities of the Sellers relating to the Business at the closing. The transactions are part of a sale process under Section 363 of the Bankruptcy Code that will be subject to approval by the Court and compliance with agreed upon and Court-approved bidding procedures allowing for the submission of higher or otherwise better offers and satisfaction of other agreed-upon conditions. In accordance with the sale process under Section 363 of the Bankruptcy Code, notice of the proposed sale to EnergySolutions was given to third parties and competing bids are being solicited. The Company will manage the bidding process and evaluate the bids, in consultation with its advisors and as overseen by the Court.

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In connection with filing the Bankruptcy Petitions and the entry by the Court of the Interim DIP Order on July 25, 2023, the Debtors entered into the DIP Credit Facilities. The DIP Revolving Credit Agreement allows the Debtors to access up to the lesser of the Borrowing Base (as defined in the DIP Revolving Credit Agreement) or $12.0 million, less the amount of all Prepetition Revolving Credit Obligations. The DIP Term Loan Agreement provides the Debtors with a secured superpriority debtor-in-possession term loan facility not to exceed $19.5 million, with an immediate availability of $14.0 million upon the entry of the Interim DIP Order and the balance of which will be available after entry of the final order by the Court, which has not been obtained at this time. Borrowings under the DIP Credit Facilities are senior secured obligations of the Debtors, secured by superpriority liens on the assets of the Debtors, subject to customary exceptions. The DIP Credit Agreements contain various customary covenants, as well as covenants mandating compliance by the Debtors with a 13-week budget, variance testing, and reporting requirements. The proceeds from the DIP Credit Facilities may be used for, among other things, post-petition working capital, expenses related to the bankruptcy proceedings, payment of court-approved adequate protection obligations, and other court-approved purposes.

In addition, the filing of the Bankruptcy Petitions constituted an event of default that accelerated the Company’s and the other Debtors’ obligations under its then-outstanding debt, including approximately $15.7 million under the Revolving Credit Facility, approximately $35.6 million under the Term Loan, and approximately $0.8 million under the Wynnefield Notes. These debt instruments provide that, as a result of the Bankruptcy Petitions, the principal, interest and any prepayment premiums due thereunder shall immediately become due and payable. Any efforts to enforce payment obligations under these debt instruments are automatically stayed as a result of the Bankruptcy Petitions, and the creditors’ rights of enforcement in respect of the debt instruments are subject to the applicable provisions of the Bankruptcy Code.

During the first six months ended June 30, 2023, the Company relied on borrowings under the Revolving Credit Facility, additional borrowings under the Term Loan and the Wynnefield Notes (each as defined in “Note 9—Debt”), and sought to diligently manage its working capital as its principal sources of liquidity prior to filing the Bankruptcy Petitions. Despite the positive cash flows from operations during this period, the Company experienced a significant increase in negative cash flows. As a result, the Company's cash position continued to decrease, leading to negative total cash flows for the six months ended June 30, 2023. These negative cash flows were primarily driven by the following factors:

●

Difficulties managing short-term negative cash flows that resulted from, among other things, having to fund significant weekly craft labor payrolls on large outage projects before those payrolls could be billed to the Company’s customers and collected.

●

Ongoing losses incurred on fixed price contracts in the Company's Florida and Texas water business.

●

Costs related to the Company’s exit from its Tampa, Florida-based transmission and distribution operations and its Norwalk, Connecticut-based transmission and distribution operations, both of which utilized cash resources and negatively impacted liquidity.

●

Costs related to exiting the Company’s chemical projects in Texas.

●

Challenges with the timing of billing and collecting cash from customers, particularly in periods with high revenues.

●

Funding certain of the Company’s past due accounts payable, the balances for which had become larger than the Company’s vendors were willing to accept. For this reason, the Company had to make payments to certain vendors to either reduce the amounts that were past due or otherwise bring such vendors current.

●

The Company has been operating with a high level of borrowings as it has had to, among other things, fund prior period losses, and therefore when revenues were growing significantly in the first six months of 2023, largely as a result of increased nuclear business due to a significant customer outage, the Company had to enter into amendments to the Revolving Credit Facility and the Term Loan to access additional funding to compensate for its working capital requirements.

●

The Company’s borrowings under the Revolving Credit Facility and Term Loan both bore higher rates of interest than were in effect in prior periods and these higher interest charges need to be funded by the Company, to the extent not deferred.

●

The amendments to the Revolving Credit Facility and the Term Loan in the first half of 2023 involved the incurrence by the Company of out-of-pocket counsel fees, both for the Company and for each of the lender groups involved, as well as to the Company’s financial advisors.

●

The Company incurred expenses in the first and second quarter of 2023 in connection with its ongoing review of strategic alternatives. These expenses included the fees and expenses of the Company’s financial advisors, tax advisors, and counsel.

●

Notwithstanding the Company’s materially higher revenues in the first six months of 2023, the Company was unable to convert pipeline opportunities into revenue sufficient to fund the losses and costs referred to above as well as fund its working capital requirements.

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A variety of other factors can also affect the Company’s short- and long-term liquidity, the impact of which could be material, including, but not limited to: costs related to the Chapter 11 Cases; cash required generally for funding ongoing operations, projects and commitments; matters relating to the Company’s contracts, including contracts billed based on milestones that may require the Company to incur significant expenditures prior to collections from its customers and others that allow for significant upfront billing at the beginning of a project, which temporarily increases liquidity in the near term; the outcome of potential contract disputes, which may be significant and involve liquidated damages and litigation; payment collection issues, including general payment slowdowns or other factors which can lead to credit deterioration of the Company’s customers; pension obligations requiring annual contributions to multiemployer pension plans; insurance coverage for contracts that require the Company to indemnify third parties; and issuances of letters of credit and bonding arrangements.

To address the negative cash flows in the Company’s business over recent quarters, the Company conducted a comprehensive strategic alternatives process while concurrently taking aggressive steps to improve its liquidity and profitability. The implementation of these initiatives was part of a comprehensive liquidity plan, developed and implemented in 2022, which ultimately was unable to resolve ongoing liquidity issues and resulted in the Company filing the Bankruptcy Petitions.

Following the anticipated completion of the sale of the Business, the remainder of the Company is currently expected to undergo liquidation under a Chapter 11 plan or conversion to Chapter 7 of the Bankruptcy Code. The Company cannot provide any assurance that it will be able to successfully complete a sale of the Business or that it will be able to continue to fund its operations throughout the Chapter 11 process.

The Company made significant amendments to its Revolving Credit Facility (as defined below) and Term Loan (as defined below) during 2022 and 2023. In the third and fourth quarters of 2022, as well as the first and second quarters of 2023, the Company entered into a total of five separate amendments to these agreements. The first two amendments deferred principal payments on the Term Loan from January 1, 2023, to January 9, 2023, and revised certain terms in both the Revolving Credit Facility and the Term Loan. During the first quarter of 2023, the third and fourth amendments provided for delayed draw term loans under the Term Loan, with $1.5 million in immediate funding and an additional $3.5 million funded at the time of the fifth amendment. The fifth amendment, executed on April 4, 2023, increased the interest payable by the Company on certain stated events related to the Term Loan. Additionally, on the same date, the Company agreed to pay PNC an additional exit fee of $0.6 million related to the Revolving Credit Facility. Furthermore, during the first quarter of 2023, the Company issued two unsecured promissory notes (“Wynnefield Notes") totaling $750,000 to the Wynnefield Lenders (as defined in “Note 9—Debt”).

The Company's liquidity plan, including the utilization of DIP Credit Facilities and the implementation of various strategic initiatives, is intended to support the Company's ongoing operations during the Chapter 11 process. The Company has been diligently working on exiting certain underperforming operations since 2022, including the discontinuation of water projects in Florida and Texas, as well as exiting transmission and distribution operations in Florida and Connecticut, and underperforming chemical projects in Texas. These measures, coupled with the filing for Chapter 11 bankruptcy protection, are expected to enable the Company to continue operating in the ordinary course of business during the Chapter 11 process.

While the core nuclear and fossil business exceeded the Company’s revenue forecast for the first half of 2023, and is continuing to perform well, revenue is expected to fall in the second half of 2023, as the Company’s outage services for a large customer concluded at the end of the second quarter. This anticipated revenue decline poses greater liquidity challenges, despite the availability of DIP Revolving Credit Agreement and DIP Term Loan Agreement funding. As noted above, EnergySolutions and the Company signed the Purchase Agreement (as defined above) pursuant to which EnergySolutions will acquire the Business, which sale is being facilitated through Section 363 of the Chapter 11 Bankruptcy Code. However, if the Company is unable to complete the sale of the business pursuant to the Section 363 sale process and is unable to address any liquidity shortfalls that may arise based on any of the foregoing factors or others that may arise in the future, the Company may be required to liquidate under Chapter 7 of the Bankruptcy Code.

In conclusion, the significant events and developments, including the negative cash flows, Chapter 11 bankruptcy filing, potential sale of assets, and liquidity challenges, raise substantial doubt about the Company's ability to continue as a going concern. The Company remains focused on continuing its operations during the Chapter 11 process and successfully completing the sale of the Business.

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NOTE 3—RECENT ACCOUNTING PRONOUNCEMENTS

Recently Adopted Accounting Pronouncements

The Company did not implement any new accounting pronouncements during the first six months of ~~2022. However, the Company is currently evaluating the impact of future disclosures that may arise under recent SEC proposals.~~2023.

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NOTE 3—4—LEASES

The Company primarily leases office space and related equipment, as well as equipment, modular units and vehicles directly used in providing services to its customers. The Company’s leases have remaining lease terms of one to ten years. Most leases contain renewal options for varying periods, which are at the Company’s sole discretion and included in the expected lease term if they are reasonably certain of being exercised. In accordance with ASU 2016-02, the Company accounts for lease components, such as fixed payments including rent, real estate taxes, and insurance costs, separately from the non-lease components, such as common area maintenance costs.

In accordance with ASU 2016-02, for leases with terms greater than twelve months, the Company records the related right-of-use assets and lease liabilities at the present value of the fixed lease payments over the lease term at the lease commencement date. The Company uses its incremental borrowing rate to determine the present value of the lease as the rate implicit in the lease is typically not readily determinable.

Short-term leases (leases with an initial term of twelve months or less or leases that are cancelable by the lessee and lessor without significant penalties) are expensed on a straight-line basis over the lease term. The majority of the Company’s short-term leases relate to equipment used in delivering services to its customers. These leases are entered into at agreed upon hourly, daily, weekly, or monthly rental rates for an unspecified duration and typically have a termination for convenience provision. Such equipment leases are considered short-term in nature unless it is reasonably certain that the equipment will be leased for a term greater than twelve months.

On September 2, 2021, the Company made the decision to relocate its corporate headquarters to Atlanta, Georgia and entered into a ten-year lease agreement. The Company completed its relocation in March 2022. The lease is presented as a right-of-use asset and lease liability and the lease liability amounts to ~~$3.3~~$3.2 million with a present value of $2.2 million over ~~a ten-year term.~~the life of the contract. If the Company defaults, the landlord has the right to use the security deposit for rent or other payments due to other damages, injury, expense or liability as defined in the lease agreement. Although the security deposit shall be deemed the property of the landlord, any remaining balance of the security deposit shall be returned by the landlord to the Company after termination of the lease as the Company’s obligations under the lease have been fulfilled. The Company subleased a portion of its former office space and collected ~~$30,000~~$15,000 of sublease income during the first six months ~~ended June 30, 2022.~~of 2023. The lease on the Company’s former office space expired on March 31, 2023.

The components of lease expense were as follows:


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended June 30,				Six Months Ended June 30,
Lease Cost/(Sublease Income) (in thousands)	2022		2021		2022		2021		2023		2022		2023		2022
Operating lease cost	$	573	$	538	$	1,119	$	1,092	$	513	$	573	$	1,055	$	1,119
Short-term lease cost		1,611		813		3,228		1,433		1,535		1,611		4,226		3,228
Sublease income		(15)		-		(30)		-		—		(15)		(15)		(30)
Total lease cost	$	2,169	$	1,351	$	4,317	$	2,525	$	2,048	$	2,169	$	5,266	$	4,317

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Lease cost related to finance leases was not significant for the three and six months ended June 30, ~~2022~~2023 and ~~2021.~~2022.

Information related to the Company’s right-of-use assets and lease liabilities were as follows:


Lease Assets/Liabilities (in thousands)	Balance Sheet Classification	June 30, 2022		December 31, 2021		Balance Sheet Classification	June 30, 2023		December 31, 2022
Lease Assets
Right-of-use assets	Other long-term assets	$	3,379	$	1,527	Other long-term assets	$	3,485	$	4,223

Lease Liabilities
Short-term lease liabilities	Other current liabilities	$	1,467	$	1,606	Other current liabilities	$	1,301	$	1,603
Long-term lease liabilities	Other long-term liabilities		2,379		511	Other long-term liabilities		2,818		3,010
Total lease liabilities		$	3,846	$	2,117		$	4,119	$	4,613

Supplemental information related to the Company’s leases were as follows:


		Six Months Ended June 30,				Six Months Ended June 30,
(dollars in thousands)	2022		2021		2023		2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash used by operating leases	$	1,211	$	1,154	$	1,145	$	1,211
Right-of-use assets obtained in exchange for new operating lease liabilities		2,854		737		504		2,854
Weighted-average remaining lease term - operating leases		5.70 years		1.38 years		5.33 years		5.70 years
Weighted-average remaining lease term - finance leases		1.73 years		2.73 years		0.73 years		1.73 years
Weighted-average discount rate - operating leases		9%		9%		9%		9%
Weighted-average discount rate - finance leases		9%		9%		9%		9%

Total remaining lease payments under the Company’s operating and finance leases were as follows:


	Operating Leases		Finance Leases

Six Months Ended June 30,	(in thousands)
Remainder of 2023	$	910	$	3
2024		1,172		1
2025		658		-
2026		531		-
2027		463		-
Thereafter		1,483		-
Total lease payments	$	5,217	$	4
Less: interest		(1,102)		-
Present value of lease liabilities	$	4,115	$	4

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~~Total remaining lease payments under the Company’s operating and finance leases were as follows:~~

Operating Leases

Finance Leases
Six Months Ended June 30,

(in thousands)
Remainder of 2022

$
1,013

$
3
2023

905

6
2024

495

1
2025

375

-
2026

381

-
Thereafter

1,873

-
Total lease payments

$
5,042

$
10
Less: interest

(1,206)

-
Present value of lease liabilities

$
3,836

$
10

NOTE 4—5—CHANGES IN BUSINESS

Discontinued Operations

Electrical Solutions

During the fourth quarter of 2017, the Company made the decision to exit and sell its Electrical Solutions segment (which was comprised solely of Koontz-Wagner Custom Controls Holdings LLC (“Koontz-Wagner”), a wholly owned subsidiary of the Company) in an effort to reduce the Company’s outstanding term debt. The Company determined that the decision to exit this segment met the definition of a discontinued operation. As a result, this segment has been presented as a discontinued operation for all periods presented.

On July 11, 2018, Koontz-Wagner filed a voluntary petition for relief under Chapter 7 of Title 11 of the Bankruptcy Code with the U.S. Bankruptcy Court for the Southern District of Texas. The filing was for Koontz-Wagner only, not for the Company as a whole, and was completely separate and distinct from the Williams business and operations. As a result of the July 11, 2018 bankruptcy of Koontz-Wagner, the Company recorded a pension withdrawal liability of $2.9 million related to Koontz-Wagner’s International Brotherhood of Electrical Workers Local Union 1392 (“IBEW”) multi-employer pension plan.

After an arbitration process, on May 12, 2021, an arbitrator concluded that the IBEW used an incorrect per hour contribution rate in calculating the Company’s pension withdrawal liability, which resulted in the Company overpaying. The arbitrator directed IBEW to refund all overpayments, with interest, to the Company and to redetermine the Company’s payments going forward using the proper contribution rate. Accordingly, the Company’s overall pension withdrawal liability decreased by approximately $0.3 million. The pension liability is expected to be satisfied by annual cash payments of $0.3 million each, paid in quarterly installments, through 2038. ~~The Company recorded a gain on disposal of approximately $0.2 million during the first six months of 2021 to reduce its previously recorded estimated withdrawal liability.~~

Mechanical Solutions

During the third quarter of 2017, the Company made the decision to exit and sell substantially all of the operating assets and liabilities of its Mechanical Solutions segment and determined that the decision to exit this segment met the definition of a discontinued operation. As a result, this segment has been presented as a discontinued operation for all periods presented.

As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company did 0tnot have any assets related to its Electrical Solutions’ and Mechanical Solutions’ discontinued operations. The following table presents a reconciliation of the carrying amounts of major classes of liabilities of Electrical Solutions’ and Mechanical Solutions’ discontinued operations:



(in thousands)	June 30, 2023		December 31, 2022
Liabilities:
Current liabilities of discontinued operations	$	113	$	110
Liability for pension obligation		2,242		2,244
Liability for uncertain tax positions		511		1,235
Long-term liabilities of discontinued operations		2,753		3,479
Total liabilities of discontinued operations	$	2,866	$	3,589

The following table presents a reconciliation of the major classes of line items constituting the net income (loss) from discontinued operations. In accordance with GAAP, the amounts in the table below do not include an allocation of corporate overhead.


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2023		2022		2023		2022
Loss on disposal - Electrical Solutions		—		17		—		17
Interest expense		44		30		88		30
Loss from discontinued operations before income tax		(44)		(47)		(88)		(47)
Income tax benefit		(721)		(640)		(718)		(623)
Income from discontinued operations	$	677	$	593	$	630	$	576

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(in thousands)

June 30, 2022

December 31, 2021
Liabilities:

Current liabilities of discontinued operations

$
104

$
316
Liability for pension obligation

2,287

2,368
Liability for uncertain tax positions

1,236

1,882
Long-term liabilities of discontinued operations

3,523

4,250
Total liabilities of discontinued operations

$
3,627

$
4,566

The following table presents a reconciliation of the major classes of line items constituting the net loss from discontinued operations. In accordance with GAAP, the amounts in the table below do not include an allocation of corporate overhead.

Three Months Ended June 30,

Six Months Ended June 30,
(in thousands)

2022

2021

2022

2021
General and administrative expenses

$
—

$
6

$
—

$
34
Loss (gain) on disposal - Electrical Solutions

17

(228)

17

(228)
Interest expense (income)

30

(21)

30

30
Income (loss) from discontinued operations before income tax

(47)

243

(47)

164
Income tax expense (benefit)

(640)

18

(623)

37
Income (loss) from discontinued operations

$
593

$
225

$
576

$
127

NOTE 5—6—REVENUE

Disaggregation of Revenue

The Company’s contracts generally include a single performance obligation for which revenue is recognized over time, as performance obligations are satisfied, due to the continuous transfer of control to the customer. For cost-plus contracts, the Company recognizes revenue when services are performed and contractually billable based upon the hours incurred and agreed-upon hourly rates. Revenue on fixed-price contracts is recognized and invoiced over time using the cost-to-cost percentage-of-completion method. To the extent a contract is deemed to have multiple performance obligations, the Company allocates the transaction price of the contract to each performance obligation using its best estimate of the standalone selling price of each distinct good or service in the contract. The Company does not adjust the price of the contract for the effects of a significant financing component. Change orders are generally not distinct from the existing contract due to the significant integration service provided in the context of the contract and are accounted for as a modification of the existing contract and performance obligation. The Company believes these methods of revenue recognition most accurately reflect the economics of the transactions with its customers.

The Company’s contracts may include several types of variable consideration, including change orders, rate true-up provisions, retainage, claims, incentives, penalties, and liquidated damages. The Company estimates the amount of revenue to be recognized on variable consideration using estimation methods that best predict the amount of consideration to which the Company expects to be entitled. The Company includes variable consideration in the estimated transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur or when the uncertainty associated with the variable consideration is resolved. The Company’s estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based on an assessment of its anticipated performance and all information (historical, current, and forecasted) that is reasonably available. The Company updates its estimate of the transaction price each reporting period and the effect of variable consideration on the transaction price is recognized as an adjustment to revenue on a cumulative catch-up basis. In circumstances where the Company cannot reasonably determine the outcome of a contract, it recognizes revenue over time as the work is performed, but only to the extent of recoverable costs incurred (i.e. zero margin). A loss provision is recorded for the amount of any estimated unrecoverable costs in excess of total estimated revenue on a contract as soon as the Company becomes aware. The Company generally provides a limited warranty for a term of two years or less following completion of services performed under its contracts. Historically, warranty claims have not resulted in material costs incurred.

On July 20, 2023, the Company made a strategic decision to exit the water projects business in Florida and Texas. This led to the discontinuation of a significant portion of WIS's business and operations in the water projects division. As a result of the exit, the Company made financial adjustments, reducing its contract liability by $3.5 million and revenue by $0.6 million for the three-month and six-month periods ending June 30, 2023. The Company will continue to focus on non-union pulp and paper mill maintenance and repair activities under WIS. Additionally, on July 25, 2023, the Company took steps to reject the customer contracts associated with the water projects by filing motions with the Court. The Court will assess these motions at a hearing scheduled for August 17, 2023.

Disaggregated revenue by type of contract was as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2023		2022		2023		2022
Cost-plus reimbursement contracts	$	77,244	$	39,771	$	167,317	$	94,026
Fixed-price contracts		6,099		16,288		19,496		31,592
Total	$	83,343	$	56,059	$	186,813	$	125,618

Disaggregated revenue by the geographic area where the work was performed was as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2023		2022		2023		2022
United States	$	83,343	$	56,059	$	186,813	$	120,116
Canada		-		-		-		5,502
Total	$	83,343	$	56,059	$	186,813	$	125,618

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~~Disaggregated revenue by type of contract was as follows:~~

Three Months Ended June 30,

Six Months Ended June 30,
(in thousands)

2022

2021

2022

2021
Cost-plus reimbursement contracts

$
39,771

$
82,071

$
94,026

$
137,664
Fixed-price contracts

16,288

9,500

31,592

14,758
Total

$
56,059

$
91,571

$
125,618

$
152,422

~~Disaggregated revenue by the geographic area where the work was performed was as follows:~~

Three Months Ended June 30,

Six Months Ended June 30,
(in thousands)

2022

2021

2022

2021
United States

$
56,059

$
81,718

$
120,116

$
132,908
Canada

-

9,853

5,502

19,514
Total

$
56,059

$
91,571

$
125,618

$
152,422

Contract Balances

The Company enters into contracts that allow for periodic billings over the contract term that are dependent upon specific advance billing terms, as services are provided, or as milestone billings based on completion of certain phases of work. Projects with performance obligations recognized over time that have costs and estimated earnings recognized to date in excess of cumulative billings are reported in the Company’s unaudited condensed consolidated balance sheets as contract assets. Projects with performance obligations recognized over time that have cumulative billings in excess of costs and estimated earnings recognized to date are reported in the Company’s unaudited condensed consolidated balance sheets as contract liabilities. At any point in time, each project in process could have either contract assets or contract liabilities.

The following table provides information about contract assets and contract liabilities from contracts with customers:


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2022		2021		2022		2021		2023		2022		2023		2022
Costs incurred on uncompleted contracts	$	53,778	$	82,218	$	117,628	$	136,971	$	87,424	$	53,778	$	183,072	$	117,628
Earnings recognized on uncompleted contracts		2,281		9,353		7,990		15,451		(4,081)		2,281		3,741		7,990
Total		56,059		91,571		125,618		152,422		83,343		56,059		186,813		125,618
Less—billings to date		(44,865)		(80,589)		(114,424)		(141,440)		(75,894)		(44,865)		(179,364)		(114,424)
Net	$	11,194	$	10,982	$	11,194	$	10,982	$	7,449	$	11,194	$	7,449	$	11,194
Contract assets	$	13,483	$	12,265	$	13,483	$	12,265	$	8,088	$	13,483	$	8,088	$	13,483
Contract liabilities		(2,289)		(1,283)		(2,289)		(1,283)		(639)		(2,289)		(639)		(2,289)
Net	$	11,194	$	10,982	$	11,194	$	10,982	$	7,449	$	11,194	$	7,449	$	11,194

For the three and six months ended June 30, ~~2022,~~2023, the Company recognized revenue of approximately $0.7 million and ~~$2.1~~$4.8 million, respectively, on approximately ~~$3.4~~$6.2 million that was included in the corresponding contract liability balance on December 31, ~~2021.~~2022.

Remaining Performance Obligations

The following table includes estimated revenue expected to be recognized in the future related to performance obligations that were unsatisfied (or partially unsatisfied) as of June 30, ~~2022:~~2023:

(in thousands)

Remainder of 2022

2023

2024

Thereafter

Total
Remaining performance obligations

$
98,141

$
38,916

$
10,762

$
86,484

$
234,303


(in thousands)	Remainder of 2023		2024		2025		Thereafter		Total
Remaining performance obligations	$	44,645	$	45,786	$	65,899	$	37,315	$	193,645

NOTE ~~6—EARNINGS (LOSS)~~7—LOSS PER SHARE

As of June 30, 2023, the Company’s 27,210,391 shares outstanding included 514,926 shares of contingently issued but unvested restricted stock. As of June 30, 2022, the Company’s 26,427,635 shares outstanding included 321,142 shares of contingently issued but unvested restricted stock. AsRestricted stock is excluded from the calculation of ~~June 30, 2021, the Company’s 25,915,502~~basic weighted average shares outstanding, but its impact, if dilutive, is included ~~215,956~~in the calculation of diluted weighted average shares outstanding.

Basic earnings (loss) per common share are calculated by dividing net income (loss) by the weighted average common shares outstanding during the period. Diluted earnings (loss) per common share are based on the weighted average common shares outstanding during the period, adjusted for the potential dilutive effect of ~~contingently~~common shares that would be issued upon the vesting and release of restricted stock awards and units.

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issued but unvested restricted stock. Restricted stock is excluded from the calculation of basic weighted average shares outstanding, but its impact, if dilutive, is included in the calculation of diluted weighted average shares outstanding.

Basic earnings per common share are calculated by dividing net income by the weighted average common shares outstanding during the period. Diluted earnings per common share are based on the weighted average common shares outstanding during the period, adjusted for the potential dilutive effect of common shares that would be issued upon the vesting and release of restricted stock awards and units and stock options, if any.

Basic and diluted ~~earnings~~loss per common share from continuing operations were calculated as follows:


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended June 30,				Six Months Ended June 30,
(in thousands, except share data)	2022		2021		2022		2021		2023		2022		2023		2022
Income (loss) from continuing operations	$	(5,311)	$	2,646	$	(7,338)	$	1,063
Loss from continuing operations									$	(56,774)	$	(5,311)	$	(56,920)	$	(7,338)

Basic income (loss) per common share:
Basic loss per common share:
Weighted average common shares outstanding		26,106,493		25,683,258		26,034,907		25,306,130		26,695,465		26,106,493		26,559,598		26,034,907

Basic income (loss) per common share	$	(0.20)	$	0.10	$	(0.28)	$	0.04
Basic loss per common share									$	(2.13)	$	(0.20)	$	(2.14)	$	(0.28)

Diluted income (loss) per common share:
Diluted loss per common share:
Weighted average common shares outstanding		26,106,493		25,683,258		26,034,907		25,306,130		26,695,465		26,106,493		26,559,598		26,034,907

Diluted effect:
Unvested portion of restricted stock units and awards		—		753,247		—		762,961		—		—		—		—
Weighted average diluted common shares outstanding		26,106,493		26,436,505		26,034,907		26,069,091		26,695,465		26,106,493		26,559,598		26,034,907

Diluted income (loss) per common share	$	(0.20)	$	0.10	$	(0.28)	$	0.04
Diluted loss per common share									$	(2.13)	$	(0.20)	$	(2.14)	$	(0.28)

The weighted average number of shares outstanding used in the computation of basic and diluted ~~earnings~~loss per common share does not include the effect of the following potential outstanding common stock. The effects of the potentially outstanding service-based restricted stock and restricted stock unit awards were not included in the calculation of diluted ~~earnings~~loss per common share because the effect would have been anti-dilutive. The effects of the potentially outstanding performance- and market-based restricted stock unit awards were not included in the calculation of diluted ~~earnings~~loss per common share because the performance and/or market conditions had not been satisfied as of June 30, ~~2022~~2023 and ~~2021.~~2022.


	Three Months Ended June 30,		Six Months Ended June 30,		Three Months Ended June 30,		Six Months Ended June 30,
	2022	2021	2022	2021	2023	2022	2023	2022
Unvested service-based restricted stock and restricted stock unit awards	599,344	—	623,836	—	195,840	599,344	198,662	623,836
Unvested performance- and market-based restricted stock unit awards	912,675	833,111	912,675	833,111	634,896	912,675	634,896	912,675

NOTE 7—8—INCOME TAXES

The effective income tax ~~expense~~ rate for continuing operations for the three and six months ended June 30, ~~2022~~2023 and ~~2021~~2022 was as follows:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended June 30,

Six Months Ended June 30,

2022

2021

2022

2021

2023

2022

2023

2022

Effective income tax rate for continuing operations

3.1%

2.8%

(0.8)%

19.8%

5.3%

3.1%

5.3%

(0.8)%

~~Table of Contents~~

The effective income tax rate differs from the statutory federal income tax rate of 21% primarily because of the release of FIN 48 tax positions including the interest and penalties, based on the Company’s policy, the partial valuation allowances recorded on the Company’s deferred tax assets and the Canadian income tax ~~provision.~~benefit. It is important to note that FIN 48 requires the Company to evaluate its income tax positions, and any adjustments made as a result of the resolution of uncertain tax positions, including the release of tax provisions and related interest and penalties, are accounted for in accordance with FIN 48 guidelines. As such, these adjustments can impact the effective income tax rate reported in the financial statements.

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For the three months ended June 30, ~~2022,~~2023, the Company recorded income tax benefit from continuing operations of $3.2 million, or 5.3% of pretax loss from continuing operations, compared with income tax benefit from continuing operations of $0.2 million, or 3.1% of pretax loss from continuing operations, in the corresponding period of 2022. For the six months ended June 30, 2023, the Company recorded income tax benefit from continuing operations of $3.2 million, or 5.3% of pretax loss from continuing operations, compared with income tax expense from continuing operations of $0.1 million, or ~~2.8%~~(0.8)% of pretax ~~income~~loss from continuing operations, in the corresponding period of 2021. For the six months ended June 30, 2022, the Company recorded income tax expense from continuing operations of $0.1 million, or (0.8)% of pretax loss from continuing operations, compared with income tax expense from continuing operations of $0.3 million, or 19.8% of pretax income from continuing operations, in the corresponding period of 2021.2022. The decrease in income tax provision from continuing operations for the three and six months ended June 30, ~~2022,~~2023, compared with the corresponding periods in ~~2021,~~2022, was primarily related to the ~~$0.2~~$2.4 million ~~decrease in the Canadian~~ income tax ~~provision.~~benefit due to the reversal of indefinitely lived deferred tax liabilities net of the indefinitely lived deferred tax assets, and the $0.8 million income tax benefit for the release of FIN 48 tax positions, including the interest and penalties, in compliance of the Company’s policy.

The Company’s net deferred balance was primarily composed of indefinite lived deferred tax liabilities attributable to goodwill and trade names, and the indefinite lived deferred tax assets related to the post 2017 net operating losses and Section 163(j) interest addback. A full valuation allowance was applied to most of the remaining deferred balances. The indefinite lived deferred tax assets enabled the release of the valuation allowance to the extent that it can offset the indefinite lived deferred tax liabilities. Because all indefinite lived deferred tax liabilities ~~are~~were part of continued operations, and the release of valuation allowance iswas attributable to the future taxable income related to these deferred tax liabilities, the entire valuation allowance released was recorded in continuing operations according to ASC 740-20-45-3. As of June 30, ~~2022,~~2023, the Company had written off $2.4 million net deferred tax liabilities, mainly composed of the reversal of $12.4 million indefinite lived deferred tax liabilities attributable to goodwill and trade names, partially offset by ~~$6.8~~the reversal of $6.6 million indefinite lived deferred tax assets attributable to post 2017 net operating losses and ~~$3.3~~$3.4 million indefinite lived deferred tax assets attributable to Section 163(j) interest ~~addback, plus $0.3 million deferred tax liability accrued with respect to the Company’s outside basis difference in its investment in Canada.~~addback.

As of June 30, ~~2022,~~2023 and ~~2021,~~2022, the Company would have needed to generate approximately ~~$291.3~~$296.1 million and ~~$273.4~~$313.6 million, respectively, of future taxable income in order to realize its deferred tax assets.

The Company’s foreign subsidiaries may generate earnings that are not subject to U.S. income taxes so long as they are permanently reinvested in its operations outside of the U.S. Pursuant to ASC 740-30, undistributed earnings of foreign subsidiaries that are no longer permanently reinvested ~~would~~ become subject to deferred income taxes.

As of June 30, ~~2022,~~2023, the ~~Company projects that its~~Company’s Canadian subsidiary ~~will have generated~~had approximately ~~$5.9~~$0.5 million undistributed earnings byprojected for the end of ~~2022. The Company’s management expects~~2023 that ~~all of the undistributed earnings will~~is expected to be repatriated back to the United States within the next 12 months.

The Company formed the Canadian subsidiary in 2018 without significant capital ~~investment,~~input, and the majority of the undistributed earnings was expected to be repatriated as dividends to the United States at the ~~United States-Canada~~U.S.-Canada treaty rate of 5%. As a result, ~~the Company accrued a deferred~~less than $0.1 million income tax liability ~~of $0.3 million related~~was accrued with respect to ~~its investment in Canada for its outside basis difference as of June 30, 2022.~~the foreign withholding tax associated with the remaining distribution from the Canadian subsidiary.

As of each of June 30, ~~2022~~2023 and ~~2021,~~2022, the Company provided for a total liability of ~~$2.3~~$0.9 million and ~~$2.9~~$2.3 million, respectively, for uncertain income tax positions, which include the unrecognized tax benefits related to various federal, foreign and state income tax matters, and the accrual of interest, penalties, and foreign currency adjustments that can potentially arise from these positions. For the period ended June 30, ~~2022,~~2023, the ~~$2.3~~$0.9 million reserved for uncertain income tax positions ~~were~~was included in long-term liabilities of discontinued operations and other long-term liabilities, of which ~~$1.2~~$0.5 million ~~were~~was related to discontinued operations, compared to ~~$1.8~~$1.2 million for the corresponding period in ~~2021.~~2022. If the unrecognized tax benefit is recognized, the reduction in the liability would be recorded as a tax benefit and reduce the effective tax rate. Among the ~~$2.3~~$0.9 million reserved for uncertain income tax positions, approximately ~~$1.1~~$0.4 million was accrued for potential payment of interest and penalties, of which ~~$0.5 million~~ was primarily related to discontinued operations.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was enacted and signed into U.S. law to provide economic relief to individuals and businesses facing economic hardship as a result of the COVID-19 pandemic. The Company has incorporated the impact of the CARES Act to the tax provision. In addition, the Company deferred payments of federal employer payroll taxes of approximately $4.9 million, as permitted by the CARES Act. The first half of the deferred amounts were paid in December 2021, and the second half ~~will be~~were paid byin December 2022.

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NOTE 8—9—DEBT

The following table provides information about the Company’s debt, net of unamortized deferred financing costs:


(in thousands)	June 30, 2022		��	December 31, 2021		June 30, 2023		December 31, 2022
Short-term borrowings	$	10,223		$	676
Term loan, current portion of long-term debt		1,050			1,050
Revolving Credit Facility						$	9,022	$	17,399
Current portion of Term Loan							438		-
Current debt	$	11,273		$	1,726	$	9,460	$	17,399

Term loan, noncurrent portion of long-term debt	$	32,375		$	32,900	$	31,728	$	25,282
Debt discount		(691)			(791)
Unsecured Promissory Note with Wynnefield Partners Small Cap Value, LP I							400		-
Unsecured Promissory Note with Wynnefield Partners Small Cap Value, LP							350		-
Unamortized debt discount from refinancing							(491)		(591)
Unamortized deferred financing costs		(1,556)			(1,781)		(1,106)		(1,331)
Long-term debt, net	$	30,128		$	30,328	$	30,881	$	23,360

Total debt, net	$	41,401		$	32,054	$	40,341	$	40,759

Debt Refinancing

On December 16, 2020, ~~(the “Closing Date”),~~ the Company and certain of its subsidiaries refinanced and replaced its prior revolving credit facility and term loan facility and entered into (i) the Term Loan Agreement (as defined below), which provided for senior secured term loan facilities in an aggregate principal amount of up to $50.0 million (collectively, the “Term Loan”), consisting of a $35.0 million closing date term loan facility ~~(the “Closing Date Term Loan”)~~ and up to $15.0 million of borrowings under a delayed draw facility (the “Delayed Draw Term Loan Facility”) with EICF Agent LLC, as agent, and CION Investment Corporation, as a lender and a co-lead arranger, and the other lenders party thereto; and (ii) a senior secured asset-based revolving line of credit of up to $30.0 million (the “Revolving Credit Facility”) with PNC Bank, National Association (“PNC”). The Delayed Draw Term Loan Facility expired in June 2022. In connection with the refinancing, the Company repaid the outstanding balance of the prior facilities and all interest in full.

As of June 30, ~~2022,~~2023, the Company had ~~$10.2~~$9.0 million outstanding debt under the Revolving Credit Facility, ~~and $33.4~~$32.2 million outstanding (including both the noncurrent and current portion of the Term Loan) under the Term ~~Loan.~~Loan and $0.8 million outstanding under the Wynnefield Notes. Total liquidity (the sum of unrestricted cash and availability under the Revolving Credit Facility) was $5.8 million at the end of the second quarter of 2023. As of June 30, ~~2022,~~2023, the Company was not in compliance with all debt covenants, as ~~amended effective June 30, 2022.~~

~~In connection with~~amended. The filing of the ~~Company’s assessment~~Bankruptcy Petitions constituted an event of ~~going concern considerations in accordance with FASB ASC Topic 205-40, “Presentation of Financial Statements - Going Concern,” management has determined that~~default under the Term Loan and the Revolving Credit ~~amendment described above~~Facility. Any efforts to enforce payment obligations under the Term Loan and ~~other factors such as the company’s backlog, alleviated initial doubt about the Company’s ability to continue~~Revolving Credit Facility are automatically stayed as a ~~going concern.~~result of the Bankruptcy Petitions, and the creditors’ rights of enforcement in respect of such agreements are subject to the applicable provisions of the Bankruptcy Code.

The Revolving Credit Facility

On the Closing Date, the Company and certain of its subsidiaries (the “Revolving Loan Borrowers”) entered into the Revolving Credit and Security Agreement with PNC, as agent for the lenders, and the lenders party thereto (the “Revolving Credit Agreement”), which provides for the Revolving Credit Facility. As part of the Revolving Credit Facility, the Company may access a letter of credit sublimit in an amount up to $2.0 million, a swing loan sublimit in an aggregate principal amount of up to $3.0 million, and a Canadian dollar sublimit in an aggregate principal amount of up to $5.0 million. The Revolving Credit Agreement matures on December 16, 2025.

As of June 30, ~~2022,~~2023, the borrowings under the Revolving Credit Facility bore interest at the ~~Company’s~~Company's election at either (1) the base commercial lending rate of PNC, as publicly announced, plus 1.25%, payable in cash on a monthly basis, (2) the ~~30, 60 or 90 day LIBOR~~Term SOFR (as defined in the Revolving Credit Facility agreement, as amended) based on the secured overnight financing rate (“SOFR”), subject to a minimum ~~LIBOR~~SOFR floor of 1.00%, plus 2.25%, payable in cash on the last day of each interest period, or (3) with respect to Canadian dollar loans, the Canadian Dollar ~~Offered~~offered Rate (“CDOR”), subject to a minimum CDOR rate of 1.00%, plus 2.25%, payable in cash on a monthly basis. In addition, upon the occurrence of an event of default, ~~and for so long as such event of default continues, default interest equal to~~an additional 2.00% per year ~~in excess of the rate otherwise applicable will be payable.~~default interest would apply. The ~~Revolving Credit Agreement also includes customary replacement provisions in the event of the discontinuation of LIBOR.~~

~~The Revolving Loan Borrowers’~~ Obligations ~~(as defined in the Revolving Credit Agreement) are~~were guaranteed by certain ~~of the Company’s material, wholly owned~~ subsidiaries ~~subject to customary exceptions (the “Revolving Loan Guarantors”~~ and ~~together with the Revolving Loan Borrowers, the “Revolving Loan Credit Parties”). The Revolving Loan Credit Parties’~~

~~Table of Contents~~

~~obligations are~~ secured by ~~first-priority security interests on substantially all of the Revolving Loan Credit Parties’ accounts receivable and a second-priority security interest in substantially all other~~ assets, ~~of the Revolving Loan Credit Parties, subject to the terms of~~with the Intercreditor Agreement between ~~PNC and~~ EICF Agent LLC, as the Term Loan agent, and PNC, as the Revolving Loan ~~Agent and~~agent (the “Intercreditor Agreement”), specifying the relative lien priorities of the Term Loan Agent ~~respectively (as each such term is defined~~and Revolving Loan Agent in the ~~Intercreditor Agreement), as described below (the “Intercreditor Agreement”).~~

The Revolving Loan Borrowers may from time to time voluntarily prepay outstanding amounts, plus any accrued but unpaid interest on the aggregate amount being prepaid, under the Revolving Credit Facility, in whole or in part. There is 0 required minimum prepayment amount. If at any time the amount outstanding under the Revolving Credit Agreement exceeds the borrowing base, or any sublimit, in effect at such time, the excess amount will be immediately due and payable. Subject to the Intercreditor Agreement, the Revolving Credit Agreement also requires mandatory prepayment of outstanding amounts in the event the Revolving Loan Borrowers receive proceeds from certain events and activities, including, among others, certain asset sales and casualty events, the issuance of indebtedness and equity interests, and the recovery of any proceeds from certain specified arbitration proceedings.

The Revolving Credit Agreement provides for (1) a closing fee of $0.2 million, which was paid on the Closing Date, (2) a customary unused line fee equal to 0.25% per year on the unused portion of the Revolving Credit Facility, which is payable on a quarterly basis, and (3) a collateral monitoring fee of $2,500, which is payable on a monthly basis. The Revolving Credit Agreement also provides for an early termination fee (the “Early Termination Fee”), payable to the revolving lenders thereunder upon (1) any acceleration of the Obligations and termination of the Revolving Credit Agreement and the obligation of the revolving lenders to make advances thereunder following the occurrence of an Event of Default (as defined in the Revolving Credit Agreement), or (2) any other termination of the Revolving Credit Agreement and the obligation of revolving lenders to make advances thereunder for any reason (the “Early Termination Date”). The Early Termination Fee is calculated as follows: if the Early Termination Date occurred on or prior to the first anniversary of the Closing Date, the Early Termination Fee would have been 2.00% of the Revolving Credit Facility; and if prepayment occurs after the first anniversary of the Closing Date and on or prior to the second anniversary of the Closing Date, the Early Termination Fee will be 1.00% of the Revolving Credit Facility. While any letter of credit is outstanding under the Revolving Credit Facility, the Revolving Loan Borrowers must pay a letter of credit fronting fee at a rate equal to 0.25% per year, payable quarterly, in addition to any other customary fees required by the issuer of the letter of credit.relevant collateral.

The Revolving Credit Agreement contains customary representations and warranties, as well as customary affirmative and negative covenants, in each case, with certain exceptions, limitations and qualifications. The Revolving Credit ~~Agreement~~Facility agreement also requires the Revolving ~~Loan Borrowers~~Credit Facility borrowers to regularly provide certain financial information to the lenders thereunder ~~maintain~~on a ~~springing minimum fixed charge coverage ratio,~~weekly, monthly, quarterly and ~~comply with certain limitations on capital expenditures.~~

Events of default under the Revolving Credit Agreement include, but are not limited to, a breach of certain covenants or any representations or warranties, failure to timely pay any amounts due and owing, the commencement of any bankruptcy or other insolvency proceeding, judgments in excess of certain acceptable amounts, the occurrence of a change in control, certain events related to ERISA matters, impairment of security interests in collateral or invalidity of guarantees or security documents, or a default or event of default under the Term Loan Agreement or the Intercreditor Agreement, in each case, with customary exceptions, limitations, grace periods and qualifications. If an event of default occurs, the revolving lenders may, among other things, declare all Obligations outstanding under the Revolving Credit Facility to be immediately due and payable, together with accrued interest and fees, and exercise remedies under the collateral documents relating to the Revolving Credit Agreement.

On August 3, 2022, the Company entered into an Amendment to the Revolving Credit Agreement (the “Revolving Credit Amendment”) that, among other things, (i) amended the calculation of EBITDA (as defined in the Revolving Credit Agreement), effective as of June 30, 2022, to include (or “add back”) certain non-recurring losses and expenses relating to projects executed in Jacksonville, Florida, one-time costs and expenses incurred in connection with the Company’s transmission and distribution business unit start-up, and costs and expenses arising out of the Company’s litigation with a designated former executive and his employer (in each case, subject to certain specified dollar limits), (ii) permitted advances against certain eligible receivables of one of the Company’s joint ventures (also subject to specified dollar limits), (iii) included provisions that replace the London Interbank Offered Rate (LIBOR) interest rate with customary provisions based on the secured overnight financing rate (SOFR), and (iv) provided for the payment of a $25,000 amendment fee, plus applicable fees and expenses. The $25,000 amendment fee will be expensed as incurred.

EICF Agent LLC, as the Term Loan Agent, and PNC, as the Revolving Loan Agent, entered into an Intercreditor Agreement, dated as of the Closing Date, to which the Term Loan Credit Parties (as defined below) and Revolving Loan Credit Partiesannual basis.

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~~consented. The Intercreditor Agreement, among other things, specifies~~Due to the ~~relative lien priorities of~~Chapter 11 filing, the ~~Term Loan Agent and Revolving Loan Agent in the relevant collateral, and contains customary provisions regarding, among other things, the rights of the Term Loan Agent and Revolving Loan Agent~~lenders are now subject to ~~take~~automatic stay provisions. This means that certain actions, including enforcing remedies or taking enforcement actions against the ~~relevant~~ collateral, are temporarily stayed or put on hold. The lenders must now adhere to the provisions and ~~certain~~ limitations ~~on amending the documentation governing each~~set forth under Chapter 11 of the ~~Term Loan~~Bankruptcy Code until further notice from the bankruptcy court.

In light of the bankruptcy filing, any further actions or changes to the agreement, such as amendments or fees, will likely require approval or supervision by the Court. The lenders' ability to exercise their rights under the agreement will be subject to the Court's approval and ~~Revolving Credit Facility.~~the bankruptcy proceedings.

The Term Loan

OnFollowing the ~~Closing Date, the Company and certain of its subsidiaries (the “Term Loan Borrowers”) entered into~~Company's filing for Chapter 11 bankruptcy, the Term Loan, Guarantee, and Security Agreement with EICF Agent LLC and lenders are now subject to automatic stay provisions under Chapter 11 of the Bankruptcy Code. These provisions allow the Company to maintain the term loan's long-term classification and prevent it from being reclassified as ~~agent for~~current debt during the lenders, CION Investment Corporation, as a lender and co-lead arranger, and the other lenders party thereto (the “Term Loan Agreement”), which provides for the Term Loan. The Closing Date Term Loan was fully drawn on the Closing Date, while the Delayed Draw Term Loan Facility was available upon the satisfaction of certain conditions precedent for up to 18 months following the Closing Date and expired in June 2022. bankruptcy proceedings.

The Term Loan ~~Agreement matures on~~agreement, provided for a Term Loan with a maturity date of December 16, 2025.

~~Borrowings~~ As of June 30, 2023, borrowings under the Term Loan ~~Agreement bear~~bore interest at ~~LIBOR, plus~~SOFR, with a margin of 8.50% (if the Total Leverage Ratio (as defined in the Term Loan Agreement) is less than 2.50:1) or 9.00% per year (if the Total Leverage Ratio is greater than or equal to 2.50:1), subject to a minimum ~~LIBOR~~ floor of 1.00%, plus an applicable margin of 11.00%, with part of the interest being payable in ~~cash~~kind on a quarterly basis. In addition, upon the occurrence of an event of default, and for so long as such event of default continues, default interest equal to 2.00% per year in excess of the rate otherwise applicable will be payable. The Term Loan Agreement also includes customary replacement provisions in the event of the discontinuation of LIBOR.

The ~~Term Loan Borrowers’~~ Obligations (as defined in the Term Loan ~~Agreement) are~~agreement) of the Term Loan borrowers were guaranteed by certain ~~of the Company’s material, wholly owned~~ subsidiaries ~~subject to customary exceptions (the “Term Loan Guarantors”~~ and ~~together with the Term Loan Borrowers, the “Term Loan Credit Parties”). The Term Loan Credit Parties’ obligations are~~ secured by first-priority security interests on substantially all of the Term Loan ~~Credit Parties’ assets, as well as~~credit parties' assets. Additionally, a second-priority security interest on the Term Loan ~~Credit Parties’~~credit parties' accounts receivable and inventory was established, subject to the Intercreditor Agreement.

~~Subject to certain conditions,~~Despite the ~~Term Loan Borrowers~~bankruptcy filing, the Company may ~~voluntarily~~still prepay the Term Loan ~~on any Payment Date (as defined in the Term Loan Agreement),~~voluntarily, in whole or in part, ~~in a minimum amount of $1.0 million of the outstanding principal amount, plus a~~subject to specific prepayment ~~fee. The prepayment fee was amended effective June 30, 2022, as described below.~~

~~Subject to~~fees and certain ~~exceptions, within~~ ~~120 days~~ of the end of each calendar year, beginning with the year ended December 31, 2021, the Term Loan Borrowers must prepay the Obligations in an amount equal to (1) (i) if the Total Leverage Ratio is greater than 3:00:1:00, 50.0% of Excess Cash Flow (as defined in the Term Loan Agreement) or (ii) if the Total Leverage Ratio is equal to or less than 3:00:1:00 and greater than 2:00:1:00, 25.0% of Excess Cash Flow, less (2) all voluntaryconditions. Additionally, mandatory prepayments ~~made on the Term Loan during such calendar year; provided that, so long as no default or event of default has occurred and is continuing or would result therefrom, no such prepayment will~~may be required unless Excess Cash Flow for such calendar year equals or exceeds $0.5 million. The Company was not required to prepay any Obligations for the year ended December 31, 2021. The Term Loan Agreement also requires mandatory prepayment ofunder certain ~~amounts in the event the Term Loan Borrowers receive proceeds from certain events and activities,~~circumstances, including ~~among others, certain asset sales and casualty events, the issuance of indebtedness and equity interests, and~~ the receipt of ~~extraordinary receipts (with certain exclusions), plus, in certain instances, the applicable prepayment fee.~~proceeds from specific events or activities.

The Term Loan ~~Agreement contains~~agreement included customary representations, ~~and~~ warranties, ~~as well as customary~~ affirmative and negative covenants, ~~in each case, with~~subject to certain exceptions, limitations, and qualifications. The ~~Term Loan Agreement also requires the Term Loan Borrowers~~company was required to ~~regularly provide~~maintain certain financial ~~information to the lenders thereunder, maintain a maximum total leverage ratio~~ratios and ~~a minimum fixed charge coverage ratio, and comply with certain~~ limitations on capital expenditures.

Events of default under the Term Loan ~~Agreement include, but are not limited~~agreement included various breaches or failures to ~~a breach of certain covenants or any representations or warranties, failure to timely~~ pay, ~~any amounts due and owing, the commencement of any~~ bankruptcy or insolvency proceedings, and other ~~insolvency proceeding, judgments in excess~~specified events. In case of certain acceptable amounts, the occurrence of a change in control, certain events related to ERISA matters, impairment of security interests in collateral or invalidity of guarantees or security documents, or a default or event of default under the Revolving Credit Agreement or the Intercreditor Agreement, in each case, with customary exceptions, limitations, grace periods and qualifications. If an event of default, ~~occurs,~~ the Term Loan lenders ~~may, among other things,~~were entitled to declare all Obligations ~~to be~~ immediately due and payable ~~together with accrued interest and fees,~~ and exercise remedies under the collateral ~~documents relating~~documents.

The Company made amendments to the Term Loan ~~Agreement.~~agreement at different times. The amendments involved modifying financial covenants, adjusting interest rates, deferring payments, and imposing additional reporting obligations. They also included amendment fees payable to the lenders.

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The Wynnefield Notes

The Wynnefield Notes consist of (i) an Unsecured Promissory Note by and among the Company, as borrower, certain of its subsidiaries, as guarantors under a separate Guaranty Agreement, and Wynnefield Partners Small Cap Value, LP I in the aggregate principal amount of $400,000 and (ii) an Unsecured Promissory Note by and among the Company, as borrower, certain of its subsidiaries, as guarantors under a separate Guaranty Agreement, and Wynnefield Partners Small Cap Value, LP (together with Wynnefield Partners Small Cap Value, LP I, the “Wynnefield Lenders”) in the aggregate principal amount of $350,000. All principal and interest will be due on the maturity date of the Wynnefield Notes, which will be the earliest of (i) December 23, 2025; (ii) a change in control of the Company; (iii) a refinancing or maturity extension of either of the Term Loan Agreement or the Revolving Credit Agreement; or (iv) an acceleration following the occurrence of an event of default (as defined in the Wynnefield Notes, and which includes any default under the Term Loan agreement or the Revolving Credit Facility agreement). The Wynnefield Notes bear interest at the fixed rate of (i) 8.0% per annum from the closing date; (ii) 13.0% per annum from and after the maturity date; and (iii) 13.0% per annum from and after an event of default (as defined in the Wynnefield Notes, and which includes any default under the Term Loan agreement or the Revolving Credit Facility agreement). The Wynnefield Notes are subject to an aggregate exit fee of $100,000, payable upon the earlier of an event of default or payment in full of all obligations due under the Wynnefield Notes. In connection with the Wynnefield Notes, the Company, certain of its subsidiaries, the Wynnefield Lenders and the agents under each of the Revolving Credit Facility agreement and the Term Loan agreement have entered into two Subordination and Intercreditor Agreements, pursuant to which the Wynnefield Lenders have agreed, on the terms and subject to the conditions set forth therein, to subordinate the Wynnefield Notes to the obligations of the Company under the Revolving Credit Agreement and the Term Loan Agreement.

The Wynnefield Lenders, together with their affiliates, are the Company’s largest equity investor. Nelson Obus, a member of the Company’s Board of Directors, is a managing member of Wynnefield Capital Management, LLC, the general partner of the Wynnefield Lenders.

Following the Company's filing for Chapter 11 bankruptcy, the Wynnefield Notes are now subject to automatic stay provisions under Chapter 11 of the Bankruptcy Code. These provisions allow the Company to maintain the long-term classification and prevent it from being reclassified as current debt during the bankruptcy proceedings. The automatic stay provisions also protect the Company from certain creditor actions, providing temporary relief from debt-related enforcement actions while the bankruptcy Cases are ongoing.

Debtor-In-Possession Financial Credit Facilities

On July 22, 2023 the Debtors filed voluntary petitions under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. These cases are being jointly administered under the caption In re Williams Industrial Services Group Inc., et al.

In conjunction with the bankruptcy filings, following the entry by the Court of the interim order authorizing and approving the DIP Credit Facilities on July 25, 2023 (the “Interim DIP Order”), the Debtors entered into certain debtor-in-possession financial credit agreements, consisting of the following:

Superpriority Senior Secured Revolving Credit and Security Agreement (the “DIP Revolving Credit Agreement”), pursuant to which, and subject to the terms and conditions therein, PNC Bank, National Association, in its capacity as administrative agent, and the financial institutions from time to time party thereto, as lenders (collectively, including any financial institution that has issued letters of credit on behalf of any Debtor in connection with the DIP Revolving Credit Facility (as defined below), the “DIP Revolving Lenders”), provided the Debtors with a secured superpriority debtor-in-possession revolving credit facility in an aggregate principal amount of up to the lesser of (a) the Borrowing Base (as defined in the DIP Revolving Credit Agreement) and (b) $12.0 million, less the amount of the Obligations owing by the Debtors under the Revolving Credit Facility, which were rolled into the facilities provided under the DIP Revolving Credit Agreement (the “DIP Revolving Credit Facility”), subject to the terms and conditions set forth therein.

Superpriority Senior Secured Term Loan, Guarantee and Security Agreement (the “DIP Term Loan Agreement” and, together with the DIP Revolving Credit Agreement, the “DIP Credit Agreements”), pursuant to which, and subject to the terms and conditions therein, EICF Agent LLC, in its capacity as agent, and the lenders from time to time party thereto (collectively, the “DIP Term Loan Lenders”), provided the Debtors with a secured superpriority debtor-in-possession term loan facility in aggregate principal amount not to exceed $19.5 million (the “DIP Term Loan Facility” and, together with the DIP Revolving Credit Facility, the “DIP Credit Facilities”).

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~~On August 3, 2022 (the “Signing Date”), effective as~~With the entry of ~~June 30, 2022,~~ the ~~Company entered into an Amendment to~~Interim DIP Order by the Court, the DIP Revolving Lenders provided the DIP Revolving Credit Facility in the principal amount described above, and the DIP Term Loan ~~Agreement (the “Term Loan Amendment”) that,~~Lenders provided a $19.5 million multi-draw term loan facility, consisting of $14.0 million of term loans available immediately upon entry of the Interim DIP Order and the balance of which will be available after entry of the final order by the Court, which has not been obtained at this time.

The borrowings under the DIP Credit Facilities are senior secured obligations of the Debtors, secured by superpriority liens on the assets of the Debtors, subject to customary exceptions. Additionally, the DIP Credit Agreements contain various covenants, including requirements for the Debtors' compliance with a 13-week budget, variance testing, reporting obligations, and other relevant provisions. The proceeds of all or a portion of the DIP Credit Facilities may be used for, among other things, ~~(i) amended~~post-petition working capital for the Debtors, payment of costs to administer the Cases, payment of expenses and increased the Total Leverage Ratio (as defined in the Term Loan Agreement) applicable to the Company for certain periods, (ii) amends the calculation of Consolidated EBITDA (as defined in the Term Loan Agreement) to include (or “add back”) certain non-recurring losses and expenses relating to projects executed in Jacksonville, Florida, one-time costs and expenses incurred in connection with the Company’s transmission and distribution business unit start-up, and costs and expenses arising outfees of the ~~Company’s litigation with a designated former executive~~transactions contemplated by the Cases, payment of court-approved adequate protection obligations under the DIP Credit Agreements, and ~~his employer (in~~payment of other costs, in each case, subject to ~~certain specified dollar limits), (iii) provided for a fee of 1%~~an approved budget and such other purposes permitted under each of the ~~then-outstanding principal balance due upon maturity~~DIP Credit Agreements and the Interim DIP Order or any other order of the term loan without duplication of fees paid in connection with the Company’s prepayment fee structure, (iv) extended the Company’s existing prepayment fee structure to require upon repayment (a) prior to the first anniversary of the Signing Date, a fee of 3% of the principal amount being repaid, (b) on or after the first anniversary of the Signing Date and prior to the second anniversary of the Signing Date, a fee of 2% of the principal amount being repaid, and (c) on or after the second anniversary of the Signing Date, a fee of 1% of the principal amount being repaid, and (v) provided for the payment of a $0.2 million amendment fee, plus applicable fees and expenses. The Company’s expense related to the Term Loan Amendment was $0.2 million and will be recognized as interest expense over the remaining term of the modified Term Loan Agreement.Court.

Letters of Credit and Bonds

In line with industry practice, the Company is often required to provide letters of credit and payment and performance surety bonds to customers. These letters of credit and bonds provide credit support and security for the customer if the Company fails to perform its obligations under the applicable contract with such customer.

The Revolving Credit Facility ~~provides~~provided for a letter of credit sublimit in an amount up to $2.0 million. As of June 30, ~~2022,~~2023, the Company had ~~$0.5 million~~no letters of credit outstanding under this sublimit and $0.4 million cash collateralized standby letters of credit outstanding pursuant to its prior revolving credit facility with Wells Fargo Bank, National Association. There were 0no amounts drawn upon these letters of credit as of June 30, ~~2022.~~2023.

In addition, as of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company had outstanding payment and performance surety bonds of ~~$61.9~~$60.3 million and ~~$67.6~~$59.2 million, respectively. After June 30, 2023, approximately $52.7 million of these outstanding and performance surety bonds were called upon by sureties based on the discontinuance of the Company’s water projects in Florida and Texas (see "Note 15—Subsequent Events"). This event resulted in the sureties exercising their rights under the bonds, and the corresponding funds were utilized for fulfillment in accordance with the terms of the bonds.

Deferred Financing Costs and Debt Discount:

Deferred financing costs and debt discount isare amortized over the terms of the related debt facilities using the straight-line method. The following table summarizes the amortization of deferred financing costs and debt discount related to the Company's debt facilities and recognized in interest expense on the unaudited condensed consolidated statements of operations:


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2022		2021		2022		2021		2023		2022		2023		2022
Term loan	$	112	$	112	$	225	$	225	$	112	$	112	$	225	$	225
Debt discount on term loan		50		50		100		100		50		50		100		100
Revolving credit facility		95		95		190		190		95		95		190		190
Total	$	257	$	257	$	515	$	515	$	257	$	257	$	515	$	515

The following table summarizes unamortized deferred financing costs and debt discount included on the Company's unaudited condensed consolidated balance sheets:


(in thousands)	Location	June 30, 2022		December 31, 2021		Location	June 30, 2023		December 31, 2022
Term loan	Long-term debt, net	$	1,556	$	1,781	Long-term debt, net	$	1,106	$	1,331
Debt discount on term loan	Long-term debt, net		691		791	Long-term debt, net		491		591
Revolving credit facility	Other long-term assets		1,319		1,509	Other long-term assets		938		1,128
Total		$	3,566	$	4,081		$	2,535	$	3,050

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NOTE 910—FINANCIAL INSTRUMENTS

Fair Value of Financial Instruments

ASC 820–Fair Value Measurement defines fair value as the exit price, which is the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. ASC 820 also establishes a three-tier fair value hierarchy, which categorizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in the active markets for identical assets and liabilities and the lowest priority to unobservable ~~inputs.~~inputs (see below).

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The Company’s financial instruments as of June 30, ~~2022~~2023 and December 31, ~~2021~~2022 consisted primarily of cash and cash equivalents, restricted cash, receivables, payables, and debt instruments. The carrying values of these financial instruments approximate their respective fair values, as they are either short-term in nature or carry interest rates that are periodically adjusted to market rates.

NOTE 11—GOODWILL AND OTHER INTANGIBLE ASSETS

The Company determines the fair value of its reporting unit annually on October 1^st, utilizing a combination of income, market, and cost approaches. Under the income approach, fair value is ascertained based on the present value of estimated future cash flows, discounted at a suitable risk-adjusted rate. The Company leverages its internal projections to estimate forthcoming cash flows, supplemented by an estimate of long-term growth rates based on the most recent long-term outlook for the reporting unit, which is classified within Level 3 of the fair value hierarchy. The market approach calculates fair value by employing comparative market multiples in valuation estimates. Meanwhile, the cost approach relies on the assumption that a prudent investor would not pay more for an asset than the cost of replacing or reproducing it, determined through estimating replacement cost.

As of June 30, 2023, the Company held $12.5 million of unamortizable indefinite-lived intangible assets related to its Williams Industrial Services Group trade name. No amortization expenses were incurred for both periods ended June 30, 2023 and 2022, along with no amortization for the years ended December 31, 2022 and 2021, as stated in the 2022 Report under "Note 7—Goodwill and Other Intangible Assets." The Company assesses the fair value of its trade name using the relief from royalty method, which calculates fair value by determining the present value of after-tax cost savings linked with asset ownership, hence eliminating the need for royalties for its utilization throughout its estimated useful life. Due to the annual indefinite-lived intangible asset impairment analysis performed as of October 1, 2022, and 2021, the Company determined that the trade name's fair value exceeded its book value, thereby no impairment charge was recorded for the years ending December 31, 2022 and 2021. Similarly, due to the annual indefinite-lived intangible asset impairment analysis conducted as of October 1, 2022 and 2021, the Company established that the fair value of its reporting unit surpassed its book value, thus no impairment charge was noted for the years ending December 31, 2022 and 2021.

The Company's Chapter 11 bankruptcy filing prompted a reevaluation of its goodwill and other intangible assets for the period ended June 30, 2023. This assessment determined that the Company's book value exceeded the fair value of its trade name and reporting unit, leading to an intangible asset impairment charge of $12.5 million linked to its trade name and a goodwill impairment charge of $35.4 million associated with its reporting unit. This evaluation reflects the impact of the significant financial challenges, including the Chapter 11 bankruptcy filing and trailing twelve-month operating loss, that the Company has encountered.

Consequent to the evaluation, the Company recognized a total impairment loss of $47.9 million, with $12.5 million attributed to an intangible asset and $35.4 million attributed to a Goodwill Asset. This impairment mirrors the significant devaluation of the Company's overall worth and its inability to meet performance objectives in the face of challenging financial conditions.

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In accordance with ASC 350-20-50-1, the following information concerning the goodwill impairment is disclosed:

Description of the Impairment Event: The Company filed Chapter 11 Bankruptcy Petitions, leading to substantial financial difficulties, and reported a trailing twelve-month operating loss from continuing operations of $9.1 million.

Date of Assessment: The goodwill impairment assessment was executed for the period ended June 30, 2023.

Reasons for Impairment: The impairment stemmed from the significant devaluation of the Company's overall value and its incapacity to meet performance objectives.

Methodology and Assumptions: Management utilized an array of valuation methods and assumptions, including negative cash flow, historical operating income, prospects of future performance within current conditions, and economic circumstances. These factors were applied to conclude that the carrying amount of the trade name goodwill and intangible asset surpasses their respective fair values.

Amount of Impairment Loss: The impairment loss acknowledged for the intangible asset was $12.5 million, and for the Goodwill Asset was $35.4 million.

Description of Affected Reporting Units or Segments: The goodwill impairment had a bearing on the entirety of the Williams Industrial Services Group and the intangible asset is related to the Company’s trade name.

Future Implications: The impairment underscores the arduous financial environment and underscores the necessity for substantial management initiatives to stabilize and enhance the Company's financial performance.

NOTE ~~10—~~12—COMMITMENTS AND CONTINGENCIES

Litigation and Claims

The Company is from time-to-time party to various lawsuits, including personal injury claims and other proceedings that arise in the ordinary course of its business. With respect to all such lawsuits, claims and proceedings, the Company records a reserve when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. The Company does not believe that the resolution of any currently pending lawsuits, claims and proceedings, either individually or in the aggregate, will have a material adverse effect on its financial position, results of operations or liquidity. However, the outcomes of any currently pending lawsuits, claims and proceedings cannot be predicted, and therefore, there can be no assurance that this will be the case.

On July 22, 2023, the Company and its subsidiaries, Williams Industrial Services Group, L.L.C., Williams Plant Services, LLC, Williams Specialty Services, LLC, Williams Industrial Services, LLC, WISG Electrical, LLC, Construction & Maintenance Professionals, LLC, Williams Global Services, Inc., Steam Enterprises, LLC, GPEG, LLC, Global Power Professional Services Inc., WISG Canada Ltd., WISG Nuclear Ltd. and WISG Electrical Ltd. (collectively with the Company, the “Debtors”), filed voluntary petitions (the “Bankruptcy Petitions”) under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the District of Delaware (such court, the “Court” and such cases, the “Cases”). The Chapter 11 Cases are being jointly administered under the caption In re Williams Industrial Services Group Inc., et al. The Debtors will continue to operate their businesses as “debtors-in-possession” under the jurisdiction of the Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Court. No trustee has been appointed and the Company will continue to manage itself and its subsidiaries as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code. It is anticipated that substantially all of the business and operations of Williams Industrial Services, LLC, the entity carrying on the Company’s water projects, will be discontinued during the course of the Cases.

On July 25, 2023, the Bankruptcy Court issued orders approving the “first day” relief motions on an interim basis (the “Interim DIP Order”), authorizing the Company to, among other things, enter into the DIP Credit Facilities and pay employee wages and benefits.

There has been no order confirming a plan of reorganization, arrangement, or liquidation of the Debtors’ assets in the Cases, and the Debtors are seeking the sale of certain assets through the Purchase Agreement and will seek Court approval of such sale.

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The Company completed a bankruptcy filing of its Koontz-Wagner subsidiary on July 11, 2018. This could require the Company to incur legal fees and other expenses related to liabilities from this bankruptcy filing. While the Company does not anticipate these liabilities will have a material adverse effect on its results of operations, cash flows and financial position, and although the statute of limitations has run on certain claims that the Chapter 7 Trustee for the Koontz-Wagner estate might assert, there can be no assurance of the outcome. The filing was for Koontz-Wagner only, not for the Company as a whole, and was completely separate and distinct from the Williams business and operations. For additional information, please refer to “Note 4—5—Changes in Business” to the unaudited condensed consolidated financial statements.

The acquiror of certain assets from a former operating unit of the Company has been named as a defendant in an asbestos personal injury lawsuit and has submitted a claim for indemnification and tendered defense of the matter to the Company. The Company has assumed defense of the matter subject to a reservation of rights and objection to the claim for indemnification. Neither the Company nor its predecessors ever mined, manufactured, produced, or distributed asbestos fiber, the material that allegedly caused the injury underlying this action. The Company does not expect that this claim will have a material adverse effect on its financial position, results of operations or liquidity. Moreover, during 2012, the Company secured insurance coverage that will help to reimburse the defense costs and potential indemnity obligations of its former operating unit relating to these claims. The Company intends to vigorously defend all currently active actions, and it does not anticipate that this action will have a material adverse effect on its financial position, results of operations or liquidity. However, the outcomes of any legal action cannot be predicted and, therefore, there can be no assurance that this will be the case.

Insurance

The Company maintains insurance coverage for most insurable aspects of its business and operations. The Company’s insurance programs, including, but not limited to, health, general liability, and workers’ compensation, have varying coverage limits depending upon the type of insurance. For the three and six months ended June 30, ~~2022,~~2023, insurance expense, including insurance premiums related to the excess claim coverage and claims incurred for continuing operations, was ~~$1.5~~$1.7 million and ~~$3.2~~$3.5 million, respectively.

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The Company’s unaudited condensed consolidated balance sheets include amounts representing its probable estimated liability related to insurance-related claims that are known and have been asserted against the Company, and for insurance-related claims that are believed to have been incurred but had not yet been reported as of June 30, ~~2022.~~2023. As of June 30, ~~2022,~~2023, the Company provided ~~$0.9~~$0.4 million in letters of credit and ~~$1.5~~$1.0 million of non-depleting cash collateral as security for possible general liability and workers’ compensation claims.

Executive Severance

As of June 30, ~~2022,~~2023, the Company had outstanding severance arrangements with senior executives. The Company’s maximum commitment under all such arrangements, which would apply if the employees covered by these arrangements were each terminated without cause, was ~~$6.0~~$5.5 million on June 30, ~~2022.~~2023. The Company did not accrue executive severance expenses as of June 30, ~~2022.~~2023.

NOTE ~~11—~~13—STOCK-BASED COMPENSATION PLANS

~~During~~Effective for the ~~first six months~~second quarter of ~~2022,~~2023, the Company ~~granted 291,894 service-based restricted~~reversed all its stock compensation expense for $1.1 million following the Chapter 11 bankruptcy filing on July 22, 2023, and entering into the Purchase Agreement with EnergySolutions. The Purchase Agreement involves the sale of substantially all the Company's assets. The Purchase Agreement is part of a sale process under Section 363 of the Bankruptcy Code.

Management has concluded that the stock compensation, both equity and liability-based will not be paid to employees or the board of directors due to the significant devaluation of the Company's stock and the inability to meet performance objectives. Approximately $0.7 million of expense related to equity-based awards ~~under the 2015 Equity Incentive Plan (as amended~~ and ~~restated, the “2015 Plan”), at a grant date fair value~~$0.4 million of ~~$1.85 per share,~~expense related to ~~its non-employee directors, which vest in full on February 3, 2023.~~

~~During the first six months of 2022,~~cash-based awards were reversed. Additionally, the Company ~~granted 362,356 service-based restricted~~reversed $0.5 million of stock ~~units~~compensation liability related to ~~its employees under~~cash-based plans.

The significant devaluation of the ~~2022 long-term incentive (“LTI”) program~~Company's stock occurred following the Chapter 11 bankruptcy filing and the ~~2015 Plan at a grant date fair value of $1.99 per share. These service-based restricted stock units can be paid in cash or shares at the election~~execution of the ~~Compensation Committee of~~Purchase Agreement on July 22, 2023. Given the ~~Board of Directors and shall vest in equal annual installments over a period of three years.~~

~~During the first six months of 2022, the Company also granted 724,726 performance-based restricted stock units to its employees under the 2022 LTI program~~current financial situation and the ~~2015 Plan at a grant date fair value of $1.99 per share. The 2022 performance-based restricted stock units have~~ ~~three~~ ~~annual performance periods (fiscal years 2022, 2023 and 2024),~~uncertainties associated with ~~operating income and free cash flow goals (equally weighted) for each year, and threshold performance resulting in awards earned at 50% of~~ the target opportunity and maximum performance resulting in awards earned at 200% of the target. The annual achievement levels are accumulated over the three-year performance period and the earned amounts, if any, will vest on March 31, 2025. The three-year average payout level for each performance objective replaces the actual payout level for any fiscal year where the actual payout is less than the three-year average. These performance-based restricted stock units can be paid in cash or shares at the election of the Compensation Committee of the Board of Directors.

During the first six months of 2021, the Company granted 307,616 service-based restricted stock units under the 2021 LTI program and the 2015 Plan at a grant date fair value of $3.48 per share. These service-based restricted stock units can be paid in cash or shares at the election of the Compensation Committee of the Board of Directors and shall vest in full on March 31, 2024.

Additionally on June 15, 2021, the Company granted an employee 41,666 service-based restricted stock units under the 2015 Plan at a grant date fair value of $6.27 per share. The service-based restricted stock units vested with respect to 25,000 shares of common stock on the date of grant (June 15, 2021), while 8,333 vested on March 31, 2022 and the remaining 8,333 will vest on March 31, 2023. These awards may be paid in cash or shares at the election of the Compensation Committee of the Board of Directors.

During the first six months of 2021, the Company also granted performance-based restricted stock units under the 2021 LTI program and the 2015 Plan with an aggregate cash value of approximately $2.2 million, which could be paid in cash or shares at the election of the Compensation Committee of the Board of Directors. The 2021 performance-based restricted stock units have ~~three~~ annual performance periods (fiscal years 2021, 2022 and 2023), with operating income and free cash flow goals (equally weighted) for each year, and threshold performance resulting in awards earned at 50% of the target opportunity and maximum performance resulting in awards earned at 200% of the target. The annual achievement levels are accumulated over the three-year performance period and the earned amounts, if any, vest on March 31, 2024. The three-year average payout level for each performance objective replaces the actual payout level for any fiscal year where the actual payout is less than the three-year average. These are cash-based awards that were included in other current liabilities on the consolidated balance sheet beginning in April 2021.

~~Table of Contents~~

Additionally on May 17, 2021, the Company granted an employee 37,500 performance-based restricted stock units as an inducement award outside of the 2015 Plan at a grant date fair value of $5.00 per share. The performance-based restricted stock units, if any, vest on March 31, 2024. The performance-based awards have three annual performance periods (fiscal years 2021, 2022 and 2023), with operating income and free cash flow goals (equally weighted) for each year, and threshold performance resulting in awards earned at 50% of the target opportunity and maximum performance resulting in awards earned at 200% of the target. These awards may be paid in cash or shares at the election of the Compensation Committee of the Board of Directors.

The Company previously granted (i) performance-based restricted stock units under the 2016 LTI program, which were scheduled to vest if the Company achieved a per share stock price of $5.50 for 30 consecutive trading days prior to August 5, 2021, (ii) performance-based restricted stock units under the 2017 LTI program, which were scheduled to vest if the Company achieved a per share stock price of $6.00 for 30 consecutive trading days prior to March 31, 2021 (pursuant to an extension from the initial vesting date of March 31, 2020, which extension was approved by the Compensation Committee in February 2020), and (iii) performance-based restricted stock units under the 2018 LTI program, which were scheduled to vest if the Company achieved a per share stock price of at least $5.00 for any period of 30 consecutive trading days prior to June 30, 2021 (collectively, the “LTI Performance Awards”). On March 5, 2021, the Compensation Committee of the Board of Directors extended the performance period for each of the LTI Performance Awards to December 31, 2022. In accordance with ASC Topic 718, “Compensation—Stock Compensation” (“ASC 718”), the Company conducted a lattice valuation model in order to revalue the market price for the LTI Performance Awards at the March 5, 2021 modification date. The 2018 LTI program met the market objective by achieving a per share stock price of $5.00 for 30 consecutive days, and approximately 195,240 shares will vest for recipients remaining employed through December 31, 2022.

During the first six months of 2021, the Compensation Committee of the Board of Directors approved modifying the 2020 and 2019 performance-based restricted stock units granted in 2020 and 2019. The 2020 and 2019 performance-based restricted stock units did not achieve the 2021 performance objectives. The 2019 performance-based restricted stock units expired because their final performance period was 2021.

During the first six months of 2021, the Company’s management analyzed the probability of achieving the 2022 performance objectives for the 2021 and 2020 performance-based restricted stock units granted in 2021 and 2020 and determined that, after comparing the actual year-to-date results to the forecasted results,restructuring process, it is ~~unlikely~~apparent that the Company will ~~achieve~~not meet the ~~minimum~~ performance ~~metric for~~objectives required to award the ~~2022 performance period. This resulted in~~cash-based compensation.

As a ~~$0.3 million adjustment for~~result of these developments, the ~~2021 performance-based restricted~~Company deemed it appropriate to reverse the stock ~~units and an entire reversal of $0.5 million for~~compensation expense, as the ~~2020 performance-based restricted stock units within the first three months of 2022. The 2020 performance-based restricted stock units will expire after the 2022 performance period~~awards are no longer expected to be settled, and the ~~2021 performance-based restricted~~associated liability is no longer probable of being paid. These actions are consistent with the Company's ongoing efforts to manage its financial position and align its compensation plans with the current operating conditions during the Chapter 11 proceedings.

The stock ~~units were adjusted~~compensation reversal does not impact any obligations or liabilities related to ~~vest at 55% of their original cash value and will be expensed for a total of $0.9 million until~~ the ~~end~~Purchase Agreement with EnergySolutions or other aspects of the ~~service requisite period of March 31, 2024.~~

While the majority of restricted stock units and awards were granted as equity, in accordance with ASC 718, the Company has 1 cash-based plan that is classified as a liability. Stock-based compensation expense for the three months ended June 30, 2022 and 2021was $0.6 million and $0.7 million, respectively, and for the six months ended June 30, 2022 and 2021 was $0.6 million and $1.5 million, respectively, and was included in general and administrative expenses on the Company’s unaudited condensed consolidated statements of operations.

~~NOTE 12—OTHER SUPPLEMENTARY INFORMATION~~

~~The following table summarizes other current assets included on the Company's unaudited condensed consolidated balance sheets:~~

(in thousands)

June 30, 2022

December 31, 2021
Sales tax receivable - Canada

$
5,217

$
4,866
Security deposits - real estate

1,978

1,978
Prepaid expenses

1,826

1,136
Unamortized commercial insurance premiums

1,266

2,389
Other current assets

525

680
Total

$
10,812

$
11,049

Chapter 11 proceedings.

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NOTE 14—OTHER SUPPLEMENTARY INFORMATION

The following table summarizes other current assets included on the Company's unaudited condensed consolidated balance sheets:


(in thousands)	June 30, 2023		December 31, 2022
Unamortized commercial insurance premiums		1,328		2,611
Prepaid expenses		1,018		1,511
Security deposits - real estate		1,008		1,978
Other current assets		426		158
Total	$	3,780	$	6,258

The following table summarizes other current liabilities included on the Company's unaudited condensed consolidated balance sheets:

(in thousands)

June 30, 2022

December 31, 2021
Sales tax payable - Canada

$
5,215

$
5,135
Short-term lease liability

1,467

1,606
Accrued job cost

1,250

2,433
Legal fees

423

113
Stock Compensation

369

938
Other current liabilities

1,502

792
Total

$
10,226

$
11,017


(in thousands)	June 30, 2023		December 31, 2022
Short-term lease liabilities	$	1,301	$	1,603
Accrued workers compensation		815		267
Accrued job costs		680		2,136
Accrued legal and professional fees		180		145
Other accrued liabilities		1,227		1,559
Total	$	4,203	$	5,710

The following table summarizes other long-term assets included on the Company's unaudited condensed consolidated balance sheets:


(in thousands)	June 30, 2022		December 31, 2021		June 30, 2023		December 31, 2022
Equity method investment in RCC					$	2,017	$	1,868
Right-of-use lease assets	$	3,379	$	1,527		3,485		4,223
Equity method investment in RCC		1,863		2,521
Unamortized Debt Issuance Cost		1,319		1,509		938		1,128
Unamortized software subscriptions						—		757
Other long-term assets		1,079		155		308		299
Total	$	7,640	$	5,712	$	6,748	$	8,275

The following table summarizes other long-term liabilities included on the Company's unaudited condensed consolidated balance sheets:


(in thousands)	June 30, 2022		December 31, 2021		June 30, 2023		December 31, 2022
Long-term lease liability	$	2,379	$	511
Long-term lease liabilities					$	2,818	$	3,010
Liability for uncertain tax positions		1,087		1,136		353		1,115
Other long-term liabilities		977		-		30		800
Total	$	4,443	$	1,647	$	3,201	$	4,925

NOTE ~~13—~~15—SUBSEQUENT EVENTS

~~In August 2022,~~Exiting the ~~Company entered into the Term Loan Amendment~~Water Projects in Florida and ~~the Revolving Credit Amendment, which revised certain terms in the Company’s Term Loan Agreement and Revolving Credit Agreement.~~Texas

On ~~August 3, 2022,~~July 20, 2023, the Company ~~entered into~~decided to exit the ~~Revolving Credit Amendment, which, among other things, (i) amended the calculation of EBITDA (as defined~~water projects business in Florida and Texas resulting in the ~~Revolving Credit Agreement), effective as~~discontinuation of substantially all of WIS’s business and operations in the water projects division. The exit led to financial adjustments, reducing the Company’s contract liability by $3.5 million and revenue by $0.6 million for the three-month and six-month periods ended June 30, ~~2022, to include (or “add back”) certain non-recurring losses~~2023. The Company continues work of non-union pulp and ~~expenses relating to projects executed in Jacksonville, Florida, one-time costs~~paper mill maintenance and ~~expenses incurred in connection~~repair activities under WIS. On July 25, 2023, the Company filed motions with the ~~Company’s transmission~~Court to reject the customer contracts associated with the water projects, and ~~distribution business unit start-up, and costs and expenses arising out of~~ the ~~Company’s litigation with~~Court will consider these motions at a ~~designated former executive and his employer (in each case, subject~~hearing to certain specified dollar limits), (ii) permitted advances against certain eligible receivables of one of the Company’s joint ventures (also subject to specified dollar limits), (iii) included provisions that replace the London Interbank Offered Rate (LIBOR) interest rate with customary provisions basedbe held on ~~the secured overnight financing rate (SOFR), and (iv) provided for the payment of a $25,000 amendment fee, plus applicable fees and expenses. The $25,000 amendment fee will be expensed as incurred.~~August 17, 2023.

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Chapter 11 Filing

On ~~August 3, 2022~~July 22, 2023, the Debtors filed the Bankruptcy Petitions under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. The Debtors will continue to operate their businesses as "debtors-in-possession" under the jurisdiction of the Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Court. On July 25, 2023, the Bankruptcy Court issued orders approving the “first day” relief motions on an interim basis (the ~~Signing Date)~~“Interim DIP Order”), ~~effective as of June 30, 2022,~~authorizing the Company ~~entered into an Amendment~~ to, ~~the Term Loan Agreement (the “Term Loan Amendment”) that,~~ among other things, ~~(i) amended~~enter into the DIP Credit Facilities and ~~increased the Total Leverage Ratio (as defined~~pay employee wages and benefits. The Debtors will continue their operations in the ~~Term Loan Agreement) applicable~~ordinary course of business as debtors-in-possession and pursue a structured sale of the Transferred Assets pursuant to a competitive bidding and auction process under Section 363. The Debtors are seeking the sale of the Transferred Assets through the Purchase Agreement and will seek Court approval of such sale.

Purchase Agreement

On July 22, 2023, prior to the filing of the Bankruptcy Petitions, the Company and its subsidiaries entered into a "stalking horse" Purchase Agreement with EnergySolutions. The Purchase Agreement provides for the sale of substantially all of the Sellers' assets relating to the Business to EnergySolutions for an amount in cash equal to $60.0 million, less certain ~~periods, (ii) amended the calculation of Consolidated EBITDA (as defined~~deductions and adjustments as specified in the ~~Term Loan Agreement) to include (or “add back”) certain non-recurring losses~~Purchase Agreement. EnergySolutions will not purchase the water and ~~expenses relating to projects executed in Jacksonville, Florida, one-time costs~~wastewater business, the non-unionized pulp and ~~expenses incurred in connection with~~paper business not included as part of the ~~Company’s~~Business and its transmission and distribution business ~~unit start-up,~~associated with WIS. The Purchase Agreement is subject to Court approval and ~~costs~~compliance with agreed-upon bidding procedures under Section 363 of the Bankruptcy Code. Following the anticipated completion of the Purchase Agreement, the remainder of the Company is currently expected to undergo liquidation under Chapter 11 plan or conversion to Chapter 7 of the Bankruptcy Code. The Company cannot provide any assurance that it will be able to successfully complete a sale of the Business or that it will be able to continue to fund its operations throughout the Chapter 11 process. For additional information regarding the Purchase Agreement, see “Note 2—Liquidity” to the unaudited condensed consolidated financial statements included in this Form 10-Q.

Debtor-in-Possession Financing

In connection with filing the Bankruptcy Petitions and ~~expenses arising out~~the entry by the Court of the Interim DIP Order authorizing and approving the DIP Credit Facilities on July 25, 2023, the Debtors entered into the DIP Credit Facilities, which are described in “Note 9—Debt” of these unaudited condensed consolidated financial statements.

Notice of Delisting

On July 24, 2023, the Company received written notice from the staff of NYSE Regulation that, as a result of the Cases and in accordance with Section 1003(c)(iii) of the NYSE American Company Guide, NYSE Regulation had determined to commence proceedings to delist the common stock of the Company. Trading of the Company’s ~~litigation with a designated former executive~~common stock on the NYSE American was suspended on July 24, 2023, and ~~his employer (in each case, subject to certain specified dollar limits), (iii) provided for a fee of 1% of~~ the ~~then-outstanding principal balance due upon maturity of~~delisting became effective August 11, 2023, 10 days after the ~~term loan without duplication of fees paid in connection~~NYSE American filed the Form 25 with the Company’s prepayment fee structure, (iv) extended the Company’s existing prepayment fee structure to require upon repayment (a) prior to the first anniversary of the Signing Date, a fee of 3% of the principal amount being repaid, (b) on or after the first anniversary of the Signing Date and prior to the second anniversary of the Signing Date, a fee of 2% of the principal amount being repaid, and (c) on or after the second anniversary of the Signing Date, a fee of 1% of the principal amount being repaid, and (v) provided for the payment of a $0.2 million amendment fee, plus applicable fees and expenses.SEC. The Company’s ~~expense related to~~common stock is currently quoted on the ~~Term Loan Amendment was $0.2 million and will be recognized as interest expense over~~OTC Pink Market operated by the ~~remaining term of~~by OTC Markets Group Inc. under the ~~modified Term Loan Agreement.~~symbol “WLMSQ.”

Appointment of Chief Restructuring Officer

Effective on July 27, 2023, the Company appointed Edward Gavin to serve as the Chief Restructuring Officer ("CRO") of the Company for such a term and in accordance with the terms and conditions of that certain engagement letter, dated as of July 20, 2023, by and among the Company and Gavin/Solmonese LLC (the "Engagement Letter"). As further set forth in the Engagement Letter, Mr. Gavin's authority as CRO includes, in coordination with the Company's advisors and management, (i) overseeing the administration of the Cases for the Company in Delaware, (ii) representing the Company in Court proceedings as to financial matters that may come before the Court, (iii) monitoring the debtor-in-possession budget and approving all payments, and (iv) managing creditor committees and negotiating as necessary. The appointment of a CRO by the Company was a condition of obtaining the DIP Credit Facilities.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Cautionary Statement Regarding Forward-Looking Statements

This Form 10-Q and its exhibits contain or incorporate by reference various forward-looking statements that express a belief, expectation or intention or are otherwise not statements of historical fact. Forward-looking statements generally use forward-looking words, such as “may,” “will,” “could,” “should,” “would,” “project,” “believe,” “anticipate,” “expect,” “estimate,” “continue,” “potential,” “plan,” “forecast” and other words that convey the uncertainty of future events or outcomes. These forward-looking statements are not guarantees of our future performance and involve risks, uncertainties, estimates and assumptions that are difficult to predict. Therefore, our actual outcomes and results may differ materially from those expressed in these forward-looking statements. Investors should not place undue reliance on any of these forward-looking ~~statements.~~statements, particularly given the potential impact of the Company's voluntary petitions under Chapter 11 of the United States Bankruptcy Code and the subsequent events that have occurred. Except as required by law, we undertake no obligation to further update any such statements, or the risk factors described in this Form 10-Q and in our ~~2021~~2022 Report under the heading ~~“Part~~"Part I—Item 1A. Risk Factors,”" to reflect new information, the occurrence of future events or circumstances, or otherwise. The forward-looking statements in this Form 10-Q do not constitute guarantees or promises of future ~~performance.~~performance, particularly in light of the uncertainties and risks arising from the ongoing Chapter 11 proceedings and related events. Forward-looking statements may include information concerning the following, among other items:

●

our ability to make interest and principal payments on our debt and satisfy the amended financial and other covenants contained in our debt facilities, as well as our ability to engage in certain transactions and activities due to limitations and covenants contained in such facilities;

●

our ability to generate sufficient cash resources to continue funding operations, including investments in working capital required to support growth-related commitments that we make to our customers, and the possibility that we may be unable to obtain any additional funding as needed or incur losses from operations in the future;

●

~~exposure to market risks from changes in interest rates, including changes to or replacement of the LIBOR;~~

●

~~our ability to obtain adequate surety bonding and letters of credit;~~

●

~~our ability to maintain effective internal control over financial reporting and disclosure controls and procedures;~~

●

~~our ability to attract and retain qualified personnel, skilled workers, and key officers;~~

●

failure to successfully implement or realize our business strategies, plans and objectives of management, and liquidity, operating and growth initiatives and opportunities, including any expansion into new markets and our ability to identify potential candidates for, and consummate, acquisition, disposition, or investment transactions;

●

~~the loss of one or more of our significant customers;~~

●

~~our competitive position;~~

●

market outlook and trends in our industry, including the possibility of reduced investment in, or increased regulation of, nuclear power plants and declines in public infrastructure construction and reductions in government funding, including funding by state and local agencies;

●

~~costs exceeding estimates we use to set fixed-price contracts;~~

●

~~harm to our reputation or profitability due to, among other things, internal operational issues, poor subcontractor performances or subcontractor insolvency;~~

●

~~potential insolvency or financial distress of third parties, including our customers and suppliers;~~

●

~~our contract backlog and related amounts to be recognized as revenue;~~

●

~~our ability to maintain our safety record, the risks of potential liability and adequacy of insurance;~~

~~Table~~ expectations regarding risks attendant to the Chapter 11 bankruptcy process, including the Company’s ability to obtain approval from the Court with respect to motions or other requests made to the Court throughout the course of ~~Contents~~the Chapter 11 process, including with respect to the asset sale and DIP Credit Agreements; the Company’s plans to sell certain assets pursuant to Chapter 11 of the Bankruptcy Code, the outcome and timing of such sale, and the Company’s ability to satisfy closing and other conditions to such sale; the effects of Chapter 11, including increased legal and other professional costs necessary to execute the Company’s wind down, on the Company’s liquidity and results of operations; the length of time that the Company will operate under Chapter 11 protection and the continued availability of operating capital during the pendency of Chapter 11; the Company’s ability to continue funding operations through the Chapter 11 bankruptcy process, and the possibility that it may be unable to obtain any additional funding as needed; the Company’s ability to meet its financial obligations during the Chapter 11 process and to maintain contracts that are critical to its operations; the Company’s ability to comply with the restrictions imposed by the terms and conditions of the DIP Credit Agreements and other financing arrangements; objections to the Company’s wind down process, the DIP Credit Agreements, or other pleadings filed that could protract the Chapter 11 process; the effects of Chapter 11 on the interests of various constituents and financial stakeholders; the effect of the Chapter 11 filings and any potential asset sale on the Company’s relationships with vendors, regulatory authorities, employees and other third parties; risks relating to the trading price and volatility of the Company’s common stock and the effects of the delisting from NYSE American; possible proceedings that may be brought by third parties in connection with the Chapter 11 process or the potential asset sale and risks associated with third-party motions in Chapter 11; the timing or amount of any distributions, if any, to the Company’s stakeholders; employee attrition and the Company’s ability to retain senior management and other key personnel due to the distractions and uncertainties; the impact and timing of any cost-savings measures and related local law requirements in various jurisdictions; the impact of litigation and regulatory proceedings; the Company’s ability to continue as a going concern; and expectations regarding financial performance, strategic and operational plans, and other related matters.

●

adverse changes in our relationships with suppliers, vendors, and subcontractors, including increases in cost, disruption of supply or shortage of labor, freight, equipment or supplies, including as a result of the COVID-19 pandemic;

●

~~compliance with environmental, health, safety and other related laws and regulations, including those related to climate change;~~

●

~~limitations or modifications to indemnification regulations of the U.S.;~~

●

~~our expected financial condition, future cash flows, results of operations and future capital and other expenditures;~~

●

the impact of unstable market and economic conditions on our business, financial condition and stock price, including inflationary cost pressures, supply chain disruptions and constraints, labor shortages, the effects of the Ukraine-Russia conflict and ongoing impact of COVID-19, and a possible recession;

●

~~our ability to meet publicly announced guidance or other expectations about our business, key metrics and future operating results;~~

●

the impact of the COVID-19 pandemic on our business, results of operations, financial condition, and cash flows, including global supply chain disruptions and the potential for additional COVID-19 cases to occur at our active or future job sites, which potentially could impact cost and labor availability;

●

~~information technology vulnerabilities and cyberattacks on our networks;~~

●

~~our failure to comply with applicable laws and regulations, including, but not limited to, those relating to privacy and anti-bribery;~~

●

~~our ability to successfully implement our new enterprise resource planning (ERP) system;~~

●

~~our participation in multiemployer pension plans;~~

●

~~the impact of any disruptions resulting from the expiration of collective bargaining agreements;~~

●

~~the impact of natural disasters, which may worsen or increase due to the effects of climate change, and other severe catastrophic events;~~

●

~~the impact of corporate citizenship and environmental, social and governance matters;~~

●

~~the impact of changes in tax regulations and laws, including future income tax payments and utilization of net operating loss and foreign tax credit carryforwards;~~

●

~~volatility of the market price for our common stock;~~

●

~~our ability to maintain our stock exchange listing;~~

●

~~the effects of anti-takeover provisions in our organizational documents and Delaware law;~~

●

~~the impact of future offerings or sales of our common stock on the market price of such stock;~~

●

~~expected outcomes of legal or regulatory proceedings (whether claims made by or against us) and their anticipated effects on our results of operations; and~~

●

~~any other statements regarding future growth, future cash needs, future operations, business plans and future financial results.~~

These forward-looking statements represent our intentions, plans, expectations, assumptions, and beliefs about future events and are subject to risks, uncertainties, and other factors, including unpredictable or unanticipated factors that we have not discussed in this Form 10-Q. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by the forward-looking ~~statements.~~statements, particularly in light of the Chapter 11 Cases. Additionally, the Cases may result in holders of the Company’s securities receiving no value for their interests. Because of such a possibility, the value of these securities is highly speculative and poses substantial risks. Trading prices for the Company’s securities may bear little or no relationship to the actual recovery, if any, by holders of the Company’s securities in the Cases. The Company expects that holders of shares of the Company’s common stock could experience a significant or complete loss on their investment, depending on the outcome of the Cases. Accordingly, the Company urges extreme caution with respect to existing and future investments in its securities.

In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. Investors should consider the areas of risk and uncertainty described above, as well as those discussed in the ~~2021~~2022 Report under the heading “Part I—Item 1A. Risk Factors.” The uncertainties surrounding the Company's financial condition and operations, the effects of the delisting from NYSE American, and the ongoing Chapter 11 proceedings should be given particular attention by investors. Except as may be required by applicable law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, and we caution investors not to rely upon them unduly.

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The following discussion provides an analysis of the results of continuing operations, an overview of our liquidity and capital resources and other items related to our business. Unless otherwise specified, the financial information and discussion in this Form 10-Q are as of and for the three and six months ended June 30, ~~2022~~2023 and are based on our continuing operations; they exclude any results of our discontinued operations. Please refer to “Note 4—5—Changes in Business” to the unaudited condensed consolidated financial statements included in this Form 10-Q for additional information on our discontinued operations.

This discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements and notes thereto included in this Form 10-Q and our audited consolidated financial statements and notes thereto included in the ~~2021~~2022 Report.

Recent Developments

Bankruptcy Proceedings and Going Concern

On July 22, 2023, the Company and its subsidiaries filed the Bankruptcy Petitions under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. The Cases are being jointly administered under the caption In re Williams Industrial Services Group Inc., et al. The Debtors will continue to operate their businesses as “debtors-in-possession” under the jurisdiction of the Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Court. On July 25, 2023, the Bankruptcy Court issued orders approving the “first day” relief motions on an interim basis, authorizing the Company to, among other things, enter into the DIP Credit Facilities and pay employee wages and benefits. The Debtors will continue their operations in the ordinary course of business as debtors-in-possession. It is anticipated that substantially all of the business and operations of WIS, the entity carrying on the Company’s water projects, will be discontinued as a result of the Cases. There has been no order confirming a plan of reorganization, arrangement, or liquidation of the Debtors’ assets in the Cases, and the Debtors are seeking the sale of the Transferred Assets through the Purchase Agreement and will seek Court approval of such sale.

The bankruptcy filing and financial challenges raise substantial doubt about the Company’s ability to continue as a going concern for the twelve-month period following the issuance of this Form 10-Q.

Purchase Agreement

On July 22, 2023, prior to the filing of the Bankruptcy Petitions, the Company and certain of its subsidiaries entered into the “stalking horse” Purchase Agreement with EnergySolutions, pursuant to which, among other things, the Sellers will sell substantially all of their assets relating to (i) the business of providing a broad range of construction and maintenance services to customers in the nuclear, conventional power (fossil, hydro, natural gas), energy delivery, water and wastewater, pulp and paper, chemical and government industries, (ii) solely to the extent conducted pursuant to certain contracts of WIS, certain non-unionized pulp and paper operations, and (iii) the business as conducted by WPS and WSS. WIS will retain its water and wastewater business, the non-unionized pulp and paper business not included as part of the Business and its transmission and distribution business, and the Sellers will retain any other business of the Sellers not set forth in clauses (i)-(iii) above. The Purchase Agreement provides that the aggregate consideration to be paid by EnergySolutions for the sale of all of the Transferred Assets and the obligations of the Sellers as set forth in the Purchase Agreement shall be an amount in cash equal to the sum of $60.0 million, less (i) any deductions on account of certain cure costs that may be required to be paid pursuant to the Bankruptcy Code in order to cure monetary defaults under certain contracts assumed and assigned to EnergySolutions and (ii) the aggregate amount of all overdue payables as of 11:59 p.m. E.T. on the day that is six business days prior to the closing date, subject to certain limitations. As additional consideration for the Transferred Assets, EnergySolutions will assume certain liabilities of the Sellers relating to the Business at the closing.

The transactions are part of a sale process under Section 363 of the Bankruptcy Code that will be subject to approval by the Court and compliance with agreed upon and Court-approved bidding procedures allowing for the submission of higher or otherwise better offers and satisfaction of other agreed-upon conditions. In accordance with the sale process under Section 363 of the Bankruptcy Code, notice of the proposed sale to EnergySolutions was given to third parties and competing bids are being solicited. The Company will manage the bidding process and evaluate the bids, in consultation with its advisors and as overseen by the Court.

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The Purchase Agreement contains customary representations and warranties of the parties and is subject to a number of conditions to closing and termination provisions, including that either party can terminate the Purchase Agreement if the closing has not occurred by the date that is 57 days following the date of filing the Bankruptcy Petitions, unless such date is extended by (i) the Sellers with the written consent of the applicable DIP Revolving Lenders and the DIP Term Loan Lenders for an additional period not to exceed 120 days from the date of the Purchase Agreement or (ii) EnergySolutions and the Sellers to such other subsequent date as may be mutually agreed by EnergySolutions and the Company in writing. The Purchase Agreement also provides that the Company will pay a break-up fee to EnergySolutions equal to $2.4 million upon termination of the transaction in certain circumstances and for the reimbursement of EnergySolutions’ expenses incurred in connection with the Purchase Agreement up to an aggregate amount of $1.0 million in the event of termination of the Purchase Agreement in certain circumstances.

Debtor-in-Possession Financing

In connection with filing the Bankruptcy Petitions and the entry by the Court of the Interim DIP Order on July 25, 2023, the Debtors entered into the DIP Credit Agreements. The DIP Revolving Credit Agreement allows the Debtors to access up to the lesser of the Borrowing Base (as defined in the DIP Revolving Credit Agreement) or $12.0 million, less the amount of all Prepetition Revolving Credit Obligations. The DIP Term Loan Agreement provides the Debtors with a secured superpriority debtor-in-possession term loan facility not to exceed $19.5 million, with an immediate availability of $14.0 million upon the entry of the Interim DIP Order and the balance of which will be available after entry of the final order by the Court, which has not been obtained at this time. Borrowings under the DIP Credit Facilities are senior secured obligations of the Debtors, secured by superpriority liens on the assets of the Debtors, subject to customary exceptions. The DIP Credit Agreements contain various customary covenants, as well as covenants mandating compliance by the Debtors with a 13-week budget, variance testing, and reporting requirements. The proceeds from the DIP Credit Facilities may be used for, among other things, post-petition working capital, expenses related to the bankruptcy proceedings, payment of court-approved adequate protection obligations, and other court-approved purposes. In addition, the filing of the Bankruptcy Petitions constituted an event of default that accelerated the Company’s and the other Debtors’ obligations under its then-outstanding debt, including the Revolving Credit Facility, the Term Loan, and the Wynnefield Notes. These debt instruments provide that, as a result of the Bankruptcy Petitions, the principal, interest and any prepayment premiums due thereunder shall immediately become due and payable. Any efforts to enforce payment obligations under these debt instruments are automatically stayed as a result of the Bankruptcy Petitions, and the creditors’ rights of enforcement in respect of the debt are subject to the applicable provisions of the Bankruptcy Code.

Delisting from NYSE American

Chief Restructuring Officer

Effective on July 27, 2023, the Company appointed Edward Gavin to serve as the Chief Restructuring Officer (“CRO”) of the Company for such a term and in accordance with the terms and conditions of that certain engagement letter, dated as of July 20, 2023 by and among and the Company and Gavin/Solmonese LLC (the “Engagement Letter”). As further set forth in the Engagement Letter, Mr. Gavin’s authority as CRO includes, in coordination with the Company’s advisors and management, (i) overseeing the administration of the Cases for the Company in Delaware, (ii) representing the Company in Court proceedings as to financial matters that may come before the Court, (iii) monitoring the debtor-in-possession budget and approving all payments, and (iv) managing creditor committees and negotiating as necessary. The appointment of a CRO by the Company was a condition of obtaining the DIP Credit Facilities.

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Backlog

The services we provide are typically carried out under construction contracts, long-term maintenance contracts and master service agreements. Total backlog represents the dollar amount of revenue expected to be recorded in the future for work performed under awarded contracts.

Revenue estimates included in our backlog can be subject to change as a result of project accelerations, cancellations or delays due to various factors, including, but not limited to, the customer’s budgetary constraints and adverse weather. These factors can also cause revenue amounts to be recognized in different periods and at levels other than those originally projected. Additional work that is not identified under the original contract is added to our estimated backlog when we reach an agreement with the customer as to the scope and pricing of that additional work. Backlog is reduced as work is performed and revenue is recognized, or upon cancellation.

Backlog is not a measure defined by GAAP, and our methodology for determining backlog may vary from the methodology used by other companies in determining their backlog amounts. Backlog may not be indicative of future operating results and projects in our backlog may be cancelled, modified, or otherwise altered by our customers. We utilize our calculation of backlog to assist in measuring aggregate awards under existing contractual relationships with our customers. We believe our backlog disclosures will assist investors in better understanding this estimate of the services to be performed pursuant to awards by our customers under existing contractual relationships.

The following tables summarize our backlog:


(in thousands)	June 30, 2022		December 31, 2021		June 30, 2023		December 31, 2022
Cost plus	$	185,325	$	559,417	$	186,158	$	291,894
Lump sum		48,978		72,276		7,487		41,309
Total	$	234,303	$	631,693	$	193,645	$	333,203


(in thousands)	Three Months Ended June 30, 2022		Six Months Ended June 30, 2022		Three Months Ended June 30, 2023		Six Months Ended June 30, 2023
Backlog - beginning of period	$	256,956	$	631,693	$	234,927	$	333,203
New awards		17,227		55,520		11,053		27,126
Adjustments and cancellations, net		16,179		(327,292)		31,008		20,129
Revenue recognized		(56,059)		(125,618)		(83,343)		(186,813)
Backlog - end of period	$	234,303	$	234,303	$	193,645	$	193,645

Total backlog as of June 30, ~~2022~~2023 was ~~$234.3~~$193.6 million, compared with ~~$631.7~~$333.2 million on December 31, ~~2021,~~2022, a decrease of ~~$397.4~~$139.6 million ~~which was primarily~~ driven by converting several large nuclear projects from backlog to revenue and exiting the ~~loss~~transmission and distribution, chemical and water end-markets. At the same time, current backlog also reflects the fact that the Company is pursuing a narrower set of ~~a multi-year contract within~~core markets for new business and that the ~~nuclear decommissioning market in February 2022, contributing to a loss~~release of ~~approximately $374.6 million in backlog for~~public funding under the ~~years 2022 through 2029.~~ Inflation Reduction Act and Infrastructure Investment and Jobs Acts into those markets is moving slower than originally anticipated.

We estimate that ~~$144.6~~$68.3 million, or ~~61.7%~~35.3% of total backlog on June 30, ~~2022,~~2023, will be converted to revenue within the next twelve months and ~~$98.1~~$44.6 million, or ~~41.9%~~23.1% of total backlog, will be converted to revenue within the remainder of the fiscal year. As of December 31, ~~2021,~~2022, we estimated that approximately ~~$157.2~~$178.6 million of our year-end backlog ~~as adjusted for the loss of the multi-year contract in February 2022,~~ would be converted to revenue during ~~2022.~~2023. Please refer to “Part I—Item ~~1, Business~~1. Business” under “Backlog” ~~and “Note 17—Subsequent Events”~~ included in the ~~2021~~2022 Report for additional information.

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Results of Operations

The following summary and discussion of our results of operations is based on our continuing operations and excludes any results of our discontinued operations:


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2022		2021		2022		2021		2023		2022		2023		2022
Revenue	$	56,059	$	91,571	$	125,618	$	152,422	$	83,343	$	56,059	$	186,813	$	125,618
Cost of revenue		53,778		82,218		117,628		136,971		87,293		53,778		183,072		117,628
Gross profit		2,281		9,353		7,990		15,451
Gross profit (loss)										(3,950)		2,281		3,741		7,990

Selling and marketing expenses		402		231		732		442		182		402		318		732
General and administrative expenses		6,294		6,372		12,365		12,683		5,976		6,294		11,905		12,365
Depreciation and amortization expense		46		46		112		87		43		46		98		112
Total operating expenses		6,742		6,649		13,209		13,212		6,201		6,742		12,321		13,209

Operating income (loss)		(4,461)		2,704		(5,219)		2,239
Operating loss										(10,151)		(4,461)		(8,580)		(5,219)

Interest expense, net		1,261		1,213		2,480		2,506		1,971		1,261		3,764		2,480
Goodwill and intangible impairment expense										47,900		—		47,900		—
Other income, net		(240)		(1,232)		(419)		(1,592)		(86)		(240)		(147)		(419)
Income (loss) from continuing operations before income tax		(5,482)		2,723		(7,280)		1,325
Loss from continuing operations before income tax										(59,936)		(5,482)		(60,097)		(7,280)
Income tax expense (benefit)		(171)		77		58		262		(3,162)		(171)		(3,177)		58
Income (loss) from continuing operations	$	(5,311)	$	2,646	$	(7,338)	$	1,063
Loss from continuing operations									$	(56,774)	$	(5,311)	$	(56,920)	$	(7,338)

Revenue for the three months ended June 30, ~~2022 decreased $35.5~~2023 increased $27.3 million, or ~~38.8%~~48.6%, compared with the corresponding period in ~~2021.~~2022. This ~~decrease~~ was primarily driven by $37.2 million related to a ~~reduction in the United States~~ nuclear market of $20.1 million which was largely driven by the timing of a nuclear outage that occurs every other year that contributed to $17.6 million in revenue during the corresponding period in 2021. Additionally, the Company lost nuclear decommissioning projects, resulting in an $11.5 million reduction in revenue and exited the Canadian nuclear market, resulting in a $9.9 million reduction in revenue. These declines wereproject, partially offset by ~~increased volume in~~a $9.6 million reduction due to exiting the ~~Company’s~~net loss projects related to the energy delivery, water and ~~transmission and distribution businesses of $4.0 million and $1.6 million, respectively.~~chemical businesses.

Revenue for the six months ended June 30, ~~2022 decreased $26.8~~2023 increased $61.2 million, or ~~17.6%~~48.7%, compared with the corresponding period in ~~2021.~~2022. This ~~decrease~~ was primarily ~~due~~driven by a $78.0 million increase related to ~~the timing of~~ a nuclear ~~outage that occurs every other year which accounted for~~project and a ~~$19.4~~$2.1 million ~~reduction~~increase in ~~revenue. The nuclear outage contributed to approximately $3.1 million of revenue during~~ the six months ended June 30, 2022 compared to $22.5 million during the corresponding period in 2021. Additionally, compared to the same period in 2021, the Company lost certain nuclear decommissioning projects in early 2022, resulting in a $15.6 million reduction in revenue, and exited the Canadian nuclear market, resulting in a $14.0 million reduction in revenue.chemical market. These ~~declines~~gains were partially offset by a ~~$6.9~~$5.9 million ~~year-over-year increase with several key customers~~decrease in ~~our~~the water end market, $5.5 million decrease resulting from exiting the Canadian nuclear market, and a ~~$2.7~~$4.8 million ~~increase~~reduction in ~~our chemical services market, increased~~ volume in the Company’s ~~water business of $10.9 million, and growth in the transmission and distribution businesses of $2.5 million.~~decommissioning market.

Gross profit for the three months ended June 30, ~~2022~~2023, decreased by ~~$7.1~~$6.2 million ~~or 75.6%,~~ compared with the corresponding period in ~~2021, while gross margin declined~~2022. This was primarily driven by our net loss projects related to ~~4.1% from 10.2%. The decrease in gross profit reflects start-up costs relating to our entry into~~ the ~~transmission~~energy delivery, water, and ~~distribution markets and the impact of additional losses on certain lump sum projects in our Florida water~~chemical end markets. We anticipate that these projects will continue to generate revenues with no associated profits until completion within the fourth quarter of 2022. Excluding the impact relating to start-up costs in the transmission and distribution markets and the lump sum projects in the water market for which losses were incurred, the Company would have realized a gross margin of 10.0% rather than 4.1%.

Gross profit for the six months ended June 30, ~~2022~~2023, decreased by ~~$7.5~~$4.2 million ~~or 48.3%,~~ compared with the corresponding period in ~~2021, while gross margin declined~~2022. This decrease was primarily driven by lower profits on a nuclear project and net loss projects related to ~~6.4% from 10.1%. The decrease~~the energy delivery, water, and chemical end markets.

Operating loss for the three months ended June 30, 2023 increased by $5.7 million compared with the corresponding in ~~gross profit reflects start-up costs relating to our entry into the transmission and distribution markets and the impact of additional losses on certain lump sum~~2022. This increase was primarily driven by net loss projects in our Florida water markets. We anticipate that these projects will continue to generate revenues with no associated profits until completion within the fourth quarter of 2022. Excluding the impact relating to start-up costs in the transmission and distribution, ~~markets~~water, and chemical businesses. Please refer to the ~~lump sum~~Gross Margin Reconciliation below for additional information.

Operating loss for the six months ended June 30, 2023, also experienced an increase of $3.4 million compared with the corresponding in 2022. This was primarily driven by net loss projects in the transmission and distribution, water, ~~market for which losses were incurred,~~and chemical businesses. Additional information can be found in the ~~Company would have realized a gross margin of 11.2% rather than 6.4%.~~Gross Margin Reconciliation below.

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WILLIAMS INDUSTRIAL SERVICES GROUP INC. AND SUBSIDIARIES

GROSS MARGIN RECONCILIATION

NON-GAAP FINANCIAL MEASURE (UNAUDITED)

The following table reconciles our adjusted gross margin to our actual gross margin by deducting the energy transmission and distribution projects, chemical projects and large lump sum water projects that are ~~incurring start-up costs and lump sum projects in the water markets that are generating a loss.~~underperforming. We believe this information is meaningful as it isolates the impact ~~that our start-up costs and the non-profitable lump sum~~these underperforming projects have on ~~our~~ gross margin. Because adjusted gross margin is not calculated in accordance with GAAP, it may not be comparable to other similarly titled measures of other companies and should not be considered in isolation or as substitute for, or superior to, financial measures prepared in accordance with GAAP.


(in thousands)	Three Months Ended June 30, 2022		Six Months Ended June 30, 2022		Three Months Ended June 30, 2023		Six Months Ended June 30, 2023
Revenue	$	56,059	$	125,618	$	83,343	$	186,813
Cost of revenue		53,778		117,628		87,293		183,072

Gross profit		2,281		7,990
Gross profit (loss)						(3,950)		3,741
Gross margin		4.1%		6.4%		(4.7)%		2.0%

Minus: revenue from transmission and distribution start-up business		(1,597)		(2,540)
Minus: revenue from transmission and distribution business						(71)		(1,427)
Minus: revenue from Florida lump sum water projects		(3,687)		(9,928)		(2,149)		(8,713)
Minus: revenue from chemical projects						200		(904)
Minus: total revenue deducted		(5,284)		(12,468)		(2,020)		(11,044)

Minus: cost of revenue from transmission and distribution start-up business		(3,228)		(5,325)
Minus: cost of revenue from transmission and distribution business						(51)		(2,878)
Minus: cost of revenue from the Florida lump sum water projects		(4,861)		(11,868)		(4,962)		(13,472)
Minus: cost of revenue from chemical projects						969		(515)
Minus: total cost of revenue deducted		(8,089)		(17,193)		(4,044)		(16,865)

Adjusted revenue		50,775		113,150		81,323		175,769
Adjusted cost of revenue		45,689		100,435		83,249		166,207
Adjusted gross profit	$	5,086	$	12,715
Adjusted gross profit margin		10.0%		11.2%
Adjusted gross profit (loss)					$	(1,926)	$	9,562
Adjusted gross profit (loss) margin						(2.4)%		5.4%

~~The~~On July 20, 2023, WIS made a strategic decision to exit the water projects business in Florida and Texas. This led to the discontinuation of a significant portion of WIS's business and operations in the water projects division. As a result of the exit, the Company ~~recorded an operating loss for the three months ended June 30, 2022 of $4.5~~made financial adjustments, reducing its contract liability by $3.5 million ~~compared to operating income of $2.7~~and revenue by $0.6 million for the ~~corresponding period in 2021. This operating loss was primarily due to the decrease in gross profits due to the start-up costs in the energy transmission~~three-month and ~~distribution markets and the non-profitable lump sum projects in our water market.~~

~~The Company recorded an operating loss for the six months ended~~six-month periods ending June 30, ~~2022~~2023. Despite exiting the water projects, the Company will continue to focus on non-union pulp and paper mill maintenance and repair activities under WIS. Additionally, on July 25, 2023, the Company took steps to reject the customer contracts associated with the water projects by filing motions with the Court. The Court will assess these motions at a hearing scheduled for August 17, 2023.

Table of $5.2 million compared to operating income of $2.2 million for the corresponding period in 2021. This operating loss was primarily due to the decrease in gross profits due to the start-up costs in the energy transmission and distribution markets and the non-profitable lump sum projects in our water market.Contents

General and Administrative Expenses


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2022		2021		2022		2021		2023		2022		2023		2022
Employee-related expenses	$	2,673	$	3,438	$	5,729	$	6,970	$	2,236	$	2,673	$	4,533	$	5,729
Stock-based compensation expense		608		745		577		1,460		(614)		608		—		577
Professional fees		1,293		976		2,944		1,886		1,731		1,293		3,599		2,944
Other expenses		1,720		1,213		3,115		2,367		2,623		1,720		3,773		3,115
Total	$	6,294	$	6,372	$	12,365	$	12,683	$	5,976	$	6,294	$	11,905	$	12,365

Total general and administrative expenses for the three months ended June 30, ~~2022~~2023, decreased ~~$0.1~~by $0.3 million, ~~or 1.2%,~~representing a decline of 5.1% compared ~~with~~to the corresponding period in ~~2021.~~2022. The decrease was ~~largely driven by~~primarily attributable to an expense reduction resulting from a ~~decrease in~~stock-based compensation adjustment related to the Chapter 11 Cases. Management's expectations regarding performance objectives were not met, leading to this adjustment, and the Company's stock experienced a drastic devaluation during the period. Additionally, employee-related expenses, ~~of $0.9 million. This decrease was~~including salaries and benefits, decreased, contributing to the overall expense reduction. These expense reductions were partially offset by increases ~~of $0.3 million in professional fees related to an ongoing legal matter and $0.4 million~~ in other expenses, ~~relating to computer~~including subscriptions, software, ~~costs.~~and hardware costs, as well as higher professional fees incurred during the period.

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Total general and administrative expenses for the six months ended June 30, ~~2022~~2023, decreased ~~$0.3~~by $0.5 million, ~~or 2.5%,~~representing a decline of 3.7% compared ~~with~~to the corresponding period in ~~2021.~~2022. The decrease was ~~largely~~primarily driven by a $1.2 million decrease in employee-related expenses, specifically related to salaries and benefits, and a $0.6 million expense reduction resulting from a stock-based compensation ~~expenses of $2.1 million. This decrease was partially~~adjustment related to the Chapter 11 Cases. Management's expectations regarding performance objectives were not met, leading to this adjustment, and the Company's stock experienced a drastic devaluation. However, these expense reductions were offset by ~~increases of $1.1~~a $1.3 million increase in professional fees ~~relating to an ongoing legal matter, $0.5 million relating to computer software costs~~ and ~~$0.3 million related to our exit from our Canadian nuclear market.~~other expenses incurred during the period.

Total Other (Income) Expense, Net


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2022		2021		2022		2021		2023		2022		2023		2022
Interest expense, net	$	1,261	$	1,213	$	2,480	$	2,506	$	1,971	$	1,261	$	3,764	$	2,480
Goodwill and intangible impairment expense										47,900		—		47,900		—
Other income, net		(240)		(1,232)		(419)		(1,592)		(86)		(240)		(147)		(419)
Total	$	1,021	$	(19)	$	2,061	$	914	$	49,785	$	1,021	$	51,517	$	2,061

Total other expense, net, for the three months ended June 30, ~~2022~~2023 increased ~~$1.0~~$48.8 million compared with the corresponding period in ~~2021.~~2022. The increase was ~~primarily due~~driven by a $47.9 million goodwill and intangible asset impairment expense and a $0.7 million increase in interest expense related to our short-term and long-term debt and a ~~$1.0~~$0.2 million decrease in other ~~income related to a smaller distribution from a former subsidiary associated with a legal claim.~~income.

Total other expense, net, for the six months ended June 30, ~~2022~~2023 increased ~~$1.1~~$49.5 million compared with the corresponding period in ~~2021.~~2022. The increase was ~~primarily due~~driven by a $47.9 million goodwill and intangible asset impairment expense, a $1.3 million increase in interest expense related to our short-term and long-term debt and a ~~$1.0~~$0.3 million decrease in other income ~~related~~associated with joint venture income and disposal of equipment.

The goodwill and intangible asset impairment reflects the substantial devaluation of the Company’s overall value and its inability to meet performance objectives due to the challenging financial conditions concluding in filing Chapter 11 Bankruptcy. As a result of the evaluation, we recognized a total impairment loss of $47.9 million, comprising $12.5 million contributing to an intangible asset and $35.4 million contributing to a smaller distribution from a former subsidiary associated with a legal claim, coupled with a decrease of $0.2 million of other income related to profits associated with a joint venture in the nuclear market and partially offset with a $0.1 million increase in currency conversion expense.Goodwill Asset.

Income Tax Expense


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2022		2021		2022		2021		2023		2022		2023		2022
Income tax expense (benefit)	$	(171)	$	77	$	58	$	262	$	(3,162)	$	(171)	$	(3,177)	$	58

Income tax expense for the interim periods is based on estimates of the effective tax rate for the entire fiscal year. The effective income tax rate is based upon the estimated income during the calendar year, the estimated composition of the income in different jurisdictions and discrete adjustments, if any, in the applicable quarterly periods for settlements of tax audits or assessments and the resolution or identification of tax position uncertainties.

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The decrease in income tax provision from continuing operations for the three and six months ended June 30, ~~2022~~2023, compared with the corresponding periods in ~~2021~~2022, was primarily related to the ~~$0.2~~$2.4 million ~~decrease in the Canadian~~ income tax ~~provision.~~benefit due to the reversal of indefinitely lived deferred tax liabilities net of the indefinitely lived deferred tax assets, and the $0.8 million income tax benefit for the release of FIN 48 tax positions, including the interest and penalties, in compliance of the Company’s policy.

Discontinued Operations

See “Note 4—5—Changes in Business” to the unaudited condensed consolidated financial statements included in this Form 10-Q for information regarding discontinued operations.

Liquidity and Capital Resources

As previously disclosed, on July 22, 2023, the Company, in conjunction with its subsidiaries, filed voluntary petitions under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. These proceedings are being jointly administered under the caption In re Williams Industrial Services Group Inc., et al. Throughout this process, the Debtors will continue their operations as debtors-in-possession in the ordinary course of business, while simultaneously pursuing a structured sale of the Transferred Assets through a competitive bidding and auction process under Section 363 of the Bankruptcy Code.

A pivotal step in our strategic efforts occurred on July 22, 2023, prior to the filing of the Bankruptcy Petitions, as the Company and its subsidiaries entered into a "stalking horse" Purchase Agreement with EnergySolutions. This Purchase Agreement provides for the sale of substantially all of the Sellers' assets related to the Business to EnergySolutions for a cash consideration of $60.0 million, subject to certain specified deductions and adjustments as outlined in the Purchase Agreement. The water and wastewater business, the non-unionized pulp and paper business not included as part of the Business, and the transmission and distribution business associated with WIS are excluded from EnergySolutions' purchase. The Purchase Agreement is subject to Court approval and compliance with agreed-upon bidding procedures under Section 363 of the Bankruptcy Code. Following the anticipated closing of the Purchase Agreement, the remainder of the Company is currently expected to undergo liquidation under Chapter 11 plan or conversion to Chapter 7 of the Bankruptcy Code. The Company cannot provide any assurance that it will be able to successfully complete a sale of the Business or that it will be able to continue to fund its operations throughout the Chapter 11 process.

The Purchase Agreement represents a key part of our liquidity plan to address the challenges we are facing. This plan, as described in "Note 2—Liquidity," outlines a series of strategic measures that have been undertaken to mitigate liquidity concerns and ensure the continuity of our operations. These measures include utilizing DIP loans, exiting underperforming operations, reducing operating expenses, optimizing working capital cycles, and other initiatives aimed at strengthening our financial position pending the sale of the business and the subsequent winding up of our operations.

As the Chapter 11 process continues, our operations remain subject to the inherent uncertainties and risks associated with such proceedings. The outcome of the Chapter 11 Cases may lead to a notable transformation in the composition and extent of our assets and liabilities. Accordingly, the depiction of our operations, properties, liquidity, and capital resources in this Form 10-Q may not fully capture the evolving scenario during the Chapter 11 Cases.

During the first six months ~~ended June 30, 2022,~~of 2023, our ~~principal sources of~~ liquidity ~~were~~was primarily supported by borrowings under the Revolving Credit Facility, additional borrowings under the Term Loan, issuance of Wynnefield Notes, and ~~effective management of our~~ working ~~capital. Our principal uses of cash~~capital management. Moreover, strategic actions were taken, including the amendments to ~~pay for customer contract-related material, labor~~the Revolving Credit Facility and ~~subcontract labor, operating expenses, and interest expense on~~ the Term Loan and issuance of the ~~Revolving Credit Facility. See discussion~~Wynnefield Notes, to navigate liquidity constraints and sustain operations while exploring strategic alternatives. This process culminated in ~~“Note 8—Debt”~~the commencement of the Chapter 11 Cases.

For additional information regarding our liquidity outlook, including the uncertainty regarding our capacity to continue as a going concern pending the closing of the sale of the Business and the ongoing liquidity challenges, please refer to "Note 1—Business and Basis of Presentation" under "Going Concern," "Note 2—Liquidity," and "Note 9—Debt" within the unaudited condensed consolidated financial statements ~~included~~provided in this Form ~~10-Q for additional information about the Term Loan and the Revolving Credit Facility.~~10-Q.

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Net Cash Flows

Our net consolidated cash flows, including cash flows related to discontinued operations, consisted of the following:


	Six Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2022		2021		2023		2022
Cash flows provided by (used in):
Operating activities	$	(10,263)	$	(1,402)	$	1,032	$	(10,263)
Investing activities		(438)		(418)		235		(438)
Financing activities		8,859		686		(1,717)		8,859
Effect of exchange rate changes on cash		16		128		—		16
Net change in cash, cash equivalents and restricted cash	$	(1,826)	$	(1,006)	$	(450)	$	(1,826)

Cash and Cash Equivalents

As of June 30, ~~2022,~~2023, our operating unrestricted cash and cash equivalents decreased ~~$1.8~~$0.5 million to ~~$0.7 million~~$45,582 from ~~$2.5~~$0.5 million as of December 31, ~~2021.~~2022. As of June 30, ~~2022, no~~2023, $32,361 of operating cash was held in U.S. bank accounts and ~~$0.7 million~~$13,221 was held in Canada. Total liquidity (the sum of unrestricted cash and availability under the Revolving Credit Facility) was ~~$6.5~~$5.8 million at the end of the ~~second quarter~~first half of ~~2022.~~2023.

Operating Activities

Cash flows from operating activities result primarily from earnings sources and are affected by changes in operating assets and liabilities, which consist primarily of working capital balances related to our projects. For the six months ended June 30, ~~2022,~~2023, cash ~~used in~~provided by operating activities ~~totaled $10.3 million, an increase in cash used of $8.9~~increased $11.3 million compared to the corresponding period in ~~2021. The increase in~~2022. For the six months ended June 30, 2023, cash provided by operating activities totaled $1.0 million, compared to $10.3 million of cash used ~~was primarily due to recording a net loss from operations of $6.8 million, an increase~~ in ~~other assets of $2.2 million and a decrease~~operating activities in ~~accounts payable of $1.3 million. This was partially offset by an increase in cash provided from our accounts receivable decreasing by $2.1 million compared to~~ the corresponding period in ~~2021.~~2022. Major components of cash flows provided by operating activities for the six months ended June 30, 2023 were as follows:


	Six Months Ended June 30,
(in thousands)	2023
Cash flows provided by (used in):
Net loss	$	(56,290)
Net income from discontinued operations		(630)
Deferred income tax benefit		(2,395)
Depreciation and amortization on plant, property and equipment		98
Amortization of deferred financing costs		415
Amortization of debt discount		100
Loss on disposals of property, plant and equipment		86
Bad debt expense		(205)
Stock-based compensation		—
Paid-in-kind interest (1)		883
Impairment expense		47,900
Cash effect of changes in operating assets and liabilities		11,164
Net cash provided by operating activities, continuing operations		1,126
Net cash used in operating activities, discontinued operations		(94)
Net cash provided by operating activities	$	1,032

(1)

Paid-in-kind interest is added to the Term Loan principal and will be paid at maturity.

Cash effect of changes in operating assets and liabilities for the six months ended June 30, 2023 included the following (includes foreign currency translation conversion from Canadian dollar to United States dollar):

●

Accounts receivable, excluding credit losses recognized during the period, decreased $10.5 million during the six months ended June 30, 2023, which increased cash flows from operating activities. The variance is primarily attributable to the timing of billings and collections.

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●

Contract liabilities, which consisted of billings on uncompleted contracts in excess of costs and estimated earnings, decreased $5.6 million during the six months of June 30, 2023, which decreased cash flows from operating activities. In addition, contract assets, which consisted of costs and estimated earnings in excess of billings on uncompleted contracts, decreased $4.7 million during the first six months of June 30, 2023, which increased cash flows from operating activities. These balances can experience significant fluctuations based on business volume and the timing of when job costs are incurred and the timing of customer billings and payments.

●

Other current assets decreased $2.5 million during the six months ended June 30, 2023, which increased cash flows from operating activities. The variance was primarily due to unamortized commercial insurance premiums, security deposits related to real estate and prepaid expenses related to professional retainers and subscriptions.

●

Accrued and other liabilities and accounts payable decreased $2.4 million during the six months ended June 30, 2023, which decreased cash flows from operating activities. The liabilities and payables were primarily related to a decrease in short-term lease liabilities, accrued job costs and accounts payable, partially offset by an increase in workers compensation, legal and professional fees, and accounts payable.

●

Other long-term assets decreased by $1.5 million during the six months ended June 30, 2023 which increased cash flows from operating activities. The variance was primarily due to decreases in right-of-use lease assets, software subscriptions and debt issuance costs, partially offset by an increase in joint venture earnings.

Investing Activities

Cash flows from investing activities were insignificant for the six months ended June 30, ~~2022,~~2023, consistent with the corresponding period in ~~2021.~~2022.

Financing Activities

For the six months ended June 30, 2023, net cash used in financing activities was $1.7 million primarily composed of cash used in prepayments exceeding our borrowings under the Revolving Credit Facility by $8.4 million and approximately $0.1 million for payment of statutory taxes related to stock-based compensation. This was partially offset by a $1.0 advancement pursuant to the Term Loan, delayed draw term loans in an aggregate principal amount of $5.0 million and $0.8 million from the Wynnefield Notes.

During the first half of 2022, net cash provided by financing activities of $8.9 million was primarily ~~composed of~~due to cash provided by our borrowings exceeding our repayments from customers under the Revolving Credit Facility by $9.5 million, partially offset by a $0.5 million payment on our Term Loan and approximately $0.2 million for payment of statutory taxes related to stock-based compensation.

~~During~~For additional information about our outstanding debt, please refer to “Note 9—Debt” and “Note 15—Subsequent Events” to the first half of 2021, net cash provided by financing activities of $0.7 million was primarily due to cash provided by our borrowings under the Revolving Credit Facility exceeding our repayments from customer cash receipts by $1.7 million, which was partially offset by cash usedunaudited condensed consolidated financial statements included in ~~connection with our stock-based awards for payments of statutory taxes of $0.5 million and a $0.5 million principal payment we made on the Term Loan.~~this Form 10-Q.

Effect of Exchange Rate Changes on Cash

For both the six months ended June 30, ~~2022~~2023 and ~~2021,~~2022, the effect of Canadian foreign exchange rate changes on our cash balances was not material.

~~Dividends~~Liquidity Outlook

~~We do not currently anticipate declaring dividends in the near future.~~ As of June 30, ~~2022,~~2023, the ~~terms~~Company continued to face financial challenges, including liquidity constraints, which raise substantial doubt about its ability to continued as a going concern. The Company's liquidity position has been adversely impacted by cash flow requirements related to specific projects and ongoing operations.

To address these financial challenges and ensure the continuity of its operations pending the sale of the ~~Term Loan~~Business, the Company filed voluntary petitions under Chapter 11 of the United States Bankruptcy Code on July 22, 2023. The Company and ~~Revolving Credit Facility restricted our ability to pay dividends. In addition,~~its subsidiaries will operate as debtors-in-possession under the ~~timing~~jurisdiction of the United States Bankruptcy Court for the District of Delaware in accordance with applicable provisions of the Bankruptcy Code and ~~amounts~~orders of ~~any dividends would be subject to determination and approval by our Board of Directors.~~the Court.

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~~Liquidity Outlook~~In connection with the bankruptcy filing and the Court's entry of the Interim DIP Order on July 25, 2023, the Debtors entered into the DIP Credit Facilities to support their operations during the Chapter 11 process. The Company and certain of its subsidiaries also entered into the “stalking horse” Purchase Agreement with EnergySolutions Nuclear Services, LLC on July 22, 2023, prior to the filing of the Bankruptcy Petitions. The DIP Credit Facilities and the Purchase Agreement are described further elsewhere in this Form 10-Q.

~~Overall, while we anticipate we will~~The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. However, the recent bankruptcy filing and financial challenges raise substantial doubt about the Company’s ability to continue as a going concern for the twelve-month period following the issuance of this Form 10-Q.

The Company is continuing to implement a liquidity improvement plan to address profitability and reduce operating expenses during the course of the Chapter 11 Cases. Steps taken include aggressive cost reductions, improved collection terms with customers, and discontinuing underperforming operations. The Company's plan also includes optimizing cash flow by managing labor payrolls and collections from customers. The Company anticipates it may continue to experience periodic ~~short-term~~ constraints on ~~our~~ liquidity ~~as a result of the~~due to cash flow requirements of specific projects through the ~~third quarter 2022, we expect our~~Chapter 11 process and additional financing may be necessary to address potential liquidity ~~situation~~shortfalls during the Chapter 11 process. The Company remains focused on implementing its liquidity improvement plan and diligently managing business operations while navigating the Chapter 11 process. The Company's continuation as a going concern is dependent upon successfully managing the Section 363 bidding process and closing on a purchase agreement, securing necessary financing and addressing liquidity challenges during the Chapter 11 process. For additional information, please refer to ~~have stabilized at an improved level by~~“Note 2—Liquidity”, “Note 9—Debt” and “Note 15—Subsequent Events” to the ~~fourth quarter~~unaudited condensed consolidated financial statements included in this Form 10-Q.

The Company has also exited a portion of ~~2022. Such constraints on our liquidity negatively affected our ability to remain in compliance with our debt covenants, and, accordingly, in August 2022, we entered~~its underperforming operations within the Term Loan Amendment and the Revolving Credit Amendment to revise certain terms contained in the Term Loan Agreement and the Revolving Credit Agreement, respectively, including, among other things, certain relevant financial covenants. Effective as of June 30, 2022, the Term Loan Amendment, among other things, amended and increased the Total Leverage Ratio (as defined in the Term Loan Agreement) for certain periods and amended the calculation of Consolidated EBITDA (as defined in the Term Loan Agreement) to include (or “add back”) certain non-recurring losses and expenses relating to projects executed in Jacksonville, Florida, one-time costs and expenses incurred in connection with the Company’s transmission and distribution market in Florida and completed several underperforming chemical projects in Texas. On July 20, 2023, the Company made a strategic decision to exit the water projects business ~~unit start-up,~~in Florida and ~~costs~~Texas. This led to the discontinuation of a significant portion of WIS's business and expenses arising out of the Company’s litigation with a designated former executive and his employer (in each case, subject to certain specified dollar limits). The Revolving Credit Amendment, among other things, amended the calculation of EBITDA (as definedoperations in the ~~Revolving Credit Agreement), effective as of~~water projects division. This action required the Company to make an adjustment that reduced our contract liability by $3.5 million and reduced revenue by $0.6 million for the three and six month periods ended June 30, ~~2022, to include (or “add back”) certain non-recurring losses and expenses relating to projects executed~~2023 but resulted in ~~Jacksonville, Florida, one-time costs and expenses incurred~~the cessation of work that resulted in connection with the Company’s transmission and distribution business unit start-up, and costs and expenses arising out of the Company’s litigation with a designated former executive and his employer (in each case, subject to certain specified dollar limits) and permitted advances against certain eligible receivables of one of the Company’s joint ventures (also subject to specified dollar limits). We expect to maintain sufficient liquidity by managing our expenses and borrowing and repayments of our Revolving Credit Facility. The Company is pursuing two legal claims that could impact its future liquidity. The first involves litigation against a former employee and his employer and the second is an arbitration proceeding against a third party in connection with the restatement of our financial statements which occurred during 2015 to 2017. We are currently unable to predict the likelihood that we will reach a favorable settlement or prevail in these actions and, if we do settle or prevail, whether any net ~~proceeds that we may receive will be material.~~losses.

A high percentage of our cost of service comes from weekly craft labor payrolls, and the lag between incurrence of those payrolls and the subsequent collection of the resulting customer billings results in negative cash flows for that time period. Although we utilize the Revolving Credit Facility to address those time period negative cash flows, contract terms restricting customer invoicing frequency, delays in customer payments, and underlying surety bonds negatively impact our available borrowing base. We believe that we have sufficient resources to satisfy our working capital requirements through the next 12 months and our long-term liquidity needs and foreseeable material cash requirements, as we strategically use our $30.0 million borrowing availability under our Revolving Credit Facility and continue to implement our future growth initiatives. A variety of factors can affect ~~our~~the Company’s short- and long-term liquidity, the impact of which ~~impact~~ could be material, including, but not limited to: costs relating to the Chapter 11 Cases; the funding of certain of the Company’s previously disclosed underperforming contracts; cash required for ~~operations;~~funding ongoing operations and projects; matters relating to ~~our~~the Company’s contracts, including contracts billed based on milestones that may require usthe Company to incur significant expenditures prior to collections from ~~our~~its customers and others that allow for significant upfront billing at the beginning of a project, which temporarily increases liquidity in the near term; the outcome of potential contract disputes, which may be significant; payment collection issues, including those caused by economic slowdowns or other factors which can lead to credit deterioration of ~~our~~the Company’s customers; required interest payments on ~~the Term Loan~~outstanding debt and ~~the Revolving Credit Facility and on our~~ operating and finance leases; pension obligations requiring annual contributions to multiemployer pension plans; insurance coverage for contracts that require usthe Company to indemnify third parties; and issuances of letters of credit. We believe that we have adequate sources of liquidity to meet our long-term liquidity needs of developing key management and craft personnel, enhancing our services to meet new opportunities and obtaining the amount of capital needed to drive our long-term growth initiatives of attracting new customers and expanding our market reach. In the event that we are unable to address any potential liquidity shortfalls that may arise in the future, management will need to seek additional funding, which may not be available on reasonable terms, if at all.

While we do not expect the COVID-19 pandemic to materially adversely affect us, we currently cannot predict the ultimate impact of the COVID-19 pandemic on our business, results of operations, financial condition and cash flows, or on our customers, as such impact is dependent on future developments, including the duration and severity of the pandemic and the related length of its impact on the global economy. Management will continue to closely monitor conditions using the data available and will draw on the expertise of health officials. Any recovery from the COVID-19 pandemic and related economic impact may be slowed or reversed by a number of factors, including the continued sporadic outbreaks of COVID-19 cases, the ongoing spread of new COVID-19 variants and the impact of COVID-19 vaccines and treatments, and even after the COVID-19 pandemic has subsided, we may continue to experience an adverse impact to our business as a result of the pandemic’s global economic impact.

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Off-Balance Sheet Transactions

Our liquidity is currently not dependent on the use of off-balance sheet transactions but, in line with industry practice, we are often required to provide payment and performance surety bonds to customers and may be required to provide letters of credit. If performance assurances are extended to customers, generally our maximum potential exposure is limited in the contract with our customers. We frequently obtain similar performance assurances from third-party vendors and subcontractors for work performed in the ordinary course of contract execution. However, the total costs of a project could exceed our original cost estimates, and we could experience reduced gross profit or possibly a loss for a given project. In some cases, if we fail to meet certain performance standards, we may be subject to contractual liquidated damages.

As of June 30, ~~2022,~~2023, we had a contingent liability for issued and outstanding standby letters of credit, generally issued to secure performance on customer contracts. As of June 30, ~~2022,~~2023, we had $0.5 million of outstanding letters of credit under the Revolving Credit Facility sublimit and $0.4 million of outstanding cash collateralized standby letters of credit pursuant to a prior revolving credit facility with Wells Fargo Bank, National Association, and there were no amounts drawn upon these letters of credit. In addition, as of June 30, ~~2022,~~2023, we had outstanding surety bonds of ~~$61.9~~$60.3 million. Our subsidiaries also provide financial guarantees for certain contractual obligations in the ordinary course of business.

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Critical Accounting Policies and Use of Estimates

There have been no material changes to our critical accounting policies and estimates as set forth in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in our ~~2021~~2022 Report.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and are not required to provide the information required under this item.

Item 4. Controls and Procedures.

Disclosure controls and procedures are those controls and procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. The Company’s management, under the supervision of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this Form 10-Q. Solely as a result of the material ~~weakness~~weaknesses described below, our Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, ~~2022,~~2023, our disclosure controls and procedures were not effective. However, our management, including our Chief Executive Officer and Chief Financial Officer, has concluded that, notwithstanding the identified material ~~weakness~~weaknesses in our internal control over financial reporting, the financial statements in this Form 10-Q fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented in conformity with U.S. GAAP.

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Material Weakness in Internal Control Over Financial Reporting

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. As previously disclosed in our ~~Annual~~2022 Report, ~~on Form 10-K for the year ended December 31, 2021,~~ we identified atwo material ~~weakness~~weaknesses in our internal ~~control~~controls over financial reporting.

We ~~have determined that we~~ did not design and maintain effective user access controls to adequately restrict user access and the ability to modify financial data within certain financial applications, including ensuring appropriate segregation of duties relating to the preparation and review of journal entries in these financial applications.

We identified immaterial errors that indicated an additional deficiency existed in the Company’s internal control over financial reporting for the secondary reviews of potential loss accruals and approval of certain expenses.

User Access Controls

To enhance the design and maintenance of effective user access controls, the Company established an access control review process to ensure appropriate segregation of duties related to the preparation and review of journal ~~entries in these~~entries. The user access controls are currently designed to manage and monitor the authorization and permissions granted to individuals who require access to financial ~~applications. As part~~systems and data.

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The user access control enhancement incorporates:

●

Regular access control reviews are conducted to assess the appropriateness of user access rights. These reviews involve verifying that access permissions align with individuals' job responsibilities and are necessary for the performance of their duties. Access rights are periodically re-evaluated to ensure that they are up to date and remain relevant to employees' roles within the organization.

Secondary Review Process/Loss Adjustments

To ensure the accuracy and reliability of our ~~books for~~financial reporting, the ~~second quarter~~Company has enhanced its secondary review process. This process involves a systematic evaluation of ~~2022, we identified immaterial~~project cost estimates and expenses conducted by personnel within the operations, project controls and the accounting department. The secondary reviewers possess the necessary expertise and knowledge to identify potential errors, ~~that indicated an additional deficiency existed in the Company’s internal control over financial reporting. Specifically, we did not have controls designed effectively for~~misstatements, or omissions.

In addition to the secondary review process, we evaluate the risk of potential loss adjustments that may have to be recognized during the reporting period or contingent liabilities or losses that may arise after the reporting period but before the issuance of the financial statements. These accruals are intended to ensure the appropriate recognition of potential losses in accordance with relevant accounting principles.

The enhancement of secondary reviews of potential loss accruals and approval of certain ~~expenses.~~ expenses include:

●

Management conducts a monthly project review of the accuracy of estimated costs at completion on fixed-price projects with operations, project controls and accounting to identify potential loss adjustments that may arise from changes in project execution.

●

The Company reduced its threshold for project reviews with various levels of management.

●

The Company increased its evaluation of project schedules, nature of costs and project execution compared to how the project was bid to identify potential risks in the estimated costs at completion.

●

Senior management conducts reviews in the event of a 5% or greater discrepancy between project management and project controls.

●

The secondary reviewers perform reconciliations to validate the consistency and accuracy of financial information across different sources and systems and compare the reported figures with underlying documentation, general ledger balances, and other relevant data to identify any discrepancies.

The foregoing control deficiencies did not result in a misstatement of the Company’s ~~annual~~interim or ~~interim~~annual consolidated financial statements. However, these control deficiencies could have resulted in misstatements of interim or annual consolidated financial statements and disclosures that may have been material. ~~Therefore, management~~Management has concluded that: (1) ~~each of~~the Company has implemented changes to address the control deficiency related to the user access as described above, but those changes have not been subjected to testing by our external auditor and thus in the interim will continue to constitute a material weakness; (2) the above control ~~deficiencies constitutes~~deficiency pertaining to the secondary review of potential loss accruals continues to constitute a material ~~weakness;~~weakness even though the Company has implemented additional procedures to improve the secondary review of potential loss accruals; and ~~(2)~~(3) in turn, the Company did not maintain effective internal control over financial reporting as of June 30, ~~2022.~~2023.

While management is working on implementing a remediation plan regarding the current deficiencies and material weaknesses, no assurance can be made that such plan will be completed in a timely manner or that the updated controls and procedures associated with such plan will be deemed adequate after being subjected to testing.

Management’s Plan to Remediate the Material ~~Weakness~~Weaknesses

Management has evaluated the user access controls material weakness described above and ~~is in the process of updating~~has updated its design and implementation of internal control over financial reporting to ~~remediate that material weakness and~~ enhance the Company’s internal control environment. ~~However, the implemented and enhanced controls have not operated for a sufficient period of time to demonstrate that the material weakness was remediated as of June 30, 2022.~~ Having identified the material weakness relating to the secondary review and approval of certain expenses described above, we ~~will promptly be initiating~~have initiated a review ~~and~~ process related to ~~remediate such~~this deficiency. We are committed to continuing to improve our internal control processes and will continue to diligently and vigorously review our financial reporting controls and procedures.

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Changes in Internal Control over Financial Reporting

Under the applicable SEC rules, management is required to evaluate any changes in internal control over financial reporting that occurred during each fiscal quarter that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Other than the changes described above regarding enhancements associated with ongoing remediation efforts, there were no changes in our internal control over financial reporting during the period covered by this Quarterly Report on Form 10-Q that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

In addition, we are engaged in a transformation project to upgrade our ERP system to a cloud-based platform to increase efficiency, provide additional process capabilities and enhance information security. We currently expect this upgrade to be completed in early 2023.

Part II—OTHER INFORMATION

Item 1. Legal Proceedings.

The information included under “Litigation and Claims” in “Note ~~10—~~12—Commitments and Contingencies” to the unaudited condensed consolidated financial statements in this Form 10-Q is incorporated by reference into this Item.

Item 1A.

Risk Factors.

Our business faces significant risks and uncertainties. Certain important factors may have a material adverse effect on our business prospects, financial condition, and results of operations, and you should carefully consider them. There have not been any material changes to our risk factors from those reported in our ~~2021 Report.~~2022 Report other than as set forth below.

We may not be able to continue as a going concern and holders of our common stock could suffer a total loss of their investment.

Substantial doubt exists about the Company’s ability to continue as a going concern. It is likely that our equity securities will be canceled and extinguished in connection with the Chapter 11 Cases, and that the holders thereof would not be entitled to receive, and would not receive or retain, any property or interest in property on account of such equity interests.

Trading in our common stock during the pendency of the Chapter 11 Cases is highly speculative and poses substantial risks. It is likely that our common stock will be canceled or that holders of such common stock will not receive any distribution with respect to, or be able to recover any portion of, their investments.

It is likely that our equity securities will be canceled, or that holders of such equity will not receive any distribution with respect to, or be able to recover any portion of, their investments. Following the filing of the Chapter 11 Cases, our common stock was delisted from the NYSE American and is now quoted on the OTC Pink Market under the symbol “WLMSQ.” Any trading in our common stock during the pendency of the Chapter 11 Cases is highly speculative and poses substantial risks to purchasers of our common stock. We urge extreme caution with respect to existing and future investments in our equity and other securities. There is a significant risk that the holders of our common stock will receive no recovery under the Chapter 11 Cases and that our common stock will be worthless.

We are subject to the risks and uncertainties associated with the Chapter 11 Cases.

During the Chapter 11 Cases, we plan to continue our business as debtors-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code. As a consequence of filing the Chapter 11 Cases, we will be subject to the risks and uncertainties associated with bankruptcy. These risks include, but are not limited to, the following:

●

our ability to negotiate and consummate a Chapter 11 plan, including plans to sell certain assets pursuant to Chapter 11 of the Bankruptcy Code, the outcome and timing of such sale, and our ability to satisfy closing and other conditions to such sale;

●

our ability to obtain the Bankruptcy Court’s approval with respect to motions or other requests made to the Bankruptcy Court in the Chapter 11 Cases;

●

our ability to continue funding operations through the Chapter 11 bankruptcy process, and the possibility that we may be unable to obtain any additional funding as needed;

●

our ability to comply with the restrictions imposed by the terms and conditions of the DIP Credit Agreements and other financing arrangements;

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●

the possibility that actions and decisions of our creditors and other third parties with interests in the Chapter 11 Cases may be inconsistent with our plans;

●

the high costs of bankruptcy proceedings and related fees, particularly if delays in the Chapter 11 Cases increase fees and costs;

●

objections to our wind down process, the DIP Credit Agreements, or other pleadings filed that could protract the Chapter 11 process;

●

our ability to motivate and retain key employees throughout the Chapter 11 Cases;

●

our ability to maintain contracts that are critical to our operations; and

●

the effects of Chapter 11 on the interests of various constituents and financial stakeholders.

Because of the risks and uncertainties associated with a voluntary filing for relief under Chapter 11 of the Bankruptcy Code and the related proceedings, we cannot accurately predict or quantify the ultimate impact that events that occur during the Chapter 11 Cases may have on ultimate recovery for stakeholders, including creditors. As mentioned above, it is likely that holders of our common stock will not recover any portion of their investments.

If we are not able to obtain confirmation of a plan of reorganization, or if current liquidity is insufficient, we could be required to liquidate under Chapter 7 of the Bankruptcy Code.

If confirmation by the Bankruptcy Court of a plan of reorganization does not occur, or if the Bankruptcy Court otherwise finds that it would be in the best interest of holders of claims and interests or upon the showing of cause, the Bankruptcy Court may convert our Chapter 11 Cases to cases under Chapter 7 of the Bankruptcy Code. In such event, a Chapter 7 trustee would be appointed or elected to liquidate our assets for distribution in accordance with the priorities established by the Bankruptcy Code.

Our common stock has been delisted from the NYSE American.

Our common stock began trading on the OTC Pink Market under the symbol “WLMSQ” on July 25, 2023. We can provide no assurance that our common stock will continue to trade on this market, whether broker-dealers will provide public quotes of our common stock on this market, whether the trading volume of our common stock will be sufficient to provide for an efficient trading market or whether quotes for our common stock will continue on this market in the future, which could result in significantly lower trading volumes and reduced liquidity for investors seeking to buy or sell our common stock. Furthermore, because of the limited market and generally low volume of trading in our common stock, the price of our common stock could be more likely to be affected by broad market fluctuations, general market conditions, changes in the markets’ perception of our securities, and announcements made by us or third parties with interests in the Chapter 11 Cases.

The pursuit of the Chapter 11 Cases has consumed, and will continue to consume, a substantial portion of the time and attention of our corporate management and will impact how our business is conducted, which may have an adverse effect on our business and results of operations.

The requirements of the Chapter 11 Cases have consumed and will continue to consume a substantial portion of our corporate management’s time and attention and leave them with less time to devote to the operations of our business. This diversion of corporate management’s attention may have a material adverse effect on the conduct of our business, and, as a result, on our financial condition and results of operations, particularly if the Chapter 11 Cases are protracted.

We depend on a few highly skilled key employees to navigate the Chapter 11 Cases, and if we are unable to retain, manage, and appropriately compensate them, the outcome of the Chapter 11 Cases could be adversely affected.

Our ability to consummate a successful plan of reorganization is based on the continued service of our senior management team and other key employees, and on our ability to continue to motivate and appropriately compensate key employees. During the pendency of the Chapter 11 Cases, our employees will face considerable distraction and uncertainty, and we may experience increased levels of employee attrition. We may not be able to retain the services of our key employees in the future. If our key employees fail to work together effectively and to execute our plans and strategies, the Chapter 11 Cases could be prolonged or adversely affected.

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Item 6.

Exhibits.

Exhibit		Description
10.1*2.1		~~2015 Equity Incentive Plan (as amended and restated~~Asset Purchase Agreement, dated as of ~~March 15, 2022)~~July 22, 2023, by and among Williams Industrial Services Group Inc., Williams Industrial Services Group, L.L.C., Williams Industrial Services, LLC, Construction & Maintenance Professionals, LLC, WISG Electrical, LLC, Williams Plant Services, LLC, and Williams Specialty Services, LLC, as Sellers, and EnergySolutions Nuclear Services, LLC, as Buyer (filed as Exhibit ~~10.1~~2.1 to our Form 8-K filed with the SEC on ~~May 17, 2022~~July 24, 2023 and incorporated herein by reference).**
10.2*10.1		~~First~~Fifth Amendment to Term Loan, Guarantee and Security Agreement, dated as of ~~June 30, 2022,~~April 4, 2023, by and among Williams Industrial Services Group Inc., Williams Industrial Services Group, L.L.C., Williams Industrial Services, LLC, Williams Specialty Services, LLC, Williams Plant Services, LLC, Williams Global Services, Inc., and Construction & Maintenance Professionals, LLC, as borrowers, Global Power Professional Services Inc., GPEG, LLC, Steam Enterprises LLC, WISG Canada Ltd., WISG Nuclear Ltd., WISG Electrical Ltd. and WISG Electrical, ~~Ltd.,~~LLC, as guarantors, and EICF Agent LLC, as agent, and the lenders party ~~thereto.~~thereto (filed as Exhibit 10.6 to our Form 10-Q filed with the SEC on May 17, 2023 and incorporated herein by reference).♦**
10.3**10.2		~~First Amendment to] Revolving Credit and Security Agreement,~~Fee Letter, dated ~~as of June 30, 2022,~~April 4, 2023, by and among Williams Industrial Services Group Inc., Williams Industrial Services Group, L.L.C., Williams Industrial Services, LLC, Williams Specialty Services, LLC, Williams Plant Services, LLC, Williams Global Services, Inc., ~~and~~ Construction & Maintenance Professionals, LLC, and WISG Electrical, LLC, as borrowers, Global Power Professional Services Inc., GPEG, LLC, Steam Enterprises LLC, WISG Canada Ltd., WISG Nuclear Ltd. and WISG Electrical Ltd., as guarantors, and PNC Bank, National Association, as agent, and the lenders party ~~thereto.~~thereto (filed as Exhibit 10.9 to our Form 10-Q filed with the SEC on May 17, 2023 and incorporated herein by reference).♦
10.3		Consulting Services Agreement, dated July 1, 2023, by and between Williams Industrial Services Group, L.L.C. and Damien Vassall.♦*
10.4		Superpriority Senior Secured Debtor-in-Possession Revolving Credit and Security Agreement, dated as of July 25, 2023, by and among Williams Industrial Services Group Inc., Williams Industrial Services Group, L.L.C., Williams Industrial Services, LLC, Williams Specialty Services, LLC, Williams Plant Services, LLC, Williams Global Services, Inc., Construction & Maintenance Professionals, LLC, and WISG Electrical, LLC, as borrowers, Global Power Professional Services Inc., GPEG, LLC, Steam Enterprises LLC, WISG Canada Ltd., WISG Nuclear Ltd. and WISG Electrical Ltd., as guarantors, PNC Bank, National Association, as agent, and the lenders party thereto (filed as Exhibit 10.1 to our Form 8-K filed with the SEC on July 28, 2023 and incorporated herein by reference).**
10.5		Superpriority Senior Secured Debtor-in-Possession Term Loan, Guarantee and Security Agreement, dated as of July 25, 2023, by and among Williams Industrial Services Group Inc., as borrower, EICF Agent LLC, as agent, and the other credit parties party thereto (filed as Exhibit 10.2 to our Form 8-K filed with the SEC on July 28, 2023 and incorporated herein by reference).**
31.1		Certification by the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.♦
31.2		Certification by the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.♦
32.1		Certification by the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
32.2		Certification by the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).

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101		The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, ~~2022,~~2023, formatted in Inline XBRL: (i) Condensed Consolidated Balance Sheets; (ii) Condensed Consolidated Statements of Operations; (iii) Condensed Consolidated Statements of Comprehensive ~~Income;~~Income (Loss); (iv) Condensed Consolidated Statements of Stockholders’ Equity; (v) Condensed Consolidated Statements of Cash Flows; and (vi) Notes to Condensed Consolidated Financial Statements.♦
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).♦

♦ Filed herewith.

* Indicates a management contract or compensatory plan or ~~arrangement~~arrangement.

** Certain schedules and exhibits to this agreement have been omitted pursuant to Item 601(a)(5) of Registration S-K. A copy of any omitted schedule and/or exhibit will be furnished supplementally to the SEC upon request.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	WILLIAMS INDUSTRIAL SERVICES GROUP INC.

Date: August ~~11, 2022~~16, 2023	By:	/s/ ~~Damien A~~. ~~Vassall~~Randall R. Lay
		~~Damien A. Vassall~~Randall R. Lay
		Executive Vice President, Chief Financial Officer and Chief Operating Officer (Duly authorized officer and principal financial and accounting officer of the registrant)

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(in thousands)	Remainder of 2022		2023		2024		Thereafter		Total
Remaining performance obligations	$	98,141	$	38,916	$	10,762	$	86,484	$	234,303